World Online fires, sues chair Schulhof

Former Sony CEO accused of immoral, unethical conduct

By MARTIN PEERS

NEW YORK -- Former Sony Corp. of America CEO Michael Schulhof's attempts to carve out a new career for himself in the Internet world have led to a vicious dispute with European Internet startup World Online Intl., which accused him of immoral and unethical behavior Thursday and fired him as chairman.

World Online's major shareholders, which include the Sandoz Family Foundation, have also sued Schulhof for allegedly breaching a noncompete provision in his consulting agreement with the company. The suit was filed in Amsterdam but a similar case will shortly be filed in the U.S., according to an attorney for World Online.

World Online also said the Sandoz Family Foundation "intends to file suit in Amsterdam next week to recover $1.9 million" paid to Schulhof's private company, Ochill Investments, under a consultancy agreement, which has been terminated.

The lawsuit will allege, World Online said, "that Schulhof has conducted himself in a manner that is inconsistent with the fundamental ethical and moral values of the company." A spokesman for the company declined to elaborate, as did World Online's attorney.

Counterclaim

The allegations were dismissed out of hand by Schulhof's attorney, Stanley Schlesinger of Warshaw, Burstein, Cohen, Schlesinger & Kuh. "These allegations have no basis in fact and are completely untrue," Schlesinger said, adding that Schulhof is preparing to file a counterclaim alleging the company was trying to renege on its obligation to pay Schulhof stock options.

He added that Schulhof had not breached any noncompete clause in his agreement with the company.

Schulhof, who ran Sony's U.S. operations for seven tumultuous years until his resignation in late 1995, has kept a low profile for the past couple of years aside from joining the boards of a few small scientific and electronic startups.

About a year ago, according to a World Online spokesman, he became chairman of the European Internet startup and signed a consulting agreement with the company. His mandate, sources said, was to help expand the business in Europe and the U.S.

That has certainly occurred. Last October, Schulhof announced the Sandoz Family Foundation's $300 million investment in the company, which brought the foundation a 51% stake and control. A statement from World Online at the time said the company expected to have 1 million subscribers by this year, "eclipsing America Online as Europe's largest content-based Internet company."

The dispute between Schulhof and the company began several months ago, Schlesinger said, although its origins are unclear. World Online CEO Nina Brink made the decision to pursue the legal action, he added.

A World Online spokesman said Schulhof had "several other relationships with companies in the same business," a breach of a noncompete clause in a shareholders agreement between the parties.

World Online's attorney Stephen Rathkopf, a partner with the law firm of Herrick, Feinstein in New York, refused to identify the competing companies but said details will be released during a court hearing scheduled for Amsterdam court today.

According to news reports, however, Schulhof put money up and joined the board of a U.S. Internet startup, JFAX Communications, almost two years ago.

Schlesinger said Schulhof had been "instrumental in opening horizons" for the company, adding that the matter was simply a contractual dispute and a "vicious attempt" to take away stock options owed to Schulhof.

World Online wants the Dutch court to fine Schulhof $10 million per breach of the noncompete clause and $1 million for each day the breach continues.