Private Receiver Wants Quick End to ‘Consipio v Private’ Lawsuit

LAS VEGAS, Nev.—Since being appointed receiver of Private Media Group overseeing all company assets, with direct authority granted by Nevada state Judge Elizabeth Gonzalez to suspend "any director, officer, administrator, managing member, or employee of any direct or indirect subsidiary of Private," Eric Johnson has not only taken control of arguably every aspect of the Barcelona-based publicly traded company, but he also has attempted to put a quick and final end to the ongoing Consipio v. Private lawsuit, according to his attorney. 

In emails to the defendant’s counsel on Aug. 31 and Sept. 7, Johnson’s attorney, Thomas Kummer, wrote to the defendant’s counsel, Robert Dotson of Laxalt & Nomura Ltd., demanding “that you withdraw the writ that was scheduled for hearing before the Nevada Supreme Court on September 8, 2011,” and “further [demand] that Private Media Group Inc. should not attempt to show cause why the writ should stand.”

The Sept. 8 hearing was to hear arguments on a petition for writ filed by Private last December seeking to vacate an Oct. 21, 2010, Order entered by Gonzalez granting Consipio Holdings BV the right to vote 5.9 million shares of Private common stock at a shareholders meeting that took place last November. Private wanted the order stayed at least until after the New York Supreme Court has finalized its determination in that state’s version of Consipio v. Private on the ownership of the 5.9 million shares, which Consipio claims are its to vote following Private’s default in 2008 on a $4 million note it purchased from Commerzbank in 2003.

The Nevada Supreme Court did cancel the oral arguments scheduled for Sept. 8, but simultaneously directed Private to file an emergency Notice of Appeal with the Court asking it to stay Gonzalez’ Aug, 23 order appointing Johnson as receiver. While following the directive from Johnson ordering him to drop the appeal of the Oct. 21 order, Dotson did file a response with the High Court on Sept. 7 seeking its guidance “as to whether [Laxalt & Nomura] should follow the direction of the Board or the Receiver.”

Indeed, as noted by Judge Gonzalez during the Aug. 31 hearing, the directive by the receiver that Dotson take direction only from him or his counsel, and that he refrains from communicating with anyone at Private Media about the case, put Dotson “in a difficult position … especially since you already filed the petition for writ,” said the judge.

In response, Dotson argued that “pursuant to Nevada case law it is appropriate that the directors have counsel, that they are—the company is indeed an aggrieved party given the appointment of the receiver—and that the receiver has no right, therefore, under Nevada Rules of Professional Conduct to interfere with the communications and the right of the directors on behalf of the company to seek counsel.”

In a Sept. 6 reply filed with the Nevada Supreme Court in support of the emergency request for stay of the order appointing a receiver, Dotson also wrote, “It is the contention of the Independent Directors that appointing Mr. Johnson as Receiver has effectively caused control of the company to shift to Plaintiffs, a group of minority shareholders and creditors. … This view is buttressed by the email immediately following his appointment containing the footer of Lionel, Sawyer & Collins, [and] counsel for Plaintiffs. This fear seems to have been confirmed at the hearing that took place on August 31, 2011, and the exchange indicating the Receiver's view of the dispute and the Court's inclination to approve a settlement. This is of great concern to the independent directors, who fear an unfavorable settlement of the decade old claim of Consipio currently before a New York court.”

In fact, Kummer confirmed during the Aug. 31 hearing that Johnson “is not giving approval at this time” for Dotson to communicate with anyone at Private, including its independent directors, who want to pursue the request for writ and emergency Notice of Appeal. Johnson, he said, believes “that this litigation is just costing Private Media a small fortune and basically is not necessary. And that's his position.”

However, Gonzalez provided verbal consent during the hearing that Dotson could continue to communicate with the independent directors, but only with respect to the repeal of the receivership order, and only for 21 days from the date of the Aug. 31 hearing.

The Nevada Supreme Court has also signaled its intent to consider the request for writ filed by Private in December on the ownership of shares by an entry made today on the court’s website indicating that the case has been submitted for decision. A source close to the case indicated to AVN that the writ may be decided by the Supreme Court within a matter of days.

In related news, Private Media Group’s former SEC counsel, Samuel Guzik, confirmed that he was terminated by Eric Johnson, but noted that he continues to serve as counsel to the Audit Committee, “as the Audit Committee has an independent right to hire attorneys and advisors under Sarbanes-Oxley Act of 2002, which is Federal law. No reasons have been given to me for the termination by the Receiver.”

Dotson also noted during the Aug. 31 hearing before Judge Gonzalez that, in addition to Guzik, “many” unnamed directors possibly working for Private subsidiaries also have been terminated, though the number, positions they held or entities they worked for was not clarified during the hearing.

AVN has requested from Kummer an accounting of terminated Private personnel, but has not received a reply. A request for comment from the defendant’s spokesperson also has gone without reply.