A lawsuit was filed today in Los Angeles Superior Court by Boston-based Allied Advertising Ltd alleging breach of contract, fraud and deceit, and unfair business practices against David Bergstein and his ThinkFilm movie distribution company. 
It seeks more than $4.1 million in unpaid bills and contracts, plus damages, interest and a 5% penalty for all sums not paid in full within 30 days of a demand for payment. It is yet the latest twist and turn in what is obviously becoming a financial meltdown in Bergstein's film production and distribution empire which includes ThinkFilm and Capitol Films. (See my previous, Capitol Films Cash Crunch: SAG Demands Meeting With Owner David Bergstein).
The lawsuit follows Bergstein's reported yacht trip to the Cannes Film Festival , included in the complaint: "Between January and May 2008, while most of the ThinkFilm debt to Allied was outstanding, defendants have gone on a lavish film licensing buying spree at various film festivals around the world, including a film about director Roman Polanski scheduled for release on the Home Box Office cable channel later in 2008."
The facts claimed in the lawsuit point to a business deal gone sour for Allied Advertising, which is in the business of placing advertising and promotion for feature motion pictures owned, licensed or distributed by client production companies or distributors. On June 21st, 2004, Allied and ThinkFilm entered into an agreement under which Allied would place P&A for movies owned and/or licensed or distributed by ThinkFilm with various media outlets around the U.S. ThinkFilm was supposed to pay Allied whenever Allied advanced payment to the media outlets on ThinkFilm's behalf, or pay a hefty penalty. That agreement was modified on November 18, 2004.
Then, in October 2006, ThinkFilm was acquired by Los Angeles entrepreneurs David Bergstein shortly after he bought Capitol Films that January. "But between Fall 2006 (when Bergstein assumed control of ThinkFilm) and March 2008, defendants became increasingly delinquent on their obligation to pay Allied invoices when due. Through his manipulation of the business operations and employees of ThinkFilm, Bergstein repeatedly promised to honor and pay in full the debt of Thinkfi;l owed to Allied," the lawsuit alleges. By November 2007, that sum was $1.9M. ThinkFilm promised to present a schedule to pay up. So Allied says it advanced an additional $2.2M from November 2007 through March 2008.
But, with the total now $4.1M, "defendants have failed to pay any of this arrearage," the lawsuit claims. "On April 5th, 2008, thinkfilm executives stated in writing to Allied that a repayment schedule had been developed by certain ThinkFilm executives, but that it required the authorization of Bergstein, who dominates and controls ThinkFilm... However, Bergstein has proceeded to deplete much of the hard assets of ThinkFilm by, in March 2008, selling the ThinkFilm Canadian library to Entertainment One Ltd." This is also when Bergstein went on his "lavish film licensing buying spree" referenced above. A final demand letter was sent to May 12, and the bill remains unpaid, resulting in the lawsuit today.
On the fraud and deceit cause of action, the lawsuit alleges, the defendants "were part of a plan or scheme to defraud and deceive Allied and other third parties. Between January 2008 and May 2008, defendants paid millions of dollars to acquire the rights to new feature motion pictures (or the right to produce or distribute such films). In order to convince film owners, producers, production companies and other third parties that it had credibility with advertising agencies such as Allied, to professionally and effectively advertise forthcoming motion pictures, defendants needed to create an impression that they were paying print and advertising obligations as they came due, which was not true. In furtherance of this scheme, defendants needed to deceive Allied into believing that a payment schedule would be presented and honored in good faith.
"Defendants knew that their representations were false when they made, or they were made recklessly and without regard for the truth... Defendants' actions were perpetrated with fraud, malice and oppression."
Interestingly, the lawsuit contends that after Fall 2006, there existed "a unity of interests and ownership between defendant David Bergstein and ThinkFilm LLC such that ... defendants are the alter egos of each other in that at all times herein mentioned, thinkFilm was a mere shell, instrumentality and conduit of David Bergstein, through which he carried on his business, exercising complete control and dominance of ThinkFilm to such an extent that any individuality or separateness of these defendants ceased to exist."
NOW do you see what I’ve been trying to say about Bergstein?! He’s scum, pure and simple. A scam artist–nothing more, nothing less.
Comment by Can't Take it Anymore — May 28, 2008 @ 7:19 pm
Yikes.
