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Dallas’ Godwin Gruber is being hauled into court over allegations involving stock promotion, NASCAR’s trademark and a video titled “Race Track Girls Go Nutz” featuring nude women. Consolidated Sports Media Group, the company that distributed the video, filed a petition, Consolidated Sports Media Group v. Godwin Gruber, et al., on Aug. 4 in Dallas’ 101st District Court. The petition names Godwin Gruber and Phillip W. Offill Jr., a Godwin Gruber partner, as defendants. It alleges that Offill arranged for Doyle Mark White’s public relations company to send a blast fax to thousands of prospective investors in CSMG. The petition also names as a defendant White, who used to be a client of Offill’s and whose financial PR business, Daystrike Marketing Inc., is now defunct. CSMG alleges Daystrike drafted and disseminated the fax without the knowledge or approval of CSMG’s executives. But the parties disagree over who arranged for, drafted and knew about the fax prior to its sending. The fax included “NASCAR” in its title and used the NASCAR name half-a-dozen other times, stating “NASCAR has the largest audience of any sports category in the World!!!” That audience would “go nutz” buying the newly released CSMG video, the fax asserted. “Investors, Start your engines!” On Dec. 6, 2004, less than a month after White’s company distributed the fax, the National Association of Stock Car Auto Racing Inc. (NASCAR) sued CSMG in U.S. District Court for the Middle District of Florida. NASCAR alleges in National Association of Stock Car Auto Racing Inc. v. John Eckerd, Consolidated Sports Media Group Inc., et al. that CSMG infringed on its trademark rights with the distribution of the blast fax. Earlier this month, CSMG sued Godwin Gruber, Offill and White in state district court in Dallas alleging, among other things, that the firm and Offill, by arranging for White to send the fax, breached their fiduciary duties and committed legal malpractice. “Offill secretly took various actions purportedly on behalf of CSMG, when in fact Offill had no authority whatsoever to do so, and his unauthorized actions caused significant legal problems and financial losses for CSMG,” CSMG alleges in its petition. But CSMG’s allegations go beyond the issue of NASCAR’s trademark and the fax. They include the claim that Offill represented both sides of a transaction: Specifically, the petition alleges, Offill represented CSMG and its executives, while at the same time representing investors who were offering to put up a $1 million stake in CSMG to finance the distribution of the video. Those investors bought CSMG stock through limited partnerships and corporations, the petition alleges. The investors represented by Offill sold their CSMG shares during the short period between when the blast fax drove the share price up and when NASCAR sued CSMG in Florida, which brought CSMG’s stock price down, the Godwin Gruber petition alleges. CSMG alleges Offill and his investors made “millions.” CSMG further alleges that Offill did not disclose his representation of the investors to CSMG. “Offill committed malpractice in discharging his professional responsibilities, and he willfully breached his fiduciary duties to CSMG by, inter alia, concealing conflicts of interest and material facts, by acts of disloyalty, and by self-dealing,” CSMG alleges in its petition. “Offill carried out an illegal ‘pump and dump’ scheme whereby he, entities controlled by him, and persons with whom he had longstanding (but undisclosed) relationships illicitly made millions of dollars in a few months, but left CSMG crippled by financial and legal problems,” CSMG further alleges. The Securities and Exchange Commission defines “a pump-and-dump scheme” in a proposed rule it published on April 21, 2004, in the Federal Register: It involves using shell companies to mislead investors and having promoters pump up the price of a stock through unduly positive press releases on the Internet. In its petition, CSMG seeks unspecified damages, exemplary damages and disgorgement of profits. Offill and Godwin Gruber managing partner Darrell Jordan deny the allegations in the petition. Jordan refers to the litigation as “baseless.” None of the defendants had filed a response to CSMG’s petition before press time on Aug. 25. James Reskin, a solo practitioner in Louisville, Ky., who represents White, says, “We do not agree with the allegations. The facts will bear that out, and we look forward to the resolution of this claim.” CONFLICTS ALLEGED In its complaint in Eckerd, NASCAR names as defendants CSMG and Eckerd, who originally produced the “Race Track Girls Go Nutz” video. Jennifer N. Stephens, of counsel at Dallas’ Sifford Anderson & Co., represents Eckerd and CSMG in the NASCAR suit in Florida. She says her clients deny “any involvement in the blast fax.” She says Eckerd was a consultant for CSMG, not one of its executives, and Eckerd merely owned the video and sold the distribution rights to CSMG. Atlanta’s Alston & Bird represents NASCAR in the Florida litigation against Eckerd and CSMG. Andrew Wilson, an associate with the firm who represents NASCAR, says