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MONDAY, JUNE 30, 2008

The Rage Offstage at MarvelBy BILL ALPERT

Lawsuits raise questions about Marvel Entertainment's title to its billion-

dollar character franchises, which include The Incredible Hulk. (Video)

THE COMIC BOOK'S SPLASH page would show a close-up of Peter F. Paul brooding about MarvelEntertainment, its creative force Stan Lee and the Clintons. The next panel would reveal the electronic anklebracelet that's kept Paul under house arrest for three years.

"I was set-up as the fall guy," Paul tells a reporter by phone. "But ifthe legal process works as it should...I will be vindicated."Lawsuits against Marvel, Lee and Bill and Hillary are pressing Paul'sclaims that a dot-com he started with Stan Lee in 1998 was undone bthe actions of the former president, short-sellers and Stan Lee himselIn a Manhattan federal district court, some of Paul's associates arguethat the bankrupt dot-com, Stan Lee Media, still owns rights to Marvcharacters like Spider-Man and The X-Men. On behalf of the formerdot-com, they want half the profits that Marvel (ticker: MVL) is pilinup, now that it's producing its own films like the smash hitIron Manand the just-opened The Incredible Hulk.The Clintons, Marvel and 85-year-old Stan Lee all vehemently rejectPaul's claims and duly note his many felony convictions. He's got theelectronic bracelet because he's awaiting sentencing for hismanipulation of shares of Stan Lee Media. Paul's criminal recordopens the door to impeachment of anything he alleges. But that

doesn't mean he's wrong about everything. The securities filings for Marvel and Stan Lee Media containseemingly contradictory assignments by Stan Lee of his rights in the superhero characters he helped create ithe 1960s. And Lee's assertions in a 2002 lawsuit against Marvel don't appear to track with what he saysnow.So even if the folks pressing Peter Paul's claims aren't likely to win half ofMarvel's profits, they've raised factual questions about Marvel's title to itsbillion-dollar character franchises.Marvel's profits are worth brawling over. The New York company's stocktrades for $33, after its earnings more than doubled last year to $140million, or $1.70 a share, on revenues of $486 million. Since 2000, 13PG-13-rated films based on Marvel characters have averaged more than$400 million in sales. This is the first year the company will produce itsfilms, taking all profits, not just license fees.Marvel's made a huge comeback since its bankruptcy in the late '90s, afteryears of poor performance under financier Ronald Perelman. In 1998, thenew controlling shareholder Isaac Perlmutter used bankruptcy procedures to reject Marvel's $1 million-a-yelifetime-employment contract with Lee. That voided Lee's exclusive assignment to Marvel of his rights incharacters like Spider-Man.

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Rhythm & Hues/2008 UniversalStudios and Marvel Studios viaBloomberg News

The Incredible Hulkwill bulk upMarvel's revenues. But who ownshim?

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IT ALSO FREED HIM TO start a new company with his friend Peter Paul, which they called Stan LeeMedia. Paul put in $500,000, while Lee assigned the company all his intellectual property. Calling itself anInternet animation studio, the dot-com rode the bubble market.Flush with success, Paul underwrote a gala Hollywood fundraiser in August 2000 for Hillary Clinton's U.S.Senate campaign. He had begun negotiating with representatives of Bill Clinton for the departing president become Stan Lee Media's ambassador of goodwill.

Just days later, newspapers reported that Paul had served time on twfelony convictions: the first, for taking millions of dollars from theCuban government for a shipment of coffee he never delivered; thesecond, for cocaine possession. The Clintons cut themselves off fromPaul.Paul had been manipulating the stock since 1999, and now tried tokeep the shares and company afloat -- covering payroll withborrowings from his margin account. After the Securities andExchange Commission began reviewing his stock dealings, Paul fle

to Brazil. Arrested there, he had to await extradition in a prison he says was like a dungeon.

Stan Lee Media sought bankruptcy protection in 2001. In2002, Stan Lee sued Marvel Entertainment on a previouslundisclosed contract. It turned out that in November 1998-- a month after assigning his intellectual property to StanLee Media -- Lee had gone to Marvel claiming half-ownership of Spider-Man, the X-Men and other charactersince Marvel had cancelled his previous rights assignmenin its bankruptcy. Lee got a new contract for up to $1

million in annual salary and 10% of movie and TV profits, assigning Marvel his rights in those characters.So, come 2002, Spider-Man: The Movie had grossed more than $1 billion and Lee invoked that contract andsued. Their 2005 settlement was sealed, but Marvel later reported a $10 million charge for it.Peter Paul,meanwhile, had been extradited back to the U.S. where he pled guilty in March, 2005 for his Stan Lee Medistock manipulation. Since then he's sued the Clintons in California for scaring off a potential investor in StaLee Media. He's also aided the group that's trying to assert Stan Lee Media's claims to Stan Lee's creations.Working with him is investor Jim Nesfield, a one-time Wall Streeter who was the star informant for EliotSpitzer when the former New York Attorney General sued mutual funds for allowing "late trading" by hedgfunds.

Nesfield approached Marvel and was rebuffed when he asserted claims to Stan Lee's creations. He then filedan unusual 13-D with the SEC, detailing what he said were Marvel and Stan Lee's wrongdoings.

So Lee himself complained to a Colorado state court judge about what he called a hijacking of Stan LeeMedia. Lee wrote other shareholders, saying that Peter Paul was behind Nesfield's group and blaming Paulfor the company's earlier bankruptcy. A large block of shares was still held by entities that Paul had admitteusing in his 1999-2000 manipulations. But since 2003, Paul says, all thatstock belonged to Christopher C. Belland, a Key West, Fla., realtor andtour operator who posted bond for Paul. In May, the Colorado judgeruled that Nesfield's group could run Stan Lee Media.

In a statement toBarron's, Marvel says Nesfield's group will recovernothing. Lee's agreement with Stan Lee Media never mentioned anyMarvel characters, Marvel says. What's more, it says, Stan Lee'scharacter creations were "works-for-hire" and have always belonged toMarvel. Lee has made public statements concurring with the "work-for-hire" characterization. But those statements seem at odds with hisMarvel contracts and his 2002 lawsuit. Stan Lee didn't respond to

The Bottom Line:

Marvel shares have been on a tear inrecent months, due to excitementaboutIron Man. But a bitter legalfight over ownership may dog theshares.

A group of investors claim their company ownssome of the rights to Marvel Entertainment'scharacters created by Stan Lee, reports Barron'sBill Alpert. (June 30)

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inquiries fromBarron's (nor did an attorney for the Clintons).

Stan Lee's onetime friend and now nemesis Peter Paul insists that he stands to get nothing from the disputeexcept vindication. "The reason that these people thought they could get away with this fraud," says Paul,"was that I was detained in Brazil under conditions arranged by Bill Clinton."

Now it's up to the courts to decide who's the superhero, and who is the villain.