By Zach Arnold | May 2, 2016
Al Haymon envisioned a UFC-like scenario for boxing. As the Zuffa Myth goes, the Fertittas lost $44 million dollars before hitting it big with The Ultimate Fighter. Little did the Fertittas know how much Al Haymon would make their $44 million dollar “investment” in UFC look like chump change. Forget $44 million dollars. Forget the amount of cash organized crime spent in Japanese pro-wrestling, boxing, and MMA. Al Haymon trumped all of them with a $925 million dollar cash infusion into PBC.
Who on Earth would think that pouring $925 million dollars into combat sports would be a good idea? This is the basis of the latest prong in the nationwide legal attack against Al Haymon and the two investment trusts that have gone all-in with him.
First came the plea from the Association of Boxing Commissions to the Department of Justice to go after Al Haymon. Addendum: New ABC president Mike Mazzulli refuted the allegations made in the letter sent by ABC last year.
Then came the unfair competition & anti-trust lawsuits in California by both Golden Boy & Top Rank in Los Angeles Federal court. Haymon’s legal team couldn’t stop the plaintiffs from discovery & depositions, which will surely provide evidence to allow GB & TR to amend their initial legal complaint to add more defendants and more causes of actions.
Now comes the lawsuit against the two trust vehicles financing Al Haymon’s PBC. It’s a shareholder derivative lawsuit, meaning shareholders are suing the trust vehicles they invested money in and they’re doing so based on allegations that the corporation won’t fulfill their responsibility to the shareholders in getting their money back on an investment that supposedly violated the promises made in the investment prospectus.
Read Paul Gift’s article at Bloody Elbow titled $925 million lawsuit filed over investments with PBC’s ‘shady entrepreneur’ Al Haymon. Here’s the zinger from the article:
“According to Waddell’s website, as of Mar. 31, 2016 these six funds now have a total market value of only $357,747,414, which implies that the funds allegedly used to finance the PBC have collectively lost over $567 million in a little less than three years.”
The legal teeth for trying to choke out Al Haymon’s funding
Now I will point out some very interesting items you might want to focus on from this latest legal attack.
There are three plaintiffs, all shareholders, filing the lawsuit against the two trust funds backing Al Haymon. Two of those plaintiffs became investors in the trust funds in July of 2015. The legal complaint acknowledges that Ryan Caldwell, trust portfolio manager, had started financing Haymon in April of 2013.
The lawsuit cites only two causes of actions: breach of fiduciary duty and breach of contract. In plain English, “what the **** are you doing with my money?” causes of actions. The shareholders are asking a judge & jury to tell the investment trusts to get their money back from Al Haymon and make the shareholders whole. As a bonus, this lawsuit theoretically puts these shareholders in a higher position on the food chain should there be bankruptcy proceedings.
The lawsuit is an indirect attack on Al Haymon & (now former) trust portfolio manager Ryan Caldwell for all intents and purposes without actually naming them as defendants. And the strategy is built upon previous lawsuits already filed. Everything is interconnected.
The lawsuit alleges that the investment trusts shifted $925 million dollars into a Delaware LLC shell called Media Group Holdings. The legal argument made in the complaint is that ABC has asked for a criminal investigation into Haymon and that if a criminal investigation produces a conviction, the hundreds of millions of dollars in Media Group Holdings would vanish thus making the $925 million dollars poured into PBC worthless. Additionally, the Kansas lawsuit builds upon the Golden Boy & Top Rank lawsuits alleging that Haymon’s PBC is a criminal enterprise violating anti-trust & competition laws. The lawsuit also claims that the value of the investment into Haymon’s PBC becomes worthless if he loses the GB & TR lawsuits because his business plan would implode.
The Kansas lawsuit alleges that:
- Portfolio manager Ryan Caldwell shifted $925M into Media Group Holdings LLC for Haymon’s PBC
- The investment trusts got seats on the boards of Haymon’s various companies
- That Ryan Caldwell supposedly negotiated television deals on behalf of Al Haymon
- That Caldwell resigned or may have been forced out of the two funds and was hired as an executive for Haymon
- That the two trust vehicles pouring money into Haymon’s PBC acknowledged the creation of MGH to shareholders but did not detail what it was about or what the money was being invested in
- That Media Group Holdings LLC has given Haymon over $300 million dollars and that there is an estimated $525 million dollars left in the LLC
The legal complaint is very crafty to note that the plaintiffs did not ask the investment trusts to investigate the investments made into Media Group Holdings LLC because it would have been pointless to do so after the Board of Trustees were actively involved in the business dealings. This is important to point out because there is a quasi-sovereign immunity principle at work with shareholder derivative lawsuits. Before you can sue a state agency or a municipality, you have to give them the right to settle or reject a legal claim up front. The same principle is often exercised in shareholder derivative lawsuits, where you have to petition a corporation’s board for an investigation.
In the case of this derivative lawsuit, the plaintiffs are requesting that all of the money in Media Group Holdings LLC gets returned to the trusts and that the defendants pay back the $300 million dollars-plus supposedly already spent on Haymon’s PBC.
The end game is to recover the money lost on PBC and to choke out Haymon’s financial backing.
If the Kansas state lawsuit can survive a motion to dismiss, the value of discovery & deposition will not only prove to be enormous in the derivative lawsuit but also in the Golden Boy & Top Rank lawsuits. It would bust the doors wide open. The big question: what if the various civil lawsuits produce enough evidence to persuade the Feds to launch a real serious criminal investigation?