By all rights the executives at Columbia Pictures Industries, Inc., should be celebrating. Only four years ago the company was on the brink of financial distaster. Debts exceeded $200 million, and independent producers were staying clear of the studio for fear their movies would get caught up in bankruptcy proceedings.
A new management, which took control in 1973, has staged a dramatic turnabout. Debts are down by $145 million and in sight of being paid off entirely. Profits are up handsomely. And this year Columbia hopes to ride the crest of moviedom's current super-blockbuster. "Close Encounters of the Third Kind."
Instead of celebrating, however, Columbia's top management is caught up in its own close encounter - an internal dogfight. The industry is watching in ghoulish fascination for, as one executive describes life in this presure-cooker industry. "It's not enough that your own movie has to succeed-your friend's have to fail."
What has divided the president and the board of Columbia is the recent reinstatement of studio chief David Begelman after an internal investigation disclosed he had obtained by "improper means" more than $60,000 from the company by cashing phony checks issued in the names of actor Cliff Robertson and director Martin Ritt, among others, and sources said, by the establishment of phony bank accounts. Furthermore, the company indicated, he had padded his expense account by $23,200.
In reinstating Begelman, whom many credit with generating the film revenues for Columbia's remarkable turnaround, the company said he was now under psychiatric care for the "emotional problems" which prompted these acts and therefore "his effectiveness as an executive" will not be impaired.
The company thought the matter would be ended with the announcement. But subsequent publicity has generated pressure for action by local law enforcement authorities, who were accused of a cover-up. And last week the Los Angeles County District Attorney said his office was beginning its own criminal investigation.
Begelman, 56, a former agent, was brought into Columbia in 1973 when Allen & Co., a New York investment firm, took control and installed Alan J. Hirschfield, now 42, also from Allen & Co., as president and chief executive officer of the parent company.
Under Begelman, Columbia released a string of profitable hits including "Shampoo," "Funny Lady," "Tommy," "The Front," "Fun With Dick and Jane," "The Deep," and currently "Close Encounters." These have helped Columbia whittle its debt.
Begelman, Yale-educated, last year earned about $500,0000. In salary and bonuses, in addition to executive perquisites including a house in Beverly Hills.
The Begelman case has split the movie community into two camps - supporters who feel he was acting self-destructively because of job pressures and has already suffered enough, and those who believe his return to power effectively condones stealing in a business where allegations of theft and cheating are widespread.
"What this really says to people who have an inclination to do this kind of thing is that it's not so bad, and the higher you are, the easier it is," said one former studio executive who asked not to be identified.
"I don't think the rich should be penalized just because they're rich," countered agent Sue Mengers, a key Begelman supporter and one of the most powerful people in Hollywood by virtue of her client list which includes Barbra Streisand, Burt Reynolds and Ryan O'Neil, among others.
"I've known David Begelman for 15 years," he said, "and I subscribe to the stress theory. When he undertook the task of turning that company around, he was a novice who hadn't run a studio before. Everyone in the industry took for granted that it would be a disaster. He needed to succeed. The energy, the gamble, took its toll on the man."
Although Begelman has paid back Columbia the disputed funds and the company has refused to press charges, last week the Los Angeles district attorney said his office has commenced a criminal investigation.
Earlier probes by the Beverly Hills and Burbank police departments were triggered when actor Robertson discovered his name had been forged on a $10,00 check. But each department said the other had jurisdiction, and they cited the lack of a complaint in the case. Industry sources said the two departments considered the case a hot potato.
Robertson, who discovered the forgery after receiving an Internal Revenue Service form from Columbia when he had not worked for the company in the previous year, went to the Federal Bureau of Investigation when the local police did not move. Lately he has been charging that the lack of any prosecution represents "a cover-up," and that Begelmans' misappropriations are "only the tip of the iceberg" of what goes on in Hollywood.
With the Securities and Exchange Commission and the FBI still looking into the case, there is also concern on the part of film people that the return of David Begelman could focus unwanted publicity on the studios and set off investigations of business practices that over the years have gone largely unscrutinized.
"There has been stealing for years, in the way costs are allocated on a lot of movies", said a top studio executive. "You can't believe what happens in the financing of pictures. Everything from cooks to chauffeurs to trips are hidden in the costs. People decorated their houses. And what happens is that all the profits participants then get cheated."
If you open the dirty laundry bag at most movie studios you'll probably discover things far worse than what David Begelman did," said Hollywood gossip commehan what David Begelman did," said Hollywood gossip commentator Rona Barrett."I know men in this business, and women, who have expense accounts, live completely on these expense accounts, and then pocket their salaries."
The Washington Post conducted two weeks of interviews here and in New York with actors, producers, directors, agents, writers and studio executives. Indicating the sensitive nature of the Begelman affair, many asked that their names not be used. However, it has been possible to reconstruct major elements of the struggle and debate within Columbia over what to do about the studio chief.
Columbia discovered the Begelman defalcations after the Beverly Hills Police department informed the company about its investigation. On Sept. 30 the company stripped Begelman of his jobs as executive vice president and director of the parent company but only put him on a leave of absence as president of the motion picture and television and division - the largest part of the company.
A six-week investigation was begun by an internal audit committee of the board with the assistance of Columbias regular law firm, Weil, Gotshal and Manges. The probe, sources says, exhaustively checked Begelman' personal financial records.
