Down The Rabbit Hole With Ron Tutor
A marble-appointed 737, a 258-foot yacht, a $32 million mansion and a $3 billion-a-year construction business. The charmed (and controversy-plagued) tycoon has succeeded everywhere but Hollywood, where his $700 million Miramax gamble has the town whispering: Was it worth it?
At the Cannes Film Festival last May, Ron Tutor announced himself as Hollywood's newest movie mogul. Tutor, the construction magnate who only months earlier had led a group that acquired the storied independent film company Miramax from the Walt Disney Co. for $663 million, hosted a lavish party aboard his $65 million yacht Pegasus II, which has six suites, a gym and a screening room. At the black-tie soiree, guests including Rob Lowe and actress Jamie-Lynn Sigler slipped on boat shoes, danced under the stars and guzzled champagne provided by sponsor Moet & Chandon.
One night earlier, Tutor had joined his new partners -- Miramax chairman Richard Nanula, Colony Capital Llc. chairman Thomas Barrack and Lowe -- in hosting a private dinner for about 50 guests on the grounds of a villa in the hills above the Palais des Festivals. As Lowe offered a toast to the rebooted company, some of the film industry's top insiders dived into a lavish truffle-laden, seafood-centric menu accompanied by wine pairings. "It was a wonderfully intimate affair," recalls an attendee who rubbed shoulders with ICM chairman Jeff Berg, independent film executives Bob and Jeanne Berney and Margin Call executive producer Kirk D'Amico. "Everybody got to really talk to each other, and it built a lot of excitement about what the possibilities were for the new Miramax."
Nearly a year later, those prospects aren't quite as rosy. Since Tutor and partners took over, The House That Harvey and Bob Weinstein Built has not produced a film nor put any in development. On March 16, CEO Michael Lang, who had been recruited from Fox to help exploit Miramax's rich library of more than 700 films, departed. All of this has led chatter in Hollywood to center not on Miramax's next steps but on whether there is even a long-term strategy at all. Says a puzzled film executive, "As far as making it a going concern, I think there is a fuzziness as to what they plan to do."
More clear is the financial toll Tutor's dalliance with Hollywood has taken on a man whose estimated net worth is $790 million. A twice-divorced 71-year-old who skis in Sun Valley, vacations in St. Barts, calls a $32 million Beverly Park manse home (neighbors include Sumner Redstone, Denzel Washington, Haim Saban and Barry Bonds) and travels the globe on a private Boeing 737, Tutor might have discovered his life's missing ingredient -- glamour -- through dabblings in film and the Miramax acquisition but likely not financial gain.
At issue is not only Tutor's investment in Miramax (it is estimated he personally fronted $50 million to purchase the company) but also his messy entanglement with embattled film financier David Bergstein. And it comes at a time when Tutor Perini Corp., the $3 billion-a-year publicly traded construction company he runs as CEO, remains locked in a nearly two-decade legal war with Los Angeles' Metropolitan Transportation Authority stemming from construction of the city's Red Line subway. The company also is battling MGM Resorts International over its work on the allegedly uninhabitable Harmon Hotel at the $8.5 billion CityCenter development in Las Vegas.
But if you ask him, Tutor will say he believes that his experience in the construction business can be used to his advantage in Hollywood. "The lessons I learned in the construction contracting business that I have brought to the entertainment business is [sic] never let the numbers lie and go to work every day with a sense of discipline and goals as to what we are trying to accomplish and how we are going to get there," says Tutor, who last spring answered questions in an e-mail interview but declined further comment.
Since August 2010 -- about four months before the Miramax transaction closed -- Tutor has sold $188 million of Tutor Perini stock, doing so at increasingly lower prices. The liquidation has at least partly funded Tutor's film ventures, he said in a March conference call with analysts who cover Tutor Perini, and has considerably reduced his stake in the company. In 2008, when his namesake firm combined with Perini Corp., he owned about 43 percent of the new company's shares; he was down to about 23 percent by the end of 2011. And in a September federal filing, Tutor Perini's board allowed Tutor to sell 100 percent of his stock if he chooses. "I hated every sale of stock I've made since the first one," said Tutor in a call last year.
