Synergy sues to get Gay Games license back

Court papers reveal disputes since spring

by Eric Resnick

Cleveland--The organization once licensed to hold the 2014 Gay Games has sued to try to get the license back and prevent a new group from being formed and given the license. They also want at least $25,000.

The Cleveland Synergy Foundation led the effort to bring the Games to northeast Ohio, and the Federation of Gay Games selected Cleveland last September. But the federation ended the license agreement it had with Synergy two months ago.

The federation has assured area leaders that the 2014 Games will remain in Cleveland and Akron.

Boston and Washington, D.C. were also in the running last year, and the license dispute has produced a new effort by some in those cities to get the Games moved.

If the suit is successful, or if the litigation drags on, Synergy could prevent the formation of a new non-profit organization to pick up the license they lost.

The federation has given a group of local partners until the end of the year to form a new group to sponsor the Games here. These partners include the cities of Cleveland and Akron, Positively Cleveland, the Akron Summit Convention and Visitors Bureau, the Greater Cleveland Sports Commission and members of the local LGBT community.

Synergy�s suit was filed in Cuyahoga County Common Pleas Court on September 2. It is before Judge Michael Russo.

They are suing the federation, the city of Cleveland, the sports commission and Mayor Frank Jackson�s governmental affairs director, Valarie McCall.

The suit says the defendants �have maliciously agreed, conspired, and colluded for the purposes of . . . breach[ing] of the license agreement.�

�The FGG had a monetary incentive to engage in the conspiracy in order to avoid the terms and conditions of the license agreement which capped the amount of money the FGG could receive from the 2014 Gay Games IX for sponsorships and registration fees and put Synergy in control of the revenue from the 2014 Gay Games,� the complaint continues.

�The City of Cleveland and GCSC also had a monetary incentive to engage in the conspiracy in order to reap the benefits of the significant financial benefits associated with the 2014 Gay Games.�

The complaint says, �The malicious combination is demonstrated by the improper communications by and between representatives of the FGG, the City of Cleveland and the GCSC for the purpose of inducing the breach of said contracts and the tortious interference with said contracts.�

Other cities press to get the Games

A campaign by bloggers upset that Washington, D.C. and Boston were passed over continues, partly because unauthorized people within the federation are feeding them information that is not true, said FGG spokesperson Kelly Stevens.

The bloggers and others quoting them insist that the Games will go to Washington, the runner-up city, if Cleveland fails.

�They want to put the genie back in the bottle, and it�s not going to happen,� said Stevens a week before the suit was filed.

�This is very wishful thinking by another city, but it�s very unfortunate,� Stevens said. �It does not show support for the Games.�

Stevens said �there was much support for Cleveland and finger-wagging at Washington� at the federation�s annual meeting in Cologne.

When pressed, Stevens said that if the new Cleveland group fails, �there�s always a possibility� the federation will talk to another city--as was the case four years ago when the Montr�al Games were moved to Chicago--�but to wave that out there is horrible.�

In their complaint, however, Synergy claims that it is �critical to the retention of the 2014 Gay Games in the cities of Cleveland and Akron� that they keep the license, since �failure to honor the license agreement requires the award of the 2014 Gay Games to . . . the second place bidder. If the second place bid organization declines to run the 2014 Gay Games, the request for proposal would require the Games be awarded to the third place bidder.�

Based on those blog reports, Synergy claims, �Upon information and belief, FGG has already made inquiry whether the unsuccessful bid organizations from Washington, D.C. and Boston would accept the Games and host these Games in their city.�

Synergy still claims to be licensed

In the stating of the case, however, Synergy acknowledges that the federation revoked their license July 6, though they reject and contest it.

�When the members of Synergy arrived for the [July 6] meeting at City Hall . . . the Synergy members were confronted by one of the co-presidents of the FGG and the FGG�s attorney who had handed Synergy a letter purporting to terminate the license agreement,� the complaint says.

�Approximately one hour before the Cologne closing ceremonies were set to begin on August 7, 2010, Kurt Dahl, one of the co-presidents of the FGG, advised Synergy that the FGG would not recognize the validity of the license agreement and that Synergy would not be permitted to participate in the Cologne closing ceremonies and/or receive the flag at the ceremonies,� the complaint also says.

This did not stop Synergy from claiming they are �the organization licensed to produce the 2014 Gay Games,� in numerous public statements and fundraising solicitations, and for a �Pepsi Refresh Everything� contest.

On August 24, Synergy director Brian Tavolier posted on Facebook: �We are back . . . as the official licensed host of the 2014 Gay Games!! . . . And we�re not backing down!�

Synergy officials stopped talking to the Gay People�s Chronicle in July, but were asked by email to explain this claim each time Synergy made it. Synergy always ignored the reporter.

