Is D.C. Rag Metro Weekly Facing Closure Over a $1 Million Fraud Lawsuit?

It’s not just the advertising downturn in print that’s hurting gay print publications large and small. A lawsuit slapped against Metro Weekly owner Jansi LLC is asking for over $1 million — almost certainly more than they’ve got on hand.

Post-Newsweek Media Inc. is suing Jansi, an entity fronted by Metro Weekly publishers Randy Shulman and Sean Bugg, over unpaid debts, reports the Washington Business Journal:

Back when Metro Weekly was published by Shulman-owned Isosceles Publishing Inc., the company used a Post-Newsweek affiliate, Gaithersburg-based Comprint Inc., to print Metro Weekly’s 45,000 or so copies each week.That relationship ended with a collections lawsuit. A 2005 settlement called for Isosceles to pay Comprint $125,000. But by the end of 2008, Isosceles had repaid just $40,000 and failed to make any payments thereafter, according to Post-Newsweek’s suit.

In the meantime, facing mounting tax liabilities, Isosceles licensed the right to publish Metro Weekly to Jansi — a new entity co-owned by Shulman and Bugg — while leaving the liabilities behind with Isosceles, the suit says.

According to court records, Shulman allegedly said in a deposition that “the licensing arrangement was the ‘only way’ Metro Weekly could continue to be published in light of the tax lien against Isosceles.” (Nearly $656,000 in federal and state tax liens have been filed against Isosceles, according to Washington Business Journal data.)

So in order to keep printing Metro Weekly while struggling under mounting collections payments, Shulman’s original company Isosceles cut a deal with a “licensing” deal a new company — which just so happens to be owned by him and Bugg. A licensing deal, rather than a sale, means the original company holds on to any debt liabilities while the new one is theoretically immune to past bad behavior. The business practice isn’t actually that abnormal, but Post-Newsweek didn’t like it, so they’re suing both Schulman and Bugg in D.C. Superior Court, asking for the $85,000 allegedly still owed and a fat $1 million in damages. (The Business Journal quotes Metro Weekly attorney William McLain: “The lawsuit filed is without merit. They’re not going to recover against Jansi — it’s just not that corporation’s debt.” And here’s Post-Newsweek attorney Paul Thaler: “We hope that they have a long and sustained and successful run. Post-Newsweek does not want to drive it out of business. Post-Newsweek just wants to get paid.”)

If a court upholds the Isosceles-Jansi licensing arrangement, Post-Newsweek can still go after the original debtor: Isosceles. And if Isosceles has no cash on hand, a court can hand the company and its assets to Post-Newsweek, thus giving it control over its licensing arrangement with Schulman and Bugg’s Jansi. Which it could cancel, and shut down the Metro Weekly brand.

Not that Post-Newsweek would really want to go that route for the same reason banks hate owning homes. Whatever happens, we’d hate to see Metro Weekly close. It’s a decent paper with good inside baseball coverage of LGBT policy making, and closing down gay rags helps nobody.