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« | Home | »

More trouble for UFC’s main sponsor, Xyience

By Zach Arnold | October 16, 2007

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By Zach Arnold

Adam Swift at MMA Payout is reporting that the Department of Corporations in the state of California has issued a desist and refrain order against Xyience. Read Swift’s full report for the list of complaints against Xyience Inc.

The news comes at a very interesting time for Rich Bergeron, who was sued by Xyience Inc. for $25 million USD in Clark County, Nevada (Las Vegas). An interesting sidenote to the Bergeron lawsuit is that the judge in the case, Timothy C. Williams, was the same judge that presided over the Fishman Companies vs. DSE Inc. lawsuit. On October 11th, Bergeron filed a 1-page motion to dismiss document with the court. The attorney representing Xyience Inc. is Jamie Cogburn.

Xyience Inc. recently signed a three-year extension with the UFC to remain as the promotion’s main sponsor.

Bonus question: When will media writers start scrutinizing the relationship between Xyience and UFC? It may not be a glamourous or sexy topic, but it is a story worth commenting on… is it not?

Topics: Media, MMA, UFC, Zach Arnold | 27 Comments » | Permalink | Trackback |

27 Responses to “More trouble for UFC’s main sponsor, Xyience”

  1. Anonymous Fan says:

    Would they even be business associates if they hadn’t gone to high school together?

  2. Dave says:

    I’ve been reading about this allegedly corrupt company for what seems like a year now. Mostly from the mentioned poor lad who’s getting sued by them. From what I’ve read it seems as though Bergeron did his homework. There has been quite a few court cases recently involving companies suing folks because they don’t like being taken to task on a website. Some examples that come to mind are Lowe’s and Video Professor. While those cases are slightly different they do have some in common with this Xyience case.

    If Mr. Bergeron is reading this he may want to contact the Electronic Frontier Foundation (eff.org) would be willing to help out in any way. They helped out in both of the other cases I mentioned above.

    Anyway as far as the question: why have media writers not scrutinized this relationship between the UFC and Xyience? I think it’s a combination of disinterest and fear. Some don’t see it as a big story. I personally think it has the potential to bring the UFC to it’s knees. Then there’s fear. Nobody wants to get sued, even when they know they aren’t wrong. Also I don’t think anybody writing about MMA wants to burn their bridges (completely) with UFC.

  3. fightopinionReader says:

    Given Xyience’s history, I’m guessing the UFC – Xyience agreement would consist of up front payments, with the UFC risking very little. Just speculation on my part.

    Having a sleazy sponsor is not always a big deal. If the sleaze were to affect a sentimental victim (kids, physical challenged, mentally challenged, etc), offend a political interest group, or involve a media hot topic (steroids, mob), or if the UFC will actively aiding or abetting the sleaze, than there would be greater interest. But this particular sleaze is very dry, supposedly ripping off some faceless, unknown investors and violating some complex state regulations.

  4. SamScaff says:

    I dont think any journalists (or bloggers) want to acknowledge that Xyience exists. Because it has an absolutely embarassing and terrible name as well as a cringe-inspiring advertising campaign. The whole putting the can in the fighter’s hand thing was soo f-ing stupid. And how bad did we all feel when Rich Franklin with his shattered nose pretended to drink that crap after the Anderson Silva fight.

    I think most people wish Xyience didnt exist, or at least was NOT a sponsor of UFC. I know I do.

  5. The Gaijin says:

    “Having a sleazy sponsor is not always a big deal. If the sleaze were to affect a sentimental victim (kids, physical challenged, mentally challenged, etc), offend a political interest group, or involve a media hot topic (steroids, mob), or if the UFC will actively aiding or abetting the sleaze, than there would be greater interest. But this particular sleaze is very dry, supposedly ripping off some faceless, unknown investors and violating some complex state regulations.”

    It’s certainly nowhere near as scandalous or sexy as a relationship with the yakuza/mob, so unless and until something like that surfaces, I really don’t see it gaining too much traction.

    One might muse about this however: Xyience’s shady business dealings are no surprise and have been somewhat common knowledge for some time now (there’s been several reports about this on FightOpinion alone), yet UFC continues to have them as one of their mainline sponsors. Maybe they’re a little more hard up for sponsors than they have been letting on (re: One of their bigger sponsors could go insolvent/be involved in an ENRON style scandal etc. etc. and is just the type of bad press they don’t want or negative association they don’t need), not to mention another one of their big sponsors (Amp’d) filed Chapter 11 recently too – the well is starting to run dry on that end(?).

