The Misadventures of ‘Munchausen’ : How a $23.5-Million Fantasy Film Turned Into an Over-Budget Nightmare

Your “reality,” sir, is lies and balderdash, and I’m delighted to say that I have no grasp of it whatsoever.

--Baron Munchausen

By legend, the 18th-Century German storyteller Baron Karl Friedrich Hieronymus von Munchausen always preferred a vivid lie to the drab truth. This is a story about the making of a movie about Munchausen. Not surprisingly, it is a slippery and difficult tale.

On paper, “The Adventures of Baron Munchausen”--a big-budget, independent production to be distributed by Columbia next Christmas--was cautiously designed by experienced film makers and some of Hollywood’s most conservative studio executives.

In reality, the spending on “Munchausen” quickly spiraled out of control and the film threatened to become that most dreaded of Hollywood monsters, a rogue production capable of seriously damaging companies and careers with runaway costs.

At one point early in production, accountants estimated that “Munchausen” might run $8 million to $10 million over its original $23.5 million budget.

The sudden overage cast a serious pall over the biggest and potentially showiest project endorsed by David Puttnam, who was forced out as chairman of Columbia when the parent Coca-Cola Co. decided in September to merge Columbia with its Tri-Star Pictures.

A British movie producer, Puttnam had lectured Hollywood about the evils of excessive cost when he took charge of Columbia just 15 months before. Ironically, he and his cohorts soon became embroiled in “Munchausen’s” budget problems--although his wary approach to movie finance has protected Columbia by shifting any direct responsibility for cost overruns from the studio to insurers.

Because Columbia constructed a deal that removes it from any financial liability for “Munchausen,” which is being shot in Spain and Italy, the film cannot become a fiasco on the order of “Heaven’s Gate.” That 1980 film, directed by Michael Cimino as an in-house production at United Artists, ran more than $30 million over its original $11.6-million budget and made barely over $3 million at the domestic box office.

“Heaven’s Gate,” a phrase that has entered the film vocabulary as a synonym for financial irresponsibility, contributed to Transamerica Corp.’s decision to sell off the studio.

If “Munchausen” is less threatening to Columbia than, say, “Ishtar”--an over-budget disaster produced by Puttnam’s predecessors at the studio--it remains an extraordinarily troubled movie.

According to the director, the producer, and others, production hold-ups and a morass of deal-making delays nearly destroyed the picture before it was half-finished. At one point, the director was about to be replaced when he agreed to major changes in the script. And with months of work remaining to be done, sources close to the production say the producer and director no longer talk to each other, while Sean Connery, its best-known actor, has walked away from his role.

Spending on “Munchausen” is now being supervised by Film Finances, Inc., the company that insured the budget, and sources say that the payroll is now being met by agents assigned by Lloyd’s of London, a company whose services are usually not required until the ship has sunk.

Fact and fiction have occasionally become as muddled in the making of the movie as they were in the 18th-Century nobleman’s fantastic yarns.

Asked at a press conference last September about claims that Marlon Brando would appear in “The Adventures of Baron Munchausen,” writer-director Terry Gilliam playfully replied, “We were lying about Marlon Brando. . . . Everything we are saying about this film is a lie.”

In fact, they were not lying about Brando. Gilliam said Brando had considered playing a key role in the film, but ultimately declined and the part went to British actor Oliver Reed.

But the gap between words and reality has grown wide on a film that lurched out of fiscal control.

At the end of July, “Munchausen” had been promised to its financiers for $23.5 million, a figure that included a $2-million contingency fund to cover unforeseen expenses. But expenses consumed $2 million before the first frame of film was shot Sept. 21, and the production was spending at a rate that would have driven the final budget figure to an estimated $32.5 million or more.

In an unusually drastic move in November, the company that had insured the film’s budget took over the production and shut it down. A handful of key crew people were kept on the payroll, but the rest--perhaps more than 100 persons--found themselves taking a two-week unpaid vacation while representatives of the bonding and production companies wrestled over ways to trim the budget.

