NBC drama features executive’s firm

NBC Universal hired Ben Silverman in June to reverse the fading fortunes of its broadcast network. But the biggest winner so far seems to be the 37-year-old TV producer and the production company, Reveille, he is poised to sell for more than $100 million.

Since Silverman became co-chairman of NBC Entertainment, in charge of picking the network’s shows, Reveille has become a leading source of programming for NBC. Of the 18 prime-time shows NBC has ordered since Silverman’s arrival, Reveille has an ownership interest in five of them. In addition, NBC confirmed Friday that it had bought eight other scripts and concepts from Silverman’s 5-year-old company.

Reveille had three projects in the works at NBC before Silverman joined the General Electric Co.-owned network. It now has more projects there than any supplier other than NBC Universal’s own TV production studio.

The surge in sales has raised questions among the network’s other suppliers and business ethics experts about whether, in his position as programming chief, he has favored Reveille shows, possibly enriching himself at the expense of GE shareholders and other studios.

NBC Universal defends Silverman and said that Chief Executive Jeff Zucker had the final say when it came to approving Reveille projects.

Reveille, which is based on NBC Universal’s lot in Universal City, is now in exclusive negotiations to be sold for $100 million to $150 million to a London-based firm owned by Elisabeth Murdoch, the daughter of media mogul Rupert Murdoch, according to three people close to the talks.

Reveille’s value comes from its shows on the air such as “The Office” and “The Biggest Loser” on NBC and ABC’s “Ugly Betty,” its numerous projects in development and the foreign distribution rights for those programs.

“It’s a bizarre and troubling situation,” said Thomas Donaldson, a professor who specializes in business ethics at the Wharton School of the University of Pennsylvania. “The issue is how much of that enrichment should actually be going to General Electric shareholders.”

Silverman declined to be interviewed. He is selling his company to end speculation that he might be profiting inappropriately from his decisions at NBC, said a person familiar with his thinking who requested anonymity because he was not authorized to speak on the record.

“This was the only way to put everyone’s sniping to rest,” he said, adding that it was unfortunate the pending sale was stirring up complaints.

Avoiding conflicts

Overall, NBC Universal’s television studio has 85 projects in development for the network. The company typically takes partial ownership in shows from outside suppliers, including Reveille. Longtime provider Warner Bros. Television, which has delivered such colossal hits to NBC as “Friends” and “ER,” has just two projects in development. Another major studio, 20th Century Fox Television, has five.

NBC Universal’s top management said it anticipated that the network would be buying Reveille shows because they reflected the tastes of the new programming chief. NBC Universal said it did not believe there was any conflict of interest, but recognized that Reveille’s complicated structure had created the perception of one.

“Ben is making a recommendation,” NBC Universal General Counsel Rick Cotton said in an interview. “The ultimate decision maker when Reveille is involved in any way is not Ben Silverman but Jeff Zucker. And Zucker is not conflicted.”

In the ranks of the Fortune 500, General Electric is well regarded for its rigorous standards. The company’s internal guidelines for avoiding conflicts state: “On the job or in your free time, nothing you do should conflict with your responsibilities to GE. Even when nothing wrong is intended, the appearance of a conflict can have negative effects. It is crucial to consider how your actions might appear, and to avoid the perception of a conflict of interest.”

NBC Universal said it had a system to guard against potential conflicts posed by Silverman’s continuing ownership of Reveille. Before Zucker weighs in, the legal and financial departments scrutinize each proposed Reveille project, including the purchase of scripts and the ordering of series, Cotton said. NBC Universal also required Silverman to step away from Reveille’s daily management and put profits from Reveille shows into a blind trust. If the Reveille sale goes forward, Silverman would be allowed to cash out.

Some ethics experts said any conflict would have been eliminated had NBC Universal required Silverman to immediately sell his interest in Reveille.

“This sale should have happened before he joined NBC -- before NBC started purchasing programming from Reveille,” Donaldson said.

