WWE- JAKKS LAWSUIT RELEASES
WWE FILES LAWSUIT AGAINST THEIR TOY LICENSEE, JAKKS PACIFIC
WWE issued the following press release this afternoon:
World Wrestling Entertainment, Inc. Files Suit against Jakks Pacific, Inc., THQ, Inc. and Related Defendants
Tuesday October 19, 3:16 pm ET
WWE Cites RICO Violations and Commercial Bribery Scheme in Connection with Intellectual Property Licenses
STAMFORD, Conn.--Oct. 19, 2004-- World Wrestling Entertainment, Inc. ("WWE") today filed a fourteen count complaint in the United States District Court for the Southern District of New York against Jakks Pacific, Inc. ("Jakks"), two foreign subsidiaries of Jakks, THQ, Inc. ("THQ"), a joint venture involving Jakks and THQ, Stanley Shenker & Associates, Inc. ("SSAI") and Bell Licensing, LLC. The suit also names as defendants certain individuals employed by the corporate defendants, including specifically Jack Friedman, Stephen Berman and Joel Bennett, the three highest-ranking executives of Jakks, and Stanley Shenker and James Bell.
The suit alleges numerous violations of the Racketeer Influenced and Corrupt Organization Act (RICO); violations of the anti-bribery provisions of the Robinson-Patman Act; and various claims arising under state law. By the action, WWE is seeking treble, punitive and other damages, as well as a declaration that the videogame license with the joint venture of Jakks and THQ, and a related amendment to the toy license with Jakks, are void and unenforceable due to commercial bribery and other violations of state law. The lawsuit can be viewed at corporate.wwe.com.
The suit arises out of litigation initially commenced by SSAI against WWE in Connecticut state court for commissions SSAI claimed it had earned while serving as WWE's licensing agent. During that litigation, WWE discovered certain irregularities in its licensing program beginning in the 1998 time frame when SSAI served as WWE's licensing agent and Bell served as WWE's Senior Vice President of Licensing and Merchandising. Specifically, WWE learned in the Connecticut state court proceeding that SSAI split its commissions with Bell on various licenses allegedly procured by SSAI and recommended to WWE management by Bell. WWE also learned that certain licensees had paid monies into a foreign bank account controlled by Shenker during the time he was WWE's licensing agent. In the Connecticut case, the Court found that Stanley Shenker had committed serial perjury in order to cover up his payments to Bell and his receipt of monies in a foreign bank account from WWE licensees, including Jakks, and granted a default judgment in favor of WWE against SSAI on counterclaims asserted against SSAI. The Court in the Connecticut case has also granted partial summary judgment against Bell in favor of WWE on claims asserted against Bell by WWE.
The federal lawsuit filed by WWE against Jakks and the other defendants relates to a series of payments made in 1998 to Shenker's foreign bank account by two foreign subsidiaries of Jakks. The Company has discovered that the payments in question were then split with Bell by Shenker. Two of the payments in question occurred during the time that WWE was in the process of selecting a licensee for videogames featuring WWE talent. One of the payments was directed to be made by Jakks' officers on the same day that SSAI and Bell recommended that the videogame license be granted to Jakks. The third payment was made after the videogame license was awarded to a joint venture of Jakks and THQ.
In a statement issued today, Linda McMahon, the Chief Executive Officer of WWE, stated:
"We very much regret having to take this action today, but regret even more the facts and circumstances which have compelled us to do so. WWE's intellectual property is a valuable asset of the Company, and we believe the actions taken today are necessary to preserve the integrity of our licensing process and essential to ensure that WWE receives appropriate and fair compensation for the grant of a license to use our intellectual property."
Jakks has been WWE's toy licensee since late 1995 and the current toy licenses are otherwise set to expire in 2009. The joint venture of Jakks and THQ obtained the videogame license in 1998, with its term also scheduled to expire in 2009, subject to a right to renew the license by the joint venture for another five years on certain conditions.
World Wrestling Entertainment, Inc. (NYSE: WWE) is an integrated media and entertainment company headquartered in Stamford, Conn., with offices in New York City, Los Angeles, Toronto, and London.
Trademarks: The names of all World Wrestling Entertainment televised and live programming, talent names, images, likenesses, slogans and wrestling moves and all World Wrestling Entertainment logos are trademarks which are the exclusive property of World Wrestling Entertainment, Inc.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include general market conditions, which could result in only a portion or none of the shares being registered to be offered and sold, the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated.
JAKKS AND THQ PUBLICLY RESPOND TO WWE'S LAWSUIT
Both Jakks Pacific and THQ responded publicly to the lawsuit World Wrestling Entertainment filed on Tuesday, alleging bribes towards former WWE Licensing Executive Jim Bell helped land WWE licenses, and as one would expect, both companies deny that anything illegal was done.