BMO Capital Markets analyst Avram Fisher notes that Tutor Perini shares are trading at six times analysts' 2013 consensus earning estimates, while the company's peer firms are trading at 12 times their earning estimates. He says the valuation gap can be partly explained by investors' concerns over Tutor's personal business in Hollywood at the expense of the construction firm. "I think some of that fear is reflected in that multiple discount," says Fisher. And Tutor Perini is being hounded by a group of unnamed shareholders that has written to the firm and called for Tutor's removal as CEO because his Hollywood pursuits have become a "distraction," says Robert Ottinger, the shareholders' attorney. He says the bankruptcy proceedings of five film companies Tutor and Bergstein partnered on have exposed the CEO as someone with "poor business judgment. And he is the guy we supposedly trust with running this huge public corporation." Tutor Perini did not return phone calls seeking comment.
If Tutor could take back any part of his Hollywood experience, his business with Bergstein would likely top the list. They met around 2000, introduced by Bergstein's then-girlfriend, who had known Tutor through a "lady friend" of his, said Tutor in a July 2010 deposition. The then-sixtysomething Tutor began to frequent L.A. nightclubs with Bergstein, 22 years his junior. They met controversial producer (and now Grauman's Chinese Theatre co-owner) Elie Samaha, who also had a movie company and introduced them to Sylvester Stallone, John Travolta and others in Hollywood. Tutor and Bergstein's first venture into the movie business came with the creation and incorporation of film company R2D2 in November 2002; they'd later add ThinkFilm and Capitol Films to their stable of companies and would produce such movies as The Wendell Baker Story (2005) and Father of Invention (2010). But they've been sued for not paying back loans they received to finance films and now find their five companies mired in bankruptcies. It's not clear whether any of the movies made by Tutor and Bergstein has turned a profit, though it is likely that titles in their library that were added through acquisitions have been profitable. There have been high-profile debacles, such as David O. Russell's unreleased $26 million comedy Nailed, which the director walked away from in 2010 after production problems and disagreements with Tutor and Bergstein. In a February deposition, Tutor said he'd been "inundated" with legal fees related to the Bergstein ventures that have totaled more than $10 million during a period of about a year and a half.
In Hollywood, of course, there is a long history of rich outsiders coming to town, losing their money and returning home with their tails between their legs. But Tutor, who already had spent tens of millions of dollars on lawyers and legal settlements related to his dealings with Bergstein, instead decided to double down on the biggest of bets. Hollywood increasingly is wondering whether Tutor's investment in Miramax is fueled by simple vanity or whether he has a viable plan to create a lucrative next act for a company that counts 284 Academy Award nominations and 68 Oscars in its pedigree.
From the outset, some observers scoffed that the nearly $700 million Tutor and partners paid to Disney was too pricey for a library without an A-list franchise like Twilight or The Hunger Games to exploit and no Weinsteins (who partnered with supermarket investor Ron Burkle to try to reacquire their company) at the helm to generate future hits. Weinstein Co. COO David Glasser says that under the Weinsteins, Miramax would have been run differently. "It wouldn't have just been monetizing the library but growing it by adding new titles to it. For us and Ron Burkle, that's where we saw the value," he says. "Could you imagine in a perfect world if we had brought back the Miramax name through our company? We could have moved titles like The King's Speech to it. There is a business value in that. That [could have been] really interesting."
Since the acquisition, Miramax has, at least outwardly, remained quiet; its biggest moves have been brokering digital deals with the likes of Netflix and Hulu to generate revenue from the film library, which includes such titles as best picture Oscar winners Shakespeare in Love and Chicago as well as the Scream franchise. But there are diminishing returns on exploitation of a film library (just ask MGM), and many believe that the company will need to expand the collection to remain vital. Says a rival film executive, "I like the Miramax guys, but the question is the long-term plan." At the center of the uncertainty is Tutor, a man known by few in Hollywood. But those around Tutor say he knows what he's doing. "He is a man who knows what he wants and will work hard to get it," says James Robinson, the mercurial chairman of production company Morgan Creek, who was part of the Tutor-led group that eventually bought Miramax but dropped out for undisclosed reasons. "He's not a complicated man."
