COLUMN ONE : A Mogul’s Bankroll--and Past : Arnon Milchan has emerged as one of Hollywood’s most powerful producers. His background is unusual: agribusiness and munitions.


In the controversial film “JFK,” an Academy Award nominee for best picture, director Oliver Stone explores the shadowy machinations of a burgeoning military-industrial complex. It is a world with which the picture’s executive producer, a jet-setting Israeli businessman named Arnon Milchan, has more than a passing acquaintance.

For decades, Milchan has successfully straddled two worlds-- methodically carving out a position as one of Hollywood’s most influential movie producers while continuing to manage an international web of companies in industries ranging from arms consulting to agribusiness.

Those dealings have nourished Milchan’s movie career, providing him with the capital to get films off the ground, but they also have landed him in controversy. The 47-year-old producer--described in a 1989 Israeli newspaper story as “probably the country’s largest armaments dealer"--has been linked to two international scandals.

The first, referred to as the South African Watergate, was a pro-apartheid propaganda campaign that shook that nation’s government. The other concerned the shipment of devices, which could trigger nuclear explosions, to one of his Israeli companies.

Milchan has never faced charges of wrongdoing in connection with the cases, and such Ludlumesque intrigue has not caused him any discernible problems in Hollywood. With a potential filmmaking bankroll of nearly $1 billion and responsibility for nearly one-third of Warner Bros.’ releases this year, he is regarded as moviedom’s newest mogul.


“No doubt about it, if Arnon didn’t exist, fewer films would be made,” said director Sydney Pollack, who was briefly a partner of Milchan’s in the mid-1970s.

Milchan won mainstream credibility in the late 1980s, when he produced the back-to-back hits “The War of the Roses” and “Pretty Woman.”

But his real clout came in early 1991, when his Regency Enterprises hooked up with three entertainment giants--America’s Time Warner, French pay-TV leader Canal Plus and a German movie and TV company, Scriba & Deyhle, for the largest American-European entertainment joint venture ever formed.

Under the agreement, Warner Bros. will market and distribute 40 movies from the partnership. Milchan also is starting a record label, giving rise to speculation that his empire-building is not over. Ask him whether he sees Regency as a “mini-major'--one tier below the six major Hollywood studios--and the scope of his thinking becomes clear.

“I have never liked the word mini, " Milchan said, eyes twinkling through undersized wire-rimmed glasses that give him a scholarly look. “Either you’re in or you’re out.”

Milchan, no doubt, is “in"--a welcome presence in an industry facing stratospheric production and marketing costs, economic downturn and the foundering of such companies as Orion Pictures and Carolco Pictures.

Still, he has never operated as a Hollywood “insider.” Regency, one of 30 companies Milchan owns in 17 countries, is based in the Netherlands. A citizen of Israel and Monte Carlo, Milchan and his longtime companion--a Swedish woman named Ase Thastrom--make a 300-year-old farmhouse outside Paris their base.

On the surface, the globe-trotting Milchan is a study in humility. Sporting a self-deprecating wit and his trademark Fruit of the Loom-style T-shirts, he is a master at making colleagues feel that he knows less than they. Posing for pictures is anathema. Erecting a building or adopting a corporate logo is not his style. Regency’s 30-person staff inhabits two adjoining bungalows on the Warner lot in Burbank; by industry standards, Milchan’s art-filled office is modest.

Not so his drive, which takes the form of 18-hour days, and two-day stretches with only an hour or two of sleep.

“Winning is very important to Arnon,” said David Smith, a tennis coach who is on the court with the ultra-fit producer three or four hours each morning on days when Milchan is working--and six to eight hours a day when he is not. “He’s very highly motivated, 100% focused. In everything, he has to be the best.”

Relationships--from heads of state such as former Canadian Prime Minister Pierre E. Trudeau to movie stars such as Robert De Niro--are his stock in trade, an underpinning of his success.

“Arnon knows how to be liked,” said producer Menahem Golan, who played soccer with the producer as a youth. “That’s an important piece of his character.”

The late Sergio Leone, piqued at having to shave a full hour off the American version of the 1984 film ‘Once Upon a Time in America,” was said to have remarked, somewhat cryptically, of his producer: “There are three things that make Arnon a great producer: Charm . . . charm . . . and charm.”

Although Milchan has his share of detractors, he is generally well regarded by the creative end of the business. Directors, for the most part, find Milchan that rare producer who sides with them rather than the studio.

