NEW YORK – A federal court has granted summary judgment to the plaintiffs in a case involving former FriendFinder CEO Marc Bell and his former co-chairman Daniel Staton. The court ruled Bell and Staton “owe their creditors millions of dollars personally and through their shell company, Strategic Media I LLC,” according to a statement issued by David Yerushalmi, lead counsel for the plaintiffs.
Judge William H. Pauley III of the Southern District of New York granted summary judgment to the creditors on the their claims Strategic Media owed more than $20 million on defaulted note payments dating back to late 2011. Pauley also granted a $2.4 million judgment against Bell and Staton, personally. According to Yerushalmi, once interest is added, the total will increase to more than $3 million.
The court also ruled Strategic Media creditors may pursue “alter ego” claims against Bell and Staton. If those claims prevail, Bell and Staton could be personally liable for fulfillingl Strategic Media’s $20 million obligation.
Under the alter ego doctrine, the court can set aside the corporate shield of liability—or in the case of a limited liability company like Strategic Media, the liability protection which forming a LLC affords to its members and managers—so officers, directors and/or owners can be held personally liable for the company’s debts and obligations. The doctrine typically is applied when the court is persuaded a given corporate entity has been used merely for the purpose of shielding its officers, directors, etc., from liability, or when the actions of the business entity become indistinguishable from those of its owners and/or officers.
Whether or not the alter ego claims ultimately succeed, Yerushalmi is stoking the rhetorical fires with his comments about Bell and Staton.
“Marc Bell and Daniel Staton live and work in Boca Raton, Fla., and present themselves to their business associates and communities as upstanding and successful businessmen,” Yerushalmi said. “What we’ve discovered in this litigation is that both men are deadbeats who made millions peddling pornography and then left their creditors and investors holding the bag—unfortunately, an empty bag.”
Yerushalmi was referring, of course, to the history of FriendFinder Networks’ ill-fated IPO, which raised $50 million from investors but didn’t play out well in the long run. The company filed for Chapter 11 bankruptcy protection in September 2013.
In celebrating the court’s rulings in favor of his clients, Yerushalmi also was not shy about playing the “porn card” in disparaging the Bell’s and Staton’s characters.
“Bell and Staton hide behind very high-priced Manhattan lawyers to avoid paying their personal and corporate obligations,” Yerushalmi said. “One must suppose that their personal ethics are in line with all of the other online porn merchants.”
With this latest ruling in hand, Yerushalmi vowed to continue his dogged pursuit of satisfaction for his clients.
“You can count on one thing: We will not rest until we collect our clients’ millions from Bell and Staton,” Yerushalmi said. “We will find and track their hidden assets. We will watch to see if Armour Residential and Javelin Mortgage Investment Corp. [other businesses owned by the defendants] make the requisite disclosures to their investors about the company they keep. We will expose both men as deadbeats who have made their livelihood through the sex trade and who use bankruptcy and corporate shells as a game.”
