June was a revelation in more ways than one. Frank’s German broker was about to change our lives, and once that knowledge started to flow into our minds, there was no going back. It started with a letter to John Waterman, our second proposed Managing Producer for THE DANGER CLUB, from Frank Cmero concerning his broker in Germany.
I do not have an investor. On our end are European banks, usually Deutsche or UBS. I am looking for an investor with 5% of our project cost or at least $1 million. After I receive proof of funds the bank will send complete information on available investment programs. The investor's money is deposited in the bank in an account under his name and is blocked for the period of the investment program (12 months). The bank opens a credit line against the deposit and uses this in investments. The profit is released monthly and is used to finance the project. Once the investment program is finished the investor can take his initial deposit plus 10% interest. I have attached info how the investment programs work. After we receive an offer from the bank your investor can talk to the bank or meet them face to face to discuss the whole deal. If you have any questions please let me know.
The programs run usually for 10 -12 months. It means after this period, when the program finishes the investor can take the money back. The investor has a contract with the bank and can verify all the information before he signs. He can communicate with the bank manager responsible for the program and meet him in Germany or Switzerland to be sure everything is OK. The programs are organized only by the top 10 European banks. After we confirm we have funds available the broker in Germany contacts the bank and send us all information about available programs including contact details to the bank manager so you can verify everything before making any commitment.
I couldn’t actually believe I had read that right, so I sent this back to Frank: Wait...that much money can't be generated from the investment of 2 million dollars. Breaking down 46 million for 10 months would be 4.6 million a month...wouldn't it???
We limped on into July; it would be another month or so before Frank actually explained his German funding program to us, and then it would be quite a revelation. No Gene as of the end of the first week of July, then a note from Chris Staser, who was back home in Salt Lake City, saying that Gene would like a phone meeting the following day, the 8th. I wasn’t on that call, but Chris Staser thought it went well. Turned out later he didn’t really know much at all...
Frank’s people in Germany were waiting for POF from Gene. July 10th (my birthday) I actually spoke to Gene Fowler.
Gene just telephoned me to say he is sending me the proof of funds documents tonight and he wants me to send them to Frank (why? no idea) so I will try to send it tonight no matter how late it is. He's going to telephone me tomorrow morning to be sure I got them and sent them on. He did mention that his group wanted to meet the bank reps here in the states and I told him Frank had told me yesterday that this would be possible.
More news later!
Frank received the POF from me that evening, but when he opened it, it was dated for September of 2008, eight months earlier. Frank it still might work, but he needed a couple more documents, asked for them and once again we were waiting. It turned out that Gene’s supposed investor was named Abel and lived in Texas. Frank needed an information sheet filled out on Abel which Gene then claimed could be an identify theft scheme because it required a copy of Abel’s passport photo. He insisted that the information sheet should be between the bank and the investor alone.
Gene telephoned Chris on the 14th and asked to speak to me as well. That same day I wrote this letter:
Dear Film team;
We are actually making some progress toward the funding of THE DANGER CLUB and GO WEST, YOU IDIOT!. Gene Fowler and his business partner Scott (? -- I know he told me his last name, but he was talking about a lot, that day. There was mention that they provided funding for The 300, The Hangover and The Teenage Mutant Ninja Turtles new version) have provided their proof of funds to the German bank consortium, and now there is an application sheet for them to complete. Gene wants it sent directly to the bank, and I'm going to be talking to him today, so hopefully Frank C can arrange this today. I will be speaking to Gene and Christopher later today; the bank consortium will be sending their rep here to sign the agreement, so the investors won't have to go to Frankfurt.
So hopefully soon we can move forward. Thank you so much for your patience, hard work and enthusiasm for our scripts.
Blessed Be, Debora Hill
Frank sent this letter to Gene the same day:
Dear Gene and Chris,
The German broker is asking for this information because he wants to sign a contract with the investor regarding his commission. He knows once he gives direct contact then he might be left out and he will lose his commission. If you wish you can verify this by contacting him directly.
I have had a contract with him since 2007, so if you don't want to release any further information we have the following option. The investment program will be under my name but you can control the whole process. The German broker will confirm date of the meeting with his associates in the US. You discuss all the details and when you feel comfortable you give us the green light to proceed. Of course we will need a contract between myself and the investor so you can control the funds distribution. I am not sure you want to proceed this way.
Please let me know how to move from here.
