'Goodfellas' Producer Sues Warner Bros. Over Lack of Any Profits

This was "studio accounting" on steroids, says a lawsuit from Irwin Winkler.
 

Goodfellas producer Irwin Winkler is now in court with a claim that Warner Bros. has reported a financial loss on the Martin Scorsese gangster film and that he's been cheated of contingent profits related to home video income.

Represented by Bert Fields, the producer says he is entitled to 50 percent of net profits, but that a film that cost $30 million to make and took in $275 million at the box office wasn't even in the black. Winkler alleges at least $18 million in damages for breach of contract or fraud.

"Warner Bros. even charged $40 million of 'interest' on its $30 million cost of production," says the complaint filed in LA Superior Court on Tuesday. "But that was only the tip of the iceberg. This was 'studio accounting' on steroids. It was also fraud. What Warner Bros. represented as the receipts of Goodfellas were really only a fraction of the actual receipts. Warner Bros. concealed more than $140 million of its actual receipts."

A spokesperson for Warner Bros. responds, "The allegations are baseless and we will vigorously defend."

According to the complaint (read here) from Winkler, who also produced Rocky, Raging Bull, The Right Stuff and other big films, his net profits are spelled out in a 1981 contract. It took almost a decade to make Goodfellas, starring Robert De Niro, Joe Pesci and Ray Liotta, but the payoff was grand with six Academy Award nominations and a healthy box office.

Now 86-year-old attorney Fields, whose past mob hits include representing Godfather author Mario Puzo in a lawsuit against Paramount, is pointing to periodic accounting reports showing the receipts and expenses of Goodfellas.  It wasn't until 2014 that Winkler allegedly discovered misrepresentations in receipts. When challenged by an accountant, Warner Bros. is said to have finally fessed up. The 2014 date figures to be important for statute of limitation purposes, though the lawsuit is also asserting fraud just in case the contract claim is ruled to be untimely.

"In particular, Warner massively understated the home video receipts of Goodfellas," states the complaint. "In its 2009 report (its last report until 2014) Warner represented that 'Total Domestic and Foreign Video' receipts were only $32 million. In fact, such receipts at the time were $128 million."

The amount of home video revenue coming overseas was said to be wrong. It's alleged that there were misrepresentations "from every one of 74 separate countries listed in its reports."

How this allegedly happened, according to the complaint, was the use of a subsidiary Warner Home Video to hide four-fifths of the incoming money.

"As the home video revenue from Goodfellas was received by its subsidiary, it was commingled with other funds, and Warner withdrew from its subsidiary an amount equal to 20% of that [home video] revenue, which it reported to plaintiffs as the 'total' such revenue," the lawsuit says. "Later, having complete and absolute control of its wholly owned subsidiary, Warner withdrew from that subsidiary an amount equal to the remaining 80% balance of such video revenue, less video costs. That balance, although received by Warner, was concealed and went unreported."

The lawsuit hardly stops there. Winkler says he didn't even get half of that 20 percent because Warner further deducted costs and substantial "distribution fees." The plaintiff is also objecting to alleged misallocation of money when Goodfellas was packaged with other films. Warner Bros. is charged with knowing all this was happening until 2014, when it "finally disclos[ed] to plaintiffs that only '30%' of its home video revenue was being reported, a critical fact that Warner knew had been essential to prevent its prior reports from being materially misleading, and a critical fact that Warner knew it could have and should have disclosed in every one of its prior reports, but elected instead to conceal."

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