Trustee: Bergstein withheld some infoMon May 10, 2010 @ 07:32PM PST
By Alex Ben Block
In his first report, the forensic accountant assigned by a federal bankruptcy court judge to examine five companies managed by David Bergstein said “certain tax returns have not been filed,” as creditors in the involuntary bankruptcy action allege.
But Bergstein said that doesn't reflect what really is going on.
Interim trustee Ronald Durkin, a CPA and former FBI agent, said Bergstein has been cooperating but has frustrated efforts to get all of the records, files and documents Durkin needs. The trustee wrote that, in particular, he has not been able to get clarification or copies of any tax documents that might have been filed, though Bergstein has told him some were filed.
“Three weeks into this case,” Mr. Bergstein has not produced a single income tax return for any of the (companies in the involuntary bankruptcy), and it is uncertain whether (those companies) ever filed any income tax returns,” the report says.
In an interview Monday, Bergstein said he has cooperated with Durkin except for providing access to his personal computer and his assistant’s personal computer, both of which have years of files and records that he said are not relevant to the case.
Bergstein said he did not file income taxes for the companies in question in 2008 or 2009 because he was unable to get information needed to complete the returns from bankrupt New York hedge fund D.B. Zwirn, which he is suing, but he said all taxes were paid, including payroll taxes.
Durkin reported that he had a number of meetings with Bergstein and his in-house lawyer, who refused to provide unfettered access to company computers because they contain files that cover a number of companies not part of the federal bankruptcy case. Bergstein insists that Durkin has gotten every relevant file he sought and more.
Bergstein did tell Durkin, according to the report, that none of the five companies in the federal case — including ThinkFilm and Capitol Films Development — currently has any employees, does any payroll or has any other assets. They have less than $5,000 in those corporate bank accounts but more than $40 million in liens owed to other companies controlled by Bergstein and his business partner Ronald Tutor.
Bergstein said Monday that the assets that did exist in those companies were legally sold more than a year ago.
According to a document related to the case obtained by THR, one of the companies, CT1 Holdings, did have employees and was doing business as of September. Bergstein disputes that.
Among the assets sold were hundreds of movies including “Crouching Tiger, Hidden Dragon,” “Half Nelson,” “Laws of Attraction” and others that were in the libraries of ThinkFilm, Franchise and other acquired companies.
Durkin wrote that when he first arrived, he was given a tour of Bergstein’s office and observed about 10 employees. Bergstein said none of them worked for the companies in the bankruptcy case. However, one of the employees then told Durkin that he was employed by one of those companies. Bergstein said Monday that employee was wrong if he said that.
One of those Durkin met was Jeff Dea, acting controller of ThinkFilm. On April 28, Dea asked Durkin what he should do because he had not been paid in five weeks. Durkin said he couldn't advise him. Later that day, Lorena Torres — an accountant who worked with Dea — quit, saying she had not been paid either.
Bergstein said Monday that Dea, Torres and all others have been paid and that Torres left the company voluntarily.
Durkin also complained that Bergstein and Tutor wrote a check and filed a lawsuit against D.B. Zwirn on behalf of companies that are part of the bankruptcy without his permission or consent. Bergstein acknowledged filing the suit but said he did not realize he needed permission and offered to remove those companies in the bankruptcy from the Zwirn suit, but Durkin told him not to.
The trustee said he told Bergstein he needs “unimpeded access to records” of the companies in question “even if they are commingled with the records of other companies controlled by Mr. Bergstein.” He said he will file additional reports in the case.
Bergstein said the discovery process in the case is just starting and that he doesn’t expect it can be concluded, or settled, before July at the earliest. Bergstein repeatedly said he expects to prevail in the bankruptcy matter and predicted that the case will be dismissed. Bergstein plans to sue those who brought the case against him for acting improperly and damaging his business.
The next hearing before bankruptcy court Judge Barry Russell is set for May 26 in Los Angeles.