MMA News Forums » MMA Forums » General MMA Forum

[jesusatemyhotdog]

Found this very informative article by mmapayout.com editor and Sherdog contributor, Adam Swift.

Background Checks at Center of Multi-Million Dollar Pride Lawsuit

The UFC's purchase of Pride Fighting Championships was met by great expectations when it was announced in March 2007. Executives, fans and fighters alike hailed the acquisition as the start of a new golden age for the sport, the beginning of an era of undisputed champions and global ascendance of mixed martial arts under the direction of Zuffa.

"This is really going to change the face of MMA. Literally creating a sport that could be as big around the world as soccer," UFC co-owner Lorenzo Fertitta told ESPN.com at the time. "I liken it somewhat to when the NFC and AFC came together to create the NFL."

While unification bouts in the light heavyweight and middleweight divisions have materialized and many of Pride's top stars now call the Octagon home, dreams of continuing the popular Japanese MMA brand and creating an annual "Super Bowl of MMA" evaporated when Pride FC Worldwide's Japan office was suddenly closed last October.

UFC President Dana White told media last year that the purchase of Pride was "the worst deal ever done in the history of business." He indicated efforts to reestablish the Pride brand in Japan, including finding a new television home for the company, had fallen short. Yet despite all the difficulties, he said, the deal gave Pride's new owners what they wanted.

One week ago Pride FC Worldwide Holdings LLC and its related subsidiaries, which were created when Frank and Lorenzo Fertitta acquired the UFC's top competitor, filed suit against the company's former owners: Dream Stage Entertainment, Nobuyuki Sakakibara, Ubon, Dream Stage Holdings and unidentified defendants to be named at a later date.

The crux of the lawsuit, which alleges 14 claims for relief, stems from the purported failure of Pride's former ownership to cooperate with background checks and drug tests as required by the agreements.

The complaint states that because of the Fertittas' involvement in the Nevada gaming industry, specifically their possession of privileged gaming licenses as owners and operators of Station Casinos, it was "essential" for the selling parties "to undertake certain post-closing actions."

Section 5.3 of the asset purchase agreement expressly required that the defendants, particularly Sakakibara, "submit to and pass any reasonable background checks." However, according to the complaint, the selling parties "have repeatedly and consistently failed to submit basic information to and have materially obstructed the Investigator in the conduct of its background checks and due diligence investigation of, among others, Sakakibara and Ubon."

Pride Worldwide alleges that "the Selling Parties never intended to comply with this material term, thereby defrauding the Purchasing Parties into entering into the AP Agreement, the Consulting Agreement, the Non-Compete Agreement and the other related transactional documents and into paying the Selling Parties millions upon millions of dollars."

Notice of breach was first provided on Aug. 22, 2007.

The complaint specifically cites a series of articles published in Shukan Gendai magazine, which linked the previous ownership of Pride with organized crime in Japan, as heightening the necessity of the parties to cooperate with the investigation. Because of their failure to cooperate, Sakakibara and Ubon were ultimately found "unsuitable to conduct the Business and perform the services as anticipated under the AP agreement and the Consulting Agreement."

According to the filing, Sakakibara and Ubon received more than $1.5 million in consulting fees through September 2007.

Pride Worldwide alleges two other specific breaches, including the failure to provide "account information from April 2007 to the present of all transactions into and out of the fan club membership account and any other accounts, deposit collections repositories, payment processing funds or any other revenue collection accounts, including all documents, customer information, transaction reports, bank account statements and related information."

This breach has "further jeopardized and diminished the viability and operational condition of the Business," according to the complaint.

Also cited is the former owners' failure to arrange for the termination of agreements relating to the master disc rights for the "Pride" and "Victory" theme songs, as well as other fighters' theme songs and their transfer to Pride Worldwide.

The complaint also alleges that the former owners breached a seven-year non-compete agreement.

Because of the "breaches, misrepresentations, and other wrongful actions as set forth," Pride Worldwide is asking that the court discharge it from any further payment obligations under the Consulting Agreement, refund the millions of dollars already paid under the agreements and discharge it from any further obligations under the asset purchase agreement, including the duty to maintain Pride post closing.

[SimpleJack]

So they purchased the company knowing it had troubles and now they are suing to avoid paying for it.......typical.

[Clint]

This one looks pretty cut and dry. The contract required that they undergo the background checks. They didn't and were informed that they were in violation 6 months ago and have yet to do anything.

There were some interesting clauses in there: 7 year noncompete, a requirement to keep pride open,etc.

Originally Posted by DonFrye

So they purchased the company knowing it had troubles and now they are suing to avoid paying for it.......typical.

