David Bergstein Settles Hedge Fund Lawsuit for $70 Million (Exclusive)
The beleaguered movie financier and partner Ronald Tutor have reached a tentative resolution of a $108 million lawsuit filed on behalf of the now-defunct New York hedge fund D.B. Zwirn.
Beleaguered movie financier David Bergstein and his business partner Ronald Tutor have reached a tentative resolution of a $108 million lawsuit filed on behalf of the now-defunct New York hedge fund D.B. Zwirn. Sources tell THR that the settlement is worth $70 million.
The case was filed in 2009 in Los Angeles Superior Court by attorneys working on behalf of Fortress Investment Group, successor to Zwirn and related entities including Bernard National Loan Investors of the Cayman Island. The settlement was apparently reached earlier this month during a closed-door arbitration hearing. Both sides signed a confidentiality agreement covering the terms and amount of the settlement.
In an email last week from attorney Jeffrey Garfinkle, who represents Tutor and others in a federal involuntary bankruptcy case, to a lawyer for bankruptcy court trustee Ronald Durkin, it was confirmed that the Zwirn suit had been settled. But the amount of the settlement was provided to THR by other sources.
Attorneys representing Bergstein and Tutor did not respond to a request for comment. Through a publicist, Tutor declined comment. Zwirn lawyer Howard Rubinroit responded to an inquiry by saying “Some of your information is incorrect." He declined to be more specific.
Zwirn, until it was liquidated three years ago, had been the primary backer of Bergstein and Tutor’s interests in the movie industry. The suit claims Zwirn loaned the duo more than $200 million. The suit also sought interest charged and lawyers fees.
Zwirn put up $23.2 million in 2006 used to acquire Capitol Films Ltd and $24.5 million for the 2006 acquisition of ThinkFilm. There were also loans for movies including Bordertown, The Wendell Baker Story, Black Water Transit (never released) and Stopping Power (never made). There was also $25 million in loans made in connection with a failed music company, Sheridan Square Entertainment.
Bergstein and Tutor signed personal guarantees for many of the loans, all made to corporate entities. Those guarantees were at the center of the Zwirn litigation.
According to the suit, not all the money loaned actually was used as intended. Of the more than $16 million provided to produce Stopping Power, according to the lawsuit, some money was used instead for payments on other films, to cover personal debts and over $1 million went to casinos to cover what is described as “personal gambling debts.”
Bergstein, Tutor and various related companies counter-sued Zwirn, Fortress and others in April 2010 charging that this was an example of the “greed of the finance industry,” and alleging that Zwirn had not lived up to promises to loan them about $250 million, which caused many problems. It also charged Zwirn with piling on loan fees and usurious interest rates. That countersuit was eventually dropped.
The $70 million settlement, if actually paid, will be in addition to $45 million previously paid in 2009 by Tutor (through a shell company) toward a $108 million settlement of what Zwirn then said was a $180 million debt. That agreement was allegedly breached later that year when the remaining $63 million was not paid by Tutor.
The $45 million that was paid in 2009 was credited to a company the suit says is owned by Tutor called Library Asset Acquisition Company (LAAC), which then laid claim to the film libraries of ThinkFilm and other assets. LAAC is now a creditor in the federal court case involving the forced bankruptcy of five Bergstein-controlled companies including Capitol and ThinkFilm, and R2D2, a holding company used by Bergstein and Tutor to hold movie assets until Tutor sold his interest to Bergstein for $10 in 2009.
Tutor, who is also CEO of a large construction company and an investor in the new Miramax, is expected to pay the money sometime after early August. That is when it is anticipated the final settlement will be presented to the L.A. Superior Court for approval.