C. Kerry Fields, a professor at the USC Marshall School of Business, described the situation as “tawdry.”

“GE would not have permitted him to earn a compensation package that is as much as what he will be getting in any sale of his firm,” Fields said. “It’s a convenient wink and a nod at the ethics rules.”

NBC Universal declined to discuss the potential sale. A GE spokesman declined to comment.

Making a name

The son of a television executive and a music composer, Silverman arrived in Hollywood 15 years ago. He eventually landed at the William Morris Agency, where he established himself as a smooth and driven deal maker. Working from the agency’s London office, he bought rights to overseas hits and sold them to U.S. broadcasters -- shows such as “The Weakest Link” and “Big Brother.”

He left William Morris in 2002 to build his own brand, Reveille, named after the cavalry’s bugle wake-up call. Reveille bought the rights to BBC blockbusters “Coupling,” which flopped on NBC, and then “The Office.” The offbeat sitcom became a sleeper hit, and Silverman’s clout in Hollywood soared. He became more than a reality TV producer.

Itching for a bigger stage, Silverman lobbied for meetings this spring with top executives of Walt Disney Co., News Corp. and NBC Universal. He let them know he was available to run their networks.

NBC Universal’s Zucker pounced and hurriedly signed Silverman to a deal, worried that he might otherwise lose him to a rival, people close to the executives said. Zucker, who had become CEO in February, was determined to shake up the entertainment division, where a prime-time ratings slide had cost GE $1 billion in lost advertising. Zucker said he liked Silverman’s upbeat attitude, his flair for showmanship and his impressive track record.

“This was not planned, it was an opportunity,” Zucker said May 29, the day he named Silverman co-chairman of entertainment and of Universal Media Studios, the company’s production arm. Zucker also tapped as co-chairman Marc Graboff, a longtime business affairs executive, who Zucker believed had skills that would complement Silverman’s creative energy.

As part of the deal, NBC Universal agreed to buy out Silverman’s financial backer in Reveille on the assumption that the firm’s value would stagnate without its founder and controlling shareholder. NBC Universal paid media mogul Barry Diller’s IAC/InterActiveCorp, which had financed a group of Reveille projects, $8.2 million for its interest, regulatory filings show.

Some NBC Universal executives also figured Reveille would become dormant without its inspirational leader, two people close to the company said. So, rather than forcing Silverman to sell it, NBC Universal barred him from owning a stake in any Reveille projects that sprung to life after June 18, his start date. The rights to those projects were to be held in a new company.

Formed on June 18, Reveille Independent, or “Reveille 3,” is managed by Silverman’s four former lieutenants, state incorporation records show. Silverman’s former assistants now run the reconstituted Reveille from the Universal lot and assumed its fewer than 40 employees.

Of the 13 Reveille projects currently in development at NBC, Silverman has an ownership stake in nine of them, according to the person close to Silverman. The remaining three are from Reveille 3, which also holds a piece of another NBC show.

“My sense is that the phenomenal success of Reveille and Silverman created an almost irresistible temptation for NBC, and they were lured into an arrangement that is not NBC’s usual standard for doing business,” said Donaldson, the Wharton professor.

NBC Universal said it had handled conflict of interest issues differently over the years. When the legendary Grant Tinker became NBC president in the early ‘80s, the network’s owner, RCA, required him to divest his stake in MTM, the production company behind “The Mary Tyler Moore Show” and “Hill Street Blues” -- a hit on NBC at the time. Don Ohlmeyer said he was not forced to sell his company when he became head of NBC West Coast in 1993, but he didn’t buy any programs from his firm for the network. He sold his company anyway.

After the Memorial Day weekend pact with NBC, Silverman spent about three weeks wrapping up deals for Reveille before starting his new job, he told The Times in June. Those were among the projects he would be able to profit from and that he later recommended in his role at NBC.

