What did Vestron do with its "Dirty Dancing" earnings? -- Part 5

Continued from Part 4.

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Fries Entertainment was an independent movie company that existed during approximately the same years as Vestron and that likewise went bankrupt. The bankruptcy of Fries Entertainment is told in an article written by John Lippman and published by The Los Angeles Times in late 1991.The article includes the following passages.

.... Escalating salaries, perks and nepotism flourished despite mounting financial losses, making Fries Entertainment resemble a family business more than a public company, critics say.

"They ran it like a private company and took huge, huge salaries," says Doug Lowell, an analyst who specializes in following independent production companies ....

The story of Fries Entertainment in many ways exemplifies the plight of small production companies in Hollywood. Squeezed by a highly competitive marketplace increasingly dominated by well-heeled major studios, independents are unable to corral the resources--financing, talent, influence--needed to launch and sustain new TV shows and movies.

Small Hollywood studios were also popular among Wall Street investors in the early to mid-1980s. Seduced by the potential for big profits, a crop of entrepreneur-driven firms like Fries went public -- among them Vestron, Heritage and DeLaurentis. Many collapsed or were swallowed by larger studios.

[The corporation's chairman Charles "Chuck"] Fries (pronounced "freeze") denies that he mismanaged the company and says he suffered along with the other shareholders. "My family lost $25 million worth of shares," the 63-year-old producer says. "So I'm just as unhappy as everyone else is here." ....

Fries lives like a mogul: He drives a Rolls Royce, is renovating a $5.6-million, 15-room Beverly Hills mansion, belongs to the swank Bel Air Country Club and was even the subject of a puffy profile on Lifestyles of the Rich and Famous. ....

But the firm's performance has been anything but stellar. It has lost money four of the past five years. Its stock price has plunged 98% from its peak in 1986. Upon going public, a string of misfired ventures put Fries Entertainment on a financially treacherous path. ...

During the past seven years, Fries Entertainment has burned up the original $7.7 million in equity it raised from its public offering, $30 million in convertible bonds and a $26.5-million bank loan. Additionally, it owes at least $4.1 million to a British film financing company, according to company financial reports. ....

Fries went into the movie business in 1985 and launched a home video operation in 1987. He concentrated on low- to medium-budget action films that were designed to play well in the overseas and home video markets. The company became known for punching out films with appeal to teens, such as Thrashin', billed as a "skateboard romance," and Phantom of the Mall. ....

During the past several years, Fries's second wife, Ava Ostern Fries, has had a highly visible presence at the company. Fries made a series of lucrative deals with her production company, Avanti Productions. Since 1988, Fries Entertainment has paid Avanti $192,500 in fees for developing movies and TV shows, according to the company's proxy statements. Ava Fries, a onetime commercial and TV actress, is also provided an office and secretary.

Charles Fries says the production fees collected by Avanti were to pay for his wife's development executive and secretary. ... The only show Avanti developed for Fries Entertainment that got on the air was Born Famous, a series of 1987 specials hosted by Meredith MacRae about celebrity parents and their kids. Separately, in 1989, Fries Entertainment paid Avanti $370,500 for his wife's "personal life story" and for other production services, according to company proxy reports. ...

Even as Fries Entertainment's financial problems mounted, the company continued to employ family members on generous terms.

Fries' eldest son, Charles W. (Butch) Fries, who until recently was executive vice president, earned a salary that rose to $359,459 last year from $79,835 in 1983. His pay was rolled back, however, by one-third to a base of $250,000 as part of a new three-year contract as a producer and administrative executive. Two other sons were on the payroll in lower executive positions, although one recently left as part of staff cutbacks.

Fries defends hiring family members and says nepotism has been commonplace at major studios since Hollywood's earliest days. Although he concedes that the practice "generates attitudes" among critics, Fries insists that his family members are "capable" and have "pulled their weight."

As for Fries himself, his salary grew to $935,994 in 1991 from $356,260 in 1983, helped along by automatic annual $50,000 raises, according to proxy statements. ....

Yet, despite the worsening financial situation, Fries did not have his perks cut back. According to proxy reports, his firm is paying $122,000 to install and equip a private screening room, security system and phone system at his new Beverly Hills home. .... The company also provides him with a life insurance policy and helps pays for a limousine and "another prestige car" every other year. These "additional benefits" cost $88,000 in 1991 and $83,400 in 1990. ....

In her 1984 lawsuit, Carol Fries alleged that the public offering documents did not fully disclose the company's operations. For example, she said Fries Entertainment owned a Haagen-Dazs ice cream franchise in Westlake Village, an enterprise that she maintained had no other value than to employ their daughter and son-in-law. ...

I do not know whether Vestron had similar problems with nepotism and extravagance -- which are common temptations.

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Below are five more movies that Vestron co-produced on its way to bankruptcy. (The date after the movie's title is the movie's release date.)

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Midnight Crossing -- November 11, 1988

A group of adventurers sneak into Cuba to try to recover $1 million in cash that when hidden when Fidel Castro took over in 1959. They find themselves trying to avoid detection by Cuban authorities while also battling modern-day pirates who are also after the treasure.

The movie cost $5 million to make and earned $1.3 at the box office.

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Amsterdamned -- November 1988

A hard-boiled police detective sets out to capture a gruesome serial killer terrorizing the canals of Amsterdam.

I did not find the movie's cost. Vestron shared only in the US box office's earnings, which were $98,000.

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Burning Secret -- December 23, 1988

An American diplomat's 12-year-old son befriends a mysterious baron while staying at an Austrian spa during the 1920s. Soon the baron begins to flirt with the boy's mother. The boy's jealousy becomes uncontrollable.

I did not find the movie's cost. Vestron would earn money only from the US box office, but the movie was released only in Germany, where it earned $172,000 at the box office.

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Parents -- January 27, 1989

A young boy living in 1950s suburbia suspects his parents are cannibalistic murderers.

The movie cost $3 million to make and earned $870,000 at the box office.

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Dream a Little Dream -- March 3, 1989

An accident puts the consciousness of an elderly dream researcher into the body of a bratty teenager.

I did not find the movie's cost. The movie earned $5.6 million at the box office.

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Continued in Part 6