  6. If Dana was drinking Coke instead of NOX CG-4 they might have signed Fedor.

  7. D. Capitated says:

    re: One of their bigger sponsors could go insolvent/be involved in an ENRON style scandal etc. etc. and is just the type of bad press they don’t want or negative association they don’t need), not to mention another one of their big sponsors (Amp’d) filed Chapter 11 recently too – the well is starting to run dry on that end(?).

    Enron was a massive international corporation with $100+ billion in yearly revenue, holdings all over the world, and 19,000 employees. I would be astonished if Xyience had more than a couple hundred employees and $50 million dollars in yearly revenue.

  8. The Gaijin says:

    Clearly, I didn’t mean something on as monumental a scale as Enron genius, hence the “Enron-STYLE scandal” (not Enron-LEVEL) statement. Rather, I was alluding the negative association and press of having a major sponsor being involved in investor lawsuits, stories of corporate fraud etc. as well as the possibility of a major “long term” sponsor having, ya know, NO MONEY.

    Fact of the matter is one of their big sponsors filed a Chapter 11 and the other one has been facing continued allegations of financial wrongdoing and could be involved in on-going and embarrassing litigations. So we could see the loss of two of their big sponsors and they’ll be left with – Mickeys, Conan: Video Game and …?

    Normative interpretations of my post would have easily lead most people to the correct conclusion, but once again I’m glad to see you’re still a raging douche know-it-all.

    “Enron was a massive international corporation with $100+ billion in yearly revenue,”

    And obviously they DIDN’T have $+100B in yearly revenue now did they? Or we’d never being referring to such financial shenanigans as “Enron-type” scandals…

  9. The Gaijin says:

    (1) Why are the Fertitta brother’s who are involved in casinos and the type of stringent regulations and oversight that that involvement entails even bothering to associate themselves with a “known criminal” like Pike?? It’s nowhere near worth the risk of tarnishing themselves or attracting negative heat.

    (2) If the desist and refrain order is in place order goes has any weight, one might think this would negatively effect their ability to act as a “major sponsor” – the order supposedly came out 1 month before they announced their renewed sponsorship (which coincided with a $12M share funding – similar to a Canadian ‘private placement’).

    (3) If the Bergeron website has any factual legitimacy, could this story gain some more traction or bad press based on the fact that he alleges that the Fertitta brothers are de facto owners/controllers of Xyience? One wouldn’t think these allegations of securities fraud against Xyience would sit to well with the NSGC if it turns out Frank and Lorenzo have business involvement with the company.

    Maybe I’m making a mountain out of a molehill b/c I’ve got nothing better to do before going to bed…but this story looks a lot more interesting than it did at first blush.

  10. fightopinionReader says:

    Check out the television in the wee hours of the night, many channels sell paid programming to the sleaziest of advertisers: Natural male enhancement, no money down real estate, incredible weight loss in one tiny pill, simple work out machines that will give you tons of muscle in a 30 minute workout, and the cure for baldness.

    I’m sure many of these businesses will be bankrupt in 5 years. Any of the businesses that manage to succeed will probably be investigated by a fed watchdog agency. Kevin Trudeau, despite the sleasiest of reputations, still manages to buy advertising time.

    For the most part, viewers don’t associate these fraudulent products with the channels or show they run on. Viewers can easily separate the advertisers from the entertainment programming.

  11. D.Capitated says:

    Clearly, I didn’t mean something on as monumental a scale as Enron genius, hence the “Enron-STYLE scandal” (not Enron-LEVEL) statement. Rather, I was alluding the negative association and press of having a major sponsor being involved in investor lawsuits, stories of corporate fraud etc. as well as the possibility of a major “long term” sponsor having, ya know, NO MONEY.

    An Enron-style scandal would mean that someone somewhere cares about Xyience. Its a niche product in a niche market. Its like worrying about ICO-PRO coming up in Congressional hearings for Vince. As for whether or not their sponsors are doing super doesn’t matter as long as they recieve money to plaster names on the canvas, guaranteed.

    And obviously they DIDN’T have $+100B in yearly revenue now did they? Or we’d never being referring to such financial shenanigans as “Enron-type” scandals…

    Look up the word “revenue” in the dictionary. Then come back to argue what Enron’s was rather than pretend to know what you’re talking about.

    Why are the Fertitta brother’s who are involved in casinos and the type of stringent regulations and oversight that that involvement entails even bothering to associate themselves with a “known criminal” like Pike?? It’s nowhere near worth the risk of tarnishing themselves or attracting negative heat.

    Pike is buying advertisement space. This is not some deep working involvement where Pike owns half of UFC or manages fighters on behalf of them, and so it will cast no pall on the company. Were the Houston Astros embroiled in controversy over Enron?