Resurrecting projects

During that time, he courted one of his boyhood idols, television great Norman Lear, who had achieved fame in the ‘70s after turning a British show, “Til Death Us Do Part,” into the culturally defining hit “All in the Family.” Soon after joining NBC, Silverman announced that he was bringing Lear, 85, back to prime time. Reveille is co-producing Lear’s NBC project, “Cat and Dog,” about a woman who reenters the workforce and is pitted against her late husband’s ruthless business partner.

Reveille is also a co-producer for remakes of the Spanish-language telenovela “Sin Tetas No Hay Paraiso,” which Silverman announced when he joined NBC. The concept for the show, which is now being developed for NBC and its Spanish-language sister Telemundo, revolves around a flat-chested woman who sees breast implants as her ticket out of poverty.

Silverman resurrected two of the three Reveille projects that had stalled under the previous regime. “Zip,” a comedy about a con artist who believes in the power of positive thinking, and “Kath and Kim,” based on a popular Australian series about a mother and daughter, were put on the fast track for prime time, NBC confirmed.

Another Reveille show rejected by his predecessor but championed by Silverman was “American Gladiators,” a remake of the 1990s competition show that will debut on NBC on Jan. 6 with wrestler Hulk Hogan.

Reveille’s “Nashville Star” was not renewed by NBC Universal’s cable channel, USA Network, in part because of low ratings. But now, it is one of two Reveille shows under consideration for NBC’s prime-time schedule. The other is a spinoff of “The Office.” (Neither are included in the 13-project total.)

Even though Silverman owns no stake in Reveille 3, the new company flourished after he went to work at NBC. As one of his first acts, Silverman revived Donald Trump’s prime-time show, “The Apprentice,” which had been removed from NBC because of slumping ratings. Within months, Reveille, which had no previous relationship with Trump, began working to develop a half-hour syndicated show that would feature the real estate tycoon as a mediator for people with financial disputes.

Keeping foreign rights

Reveille 3 also became a go-to international distributor. Silverman was allowed by NBC Universal to keep the foreign rights to Reveille programs that he helped develop such as “American Gladiators” and “Kath and Kim.” But it was Reveille 3 executives who sold them internationally -- blurring the lines defining Silverman’s influence over his old firm. After contracting with Reveille to sell “Are You Smarter Than a 5th Grader” overseas, Mark Burnett, one of the most successful reality TV producers -- with “Survivor” and “The Apprentice” -- was invited by Reveille to produce “My Dad Is Better Than Your Dad” for NBC.

Burnett said his sudden close ties to Reveille were not about getting airtime on the network.

“My working with Reveille has absolutely nothing to do with getting projects on NBC and absolutely everything to do with making more money in foreign distribution,” Burnett said.

Similarly, he said he gave Reveille the foreign distribution rights for “Amne$ia,” which Silverman had ordered for NBC. “When it suits us -- to help our bottom lines in distribution -- we will work together.”

All the various incarnations of Reveille, including Reveille 3, would be included in Silverman’s sale to Elisabeth Murdoch’s Shine Ltd., one of Britain’s fastest-growing production companies. The proceeds from Reveille 3’s slate of shows would be divided among the company’s four executives, said the person close to Silverman.

Reveille 3 declined to comment.

NBC Universal said it did not stand to profit from the sale. It would be compensated for the $8.2 million it paid Diller’s company only if the programs covered by that investment, including “Kath and Kim,” “Cat and Dog” and “American Gladiators,” make money. Income from those programs is earmarked to pay back NBC Universal, with the company sharing any additional proceeds on a 50-50 basis with Silverman or Shine, should it buy Reveille, said three people with knowledge of the deal.

NBC is betting that some of the Reveille shows will take off.

“If the ratings are poor, then the perception will be that he wasn’t acting on behalf of the best interest of NBC,” said Dean W. Krehmeyer, executive director of the Business Roundtable Institute for Corporate Ethics at the University of Virginia. “That’s when it will get sticky.”

meg.james@latimes.com