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As CEO of Greenlight Film & Television, Gary Howsam created false contracts with international distributors in order to secure more than $7 million in film loans from Comerica Bank, according to an affidavit filed by an FBI special agent investigating the bank fraud allegations against the producer.
Howsam was arrested Monday during the American Film Market and placed on administrative leave from his position as CEO of Toronto-based Peace Arch Entertainment. He was released later in the day on $500,000 bond, surrendered his passport and was fitted with an electronic monitoring device. He remains under house arrest at a friend’s home in Pacific Palisades, Calif.
Howsam’s attorney, Donald Randolph of Santa Monica, said the affidavit “is an accusation and nothing more. What actually occurs in these cases will play itself out in a period of months.”
Howsam was arrested on one count of bank fraud involving financing for the 2001 film “Going Back.” His arraignment is scheduled for Dec. 3. If found guilty, he faces a maximum of 30 years in federal prison.
Howsam joined Toronto-based Peace Arch in 2003.
According to the court papers filed Monday by Special Agent Jennifer Teasdale, Comerica loaned Greenlight more than $35 million between November 1999 and October 2000 for the production of six films.
Teasdale’s affidavit claims that in order to secure international distribution rights, Greenlight partnered with Los Angeles-based Hilltop Entertainment and Harel Goldstein, who owned a third of Hilltop. For “Going Back,” Howsam estimated the film’s budget to be $4 million-$4.5 million and was banking on a deal that Goldstein was working on with a German conglomerate that would generate $3 million-$3.5 million for the film.
But as Howsam started preproduction, the German deal fell through and Goldstein was unable to obtain any other international presale distribution agreements in order to get the film loan from Comerica.
A few days before Howsam was to meet with the bank, he allegedly told Goldstein that “they needed to get creative and do some ‘art department’ work. When Goldstein asked Howsam what he meant by ‘art department,’ Howsam said they would have to create some deal memos.”
According to the affidavit, Comerica eventually figured out that more than 10 false distribution contracts for five international territories were submitted as collateral to the bank in order to secure the loan for “Going Back.”
“Comerica determined that some of the false contracts had been created by whiting out and/or cutting and pasting information from genuine distribution contracts to facilitate the creation of false contracts,” Teasdale wrote.
Among the alleged forged documents was a distribution agreement between Greenlight and France Televisions, which purported to sell the distribution rights for “Going Back” for $550,000.
The government claims the distribution agreement was “visibly altered” and that the signature of France Televisions’ Fabrice Bailly “had quite clearly been physically cut and then applied onto the document.”
Bailly was interviewed by the FBI and told agents he did not sign the agreement, according to court papers.
For some of the agreements, Howsam allegedly used genuine distribution contracts from previous films he produced. Fake distribution contracts were also allegedly prepared for the films “Ignition” and “Global Heresy.”
The alleged ruse started to unravel when Comerica determined the papers were doctored and filed suit against Goldstein and Howsam. Goldstein subsequently settled his lawsuit.
On Sept. 27, Goldstein signed a plea agreement and was charged with bank fraud. As part of the agreement, he has been cooperating with federal investigators.
On Friday, the government wired Goldstein with a microphone and video device for a meeting with Howsam at a restaurant in Tarzana. FBI agents recorded the meeting.
Among the statements allegedly made by Howsam were, “They don’t have my fingerprints anyway” and that he, Goldstein and another man, identified only as Phillippe L., cleaned up “every bloody shred” of the forged contracts and “rolled it all up, put it in a bag and took it away … it’s gone.”
Meanwhile, Peace Arch president and CEO John Flock said Peace Arch is not a party to the criminal investigation.
“The complaint against Gary is against Gary only,” Flock said Wednesday. “There’s no allegations whatsoever that have anything to do with anything other than a series of bank loans that took place in 1999 and 2000.”
Howsam holds a 21% stake in Peace Arch. He has been replaced as CEO on an interim basis by former CBS Entertainment boss Jeff Sagansky, who was named co-chairman of the company in July.
Peace Arch has launched a formal hunt for a new CEO. Until a permanent replacement is found, Flock will continue to run the company on a day-to-day basis, working with Sagansky.
Etan Vlessing in Toronto contributed to this report.
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