Organizers Allege Takeover Attempt : San Diego Marathon: Orange County firm that sold sponsorships named in lawsuit.

San Diego-based In Motion Inc., organizer of the financially beleaguered San Diego Marathon, filed a $1 million lawsuit against a Newport Beach-based sports marketing firm and two Orange County businessmen in Superior Court on Thursday.

The lawsuit, said Lynn Flanagan, In Motion president, deals with “fraud, deceit and conspiracy” in regard to a “hostile takeover” of the San Diego Marathon. Named in the lawsuit are Mulcahy Sports Group Inc., its president, Patrick Mulcahy, and Dean Rallis Sr.

In Motion hasn’t paid its elite runners, vendors or consultants, and Flanagan charged that In Motion is broke, in part, because Mulcahy’s breach of contract with the race organizer.

At a news briefing, Flanagan read from a lengthy prepared statement that began by comparing the arduous plight of the marathon to boxing’s fictional Rocky Balboa and ended with the vision of an event on the brink of financial success.

In between, Flanagan recited the story of In Motion’s association with Mulcahy and the other men named in the lawsuit.

Mulcahy said he had not been served the legal papers as of late Thursday afternoon and repeated his statement Wednesday that he had nothing to do with a takeover of the marathon and that Flanagan has mistakenly associated him with a group of men, ex-employees of his, in fact, who are attempting to take over the event.

“Some people I used to know are involved, but they are no longer employed by me,” Mulcahy said. “They thought they could steal the event from Lynn.”

Flanagan maintains that In Motion’s troubles began when she hired Mulcahy Sports Group to sell corporate sponsorship for the San Diego Marathon in April, 1991.

“Mulcahy committed to raising a substantial amount of cash sponsorship and to securing a favorable television contract. He did neither,” she said. “The show he produced was not only poor in quality, it started 24 minutes late and was ridiculed by the media and his peers.”

On the advise of his attorney, Mulcahy declined comment on the bulk of Flanagan’s accusations, but in regard to the telecast said: “We produced a good telecast. It depends on who you talk to. We were commended for the presentation, including by some of the sponsors.”

During his nine-month association with In Motion, which abruptly ended Dec. 8, the day of the marathon, Flanagan said Mulcahy told her he had raised $360,000 in cash sponsorship. She said the actual figure was between $50,000 and $60,000. In 1987, when Flanagan did her own sponsor fund raising, she raised $175,000.

Days before the marathon, Flanagan said she and her three-member staff discovered Mulcahy had “alienated potential sponsors, represented competing events and misrepresented what he had actually done for the event.” she said. “But it was too late to change anything. We lost thousands of dollars.”

Flanagan said the marathon’s bills are more than $100,000, including $15,100 owed to the elite runners. She said she has lost her personal savings and her home.

“The only way (the San Diego Marathon) has survived is through the thousand of hours by volunteers and through the barter system,” she said.

Out of obligation to pay her bills, she fought the temptation to file bankruptcy.

“Certainly that was the first option,” she said. “That would have been the best thing, but then you’ll never pay. I can’t live with myself and do that. My commitment is to save this event and I have a responsibility to pay my bills.”

But In Motion’s monetary woes predate the 1991 marathon. According to a document obtained by The Times, In Motion held a stock offering in March of this year that failed. In the prospectus, the company’s working capital deficiency was listed as $87,910 on Oct. 31, 1991, and as $25,580 on Oct. 31, 1991. The marathon was $150,000 in the hole Feb. 15, 1992.

A source in the running community said approximately 100 potential stockholders were sent the prospectus, with a minimum purchase of 1,000 shares at $10 per share required, but there were no takers.

Flanagan said she decided to file the lawsuit after a series of events last week in Carlsbad. According to Flanagan, Bob Reif, Barry Spears and Edmund Jung, three men she associated with Mulcahy, met with Carlsbad City Manager Ray Patchett and the Carlsbad Police Department. Mulcahy said the three men left his employ in late May.

“Part of the business group was from overseas,” Patchett said. “I met with them. They told me they owned the San Diego Marathon. I listened and asked if they talked to the other people who own it. They proceeded to ask me how you go through the process.”

Flanagan said the men tried to get copies of In Motion’s permits through Carlsbad, and get a copy of a business contract through at least one of In Motion’s sponsors.

At a March meeting with Rallis, who at the time represented Mulcahy, Flanagan said Rallis filed articles of incorporation for the San Diego Marathon.

“They thought they could get the rights to the name (of the marathon). They were dead wrong,” said Michael Curran, Flanagan’s attorney.

Patchett said Carlsbad officials think the marathon is a fine event and they are trying to develop a long-term agreement with In Motion.

“We would like to see it be one of the finest marathons in the world and we would like to see them do it,” he said.