Sunday, July 11, 2010

Solving The Crime: An Intro to The Story Behind The Fertitta/Zuffa Assassination of PRIDE

By: Rich Bergeron



It is important to frame this piece with a bit of Fertitta "Family" history.

If you look deep enough into the background of the 90% owners of Zuffa, LLC you will find a long and sordid history of Italian Mafia connections dating back to Galveston Texas, which was America's Vegas before the Vegas we know today existed. Just page back through my own compiled history of the Fertitta and Maceo families here on this site, and it's clear the connection is undeniable and very telling.

There could be endless debate on the subject of whether the Zuffa-owning Fertitta sons could possibly be "made men" even despite all the oversight and regulation involved in the gaming industry. It may be unlikely that the Brothers Fertitta could be carrying on any sort of traditional racketeering, and they are generally promoted as "clean" and clear of those old connections, but this family is historically ruthless, and some things get passed on through genes even if not by the traditions and principles of "La Cosa Nostra."

So, is it conceivable Frank Fertitta III and Lorenzo Fertitta might still be doing the bidding of the same kind of ruthless folks their father worked for when he made all his initial inroads in Las Vegas? As far as being "bosses" of a crime family, the two don't brothers fit the stereotypical "Don" profile at all, though Frank III has been referred to as "Frankie Three Sticks." Yet, blending into the mainstream business world would be perfect cover if these two brothers are indeed somehow carrying on the old family traditions and associations. If the influence is more subtle, less pronounced, harder to track, and hardly ever talked about, everybody wins. An investigation into the family's recent business activity from A to Zuffa reveals that even if the mafia stigma is no longer a factor, certain moves made by all the associated Fertitta businesses resemble financial "hits" or shakedowns.

No other Fertitta business move in relation to MMA has been more infamous than the assassination of PRIDE, at one point the greatest and only major threatening competition the UFC faced. Yet, long before PRIDE was on the Zuffa purchasing radar the Fertitta-led Zuffa team muscled in on other promoters and made the whole industry fit their needs. The process seemed to favor them every step of the way, and it is no surprise that they gained quick sanctioning and respectability in Nevada because of the Fertitta endorsement and the family's power base there.

A famous Zuffa move made fairly early on was to trademark the word "Octagon." There is a California promoter named Kazja who was using that term and an octagon cage long before the UFC made it famous. Kazja is a very intriguing character, and he can recite the detailed history of MMA's rise in California and the political machinations that culminated recently in the disgraced exodus of California State Athletic Commission Armando Garcia. People like Kazja and Ron Kort have been screaming from the rooftops for years about how the UFC is allegedly complicit in much of the corruption involved in California MMA circles. Kazja's site explains a lot of the early politics involved with the UFC, and his contentions regarding how the unified rules of MMA were adopted are also really staggering.

The Fertittas and Zuffa have not been implicated thus far in any formal charges or corruption probes related to Armando Garcia as of yet, but evidence unearthed by Kazja, Kort, and some other promoters in California points to a long campaign of intimidation and overbearing influence waged by those behind the UFC.

Pablo Picasso once said, "good artists create, but great artists steal." There are folks out there who have been trying to show for years that the Fertittas, Dana White, and Zuffa as a whole started out by stealing whatever they could get away with to build what has since become the WWE of MMA. Are all these folks railing against the corruption they see just jealous? Are they misinformed? Are all the UFC's detractors just "haters" who like to flame Dana White 24/7 on the message boards? Or, do things like the "Zuffa Myth" really exist? It's well known that nice guys finish last and the business world can certainly be a cruel and brutal atmosphere at times, but some would argue the UFC's approach to business has been excessively ruthless.

There are even allegations that the folks behind the UFC stole the concept for one of the most popular UFC offshoots: The Ultimate Fighter reality TV franchise. Chris Champagne told us back in 2007 about a TUF-like show called "The Quest" he allegedly pitched to Dana White, only to have it snatched from him without getting any credit or payment whatsoever.

Click here to listen to part 2 of Chris Champagne's Interview.

So, as far as rackets the Fertittas have still got robbery going for them in at least a figurative business sense. The latest cases of the Xyience bankruptcy and the Station Casinos looming bankruptcy debacle represent an extension of what looks to me like a sophisticated new legal corporate theft ring. The Fertittas have also recently personally extended an offering of $244 million in cash to bankrupt Station casinos smoothly and wipe out much of the vaulting debt that hangs over the company while under the Chapter 11 blanket. It appears that they might have been using the Xyience bankruptcy as a trial run to see if they could handle such a process and if it would be beneficial.

So, the recent family history details a penchant for adapting old school mafia thinking into new-school shady business dealing. The new rules of engagement may all be legal but they are no less dangerous and disturbing to the victims on the other end of the shaft.