On August 30, federation attorney James Aronoff sent Synergy�s attorney Scott Simpkins a letter saying �the FGG remains seriously concerned with CSF�s continuing to act as if the license agreement were still in effect, and CSF holding itself out as the current licensee and �host� organization when, in fact, it no longer has the legal or contractual right to do so.�

The letter continues, �any rights that CSF may have had under the license agreement effectively terminated on July 6, 2010. This means that any representation by CSF that it remains the host of the 2014 Games is factually incorrect and misleading . . .�

The letter also calls for Synergy to cease use of the Gay Games logo, trademarks and branding elements.

Money is an issue

The complaint, which is lengthy and contains a lot of uncontested historical information, does confirm what emerging documents are starting to suggest.

The Gay People�s Chronicle has obtained over 1,000 pages of documents and records which are being sorted and analyzed.

Coming into clearer focus, between the documents and the complaint, is that the relationship between Synergy and FGG started to sour in the early spring, around April, and that the issues involve finances and reporting.

The FGG also appears to be concerned that Synergy is not raising enough money, and running large deficits. The city is concerned that Synergy is not accounting for all the money it granted.

The city of Cleveland, through the sports commission, gave Synergy $700,000 to bring the Games to town.

The federation gave Synergy a $50,000 line of credit to start off, which they now want returned.

In the complaint, Synergy says the federation�s actions, and the hiring of a new accountant, caused their late reporting.

�FGG�s steering committee never provided a template and/or guidelines for the Games budget,� Synergy says to explain why the performance plan was submitted late.

Synergy said in an e-mail, �We have not received a template, matrix, chart or spreadsheet for the development of the performance plan from the FGG. To that end, we are requesting upon receipt of that template, that is required to be implemented by the FGG per the licensing agreement, an extension of 120 days.�

�Five days later,� the complaint says, �Darl Schaaf, the appointed chair of the steering committee, responded by �strongly recommending� that Synergy complete the performance plan on the original schedule, notwithstanding the fact that the FGG had still not provided a template as required by the license agreement.�

Conflicts of interest?

Synergy also claims that the federation did not follow due process when terminating the license agreement.

The agreement is under seal, but some information about its contents are in the complaint. People with knowledge are also talking about parts of it.

Stevens said both the federation and Synergy had the right to terminate the agreement for any reason, and that attempted mediation with Synergy was not productive.

There was the appearance of conflict of interest among the parties from the beginning.

Jon Pinney was Synergy�s attorney; he was recommended by McCall. But he is also a Positively Cleveland vice president, and went to Cologne as part of the delegation to promote Cleveland and receive the flag.

Pinney had to stop representing Synergy.

McCall was on Synergy�s board of directors until her resignation on July 6. She is the Cleveland official most tied to the Games, and as such, had conflicting loyalties.

The counts against McCall in the complaint appear to be about her performance as a Synergy director, more than as a city official. McCall, also an attorney, was clearly trying to represent both sides of the conflict for a while.

�Despite the fact that Valarie McCall was a member of the Synergy board of directors, she did not return Synergy�s calls or email requests,� Synergy says.

�Valarie McCall�s failure to advise Synergy of the details of the requested �project report� and failure to even return phone calls on this subject breached a fiduciary duty which she and the city of Cleveland owed to Synergy.�

Though she denies it, McCall is apparently responsible for orchestrating the secrecy around events in early July, as word was getting out that something was wrong. She is speaking to press now.

McCall received the Gay Games flag in Cologne on behalf of the city.

�McCall, acting in her official capacity as an employee of the City of Cleveland and as a member of the Board, clandestinely negotiated with FGG to breach the License Agreement, and further conspired to replace Synergy with another, yet to be created organization,� the complaint alleges.

Which Synergy?

As early as March, federation officials began asking questions about Synergy�s structure.

While �Synergy� most often means the not-for-profit Cleveland Synergy Foundation, the former licensee of the Games, there is another �Synergy.� A for-profit, limited liability corporation was set up the same day as the non-profit, called Cleveland Synergy LLC.

Tavolier is the statutory agent of both. W. Doug Anderson is an incorporator of both. His partner, Jeff Axberg, is an incorporator of the Synergy Foundation only.

Such arrangements are common with hospitals to raise money for charity care, but with Anderson, Axberg and Tavolier running both entities, it is difficult to tell where one starts and the other stops.

As a limited liability corporation, the for-profit Cleveland Synergy is not transparent.

A third company also appeared on Synergy�s SynergyFest website called Synergy Travel, which uses the Synergy Foundation�s logo.

The website�s copyrights were owned by Synergy LLC in March, though the tag has been removed since.

It�s not clear what the relationship between the companies is, but it is clear from the documents that federation officials began to ask questions about it, sometimes to Cleveland officials.

More concern started when financial statements were submitted showing loans between the Synergy LLC and the Synergy Foundation.

Synergy Foundation, in March, received $122,500 from Synergy LLC, which were then booked as foundation liabilities.

Only the Synergy Foundation had access to the city money and the line of credit from the Federation of Gay Games.

Still, in June, Synergy Foundation booked $31,165.42 net losses.

Cleveland attorney Richard Haber represents Synergy.

The city is not answering questions about the group that is being formed to get the new Gay Games license.

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