Focus Media Execs Indicted Over Sears

CHICAGO Five years after Sears Roebuck and Co. and Focus Media feuded in civil court about the payment of media bills, two of the company’s former top executives have been charged with stealing $23 million from the retailer, according to an indictment filed by the U.S. Attorney’s Office in Los Angeles.

Thomas Edward Rubin, 57, and Thomas Patrick Sullivan,63, are charged with conspiracy, mail fraud and wire fraud, according to the indictment. Rubin and Sullivan were chairman and chief financial officer, respectively, of the independent Santa Monica, Calif., media company, which went into bankruptcy in 2000.

Sullivan and Rubin were arrested on June 2, according to the U.S. Attorney’s office. Rubin was released Tuesday on a $2 million bond. Sullivan had been released the previous week on a $250,000 bond.

They were arraigned earlier this week, and both pleaded not guilty.

The trial is scheduled for July 12. A status hearing is scheduled for June 27 in federal court in downtown Los Angeles.

The indictment alleges that Rubin and Sullivan received $35 million from Sears to pay for advertisements placed by Focus in 1999 and 2000. The pair, however, used $23 million of that money for their own purposes, according to the indictment.

Sears representatives declined to comment on the issue. Bruce Margolin, Sullivan’s attorney, said his client denies all allegations.

David Lafaille, Rubin’s attorney, said, “This seems to be a terrible mistake. The U.S. attorney for the Central District of California alleges causes of action virtually identical to those previously pled by Sears and NBC. Those civil cases were dismissed. I expect a similar favorable outcome here. We have complete faith in our judicial system and know that any fair- minded judge or jury will exonerate him.”

It was Sears’ missed media payments that eventually forced Focus Media out of business, as NBC, ABC and PaxTV filed to move the company into involuntary bankruptcy over unpaid media bills owed by Focus [Adweek, Oct. 16, 2000].

Sears had fired the agency and filed suit alleging breach of contract and constructive fraud, claiming the media shop was holding onto as much as $50 million Sears had given it to purchase media.

Sears, which is now part of Sears Holdings Corp., spends $680 million on advertising annually, according to Nielsen Monitor-Plus.