Puttnam, while still a producer, declined to make Gilliam’s previous film, “Brazil,” which was eventually made independently and distributed in the United States by Universal. Universal released “Brazil” at Christmas, 1985, but only after Gilliam won a lengthy, bitter feud with studio chief Sidney Sheinberg over the length and structure of the director’s cut.

“I didn’t think the movie he described to me could be made,” Puttnam said recently of his decision to pass on “Brazil.” “Of course, I was wrong. It was a brilliant film. Terry is a brilliant film maker.”

It was partly because of “Brazil” that Puttnam wanted to have “Munchausen” for Columbia. But despite Gilliam’s ability to make “Brazil” for $15 million, Puttnam said he remained skeptical about estimates on “Munchausen” and insisted that the deal be structured as a “negative pick-up,” meaning that Columbia would buy certain rights to the film but would not be involved in its production.

Columbia agreed to pay $12.5 million for the theatrical distribution and television rights for most of the world. The studio’s video joint venture with RCA would pay another $8 million for rights to the cassette. The remaining $3 million was to come from investors who purchased the rights to the movie in Germany and Italy.

Puttnam said Columbia gave producer Thomas Schuhly a $1-million “advance,” but the rest of the money was not to be paid until the finished film is delivered in late 1988. Funds for day-to-day production and payroll costs were provided by a loan from the Long Term Credit Bank of Japan. The commitments from Columbia and the other investors provided the collateral, and Film Finances Inc., based in London and Los Angeles, issued a bond guaranteeing that the film would be made at its funded budget.

Shooting the Moon

The script for “Munchausen,” co-written by Gilliam and Charles McKeown, one of his “Brazil” collaborators, promised an epic 18th-Century fantasy about an old storyteller whose gifts for magic are restored by the faith of a young girl who becomes his companion on a series of adventures. One adventure occurs in the belly of a whale, another occurs on the moon.

The moon sequence was the longest in the script, taking up 28 of 126 pages. In it, the Baron and 8-year-old Sally are carried by a balloon made from silken underwear to a lunar world peopled by giants with detachable heads.

The sequence concluded with a chase where the Baron steers a headless giant from a perch in the giant’s empty neck-hole. The Baron escapes only when the giant’s own mount--a three-headed griffin--rips itself apart while trying to descend on three victims at once. The whole sequence was brushed with the whimsical notion that each lunar eclipse wipes out every bit of memory on the moon.

Puttnam and others who read the script considered the moon sequence the centerpiece of the entire fantasy, and it was the one that would feature Connery.

Several months later, the moon almost cost Gilliam his job and it convinced Connery to quit his.

In November--frustrated by Gilliam’s refusal to scale back the script--the bondsmen threatened first to seize the director’s personal assets if he didn’t cut the moon sequence, then threatened to fire him.

As far as Gilliam was concerned, the bondsmen had no one to blame but themselves. A bond is like an insurance policy, with fees that run as high as 6% of a film’s budget. It is the insurer’s responsibility to determine whether a budget is realistic for the script. It is the insurer who must pay off any overage.

The 47-year-old director paused in early December during the fevered shooting schedule at the government-owned Cinecitta Studios in Rome to quote his own words during an earlier confrontation with the bondsmen.

“I’m the director,” he said to them. “I’m supposed to fantasize. Thomas is the producer. He’s supposed to con you. And you’re the money guys. You’re supposed to be checking what’s really possible.”

Executives of Film Finances were interviewed for this story, but refused to comment on almost all specific questions related to the project.

Gilliam and McKeown had attempted to cool the temperature of Film Finances executives with various suggestions for cuts, but they apparently did not cut deeply enough. The strain between the two sides grew during the difficult monthlong shoot in Spain. Gilliam said he got so angry during one meeting with the bondsmen in Spain that he stormed outside, went to his car and promptly put his fist through the windshield.

