One LA Weekly owner sues the rest, alleging they’ve pillaged the company
Nine months after a mysterious new company bought LA Weekly, one of the company’s owners is suing the rest, alleging they have mismanaged the alternative weekly, pillaged it for their own gain and improperly kicked him out of the management team.
In addition to damages and other compensation, David Welch is seeking to dissolve the company, which could leave LA Weekly searching for another new owner.
For the record:
6:30 p.m. Aug. 27, 2018An earlier version of this article said LA Weekly’s union was broken in the November sale. LA Weekly copy chief Lisa Horowitz, president of the local, said that there was no interruption in unionization and that seven editorial and production staff members are in the union.
Welch, a Los Angeles cannabis attorney, filed his lawsuit Monday in Los Angeles County Superior Court. Welch, along with LA Weekly Publisher and Chief Executive Brian Calle, were the only members of the ownership group identified shortly after the Oct. 18 announcement that Voice Media Group was selling LA Weekly to a fledgling company called Semanal Media.
The suit blames Calle for decisions that created and fueled public backlash against LA Weekly, such as slashing the editorial staff. It describes Calle as the leader of a group of “core” investors who, the suit alleges, have worked to enrich themselves at the paper’s expense — for example, by planning a competing alt weekly, creating an advertising agency that competes with LA Weekly’s advertising arm and diverting LA Weekly opportunities and resources to fuel those outside ventures.
Calle called the lawsuit frivolous. “We believe the allegations in this complaint are categorically unfounded,” he said in a statement. “Everyone at the Weekly has been working hard to ensure that this well-loved cultural institution continues to provide its loyal readers with the quality content they expect.”
The other defendants could not be reached for comment.
LA Weekly has been cutting costs, staff and coverage for years as news publications struggle to make money in the internet age. But its sale last fall sparked an energetic boycott campaign against the paper, led by some of its own former writers.
The boycott, led in part by music writer Jeff Weiss, arose shortly after nearly all of LA Weekly’s journalists were laid off as the paper changed hands in November. The campaign paints the new owners as self-interested men with ties to Orange County and to conservative causes who don’t value or understand journalism, journalistic ethics, progressive alt-weekly culture or Los Angeles.
The boycott has aggressively lobbied advertisers, event participants and journalists to sever ties with the paper. Big advertisers such as Amoeba Music have pulled out, and LA Weekly has canceled moneymaking events such as its Essentials food party.
Calle — who previously ran the Orange County Register’s historically libertarian editorial page and a decade ago spent about a year working for the conservative Claremont Institute — has rebutted the boycott campaign’s characterization of the ownership group, saying he has progressive stances on social issues and noting that the owners include men of color, that he himself is gay and that several have lived in Los Angeles.
In his suit, Welch accuses his fellow owners of violating journalistic ethics as well as business ethics, severely damaging LA Weekly’s legacy of strong journalism and diverting resources from the company into their own pockets.
Calle, the suit says, has been making $120,000 a year as chief marketing officer of Orange County marijuana firm Kurvana even as he retains “full editorial control” of LA Weekly, and has arranged for Kurvana to be promoted in LA Weekly at the paper’s expense. Calle let Kurvana run ads in the Weekly even after racking up a balance due of tens of thousands of dollars, the lawsuit says. Further, it says, LA Weekly ran a “glowing review” of a Kurvana product July 26 without disclosing that Calle is in charge of Kurvana’s marketing.
The suit also says Calle and two fellow LA Weekly owners — Wayne Gross, a litigator from Huntington Beach, and Steve Mehr, an attorney who is chief executive of Irvine business development consulting firm WebShark360 — funded a company called Vanguard that sells advertisers the opportunity to promote their products via people who are popular on social media. That encroaches on a way LA Weekly has earned money, and they have used LA Weekly staffers “to conduct Vanguard business from the LA Weekly offices” without compensating the company, the suit alleges.
The trio also have been working to establish an Orange County-focused publication that would not be owned by LA Weekly’s parent company and would divert business from it, the suit alleges.
The suit also alleges that Calle and fellow LA Weekly owner Kevin Xu, the CEO of “regenerative medicine” firm Mebo International, committed LA Weekly to joint ventures while also being paid by the venture’s other party. And it says Calle pressured Welch to sign a compensation agreement under which LA Weekly would pay Calle $135,000 a year, plus a $135,000 bonus upon the completion of tasks “such as signing a new office lease and restaffing the editorial team.” Welch refused, the suit says.
The lawsuit claims that Welch objected to the other owners’ actions and that they then pushed him out of the management team, violating a contract.
Tensions came to a head, the lawsuit says, after Calle and Xu falsely told employees in April that local laws required the company to reduce the employees’ paid time-off benefits. The suit says Welch sent Calle an email taking him to task for the false statements.
On May 14, the suit says, Calle and Xu convened a meeting of all the owners except one — Nyjah Huston, a professional skateboarder who was the subject of an effusive LA Weekly cover story in March — and they agreed to remove Welch from the management team. It says Mehr moved to remove Welch’s name from the company’s operating agreement and replace it with that of fellow owner Andy Bequer, who owns an addiction treatment center in Fountain Valley.
Those moves violated an oral contract that guaranteed Welch a year on the management team when he invested in the company, the suit says.
If the lawsuit succeeds, LA Weekly could be up for sale again or its assets dispersed.
The boycott group initially hoped to buy LA Weekly from its current owners, but no longer, music writer Weiss said. Along with several others who used to work for LA Weekly, including culture writer Jenn Swann and former food editor Sarah Bennett, Weiss is planning to launch a new publication, titled the LAnd, by year’s end.
Welch’s lawsuit also offers a peek into the ownership structure of LA Weekly’s parent company. It says Semanal Media is wholly owned by and the sole asset of Street Media, a Delaware company.
Xu and his mother, Lily Li, are listed as together owning 26% of Street Media; Calle, 17%; Welch, 13%; Mehr, 12%; Bequer, 8%; property developer Michael Mugel, 6%; Gross, 5%; hotel developer Paul Makarechian, 4%; Huston, — who previously had not been publicly identified as an owner — 2%; and attorney Alan Greenberg, 1%.
There are additional shares in the company that have not yet been issued to anyone, according to the lawsuit.
Welch is being represented in the case by Patricia Glaser and Rory Miller of the law firm Glaser Weil.
7:45 p.m.: This article was updated with a statement from Calle and a comment from Weiss.
2:05 p.m.: This article was updated to mention that Huston was the subject of an LA Weekly cover story and the names of Welch’s attorneys.
This article was originally published at 11:20 a.m.