Paul Carlucci, who runs the News America Marketing product-promotions business for Rupert Murdoch's News Corp., reportedly likes to quote lines from "The Godfather" and intimidate smaller competitors, including Brooklyn Park-based Insignia Systems.
But it was Carlucci who had his nose bloodied recently.
A Michigan judge awarded Valassis Communications, a newspaper coupon company and Insignia business partner, $300 million in damages in an antitrust lawsuit it filed in state court against News Corp. And earlier this year, Floor Graphics, another smaller competitor, said it won a favorable, confidential settlement from News America several days into trial concerning a lawsuit that it brought alleging fraudulent tactics.
These companies, of which News America is the largest, compete in the apparently hard-edged trade of peddling newspaper advertising inserts, in-store promotions and related businesses. They have been fighting it out in court as well as in the marketplace for years.
"This bodes well for us," said Scott Drill, CEO of Insignia Systems, which develops and markets in-store advertising products and programs. "A lot of the evidence in those cases is identical. We allege that News America has engaged in widespread, illegal conduct for years: false advertising and falsely disseminating information about Insignia and the percentage of our signs that were being put up on shelves. The message was: 'Why would you do business with a company that's not executing?' That's false."
Drill said that Carlucci has played a scene from "The Untouchables" at sales meetings "where Al Capone beats somebody with a baseball bat. ... They monopolize the market through the use of exclusive contracts that foreclose prospective competitors and whatever means they can to destroy competition. Illegal conduct. That's my opinion. We sued them in 2003 and they sued me for slander and libel back in 2006. This verdict in Michigan vindicates me."
Laura Richards, a vice president of News America Marketing, said in a written response to questions that the company could not discuss trade litigation.
However, she did respond to Carlucci's reputation as a tough guy.
"Depicting an Italian-American CEO from New York in this way makes for good courtroom theater, but these stories are either incorrect or exaggerated," Richards said. "While a number of movie clips were shown at a News America sales conference, the purpose was not to demonstrate a business model, but rather to offer a light moment to employees during a training session. While Mr. Carlucci does enjoy those movies, his presentation also included scenes from 'Mary Poppins' and one with Fred Astaire dancing. He would not show a movie clip depicting any type of violence to his employees, for whom he has the utmost respect for their intelligence, honesty and exceptional work ethic."
Got that, Don Corleone?
Stock price takes big jump
Valassis shares have nearly doubled since July 15, to almost $13 per share on the strength of a positive earnings statement and the Michigan court award. The jury in the Wayne County Circuit Court in Michigan found News America Marketing liable of "tortious interference" with Valassis and unfair competition. News America Marketing said that it would appeal the decision.
Chris Mixon, a News America executive, said in a statement after the verdict was delivered last month: "We are disappointed with today's decision, which rewards a company that turned to litigation as its business strategy rather than compete."
Insignia, meanwhile, earned $1.4 million, or 9 cents per share, during the first half of 2009, on lower revenue of $12 million. An improved bottom line was affected by one-time charges and lower legal costs in 2009. Drill said that Insignia's business is up in the third quarter. The stock hit a 52-week high Monday of $3.39.
And Insignia's vendetta with News America isn't over yet. The company is awaiting a decision by U.S. District Judge John Tunheim concerning dueling motions filed in May over the dismissal of Insignia's 2003 lawsuit against News America.
Neal St. Anthony • 612-673-7144 • firstname.lastname@example.org