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Pixelon Creditors Trying to Force Bankruptcy

Courts: Three companies seek liquidation of online broadcast network whose founder is a convicted felon.

May 03, 2000|P.J. HUFFSTUTTER | TIMES STAFF WRITER

Three creditors of Pixelon Corp., the online broadcast network that shocked the dot-com world last month when its founder admitted to being a convicted embezzler, are trying to force the San Juan Capistrano company into bankruptcy.

The trio of Orange County companies, which are owed a total of more than $550,000, filed a Chapter 7 liquidation petition on behalf of Pixelon in U.S. Bankruptcy Court in Santa Ana.

The maneuver means that Pixelon has 20 days to respond if it wants to fight the petition, repay the creditors or convert the petition into a Chapter 11 reorganization, which would allow the company to stay in business under court supervision.

"I've contacted Pixelon and the response has been either, 'We're reviewing the claim' or 'Stand in line, you're not alone,' " said Michael W. Kinney, an attorney for the creditors.

Officials at Pixelon, which makes software that allows people to watch audio and video programs over the Web, could not be reached for comment Tuesday.

Pixelon owes at least $525,000 to Clear, Alexander & Associates in Corona del Mar for corporate consulting work, nearly $23,000 to Snowden Electric Co. in Buena Park for electrical installation services and nearly $4,500 to Single Source in Rancho Santa Margarita for corporate furnishings, according to court documents.

Pixelon burst onto the Internet scene last fall. Celebrating its launch, company founder Michael Adam Fenne used $10 million of the $23 million he had raised from investors to throw a lavish party in Las Vegas hosted by comedian David Spade. It featured 10 performers, including the Who, Natalie Cole and Tony Bennett.

Last month, authorities in Virginia announced that Fenne's real name was David Kim Stanley, a convicted felon who had bilked people out of hundreds of thousands of dollars and then failed to appear in court. He had been on Virginia's most-wanted list for three years. Stanley surrendered to Virginia state police in April and is being held in a jail in Wise, Va.

The bankruptcy petition is only part of Pixelon's ongoing legal battles.

Outraged by the excess, the company's board of directors last November ousted Stanley and several other employees. Among them was Simone Sheffield, a company employee whom Pixelon had hired to organize the party and book the acts for the concert.

Sheffield, via a collection agency, subsequently filed a lawsuit in March against Pixelon in Orange County Superior Court in Santa Ana.

According to the complaint, friends approached Sheffield last year and told her about an Internet company that had "millions of dollars to spend, but had no idea how to spend them properly." Stanley later hired Sheffield to organize the iBash, as it was dubbed, along with other duties.

Sheffield's attorneys have declined to comment.

When previously contacted about Sheffield's complaint, Paul Ward, the current chief executive of Pixelon, denied that either the company or its board of directors had done anything wrong.

"The board disavowed her contract and she knew it," Ward said.

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