A U.S. federal bankruptcy judge on Monday unsealed a report on embattled film financier David Bergstein’s forced bankruptcies that alleges the destruction of files, details widespread financial mismanagement and outlines a “Bergstein-Tutor business model” consisting of foreclosing on film libraries and repurchasing them far below market value.
The 374-page report, completed by court-appointed trustee Ronald Durkin, sheds light on the business dealings of Bergstein film entities ThinkFilm, Capitol Films Development, R2D2, CT-1 Holdings and CapCo Group before a group of creditors pushed the companies into bankruptcy earlier this year.
Among the findings is an outline of the “Bergstein-Tutor … business model,” referring to Bergstein’s sometime business partner, construction magnate Ron Tutor. Bergstein was a key orchestrator of Tutor’s $660 million purchase of the Miramax library from Disney last year.
Messages left for Tutor and Bergstein were not immediately returned Monday night.
The model, according to Bergstein’s own testimony, included acquiring films by purchasing debt and foreclosing on film libraries at auction.
In contrast to Bergstein’s statements, however, the trustee concludes that Bergstein “used time pressure and misinformation” to deter other buyers, thus allowing Bergstein himself to repurchase films far below their market value. This led to disputes with several Hollywood guilds, including the WGA and SAG.
Durkin’s report also asserts that Tutor and Bergstein likely “failed to perform their fiduciary duties” and that the Bergstein companies deleted and withheld hundreds of computer files from the court-appointed bankruptcy trustee.
Tutor, the report states, signed personal guarantees for a $40 million loan from hedge fund D.B. Zwirn in 2007 to CT-1. The guarantee asserted that the mogul was knowledgeable about the financial condition of the company, its borrowers and his co-guarantor, Bergstein.
“Tutor knew that this warranty was false, but he signed the guarantee anyway,” the report says.
The loan is currently the subject of another lawsuit, filed by Zwirn, alleging that the loan was not repaid.The ramifications of the trustee’s report are not yet clear. Soon after the judge ordered the report unsealed, however, attorneys for Bergstein and his wife Sara filed an emergency motion to halt its release.