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Fraud Is Alleged in CBS Deal : Entertainment: The cancellation of a TV pilot was part of an effort to conceal payments made to bring an executive aboard, a lawsuit says.

October 12, 1992|ROBERT W. WELKOS and ALAN CITRON | TIMES STAFF WRITERS

A long-running lawsuit involving some of Hollywood's most powerful players has led to accusations that CBS committed fraud when it hired entertainment President Jeff Sagansky.

The Los Angeles Superior Court case, set for a hearing today, alleges that CBS abruptly canceled a television pilot called "Triangle" in 1989 as part of an elaborate scheme to conceal payments made in connection with bringing Sagansky on board at the network.

Sagansky was chairman of TriStar Pictures at the time. The suit contends that CBS approached TriStar's sister company, Columbia Pictures Television, with an offer to buy out Sagansky's contract in the guise of a cancellation fee for "Triangle."

In return for accepting the arrangement, Columbia was to receive future series commitments from CBS, the suit alleges.

CBS calls the allegations "wild" and "untrue." At Sony Pictures Entertainment, the parent company of TriStar and Columbia, a spokesman said the company has a policy against commenting on pending litigation.

The case was brought by Philip L. DeGuere Jr., who produced the hit TV series "Simon & Simon" before making "Triangle" for CBS. DeGuere maintains that the defendants defrauded him of more than $900,000 in the "Triangle" deal.

The suit has rattled Hollywood because of assertions that a handful of powerful figures often work in collusion in determining what movies and television shows are made.

DeGuere's attorney, Joseph A. Yanny, has submitted to the court a CBS memo that supposedly spells out how network executives masterminded a scheme to hide from stockholders the cost of buying out Sagansky's TriStar contract.

The 1990 memo from CBS executive Layne Britton says CBS will cover cancellation costs of up to $2 million for "Triangle," and that the money will include funds due to Columbia "for the failure of this series as a part of the Jeff Sagansky agreement."

As if to clarify his point, Britton adds: "When I say the Jeff Sagansky agreement, I mean the agreement entered between CBS and Columbia that provided for the release of Jeff Sagansky from his TriStar deal to come work for CBS."

The one-page memo is part of a voluminous court file assembled by Yanny, who has been fighting to gain access to other CBS and Columbia correspondence.

DeGuere's former attorneys, the Century City firm of Ziffren, Brittenham & Branca, are also defendants in the case. DeGuere contends that the Ziffren firm failed to represent his interests in negotiations over "Triangle" because of conflicting business dealings with Columbia and CBS. The firm has denied any wrongdoing.

At today's hearing, a court-appointed referee will be asked to decide whether Columbia and CBS must produce all documents, including drafts, notes and other correspondence, regarding the so-called Sagansky agreement.

Sagansky declined to comment on the allegations, but in a deposition taken in connection with the case he seemed to allude to a possible connection between "Triangle" and his deal to leave TriStar.

"When did you become aware of Mr. DeGuere's project 'Triangle?' " Sagansky was asked.

"During the negotiations to get me out of Columbia," Sagansky replied.

"And how did you become aware of that?"

"It was, I thought, part of the understanding of my getting out."

Both sides in the suit have agreed to place certain documents under seal to protect corporate trade secrets and other "confidential or proprietary information."

"It's unfortunate that these people have seen to it that the file is sealed, but I think the Layne Britton memo says it all," Yanny said. "The failure of DeGuere's series was part of the Sagansky agreement . . . What happened to DeGuere is no more than business as usual in this town."

The suit argues that DeGuere's problems began when CBS paid Columbia a premium price for "The Young and the Restless," a popular soap opera that was vital to the network's daytime ratings. As a result, CBS was forced to cut development of new shows, including "Triangle."

What DeGuere did not know, according to the suit, was that his attorneys represented Columbia Pictures Television on behalf of "The Young and the Restless" at the same time they represented him in his dealings with CBS.

"The Young and the Restless" was so important to Columbia that the studio brought in Kenneth Ziffren personally to handle the negotiations with CBS. The resulting deal created "bad feelings" between Columbia and CBS, according to a deposition by Gary Lieberthal, former chairman of Columbia television.

Meanwhile, another deal was cooking involving Ziffren. The court documents suggest that CBS Chairman Lawrence Tisch had consulted with Ziffren about Sagansky taking over the presidency of CBS Entertainment.

According to Yanny, a curious thing then took place with the Columbia/CBS contract on "Triangle." Under the original contract, CBS could have canceled the program without incurring a large cancellation fee.

"It was only when they decided Sagansky would make the move to CBS and would have to get out of his (Tri-Star) contract was the agreement amended to provide for a $2-million cancellation fee," Yanny said.

Dennis M. Perluss, who represents the Ziffren firm, says Yanny's allegations are groundless.

"There was nothing about the hiring of Sagansky that led Columbia to want to cancel Triangle," Perluss said. "Both parties wanted the show to be successful."

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