‘Rules Don’t Apply’ Investors Accuse Arnon Milchan of Fraud

“Rules Don’t Apply” was Warren Beatty’s return to the screen after a prolonged absence. It was a dud at the box office, but it’s enjoying a second life in court, where its big-shot investors are fighting over who is to blame for its failure and who should pick up the tab.

In the latest salvo, a group of investors including Ron Burkle, Steve Bing and Brett Ratner have filed a $50 million fraud complaint against producer Arnon Milchan, saying the film flopped because Milchan failed to market it. The suit alleges that the financier turned the job of distributing the film over to his son, Yariv, who was not competent to handle it.

The investors also contend that Milchan was distracted by an Israeli investigation into allegations that he bribed Prime Minister Benjamin Netanyahu. (Milchan says the alleged bribes were just gifts.) In addition, the suit alleges that Milchan was completely absent during the film’s production and slept through the only screening he attended before its completion.

“Among other results of Milchan’s utter failures to keep his false promises concerning marketing, the Picture was so poorly and ineffectively marketed that it had a disastrous public ‘unaided awareness’ score of 1% at the time of its release,” the investors allege.

Milchan filed suit in December, accusing Beatty and the investors of reneging on an obligation to pay him back for the film’s distribution costs. In Milchan’s telling of events, the film was an obvious flop with test audiences, and yet Beatty and the other investors insisted on expanding its release. Milchan said he consented to increase the distribution budget, but that the investors had guaranteed that they would cover his losses, which they did not do.

But the investors argue that the film received favorable reviews, even attaching some reviews to the cross-complaint with the compliments underlined. They argue that the true failure was in the marketing, accusing Milchan of diverting his attention and resources to other films in which he had a greater investment. The investors blame Milchan for failing to put out ads and posters quoting the positive reviews or to do anything to promote the film overseas.

They also allege that Milchan failed to stay in touch with Beatty during the production. Beatty once came to the studio to try to meet with Yariv Milchan regarding the distribution plan, but was told that he wasn’t there. According to the investors, Yariv Milchan was in fact at the studio, but had lied at his father’s instruction.

“Milchan also concealed from cross-complainants that his personal dependencies and disabilities, his need to sell his company and to raise a vast and critical loan, and his direct involvement in an Israeli bribery case, would, in any event, prevent or severely hamper his playing any active role in producing and supervising the making, marketing or distribution of the Picture,” the suit states.

The investors contend that Milchan’s failure to do his job voids the guarantees for the repayment of distribution costs.

“Rules Don’t Apply” grossed $3.9 million on a $31.1 million production budget, and cost $23.2 million to distribute. Milchan claims he is owed $19 million.

Rules Don’t Apply investors’ suit by gmaddaus on Scribd

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