Departing Yahoo CEO Could Face Radar Fraud Suit

(update: moments ago we were given notice of a new delay- and, so it goes. Should we go public?) Law360, New York (July 16, 2012, 10:22 PM ET) — The trustee overseeing the bankruptcy of Radar Networks Inc. has reached a deal that could allow a fraud suit against outgoing Yahoo Inc. CEO Ross Levinsohn to go forward, according to a stipulation filed Thursday.

Kate Paley, the daughter of the late founder and chairman of CBS William S. Paley, claims that Levinsohn, a Radar director who was Yahoo’s interim CEO until his replacement Monday, and other insiders at Radar transferred about $3 million she lent to the company to another entity.

Her suit, claiming fraud and conversion, was stymied after Radar, a web applications company, filed for bankruptcy, but her lawyer said Thursday in a court filing that the Radar trustee has reached a stipulation that could let her suit go forward.

“The stipulation is in the best interests of the estate and should be approved,” lawyers for Paley and the trustee said in the stipulation. Paley will require court approval if her suit is to ultimately go forward.

Levinsohn, who was Yahoo’s interim CEO until the Yahoo board appointed former Google Inc. executive Marissa Mayer to the job effective Tuesday, would be a key target in the suit.

Paley’s lawyers said that the fraud suit, a state court action in California, is essentially a two-party action between Paley on one side, and Levinsohn, Radar founder Nova Spivack and Evri Inc., which eventually bought it, on the other.

The insiders had been litigating against Paley, but used Radar’s bankruptcy to put off a trial scheduled for February after a partial summary judgment order went against them, according to the motion.

The trustee does not have the resources to pursue the action himself, the stipulation says.

Paley will be responsible for the choosing the lawyers that prosecute the case.

“This agreement will eliminate delay and allow the claims against Levinsohn to proceed to a public trial,” said Trent Freeman, a spokesman for Paley.

Freeman said the defendants are expected to oppose the arrangement in order to delay the trial. A hearing is scheduled for July 27 in California bankruptcy court.

Paley is represented by Katherine D. Ray of Goldberg Stinnett Davis & Linchey PC.

The trustee is represented by Michael A. Issacs of McKenna Long & Aldridge LLP.

Levinsohn is represented by Eric J. Amdursky and Jennifer Taylor of O’Melveny & Myers LLP. Spivack is represented by Jonathan M. Reymann. Radar is represented by John Walshe Murray of Murray & Murray PC. Evri is represented by Stephen C. Willie of Savitt Bruce & Willey LLP.

The case is Paley v. Radar Networks Inc. et al., case number CIV-494701, in the Superior Court of the State of California, County of Mateo.

The case is In re: Radar Networks Inc., case number 11-bk-33990, in the U.S. District Court for the Northern District of California.

[surprisingly no mention made of Paul Allen’s Vulcan Capital, which orchestrated the fraud and fraudulent conveyance].

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