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Lawsuit lifts veil on WSOF internal issues, alleges financial problems, NAC violations

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A new lawsuit alleges dire financial straits, violation of NAC rules and a dispute over international licensing rights at the World Series of Fighting. Paul Gift has the details.

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WSOF Asia, an LLC whose ownership includes "prominent individuals and entities" in China and Hong Kong, filed a lawsuit in Las Vegas federal court on Monday against MMAWC, the controlling company of the World Series of Fighting (WSOF), and other individuals including CEO Carlos Silva, matchmaker Ali Abdel Aziz and member Bruce Deifik. The lawsuit paints a picture of significant internal strife in the past year along with claims of defamation, breach of contract, dire financial straits and violations of the Nevada Athletic Commission's (NAC) code for MMA promoters.

While Ray Sefo is often touted as the founder and face of WSOF, the lawsuit claims Shawn Lampman was the "initial founder and promoter for MMAWC...who conceived of the business and recruited and hired its key employees at the time."

Brent Brookhouse looked into Lampman's past two years ago, finding that in 2007 he "was on the board of a homeowner's association and was accused of taking money from the association account" in the amount of $665,000. Earlier this year, Lampman was sentenced to ten months in federal prison on a tax conviction and subsequently removed from his position at the WSOF which at the time was described as that of a consultant. But Monday's lawsuit alleges Lampman had an ownership interest in the company and played a key role in shaping and signing off on company policy.

If it seems strange that WSOF would sue itself, it's because WSOF Asia is not a subsidiary. The lawsuit stems from a claim that "MMAWC was in dire need of cash for operations and on the cusp of shutting down" in 2012.

On or about October of 2012, MMAWC through Lampman solicited a small group of prospective investors including Shawn Wright, Mack Steele, and Vincent Hesser in an effort to secure from Tropyx additional operating funds for MMAWC totaling $700,000. At the time, MMAWC was a development stage enterprise and nascent competitor in the mixed martial arts industry dominated by UFC.

...

In further consideration for this loan and investment, these individuals together with Lampman and MMAWC bargained for, negotiated, and consummated certain worldwide licensing rights for MMAWC and its d.b.a and trademark "WSOF".

Hesser allegedly obtained the worldwide, international trademark rights for the WSOF and "the exclusive authority and right to pursue any international expansion branding opportunities for an initial term of 60 months" in an Oct. 15, 2012 agreement signed by Lampman. In addition to the $700,000, MMAWC would receive 10% of gross revenues or a minimum 25% of the net profits generated by Hesser's licensing rights.

Within eight days, in another agreement allegedly signed by Lampman, Hesser assigned the WSOF licensing rights for Asia to Royal Union Trust who subsequently assigned said rights to WSOF Asia.

By 2013, Hesser had become a board member and co-CFO of MMAWC while continuing to pursue licensing deals in China, Japan, Singapore, India, Qatar, Philippines, Mexico and Chile. Sometime in the past two years, "a rift" developed between Hesser and MMAWC member Bruce Deifik. The story of the rift paints a picture of financial problems and unethical management at the top of the company.

Those issues included among other things a number of board resolutions reached and executed but ultimately ignored and disregarded by Deifik principally related to funding issues whereby Deifik, agreeing to provide immediate short-term capital infusions would fail to perform in accordance with the terms and provisions as negotiated and accepted by the board and Deifik to the considerable detriment of the company and its operations.

Deifik took advantage of the Company's dire financial straits, rejecting many opportunities the Company might have had to bring in new investors and additional capital in favor of securing more favorable terms for himself so as to increase his stake and control in the Company.

Ultimately Deifik managed to secure a controlling interest in MMAWC primarily as a result of buying out Lampman and the AKAK [sic] Trust.

Once secured, Deifik used his newly acquired majority ownership and control to exercise undue dominion over the board and employees and usurped and undermined the authority of the duly appointed officers of MMAWC including Hesser as CFO and Shawn Wright as Treasurer.

The lawsuit goes on to cite two specific employees over whom Hesser and Deifik clashed: Vice President and matchmaker Ali Abdel Aziz and Chief Operating Officer Keith Evans.

Regarding Abdel Aziz, it's claimed Hesser became aware of Aziz's "relationship to and control of an entity named Dominance, LLC. Dominance, LLC manages mixed martial arts fighters." Abdel Aziz's wife is listed as the managing member of Dominance and his sister is believed to be its Vice President.

NAC 467.104 code of unarmed combat reads, "An unarmed combatant may not have a promoter or any of its members, stockholders, officials, matchmakers or assistant matchmakers: 1. Act directly or indirectly as his or her manager; or 2. Hold any financial interest in the unarmed combatant's management or earnings from contests or exhibitions."

