Universal Settles With Montecito Picture Partners

Universal Studios has made a multimillion-dollar settlement with director Ivan Reitman and former studio chief Tom Pollock--partners in Montecito Picture Co.--officially dissolving their 11-month-old company’s production partnership with PolyGram Filmed Entertainment.

Neither Reitman nor Pollock would discuss terms of the settlement, but sources close to the deal said it will represent a $15-million to $20-million write-off for Universal.

Montecito is the latest casualty of Universal’s integration of PolyGram, the movie company and music giant that the studio’s parent, Seagram Co., acquired in May.

Seagram bought PolyGram a month after Pollock and Reitman finalized their deal with the formerly Dutch-owned movie company to co-finance 15 to 20 films over a five-year period.

Under their agreement, the partners, who were one-third owners of Montecito, were responsible for securing half the financing, which they did by lining up a $300-million credit facility with Citibank of New York. PolyGram committed to matching that sum.

Even when Seagram put PolyGram’s movie assets on the block last spring, PolyGram continued to fund Montecito’s overhead and development until Seagram’s acquisition was completed in December.

At that point, all funding of the company, including the bank line, was cut off.

Pollock and Reitman--who directed such hit films as “Ghostbusters,” “Twins,” “Dave” and “Kindergarten Cop”--threatened to sue Universal for breach of contract after the studio cut off funding.

As part of the settlement, the partners take ownership of the 15 projects in development at their company. Pollock said he and Reitman plan to continue to develop projects while seeking independent financing and eventually a new studio distribution deal.

“This leaves us enough capital to continue developing projects and pay for our overhead for a substantial period of time,” said Pollock, a former top entertainment attorney who served as head of Universal Pictures from 1986 until being forced out not long after Seagram bought the company in 1995.

Pollock, who teaches in the film department at UC Santa Barbara and is chairman of the board of trustees of the American Film Institute, said that by bringing some independent financing to the table in a future deal, “we can help the studios protect their downside.”

Pollock and Reitman, both of whom reside in Santa Barbara, will continue to base their company there and maintain an office in Beverly Hills. The partners are in the process of building permanent headquarters for Montecito Picture in Santa Barbara.

The two have been friends and business associates for more than 25 years. As Reitman’s former attorney, Pollock negotiated deals for his early films such as “Animal House,” “Meatballs,” “Stripes” and “Ghostbusters,” and when he took over Universal Pictures, he made a huge overall studio deal with the director-producer.