Fraud Suit Aims at Advocate, Out, here! TV Parent Company

A lawsuit filed in California state court against Regent Entertainment, the parent company of the Advocate and Out magazine, is charging that business with fraud, while other suits filed in federal and New York state courts against Here Media, the subsidiary that operates the gay magazines, suggest that unit is struggling financially.

Merrill Lynch and Bank of America charged in the California lawsuit that the “defendants committed deliberate acts of fraud and self-dealing… and schemed to funnel loan proceeds to themselves through a series of sham transfers and transactions with affiliated parties,” according to a portion of the filing quoted in Variety, the entertainment industry publication.

The financial services firms issued two loans in 2005 and 2006 worth $90 million to Regent that were to be used to fund the production and distribution of movies. The two firms charged that Regent drew down cash by creating fake transactions to make it appear that it was executing movie deals.

“Defendants knew that these marketing and release strategies and distribution budgets would never be adhered to or executed and that they were inappropriate for the scope of the, more often than not, low-quality straight to DVD film titles, but submitted them to Plaintiffs anyway,” said another portion of the suit cited by the Courthouse News Service.

In the lawsuit, Merrill and Bank of America named Regent, Stephen P. Jarchow, the company’s chairman, and various Regent business units, including the one that operates the gay businesses, in the fraud. Jarchow is also the chairman of Here Media, the gay business unit. Paul Colichman, who is gay, is the chief executive officer of Here Media.

Regent did not respond to an email seeking comment on any part of this story, but Jarchow told Variety, “Basically, Merrill Lynch is unhappy with the deal they made five years ago, and this is their way of expressing it.”

Variety paraphrased Jarchow saying “that he believes he and Regent have complied with the terms of the agreement.”

In 2009, Regent merged with PlanetOut, which owned and operated the Advocate, the national gay news magazine, and Out, the high-end glossy, among a number of properties. PlanetOut appeared to be on the verge of bankruptcy prior to the merger. All of Regent’s gay businesses, including here! TV, the cable network, were folded into Here Media. That unit appears to be in financial trouble.

In 2010, a New York City graphics firm sued Here in New York Supreme Court seeking just over $200,000 in unpaid bills that date back to early 2009. That case is ongoing.

A Maryland photographer sued Here in 2010 in federal court after the magazine allegedly failed to pay him for a photo shoot the Advocate hired him to complete at the 2009 National Equality March in Washington, DC. The photographer asserted that the Advocate’s failure to pay made its use of his pictures copyright infringement under the contract the parties signed and he “may elect to recover statutory damages…of up to One Hundred Fifty Thousand Dollars ($150,000) for each of the ten (10) photographs infringed by Defendant, along with pre- and post-judgment interest at rates allowable by law.”

The parties in the federal lawsuit are engaged in settlement talks. It is doubtful that the photographer will collect in excess of $1 million for his work.

Also in 2010, a photo-retouching firm, publishing giant Reed Elsevier, and a freelance artist sued Here in civil court, where lawsuits for under $25,000 are heard. One of those lawsuits was disposed of and two are ongoing.

Further evidence that Here is struggling comes from the website Writers Weekly. which posted 2010 complaints from three writers who published in the Advocate and were not paid roughly $8,000 altogether. Two received either all or some of the money due them after their complaints were aired publicly.

Regent is the third business, after PlanetOut and Window Media, which published the Washington Blade and the Southern Voice among other gay newspapers, to try and reap large profits from consolidating gay online and print publishing. Window Media’s parent, the Avalon Equity Fund, went into receivership in 2009. Its operating units then went bankrupt, though the Washington Blade was reintroduced by an employee group that bought the name out of bankruptcy.

“The various lawsuits, some with serious charges, are yet to be resolved, but it reminds me of another mess, Window Media,” said William Dobbs, a longtime gay activist and media watchdog. “Let’s hope that the community’s stake in high quality journalism is not damaged by more hubris, greed, and mismanagement.”