Private Vows to File Counterclaim Against Bunimovitz

Aug 25, 2010 6:00 AM PST
BARCELONA — The feud between Private Media Group and the company’s former CEO Ilan Bunimovitz is heating up with Private saying it intends to file counterclaims against Bunimovitz, seeking monetary damages and other relief.

According to documents obtained by XBIZ, the move is in response to Bunimovitz’s and two large investors’ claims alleging mismanagement of the company’s business by the company’s three independent directors, Johan G. Carlberg, Peter Dixinger, Bo Rodebrandt and Private’s CEO and chairman Berth Milton.

The papers say Private believes that the allegations are without merit and are an improper attempt to circumvent valid and lawful actions of the disinterested majority of the board of directors, including all three independent directors and to instead place control of the company in the hands of a disgruntled former employee (Bunimovitz), his former subordinate employee (Eric Johnson) and a creditor (Consipio Holding BV).

The company also states that Bunimovitz’s actions are a clear and serious breach of his fiduciary duties and have been taken in bad faith to advance his interests.

According to the documents, Bunimovitz also has filed an employment arbitration demand and related claim against the company alleging that his termination on July 19 was without cause and taken in retaliation for his demands of an independent investigation of Milton’s alleged “self-dealing transactions.”

Bunimovitz also claims his termination was an effort by the company to silence him and that his termination wasn’t properly authorized by the board of directors.

But Private says both Bunimovitz and his attorneys were aware of the request made by the chairman of the board of directors to terminate him since at least May.

In addition, the company says the “self-dealing transactions” included payment of rent for the chairman’s personal office, the failure of the chairman to repay a multimillion- dollar loan from the company and unauthorized cash payments that the chairman be directed to himself, all of which, according to the company, were under review by the independent directors since Jan. 2010 and disclosed in the company’s SEC reports.

In court documents filed with the Clark County District Court of Nevada on Aug. 13, Bunimovitz claims that “Milton doesn’t own or control a majority of Private’s outstanding common stock.” But, according to the filing, “Milton has stated that he intends to cause Private to issue millions of additional shares of Private to himself or entities he controls to ensure that he does control a majority of Private stock.”

A Nevada judge last week issued a temporary restraining order against Private, putting a halt to any special meetings by Private’s board of directors without authorization from the court.

The injunction also enjoins Private from issuing any additional shares of stock, incurring any additional debt, disposing of any business assets outside of the ordinary course of business and making any loans to any officer, affiliate or director of the company.

A hearing has been set for Sept. 3, with the judge planning to weigh a preliminary restraining order and whether a receiver should be appointed to handle Private’s business dealings.

Bunimovitz told XBIZ that he couldn’t talk about on-going litigation.

Private’s attorneys did not immediately respond to XBIZ for comment by post time.

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