Troubled 'Black Water Transit' sold at auction

6:34 PM PST 06/11/2010 by Alex Ben Block, AP

Unreleased thriller was valued in legal papers at $26 mil

The troubled history of the unreleased thriller "Black Water Transit" took another twist on Friday when ownership of the movie valued in legal papers at $26 million was sold for a $2 million credit in a foreclosure auction opposed by a lender and the federal bankruptcy court trustee overseeing five companies controlled by embattled financier David Bergstein.

The movie was sold at an auction in a west L.A. law office by Library Asset Acquisition Company (LAAC), whose ownership is confidential, but believed to be Bergstein and sometime partner Ronald Tutor, the construction company executive who is backing a Bergstein advised $650 million bid for Miramax.

The buyer was a newly formed company called Black Water Transit Acquisition Company whose ownership is as murky as the plot of the movie, but appears to be Bergstein and Tutor. In the notice of the sale, buyers were told to contact Bergstein's lawyer Ray Reyes, who also signed papers on behalf of the buyer. Reyes told THR the identify of the seller and buyer was confidential.

Bergstein has a history of buying properties out of foreclosure, even when it has involved his own companies, for a fraction of the real value, having eliminated all legal and debt obligations through the sale process. He is then free to re-sell or market the movie without paying lenders, mortgage holders or others.

LAAC was apparently created by Bergstein and Tutor after they made a partial $45 million payment earlier this year on a debt owned to bankrupt New York hedge fund D.B. Zwirn (who claimed to be owed over $100 million). Tutor previously confirmed to THR he put up that $45 million. Since LAAC was technically a lender, they were able to bid $2 million Friday as a "credit," which means they took it off what they were owed without actually paying any cash. LAAC then transferred ownership of Black Water Transit to the new entity.

There is also another legal entanglement.

Both the sale and purchase involved Aramid Entertainment Fund, which made loans toward the production of the movie, but is now involved in litigation with Bergstein, Tutor and related entities. Aramid strongly objected to the sale of BWT because they said their rights were not being protected and that the sale would violate the bankruptcy laws, because five companies controlled by Bergstein are the subject of an involuntary bankruptcy action. Aramid has been one of the prime movers among the creditors bringing that action in federal court in Los Angeles.

A lawyer for interim bankruptcy court trustee Ronald Durkin also strongly opposed the foreclosure sale Friday because he had not been consulted or given approval. Jeffrey Garfinke, an attorney with Buchalter Nemer, who was the agent handling the foreclosure sale, said on the record Friday that it was the opinion of his clients (LAAC) the sale had nothing to do with the bankruptcy action. He called the objections by Durkin "untenable, unsupportable and frankly idiotic."

An attorney for Aramid, Eric Harbert of Stroock & Stroock, attended and noted the objections of his client, who he said reserved all their legal rights to challenge the sale later.

Also attending was David Ahdoot, an attorney representing SAG, the DGA and WGA, who also objected to the sale and reserved legal rights to file a challenge. Ahdoot referred all questions to the guilds, whose spokesman declined comment.

There were no other bidders for the movie, a crime drama based on a novel by Carsten Stroud, directed by Tony Kaye ("American History X") and starring Laurence Fishburne, Stephen Dorff, Brittany Snow and Karl Urban.
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