Laundry Service calls Papa John's founder's extortion accusation 'disparaging and outrageous'

Key Points
  • Laundry Service, the media agency accused of extortion by Papa John's founder John Schnatter, called his claims "disparaging and outrageous" in a memo sent to employees Tuesday.
  • The agency is planning an on-the-record response to dispute Schnatter's comments and asked employees not to speak to journalists, according to the memo.
  • Schnatter's lawyer said she's asked Laundry Service for an audio tape of the call, if one exists.
Hyoung Chang | The Denver Post | Getty Images

The media agency accused by Papa John's founder John Schnatter of extortion fired back in an internal memo sent to employees Tuesday, calling his claims "disparaging and outrageous."

“As you all know, there’s been a lot of coverage about Laundry Service and Wasserman related to the Papa John’s situation in the past several days,” according to a copy of the memo obtained by CNBC. “The disparaging and outrageous comments about Wasserman and Laundry Service that have been covered are completely false and we have a centralized PR strategy to go on the record and refute them. Until that time we cannot expect the media to know the truth.”

Laundry Service, which is owned by talent management company Wasserman, came under fire by Schnatter after Forbes reported that the former Papa John's chairman used a racially charged slur during a confidential conference call with the agency in May.

Schnatter accused Laundry Service of trying to extort the pizza chain in an interview with a Louisville, Kentucky, TV station Friday and again in a letter to the board of directors on Saturday.

He told the board that Papa John's fired Laundry Service the day after the call took place, but still owed the media agency about $1.3 million. Schnatter said that the agency requested $6 million "because they claimed some of their people had been offended by what I had said" and that one of their attorneys threatened "a smear campaign" if Papa John's didn't pay up. He said the company ultimately paid Laundry Service $2.5 million.

Wasserman and Laundry Service did not immediately respond to CNBC's request for comment.

Schnatter resigned his post last week at the behest of Papa John's board after confirming the Forbes' report. However, he said the comments were taken out of context and that he was provoked into using the N-word after Laundry Service executives on the call suggested the pizza chain bring on performer Kanye West as a co-spokesman for television spots and promotions.

Schnatter said he refused to work with West because "he uses the 'N' word in his lyrics," according to his letter Saturday to the board. It was later on the call that Schnatter said he used the actual word when pressed whether or not he was a racist.

Los Angeles-based attorney Patricia Glaser, who's representing Schnatter, said she asked Laundry Service for a recording of the call, if one exists.

“If there’s a tape, let’s hear it,” Glaser told CNBC. “We believe it will vindicate John, and we want to know if it exists."

Laundry Service told employees in Tuesday's memo that it plans to publicly respond to Schnatter's comments and asked employees not to speak to journalists.

“All matters pertaining to Laundry Service, Cycle, Wasserman and their clients are strictly confidential and should not be disclosed to anyone outside the company," the memo said.

On Tuesday, Papa John's said it retained international law firm Akin Gump Strauss Hauer & Feld to conduct an internal audit and investigation of the pizza chain's existing policies and systems related to diversity and inclusion, supplier and vendor engagement and Papa John's culture.

Washington, D.C.-based Akin Gump is one of the most prestigious law firms in the U.S., specializing in complex corporate and white collar criminal cases.