Franchise Pictures' chairman Elie Samaha and president/COO Andrew Stevens yesterday responded to the latest charges in the lawsuit against them by Intertainment Licensing, labelling the accusations as "preposterous."

Intertainment amended its suit on Tuesday to include Imperial Bank as a defendant, alleging that Imperial not only knew that the budgets on the Franchise films were being inflated but concealed the fraudulent scheme from Franchise.

Answering back in what has become an escalating war of words, Stevens claimed that such allegations are "another smokescreen to deflect opinion away from the real issues." Speaking from the AFM, Stevens claimed that Intertainment is anxious to prevent its letters of credit on Franchise's films from being cashed due to lack of funds. Franchise has filed its own suit against the German company.

The legal tussle between the German rights trader and Franchise took an acrimonious new twist at the start of this week with the inclusion of Imperial Bank to the list of defendants in Intertainment's $75m fraud suit against Samaha's Franchise Pictures.

The amended lawsuit alleges that Imperial, which served as Franchise's production lender for most of the pictures made under the five-year, 60-picture deal with Intertainment, "was aware that the budgets were fraudulently inflated" and claims that "Imperial actively allowed Franchise to engage in the fraudulent scheme, concealed the fraudulent scheme from Intertainment, and on at least two instances signed inflated budgets knowing that such budgets would be used to mislead Intertainment".

Under the original five-year deal, Intertainment had agreed to acquire the European rights to at least 60 Franchise films in return for paying Franchise an amount equivalent to 47% of the films' bonded budgets. However, according to Intertainment's lawsuit, in some cases the budgets presented to Intertainment by Franchise "was more than double the actual cost to produce the movie".

The amended lawsuit provides examples of inflated budgets for ten of the 26 films made so far under the Intertainment-Franchise deal, including Art Of War, Battlefield Earth, Get Carter, The Whole Nine Yards, and The Pledge, and points out that Franchise's "cumulative fraudulent [budget] inflation" on these ten films alone totalled "between $119m and $124m".

According to the lawsuit, Imperial "participated in this fraudulent scheme" because the inflated license fees served "to reduce the risk on each loan" granted to Franchise and because Imperial could collect "an unusually high financing fee [which] constituted payment to Imperial for its active participation in this fraudulent scheme". In addition, the lawsuit notes that "Franchise provided almost 60% of all business for Imperial's film finance division in 1999" and quotes Samaha from the annual report of the bank's parent corporation Imperial Bancorp where the producer praises Imperial, saying "they have always come through for me when I needed them".

This latest development comes after a spat between Intertainment and Franchise over the screening of Sean Penn's The Pledge in the official competition section of the Berlin Film Festival earlier this month. (ScreenDaily, 25 Jan 2001)

Additional reporting by Martin Blaney

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