The only actual murder thought to be possibly connected in any way to the Fertitta Family in recent years is that of casino skimmer Carl Thomas, and because of the mysterious circumstances there isn't any actual evidence that it even was a murder. Thomas was killed in a one car accident in Oregon shortly after talking to Frank Fertitta, Jr. about testimony Thomas was supposed to give in relation to the Fertitta family's gaming interests. He died before he could give that testimony, and the crash was ruled an accident. Thomas and Fertitta had a long history together, some of which is illustrated in the Nicholas Pilleggi book that spawned the movie "Casino."

Since that single car accident on a lonely stretch of Oregon road just a short distance from Thomas' own property, the Fertitta family has been working feverishly to put the "family" associations behind them. There have been no mysterious deaths or criminal probes into Fertitta activity since Frank III took over the casino empire in the wake of the Thomas crash.

If Thomas was murdered, the execution was perfectly planned and orchestrated. The Fertittas have an uncanny history of avoiding the long arm of the law. Even in the days when many Fertitta family members were known organized crime associates running rackets in Texas they were able to avoid convictions. The family has mastered the art of not getting caught in the act and covering up their transgressions and their past family history.

This kind of ruthless criminal genius may just be passed down from generation to generation through genetics, and the latest crop of Fertitta brothers may very well be the most sophisticated and slick businessmen to ever come from the Fertitta bloodline. After all, under their tenure as Zuffa owners they have been able to corner the MMA market and remain on the top of the heap of competing leagues. Though the early going meant millions of dollars in hard losses, they have turned the sinking ship around.

However, just like the mysterious death of Carl Thomas resulted in the Fertittas getting the green light to expand their gambling empire to Kansas City, so too did another murder of sorts allow the Fertitta family to take advantage of another situation.

The corporate murder of the Japan-based PRIDE organization is still lamented by hard core MMA fans who miss the PRIDE format and unique rules. PRIDE involved 10 minute rounds fought in a ring and allowed soccer kicks to the head to name just a couple differences between their league and the UFC. There were also a host of formidable and impressive PRIDE fighters and an amazing assortment of some recordings of the best MMA fights ever fought that were all inclusive assets attached to the PRIDE organization's sale to Zuffa. The UFC would eventually acquire all the PRIDE assets by promising to continue to run and cultivate PRIDE as a going concern. Instead, Zuffa simply dismantled their competition piece by piece.

The PRIDE and Xyience cases overlap in some respects, but until now I have devoted little research to the history of PRIDE itself and the deal that resulted in that organization's ultimate death. The gist of the Xyience connection is that the strength of the Xyience sponsorship was touted as one of the justifications for the $350 million financing package related to the PRIDE purchase that was procured by Zuffa. I lay out the whole "senior secured credit facility" scheme here:

Due to my investigative reporting on Xyience and how the Fertittas bought into Xyience just in time to prop it up and make it look viable for the PRIDE financing to go through, I was actually contacted by PRIDE's legal team representing the former owners of the organization in litigation against Zuffa. I have consulted with their attorney on a few occasions already and will be reporting regularly on developments in the case here on this blog over the next few weeks.

From what I know now it appears to me that the UFC's acquisition of PRIDE was never designed to keep both organizations alive and thriving. The UFC has been steadily losing the most money on overseas shows since it is headquartered in Las Vegas and naturally holds many of its events there or in the continental United States. The logistics and the costs skyrocket when you have to take the whole operation to the other side of the world for a major event.

To operate PRIDE in Japan would have been a logistical nightmare for the Fertittas without relying heavily on those already running the company there. It's pretty obvious to me that the UFC had this in mind all along when they set about destroying the PRIDE brand after purchasing the company. From what I know about Zuffa and the Fertittas, they don't like working with any other promotion if they don't absolutely have to. So I wonder why would they agree to work with PRIDE's assistance at all.

The UFC had acquired the WEC with great success prior to buying PRIDE, but that was a United States-based company. It has been a lot easier for the UFC to develop that company into a powerhouse than it would have been for them to maintain PRIDE overseas.

My opinion, which has been cultivated through my own personal legal experiences with Fertitta Enterprises attorneys, is that the Fertittas and Zuffa lawyers made sure all agreements with PRIDE's owners had an easy way out. If they could prove a technicality to back out of any contract they signed with PRIDE, it would be a perfect arrangement for them to feign interest in maintaining the league until they could find a way to destroy it. If they intended to work with PRIDE to continue the organization, the agreements they signed would seem to be along those lines. However, if they only intended to lie to PRIDE officials just long enough to acquire the company and all the assets, the language and the fine print of those agreements would be naturally written with escape clauses.

