Ronald Tutor: No Miramax for Bergstein
Mogul breaks silence in exclusive THR interview
Ronald Tutor has always loved going to the movies.
As a child growing up in a close-knit Armenian-American family in the San Fernando Valley, he not only saw films but got a taste of business through his mother, who for a time headed the ladies' wardrobe department at Universal Studios. Eventually, however, he followed his father into the construction business, where he went on to make his fortune.
Now Tutor, who is chairman and CEO of Tutor Perini construction, has committed to personally investing about $200 million in partnership with Colony Capital and others to purchase Miramax Films from Disney for more than $650 million.
In an exclusive interview with THR, Tutor unleashed a bombshell: There will be no role in the new theatrical distribution company for the controversial David Bergstein, with whom Tutor has been investing in movies and movie companies for the past seven years.
In a rare, wide-ranging discussion (excluding Miramax deal details that fall under a nondisclosure agreement), Tutor, 69, did not mince words about his former partner, making clear that the relationship with Bergstein is "strained" while expressing pity for his former friend and his failings.
"There's something very nice about (Bergstein) when you meet him, he's very charming," Tutor said. "But as I've told him a number of times, he needs to look inward. All the sick things he did, gambling money he didn't have, trying to grow a business he didn't know and borrowing the way he did, and the madness, to sum it up, of what took place, he's got to learn from it because it virtually destroyed him. If you don't learn from your mistakes, you just continue to make them."
It was Bergstein who got Tutor into the movie business after they met as neighbors in the upscale Hidden Hills gated community.
Tutor, twice divorced, and Bergstein, then unmarried, became social friends first. They met Elie Samaha, who had parlayed a dry cleaning business into a nightclub empire and then a movie company. When Samaha's Franchise Films ran into money problems, he received an investment of about $5 million from Tutor and Bergstein, one that was guaranteed by Samaha's library of films. When Samaha couldn't meet his obligations, Bergstein foreclosed -- and that became the basis of his entry into the movies.
Tutor remained a mostly silent partner, busy with his global construction business. Tutor Perini is ranked by Fortune as the 432nd largest U.S. company, and it is one of the two or three largest contractors doing business with private industry and government, both at home and abroad. Known as a workaholic, Tutor nonetheless found time each May to attend the Festival de Cannes with Bergstein, staying aboard Tutor's yacht Pegasus, which sports six staterooms named after Greek isles and an eight-foot, drop-down projection screen. The yacht was recently valued for sale at $56.9 million, but Tutor said that's a mistake and he now has no intention of selling.
For his part, Bergstein, who came out of the distressed asset business, began looking for distressed assets among movie companies, with a vision of gathering a huge library of movies that would be of ever greater value in the digital age. In 2006, that led to he and Tutor investing to buy the venerable London-based Capitol Films and the smartly run indie ThinkFilm, which netted Oscars for the documentary "Taxi to the Dark Side" and "Half Nelson."
However, what started out as a grand vision spiraled into controversy, losses, lawsuits and a federal involuntary bankruptcy proceeding, costing millions -- most of it money Tutor invested or guaranteed -- even as the Tutor Perini business continued to grow.
Now, even as Tutor pays attorneys millions to defend those suits, including one against defunct New York hedge firm D.B. Zwirn and the bankruptcy action that entangles them and related companies, he remains determined to play an even bigger role in movies.
Bergstein, 48, did not return a call seeking comment on this report.
Tutor vows he will do what he must to clean up the mess. "Whatever went wrong, I take responsibility," he said, "even though I wasn't involved. I was too busy. But even being as passive as I was, I have to take responsibility. And in spite of what it may ultimately cost me, I've still got a lot of money."
That he has. A recent report put Tutor's personal worth at more than $700 million, and that's probably conservative. His 2009 salary was $1.5 million, but a bonus and stock grants inflated that total to more than $11 million. That isn't out of line for a company the size of Tutor Perini, which had 2009 revenue of $5.2 billion, net income of $137 million and as of March an order backlog worth more than $3.7 billion.
Tutor sorrowfully said Bergstein's finances are a different story. "David, with whatever he did, wiped himself out," he said. "He has nothing remaining and he's a young man with a wife and a couple small kids who lost it all. It's very hard to be angry or vindictive to someone in that position. It's not a part of my makeup."
