The 2000 gala Hollywood tribute dinner for outgoing President Bill Clinton was packed with important people and big stars like Michael Douglas, Whoopi Goldberg, Shirley MacLaine, John Travolta, Muhammad Ali and Goldie Hawn, but the honor of making a speech introducing the president fell to a comic-book writer from the Bronx: Stan Lee. Remembering the event five years later, the 82-year-old Lee said, "At first I couldn't believe it, but then, knowing Peter, I believed it."

Peter Paul was the ex-con businessman who had introduced Lee to a dazzling array of political figures and other celebrities and helped found Lee's ill-fated non-Marvel venture, Stan Lee Media. In their biography Stan Lee and the Rise and Fall of the American Comic Book, Jordan Raphael and Tom Spurgeon noted, "The story of Stan Lee Media is really the story of Stan Lee and Peter Paul." At its height, the relationship between Paul and Lee was a star-studded fairy tale of high-profile parties and global entertainment franchises. But as Lee, in 2005, described the tribute dinner, he was appearing at a deposition, which was part of a web of interlocking litigation and criminal investigations, including a lawsuit filed by Paul against former President and First Lady Bill and Hillary Clinton, FBI probes into Senator Hillary Clinton's campaign financing and Securities and Exchange Commission investigations into Stan Lee Media. Paul, who was listening in to the deposition via a conference phone, was awaiting sentencing on stock fraud charges.

Paul spoke to the Journal in June and July, during what could turn out to be his final days of freedom before serving up to 10 years in prison for his part in a scheme to commit securities fraud involving the manipulation of Stan Lee Media stock. His real stock in trade, however, has always been image and reputation. When he first met Lee in 1989, he immediately recognized in the ex-comics writer an image of considerable potential. As beloved co-creator of a vast number of popular comics characters, Lee was an ideal figure to recruit for the American Spirit Foundation, a nonprofit organization run by Paul and Hollywood star James Stewart, which used its association with widely adored figures such as Ronald Reagan, Bob Hope and Gene Roddenberry to raise funds for patriotic outreach projects, mentoring programs and reading initiatives.

Paul went on to literally capitalize on the good will Lee's name inspired by helping Lee break from his contractual shackles at Marvel and raising $300 million in investment capital for Stan Lee Media. The flip side of his association with the popular Lee became apparent when the SLM bubble burst and Paul, blamed for the company's downfall, became as reviled and villainous a figure as Lee was sympathetic and admired. Instead of being seen as Lee's guiding mentor, he became known as the Judas in the SLM empire who brought about its collapse. Prosecutors accused Paul of a complicated series of maneuvers by which SLM's stock was artificially inflated while Paul used the stock as collateral for secret loans. Even while pleading Guilty to some of the charges as part of an agreement with prosecutors, Paul bristled at the beating his own public image was taking. The last straw was an account in the Raphael/Spurgeon book that portrayed him as having betrayed Lee. Even in the midst of the legal whirlwind surrounding him after his extradition back to the United States from Brazil, Paul made time to talk to the Journal in an effort to resurrect the heroic image of himself he seemed to crave.

"My real issue today," he told the Journal, "is [that] Stan had the nerve to tell people he lost money with me. Everybody looted this company and turned Stan against me. This man was my closest friend. I protected him so that this man could be accepted as the icon to adolescents that he was."

Along with protesting his innocence and laying the seeds of a possible legal claim that Lee's recent Marvel settlement for more than $10 million should go to SLM shareholders (of whom Paul remains the second largest), Paul recounted hitherto untold stories from the days of SLM, including plans to partner with Michael Jackson to purchase Marvel on behalf of Lee and efforts to appoint a retired U.S. president to the SLM board. Given his history, which includes a stint in prison for sinking a freighter and defrauding the Cuban government of $10 million (his explanation that he was operating at the behest of the CIA fell on deaf ears), credibility does not come easily to a man like Paul. When Paul offered to testify (as part of a plea-bargain arrangement for his own case) in support of the Justice Department's then pending case against Clinton senatorial campaign fundraiser David Rosen, U.S. District Judge A. Howard Matz described Paul as "a con artist" and "a thoroughly discredited, corrupt individual." Taking this into consideration, the Journal pieced together the following account from those elements of Paul's recollections that could be documented or confirmed from reliable sources. The resulting truth was, as is so often the case, much stranger than fiction.

Before taking Lee under his wing, Paul was exercising his star-making powers on behalf of another under-performing celebrity: Fabio. Known to the public as a long-haired hunk of uncertain talent, Fabio was being groomed for the comeback trail by Paul, who came to the conclusion that his client would be ideal to play the role of The Mighty Thor in a major production. This idea was the occasion for Paul's first meeting with Lee in 1989. "Peter brought Fabio up to the office," said Lee (speaking at the deposition from which all his comments here are taken), "and we talked. And we never did the deal with Fabio, but Peter and I got friendly."