Tutor is a throwback. He uses coarse language in interviews, angrily dismisses those who disagree with him and has seemed wholly unconcerned with a reputation for business practices that have drawn the ire and scrutiny of commentators, public officials and peers. That win-at-all-costs approach to dealmaking has helped Tutor Perini secure lucrative contracts for massive projects such as L.A.'s Red Line, military contract work in Iraq and the forthcoming 13 million-square-foot Hudson Yards development on New York's West Side. But he's known in construction circles for the use of change orders, which allow a contractor to add items to the original scope of work and charge for those additions, inflating the costs of construction projects he has won by being the lowest bidder. These methods have led to speculation that Tutor has tried to cheat public agencies out of millions of dollars and gain influence from campaign contributions.
All this led Tom Bradley, then the mayor of Los Angeles, to say in 1992: "Ron Tutor is the greatest change-order artist that I've ever seen. He submits the low bid then makes it up on the change orders." And Tutor has been largely defiant.
"I told 'em to go to hell," he told the Los Angeles Times in 1993 when recalling a subway dust-up. Says attorney Nomi Castle, who has represented the businessman since 1974: "He very often does not suffer fools gladly. I have never once known him to do anything other than take total responsibility for the decisions that he makes and not blame others."
The stakes, of course, weren't always so high. Tutor, of Armenian descent, grew up the son of immigrants in Van Nuys, a middle-class suburban enclave in the San Fernando Valley. His father, Albert G. Tutor, who was an orphan, anglicized the family surname because people mispronounced or misspelled his last name, the Armenian word for "teacher." So Tutor's father chose an English word that was close enough.
In 1949, the elder Tutor founded the family construction business, A.G. Tutor Co., which built houses and small commercial buildings. While attending Van Nuys High School, Tutor worked for his father, "just trying to make some money like any other high school kid," he told THR last year. "Certainly at that time, the film business was not of interest to me." But Tutor has said in interviews that for a time, his mother oversaw the women's wardrobe department at Universal Studios, which sparked his curiosity in film. Tutor began working with his father full time after graduating from USC in 1963 with a degree in business. According to a 1999 profile in the trade publication Engineering News-Record, Tutor's resolve stems from a rocky stretch shortly after he began working for the family business at age 23. Tutor's younger brother died in a car crash, and two years later, his father left the business to fight cancer (the elder Tutor died about a decade ago). Then subcontractors he knew went belly-up. "I kind of declared a blood oath to myself: That would never happen to me," he told the News-Record.
The family business grew quickly under the younger Tutor. In 1972, he partnered with N.M. Saliba Co. to create Tutor-Saliba Corp. During the 1970s, Tutor began joint venturing with Framingham, Mass.-based construction firm Perini Corp. In 1997, Tutor and investors took over the company, and he eventually would become CEO. In 2008, publicly traded Perini acquired Tutor-Saliba in an $862 million deal. With revenue of $3.72 billion and nearly 8,000 employees and 20 offices throughout the U.S. and its territories, Tutor-Perini's gross profit was $395 million in 2011.
Ranked by revenue, the company is the 15th-biggest contractor in the country, contributing tens of thousands of dollars over the years to philanthropic causes like college scholarships for engineering and construction-management students as well as spending on influential lobbyists. According to the Los Angeles City Ethics Commission, in 2010, while trying to win a contract for construction at Los Angeles International Airport, the company worked with controversial lobbyist Richard Alatorre, a former Los Angeles City Councilman who had previously pleaded guilty to felony tax evasion. Tutor, a registered Republican who has supported Democratic candidates, has backed former L.A. Mayor James Hahn and L.A. City Councilmembers Jan Perry and Richard Alarcon, among other local politicians. "He throws around a lot of money, and these people live off of money to keep their game going," says Ron Kaye, former editor of the Los Angeles Daily News, which long has covered Tutor's firm. "His influence in the city and the county is enormous."