The probe also canvassed more than four years' financial records at the Columbia studio. Within the first few days most of the misappropriations were discovered, including a $5,000 check using the name of director Martin Ritts, and a $25,000 check on an unidentified third party who is not in the movie business.
"He left a paper trail that any 10-year-old could follow," said one source familiar with the investigation.
Hirschfield, president of the parent company, is known to have opposed the return of Begelman even before the final report was in. And the board had indicated it would be up to him to decide what should finally be done.
After the investigation report came in, Hirschfield tried to sever Begelman as head of the studio. But to retain his acknowledged talent for packaging and picking hit movies, he offered to establish a producer-consulting relationship with Begelman and provide him with a settlement worth approximately $1 million.
But Hirschfield was overruled by the board of directors, dominated by Allen & Co. president Herbet A. Allen and by Matthew B. Rosenhaus, Columbia's largest shareholder and vice chairman of Nabisco, who together represent about 15 per cent of Columbia shares.
Sources say Hirschfield was reminded of the personal debt he owed to Allen & Co. for his job, was threatened with losing his own position if he did not take Begelman back, and remains in considerable jeopardy because he has lost the confidence of of the board.
Allen and Rosenhaus are both saying Hirschfield was mainly interested in grabbing more personal power by getting rid of Begelman and taking over the studio himself. And the two company directors have expressed dismay that Hirschfield did not show more sympathy when his old friend Begelman got into trouble.
"No one would have expected Hirschfield to cover up," said an individual familiar with the situation. "But at least he could have seen the situation in a favorable light rather than an unfavorable light. People were disappointed that Hirschfield didn't act as if they were close personal friends."
Supporters of Hirschfield, whose contract expires this year, claim that he was acting on both moral and pragmatic business grounds, feeling that to reinstate Begelman in a position of executive responsibility after he committed what were clearly improper acts would tarnish the company in the eyes of the business and financial community and produce lasting damage among investors.
Meanwhile, sources say, an orchestrated lobbying campaign was conducted on Begelman's behalf, spearheaded by producer Ray Stark, who helped install Begelman in the first place, and agent Mengers. Threats were allegedly made by Stark and some stars to boycott Columbia if Begelman did not get his job back.
Stark is considered the "eminence grise" of Columbia, an extremely successful producer who continued to make films at the studio in the years when others stayed away. Stark hits like "Funny Lady" and "The Way We Were" helped Columbia in its direst period. Stark owns an estimated 100,000 Columbia shares - about 1 per cent of the company - and the studio, sources say, owes him several million dollars. Stark was supposedly shopping other studios for future projects to show how serious he was about not doing further films at Columbia, where he now has several features in the works including "Cheap Detective," a Neil Simon comedy, and "Casey's Shadow," a movie about horse racing directed by Martin Ritt.
Stark, who says he "recommended" Begelman to Columbia in the first place and also urged Allen & Co. to invest in the company, says Begelman was taken back because "he's the best piece of manpower that could be available."
Some see an unholy alliance between Stark and Begelman. "If you're responsible for getting someone his job, then he's beholden to you - just like it is in the government," said one Hollywood insider. Other say, however, that Stark is so successful that any studio would beg to distribute his movies, and that he doesn't need Columbia.
Begelman declined to be interviewed or to return calls from Washington Post reporters.
But in an interview in New York Magazine, Begelman was quoted as saying that his "misdeeds, my misappropriations of funds" were "aberrational, bearing no sense to reality. I had neurotic displays of self-destructiveness. While everyone considered me very successful, apparently subconsciously I didn't have the same high regard for myself. Therefore I was determined to do something that, if it didn't destroy me, would hurt me badly."
Whether Begelman's misappropriations are "tip of the iceberg" is difficult to answer. Most observers subscribe to the personal-aberrations view. Intereatingly, one of the excuses heard most frequently for Begelman is the relatively sums involved.
"If he had really wanted to steal, there are better ways to go about it and he could have gotten a lot more money," said one actor in a typical comment.
Columbia executives say that they feel sure their investigation discovered all of Begelman's misdeeds and that they do not expect any new revelations.
"We became convinced that this was a mental problem that could be dealt with, not a problem with a thief," said Columbia board member Allen.
However, sources say that "more was involved" than just the $61,000, that some of it "was not exactly stealing," and that the way Begelman billed Columbia for the installation of an expensive screening room in his home is still being disputed.
Meanwhile, Hirschfield and Begelman remain in their jobs. Hirschfield, on a trip last week from New York headquarters, was seen having dinner with Begelman at the Beverly Hills Hotel, the two warmly arm in arm in what was interpreted as a public display of how everything had smoothed over and they could both ride out the storm. Hirschfield is said to maintain more cordial relations with Begelman than with the rest of Columbia's board.
Wall Street isn't satisfied. "A piece of the puzzle has not been aired yet," said Anthony M. Hoffman, enterainment analyst with Bache Halsey Stuart Shields Inc. "To say it's just emotional problems is a general comment about a specific event. Sure there is an event that made Begelman feel he needed money, and what it is I don't know. Neither the company or Begelman has said anything about it.
"Nothing is going to quiet things down until final revelations are made. It is going to come out sooner or later. But if they let it go on festering it will turn out worse than it really is." CAPTION: Picture, The name of director Martin Ritt was used on a check $5,000. By Ken Feil - The Washington Post