LOS ANGELES (CN) – The LA Weekly, once revered as an alternative news source for Angelenos, has been mismanaged by a group of investors to the “point of no return” according to an investor who accused the owners of hurting the publication by firing most of the editorial department, drying up revenue streams and using the publication’s name to fund other ventures.
A group of investors bought the LA Weekly this past November. One of the investors includes Los Angeles-based cannabis attorney David Welch, who sued his co-investors in LA County Superior Court on Monday.
Welch lays much of the blame on the group’s leader Brian Calle, publisher at the LA Weekly and CEO of the publication’s parent company Street Media. Calle formerly headed the editorial board at the Orange County Register and was a contributor to the far-right news site Breitbart.
According to Welch, the identities of many of the other investors were hidden from him even though he performed four months of legal work to facilitate the purchase of the publication. He also claims the group asked him for $225,000 when they came up short to complete the purchase.
Welch says he was promised a spot on the publication’s management team but had no idea Calle would fire most of the editorial team the day the sale became finalized.
After the ensuing backlash, the new investors lost sponsored tie-in events and took to promising favorable reviews to restaurants that participated in food events.
“In interviews, Calle discussed shifting the focus of the LA Weekly in a direction that favored major advertisers by offering non-controversial, if not outright favorable, coverage,” according to the complaint.
A boycott organized by former contributors pulled away enough sponsors from one food event, resulting in its cancellation, and other longtime sponsors pulled their advertising from the weekly.
Welch says while these series of blunders were bad enough, Calle and the other investors diverted profits and used the publication to line their own pockets.
“Through a series of self-interested transactions, made without adequate disclosures and other safeguards to ensure that Street Media received fair market value for its services, defendants began to personally enrich themselves from the company’s coffers,” Welch says in the complaint.
In one instance, Welch claims he was pressured to sign off on a contract for Calle to receive a $135,000 salary and a $135,000 bonus for “trivially easy tasks,” like signing an office lease and hiring replacements for the fired staff.
Calle has also given free advertising to a cannabis company where he collects a salary as a marketing officer and has made no effort to address this ethical violation, Welch says.
Management also lied to employees by claiming paid time off had to be reduced due to a new local law. Welch says he would not put his name to the directive and was subsequently removed from the core management team despite being a 13 percent owner of Street Media.
Defendant investors include Wayne Gross and Alan Greenberg of the law firm Greenberg Gross, for whom Welch once did litigation work; Kevin Xu, CEO of a “regenerative medicine” company, and his mother Lily Li; attorney Steve Mehr; hotel developer Paul Makarechian; Andy Bequer, CEO of an addiction treatment center; property developer Michael Mugel; and professional skateboarder Nyjah Huston, who was featured on an LA Weekly cover without a disclaimer alerting readers to his role within the company.
Welch seeks dissolution of the investor group, damages, a constructive trust over all the assets misappropriated by defendants and other forms of relief.
An email sent to Calle, Xu and Mehr were not immediately responded to by press time. Welch is represented by Patricia Glaser and Rory S. Miller of Glaser Weil LLP.