'Duck Dynasty' Producers Committed Massive Fraud and Self-Dealing, Lawsuit Contends
Deirdre and Scott Gurney, the producers of "Duck Dynasty," have officially been terminated by ITV following a fraud investigation, and a claim has been filed in California Superior Court. "Following a meeting with Scott and Deirdre Gurney, the Board of Gurney Productions has been left with no alternative but to terminate their employment and file a lawsuit in the Superior Court of California on the grounds of self-dealing, fraudulent concealment and breach of contract," according to a statement from a Gurney Productions spokesperson.
"As announced on Monday, Emmy-winning producer Craig Armstrong has been appointed interim CEO of Gurney Productions and has the full ground support of ITV America's senior team. Under his leadership, all Gurney Productions shows and development will continue to be produced by the company's strong team of producers. Armstrong, along with his producing partner Rick Ringbakk, is co-founder and co-CEO of 5x5 Media, which continues to operate as before." "It's very much business as usual and our brilliant production team remains focused on making and delivering great shows."
The Gurneys sold a 61.5% stake in the company to ITV in 2012 for $40 million, but remained co-CEOs of the firm. The suit alleges that in August, the Gurneys secretly set up a new company, Snake River Productions. In September, the new company bought distribution rights to "Northern Territory," a reality show, from Gurney Productions, according to the lawsuit. That transaction-for $3.6 million-inflated Gurney Productions' EBITDA, which had the effect of artificially boosting the value of the Gurneys' remaining minority stake in the company, the suit alleges.
"Every dollar that the Gurneys spent to purchase rights from the Company through Snake River would have been paid directly back to the Gurneys several times over through distributions and under the terms of the Operating Agreement's buyout provisions," the suit claims.
Distribution
In October, the Gurneys took a distribution from the old company in the amount of $1.4 million, which the lawsuit alleges was the direct result of self-dealing. At the September board meeting, the suit claims that Deirdre Gurney disclosed a higher-than-expected EBITDA. The board queried her, focusing in on the "Northern Territory" rights sale. The suit alleges that she pretended not to remember the name of the company that had acquired the rights. It was only after the meeting that ITV discovered that the rights had been sold to Snake River, and that the Gurneys were the owners of Snake River, the suit alleges.
This discovery prompted ITV to launch an investigation. ITV discovered that two employees-Josh Puga and Tara Delaney, who is Deirdre Gurney's sister-had been transferred to the payroll of Snake River, even though they still worked for Gurney Productions. That also had the effect of increasing Gurney Productions' EBITDA, enhancing the value of the Gurneys' minority stake, according to the suit.
The lawsuit also claims that the investigation found that the Gurneys had charged hundreds of thousands of dollars in personal expenses to the company, including travel costs, mortgage payments, childcare payments, groceries, dues at the Manhattan Country Club, helicopter rides, boat expenses and pet supplies. The suit alleges that the Gurneys charged $542,000 in personal expenses to the company as of September 2013. Despite promises to repay the personal expenses in 2014, the company was not reimbursed, according to the suit. The suit alleges that the Gurneys repeatedly told the board that the expenses had been repaid, and that the board only discovered that the expenses remained unpaid in September 2016.
The suit also alleges that Scott Gurney took an improper $350,000 distribution from the company in January 2016, and the board only learned of it in September. The Gurneys could not be reached immediately for comment. — Reuters