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Concerns Voiced About Red Alert Proposal in John Rogers Case

4 min read

The $28 million cash offer to acquire the photo archives and sports memorabilia assets once owned by John Rogers has drawn objections and cautionary filings.

First Arkansas Bank & Trust of Jacksonville asked the court to order Red Alert Media Matrix Inc. to deposit $1 million as nonrefundable earnest money if the proposed asset sale and purchase agreement gains more traction.

Michael McAfee, the court-appointed receiver of the assets, in his first quarterly report to Pulaski County Circuit Judge Chris Piazza expressed several concerns with the Red Alert proposal, including ambiguous wording and lack of documentation verifying the funds.

Red Alert couldn’t provide proof of funds in a $59 million all-cash offer in March.

First Arkansas officials don’t oppose Red Alert’s latest deal, which, as currently proposed, would yield 100 percent payment to First Arkansas. As of April 30, the bank holds a $14.9 million judgment against Rogers and three of his former ventures: Sports Cards Plus Inc., Planet Giant LLC and Digital Stock Planet LLC.

Other creditors would be paid from the remaining cash and/or 1 million shares of unregistered, restricted Red Alert common stock.

Red Alert, a shell company with no assets, places an incredible paper value of $972 million on the stock. The number is tied to the astounding “insurable value” of $1.5 billion for the assets of the insolvent Rogers ventures.

There is no known insurance policy protecting assets of $1.5 billion. What Red Alert calls insurable value is actually tied to appraisals, described by sources familiar with the assets as massively inflated and based on unrealistic assumptions.

The fiercest objection to Red Alert’s proposed asset sale and purchase agreement was filed by George Demos of Kenosha, Wisconsin:

“The cash part of the offer is inadequate to pay the known creditor claims. The $1 billion claimed value of the unregistered stock is illusory at best. Even if the stock had some value, it forces Rogers’ creditors, whom he has repeatedly defrauded, to continue to do business with him and his affiliated companies.”

Rogers has been associated with the Red Alert proposal. Demos and others believe Rogers will re-emerge in the ownership of Red Alert. Demos and his brother, Steve, hold a $3.5 million breach of contract and fraud claim in the Rogers litigation.

In his April 30 report to the court, McAfee noted the absence of necessary documentation regarding the Red Alert stock as well as possible problems with state and federal securities regulators.

McAfee also took exception with Red Alert’s proposal to cut his 5 percent receiver’s fee in half. The receiver’s fee is to come from the available cash distribution to creditors when the former Rogers assets are liquidated.

Red Alert proposes taking a 2.5 percent payment ($700,000) from McAfee and shifting it to Little Rock attorney Richard Mays Sr. for his legal work on the proposed asset sale and purchase agreement.

In addition to cash, the proposal also calls for the former Arkansas Supreme Court justice to receive 50,000 shares in Red Alert. Based on Red Alert’s math, the shares are worth $48.7 million.

Mays and Tim Holly of Atlanta, Red Alert chairman and CEO, aren’t strangers.

While chairman of Little Rock’s fledgling Soul of the South, Mays attempted to orchestrate a sale of the financially troubled television network to Holly’s Red Alert. Mays invested $500,000 in Soul of the South.

Red Alert couldn’t provide proof of funds in that deal, and Mays resigned from the Soul of the South board of directors.

Mays isn’t the only name with shared links to Soul of the South, Red Alert and the Rogers assets.

William “Mac” Hogan, a leading creditor of John Rogers, invested $375,000 in Soul of the South. Rogers signed on to invest $125,000 in Soul of the South but didn’t come up with the cash.

Hogan has a $12.3 million claim from a string of Rogers deals he helped finance that include allegations of fraud against Rogers.

Hogan is described by sources as “one of the people driving the bus” in the Red Alert asset sale and purchase agreement of the former Rogers assets. Hogan is listed as the second priority creditor behind First Arkansas Bank & Trust in Red Alert’s proposal.

Creditors Note Objections

That pecking order of parties to receive payment if the Red Alert deal is consummated drew objections from Demos and two other creditors:

• Arthur and Paul Jaffe of North Bergen, New Jersey, the latest creditors of Rogers to join the legal fray on April 10. They claim an ownership stake in some of the assets Red Alert intends to buy such as the Detroit News collection and the Ponzini collection. Details about this collection are unknown.

But the Jaffes did invest $290,000 with Rogers in August 2013 for an ownership share of a collection described initially as 800,000 vintage news photos and negatives and later numbered at 750,128.

The Jaffes also claim an unspecified ownership stake in the famed Conlon Collection of glass-plate negatives, which has drawn many competing claims.

• Fairfax Media Management PTY Ltd. of Sydney, Australia, which asked the court to recognize its continued ownership of photo archives that were to be sold to Rogers after the collection was digitized. The digitization wasn’t completed, and Fairfax rescinded the contract. The company wants its photos excluded from the Red Alert transaction.

The Fairfax photos came from the Sydney Morning Herald and other publications in Australia and New Zealand, as well as some photographs from non-Fairfax sources.

A hearing is expected — but hasn’t been set — to sort through the issues surrounding the Red Alert proposal.

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