    If the desist and refrain order is in place order goes has any weight, one might think this would negatively effect their ability to act as a “major sponsor”

    Why? What if they already paid the UFC?

    If the Bergeron website has any factual legitimacy, could this story gain some more traction or bad press based on the fact that he alleges that the Fertitta brothers are de facto owners/controllers of Xyience?

    If the Fertitta Bros. own Xyience, sure, there could concievably be more scruitiny, though it would come from the FTC rather than sporting commissions. But that’s a pretty big “if”. What effect would it have on Zuffa in the public’s eye? Probably none, unless they were fixing fights, supplying steroids, or something similar.

  12. Jeremy (not that Jeremy) says:

    This is a one way street. There’s no risk to UFC from Xyience’s problems aside from potentially losing a sponsor.

    It’s the equivalent of the New England Patriots “CMGI Field” –> “Gillette Stadium” thing. If they go down, then someone else will buy the sponsorship.

    If anyone is actually interested in knowing whether the Xyience thing is similar to Enron (short version, it’s not), then let me know and I’ll write a monster post about it that no one wants to read when I have some time.

  13. The Gaijin says:

    “Look up the word “revenue” in the dictionary. Then come back to argue what Enron’s was rather than pretend to know what you’re talking about.”

    Enron’s accountants were as cutesy as you about what’s considered “revenue”. Please refresh me as to how that worked out again? Bottom line they WERE NOT making what the federal government or any securities considered to be “revenue”…usually your stock doesn’t drop from $90.00 to pennies b/c “people didn’t go look in the dictionary to see what ‘revenue’ means”.

    Nice try tho 😉

  14. The Gaijin says:

    “Why? What if they already paid the UFC?”

    My definition (though maybe not in Webster’s) of long term sponsorship would entail more than one payment.

  15. D.Capitated says:

    Enron’s accountants were as cutesy as you about what’s considered “revenue”. Please refresh me as to how that worked out again? Bottom line they WERE NOT making what the federal government or any securities considered to be “revenue”

    You should look up exactly what happened. The revenues they reported were done so legally, though through a loophole in the law. Instead you are making gross errors and passing them off as intelligent opinions.

    …usually your stock doesn’t drop from $90.00 to pennies b/c “people didn’t go look in the dictionary to see what ‘revenue’ means”.

    You can have almost infinite revenue, but if your expenses are +1 of that, you’re still losing money. I hope you are aware of this.

    My definition (though maybe not in Webster’s) of long term sponsorship would entail more than one payment.

    The definition of Xyience’s contract with the UFC and how Zuffa has been compensated is completely unknown to you or me. Was it one payment? Was the last payment given before September 10th of this year (which is when that Cease and Desist was served)? Quite possible. Is it possible that Xyience can still pay for advertiser space despite not being able to sell shares in the company (which is what that notice pertains to)? Dunno, I wouldn’t be shocked if they could. What damage would any of this do to the UFC’s credibility? None, unless some amazing things come out soon.

  16. The Gaijin says:

    “You should look up exactly what happened. The revenues they reported were done so legally, though through a loophole in the law. Instead you are making gross errors and passing them off as intelligent opinions.”

    Like your intelligent opinion that spurious accounting practices should be passed off as ‘revenues’.

    Selling off money losing assets to shell corporations (that you set up-own-finance), shifting losses off of balance sheets and then claiming the sales as cashflows. All the while neglecting to reflect the fact that they were merely taking money from their left pocket and putting it into their right pocket [which the ILLEGALLY failed to report as loans to the shell corps – which would have reflected the fact that they were merely paying themselves]. And of course capitalizing entire transactions rather than the income made from them. That’s certainly what I and any intelligent person would consider “revenues”.

    Sorry I (and millions of others) don’t share the same view that you and Enron did about what constitutes “revenues”. Clearly *I’m* the one making “gross errors” here.

    Play your little semantics and accounting loophole games all you want…we all know what happened and you and I both know you’re wrong. You really are a fuckin know-it-all douche eh?

  17. D.Capitated says:

    Like your intelligent opinion that spurious accounting practices should be passed off as ‘revenues’.

    I didn’t say it was right. I’m just telling you that at the time, they were exploiting a flaw in the system. And they did. Go search revenue numbers for Enron and see what comes up.

    In any case, I don’t even know why we’re having this discussion. I’m assuming its because you feel that you have to be right about something after being rebuked repeatedly over what you apparently feel may be a scandal capable of destroying the lone remaining major MMA promotion. Enron is infinitely bigger than Xyience in every way, shape, and form. Either you get that or you don’t.

