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Bratz maker MGA Entertainment ordered into receivership

Isaac Larian, the outspoken entrepreneur who made a fortune off the popular Bratz dolls, was ordered by a federal court judge late Monday to hand control of his company to a temporary receiver.

In addition, MGA Entertainment Inc., based in Van Nuys, can no longer produce or distribute the sassy dolls. That’s because U.S. District Court Judge Stephen Larson in Riverside also lifted his stay of an order giving archrival Mattel Inc. control of the Bratz assets.

The independent receiver will oversee the assets and operation of MGA, which began making the dolls in 2001 and turned them into a worldwide phenomenon that challenged the reign of fashion doll queen Barbie.

The order was a sweeping victory for El Segundo-based Mattel -- the maker of Barbie -- which last year won a jury trial that found the Bratz line was created by a designer working for Mattel under exclusive contract when he came up with the idea for the dolls.

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In a December court order, Mattel was granted the ownership of key copyrights for the dolls and even the Bratz name. MGA was allowed to continue to make and sell the dolls pending further rulings.

But Monday, Larson issued the receivership order, which said MGA and Larian were involved “in transactions, acts, practices and courses of business that constitute fraudulent transfers of assets and violations of Mattel’s ownership.” Mattel had accused Larian several times of trying to shield assets.

The appointment of the receiver was immediate.

Shortly after Larson ruled, Larian said in an e-mail: “I’m very disappointed in this order and plan to appeal immediately.” He declined further comment -- uncharacteristic for a man who seldom shied from making his views known on Mattel or court actions.

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Mattel representatives declined to discuss the ruling.

Larson scheduled a hearing for May 18 on whether to make the receiver permanent. The appointed receiver, Beverly Hills attorney Patrick Fraioli Jr., was given sweeping powers to “manage, supervise and oversee the assets of the MGA entities and the Bratz brand.”

The company, which makes several versions of the Bratz dolls as well as some other toys, has about 1,500 employees.

The order further directed Fraioli to “investigate the financial affairs” of the company from the time of the jury decision in July. Larson’s order said the receiver could take any action deemed necessary to “collect, preserve or protect the Bratz assets” and could investigate “to uncover concealed Bratz assets and/or fraudulent conveyances.”

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In addition, the court order affirmed a $100-million fine for MGA and Larian, who the jury found had played a role in the contract breach.

Larian, who was named an Ernst & Young entrepreneur of the year in 2007, arrived in the United States from Iran in 1971 and worked as a busboy to earn his way through college.

He built the Bratz brand -- which featured dolls in tight-fitting outfits that upset some parents who believed them too racy -- into such a worldwide force, industry experts said it was a major factor in diminishing Barbie sales.

Larian often publicly chided Mattel and trumpeted his own victories. The nattily dressed executive portrayed himself as an all-American success story during the trial and remained defiant even when the judge took away the Bratz copyrights.

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“We will come out on top in the end,” he said.

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david.colker@latimes.com


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