I guess it shows that it’s never just one thing going wrong in a situation like this.
Film financing doesn’t need this, it really doesn’t.
Comment by Furious D — May 28, 2008 @ 7:33 pm
Bye Bye Bergie.
Comment by reelbusy — May 28, 2008 @ 7:48 pm
Oops. Maybe ThinkFilm can make a cool doc about this.
Comment by Seth — May 28, 2008 @ 8:00 pm
Debts are debts, sure, but Allied Advertising is no virgin either. If you think studio books are Martian, look at the deals between exhibitors and ad agencies some time.
Comment by Santayana — May 28, 2008 @ 11:28 pm
They owe you money too? THINK you’ll ever see it? THINK again.
Comment by Anonymous — May 29, 2008 @ 9:08 am
As someone who has had the displeasure of meeting with Bergstein in person (and having been fed his b.s. first hand), I can only affirm that every one of Nikke’s observations and revelations are entirely true.
More to the point, Bergstein underscores the reckless, malfeasance that Wall Street/Hedge Fund back types have brought to Hollywood, a town that would fellate a hippo if it could finance the dreck that that wouldn’t pass the litmus test of the marketplace.
What makes Bergstein worse than the others is that he obviously set out to defraud the industry with his little ponzi scheme from the get go. Why else would he have acquired such a rag-tag group of businesses that were either riddled with debt or hyper-redundant, especially in this economy? Either his arrogance blinded him into believing that he actually had the resources to build a global studio with this hodge podge of distressed assets OR he was just “pumping and dumping” these companies with never any real intention of building anything.
But hey, it’s not like the red flags weren’t waived high for all to see. The way he leveraged debt and slow-played his vendors made it seem like he was stalling for time a breakout hit to emerge to pay down his credit lines/vendors. The funniest one was when they blamed late payroll that resulted in a labor stoppage on “his inability to sign checks because his was father was ill”. As if anyone was supposed to believe that Capital has no CFO or other execs who could sign in his place (I try to imagine little Bergstein there with his hairy chest and tacky gold chains while he’s signing hundreds of payroll checks on each show).
The sad thing is that Bergstein’s actions will leave a carbon footprint behind that the surviving, well-intentioned indie producers will be have to deal with. Abuses such as his only serve to create further distrust between the independents on the one hand and the guilds, lenders and talent on the other. At the same time, almost none of Capital’s currently distressed pablum would even have been greenlit by any sane company who evaluated the buy-side demand for product before committing.
So to that end, perhaps we should ask ourselves the following question … who is worse, Bergstein for doing what opportunistic sleazebags usually always do? Or the industry for continuing to be so short-sighted that it is willing to embrace these pariahs after both the legitimate independent financiers and studios have told them the numbers don’t make sense or the picture doesn’t work. Food for thought to say the least …
Comment by Sly Wilcox — May 29, 2008 @ 10:00 am
Jerry Feldman runs a great ship at Allied. His staff will work your film like no one else. Allied also has one of the most feared women in publicity, the mighty Jane Lanouette. I’ve seen grown men that tower over Jane cower in her presence. I pity the film company that messes with Jane.
Comment by dvdoff — May 29, 2008 @ 12:10 pm
They’ve screwed other agencies as well. I guess they don’t like paying their bills!!!
Comment by K. Michelle — May 29, 2008 @ 1:04 pm
You are all wrong. David makes good money, doing what he does. And that’s all that matters.
See, everyone in the film industry operates on an assumption: that everyone else in the film industry wants to get films, etc. made. Produced. Distributed. David is smarter than that. He just wants to make money.
The way he makes money is something called ‘bridge financing’. Bridge Financing comes in to play when a film’s production falls into troubled times. The producers then reach out through whatever channels they can to get big funds, fast. And they pay whatever rates of interest necessary to do so.
David sets film up for difficulty. He knows, going in, that he’s going to trip the film up so that the producers ask and beg for the dough. He then comes through with the high interest loans.
Extortion, you say? Nope. Because David does not actually do anything he isn’t known for doing. He doesn’t set contracts up to put himself at risk. For example, he has a woman officed down his hall who opens and closes and moves corporate entities on a daily basis. She’s good and provides David all the valuable corporate protection that his contracts can’t. Regardless, it’s not extortion because David is actually HELPING his productions, by FACILITATING these loan agreements. Does he make money from facilitating them? You bet he does. And he makes very wealthy, very powerful friends and makes these friends even richer.
