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Midway board sued for corporate waste

Midway board sued for corporate waste

Midway's creditors are now suing members of the board for corporate waste and unjust enrichment.

Midway again suffered a financial blow today when a number of creditors who aided the publisher launched a court case aimed at members of the board who now stand accused of "corporate waste and unjust enrichment".

The 29-page lawsuit was leaked to Gamesutra today and accuses specific members of the Midway board of directors of a number of wrongdoings which basically amount to lining their own pockets as the company continued to fail.

Midway, which hasn't posted an annual profit since 1999, has been slowly going under for a while now and has been forced to cancel games, close studios and face stock de-listing on the New York Stock Exchange. A series of poor releases has also seen critical talent flee the publisher and the possible sale of core franchises.

The lawsuit alleges that Midway's continuing decline "arises out of a series of disastrous and ill-advised financial transactions that largely occurred during 2008." The suit also specifically names majority shareholder Sumner Redstone, his holding company National Amusements, investor Mark Thomas and former chairperson Shari Redstone as individuals who benefited to the detriment of the rest of the company.

Redstone sold his 87 percent share in Midway for a paltry $100,000 USD last year to Mark Thomas, who took on the $70 million USD debt with the purchase. Shortly afterwards Midway filed for bankruptcy as the change in ownership allowed creditors to start seeking that debt, which Midway was unable to pay. The suit claims that the move allowed Redstone to sacrifice Midway in order to rid himself of the huge debt and that the company did not look for any alternative to this action that might have helped revive the publisher. The claim is backed up by the fact that Thomas was an " inappropriate investor", having no experience or assets to contribute.

Midway has declined to comment on the suit at this point, but if you can stomach the legalese then Gamasutra looks at the case in a bit more detail. Let us know your thoughts in the forums.

2 Comments

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Bauul 13th May 2009, 13:57 Quote
Poor Midway. Without any decent games they were destined to fail. I guess with any sinking ship, the directors could choose to nab something along the way if they wanted. Happens quite a lot if people can get away with it.
LordPyrinc 14th May 2009, 05:09 Quote
Alas... the actual fiends that made off with the coin will probably never get punished.
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