Alston & Bird declines comment on the suit. Godwin Gruber originally represented Eckerd and CSMG in the Florida litigation but has been replaced by Sifford Anderson as CSMG’s counsel, according to lawyers at both firms. After NASCAR sued Eckerd and CSMG in Florida, CSMG then sued Offill, Godwin Gruber and White in Dallas. In its petition in Godwin Gruber, CSMG lays out a scenario starting in 2004, when Scott Schepper, who had acquired distribution rights to the “Race Track” video, sought representation from Offill to help arrange $1 million in financing for distribution of the video. Schepper’s lawyer James A. Fisher, a partner in Dallas’ Fisher Holmes & Turner, says his client was a relatively unsophisticated individual looking for financing when he came to Offill seeking advice. On Aug. 18, Schepper filed a petition to intervene in support of CSMG’s allegations in Godwin Gruber in state district court in Dallas. Offill, the petition alleges, advised Schepper to become president of an existing corporation, known as Barcode Inc. The company’s name was subsequently changed to CSMG, and it was through that entity, the petition alleges, that Offill recommended that Schepper sell stock to raise the money to distribute the video. Lewis R. Sifford, president of Sifford, Anderson & Co. and one of the attorneys representing CSMG, says, “A public offering is not on the list of how to raise capital for a company of this size usually.” In November 2004, the petition alleges, Offill arranged for his client White’s company Daystrike to send the blast fax promoting CSMG’s stock primarily on the basis of the company’s intention to distribute the “Race Track Girls Go Nutz” video. CSMG maintains in its petition that Offill arranged for White’s company to send the fax without the knowledge or approval of CSMG’s executives. CSMG’s stock trades “over the counter.” Over-the-counter stocks aren’t traded on a major stock exchange and don’t have to meet those exchanges’ financial requirements, according to Barron’s Dictionary of Finance and Investment Terms. CSMG alleges that Offill never disclosed — and even concealed from CSMG’s president Schepper — his relationship with White and other clients who had a stake in CSMG stock. The petition further alleges that Offill and Godwin Gruber had a conflict of interest because of Offill’s relationships with his clients who owned CSMG stock and with White, whose company drafted and distributed the blast fax. The petition alleges Offill never raised the possibility of a conflict of interest to CSMG or Schepper. The widely distributed fax, CSMG alleges in its petition, “conspicuously and indiscriminately uses the NASCAR trade name to promote the video.” CSMG alleges that its executives “spent a great deal of time and money editing the ‘Race Track Girls Go Nutz’ video footage to eliminate every image of NASCAR’s [trademark].” Many of the scenes in the video were taped at NASCAR race tracks. The petition also alleges that CSMG executives had no knowledge of the blast fax’s content and references to NASCAR before its distribution. But in a deposition taken on May 2 in the Florida suit, White stated that CSMG executives provided the content for the fax, approved it and authorized it. FILES AND THE BILL Offill refers specific questions about the suit to Jordan. Richard “Dick” Sayles, a partner in Dallas’ Sayles Werbner who represents Godwin Gruber and Offill in the CSMG suit, says, “It’s a defensible case.” Sayles says CSMG terminated its attorney-client relationship with Godwin Gruber after CSMG failed to pay its bill and demanded its files. According to an amended motion for leave of court to withdraw as counsel filed on May 3 by Godwin Gruber and Offill in the Florida suit, Offill sent a letter on April 15 to CSMG stating that he intended to withdraw as counsel, and CSMG executives replied five days later terminating the relationship. The Godwin Gruber motion also alleges that CSMG was unable to pay past and future bills to Godwin Gruber. Jordan says CSMG has not paid Godwin Gruber $30,000 in legal fees for the firm’s previous work involving the company’s financing as well as representation in the NASCAR case, Jordan says. Stephens and Sifford, who represent CSMG, say their clients are still waiting for the firm to return their case files related to the firm’s representation. Sifford says CSMG didn’t pay Godwin Gruber any fees because the company was never charged or sent any bills. CSMG says it terminated its relationship with the firm and Offill after they learned of Offill’s alleged conflicts. Jordan says he can’t explain why CSMG wasn’t billed. But he says that he has reviewed documents related to Offill’s representation of CSMG. Those documents, Jordan says, “totally support” what Offill has told him regarding Offill’s representation of CSMG. Jordan says Offill has told him that he had nothing to do with the blast fax. Offill had represented White, the owner of the company that distributed the blast fax, Jordan says, but Offill did not arrange for the fax about CSMG. Notes Jordan, “We’ll contest the matter vigorously, and we expect to prevail.”

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