The Colorado Rapids filed a lawsuit Tuesday in U.S. District Court alleging Ciao Telecom’s parent company has failed to make nearly half a million dollars in jersey sponsorship payments.
The lawsuit claims Global Logistics Solutions LLC has missed two payments and seeks the $485,000 that is owed as well as attorney fees and unspecified damages.
The Rapids signed the jersey sponsorship, worth $8.3 million over five years, on April 29.
Ciao’s logo has been emblazoned on the front of the club’s jerseys since the Rapids’ May 4 game against the Los Angeles Galaxy.
According to court documents obtained by The Denver Post, GLS agreed to pay the Rapids $80,000 to close the sponsorship deal, but only $75,000 was paid. Payments of $240,000 due on July 30 and Sept. 30 were not made. Another $240,000 payment is due Nov. 30.
The deal would have paid the Rapids $800,000 this season, increasing to $1.5 million in 2015, $1.75 million in 2016, $2 million in 2017 and $2.25 million in 2018.
DOCUMENT: Read the lawsuit filed in U.S. District Court
In May, Ciao founder Victor Santos told the Post the sponsorship deal was part of a strategic plan to roll out advertising-supported, ultra-low cost cellular service in the U.S. The metro Denver market was to be first to get Ciao Mobile Lite.
Phone messages left for Ciao Telecom president Don Pinkston were not immediately returned.
Rapids president Tim Hinchey on Oct. 21 said Ciao was “still a little behind on their launch. They’re looking at retail locations. As we said before, 2014 was about getting the name out for them, and that’s why they took a punt with us.”
A look at Ciao’s financials reveals the sponsorship agreement involved significant risk for the Rapids. In the weeks before the deal was signed, Ciao completed a reverse merger allowing public trading in the company. According to the company’s most recent SEC filing, in March, it had roughly $65 million in liabilities and $2 million cash on hand. Ciao has filed to delay other SEC filings, a potential sign of financial trouble.
Ciao Telecom also had a jersey sponsorship deal with Italian Serie B club Reggina Calcio, which was supposed to run through the 2014-15 season, but Ciao’s logo has since been removed from the club’s website. Attempts to reach the club for comment were not returned.
Ciao’s stock price, which is traded over-the-counter under the symbol CIAU, has plummeted since July. Thursday morning it was trading at about 36 cents per share.
The Rapids ended their season on Saturday with a franchise-worst 14-game winless streak. The team’s average attendance declined 2.4 percent overall this year despite MLS setting a total and average attendance record. The club had the third lowest average attendance in the league — 15,071 — ahead of only the San Jose Earthquakes and the now-shuttered Chivas USA.
Hinchey said last week that 80 percent of the club’s roughly 5,400 season ticketholders have renewed for next year, the second highest rate in club history. The club has also added 500 new season ticketholders, he said.
Daniel Boniface: 303-954-1104, dboniface@denverpost.com or twitter.com/danielboniface
