Creditors Allege Shady Insider Dealing In Midway Bankruptcy
Creditors Allege Shady Insider Dealing In Midway Bankruptcy
February 15, 2009
When mystery man Mark Thomas acquired troubled game publisher Midway for a mere $100,000 last November, the deal raised more than a few eyebrows. It also raised questions like:
- Who is Mark Thomas?
- How could a company which owns popular franchises like Mortal Kombat and TNA Impact! be purchased so cheaply?
A motion filed on behalf of certain Midway creditors in U.S. Bankruptcy Court in Delaware on Friday makes those questions a matter of record and seeks to block the troubled publisher's move to spend collateral which obscure buyer Mark Thomas's Aquisitions Holding Subsidiary (AHS) put up as part of the Midway purchase.
The language of the motion, which seeks to protect the interests of holders of $150 million of senior Midway debt, comes close to alleging fraudulent insider dealing:
These cases... are tainted by highly unusual transactions by insiders of the Debtors... that, to put it charitably, require significant scrutiny... The rights and protections now offered [to AHS] are excessive and, under the circumstances, inappropriate...
The motion also digs into the shadowy relationship between former Midway owner Sumner Redstone (far left) and mysterious purchaser Mark Thomas:
[Midway] was dominated and controlled until November 28, 2008, by Sumner Redstone...
As recently as February 29, 2008, [Midway's] balance sheet was far less encumbered by debt... On February 29th, 2008 [Midway took three loans from Redstone-controlled entities]... just like that [Midway's] $15 million in outstanding loan indebtedness... ballooned to $90 million... to [Redstone]...
After the consummation of these Insider Loans... the Redstone parties sold for [$100,000] all of their [holdings] to... a very secretive individual named Mark Thomas... a person virtually unknown in the video game industry...
No disclosures ever have been made regarding Thomas or what, if any, relationship Thomas or his companies have with any Redstone Party... But it is safe to assume there must be a connection... given that Redstone essentially gifted [Midway for a mere $100,000]... to Thomas...
[Thomas stands] to reap an enormous, almost unprecedented windfall... if paid in full... the Thomas Parties will recover some 30,000% on their $100,000 investment within a matter of a few months... The Thomas Parties' return stands in stark contrast to the tens, or potentially even hundreds, of millions of dollars... that the Redstone-Thomas transaction may have stolen from [other creditors]...
Based on such language, it sounds like things could get very ugly, very quickly in the Midway bankruptcy proceedings. With that in mind, GamePolitics turned to Wedbush-Morgan analyst Michael Pachter for comment on the allegations:
The simple answer is that the unsecured creditors are alleging that the issuance of debt to Redstone secured by collateral was an “insider” deal. The secured debt has preference over unsecured debt in liquidation, meaning that Redstone’s successor (Thomas) gets paid first.
The filing goes on to allege that when Redstone sold his equity and secured debt to Thomas, the act was a change of ownership, and triggered rules that wiped out tax losses, accelerated default provisions on the unsecured debt, and impaired Midway’s ability to refinance.
The unsecured creditors apparently don’t like the fact that Thomas was a financial buyer, and has full control now. It is not in Thomas’ best interests to risk his big payday, and the unsecured creditors apparently believe that Thomas is going to force repayment of the debt as accounts receivable are collected.
In substance, they’re saying that Redstone orchestrated this, and they don’t like it. They are trying to keep Thomas from pulling cash out until they get a chance to reorganize, as that could accelerate and exacerbate Midway’s troubles.
GP: We'll keep GamePolitics readers posted on developments...
DOCUMENT DUMP: Grab a copy of the creditors' motion here.
UPDATE: The Chicago Tribune has a piece on the guessing game surrounding Mark Thomas's identity (via Kotaku).
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Posted 02/09/10 at 01:16pm
Andrew Eisen: Shouldn't be. Spirit of anti-discrimination laws would seem to include sexual orientation (and eye color). Plus there's always equal protection and such. Never know until you try.
Andrew Eisen: Shouldn't be. Spirit of anti-discrimination laws would seem to include sexual orientation (and eye color). Plus there's always equal protection and such. Never know until you try.
Posted 02/09/10 at 01:10pm
Andrew Eisen: Should have sued (unless that wasn't an option given her financial situation or something). Might have won.
