Former Stan Lee Media associate Peter Paul is well aware of the role he has been cast to play in various media accounts of the company's misfortunes. He is The Man Who Destroyed Stan Lee, who pulled the rug out from under Lee's burgeoning Internet empire, then fled to South America.

Speaking to the Journal by phone from Brazil, Paul protested that he had nothing to do with the rapid decline of SLM stock or the subsequent failure of the company's financing: "I feel like Lewis Carroll and I fell down the god-damn rabbit hole with Alice. A campaign has been undertaken to assassinate my character by the current management."

As reported by the Journal last month, SLM has filed for Chapter 11 bankruptcy protection. (That story - Newswatch, "The Stan Lee Story Reaches Chapter 11" - is available in its entirety online at www.tcj.com and should be read in tandem with this one to get a full picture of these events from decidedly different angles.) SLM Chief Executive Officer Kenneth Williams told the Journal he is attempting to reorganize the company and establish new financing. As of the beginning of April, however, the Stan Lee Media website was no longer available online.

Paul's consulting contract with SLM was terminated as the company, reeling from a sudden drop in its stock price, crashed and burned in the final days of 2000, and Williams later dropped hints in the media about evidence of misuse of company funds and possible charges against Paul. Though SLM's fall was covered to a greater or lesser extent by news media as disparate as Animation World Magazine and CNN, one report that was particularly pointed in its characterization of Paul was a March 9 article by Laura Rich in The Industry Standard, an Internet business news magazine with both print and Web editions. Paul's attorney Jonathan Freund slammed the Standard with demands for a retraction and $5 million compensation for damages already allegedly suffered.

In a March 15 letter to Industry Standard Editor in Chief Jonathan Weber, Freund wrote, "The referenced article contains numerous libelous false statements that have irreparably harmed our client. Collectively, they reflect a wanton and reckless disregard of the truth which evidences a clear intent by the authors and your magazine to defame and injure our client."

The letter identified 13 "falsehoods" in the article: that Paul had revealed plans to "flee" to Brazil; that Paul had been disbarred; that Paul had attempted to go into business with former astronaut Buzz Aldrin; that Paul had never had an official job at SLM; that SLM stock had fallen for no known reason; that Paul's connections to a family trust that held SLM stock for him were only revealed by the sudden sell-off of his stock; that Stephen Gordon, an associate of Paul's, had been brought into the company as executive vice president; that Paul shifted assets to his fourth wife; that Paul had hidden ties to companies trading SLM stock; that SLM is considering requesting that charges of fraud and embezzlement be filed against Paul; that Paul was convicted of selling heroin; that Paul had pleaded Guilty to defrauding shareholders of another company; and that Paul had called the shots at SLM.

The Standard responded by making small changes in the version of the article that ran on its website and running a correction on the website and its following print issue. The changes and correction addressed only three of the objections Paul had raised: "In a previous version of this story, The Standard made an error in stating, incorrectly, that Peter F. Paul had been convicted of the sale of heroin. In addition, we erred in stating that Mr. Paul had a fourth wife when he has been married only three times, and that he had been 'disbarred' as an attorney when he has only been suspended. The Standard sincerely apologizes to Mr. Paul and to its readers for the errors."

Rich and the Standard did not respond to questions from the Journal.

Despite such acknowledgments of error, Paul faces an uphill battle in trying to counter the image of himself that has already taken shape in the public's communal mind. The adjustments made by the Standard - changing disbarment to suspension, reducing the number of Paul's wives by one and replacing heroin in the text of the article with a reference to the sale of unspecified drugs - are hardly likely to win him much sympathy.

Paul's background history is so bizarrely colorful that the more he tries to explain his version of events, the stranger they become. A prime example is the complicated story of how Paul was sentenced to prison in the late '70s for his part in a Byzantine affair involving a phantom coffee enterprise, a sabotaged freighter, a Goya painting, drug dealers and Fidel Castro. The Standard reported that Paul had been involved in a scheme to set up a phony coffee company to bilk investors, an insurance company and the Cuban government out of nearly $9 million.

"Twenty-three years ago, I had been approached to work with anti-Communist and anti-Castro forces," Paul told the Journal. On behalf of those forces, he became involved in what Freund described as a "politically connected and government-sanctioned activity." When the scheme fell through, Paul said he took the rap and pleaded Guilty to conspiring to defraud the Cuban government and possession of cocaine.

