Robert Greenwald and David Matalon, who recently teamed on 20th Century Fox’s “Hear No Evil,” have established a joint development fund, underscoring an escalating trend among indie producers to initiate and package movies outside the studio system.

Out of their revolving $ 2.5 million fund, which Matalon says “partially comes out of our own pockets” with the remainder raised from “confidential sources,” the producers have acquired a handful of properties, most recently movie rights to Los Angeles Times reporter Bob Sipchen’s non-fiction book “Baby Insane and the Buddha.”

Greenwald — who plans to direct “Baby Insane” as well as certain other joint projects born from the fund — and Matalon have hired playwright and screenwriter BruceGraham to adapt the Doubleday book.

The true story centers on the trustful father/son-like relationship that develops between a shrewd, conservative San Diego detective (known as “the Buddha”) and a young hardcore member of the Crips gang (Kevin “Baby Insane” Glass) whom he convinces to turn informer and help bust up a drug ring.

Greenwald said the producers will have the cooperation of both the cop, Patrick Birse, and Baby Insane, who is in the FBI’s witness protection program.

Sipchen will be a consultant.

According to Matalon, he and Greenwald spent “big money” on the “Baby Insane” deal, which between the book rights and script will total “very near $ 1 million.” The transaction was brokered by Sipchen’s agent, Ron Bernstein of the Gersh Agency.

Matalon said the material lends itself to “two major male actors and one very strong female role.”

Greenwald said he was attracted to the material not only because “it’s an extraordinary personal story,” but also because it chronicles the “devastating influence of gangs on our cities.”

Sipchen’s book originated as a newspaper article he wrote about two years ago , for which movie rights were previously optioned and the project was developed by Steve Anderson (“South Central”). When the option lapsed six weeks ago, Bernstein was hired as the new agent to resell the rights.

In addition to “Baby Insane,” Greenwald and Matalon — who maintain separate production companies independent of the joint venture — have acquired several other properties from the development pool.

Kristin Ladner, exec in charge of feature development for Greenwald Prods., discovered Sipchen’s book and is responsible for supervising projects derived from the fund.

Matalon said that — as was the case with Fox’s “Hear No Evil” and Paramount’s Lasse Hallstrom-helmed “Gilbert Grape,” which Matalon is producing independent of Greenwald — his strategy is to fully package and greenlight these projects before making distribution deals with the studios.

Writer Graham, who is adapting “Baby Insane,” is also close to completing an original script called “Liar, Liar” for the producers. Based on an idea of Greenwald’s, the “boy who cried wolf” story is about a young boy who makes up stories; when a real crisis occurs no one will believe him.

Out of the fund, the producers are also developing another trio of original screenplays: Cindy Meyers’ “Guilty,” described as father-daughter love story; and “The Boy Next Door,” a love story by Deborah Deen Davis about a dancer in the mid-1920s who comes to a small town in Oregon for the summer and finds romance with the younger boy next door; and David Rosenfelt’s “Lord Charlie,” about a sports talkshow host who makes a prediction that comes true and becomes a media phenomenon.

The joint venture between Matalon and Greenwald is yet another example of indie producers taking it upon themselves to develop material outside the studios.

Recently, Robert De Niro and Jane Rosenthal’s New York-based Tribeca secured a $ 4.5 million fund from JVC for development of three pix (Daily Variety, Feb. 24).

The advantage of approaching the major distributors after projects are fully developed and packaged, Matalon explained, is that it enables the producers to “get better, more fair deals, than making them (the projects) subject to the studios.”

In the case of “Gilbert Grape,” the producer said he actually started shooting the picture before making a deal with Paramount.

Matalon and Greenwald began a friendship and business relationship when Greenwald directed TriStar’s 1988 “Sweet Hearts Dance” when Matalon was the studio’s president.

Since becoming an indie producer in January 1991, Matalon has made three films, including the Bruce Willis vehicle “Color of Night” for Cinergi/Hollywood Pix, which starts lensing Monday.

He says he hopes to get another one or two pix rolling by year’s end. Another of the producer’s priority projects is “The Wall People,” a contemporary fairy tale based on a book by Jody Dicerto about 5-inch-tall people who live in walls.

Greenwald, who started his career in legitimate theater as an “actor’s director,” has since made his name in TV. His directing credits include telepic “The Burning Bed”; more recently he directed and produced “Forgotten Prisoners: The Amnesty Files” for TNT in the U.S. and a theatrical release in Europe.

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