‘Stargate’ video game fraud case heads to court

The battle for control of the starship Destiny continues in the second season of Stargate Universe, which began Tuesday night on Syfy. Meanwhile, here on Earth, a different sort of conflict is about to rage in a courtroom over the destiny of another part of the vast Stargate universe.

Depositions have been under way in a multimillion-dollar fraud complaint brought by investors in a bankrupt Mesa video game studio against the companies that formed in the wake of its collapse to maintain the online combat game Stargate Resistance.

Evidentiary hearings are set to begin Wednesday in Maricopa County Superior Court in Phoenix. Dark Comet Games and Fresh Start Studios are accused of raiding the assets of Cheyenne Mountain Entertainment without the approval of a bankruptcy judge. Shareholders also say Fresh Start paid only $100,000 for all of Cheyenne Mountain’s assets — a fraction of 1 percent of their alleged worth — after tens of millions of dollars were spent to develop a game that has still never seen the light of day.

Lost Worlds

MGM Studios granted Cheyenne Mountain a lucrative license in 2006 to develop video games based on the popular Stargate movie and television franchise, which follows the adventures of U.S. Air Force officers who explore the galaxy through ancient alien portals called Stargates. But, as time wore on, the promised online roleplaying game Stargate Worlds fell further behind. It’s a tangled tale involving leadership disputes, unpaid employees, a sponsored race car driven by former Malcolm in the Middle star Frankie Muniz (pictured) and, at one point, even a multi-level marketing scheme.

Stargate Resistance, a third-person shooter, was rushed to market in lieu of Stargate Worlds in February, barely a week before Cheyenne Mountain sought Chapter 11 bankruptcy protection. In a marketplace obsessed with first-person-perspective combat simulations, it was met with tepid to average reviews from gamers.

Around the same time, the company — named after the Cold War command center in Colorado that is home to the fictional Stargate — announced it had fired its chairman and chief executive officer, Gary Whiting, and accused him of wrongdoing against the company. Whiting and Cheyenne Mountain are both involved in litigation in Utah courts as well.

Then, in May, Dark Comet Games and Fresh Start Studios came forward purportedly under contract from FireSky, a Cheyenne Mountain subsidiary, to assume maintenance of the recently launched Stargate Resistance. The company, describing itself as comprising much of the original Stargate Worlds team, promised to keep the online combat game operational and even add to it with software expansions. The company recently announced a “collectors value edition” of the game that offers includes three expansion packs all for $29.95.

The players

Defendants in the Arizona action filed on behalf of Cheyenne Mountain by shareholders also include Karl Hiatt (pictured), a Mesa plastic surgeon specializing in breast augmentation and liposuction, and his wife. Hiatt is described in the complaint as a principal and manager of both Dark Comet and Fresh Start. Also named as defendants: the companies’ studio head/creative manager Harlan Brown of Gilbert and Apache Junction; principal/manager Chris Lombardo of Eagle, Idaho; and principal/manager Mark Renberg of Meridian, Idaho, and Gilbert.

The plaintiffs, alleging breach of contract, civil conspiracy, fraudulent transfer, “tortious interference” and unjust enrichment, want the transfer declared fraudulent and all assets returned, plus $10 million in damages. With legal fees, this could add up to hundreds of millions of dollars.

Dark Comet and the plantiff investors have also wrangled over requests the company made to Cheyenne Mountain’s court-appointed receiver for funds to pay utility bills and to keep Stargate Resistance and related websites online.

Ira Gagon, a part-time Arizona resident who describes himself as one of more than 800 investors who have put more than $50 million into the company over nearly five years, says Cheyenne Mountain’s bankruptcy was intended to stop the transfer of assets to Dark Comet and Fresh Start.

“The plaintiffs of the lawsuit are helping CME to make sure justice prevails and we get our assets returned so we can complete Stargate Worlds MMORPG and all the others games, plus market Stargate Resistance, which CME produced,” he said.

In response to a request for comment, Dark Comet released a statement noting that litigation over the control of Cheyenne Mountain assets has been ongoing since February, and said it has cooperated with the court-appointed receiver to keep Resistance alive. Dark Comet dismissed the plaintiffs as a “small group of wealthy individuals claiming status as Cheyenne Mountain shareholders” who, when denied the opportunity to take control of the company, hired large law firms in Arizona and Missouri to seek a broad range of injunctive relief.

“Maricopa County Superior Court Judge Sam Myers denied each and every one of those requests,” the company said. “The group has decided to nonetheless continue with its lawsuit against Dark Comet. Dark Comet intends to vigorously defend.”

Game over?

According to the complaint, the transfer of assets was orchestrated by former Cheyenne Mountain president Tim Jenson (pictured), but the physical removal of items on Feb. 24 was prevented by police who had been called to the office. The complaint was later amended to add Jenson and his wife as defendants. It says he tried to negotiate a transfer and sale of Cheyenne Mountain assets to Fresh Start and Dark Comet without court approval and even though he had been fired on Feb. 11.

While chief financial officer of California software firm Merisel in 2008, Jenson was accused by the Securities and Exchange Commission of secretly orchestrating the sale of assets to another entity in his control, resulting in a judgment he agreed to that barred him from serving as officer or director of a public company and ordering him to pay $275,000 in civil fines.

Gagon said Cheyenne Mountain’s signature project, Stargate Worlds, was actually two months away from completion two years ago, but was stalled by Jenson. He said there were other titles far along in the development process, including a Western adventure game and a racing simulation.

Only Stargate Resistance has ever made it to market.

“We have all the money we need to finish Stargate Worlds, ” Gagon said. “Resistance to us is almost like a bump in the road.” He added: “We are going to still market it and give it the necessary promoting and improvement.”

According to Gagon, many of the original investors are lining up to see the original project through, with the backing of Texas oilman David Roberts and Sacramento Kings center Samuel Dalembert (pictured) — both of whom are listed as having joined the action against Dark Comet.

But with debt-burdened MGM facing possible bankruptcy or sale and effectively ending production of its direct-to-DVD Stargate movies — even halting its legendary James Bond film franchise — Stargate Worlds may have missed its launch window.