"The Standard extrapolated from that that I was defrauding shareholders, when that was the furthest thing from the truth," Paul told the Journal. The truth, as Paul explained it, was far stranger than fiction. "By the time I was 27 years old, I was president of the World Trade Center. I had represented the president and government of Peru, the president of Panama [and several other heads of Central and South American states]. I represented every major anti-Communist participant in the Bay of Pigs. I had worked for four major intelligence agencies, and I was recruited by operatives of our government for a plan to embarrass Castro." According to Paul, the target of the fraudulent scam, which apparently involved scuttling an empty freighter and claiming it was full of coffee, was Castro himself and the Cuban coffee market, which at that time was subsidized by Russia. No shareholders were involved, Paul asserted proudly, apparently feeling that defrauding Cuban Communists was less criminal than defrauding capitalist investors.

According to Freund, Paul's actions "liberated" almost $10 million for Paul and his fellow conspirators, "a significant part" of which was used to finance anti-Castro counter-insurgency activities in Colombia and Venezuela. Despite this heroic liberation and Paul's claim that his actions were sanctioned by the US government, he was given a three-year sentence and successfully sued by the Cuban government. "If I had delivered the coffee to the Cubans, I would have been guilty of violating the prohibition against trading with Cuba," Paul told the Journal. "But President Carter, who I, by the way, had been a friend of, licensed an enemy government to sue me and they won a $10 million judgment against me."

Asked why he thought the government would have stabbed a well-connected and loyal citizen like him in the back in such a manner, Paul responded, scornfully, "You don't think that happens? There's no monolithic government. There's this agency and that agency and they don't always like each other. There's no monolithic government policy. But how do I explain that to a reporter for a comic-book magazine who doesn't have a clue about how the world operates?"

As Paul added details to his description of the affair, the Journal's tiny comic-book-magazine head was indeed spinning with an increasingly tortuous labyrinth of contacts and plots leading to other contacts and plots over a period of years, involving the Spanish ambassador to Peru, a plan to take over an African country and actor John Wayne (who died in 1979). In one of the more bizarre tangents of the conspiracy, the Standard reported that Paul had traded a Goya painting for heroin (later amending that to unspecified drugs). Questioned about this, Paul told the Journal, "There was no heroin connected with the Goya painting."

Pressed as to whether other illegal drugs than heroin - such as cocaine - were traded for a Goya painting, he said, "There were no drugs traded. I had a contract to sell the painting to persons who gained their money by selling heroin." This deal, he said, was connected to his patriotic conspiracy against Castro, but exactly how it was connected was never clear to the Journal.

In a similar manner, Paul's correction of the Standard regarding the number of times he has married succeeds primarily in bringing up additional exotic details not mentioned by the Standard. In his letter to the Standard, Freund wrote, "In fact, Mr. Paul has only been married twice (not including a brief midnight nuptial that was annulled in 60 days)."

Despite his conviction, or possibly because of it, Paul was soon welcomed back into a network of rich, famous, and influential figures. He was commended by Chief Justice Warren Burger, he said, and visited President Reagan in the White House (after getting his parole officer's permission). He ran high-profile foundations such as the California Bicentennial Foundation and the American Spirit Foundation, which he co-founded with actor James Stewart. Numbered among the American Spirit Foundation's accomplishments were a dinner honoring Stan Lee and a special broadcast of It's a Wonderful Life to two million citizens of Russia.

Lee and Paul became friends, and, despite all that has come between them, Paul still defends Lee against detractors who say the writer rode to prominence on the coattails of his artists. "Whether he was creator or co-creator is irrelevant," Paul said, for the moment slipping from the heights of international politics to carry on a common comics-shop debate. "How is it possible that Steve Ditko and Jack Kirby didn't go on and do something extraordinary without Lee? They only did extraordinary things with him. And when Marvel screwed its creative people, he didn't have the authority to do anything about it. That was not his fault."

Paul came to the conclusion that Lee was being wasted at Marvel. "Stan and I were like family," Paul said. "I watched him be warehoused at Marvel. Here was one of the most creative geniuses of all time, more so than Walt Disney or anybody else. I wanted to do something for him as a gesture of friendship so that he wouldn't have to live out the rest of his days reporting to those vultures at Toy Biz [Marvel's new owners]."

