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Mays upset with ex-owner of Pathway Productions

March 16, 2009
Pathway Productions, purveyors of some of the highest-profile documentaries to come out of the Indianapolis area in the last decade, is on the brink of extinction. Not even a rescue plan forwarded by Mays Chemical Co. President William Mays last year could save the company.

Mays blames former Pathway owner Michael Husain for driving the stake in the firm's heart, and said he plans to sue Husain while pursuing plans to jump-start the company in the next 60 days.

"Pathway Productions is basically insolvent at this point," said Mays, who said he had not been involved with the company until buying a majority stake in late 2007. "I'm trying to resurrect it, and get debts worked through, the first of which is, of course, a secured creditor with the bank."

Employees said they were notified suddenly by e-mail in early February that they no longer had jobs. Pathway had vacated its offices at 200 S. Meridian St. by mid-February.

Mays said the company was driven to ruin in part because Husain, who recently left the company to start a new firm, misled him about the company's financial situation. Mays said he was misled about how much work clients had paid for and how much had been completed. "Clearly, there will be legal action against the former owner," Mays said. "There were misrepresentations made to me that are considered fraud." Husain said he was stunned by Mays' allegations.

"That's just not true," Husain said. "If Bill really said that, I'm surprised and disappointed. Bill has never raised this issue with me."

Mays said he was too trusting when he made the deal with Husain to acquire a majority share of Pathway.

"I didn't do a forensic audit on the company because I'm not used to people intentionally lying to me," Mays said. "This is a business screw-up. I've been involved in them before. It's not the end of the world. It won't bankrupt me, but it does affect your reputation."

Husain again refuted Mays' version of the story.

"Bill is a sophisticated businessman," Husain said. "Bill did about six months of due diligence. He had a team of accountants and lawyers. Every piece of information he requested, I provided."

Mays said he likely will liquidate the company before relaunching a video production and Web site development firm.

But he said his first obligation is to satisfy as many creditors as he can and pay Pathway employees — about 10 people — what they are owed. He then will look to mend fences with clients.

"I have a moral obligation to the employees who have not been paid," Mays said.

"I understand times are hard. These people worked, and they deserve to be paid. That's the way I do business."

After Mays bought into the company, Husain continued in a creative capacity and retained a minority ownership stake. Husain, who founded Pathway from his basement in 1996 and built it into a documentary-making powerhouse, recently founded Good Vibes Media, which produces video and online content.

Husain, who is in his mid-40s, said that, as far as he knew, he left Pathway on good terms.

Last fall, Mays brought in Jerald Harkness as CEO. Harkness, whose father is an Anderson sporting goods store owner and former Indiana Pacer and sports broadcaster, hopes to work with Mays to restart Pathway.

In its heyday, Husain said, the company brought in $6 million annually in revenue and had 25 employees.

It was one of the market's best-known video production and Web development companies, with a client list that included cable channels A&E, VH-1, ESPN and Discovery Channel, as well as the NCAA, Butler University and Eli Lilly and Co.

Tom Cochrun, a former Indianapolis newscaster who later operated local video production company Nineteenth Star, said Husain is known as one of the market's best creative talents.

"He is a very good writer and director, a great storyteller," said Cochrun, who is now retired and living in California. "And he had some very good people working for him at Pathway."

But over the last few years, the company scaled back. Clients complained that phone calls went unanswered and projects were slow to be completed.

"They have been having a challenge for quite a while," said Bruce Bryant, past president of the Indianapolis Ad Club and founder of locally based Promotus Advertising.

"Our clients who worked with Pathway have been very unhappy."

Part of the problem, Cochrun said, might have been the relatively low profit margins for the kind of work Pathway specialized in.

"With corporate work, you can achieve profit margins of 15 [percent] to 30 percent," Cochrun said.

"Working with the networks, the profit margins are 6 [percent] to 8 percent, max. If you make any mistakes during production, you very quickly get into your profits."

Mays, 63, said he bought the company for "several hundred thousand dollars."

"If I had known the situation, I would never have paid that much," Mays said. "Clients are coming out of the woodwork about work they've paid for, but was not done. We've been blindsided."

Mays said he is irked not just because he believes Husain misled him, but also because Husain started a new company in violation of a non-compete clause in his contract.

Husain said he sold 75 percent of the company to Mays, then left last July.

"It was Bill's company, and it was time for me to move on," Husain said, who added that his 25-percent stake reverted to the company.

Husain would not comment directly about any non-compete clause, but said, "I honored every part of the deal."

Mays claims Husain pocketed money that should have gone into Pathway's accounts receivables.

Mays is working with David E. Corbitt, a partner in the local law office of Krieg DeVault LLP, on the matter's legal end. Corbitt declined to comment.

No lawsuit had been filed by IBJ's deadline.

In the end, Mays said, Husain has ruined not only Pathway, but his own professional prospects.

"Really, we don't care about him competing because anyone who has worked with him knows he took the advance money, and didn't do the jobs," Mays said. "He's finished in this community."

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