When the crew returned to Rome from the Spanish location in early November, Film Finances shut the production down and demanded that the moon sequence be eliminated. It would cut an estimated two weeks out of the shooting schedule and as much as $2 million in costs.

Gilliam said he would not cut what he considered the heart out of his film and the bondsmen told him they would find a director who would.

“Munchausen” executive producer Jake Eberts said he first heard about a possible change in directors when the production was still filming in Spain. Eberts said a source in Los Angeles told him Film Finances had been contacting Hollywood agencies to find out who was available.

Two of the names mentioned, Eberts said, were Gary Nelson, who had directed “The Black Hole” for Disney in 1979, and 71-year-old Richard Fleischer, whose most recent films include “Red Sonja,” “Conan the Destroyer,” “Amityville 3-D” and last summer’s “Million Dollar Mystery.” Eberts said he thought the inquiries were a bluff on the part of Film Finances President Richard Soames to frighten Columbia into putting up more money.

Eberts had provided development money for a string of successful British-made films--among them, “Chariots of Fire,” “Gandhi” and “The Killing Fields”--and when he read the “Munchausen” script, he said he quickly decided he was on to another winner.

But he did have reservations about the budget. He said he told Schuhly and Gilliam that the film could cost $40 million to make but would never attract more than $25 million in financing. The costs could be limited somewhat by casting lesser-known stars (British stage veteran John Neville was eventually cast in the title role) but it was still going to be a tough film to finance.

Eberts said he wanted the producer and director to develop an elaborate package of costume and set designs before they took their project to the major studios, and he immediately put up $350,000 to cover those costs. Within months, Eberts’ investment in costumes, set design and other development costs had grown to $850,000.

The $150,000 Lunch

Gilliam and Schuhly, a West German who had worked with the renowned German director Werner Fassbinder, were introduced by Gilliam’s “Brazil” producer Arnon Milchan. Milchan wanted to hire Schuhly to handle day-to-day production chores on “Munchausen,” and both Schuhly and Gilliam happened to be on the Lake Como, Italy, set of Milchan’s “Man on Fire” the same day.

Gilliam and Milchan had had disagreements about the way the “Brazil” production had been set up financially, and Gilliam, a member of England’s Monty Python comedy group, insisted on having the new Python company, Prominent Features, serve as co-producer on “Munchausen.”

Milchan said he didn’t want to do a co-production and wished Gilliam well. Gilliam then accepted Schuhly’s offer to co-produce “Munchausen.”

Six months later, Gilliam, Schuhly and Eberts were in Los Angeles, designs in hand, pitching “Munchausen” at the major studios. One of the luncheon meetings on their crowded schedule was with Scott Rudin, production boss at 20th Century Fox.

Gilliam said that although Fox had once taken out a four-page ad in Daily Variety announcing “Munchausen” as a future Fox production, the studio had long since decided not to do it. Gilliam and Eberts decided to cancel the Rudin lunch so they would have time to pitch to studios that “were still alive.”

Rudin told Eberts there were other things to talk about at lunch. Fox wanted to know when it would be getting back the $150,000 it had paid in development money to Milchan.

“I was dumbfounded,” Gilliam said. “Arnon (Milchan) had not said one word about receiving any money from Fox.”

Gilliam said that in order to extricate “Munchausen” from Fox’s claims, the production company not only had to repay the $150,000 that Fox had paid Milchan, but also pay Milchan another $75,000. In addition, Milchan and Fox were both guaranteed a percentage of any eventual profits.

In a recent interview, Milchan confirmed the terms of the settlement and added that because of his previous relationship with Gilliam, he told his attorney to make the deal as painless as possible.

“We had a signed working relationship, Terry and I,” Milchan said. “I had 50% of the movie and I didn’t have to give it up. Selling 50% of a movie for $75,000 isn’t being difficult.”

In any event, the deal ended the professional and personal relationships between Gilliam and Milchan, who had been close allies through the “Brazil” fight with Universal. The two men have not spoken to each other since.

