Chris Fenton, the former head of DMG Entertainment’s motion picture group, has filed a $30 million suit against the company, accusing the founders of cutting him out of wealth generated by an IPO and then running the company into the ground.
Fenton left the company in February 2018, after helping to position it as a key distributor of U.S. studio films in China. In the lawsuit, he says he was fired after complaining that the founders had reneged on their promise to make him “rich” after the IPO of the Chinese portion of the group.
At one point after it was listed on the Shenzhen stock exchange in 2014, DMG was worth $5 billion. But the company’s stock has fallen sharply in the past year. Listed as Yinji Entertainment & Media Company, the company saw its shares close Tuesday at RMB3.53 apiece, giving a market capitalization of $930 million (RMB6.26 billion.)
Fenton’s suit claims that the founders “have fled China and left DMG’s presence in China in shambles, with hundreds of employees losing their jobs.” Fenton accuses the founders – Dan Mintz, Wu Bing, and Peter Xiao – of reckless risk-taking, and of engaging in complex financial maneuvering to get money out of China.
The suit alleges that the founders borrowed hundreds of millions of dollars secured by DMG stock and used the funds to buy a $20 million mansion in Beverly Hills, multiple airplanes, including a $30 million Bombardier jet, and luxury vehicles, including Rolls-Royces, Bentleys and Ferraris. The suit says that the founders also took on millions in debt to pay for experimental regenerative medical treatments.
Some Chinese employees of the company were listed as guarantors of $220 million in loans, the suit alleges.
A former William Morris agent, Fenton worked at DMG for 17 years. He states that he personally defended the company from an SEC investigation into potential violations of the Foreign Corrupt Practices Act in 2013. The SEC was investigating whether DMG had bribed Chinese officials, including Han Sanping, then the head of the China Film Group. Fenton states that he took the lead in defending the company and explaining the Chinese film business to the SEC, while the founders remained out of sight. The SEC ultimately decided not to pursue charges.
“Plaintiff’s responses to the SEC were in accordance with what he believed to be truthful at the time, although after seeing the reports of DMG’s troubles in China over the course of 2018, Plaintiff has reason to believe that pertinent information was deliberately withheld from him,” the suit states.
The suit also alleges that Mintz asked Fenton to propose an unusual deal to A-list actors, directors and producers. Under the terms, DMG would give the artist $45 million over three years. In exchange, the artist would give DMG $30 million over the same period. The cost to DMG would be hidden, while the money received would be booked as revenue. According to the suit, the goal of the arrangement was to take advantage of the company’s high stock multiple. Fenton’s suit says he actually tried to pitch the deal to one A-list actor and a producer, without success. An attorney for one of them told Fenton it did not “pass the smell test.”
Fenton was paid $1 million a year during his last five years with the company, though the suit states he was also owed bonuses and compensation from the IPO.
The suit quotes the founders as making various promises to Fenton following the IPO. In July 2015, for example, the founders flew by private jet to Milan for Wu’s birthday. At the event, Fenton says Wu told him, “The IPO made us rich, and you will be rich from it, too.” Those promises were never honored, the suit alleges.
“Plaintiff put his credibility and long-standing reputation on the line on a daily basis defending both DMG and the Founders from scrutiny by industry colleagues, the media, and both U.S. and Chinese government authorities,” the suit says.
Fenton is seeking at least $30 million in damages for breach of contract, constructive discharge, promissory fraud, and other claims.
Update: Friedemann Thomma, DMG’s attorney, calls the suit “frivolous.”
“Chris Fenton’s frivolous suit against DMG Entertainment is a fabrication of his own imaginations. None of the claims asserted by Chris Fenton in the unfiled complaint have any merits. DMG is looking forward to defending this case to expose the true nature of Chris Fenton to the industry.”
“My client’s position is that Chris Fenton’s assertions in the complaint, published by Variety without proper fact checking, are factually wrong. Specifically, Chris Fenton had been a contracted employee by DMG Entertainment for four (4) years and not 17 years as he asserts. Chris Fenton’s contract was terminated due to his poor performance and asset mismanagement of investments which costs DMG millions of dollars. During his short tenure Chris Fenton was not tasked to work for Yinji Entertainment & Media Company, a Chinese publicly traded company. During his tenure he was paid an annual salary of $200,000 plus $800,000 per year for the purchase of his talent company. His contract did not promise him any bonus or other compensation other than his $200,000 annual salary. Chris Fenton also misled the company in the purchase of his talent company which dramatically underperformed his stated revenue projections.”
David Albert Pierce, Fenton’s attorney, says they’ll let the complaint speak for itself:
“DMG’s rebuttals are false,” Pierce says. “When they see the complaint, they’ll see the facts that rebut their statements today. DMG seems very reckless in their response and reckless is par for the course with them. We’ll let our allegations speak for themselves.”