It's designed to prevent conflicts of interest, and while some may think of a promoter/manager potentially taking advantage of a fighter, this conflict of interest allegedly went the other way.

Mr. Aziz while acting as the matchmaker for WSOF, set up fights using fighters managed by Dominance LLC. Mr. Aziz set up these fights on terms favorable to Dominance, LLC managed fighters and detrimental to the interests of WSOF.

Plaintiff is informed and believes Dominance also arranged sponsorships for its fighters. On several occasions the sponsors for fighters managed by Dominance and those of WSOF were in conflict. When such conflicts arose, Mr. Abdeziz [sic] always favored the sponsors of Dominance over WSOF sponsors to the detriment of WSOF.

For instance, on or about April 10, 2015 WSOF sponsor ProSupps cancelled its sponsorship of WSOF, because ProSupps commercials did not run during an event. ProSupps commercials did not run because, Defendant Aziz directed ProSupps to change its commercials, because a sponsor of one of his fighters had a conflict with video footage with ProSupps commercials.

Aziz took this position with ProSupps knowing full well that his fighter's contract with WSOF stated that a fighter could not have a conflict with a corporate sponsor.

According to the suit, Hesser tried to terminate Abdel Aziz's employment over this "blatant violation" of NAC 467.104, but Deifik wouldn't allow it.

The claims regarding Keith Evans aren't the type to get a promoter's license revoked, but are serious nonetheless. Evans is believed to have overcharged the company for expense reimbursements by almost $20,000 and to have "surreptitiously obtained and rebroadcast WSOF's fight library footage for personal profit without right or authority streaming said footage on its website for pay" through Pure Sports, LLC of which he was a managing member.

Mr. Hesser became aware of this and brought the matter to the attention of the board. The board passed a resolution terminating Mr. Evans. Yet inexplicably, implementation of the Board's resolution was blocked by Bruce Deifik. Mr. Evans remains an employee to this day.

When the rift between Hesser and Deifik grew larger, the suit states that "Deifik demanded to see an executed copy of the Assignment [agreement] and upon reviewing it claimed that Lampman had no authorization to enter into the agreement back in 2012." By May 6, Deifik had secured a controlling interest in MMAWC and would soon thereafter terminate Hesser.

These presently serving control persons refuse to address the company's apparent violation of NAC 467 and worse, appear to have orchestrated a subterfuge in order to evade regulators.

Worse still, Deifik and his cohorts have taken it upon themselves to re-characterize certain members' equity stake as fully dilutable notwithstanding the written agreements between the parties and corporate governance protocols and have since attempted to dilute these members without authority.

Out of significant concern for the viability of MMAWC and the very real regulatory enforcement and sanction, Hesser has made every effort to compel MMAWC to comply with the restrictions imposed by the NAC so as to prevent or preclude the very real conflict of interest posed by Aziz and his relationship with MMAWC.

Hesser notified MMAWC's newest CEO, Carlos Silva. Mr. Silva appeared reluctant to address the issue in any meaningful way.

To be fair, the claims in this lawsuit are only one side of what's probably a complex story. Prior to the lawsuit's filing, Bloody Elbow's John Nash had already asked WSOF to comment on NAC 467.104 as it relates to Abdel Aziz but received no response. He also spoke with NAC executive director Bob Bennett who was unaware of Abdel Aziz's potential role as a manager.

While MMAWC is a private company with very little corporate transparency, Bloody Elbow has obtained its annual list of managers/managing members filed with the state of Nevada. While not conclusive evidence, the forms appear to support some type of ownership change in between Aug. 2014 and Aug. 2015, consistent with the timing of when Deifik is alleged to have obtained a controlling interest in the promotion. In 2014, the listed members were Keith Evans, Sig Rogich, Ray Sefo and Shawn Wright. By 2015, the listed members were Bruce Deifik, Bruce Bendell and Haskel Iny.

MMAWC - WSOF - Annual List of Members (2014)

MMAWC - WSOF - Annual List of Members (2015)

A change in control of the company would also be consistent with the installation of a new CEO, Carlos Silva, and CFO, Barry Pincus, this past summer.

In addition to Monday's federal filing, there are two other related lawsuits currently pending in Nevada state court. MMAWC sued Shawn Wright (former Treasurer) and other entities in Sept., who then countersued. MMAWC is also suing WSOF Asia Holdings, Shawn Wright and Vincent Hesser.

While the merits of the parties' claims may be unclear at the moment, a few things are crystal clear. The WSOF is in a battle for its international licensing rights, the NAC will probably be asking the executives some questions in very short order, it's starting to look like Shawn Lampman was much more than a consultant, and in the lawsuit-fest that's starting to go down, the lawyers will be the big winners.

Paul is Bloody Elbow's analytics writer and former provider of expert witness support in antitrust cases. Follow him @MMAanalytics.