Unlucky producer or Hollywood fraud?

Reporting from Columbus, Miss. — —  On a spring evening in this Mississippi town, Jim Walker dug into a plate of roast beef, macaroni and cheese, and green beans at the Palmer Home for Children and tried to swallow his frustration.

The orphanage was hosting an awards dinner for 65 of its charges — some in high chairs, others in high school. The kids, who wore Easter dresses and secondhand ties, accepted prizes for spiritual growth and certificates for artistic excellence. A 22-year-old who arrived at Palmer Home at 8 months old and graduated from the University of Mississippi received a top honor.

As poignant as the evening was, Walker, an orphanage board member and its former development director, couldn’t help but be upset that the accomplishments of the privately funded, 116-year-old institution were unfolding in obscurity. Palmer Home was the sort of place, Walker believed, that would make a heartwarming movie, showing that orphanages weren’t Dickensian warrens of misery.

It was scarcely some Hollywood fantasy.

In fact, a year earlier, cameras were set to roll on “Miracle at Palmer Home.” David Mickey Evans, who directed “The Sandlot,” was preparing to shoot the fictionalized story of three kids who run away from the orphanage to make room for needier children. Walker, who cowrote the movie’s story, said the budget was initially $7 million. But the project collapsed days before filming was to begin, he said, and some of the movie’s investors wonder where their money — some $1 million — went.

A former colleague of the film’s producer, Bret Saxon, thinks he knows: Scott Barbour contends in a lawsuit that Saxon and his companies took the money to finance a “luxury lifestyle.” Saxon, the suit claims, followed the same pattern on other film projects: Create a “falsely exaggerated” budget for a film, then “attempt to produce the movie project for substantially less” and “pocket the difference.”

The Palmer Home movie is one of 10 independently financed film projects — including one starring Woody Harrelson, another with Luke Perry, and one about California con man Barry Minkow — that have sparked a spate of lawsuits in the last year and a half against Saxon. A veteran of the infomercial world, the 45-year-old Saxon has co-written books about how to meet famous people and schmooze the rich and powerful.

Investors have filed six lawsuits against Saxon, alleging that he misappropriated or failed to repay more than $7.8 million in investments, loans and fees. In the first case, filed in February 2010, a Tennessee arbitrator found Saxon liable for fraud and breach of contract and ordered him to pay investor Jon Yarbrough $2.25 million.

A lawyer for Saxon, Andrew Jablon, said, “Mr. Saxon agreed, at the advice of his counsel in Tennessee, to enter into a stipulated judgment as part of a business resolution.” In the other lawsuits, which are all in the early stages of litigation, Jablon said Saxon also did nothing wrong. Jablon argued that Barbour has tried to extort money from Saxon and that others have been motivated to sue him because of money woes not of Saxon’s making.

As for the money invested in “Miracle at Palmer Home,” it was spent on “pre-production and production costs,” Jablon said. “There was no theft of assets — nothing.” The movie, Jablon said, was postponed because a cast member became ill.

Outside the system

The saga of Bret Saxon and the question of whether he is simply an unlucky producer or, as alleged in the lawsuits, a fraud provides a window into film financing in modern Hollywood and the risks of such investments.

Independent producers like Saxon serve as both fundraisers and filmmakers, and the roles are linked more closely than ever. The major studios have cut the number of movies they make, concentrating on extravaganzas such as “Transformers” and “Pirates of the Caribbean.” Of the 560 films released theatrically in the United States last year, only 104 came from the major studios, according to the Motion Picture Assn. of America, down 6% from 111 major studio releases in 2009.

Independent producers are the engines behind the hundreds of other films. They comb the world for financing, pitching their projects at international movie markets, over Beverly Hills lunches, on the decks of yachts moored at the Cannes Film Festival. Many independently produced movies are made with no guarantee of distribution; the completed films are shopped around in the hopes of attracting a sale that will more than cover their budgets.

Cash has flooded into movies from international tax deals, government subsidies, foreign banks, hedge funds and wealthy individuals. Although the investments are highly speculative, they offer investors a chance to mingle with stars, see their names on the big screen, and, in rare cases such as the independent blockbusters “Little Miss Sunshine” or “My Big Fat Greek Wedding,” collect a windfall.

Saxon, who according to court records declared personal bankruptcy in 1991 and 1998, has been a producer or executive producer on a number of films, none a major success. The 2005 Costa Rican comedy “Blue Sombrero” and the 2009 thriller “Across the Hall” have no reported box-office receipts. His 2007 poker movie “The Grand” grossed just $115,879 in domestic theaters.

