Legal troubles for Capitol execs
Bergstein, Tutor being sued for $120 millionMore AFM news
Even as Capitol Films pursues international sales for a slate of movies at AFM this week, legal battles for the men who head the company are heating up.
In the latest salvo, executives behind defunct New York hedge fund D.B. Zwirn, which provided most of the money to David Bergstein and his partner Ron Tutor to make and sell movies, filed suit Monday for reimbursement of about $120 million. That money was used by the pair to acquire Capitol for $30 million and ThinkFilm for $25 million as well as to operate a series of companies and produce movies involving high-profile directors and stars.
Bergstein, whose banner now is Pangea Media Group, and Tutor, the Los Angeles-based millionaire behind Tutor-Saliba, one of the largest U.S. construction firms, provided personal guarantees on the loans that appear to put them on the hook for more than $65 million. That's according to the lawsuit filed on behalf of D.B. Zwirn Special Opportunities Fund; its subsidiary Bernard National Loan Investors of the Cayman Islands; and Hemlock S.A.R.L. of Luxembourg, which was set up to collect money owed Zwirn by Fortress Investment Group, which acquired the defunct fund in April.
The suit is the latest in a string of legal actions against Bergstein and Tutor and related entities. They already have lost ownership of several movies because they defaulted on production bridge loans made by Aramid Entertainment Fund, a Cayman Island company that operates out of London and now has the low-budget hit "Paranormal Activity."
The movies that Aramid, which has lost more than $20 million, has taken full or partial control of include Taylor Hackford's "Love Ranch," starring Helen Mirren and Joe Pesci; "The Edge of Love," starring Keira Knightley; "$5 a Day," starring Christopher Walken and Sharon Stone; British horror movie "Bad Meat"; and the thriller "Black Water Transit," directed by Tony Kaye and starring Stephen Dorff and Laurence Fishburne.
Aramid terminated its right to sell or license those movies, but Capitol/Pangea is selling foreign rights at AFM to "Love Ranch" and "$5 A Day," apparently trying to raise money. Aramid's spokesman declined comment but indicated plans for additional legal action.
Capitol no longer is actively selling "Transit," which it unveiled as a major property two years ago at Cannes. When Kaye finished editing the film, Bergstein refused to take delivery, reportedly because he considered it unreleasable. He sought compensation from completion bond company CineFinance, claiming the budget had ballooned to about $48 million, which could not be recovered.
CineFinance, meanwhile, was acquired by HCC Insurance Holdings of Houston, which eventually negotiated a settlement with Bergstein for an estimated $15 million. That included payments to Aramid, most of which have not been made.
As part of the deal, Bergstein also promised to finish "Transit" so it could be sold but did not do so. Another producer involved said it is finished but is so muddled that it can't be released. Aramid, which held a bridge loan, repossessed its interest in that negative as well.
There are other movies Bergstein's companies did finance that might be releasable, including "Nailed," a $33 million production directed by David O. Russell and starring Jake Gyllenhaal, Jessica Biel and Tracy Morgan. "Nailed" was shut down several times during production by SAG and the DGA, but Bergstein resolved the concerns of those guilds.
Matthew Rhodes, a producer on "Nailed," said there are funds for postproduction, and "Nailed" will be offered to domestic distributors and international buyers next year at Cannes. He called the movie "fantastic" and "wonderful."
According to the latest suit, Zwirn specialized in unusually risky loans seeking high returns. Between 2004-07, Zwirn and subsidiaries loaned Bergstein/Tutor companies $51 million, $23.2 million, $29.4 million and $16 million.
In mid-2008, according to the suit, Bergstein/Tutor stopped making payments on the loans and soon went into default. The filing also says Tutor did not deliver evidence of his financial assets as required, though it notes he previously showed a personal worth of at least $800 million. Tutor is said to have personally invested more than $40 million before he stopped funding.
All the loans have swelled with the addition of interest charges and the claims for legal cost reimbursement. Pangea has offices in Westwood and employs about 50 people.
Calls to Tutor, who has said he is a silent partner in the movie business, and an attorney at Capitol/Pangea said to represent Bergstein were not returned by press time.