Medient Studios former CEO Manu Kumaran has filed suit seeking to dissolve the entertainment company he founded, exactly two weeks after he was fired in an abrupt leadership overhaul.
In the suit filed Monday in a Reno, Nev., state court, Kumaran is asking the court to appoint a receiver and disband the corporation in addition to seeking monetary damages in excess of $10,000. He is also asking for attorneys’ fees.
Although headquartered in Effingham County, the company was incorporated in Nevada.
The defendants listed in the suit are members of Medient’s current board of directors, including its recently appointed chair, Charles Koppelman, former governor of New York David Paterson, Joseph Giamichael and new CEO Jake Shapiro.
Medient Studios announced June 12 it had terminated Kumaran and several others over what it described as the management’s lack of focus and for straying from the company’s main goal of making movies.
The suit is just the latest drama for Medient, which less than a year ago finalized an agreement with the Effingham County Industrial Development Authority to build a $90 million mega-studioplex on its land off Old River Road.
In exchange, the IDA is granting them a $10 million, 20-year lease, at the end of which Medient has the option of purchasing the land for $100.
In the complaint, Kumaran details the events leading up to his June 9 ouster, accusing the board of directors of issuing Shapiro 40 million preferred stock at less than fair value for “the sole purpose of diluting Kumaran’s majority interest in Medient.”
Read Kumaran's complaint against Medient.
“Koppelman, Giamichael, Paterson and Shapiro have colluded to grossly mismanage the corporation in the conduct and control of Medient affairs,” the lawsuit states.
The issue of stock dilution and Shapiro’s generous allotment of preferred shares has been a controversial one. In an interview June 12, Shapiro said share dilution was a large factor contributing to Kumaran’s termination but declined to comment on his preferred stock option.
The suit said that the board of directors, of which Koppelman and Giamichael were already members, adopted a resolution on January 6 of this year authorizing this increase in common shares from 500 million to 5 billion, as well as an increase in votes per share for the company’s preferred stock, from 25 to 250.
The suit states that Kumaran used $15 million of his own money to acquire 10 million of 50 million shares of preferred stock, a move he touted in a press release earlier this year as “a decision to put my money where my mouth is.”
In May, Kumaran said he provided a deposition before the Securities and Exchange Commission after which he requested to meet with the board to discuss his testimony and other issues.
Kumaran said by June 9, during a conference call with the board, Shapiro, then corporate finance chief, proposed a resolution granting himself the remaining 40 million preferred shares without paying fair market value.
At the conclusion of the call, the suit says, “Kumaran was informed by David Fritz (Medient’s outside counsel) he was ‘no longer a part of Medient.’”
Some of Medient’s investors have also questioned Shapiro’s shares in light of the company’s stock performance lately — a sub-penny stock that’s lost more than 95 percent of its value over the year and currently trades around .0016.
In the suit, Kumaran alleges that Shapiro has reduced Medient’s workforce from 28 independent contractors to three or four.
Shapiro said in interview June 12 he was instituting cost-cutting measures by reducing the number staff and scaling down plans for the studioplex, preferring to build one building at a time.
Asked about potential litigation stemming from the takeover, Shapiro expressed confidence in the board’s actions.
“(Everything) was done 100 percent according to the book,” said Shapiro.
A spokeswoman for Medient said Tuesday the company was preparing a statement. A lawyer for Kumaran said he had no additional comment at this time.
Website
The suit dropped the same day that Medient said its website had been modified without permission. Several pages were taken down, the current board of directors’ names were removed and the company’s name was changed to “Medient Studios India Pvt Ltd.”
Pankaj Kapoor, a co-founder who was also dismissed from Medient, is the registered owner of the domain and said as much when contacted Monday.
“(The) changes to it are self-explanatory and reflect the ownership of the brand name Medient and all the associated domain names,” said Kapoor in an email.
Last week, the Effingham County IDA put on hold a supplemental agreement with Medient as it waits to see what changes the company will make to its master plan.
John Henry, CEO of the IDA, said his organization has been careful in its dealings with Medient.
“We’re not hiding anything,” said Henry. “Every project that we do, prior to any incentives, we run through a fiscal economic impact analysis on either a 10-year or 20-year horizon … and from that we get the net present value.”
Henry said any changes Medient makes will be thoroughly vetted by the IDA, even as some Effingham residents express misgivings about the project.
Arthur Rud Sr. served on the Effingham County IDA for seven years until 2012 and said he’s been opposed to the project from the beginning.
Rud Sr. said he disagrees that the IDA doesn’t have much at stake with Medient, especially now that it’s put in an $800,000 well on the property.
“How many hours of labor for that well? How many dinners have they gone to? How many trips to Atlanta? How much in lawyers’ fees to write up those contracts?” asked Rudd Sr.
“The taxpayers are on the hook,” he said. “I just think the whole thing is going to blow up before it’s over.”