In a suit that could bode ill for Destination Film Distribution as well as other insurance-backed film companies, Neil Sacker has sued his former employer. Destination’s ex-head of business and legal affairs claims that he was fired for refusing to approve a sweetheart deal giving exclusive Internet distribution rights to Jetcast.com, a company allegedly owned by Destination senior executives Brent Baum, Barry London, John Williams and Paul Westphal.
In his suit, filed Friday in the Santa Monica branch of L.A. Superior Court, Sacker also alleges that Destination never obtained the $100 million line of credit from Chase Manhattan Bank that it needed to complete its financing.
Destination was formed with great fanfare in 1998 by producer Steve Stabler and former DreamWorks exec Brent Baum. Former Paramount exec Barry London joined shortly thereafter. In a ground-breaking deal, the company raised $100 million in a bond issue put together by Wall Street firm Donaldson, Lufkin & Jenrette and backed by an insurance policy written by AIG Europe and AXA Reinsurance.
Even at that time, however, members of the financial community questioned the deal, particularly Destination’s hiring of a senior exec from one of the insurance companies that backed the bond.
Although touted as the next new thing in film financing, insurance-backed deals remain controversial, having spawned at least two high-profile suit by insurers against Chase Manhattan Bank alleging fraud (Daily Variety, Dec. 15, 1999). .
Sacker told Daily Variety, “I had to make a decision. Should I keep my mouth shut and do something that I know is wrong on the theory that it will be the least harmful to my career, or should I do what I know is the right thing and be able to sleep well at night?”
Pierce O’Donnell, Sacker’s attorney, added, “Neil consulted with outside counsel and was told he needed further information before he could approve this deal. Lawyers should not be fired for carrying out their ethical obligations.”
Attorneys for Destination did not return calls seeking comment.
Sacker, a well-regarded industry veteran, joined Destination in 1998 after stints at Warner Bros. and Miramax, where he served as head of business and legal affairs. Once at Destination, he quickly discovered that the company had misrepresented its ability to produce and distribute films. It claimed it could produce films with budgets up to $40 million and the support of a $100 million print and advertising fund from Chase, but in reality, production costs were capped at $19 million, while print and advertising expenses were limited to $15 million.
Sacker alleges that, though he was lured to Destination by its intentional misrepresentation that it could make films with $40 million budgets, he decided to stay and rose in the company until he refused to approve the Jetcast deal.
Sacker charges that while he was exploring a potentially lucrative with Encore Media Group to distribute Destination’s content over the Internet, London “demanded” that Sacker close the Jetcast deal. Sacker alleges that London, Baum, Westphal and Williams have undisclosed financial interests in Jetcast and a material conflict of interest. After Sacker said he did not have sufficient information to approve the deal, Baum allegedly screamed at him, “It’s none of your fucking business who owns Jetcast.” At that point Sacker was fired and escorted from the office.
Immediately after the firing, Sacker alleges, London and Baum told Stabler they had terminated Sacker for good cause. The motive, according to the complaint, was that Stabler, who had left the company “on horrible terms” and whom Baum and London “believed to be a gossip,” would spread the bad word about Sacker. Stabler stepped down as CEO in November 1999 amid rumors that the company was overspending on overhead and its financing was slipping away (Daily Variety, Nov. 8, 1999).
Destination recently released “Drowning Mona” and “Eye of the Beholder.” Its summer production slate includes the Neal Moritz-produced “Slackers” and “The Wheelman,” a thriller about a prodigy getaway driver.