JAKKS PACIFIC WWE sues toymaker, alleging scheme
The toymaker paid at least $100,000 in bribes, the lawsuit says.
STAMFORD, Conn. (AP) -- World Wrestling Entertainment Inc. filed a federal lawsuit Tuesday alleging a bribery scheme aimed at obtaining its licenses for video games and toys.
The lawsuit, filed in New York, charges that Jakks Pacific Inc. and its subsidiaries made payoffs to win the licensing rights for the wrestling company's toys and games. Payments of at least $100,000 were made to a foreign bank account of Stanley Shenker, WWE's licensing agent, who allegedly split the money with James Bell, WWE's senior vice president of licensing and merchandising, according to the lawsuit.
Stock dropped
Jakks shares plunged more than 22 percent, or $5.34, to close at $18.81 Tuesday on the Nasdaq Stock Market on news of the lawsuit. They lost another 5 percent in after-hours trading.
According to the suit, Bell and Shenker recommended the license be granted to Jakks during the 1990s. Two payments occurred during the selection process and a third payment was made after the video-game license was awarded to Jakks, WWE said.
"We very much regret having to take this action today, but regret even more the facts and circumstances which have compelled us to do so," said Linda McMahon, WWE's chief executive.
In a statement late Tuesday, Malibu, Calif.-based Jakks denied the allegations and said it expects it "will be completely vindicated in the litigation."
The allegations are also part of a federal criminal investigation by a grand jury in Connecticut, WWE's attorney, Jerry McDevitt, and Bell's attorney, John Williams, said.
Williams said he was surprised by the lawsuit because he expected a settlement. He also disclosed that talks had begun to resolve the criminal investigation.
"I'm not going to take the position this is a pristine operation," Williams said. "I think not every 'i' was dotted and not every 't' was crossed. Whether in fact it cost WWE any money is a different question."
Attorneys for the other defendants did not immediately return calls seeking comment.
Another allegation
In the suit, WWE alleges that Shenker and Bell also agreed to share hundreds of thousands of dollars in commissions from the deal.
Jakks has been WWE's toy licensee since 1995 and obtained the video game license in 1998. The licenses generate royalties of about $13 million, or about 3.5 percent of WWE's $375 million in annual revenue, officials said. WWE is seeking damages, but has not yet calculated the amount.