What is wrong with that? The system actually works. Hell, it works as well as any studio system these days. Talk about extortion….
At least David offers everyone involved in his scheme, knowingly or not, more than they are normally paid, to entice them into his trap.
He works with agents, for example, who feed him projects and talent. Agents who take fees for facilitating those deals. These agents that do business with him know that he’s going to trip production. But they get paid well, where nobody looks. They get paid better even, that their simple commissions might warrant.
All he has to do to keep alive is allow one film in five to go through to fruition. Which he does. Or will do, when the heat gets to be too much. And everyone will almost be happy, for a while. And tolerate the entire thing a bit longer. But by then, he will have made many millions and dashed thousands of people’s dreams.
Hollywood is hard enough without the likes of him.
He has a book that he calls his bible. It’s a modern version of THE PRINCE. I won’t say more about that now.
Evil?
Just cold. Smart. And where cold and smart combine to hurt others, if that’s evil, well, then, I know for a fact he can live with that.
Comment by anonymous, for now — May 29, 2008 @ 2:10 pm
It’s a shame that Think got entangled in this mess. Mark Urman and Randy Mannis are stand up guys in a business that doesn’t have many…I hope this doesn’t permanently mar Think’s reputation. They’ve been a huge support for intelligent films/docs over the years and kept NY a vibrant place for filmmakers- A Former Thinker
Comment by FORMER THINKER — May 29, 2008 @ 3:35 pm
If anyone did a little Thinking and read a little about who The Berg got his money from? The connections they would see would be a bigger picture than films . This is money that comes and goes through hollywood , Las Vegas and other places where you funnel international money for international companies. That’s just business , the show business of these situations is clear.
If you were an agent and used your “clinet” to further what you knew was just a pawn to get more opportunity ( to do it again ) and 10% of a fraud based production , you could be in a litigation ? I meant if anyone who has a duty to represent a clients best interest and uphold the law you might have some litigation issues? The law is binding even in hollywood , both civil and criminal .
To whom it may concern , I know it sucks to think of suing your agent and disbarring a lawyer but if you know who took your wallet and they still have your wallet and you go to lunch and they look at you and say ” i’ll get lunch, you leave the tip” , do you ask for your wallet back ?Hoping if you get your wallet do you have enough to leave even 10% for a pathetic tip ? Let’s see who really wants to work in a place where the rules are the same even if you think your silly little contracts aren’t worth the paper you signed and sent through business and legal affairs ? Yes this is all business no show, act like it matters and don’t be a pussy who is scared they won’t work again , you weren’t working before.
“nothing gold can stay ” , Robert frost’s Agent explaining ‘bridge financing.
Comment by Ari Gold — May 29, 2008 @ 5:08 pm
There’s is no denying that David Bergstein is a devilishly shroud, if not brilliant, businessman.
I think a lot of intelligent (and well informed) theories have been expressed herein as to why he has chosen to run his business the way he has. However, I think the concept that he is doing this solely to churn the meter on “bridge loans” is a bit counterintuitive because of the long term implications it would have on Capital’s relationship with its senior lenders (especially their credit committee), the bond companies (who would fear the economic impact of cleaning up one of his messes) and the talent (whose agents wouldn’t put them in a position to get burned out of fear of being fired).
Like most Wall Street guys, Bergstein understands the leverage one has when dealing with distressed companies, or in this case, distressed talent like David O’Russell, J Lo and Taylor Hackford. Names that have value and track records in foreign, but who have lost their ability to get a film made through the studios.
Utilizing the remaining overseas value left in these distressed “brands”, Bergstein and his established foreign sales companies (Capital and IM Global) go out and pre-sell on these names/titles. However, with as tough as the foreign markets are these days (especially when it comes to pre-sales), Bergstein realizes he needs to be able to guarantee the exposure and legitimacy of a domestic theatrical release out in front to give comfort to the foreign buyers … so enter Thinkfilm (which he acquired last year, giving him the ability to guarantee theatrical releases for his films ala Avi Lerner’s acquisition of First Look).
