FriendFinder Networks Inc. (FFNTQ), the bankrupt owner of Penthouse magazine, was sued by a company that has gathered movies, photos and other works created by the publication’s founder, the late Bob Guccione, over ownership rights of the artwork and property.
Guccione Collection LLC filed a lawsuit yesterday in U.S. Bankruptcy Court in Wilmington, Delaware, seeking a ruling that the posting and sale of the works online doesn’t violate FriendFinder’s intellectual property rights.
Guccione Collection, headed by Jeremy Frommer, a financier and Wall Street veteran of more than two decades, was sent a notice demanding that it take down the material, according to the complaint.
The Penthouse publisher “cannot demonstrate that they own any intellectual property rights covering assets owned by GC,” Guccione Collection said in the complaint. “Assets offered for sale by GC belonged personally to Mr. Guccione and were never owned by Penthouse.”
FriendFinder had no immediate comment, said Thom Weidlich, a spokesman for the Boca Raton, Florida-based company, in an e-mail.
Guccione died in October 2010.
FriendFinder, the operator of thousands of adult-oriented websites including adultfriendfinder.com, sought bankruptcy protection Sept. 17, listing assets of $465.3 million and debt of $661.9 million.
The company has more than 8,000 websites spanning more than 200 countries with more than 220 million members and over 750,000 paying subscribers, according to court papers. The websites offer social-networking and adult dating, video-sharing and live interactive video entertainment.
In addition to publishing Penthouse magazine, the company licenses the brand for content such as pay-per-view programming.
The curator of Guccione’s lubricious collection contends that it suffered damages both monetarily and to its reputation when its website was taken down the same day as the bankruptcy filing by its hosting service, which took about five hours to be restored, following FriendFinder’s demands.
Frommer, interested in all things related to Guccione and Penthouse, has spent more than a year building the Guccione Collection.
“I am a buyer of any and all Penthouse assets,” Frommer said yesterday in a phone interview. While he is interested in the Penthouse magazine, any offer to buy the business is merely speculative at the moment, he said.
“To make any offer I would need to do proper due diligence,” Frommer said. FriendFinder would need to do an analysis and review of its assets value to determine whether Penthouse is a core asset, he said.
Frommer declined to speculate on Penthouse’s value saying it would be “inappropriate to make my proposals in the press,” and until he understands the financials better.
While both companies seek to sate lascivious desires, FriendFinder’s business model differs greatly from that of Penthouse, leading Frommer to believe that management would be open to “discuss value with a potential buyer of non-core assets.”
Frommer said he wants to see “the Guccione legacy endure” and return Penthouse to its roots in the 1980s, when it was the top men’s magazine in the U.S. and sold 4 million to 5 million issues domestically a month.
The magazine has been deteriorating for the more than five years and “unless they have a turnaround plan for Penthouse, it would be a shame” not to entertain discussions with a potential buyer, Frommer said. He said he and his associates have the “wherewithal” to make an offer.
Frommer would be open to forming a joint venture or some sort of partnership if FriendFinder isn’t inclined to sell Penthouse outright.
“The fact is I am reaching out to them in a friendly way to discuss rebuilding an asset that was important to so many fans, including myself, that has dwindled down” to an almost forgotten periodical.
In February 2012The New Jersey entrepreneur began collecting Guccione’s personal memorabilia, which had been strewn about the country after being used to help satisfy some of his creditors. At an auction in Englewood, New Jersey, Frommer acquired a storage locker that contained erotic photos, artwork, films, magazines and documents, according to court papers. Frommer tracked more down in Arizona that belonged to a creditor and bought those items last November.
“Filthy Gorgeous,” a film about the life of Bob Guccione, who died at 79 from cancer, will air in November, Frommer said. They are working on a line of women’s lingerie called “Guccione Girls” and are in talks with a “major auction house” to sell some of the collections key items including some of Guccione’s earliest oil paintings, his personal camera, and assets related to his film “Caligula.”
Born in Brooklyn, New York, in 1930, Guccione started Penthouse in the mid-1960s. The magazine achieved prominence and infamy in the 1980s, displaying nude photographs of stars such as singer Madonna and Vanessa Williams, the first black woman crowned Miss America, who lost her title over the photos.
By the 1980s, Guccione had created a $300 million media business, and Penthouse battled Playboy with more-explicit photographs. It had a circulation of 4.7 million, according to the New York Times.
FriendFinder sought bankruptcy protection seeking to quickly execute a creditor-supported restructuring that would turn the company over to noteholders.
Under the restructuring deal, Second-lien noteholders, with about $320.3 million in 11.5 percent non-cash paying notes and about $10.6 million in 14 percent cash-paying notes, would exchange debt for all of reorganized FriendFinder’s equity, court papers show. Current shareholders are slated to receive nothing.
The 14 percent senior secured first-lien noteholders, owed about $234.3 million, would get cash and new notes. The deal is supported by holders of more than 80 percent of the company’s notes.
The restructuring would shed about $300 million in debt and cut annual interest expenses by about $50 million, according to a company statement.
The lead case is In re PMGI Holdings Inc., 13-bk-12404, U.S. Bankruptcy Court, District of Delaware (Wilmington). The lawsuit is In re Guccione Collection LLC v. FriendFinder Networks Inc., 13-52259, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Michael Bathon in Wilmington at firstname.lastname@example.org