Sunday, 11 April 2010

Hollywood Babble On & On #486: The Importance of Purity

Welcome to the show folks...

There are no two words that put sheer terror into the hearts of CEOs the world over: Forensic Accountant.

Now you're probably scratching your head,
and furrowing your knobby brow in a futile attempt to understand, so I'll do a little explaining, and I'll start right at the roots.

The roots of the name comes from the words "Forensic" meaning: "suitable for use as evidence in a court of law," and "Accountant" which means: "boring guy who figures out where all the money went."

Alone they are subject for hit TV shows, and someone you go to when you can't understand your taxes. Together, they are a CEO's living nightmare, because it is never a good sign when a Forensic Accountant starts sniffing around your company. That's because Forensic Accountants are called in when companies are being sued for megabucks, going bankrupt, or under investigation from law enforcement. They are a small elite brotherhood who are masters of sniffing out the slightest sin, both mortal and venal, and bringing them into the light.

Now you're probably wondering why am I discussing the usually arcane and tedious world of accountancy on my humble little pop-culture blog?

It's because of this story.

For those too lazy to click the link, I'll do a little explaining.

David Bergstein runs ThinkFilm, Capitol Film, and about half a dozen other independent film-related companies. Those companies are all going tits-up in bankruptcy court, but that's not stopping Bergstein from making a bid for Miramax, but that's another story.

What's important is that every single person that this cluster-fark of companies ever did business with is currently suing them into oblivion. To guide it into this oblivion the court has appointed a trustee, a former FBI analyst and forensic accountant named Ronald Durkin. Durkin's job is to sort out the mess left by Bergstein and see what action, be it civil or criminal, is to be taken.

The folks suing the ThinkFilm conglomeration are hailing this appointment, figuring it's just what they need to nail David Bergstein's hide to the wall, and they are accusing him of everything from using company money to cover gambling debts to being the movie biz equivalent to Enron.

Now I'm not going to say whether or not Bergstein did any of the things he's being accused of. I'm not a mind-reader, and I can't make those kind of judgments until after the forensics accountant has had his way with the company's books.

What I can judge him about is why he is in this situation.

Because it's all his own damn fault.

It doesn't really matter if he's innocent or guilty, because he's worked so damn hard to look as guilty as possible. He fired Chief Financial Officers on a basis so regular, it has to look suspicious, with some reports saying he went through 5 CFOs in 22 months.

He made deals, even though he was completely unable to raise the money to close those deals. Created complicated and convoluted webs of interconnected shell companies and corporations so no one really knew just who or what they were doing business with at any given moment, even trying to get one of his shell companies to buy the film library of his bankrupt company. Then he let bills go unpaid, and generally got everyone he did business with pissed off at him.

If he isn't guilty of some malfeasance, then he tried damn hard to make everyone think he did, and that's just plain dumb.

I've said it before, and I've said it again, when you are in a position of authority, you must be like Caesar's wife, you can't just be pure, you have to appear to be pure in everything you do.

That's because of two things, the first is risk, and the second are the enemies you will make.

The movie business is risky when you're not a big studio. Even when you're a big studio you're prone to powerful feast or famine cycles. Those cycles are exponentially more powerful when you're an independent producer or distributor. You are literally walking a high wire, and even when you do everything right, the whole deal can turned to parboiled shit overnight. When you're independent you don't have a big parent company with deep pockets to see you through the lean times, and most companies don't survive.

Then there are the enemies you're going to make. Now I preach that one should do whatever they can to minimize the enemy making through good manners and common sense, but you can't please all of the people all of the time. There are going to be people that don't like you, it's inevitable.

So when your business goes to pot, you don't want a legion of enemies screaming for your pelt. A few are allowed, because they can be drowned out by allies who believe you to be fundamentally honest.

Do you get my point?

When you're honest in all your dealings, and also appear to be honest in those same dealings, your allies will defend you, and your enemies will have nothing to attack you with.

Your sins, whether real or imagined, are your enemy's ammunition.

It's up to you to make sure their cannons are empty, because if you don't, you end up with a forensic accountant picking apart your life.


  1. Still circling a topic for my blog. Trying to avoid the risk of repeating myself, but it's not like anyone reads my archives anyway.

    Don't be silly. Some of us have your archives memorized.

    Sorry, but you leave an opening like that I'd be drummed out of the crazy blog commenter guild if I let it pass. ;)

  2. Uh, "creative" Hollywood accounting is well known. Wouldn't it be funny if someone like say, Republican politicians in 2010 got control of congress and started investigating said accounting methods?

    Those politicianss would have been elected by a section of the electorate that has spent the last 20 years being the butt of Hollywood's jokes and demonized constantly in their movies. Perhaps some interesting tax issues might arise, don't you think?