Monster Ousts Executive With Bizarre Past

In a recent press release announcing the 40th anniversary of Monster Products (formerly Monster Cable), company founder and CEO Noel Lee stressed Monster’s adaptability as central to its longterm success.

“It is a difficult exercise to constantly look at the relevance of a brand, and the company, and make the necessary changes to become even better and more important to our customers,” he said. “Change is never easy, but one has to look at the company’s product offerings, its value proposition and mission statement, and marketing and sales strategies.”

If you haven’t been following Monster’s somewhat bizarre trajectory lately (such as the company’s attempt earlier this year to raise $300 million by entering the murky waters of blockchain technology and cryptocurrencies), Lee’s statement might sound unremarkable. But the Head Monster then goes on to announce “a complete restructuring and revamping of the company,” precipitated by the ousting of former COO Fereidoun Khalilian and other “toxic” members of the management team in late July. Police reports were filed with both the South San Francisco Police Department and the FBI, accusing Khalilian of fraud, theft, and conspiracy against Lee and Monster Products. Monster even filed for (and was granted) a temporary restraining order against Khalilian, for protection against alleged “threats of mutilation, death, and threats to family,” according to paperwork filed in the Superior Court of California, County of San Mateo. But as strange as this all sounds, Khalilian’s behavior should not have come as a total shock to Monster’s leadership.

The former executive (also known as Fred or “Prince Fred” Khalilian) has a documented history of disturbing behavior that began long before he was appointed the COO of Monster in 2017. He has been branded a scam artist by the FTC, and was permanently banned from the telemarketing industry in 2011 after being ordered to pay over $4 million in damages to customers whom he duped into buying bogus extended warranties for their vehicles. He has also been accused of multiple counts of sexual assault, and was arrested in 2007 on charges of sexual battery and false imprisonment. But Khalilian’s plan to make billions via a (theoretically legal) online gambling site called PokerTribe.com was simply too enticing for Monster to ignore. After losing the lucrative deal to build the popular Beats by Dre headphones, Monster was in dire need of cash. The company had a net loss of $29 million in 2016, and $27 million in 2017. Monster lost a further $19.6 million during the first quarter of 2018. Khalilian promised to have the gambling site in operation by December 15th of 2018, but it never happened.

Khalilian’s gambling ambitions began in 2011, after an internationally popular website called PokerStars was shut down by the U.S. government. Khalilian believed that he could succeed where others had failed by using the 1988 Indian Gaming Regulatory Act to his advantage. By partnering with one or more casino-operating tribes, Khalilian hoped to circumvent the laws prohibiting interstate betting via telecommunications systems. He convinced the Cheyenne and Arapaho tribes to hire him as a consultant, charging a fee of $9.4 million in exchange for his help in navigating the legal and corporate hurdles in their path. Years went by with no results. “A lot of money was paid and nothing was ever received,” said Reggie Wassana, speaker of the Cheyenne and Arapaho tribal legislature. Ultimately, the two tribes filed a lawsuit against Khalilian, whose dealings were “marked by deceit, greed, and utter disregard for the laws and economic wellbeing of the tribes.” Khalilian then managed to make a similar deal with the Iowa Tribe, collecting over $10 million in fees, while trying to negotiate a deal with the state to launch PokerTribe.com without violating the law. It was during this complicated process that Khalilian signed a deal to partner with Monster. But since that deal was struck in June of 2017, Noel Lee’s opinion of Khalilian has changed dramatically. Lee originally saw Khalilian as a “genius,” though admittedly “a very unusual personality” and “an acquired taste.” Now Lee believes that Khalilian and his cohorts were attempting a “hostile takeover” of Monster. Meanwhile, the Iowa Tribe has joined the Cheyenne and Arapaho tribes in their complaints against Khalilian. After shelling out tens of millions, the tribes were left with nothing but a nonworking website.

With Khalilian officially gone from Monster, Lee has brought on a new senior management team led by the newly appointed COO, Kevin Lee, and former Best Buy executive Mike Manske, who is now Monster’s Global VP of sales. It remains to be seen whether Monster can recover from this debacle or whether the company’s pattern of poor judgment will continue in the future.

Do you think Monster will see another heyday, or have the last few years marked the beginning of the end? Share your thoughts in the related forum thread below.