In Busy Month, Judge Rules for Plaintiffs in 'Consipio v Private'

LAS VEGAS/NEW YORK—It continues to be a very active month in the ongoing legal battle between the current management of Private Media Group (PMG) and a group of former executives and creditors. A barrage of motions has been filed in courtrooms in Las Vegas and New York by both sides in a whack-a-mole exercise that has prevented cases that probably should have ended long ago from concluding.

In Nevada, the plaintiffs are seeking to expedite the process that will determine the whereabouts of 3.95 million out of 5.6 million shares of Private stock pledged as collateral on a 2001 loan provided by Commerzbank to Private and guaranteed by Milton. The loan was subsequently acquired by Consipio in 2003. In lieu of payment, and as the “sole and lawful owner of the voting rights" to the shares, Consipio has claimed the right to vote those shares in a shareholder meeting in November of last year. The 3.95 million missing shares had been transferred into a Gibraltar corporation owned by Milton, Slingsby Enterprises Ltd., and, according to documents filed by the plaintiffs with the court, have since been transferred from Slingsby by Milton to an unknown destination. As a result, the court has issued subpoenas to determine the location of the shares so that they can be tranferred to Consipio, which intends to vote them as soon as possible.

In New York, Consipio has filed a separate action against Private, Slingsby and Milton to recover on the promissory note originally worth $4 million. After Slingsby successfully argued that it should be dismissed from the case on statute of limitations grounds, Judge Richard Lowe III granted Slingsby's motion to dismiss, but also allowed Consipio to amend it original complaint "in order to asset allegations that Plaintiff and PMG had modified the note in 2003 to extend its maturity date to 2008, which would have extended the limitation period as to Slingsby." That allowance essentially split the New York lawsuit into two separate actions, the second of which is ongoing.

As previously reported by AVN, two motions filed in Las Vegas by the plaintiffs earlier this month were granted by the court, which sealed one of them. According to the court minutes from an April 14 hearing, Nevada state judge Elizabeth Gonzalez handed the plaintiffs another victory last week when she denied two motions filed by the defense, each of which involved Private’s U.S. corporate counsel, Samuel S. Guzik, who was cited for taint in this case last November by Judge Gonzalez.

The denied motions by Private had requested that the judge “enter an Order sealing exhibits 2, 3, and 4 to its Motion for Modification of Preliminary Injunction in order to protect the disclosure of privileged attorney-client information and to prevent any waiver of such disclosure,” and also requested that “The Court’s Findings of Fact and Conclusions of Law delete all reference to Mr. Guzik, and that the Preliminary Injunction be modified as set forth herein and set forth in the proposed Order attached hereto as Exhibit 5.”

Exhibits 2, 3 and 4 contain copies of the partial transcript of an evidentiary hearing held Nov. 3, 2010, during which Judge Gonzalez referred to the “insolent and contemptuous behavior of Mr. Guzik”—as well as correspondence from February 2010 between Guzik and Daniel Sanchez, a former independent director of Private and member of the company’s audit committee who resigned June 15, 2010. The correspondence was related to issues regarding compensation to then-Board Chair Berth Milton and a request by then-CEO Ilan Bunimovitz to delay a vote by the Board regarding Milton’s compensation pending a review by Board members of additional information.

In the unrelated New York version of Consipio v Private, the plaintiffs filed a motion requesting the court to attach the U.S. assets of Private. Earlier in the trial, a previous judge had denied a similar motion on Sept. 10, stating that the plaintiffs had not demonstrated “significant prejudice to its interests,” but the case has evolved since then, and the plaintiffs believe that, with a new judge and a new complaint, they now have far more substantial arguments in terms of demonstrating prejudice.

A spokesman for Consipio Holding, speaking on behalf of Private’s shareholders and creditors, provided the following statement regarding the recent orders: “This is yet another favourable ruling for transparency and shareholder rights and another step towards ending Berth Milton’s unauthorized use of Private’s assets for his personal benefit.”

“On April 7, 2011, in Clark County Court in Las Vegas, Nevada, in the case of Consipio Holding BV et al v. Private Media Group, Inc., et al, two motions by the plaintiffs were granted by the court,” it continued. “In the first instance, the court found that Milton, Private’s Chairman and CEO, has been deliberately avoiding service of documents relating to the case and ruled that Milton may be served by simple publication of the relevant complaints thereby finally allowing the court to take jurisdiction over Milton in the state of Nevada, where Private is incorporated. The second motion was sealed, but we applaud the court’s decision to grant our motion, which was of a material nature.

“Recently, the court also denied two motions by Private which would have allowed Samuel Guzik, counsel for Private, who has already been held in contempt of court and fined for his conduct, to continue to provide advice to the Board of Private on behalf of Milton. We are delighted that common sense and sound corporate governance have again prevailed and we look forward to reuniting Private’s assets with its legitimate shareholders and creditors.”

Attorneys for Private declined to comment.

The New York Consipio motion can be accessed here.

The Nevada Private motion for modification of preliminary injunction can be accessed here.

The Nevada Private motion to seal portions of transcript can be accessed here.