Not long after that, Paul's professional relationship with Fabio fell apart just as his relationship with Lee was beginning. Paul was already involved with Stewart and the American Spirit Foundation and Lee seemed like an ideal front man in the decent, amiable James Stewart mold. Paul told the Journal, "We asked Stan to chair it because of his success in reaching adolescents with his mythic tales. I had Ronald Reagan launch Entertainers for Education for Stan in front of 120+ Hollywood luminaries I invited to my fourth annual Spirit of America Awards Dinner and celebration of Helen Hayes' 90th birthday at the Beverly Wilshire Hotel in October 1991." At his deposition, Lee recalled with some wonder sitting across a table from Reagan.

The American Spirit Foundation event was the first of many glamorous events that Lee found himself attending thanks to Paul. As the two began to see more of each other, a common topic over lunch was Lee's under-appreciated status at Marvel. The ex-comics writer was told he deserved more than an "emeritus" title and a token paycheck. To Paul, Lee was a valuable property that was being allowed to lie fallow by his contract holders. The Marvel characters Lee had had a hand in creating were an intellectual-property bonanza waiting to explode, Paul argued presciently. He laid out for Lee a plan whereby investors could be brought in to buy Marvel and install Lee at the company's head.

How far did that plan get? In 1991-92, Paul put together a Japanese American investment group and approached Marvel with an offer. Initially, Paul's intermediary with Marvel was Marvel Marketing Director Denyce Buck, who reported to Joe Calamari, a former Marvel owner who was then an executive vice president overseeing the company's animation projects for television. Marvel was then owned by New World, which had just been bought by Ron Perelman, a billionaire with a reputation as a ruthless financial wizard. Paul told the Journal, "I... made a proposal to buy the company for about $25-$28 million -- which was a number that Perelman was entertaining. But in the offer, which was communicated through Denyce Buck, was a proposal to take Marvel public and sweeten the deal for Perelman with a piece of the new public company."

Perelman, however, apparently decided there was no need to settle for a piece of a publicly traded Marvel when he could have the whole thing. "Immediately thereafter, Perelman saw the merit of taking Marvel public and decided not to sell Marvel," Paul said. "The rest is history. He looted at least $200 million from Marvel, left it in bankruptcy, causing the ultimate voiding of Stan's contract and my ability to get the new contract and start Stan Lee Media." Paul's account of history always moves at a very rapid pace, because there's always more that he wants to explain than time allows. Perelman did indeed leave Marvel in bankruptcy after a series of expansionary acquisitions left the company cash-poor just when it needed to make major balloon payments on its loans. Marvel descended into Chapter 11 bankruptcy, as Perelman battled it out with major Marvel stockholder Carl Icahn, an even more cut-throat corporate raider.

Meanwhile, Paul did not give up on his dream of a liberated and capitalized Stan Lee. "I also was involved in 1997-1998 in trying to get a studio to create a Stan Lee division and liberate him from Marvel that way. I had meetings with Stan and Bob Daly, who ran Warner Brothers; Bill Mechanic at Fox; Brian [Compton], CFO at Universal; a senior Sony official and Greg Probert, Number Two at Buena Vista, who presented the idea directly to Michael Eisner. Only Fox responded seriously by designating Lucy Hood -- who reported to Anthea Disney at the publishing arm -- and Bill Mechanic to develop a proposal for Rupert Murdoch to buy Stan out from Marvel and create a Fox Stan Lee division. Ultimately, for a paltry $5 million, no studio would do it and that is when I decided to do it myself and fortuitously that coincided with Perlmutter voiding Stan's contract in August '98."

In late 1998, Marvel emerged from bankruptcy under the ownership of its former licensing partner Toy Biz. Toy Biz owner Ike Perlmutter, having worked his way up from his days as a junk dealer, had a reputation as a penny-pincher, and, according to Comic Wars (Dan Raviv's history of the Marvel bankruptcy), he was appalled to find that Lee, who no longer even wrote for Marvel, was guaranteed an annual salary that escalated by 2002 to $1 million. Perlmutter ordered the lifetime contract to be voided, offering Lee a two-year contract at an annual salary of $500,000.

Paul saw this as an opportunity and he seized it. Part of what Marvel got for its money under the old contract was a disavowal on Lee's part of any rights to the many characters he had helped to create while working at Marvel. As Paul saw it, the contract had, in effect, licensed Lee's characters to Marvel. "When they voided the contract, they voided the license," Paul told the Journal.

Marvel is unlikely to share that interpretation, since its position has long been that the core characters that make up its trademarked universe were created as work for hire and therefore belong to the company. Lee balked at the new offer, however, and without a contract in place, however, there was nothing to guarantee that Lee wouldn't challenge Marvel's right to the characters. The timing was perfect for Paul and Lee, because the company was taking its first shaky steps out of bankruptcy. "I understood their vulnerability at that point," Paul said. Perlmutter's Marvel was surviving on a $200 million bridge loan that had been taken out to cover Toy Biz's acquisition of the company. News that the co-creator of all of Marvel's core characters was suing to get his characters back could, no matter how strong or weak his case, inspire a disastrous foreclosure on the loan.