Final Cut

Eberts, Gilliam and Schuhly pitched “Munchausen” to most of the major studios, and were rejected at most of them because of its high budget. Eberts said he’d been somewhat wary of dealing with Columbia, fearing that his past associations with Puttnam on such films as “Chariots of Fire” and “The Killing Fields” would subject Puttnam to charges of cronyism.

But the threesome did end up in the executive offices at Columbia’s Burbank Studios headquarters, where they were greeted by David Picker, Puttnam’s production president. Eberts and Picker, old friends, embraced, and before they were seated, Picker blurted out, “Let me tell you, I think this is the most wonderful script I’ve ever read.”

Negotiations began immediately.

There were some hitches. Puttnam wanted to commit to a price for the worldwide distribution rights rather than fund the project directly as a Columbia production. This would relieve the studio of any liability should the project go over budget. He was also unwilling to give Gilliam “final cut,” the privilege granted to a handful of powerful directors to determine the final release form of the film.

Gilliam and the Columbia executives worked out a compromise that reserved the final cut for the studio, but guaranteed to the director that his version would be released if 55% or more of audiences at two research screenings rated the film in the two highest categories.

In late July, the contracts were signed. “The Adventures of Baron Munchausen” was to be a film directed by Terry Gilliam, no longer in length than 115 minutes, produced by Laura Film GmbH/Prominent Features Ltd.

Laura, owned by Schuhly, was to be directly responsible for production arrangements. Prominent was to provide the services of Gilliam and the company’s post-production facilities in London.

A Hungry Maw

Principal photography on “Munchausen” was to begin Sept. 7 in Rome where Schuhly, using personal credit and the $1-million advance from Columbia, had signed deals for costumes, set construction and stage rental.

When Sept. 7 arrived, however, the costumes needed for the first week’s shooting weren’t ready. Schuhly blamed the delay on Columbia lawyers, saying that contractual nit-picking kept the contract from being signed for more than two months after the deal was agreed upon.

“The film was supposed to start serious preproduction the first of May,” Schuhly said, during an interview in his office at Cinecitta Studios. “We started serious preproduction on the 21st of July.”

Eberts insisted that Columbia “behaved impeccably,” but agreed that negotiating delays put the film on a desperately tight schedule.

The costumes weren’t the only holdup on Sept. 7. The sets weren’t ready either.

Shooting was to begin in an exquisitely contrived “bombed-out theater” set, which--in a weird blend of illusion and reality--was to fit inside a Cinecitta sound stage that had been bombed out itself during World War II and was still without a roof.

The principal actors and British crews arrived on time and began collecting salary and per-diem payments, per their contracts. But Italian workmen were still pounding away on the theater set.

Eberts didn’t learn of the production delay until late on Sept. 7 when he called Schuhly from London to see how the first day had gone. He said he was shocked to hear that Day One wouldn’t occur until Week Two.

Any major film becomes a hungry maw, devouring cash at a terrifying rate once the official shooting date kicks all of the contractual obligations in. “Munchausen,” a complicated production that would involve hundreds of crew members, about 8,000 appearances by extras and a panoply of difficult special-effects shots, would consume as much as $1 million during every scheduled shooting week, ready or not.

Gilliam, who blames the delays on Schuhly’s production management, said it had been apparent “months ahead” that shooting couldn’t proceed on schedule.

Eberts, the executive producer, doesn’t blame any individual for the delay. But he said “the entire production team,” including the staff of Cinecitta, “simply didn’t have the experience” to handle a movie as elaborate as “Munchausen.”

Said Schuhly: “Terry and me thought we could do it for that money. And then the big waves came. Whoff!”

At the same time, Schuhly claims that “everybody,” including Columbia, either knew or should have known as early as July that the film couldn’t proceed according to the schedule and according to the budget outlined in the contracts.

In any event, when Day One of Week Two arrived, the production was still not ready to begin filming.

A mass of scaffolding had toppled over on the unfinished theater set sometime over the first weekend, disabling much of the set and forcing a second week’s delay.

