UPDATE: The Bankrutpcy Court hearing will be March 30.
The long list of unpaid bills trailing David Bergstein and his Capitol Films and ThinkFilms shingles has culminated in a bombshell filing in U.S. Bankruptcy Court in Los Angeles. In the past, Deadline has exposed how Bergstein-funded films like the David O.Russell-directed Nailed were shut down repeatedly over money problems. Wonder how those stiffed will feel about the allegation that Bergstein allegedly used company funds to cover gambling markers?
A total of 14 creditors ranging from financier Screen Capital International to Hollywood labor guilds petitioned the court Wednesday to place Bergstein’s five main holdings into Chapter 11, and appoint an emergency trustee to take control of a film library estimated at between 600-800 films.
Even worse for Bergstein, two of the main financial advisors to his companies have turned on him, blaming him alone for the incredible irregularities.
According to the charges, Bergstein treated his various entities as “if they were his own personal fiefdom and bankroll.” An accounting system for debtors allegedly consisted of an Excel spreadsheet maintained by an assistant who was not an accountant. As the company plunged deeply into debt—as much as $100 million or more– receivables were routinely “swept” away by Bergstein and his assistant, while employees and payroll taxes went unpaid, per the complaint.
Most serious is the charge Bergstein allegedly used receivables for personal business: “Most alarmingly, Bergstein used at least one of the Entities’ bank accounts as collateral to obtain loans from a casino to fund his personal gambling and may have used funds from one or more of the Entities’ to repay such loans,” the complaint charges. “More specifically, Bergstein obtained $950,000 in cash from Mandalay Bay in exchange for `markers’ issued to Mandalay Bay.” The complaint states that The Bank of America reference on “each of the markers is an account that was maintained by Production Management Services Inc., a subsidiary of CapCo, one of the Alleged Debtors. Bergstein also had complete control over this account.”
Affidavits from former ThinkFilm financial consultant Jeffrey A. Gaul and ex-acting COO Roger Gertz paint a picture of Bergstein hoarding financial information as his company spiraled out of control. Gaul stated in the affidavit that incoming cash was “swept from the ThinkFilm account by Bergstein…without the accounting department being informed of the nature of the transaction.” Gaul claimed that during his 22 months with the company, “Bergstein was the only one who determined if funds were available, which bills to pay (or not) and when checks would get written (and mailed). The conscious avoidance of paying taxes was a particularly glaring and egregious offense. Specifically, payroll taxes were either paid late or, at least from mid-July, 2009 until I left, they were not paid at all. Nor were tax returns filed with the IRS. The one exception I can recall is that Bergstein made sure a state return was filed for the special purpose in those states (such as New Mexico) where the Company would receive a production tax rebate or credit.”
Gertz, brought in by Bergstein in 2009, wrote that he too was frustrated by a lack of standard accounting practices. Eventually he discerned that the company was $100 million-$150 million in debt, with only $2 million-$3 million in receivables and an overhead of $400,000 per month. Gertz finally left when he wasn’t being paid.
“I encourage anyone else with a grievance to contact Screen Capital,” said that company’s chief, David Molner, who rallied the creditors and led the charge on the Bankruptcy Court filing. Bergstein did not return calls for comment.
- David Permut And Bob Saget Suing Bergstein’s Think Films And Capitol Films
- David O. Russell Film Shut Down 4th Time
- David Bergstein/ThinkFilm Sued for Fraud
- Capitol Films Cash Crunch: SAG Demands Meeting With Owner David Bergstein
- ‘Nailed’ Tip Of The Iceberg: Capitol Films’ Cash Woes Impact Indies
- SAG Orders Actors On David O. Russell Film To Leave