Understanding the risks they were facing, Marvel's Hollywood liaison Avi Arad and others prevailed upon Perlmutter to authorize negotiation of a new contract that was more generous to Lee than the voided contract had been. Not only was the million-dollar salary back in place, but Lee was, for the first time, allowed to initiate his own ventures outside of Marvel as long as he continued to put in a certain amount of hours representing Marvel to the public.

This was key to Paul's back-up plan. If he couldn't buy Marvel for Lee, he would form a new company with Lee at the head and take that company public. Plan B proved wildly successful. Even while he was the nominal spokesperson for Marvel Entertainment, Lee became the figurehead of his own Web-based entertainment company, Stan Lee Media, which in the midst of the dot-com boom, proved to be a magnet for investment capital. By 1999, SLM had gone public by acquiring Boulder Capital Opportunities, an investment-shell holding company that was already established on the stock exchange. Unlike Marvel and its licensees, however, SLM published no comics, manufactured no toys and produced no movies. What it generated was intellectual property -- concepts for development in all kinds of media and all over the world. Its one essential asset was Stan Lee -- or more precisely, his then 77-year-old brain, from which a fountain of commercial ideas promised to flow.

One-time SLM Vice President of Creative Affairs Buzz Dixon told the Journal, "It was always more appearance than substance. There's a tendency in the entertainment world to put on a front and that's what they did. It was nothing blatantly duplicitous, but they tried to seem as big and important as possible."

One of the ways that SLM puffed itself up was by sending Lee to prominent, celebrity-filled events, all arranged by Paul, the master manipulator. SLM sponsored the Hollywood Christmas Parade. Lee found himself attending dinners with people like Al Gore and the president of Poland. Asked at the deposition about the purpose of the Gore event, Lee said, "I took it for granted. Peter was always doing things with important people, and it was just -- I wasn't surprised. I mean, he could have said to me he wants to have a party for the Supreme Court justices or -- I would have said, 'Sure. That's what Peter does.'"

Although it was well known that Paul "did things" for SLM behind the scenes, he held no official title. The company's CEO was Ken Williams, who had been hired by Paul. Lee collected an annual salary at SLM of $272,500, but Paul was compensated for his services only as an independent consultant. Nevertheless, despite Lee's name in the company's logo, Dixon said, "If you think of it in levels, Peter was the first level, Stan was on the second level, I was on level three and the artists were on five or six.... I think there were wheels within wheels that Stan may not have been aware of."

Asked at the deposition about Paul's role in the company, Lee said, "Well as far as I knew or understood, Peter really ran the place." Asked about Paul's title, Lee replied, "You know, I'm not sure what it was. I was never sure what his title was, but he was the -- you know, he and I were the two biggest stockholders, and Peter really did everything."

Lee was asked, "Did you know if he was an employee of the company?"

"No, I don't," Lee responded. "I never thought of that. I don't know."

At its peak, SLM was better capitalized than Lee's sometime boss, Marvel Entertainment. Which caused Paul's and Lee's minds to turn again to the possibility of purchasing Marvel and its inventory of products from Lee's imagination. Lee said, "At that time, it looked as though our stock was high and that we had -- I thought we had some money in the company, and -- whether it was Peter's idea or mine, but the point is we both discussed: 'Gee, wouldn't it be something if we could actually buy Marvel.' And yes, we did. We did discuss that. I remember I said, "I hope it can be a friendly takeover. I -- I hate the expression 'a hostile takeover.'"

The prospect of acquiring Marvel was so much on Paul's mind that SLM employees remember seeing him bounce through the halls one day wearing a Spider-Man costume. But that sight was no stranger than the one that greeted them the day Paul's new potential Marvel-purchasing partner came by to look over the SLM facilities and turned out to be pop-star Michael Jackson. Jim Salicrup, a former Marvel editor who was then a writer-editor for SLM, told the Journal, "Up close, he seemed surprisingly normal-looking. His nose was still attached and everything back then."

For once, the connection to Jackson came not through Paul's vast network but via SLM artist Aaron Sowd, who knew someone in the Jackson camp. According to Paul, "After we built SLM into a public company with a market cap almost twice Marvel's, we talked with Michael Jackson about teaming up to buy Marvel. I have a videotape of Michael in our offices for over two hours, seeing what we were doing."

Jackson, who was an avowed fan of Lee's work at Marvel, was reportedly interested and sat down with Lee and Paul to discuss the possibilities. Salicrup, who was also present, recalls Jackson saying to Lee, "If I buy Marvel, you'll help me run it, won't you?"

According to Salicrup, Lee responded, 'Sure. I'll be here."

Jackson retained the services of investment banking firm Wasserstein-Perrella to negotiate with Perlmutter, but according to Paul, the Marvel owner was unwilling to take less than $1 billion for the company, and Jackson's zeal eventually faded.

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