Business: Continuing Saga of Hollywoodgate

Hollywood, that chimerical land of sudden riches and happy endings, is being rocked by protests about sordid abuses in the real world. A number of stars, directors and independent producers, who had kept their mouths shut in the past for fear of jeopardizing their careers, are speaking out against the fast shuffles dealt them over the years by the studios.

The protests have been sparked by the continuing scandal involving David Begelman, 56, president of film and television operations for Columbia Pictures. Though Begelman admitted embezzling more than $60,000 from Columbia and signing at least three checks with fake signatures, including that of Actor Cliff Robertson, he was returned practically unpunished to his $400,000 post. His reinstatement, which was seen as a symbol of the arrogant power wielded by Hollywood’s kingmakers, became too much to stomach even for many veterans of the cynical film community.

Begelman was calmly going about his business last week. Every morning he arrived at his Burbank studio by 9 to view rushes of the previous day’s filming, and he was keeping sharp watch on his latest hit, Close Encounters of the Third Kind.

Currently it is the nation’s top-grossing film, having run up $62 million in receipts in six weeks. Wheeling as usual, Begelman set up a distribution deal for Robert Mitchum’s new film, The Amsterdam Kill, and signed Robert Redford to star in Electric Horseman.

It was precisely because Begelman had rescued Columbia from the brink of bankruptcy and turned it into a moneymaker that its directors last December decided to reinstate him. A vocal dissenter had been Alan Hirschfield, president of Columbia’s parent, Columbia Pictures Industries; the two men seemed formally reconciled last week, and Hirschfield spent the week in Hollywood talking with Begelman about future plans. But the Columbia directors were scheduled to meet again this week, and there was speculation that they might reconsider their decision, particularly since Columbia stock has fallen to 15% from 20% in December, before the affair burst into the open.

The bad publicity is continuing. Last week New West and New York magazines ran a seven-page expose on Begelman, charging that his recent rip-offs were not a “mental aberration,” as he claimed, but fitted a long-term pattern, dating back to his days as Judy Garland’s agent in the early 1960s. Drawing mainly on files and canceled checks supplied by Garland’s former husband Sid Luft, the article asserted that Begelman and a partner, Freddie Fields, had fleeced the singer of large amounts. Meanwhile the Los Angeles County district attorney was investigating the latest Begelman case but was finding it difficult to prosecute because Columbia would not press charges.

The Begelman affair, however, has prompted many stars and agents to make their own verbal indictments of practices in the $3.2 billion-a-year film industry. Said Hollywood Lawyer Ronald Litz: “The custom in Hollywood is that you get away with as much as you can until you’re caught.” Litz won a $225,000 settlement from Columbia for Robert Redford and Director Sydney Pollack, who contended they had been denied their fair share of the profit from The Way We Were.

Indeed, actors, directors and writers commonly complain that studios cheat them out of the “points,” or percentages of the film’s profits, for which they make contracts. Hollywood’s contracts are so complicated that almost no one can understand them; the definition of “net profit” takes up seven pages of single-spaced type in one studio’s contract. “Net profits” and “gross receipts” for a film rarely mean what they imply in other businesses, and the studio often can and does add on exorbitant overhead charges, deduct all manner of “expenses,” and play with foreign costs and taxes.

A onetime Columbia executive cites the example of Funny Girl, which cost $6 million to produce but was not accounted in the black until it had taken in $30 million in gross receipts. David Merrick complains that independent producers like himself are grossly overcharged for “overhead” by the studios: “They always manage to throw in the kitchen sink.” Jeff Wald, who manages Sylvester Stallone (Rocky), says that the independents must be constantly on guard against the studios’ chicanery: “They’ll build the sets needed for your picture on Saturday and Sunday, when you have to pay double time.” Actor Tony Curtis adds that “a studio executive will fly down to Acapulco with 14 of his chicklets and charge the trip against profits.” Curtis contends that movie companies have cheated him for years, and asks: “If that’s the way they treat a dude like me, who’s got a reputation and an image, how do you think they treat a guy they’ve never heard of?”

Disputes over bookkeeping and vagaries in reporting foreign receipts lead to continual strife. Actors Sean Connery and Michael Caine sued Allied Artists for $109,146 each to retrieve profits that they contend were understated for The Man Who Would Be King. Such suits are usually settled out of court. Bringing them to trial, say actors and their lawyers, would be enormously costly and would pose a risk of blacklisting for the troublemaking plaintiffs. In their own defense, studio executives claim that they tack on only the costs required to meet their legitimate expenses and overhead. And they have a big overhead, they add, to cover their losses from films that bomb out. Robert Evans, who has been both a studio chief (Paramount) and an independent producer, agrees with that reasoning. Says he: “Who pays the $21 million loss on The Sorcerer? The studio.”

Risk, of course, justifies a high rate of return, but not chicanery. The Begelman affair reawakens old suspicions about Hollywood—that it is dominated by a handful of imperious men who can benefit from a double scale of justice and a one-sided set of books.