Ebony Magazine’s Creditors Duel Mystery Businessman Over Assets

(Bloomberg) -- Ebony magazine, once one of the most influential Black-owned media brands, has championed luminaries like Diana Ross, Beyonce Knowles and Barack Obama. Its photo archive is now housed at institutions including the Smithsonian’s National Museum of African American History and Culture.

Now 75 years old, the magazine is a shell of its former self. It hasn’t published a print edition since spring 2019, and weeks after its CEO was ousted following an internal review, creditors filed an involuntary bankruptcy petition with the goal to “maximize the value of Ebony’s assets,” the company said in a July 31 statement.

Put plainly, they want Ebony liquidated, and the publisher has asked for one more week to respond. The two sides asked the judge on Friday to extend the deadline until Aug. 21 so they can continue discussions about its fate.

As things stand, a U.S. bankruptcy judge will have to untangle a series of convoluted dealings that involve a deposed executive, a businessman linked to a fraud case, and a creditor who sits on the board of the company his firm is trying to liquidate. Hanging over it all is a public back-and-forth over who actually owns Ebony and who has the power to shape the once vaunted publication’s future.

The bankruptcy petition, filed by Parkview Capital Credit and two other creditors, alleges that Ebony Media Holdings LLC owes Parkview almost $11.9 million. Parkview had extended loans to CVG Group LLC to buy Ebony in 2016, according to another company statement.

‘Unauthorized Transactions’

A CVG partner, Willard Jackson, had been installed as chief executive at Ebony. But in April, Parkview’s portfolio was taken over by Blueprint Capital Advisors, a Black-owned asset manager that installed its co-founder Jacob Walthour Jr. on Ebony’s board. An independent inquiry was organized to look into Jackson, according to a July 5 statement from Ebony.

The inquiry, which also looked into Jackson’s involvement with a businessman named Robert Shumake, found “unauthorized transactions, conflicts of interest, undisclosed corporate entities and bank accounts, and his involvement in multiple crowdfund deals with Mr. Shumake in a scheme to defraud investors and fund Ebony capital expenditures,” according to an Aug. 1 letter to Blueprint shareholders that was obtained by Bloomberg News.

Jackson was removed from his post at Ebony in early July and Walthour assumed the chairman role, Ebony said. Jackson didn’t respond to requests for comment.

However Blueprint wasn’t in a position to make any changes to the board, according to another group called Ebony Capital Partners LLC, owned by Jackson, Shumake and a CVG partner, Michael Gibson, according to a declaration from Shumake that was filed to the bankruptcy court on July 28. Ebony Capital filed an emergency motion to dismiss the bankruptcy petition, saying that CVG turned over a “majority in interest” in Ebony Media to Ebony Capital Partners in 2019. An agreement dated Aug. 22, 2019, was attached to the filing.

Statements purportedly from Ebony began appearing on the PR Newswire website with allegations that Walthour had engaged in insider trading by discussing Ebony operations in the press. Walthour denied the allegations in the letter to shareholders, calling them “patently false” and Ebony issued a statement saying it’s “pursuing every legal avenue to end the misrepresentations.”

Ebony Capital Partners

At least one release is no longer available on PR Newswire.

Walthour told the Wall Street Journal last month that the board wasn’t informed of the deal with Ebony Capital Partners and suspects the transfer documents are fraudulent. Blueprint declined to comment to Bloomberg News.

Ebony Capital Partners said in a court filing that it and no other party had the legal authority to remove individuals from the board, and that the removal of Jackson was therefore unauthorized. Daniel Avila II, a lawyer for Ebony Capital Partners, said in a phone interview the asset transfer was legitimate. CVG and Gibson didn’t respond to multiple requests for comment and calls to a number listed on its website didn’t connect. Shumake had no immediate comment.

Shumake pleaded guilty in 2017 to two misdemeanors related to mortgage fraud, and has been involved in a civil forfeiture case involving approximately $252,000 seized by the federal government. “Law enforcement has identified numerous state criminal cases and news stories involving Shumake and/or an apparent alias of Shumake,” prosecutors wrote in a Dec. 3, 2018, court filing in the case.

Avila declined to comment on the PR Newswire releases and other cases involving Shumake.

On Aug. 5, a day before an emergency hearing on the motion to dismiss was scheduled to be held, the motion was withdrawn. Ebony Capital Partners intends to file an amended motion this week to reflect new information and claims, Avila said.

The current state of affairs is a far cry from the prominence and prestige once linked to the Ebony name. But the brand has been flagging for some time.

Founded in 1945 by John H. Johnson, Ebony would eventually rise to become an important part of Black history alongside its sister publication, Jet. CVG Group purchased both brands from Johnson Publishing Company in 2016 and Johnson went bankrupt three years later.

In a statement following the announcement that Ebony and Jet’s photo archive would be donated, the Smithsonian said it represented “a coda to the story of a company of great significance to the African American community.”

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