LOS ANGELES (CN) – Viacom diverted three years of ad revenue from the mixed martial arts promoter Bellator after seizing control of it, a shareholder claims in court.
Turkish shareholder Koloni Reklam, Sanayi, Ticaret sued Viacom in Superior Court on Monday alleging breach of contract, breach of fiduciary duty, unjust enrichment and other counts.
Koloni Reklam holds a 1 percent interest in Bellator. It claims Viacom bought a minority stake in Bellator Sport Worldwide and then diverted advertising revenue through a subsidiary called New Remote.
Businessman Bjorn Rebney founded the mixed martial arts promoter in 2008. Two years later Viacom bought 50 percent of the company, then got controlling interest in December 2011.
“Viacom has repeatedly purchased majority interests in privately held companies and followed the same modus operandi: withhold financials from minority shareholders while using its sheer mass and complicated weave of accounting relationships to hide or divert income at the expense of these shareholders, who are left in the dark,” the lawsuit states.
Koloni Reklam claims Viacom breached an operating agreement by failing to provide financial reports to minority members, making it “impossible for plaintiff to track Bellator’s performance and the flow of monies in and out of the company.”
It claims advertisers pay millions of dollars to sponsor Bellator’s mixed martial arts events by placing ads on cage mats and buying television spots.
“Over the past several years, none of this substantial revenue has been paid to Bellator. Receipt of this revenue would have made Bellator profitable, eliminated the need for further investment capital, and avoided dilution of plaintiffs’ interest in Bellator,” the complaint states.
Viacom said in April that it would make an adjustment of $500,000 to reflect revenue from New Remote’s license agreement with Bellator for event sponsorship, Koloni Reklam says. But it says it is “impossible” to determine from Bellator’s financial statements how much revenue Viacom has diverted to other business interests.
Koloni Reklam claims the amount owed could be hundreds of millions of dollars.
“In recent years, Viacom has directed its subsidiary, Spike TV, to substantially reduce the number of events produced by Bellator under the Spike-Bellator licensing deal, which has substantially diminished Bellator’s revenues and harmed the interests of minority members such as plaintiff,” the lawsuit states.
Koloni Reklam demands an accounting, and compensatory and punitive damages, and wants Viacom ordered to buy out its interest in Bellator or dissolve the company.
It is represented by Ekwan Rhow with Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow.
Viacom did not immediately respond to a request for comment.
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