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Extortion and the UGO Network?
An Anonymous Webmaster asks: "I'm the webmaster of one of the largest websites on the UGO Network. This past month UGO gave notice to all affiliates that they say all guarantees are gone and will only make payments up to February's ad traffic at half rate. Yes they are currently 2 months behind on payments. (This includes HardOCP, ShackNews, BluesNews,
VoodoExtreme, Telefragged,
OldManMurray, my website and many others. UGO handed out contracts last week saying we must forfeit all our rights to previously owed money and rights to sue them to get those last 2 checks. Yes that's right, if we don't
sign a paper saying we wont sue them they will withhold 2 months of payments they already owe and have available to them. Does anyone have any realistic advice for all these webmasters? A lawsuit just doesnt seem like it would really net any cash." Now this just doesn't sound fair at all. It's a shame that these big site networks aren't able to pay their sites what's owed, but is such extortion really the answer? I'm sure many webmasters may have found themselves in this position before. What did you do to resolve this kind of problem?
I can't believe you're not considering filing suit. Take a close look at your current contract and contact a lawyer. Some of the websites were mentioned in the summary: HardOCP, ShackNews, BluesNews, VoodoExtreme, Telefragged, OldManMurray... Get these guys organized, start a lawsuit toghether, and squeee UGO where it hurts. I dont know what other debts they owe, but it seems they're trying to extort you guys in favor of "larger, more powerful" debt holders. If thats the case, as a group, you may be the largest debt holder. Do not give that up for free. You should be able to force UGO to trade the debt they owe you for equity in the company. Im sure the smart and savvy people running these websites could do a much better job of running UGO.
so whatever you do, DO NOT SIGN ANYTHING LIMITING YOUR RIGHTS! This contract is written by their lawyers to do one thing.. !@#%!@#$ you over!
GET ORGANIZED with the other large web sites, and put forward an organized front. UGO can bully you guys one at a time, but not if you all stand together.
You're already looking at lost money from UGO, more is obviously on the horizon, so whatever they're trying to withhold now may be just the trickle before the dam breaks. Forget about actually getting paid in dollars.. they dont have any.
If you go to trial, or seriously threaten such.. they will likey reconsider, and may try to work out a debt for equity swap were you get like 50 cents on the dollar. Remember, you are their customers.. since its through your web sites that they make money for ads. They can't alienate you to the extent that you pick up shop and leave.
good luck
If you want a lawyer fool enough to take a contingency fee on a small amount against a dotcom . . .
I once had someone come in expecting me to *defend* a wrongful death case on a contingency (How would that work? I pay a third of the judgment if he loses?
And the one hurt on a motorcycle, expecting me to arrange for "my compensation."--the fool had run into the car in front of him (Unless the vehicle in front of you disabled its backup lights and suddenly went into reverse, the fact that you collided with it is conclusive evidence that you were following too close . .
hawk, esq
Many of these ad networks have business models that guarantee that they will eventually fail.
If they are forced to go out of business, no amount of complaining, emailing or suing will get you cash.
I'd chalk it up to experience and move on. You may use this as an opportunity to exit the web, as you may find (as your network did) that it's much harder to run at a profit than it was a year or two ago. Tough conclusion to reach, but it's better to reach it with a few bucks left in your pocket.
I don't know about any particullar ones, but you may even be able to find one that will pay you 2/3 or so the amount owed themselves, in exchange for selling the debt to them.
That is, they will take on all of the risk that the debt won't be settled, and just pay you some fixed portion of it. Collection agencies have a huge absolute advantage on collecting on bad debt. A lot of times all it takes is a letter from the collection agency to convince somebody to pay up. They know about all of the legal options there are to getting your money (liens on property/future income, small claims, whatever), and can do it quickly and cheaply.
If you don't think it's worth a lawyer, contact a collection agency. If nothing else, they should be able to tell you the likelyhood of collecting.
I used to work for UGO about 3 years ago (or so) as the "Affiliate Manager". (This was back in the day before Joe Robinson and his cronies in New York acquired UGO). In fact, I left that job *because* of the acquisition - after moving to San Francisco (one of the first places on earth I would want to live) only six months prior for the express reason of working for UGO, there was no way in hell I was going to haul my butt over to New York (probably the last place on *earth* I will ever want to live) to work with that pack of wolves.
