GGW LLC and its affiliates (“GGW”), which produce and distribute the soft core pornography videos known as “Girls Gone Wild”, recently filed for relief under chapter 11 of the Bankruptcy Code. The filing follows years of legal troubles for the company’s founder, Joe Francis, including criminal charges of racketeering and tax evasion, and civil litigation against Steve Wynn’s Mirage Resorts Casinos stemming from gambling debts owed by Francis. The bankruptcy filing of GGW was evidently precipitated by a slander judgment of $19 million obtained by Wynn against Francis.
The prurient nature of GGW’s business model aside, the case actually provides a cautionary tale for entrepreneurs who seek bankruptcy protection under chapter 11 in order to try to maintain control of the businesses that they have founded. Such owners are often ill-suited for the so-called “fishbowl” of chapter 11; they tend to ignore the advice they are given (or are unable to comprehend) that the filing of a petition for relief under chapter 11 both creates a distinct bankruptcy estate, and imposes substantial fiduciary obligations on company officers and directors to such estate and its creditors.