Through the years, newspaper stories have suggested that campaign contributions by Tutor and his company have influenced the votes of officials who have approved change orders or new projects for Tutor Perini. During the early 1990s, representatives for Los Angeles County Supervisor Deane Dana voted to approve $45.8 million in change orders for Tutor Perini predecessor company Tutor-Saliba's subway work; at the time, the company was Dana's biggest campaign contributor, doling out $28,000 for his re-election effort, according to a December 1992 L.A. Times story. And in a controversial January 2003 decision, after Tutor, his employees and their spouses gave more than $200,000 for Hahn's 2001 mayoral campaign and the 2002 Hahn-led effort to stop the San Fernando Valley's secession, the city awarded Tutor-Saliba a $34 million Van Nuys Airport parking garage and bus shuttle terminal project, even though the firm was locked in a legal battle with the MTA over the subway and was considered by some airport staffers to be unfit for the job, according to a January 2003 L.A. Times article.
Tutor-Saliba's subway litigation with the MTA, which began in 1995, still lingers. The construction company initially sued the agency for $16 million it said it was owed for unanticipated expenses, but a cross-complaint from the MTA argued that Tutor-Saliba was demanding money for illegitimate claims (there have been two trials and judgments in favor of both parties). If Tutor's company loses its most recent appeal of a 2006 jury finding that the firm violated the California False Claims Act, municipalities could use the violation as a reason to not award the company future government contracts. And since 2010, Tutor has been engaged in a nearly $500 million legal fight with MGM Resorts International, a co-developer of Las Vegas' CityCenter project, over construction of a flawed hotel and condominium tower. Engineers hired by MGM Resorts have said the 26-story Harmon Hotel, which was supposed to have topped out at 47 floors, would likely collapse in a strong earthquake. Tutor Perini has argued it can be fixed. The stunted Norman Foster-designed tower stands empty, serving as an expensive billboard for Las Vegas buffets and nightclubs. "I wouldn't do business with MGM again if they were the last owner on the planet," Tutor told the Las Vegas Sun in 2010.
As he has waged his legal wars, Tutor has paid himself a handsome salary. According to Tutor Perini filings, his compensation in 2010 was $9 million. As part of a five-year employment contract Tutor signed with the company in 2008, he receives 150 hours of annual personal flying time in the company's 737. Other perks include an apartment in Las Vegas and a car and driver (Tutor is chauffeured in a GMC Denali SUV). Currently, Tutor's driver is Paul Barresi, who long worked with Anthony Pellicano as a private investigator and until 2006 was a director, writer and producer on such pornographic films as Frat Boys on the Loose 7 and Leather Bears and Smooth Chested Huskies. (Tutor said in a November deposition that many years earlier, he employed Barresi as a personal trainer; Barresi could not be reached for comment.) According to Tutor's close friend, entrepreneur John Rockwell, the businessman recently commissioned upgrades to the 737 -- which has two bedrooms and a marble-appointed interior -- making it even more opulent. "He knows how to travel in style," says Rockwell, who was introduced to Tutor by Los Angeles Clippers owner Donald Sterling about five years ago.
It's clear that Tutor enjoys the trappings of his success. His estate in the gated community of Beverly Park is an upgrade from a $10 million residence in Hidden Hills that he has listed for sale and previously rented to Britney Spears after his new digs were completed last year. And since the Cannes Film Festival, he has jettisoned the 197-foot Pegasus II, upgrading to the 258-foot, Danish-built Pegasus V, recently ranked by SuperYacht Life magazine as the 75th-largest in the world. He also has given $30 million to alma mater USC for a campus center that bears his name.
In spite of the opulence Tutor cloaks himself in, Rockwell says the mogul is unfussy, even "down home." He says that Tutor enjoys meals at Monty's, a modest steakhouse in Woodland Hills, and Ristorante Peppone, an old-school Italian restaurant in Brentwood. Rockwell says Tutor is "very bright. He's a big reader." He says Tutor's generosity is unending: "He's been so good to me. I can't tell you how good." But even Rockwell knows where to draw the line with his good friend. Rockwell once tried partnering with Tutor on a private club on the Sunset Strip in West Hollywood that would have taken the place of the shuttered Le Dome restaurant, which had counted Tutor as an investor. But the deal didn't work out. And the experience helped Rockwell realize something: "Ron is pretty tough in business. It'd be better to be his friend rather than do business."
