CHAPTER 14
In January 1999, news of Stan Lee’s new Internet company Stan Lee Media Inc. (SLM) exploded across the Web. Journalists rushed to cover the story. An interview with Lee gave reporters a chance to hear about the start-up, as well as listen to the man himself spin yarns about the fabled creation of his Marvel superheroes. The marriage of the world’s most exciting storytelling channel and the world’s most interesting storyteller seemed to promise a surefire success.
Lee launched SLM with Peter F. Paul, an entrepreneurial Hollywood gadfly who had started a nonprofit foundation with legendary screen star Jimmy Stewart and led several high-profile fund-raising campaigns. SLM marketing documents called Paul a “new media producer,” touting his experience as founder of Digicon Entertainment, which created a Marilyn Monroe artificial intelligence/virtual reality animation for Sony.1 More recently, Paul had successfully boosted heartthrob Fabio’s career and displayed a keen knack for making friends with the rich and powerful, like President Bill Clinton and wife Hillary.
The rise of the Internet and its global significance provided Lee with yet another opportunity to show that he could master a new media form, even at seventy-six years old. “When Peter Paul suggested we start an Internet company, the only thing I really knew about the web was that it was going to be the biggest force for entertainment and communications that the world has ever known. So, naturally, I was excited about getting involved in it,” Lee explained.2 Paul estimated that Lee’s name alone accounted for about $30 million in brand value. SLM could not use the super-heroes that Lee created or cocreated, since Marvel owned the copyrights, but the old master could launch an entirely new superhero universe that the start-up venture would own outright.
The idea of showing Marvel and the world that he could unleash a rival super-hero collection fueled Lee, his competitive streak sparked by the recent woes Marvel had faced and the slights he felt in the battle over his lifetime contract, despite the “Chairman Emeritus” title Marvel bestowed on him. He chafed at the notion that after a lifetime of service he was little more than a figurehead.
Lee also felt hurt and angry that he had to grovel with new Marvel head Ike Perlmutter to renegotiate a new deal after he had been working under a lifetime contract that provided financial security and acknowledged his role in building the company. Lee found Perlmutter’s initial offer insulting, from a lifetime contract to a two-year deal at “exactly half what I had been earning.” Lee wondered whether the ghost of Martin Goodman may have been guiding the new Marvel leadership team.3
Ultimately, Marvel executives realized Lee’s value as spiritual head of comic books and couldn’t risk a public relations nightmare if the legendary figure went off to DC or another publisher. Attorney Arthur Lieberman negotiated the final deal that gave Lee a raise (to more than $800,000 annually for life) and $125,000 a year for the Spider-Man newspaper strip, but more importantly a $500,000 annual pension for Joanie and a 10 percent stake in future Marvel film and TV profits.4 The new contract also gave Lee an escape clause, essentially permitting him to work on any other projects he wanted, regardless of publisher or organization.
Now, with the launch of SLM, Lee could take a bit of a shot at Marvel, declaring that in contrast to his former outfit, SLM would produce online comic books and superheroes that were “edgy, high-concept, and surprising.”5 According to Lee, the new company would also partner with online production firms, create Web pages and virtual comic books, launch interactive games, and feature Web-based classes with the comic book legend for those who wanted to break into the business.
Stan Lee Media launched in early 1999 in a typically nondescript office building on Ventura Boulevard in Encino, California. Although on the outside the place looked just like all the other businesses in the sea of buildings twenty miles from Los Angeles, SLM issued glossy press kits in bright, almost garish colors, hyping Lee and his past successes as a way to draw in new investors and spring quickly toward a stock IPO, the route to riches that Internet companies had charted over the last several years. The press kit exclaimed that Lee had “exerted more influence over the comicbook industry than anyone in history” and that “more than 2 billion of his comicbooks have been published in 75 countries and in 25 languages.”6 SLM’s centerpiece was www.stanlee.net, a hub for new characters and products.
