Aug. 21 (Bloomberg) -- Al Jazeera Satellite Network manufactured claims to $65 million tied to its 2013 purchase of Current TV, the cable network owned by former U.S. Vice President Al Gore, and should be barred from getting access to the funds, according to an unsealed lawsuit.
Al Jazeera officials improperly sought to use funds held in escrow in the $500 million deal to resolve disputes with Time Warner Cable Inc., Dish Network Corp. and other TV distributors that balked at broadcasting Qatar-based Al Jazeera’s U.S. news channel, Gore and Joel Hyatt, another former Current TV owner, said in the suit, filed Aug. 15 in Delaware Chancery Court. A redacted version of the complaint was unsealed today.
Al Jazeera is using the “underhanded tactic” of turning the escrow fund into “a reservoir from which to pull money to buy favor with its distributors,” the partnership that owned Current TV said in the complaint.
Buying Gore’s channel and rebranding it gave Al Jazeera America access to millions of U.S. homes. Gore was to make an estimated $100 million on sale of the network, which he helped to start in 2004. After debt, he was to gross an estimated $70 million for his 20 percent stake, people familiar with the transaction said last year.
Dawn Bridges, an Al Jazeera America spokeswoman, declined in an e-mail to comment on the allegations in the unsealed suit.
Earlier this week, Al Jazeera officials rejected Gore’s claims that they engaged in fraud in their handling of the escrowed funds and said the case involved an “ordinary commercial dispute.”
Gore, 66, and his partners -- including Hyatt, founder of Hyatt Legal Services, Los Angeles billionaire Ron Burkle and money manager Richard Blum -- bought Current’s predecessor company for $70 million in 2004.
The former Democratic vice president said at the time that he wanted to create a “transformational” network. Revamped as Current TV, it would, like YouTube, thrive on youthful viewer input, be an antidote to Fox News and a liberal competitor to MSNBC.
Al Jazeera had unsuccessfully sought for years to get U.S. cable operators to pick up its Al Jazeera English channel, which broadcasts to 220 million homes in more than 100 countries. Buying Current TV gave Al Jazeera America access to about 43 million homes nationwide, less than half of all pay-TV homes.
As part of the purchase, $85 million was put into escrow and $65 million of that figure is what is at issue in Gore’s case, according to court filings.
The money was to be used for the “limited purpose” of indemnifying the Current TV partners in any disputes that might arise over the sale, according to Gore’s filing. The escrow period ended July 2, according to the filing.
While Gore’s lawyers blacked out references to the $65 million in the redacted suit, they used the number in earlier court filings in the case.
Al Jazeera wrongfully sought to use some of the escrowed money to pay expenses tied to the termination of a contract with Time Warner Cable, according to Gore’s suit. The former Current TV partners said those costs weren’t covered by the purchase agreement.
The Qatari network also said it was entitled to funds to help resolve a dispute with Dish over an audit that it never informed Gore or Hyatt was being done, according to the suit.
Another claim for the escrowed funds related to Al Jazeera’s suit against AT&T Inc. over that company’s refusal to air Al Jazeera America on its U-verse cable network. In June, AT&T agreed to resolve the Delaware suit by making the network available to its 5.7 million viewers, two people familiar with the agreement said at the time.
Al Jazeera officials failed to notify Hyatt about the “AT&T termination claim and permit him to control the defense of it” as required by the sale agreement, the ex-Current TV partners said in their suit.
Gore and the other partners are asking Delaware Judge Sam Glasscock III to order Al Jazeera to immediately turn over the balance of the escrow fund minus legitimate litigation costs and plus damages, according to the court filing.
The case is Gore v. Al Jazeera, CA No. 10040, Delaware Chancery Court (Wilmington)
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