No they are suing because Sakikabara and company did not keep their end of the contract. If they refused the background checks, then that puts the Fertita's casino businesses at stake, so there would be no option but to close down Pride.

Also they didn't provide Bank information that they were required to do so.

[SimpleJack]

Originally Posted by Clint

This one looks pretty cut and dry. The contract required that they undergo the background checks. They didn't and were informed that they were in violation 6 months ago and have yet to do anything.

There were some interesting clauses in there: 7 year noncompete, a requirement to keep pride open,etc.



No they are suing because Sakikabara and company did not keep their end of the contract. If they refused the background checks, then that puts the Fertita's casino businesses at stake, so there would be no option but to close down Pride.

Also they didn't provide Bank information that they were required to do so.

I never debated any of that. I'm sure they will win also. The idea here is that I am positive that language was put into the contract knowing that they would never be able to uphold their end of the contract. Sakikabara and Udon were just trying to delay the inevitable suit.

[Clint]

Getting a background check doesn't sound like a difficult thing to do, unless you are Yaluza affiliated, in which case you shouldn't have signed a contract to get a background check.

Designing the agreement to not work would be an awfully risky move since it puts their gaming licenses at risk, which make far more money than what they spent on the Pride purchase.

[valheruking]

If it really is as simple as things like failure to provide information etc, it makes you wonder how deep into the organised crime world Sakakibara/PRIDE was.

[Clint]

Originally Posted by valheruking

If it really is as simple as things like failure to provide information etc, it makes you wonder how deep into the organised crime world Sakakibara/PRIDE was.

Yeah considering the situation, refusing to get a background check looks shady. I would think that an innocent person would want to get one to clear their own name.

[jesusatemyhotdog]

For more info on the way Pride did business and their demise, here are some links to a first hand account by Bas Boon (owner and manager of the Golden Glory team in Holland) as told to a journalist. Forgive the English, as it was written by somebody who does not speak English as their first language.


Part 1

The real story about what happened why Pride died
By Bas Boon
The problems started for me as a manager when Semmy Schilt and Stefan Leko were not participating (while qualified at the final elimination) the reason I did not wanted to sign a contract before the fight with k-1. This was a business deal gone bad and there was no yakuza involved, we choose to be a free agent.
However Pride also caused problems, they did not gave the fights which we agreed by contract to some fighters and the robe holding with the Sergey and Semmy match caused a lot of problems for Golden Glory.

Bas Boon came in contact with Miro Mijatovic the manager at that time from Mirko Cro Cop, together they would do the matchmaking for NTV’s Bom Baye 2003. Our bad luck was that Pride started Shokewave and K-1 started Dynamite all on NYE 2003.
This would al not be so bad as Mirko Cro Cop became injured (see story fight opinion) the rumor was that Ken Imai went their with the alleged $300.000 in order from Pride the screw the main event at the Inoki’s show and pay Mirko for an injury (read well rumor).
I got a phone call from Miro, he said that Pride was screwing with him and that Mirko came two weeks before the event with an injury, to screw up the main event! He ask me if I could guarantee to bring the fighters from Golden Glory as his partner promoter Kawamata wanted to cancel the show (he worked together with him promoting the show).

Pride starting making threads, first by phone later by lawyer, if I would have Semmy fight in their show, then this and that. Funny is that Pride did not gave Semmy the amount of fights they promised that year and had some small letters in the contract stating that they would own him for the next 10 years!
I told Miro I could do better and invited him to come with Inoki to St Petersburg Russia to an M-1 event were I was the co-producer. I had worked a long time with all promoters in Holland and other parts of Europe in producing their shows for TV or as a promoter or co-producer.