“Arnon is like those old guys in Hollywood, hustling wheeler-dealers such as the Selznicks, the Kordas, the Zanucks, who had respect for artists,” director Henry Jaglom said. “He uses the power of his position to make sure their films get made and doesn’t assume money gives him the right to tamper with their work. Unlike so much of the foreign money coming into the studios, Arnon’s doesn’t bring with it a lot of leveling and compromise. It’s the difference between dealing with a corporate mentality and a buccaneer mentality.”

As a young man, Milchan seemed headed for a more settled life, studying economics and business administration in London and Geneva. At age 20, however, he took over the family business when his father took ill. With the $61,000 he inherited upon his father’s death, he turned Milchan Bros.--a small fertilizer technology company on the skids--into one of Israel’s largest chemical concerns.

Signing exclusive deals to represent and test the scientific breakthroughs of international chemical companies such as Du Pont, Sandoz, and Ciba-Geigy, Milchan the aspiring chemist (“You can put me with any scientist today and I’ll give him a run for his money”) evolved into Milchan the global businessman.

Milchan’s friends say he has frequently told how, in the 1960s, he got wind of a plan to build an airport in Iran, where he was helping to increase agricultural output. No matter that he knew nothing of airport construction; he finagled an audience with the shah and promised to build the project faster and cheaper than anyone else. Ten days later, he had a team of experts lured, at great expense, from other firms. When the plan they submitted was accepted, Milchan emerged a richer man.

When asked recently about the story, Milchan denied building the airport--or ever saying he had. His company, he said, only received a contract to remove weeds from the airport’s runaways.

Once regarded as a world-class gambler, Milchan always has gone with his gut. In 1966, he married a French model 10 days after they met--although they did not share a common language. “The problems,” he says, “began when I learned to speak French.”

A decade later, he shelled out $30,000 worth of poker chips when Israeli businessman Meir Teper--then a virtual stranger--approached him at a baccarat table and asked him to invest in his Ted Lapidus store at Caesars Palace.

Milchan’s high-rolling instincts paid off handsomely. By 1972, his companies were reported to have a combined gross revenue of $100 million. Today, Milchan Bros., the umbrella organization for the group, is involved in plastics, electronics, communications and pharmaceuticals.

Not to mention armaments.

In 1985, Milchan’s name surfaced during a federal investigation into alleged clandestine efforts by Israel to obtain U.S. weapons technology.

The probe centered on a Huntington Beach man named Richard K. Smyth, indicted by the U.S. attorney’s office in Los Angeles on charges that he illegally exported 800 krytrons--electronic timing devices that can be used to trigger nuclear weapons. The recipient, according to the indictment: Heli Trading Co., an Israeli firm owned by Milchan.

Smyth, a computer engineer who had served as an adviser to the North Atlantic Treaty Organization and the U.S. Air Force, told authorities that he and Milchan were involved in a joint venture with the “encouragement” of the Israeli government. He was believed to be referring to Milco, the Huntington Beach-based company that had shipped the krytrons to Israel.

Milchan never was accused of wrongdoing in the case--which he has dismissed, in the past, as “the unbelievable stupid krytron story.” Despite the company name, he says, he had nothing to do with Milco, knew nothing of any krytron order, and left all Heli Trading business in the hands of Israeli managers.

“At the end of the day, you can’t be expected to read scripts, go to marketing meetings and still worry about everything else,” Milchan said.

Smyth disappeared--some think to Israel--before he could be brought to trial. The Israeli government, insisting that the krytrons were to be used for defense-related research and development of conventional, not nuclear, weapons, returned 460 of the devices.

Although he acknowledges dealings with the Israeli Ministry of Defense, Milchan denies receiving commissions for arms sales. He allows, however, that he serves as an on-the-books consultant to Raytheon--producer of Hawk and Patriot missiles--as well as Beachcraft, a Raytheon subsidiary that manufactures civil and military aircraft.

Patriotism figures heavily into the picture, as Milchan is the first to point out. As a “10th-generation Israeli” on his mother’s side, he played center on the Israeli national soccer team, fought in the Six-Day War, and made the country’s spirit--"take the impossible and make it happen,” as he puts it--his own.

“I’d do anything I can for my country within the bounds of the law,” Milchan said. “My family and I risked our lives to make sure Israel stays alive. Patriot missiles saved a lot of people from the Scud attacks (during the Persian Gulf War), and if I had anything to do with it,” he adds vaguely, “I’d be proud.”

