Moshe Barkat, founder of the industry-leading film and video post-production house Modern VideoFilm (MVF), has filed a $100 million lawsuit in Los Angeles Superior Court against Medley Capital Corporation, consulting firm Deloitte Corporate Restructuring Group, and MVF board member Charles Sweet.
The suit alleges “bad faith misconduct, corruption, and gross incompetence,” and that the parties violated their fiduciary duty to MVF and breached Barkat’s employment contract with MVF. The suit claims further that that the defendants “destroyed Barkat’s life work, valued at more than $100 million at the time of their wrongdoing.”
According to his lawsuit, in 2012, Barkat wanted to pay off MVF’s existing debt and find a lender that would support MVF’s expansion. The lawsuit alleges that, after Barkat accepted a $50 million loan from Medley Capital, “Medley claimed ‘Events of Default’ had occurred, even though MVF had not missed a payment,” according to the lawsuit.
The lawsuit alleges that Medley then became heavily involved in the management and operations of the company, and took control of Barkat’s stock voting rights, fired MVF’s board of directors, appointed a board that was loyal to Medley, and removed Barkat as an officer of MVF.
Additionally, the suit says a lucrative co-venture deal between MVF and Technicolor fell apart “due to Medley’s heavy hand and its bad faith pursuit of equity in MVF as a condition of closing [the Technicolor deal].”
Barkat claims that Medley then insisted that Barkat retain Deloitte, even though the consulting group “was clueless about the post-production business and proposed no plan for helping the company.”
According to the suit, Deloitte executives took effective control of MVF, installed Charles Sweet as the sole board member, and “embarked on a fee churn” of $50,000 a week to Deloitte, which after paying itself $1 million from MVF’s coffers, “ran [MVF] into the ground….paying itself instead of [MVF] vendors.”
The suit further complains that by last September, Medley, Deloitte and board member Sweet “did not want Barkat to be in position to scrutinize their conduct in running the company,” and “engaged in a witch hunt to come up with reasons to fire Barkat,” who was subsequently terminated in breach of his employment contract after the defendants made numerous false, defamatory allegations.
Also named as defendants in the lawsuit are Medley Opportunity Fund II LP, MCC Advisors LLC, and MVF’s parent company, Modern VideoFilm, Inc. The complaint includes causes of action against the defendants for breach of employment contract, defamation, unfair competition, and breach of fiduciary duty by Medley, Deloitte and board member Sweet.
In a statement to TheWrap, a Medley spokesperson said, “We believe these claims are meritless and intend to defend them vigorously.”
Barkat founded MVF in 1979 and was the driving force behind the growth and success of the company for more than three decades as president and CEO. MVF was particularly admired for its content management system, which converted and stored files in multiple formats for clients.
The company hasworked on high-profile film and TV shows including “Avatar,” “Life of Pi,” “Star Wars,” “Modern Family,” “The Grand Budapest Hotel,” “Titanic 3D” and “Slumdog Millionaire.”