Bankruptcy
Following the failure of Battlefield Earth and other films independently produced by Franchise Pictures, The Wall Street Journal reported that the FBI was probing "the question of whether some independent motion picture companies have vastly inflated the budget of films in an effort to scam investors". In December 2000 the German-based Intertainment AG filed a lawsuit alleging that Franchise Pictures had fraudulently inflated budgets in films including Battlefield Earth, which Intertainment had helped to finance. Intertainment had agreed to pay 47% of the production costs of several films in exchange for European distribution rights, but ended up paying for between 60–90% of the costs instead. The company alleged that Franchise had defrauded it to the tune of over $75 million by systematically submitting "grossly fraudulent and inflated budgets".
The case was heard before a jury in a Los Angeles federal courtroom in May–June 2004. The court heard testimony from Intertainment that according to Franchise's bank records the real cost of Battlefield Earth was only $44 million, not the $75 million declared by Franchise. The remaining $31 million had been fraudulent "padding". Intertainment's head Barry Baeres told the court that he had only funded Battlefield Earth because it was packaged as a slate that included two more commercially attractive films, the Wesley Snipes vehicle The Art of War and the Bruce Willis comedy The Whole Nine Yards. Baeres testified that "Mr. Samaha said, 'If you want the other two pictures, you have to take Battlefield Earth — it's called packaging'". Baeres commented: "We would have been quite happy if he had killed Battlefield Earth".
Intertainment won the case and was awarded $121.7 million in damages, Samaha himself was declared by the court to be personally liable for $77 million in damages. However, the jury rejected Intertainment's claims under the Racketeer Influenced and Corrupt Organizations (RICO) statute, which would have trebled the damages if Franchise had been found liable on that charge. Samaha vowed to appeal but the fraud judgment destroyed Franchise's viability; the company and its subsidiaries all filed Chapter 11 bankruptcy petitions on August 19, 2004.
Read more about this topic: Franchise Pictures
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