Years earlier, Milchan’s name surfaced in connection with another scandal--this one involving South Africa. The “Muldergate” case revolved around accusations that officials from the office of then-Information Minister Cornelius P. Mulder tried to favorably influence international public opinion in the 1970s through the use of a secret slush fund thought to be more than $100 million.

The money reportedly was used to buy influential news publications and communications outlets around the world and to oppose politicians critical of the South African regime. Press reports at the time quoted Eschel M. Rhoodie--Mulder’s deputy and a key figure in the scandal--as saying that some funding went to candidates who defeated liberal Democratic Sens. John Tunney of California and Dick Clark of Iowa.

In response to a written inquiry from The Times, Rhoodie said he had been introduced to Milchan, but could not recall the producer participating in any Muldergate-related affairs. However, in their 1980 book, “Muldergate,” South African journalists Merven Rees and Chris Day described Milchan as one of Rhoodie’s “front men,” though they did not detail his alleged activities in the propaganda campaign.

Milchan has given contradictory accounts of his South African dealings over the years.

In an initial interview with The Times, Milchan insisted that his involvement was limited to a three-day visit to South Africa in the mid-1970s.

The Ministry of Information “probably had plans for me,” the producer acknowledged. “But that was before I received the shock of my life. At the local zoo, I came across a sign saying, ‘No Asians, Blacks, or dogs allowed.’ I realized that, as an Asian--since I was from Israel--I couldn’t go in. I never set foot in that country again.”

A 1986 article in the Jerusalem Post, an English-language Israeli newspaper, told a different story. Milchan, it alleged, had served as the “Israeli money man” for the Muldergate conspirators, laundering funds through a bank in Italy. According to the Post, Milchan acknowledged his role; the paper quoted him as saying he blew the whistle on the operation because “he couldn’t sleep at night.”

Confronted with this newspaper account in a second interview with The Times, Milchan did an about-face.

Maintaining that strong feelings against apartheid make the subject painful for him, he acknowledged some involvement with the operation. “I worked with them, but I wasn’t the ‘money man,’ ” he said. “They asked, but I wouldn’t do it.”

Milchan contacted The Times once again last Thursday. In that interview, he categorically denied “any involvement in any organization in South Africa.” Evidence of his convictions, he said, is his next film, “The Power of One,” which takes a strong stand against the country’s separatist policies.

“I will fight the rest of my life against racism and apartheid,” Milchan said.

Whatever the reality, Milchan’s new business partners evidently find his past less important than their collective future.

“I know about things, but I also know there’s a load of bull---- out there,” Scriba & Deyhle partner Bodo Scriba said. Canal Plus’ Chief Executive Officer Rene Bonnell said: “My only problem is with whether Milchan is a good producer. . . . His personal history I do not know.”

Terry Semel, president of Warner Bros., acknowledges reading about Milchan’s krytron involvement in the mid-1980s, but said he was unaware of a South African connection.

“There was a common rumble having to do with Arnon’s arms dealing, but, frankly, we didn’t look into it,” he said. “We were making a movie deal with him, not buying a piece of his company. We didn’t do any research into how he made his money. But, then, why should we? He’s never been charged with any illegal activities, as far as we know, and we won’t indict him on the basis of what might have been.”

Milchan turned his attention to Hollywood in 1975 after producing films in Israel and England in the early part of the decade.

“Part of it was my love of movies,” he said. “Part was that, since I was Jewish and living in a small country, making a movie seemed so intimidating. I’ve always been attracted to things a little scary.”

His early years in the movie industry, Milchan recalls, were spent overcoming deep-rooted insecurity. The 1981 TV mini-series “Masada,” which he produced with then-partner Pollack, provided a foothold. But the big screen still loomed large.

“In the beginning, I couldn’t believe they were letting me make a movie. . . . If only they knew how much I didn’t know,” Milchan said. “Then I realized no one really knows. Nine out of 10 decisions made in this town are wrong.”

Milchan has had his share of flops, including “Big Man on Campus,” “Legend,” and “Man on Fire.” His reputation was considerably enhanced, however, when “The War of the Roses” became a Christmas 1989 hit and “Pretty Woman” was released a few months later. “Pretty Woman” became the No. 2 picture of 1990, eventually taking in more than $350 million worldwide.

The producer’s confidence undoubtedly was boosted again when American film writers and critics released a list of the top 20 movies of the 1980s--and his name was attached to three: Martin Scorsese’s “King of Comedy,” Terry Gilliam’s “Brazil,” and Leone’s “Once Upon a Time in America.”

