Gawker’s Millions Mired in Tax Dodge
If you haven’t been following the epic battle between Gawker media founder Nick Denton, wrestler Hulk Hogan, and billionaire Peter Thiel, you have been missing one of the great sagas of the Internet age.
Denton built his tawdry media empire on the back of countless reports that hounded Hollywood celebrities, professional athletes, and Silicon Valley entrepreneurs. But when he published a grainy sex video featuring Hogan, he went a step too far. Hogan, secretly backed by PayPal Founder Peter Thiel – whom Gawker had outed as gay back in 2007 – sued in his hometown court and won a $115 million judgment, plus $25 million in punitive damages. That forced Gawker and Denton into bankruptcy. Last night, we learned Univision had won a court-ordered auction and will buy Gawker Media’s assets for $135 million.
Here’s the coda: Fortune has learned through some rigorous reporting that, while regularly decrying “tax breaks for the rich,” Denton employed many of the same byzantine tax tactics used by Silicon Valley companies to hide his company’s assets overseas and escape taxes. Gawker had a holding company in the Cayman Islands, and a subsidiary in Denton’s ancestral home of Hungary. Moreover there is a mysterious British holding company called Greenmount Creek, controlled by the Denton family trust, which appears to own 28% of the operation and is obliged to pay an unsecured note that will be worth $12.5 million, tax-free, in 15 years. Whether Hogan, whose real name is Terry Bollea, can get his hands on that distant money remains to be seen. In the meantime, Denton is appealing the verdict.
You can read Jeff John Roberts’ story, which will be in the September issue of Fortune magazine, this morning here. Besides being a colorful account of a high-tech tycoon brawl, it’s yet another lesson in how porous and unmanageable the global tax system has become.