  18. The Gaijin says:

    Hahaha…please tell me where I said it was capable of bringing down the UFC? The only place where I could have even conceivably eluded to this included a post amble where I said it would take a major stretch and some serious 1 in a million odds for things to actually have any traction on that story.

    I never once said that the Xyience “scandal” would since their ship. I said it was bad press that they wouldn’t want or need (since some interest groups will attach onto any negative press to villify them) and that it wasn’t great news that a 2nd major sponsor appeared to be in financial (as well as legal) troubles. Last I checked I don’t see too many major sponsors lining up for them – not that this is a big deal if you read Adam Swift’s analysis of their financial situation (they don’t appear to be in need of outside funds at the moment).

    But its just the hair on the turd sandwich that has been ’07 when it comes to the bad news side of things. They’re losing boatloads of cash on their overseas PPVs, they bought a $40M albatross that they ended up winding up and in doing so severely crippling their ability to do business in a lucrative (though not as big as it once was) Japanese marketplace, a great deal of upsets have damaged their ability to have marketable ppv’s and possibly damaged the drawing power of some of their biggest names (it will be interesting to see how their later half of ’07 PPVs have sold), the HBO deal died on the table after White called it a done deal on numerous occassions and they couldn’t pen Fedor (likely not that big of a negative since he was going to get ~$1M/fight guaranteed and is not a bankable guy as of yet) which in turn led to them losing their only surefire PPV draw for the short term, in light of all the injuries and upsets (a far bigger deal).

    The Xyience thing will far from kill them but it’s not a good thing when all your major sponsors are companies that won’t or might not be around in a year and you’ve got no one to replace them.

  19. AS says:

    Every other MMA promoter in the country would kill for the UFC’s “problems.”

  20. D.Capitated says:

    Hahaha…please tell me where I said it was capable of bringing down the UFC? blah blah blah

    Listen, however the Xyience deal goes, no matter what happens to the company, it is not going to affect Zuffa unless they are unable to replace Xyience as a sponsor, which I would be shocked if they were incapable of doing so. There is no “negative heat” that will come of it from anyone except fanboys and their MMA blogs. As far as everyone knows, the Fertittas don’t own Xyience, nor is there a claim that they do. There is no clear cut indication that Xyience has or will be unable to pay for advertising space.

    The rest of your post is an excuse so that you can talk about the ills of the UFC, as if 2007 has been a disasterous year for the company following two gangbuster PPVs, a probably third in December, solid numbers for free TV events, etc. This is hardly to say that its been a perfect year for them, but god knows it hasn’t been hell either.

  21. So I guess anyone who is against Xyience is also opposed to fighters getting sponsorship money.

  22. klown says:

    GameCritics,

    No, silly. We support Dana White dropping his arrogant attitude and courting legitimate sponsors instead of making stupid statements that turn sponsors away.

  23. The Gaijin says:

    “The rest of your post is an excuse blah blah.”

    I never said it was a disastrous year, but again assume that in order to further your own argument. I assume you have a crystal ball that gives you the numbers on UFC 76, 77, 78 which are awful looking in terms of drawing the buying public and of course the UFC December PPV that is now lacking Randy, likely won’t have Rampage, etc. etc.??

    Fact of the matter is that as of late, UFC has been the recipient of some pretty crappy luck with fighters and on the business/business development side of things. Maybe Dana White needs to reconsider his business tactics especially in light of the PRIDE fiasco, HBO deal falling thru, horrible attitude to attracting corporate sponsors, Fedor and Randy? Maybe not…let me know what your crystal ball tells you

  24. D. Capitated says:

    I never said it was a disastrous year, but again assume that in order to further your own argument. I assume you have a crystal ball that gives you the numbers on UFC 76, 77, 78 which are awful looking in terms of drawing the buying public and of course the UFC December PPV that is now lacking Randy, likely won’t have Rampage, etc. etc.??

    It was never going to have them to begin with. Nor does it necessarily need them to succeed in any way.

    Fact of the matter is that as of late, UFC has been the recipient of some pretty crappy luck with fighters and on the business/business development side of things. Maybe Dana White needs to reconsider his business tactics especially in light of the PRIDE fiasco, HBO deal falling thru, horrible attitude to attracting corporate sponsors, Fedor and Randy? Maybe not…let me know what your crystal ball tells you

    Your crystal ball must be slightly damaged if you believe that Couture/anyone or Rampage/anyone was ever lined up for December 29th. What will Dana do? I don’t know what he’ll do because he hasn’t done it yet. He may very well end up with a ESPN deal and have Burger King as a full time sponsor in 3 months.