“I’m not sure I have credibility yet,” Milchan protested, shaking his head. “I’m still not as good as I want to be. . . . All I know is that my phone calls are returned much faster now.”

Some see Milchan as a middleman or facilitator, pairing someone who buys with someone who sells. More, however, credit him with taste--taste he says is more in tune with that of the moviegoing public since the resurgence of “emotionally mature” films.

“Arnon makes movies, not deals,” said “Pretty Woman” screenwriter Jonathan Lawton. “You will not see him running around signing every actor and writer in town to line up projects. When he finds a project he likes, he makes it. It’s that simple.”

Right now, the producer has three films in release: “The Mambo Kings” and “Memoirs of an Invisible Man,” which open in Los Angeles today, as well as “JFK.” A March opening is planned for “The Power of One.”

Though not known as a hands-on producer, Milchan’s artistic muscles, his colleagues say, have bulked up over the years.

“For most people who make money, making money eventually isn’t enough,” Pollack said. “I’ve seen Arnon turn from a pure ‘financier’ to a ‘producer,’ exercising creative judgment. Movies do for him what they do for us all. They’re a way of avoiding a real job, an alternative to seeing through clear glass until the end of your life.”

Milchan speaks with pride about going to the mat on 1985’s troubled but critically acclaimed “Brazil,” taking on MCA President Sidney J. Sheinberg, who found the film long and artistically problematic. Rather than alter the movie to Universal Pictures’ specifications, he sided with director Gilliam and offered to buy it outright.

Milchan and Gilliam next embarked on the ill-fated “The Adventures of Baron Munchausen.”

In “Losing the Light,” a new book about the making of the film, author Andrew Yule reports that their relationship deteriorated after Gilliam discovered that Milchan had pocketed a $150,000 fee from 20th Century Fox for the rights to “Munchausen” without telling him.

Milchan says it was all a misunderstanding--that the $150,000 was compensation for money he personally had laid out in developing the idea. If so, the director responded, he has no idea how the sum was spent. “It was something of a shock to discover that his concept of partnership wasn’t the same as mine,” Gilliam said in an interview with The Times.

In a business of ethical ambiguity, Milchan may be just another shade of gray.

“There are no memories in Hollywood,” said Gilliam, another outsider who made good. “You can be stabbed in the back and, a year later, be in bed with the person. If you’re successful, that’s all that counts.”

Stone is a case in point. He has built his career on skewering the military Establishment in films such as “JFK,” “Born on the Fourth of July” and “Platoon.” But he is about to embark on a long-term deal with Milchan nonetheless.

“I’ve heard the rumors, but, then, I’ve always had a penchant for larger-than-life pirates,” the director said. “If Arnon comes from an arms or defense background, well, so did Rhett Butler. If those stories are true, I’m sure Arnon sees himself as a patriot.”

Milchan, meanwhile, is ensconced on the Hollywood fast track, possessed of creative and financial control. With the resources of a studio and his foreign partners behind him, he no longer has to engage in “pre-sales"--selling off the rights to home video, cable and foreign theatrical markets--to cover the cost of producing his films.

“If you get a hit and don’t own it, you’re in the wrong business,” he said--a truth he discovered after “Pretty Woman,” when his take was far less than if he had financed it himself. “You’ve got to play the upside.”

Under the terms of the deal with Warner Bros., Milchan, Canal Plus and Scriba & Deyhle will put up 50% of the money on some films, 100% on others. Milchan’s European partners not only get movies for their TV outlets but become long-term players in Hollywood film production. Warner Bros. keeps all the distribution rights, except for French and German TV.

Though Scriba & Deyhle and Canal Plus now own equal shares of Regency, Milchan--who retains 51%--holds the real power by Hollywood standards: the ability to “green light"--give the go-ahead to those projects financed without Warner Bros.’ help.

This lack of bureaucracy, insiders say, gives Milchan an edge over studio chiefs.

“Arnon’s major advantage is that he can give you a quick yes or no,” said producer David Matalon, a former head of TriStar Pictures who has worked extensively with Milchan. “Everyone else has to deal with committees and computer models that bear little resemblance to reality.”

Teper, a friend of the producer’s since they met at the gaming tables, sees Hollywood as yet another of Milchan’s high-stakes games. “Arnon lost his appetite for baccarat,” he said, “after he found there was more money to be made gambling in the movie business. In Hollywood, two out of 10 pictures make money. In Vegas--or at least at the roulette table--the odds are one in 36. He went for the better odds.”