The Source co-owners
David Mays and Ray “Benzino” Scott obtained a temporary restraining
order against The Source Entertainment Inc.'s board of directors yesterday (Jan.
12), in an attempt to stop The Board from ousting them from the company.
Mays and Scott
were given 48 hours to appear at a special meeting called yesterday by The Source
Entertainment Inc., the parent company of The Source magazine.
The Board is attempting to boot Mays and Scott from the company, claiming their
involvement in the company hurts “not only the employees of The Source,
but all of its investors, vendors, subscribers and readers.”
“The Board unanimously concluded that various acts of mismanagement and
breaches of fiduciary duties to the Company by both David Mays and Raymond Scott,
who head the company, were in violation of their employment contract, and that
cause existed for their termination,” The Board said in a statement released
Mays and Scott however, obtained a temporary restraining order against the
Board of Directors. "They can want to do that all they want, but it's not
happening," Mays told The New York Post.
The magazine defaulted on an $18 million loan from Textron Financial Partners
last year. Textron filed a lawsuit in Oct. of 2005, asking The Source to be
placed into receivership.
The Black Enterprise/Greenwich Street Corporate Growth Partners L.P. is a $91
million private equity investment fund created in 1997 to finance the growth
of established minority-owned, managed, or targeted businesses.
Black Enterprise invested an initial $12 million dollars in The Source in return
for a minority stake and seats on the board of directors.
In order to qualify for the fund, businesses must have at least $10 million
in annual revenue.
“To date, the once highly profitable publication has been sued by its
primary lender, Textron Financial Corporation of Providence, R.I., for failure
to meet ongoing financial obligations, have been evicted from their offices,
and owe $9-12 million to various vendors,” the Board of Directors continued.
“The Board decided this was the only feasible course of action as Mays
and Scott could not continue their series of financial recklessness and negligence
that, in the end, hurts not only the employees of The Source, but all of its
investors, vendors, subscribers and readers.”
The Board is attempting to
permanently implement internal management changes, which “will restore
The Source to greater profitability while allowing the publication to regain
the prominence it once enjoyed within the industry and by its readers.”