All I can say is that the "NY suits," - as we called them back then - were as ruthless and morally depraved back then as they seem to be now. They had a history of having the "Inverse Midas-Touch" curse: everything (and everyONE) they've touched, before and after the aquisition, has turned to crap. Their business plans for the future of UGO (which *used* to stand for "Unified Gamers Online", BTW) could easily be summarized as "throw money at it until it becomes profitable, and milk the affiliates for all they are worth before giving them the finger." Once UGO was purchased (at an unbelievable profit to the original owner), the people on Park Ave. managed to run what was once a dedicated online gaming resource for the People(TM) into the ground by A) Firing any and all people who were associated with the "Old Regime," B) spreading out to other, unrelated forms of entertainment, and C) hiring third-rate porn writers to be primary writers and editors.
They have a legal team seemingly funded from on high by the Prince of Darkness Himself, as is evidenced by exactly how badly and often they've screwed over employees, affiliates, and anyone else who's had the unfortunate foresight to get involved with them on any level. In fact, I've seen roughly 30 people that I personally know (or knew) get trampled by them monetarily speaking, and nothing has ever happened to them to balance the scales. Any ex-affiliate or ex-employee of UGO that doesn't speak badly about them was probably paid an unusually high bonus for their silence (and I speak from personal experience on that, but screw 'em: if they wanted my _continued_ silence, I'd still be getting checks.)
If I were you, I would take the last two months pay and jet. My experience with the (many) other situations of this kind dealing with UGO would strongly suggest that a legal battle with them will be nothing short of a waste of your time and a massive drain on your resources. The only way you'll actually get something out of it is to take whatever money they're offering and wash your hands of it. It may not be the most honorable way of handling the situation, but in this case, I'd bet a week's pay that taking the honorable road will earn you starvation (if this web site is your only source of income).
--WorLord
Even if your creditor goes bankrupt, you'll probably collect something. And you may be able to force them into bankruptcy before they totally run out of cash, so it's better to start sooner rather than later.
As a rule of thumb, never let a commercial creditor get more than 60 days behind. The probability of payment declines rapidly after that point.
. .
IANAL, but I handle all our company's contracts in the UK and USA.
Look carefully at the pattern of earnings and balance sheet reporting that UGO has made during recent fiscal periods.
This may not be formally reported or up to date. In the UK there is Comapnies House, to which Directors (but, interestingly, not the companies) are obliged to file annual accounts and shareholder information).
In the USA you will have to look at individual State Registrars, unless UGO is under SEC rules to file federally because of number of shareholders, public offers or listings.
Get *every* piece of detail you can about the INDIVIDUALS who run the business.
Companies in common law, USA and UK are Legal Persons, intentionally separated from their officers, in both countries (in the UK Companies Act, and once again your local state law) there is the concept of PERSONAL LIABILITY of officers and directors in the event they operate the company KNOWING IT CANNOT FINANCIALLY SURVIVE.
This *is* a complex affair.
But you may be in a position to apply pressure to obtain needed severances from contracts, so that you can do business elsewhere.
Or you may want to try to negotiate a settlement from any cash reserves still remaining.
You may yet be a creditor in the event UGO becomes insolvent or files Chapter 11.
I know you said a lawsuit may be futile. I am not advising on that (though these steps would be prepared by a good forensic accountant's legal team) but I *am* suggesting you get what info you can to apply LEVERAGE upon the officers, directors or whoever is responsible.
If you feel you can follow these steps and also read your local legal codes, _and_ provided you treat this in a resonably detached manner (I learned many skills years ago when such an investigation became a personally charged affair because my business was very hurt, but I still don't recommend the vendetta, you're smart enough to see the reasons for that) then you can at the very least feel as if your own intelligence can apply to the awful and unpleasant situation you are in. This aspect alone, for anyone bright enough to have managed their own business, gives a certain amount of better sleep and can reduce personal bitterness and sense of hopelessness. In fact many fraudsters OPERATEON THE BASIS that it is a common perception that legal recourse is hopeless. Legal recourse does not mean you have to go to court. The vast majority of serious cases are settled between big companies.
If you find a basis for argument that the directors or officers of the company have operated and ENCOURAGED NEW BUSINESS in the knowledge that their financial models are unsustainable, and / or they are broke, they may fall foul of insolvency rules, and in the UK I can say for certain I would immediately file suit for fraud against the INDIVIDUALS THEMSELVES. In the UK companies law makes it a CRIMINAL offence to operate a company when you know it can't meet its bills. Check your local State Codes for the equivalents WHERE THE COMPANY IS DOMICILED AND OR LOCATED...
Finally, for this post at least, WRITE UP what you find, quoting law and precendence wherever you can, and copy it to officers _home_ addresses, circulate to investors and advisors (who may also legally be culpable in some circumstances) and think seriously about putting a release across PRWire or another news service which gets picked up by the mainstream press. If the likelihood of fraud is widespread, and key officers of UGO have personal assets, you may find a specialist attorney calling you offering a deal to pursue in return for a reasonable commission. In other words, get in position to have your pound of flesh back, _as well as_ what is already legally due to you, and you may suddenly find yourself treated *much* more fairly.
