May 31, 2011 7:53pm PT by Alex Ben Block
David Bergstein Testifies in Court for First Time Amid Long-Running Legal Woes
Since the involuntary bankruptcy case against his movie holding companies began in March 2010, David Bergstein had never appeared in person at the many court hearings.
He was deposed in the case, and almost testified in lawsuits brought against him by Aramid Entertainment and defunct hedge fund D.B. Zwirn. But both those cases, scheduled for trial last month, were settled out of court at the last minute, thanks to Bergstein's former business partner Ronald Tutor. So neither took the stand in open court
On Tuesday, however, Bergstein for the first time faced the group of creditors group who successfully brought the rare involuntary bankruptcy action that has ground his movie business to a halt. They gathered in a 26th-floor room of the federal bankruptcy court trustees offices in downtown L.A.
Bergstein was there because the federal court had designated him as the responsible party for the companies in the suit, including R2D2, ThinkFilm and Capitol Film.
For most of the nearly two-hour session, Bergstein was questioned by Leonard Gumport, attorney for court appointed trustee Ronald Durkin. Gumport sat opposite Bergstein, while Durkin sat between them taking notes, and next to him was a court stenographer.
Bergstein, in a dark suit, white shirt and no tie (unlike all the lawyers), was accompanied by his lawyer, Joel Boxer. He complained that a lot of the documents he needed had been held from him by his former attorney Susan Tregub, whom he said he recently demanded hand over all the documents.
In the face of overwhelming evidence, Bergstein conceded to Gumport that he erred when he turned in schedules last week listing his creditors with all zeros in the columns where assets and debts were supposed to be listed. He said he meant to leave it blank because he didn't know the exact amount.
"This is not about me trying not to be helpful," Bergstein said under oath. "But every time I put something down I get crucified."
Speaking in a soft monotone most of the time, Bergstein said he no longer had the staff or resources to sift through all the data necessary to determine the exact amounts, so he wrote zero. Bergstein repeatedly denied that his office computer, which he has refused to allow the trustee to image, contains anything having to do with any of the five bankrupt companies.
To most questions he just said, "I don't recall," or his lawyer told him not to answer.
"I don't want to be like Sgt. Schultz," Bergstein said at one point, referring to the sitcom character who famously exclaimed, "I know nothing!" to every question. "But I don't have the records."
Gumport with steely determination told Bergstein he had made an error by saying zero when he meant he couldn't answer and that he needed to file an amendment to the schedules. Bergstein said he would.
This was not the first time the issue of an incorrect creditors list had come up. In a trustees report earlier this year, Durkin pointed to instances where Bergstein listed creditors who later said they were not creditors. At the time, the number of creditors was an issue in the nature of the case.
It was that failure to comply with the court order to produce the list that pushed Judge Barry Russell earlier this year to declare all five of the Bergstein-controlled companies as bankrupt.
There were about two dozen people in the gallery, most lawyers representing the creditors, who included the Hollywood talent guilds, an Irish bank, an advertising company and of course the hedge fund Aramid. Sitting with his lawyers in the audience was David Molner, head of Screen Capital International and advisor to Aramid, who spearheaded the involuntary case and brought together a group that eventually grew to more than 30 angry creditors.
After Gumport gave up his questioning in frustration, Durkin said they would schedule another date after Bergstein was given time to correct the creditors list and get other requested records.
Then Durkin asked if any of the creditors wanted to question Bergstein.
Molner took the opportunity and sat across from Bergstein as they glared at each other. Molner pressed Bergstein about several issues, including a consultant from China who had a claim against the bankrupt companies. Molner prompted Bergstein to estimate that his companies, while operational, had made 30 to 40 loans for $400 million to $500 million, and that they had about $100 million in equity at one time.
Bergstein became unhappy about Molner's questions finally and cut him off, saying, "You're not a real creditor. You're here about your other stuff," referring to other legal matters. "You manufactured claims."
Molner, who had successfully led the creditors group, stared him down and assured Bergstein he was very much among the creditors, then departed.
Durkin set July 7 for Part 2 of Bergstein and his creditors.