At first the accident seemed a perverse stroke of luck. Presumably, insurance would pick up the tab for the lost time, while the costume people seized the opportunity to catch up. Instead, said Eberts, the insurer agreed to pay for only one day, claiming that the accident was no accident. There was speculation on the set that the scaffolding had been sabotaged.

Although the film was two weeks late and an estimated $2 million over budget, the snowball was just gaining downhill speed. By Schuhly’s own account, the budget was spiraling toward a $5-million overrun as early as September.

Schuhly said he told Columbia’s Picker that he needed more money when Picker visited the set the first week of September, and that Picker reassured him that everyone had faith in him.

In a recent interview, Picker disputed Schuhly’s claim. He said that the producer fired no warning flares at all; quite the contrary.

“Thomas said everything was going fine and that he had a nest egg of $2 million in case he ran into problems,” Picker said. “We were absolutely unaware of any budget problems with the film (then).”

Eberts said that Film Finances was aware of problems in mid-September and that sometime late in the month, Soames, head of the bonding company’s U.S. operation, told Eberts he had a “gut” feeling that the film would eventually go over budget by about $4 million.

According to Eberts, Soames believed that half of the excess would be covered by the $2-million contingency fund included in the budget, money that was contractually earmarked for deferred salary payments to the producer and director. Eberts said Soames planned to get the rest of the money by persuading Columbia to pay off the Japanese loan, take over direct financing of the movie and save $2 million in interest payments.

If David Puttnam had been inclined to agree to that, he wouldn’t have had time to act on it. On Sept. 16, Coca-Cola made its stunning announcement that it was merging Tri-Star and Columbia and placing Tri-Star Chairman Victor Kaufman in charge of both studios.

Coke executives publicly proclaimed support for their other operational heads, but film people knew exactly what the announcement meant. Puttnam was being pushed out after 15 months as chairman of Columbia, and his right-hand man, Picker, was sure to be forced out with him.

For Gilliam, it was deja vu. His “Brazil” problems with Universal had been caused largely by a change in studio leadership while that film was in production. Now, the only people at the studio with any passion for “Munchausen” were on their way out.

Schuhly complained that once the budget problems were known to Columbia, the studio ignored them, and him. He quoted Picker, speaking on behalf of Kaufman, as saying, “We’re cognizant of your problems, but we have a deal.”

When the production was shut down and the strain between the film company and Film Finances was at its worst, Schuhly said he couldn’t get a call returned from Puttnam, Picker or Kaufman. Kaufman referred all calls about “Munchausen” to Columbia’s legal department.

Picker, who is now an independent producer with projects at Columbia, said the studio made it clear from the beginning that it would not put more money into “Munchausen” than was contractually committed.

“We made a deal for a picture at a certain price,” Picker said. “We were consistent in saying, ‘Don’t come to us for money; there won’t be any.’ ”

Nearly everyone involved in the project believes “Munchausen” has enormous earning potential, particularly in central Europe, where the Munchausen stories hold an appeal perhaps as powerful as that of “Alice in Wonderland” in English-speaking countries.

Yet, the problems continue.

The latest public-relations blow to the film was the resignation of Sean Connery from his role as the Moon King. Connery’s publicist said the actor quit because of the cuts made in the moon sequence. But, as this is written, the Moon King role is simply the film’s latest controversy.

According to sources in Rome, “Munchausen’s” producer is still negotiating to get Connery back (his presence was part of the deal with German and Italian investors), but the idea is being resisted by Gilliam, who reportedly wants to cast fellow Python Michael Palin in the role.

Under Siege

The village of Belchite is an empty ruin in the rough hills outside Zaragoza, Spain.

Shelled to oblivion in 1936, the town’s remains--down to its shoddily buried human bones--were left as reminders of Civil War carnage. Belchite was thus perfect for “Munchausen’s” location shots, which required a city on the verge of toppling before a bloody siege by the Turks.

Most of the cast and crew arrived in Zaragoza on Oct. 22. Their troubles, if nothing else, came with them.

