The lawyer in the case against Variety owner Jay Penske by a Beverly Hills marketing executive called to set me straight.
Lawyer Steven Morris said Penske refused to honor a joint venture signed last year between Variety and his client, Beverly Hills Media Group, before Penske bought the trade from Reed Elsevier. And so Penske just cancelled it, after first trying to negotiate different terms.
BHMG said: No can do. (Read it here)
BHMG sued Penske first, on April 30, for breach of contract. Penske countersued for fraud the next day, May 1, as the court documents confirm. Duly noted. (Our first story had the order wrong, as did Deadline.)
And there are some juicy details, it turns out. At issue is not just the joint venture between the trade and the marketing company but a $500,000 sponsorship they were supposed to split.
“It was the largest single sponsorship in Variety history,” said Morris.
So who was the client? Commerce Casino, down the 5. (Pictured from left, IMG's Barry Frank, Bert Bedrosian, Variety President Neil Stiles at Commerce Casino event)
The massive sponsorship associated the casino with a year-long series of events at Variety.
Morris said that contrary to Penske’s claim in his countersuit, he was well aware of the joint venture when he was in the process of buying Variety with investor Dan Loeb. Indeed, the $500,000 was paid in August of last year, well before the purchase. He said that Penske offered BHMG’s Bert Bedrosian a 10% commission on sales instead of the 50-50 split that had been signed in the contract.
"You can’t trick a guy into believing that he assumed a major contract in buying a company that wasn’t actually part of the deal,” said Morris. “The contract and the details of the transaction were disclosed. He has an army of lawyers who looked at the contract, they knew what they were buying.”
But Penske’s abrupt cancelling of the JV – which leaves more than $100,000 orphaned in the joint account of the now-disputed LLC – is apparently the new publishing executive’s modus operandi, Morris said.
“He’s repudiated many Variety deals,” said Morris. “Many don’t have the wherewithal to sue Variety. It’s a big undertaking. He says, ‘Take 20 cents on the dollar or sue me.'”
So Bert Bedrosian did.
Meanwhile, the $500,000 sponsorship would have to be considered a low in the history of the trade. One former sales executive told me that casinos were always considered off-limits for advertising.
“There were three places you wouldn’t take money – casinos, porn and Scientology,” said this former executive. “We were told: Do not do it. It was a line we were not to cross.”
Deadline now reports that Penske has now added Reed Elsevier and Reed Business Information as defendants to its claims of kickbacks and fraud in a complaint filed in Supreme Court of New York.
Penske’s attorney Matt Hinks said they had no comment for this story. Jay Penske called to discuss the lawsuit at some length, but declined to go on the record.