Film Agency President Resigns Under a Cloud

Cody Cluff, one of the founders and the only president of the Entertainment Industry Development Corp., resigned Monday with a $287,000 severance package and an uncertain future as he confronts allegations of misappropriation and perjury.

The departure allows the film board’s executive committee, made up of prominent local politicians and others, to focus on restructuring the agency so that no future president will be given the freewheeling, unchecked power that Cluff enjoyed during his seven-year tenure, members said Monday.

The agreement ends a monthlong feud that started Nov. 22, when Cluff refused to honor the board’s decision to force him out on a paid leave of absence.

Cluff signed the agreement Saturday. Board Chairman Frank Scherma signed Monday on behalf of the executive committee. The resignation is retroactive to Dec. 16.

The deal gives Cluff up to $200,000 for future legal expenses, plus about $87,000 in salary and fringe benefits.

The agreement allows the agency to approve or disapprove legal bills. If convicted, Cluff agreed to reimburse the agency for any defense costs.

The district attorney’s office has not filed formal charges against Cluff.

In a search warrant affidavit signed in September, investigators alleged that Cluff misused hundreds of thousands of dollars in film board funds for trips to resorts, expensive wine and exorbitant restaurant tips and for campaign contributions to elected officials, 19 of whom served on the agency’s board of directors.

The affidavit raised questions about more than $20,000 in cashier’s checks purchased by the agency and given to Cluff, more than $50,000 in direct payments to Cluff’s personal American Express card, the purchase of a $350 bottle of wine and other expenses. Cluff also had directed nearly $47,000 to the Pittsburgh Film Office and a national film organization run by a friend.

Los Angeles County Supervisor Zev Yaroslavsky and City Councilwoman Wendy Greuel, members of the agency’s executive committee, said the agreement was a good deal for the public.

They said it satisfies the legal responsibility to provide Cluff with money for legal fees, puts a cap on the amount he is entitled to receive, and requires him to answer all questions posed by the film board’s consultants, which were hired to examine the corporation’s finances and management practices.

“It’s cheaper to enter into this agreement,” Yaroslavsky said, noting that under the bylaws, Cluff could possibly extend the controversy for many more months and run up legal bills.

If Cluff is charged and convicted, he would be required to reimburse the legal fees.

A source close to the film board said Monday that legal bills related to the investigation so far total about $120,000, which would not count toward the $200,000 maximum available to Cluff under Monday’s agreement.

The agency’s bylaws require that any employee “shall be indemnified against expenses actually and reasonably incurred” for legal costs if they are successful in any “civil, criminal, administrative or investigative proceeding” brought against them because of their work for the agency.

Film board officials also have said the salary package amounts to no more than what the paid leave would have given Cluff had he chosen to accept it.

Film board consultant Keith Comrie said Cluff has argued that every dollar he spent was “in a good-faith” effort to do his job promoting Los Angeles County to the film industry, and to streamline the process for issuing permits to production companies to shoot on location.

“We have not seen any evidence to date that he has done anything in bad faith,” Comrie said.

“There is nothing that the district attorney has offered so far that would argue otherwise.”

Comrie said the film board’s audit and the district attorney’s investigation are not complete.

In September, Dist. Atty. Steve Cooley sent letters to film board members that some interpreted as warnings against providing money for Cluff’s defense.

Deputy Dist. Atty. Kerry White, who is heading the criminal investigation, declined to comment on the severance package, but said film board members are not in a position to know whether Cluff committed any crimes.

“Their audit is just getting underway, and they have not gone through enough records to make that determination,” he said.

“And that’s what we’re doing now -- going through the records to determine whether a crime has been committed.”

Comrie said Cluff has offered explanations for all expenses.

He said Cluff also has explained the perjury accusations, which allege that he provided false information on state tax and registration documents, as “oversights by accountants that were later corrected.”

Cluff referred questions about the severance package to his attorney, Mark Werksman, who called it “the right thing for both sides.”

“Now, Cody and the EIDC can work together to solve any issues brought forth by the D.A.,” he said.

Werksman said Cluff’s willingness to cooperate with auditors “reflects his innocent state of mind, and that he wants to assist in investigating everything that’s being questioned.”

Yaroslavsky said he doesn’t know whether Cluff’s explanations for his expenses are adequate.

“None of us have thumbed through the 70 boxes of information” prosecutors are examining, he said. “But so far, he has not been charged with anything.

“If he is never charged with a crime and runs up a million dollars [in legal bills], he could have come back at EIDC for that under the terms of the bylaws.

“This agreement caps our total defense costs at $200,000. If he is convicted, we could recover the money after the fact.”

Yaroslavsky said the agreement relieves the film agency’s staff from the distractions of Cluff’s legal problems and frees the board to begin restructuring the organization.

He said that whatever structure emerges, the governing board must do a better job of keeping tabs on the staff and ensuring that the president is held accountable.

“We bear the responsibility for not being more attentive as we should have been,” Yaroslavsky said.

“I am more angry about this than anybody is.”

Greuel said that while she cannot draw any conclusions about the legality of Cluff’s actions, she does think that some decisions reflect bad judgment, which is why the executive committee voted to put him on a leave of absence late last month.

“This agreement moves us another step toward reorganizing this entity,” she said.