9:52am PT by Matthew Belloni
'Bones' Producer Sues Fox for "Accounting Chicanery," Claims Top Execs "Threatened" Him
Last November, top 21st Century Fox executives Rupert Murdoch, Lachlan Murdoch and Peter Rice joined the cast and crew of Fox's veteran crime drama Bones for a celebration of its 200th episode on the studio lot in Los Angeles.
Today, the Murdochs and Rice likely won't be as festive.
Bones executive producer Barry Josephson has filed a bombshell lawsuit against the Fox network and the parent of studio 20th Century Fox Television, claiming he's been shortchanged due to Fox's "unrelenting efforts" to cheat him out of his share of profits from the longest-running hourlong drama in Fox's history. He also says he was "fraudulently threatened" by Rice and other execs into accepting a lower license fee from Fox or else face immediate cancellation of the show. The complaint, filed in Los Angeles Superior Court and obtained by The Hollywood Reporter, seeks unspecified damages on breach of contract, fraudulent inducement and other claims.
Josephson, a prolific film and television producer, has been with Bones through all 11 seasons and 206 (and counting) episodes. He claims in the suit he brought the Bones property to Fox, discovering the book on which it's based, partnering with showrunner Hart Hanson, casting stars Emily Deschanel and David Boreanaz, and serving as its executive producer on every episode.
But thanks to "Hollywood accounting" (which the complaint, in a nice touch, says "is so commonplace as to be cliche"), Fox underreported millions of dollars in revenue, which was revealed in an audit Josephson initiated of the first seven seasons of the show. "Simply put, the audit uncovered a veritable mother lode of accounting chicanery and self-dealing," the suit claims, hinting that tens of millions of dollars could be at stake.
Specifically, Josephson alleges Fox failed to report nearly $20 million in foreign TV licensing fees, revenue from Fox.com and Hulu (co-owned by 21st Century Fox) and other sources. In addition, Fox is said to have misclassified $8 million in electronic sell-through monies as "home video" revenue (which would give Fox an advantage in accounting to profit participants).
Josephson is hardly the first producer to call B.S. on studio accounting. Profit participation claims are fairly common among the upper echelon of talent in Hollywood (meaning those with the wherewithal and financial incentive to initiate the time-consuming and expensive process of interpreting a complex contract and auditing). For instance, Josephson claims his deal for Bones contains a profit definition 45 pages long (11 pages of which form a glossary of defined terms).
In the suit, Josephson lays out his right to Defined Modified Adjusted Gross Receipts, known among talent lawyers and business affairs execs as MAGR, which reduces his share of profits by distribution fees, administration fees and the cost to make the show, among other charges. Fox is said to have improperly classified certain revenue to advantage itself in reporting to talent. For instance, "it is better that an expense be classified as a Production Charge (which earns a 12.5 percent fee) rather than a Distribution Expense (which is simply passed along to profit participants," according to the suit.
In addition, Josephson alleges a so-called "vertical integration" claim, meaning 20th TV, which produces Bones, is said to have cut a sweetheart deal with Fox Broadcasting, valuing the show at less than its market worth in order to screw profit participants such as himself. Josephson claims this self-dealing applied to licensing deals with Fox-affiliated companies throughout Europe.
Perhaps most interestingly, the complaint also alleges some pretty significant strong-arming behind the scenes at Fox. In 2009, Josephson claims Fox executives, including 20th TV chairmen Dana Walden and Gary Newman (who now also run FBC) and top TV executive Rice "fraudulently threatened" him and other profits participants (including the talent agencies ICM Partners and WME) to accept a reduced license fee of $2 million per episode for seasons five and six of the show or it would be canceled. Hardball negotiations are common in the TV business but the execs are said to have lied to Josephson, telling him that other profits participants had agreed to the reduced license fee to bring the show back while the others, including Boreanaz and Deschanel, had refused to sign. Similarly "fraudulent" tactics were employed on the season seven and eight renewal, the complaint alleges.
The suit doesn't specify damages but it's safe to say Josephson believes he's owed millions of dollars. The suit is peppered with little tidbits evidencing the show's extremely high value to Fox over the years. New 21st Century Fox CEO James Murdoch is said to have personally told Josephson that Bones is "perhaps the most profitable show in Fox's history." (Hmmm. More profitable than The Simpsons? If Josephson is allowed to explore Fox's books in the litigation, perhaps we will all find out.)
The complaint alleges causes of action for breach of contract, inducing breach of contract, breach of the implied covenant of good faith and fair dealing, intentional interference with contract, unfair competition, fraudulent inducement, declaratory relief and accounting.
The suit was filed by attorneys Dale Kinsella, Chad Fitzgerald and Aaron Liskin at Santa Monica's Kinsella Weitzman Iser Kump & Aldisert.
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