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Plans for Movie Complex at Mall End Bitterly : Lawsuit: A much-heralded venture between AMC Theaters and a nonprofit group disintegrates into litigation. Meanwhile, Magic Johnson's company plans to go ahead with its own project.

August 29, 1993|SCOTT SHIBUYA BROWN | TIMES STAFF WRITER

CRENSHAW — In the aftermath of the riots, the joint venture formed last September to bring a movie theater complex to the Baldwin Hills Crenshaw Plaza was more than just a deal. It was a hopeful symbol of the city's commitment to rebuild and heal itself.

If all went well, the struggling shopping center at the heart of the West's largest and wealthiest black community would finally have the traffic-generating theater its merchants were crying for. Los Angeles would finally have a choice venue for showing (and premiering) the growing number of movies from black filmmakers.

And just as important, there was a home-grown aspect to the solution: One of the partners in the joint venture was Economic Resources Corp., a local nonprofit company whose top executives were black. "This is going to be a total home run," exulted an executive with the other company in the venture, American Multi-Cinemas, operator of the big AMC theater chain.

Almost exactly one year later, the venture is dead, racked by acrimony and litigation. AMC has sued the nonprofit Economic Resources Corp., alleging misrepresentation and a host of financial misdealings regarding the joint venture, called Inner City Cinemas.

Two weeks ago, the partnership's efforts were rendered superfluous by Magic Johnson, who announced, with the blessing of the Plaza's developers, his intent to bring a theater to the mall. And officials at the Los Angeles Community Redevelopment Agency, who oversaw the development of the shopping mall in the late '80s, refuse to discuss in anything more than general terms the deal they had counted on so heavily just a few months before.

"It's such a touchy situation," said Bill Price of the CRA, which was prepared to contribute $788,000 to the venture before it fell apart. "I can't comment on that."

AMC's attorneys likewise declined to comment on what happened. According to their lawsuit, however, the partnership began to sour within weeks after it commenced. Just 11 days after public announcement of the joint venture, contends the suit, officials at Economic Resources provided the theater chain an unaudited financial statement that misrepresented Economic Resources' assets.

Several weeks later, says the suit, AMC officials learned that Economic Resources, which owned and operated the Baldwin Theatre--until recently the nation's only black-owned movie theater--owed more than $100,000 in overdue film rentals.

The suit also contends that Economic Resources used other joint-venture funds to pay off nearly $80,000 in internal debts, and that the Economic Resources executives named to head the joint venture were incompetent, showed up sporadically for work, and in one instance, ran another business on the side.

Economic Resources executives also refused to comment on the suit. "We don't believe there's any merit in these allegations," said Dutch Ross, president of the 25-year-old company, which is based in Lynwood. "This was a viable business opportunity and this was a joint venture that should have been allowed to go forward."

Ross said last week that Economic Resources filed a cross-complaint to the AMC suit, but he would not disclose its contents, and the complaint has not yet been made public. "This is an issue of litigation so we're not in a position to comment," Ross said.

According to AMC's suit, however, Inner City Cinemas was a veritable bastion of mismanagement. For example, as part of the joint venture agreement, AMC agreed to donate a six-screen theater it owned in the Hawthorne Mall to the venture, while Economic Resources was to contribute the Baldwin Theatre. But in their suit, AMC's attorneys allege that many expenses incurred by the Baldwin Theatre, such as property taxes, fees for security services and workers' insurance premiums, were paid for with Inner City Cinemas money. Meanwhile, rent for the Hawthorne theaters between March and May of this year was unpaid by the joint venture, the suit said.

Such discrepancies went unnoticed because Economic Resources, in its day-to-day operations of the two theater complexes, failed to use AMC's automated accounting system, even though AMC had insisted that the joint venture would use the system, the suit said.

AMC attributes much of the trouble to the Economic Resources executives appointed to manage the joint venture.

Negotiations for the venture began in November, 1991, on the initiative of Ken Lombard, an Economic Resources executive at the time who later became president of Inner City Cinemas. According to the suit, however, Lombard was undermined by the joint venture's chief executive officer, Lance Drummond, whom the suit characterizes as someone with, "no background in the operation of movie theaters and . . . a limited understanding of the theater business."

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