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Mon, March 03, 2008

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Background Checks? Got It Down to a “Xyience”

By Charles Jay
How do you make something out of nothing? Can anyone say “whole cloth”?

A couple of weeks ago, a company called Xyience, a major sponsor of UFC shows, filed for bankruptcy under Chapter 11, as reported in the Las Vegas Review-Journal.

When you take a look at what the company does and where it stands, it sounds like a phantom; a paper tiger. A shadow company. Something propped up like cardboard. Those MMA followers who thought the IFL was ethereal would truly love this story. Here they’re trying to tell us that a company that experiences all of this exposure on UFC telecasts on Spike TV and pay-per-view, in magazines, and on the well-trafficked UFC website can’t get its product in more than 230 stores, and is essentially a regional player, with distribution mostly in the Southeast?

To say that strains credulity is like saying Oprah Winfrey is mildly influential.

I drove around southern Florida yesterday and passed by at least 75 stores, maybe 100, that should have been outlets for a line of products that is as big a player as is represented by their advertising. How does a company like this get behind the eight ball to the tune of $37 million? If they are going to represent that some of this has to do with the advertising and marketing associated with the UFC, why then is there so much expenditure and so little in the way of product?

And why in the world would Lorenzo and Frank Fertitta be creditors of the company for as much as $17.6 million? Why would they have allowed such a debt to be run up? And don’t give me that B.S. about “loyalty” and “relationships.” Those kinds of things are built on reliability, accountability and paying the bills. Why would these UFC guys be so no-nonsense in all other areas of what they do and such creampuffs when it comes to Xyience, a company with ZERO track record of success, and in fact a dark history of just the opposite?

What is the real purpose of this company?

I mean, why would an organization that seemed so committed to drawing ALL mixed martial arts traffic to its own website (ufc.com) and so threatened by the existence of those sites who would compete for that traffic that it at one time instituted a ban on access toward those sites, be so charitable toward an outside company in which it purportedly had no financial interest whatsoever?

Well, maybe, just maybe, it’s because they DO have a financial interest.

Or at least that’s what a blogger and internet writer by the name of Rich Bergeron is claiming. Let me preface this by saying that I have not spoken to Bergeron, nor have I gone over all he’s written with a fine-toothed comb. But I can tell you that he seems to have done a lot of research. Basically, his contention is that principals of the UFC have at least an indirect interest in Xyience, and that the company exists as a means of funneling investor money into the hands of certain individuals, and not toward the business itself. There’s some smoke there, but my sense is that there’s also a lot of fire.

Bergeron got sued by Xyience, which means that he may have gone a little too far in extrapolating some of his findings; but it almost certainly means that he has someone worried over there.

Russell Pike, who founded Xyience and oversaw its involvement with the UFC for some time, is a convicted felon, having pleaded guilty to grand theft and forgery in California in 1987 and of money laundering in 1999. Not only that, according to a “Desist and Refrain Order” filed by the California Department of Corporations in September of last year, pursuant to the sale of Xyience stock, Pike suffered a default judgment in a civil action filed against him by The Mirage, a hotel-casino licensed by the Nevada State Gaming Commission, when he allegedly wrote them $300,000 in bad checks over a two-day period in 1995.

And that is very interesting indeed, especially in light of the Fertittas’ recent lawsuit filing against Dream Stage Entertainment, the former owners of PRIDE, which the UFC purchased last year. In the complaint, the Fertittas allege that the rumored involvement of some of Dream Stage’s people with elements of the Japanese Yakuza “could have a detrimental effect upon the Purchasing Parties’ (the Fertittas’) affiliates’ gaming licenses (for the uninitiated, the Fertitta family controls Station Casinos Inc, which has about 17 properties in the United States).”

But it was okay to engage in a marketing partnership with a convicted forger and money launderer who has written bad checks to casinos, and furthermore, to literally bring him and his company into direct involvement with promotions on casino properties such as the Mandalay Bay in Las Vegas, where Pike should have probably been put into the Black Book (in this reporter’s opinion)? Why had THAT never seemed to bother them?

All questions worth asking, and worthy of being answered, perhaps in front of a gaming commission.

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