18 ARKANSAS BUSINESS Public PC Companies May 14, 2007 Equity: Lawsuit Says Shareholders Duped

(continued from Page 1) the owners of Arkansas Media, which is controlled by “entities wholly owned and controlled by [the three men] or members of their families,” the law- suit says. The lawsuit contends that the three men put their own interests ahead of those of Equity’s uninformed shareholders. “Arkansas Media claims to be some sort of ‘management’ enterprise cre- ated by the controlling shareholders and directors of Equity and is currently owned by ‘affiliates’ of those persons,” the lawsuit says. In 1998, Equity, led by the own- ers of arkansas Media, contracted to pay arkansas Media fees that totaled more than $1 million a year in 2003, 2004 and 2005, despite Equity’s multi- million-dollar losses. That agreement, which appears to favor Hooper, Fess Pirnique Michael and Morton, is a major subject of the lawsuit. Attorneys for both sides declined comment, and several calls to Equity and Coconut Palm executives were referred to Stan Smith, the new com- Equity Media Holdings Corp., the new company formed with Equity Broadcasting Corp.’s merger with Coconut Palm pany’s public information officer, who Acquisition Group of Boca Raton, Fla., will keep its headquarters at 1 Shackleford Drive in Little Rock. did not return messages left at his Florida office before deadline. Equity Media Holdings Corp. But despite Equity’s growth, the The shareholders are being represent- company and a handful of its execu- ed by Friday Eldridge & Clark of Little Growing Footprint KKYK: Little Rock, RTN tives have been plagued by a history of Rock, and Equity is being represented Television KLRA: Little Rock, Univision losses and securities infractions. by Cauley Bowman Carney & Williams KEYU: Amarillo, Texas, Univision KWBF: Little Rock, MyNetworkTV According to filings with the SEC, of Little Rock, a law firm that formerly KAMT: Amarillo, Texas, Telefutura KIMG-LP: Los Angeles, Calif. Equity had a net loss of $12.7 million specialized in representing shareholders WYGA: Atlanta, Ga. WMQF: Marquette, Mich., FOX and MyNetworkTV in 2005 and a net loss of $6.1 million but has recently started appearing on WNGS: Buffalo, N.Y., RTN WUMN-CA: Minneapolis, Minn., Univision in 2004. The company had a net loss the other side of the table. WGMU: Burlington, Vt., MyNetworkTV WTMS-CA: Minneapolis, Minn., Telefutura of $14.1 million for the period ending It appears the lawsuit, originally KBTZ: Butte / Bozeman, Mont., FOX & MyNetworkTV KMMF: Missoula, Mont., FOX and MyNetworkTV Sept. 30, 2006, as compared with a net filed in Pulaski County Circuit Court KWWF: Cedar Rapids / Waterloo, Iowa, RTN K55JY: Monroe, La. / El Dorado loss of $4.2 million for the nine-month in July 2006, will not affect the merger, KDEV: Cheyenne, WY / Scottsbluff, Neb., ABC WGAP-LP: Nashville, Tenn., Univision period ended Sept. 30, 2005. as the company has officially filed with KTUW: Cheyenne, WY / Scottsbluff, Neb., RTN KUOK: Oklahoma City, Okla., Univision “The Class a shareholders have the Securities & Exchange Commission KDEV-LP: Denver, CO / Cheyenne, Wy., RTN KWDW: Oklahoma City, Okla., Telefutura taken the financial risk to capitalize and is now trading as Equity Media WUDT-CA: Detroit, Mich., Univision WBIF: Panama City, Fla., RTN the company in hopes that it would Holdings Corp., based in Little Rock. WUJF-LP: Dothan, Ala. KRRI-LP: Reno, Nev. become profitable,” the lawsuit notes. It has acquired the symbol EMDA and KTVC: Eugene, Ore., RTN KUTF: Salt Lake City, Utah, Telefutura “The company has never been able to was trading, thinly, last week at $4.30 WTLE: Ft. Myers / Naples, Fla., Telefutura KCBU: Salt Lake City, Utah, RTN deliver on its promises and it has sus- per share. WUVF: Ft. Myers / Naples, Fla., Univision KUSE-LP: Seattle, Wash. tained continuous losses.” WEVU-CA: Ft. Myers / Naples, Fla., Univision K34HQ: Sherman, Texas Equity’s founding members — Fess, Public Eye KPBI: Ft. Smith / Fayetteville, MyNetworkTV KQUP: Spokane, Wash., RTN Morton and Hooper, three of the five Coconut Palm first announced the KFDF: Ft. Smith / Fayetteville, RTN KWBM: Springfield, Mo., MyNetworkTV individuals listed in the lawsuit — have acquisition plans in April 2006 in a deal KXUN: Ft. Smith / Fayetteville, Univision WNYI: Syracuse, N.Y., Univision been involved in some high-profile and that was valued at $267.4 million. W56EJ: Gainesville, Fla. KUTU: Tulsa, Okla., Univision successful business ventures in the last Equity, which had long struggled to WUHQ: Grand Rapids, Mich., Mas Musica KUTW: Waco / Temple / Bryan, Texas, Univision two decades ranging from hotels and deliver the lofty profits and payouts to KLMN: Great Falls, Mont., FOX & MyNetworkTV KWKO: Waco / Temple / Bryan, Texas, Univision restaurants to real estate and securities shareholders it had hoped, managed WJMF: Jackson, Miss., Univision WSLF-LP: West Palm Beach, Fla. brokerage. The partners also had some to make itself attractive by becoming WUJF: Jacksonville, Fla., Univision KOUN-LP: Wichita Falls / Lawton, Okla., Univision busts, including a subsidiary called one of the largest networks of televi- KUKC: Kansas City, Mo., Univision K36GZ: Wichita Falls / Lawton, Okla., Telefutura SummerSoft and a computer retail store sion stations in the country (132 at KEGS: Las Vegas, Nev., RTN it opened on Bowman Road in 1998. last count) and a leading operator of KBNY: Las Vegas, Nev., Su TV Radio The three founders are all broker- Spanish-language stations. WBLU: Lexington, Kent., MyNetwork TV & RTN KWBF-FM, North Little Rock, Jammin’ Oldies dealer veterans in the securities indus- “We believe this transaction provides try, and each has also previously been an opportunity to enhance [Equity’s] Source: Equity Media Holdings Corp. disciplined by regulators for break- strong distribution capabilities as a top ing securities laws, according to the U.S. Hispanic media services company Arkansas Securities Department. by growing internally and through Equity’s strategy has been to build its programming in the United States. The Fess and Morton at one time both acquisition of complementary media footprint by acquiring underdeveloped company’s stations currently reach 42 worked for Diversified Financial service offerings,” Richard Rochon, properties and new stations, and it has markets encompassing nearly 25 per- Services, which shut down due to nega- Coconut Palm’s chairman and CEO, become a major developer of Univision cent of the country’s population and tive net capital. In 1986, records show, said 13 months ago. stations, the largest provider of Hispanic reaching more than 20 million homes. Fess was fined $500 because a batch