By the end of 2006, every major studio had lined up private equity backers for at least one package of films.
Paramount Pictures financed a slate with Merrill Lynch & Co. that included "Mission: Impossible II" and a second slate covering such films as "Flags of Our Fathers" with Dresdner Kleinwort & Co. Walt Disney Co. turned to Credit Suisse First Boston to find investors for a package that included the Jodie Foster thriller "Flightplan."
For The Record
Los Angeles Times Wednesday, March 19, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 63 words Type of Material: Correction
Studio financing: An article in Section A on Feb. 16 about hedge-fund financing of Hollywood movies said studio projections for films in an investment pool known as Gun Hill Road I indicated that "Doom," "The Holiday" and "Stranger Than Fiction" might lose a combined $100 million over seven to 10 years. The projected losses for those three films are actually about $84 million.
For The Record
Los Angeles Times Friday, March 21, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 45 words Type of Material: Correction
Studio financing: An article in Section A on Feb. 16 about hedge-fund financing of Hollywood movies incorrectly identified Och-Ziff Capital Management as an investor in a slate of films known as Gun Hill Road I. Och-Ziff was not an investor in Gun Hill Road I.
Kavanaugh's Relativity Media joined with Deutsche Bank to raise $620 million for the co-financing of movies at Sony Pictures and Universal Studios. The German investment bank also underwrote a $740-million follow-up fund.
Kavanaugh had a curious record for someone attempting to raise hundreds of millions of dollars from investors.
That record involved a Santa Monica venture capital business he operated during the dot-com boom of the late 1990s. A lawyer for Kavanaugh, Alan Harris, said in a letter to The Times that the business was "very successful."
Kavanaugh's own testimony and court filings suggest otherwise. He testified in civil court last month that as of 2002, the business was essentially worthless. Kavanaugh filed documents stating that shares in the start-up companies in which he concentrated his investors' money had no market value by the end of 2002. Kavanaugh testified that at that time he was "all but bankrupt."
Several of Kavanaugh's investors sued, accusing him of fraud, misrepresentation or other wrongdoing. He denied the accusations. At least two of the lawsuits were settled with payments to the plaintiffs and no admission of liability, according to court records and statements by Kavanaugh or his lawyers.
In a third case, an arbitrator ruled in 2002 that Kavanaugh had been "clearly negligent" in managing a $6.2-million investment by Los Angeles public relations executive Michael Sitrick. Kavanaugh was ordered to pay $7.7 million in damages. Sitrick is still trying to collect the judgment.
Kavanaugh's recent testimony about his venture-capital firm was tied to this case. He was trying to show that the business tanked, leaving him unable to pay Sitrick's judgment in 2002. To that end, Kavanaugh testified that he lost more than $730,000 of his own money in options trading after the dot-com crash -- much of it in a single day.
Under cross-examination, Kavanaugh also admitted that he never earned a bachelor's degree from UCLA, despite having claimed for several years that he was a graduate. That claim appeared on offering statements prepared for prospective investors.