Saxon traveled by private jet, had a Mercedes and a Ferrari, and lived in a 10,900-square-foot Pacific Palisades estate with a movie theater, tennis court and swimming pool, according to interviews and court records. Saxon traveled with a personal trainer and carried an exclusive black American Express card, according to court filings and interviews with former colleagues and movie investors. Jablon said he doesn’t see “anything improper about these facts” and that the trainer accompanied Saxon as a personal friend.

Said Dennis Sonnenschein, a fledgling Tennessee screenwriter whose brother, Thomas, is suing Saxon over a movie Dennis Sonnenschein co-wrote: “He put on the dog when he wanted to put on the dog.”

Former colleagues of Saxon and those who invested with him describe him as a charismatic figure.

“He was able to instantly gain your trust. I was immediately enamored — this was a guy I wanted to be like,” said Steven Zellers, who said he met Saxon about 10 years ago, invested in several of his projects, and is suing him for $1.5 million.

Some of those suing Saxon say that even as his explanations for where investors’ money had gone became increasingly implausible, they nevertheless gave him more.

“He has a unique skill,” said Zellers. “He makes you feel all warm and fuzzy. He’s that good.”

A ‘Grand’ image

Saxon’s Hollywood career began at the margins. He grew up in Los Alamitos, went to the University of Phoenix and Loyola Law School, and worked in the infomercial business at Transactional Marketing Partners, founded by Earl Greenburg, a legend in the field.

In 1995, Saxon and coauthor Steve Stein published the first of their how-to books about rubbing shoulders with the rich and the powerful: “How to Meet and Hang Out with the Stars: A Totally Unauthorized Guide.” A second book followed in 1998: “The Art of the Shmooze: A Savvy Social Guide for Getting to the Top.”

The books offer tips on crashing parties, cornering celebrities and meeting women. (Sample pickup line: “Can I see your tan lines?”) The books are jammed with blurry, black-and-white photographs of Saxon posing with John Travolta, Elton John, Michael Eisner, Luke Perry and other celebrities.

“Bret always had an aura of success — he spent a lot of money, he was always traveling the world,” said Barbour, who said he met Saxon in 1999 or 2000, worked with him for three years at TMP and is suing him for $550,000 in allegedly unpaid loans and $60,372 in allegedly unpaid commissions. “No one quite knew what Bret did, but he was always out doing it.”

Saxon had credits on the 2002 ESPN short “A Date With Anna” (about a photo shoot of tennis star Anna Kournikova), the 2003 documentary “Hollywood’s Hottest” (a compilation of movie nude scenes) and, from 2003-04, the VH1 series “Driven” (which looked at how celebrities became who they are), according to IMDB.com.

As he moved into film production, Saxon rented a bungalow for his production company, Insomnia Media Group, on the Universal Studios lot. By 2006, he was raising money for “The Grand,” a mockumentary about a professional poker tournament starring Woody Harrelson, Ray Romano, Dennis Farina and Cheryl Hines. Several of the lawsuits Saxon is facing stem from that movie.

A trio of investors — fledgling producers Kirkwood Drew, Jordan Udko and Ayman Kandeel — claim in their lawsuit that they gave Saxon $2.73 million in May 2006 to make “The Grand” and contend their contract promised a “guaranteed minimum” return of $2.97 million.

The three, who called themselves I Need a Grand Productions, claim that Saxon may have raised as much as $5 million total to make the movie but spent “no more than” $2 million to make it. Just a few weeks after their outlay, the three allege, Saxon spent their money for the down payment on a $4.2-million home in Pacific Palisades with a tennis court, swimming pool and theater.

In separate suits, three litigants each say that Saxon pledged earnings from “The Grand” to them. Drew, Udko and Kandeel claim Saxon promised 100% of the film’s earnings to them. Zellers, who says he invested $500,000 in “The Grand,” claims that three weeks later, Saxon pledged 100% of the earnings to him. Yarbrough, the Tennessee businessman who secured the $2.25-million award against Saxon, claims Saxon assigned him 100% of the earnings.

Saxon was able to sell the U.S. distribution rights to “The Grand” for about $1.1 million, according to Zellers’ lawsuit. I Need a Grand Productions said it received $782,500 of that money; Zellers, 35, said he has received nothing.

Jablon, Saxon’s attorney, said the I Need a Grand investors “have been paid everything they are entitled to.” Zellers, the attorney said, sees the litigation “as an opportunity to get money back from an investment that didn’t pan out.”

If there was any tension between Saxon and his investors over the financing of “The Grand,” few in Hollywood appeared to know. In fact, anyone who read the town’s trade newspapers around the time would have assumed instead that Saxon had entered the ranks of major producers.

