Findings of probe into film financier David Bergstein are briefly unsealed
A yearlong investigation examining the business dealings of film financier David Bergstein has been unsealed in U.S. Bankruptcy Court, painting a devastating picture of a web of companies he allegedly co-owned with construction magnate Ron Tutor.
The report was written by Ronald Durkin, a forensic accountant appointed in April 2010 by the Bankruptcy Court in Los Angeles to examine five companies run by Bergstein, a controversial figure in Hollywood who has been involved in numerous lawsuits related to his business affairs. Creditors forced the companies into bankruptcy in an attempt to protect their remaining assets.
Unsealed late Monday by Bankruptcy Judge Barry Russell, the report was quickly resealed Tuesday after an emergency request by Bergstein.
The report analyzes the intricate structure and financial dealings of Bergstein’s companies and alleges, among other claims, that files were improperly deleted or withheld by a company run by Bergstein. The film financier denied the claims.
The investigation also concludes that Tutor, chief executive of Sylmar construction giant Tutor-Saliba Corp. and an owner of the newly independent studio Miramax Films, was involved in Bergstein’s businesses at a time when he said he wasn’t.
According to the report, in May 2010, Tutor’s lawyer provided a document to the trustee showing that he had sold his 50% stake in R2D2, the parent company of the bankrupt firms, to Bergstein in January 2009 for $10. Tutor repeated that claim in a sworn statement and said during examination that he sold his interest because, “To me there was no value remaining in the entity, and that was my nice way of saying I didn’t want to be partners any longer.”
Durkin cast doubt on the legitimacy of that agreement.
“There is a substantial basis to conclude that the [agreement] was created by Bergstein and Tutor during the bankruptcy cases in order to make it incorrectly appear that Tutor and his affiliates had distanced themselves from the debtors and were not their insiders,” the report states.
The document not only served to separate Tutor from the embattled Bergstein, Durkin said, but also to dispel questions surrounding Tutor’s ownership, through an affiliate, of $45 million in liens against R2D2. Those liens make his affiliate the first beneficiary of any assets in Bergstein’s companies should they be turned over to creditors.
If Tutor had still been a co-owner of R2D2 in March 2009, when he acquired those liens, it would lead to rigorous scrutiny of an “insider” transaction, Durkin said.
Tutor, in an interview, denied the findings.
“I sold it when I said I sold it,” he said. “I made the mistake of trying to help a friend, and here I am. All good deeds go punished.”
Bergstein said that Durkin had ulterior motives in reaching his conclusion.
“The trustee spent over $3 million and is looking for a way to recover that money, and he feels he would be in a better position to do that if Ron didn’t sell his interest to me,” Bergstein said.
Leonard Gumport, an attorney for Durkin, dismissed Bergstein’s accusation: “That’s his opinion. My opinion is that he’s mistaken.”
Durkin’s report is not a binding judgment or an official ruling by a court. Its conclusions can be disputed.
Tutor has been the deep-pocketed partner of Bergstein since they went into the film business in 2003. They acquired companies, including the independent distributor ThinkFilm, and began financing pictures such as the Helen Mirren drama “Love Ranch,” but they soon ran into trouble amid allegations of unpaid bills and productions halted because of financial issues, according to interviews with people at the time.
Despite Tutor’s assertion that he separated from Bergstein in early 2009, the trustee laid out contradictory evidence, which includes a May 2009 deposition by Tutor, June and November 2009 court filings by R2D2’s attorney, and a July 2009 loan application that, Durkin said, all indicate Tutor was a co-owner of R2D2 at those times.
The trustee also found that Tutor paid the legal bills for the bankrupt companies at least through July 2010. Tutor declined to comment on the matter.
Durkin is now seeking orders to consolidate the assets of Bergstein’s companies, to subordinate the claims of Tutor’s affiliate on the bankrupt companies, and to obtain access to files that have thus far been withheld from him. Without such orders, he said, “creditors of the debtors’ bankruptcy estates will likely recover nothing.”
David Molner, chief executive of lead creditor Aramid Capital, said he hoped there will be a favorable resolution for his firm and other creditors, which include the Screen Actors Guild, Writers Guild of America and Directors Guild of America.
“This long-awaited report validates, in shocking detail, the long list of misdeeds alleged by creditors and known by so many others for so long,” he said. “If the court follows the trustee’s recommendations, it will hopefully clear the way for the assets to be properly marshaled and liquidated for the benefit of creditors.”
