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Ever since Tom Cruise showed up in Dan Snyder’s box on game days, it’s been rumored that the Redskins owner wanted to make a name for himself in Hollywood. Well, his extra-gridiron efforts are bearing fruit: Snyder’s name is all over Hollywood Foreign Press Association v. Red Zone Capital Partners, a major federal lawsuit accusing Snyder and his partners of a variety of fiscal shenanigans.
The suit’s main allegation holds that Snyder’s investment arm engineered the sale of the TV rights to the Golden Globe Awards despite, according to the plaintiffs, not owning or controlling those rights.
The Golden Globes have been doled out by the Hollywood Foreign Press Association (HFPA) since 1944. The first public presentation of the statuettes came a year later during a ceremony at the Beverly Hills Hotel. There wasn’t even a television network to broadcast that show. But ever since the boob tube took root a few years later, the telecasts of all sorts of entertainment industry awards shows, including the Golden Globes, have become huge business.
In 1983, HFPA brought in Dick Clark Productions (dcp) to produce the telecasts of its show, and the two entities split the profits. That arrangement has been maintained through the decades through a series of contract extensions; the current contract between HFPA and dcp was signed in 2001, and expires with next week’s telecast of the 2011 Golden Globe Awards on NBC.
The McLean-based private investment fund Snyder controls, Red Zone Capital Partners, bought dcp in 2007. (Dick Clark himself had sold the company that bears his name in 2002.) The suit says dcp has since been reduced to nothing more than an “alter ego” of Red Zone. HFPA now says what had been a long, beautiful relationship between the association and dcp was destroyed on Sept. 30, 2010, when dcp sold the broadcast rights of the Globes to NBC through 2018.
According to the complaint, that deal was made “without HFPA’s consent or authorization.”
The federal complaint includes the text of an e-mail that the HFPA says was sent to HFPA President Philip Berk by dcp’s executive vice chairman, Mark Shapiro, a former Red Zone official who became CEO of Six Flags after the takeover. According to the complaint, the Snyder protégé tells the group that he won’t negotiate any deal for the Golden Globes broadcast rights. “I would never make a move on a network renewal or new home without your involvement,” says Shapiro in the e-mail.
Then, Red Zone/dcp went ahead and made the deal.
“In fact, dcp did not even notify or consult with HFPA before entering into the NBC agreement, in marked contrast with all prior extensions of the NBC agreement,” reads the suit, filed on Nov. 17 in a U.S. District Court in California. “Rather, dcp proceeded in stealth…In short, dcp granted NBC a broadcast license for rights that were not dcp’s to grant.”
NBC is not named as a defendant in the suit, though HFPA now contends the network’s behavior indicates it wasn’t exactly proud of the deal: “NBC never issued an announcement that it had made this deal with Dick Clark Productions,” says one Hollywood source with HFPA leanings. “Out here, when you make a deal like that, you tell people.”
HFPA alleges in the suit that after learning about the NBC deal it has also discovered that dcp has been peddling various digital media rights to the Golden Globes —including a deal with Facebook —that Snyder’s company never even discussed getting from the association.
The allegations of infringement and bad faith dealing listed in the complaint contain numerous charges that “dcp was acting at Red Zone Capital’s direction and under its control.”
HFPA would not comment on the litigation beyond a statement from its lead litigator, Linda J. Smith of O’Melveny and Myers, contending that the complaint “catalogues in great detail how dcp has been trying to steal the HFPA’s most valuable asset.”
Dcp declined to comment on the Shapiro e-mail or any of the specific charges made by HFPA in the lawsuit. A dcp spokesperson, requesting anonymity, issued the following written statement: “Our respective rights under the contract are clear and we will vigorously defend those rights in court. The HFPA is trying to unilaterally change the basis on which DCP and the HFPA have done business for almost three decades and it isn’t in the best interests of their members or the show.”
Snyder’s run with dcp has been shaky from the start.