Andrew Eisen: Should have sued (unless that wasn't an option given her financial situation or something). Might have won.
Posted 02/09/10 at 01:00pm
Valdearg: Story about a Male to Female TG who was expressly told she wouldn't be given a job because she was TG. Its not the main point of the story, but explicit, perfectly legal discrimination like this exists.
Valdearg: Story about a Male to Female TG who was expressly told she wouldn't be given a job because she was TG. Its not the main point of the story, but explicit, perfectly legal discrimination like this exists.
Posted 02/09/10 at 12:53pm
Valdearg: Lol, I don't know. It may very well be legal to do so. Though that might able to fall under the "race" restriction, depending on how that point is argued.
Valdearg: Lol, I don't know. It may very well be legal to do so. Though that might able to fall under the "race" restriction, depending on how that point is argued.
Posted 02/09/10 at 12:51pm
Valdearg: I don't think they do have any legal recourse. I'll have to dig around, but I seriously believe that if the law doesn't specifically mention Sexual Orientation or Gender Identity, they can still be discriminated against in those 29 states.
Valdearg: I don't think they do have any legal recourse. I'll have to dig around, but I seriously believe that if the law doesn't specifically mention Sexual Orientation or Gender Identity, they can still be discriminated against in those 29 states.
Posted 02/09/10 at 12:51pm
Andrew Eisen: Eye color isn't covered either but I doubt it would be considered legal to refuse to hire people with green eyes.
Andrew Eisen: Eye color isn't covered either but I doubt it would be considered legal to refuse to hire people with green eyes.
Posted 02/09/10 at 12:48pm
Andrew Eisen: My explanation is longer than the Shoutbox will allow. Suffice to say that while those who are discriminated against do have legal recourse, anti-discrimination law should specifically cite sexual orientation so that there’s no question about it.
Andrew Eisen: My explanation is longer than the Shoutbox will allow. Suffice to say that while those who are discriminated against do have legal recourse, anti-discrimination law should specifically cite sexual orientation so that there’s no question about it.
Posted 02/09/10 at 12:42pm
Valdearg: "There is no federal law that consistently protects LGBT individuals from employment discrimination; it remains legal in 29 states, and in 38 states to do so based on gender identity or expression." From the Human Rights Campaign.
Valdearg: "There is no federal law that consistently protects LGBT individuals from employment discrimination; it remains legal in 29 states, and in 38 states to do so based on gender identity or expression." From the Human Rights Campaign.
Posted 02/09/10 at 12:40pm
Valdearg: @AE: Why don't you think I'm correct? I know Wiki could be flawed, but as far as it says, its up to date as of June 2009.
Valdearg: @AE: Why don't you think I'm correct? I know Wiki could be flawed, but as far as it says, its up to date as of June 2009.
Posted 02/09/10 at 12:39pm
Andrew Eisen: I don't think you're right but I really don't know and don't have the time to find out. However things actually are, it's very clear how they actually should be.
Andrew Eisen: I don't think you're right but I really don't know and don't have the time to find out. However things actually are, it's very clear how they actually should be.
Posted 02/09/10 at 12:34pm
Valdearg: "just because there's no specific state level protection for it, doesn't make discrimination right or legal." I would disagree. If there's no laws against it, it makes it perfectly legal. It's definitely not right, but perfectly legal to do.
Valdearg: "just because there's no specific state level protection for it, doesn't make discrimination right or legal." I would disagree. If there's no laws against it, it makes it perfectly legal. It's definitely not right, but perfectly legal to do.
Posted 02/09/10 at 12:33pm
Valdearg: Meaning in 29 states, private sector discrimination against gays is perfectly legal.. Sickening.
Valdearg: Meaning in 29 states, private sector discrimination against gays is perfectly legal.. Sickening.
Posted 02/09/10 at 12:33pm
Valdearg: 19 states have no protections, and another 10 only have protections for public sector jobs.
Valdearg: 19 states have no protections, and another 10 only have protections for public sector jobs.
Posted 02/09/10 at 12:32pm
Andrew Eisen: Well, most businesses have equal rights policies in place and just because there's no specific state level protection for it, doesn't make discrimination right or legal. Still, no argument against adding such protections.
Andrew Eisen: Well, most businesses have equal rights policies in place and just because there's no specific state level protection for it, doesn't make discrimination right or legal. Still, no argument against adding such protections.
