Ex-Board Member Sues Iwerks Entertainment

A board member who resigned this month from Iwerks Entertainment Inc., has sued the Burbank company and executives at the giant-screen theater and motion-simulator rides concern, alleging securities fraud dating back to its purchase of Omni Films International.

The suit was filed last week in Sarasota, Fla., by Fred Hollingsworth III, who resigned from Iwerks’ board two weeks ago.

Iwerks’ Chief Executive Roy A. Wright said in a statement: “The company believes that the complaint is without merit.”

Iwerks has been struggling to overcome several years of hefty losses as it competes against Imax Corp. in the giant-screen movie business. Iwerks posted a $13.5-million loss in its fiscal year that ended June 30, and the company has been overhauling its top management. Last fall, Iwerks’ co-founder Stanley Kinsey resigned as chairman.

Iwerks was founded by Kinsey and another former Walt Disney Co. executive in 1986. In 1993, Iwerks’ virtual reality rides and big-screen films made it a hot issue during its initial public stock offering, as Iwerks’ stock climbed as high as $37 a share.

In 1994, Iwerks bought rival Omni Films, a maker of big screen, three-dimensional and motion-simulation theaters based in Sarasota in a $17-million deal. Hollingsworth was founder and chief executive of Omni Films.

Recently, Iwerks’ fortunes have improved. In the second quarter that ended Dec. 31, Iwerks earned $603,882, on record revenues of $13.2 million.

Iwerks’ stock closed at $9 a share, down 12.5 cents Tuesday on Nasdaq.