Michael Johnson has been accused of awarding himself a secret payment of half a million dollars days before his failed Grand Slam Track project collapsed and while the venture still owed athletes and creditors millions.
Johnson is also accused of “feigning to the public” his care for the interest of athletes in the legal filing made at the US bankruptcy court for the district of Delaware.
The filing reveals that Johnson was himself owed $2.2m by GST. But it alleges he took out $500,000 (£370,000) on 4 June when he knew it was in dire straits.
“Mr Johnson initiated a payment of $500,000 purportedly on account of an unsecured note,” lawyers for an “official committee of unsecured creditors” say in the filing.
“Shockingly, Mr Johnson elected to secretly prefer himself over the athletes and other, non-insider creditors, while at the same time feigning to the public that he was selflessly looking to advance the interests of the athletes.
“Moreover, at the same time, the debtor knew it was in precarious financial straits without sufficient cash to complete its contemplated season.”
Another key accusation in the filing is that Johnson has prioritised paying high-profile athletes such as Josh Kerr over other creditors in order to limit reputation damage.
GST was marketed as a project to “save athletics”, although it only featured some track events and excluded field disciplines. The inaugural season featured four meets – one in Jamaica and three in the US – with ambitious plans to stage meets in Europe and draw in young sports fans around the globe.
“We are maniacally focused on having the youngest fanbase of any sports league in the world in the next five years,” Johnson’s co-founder Steve Gera told The Independent a few weeks before GST launched. “That’s our North Star.”
But ticket sales for the opening in Jamaica were poor and although the US events were better attended, the fourth meet in Los Angeles had to be cancelled as money ran dry, after a major sponsor, Eldridge Industries, pulled out from an agreement thought to be worth close to $40m. GST filed for bankruptcy in December.
The filing accuses GST of publicly claiming to have $30m in funding when it in fact had only raised $13m, with the money from Eldridge Industries not contractually secured.
GST said in a statement: “On behalf of Grand Slam Track, we are aware of the UCC’s recent allegation that GST secretly paid $500,000 to Mr Johnson instead of paying athletes and vendors. This claim is unfounded and false. As was previously explained to the UCC, Mr Johnson advanced millions of dollars for GST’s operating expenses, including athlete travel, accommodation and costs, only a portion which was repaid through the reimbursement. It is unfortunate that the UCC chose to ignore facts and is instead attempting to discredit the company and Mr Johnson through false statements.”
Winners Alliance, GST’s primary funder, is reportedly owed more than $15m.
It said in a previous statement: “The public record makes clear that Winners Alliance invested more capital, assumed more risk, and ultimately suffered greater financial losses than anyone.
“Winners Alliance invested millions, loaned millions in good faith, and ultimately offered millions more to stabilise Grand Slam Track and maximise recoveries for all stakeholders, including athletes, vendors, and trade creditors alike.”
