Tuesday, September 21, 2010
Golden Boy suing Top Rank
By Dan Rafael
Golden Boy Promotions sued bitter rival promotional powerhouse Top Rank, its chairman, Bob Arum, and chief financial officer David Lopez in federal court Tuesday, accusing them of racketeering and millions of dollars in fraud.
Arum denied the allegations.
The 23-page suit filed in U.S. District Court in Nevada, and obtained by ESPN.com, accuses Arum of a pattern of purposefully trying to hide millions of dollars Top Rank allegedly owes Golden Boy related to money generated from three Manny Pacquiao fights.
Golden Boy, which owns a percentage of Pacquiao's promotional contract, is seeking damages "in the range of $3 million to $5 million, plus attorneys fees," Judd Burstein, the attorney representing Golden Boy, told ESPN.com, adding that because the suit was filed under the Racketeer Influenced and Corrupt Organizations Act -- the RICO statute -- damages would be tripled if Golden Boy wins a judgment.
Burstein declined to go into more detail about the suit.
"The complaint speaks for itself and we have no further comment," he said.
When provided details about the suit, Arum, who had not seen it yet, told ESPN.com, "Of course, it's not true. The lawyers will handle it. I can't be bothered with that. ... Our attorneys said it's a desperate act on Golden Boy's part and Top Rank is going to end up getting attorneys fees."
Golden Boy contends that it is owed millions of dollars from Pacquiao's 2008 lightweight title bout against David Diaz, his 2009 welterweight title bout against Miguel Cotto and his March welterweight title defense against Joshua Clottey.
Daniel Petrocelli, Arum's attorney, told ESPN.com that the allegations are "completely fictitious. All of this is spiteful because they haven't gotten over losing the litigation [over Pacquiao's promotional contract] a few years ago. This is just spiteful and it will be redressed swiftly and decisively against all responsible parties.
"They are only doing this to get to cheap publicity. They will all bear responsibility."
Golden Boy alleges numerous instances in which Top Rank failed to report revenue from the fights and falsely inflated expenses. It also contends it is concerned that Top Rank will use similar accounting for Pacquiao's fight with Antonio Margarito on Nov. 13, which Arum recently began promoting.
On the Diaz bout, for example, the suit claims that upon Arum's direction, Lopez sent 16 accountings to Golden Boy between August 2008 and July 2010 "which falsely claim that TR received no income from sponsorships even though pictures of the Diaz bout show that Tecate beer, Affliction [a clothing company] and a company known as Smart were featured sponsors."
The suit said that sponsorships from Pacquiao's fight with Ricky Hatton generated $630,000 and $870,000 from the Oscar De La Hoya fight, so it is "inconceivable that Tecate, Affliction and Smart did not pay hundreds of thousands of dollars for the opportunity to sponsor the Diaz bout."
The suit claims "none of Lopez's [alleged] acts of fraud would have been committed absent Arum's knowledge, direction and control."
Further, Golden Boy said it does not know whether Top Rank is also "seeking to defraud Pacquiao and his promotional company, M-P Promotions, or whether they are participating in the fraud and are receiving payments based upon the unreported sponsorship income."
Among various accounting issues that Golden Boy alleges in the Cotto fight is that Top Rank purposefully misreported "at least $6 million available to distribute" to Golden Boy and Top Rank by falsely reporting Pacquiao's purse. Golden Boy says it received accountings from the fight saying Pacquiao's purse was $15 million, but that the bout agreement on file with the Nevada State Athletic Commission, which oversaw the fight in Las Vegas, lists Pacquiao's purse as $7.5 million, raising the question of where the other $7.5 million went.
In addition, the suit contends that Top Rank knowingly inflated the costs of the undercard by $800,000 "in an effort to show less profit for the bout, thereby fraudulently reducing the amount of money due to GBP."
There are similar allegations related to the Clottey fight, including more alleged deception on the amount of money generated by sponsorships, which were listed as $66,300, and alleged inflation of travel expenses, sanction fees and training expenses for the fighters, all done in order to reduce the reported profit on the event.
Golden Boy claims the collection of the various accounting issues represent a purposeful "pattern of racketeering activity."
"These accounting issues are things they have raised in prior correspondence with us," Petrocelli said. "They are groundless. They are taking spiteful shots and publicizing false allegations."
Golden Boy and Top Rank have been at odds for years over Pacquiao, who once signed with both companies virtually simultaneously in late 2006. Pacquiao eventually pledged his loyalty to Top Rank, but the damage was done.
Golden Boy sued Top Rank, with which it was already embroiled in various lawsuits. The bad blood between Arum and Golden Boy's Richard Schaefer and De La Hoya, Arum's former fighter, led to a cold war between the companies. They refused to do business with each other, denying fight fans a number of marquee matches between their fighters.
But with the legal fees mounting and unrelenting public pressure, the companies reached a global settlement on their lawsuits in June 2007.
Under the settlement brokered by mediator Daniel Weinstein, a retired federal judge, Top Rank retained Pacquiao's promotional rights with Golden Boy due to receive a percentage of Top Rank's profits each time he fought.
The settlement also cleared the way for the companies to make several major fights together. Among them were Pacquiao against Golden Boy fighters Marco Antonio Barrera, Juan Manuel Marquez, De La Hoya and Hatton. Under the settlement, Golden Boy was the lead promoter when Pacquiao faced a Golden Boy fighter, so it was responsible for providing Top Rank with the accounting for each event.
However, when Pacquiao fought Diaz, Cotto and Clottey -- all Top Rank-promoted fighters -- Golden Boy had to rely on Top Rank's accounting for each bout.
Arum and Petrocelli said the companies are still bound by Weinstein's 2007 order and that Golden Boy should have brought any concerns before him.
"As far as I'm concerned, this is a matter for the mediator," Arum said of Weinstein, who tried unsuccessfully to mediate a deal between Top Rank and Golden Boy in January that would have resulted in a Pacquiao-Floyd Mayweather bout.
"This is frivolous," Arum said. "We signed an agreement four years ago agreeing to binding arbitration on issues like this. They're going to end up paying us substantial legal fees. You can't bring an action like this if you've agreed to binding arbitration. They could have filed the complaint with Daniel Weinstein. They can't do this in a federal court. It will be thrown out. They filed this complaint because if they had done it in arbitration, it would have been confidential. So this is the way they think they can go around the confidentially provision in the agreement. They know it will be dismissed and they will pay a big price for that.
"Their motivation is to spread this filth in public instead of going to the arbitrator."
Said Petrocelli, "There is no legal basis to avoid the requirement to arbitrate all disputes between the parties related to Manny Pacquiao. This they have conceded in many letters and emails leading up to this. They know this is all subject to the [arbitration] term sheet. This case will not and cannot be litigated in federal court because it's subject to binding, mandatory arbitration and, unless they withdraw it, we will ask for it to be ordered into arbitration pursuant to the parties' written agreement."
Dan Rafael is the boxing writer for ESPN.com. Follow him on Twitter @danrafaelespn.