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Private Media Group Violated Sarbanes-Oxley Act, Judge Says

Private Media Group Violated Sarbanes-Oxley Act, Judge Says
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Nov 18, 2010 1:00 PM PST    Text size: 
LAS VEGAS — A Las Vegas judge has sided with former Private CEO Ilan Bunimovitz and several large Private investors, issuing a restraining order against the adult studio after the court found that the company violated a section of the federal Sarbanes-Oxley Act relative to personal loans to executives.

The decision, made Wednesday at Clark County District Court, focuses on the treatment of $193,000 in additional compensation received by current CEO Berth Milton, who received the funds as a loan for his Slingsby Enterprises web business but later the funds were classified retroactively as a "retention bonus."

The court said the amount of unsecured loans Milton has received from Private amount to in excess of $10 million and that the company has not demanded the repayment of the loans. "Currently, Private's business suffers from a lack of operating capital," the court said.

Bunimovitz had been questioning since last December Milton's actions and how they might constitute violation of federal securities laws and other legal requirements. In May, Milton called for his termination.

"Private has an obligation to its shareholders, including plaintiffs, to make a determination without the influence of Milton and anyone he controls, regarding the Slingsby loans and to bring appropriate legal proceedings against Milton to collect the Slingsby loans," the court said.

"There is a pattern of Milton acting and then getting members of the board of directors to justify his actions after the fact," the court said.

The restraining order against Private enjoins the company from issuing any shares of stock, incurring any additional debt, disposing of any assets, making any loans to officers and transferring or withdrawing any company funds.

It also restrains the company from paying any bonuses to Private directors and undertaking transactions without approval from its board of directors.

The restraining order also said that company officials can't conduct special board meetings without approval from the court.

The judge, however, declined to appoint a receiver for Private.

The decision to restrain Private came on the eve of the company's board of directors meeting in Barcelona, which met earlier today. The judge wouldn't say when the restraining order would be lifted.

Bunimovitz was joined in the suit by Consipio Holding BV, Tisbury Services Ltd. and financier Claudio Gianascio. The plaintiffs hold 49.5 percent of Private's issued common stock.

Bunimovitz and Private officials did not immediately respond to XBIZ for comment.

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