IBT Media is asking a New York court to cancel a 2018 deal in which Newsweek was spun off as an independent company, saying the transaction was little more than a public relations stunt to shield the magazine from bad press.
IBT Media, founded by Etienne Uzac and Johnathan Davis, purchased Newsweek in 2013. Uzac sold his 50 percent stake in the magazine's publisher to Dev Pragad in September 2018, separating IBT and Newsweek in a deal announced shortly before the Manhattan DA indicted Uzac and IBT in a money-laundering probe that targeted followers of Korean American cleric David Jang. Uzac and several other members of Jang's Olivet sect and companies they controlled pleaded guilty to money laundering and fraud a few months later. IBT pleaded guilty to scheme to defraud in the first degree. Pragad, Newsweek's president and CEO, was, like Davis, a member of Olivet at the time.
The dispute between Newsweek's shareholders broke into public view in April when Pragad announced in an all-staff memo that he had left Olivet and wanted to protect the company and newsroom from Jang's followers. Davis, whose wife Tracy Davis is the former president of Jang's Olivet University, accused Pragad of weaponizing the newsroom against him after Newsweek reported that Olivet University was once again in legal trouble with federal agents searching its California campus in a new money laundering probe.
IBT Media filed its lawsuit in New York State court on Thursday. That same day, the New York education department shut down Olivet University's New York operations, accusing Tracy Davis and other senior managers of mismanagement and failure to clean up criminal activity after the 2018 fraud conviction. Johnathan Davis is CEO of IBT Media.
Pragad became CEO of IBT Media in 2016 after the business ran into financial trouble under Uzac and Davis. He was an employee at the time, not a shareholder.
The lawsuit alleges that Davis, Uzac and Pragad had agreed privately that Pragad would return his shares to Uzac as soon as the cloud created by the Manhattan DA's investigation had lifted.
Pragad approached Uzac and Davis with a plan "to protect the Newsweek brand from the negative media attention arising from the investigation," the lawsuit says. "Pragad then proposed that IBT should announce a transaction in which ownership of Newsweek would be transferred to him. Pragad said that he would continue to run it in the same way he had before, but the public separation would insulate Newsweek from the spotlight and prevent the brand from suffering reputational harm from the investigation."
Uzac and Davis eventually agreed to the proposal on condition that Davis remain co-owner and that Pragad undertook to "transfer Newsweek back to IBT, and thereby restore Uzac's position in the ownership structure 'when things cool down,'" the lawsuit alleges. The lawyers involved in the deal did not know about this agreement, "which the three friends understood....[would occur] when Uzac determined that he had resolved his legal issues and any associated complications and notified Pragad that he was ready to resume his role in the business," according to the lawsuit.
IBT says the two companies continued to operate as one entity for years after the September 2018 separation and that the initial purchase price of $5,000 and subsequent installments totaling $1.5 million were never paid.
"This is because the purchase price was totally made-up—and, in actuality, not a purchase price at all," the lawsuit claimed.
Pragad started moving to exert control of Newsweek and distance himself from Olivet as Uzac approached the end of his community service for his fraud conviction, according to the lawsuit.
Newsweek reached out to IBT Media, Newsweek, Johnathan Davis, Etienne Uzac and Dev Pragad for comment. Davis and Uzac did not respond.
"This case is about the rightful and legal ownership of Newsweek and Dev Pragad's duplicity," said attorney Michael C. Hefter of Hogan Lovells, on IBT Media's behalf. "As we allege, we will show that the purchase agreement engineered by Dev Pragad supposedly to transfer the ownership of the Newsweek assets away from IBT was nothing more than a facade. We also will show that the image that Dev Pragad has cultivated, as the supposed owner of Newsweek and architect of its success, is a fiction."