I could comment further on contract law, too. But if you want to ask me anything write my spam account above with a very clear header, and I'll write back from my main a/c with some further pointers when I'm in less of a hurry. (only pointers, mind).
Whatever you do, my very best luck to you. - John
Dear Anonymous Coward,
Sometimes, in real life, people are confronted with situations where they don't know what to do. In such situations, they generally seek out the advice of their peers and colleagues, people that perhaps have been in similar situations, before making a decision that could possibly affect the rest of their lives. It's called getting as much information as possible, and doing everything within their power to make an informed, wise decision.
I know this is probably difficult for you to comprehend, since you were apparently born with the sum total of all human knowledge, but try to understand that this is very helpful for the rest of us.
UGO just bought out Bla-Bla, another troubled web advertising network.
"Ancillary does not mean you get to rule the world." --U.S. Circuit Judge Harry Edwards, speaking to the FCC's lawyer
If they're contractually obligated to send you the money, I'd suggest that you find a lawyer who'll work on contingency for a portion of the proceeds, and sue them. They're bascially telling you that unless you let them rewrite the contract, they'll break it anyway. That's wrong, and even if it won't net you much cash, there's no reason to let them think they can screw people like that.
I mean, it's one thing for them to want to rewrite the terms of the contract going forward, but this is bullshit - they're attempting to dodge obligations they've made. Such arrogance should not be tolerated. If they can't meet their financial obligations, let the bastards file for bankruptcy like everyone else.
OK,
- B
--
http://www.bradheintz.com/
- updated
UGO PRESS RELEASES
UGO Networks Raises $13 Million; Closes A New Round of Funding with $23 million
New Proceeds will be Used to Grow its Technology Business and Develop Advertising Sponsorships Packages
New York, NY March 5th, 2001 - UGO Networks, a leading entertainment company for 18-34 year old males, announced today that it raised $13 million dollars, closing a new round of funding with a total of $23 million. Lead Investors are GRP and Missouri-based Gryphon Holdings II, LLP Inc. and their investment partners. UGO Networks has raised in total $80 million. UGO Networks consists of UnderGroundOnline (www.ugo.com), a network comprised of 350 affiliated sites which feature content in animation, music, games, wrestling, technology, TV & film, celebrities and UGO Networks Technology Solutions, which provides Web hosting and other professional services to UnderGroundOnline affiliates, strategic partners, and third parties. Board members include Strauss Zelnick, Former President and CEO of BMG Entertainment and Yves Sisteron, Managing Partner of GRP.
"UGO Networks' strength lies not only in the size and composition of its audience, 18- 34 year old males, but in the way in which its unique business model enables multiple revenue streams," said John Wehrle, Managing Partner of Gryphon Investments. "The Company's management team has proven to be extremely adept at leveraging and maximizing all of its internal resources."
"UGO Networks has demonstrated the ability and business acumen not only to survive but to succeed in today's market environment," said Yves Sisteron, Managing Partner of GRP. "The management team is highly adept at both managing cash and generating revenue. The company has had tremendous success in building a base of blue chip advertisers and technology clients."
UGO Networks has overall annual revenues of $15 million.
"UGO Networks will use the new funding to continue operations until our breakeven which will happen before the end of calendar year 2001," said UGO President and CEO, J Moses. "To this end, we are taking cost cutting measures to increase efficiencies in our business."
UGO Networks will use the new proceeds to grow UGO Technology Solutions, its technology business and to develop and sell advertising sponsorship packages.
"As a well funded company, we are looking to leverage our cash position to explore potential strategic partners. An ideal partner would enhance our market position and leverage the Company's core assets," said Joe Robinson, Chairman and Founder, UGO Networks.
....
But you're goint to have to talk to a lawyer, have him put together a strongly worded letter saying that if they don't pay up, you will have no choice but to see them in court. They're in breach of contract here, and if what you say is true, you've got pretty much a slam dunk case here.
If god had intended you to be naked, you would have been born that way.
We've had the ugo contract examined by a lawyer earlier last year. There's very very little chance you can squeeze money out of them. The lawyer classified the contract as "one of the most one-sided contracts I've seen in my life."
UGO is, as the rest of that sector of the net, hit hard by the current crisis. It is not their fault, how much even I hate it. (I have sites under UGO)
There simply is no money to pay the sites their $10K+/month anymore. The party is over. Get over it, get a real job.
+++ATH0