end of part 1

Part 2

This way I was the person who held the first Cage Fight in April 1996 in Emmen Holland. Later Appy Echteld and Bas Boon teamed up for making these fights in St Petersburg with Vadim Finkelstein who had a meat business and did not know nothing about fighting.
Appy Echteld with his partners and Bas Boon and partners organized the biggest MMA promotion Europe had ever seen Too Hot To Handle, in the Ahoy Arena in Holland. Many times now they were working together and both Appy and partner Mark de Weerd sometimes were invited to come with Golden Glory to Japan, this was all paid and orginized by Golden Glory.
I spoke a long time ago with Monty Cox, when Monty was still fighting with his team by Rings Japan and we both agreed that Fedor was the biggest talent out there. Boon heared rumors already that Fedor had some problems with his Russian top team. Once again Appy came with Golden Glory to Japan he gave a business card of Vadim to Fedor at one of the trips he came as a guest from Golden Glory as both Appy and Boon did not speak Russian.
The result was that Fedor (who looked at some of the red devil shows being broadcasted on Russian TV) called Vadim. Vadim called me and Appy and he told me that Fedor did not want to leave The Russian to Team without some guarantees. Two things happened then which were vital for the fighting industry for today. First we found out that all fighters were getting a 50K bonus if they would fight for the title. As Fedor was the champ he would have had the same amount of money as all the other top fightes who fought for the Pride belt. This was asked by an e-mail by me to Yukino from pride, who confirmed that all fighters were getting the same 50K bonus. That e-mail was send to Russia were Vadim had the mail translated. It turned out Fedor did not even got a tenth of that amount, according Vadim.
I then smelled a huge opportunity, I knew what Fedor was making with Pride and that he was heavenly underpaid, so I set up a meeting in ST Petersburg with Miro Mijatovic and Mr Ito from Inoki’s office. Vadim would promise that Fedor would be there and so we went to St Petersburg. I must give props to Fedor who was really smart in not accepting the first offer (even if it was twice the amount he was making at Pride that time).
The following was agreed, Fedor would fight four times a year for a period of one year with evt.an extension of another two years, the amount would be almost 4 times as much as he was making at Pride, plus we negotiated that other red devil fighter would get an opportunity to fight. I did not slept for three days and had the puss coming out of my eyes from staring hours at my lap top typing contracts. Finally we all agree and we came to the agreement that Vadim me and Appy would share 20% of the management fee. However I still had Heath Herring with Pride and other GG fighters, so officially I did not want to be mentioned in the contract with Fedor as this could cause problems for GG. My part of the money in the agreement would go to Miro Mijatovic who would then pay me my share, so far so good.
I had Miro bring t-shirts of the Inoki event to St petersburg and pictures were made in the Cage with Fedor wearing the shirt, Kawasaki was there in Russia with two Japanese fighters and the news was quick widely spread in Japan. It hit like a bomb, my telephone was non stop ringing, my fax machine spit out threads from the lawyers of Pride and I was suddenly offered to not fight with Semmy against Barnet, but in Pride against a nobody for more money. Miro called me many times with Kawamata standing next to him, he started to explain me that yakuza got involved and that they were thinking in cancelling the event. I told him that this was impossible after all the work I had done and put my ass on the line. My only option was to make the new fight show a success series, I had no other options!
They were so nervous nobody would show up, I paid for all the flights myself and had Semmy Schilt, Alistair Overeem, Stefan Leko, all the Russians (Fedor , Amar, Aleksander) come to Japan. Pride tried everything but the damage was done, we came to Kobe. I will not get into details how the yakuza came to us and how tense the atmosphere was in Kobe, but it felt like a bad second hand movie were Miro and me were the main actors. Finally it was agreed that Fedor could fight (Sakakibara was waving contracts of Pride and Fedor at press conferences before we came to an agreement etc) in Inoki’s show from Kawamata, but Kawamata the promotor should pay 1 million for the use of Pride's yakuza and another million to Pride for using Fedor. I guess Fedor's price just went up another ten times at that night. In all the confusion, I had the idea Fedor never really knew what happened behind the scene and what Miro and I had done for him.
After the show the real headache came, the Russians were all paid in cash (Pride style), but as I was used to wire transfers (K-1 use to pay cash as well but Mr.Isshi run into some tax problems) and did not want to carry around with huge amounts of cash with me, I waited for the transfer. I waited very long for the transfer as the money never came, till today.
I then took a flight back to Japan at the end of January 2004 and had many meetings with Mijatovic. Finally we agreed that he would come up with a part of the money as the contracts were signed on one of his companies. In return Mijatovic would keep 50% of the Fedor money after the money was paid back for the Inoki loss. I paid all the fighters out of my own pocket and till today I am still $200.000 short. Mijatovic however told me that he would keep the contracts valid. I signed some contracts for 4 fights per years for a three year period and that only then he would pay the first part of my loss. We finally agreed!
Pride was getting nervous and Kawamata left the country without paying many people under the motto, the yakuza threatened him and he took 6 million from NTV and did a runner. Now Miro Mijatovic was only left with the contracts including the one from Fedor, but the promoter and TV station backing us up vanished. Pride got in contact with me and wanted to sign Fedor again, finally it was agreed that Fedor would fight for the same money as he received on new years evening, as long as the old pride contract original was till October 2004, this contract was signed in my office in Holland in the beginning of 2004 with at present Fedor, Appy, Vadim me and Shinoda from Pride ( I informed Miro by sending him the signed copy and by phone , he still had the original managment contract for Fedor/red Devil that time) . Pride hated the situation and I met de big boss behind the scene in person together with Miro (who always stood with me, props for that), Miro was told that he could not be in the dressing room with Fedor and that Fedor could not wear any red devil t-shirts till the contract ended in October 2004 (some childish moves to not show face loss and a sign the yakuza was in control). All this because Mijatovic found himself in a briljant position, they screwed him out of the management of Mirko Crop Cop who became Pride biggest star. Miro was always getting a percentage from Mirko and he agreed that they would pay him this (till his contract with Cro Cop stopped or till the contract with Fedodr stopped, it did not matter negotiated extra money with pride becuase they screwed him with Mikro). He would write them invoices with a certain amount of money for work he did, such as tv promotions, news paper articles, internet services, flight cost etc. Pride acted unbeliebable stupid as Mijatovic was reaaly an assed, he spoke the Japanese language even read the language had an office in Tokyo and had managed a deal for golden medalist swimmer Ian Thorpe (he also was born Croation and lived in Australia, a man of the world). He did great marketing for Pride and Fedor in newspapers and other magazines for example and hired his own Russian Japanese translator. All went well till NYE 2005. Miro was paying me my share of the money from Fedor and was the official booker for him in Japan, Appy and Vadim were just at the right time and right place and were thrown into a bed of roses!

