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There is reason to believe that the mounting legal tangles over Miramax investor Ronald Tutor‘s involvement with embattled film financier David Bergstein could reach the doorstep of the relaunched film company.
Miramax, purchased in late 2010 from Disney for $663 million, has investors including Tutor, Qatar Holdings, Tom Barrack and Colony Capital.
As that deal was closing, five companies controlled by Bergstein — including R2D2, Capitol and ThinkFilm — were put into involuntary bankruptcy as a federal court tries to figure out what happened to the money behind the 1,200-plus film library Bergstein has acquired since 2002. Titles at stake range from Oscar winner Dances With Wolves to the Nicolas Cage drama Adaptation to the Demi Moore actioner G.I. Jane.
Tutor, a construction magnate-turned-showbiz player, had claimed he was a passive investor with Bergstein and that he sold his movie interests in 2009.
But on April 11, a bombshell report by court-appointed trustee Ronald Durkin became public. It contains explosive information about how Tutor and Bergstein — whom the trustee says were co-owners — allegedly participated in a scheme to backdate a contract by which Tutor sold his multimillion-dollar investment to Bergstein for $10 to make “it appear that Tutor was not an insider when he engaged in self-interested transactions,” the report says.
The trustee’s findings are not considered facts under the law. However, if Judge Barry Russell adopts the report, the consequences could be real and severe.
Tutor’s significant assets — including his estimated $50 million investment in Miramax — could become fair game for Bergstein creditors. That could cause headaches for the Miramax group and its lenders, including several banks and hedge funds. If the creditors go after those assets, it could create a legal tangle that would at the very least make it harder for Miramax to do additional financings, acquisitions or asset sales.
Durkin is asking the judge to consolidate more than 70 businesses Bergstein created into one from which creditors could pursue assets. Tutor, who has a separate company that is the largest creditor in the case, says it is owed $45 million, placing him first in line to buy the Bergstein movies.
But the trustee also requests an “equitable subordination” of the creditors, which would mean Tutor’s claim would take a back seat to the other creditors, making Aramid Entertainment Fund the largest creditor and a likely bidder for the film libraries.
Bankruptcy attorney Mark Markus, who has no involvement in the case, says there is nothing to stop creditors from claiming that Tutor and Bergstein are “alter egos” for the bankrupt entities, putting Tutor’s investment in Miramax in play. “If they can prevail on an alter-ego theory, they can go after any assets [Tutor] has — not just his interest in Miramax,” Markus says.
Tutor — CEO of Tutor Perini, a publicly traded construction company with more than $3 billion in sales last year — is reportedly worth more than $700 million.
David Molner, who represents the Aramid fund, believes the court rulings could lay groundwork for a claim on Tutor’s assets beyond the Bergstein entities. “Whether that leads up the front stairs of the new Miramax,” Molner says, “remains to be seen.”
A spokesperson for Miramax declined comment except to say, “Miramax is not and has never been a party to any of the actions at issue.” Reps for Bergstein and Tutor did not return calls.
It could get even worse for the duo. The judge could refer the matter to the U.S. Attorney for an examination of possible criminal charges.
“More than ever, investigators, prosecutors and sentencing judges take these types of cases very seriously,” says Manny Medrano, an L.A. criminal defense attorney and analyst for KTLA-TV who is not involved in this case. “In today’s atmosphere, you see white-collar defendants being sent to federal prison for over 20 years.
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