A tough Hollywood debut
Hollywood is a club. But when an outsider with bundles of cash arrives on the scene, the newcomer usually is granted immediate entree. Talent agents, hungry to land clients their next movie, flock to anyone with an open checkbook.
So when David Bergstein, a 46-year-old entrepreneur who spent years buying and selling distressed assets, embarked on an ambitious plan to build a media empire with a deep-pocketed partner -- Los Angeles construction magnate Ron Tutor -- he was instantly welcomed.
In 2003, the pair began their film entry by lending money to a beleaguered movie company headed by nightclub impresario Elie Samaha. By 2006, they had snapped up Capitol Films, whose credits include Robert Altman’s “Gosford Park,” and ThinkFilm, the prestigious distributor of art-house titles such as “Half Nelson.”
Bergstein had become a player. But in the last few months, he and ThinkFilm have been dogged by a string of lawsuits from associates who allege they were stiffed, according to court records.
This summer, Capitol’s $33-million “Nailed,” a quirky satire starring Jake Gyllenhaal and Jessica Biel, was shut down or delayed several times because of disputes over payroll and the film’s financial structure. Bergstein says the actors and directors guilds caused most of the problems by trying to position themselves ahead of creditors, spooking the film’s lenders and prompting them to temporarily halt funding.
ThinkFilm has been hampered by a lack of promotional dollars, acknowledges co-founder and President Mark Urman. “I’m very concerned about people not being paid,” he said. “I’m trying hard to undo the damage.”
The problems at ThinkFilm and Capitol are a reminder of the travails of the independent movie business, which has been squeezed by slowing DVD sales and a film glut that has made box-office receipts harder to come by. The tough economics have claimed Time Warner Inc.'s specialty labels Warner Independent Pictures and Picturehouse. Viacom Inc.'s Paramount Vantage has dramatically scaled back.
Sitting in the conference room at his headquarters on the 30th floor of Century City’s Fox Plaza, Bergstein said he had gotten a bum rap in the entertainment press. In his view, he’s been a positive force, backing dozens of productions outside the studio system and employing about 150 people in L.A., New York and London.
“I have financed over 40 films over the last three years,” Bergstein said. “I have put over $800 million into the space. That makes me the single largest newcomer and one of the largest in the independent sector altogether.”
But some filmmakers and suppliers interviewed by The Times say they would hesitate to do business with his companies again.
“Not only would I not do anything for ThinkFilm, I’d think twice about doing any work for other independent distributors,” said Matt Bledsoe, a partner in Big Fat Brain, a Covington, Ky., marketing firm, who says his attorneys tried unsuccessfully to collect $15,000 that the company was owed for designing a website promoting ThinkFilm’s Oscar-winning documentary “Taxi to the Dark Side.”
Asked about the dispute, Bergstein referred the matter to Urman -- who referred it back to Bergstein.
In interviews, associates described Bergstein as a frenetic deal maker who got in over his head and whose brusque style alienated a community accustomed to being schmoozed.
“I don’t have a great bedside manner,” Bergstein acknowledged.
Although he had decades of experience doing business transactions, he said he never operated a company and faced a steep learning curve. He says he has lined up new financing that will help him pay his bills.
Bergstein does not pretend to be an industry type. “I don’t go to sets,” he said. “I don’t meet with actors. I don’t read scripts. I’m not interested in it.”
Moving into pictures
A Brooklyn native, Bergstein said he grew up in a blighted neighborhood and witnessed two murders by the time he was 12. He came to California in 1983 and worked for a mortgage company before breaking out on his own and making and losing millions as a real estate developer.
From the late 1980s through 2000, Bergstein said, he invested in more than 70 troubled businesses in such industries as clothing manufacturing, publishing and electronics. Although “many of my investments did not pay off . . . overall I made a significant amount of money during the period,” he said.
Next, he hooked up with his neighbor in the gated western Los Angeles County community of Hidden Hills. Tutor is chief executive of Sylmar-based construction giant Tutor-Saliba Corp., which is behind such projects as downtown’s new Los Angeles Police Department headquarters.
Bergstein trained his sights on Hollywood after lending Samaha millions of dollars to keep his company, Franchise Pictures, afloat. When the production outfit went bankrupt, Bergstein wound up with dozens of Franchise titles.