According to Paul, Toy Biz was looking to cut Lee's pay and reduce his contract renewal to two-year increments. Paul brought in attorney Arthur Lieberman, who was able to renegotiate Lee's Marvel contract so that Lee came away with the right to start a new business founded on his own name, history and image, as well as the right to say things like "Excelsior!" and "'Nuff said," whenever he wanted.

Investors proved difficult to court, however, and it took all of Paul's publicizing and deal-making skills to jump-start the new corporation. In December of 1998, Stan Lee Media consisted of three people with no money to spend other than $1 million that Paul had raised from "myself and a couple of friends." An initial effort to raise enough capital to take the company public failed. "Everyone told me you can't take a 77-year-old man public," he told the Journal. "I went to every studio in Hollywood and offered them the rights to the Stan Lee brand for $5 million and there were no takers."

Instead, the fledgling Stan Lee Media took the back door onto the NASDAQ board by buying out a holding company that was already publicly traded. "We let the public at large put a value on what Stan was worth," Paul said. Within a few months, selling Lee as a source of global entertainment licensing via the Internet, SLM had a market capitalization valued at $3.5 million. Lee had not only outdone his former owners at Marvel, he had launched one of the most flamboyantly successful businesses on the Web amid a sea of struggling dot.com start-ups. And he had done this despite the fact that, as Paul said, "Stan didn't know anything about the Internet. He didn't even do e-mail yet."

Paul objected to the Standard's report that he had never held an official job at SLM, Freund's letter pointing out that Paul was a "co-founder and highly paid consultant on strategic planning and business developments." But in rejecting the Standard's report that Paul had called the shots at SLM, Freund argued that "Paul was neither an officer or director" of the company.

This, of course, was the point the Standard had been trying to make in stating that Paul had had "no official job" at SLM. Asked about this, Paul told the Journal, "I was co-founder. I could have had a title, but the reason I didn't was because it would have meant enhanced fiduciary responsibilities and I didn't want them." The Standard noted that among those fiduciary responsibilities was the requirement that corporate officers report ties to companies which hold and sell stock in the officer's company. Because he had no official title, Paul was not bound by that rule.

In disputing the Standard's suggestion that Paul had hidden ties to companies trading SLM stock, Freund said that SLM's outside securities counsel Jeff Siegel and SLM Executive Vice President for Operations Stephen Gordon were aware of Paul's connections to those companies. Both Siegel and Gordon, however, also had ties to some of the same companies, and Gordon's employment at SLM was terminated the same day that Paul's relationship with the company was terminated. According to the Standard, SLM is investigating links between Gordon, former Merrill Lynch broker Jonathan Gordon (Stephen's brother) and Paul's holding companies, a piece of information that is not among Freund's list of falsehoods.

To Paul, the Standard's article showed an appalling willingness to buy into Williams' scenarios, even in defiance of facts and simple logic. The only explanation, he speculated, was that the reporter had had an "unnatural" and "intimate" relationship with the current management. Asked what he meant by that, Paul responded with another question: "What other explanation can there be? What would my motivation be to take an enterprise that I built single-handedly - with Stan - and ruin it? That wouldn't even make sense in a comic book. If you follow the logic, Mr. [Rick] Madden [SLM General Counsel] and Mr. Williams, those two sophisticated businessmen, had no fiduciary responsibility for what happened to the company. According to this article, I ran the company."

Paul's apparent wish to make clear the integral role he played in the founding and growth of SLM was often at odds with his attempts to deflect the blame for the company's failures that was being directed toward him by the current management. One minute, he would characterize himself as the co-founder who "single-handedly built the company," and the next minute he would become a corporate nonentity who had been out of the loop when any harm was being done to the company. One minute he would describe Madden and Williams as "sophisticated businessmen" and the next minute he would call them "dim-witted functionaries."

He told the Journal, "I engineered every strategic alliance at SLM. I was responsible for raising $10 million from companies like Macromedia and Venture Soft. The only money that was put into Stan Lee Media was money raised by myself. Kenneth Williams did not bring one relationship with him to the company."

One thing Paul denied engineering was the company's Wall Street demise. "What this is is an effort, by empty suits that I stupidly hired," he said, "to try to place the blame on Peter Paul when it's really their own shortcomings that were the problem."

Having handed over the management of the company to others, Paul said, the company soon slipped out of his control. His first sign that SLM was out of his hands? "When I started seeing that the corporate charts had no reference to me any more," he said. Paul said he didn't want to manage the day-to-day operations of the company because "I had other business interests besides Stan Lee Media, thank God. Although I did believe it was the biggest business opportunity of my life."