On behalf of Pragad, Newsweek's counsel Robert Weigel of Gibson Dunn & Crutcher LLP replied, "IBT's lawsuit against Newsweek and its CEO Dev Pragad flies in the face of express written agreements. It is a desperate attempt by IBT to avoid its clear obligations and its wholly without merit. IBT sold Newsweek to NW Media Holdings nearly 4 years ago. Under the written contract, IBT currently owes Newsweek more than $30 million. Faced with calls to repay its obligations to Newsweek, IBT has crafted a baseless lawsuit in an attempt to lay claim to the proceeds of a company that, since being freed from the anchor of IBT's admitted criminal conduct and ties to Olivet University, has thrived under the direction of its new management team, including CEO Dev Pragad."
Newsweek supplied this statement: "As company counsel Robert Weigel of Gibson Dunn & Crutcher LLP stated, this lawsuit is baseless. It was brought by a company convicted of fraud and money laundering in 2020 and on the heels of Newsweek seeking to recover tens of millions of dollars from IBT Media. Simultaneously, IBT Media has attempted to quash Newsweek's editorial independence. Protecting the division between editorial and management/ownership is critical to the efficacy of any news organization and Mr. Pragad has championed that independence and integrity as CEO. NW Media Holding Corp. and Mr. Pragad look forward to setting the story straight and will move to dismiss and otherwise vigorously defend against the complaint's unfounded allegations."
The lawsuit promises to draw more attention to David Jang's Evangelical sect and its followers, already under growing pressure from authorities investigating whether they are involved in laundering money for criminals in the United States and China.
The history of the different Olivet entities stretches back to 2000, according to their various websites. That was the year that Jang founded the Olivet Theological College and Seminary, later incorporated as Olivet University. Olivet Assembly USA and Olivet Assembly Europe both say they began in 2000 as associations of churches by alumni of the seminary. The World Olivet Assembly, which also operates out of Dover, New York, says it began the same year. Its website now lists more than 120 countries in which it says it has members.
While Jang's followers say their ministry is truly global, federal investigators are zeroing in on Olivet's links to China; the college brings many Chinese students to the United States. One former student, a pastor named JianGang "Frank" Lan, has been charged in North Carolina for possession of counterfeit goods. A North Carolina judge ordered Lan's arrest last week after he failed to appear in court and set his bond at $1 million. Lan is in China, his lawyer said. Newsweek uncovered Lan's links to the Olivet Assembly before Olivet University confirmed that he had graduated from the college.
Three senior law enforcement officials told Newsweek on condition of anonymity that they suspected links from the Lan case to Chinese organized crime and drug cartels, which look to China to buy the precursor chemicals needed to make the powerful opioid fentanyl that has been behind a surge of deadly drug overdoses in the United States.
Investigators of the Department of Homeland Security searched Olivet's campus in Anza, California, in April 2021 as part of an investigation into money laundering, visa fraud and labor trafficking, Newsweek reported.
The New York Education Department decided to shut down Olivet University's operations in the state on May 17, a few weeks after the Newsweek report and at the end of a two-year review process.
Deputy Commissioner of Education William P. Murphy wrote to Olivet on Thursday, rejecting the college's appeal of the May 17 decision, saying the college had done far too little to clean up its act from the criminal activity that led to the Manhattan DA's indictment. He specifically cited Tracy Davis' leadership role as a factor and blocked Olivet from re-applying for certification to operate in New York. The department shared the letter with Newsweek and declined further comment. The decision took effect immediately on Thursday.
Update 7/3, 8:30 p.m.: A response from an attorney representing IBT Media (not Johnathan Davis as originally reported), received after this story was published, has been added. IBT Media's guilty plea has been clarified.
Editor's Note: As Newsweek continues to report on its ownership, it does so with complete independence. Neither President and CEO Dev Pragad nor Johnathan Davis, the co-owners of Newsweek, see any stories before publication, and neither has any influence over the coverage. The newsroom operates autonomously, serving its readers and abiding by its journalistic mission.
Nancy Cooper
Global Editor in Chief