The icon’s move to the Web created headlines. People were curious about how printed materials would transition to the virtual world. Lee’s earnestness and enthusiasm spilled out in countless interviews and profiles. In an interview on NPR, Lee explained that the Web-based comic books were “really miniature movies. We have actors reading the roles. There are no dialog balloons.”7 The idea of Lee creating a new superhero universe intrigued investors and excited fans. SLM had a jump on its competitors in moving online, another factor that led institutional investors to fund the enterprise. One reporter explained Paul’s vision of SLM, explaining that the deal maker would trade on Lee’s past accomplishments to create “a Stan who could be offered up piecemeal to fans and eager licensing partners from the virtual balcony of a new House of Old Ideas built on the fluid foundation of the Internet.”8
In August 1999, eager to get on the stock exchange and unwilling to take the traditional IPO route, Paul and investment banker Stan Medley concocted a reverse merger with a public company called Boulder Capital Opportunities, Inc. The new entity would be traded as Stan Lee Media under the symbol SLEE. As creative lead and chairman, Lee received stock options for more than six million shares, as did Paul and others at the executive level. The options had little initial value, but promised to make Lee and the others extraordinarily wealthy (Lee’s annual salary was $272,500). In its first year on the top floor of the Encino building (also the point of operations for many of Paul’s other shadowy business endeavors), the company grew to 150 employees.
The flagship franchise would be The 7th Portal, a superhero team battling villains that could travel to Earth through a hidden gateway. Lee took a hands-on approach, according to Buzz Dixon, the vice president of creative affairs. Initially, Lee focused on six or seven projects, writing outlines and character sketches. “Everything I saw had Stan’s creative imprint on it,” Dixon said.9 While Lee and a new bullpen of writers and artists worked through a multitude of ideas, company officials explained to the world what was really for sale—Lee himself, remarking, “The fact is that Stan is a recognized brand in the global marketplace.”10 Paul and other executives even considered starting a Lee clothing line based on his many catchphrases and new ones they might trademark. Interviewers noted that Lee routinely reported to work each morning in his black convertible Mercedes E320 around 9:30 and often stayed until 8:00 p.m.11
SLM debuted the 7th Portal at a star-studded gala on February 29, 2000, that Paul orchestrated at Raleigh Studios in North Carolina. Television personality Dick Clark hosted the party, which featured performances by Jerry Lee Lewis, Ray Charles, and Chaka Khan. Three months later, SLM announced a deal with Paramount Parks to develop a 3-D ride based on the 7th Portal franchise for its twelve million annual visitors.
SLM had plenty of brand recognition, but it didn’t have enough content to capitalize on the multitude of deals Paul had negotiated. Lee backed the ideas of his writers and artists, but his cofounder kept the actual wheeling and dealing close to his chest, ultimately preventing Lee from exercising any significant decision-making authority. According to insiders, Lee, “would sit in business meetings and occasionally say something. But mainly he’d sit there and doodle, or fall asleep.”12 Paul kept Lee and the start-up in the news with the marketing machine operating at full speed. However, fewer and fewer of the deals amounted to any actual content or products.
Using Lee’s involvement as a lure, other celebrities also jumped on the bandwagon. SLM announced high-profile ventures with a range of stars, including the Backstreet Boys and Mary J. Blige. Pundits saw the venture as the culmination of Lee’s long career in comics and believed that given his supervision, SLM might become the Internet era’s version of Disney. It was one thing for the general public to see the “Stan Lee” name attached to an entity and equate it with Marvel’s successes or feel that such a company could become another Marvel, but it was another for the media, stock analysts, and others to climb aboard the same runaway train. The hysteria surrounding the New Economy bubble far outstripped the media’s ability to recognize its farcical elements or anticipate the fated consequences.
Dot.com mania spread from San Jose and San Francisco across the United States to New York City’s Silicon Alley and then around the world to burgeoning technology hubs like Dublin, Tel Aviv, and Moscow. In this overheated environment, when a simple idea for selling mundane consumer products on the Internet could lead to venture capitalists lining up to provide millions or tens of millions in funding, SLM seemed a surefire winner. In early 2000—at the height of the boom—Wall Street valued the company at $31 a share, which would have essentially given SLM enough paper wealth ($350 million) to buy Marvel Comics outright. Pop superstar Michael Jackson considered purchasing Marvel, personally asking Lee if he would run it if Jackson did so. Of course Lee agreed, but the acquisition never took place.