To begin with, their ill-fated costumes got caught in a freight-handlers strike at the airport. Between the costumes and weather problems, four more shooting days were lost, at a cost that approached $150,000 a day.

The filming, once under way, suffered more difficulties. In a somber crowd scene, inexperienced extras repeatedly ruined shots by smiling innocently at the camera. A trio of Yugoslav-trained “war elephants,” bulwark of the invading forces, stampeded in the wrong direction as soon as prop cannons were fired from the battlements.

Gilliam also had begun to notice growing tension between the British and Italian crew members. There were communications problems, despite interpreters, doubling or tripling the time that setups would normally take. The money Gilliam had been told he would save by using Italian labor was consumed by the sluggish production pace.

Like the stampeding war elephants, Film Finances began to show signs of growing panic during the Spanish interlude, according to several of “Munchausen’s” principals.

How deep were they in? Sources said that the bondsmen and the film’s accountant spent intense weeks recalculating the budget, while the budget itself--as if under its own power--continued to grow around them. On Oct. 22, Stratton Leopold, a young Film Finances auditor, announced that the film would come in at somewhere around $30 million. Estimates have since put the figure much higher.

Film Finances won’t get stuck for the whole amount of the overage. The company routinely reinsures its own policies through Lloyd’s of London. But whatever its final liability, the cost will be significant for a company that has had to seize control of fewer than 40 over-budget pictures, out of an estimated 1,800 clients, during its 38 years.

Eberts, Puttnam, Picker and others said Film Finances behaved badly when the pressure was on. The bondsmen panicked, they said, and began flailing at imaginary targets when they should have just stepped up and fulfilled their obligations.

“When a ship goes down, they ring a bell at Lloyd’s,” said Eberts, a former investment banker who tends to view contracts as sacrosanct. “Everyone thinks it’s tragic, but they put their hands in their pockets (at Lloyd’s) and pay up.”

Asked in an interview whether Film Finances correctly performed its initial examination of budget documents, Soames said, “Of course,” then added that the budget was “also analyzed in light of the representations of the director and producer.”

Unfolding Unrealities

For his part, Gilliam became fascinated by the degree to which the harsh realities of making “Munchausen” began, by late October, to meld with the delicate unrealities of the script.

On the day he shot a scene portraying the baron’s death, he learned that Film Finances was proposing to close the movie for two weeks while it sorted through the morass. While shooting the baron’s funeral, he heard for the first time that the bondsmen were thinking of replacing him.

Eberts maintains that the film, which he found too long anyway, may actually be improved in some ways by the trims that Gilliam and McKeown made. He concedes, however, that Film Finances’ “may be wondering” whether Columbia will ultimately cough up its $20.5 million, considering that it will now receive a movie that is less elaborate than the one it approved last July.

In a prepared statement, Columbia attorney Ronald Jacobi said only that the studio looked forward to receiving a film “in strict compliance” with its contracts.

As the production resumed at the end of November, Gilliam continued to shoot with an appearance of courage and good cheer that defied the reality of the circumstances.

Financial problems aside, the film seemed jinxed. After the peace parlay with Film Finances during the shutdown, Gilliam returned to the set for a week’s work in the roofless bombed-out theater in Rome. It rained for seven straight days.

Wrapped in a rose-colored parka against the brisk Italian winter, the director claimed to feel “numb.”

With nearly half of “Munchausen” yet to be filmed, Gilliam worked under the eye of Film Finances’ Leopold, who was installed at Cinecitta for the duration. Given previous uncertainties, Gilliam said, he had actually come to welcome the bondsman’s monitoring.

The appearance of cheer he simply attributed to “hysteria.”

In his nearby office, Schuhly professed sadness that his relations with Gilliam had become strained. “Unfortunately, nobody kept cool blood,” he said of the tensions that racked “Munchausen.”

Meanwhile, he was already talking of plans for another film he would like someday to produce--an epic drama about Alexander the Great.