Bill Block to Exit Indie Film Player QED, Russian Investors Take Control (Exclusive)

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Bill Block

Backer Media Content Capital will continue QED as a production and sales company with several movies in production and new projects.

Bill Block is in final negotiations to end his role as CEO of QED, the production company he founded in 2002, which has been behind movies including Fury, District 9, W and Sabotage.

Block is working out a separation agreement with Sasha Shapiro and Anton Lessine, the son of Russia's former press minister, who together run Media Content Capital, which acquired a controlling interest in QED in May 2012.

Shapiro and Lessine had originally said they paid “eight figures” for their interest. Sources estimate that was around $25 million.

Shapiro and Lessine tell The Hollywood Reporter in an interview that they plan to personally take over operation of QED. They said they will have a presence at Cannes in May and will announce new movie projects. “QED is in discussions on a number of projects - both domestic and international - and is developing new IP and building relationships with upcoming and established talent,” they said in a joint statement.

One reason for his exit is that Block has shifted his primary focus to working on movies and deals for Merced Media, which was created in October. Block and Kevin Frakes formed the company with $500 million raised from PalmStar Media Capital, where Frakes is CEO.

As part of the agreement, Block will produce two movies that QED is expected to invest in and for which QED will handle international sales.

The movies are Birth Of The Dragon, which will star Donny Yen (Ip Man) in a story about Bruce Lee before he became famous. In the movie, Lee uses his kung fu skills when he gets into a big battle with a famous Chinese martial artist that changes the history of martial arts in America. It is to be directed by George Nolfi (The Adjustment Bureau), with Block and Michael London among the producers, and Shaprio and Lessine as executive producers. It is written by Christopher Wilkinson and Stephen Rivele.

The second film is Yellowstone Falls, based on a script by Daniel Kunka that QED acquired under Block. The story of a mother wolf that has to defend her cubs against human predators after an apocalyptic event. It will be directed by New Zealand director Gerard Johnstone (Housebound).

On both movies, Merced Media will also have an option to participate in the financing and production.

Block and Media Content Capital have been heading for a split since late last year. Despite the success of Fury, starring Brad Pitt, which has grossed about $214 million worldwide since it was released this past October, Block and Media Content Capital have been heading in different directions. 

Fury was released in the U.S. and much of the rest of the world by Sony Pictures Entertainment, and is still opening in some territories around the globe. QED has a first dollar gross deal and the payoff continues to flow into the company.

There were rumors that QED ran into money problems late last year after funding from Russia dried up in the wake of the plunge in the price of oil and economic sanctions imposed on Russia after war broke out in the Ukraine.

However, Shapiro and Lessine insist that was not the case. They say their money came primarily from European sources and was not impacted by the situation in Russia.

Shapiro and Lessine say Media Content Capital has other investments besides QED. Among those they say is an investment in Sonifi Solutions (successor to LodgeNet), which delivers entertainment content to about 1.4 million hotel rooms and to healthcare facilities. The principal investor in Sonoifi is Colony Capital, the entity behind Miramax.

Questions have been raised about where the investment in the movie business originated because Lessine is the son of Mikhail Lesin, the former press minister of Russia under Vladimir Putin. Until December, Lesin was the head of Gazprom-Media, the largest TV and media company in Russia (which is in part owned by the Russian government). Gazprom operates NTV television and Ekho Moskvy radio, among other properties.

When he resigned, Lessin told Russian media it was for “family reasons.”

Lesin reportedly moved his family to the U.S. around 2011 and soon acquired over $30 million worth of residential real estate, mostly in California.

In July 2014, U.S. Senator Roger Wicker (R-Mississippi) wrote to the U.S. Attorney General asking that Lesin be investigated for possible violations of the foreign corrupt practices act and money-laundering. The Justice Department in December acknowledged it (and the FBI) received the request but would not comment on whether there is any investigation.

Lessine said on Thursday that “any money [he, his family or others] put into QED is not the subject of a U.S. investigation.”

His father also previously denied the allegations of wrongdoing when he spoke to Forbes Russia.

The only top level employee remaining at QED from the Block era is John Friedberg, executive vp international sales. He was most recently at the Berlin market sellling QED titles. Shapiro said QED sales there  were “soft,” which he blamed on the lack of new titles and an overall weak market. It is unclear if Friedberg, who declined to comment, will continue with QED.

QED has several movies in various stages from development to post production. The next scheduled release is Rock The Kasbah, directed by Barry Levinson and starring Zooey Deschanel, Bruce Willis, Bill Murray and Kate Hudson, which is due out this November. Shapiro said it will get a wide release domestically through Open Road Films.

QED also is in post-production on Dirty Grandpa, starring Zac Efron, Robert DeNiro and Dermot Mulroney, which Lionsgate has scheduled for a domestic release in 2016. It is expected to get a new title.

The company also has international sales rights to Franny, starring Dakota Fanning, Richard Gere and Theo James, which Shapiro said is likely to get a premiere at the Tribeca film festival. It is not a QED movie and there is no domestic deal in place for distribution as yet.

The biggest flop for QED since Media Content Capital got involved was Sabotage, which stars Arnold Schwarzenegger, Sam Worthington and Terrence Howard. It reportedly cost about $35 million to make and since it opened in March 2014 has grossed less than $13 million worldwide.

Shapiro said they still expect to make back their money on Sabotage which he said has been cleared for release in China. It is expected to open there in April.

QED also had the movie Fading Gigolo, directed by John Turturro and starring Turturro, Woody Allen, Live Schreiber and Sharon Stone. It was shown at Toronto in 2013 and then opened in limited release in the U.S. in April 2014 to mixed reviews and poor box office. Shapiro says it was a prestigious and profitable project for QED although it has grossed less than $13 million worldwide.

The company also made Haunt, a modestly budgeted horror thriller released in 2013 by IFC Midnight starring Ione Skye, Harrison Gilberson and others. It got its primary initial release on VOD and then went on to the home entertainment market.. Shapiro predicted it will eventually earn back their investment.

QED also has deals to handle international sales for other titles including Term Life, starring Vince Vaughn; and The Family Fang, starring Jason Bateman and Nicole Kidman.

Block is a Hollywood veteran who started his career as a high profile talent agent for ICM and Intertalent. He later became president of Artisan Entertainment, which had a hit with Blair Witch Project before being sold to Lionsgate in 2003.

Nick Holdsworth contributed to this report from Moscow.

CORRECTION 2/24 12:07 pm The spelling of the name of Yellowstone Falls director Gerard Johnstone was incorrect in an earlier version.