December 14, 2011 9:59pm PT by Alex Ben Block
Helen Mirren Movie 'Love Ranch' Hit With Another Lawsuit
Call this a case of love lost.
What is left of a European investment fund called Film & Entertainment VIP Medienfoonds 3 GMBH, which is part of a discredited German company, on Wednesday filed suit against the Aramid Entertainment Fund over money it says it is due from the movie Love Ranch in L.A. Superior Court.
A similar suit was filed in Germany, which the same group lost. In that case, they had to pay Aramid’s legal costs.
Love Ranch was a reported $25 million production directed by Taylor Hackford, which starred his wife, Helen Mirren, as well as Joe Pesci. It is the story of a married couple who opened the first legal brothel in Nevada.
The VIP Media Fund was one of several tax shelter deals sold to German investors during the heyday of German tax shelter investing. The funds at one time had more than $1 billion invested in more than 50 movies, including projects with major studios such as Warner Bros. and Sony.
The funds were distributed through German banks and advertised as a “guaranteed fund,” meaning investors were guaranteed to get their money back. In reality, that was not true.
Eventually Andreas Schmid, the managing director of VIP GmbH, which offered the funds, was found guilty of embezzlement and is now serving time in prison.
His successors have tried to collect as much as possible from what was invested, and this is part of that effort.
This loan was actually made to Capitol Films in December 2007, not long after that company was acquired by financier David Bergstein and his then business partner Ronald Tutor, using money lent to them by a subsidiary of the D.B. Zwirn hedge fund. The suit says that VIP was in first position to collect about $2.5 million from the first gross receipts produced by the movie.
In spring 2008, Bergstein and Tutor’s company borrowed money from Aramid as part of a short-term loan agreement called a “bridge loan,” guaranteed in part by the value of Love Ranch.
Such a loan is meant to be short term and comes with severe penalties when not paid back on time. Capitol, under Bergstein, did not repay the loan, which eventually went into default and became part of a larger bankruptcy proceeding. Bergstein later blamed his inability to pay the money back on Zwirn, which was liquidated after investors demanded their money back.
Aramid was able to force a sale of Love Ranch, which it then acquired with other investors and arranged to be finished and distributed. It was released in June 2010 and grossed an abysmal $137,000. It was later released on DVD.
Aramid’s position, which was upheld in Germany, is that VIP was actually subordinate to other investors, and in any case all of their rights were lost as part of the bankruptcy and foreclosure sale.
Now VIP is trying again in the U.S.