Mattel accuses toy rival MGA of hiding assets to avoid paying judgment

Friday, September 3, 2010

Mattel accuses toy rival MGA of hiding assets

LOS ANGELES — Toymaker Mattel Inc. has filed a lawsuit alleging MGA Entertainment fraudulently transferred hundreds of millions of dollars to keep Mattel from collecting on anticipated judgments and to defraud other creditors.

The lawsuit filed Wednesday in Los Angeles County Superior Court alleges MGA transferred $430 million in dividends and other assets to its chief executive Isaac Larian, his family members and various trusts between 2004 and 2008 to make the company appear insolvent and prevent MGA’s creditors, including Mattel, from cashing in.

The lawsuit also alleges that Larian got his friends and family members to pool their money to buy MGA’s debt from a syndicate of banks, which was collecting all revenue MGA received to secure an earlier credit agreement.

The resulting entity, Omni 808, subsequently lent money to MGA and was intended to further prevent Mattel from collecting any judgments against the Los Angeles-based company, the lawsuit alleges.

MGA said in a statement provided to The Associated Press on Friday that similar claims were dismissed in federal court and accused the El Segundo-based maker of the Barbie doll of “forum shopping.”

“This lawsuit is part of the obsession that current Mattel executives and their board of directors have to litigate MGA and Isaac Larian and his family to death at the expense of Mattel’s shareholders,” the statement read.

Mattel and MGA have been battling for several years in U.S. District Court in Riverside over who owns the pouty-lipped Bratz line of dolls.

Mattel believes the man who designed the Bratz dolls for MGA was actually working for Mattel when he created them and that Larian knew Mattel could go after any profits his company earned from the popular dolls.

An appeals court recently overturned a 2008 verdict that awarded Mattel $100 million and ownership of the doll line.

A retrial will begin in January, this time in federal court in Orange County.

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