MONDAY, JUNE 30, 2008

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The Rage Offstage at Marvel

By BILL ALPERT

Lawsuits raise questions about Marvel Entertainment's title to its billion-

dollar character franchises, which include The Incredible Hulk. (Video)

THE COMIC BOOK'S SPLASH page would show a close-up of Peter F. Paul brooding about Marvel
Entertainment, its creative force Stan Lee and the Clintons. The next panel would reveal the electronic ankle
bracelet that's kept Paul under house arrest for three years.
"I was set-up as the fall guy," Paul tells a reporter by phone. "But if
the legal process works as it should...I will be vindicated."
Lawsuits against Marvel, Lee and Bill and Hillary are pressing Paul's
claims that a dot-com he started with Stan Lee in 1998 was undone by
the actions of the former president, short-sellers and Stan Lee himself.
In a Manhattan federal district court, some of Paul's associates argue
that the bankrupt dot-com, Stan Lee Media, still owns rights to Marvel
Rhythm & Hues/2008 Universal characters like Spider-Man and The X-Men. On behalf of the former
Studios and Marvel Studios via dot-com, they want half the profits that Marvel (ticker: MVL) is piling
Bloomberg News up, now that it's producing its own films like the smash hit Iron Man
and the just-opened The Incredible Hulk.
The Incredible Hulk will bulk up The Clintons, Marvel and 85-year-old Stan Lee all vehemently reject
Marvel's revenues. But who owns Paul's claims and duly note his many felony convictions. He's got the
him? electronic bracelet because he's awaiting sentencing for his
manipulation of shares of Stan Lee Media. Paul's criminal record
opens the door to impeachment of anything he alleges. But that
doesn't mean he's wrong about everything. The securities filings for Marvel and Stan Lee Media contain
seemingly contradictory assignments by Stan Lee of his rights in the superhero characters he helped create in
the 1960s. And Lee's assertions in a 2002 lawsuit against Marvel don't appear to track with what he says
now.
So even if the folks pressing Peter Paul's claims aren't likely to win half of
Marvel's profits, they've raised factual questions about Marvel's title to its
billion-dollar character franchises.
Marvel's profits are worth brawling over. The New York company's stock
trades for $33, after its earnings more than doubled last year to $140
million, or $1.70 a share, on revenues of $486 million. Since 2000, 13
PG-13-rated films based on Marvel characters have averaged more than
$400 million in sales. This is the first year the company will produce its
films, taking all profits, not just license fees.
Marvel's made a huge comeback since its bankruptcy in the late '90s, after
years of poor performance under financier Ronald Perelman. In 1998, the
new controlling shareholder Isaac Perlmutter used bankruptcy procedures to reject Marvel's $1 million-a-year
lifetime-employment contract with Lee. That voided Lee's exclusive assignment to Marvel of his rights in
characters like Spider-Man.
IT ALSO FREED HIM TO start a new company with his friend Peter Paul, which they called Stan Lee
Media. Paul put in $500,000, while Lee assigned the company all his intellectual property. Calling itself an
Internet animation studio, the dot-com rode the bubble market.
Flush with success, Paul underwrote a gala Hollywood fundraiser in August 2000 for Hillary Clinton's U.S.
Senate campaign. He had begun negotiating with representatives of Bill Clinton for the departing president to
become Stan Lee Media's ambassador of goodwill.
The Bottom Line: Just days later, newspapers reported that Paul had served time on two
felony convictions: the first, for taking millions of dollars from the
Marvel shares have been on a tear in Cuban government for a shipment of coffee he never delivered; the
recent months, due to excitement second, for cocaine possession. The Clintons cut themselves off from
about Iron Man. But a bitter legal Paul.
fight over ownership may dog the Paul had been manipulating the stock since 1999, and now tried to
shares. keep the shares and company afloat -- covering payroll with
borrowings from his margin account. After the Securities and
Exchange Commission began reviewing his stock dealings, Paul fled
to Brazil. Arrested there, he had to await extradition in a prison he says was like a dungeon.

Stan Lee Media sought bankruptcy protection in 2001. In

2002, Stan Lee sued Marvel Entertainment on a previously
A group of investors claim their company owns undisclosed contract. It turned out that in November 1998
some of the rights to Marvel Entertainment's -- a month after assigning his intellectual property to Stan
characters created by Stan Lee, reports Barron's Lee Media -- Lee had gone to Marvel claiming half-
Bill Alpert. (June 30) ownership of Spider-Man, the X-Men and other characters,
since Marvel had cancelled his previous rights assignment
in its bankruptcy. Lee got a new contract for up to $1
million in annual salary and 10% of movie and TV profits, assigning Marvel his rights in those characters.
So, come 2002, Spider-Man: The Movie had grossed more than $1 billion and Lee invoked that contract and
sued. Their 2005 settlement was sealed, but Marvel later reported a $10 million charge for it.Peter Paul,
meanwhile, had been extradited back to the U.S. where he pled guilty in March, 2005 for his Stan Lee Media
stock manipulation. Since then he's sued the Clintons in California for scaring off a potential investor in Stan
Lee Media. He's also aided the group that's trying to assert Stan Lee Media's claims to Stan Lee's creations.
Working with him is investor Jim Nesfield, a one-time Wall Streeter who was the star informant for Eliot
Spitzer when the former New York Attorney General sued mutual funds for allowing "late trading" by hedge
funds.

Nesfield approached Marvel and was rebuffed when he asserted claims to Stan Lee's creations. He then filed
an unusual 13-D with the SEC, detailing what he said were Marvel and Stan Lee's wrongdoings.

So Lee himself complained to a Colorado state court judge about what he called a hijacking of Stan Lee
Media. Lee wrote other shareholders, saying that Peter Paul was behind Nesfield's group and blaming Paul
for the company's earlier bankruptcy. A large block of shares was still held by entities that Paul had admitted
using in his 1999-2000 manipulations. But since 2003, Paul says, all that
stock belonged to Christopher C. Belland, a Key West, Fla., realtor and
tour operator who posted bond for Paul. In May, the Colorado judge
ruled that Nesfield's group could run Stan Lee Media.

In a statement to Barron's, Marvel says Nesfield's group will recover

nothing. Lee's agreement with Stan Lee Media never mentioned any
Marvel characters, Marvel says. What's more, it says, Stan Lee's
character creations were "works-for-hire" and have always belonged to
Marvel. Lee has made public statements concurring with the "work-for-
hire" characterization. But those statements seem at odds with his
Marvel contracts and his 2002 lawsuit. Stan Lee didn't respond to
inquiries from Barron's (nor did an attorney for the Clintons).

Stan Lee's onetime friend and now nemesis Peter Paul insists that he stands to get nothing from the dispute
except vindication. "The reason that these people thought they could get away with this fraud," says Paul,
"was that I was detained in Brazil under conditions arranged by Bill Clinton."

Now it's up to the courts to decide who's the superhero, and who is the villain.