Fox Launches Study of Film Unit’s Accounting

Twentieth Century Fox Film Corp. has launched a review of its film unit’s accounting of theatrical revenue under the studio’s previous management, The Times has learned.

Some theatrical revenue from a hit 1982 movie, “The Verdict,” was credited to a box-office disappointment, “Monsignor,” in a maneuver that helped the latter film earn a higher pay-TV licensing fee from Home Box Office Inc., Fox confirmed.

Fees paid to studios by pay-TV operators normally are pegged, in part, to a film’s performance at theaters.

In response to a reporter’s query, Fox Chairman and Chief Executive Barry Diller said Wednesday that the incident was discovered during a routine internal audit and that Fox promptly notified HBO and rectified the accounts.

Less Than $1 Million

Diller said Fox does not yet know whether employees or company procedures were at fault. No employees have been terminated, Diller said, but “we are continuing to review the procedures to determine how exactly this did happen.”

Sources said another less-than-successful Fox movie may also have been credited incorrectly with box-office receipts from a stronger film, but the identities of those motion pictures could not be learned. All the discrepancies totaled less than $1 million, the sources said.

The incidents, which apparently occurred about a year ago, were discovered in an internal audit last October and came to the attention of the senior financial staff in November. HBO was notified in late November and the accounts were adjusted in December, one source said.

Steve Scheffer, HBO’s executive vice president of film programming, confirmed Wednesday that he was contacted by Fox late last year and told that proper adjustments would be made.

‘No Malice Was Intended’

“In any kind of reporting, we expect the most meticulous care to be taken in what’s given to us,” Scheffer said, but he credited Fox for alerting the pay-TV company to the mis-billing. “From our point of view . . . no malice was intended,” the HBO executive said. “I accept it in good faith.”

David Brown, who produced “The Verdict” with his partner, Richard Zanuck, said in a telephone interview Wednesday that he personally has never been notified of the incident, but he noted that a “matter of this kind” would normally be reported through “legal and accounting channels.”

Brown said: “If, in fact, an internal audit resulted in a credit to Zanuck/Brown, we couldn’t be more pleased, and especially pleased because Barry (Diller) addressed the matter forthrightly.”

Zanuck, in a separate interview, said he also had no knowledge of the incident, but he concurred in his partner’s reaction. “I’m glad that mistake was caught and that it wasn’t in the other direction.”

Diller, the former chairman of Paramount Pictures Corp., took the helm of Fox on Oct. 1, 1984, following the September resignations of former Fox Chairman Alan J. Hirschfield and Vice Chairman Norman J. Levy.

In a telephone interview, Levy said that, since he left Fox, “I had heard that there were some discrepancies that showed up in some sort of an audit.” But he added, “I certainly had nothing to do with this.”

The former vice chairman said that, in his 27 years in the motion picture business, he has heard of incidents where “inexperienced (branch) managers . . . make a wrong application of monies” but “certainly not in recent years” and not during his four-year tenure at Fox.

Levy last month filed a $21-million suit contending that Fox owner Marvin Davis breached a promise to give him a 5% stake in the company. Fox lawyers have not yet filed a response.

When told of the audit findings Wednesday, Hirschfield said: “I really was not aware of it,” but he added that he also heard rumors about the audit after leaving Fox. The former Fox chairman described his relations with the studio and Davis as “cordial.”

“Monsignor,” produced by Frank Yablans and David Niven Jr., earned about $12.4 million at the box office when released by Fox in 1982. As of May, 1983, the box-office figures for “The Verdict” were about $54 million.