This was our first introduction to Kurt Jung, the German private-placement-programs broker who would become an important part of our team long after Gene Fowler had ridden off into the sunset on his broken-down mule. Gene arranged for a conference call on the 15th at 6 pm. Everything broke down when the bank refused to accept a POF dated 10 months earlier.
Gene Fowler tried to tell us he had been fooled himself by this mysterious investor named ‘Abel’, and would no longer be working with him. When August started Chris was trying to interest another investor named ‘Brad’ (this whole cloak of secrecy crap was getting old) in working with us, and Gene brought in someone in Florida named Christopher J. Smith. More importantly, we met Kurt Jung’s U.S. business partner, Steve Glanz, but only through an almost miraculous coincidence in circumstances.
Kurt Jung sent me the contact information for Steve Glanz, but he didn’t communicate with me at all, and we were beginning to give up hope when he called me on August 11th. He had been reluctant to work with anyone who wasn’t an actual investor, then he realized we lived about 45 minutes apart – he was in Marin. So we arranged to have lunch with Steve and his fiancee Adriana the next day in Santa Rosa.
We were lucky the five of us hit it off tremendously, almost immediately. They were definitely our kind of people – if not Neo-Pagans then the next best thing (Searching Spiritualists who had abandoned Christianity) and while we were waiting for lunch Steve spoke to Chris Staser and Gene Fowler. After this was quickly decided to work with Steve, and the next week or so was spent attempting to work out templates for Joint Venture Agreements with the potential investors.
On August 8th Steve G had his first phone conference with Chris Staser, Gene Fowler and a representative for their investor Christopher J. Smith. As Steve mentioned in one of his notes to me, it was very difficult to work with a group of people rather than one-on-one with the investor, a problem that continued to plague us long after this promising start.
August 8, 2009
They called me five minutes after the meeting started to join the group. Chris Smith wasn't on, his assistant was. Steve Glanz is sending Chris Smith the paperwork today; Gene doesn't really believe the plan will work but he's really excited that it might, because it would start paying out in about two weeks rather than 4-6 as with Rob Simpson's plans. And if Chris leaves the seed money invested it can continue after the first two films into the third, and Gene can start his animation studio.
I will be drawing up the Join Venture agreement tomorrow and Gene will sign it Monday; there will be another phone conference on Monday with Chris Smith definitely this time, at 6:30 our time if you want to join in. Fortunately one of the people involved in the plan works for Goldman/Sachs, and Chris Smith used to work for Goldman Sachs.
August was also the month we worked out our Joint Venture agreement with Frank Cmero, in the event he was able to become our investor. We didn’t have a lot of faith in that possibility given our history, but we now understood a lot more his problems in the past – there seemed to be unscrupulous lenders, investors and scammers under every rock. Over the next year we would meet most of them.
August 9, 2009
I am waiting to hear from Richard Dubin; I wanted his input on your future credits and fees. I don't make all the decisions; I've never made a decision on my own regarding Go West. We don't even know if there will be funds available to us beyond GW and DC -- beyond the budgets for the two films, the future profits from the program revert to Christopher J. Smith -- we will be able to apply for the funding for future films, DON'T BREATHE among them -- but he will have the ultimate say who gets future funds. Gene also wants funding for his animation studio and Chris for his film Sangre.
We will own the films, so any profits made on the films will be ours, and we own those between us -- the four of us for Go West and three of us for DC. If Christopher Smith funds more of our films from this program, and it has already been discussed as Gene wants him to, then there will be more fees and points and such. But that is in no way assured at this point.
A slightly awkward situation was raised in August, not having to do with the financing of the film fund. Christopher Staser asked me to read his script SANGRE (blood in Spanish). After reading the synopsis I really did not want to read the script – I could already tell it wasn’t something I would ever watch. But trying to get out of it by claiming conflict of interest didn’t wash, so he sent it to me.
We started to understand that very few people in the world knew about, much less understood, the kinds of programs Steve offered. He wrote me this letter on the 11th:
I heard from Mike Dunn. He is too busy to talk, just sent me a cursory email asking for bank contacts, etc. He obviously doesn't have a clue. I answered him as thoroughly as possible by email. He wouldn't give me his phone number.
For people like this who only know conventional financing, the educational process is a long learning curve. I used to do client education on the general field of bank debenture trading, but it's so tedious that I stopped doing it. My focus has been on direct investors who are already familiar with the business. I have some educational documents on my computer somewhere, but can't locate them for now.
You gave me a hard copy of a document that's not bad. Can you send it to me as an electronic file? I asked Kurt Jung - he knows nothing about that document. I want to send it to Mike.
