LOS ANGELES (CN) – A shareholder in the Hollywood production company behind the ’70s Paul Newman comedy hit “Slapshot” wants to inspect corporate records and uncover what he claims is an “elaborate fraud” by company insiders.
Sven Ebeling and West Coast Pictures LLC estimate that Kings Road Entertainment lost $15 million when its shares were diluted as part of shake-up by CEO, Michael Yedor.
Ebeling and West Coast Picture sued Kings Road Entertainment in Superior Court. Those are the only parties to the complaint.
“The need for inspection arises from a scheme led by Michael A. Yedor in which respondent’s articles and bylaws were purportedly amended and respondent’s board members were purportedly replaced without actual shareholder authorization. The purpose of the scheme was to usurp the value of KRE’s assets for Mr. Yedor and his agents to the detriment of petitioners, the other shareholders of KRE and KRE itself,” the complaint states.
Ebeling seeks to “investigate the malfeasance of the current purported board.” He claims that Yedor orchestrated the takeover and waste of corporate assets to oust him from the Kings Road board.
“These actions included amendment of KRE’s Articles of Incorporation and Bylaws, replacement of the entire board, including petitioner Ebeling, without notice to the shareholders, and entering into a tangled web of self-interested proxy agreements, designed to wrest control of KRE from petitioners,” the complaint states.
Ebeling claims company shares were diluted through issuance of more than 8.6 million shares for “little value” to De-Invest and its principal Bekim Zemoski, and 2.3 million shares to movie producer Rose-Marie Couture.
“This had the effect of diluting petitioners’ dominant position in KRE. Petitioner Ebeling was deceived into voting for his issuance by various false representations by those collaborating in the scheme,” the complaint states.
In late 2010, the production company secured more than 8.6 million shares from Zemoski, close to 1.7 million shares from KRE director Phillip Holmes and roughly 2.9 million shares from his wife, Couture, Ebeling says.
“Without any notice to petitioners, the collaborators purported to make serious changes to the board and the corporation’s organic documents. The collaborators could not get their story straight as to when this sham shareholder action occurred,” Ebeling adds.
He says that Yedor claimed the reshuffle took place on Dec. 13, 2010, while KRE corporate counsel Paul Nesbitt stated that it happened on Dec. 17.
“On one of those days, the collaborators purported to remove all board members, including petitioner Ebeling, elect an entirely new board, and repeal and replace the existing Bylaws and Articles of Incorporation,” the complaint states.
Ebeling says company insiders used their “new found power” to hand Yedor a controlling interest and Holmes an “unjustified windfall from KRE’s assets.”
“Holmes will be given ‘participation’ in the company’s film assets purportedly as retroactive compensation for services he rendered from February 2008 to December 2010, again wasting KRE’s assets in favor of certain insiders,” Ebeling claims.
He says that since late April this year, KRE has ignored or obstructed repeated requests to inspect corporate books and records.
In early August, James Kilkowski, a KRE representative, gave the go-ahead for an inspection but then “abruptly canceled” it, Ebeling says.
“Mr. Kilkowski offered no explanation as to why KRE would not allow inspection of other records, such as minutes of proceedings,” Ebeling adds.
Kings Road Entertainment produced Steve Martin’s mid-80s comedy “All of Me,” and “Kickboxer,” starring Jean-Claude Van Damme. The company says on its corporate web page that both projects are slated for remakes.
Ebeling and West Coast Pictures are represented by Oscar Ramallo with Kaye Scholer.