According to a news release dated Nov. 27, 2007, Borak Capital Holding, an Egyptian investment fund run by Kandeel, was putting $550 million cash into Saxon’s Insomnia Media Group. “This investment will allow Insomnia Media to continue its rapid growth and to find new and exciting projects to develop and bring to market,” Saxon was quoted as saying in the Hollywood Reporter.

Relations go South

When Saxon traveled to Tennessee to raise funds for the Palmer Home movie and other films, he said he had money from the Egyptian investment fund, investors and former colleagues say.

Doug Ames, who helped raise money for Saxon’s productions, said he heard Saxon tell potential investors that he already had all the cash he needed. “His pitch was, ‘I don’t need your money. I could do it without you, but I am giving you an opportunity to make some money,’” said Ames, 49, who later fell out with Saxon.

More than three years after the press release went out, Borak sued Saxon, alleging that the investment fund never agreed to give Insomnia Media any money and that Saxon without authorization used publicity about the bogus investment in part to “raise monies from unsuspecting investors on movie projects that did not exist.”

Michael Baranov, an attorney for Borak, said there was no investment in Insomnia, only “preliminary discussions about some potential future investment.” But Baranov withdrew the Borak suit after Jablon said he found emails indicating that Kandeel not only was aware of the news release but also made suggestions to Saxon on its phrasing. Jablon says the investment was real and was to be used for future movies.

The Borak deal didn’t stop Saxon from soliciting other investors. Ames said Saxon emphasized family-friendly movies with uplifting messages — themes that resonated in the Bible Belt.

In Tennessee, Saxon met Dennis Sonnenschein, a 67-year-old equine enthusiast and former massage parlor owner who once had been jailed for failing to pay taxes. He had dreamed of making a movie about Paso Fino horses — a breed distinguished by its stamina and smooth gait — and had co-written a screenplay about them.

Saxon expressed interest in the script, which became known as “A Fine Step,” starring Perry. Saxon said the movie would cost about $5 million and that he would provide half its cost, according to a lawsuit by Sonco Investments, an entity run by Sonnenschein’s brother, Thomas.

“He was extremely persuasive,” Dennis Sonnenschein said of Saxon.

Sonco said in its lawsuit it is owed $294,000 for its investment in “A Fine Step,” an additional investment in the Palmer Home film and an unpaid producer’s fee. Yarbrough, the head of Video Gaming Technologies, which makes slot and other gambling machines, put in $1.5 million, on condition that Saxon’s company contribute $3.5 million, according to Yarbrough’s lawsuit.

The Yarbrough suit contended that Saxon moved Yarbrough’s $1.5 million through “several unauthorized accounts” and then back into the film’s coffers to give the appearance that Saxon was living up to his end of the deal. Yarbrough’s representatives said in court filings that they tried repeatedly to review the film’s finances but Saxon would not cooperate.

In response to Yarbrough’s lawsuit, Saxon filed an affidavit last year stating that Yarbrough’s investment “will be paid back, in full” and that “A Fine Step” was “of absolutely professional quality and terrifically shot.” (But as Yarbrough’s lawyers noted, the affidavit was neither sworn nor notarized and thus was not legally admissible as evidence.)

In the affidavit, Saxon said he couldn’t immediately return Yarbrough’s funds in part because the movie was not quite done and he “cannot state with complete accuracy” how much money was left until after “the dust settles.” But the affidavit did say that about $4.8 million of its $5-million budget had been spent. A nine-page copy of the film’s budget, dated a few weeks before the film was shot and shown to The Times by someone who was involved in the movie, indicated that “A Fine Step” was set to cost only $738,776. Jablon said that budget does not reflect the actual production costs, which he said were much higher.

Last October, Yarbrough received an arbitrator’s judgment, affirmed by the Tennessee Chancery Court, against Saxon for $2.25 million in damages. Yarbrough’s lawyer, Todd McTavish, said a confidentiality provision precluded his client from commenting. But McTavish did say that Yarbrough has yet to receive any money from Saxon.

Jablon said the Sonco lawsuit and a court order related to it prevents Saxon from completing “A Fine Step,” which in turn keeps it from being sold and the investors being repaid.

Money and ‘Minkow’

As Saxon was lining up investors for “A Fine Step” and the Palmer Home film, cameras were rolling in Los Angeles in fall 2009 on a biopic chronicling the rise, fall and redemption of Barry Minkow.

Hailed as a teenage business whiz in the 1980s, Minkow turned his ZZZZ Best carpet-cleaning company in Los Angeles into a publicly traded company, making millions. But ZZZZ Best did little actual work, and Minkow served seven years in prison for fraud. He became a Protestant minister and fraud investigator after his release.

Saxon and Minkow joined forces to turn Minkow’s life story into a $3-million movie, underwritten largely by two Minkow acquaintances, Minkow said. Minkow played himself.