RedZone and Six Flags jointly purchased dcp in 2007 for $175 million. At the time, Snyder controlled Red Zone and was chairman of the board of Six Flags. Red Zone, Snyder’s private equity fund, got a controlling interest (reportedly 60 percent) of dcp; Six Flags, a public company which utilized shareholders funds, got a reported 40 percent. This odd private/public partnership, with Snyder calling the shots for both sides, created what sure seems to be a very favorable business situation for Snyder, putting him in a position to negotiate with himself when, well, hammering out licensing agreements between dcp and Six Flags.
Making the deal even more dubious: Six Flags made the massive dcp outlay while the theme park chain’s management was blaming its problems on its multi-billion-dollar debt.
Nobody who watched Six Flags during Snyder’s reign was surprised when the corporation declared bankruptcy in 2009. And the rancor over the Six Flags/Dick Clark Productions deal surfaced during the bankruptcy litigation. The hedge fund Resilient Capital Management, which claimed to have lost several million dollars in Six Flags investments during Snyder’s tenure, filed a motion citing the dcp deal and asking the bankruptcy court to appoint a trustee to oversee the company because of the alleged mismanagement and self-dealing by Snyder and his cohorts.
In the motion, Resilient alleged that the Six Flags funds used to buy into Dick Clark Productions “could have been used to easily avert a bankruptcy.” (The dcp deal was only one of many dubious transactions during Snyder’s run at Six Flags: There was also a licensing deal between the theme park and Johnny Rockets, a burger chain Red Zone bought in 2007, that put the restaurants in the parks; and, according to SEC filings, Red Zone rented its jet to Six Flags for “approximately $175,000.”)
The Resilient motion was rendered moot once the court approved a reorganization plan between Six Flags debtors and creditors that took the corporation out of bankruptcy. But the issues Resilient raised about the dcp deal might well have impacted the look of post-bankruptcy Six Flags. An SEC filing from April 13, 2010, near the end of the bankruptcy proceedings, indicates that Snyder would not be allowed to participate in the newly reorganized company’s management; According to the filing, the new board of directors could include anybody, so long as the appointee “shall not be Daniel M. Snyder,” absent the consent of certain major purchasers of the new entity.
And the Wall Street Journal reported last year that dcp sold “$165 million in notes” that the bond rating firm Moody’s Investors Service had classified as “junk.” The HFPA lawsuit contends that dcp, without permission from HFPA, used the copyrights to the Golden Globe Awards show video library as collateral for those notes, and that Red Zone took $90 million of the funds raised through the sale.
Why the brazen business behaviors? Perhaps Snyder’s hoarding money in anticipation of the NFL strike next season, which would put a huge crimp in his cash flow. HFPA folks say that they’re convinced the allegedly improper sale of the Golden Globes TV rights was a precursor to Red Zone putting dcp on the market.
“If [dcp] doesn’t have the Golden Globes, that’s a big hit to the value of the business,” says the source with HFPA leanings. “They need the Golden Globes, and [dcp] thought that they were about to lose them. It’s the kind of thing that you’d be surprised that anybody would try, it’s such a Hail Mary. But, with Dan Snyder involved, maybe we shouldn’t be so surprised.”
But Red Zone has been spending money via dcp, also. For more than a year, Snyder’s fund has been quietly looking to buy into large entertainment events. The only such deal announced so far involves dcp’s becoming a minority owner in 2010 of Coastal Luxury Management, which operates the Pebble Beach Food & Wine Festival. A California source who’s been monitoring the festival says Snyder has been showing up to board meetings, and that Red Zone representatives have told festival organizers they hope to use the experience to inaugurate Chablis-chugging gatherings in the Middle East and Far East. The source says there’s even been talk from Snyder’s people of trying to buy into the promotion of massive music festivals, including Bonnaroo, held yearly in the mountains of Tennessee.
A dcp spokesperson denied that the company is pursuing Bonnaroo. But the thought of Snyder diving into big-time rock and roll is intriguing. As soon as Dick Clark himself relinquishes the role, Snyder, once the NFL’s youngest owner, would be ready to take over as the world’s oldest teenager.