During Jakks Pacifics' Third Annual Quarterly report to stockholders, Jakks stated the following: "The Company also announced that it is engaged in discussions with WWE concerning the restructuring of its toy license and with WWE and THQ with respect to the restructuring of the JAKKS THQ Joint Venture video games license agreement with WWE. The discussions are an outgrowth of certain litigation that has been pending between WWE and a former licensing consultant to WWE and a former employee of WWE, to which the Company is not a party. WWE has raised questions about the validity of the licenses as a result of certain transactions between the Company and that licensing consultant that occurred more than six years ago. The Company has denied any wrongdoing in connection with the transactions with the licensing consultant and maintains that they were unrelated to either the toy or video game license. If the discussions are satisfactorily concluded, the restructuring of the licenses may have an impact on the Company's future revenues and net income to an extent that is presently unknown. If the discussions with WWE and THQ are not satisfactorily concluded, the Company anticipates that litigation is likely to be commenced by WWE challenging the validity of the licenses and seeking compensatory and punitive damages, in which event the Company intends to vigorously defend itself against claims which it believes are without merit."
THQ issued a press release as well Tuesday evening, stating the following:
THQ Comments on WWE Lawsuit
CALABASAS HILLS, Calif.--(BUSINESS WIRE)--Oct. 19, 2004--THQ(R) Inc. (NASDAQ:THQI) offered comments today concerning the lawsuit filed by World Wrestling Entertainment Inc. (NYSE:WWE) (the "WWE") earlier today against JAKKS Pacific, Inc. (NASDAQ:JAKK), THQ and others.
THQ is committed to preserving its rights under the videogame license with the WWE. THQ believes the WWE is pleased with the manner in which THQ has managed their brand in the video game category. As THQ is not directly accused of any wrongdoing in the complaint -- rather the complaint alleges wrongdoing on the part of JAKKS Pacific and others of which THQ was and is unaware -- THQ is not in a position to comment on these allegations. In any event, either there is no basis for terminating the video game license, or THQ expects to be made whole by those whose conduct is eventually found to be unlawful. THQ intends to vigorously protect and pursue its rights, if necessary.
The lawsuit has no effect on games currently scheduled for release, including WWE SmackDown!(TM) vs. Raw(TM), which is scheduled to ship on November 2. About THQ
THQ(R) Inc. is a leading, worldwide developer and publisher of interactive entertainment software for a variety of hardware platforms including PC CD-ROM, wireless devices, and those manufactured by Sony Computer Entertainment America Inc., Nintendo and Microsoft. The THQ web site is located at www.thq.com. THQ and the THQ logo are trademarks and/or registered trademarks of THQ Inc.
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding (i) the relationship among THQ, Jakks Pacific, Inc. and World Wrestling Entertainment, Inc., (ii) THQ's strategy with respect to the WWE video game license and (iii) the lawsuit filed by the WWE against Jakks and THQ. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ") and are based upon management's beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward looking statements, including, but not limited to economic, competitive and technological factors affecting the operations, markets, products, and pricing of THQ. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect THQ's financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission.
JAKKS PACIFIC DENIES WRONGDOING IN WWE LAWSUIT
Jakks Pacific, which holds the WWE's toy license, issued the following press release this morning, denying the charges claimed by WWE in their civil lawsuit filed yesterday. The release reads as follows:
JAKKS Pacific, Inc. Denies Wrongdoing and Expects Vindication in WWE Litigation
NEW YORK--(BUSINESS WIRE)--Oct. 19, 2004--JAKKS Pacific, Inc. (NASDAQ:JAKK) announced that a civil lawsuit was filed in the United States District Court for the Southern District of New York yesterday afternoon by World Wrestling Entertainment, Inc. ("WWE") concerning the video game license between WWE and the joint venture company operated by the Company and THQ, Inc. and the toy license between the Company and WWE. The Company denies any allegations of wrongdoing and believes that it will be completely vindicated in the litigation, and looks forward to having the claims against it dismissed. The Company will continue to devote its full energies and resources to bringing its outstanding products to market during the busy holiday season and beyond.
JAKKS Pacific, Inc. is a multi-brand company that designs and markets a broad range of toys and leisure products. The product categories include: Action Figures, Arts & Activity Kits, Stationery, Writing Instruments, Performance Kites, Water Toys, Sports Activity Toys, Vehicles, Infant/Pre-School, Plush, Construction Toys and Dolls. The products are sold under various brand names including Flying Colors(R), Play Along(R), Road Champs(R), Remco(R), Child Guidance(R), Pentech(R), Trendmasters(R), Toymax(R), Funnoodle(R), Go Fly a Kite(R) and ColorWorkshop(TM). The Company also participates in a joint venture with THQ Inc. that has exclusive worldwide rights to publish and market World Wrestling Entertainment(TM) video games. For further information, visit www.jakkspacific.com.
This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about JAKKS' business based, in part, on assumptions made by its management. These statements are not guarantees of JAKKS' future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those described above and the following: changes in demand for JAKKS' products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing and difficulties encountered in the integration of acquired businesses. The forward-looking statements contained herein speak only as of the date on which they are made, and JAKKS does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
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