The problem with all these investors is that they are clueless about our business, surrounded by gatekeepers, and too busy to talk. They tend to pick apart emails that I carefully and laboriously put together, after doing much research on their behalf. If they find one word in an email they don't like, all the usual "objections" go up, and thus they miss their opportunity of a lifetime, rather than engage in dialogue to answer their questions.
I'm not giving up. Maybe Chris Smith will contact me. Maybe Mike Dunn will turn it around. Frank has contacted a couple other people who know investors, but who also probably don't know understand creative financing. Let's keep up the pressure and see what happens.
Naturally, Chris Staser’s people couldn’t get themselves off their asses in time to take advantage of what had to be the best CMBS (Collateralized Mortgage Backed Securities) that would probably ever come our way. It closed, but it might open again in September. And...it might not.
On the 12th Frank sent Gene Fowler another funding possibility.
I would like to offer another option to finance our film projects. It is possible to receive no-payback loan against financial instruments (SBLC, BG, MTN etc). The "loan" is 90% of the instrument face value. In our case if we lease SBLC with the face value of $80 million we receive 90% or $72 million as a loan. The projects cost is $46 m what leaves $13.4 m for the investor as a profit after all fees are paid. Obviously more profit for the investor can be achieved if SBLC of higher value is leased. The leasing fee is 15% pa but it is possible to pay in escrow only 3% initially, the balance can be paid 10 days after the instrument is delivered.
Because the loan is paid in 3 days the remaining leasing fee can be paid from the loan. If we lease SBLC worth $80 m than we need to come with $2.4 m initially (3%). If investor's bank is in top 25 banks then the leasing of SBLC (or other instrument) can be organized there what would make few things much easier. If not then the deal can be organized by a Gibraltar based company. Please check the following website http://www.tradetaxfree.com/
I have also attached information on the procedure. Please let me know if this is workable option.
During August we were mainly working out the percentages we would offer a seed investor – percentage of the program profits (at least 50%), and equity in the films. The latter was never really worked out during that period, although there were suggestions made from 5-20%. It all turned out to be individual, based on the potential investors involved. But we didn’t actually have any viable investors at that time –- all of Chris Staser’s leads proved to be useless, and because he didn’t want to offend anyone or move on in case they might be of use to him at a later date, it all just sort of ran down.
Here's a question for you. I have a feeling Gene Fowler and Chris Smith are going to try to bypass us to you and use the fund for their own projects without funding ours first. Why do I feel this? Perhaps I've met too many assholes in this business; they're around every corner. Or...perhaps it's because Gene asked me to draw up the Joint Venture Agreement two weeks ago and has ignored it ever since. Or perhaps it's because when Christopher Staser called me on Friday I asked him flat out if Chris Smith was still going to be our seed investor and he said, "Oh, he and Gene are very interested in Steve's program".
So...what does that sound like to you?
Sincerely, Debora Hill
Good questions. We are all essentially finders, even though we go by different names: broker, intermediary, dealmaker, etc. Unlike licensed brokers, there is no enforced infrastructure in place for brokerage fees. Therefore, we use various types of legal documents like Fee Protection Agreements, Non-Circumvention Agreements, and the like. These are legally enforceable, even though enforcement can be challenging should someone default. Lodging FPA's with the Bank, including Pay Orders is one way. A shared Paymaster is another way.
Generally, these agreements aren't engaged until there is a real deal being discussed with real interest, as it tends to be an unnecessary effort. So far, we are not even to square one. However, some parties prefer getting such agreements in place up front, especially if there have been no phone/email introductions, or if the trust level isn't there. I will leave that to your discretion.
With regard to your comments, here is how I read the situation. Gene seems like a busy guy. When he saw that Chris Smith was not ready to move, he probably got distracted. If they do decide to pursue this seriously, I predict he will take the initiative to follow up on your JV Agreement. But just in case, you could remind him about it, now or later.
Please know that in all of my correspondences with Mike Dunn, Gene Fowler, Carlos, Staser, etc. - I always mention your name and remind them that they are obligated to fund your project from their proceeds, as that was how the introduction came about. Mike specifically asked me how that would take place, and I told him he would have to work out the JV Agreement with you. If they decide to work with me to fund additional projects, I'm open to that. However, I would remind them that yours comes first. Furthermore, if I do any additional business with them, you earn a referral fee. In essence, you are then a "broker."
Business people can be assholes, but the assholes don't stay in business very long. World gets around. It is in everyone's best interest to maintain ethics, and I believe these people will, or they would not still be in business.
