Pangea Media chief also asks court to clarify role of appointed Chapter 11 trustee
(Updated, Friday, 5:20 p.m., PST) A Los Angeles bankruptcy court judge denied David Bergstein's motions to force Aramid Film Entertainment to post a $25 million bond and to allow his business to operate without undue supervision from his court appointed trustee.
The court ruled that Bergstein's motions would only be heard after he appears in court on July 20 to answer to his Chapter 11 trustee's allegations that he is stonewalling an investigation into his companies' assets.
The hearing on Bergstein's bond motion has been scheduled for October 6 and the hearing on clarifying the role of the trustee has been scheduled for July 28.
David Bergstein is hitting back at the group of creditors currently suing him in bankruptcy court.
With the embattled businessman's bid for Miramax studios entering its 11th hour and criticism mounting from major Hollywood players and the guilds, Bergstein is trying to turn the tables on David Molner and Aramid Film Entertainment.
Aramid is attempting to recover approximately $16 million from Bergstein and his business partner Ronald Tutor. Bergstein and Tutor want Aramid to put up a $25 million bond, to demonstrate it has sufficient assets to pay costs if it loses the case.
Bergstein failed in an earlier attempt to have the Aramid's civil suit against him dropped last June. A Los Angeles district court judge found Bergstein and Tutors contention that the case should not go forward because of a lack of jurisdiction to be without merit.
Bergstein and Tutor are attempting a different tactic this time in a pair of motions filed Tuesday in the pending insolvency cases. Citing the harm that the allegations and protracted legal wranglings are doing to his primary business Pangea Media Group, Bergstein alleges that he should not have to pay legal fees if the court finds in his favor. He says the legal proceedings have cost the company $5 million in lost sales as many companies do not want to do business with him while the specter of bankruptcy looms.
Moreover, Bergstein and Tutor argue that the claims against them were the result of a personal dispute between the Pangea C.E.O and Molner. Bergstein says he was paying off his debts to Aramid until Molner jacked up the interest to usurious rates of as much as 50 to 100 percent.
'The Court was told this is the 'Enron of the entertainment industry.' In fact, it's more like the Sonic Blue of the entertainment industry," The filing reads. "This case presents a morass of hardball tactics, unethical conduct and questionable representations to the court. While the debtor is tempted to seek dismissal, it will defer dispositive motion practice until discovery is concluded on key points. Presently, however, more than adequate cause has been shown to impose a $25,000,000 bond on petitioners."
Bergstein alleges that Aramid is an off-shore company, operating out of the Cayman Islands and is attempting to disguise the fact that they are in severe financial distress. Aramid has claimed in court filings that it has assets on the order of $200 million.
"They have lied to the court about their financial capacity," Bergstein told TheWrap. "When we ultimately pull these entities out of bankruptcy we're going to prove it."
Molner said that Bergstein was just using the court filings to obfuscate the issues surrounding his failure to pay back Aramid and others for millions of dollars in loans.
"When you are asked, in a court of equity, why you are not paying certain debts, and your response over months is to spend hundreds of thousands of dollars filing motions blaming others and not answering the question, what is the answer in the court of public opinion?" Molner told TheWrap. "That is likely to be the same one in the court of law when we get to the end of this process."
Bergstein says that without any U.S. presence it will be impossible for him to force Aramid to pay legal costs if it loses the case.
"This a bad faith filing," Bergstein added. "Aramid is broke. It is an offshore company, and as far as I can tell, Molner bled off tens of millions of dollars and the majority of his $300 million was lost.
Molner says that Bergstein's claims about Aramid's precarious financial situation are baseless.
"We have a very substantial portfolio of assets, but the one part that is questionable is receivables and other claims owed to us by Mr. Bergstein," Molner said.
Molner further adds that Bergstein is bandying about terms such as "off-shore" in an attempt to play off popular sentiment about the financial service industry's excesses, though he does not dispute the fact that Aramid has no U.S. holdings.
In the second filing, Bergstein is asking the court to clarify the rights and responsibilities of court appointed bankruptcy trustee Ronald Durkin. He says that Durkin's investigation has severely disrupted his business. He also accuses the investigator of not protecting the companies assets and failing to copy or analyze relevant information he has provided.
"They're playing hide the ball, because it's not the case they thought it was in the beginning," Bergstein told TheWrap. "They realize there's not going to be a pot of money to go after, and they've decided to try to do nothing. They haven't done their job."
Still Bergstein says he does not want Durkin replaced.
Durkin did not respond to TheWrap's request for comment, but in his latest report to federal bankruptcy court he accuses Bergstein of not cooperating and of stonewalling his investigation.
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