Licensing Scandal Hits Jakks Stock
By James F. Peltz, Times Staff Writer
The stock of Jakks Pacific Inc. fell sharply Friday amid investors' growing concern that a licensing scandal could further envelop the Malibu toy company.
After plunging more than 20% in morning trading, Jakks' stock rebounded but still finished with a 6.3% loss, down $1.44 at $21.44 a share on Nasdaq as more than 4 million shares changed hands.
The slide came after a former licensing chief at World Wrestling Entertainment Inc., James K. Bell, pleaded guilty Thursday to accepting kickbacks in exchange for handing out WWE licenses.
Jakks and other companies make licensed toys, T-shirts, games and other products based on the glitzy stars of Stamford, Conn.-based WWE, formerly the World Wrestling Federation.
The names of the licensees involved in Bell's scheme weren't disclosed; WWE has filed a separate civil suit against Jakks, the toy maker's top executives, Bell and others. It alleged that Jakks paid $100,000 in bribes — split by Bell and an outside WWE licensing agent, Stanley Shenker — to secure a lucrative WWE video game license in 1998.
The license, which extends until 2009, is jointly owned by Jakks and THQ Inc., a video game maker based in Calabasas Hills. The venture produces such games as WWE's "Smackdown!" series. Jakks has a separate license to make WWE action figures.
Jakks has denied the allegations in WWE's suit, which was filed in October. But Bell's guilty plea casts a cloud over the toy company, said Sean McGowan, an analyst with Harris Nesbitt Corp.
"Somebody bribed him [Bell], and if that trail leads back to Jakks, investors would be upset," McGowan said. "The fact that he admits he was bribed doesn't mean Jakks did the bribing, but it moves the case further along the road in that direction."
U.S. Atty. Kevin O'Connor in Connecticut, along with the FBI and the Internal Revenue Service, continue to investigate the case, O'Connor spokesman Tom Carson said. He declined to comment further.
Jakks executives couldn't be reached for comment Friday, a company spokeswoman said.
Jerry McDevitt, the lawyer handling WWE's lawsuit against Jakks, said, "We hope that Mr. Bell now fully cooperates and reveals what he knows."
Bell's lawyer, John Williams, said he couldn't discuss which licenses were involved in Bell's guilty plea. But he said Bell continued to answer questions from WWE's lawyers and "anybody who has a right to question him will receive a truthful answer."
Bell pleaded guilty to one count of mail fraud in U.S. District Court in Bridgeport, Conn. He admitted to a scheme in which he arranged for Shenker's firm, SS & Associates Inc., to receive commissions on WWE licenses to which it wasn't entitled. Bell would then get kickbacks from SS & Associates.
Bell, who is scheduled to be sentenced April 29, faces up to five years in prison and has agreed to pay $1.9 million in restitution. Shenker, of New Canaan, Conn., hasn't been charged and hasn't commented on the case.
WWE's stock rose 26 cents to $12.45 a share on the New York Stock Exchange. THQ's stock fell 42 cents to $26.73 on Nasdaq. THQ has said that it was "not directly accused" of doing anything wrong in the WWE suit and that it wasn't aware of any wrongdoing by others.
Jakks was started in 1995 by Chief Executive Jack Friedman and President Stephen Berman, both former THQ executives. In 2003, Jakks' profit from the WWE video game venture was $7.4 million, or 30% of its pretax profit for the year.
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WWE Ex-Exec Pleads Guilty
A former licensing chief of World Wrestling Entertainment Inc. admitted Thursday that he accepted kickbacks in return for steering the licensing rights for several WWE products made by others.
James K. Bell, WWE's former senior vice president of licensing and merchandising, pleaded guilty in U.S. District Court in Bridgeport, Conn., to one federal count of mail fraud.
In announcing the plea, the U.S. attorney's office in Connecticut didn't disclose the licenses or companies involved in Bell's scheme.
But WWE is pursuing a separate civil suit against Bell, Malibu-based toy company Jakks Pacific Inc. and others, alleging they helped Jakks wrongfully secure a video game license from WWE in 1998. Jakks has denied any wrongdoing.
The U.S. attorney's office in Connecticut said that, under a scheme that ran from 1998 to 2000, Bell arranged for an outside WWE licensing agent, SS&Associates Inc., to receive commissions on licensing agreements to which it was not entitled. Bell would then get kickbacks from SS&Associates, owned by licensing agent Stanley Shenker, according to Bell's plea.
Bell, 49, of Norwalk, Conn., was released on $50,000 bond. He declined to comment after the proceedings.
Shenker has not been charged. His attorney, Andrew Bowman, declined to comment Thursday.
WWE, based in Stamford, Conn., filed its civil suit against Bell, Shenker and Jakks in federal court in New York in October. In the lawsuit, WWE alleged that Jakks paid $100,000 in bribes to Bell and Shenker to gain a video game deal with WWE. The alleged arrangement deprived WWE "of the benefit of competition" in awarding the license, its suit stated.
Jakks already was licensed to sell WWE toy action figures when it obtained the WWE video game license in 1998.
A Jakks spokeswoman didn't respond to a request for comment.
O'Connor's office said the FBI and the Internal Revenue Service were continuing to investigate the case. Bell, who is scheduled to be sentenced April 29, faces up to five years in prison and restitution of about $1.9 million.
WWE's stock fell 22 cents to $12.19 on the New York Stock Exchange. Jakks' stock fell 74 cents to $22.88 on Nasdaq.
credit:
http://www.latimes.com