Now, although he vowed just nine months ago that he was done with movie investments, Tutor is plunging in deeper than ever. "I was always fascinated with the business and developed a curiosity," he said. "Now a lot of that curiosity was put to bed, frankly, with David Bergstein and our role together. Really, and unfortunately, a lot of negatives came out of it. But as a result of what I learned, most of it the hard way and expensively, I suppose that's what led me to valuing the Miramax library as I did."
When news of the bid broke in March, it was Bergstein who was seen as bidding, with Tutor again his silent partner. As opposition mounted to their involvement, Bergstein shifted to adviser. In mid-June, Bergstein's role was quietly diminished again when Tutor brought into the deal as a partner his friend of two decades, Thomas Barrack Jr.
Barrack is the CEO of Colony Capital, a well-heeled investment firm he founded in 1991, most famous in Hollywood until now as a lender to Michael Jackson and later to photographer Annie Leibovitz.
Tutor won't discuss the Miramax deal, and Colony declined comment, but sources said they have tentatively agreed to jointly invest in excess of $300 million between them to buy Miramax.
The price has raised eyebrows after a parade of earlier potential investors walked away because of Disney's demand for a price close to $700 million for assets several sophisticated buyers felt were hardly worth $500 million.
Even that valuation seemed high without the participation of Harvey and Bob Weinstein, the brothers who founded the company and were pushed out in 2008 by Disney. Sources close to the Weinsteins insist they have an iron clad exit agreement that requires any buyer to get their cooperation in order to make sequels out of the two dozen or so franchise movies in the library.
The Weinsteins, backed by L.A. investor Ron Burkle, came close to a deal for Miramax themselves until Burkle at the last minute reduced what he was willing to pay to about $575 million because he didn't think the assets were worth what Disney was demanding. That prompted Disney to end the talks.
Sources who discussed it with the Weinsteins said they have no intention of working with the Tutor-Colony group. That apparently doesn't faze the new buyers, who according to sources don't believe they need to work with the Weinsteins to do the deal or to make sequels.
While Bergstein won't be part of the new venture, Tutor confirmed he is still paying out of his pocket for their expensive legal battles (with the exception of Bergstein's lawsuits over Las Vegas gambling losses). Tutor said he frequently is asked why he still associates with Bergstein, who has created a complicated maze of some 75 interlocked corporations, five of which are subject to the involuntary bankruptcy.
"Everybody asks me that," Tutor said. "I would say our friendship is very strained. We don't spend any social time together any more."
In the bankruptcy case started in federal court by creditors in March, Tutor is fighting to avoid being questioned under oath, claiming he was a passive investor with no knowledge of the operations controlled by Bergstein, who operates as CEO of the umbrella company Pangea Media Group.
On July 6, bankruptcy court interim trustee Ronald Durkin wrote in a filing that he doesn't believe Tutor, saying his claim is "implausible in light of Tutor's role as guarantor of more than $50 million in allegedly unfilled loan obligations."
"Tutor," added Durkin, a former FBI agent, "undoubtedly has extensive knowledge of the financial affairs."
"He wants to depose me but I have nothing to do with any of the issues," Tutor insisted. "But I won't be harassed by lawyers. I didn't sit in one meeting. I went in our office one time in three years. I'm a passive investor who had no idea what was going on. I've paid that price. I pay off all my guarantees, and I pay the bill when it's my bill."
Tutor is angry with David Molner and Aramid, which provided bridge loans for movies including "Love Ranch" and "$5 a Day" and has been a leader in gathering creditors and fomenting the involuntary bankruptcy.
"Aramid and David Molner are not good people," Tutor said. "And I think they will get theirs as part of this bankruptcy. What they've done is wrong, and in time it will come out."
"They assumed for some reason I won't involve myself and they'd simply crush Bergstein and take whatever assets they could," Tutor added. "But to think I'd stand by while assets I'm responsible for, that I've signed guarantees and have been paying off, that I would stand by and idly have them do it, they have been very foolish. It's one thing to be difficult and tough. It's another to outright lie."
