'Girls Gone Wild' Founder Ordered to Stay Away

NEW YORK ( TheDeal) -- "Girls Gone Wild" founder Joseph R. Francis will have to stay away from the adult video franchise.

Judge Sandra R. Klein of the U.S. Bankruptcy Court for the Central District of California in Los Angeles this week verbally granted a temporary restraining order against Francis, according to Matthew C. Heyn of Klee, Tuchin, Bogdanoff & Stern LLP, counsel to the Chapter 11 trustee for GGW Brands LLC.

Heyn said Klein requested some minor modifications to the proposed TRO. A hearing on a preliminary injunction against Francis is set for May 8, Heyn said.

Trustee R. Todd Neilson of Berkeley Research Group LLC on Tuesday sued Francis in the bankruptcy court, asking Klein to hold Francis in contempt for violating the automatic bankruptcy stay of his GGW Brands. Neilson also sought a TRO and permanent injunction barring Francis from attempting to influence control over the debtor or from coming within 100 feet of its premises.

Neilson alleged Francis has continued trying to exert control over the company and has made "violent threats" to the company's employees. The founder of GGW is no longer a manager or member of the company.

"Although he contends that he no longer has any economic interest in the debtor and that he gave up such economic interest long ago, Mr. Francis has exerted significant influence over the debtor's personnel and operations by speaking to and directing the actions of the debtor's personnel," Neilson wrote, asserting Francis has continued to attempt to exert influence over the company even after the trustee's appointment.

Specifically, Neilson called GGW's arrangement for office space "idiosyncratic." The debtor's principal place of business on Wilshire Boulevard in Los Angeles is leased by Perfect Science Labs LLC. Perfect Science uses the space but also subleases portions to GGW and Argyle Online LLC, which produces GGW content. GGW is allegedly on a month-to-month lease that it not written down and does not clearly delineate what space belongs to each entity. Francis, meanwhile, maintains an office in the space that is allegedly part of the Perfect Science portion of the building.

Neilson also noted GGW has no employees of its own and leases employees from Perfect Science.

Argyle also leases employees from Perfect Science, and it is sometimes unclear whether employees are leased to GGW or Argyle.

Neilson said the exact relationship between the three entities is unknown, but Francis has control over all three companies. Since his appointment, Nielson has instructed employees to only take direction from him and not Francis.

Francis, however, has not taken a step back and on April 21 allegedly made "violent threats" to employees and attempted to fire them because they were not obeying him. Francis also allegedly has been "verbally abusive," and many employees are afraid of him, Nielson said.

GGW distributes adult entertainment content through various pay-per-view outlets and DVDs. The company has continued its distribution since filing for bankruptcy on Feb. 27 and intends to continue so long as it is profitable.Nielson was appointed on April 11 at the request of casino operator Wynn Las Vegas LLC and the U.S. trustee.

Wynn on March 21 requested a trustee, asserting GGW had paid substantial funds to Francis over the past year. Francis doesn't receive a salary or a consulting fee. Instead, he uses corporate assets to pay all or substantially all of his personal expenses, including his mortgage, credit card bills and legal fees for matters not involving GGW, Wynn alleged.

U.S. Trustee Peter C. Anderson on April 9 added his voice to the chorus, filing a motion seeking the appointment of a trustee, or in the alternative, the appointment of an examiner.

Anderson in the motion questioned why Francis had a company credit card and also questioned $356,000 paid to Blue Horse, a "Francis entity" that apparently owns a property in Bel Air, an upscale section of Los Angeles, used by Francis. GGW had opposed the appointment of a trustee, asserting that Francis' expenses helped sell the product.

"Francis' 'bad boy' lifestyle and image are inextricably identified with the Girls Gone Wild brand just as Hugh Hefner is identified with Playboy magazine. ... Since there are many free sources of adult entertainment available to consumers on the Internet, the principal thing that causes consumers to pay for the same adult entertainment services offered by the GGW entities is the desire by the consumer to identify with Francis and his lifestyle by being a paid subscription member of the brand he is responsible for starting," the debtor said in court papers.

GGW filed for Chapter 11 on Feb. 27 with assets totaling less than $50,000 and liabilities between $10 million and $50 million.Neilson on Tuesday requested that GGW's case be jointly administered with those of GGW Direct LLC, GGW Events LLC and GGW Magazine LLC. The court approved joint administration on Wednesday.

Robert M. Yaspan of the Law Offices of Robert M. Yaspan is debtor counsel. Malhar S. Pagay and Victoria A. Newmark of Pachulski Stang Ziehl & Jones LLP and Mitchell J. Langberg and Laura E. Bielinski of Brownstein Hyatt Farber Schreck LLP both represent Wynn.

Written by Aviva Gat in New York

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