CARSON CITY, Nev. — Private Media Group, which has asked the Nevada Supreme Court to block the company's receivership, told the court in its opening brief that a lower court abused its discretion in "setting a remedy that is unduly harsh."
That "unduly harsh" remedy, of course, was Private board member Eric Johnson's appointment as receiver of the company by Clark County, Nev., Judge Elizabeth Gonzales.
Private attorneys also said that the appointment of a receiver isn't authorized under Nevada law for a corporation that isn't in spinning through the wheels of bankruptcy or winding up operations, as well as one that is publicly traded.
Private contends in the brief that Johnson since August has utilized "broad powers" that "bring about significant changes in management and to repress the majority [of board members]."
Johnson, as receiver appointed by the court, is responsible for calling all the shots in the company, and will be on the hook for preserving the company’s assets and business and setting the date for an annual meeting of shareholders.
Private cites that Johnson has restricted company communication to its own lawyer; that he is responsible for the termination of its SEC counsel, Sam Guzik; and that he removed directors of various Private units, including those from Cine Craft Ltd., Milcap Media Group and Fraserside Holdings Ltd., "installing himself and others as directors in their place."
The brief also said that Johnson terminated CEO Berth Milton's litigation counsel with respect to the appeal over his personal jurisdiction in the case, which is still being waged in another Nevada Supreme Court case, and refused to indemnify him and board members related to the appeal.
In their appeal on the receivership, Private attorney Justin Vance said that the "appointment of a receiver under [Nevada laws] and these circumstances is improper and requires reversal."
The group of shareholders suing Private, however, dispute the company's contention.
Last week, the group filed papers with Nevada Justices to oppose the current management's renewal of an emergency stay of order motion that seeks to block Johnson as receiver.
The motion blasts Private's current management's contention that as a result of the receivership the company faces a delisting on the Nasdaq Stock Market and goes on to say that current CEO Milton still owes nearly $10 million in loans from his Slingsby Enterprises Ltd. company and that "if incumbent management is allowed to reassert control over the company, it is a virtual certainty that it immediately will be plundered by Milton."
Among numerous other reasons, the shareholders also said that even if Private is delisted on the Nasdaq, that it is "preferable to turning control of the company back over to Milton" and that "even if the company is delisted from Nasdaq, it will remain a public company."
The company for the seventh time this year received a notice of delisting due to its failure to maintain a required $5 million market value required by Nasdaq, and Private's current management, lead by Milton, has attempted to leverage the near delisting to quash Johnson's receivership.
The litigating shareholders — led by Consipio Holding BV, Tisbury Services Inc., shareholder Claudio Gianascio and shareholder and former CEO Ilan Bunimovitz — said the renewed argument's points are just fantasy.
"The receivership is the symptom not the disease," Private shareholders said in the filing. "The disease is the four other independent bases for delisting laid out in the notice under the headings 'unpaid loans,' 'compensation practices,' 'financial viability,' and 'audit committee and board independence requirements.'"