Lee excelled at doing what he always did so well—becoming the face of the organization, and even more importantly, the face of a new generation of online comic books and online media. The extraordinary level of hype and willingness to believe in it with little or no validation created the perfect environment for Lee’s longing “true believers” to truly believe (and get in on the ground floor of a Stan the Man enterprise). When Lee spoke at tech conferences and other events, he stood among his kind of people, a generation of self-anointed nerds who grew up on superhero stories and were avid comic book readers.
Although some SLM employees secretly questioned the legitimacy of the many partnerships and deals, no one outside Paul and a small number of coconspirators understood how fast the company was burning through its start-up and stock funds. Court documents later revealed that SLM had plowed through about $26 million from its earliest incorporation through September 2000. In contrast, the venture only brought in about $1 million in revenue during that span.13
Like many other dot.com “bombs,” SLM was a house of cards—almost completely hype and marketing acumen built atop the good idea of bringing the comic book world online. While many dot.bombs were the outcome of excessive exuberance that capitalized on a pervasive stock market bubble and the notion that size mattered more than profitability, SLM engaged in actual fraud and stock manipulation.14 The company’s 150 workers lost their jobs when the company declared bankruptcy in December 2000. The SEC and FBI started investigations into Paul, Lee, and other SLM leaders. While authorities soon cleared Lee of financial wrongdoing, their efforts fixed on Paul. Soon, people around the world would know his name: he was the guy who caught Stan Lee up in one of the contemporary world’s most egregious Ponzi schemes.15
Just two weeks before Lee’s seventy-eighth birthday, staffers at SLM, despite their concern for their jobs and the ominous news stories about the company’s demise, bought their leader a seven-foot-tall Spider-Man statue imported from Germany. They pieced together the birthday present and kept their fingers crossed that in superhero fashion, Lee would somehow save the day. Maybe the web slinger could magically come to life and lead the charge.
During a staff meeting, the remaining SLM executives entered the main conference room and announced that the company was shutting down and the entire staff would be laid off. Amid tears and stunned faces, the employees could not believe what they were hearing, even though many had begun to realize how the financial situation had deteriorated. In less than two years the company crashed and burned through tens of millions of dollars, another web venture left to history’s dustbin. Lee physically collapsed after hearing the news and had to be helped out of the building. The memories of Goodman forcing him to deliver similar news to staffers and freelancers at Marvel still burned in his memory.16
If Paul really were a supervillain, one might imagine his slick, tuxedo-wearing exterior transforming into a slimy, super-snake or maybe an energy mass fueled to superhuman power by money and jewels. The list of iconic celebrities and political figures Paul duped is extensive. He also conned the business press as well. The Los Angeles Business Journal, for example, once dubbed him “Spider-Man’s Business Brain” and suggested that his work would transform Lee’s new characters “into a business empire.” Paul boasted that SLM was “the Disney of the 21st century.”17
Paul obviously had vast visions of grandeur. His web start-up scheme seemed simple and followed the same outline that other ventures had created during the dot. com craze. First, he would employ marketing and publicity tactics to hype the startup and Lee. Then, despite limited products and revenue, he would lead the company to public status, even without much actual substance in terms of products or content. The public offering enabled Paul to essentially use the stock money to fund an escalating deficit (and simultaneously line his pockets). In the end, the financial losses would be outsourced to shareholders, while providing riches for Paul and his allies, who turned their self-granted stock options into countless millions.