Tutor isn't predicting complete vindication from the involuntary bankruptcy case but does think "what Aramid did was reprehensible. And it cost me a lot of money, where it could have been on a much higher plane and much more decently done. They took the low road, and when the smoke clears, they'll get their punishment."
"The simple, recurring truth that Tutor and Bergstein cannot dispute is this: They and the various entities they control defaulted on tens of millions in loans, corporate guarantees and personal guarantees to Aramid and others," Molner said. "They can continue to blame everyone else, cry foul, kick up dust and throw out ever more creative excuses, but bankruptcy is not an infinite process, the facts are not on their side and they will be held accountable for their actions."
Although Tutor joined with Bergstein to sue D.B. Zwirn, he isn't as angry with them. "Zwirn contributed to it, without question," Tutor said. "Many of the things they did were reprehensible. They kept pushing money at him, lending money and making written promises to finance this film and that film and then at 11:59 bailing out and leaving (Bergstein) high and dry. They have some responsibility, but a prudent businessman doesn't bank his entire business life on a hedge fund, of all people."
Tutor has proved he knows how to build a business. A self-made man, he was born in Sherman Oaks and after attending USC grew his dad's small construction company into a giant enterprise. He always had jobs as a kid, like working as a bag boy in a grocery, even as he played high school football and baseball.
Tutor worked his way through USC studying engineering and business, a period he recalled fondly. He has since become a major contributor and member of the USC board of trustees. A campus engineering building bears his name, and the $150 million Ronald Tutor Campus Center will be dedicated soon. He even teaches an occasional class there.
Tutor said he also is family-oriented despite the two divorces. He spoke warmly of his four children and five grandchildren, calling himself "a fortunate guy."
Tutor noted that he has learned from his mistakes. For instance, when he became pals with Bergstein nearly a decade ago, one of their first investments was in several restaurants and nightclubs, including the iconic Sunset Boulevard industry hangout Le Dome. It was a financial disaster.
"I was fascinated with them," Tutor recalled. "Then I learned I didn't know anything about it or how to run them or what to do, so I quietly folded my tent and wrote off my losses and said that's a business I don't know anything about."
What Tutor knew was construction, down to the last detail of every contract. In 2008, he merged his privately held Tutor-Saliba with Perini Corp., a Framingham, Mass.-based construction giant that had run into trouble until Tutor bailed it out. Under the sale agreement, Tutor, as 98% owner of Tutor-Saliba, received a cash dividend of more than $45 million and ended up with about 43% of the combined public company, a stake now worth about $374.6 million and held through two trusts he controls.
One of the perks of being CEO is that Tutor jets around the world in a specially outfitted Boeing 737, for which Tutor Perini contributed $40,270 last year. Other corporate perks, according to SEC filings, include $14,400 for vehicle use, $127,000 for accounting and tax services and contributions to his medical, dental and life insurance. But don't look for a computer in Tutor's office; he doesn't like using them and has assistants print out whatever he needs.
SEC filings also list a number of lawsuits facing Tutor Perini, which is not necessarily a surprise for a corporation its size. One has become very personal to Tutor, however: A 15-year battle with the Los Angeles County Metropolitan Transit Authority over subway construction problems.
Tutor said the MTA once offered him a $4 million settlement but he made the mistake of turning it down. Now the organization claims Tutor owes it millions as its legal bills have ballooned past $34 million.
"And the case now comes down to one side or the other winning maybe a million dollars," he said. "That case is a couple of our favorite public servants who don't like me and decided to punish me with public money."
An MTA spokesperson declined comment.
Nick Patsaouras, a former MTA head who for the past three years has led oversight on construction of a L.A. police station built by Tutor Perini, said he found Tutor "tough but fair" and willing to work with clients to solve problems rather than string them out to make more money. However, "if (Tutor) feels wronged," Patsaouras said, "he'll go to the hilt to defend himself. Sometimes his Armenian blood takes control of him. That was the case with the MTA lawsuit."
Patsaouras warned that anyone who becomes Tutor's partner "should be aware he's not investing for the fun of it. He will be involved. He has his private jet and all that, but whoever is his partner better know it's not, 'Oh, he's a millionaire who just want
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