Filmland Partnership Erupts Into Bitter Dispute : Charges of Racketeering, Physical Threats, Mismanagement of Property Fly

When former business school dean Bruce Mallen traveled to Los Angeles from Montreal in the early 1980s to invest in a film production, he said he was surprised to see the motion picture industry spread out all over Southern California. So he came up with an idea for an office building that would cater to the entertainment business, a glittering place where film executives and producers could talk deals and plan films.

With financial help from his business partner and fellow Canadian, Nicholas P. Popich, Mallen last fall opened the eight-story Filmland Corporate Center in Culver City, across the street from the venerable Metro-Goldwyn-Mayer studios.

The center sat mostly vacant for months, but then Mallen helped persuade MGM/UA Communications to lease five floors, for a whopping $100 million over the next 10 to 15 years.

Despite that success, Filmland has lately become embroiled in a legal squabble between Mallen and Popich over management of the building and the firms they jointly own. The unusually bitter fight has included charges of physical harassment and racketeering, as well as cost overruns and mismanagement of the center.

In a civil suit filed in federal court here last month, Mallen accused Popich of fraud, breach of contract, violation of federal anti-racketeering law and of causing physical threats to be made against him.

Popich, meanwhile, has replaced Mallen as head of Filmcorp Group, which manages the building. And in refuting allegations in Mallen's lawsuit, attorneys for Popich have claimed in court briefs that Mallen mismanaged the building and exceeded construction costs by $20 million.

On March 13, U.S. District Judge Ferdinand F. Fernandez threw out the racketeering and other charges against Popich. Fernandez also refused to grant a temporary restraining order sought by Mallen to prevent Popich from removing Mallen from the building. Mallen's attorney, David Alkire said his client intends to press the fraud and contractual charges in state court, although he has yet to file the case.

Popich, a resident of the United Arab Emirates who is frequently out of town, could not be reached for comment late last week. Brian C. Lysaght, his attorney, said Popich was "delighted about the ruling." Lysaght said Popich believes that he has the right to control policy because he owns 75% of the companies while Mallen owns 25%.

Mallen claims that the dispute "goes way beyond a simple business disagreement. It's a policy difference, a management style difference, a personality difference. It's beyond pure business considerations."

Mallen's lawsuit accuses Popich of "causing threats of personal harm to prevent Mallen from disclosing the misconduct and prevent (Mallen) from pursuing" his claims against Popich. Court documents say that on Jan. 15, Mallen was "personally threatened with physical harm by a man who was apparently spying on me at my home." The court papers also say Mallen reported the incident to police in Beverly Hills, where he lives, and to Culver City police.

Concerned for Safety

That episode has caused him to be "very concerned for my personal safety as well as any witnesses who testify in this case," the court papers say. But Lysaght, Popich's lawyer, said Mallen has been unable to provide evidence that Popich had anything to do with the alleged threat.

On March 2, Filmland Development, the private company that owns most of Filmland Corporate Center, removed Mallen as an officer and director of Filmcorp Group, the management firm. Filmland Development's lawyers said in court papers that Mallen was ousted for "severe breaches" of a management agreement he signed to run the building, including the purported cost overrun, and for failing to provide the company with reports on financial and legal matters related to the building.

The cost of the Filmland Center project was initially pegged at about $73 million in 1983, before construction began, Mallen said. Both Mallen and attorneys for Popich now agree that costs escalated to about $93 million.

Popich's attorneys claim in court documents that Mallen was responsible for the increase, a charge that Mallen strongly denies.

"It was not in any way caused by anyone under my authority," Mallen said. He will say more about what caused the increase in a sworn deposition he is scheduled to make March 26, Mallen said.

Right to Use Name

The dispute also involves an agreement that Mallen signed Dec. 31, under which he resigned as chief executive of Filmcorp Group, ownership of which was then transferred to Popich. In return, Mallen was to receive ownership of two other jointly owned companies, Filmcorp Communications and Entertainment Industry Suites, and a lease covering part of Filmland Center's fourth floor.

That agreement also gave Mallen the right to use the name Filmcorp.

In addition, it gave Popich the right to purchase, for $480,000, a movie theater across the street from Filmland Center and the right to seek permission from Culver City to build a live entertainment complex on the fourth floor with a bridge connecting the building with the movie theater.

Popich said in a recent interview that he wanted to buy the theater to show movie premieres. The bridge would provide access via escalator to the entertainment complex, which would have a stage for plays and Las Vegas-style acts, Popich said.

Mallen said he is still working under terms of the Dec. 31 agreement. On Jan. 29, he placed a half-page advertisement in the trade paper Daily Variety stating that he and Popich "are no longer partnered" in Filmcorp Communications, and that although he retains a financial interest in Filmland, he is no longer liable for debts incurred by Popich or his staff's management of the building.

Locked Out of Office

Lysaght said Popich did not sign the agreement and therefore does not consider it valid.

For that reason, he said, Filmland Development has sought to end Mallen's office lease in the center and prevent him and his employees from entering the building. When he arrived at his fourth-floor office March 9, locks had been changed, Mallen said. He called Culver City police and hired locksmiths to let him in.

Mallen said he continues to work in his Filmland office as owner of Filmcorp Communications, which is working to obtain additional tenants for the building. So far, the building has leased about 85% of its space, he said.

According to Mallen, his relationship with Popich began in Canada about seven years ago when the two became partners in various entertainment industry-related ventures. They agreed, Mallen said, that Popich would furnish three-quarters of the initial capital, with Mallen contributing one-quarter.

They agreed that he would oversee investments and manage their businesses, Mallen said, while Popich "would be responsible for obtaining investment capital from his international contacts." Over the years, the pair created a number of businesses, including one that financed or produced half a dozen feature films. Among them were "Doing Time" with Richard Mulligan and "Heartaches" with Margot Kidder.

Mallen claimed that he "was personally in charge" of obtaining the land, designing and developing Filmland. The project, built on redevelopment land acquired from a number of small businesses in downtown Culver City, was chosen by city officials over a number of other development proposals.

Refused to Sign

The racketeering and fraud accusations in Mallen's lawsuit are related to an alleged $70-million Filmland refinancing loan last year from Switzerland-based Credite Suisse and a subsidiary. The suit contends that the banks "were provided with false and intentionally misleading information about the financial status of the (Filmland) project" from Popich and his English lawyer.

The pair drafted a letter to be signed by Mallen "representing anticipated rental income" at Filmland, the suit says, but Mallen allegedly refused to sign it. The information on the letter, the suit alleges, was forwarded to Credite Suisse, and based on that "misleading information" the bank extended until 1987 the due date of refinancing of the construction loan for Filmland and allowed interest payments to be added to loan amount instead of requiring them to be paid in cash.

In response, Popich has said in court papers that Mallen's case is "totally lacking in both factual and legal basis," and that the racketeering charge was merely and attempt to pressure him into settling their disputes over Filmland.

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