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September 06, 2011

N.Y. Court Authorizes Attachment of Over $7M in Private Assets

NEW YORK—In the New York Supreme Court version of Consipio v. Private Media, Justice Melvin L. Schweitzer has granted a motion by the plaintiff, authorizing the attachment of over $7 million in Private Media Group assets. The New York action was brought by Consipio in May 2010 against Private, Slingsby Enterprises Ltd. and Private CEO Berth Milton to recover on a 10-year-old $4 million promissory note and accompanying guarantee between Private and Commerzbank that Consipio purchased from the latter in April 2003. In order for the court to grant a motion to attach assets, the plaintiff must demonstrate: 1. A cause of action; 2. That it is probable the party filing the motion will succeed on the merits of its claim; 3. The existence of one or more grounds of attachment under CPLR 6201; and 4. The amount demanded from the defendant exceeds all counterclaims known to the party filing the motion. However, according to prior cases cited by the court, even if the above requirements are satisfied, the provisional remedy of attachment is up to the judge’s discretion, and the most important factor to be considered is whether the attachment is truly necessary under the circumstances. Justice Schweitzer, in signing the Aug. 30 order, came to the conclusion that, based on SEC filings made by Private over the course of the last few years, a strong possibility exists that Private will not be able to pay the judgment should Consipio prevail in the case. “As discussed infra, the court here exercises its discretion to grant an attachment to the plaintiff because it finds a serious question as to defendant’s ability to satisfy a judgment,” wrote Schweitzer. “Based on defendant's Annual Report on Form 10-K for the latest fiscal year ended December 31, 2010, it is clear that a genuine risk is posed that a judgment for the plaintiff, if granted, may not be enforceable against the defendant anywhere, including New York. Thus, it is PMG's current financial condition that has persuaded the court of the need for an attachment in this case.” Despite leaving open the final resolution of the case, Schweitzer also reinforced the court’s earlier decision that found a probability of success by Consipio. “While both attorneys seek to portray the series of letters and other communications going back and forth between the parties in the best possible light for their respective clients,” he wrote, “the court is of the view that its initial decision referred to, supra, dated May 16, 2011, denying in part defendant PMG's motion to dismiss presents sufficient support to satisfy plaintiffs burden of making an evidentiary showing not only of a prima facie case to withstand a motion to dismiss, but also a probability of success on the merits, i.e. that plaintiff likely will succeed on its cause of action against PMG that the parties entered into an agreement requiring PMG to pay on the Note on which it has now defaulted.” The dollar amount calculated by the court includes debt owed Consipio in the amount of $6,445,198, inclusive of interest through March 31, 2011, plus the costs of the action, sheriff’s fees, and expenses totaling an additional $907,727.72. The $7,347,925.72 total is substantially more than what Private Media has consistently asserted it owes Consipio in SEC filings and to the court. “Private believes that the amount due under the Note at May 9, 2008, including accrued interest, was no more than $2.4 million ($2.9 million at December 31, 2010), utilizing an interest rate of 7%,” the company stated in a recent filing. The interest rate on the loan also is in dispute before the court. Considering Justice Schweitzer's calculations, the difference in amounts owed on this debt could also bring into question the efficacy of the financial oversight provided by Private’s independent directors. Regarding attachable assets in New York, the order states, “Plaintiffs allegations in the affidavit in support of an attachment to the effect that it believes defendant has property or debts owed to it that are either in New York or may be brought into New York which may be capable of being attached, including an attachable interest in a limited liability company, warrants granting plaintiff the opportunity to obtain legal dominion and control of any such assets at this stage of the proceedings.” A spokesperson for Consipio commented, “We are pleased that the courts, after reviewing all the evidence, have dismissed Private’s highly elaborate and conspiratorial arguments and reached the only possible conclusions, that Private probably owes millions more than they claim and can’t be trusted to pay when a judgement is ultimately reached.” A request for comment to Private Media Group was not received by post time.

 
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