Asked if he thought SLM was killed by a perception that it was all concept and no product, Paul said, "I'm telling you there was a lot of substance to Stan Lee Media. We knew that you can't make money from e-commerce. It was always our intent to make profits from off-line products." As examples of concrete products that reached fruition during SLM's short lifetime, Paul pointed to two $2 million Stan Lee-themed 3-D amusement rides created as part of an agreement with Paramount Parks and Iwerks, as well as a jointly owned Backstreet Boys cross-promotion, that included a sold-out run of Backstreet Boys comics produced by SLM. A total of 25-30,000 Backstreet Boys comics were sold directly over the Internet. The rest of the run of 50,000 were sold to retail outlets.

Asked what exactly he believes the problem was that caused SLM to go under, he said, "The failure to produce a business plan. I had a philosophy to turn it into a global convergence media studio. And it had an extraordinary run for a startup venture. But that was a philosophy not a business plan. For it to work, it would've needed a cash flow and a business plan."

It was the responsibility of executive management to come up with a workable business plan, he said, adding "The market turning on us at the same time as the mismanagement was the kiss of death."

Freund's letter blames the company's fall on "the death spiral convertible financing supervised and obtained by the CEO and general counsel." That sort of financing, which SLM came to depend on, allows investors to re-value the company over time based on changing stock prices. If the stock value falls, such investors are entitled to more stock as security. The issuing of the additional stock further erodes the value of the company and accelerates what quickly becomes a vicious cycle. Paul's own shares in the company were purchased, at least in part, by borrowing against the value of the shares. When the value of those shares fell below a certain level, the terms of his loan required him to liquidate them, which fed into the downward spiral of the stock's value and led to reports that Paul had bailed out of the company.

There has been some speculation that some of the damage to SLM's stock values may have been done by short-sellers trading on slim margins of profit. In some cases, short-sellers, acting on inside information can actually profit from stock before they own it, in a kind of sell-high/then-buy-low scam. The short-seller offers to sell shares in stock that he or she doesn't own in anticipation that it will drop in value. As soon as the stock drops, the short-seller buys - at the lower price - enough stock to make good on the initial sale - at the higher price - and pockets the difference. Paul denied ties to such trading, although he did make accusations of short-selling and insider-trading directed at individuals and the employees of a well-known investment company. Despite public impressions to the contrary, Paul said he has not unloaded the bulk of his SLM stock and remains a shareholder in the company. He said he plans to collaborate with a recently filed shareholder lawsuit against SLM management.

To date, no hard evidence has surfaced that would link Paul to any wrongdoing with respect to SLM. As much as the media has assumed that Paul is the likely target of a recent Securities and Exchange Commission investigation into the circumstances of SLM's collapse, no charges or explicit accusations have been forthcoming, and according to Paul, the SEC has made no effort to subpoena him or question him about anything. "It's an informal investigation," he said, "and informal investigations don't have targets."

Even Williams' ominous hints about an internal investigation and "misuse of company funds" have so far presaged no lawsuits or legal charges against Paul. Despite all the threats between Paul, the Standard and SLM management, the only lawsuits actually filed have been four shareholder suits. Called derivative actions, these suits are a common part of the aftermath of a fallen publicly traded company.

But guilty or innocent, Paul seems born to play the role that has been written for him. Ever profit-minded, Paul declined to recount too many experiences to the Journal "without a book deal." If his life story were to be told, however, from convicted anti-Castro conspirator to corporate refugee, it might be titled Autobiography of a Fall Guy. If Paul thinks such a scenario wouldn't play even in a comic book, he hasn't read enough comics written or "presented" by Stan Lee. And what better nemesis for a hero like Lee than an ex-con who worked with Chief Justice Warren Burger and who numbers among his friends former CIA Director Bill Casey, Ronald Reagan, Jimmy Carter, Bill Clinton, James Stewart, Buzz Aldren, Fabio and, of course, Lee himself.

Paul doesn't see it that way, though, and he has served notice to the press that he's not about to lie down and let others tell his story however they want. "I ain't going to be the fall guy this time," he told the Journal, his blunt manner, as usual, a far cry from Williams' cautious evasiveness. "I still have contacts working in the government. What happened at Stan Lee Media will come out. You will be surprised at what will come out. This is the beginning, not the ending, of a story."

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