Press Release for Intertainment AG
Intertainment: Information about the current status of the legal disputes in the
USA
Ismaning near Munich, 17 January, 2005 – The individual hearings relating to the
pending legal disputes involving Intertainment AG in the USA concerning budget
fraud have developed further during recent weeks. Intertainment is providing
information in this press release about the current status of the proceedings.
Arbitration proceeding against Comerica Bank, Film Finances and others
The arbitration proceeding is currently in the discovery phase. The gathering of
evidence has taken longer than expected, and the entire arbitration proceeding
has been delayed. A decision on the ongoing schedule will be discussed at an
upcoming meeting with the arbitrators in early to mid February.
The arbitration proceeding relates to fraudulently inflated budgets for films
that were produced mainly during the years 1999 and 2000. In this connection,
Intertainment filed claims against Comerica Bank, against the bond companies
Film Finances and Film Finances Canada, and XL Reinsurance (with which
Intertainment has since settled), and against executives in these companies,
requesting damages amounting to at least 100 million dollars. The fraudulent
budgets were approved and submitted to Intertainment and its letter of credit
facility by the bank and the bond companies. Comerica has filed a claim for
approximately 70 million dollars against Intertainment for non-payment of the
second half of the license fees for some of these films.
Proceedings against Franchise CEO Elie Samaha
The decision in the trial for damages against the American film producer
Franchise Pictures heard in the summer of last year was in favour of
Intertainment. After the final judgement in this trial, Intertainment took
actions to secure liens over the assets of Elie Samaha, the former CEO of
Franchise. The liens cover any stakes held by Samaha in companies not filing for
insolvency. Intertainment had refrained from a disclosure of the assets held by
Samaha scheduled for December 2004. The background to this is that under
American law, a debtor is only able to render these rights of lien ineffective
by personal insolvency in the first 90 days after the lien is effective. This
deadline has now lapsed. A new date for a legal hearing has meanwhile been set
for January 24.
Status of the insolvency proceedings relating to Franchise Pictures
After the judgement was executed, Franchise Pictures and the subsidiaries
constituting the defendants in the lawsuit filed for insolvency pursuant to
chapter 11 of the US Insolvency Law. Within the scope of the insolvency
proceedings, the companies R2D2 and Mobius International Inc. granted Franchise
Pictures a DIP financing (“Massekredit”). Both companies are controlled by
former Franchise Investor David Bergstein. Bergstein also acquired certain film
rights from Franchise. Intertainment has been able to get commitments that the
past transactions of Franchise will be investigated by using theses resources.
The Chief Restructuring Officer of the Franchise Group has also filed an
application with the presiding insolvency court requesting that the deadline for
submitting a restructuring plan be extended by 120 days. Originally the plan was
scheduled to be submitted by the end of the year. Intertainment opposed the
application for the extension. A decision on this matter is still pending.
Post Trial Motions
In the context of the Franchise trial, a number of Post Trial Motions were
submitted by both sides after the judgement was handed down last year. A hearing
concerning these applications is scheduled for February 28.
Arbitration proceeding in the case of “Viva Las Nowhere”
In the context of the Franchise trial, the Franchise subsidiary VLN Productions
Inc. was also convicted of budget fraud. The company had produced the film “Viva
Las Nowhere”. In April 2004, Intertainment had already served its claims against
Westdeutsche Landesbank, the Lewis Horwitz Organization and the Federal Deposit
Insurance Corp. in connection with the film and this claim is now being pursued
in an arbitration proceeding. The WestLB was involved in financing the film. In
the context of the arbitration proceeding, Intertainment is making a claim in
respect of repayment of an advance payment amounting to around 1.3 million
dollars plus interest. Intertainment only made this advance payment on the basis
of submission of the fraudulent budget.
Arbitration proceeding in the case of “Tracker”
In 2003, International Motion Pictures Corporation (IMPC) had asserted a claim
against Intertainment within the scope of an arbitration proceeding for an
alleged payment claim of Kredietbank Luxembourg amounting to 3.3 million dollars
arising from the film “Tracker”. IMPC is a letter-box company based in Hong
Kong. At no point did the company have any business dealings with Intertainment.
“Tracker” was licensed to Intertainment by a company in the Franchise Group that
has since become insolvent. “Tracker” was produced by the production company
Muse. When the film was being produced Muse was the owner of Film Finances
Canada, the completion bond company for the film. Additionally the US bond
company Film Finances Inc. had a profit participation in Muse. “Tracker” had a
fraudulently inflated budget. At the end of last year, IMPC was able to
reinstate the arbitration claim that had been suspended since January 2004. The
claim was reinstated even though Franchise Pictures had already attempted to
assert a claim for payment arising from the film against Intertainment. However,
the Franchise Pictures claim was rejected outright by the court.
Intertainment will therefore seek a counterclaim against Muse and related
parties in the context of the arbitration proceeding.
End of the Press Release
Contact:
Intertainment AG, Investor Relations, Osterfeldstrasse 84, D-85737 Ismaning, Germany
Tel.: + 49 (0)89 21699-0, Fax: + 49 (0)89 21699-11
Internet: www.intertainment.de, E-mail: investor@intertainment.de