In 2005, Bergstein and Tutor set in motion a plan to build a global digital distribution business, aiming to cash in on a growing library once on-demand technology took hold. Among their biggest purchases: the $30-million acquisition of Capitol, a London-based production and film sales company, and ThinkFilm, which cost them about $25 million.
Looking to finance dozens of films, Bergstein early this year tried to secure a $300-million revolving credit line in a deal led by hedge fund firm D.B. Zwirn & Co. The transaction fell apart. Then Bergstein tried another lender but found no takers amid a deepening credit crunch.
Bergstein’s problems began boiling over this spring just as his assembly line of movies was hitting full swing.
One was “Nailed,” starring Gyllenhaal as a U.S. congressman and Biel as a small-town waitress whose life is changed when a freak accident leaves a nail lodged in her head.
The movie, which began production in South Carolina in mid-April, endured multiple shutdowns by the Screen Actors Guild, the Directors Guild of America and the International Assn. of Theatrical Stage Employees, according to people familiar with the shooting.
Bergstein says SAG and DGA tried to position themselves first among the film’s creditors, leading to several interruptions. Then the stage employees union was “feeling woozy” about the viability of the production and demanded advance payroll deposits, Bergstein said.
Union officials declined to comment. However, forcing a shutdown is rare. With an original budget of $26.7 million, the production’s costs rose above $30 million.
Another Capitol production, “Black Water Transit,” a $40-million crime drama directed by Tony Kaye and starring Laurence Fishburne, is in limbo as Bergstein clashes with the production’s bond company, refusing to take delivery of the film because he says that it is not finished and that it deviated from the script. Kaye says he is editing and retooling scenes.
Meanwhile, ThinkFilm faces complaints from vendors about unpaid bills and from filmmakers about a lack of advertising support for their movies, according to court records and arbitration filings.
Allied Advertising and Mammoth Advertising sued the distributor, alleging they are owed $4.2 million and $428,000, respectively. Publicist Nancy Willen also sued, claiming she was owed $120,000 for work on two documentaries, including Alex Gibney’s “Taxi to the Dark Side.”
Gibney is pressing his own arbitration claim, alleging ThinkFilm acquired his picture when it knew it lacked the financial wherewithal to release the movie properly. Gibney griped that the picture’s run was never expanded beyond 20 theaters even after its Oscar win.
ThinkFilm chief Urman disputes Gibney’s contention, arguing that the company spent $800,000 to market the movie. He said it grossed only $300,000 because consumers were put off by its grim subject -- an innocent taxi driver from Afghanistan who was tortured and killed in 2002.
Actress Helen Hunt, who is not suing, blames ThinkFilm’s money problems for the low visibility of her directorial debut with “Then She Found Me.” On the Friday before her mother-daughter movie was to expand on Mother’s Day weekend, not one newspaper ad appeared.
“This was a movie that was near and dear to my heart for the better part of 10 years,” Hunt said.
Urman acknowledged that the company’s money crunch prevented the movie’s expansion to more than 300 theaters, as planned, and crimped its ability to buy ads, probably limiting the film’s performance.
Coming up with cash
Bergstein says he is in the process of paying off his bills to keep his plan on track.
Urman, for one, said “funds have begun to flow.”
Willen, the publicist, recently settled her case, and on Friday she confirmed receiving partial payment.
Bergstein said he recently lined up tens of millions in marketing funds for ThinkFilm and separate funds for acquisitions and future productions. He said he was working to refinance debt already held by Zwirn.
For his part, Tutor hasn’t made any new investments in Bergstein’s entertainment ventures for about a year. “I have not continued to invest more capital,” said Tutor, adding that he remained a passive investor with a major stake in Bergstein’s operation.
New York private equity investor Paul Parmar, with more than $40 million in Bergstein’s film ventures, acknowledged that the entrepreneur was “in a tight spot” but called him “an honorable man who won’t shy away from his responsibilities.”
Bergstein acknowledged he had learned tough lessons, including the need to build better relationships with agents and to secure financing before queuing up movie productions.
David Molner, chairman of Aramid Capital Partners, whose related fund partially financed several Bergstein productions including “Nailed” and “Black Water Transit,” says the entrepreneur took on too many projects at once.
“My advice to David might have been, ‘Have you ever heard of a ‘ramp up’ in production instead of a rocket launch?’ ” he said.
Bergstein predicted that Hollywood would give him another chance. “You pick the agent who won’t deal with me.”