The glamour of show business long has been most attractive to Tutor, say several sources. In addition to his dealings with Bergstein, the father of three grown daughters and a son has a decadelong tradition of attending Cannes, where he is known for his lavish parties. Says Clark Hallren, managing partner of Clear Scope Partners, a Century City-based entertainment advisory firm: "Many people who have made fortunes on nuts-and-bolts businesses are often attracted to what I term the nonfinancial return of being in the movie business."
For much of the 1990s and 2000s, Miramax rode a wave of success and reinvented the independent film business. Led by the cantankerous Weinstein brothers -- who sold their company to Disney in 1993 for $60 million but remained at the helm until 2005 -- Miramax regularly turned out Oscar winners. The company, founded by the Weinsteins in 1979 and named after their parents, Miriam and Max, was created to distribute films the major studios didn't consider commercially viable. Along the way, Miramax wound up becoming home to plenty of commercial smashes.
This impressive history made the 2010 purchase of the company by Tutor and partners a true surprise, in part because they outbid the Weinsteins and another high-profile duo, billionaire investor brothers Tom and Alec Gores. Both groups offered about $600 million for the company. The deal -- struck in July 2010 and completed in December 2010 -- raised eyebrows because of Tutor's relative inexperience and his legal troubles.
"The film business to me is purely business," he told THR when asked why he was interested in Hollywood, "even though I've always loved the movies and film."
Tutor may love movies, but he hasn't made or acquired any at Miramax. Instead, the focus has been on inking distribution deals. Under Lang, a former News Corp. executive who helped put together the video streaming website Hulu, Miramax closed deals that will generate $325 million in revenue during the next several years, including a Netflix streaming arrangement said to be worth more than $100 million. Such deals were of paramount importance because they provided Miramax with the necessary revenue stream to attract banks that would refinance the company. "I could see why people felt that they overpaid [for Miramax]," says Hallren. "But it appears that with what they've done, that might not be the case."
Besides Barrack's Colony Capital private-equity firm and Lowe, the other major investor in Miramax is Qatar Holding Llc., the investment vehicle of the Qatari royal family. But the size of the various owners' investments is not clear. In all, they contributed about $200 million to the entity, with the remaining funds coming from a group of banks led by Barclays Plc. Qatar Holding has the biggest stake in the venture, though Tutor is the largest individual investor. Lowe's stake is said to be small, and well-placed sources consider his involvement an attempt to add celebrity sheen to the group and burnish his business credentials as he plots a foray into politics. Lowe declined comment. Published reports and sources indicate that Tutor put up his own aforementioned $50 million for the transaction, though the refinance by Miramax in late 2011 with Barclays Capital and Jefferies Group allowed Tutor and others to recoup a large portion of their investments. The $550 million bond offering originally was slated to result in a dividend of about $142 million for investors, though they were expected to be paid less than planned, according to a December Bloomberg report.
When Tutor and partners acquired Miramax, there was hope from the independent film community that the firm would get back into the business of producing and distributing movies. At the start, there were signals that Miramax would do this. The Santa Monica-based company, which maintains a staff of about 50, hired former Focus Features executive Dylan Wilcox to handle acquisitions. It brought on producers Zanne Devine (Easy A) and Adam Fields (Donnie Darko) as consultants. Agents at major talent agencies say that Wilcox and others attend film festivals and take in screenings but don't make offers on acquisition titles.
There is evidence, however, that Miramax is interested in expanding its library through acquisitions. In late 2011, it tried to purchase Summit Entertainment, which ultimately was bought by Lionsgate for $412.5 million in January. With a library of about 50 films, the Twilight studio would have provided Miramax with an infusion of new product.
"There needs to be some kind of renewal of the library in order to keep it viable and fresh. I don't think at the time they acquired [Miramax] they knew how they were going to do it," says a film-finance source who believes that under Lang, Miramax had no intention -- at least in the immediate future -- of making new movies. That decision was stunning, says this person, because at the time of the sale, the company had about 300 movie projects in development and rights to about 90 books. The new regime did cut a deal in December 2010 with The Weinstein Co. that gave Tutor and partners an option to co-finance eight sequels to Miramax films, including Rounders and Bad Santa. "Ron was very open and very fair about trying to do something with us," says Glasser. "Even on the eight titles, they reached into the till and were good partners with the idea to do these eight together and make some business. We had nothing but a great experience." However, sources say Miramax does not plan to exercise those options.
