XYIENCE CO-CEOS ADAM FRANK AND KIRK SANFORD RESIGN FROM BOARD OF DIRECTORS AS THE COMPANY PREPARES FOR A SALE

Posted on | February 10, 2008 | 5 Comments

[mpinpage]

CEOS BAIL OUT WHILE CORNER OFFICE MANAGEMENT GETS TO COLLECT ON THEIR SIX-FIGURE SALARIES

By: Rich Bergeron

Even while the company is steamrolling through bankruptcy with the help of more capital infusions from Fertitta Enterprises to facilitate exploration of the company’s sale, recent court filings from Xyience indicate that the latest casualties include Co-CEOs Adam Frank and Kirk Sanford. What’s more intriguing is that the February 2nd filings claim that prior to Sanford and Frank resigning from the board of directors in late January they were not even paid employees.

Sanford and Frank have in recent months become the public faces of the Xyience/Zuffa scandal that is still unfolding in the press and inside multiple Las Vegas courtrooms. Both men came to Xyience under questionable circumstances with Frank having a serious breach of contract lawsuit hanging over his head and Sanford wrapped up in an internal investigation at Global Cash Access Holdings after he suddenly and suspiciously vacated his position there as President and CEO.

GCA is a financial services company that provides cash access products and services to the gaming industry. Sanford took the reins of GCA in February of 1999 and reportedly left just before November to “pursue other interests and spend time with his family.”

Global Cash Access stocks then took a mid-November nosedive amid the internal investigation that followed Sanford’s departure. Some of the company’s financial reports were delayed as a result of the investigation. Despite the investigation not turning up any major fraud, the company’s stock has yet to recover from the sharp losses it took last November. Trading just under $20 at its peak in April of 2006, the stock has been gradually depreciating ever since. Virtually flatlining around $16 between October of 2006 and July of 2007, the stock’s market value tanked in November and dipped below $4. Since then the stock has been unable to reclaim even half of its pre-November value.

Not surprisingly, prior to Sanford’s being brought on as CO-CEO of Xyience under Fertitta Enterprises’ financing of the company, Station Casinos and GCA had a substantial business partnership.

Upon the company’s successful acquisition of the Fertitta financing, Kirk and Sanford were also handsomely rewarded. The following snapshot is taken from the funding consent request sent out to shareholders in late September of 2007:

THE GOLDEN PARACHUTEThe funding consent request letter went out just one day after Xyience posted a preliminary injunction on the docket of their bogus defamation case against me. The proposal went out to try to gain the support of 70 percent of the shareholders, and both Frank and Sanford sent out an email on October 4, 2007 to announce the signing of the Fertitta deal despite claims now being lobbied by burned investors that the proper percentage of shareholders never agreed to the financing.

The February 2nd filing announcing the resignation of Sanford and Frank also ensures the company’s employees making more than $100,000 are duly compensated. The document includes the following passage:

“On January 23, 2008, the Bankruptcy Court heard the Debtor’s Emergency Application for Authorization to Pay Salaries, Commissions, Employee Benefits, Accrued Vacation and Reimbursable Employee Expenses (“Payroll and Benefits Motion”). In conjunction with the Payroll and Benefits Motion, the Court required the Debtor to file a motion seeking the Bankruptcy Court’s approval of compensation paid to all employees who are presently paid an annual salary in excess of $100,000. This Salary Motion is filed for the purpose of seeking that approval.”

Meanwhile, 12 other employees were laid off on January 25th, 2008 leaving Xyience with a bare bones staff of just 27 salaried employees. So who benefited with big paydays that forced 12 folks out of a job? The filing lists: Susan Curry, Vice President of Manufacturing; Vicki DiBernardo, Vice President of Human Resources and Administration; Michael Levy, Chief Financial Officer; Jeffrey Martin, Eastern Division Manager; Ruben Rios, Vice President of Sales; and Omer Sattar, Chief Operating Officer and President.

Two other unpaid board members, Lanis O’Steen and Jerry Kramer, also resigned at the same time as Frank and Sanford, though it is not clear how involved they were in the day to day operations of the company. Interestingly enough, the filing that revealed this information was almost put under seal. Instead, the court document was released in the spirit of full disclosure, which is a principle some Xyience officials, Fertitta Enterprises, and now-former Board Members Adam Frank and Kirk Sanford have all been accused of avoiding at all costs according to multiple initial Xyience shareholders.

This case continues to develop and raises more questions with each passing day. So far, only a select few independently driven fight news Web-sites have dared to delve into the really meaty details. The Las Vegas Review Journal has published only flat reports about the bankruptcy and what appear to be one-sided allegations of death threats claimed by the current Xyience brass.

The Review Journal’s lack of any hard-hitting or critical coverage of the real heart of the story here may be related to the close ties between the Fertitta family and the Greenspun Corporation. The Greenspun-owned Las Vegas Sun is distributed in The Las Vegas Review Journal. 50/50 partners on the development of a 2005 hotel and casino community called Aliante Station, the Greenspun Corporation and Station Casinos go way back. It is also not the only project they’ve corroborated on.

“We have a great relationship with the Fertittas and Station Casinos as a result of the success of Green Valley Ranch Resort and we are confident that they will develop and operate a high-quality project for our residents and the surrounding North Las Vegas community,” Brian Greenspun reportedly announced at the time of the Aliante Station project’s unveiling.

Greenspun is the chairman of the corporation that controls more than just one Vegas newspaper. Greenspun Media Group’s holdings include the Las Vegas Sun, Showbiz Weekly, Las Vegas Life, Las Vegas Weekly, VegasGolfer, The Ralston FLASH, In Business Las Vegas, VEGAS Magazine, Las Vegas Life Home & Design, and The NEWS. GMG also publishes a number of targeted and special interest products each year for businesses such as the Fashion Show Mall and the Wynn Hotel.

No wonder FNU’s emails about this situation have not been returned by editors at the Las Vegas Sun.

The Greenspun Corporation also has other lucrative business connections with cable news outlets, local broadcast media, a film company, and transportation services. With that many smart investments, it’s easy to see why they don’t have any Xyience stock in their portfolio.

Beyond the lack of local scrutiny in the print media, Xyience is still holding its own despite the very public embarassment due to their voluntary bankruptcy. Ironically, even amidst all this internal turmoil, the almost completely financially tapped Xyience, Incorporated has yet to relinquish their lucrative marketing partnership with the Ultimate Fighting Championship. The court documents report, “Based upon the post-petition agreement entered into with Zuffa Marketing, LLC, Xyience retains its status as the Official Energy Drink of the UFC.”

[/mpinpage]