  25. Any time something bad happens to the UFC, the “Dana White needs to reconsider his business tactics” comments come out on cue lead by Josh Gross, who exposes his fanboy side each time. I’m sick of hearing this for YEARS now.

  26. “If the Fertitta Bros. own Xyience, sure, there could concievably be more scruitiny, though it would come from the FTC rather than sporting commissions. But that’s a pretty big “if”. What effect would it have on Zuffa in the public’s eye? Probably none, unless they were fixing fights, supplying steroids, or something similar.”

    There is no longer an “if” as far as the Fertittas being major financiers of Xyience. Do they own Xyience? No, not yet. If you go to my Web-site about the case I’m facing, you will find this link: http://www.unlimitedfightnews.com/exhibit23.htm

    It’s an internal email detailing how this deal came to pass. The shareholders were held over a barrell and forced to accept things they probably should have scrutinized a bit more. I’ve received information that the $12 million in investment funds seems to be misrepresented by the company brass as capital to extend the brand. But, if you look at the exhibit link you’ll see that the money was necessary to prevent bankruptcy and pay off voluminous debt. The UFC reportedly was owed $5 million in previous sponsorship payments that came out of the new deal, and then the new deal was signed. How much money is really left over for expansion, let alone worldwide expansion? The official press release announced (that’s also linked to exhibit 23) the new funding would be devoted to expanding the brand.

    The idea that this is not a huge story seems like a very ignorant assessment. What you have here is a tidal wave of bad press for the UFC, and this all comes at a time where they are facing the most competition ever. This story was heavily researched from day one, and the case against me will end with my reporting coming out spotless. I never had a vendetta or an agenda. The fact that it’s not glamorous and not many other outlets have picked it up is due to several factors. For one, there have been intimidation tactics employed against insiders, which is why I’ve had to report on some things coming from anonymous sources. For another, the UFC and Xyience are engaged in something much more than a sponsorship deal. This goes back to high school, as one astute poster pointed out. This is not some wild conspiracy. It is an orchestrated, tactical, devious plan designed to make everybody rich off other people’s backs.

    They have kept it out of the public eye for so long because of their conjoined power and influence. Even my stories were initially labeled as far fetched, gossip, and other derogatory names. Yet, it all makes sense when you look at it. Why would they stick together through thick and thin unless each side had something with which to incriminate the other? It’s a big chess game where the partners are trying to use each other, and they can’t ever go to extremes and cut ties because of what’s been done to facilitate that. There are no sacrificial lambs to slaughter. The strategy of incriminating those who insulate you has worked so far until very recently. Because of my lawsuit and the work I’ve done to make sure everything is corroborated without a doubt, the press is putting the pieces together while also still pussyfooting around the major story here of fraud and corruption. They are taking baby steps because of the threat of being locked out of covering the UFC.

    So, fear of being ostracized by the biggest player in the MMA industry plays a major role in my the mainstream press isn’t picking it up. That’s why it’s only coming out now that the UFC is experiencing some heavy hits in the news. It’s a bandwagon attack that’s in many ways justified. The UFC brass has had a chip on their shoulders for far too long, and now the media is trying to humble them a bit while the competition is making serious gains.

    As far as the story not being glamorous enough, having a unique, full understanding of what’s been going on here gives me the impression that this whole saga is blockbuster movie fodder. There is sex, scandal, power, money, and evil intentions wrapped up in all of this drama that is far stranger and more intriguing than any fiction writer could even imagine. What I’ve reported hasn’t always been written in such a way as to entertain people, but my intention was never to dress it up with all kinds of bells and whistles. I had to present the facts and present only the information I could corroborate from more than one source or from documented evidence. What I didn’t report is some intense, amazing stuff that would raise lots of eyebrows and make for a great soap opera or mini series.

    At any rate, I am never one to toot my own horn unless it’s justified, but I am honestly happy that my stories are finally starting to gain some much due respect. I worked extremely hard to put this series together amidst all kinds of critics and detractors (many from within Xyience) who tried to shoot it all down. I only wish I could get these kind of comments on my own site. Fight Opinion seems to have lots of educated readers who care about what goes on in the industry. I would be working harder to attract this kind of audience and get the same insight if I weren’t so embroiled in litigation and having to serve as my own attorney. Thanks for the props and don’t stop discussing this. It is public perception and education that will shape the future of Xyience and the UFC, and if the public doesn’t know and talk about the facts, then the mirage will continue to be believed as the real thing.

    Thanks,

    Rich Bergeron
    Unlimitedfightnews.com
    Editor/Writer/Webmaster
    rich.bergeron@gmail.com
    617-209-4325

  27. By the way, it was a 156-page motion to dismiss, not a 1-page document.

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