メンテ

Part 3

The downfall of Pride!
At new years evening 2004 Fedor won again and two months of negotiations after his contract expired in October led to no agreement between Miro and me the Russians and Pride. Mijatovic had build up Mirko to huge amount of money per fight and Bas Boon also knew the market. Pride knew they needed a long term deal and did the following: They contacted Appy with a few days before the New Years evening 2005 and told them Mijatovic was getting extra money of Fedor. They came with all the transfer sheets each time there was an event (by coincidence Mirko Cro Cop also fought on all those events). Appy had already ask a few time to Mijatovic and Sakakibara, if Mijatovic was getting extra money and in the eyes of Mijatovic he was just dealing with an old case (Mirko Cro Cop) and did nothing wrong. Yes, Miro would have used his new management with Fedor as leverage over Sakakibara, I did not see any problem in that. That case was of no bussines to Appy or me. By then Sakakibara smelled an opportunity one the would cost him, his Pride!

Mijatovic showed me two e-mail’s were Pride offered him a 2 year contract with a minimum guarantee of 4 fights per year. An amount was mentioned but (the email came from Shinoda from Pride) it also said that he could divide this amount to Fedor however he would like, smelled like a huge bribe (for example we pay you 200.000 per fight and you can give 120.000 to Fedor and keep 80.000 yourself) and Mijatovic never replied to their proposals. Instead Miro negotiated with me and I did with Appy and Vadim we all agreed that Fedor would not sign any long term deal and would take fight by fight. A similar situation learned by Miro when he managed Cro Cop, they all agreed. Sakakibara was vurious and in many cases in those circumstances he made a vital mistake. He knew Appy ask him already a few times if no extra money was paid (he new Appy was weak), so Sakakibara produced all the private invoices of money wired to the account of Mijatovic, it did not say it was for Fedor on these invoices, but they made a nice story about it. Appy could smell himself being a bigshot and took the bate, now he and Vadim would finally have their own thing without paying Mijatovic. The funny thing is that they forgot about me, I had nothing to do with all those things, worked my ass of, used my experience and knowledge, arranged the meetings and the contracts for Fedor, got him more money, got fighters from Red Devil to fight and my reward was that my fighters were not paid at the Inoki event and that I took a huge risk by bringing all these fighters to that New years evening show on my expenses!
I went to the room of Appy at that new years evening in 2005 show and ask him what happened, he gave me a story that Miro did this and that, I told him man calm down this is just Pride because we do not want to sign long contract deals (I believe that the offer from Pride made to Mijatovic would have been excepted by Vadim and Appy, they did not have a clue what they had in their hands) . Appy and Vadim had seen himself Pride falsed a document regarding contractual obligations with Fedor before the Inoki show in 2003, which Fedor claimed he never signed. Appy knew this and told me what basterds pride were at that time , how can they do this. I told him we should stay together things are going well, don’t do this. Later I heared he accused me to be in that plot (his imagination) with Miro as well, but the only person still having a huge money shortest a year later from Inoki 2003 show was me. Appy told me that all the money would go to Vadim now and he would decide, but the decision was already made (Appy and Vadim who only made money with the work from me and Miro and never invested one dollar in the whole case), they had dollar signs in their eyes and took the opportunity to cut me out of the deal.
Appy started to put himself on the mountain but did not have a clue of what happened behind the scenes at Pride.

