Jail May Be the Least of Joe Francis’ Troubles

LOS ANGELES—Girls Gone Wild founder Joe Francis is looking at a possible five-year jail sentence after being convicted this week of assault and false imprisonment, but that sentence may actually pale in comparison to the drubbing he is taking from his Chapter 11 trustee, R. Todd Neilson, who yesterday filed an emergency motion in California bankruptcy court seeking permission to declare yet another bankruptcy for GGW subsidiary, GGW Marketing, which the court quickly approved. The action comes one day after Neilson levied very serious charges against Francis in an emergency motion filed with the court in which he accuses the 40-year-old playboy of fraudulently transferring the company’s trademark to an offshore entity he owns. According to Law360, Neilson said, “he needs to review emails stored on computers and servers in the ‘Girls Gone Wild’ offices immediately because the offshore company claims GGW's license to use the ‘Girls Gone Wild’ and ‘Guys Gone Wild’ trademarks expires May 31.” He further claimed that Francis “has been siphoning money out of GGW and funding the offshore company, Path Media Holdings LLC, through a trust he owns.” "Based on the evidence discovered to date, it appears that the transfer of the trademarks to Path Media Holdings may have been a fraudulent transfer," Neilson said in the motion filed Wednesday. Thursday, Nielson was back in court, this time to file yet another motion seeking permission to declare GGW Marketing bankrupt. “Neilson said he was seeking bankruptcy protection for the GGW Marketing subsidiary partly to recover the allegedly fraudulent transfer of GGW’s trademarks to Nevis-based Path Media Holdings LLC, which is owned by an offshore trust,” Law360 reported Thursday. Francis fought back Thursday as well, filing “an opposition to Neilson’s motion seeking access to emails, saying the filing wouldn’t give sufficient notice to other parties involved in the emails and calling the request a ‘witch hunt.’” Neilson, in his Thursday motion, seemed to anticipate the charge. “The trustee candidly acknowledges that pursuing the fraudulent transfer action against Path Media is among his chief reasons for seeking authority to file a voluntary Chapter 11 petition for GGW Marketing,” he declared. “The trustee has no reason to hide his intentions from the court, because it is well-settled that a party may file a bankruptcy petition solely for the purpose of availing itself of the rights and protections afforded by the Bankruptcy Code.” U.S. Bankruptcy Judge Sandra R. Klein yesterday approved Neilson’s motion in its entirety, however, authorizing the trustee to “review certain email files that were sent to or from the email accounts ending in ‘@girlsgonewild.com’ and ‘@ggwbrands.com’ of ‘four high level managers and key executive of the Debtors,’ that are currently stored on computer equipment, including desktop  computers and servers, in the Debtors’ office space and in cloud storage associated with desktop  computers and servers in the Debtors’ office space.” Nielson was picked last month as the bankruptcy trustee for GGW. A forensic accountant and former FBI agent who headed the internal investigation into the Solyndra LLC's bankruptcy, he said at the time of his appointment that he wanted to “get to the bottom of how much control Francis had over the company, and to that end has been granted subpoena power to interview GGW employees by the court." According to Law360, “Neilson later claimed to have uncovered intricate layers of connected firms at GGW’s Los Angeles address. He said GGW itself had no employees, instead leasing them from two other companies—Argyle Online LLC and Perfect Science Labs LLC—that are supposedly being used to exert backdoor influence over GGW.” Thursday, as mentioned, Judge Klein also approved the application filed the same day by Neilson requesting that “the Court enter an order authorizing the Trustee to (i) take such steps as are necessary to revoke the cancellation of GGW Marketing, LLC, a subsidiary of Debtor GGW Brands, LLC; and (ii) take such steps as are necessary to cause GGW Marketing to file a voluntary chapter 11 bankruptcy petition.” A request for an expedited hearing on the matter was also requested by Neilson, who explained in the application, “A hearing on shortened time is necessary because Path Media Holdings, LLC appears to hold trademarks that are critical to the Debtors. The trademarks were transferred to Path, for no apparent consideration, by GGW Marketing and GGW Brands in 2011. GGW Marketing was cancelled shortly thereafter. Path contends that on February 25, 2013 it terminated the Debtors' license to use the trademarks and entered into a short-term license agreement that expires on May 31, 2013. Without use of the trademarks, the Debtors may need to shut down. The Trustee seeks to revoke the cancellation of GGW Marketing and file a chapter 11 petition for GGW Marketing, so that GGW Marketing may recover the fraudulent transfer of the trademarks to Path. Expedited relief is necessary so that such action may be commenced before the expiration of the license. Accordingly, the Trustee requests a hearing on May 20, 2013 at 2:00 p.m.” The hearing also was approved by Judge Klein, and is schedule to take place at that day and time in Courtroom 1575, located at 255 East Temple Street in downtown Los Angeles.