Malibu, California-based toyco Jakks Pacific isn’t down for the count, but one of its key licensing agreements may be. Citing 14 counts of violations that include racketeering, commercial bribery and fraud allegedly committed in and around its toy and video game licenses, World Wrestling Entertainment slapped Jakks, its three principals (chairman and CEO Jack Friedman, president and COO Stephen Berman and CFO and executive VP Joel Bennett), video gameco THQ, the Jakks/THQ joint-venture, WWE’s former licensing exec James Bell and agent Stanley Shenker with a lawsuit in mid-October. WWE is seeking treble damages, restitution of profits for an unspecified amount and, most importantly, dissolution of both the video game license forged in 1998 and the amendments made to the toy license that same year.
The agreements aren’t set to expire until the end of 2009, and the WWE video game joint-venture between Jakks and THQ made up 22% of Jakks’ pre-tax profit in 2003. As of September 30, 2004, the joint-venture had generated approximately US$42.8 million in profit.
At the heart of the suit is WWE’s allegation that Jakks, via its three principals, paid US$100,000 in bribes to Bell (who was WWE’s senior VP of licensing at the time) and WWE licensing agent Shenker (who was also repping Jakks) to secure the video game deal. The suit further alleges that this action on the part of Bell and Shenker kept other gamecos (particularly Activision) from bidding on the license, preventing WWE from getting the best financial terms on the deal. The suit then claims that Shenker, through his company Stanley Shenker & Associates, began splitting his WWE commissions, including those on the video game license, 50/50 with Bell to the tune of more than US$1 million.
When the news of WWE’s suit smackdown broke, the value of Jakks stock fell from US$24.15 to US$12.96 per share in two days. Share prices have since rebounded and were sitting at roughly US$20 as of KidScreen’s press date in late December. But the precipitous drop has touched off a slew of class action lawsuits on behalf of the toyco’s shareholders. At press time, 10 such suits were in the works.
THQ says it’s not being charged directly with any wrongdoing in the WWE suit, and Jakks maintains its innocence and expects to be vindicated in court. As yet, court dates have not been set for any of the lawsuits, and Jakks and WWE are currently refusing further comment on the case.