Mijatovic was not sitting still, both me and Miro ask Sakakibara to not continue the bullshit, but is was to late, there was so much hate and emotions took over business sence. We even offered the following, we will not start a court cause but pay us the money we lost at NYE 2003 and we will go along! Court cases cost money and aggrevation, we told him that the whole situation occurred because of the yakuza send by Pride and that it was better these things did not get into the newspaper. Miro told him what money he still needed to receive from Kawamata , so did I, which money was still outstanding. We told Sakakibara if he would pay the amount we would back of, well we all knew the story, nothing happened and Miro started the court case. Kawamata played a victim but more and more dirt was coming out in news papers, scandal magazines and the internet, exactly how we predicted it would happen.
Appy ws organizing in Holland two big events with the so called support of Pride (the old 2h2h which were done together with Golden Glory in the beginning), but without Golden Glory support, the events became a finacial disaster. Now Appy started doing the same thing were he convicted Mijatovic for, he used Fedor as leverage over Pride. He would not come with Fedor to Pride he told Pride, if Pride would not help him with the losses of his two shows he promoted or bring fighters at no cost he would stay at home and Fedor to. I do not think Fedor know anything of this, maybe he did.

Then K-1 would make an offer in July 2006 for Pride through Bas and I tried again to convince Appy (business over ego) that Pride was dying and that this would be the best move. More strange is that the offer (it was a good offer from k-1) was refused and that Fedor fought two months later for $150.000 less money then k-1 offered him, Fedor fought against Zulu in Pride????????????????????????????? Makes you wonder if Dana White speaks the truth about those crazy Russians or maybe managers??????

Appy would tell everybody he was the biggest promoter and that he (almost never mention his partner Vadim) and Pride would start doing these huge promotions through Europe. Not realizing that Pride was taking one last breath and lobbying around trying to sell a lost cause. Bas Boon was already telling everybody in Holland that Pride was going down. He knew the court case was getting a lot of negative publicity in the News papers in Japan. All that could have been prevented if Sakakibara just made a normal business deal with Miro and Bas, Appy and Vadim and Fedor or he just should have paid the lost money to Miro and Boon from that disaster NYE show in 2003, he did not.If Mirko not would have been injured it would not even have happened. Result Miro won his court case over Kawamata but got no money. Lost lawyer expenses, bad press in the newspapers, yakuza boss had to flee the country to Korea and finally Fuji Tv pulled the plug all because of ego!

The final result came as forseen, Fuji TV pulled the plug (more and more yakuza stories came in the big press and even on TV in Japan) Pride was devastated (maybe got lucky) sold their library and some of their fighters to the UFC after Pride promoted at the back yard in Las Vegas with Ed Fishman, who maybe seen by Zuffa as a real competition.

Fedor lost value in Japan, by not fighting for over one year. Appy and Vadim found after one year searching a new investor (props by the way for finding this investor) the profile on the M-1 site of Appy Echteld is a joke(worked as partner with Pride hahahaha he was the one pressing pride to his wishes, leverage with Fedor), hopefully M-1 will still succeed in becoming a real MMA force as we need a professional good MMA organisation! Fedor is not to blame and Vadim is a good business man (but ingnored who really made the deal and did the owrk), Fedor is a machine who performed as a real champion. It’s a shame that because of a language problem, he maybe understand 10% of what happened to him.

Mijatovic tried to Fedor him with a Russian translator on the way home to the airport after that famous 2004 New Years evening when Sakakibara decided to throw with dirt. One thing Fedor picked up very fast as Miro told him, do not sign a multiple deal fight contract, as we now all know, he did not! When Fedor arrived in Russia after his victory on the 2004 NYE show, he was an easy target for Vadim and Appy, it was all the fault of Miro and Bas,blablabla!

Kawamata is now a rumour that he is again involved in a NYE show or managing fighters for the people who do not know, this man still needs to pay a lot of people. Me and Mijatovic still need to get about $600.000 from him. I hope I will run into him and I hope he is a man of honor and not runs away like he did last time and pays his debt! It’s a small world!

I heard this from Bas himself, The Topjournalist

メンテ

Source

[valheruking]

Yeah i read that when it came out, pretty informative.

[atj-lucko]

Its cut and dry that Zuffa didn't do the work to make sure things were in order and was rushing to buy Pride, Ed Fishmen had the same worries when he was going to buy Pride, Zuffa seemed like they didn't care enough and now are crying fowl.