The covenants of the $350 million senior secured credit facility Zuffa used to buy PRIDE and its assets may contain some hints to this scandal if they are ever made public or acquired by PRIDE's legal team. If the Fertittas indeed intended to cultivate the PRIDE brand according to their promises to PRIDE officials, those covenants should say something about that business plan.

Not surprisingly, Zuffa's defense was a good offense, as they filed the first legal salvo in this ongoing saga. Reports first surfaced about the lawsuit in early February of 2008. The suit claimed that Zuffa's bargain basement PRIDE buyout was nothing of the sort and that the UFC was actually the victim in the whole deal. This Sherdog article describes how the initially rosy PRIDE/UFC conglomeration developed and then dissolved into litigation over the course of about a year after the UFC bought the league.

The UFC suit focused on background checks supposedly required on the PRIDE deal due to the Fertitta connection to Station Casinos and the Nevada Gaming Commission. This is a puzzling and as of yet unexplained mystery since naturally the Fertittas have to keep their gaming interests and the UFC operations wholly separate from each other. For instance, UFC bets are not taken at Station Casinos properties, and UFC events are not held at any Station Casinos property. Also, it doesn't appear any background checks were done on some of the individuals associated with the Xyience bankruptcy and my initial Xyience reports.

PRIDE's legal team responded with a countersuit. They just filed this amended counterclaim pleading that describes a devious plan to allegedly "kill PRIDE" voiced by none other than Dana White himself. PRIDE contends that Zuffa officials breached their contracts and pumped up the glorified tabloid stories of PRIDE's associations with Yakuza crime families in Japan that were printed in a Japanese publication called Shukan Gendai. The publication is no stranger to stirring worldwide scandal and regularly publishes controversial nude photos. The following description comes from the Wikkipedia page for the publication:

"Sh?kan Gendai (?????, "Nowadays Weekly") is a Japanese weekly magazine published since 1959 by Kodansha. Published simultaneously with Weekly Post (another weekly magazine published by Shogakukan), it includes articles about political scandals, sports and celebrities; nude photos; movie information; book reviews; and other articles of interest to middle-aged salarymen. Along with Weekly Post, it is credited with coining the pseudo-English term "hair nude", meaning nude photography that shows pubic hair.

"The magazine is probably best known outside Japan for its role in the scandal which led to Romanian gymnasts Corina Ungureanu, Lavinia Milosovici and Claudia Presecan being banned from competing or coaching in their home country for five years, as it was the first to publish images from their nude photobook and DVDs, which controversially featured the gymnasts wearing their official leotards."

Considering the 90% owners of the UFC come from a long line of notorious "made men" these Yakuza allegations against Dream Stage Entertainment owners are a bit hypocritical.

A hard look must be taken at the Senior Secured Credit Facility which was used to buy PRIDE and allow the principal Zuffa owners to pocket huge dividends. These same loan instruments on a much larger scale were taken out by Station Casinos in amounts of nearly a billion dollars in each instance over the last few years, which obviously resulted in a lot of overhead costs and interest payments combined with a ton of debt that crash landed and exploded due to the ongoing recession. The Fertittas went about a campaign of ruthless and relentless acquisitions and expansion to get themselves in their current Station Casinos situation, and they pinballed the company from Public to Private status to find a way to make the whole thing appear profitable despite the billions in debt they were in officially.

Suddenly they have $244 million in the pocket of an old pair of jeans to throw into reorganizing Station Casinos, but they couldn't revamp PRIDE when that organization showed signs that the going may be difficult? It doesn't seem plausible when considering the less than $70 million cost of PRIDE compared to the dividends pocketed by Dana White and the Fertittas through that $350 million credit facility that paid for PRIDE. That instrument could have and should have given all of Zuffa's owners enough money to solve any looming problem with promoting and re-creating the PRIDE brand in their image. That is, IF they ever actually intended to keep PRIDE in operation.

Of course, there is not really any dispute as to who murdered PRIDE. The UFC terminated the league without a doubt, and the blood of PRIDE is certainly all over their hands. However, some would call the killing euthanasia or physician-assisted suicide while folks like me consider it more of a gangland slaying made to look like an "accident." Could the Fertitta Brothers and Dana White be capable of such a thing? Ultimately a judge will have to decide, and we will keep everyone updated as the court continues to weigh the issues and work toward final resolution of this case.

Stay tuned for Part Two of this series. We will analyze the PRIDE/Dream Stage Entertainment lawsuit in further detail and take a look at the entire docket to come to our own conclusions on who is ahead in this fight and who needs to gain some ground or give up. Also, look out for another installment in the Xyience series due to new developments in that case.

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