World Wrestling Entertainment Inc. on Oct. 19 filed suit against toy maker Jakks Pacific Inc. and videogame maker THQ Inc., alleging a bribery scheme involving a lucrative license deal for toys and ga
NEW YORK (Reuters) - World Wrestling Entertainment Inc. on Oct. 19 filed suit against toy maker Jakks Pacific Inc. and videogame maker THQ Inc., alleging a bribery scheme involving a lucrative license deal for toys and games based on wrestling stars like The Rock.
The 14-count suit, filed in U.S. District Court in New York, alleges violations of the Racketeer Influenced and Corrupt Organization Act as well as breach of anti-bribery laws through mail and wire fraud.
WWE is seeking unspecified damages and a declaration voiding a videogame license to a joint venture between Jakks and THQ and a toy license with Jakks.
Jakks has been WWE's toy licensee since late 1995, and the current toy licenses are set to expire in 2009. The joint venture of Jakks and THQ obtained a videogame license in 1998 that is also scheduled to expire in 2009.
The toy license represents about 5% of Jakks' revenues, and its joint venture with THQ could contribute between $6 million and $7 million in profit in 2004, assuming the contract is not disrupted by the legal challenge, said Garrett Edson, an analyst with the Consumer Research Group of Whittaker Securities.
WWE's action arises from a suit filed in Connecticut against the wrestling company by then-licensing agent Stanley Shenker & Associates, which claimed WWE owed it money.
WWE alleges that in the course of that litigation, it discovered that Shenker had been paying WWE executive James Bell while it was seeking a toy license. In addition, Jakks deposited funds in various Shenker bank accounts overseas, and the money was split with Bell in what WWE alleges was a conflict of interest.
"We very much regret having to take this action today, but regret even more the facts and circumstances which have compelled us to do so," said Linda McMahon, chief executive of Stamford, Conn.-based WWE, which is known for its TV wrestling shows with stars like Triple H and Randy Orton.
"WWE's intellectual property is a valuable asset of the company, and we believe the actions taken today are necessary to preserve the integrity of our licensing process.
Said Jerry McDevitt, WWE's trial lawyer: "They are unspecified damages at the moment, but they will be substantial."
There was no immediate comment from any of the parties named in the suit -- Stanley Shenker & Associates and Bell Licensing LLC, nor Jack Friedman, Stephen Berman and Joel Bennett, the three highest-ranking executives of Jakks, and Stanley Shenker and Bell.
But in an earlier statement announcing its third-quarter results, Malibu, Calif.-based Jakks denied any wrongdoing and said it "intends to vigorously defend itself against claims which it believes are without merit."
It said it was engaged in discussions with WWE over restructuring its toy license and with WWE and THQ over the restructuring of the Jakks-THQ videogames license.
"The discussions are an outgrowth of certain litigation that has been pending between WWE and a former licensing consultant to WWE and a former employee of WWE, to which the company is not a party," Jakks said.
Additional reporting by Kevin Krolicki in Los Angeles.