Dr Phil has had his fair share of controversies and legal troubles, but the most recent one will decide the fate of his media startup’s bankruptcy. The federal bankruptcy trial concerns his media company, Merit Street Media, and allegations that he diverted assets from a $500 million deal with Trinity Broadcasting Network to launch a new company, Envoy Media.
As per The Wrap, Merit Street is a joint venture between Dr. Phil’s Peteski Productions and TBN. After facing losses, the company filed for Chapter 11 protection, which would have allowed it to restructure its debts and stay in business. After Merit Street sued TBN for breach of contract and abuse of control, TBN countersued and accused the $460 million worth Dr Phil of fraud and mismanagement.
TBN had increased Dr Phil’s stake in Merit Street to 70% while diluting its own stake to 30%. Apparently, this was a “gangster move” by the television personality to reduce TBN to nothing but a “passive minority investor“, as per the lawsuit (via THR).
In a recent turn of events, the court has ruled against Dr Phil’s favor. The collapsed television startup has been ordered into liquidation under Chapter 7 by Judge Scott W. Everett.
During the trial, the judge criticized Dr Phil, whose last name is McGraw, condemning his actions and pointing out that MSM’s assets were being maneuvered for a takeover by Envoy Media.
As per Radar Online, Judge Everett also exploded at McGraw for deleting vital evidence in the bankruptcy trial. He stated, “Candor to the court is critical“. He pointed toward McGraw, deleting text messages about how he would try to manipulate the bankruptcy to prioritize preferred creditors.
The judge added, “[McGraw’s] business was as dead as a doornail when the bankruptcy was filed… Mr. McGraw believed he was calling the shots.“
The Judge Stands by His Decision to Liquidate Merit Street Media
After accusing Dr Phil of destroying crucial evidence and ordering the company into liquidation, Judge Everett called the case an “anomaly” where McGraw planned to pay “favored creditors and not pay disfavored creditors, as his own texts show that he want to do.“
Everett stands by his decision, stating that liquidation was a much more preferable route to take rather than dismissing bankruptcy or appointing a new trustee under Chapter 11.
He wrote in his issued decision that creditors should rest assured that the independent trustee will be fair and impartial. Everett said, “Creditors can have faith that a trustee will be fair and impartial“.
He also added that if the court has ruled in favor of a dismissal, it would have given McGraw an opportunity to “pay his favored creditors rather than his unfavored creditors.”
How Dr. Phil Defended Himself in Court
Last month, McGraw took the stand, claiming the allegations made against him for improperly filing for bankruptcy set up his Envoy Media were nothing but absurd.
He said, “I’m like the engine that could. I’m doing everything I can to keep Merit up and running. This theory, that this was all a ploy to set up Envoy Media, is absurd.“
While the judge has announced his decision, a spokesperson for Peteski Productions issued a statement revealing that they would be issuing an appeal (via Radar Online):
We respectfully disagree with the court’s ruling and take issue with its comments concerning Dr. Phil McGraw. Dr. Phil is a leader of the highest integrity whose actions reflect honesty, ethics, and a life-long commitment to helping people. We are reviewing all of our options regarding an appeal, which is likely.
MSM was first launched in April 2024. Now, the judge’s ruling ensures that the company’s assets will be sold off to repay its creditors properly.
What are your thoughts on the mess Dr Phil got himself into? Let us know in the comments section below.
