Wizardworld.com Parent in Receivership
http://www.icv2.com/articles/news/2127.htmlDecember 12, 2002
In the wake of the appointment of a receiver to manage Wizardworld.com parent 800America.com on November 13, Wizard Entertainment COO Fred Pierce told us that he expects their relationship to end within days, pursuant to a provision in their agreement that specifies that it can be terminated 30 days after the appointment of a receiver. The receiver was appointed by the SEC as part of an enforcement action which resulted in the arrest of 800America.com CEO David Elie Rabi on securities fraud and other charges. The relationship between 800America.com (which operates the Website) and Wizard Entertainment (which publishes Wizard, Toy Fare, Inquest, and other magazines as well as operating the Wizard World consumer shows) included the sale of subscriptions and convention tickets on Wizard's behalf, and Wizard Entertainment providing content to the site. Pierce said that Wizard Entertainment had not been paid by the receiver, and that after the expiration of the 30 day period they would no longer have to provide the site with information.
800America.com acquired Wizardworld.com in December 2001 (see "Wizardworld.com Sold to 800America.com") in a transaction later disclosed to be a stock for stock merger for 660,000 shares of 800America.com stock. To add insult to injury, preferred shareholders of Wizardworld.com also bought 340,000 shares of 800America.com stock for $850,000 in cash as part of the transaction. Both the shares exchanged for Wizardworld.com stock and the shares bought by the preferred shareholders were to be redeemed at $2.60 per share after one year (this month).
It doesn't look like there will be much left. According to a statement on the Wizardworld site, the SEC is claiming that there were over $22 million in fictitious sales recorded by 800America in 2001, a year when the company reported earnings of $8.3 million on sales of $20.6 million. And in the SEC filings, not only is Rabi accused of fraud, he is also charged with violation of registration requirements, falsifications of company books and records and reporting requirements of the federal securities laws. The complaint also states that Rabi pleaded guilty in 1997 to securities fraud in Kentucky state court under an alias.
We also asked Pierce about what would happen to the computer code for the Wizardworld.com site, which allowed buyers and sellers to transact business on collectibles, and then reported the results in an exchange format. He said that the return of the code was not part of the bankruptcy provisions in the agreement, and that Wizard Entertainment wasn't interested in it. "We're hot and heavy into building our own Website right now," he said.
