Yesterday, five years andthousands of miles away from the hotel room in Cannes where they formed whatwas supposed to be one of the most lucrative alliances in independent filmfinancing history, Elie Samaha and Rudiger "Barry" Baeres finally facedtheir moment of truth.
That's when Samaha steppedinto a witness box in a Santa Ana, California federal courtroom. Afterdescribing his rise from working as doorman at Studio 54 to dry cleaning mogulto becoming one the most prolific indie film producers in the last five years,Samaha was asked a question that has been rattling around Hollywood since thedays of Samuel Goldwyn:
What is an oral agreement inthe film business, and is it worth anything'
The Samaha-Baeres showdownhas been brewing since Baeres, CEO of Munich-based Intertainment AG, filed a$100m lawsuit in December 2000 claiming that Samaha, the CEO of LosAngeles-based Franchise Films, engaged in a film budget-pumping scheme -- alongwith former Franchise president Andrew Stevens, Franchise-lender Imperial Bank(since folded into Comerica Bank) and two completion bond companies -- on suchfilms as The Whole Nine Yards, BattlefieldEarth, 3,000 Miles to Graceland and Get Carter.
The 40 months of pre-trialwrangling has been brutal. Stevens, after claiming to the press that he was thevictim of forgery and defamation on Intertainment's part, settled out-of-courtfor an undisclosed sum on April 19, the day before the trial commenced.
The litigation betweenIntertainment and Comerica has been sent to arbitration, as has the litigationbetween Intertainment and the bonding companies Worldwide Film Guarantors andFilm Finances.
On Thursday, after tenjurors in the civil trial had listened to four exhausting days of testimonyfrom underlings of Samaha and Baeres about arcane film financing details,Samaha had his day in court.
At stake was the survival ofhis company, which is tottering on the verge of insolvency, and whose futurerests on the jury believing that Samaha is a man of his word who, under veryunusual circumstances, took Baeres at his word.
"I believe in oralcontracts," Samaha shot back under questioning from Intertainment lawyerScott Edelman. "If I trust someone, I don't have to put things inwriting."
Intertainment claims thatFranchise, working in conjunction with its bank lender and its completion bondcompanies, engaged in a scheme that resulted in Intertainment paying up to 90%of the actual costs, not the contracted 47%, on Franchise films by the allegedFranchise practice of showing Intertainment an artificially high"bonded" budget in lieu of a much lower "bank" budget thatwas presented to the lender.
Samaha's explanation issimple, albeit novel: The budgets were artificially pumped, but Baeres andIntertainment were not the victims of fraud, for Baeres was in on the fraud.
Since October of 2000,Samaha has claimed in pre-trial depositions that he and Baeres had a secretoral agreement that Samaha could pump the budgets on the films because Samahaneeded to take the money, in essence, off the top of the production loans inorder to have enough cushion to get the films completed.
Samaha is also expected totestify at the trial that Baeres wanted the budgets to be artificially high sothat Baeres, a rights broker with no vertically-integrated distribution arms,could then flip the rights of the Franchise films at artificially higher pricesto his European sub-distributors via sales prices that were based on filmbudget fees.
By the end of Samaha's firstday on the stand, the jury was once again struggling to stay up to speed asSamaha and his lead lawyer William Price wrangled with Intertainment lawyerEdelman over the fine points of rebates from bond companies, signing bonusespaid by Intertainment to non-Franchise shadow companies, and an allegedlyforged document from Franchise demanding Intertainment release letters ofcredit on films not yet started.
As Samaha defiantly strodeoff the stand, one his attorneys held an angry press briefing for reporters inthe courthouse hallway.
Because of federal civiltrial rules, Intertainment lawyers have been able to begin their case bycalling a number of Samaha employees, such as his one-time head of sales LisaWilson and business affairs head Jim Holt, as hostile witnesses. And while Samahahas had to testify to the jury under direct examination by Intertainmentlawyers, Baeres has watched from the sidelines.
"For two weeksIntertainment lawyers haven't put up Baeres, their main witness, and the onlyone that matters," said Franchise lawyer Richard Schirtzer. "[Baeres] getsto see what everyone else testifies about him before he takes the stand."
"That'sridiculous," said Intertainment lawyer Edelman in response. "We'relaying a foundation for the fraud using Franchise's own witnesses, who areextremely helpful. "We're saving the best for last."
The trial resumes onTuesday.