Two David Bergstein firms put in bankruptcy

Judge targets ThinkFilm and Capitol Films

Eight months after they became the subject of an involuntary insolvency action brought by a group of creditors, indie movie distributors ThinkFilm and Capitol Film have been put into formal bankruptcy.

Federal bankruptcy court Judge Barry Russell, clearly frustrated with the pace of the case and the lack of cooperation from the debtors led by Pangea Media Group CEO David Bergstein, on Wednesday granted two motions for summary judgment against ThinkFilm and Capitol Films without any opposition from the other side.

The involuntary bankruptcy cases brought by the same creditors group against three other companies controlled by Bergstein -- Capco, CT-1 Holdings and R2D2 -- were continued to Nov. 10 and remain on track to go to trial.

Interim trustee Ronald Durkin, a former FBI agent and forensic accountant, will now become the bankruptcy trustee of Thinkfilm and Capitol Film, which means he will have greatly expanded authority over those entities. Durkin has been stopped by rules governing attorney-client privilege, but he will now be the client, so that is no longer an issue. He now has all the rights of a person in full charge of those companies and is expected to seek out assets to repay the creditors.

How much of those assets are left, or where the assets are now, will be part of his search. Bergstein's side has said the five companies in the case are not operating entities and have few assets. The current cash assets of the companies was put at no more than $40,000, but they have debts in the millions, according to Leonard Gumport, an attorney for Durkin.

Gumport expressed concern about how the trustee and his team will be paid for their work since the compensation is supposed to come from the debtors once the case is concluded.

In part because these companies have so little to lose in a legal sense, the judge also denied a motion brought by Bergstein's side to force the creditors to put up a $25 million bond in case they lose any of the cases. Bergstein and the attorney of his sometime business partner Ronald Tutor, Lucia Coyoca of Mitchell, Silberberg & Knupp, had argued that Aramid was in the process of selling its assets and no longer was paying back investors, so they required assurance that there would be money to pay damages if Bergstein's side won.

An attorney for the creditors, David Neale of Levene, Bender, Yoo & Brill, said Coyoca misrepresented what was going on with Aramid. The judge ruled the debtors failed to show a good cause why there should be a bond and denied the motion.

Seeking a bond was primarily aimed at Aramid Entertainment Fund and Screen Capital International, both associated with David Molner, who has been a leader among the group of creditors who brought the bankruptcy action in March.

Molner, in court for the hearing, was clearly pleased by the judge's ruling. He said afterward: "Two down, three to go. As they say in Wimbledon, 'New balls please.' "

Russell also said that while he will allow a Sept. 2 suit against Molner brought in L.A. Superior Court by alleged investors in Aramid into evidence, he will not give it any serious weight in his deliberations. He noted it is just a complaint that consists of unproven allegations.

After the Wednesday hearing, Molner broke his silence the Sept. 2 lawsuit for the first time. "It is just an attempt to embarrass us," Molner said. "It's wholly without merit."

Molner said he has never actually been served with papers relating to that suit, so he has not been able to respond. He said the fact he has not been served in six weeks since the filing is further proof that it was just filed to embarrass him.

It was revealed Wednesday that in filings in the past week, Bergstein's side for the first time said that R2D2 was the owner of Pangea, which is the umbrella company for all of Bergstein's holdings.

For months, Neale said they had sought this information but it had been obscured. It only came out now because Bergstein's side wanted to use it as proof that the involuntary action had damaged his company.

Coyoca that Pangea's business and ability to sell and license films had been all but terminated by the bankruptcy action, which she argued was a reason that the creditors should put up a bond.

Ron Tutor was Bergstein's partner in R2D2 until at least January 2009, when after investing millions of dollars he sold his interest to Bergstein for the nominal sum of $10, according to court records. Tutor, whose main business is construction, also is involved in the acquisition of Miramax from Disney for $660 million, which is separate from the bankruptcy case.

In ruling against the motion to force them to put up the bond, Russell expressed his frustration with the slow pace and delays by the debtors (Bergstein et al): "My impression is the debtors have intentionally not been that forthcoming with what is really going on in this case."

Creditors attorney David Neale was even more direct: "We have been met with stonewall after stonewall."

Neale said Bergstein and Tutor avoided giving statements under oath for months until they were forced by the judge, and then after many months had dumped more than 400 boxes of documents in response to requests for information.

"I feel like we have gone through the rabbit hole," Neale said. "I apologize if I seem frustrated, but frankly I am."

Neale said they still have not been able to fully interview Bergstein under oath, even though the deadline for the end of the discovery process was Oct. 1. Gumport said they also have not been able to get Bergstein to provide satisfactory answers, or turn over all computer records, and are not sure if he will sit for further interrogation.

The judge delayed making a ruling on a request to force Mandalay Bay Casino to provide records about gambling debts run up by Bergstein. Durkin wants to know if any company money was used to pay gambling debts. Russell also delayed a decision on forcing American Express to provide financial records relating to Bergstein and his wife.

After the hearing, attorney Coyoca, who represents the debtor companies, said her clients would not make any comment to THR about the judge's rulings.