As to Gene and Chris Smith being interested in my program, I'll believe it when I see it.
August 18, 2009
Chris Staser telephoned me tonight; he has been busy with something else the last couple of days. He finally admitted it's not Christopher Smith who won't be ready to enter the program until September 8th, it's Gene Fowler. He and some other people in Los Angeles are working on another investment for Smith, and Gene refuses to put his energy into ours until that one is finished. I feel better about it, knowing it's not Smith. Now I hate Gene Fowler, but there you are...
I already addressed that concern with Steve; I am going to forward you the letter he wrote to me yesterday; I thought I already had cc'd you on that.
Steve mentioned that you wanted a comprehensive explanation for some people in Prague, and said this morning he would be sending it to you.
Towards the end of August something happened with Mike Dunn that scared him off, which made him a pretty big wuss in my opinion. He wrote to Frank and then Frank blamed me, and then Steve tried to straighten out but it was never really accomplished. We never knew what it was, because like a lot of people who have had success in the film industry, Dunn didn’t want to admit there might be something he didn’t know about or fully comprehend. He would rather retreat than admit that, so we lost him.
August 24, 2009
OK, here's what's happening -- I finally got Christopher Staser to admit that Christopher Smith had not problem with entering the program this month -- Gene Fowler basically works for Smith, and said he couldn't get the paperwork together until after Labor Day because he is working on another big investment for Smith this month with some people in L.A. Steve Glanz, the broker, was understandable irritated, particularly after he got Gene an extension for this month. I'm beginning to really not like Gene, but I guess I don't have to.
Tom Krejci has a contact in Prague who is retired (and in his late 80's, I believe) and is bored and interested in getting involved in film again -- he produced the early Pink Panther and James Bond films. Steve has sent him all the info and Krejci is meeting with him this week; don't think there's a chance he'd get in before Labor Day either, though.
And Mike Dunn at Universal has been corresponding pretty heavily with Steve; don't know where that's going. Basically it looks like we can get funded in September; that's what everyone is saying, anyway. At least this program only takes two weeks to start getting the funding, once all the paperwork and contracts are signed -- that's where we're falling down right now.
The last week of August Chris Staser came in with a new possible investor named Brad. No last name, just Brad. Apparently Chris (or Brad, probably) thought this guy was so well-known we’d recognize his name if we heard it. Childish, yes. But I was starting to realize that an awful lot of these people were quite childish.
On Tuesday Chris Staser telephoned me -- he had a call from a new potential seed investor who was ready to speak to Steve immediately, that day, but it was already 4 pm when Chris telephoned me to approve his calling Steve, then he called Gene for his approval (don't ask, he apparently needs a lot of approval at this stage) so he was unable to get Steve right away.
Anyway, he couldn't get Brad yesterday but he's trying to get it
set up for today. Brad has no intermediaries like Chris Smith and said he would be ready to go immediately; I think we're going to be sending him the scripts and proposals today; waiting for word from Chris.
I haven't heard anymore about Mike Dunn; Steve said the last time he talked to him he left it that Mike should now telephone him when and if he's ready to proceed.
Gene is still saying he and Chris Smith will be ready to enter the program on September 8th, but I think he's really hoping we'll get another seed investor for our program first, so he can just ride in on our coattails and get his own program going without including our scripts. The good news there is that if we can do that, Steve will insist on a fee for Lost Myths Ink (any fees in that direction would be split between Deb, Sand, Scott and Frank).
Is there a report on Norbert Auerbach?
I am talking to some other investors as well and was in touch with people I was importing busses from South Korea in the past. They are from very rich Korean families and should know their decision next week. Give them a call Monday. I was talking also to some investors here in Perth & Sydney and I am meeting one of them later today. Tom K promised to call Steve this week but he's moving with Norbert Auerbach very slowly. I give him a call today. Mike Dunn is asking me for references what is kind of impossible because the investor has to sign confidentiality agreement and people I know done the programs with other platform and brokers. I encouraged him to send the compliancy documents to Steve and then do the due diligence on the platform but I am not sure he will do it. He is not really convinced. I'll be in touch after today's meeting.
I had a good meeting with the investor. I met him for the first time but I negotiated with his associates for some time regarding a couple of projects in Europe. After explaining to him how the programs work he agreed to send the compliance documents & POF to Steve and would like to enter the program commencing 10th of September. A short time ago I emailed him the documents and JV agreement. I also sent an email to Steve informing him about the meeting and the investor would like to talk to him tomorrow.