The departure of Lang signals that the direction of the company could be changing. Several sources say Lang was never part of management's long-term plans for Miramax; instead, he was brought on board to shepherd quick digital deals that would ensure the refinance. He did not return phone calls seeking comment.
With the digital business in order, management could turn to film acquisitions and production -- or even a sale of the company. While Hollywood tries to make sense of Tutor and his partners' plans for Miramax, he and his colleagues have a decision to make that will go a long way toward illuminating the company's new path. Whether the next CEO hired has production credentials will signal the firm's intended course. In the interim, Miramax's CFO, Steve Schoch, now serves as CEO, though sources say much of the decision-making power rests with Nanula, chairman of Miramax's board and a principal at Barrack's Santa Monica-based Colony Capital. The company remains guarded -- it would not confirm the members of its board of directors, and Nanula and Barrack declined comment -- but according to sources, Tutor is not involved in day-to-day operations. Still, Tutor told THR that in overseeing Miramax, he talks regularly with Barrack and Lowe, and the trio has a "businesslike yet friendship-based relationship."
There is one old friend of Tutor's who almost certainly is not consulted regularly: Bergstein. It was Tutor's buddy Bergstein who brought the Miramax deal to Tutor and was involved in negotiations -- Tutor said in a July 2010 deposition that he paid Bergstein on an hourly basis to consult on the transaction -- but their relationship soured under the weight of lawsuits and the 2010 involuntary bankruptcies of the film companies they co-owned. In May, for example, Tutor and Bergstein settled a $108 million lawsuit filed on behalf of the now-defunct New York hedge fund D.B. Zwirn, which had been a primary backer of the partners' film ventures. The settlement was worth $75 million, according to court filings. And more legal action looms. They no longer work together. "And we're hardly what you'd call business associates or friends any longer," said Tutor in a February deposition. Tutor is the largest creditor in the bankruptcy of the film companies he co-owned with Bergstein, but if Tutor is declared an "insider," he would be unable to pursue his claims. He said in the deposition that he has spent $1 million a month in legal fees during the past year to deal with matters related to Bergstein, which also have included a settlement and a pending case with lender Aramid Entertainment Fund. Bergstein declined comment.
While his troubles with Bergstein wind their way through the courts, Tutor continues to sell Tutor Perini stock as the share price drops. In a March conference call with analysts, Tutor addressed the sales, saying, "Well, the problem is I'm in escrow that has now been delayed twice in closing on my movie assets," without elaborating on the nature of the deal. In a March transaction, Tutor sold stock at $13.62 a share, down 31 percent since the sell-off began in August 2010 at $19.81 a share. In an August call with analysts, Tutor said that after he satisfied one more agreement, he did not "intend to sell any stock at these ridiculous numbers."
If Tutor's record in the construction business is an indication, despite his busted ventures with Bergstein and a less-than-roaring start to his Miramax tenure, the businessman can't be counted out in Hollywood. Bert Fields, a prominent entertainment attorney who represents The Weinstein Co., says Tutor's legal issues -- both with Bergstein and in the construction business -- probably have given some people pause, but he doesn't believe Tutor has lost deals in Hollywood because of the reputation he has earned. "All of us have to live or die with our reputations," says Fields. "But I don't know that it hurts him."
And Hallren notes that the standards in the entertainment business are simple: "If your check clears, that's all that matters."
THE MIRAMAX FILM LIBRARY: Highlights of the 700-plus-title cache
- Scary Movie: $640 million (three of the four movies)
- Scream: $507 million (three of the four movies)
- Spy Kids: $463 million (three of the four movies)
THE TOP OSCAR WINNERS
- The English Patient: 9
- Shakespeare in Love: 7
- Chicago: 6
- The Aviator: 5
- No Country for Old Men: 4
- The Piano: 3
- Life Is Beautiful: 3
- Master and Commander: 2
- Good Will Hunting: 2
- There Will Be Blood: 2