IRS files claim against David Bergstein

Says Capco firm owes $432,724 in unpaid business taxes

David Bergstein's legal battles have heated up in separate court actions on two continents.

The newest creditor joining the fray in U.S. Bankruptcy Court in Los Angeles is the Internal Revenue Service, which has filed a claim for $432,724.30 in unpaid business taxes against Capco, one of the five Bergstein companies that creditors are trying to force into bankruptcy.

Court-appointed interim trustee Ronald Durkin has said in previous court-mandated reports that Bergstein has not paid all payroll or other business taxes on his companies for the past couple of years -- or personal income taxes for three years.

The IRS claim is likely to take precedence over unpaid debts held by more than 30 other creditors.

Eight of those creditors this week filed a motion for a summary judgment in the ThinkFilm case, which would mean immediately forcing that entity into bankruptcy. In that filing, the creditors say it is clear that Bergstein and his companies have "engaged in a concerted effort to resist all discovery efforts."

The creditors say that ThinkFilm assets have been moved to avoid seizure, the company is not staying current on its debts as required by law and that it is being driven into true insolvency.

The creditors asked for an expedited decision, but Judge Barry Russell ruled against them this week, saying they will have to wait for legal opposition to be filed. The next planned court date is set for Oct. 6.

At that time, Russell also is expected to rule on Bergstein's request to force one of the creditors, Aramid, to put up a $25 million bond. At previous hearings, the judge indicated he was unlikely to force Aramid to put up a bond in case it loses.

On Wednesday, Russell ruled that Bergstein's main holding company, Pangea Media Group, must turn over computer servers containing images of documents and business records to Durkin. The judge ordered the trustee be allowed to finally look at the info, which Bergstein has resisted for the past several months. Pangea was to turn over the servers by the end of business Wednesday and will have two weeks to provide a log of information they seek to have excluded from examination.

Meanwhile, there's a new main lawyer representing the five "alleged debtor" companies -- Joseph Eisenberg of Jeffer Mangels Butler & Marmaro, who has taken over from David Weinstein of Richardson & Patel.

In an interview, Eisenberg said that the court-ordered examinations by Durkin of Bergstein and his sometime business partner, construction exec Ronald Tutor, have not been completed.

Eisenberg said Tutor's examination will continue Friday and Bergstein's next week. This comes as Tutor and a group including Colony Capital are working to finalize the $660 million acquisition of Miramax from Disney, a deal on which Bergstein remains an active consultant.

Eisenberg said they have also turned over to the interim trustee, as the judge ordered, a list of lawyers being employed in the case and an accounting of who is paying their bills.

In London, a hearing was held this week in which the shell company that was once the highly respected movie producer-distributor Capitol Films is involved in an insolvency case in the chancery division of the U.K. High Court of Justice.

That battle is mainly over whether and to whom to sell the remaining assets of Capitol. When the case was filed early this year, it was initiated by Bergstein himself, with a number of creditors on his heels.

Employing a strategy he has used before, Bergstein created a new entity called Veritum, which bid to buy the Capitol assets out of bankruptcy, meaning they would be cleansed of all legal obligations.

Later, an offer also was made by Aramid for the assets, which amounted to about 44 movies out of a library of more than 100 films weeks before the filing.

Aramid then joined with other creditors, including Allied Irish Bank and the Hollywood talent guilds, to claim there should be no sale because there was never a proper valuation of the assets. Worse, they claimed, Bergstein had shuffled most of what was valuable in the library to another entity, Pangea.

"The Pangea transaction, on the verge of insolvency, bears all the hallmarks of a transaction at an undervalue, preference, or naked asset stripping," a lawyer repping the WGA West, DGA and SAG wrote in a court filing. "In effect, $44 million (U.S.) appear to have gone missing."

According to a court filing, Bergstein denied any wrongdoing in moving about half the movies, including most of the best titles, from Capitol to Pangea.

Bergstein later switched his offer to buy the assets out of bankruptcy to an entity called Films International Ltd.

However, that entity recently bowed out of the bidding as well and was immediately replaced as a bidder by Exodus Films Co., which according to a declaration by David Rubin, one of two administrators appointed by the U.K. court, is owned by Tutor.

Exodus pressured the administrator to close its deal for $2.35 million or it would be withdrawn. Rubin wrote in his statement that Bergstein said many of the movies were only for sales agreements that will expire, so the delay would cause a loss of value.

Rubin said he felt it was better to get what the administrators could and agreed to a deal at the last minute. But at the hearing this week, it appeared the sale would be held up until more information is provided about its value and whether there are other bidders.
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