Now you have projects toplined by actors/directors who foreign buyers respond to, foreign sales companies who have track records with buyers and lenders (both mezz and senior), a domestic theatrical partner to give comfort to the foreign buyers that the picture won’t get lost and certainly a hodge podge of tax credits/subsidies in various locales to round out most of the pie.
But inevitably, almost every picture experiences either a “delta” (a shortfall in excess of the gap coverage ratio) or needs some “bridge” financing to lock talent/rights, as well as to commence pre-production and/or prep on the picture.
Perhaps this is where Bergstein and his backer (billionaire Ron Tudor) exploit the bridge financing mechanism a bit, but in the end they are only really stealing from themselves as the guarantors of the loans.
Anyhow, this example is merely to demonstrate how Bergstein has leveraged himself into the position he is in … but as you can see, it is a house of cards that crumbles very quickly when confidence is shaken and his credit worthiness is downgraded by everyone from the banks to the guilds.
Comment by Just an observer — May 29, 2008 @ 6:08 pm
ThinkFilm will not survive this in my opinion and probably shouldn’t. Harsh but true. Their name has been tarnished and I know I would not do business with them now for anything. Mark Urman and Randy Mannis may be/have been stand up guys…but anyone being a part of (or standing by) allowing ThinkFilm to play a part in this whole mess shares some responsibility. And I am sure we don’t even know the half of it yet. Now we will get to see them try to get out of their debts in any way that they can. Did someone say let’s start with Bankruptcy. ummm…ummm.
Bye, bye Think. It’s probably for the better.
Comment by Entertainment Industry Type — May 29, 2008 @ 6:38 pm
ThinkFilm owes my Toronto-based company money as well. I did business quite nicely with the Toronto ThinkFilm office for several years. Yes, they took their time in paying but we always got paid. They were even nice enough to cut me a cheque the very week they shut their doors. HOWEVER, they slyly shuffled a number of outstanding invoices to the LA office while assuring me the nice people down there would settle the account asap. I’ve been trying to collect since March and am continuing to be the squeaky wheel. Light a candle and say a prayer for this little supplier. Perhaps they won’t go belly up and we’ll eventually get our dough.
Comment by A little pea picker — May 29, 2008 @ 8:15 pm
I should have seen this trouble coming. The company seems to be following what I call the 7 Stages of Good Grief This Shouldn’t Be Happening To Any Company:
1. Frustration: Rumors start to come out that it’s getting harder to do business with a certain company.
2. Aggravation: Those rumors become certified reports, and they start coming out in a flood.
3. Unionization: Labour unions get involved as the reports become formally filed grievances and complaints.
4. Litigation: The reports and the grievances inspire the creditors to call their lawyers while there’s still a company to sue.
5. Investigation: This is when the government, especially regulators and the IRS, get involved. It’s also the most dangerous stage, because they can indict a ham sandwich as Jack the Ripper these days. And it usually leads to…
6. Devastation: This is when the lawyers, the attorneys, and the tax men tear the company apart, leaving only a shell behind.
7. Salvation: This is when the CEO finds religion and makes a comeback with a chain of luxury leper colonies in the 3rd world.
Comment by Furious D — May 30, 2008 @ 3:29 pm
This sucks. I do a lot of business with them, and I have to vouch for the people at ThinkFilm. In 6 years, I never had a problem getting paid until that asshat Bergstein took over things. The Toronto people were great, and people in the New York office have been even better- horrified and apologetic throughout this mess, and in the end they got me paid. It’s kind of a tragedy if they go away, because they’ve always picked up movies nobody else has any idea how to market, and often done well with them.
Bergstein should be run out of Hollywood on a spit.
Comment by Another Industry Type — May 30, 2008 @ 8:29 pm
Let me tell you something about Allied I’m not surprised that they made lousy business decisions with Think Film…they have no management skills whatsoever. Their company is headed by a bunch of “yes” people, anyone with any form of brain or free thought either quits or gets exited. They have an even worse track record with their junior staff who they treat like complete crap. Quite frankly they reap what they sow.
Comment by In the know — July 25, 2008 @ 2:56 pm
The only place where Bergstein’s deeds would be duly recognized and respected would be among his peers in prison. Any semi-intelligent individual can examine his “investments” in the past and see they have bombed one after the other. His pattern of bilking investors and then misallocating funds- often for himself - is nothing new.
Comment by Anonymous — September 2, 2008 @ 4:44 pm