Hollywood Tech Firm|Says Investors Pillaged It

     LOS ANGELES (CN) — A formerly successful post-production company in LA says that a New York-based financial firm nefariously acquired a controlling stake in the company and promptly ran it into the ground.
     Modern VideoFilm Holdings sued Medley Capital Corporation, its subsidiaries and several of its executives in Los Angeles County court on Monday, claiming the constant interference of the capital firm transformed the successful Hollywood business with clients like HBO, Netflix, Apple, CBS and other television and film production entities into a worthless shell company that had to auction off assets for $1 million.
     “MVF was destroyed by an ignorant, heavy-handed lender,” Modern VideoFilm says in the complaint. “Medley Capital and [Charles] Sweet destroyed virtually all of the value of the company and then sold the remaining assets in a fire sale, for an amount believed to be less than $1 million.”
     Medley Capital, meanwhile, claims that the lawsuit’s central allegations are just a resurrection of claims already made in state court, claims which were eventually dismissed.
     “Medley and the other defendants believe the outstanding claims for alleged interference with Mr. Barkat’s employment contract, and this latest attempt to resurrect other causes of action already dismissed by the court, are completely without merit and they intend to continue to defend themselves vigorously,” Medley said in a statement emailed by a spokesman.
     The business relationship between Modern and Medley Capital began in 2012, when the former was seeking a partner to help assist its growth.
     Modern, under the direction of its founder and CEO Moshe Barkat, was looking to pay off all its debt and borrow money for a planned expansion. Barkat founded the company in 1979 and steadily built it into a widely respected Hollywood-oriented business.
     When Modern first entered into discussions with Medley, much of its revenue came from post-production content management, which converts television shows or movies into computer files so that consumers can stream the video on various platforms including cellphones, computers or televisions.
     Modern worked on popular television shows like “Game of Thrones,” “The Walking Dead,” “The Leftovers,” “Star Trek” and “How I Met Your Mother.” The company also offered creative services to filmmakers, working on “Gran Torino,” “The Grand Budapest Hotel,” “I Walk the Line,” “Avatar” and “Star Wars,” among others.
     Consumers’ penchant for streaming meant the company was growing and eyed an even greater share of the market.
     In 2012, Modern met with Medley Capital in quest of a loan to the tune of approximately $50 million.
     As the two parties neared an agreement Barkat and the other Modern officers expressed concern about some of the language in the contract that required the company to grow at a certain rate or forfeit control. Medley Capital assured Modern that they would be flexible and work with the company.
     Instead, Medley did an about-face by triggering the exact clauses they said they would not despite the fact that Modern never missed a payment, according to the complaint.
     Once Medley established a foothold in Modern, they began to demand cost-cutting that were both detrimental to Modern’s relationship with its clients and the morale of its own employees, the company says.
     Medley ordered Bakrat to renege on a contractually stipulated bonus to a long-tenured employee, required the closure of one of its three buildings in the Los Angeles area and began to infiltrate the companies with its own cronies, the complaint says.
     Furthermore, the capital firm used its power to veto a merger with content management rival Technicolor to try and coerce better terms on its loan, leading to a missed opportunity that would have yielded Modern a significant spike in its annual profit, the complaint says.
     “Due to Medley Capital’s heavy hand and its bad-faith pursuit of equity in MVF, the Technicolor venture fell apart in early 2014 and this valuable opportunity was lost,” the complaint says.
     Later that year, after Medley had executed a board takeover, it fired Barkat — who had worked at the company for over 30 years — and installed their own handpicked executives Scott Avila and Charles Sweet into leadership roles at the now floundering company, Modern says.
     Sweet is a named defendant in the lawsuit; Avila is not.
     “The termination of Barkat proved disastrous for MVF,” Modern says in its complaint. “He had been the leader of and force behind MVF. Clients and employees left in droves in the aftermath of this decision.”
     The complaint also paints a picture of Avila and Sweet as being acutely incompetent and in some instances corrupt.
     Modern claims that Avila brought his mistress on board in an unnecessary marketing position, paying her thousands of dollars despite her lack of qualifications or contributions to the company.
     “Avila used company resources to pay for his romantic life,” the complaint says.
     After the removal of Barkat and other employees, HBO took “Game of Thrones” elsewhere and Modern VideoFilm slowly but surely became a worthless shell company, according to the complaint.
     “Both Sweet and Avila were agents of Medley Capital who ran MVF into the ground and destroyed it,” the complaint says.
     A spokesman for Medley said the complaint is similar to one filed in May 2015, which has already been dismissed.
     “The Aug. 29, 2016 complaint is an attempt to reassert substantially the same claims that were previously asserted by Moshe Barkat and Modern VideoFilm Holdings in each of their three prior complaints,” the spokesman said. “Those claims for breach of fiduciary duty and related causes of action have already been dismissed by the California Superior Court on several occasions, most recently on June 6, 2016, when the court dismissed those claims with prejudice.”
     Modern seeks damages in excess of $100 million. The company is represented by its attorney Louis Miller.

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