12:21pm PT by Eriq Gardner
Court Voids Fraudulent Transfer of 42 Film Projects Including Martin Scorsese and Michael Mann Movies
The new management of Cecchi Gori Pictures has hit paydirt as a California bankruptcy judge has ruled that rights to 42 film projects, including work by famed directors Martin Scorsese and Michael Mann, were fraudulently transferred. After issuing a partial summary judgment earlier this month, the judge has followed it up by determining that Cecchi Gori Pictures — once an Italian production giant behind such films as Il Postino, Life Is Beautiful and Se7en — was entitled to recover assets.
The history of this dispute is complicated, but begins with movie mogul Vittorio Cecchi Gori, who was convicted of financial crimes in Italy related to debt.
On April 1, 2015, amid these legal troubles, Vittorio Cecchi Gori's company transferred rights to various projects to an Italian producer named Gabriele Israilovici for just $1. That same day, Israilovici then transferred the assets to G&G Productions, which a year later, sold assets to another company for $300,000 and additional payments.
Cecchi Gori Pictures would then declare Chapter 11 bankruptcy with the company's new chief executive Andrew De Camara pledging war against those who had looted upon the power vacuum created by Vittorio Cecchi Gori's conviction. Revenge would come in the form of an adversary case launched against G&G, Israilovici and others.
On Feb. 2, U.S. Bankruptcy Judge Elanjie Hammond handed down the conclusion that Cecchi Gori Pictures was insolvent at the time of the transfer of assets and that it hadn't received reasonably equivalent value for the transfer of assets.
Israilovici and other defendants argued that $1 was enough — and that the transfer also constituted satisfaction of a $1.5 million loan from Israilovici to Vittorio Cecchi Gori. To the latter point, Hammond says the contract is unambiguous that the assignment of 42 film projects clearly stated that $1 was full compensation for assets, and thus, the debt was immaterial.
As for whether $1 was reasonably equivalent value, the defendants tried a range of unsuccessful arguments including that rights were worthless without additional property.
Take, for instance, a planned movie by Michael Mann, whose previous films include The Insider, Collateral and The Last of the Mohicans.
"The most potentially valuable project included in the Assets is Ferrari based on the book Enzo Ferrari: The Man, the Cars, the Races, the Machine by Brock Yates," stated defendants' opposition papers. "Mr. Israilovici had to pay $25,000 to Il Cavalino, LLC, the company owned by the family of Mr. Yates on December 14, 2014, to continue that option on that book thereby preserving that right. Had he not done so, the option on the book would have lapsed and all potential value of that project would have disappeared. Mr. Israilovici had to do that because the Debtors did not have the funds to make that payment. The well-known director Michael Mann has been attached to the project for some time. He has written a new script that he owns completely and the current scripts owned by the Debtors will not be used by him; and as a result, the Ferrari scripts owned by the Debtors may have little or no value."
What's more, defendants alleged, "The rights based solely on Mr. Yates’ book, are of limited utility without the explicit consent of the Ferrari family that neither the Debtors nor Mr. Israilovici have obtained. Finally, there are doubts about the commercial viability of racing movies because the last two major films about racing (Rush and The Last Indian) were not commercially successful."
Hammond rejects the reasoning.
"Not every project must be turned into a profitable motion picture for the Assets to have any value, and the argument that they are worthless without the Additional Property is not supported by evidence," he writes (see here). "The question here is merely whether the Assets are worth more than $1. Even in the light most favorable to Defendants, there is no logical basis to find a triable issue of fact as to whether their value exceeds $1. In addition, it is clear that the First Assignment’s net effect was a drain on the estate, as it resulted in all of the debtors’ assets being transferred away."
Having reached the conclusion that a fraudulent transfer had taken place, Hammond on Feb. 9 entered judgment. (See here.)
"The Transfer, as avoided hereby, is of no force and effect, and Plaintiffs shall recover the Assets for the benefit of the bankruptcy estate, including all rights, title and interest the Plaintiffs held immediately before the Transfer and continuing as if the Transfer had not occurred," he wrote. "Accordingly, Defendants, and any persons to whom they have transferred possession, custody or control of the Assets, shall forthwith withdraw any claim they may have as to the Assets and do all acts necessary to cause the assets to be transferred to the possession, custody and control of Plaintiffs."
The impact of this decision will have to be sorted in the months ahead, and an appeal has already been filed.
The 42 film assets include titles such as Crime and Punishment, Kafka, Seven, Machiavelli and The Easy Life.
Thirteen of the films have already been made.
That includes Scorsese's Silence, which took a quarter-century to make thanks in part to legal wrangling with Cecchi Gori. Rights were sold in 2014 when the movie needed new money, but according to court documents, a settlement with Scorsese gave Cecchi Gori at the time $900,000 plus 20 percent of Scorsese's contingent compensation for directing the picture. Certain profit rights to Silence may have been fraudulently transferred, but the film wasn't particularly a commercial success anyway.
As for Mann's Ferrari, among 15 projects that defendants argued lacked a clear chain of title, The Hollywood Reporter has learned that Cecchi Gori Pictures has now struck an agreement allowing the movie to roll ahead. Mann's attorney Mathew Rosengart, who also advises THR that Mann owns the book rights, says, "The Debtor, which recently prevailed in the bankruptcy case against G&G Productions, has concluded a separate deal with Michael Mann whereby Michael Mann retains full control over the Ferrari project, which is moving forward."