What authorities would unravel was a stock swindle orchestrated by Paul and several well-placed henchmen, including SLM executive vice president Stephen M. Gordon, sentenced in 2003 to six and a half years in federal prison for his role in the check-kiting scheme.18 Paul borrowed money from banks using the bloated SLM stock price as collateral, then sold shares illegally. The full scope of the Ponzi scheme would take investigators years to sort out, but Paul also had more straightforward illegal maneuverings, including reneging on paying back a $250,000 personal loan from Lee. He also forged Lee’s signature on multiple contracts (handwriting experts later proved that Lee did not sign the documents).19
On February 16, 2001, SLM filed bankruptcy petitions in the United States Bankruptcy Court for the Central District of California. In August 2002, the Colorado Secretary of State dissolved the company and its case was dismissed for failure to pay U.S. Trustee fees.20 While the legal machinations took time to unfurl, Paul had already fled the scene, turning up in Brazil in December 2000, hoping to avoid prosecution. However, in August 2001, Brazilian officials arrested the fugitive and imprisoned him for two years. U.S. authorities arranged for extradition, which took place in September 2003.
Although Paul would repeatedly attempt to wriggle out of legal troubles, the many complaints demonstrated that he bilked various parties out of at least $25 million.21 In 2005, he pleaded guilty to these criminal charges and first spent four years under house arrest, then in 2009 began serving a ten-year prison term at a federal institution in Anthony, Texas. Officials paroled Paul in late 2014.
Several generations worth of goodwill helped Lee dodge a great deal of the fallout. Not only did Lee physically look the part of the eccentric grandpa in the early 2000s, but it became clear to investigators that he indeed had been duped by his business partners. Not all the revelations were kind, however. Stories circulated in the business press saying that Lee slept through meetings and generally steered clear of the financial side of the firm. He did not control the money, but no one could deny that he may have had some reason to stay more on top of events unfolding at a company bearing his name.
Perhaps the saving grace for Lee centered on just how corrupt and manipulative Paul had been. The list of those he conned ranged from powerful individuals, such as Bill and Hillary Clinton, to Muhammad Ali and iconic actor Jimmy Stewart. Labeled by one journalist as a “sometimes-mysterious figure with searing eyes and grand gestures,” Paul became one of the more fantastical figures of the dot.com age, claiming at one point to have ties to secret government agencies, which necessitated federal officials to create the trumped-up charges in an effort to silence him.22
The SLM debacle virtually erased three years of Lee’s life and changed his basic outlook. “No platitude will ever repair the harm that’s been done, to me and countless others,” Lee explained. “But one thing’s for sure—I’ll never be so stupidly trusting again.”23 After the dot.bomb debacle, most experts and observers figured that Lee’s career would slowly fade to black. Perhaps the superhero industry’s greatest showman would finally call it a day after four decades in the spotlight. Few thought that even the ever-resilient Lee could sidestep the scandal, despite government investigators clearing him from any wrongdoing in the SLM crash and burn.
From a broader perspective, though, the utter collapse of the dot.com boom caught countless corporate leaders asleep, including many who had worked at the upper echelons of the business world for decades. Their shortcomings put Lee’s troubles in perspective. The widespread bust that shook the global economy made the SLM boondoggle seem like just another dot.com nightmare come true. Plus, as Peter Paul’s criminal past, outlandish scheming to deceive Wall Street, and zany claims about working for secret military operations became public, it became apparent that the con man had swindled Lee, taking advantage of their friendship to set in motion a devious plot for personal gain.
The crash of Lee’s self-titled venture ratcheted up his competitive resolve. Whatever the potential outcome, he would not ease up or retire with the SLM catastrophe as his enduring legacy. Working with Batman movie producer and industry insider Michael Uslan, Lee struck a deal with longtime competitor DC to reimagine the company’s famous characters through his eyes. They called the series Just Imagine Stan Lee, which allowed Lee to rewrite and reconceptualize the major characters in the DC pantheon, including Superman, Batman, and Wonder Woman.
The series led to some private negotiations with DC and its parent company Time Warner to possibly expand its relationship with Lee. The talks included the creation of a boutique publishing operation, potentially as a way, according to one insider, to “remove that yoke of worry from Stan’s shoulders.” Within months of the bankruptcy, Lee and the people closest to him were definitely searching for ways to deflect the negative publicity from the SLM debacle.24
Despite turning seventy-nine years old at the end of 2001, Lee vowed to continue producing superheroes and work on new and exciting projects. As usual, he tapped into his seemingly endless supply of creativity to fashion a new image as pop culture’s elder statesman and the godfather of comic books.