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Lee Defrauds Shareholders edited The Comics Journal wpd

Lee Defrauds Shareholders edited The Comics Journal wpd

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Excerpted from The Comics Journal #269 By Michael Dean Posted June 21th, 2005

Paul: Lee Settlement Defrauds Stan Lee Media Shareholders

As The Comics Journal #269 was going to press with a report on Stan Lee's settlement with Marvel, it was contacted by a shareholder in Lee's former entertainment company, Stan Lee Media, who said Lee had no right to negotiate the settlement with Marvel, because his 10 percent share in Marvel movie profits had been signed over, along with all of Lee's intellectual property, to Stan Lee Media. That shareholder was Peter Paul, familiar to anyone who followed the story of SLM's precipitous collapse into bankruptcy in 2001 as the mastermind behind the founding of the company. Paul told the Journal, "Stan hid the contract rights I negotiated between him and Marvel in 1998 (to be assigned to SLM as its principal asset) from the bankruptcy court and creditors, then sued on them and won $10 million from Marvel -- effectively defrauding all shareholders and creditors of the company." The Journal spoke with Arthur Lieberman, who as Lee's counsel was instrumental in negotiating Lee's contracts with both Marvel and SLM, as well as the Lee/Marvel settlement. Not surprisingly, he disagreed with Paul's version of events. "Stan Lee is one of the most honest people I've ever met," he said. "There was never any assignment of any part of that [Marvel] contract. I never heard of such a document. Nobody I know has ever mentioned such a document. The bankruptcy lawyers and trustees have never seen such a document. Stan says he has never signed such a document." As evidence, Paul, who said he hired Lieberman and oversaw the transfer of Lee's rights to SLM, pointed to SLM's 2000 annual report, which identifies the company's principal assets as "all the intellectual property currently owned by our founder Stan Lee, including ownership in perpetuity to Stan's name, likeness, brand and signature slogans, 'Stan Lee Presents,' 'Excelsior!' and 'Stan's Soap Box,' along with rights to all intellectual property that will hereafter be created by Stan Lee." SLM general counsel Rick Madden did not return the Journal's call, but Paul directed the Journal's attention to Lee's Employment Rights Agreement with SLM, which included the

following passage: "I assign, convey and grant to the Company forever, all right, title and interest I may have or control, now or in the future, in the following: Any and all ideas, names, titles, characters, symbols, logos, designs, likenesses, visual representations, artwork, stories, plots, scripts, episodes, literary property, and the conceptual universe related thereto, including my name and likeness ..." Marvel attorney David Fleischer told the Journal he had no information as to Paul's allegations and could not comment on any aspect of the settlement. Arguably, there is a distinction to be made between an intellectual property (Spider-Man, for example) and a share in the proceeds from that intellectual property (Lee's 10 percent of Marvel's movie profits). The "intellectual property" referred to in Lee's SLM agreement, Lieberman said, are the rights to Lee's name, image and signature slogan, as well as any characters or concepts created by Lee independently of Marvel. According to Lieberman, this intellectual property was transferred to Lee's new entertainment company, POW, in exchange for certain "considerations" by Lee toward Stan Lee Media. Lieberman declined to specify what those considerations might be. One thing that Paul and Lieberman would agree about is that Lee's contract with Marvel acts to secure Marvel's full ownership of all the characters that Lee had a hand in creating for the company, including Spider-Man, The Hulk, the X-Men, etc. As Paul explained it, the reason Marvel was willing to grant Lee a share in its movie profits was that its contract with Lee had become vulnerable at a crucial juncture. Isaac Perlmutter, the controlling shareholder of Toy Biz, which had acquired Marvel during its Chapter 11 reorganization, voided Lee's contract at the end of 1998 and offered him a new one that cut Lee's annual $1 million salary in half and changed the duration of the contract from Lee's lifetime to two years. Lee was not happy, and the door was opened to a renegotiation of his contract that was even more generous than before. "Toy Biz had obtained a $200 million bridge loan to cover the cost of its acquisition of Marvel," Paul told the Journal. "I understood their vulnerability at that point. When they voided the contract, they voided the license [to Lee's characters]. They didn't want to have to explain [to Merrill Lynch, granter of the bridge loan] why the creative genius behind the company was taking back all his characters. No one on their side wanted to take that chance." Though Lee has publicly acknowledged that his Marvel characters were created (with various artists) as work for hire and therefore owned by Marvel, a challenge to that ownership would have seriously undermined the company's standing in financial circles. For that reason, Paul argued that Lee's post-1998 contract guaranteeing him a 10 percent share in Marvel's movie profits should be seen as a form of royalty payment on Lee's share of the Marvel conceptual universe. It's not clear how far such an argument would go in court, but Marvel is unlikely to want to see the matter of its contract with Lee reopened for a number of reasons. Asked if he was contemplating any legal action related to the settlement, Paul told the Journal, "I'm investigating with other [SLM] shareholders what happened to the principal asset of the company. There is no mention in the [SLM] bankruptcy filings of the existence of the principal asset of the company and its disposition."

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