Because it looks like Mr. Smith or the new investor Chris found will enter the program as well we can use the guy I met today as a backup. We can not give the trading platform 2 investors for the same project so I signed an agreement with him on my project in Slovakia and if for some reason Smith will not invest we can use this investor for the film projects. I would prefer to finance the film projects first. The Slovak project can wait. They need me for their projects in Europe and I should have no problem negotiating with them if necessary. It looks like we will finally move next month.
Steve telephoned me this morning and talked to me about this. He feels that it must be Lost Myths Ink where the money is received, but -- you should be made an equal overseer of the fund. That way we can draw the film money first, as you suggested and then you can draw for the Slovakian project. After that, we can do the 50-50 split as arranged in the JV agreement, and you would be in charge of 50% and we would be in charge of 50%.
But, we don't know what you put in the JV agreement to tailor it to your investor. Have you already sent a signed copy to Steve? He feels that this is the way it needs to work.
Please let me clarify one thing. The film projects we need to finance are not JUST Debora's. I am executive producer in Go West and there are 4 of us who own the project. I believe Danger Club is owned by Deb & Sandra, not sure about that. My interest to finance the projects is the same as Debora's or other partners. We have been working on this for 8 years and all of us would like to see it happen. I asked Kurt to help me with the funding in the past and we used all the avenues Kurt has available.
Because I received an email from Deb before yesterday's meeting with Martin indicating that Mr. Smith is ready to proceed after the 8th of September, I didn't discuss the option of film funding with Martin because I was under the impression the profits should be used for the projects and we can not involve more investors with the same project and the platform would accept only one investor for each project. In the Trade Basics you sent us is clearly stated that "All program investments must in principle serve a project financing. Should a client for a small amount not have a project, the program will use its own project, which may cost the client some profits." and I presented it this way to Martin. In case it's not working with Smith, Dunn, or any other investor and Martin is the only investor I am prepared to give the priority to both film projects. It is actually my project as well, so it's in my interest!!
But I can not go back to Martin and change the agreement because he would back off. He also doesn't agree with the 50/50 split as I put it in the agreement. There are more people involved from his side who put the money on the table and want split 30/30/30. His partner called me last night and he was asking for an amendment of the agreement. I don't think this is a problem, we actually get absolutely nothing from Smith, so even this arrangement gives us enough money to finance film projects and my project in Europe.
The other investor with $10 million was introduced by the same person who introduced me to Martin. He was in the meeting yesterday and after that he spoke to some of his own contacts and told me they can invest $10 m. He is also partnered with Martin in his bio-diesel projects in Australia, so everything is interconnected and if we scare Martin then we lose the other investor as well.
The compliance documents, jv agreement, and your info on programs including the Trade Basics are with the investors already and I can't take them back or make amendments that could jeopardize their willingness to invest. I can sign an agreement with Lost Myths that the profits received from the program will be used for Go West & Danger Club first. We will have all very good control about the disbursement because after the first few weeks we can see where the money goes.
It is not in my interest to cause any problems with this because I know it could jeopardize the whole investment and our relationship with the platform if the money is not used as intended. We just need to finally move forward and we have a real chance.
I tried to call you a couple of times and left a message. If you would like to talk please call me. I would appreciate it if you can tell me ASAP how to proceed further because I promised Martin to call him today. He wii be flying back to London in a few days and I don’t have much time.
Don't worry; Steve knows all the details of the ownership of Go west and DC -- he only refers to them as my scripts because it is easier for brevity, I believe. So what you are saying is that the JV agreement is in the name of your company -- if not, then whose? We are willing to sign an agreement with you stating that DC and Go West will be funded first, and that will agreeable, but what happens later? We will also agree to a one-third split, although your 30/30/30 arrangement as outlined below leaves 10%...who gets that?
Go forward with Martin and we will have to get it worked out this weekend -- seriously, unless the four of us can get something signed, Steve won't go forward with this -- I don't know if he will go forward with it anyway, without Lost Myths Ink being the primary. But let's see what we can do.
Debora and Sandra
I will have an agreement to you by Sunday night our time, Monday morning your time. I will draft it tomorrow and send it to Scott tomorrow night for his approval. We'll try to get everything worked out, Steve told me today he will accept this although he doesn't seem too happy about it and he said the money for the films must be transferred to our account as soon as it is received; he will be monitoring that. Other than that, we can agree on the split and we will have a list of four possible future films with estimated budget amounts.
By the last day of August we had all signed the Joint Venture agreement for the four partners of the films.
- Log in to post comments