The legal battle between the former president of Gizmo! LLC. and its owner heated up again last week as Gizmo!’s owner went on the attack.
Gizmo! owner Peter Bieler filed a countersuit on Nov. 12 against Lynn Cartwright, Gizmo!’s former president and chief operating officer, for slander in Los Angeles Superior Court.
Bieler’s suit is in reaction to an amended lawsuit filed by Cartwright on Oct. 14 that accused him and his companies of fraud, breach of contract, negligent misrepresentation, wrongful discharge and unpaid wages.
Cartwright seeks damages of at least $461,200 for lost pay and other costs associated with her employment at Gizmo!. She claimed she suffered damage to her reputation for being forced to work in a fraudulent environment and should be awarded a minimum of $250,000 for emotional distress.
Bieler denied the allegations and said Cartwright’s allegations are an attempt to publicly humiliate him and force him into a settlement.
“She’s trying to deflect attention from her own shortcomings,” Bieler said. His lawsuit alleges, “Cartwright is making these slanderous statements in a malicious and desperate attempt to extort from Bieler and Gizmo! LLC. a settlement of Cartwright’s baseless employment-related claims. Cartwright’s strategy of spreading untruths … is nothing less than an attempt at extortion, with Bieler’s reputation as a hostage.”
Bieler is CEO and owner of several companies, including Gizmo!, GZM LLC. and Media Funding Corp. He founded Gizmo! in 1997 after scoring a huge infomercial hit with the ThighMaster Exerciser and celebrity Suzanne Somers.
Cartwright previously worked for Kent & Spiegel Direct Inc., Culver City, CA, an infomercial marketing company that filed for bankruptcy May 20, 1998. Cartwright continued to work for Kent & Spiegel for several months after the bankruptcy petition was filed. Cartwright claims she earned $185,000 a year working at the bankrupt company and took a $45,000 a year pay cut to join Gizmo!.
Bieler said he hired Cartwright after searching for a president for Gizmo! to run the business so that he could devote his time to other investments. Cartwright joined the company in October last year after accepting an offer for $11,650 a month during the first three months of her employment, which would be raised to $13,370 a month after that, according to Cartwright’s lawsuit. Bieler also indicated in an offering letter that he would consider giving her ownership in the company at a later date.
Cartwright’s lawsuit claims she was wrongfully discharged on April 21 after she did not comply with Bieler’s orders to break the law and “to lie to potential clients about Gizmo!’s financial status and ability to bring to market new products.”
“This allegation is untrue, unfounded, libelous and slanderous,” Bieler. “She resigned without notice by letter after she didn’t turn up for work for a couple days.”
He also said Cartwright was paid in full, although a check for accrued vacation was delayed for several months because she had not returned a company-owned computer that was in her possession. He said she was paid about $5,000 earlier this month after she returned the computer.
Bieler also dismissed Cartwright’s allegation that he misrepresented the financial health of the company to her, investors and clients, including several inventors and infomercial marketers. Cartwright alleged that “such fraud influenced clients to use Gizmo! to produce infomercials, when in fact Gizmo!'s undercapitalization meant that the clients were taking on the risk of never having their products reach market.”
Bieler denied the allegation and said Cartwright was given access to the company’s financial records before she was hired.
“The company was in good financial shape when she came on board, not only according to her, but also to an outside firm of consultants,” he said. “It was a fast-growing company that needed successful products to keep growing and stay healthy. She was extremely optimistic that she was going to make products that were successful. Now, she’s changed her story because she had three shows that didn’t work.”
Cartwright alleged that Bieler “fraudulently moved Gizmo!'s assets to GZM in February and April 1999 to thwart Gizmo!'s creditors.”
Bieler denied the allegation and said the transfer of assets between Gizmo! and GZM was part of a corporate reorganization plan and was done under Cartwright’s supervision. He said GZM was formed because one of the investors in Gizmo! was not able to invest more money in the company, which had several campaigns that required more money to be completed. GZM was assigned two infomercial projects in exchange for a “substantial amount of unrelated Gizmo! debt,” Bieler said.
“Any transfer was part of a legitimate corporate reorganization,” Bieler said. “The transfer was done by her, with the support of the company attorneys.” He said the two GZM infomercials were not successful and his investment in the company resulted in a loss.
Bieler also denied Cartwright’s allegation that Gizmo! charged the credit cards of 15,000 consumers and never shipped them products, including the Kitchen Kwik device and the Smart Gym.
“Everybody received a product, or if they asked for it, received a refund,” Bieler said. “No customers were defrauded. All refunds and chargebacks were paid.” He attributed shipping delays to the late delivery of inventory from a contract manufacturer that was under Cartwright’s supervision.
Michael Wolf, attorney for Gizmo!, said the company has not received any complaints as a result of either product. He said the next stage in the lawsuit are hearings on demurrers, a legal term to describe a plea for the dismissal of a lawsuit. The next hearing on a demurrer is scheduled for next month.
Meanwhile, Gizmo! and GZM still exist as legal entities, but are not actively marketing or developing new infomercials, Bieler said.