After filming on the Minkow film finished, Saxon turned to his old infomercial marketing colleague, Scott Barbour, for cash, Barbour says. Barbour, 49, contends in a lawsuit that he loaned $150,000 to Saxon in May 2010 with the promise he’d be repaid in two weeks. Barbour contends that not only was that money not repaid but also that three months later Saxon withdrew $250,000 from Barbour’s bank account without permission while Barbour was on vacation.

Even so, Barbour says in his suit that he gave Saxon another $150,000 in late August 2010. “I’m the biggest idiot in the world,” Barbour said. “But he’s so convincing.”

Barbour says Saxon promised to repay him once he sold the Minkow movie. In his suit, Barbour said Saxon in early 2011 claimed Sony Pictures had offered $2.5 million for the distribution rights to the film — and that Saxon said he would use that money to repay Barbour the $550,000 he loaned him in 2010. (Barbour claimed Saxon also owed him an unpaid $60,372. sales commission from a different business deal.)

Saxon’s attorney, Jablon, acknowledged that Saxon received money from Barbour. But he said in a court filing that Barbour and his lawyer tried to extort $1.5 million from Saxon in a meeting in January 2011. Jablon said Saxon had the conversation secretly recorded.

Barbour’s lawyer, Michael Burke, said there was no extortion attempt. Burke says the January meeting was a settlement conference and that the $1.5-million figure was mentioned only because it represented Saxon’s potential liability if he was held for treble damages.

In a statement to The Times, Saxon said in part: “The series of lawsuits filed against me and my companies, which began with a documented extortion attempt, are part of a coordinated scheme organized by Scott Barbour, a disgruntled former employee and current competitor with whom I have a business dispute.... The idea being advanced — by ex-convicts … and a host of individuals who have vested financial interests in attacking me — that I or my companies oversubscribed investments in movies, or somehow misappropriated monies, is absurd.... We will be vindicated in the pending litigation.”

The fate of “Minkow” and any potential profits from it were thrown into limbo this year when Minkow pleaded guilty in an insider-trading case unrelated to the film. The movie’s fairy-tale ending, director Bruce Caulk said, may need to be redone. Sony Pictures says it was never interested in the film; it remains unsold.

Hoping for a ‘Miracle’

While the 44-year-old Minkow was working on his biopic last year, he said he grew suspicious about Saxon’s truthfulness. Minkow rang up Walker, the orphanage board member, to discuss the Palmer Home movie, whose filming start had been postponed.

“I think you’ve got real problems. Bret doesn’t have any money,” Walker recalled Minkow telling him. Minkow confirmed the conversation. Walker said he then asked Saxon to return the Palmer Home movie investors’ $1 million.

“I said, ‘I’ll let you keep the money if you show me a bank statement that proves the money never moved,’” Walker recalled telling Saxon. “And he said, ‘I view money as fungible.’ And I said, ‘Well, Bret, money may be fungible, but if it doesn’t get back to where it belongs, people go to jail.’” Walker said none of the five “Miracle at Palmer Home” investors has received any money back.

Saxon’s attorney, Jablon, said the money was not returned to investors because it “was spent on pre-production and production costs,” including payments of “hundreds of thousands of dollars” to Walker, Ames and “Palmer Home” director Evans and that “any recoupment of investment would come in accordance with the contractual agreements with the investors.” As for Minkow, he is “devoid of credibility,” Jablon said.

Walker said fellow “Palmer Home” writer Tom Wiggin was paid $17,000. Ames said that although he received some money, it was not “hundreds of thousands” of dollars. Evans said he was paid part of what he was owed. Evans said by his estimation no more than $175,000 total was spent on the film’s pre-production.

This month, two other Saxon investors, Memphis, Tenn., businessmen David Dunavant and Ronald Coleman, joined the Sonco lawsuit, saying they each lost $100,000 on movie deals. Dunavant, 53, said in a court filing that he told Saxon his money had been “earmarked for the treatment and education of my son who suffers from autism.”

Said Dunavant in an interview: “I thought it would be useful and good to be involved with something that could provide benefits to the Palmer Home as well as make movies that are inspiring to families. I knew little about the movie business, being from Memphis. I did what I thought was a lot of due diligence.”

Walker hopes the lawsuits against Saxon actually might have a beneficial effect, stirring fresh interest in “Miracle at Palmer Home” and bringing forth new backers.

Evans said he was hopeful if new money could be found that cameras could be rolling before the end of the year, with some “Palmer Home” scenes to be shot at the orphanage itself.

“I’m an eternal optimist,” Walker said. “I think this will ultimately be a good thing for the movie and for Palmer Home.”

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