Posted 02/09/10 at 12:28pm
Valdearg: More information. Apparently, it's worse than I actually thought.
Valdearg: More information. Apparently, it's worse than I actually thought.
Posted 02/09/10 at 12:28pm
Valdearg: Check the link. Apparently, its more like 20 states that have no protections.
Valdearg: Check the link. Apparently, its more like 20 states that have no protections.
Posted 02/09/10 at 12:26pm
Andrew Eisen: In the US? Not that I'm aware of. Sad if true.
Andrew Eisen: In the US? Not that I'm aware of. Sad if true.
Posted 02/09/10 at 12:25pm
Valdearg: @AE: Actually, I think, at least for now, businesses can still discriminate against gays in a few states.. Something like 5 or 8. Its part of why Gay Rights Advocates are in support of the Employee Nondiscrimination Act, or ENDA.
Valdearg: @AE: Actually, I think, at least for now, businesses can still discriminate against gays in a few states.. Something like 5 or 8. Its part of why Gay Rights Advocates are in support of the Employee Nondiscrimination Act, or ENDA.
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Comments
Sounds like the shit is just about to hit the fan. Won't be pretty.
Very ugly might actually be an understatement.
Another question one might ask is "Was this legal?"
When the whole deal came about, I thought the same thing. How can you sell something for so cheap when it has several [hundred] million in debt and virtually had no means as to make and repay the debt in the time that it had? I, also, think that this is not just an inside job, but also trying to make a fast buck in a, largely, illegal way.
Another question is why they thought they could get away with this. Yes, Midway's debt and poor management have devalued it, but a hundred times more would have been a lowball offer.
Good to see corporate raiding is still alive and well.
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I LIKE the fence. I get 2 groups to laugh at then.
I thought it was $100K on top of Mark Thomas taking on all that debt. Which seems pretty reasonable given all the debt Midway's in. What am I missing here?
Pachter clarified it pretty well, I think.
The fear is that Thomas will get his money out first and the rest of the creditors will get screwed.
It also seems that, if Thomas (who is not a game industry person) only wants to get paid, then he will take the revenue that could go to rebuilding the company, leaving Midway nowhere.
Now when you look at these two possibilities, you have to wonder about the Redstone-Thomas relationship and how this plan got cooked up.
I hate legal jargon, so what they think that Redstone wasn't just desperate to get out from under all that debt? (With as much as he stood to lose I'd wanna shuck it off on the first guy I met too) I mean I guess it could be some kinda fraud thing but I figured Bankruptcy was just along the line of common sense since they couldn't play in time if they wanted to. I mean if he files Bankruptcy that'd buy them time to profit off the major titles wouldn't it?
well, there's no doubt that the people crying foul are pushing a position of their own. And you can bet Redstone/Thomas have tons of lawyers of their own. Ultimately, the court will decide.
As a gamer, what I'd be most concerned about is Thomas pulling all of the revenue out that he can get, leaving Midway a hollow shell. We've already seen last week that they sold off Wheelman, which was supposed to be a big release for Midway.
Michael, I'm sure, has done enough research to determine who Thomas is. The Georgetown connection will lead back to relationships with Redstone, CBS, etc. that explains a lot. Also.....Thomas is a divorce attorney who goes back a ways. Think about it.
Hopefully, if this is the BS it looks like it is, we'll see this kind of corporate BS become a felony to the parties involved and finally start jailing some of these assholes.
White collar crime can never be a felony, how else dose the goverment make money. :P
Gore,Violence,Sexauilty,Fear,Emotion these are but modes of transportation of story and thought, to take them from society you create a society of children and nannys, since adults are not required.
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So let's say that this Mark Thomas is associated with Redstone, and that the transaction was done in order to screw the creditors; what happens then? Are the creditors able to go after Redstone and Thomas, or are they stuck dealing with Midway? Are there any possible criminal charges that Thomas and Redstone should worry about? Is it possible that the transaction may be reversed?
So let's say that this Mark Thomas is associated with Redstone, and that the transaction was done in order to screw the creditors; what happens then? Are the creditors able to go after Redstone and Thomas, or are they stuck dealing with Midway? Are there any possible criminal charges that Thomas and Redstone should worry about? Is it possible that the transaction may be reversed?
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