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Producers I Have Known – Pieter Kroonenburg and Gary Howsam

September 3rd, 2012 by David Kronemyer · 4 Comments

One day at a party I ran into this guy Pieter Kroonenburg.  We hit it off right away, maybe it’s because we shared Dutch ancestry (he sometimes spelled his last name Kroonenberg).  Kroonenburg’s partner was a Canadian producer named Gary Howsam.  Their company was called Kingsborough Pictures.  “I’m the senior partner in this relationship,” Kroonenburg was careful to emphasize.  Kroonenburg had been involved with several movies, including The Call of the Wild starring Rutger Hauer.  One of my hobbies at the time was picking up movies that had been foreclosed on by the production lenders.  Typically there wasn’t a lot left in them, they’d been sold for lengthy terms throughout the world (e.g. 25 years per territory), the licensees had paid an upfront advance, they had no intention of paying anything more regardless of what happened, and even if they did it would be too expensive to go audit them to find out what was owed.  So the lender was willing to dump it, frequently for $1,000 or less, they’d already written it off and at this point they just wanted to get it off their books.  So, I was on the mailing lists of banks with films in this predicament.  Imagine my surprise when one of them was Call of the Wild.  I called up Kroonenburg.  “Hey,” I said, “how’d you like to buy back rights to your movie?”  I told him what I’d found.  He seemed hurt and bewildered his bank would do this, especially without telling him.  In any event he had no interest in reacquiring it, and (since the bank was asking too much money), I didn’t either.

At the time I had a large line of credit with J.P. Morgan Chase to supply senior financing of approximately 65% of the final approved budget for qualified productions, primarily using foreign pre-sales and syndicated tax credits as collateral.  “Senior financing” means they recouped their money first, i.e. they were “first out.”  This entailed little risk, as rare is the properly-structured production that doesn’t earn back at least 65% of its budget (sometimes called “negative cost” – not in the sense of being a negative number, but rather referring to the cost of making the film itself, i.e. the “negative” then being the first photographic element in the film reproduction process).  If the commitments weren’t in place, the film wouldn’t qualify under the line of credit.  Goldman Sachs provided mezzanine financing of approximately 30% under the same principles, except it was “second out.”  This money was more expensive since it was riskier, i.e. the film would have to recoup 95% of its budget.  This still was eminently feasible, given the inclusion criteria.  The structure still required an additional 5%, which the producer would have to come up with.  Since it was “last out,” it was the riskiest tranche.  There were a variety of ways to do this, including cash investment, deferring certain fees, and accounting maneuvers like journaling post-production items so they were paid out of net proceeds rather than booked as up-front costs.  A film budget is static and tacitly assumes the entire amount is needed immediately, whereas in fact disbursement of funds can be stretched out over a considerable length of time, during the course of which receipts also come in from pre-sales of rights.  I briefly outlined this procedure for Kroonenburg and he got excited.  “My company has a slate of movies,” he said.  “We have pre-sale commitments for most of them.”  I said, “let’s see what we can do!”  We negotiated and entered into a Co-Production Agreement.

So as not to keep you in suspense, the long and the short of it is that Kroonenburg never could put together the collateral for any of his proposed movies.  I’m sure it wasn’t for lack of trying on his part.  Most film executives spend a lot of time reading scripts, trying to pick out ones they thought would be successful.  For what I was doing at the time, the contents of the script really didn’t matter.  Nor did the writer, nor did the director.  Rather, it was the caliber and quality of the cast attachments.  To a large extent this was a Pareto-optimalized, self-equilibrating process.  The talent wouldn’t be a proponent of the script, unless they thought it was good, or at least plausible.  The regulator of this process was the agent.  Many people think the job of the agent is to find work for the talent.  In fact it’s the exact opposite.  The job of the agent is to prevent the talent from making commitments to do things, especially things they’re interested in doing.  Because that might divert the talent from doing something more remunerating to the agent, or that the agent can package, or do a deal with one of his (her) friend agents so as to build up credits in the favor bank.  Actors shouldn’t have minds of their own, and once they start to think they do, they become un-agentable.  What agents particularly hate is when talent permits their name to be attached to something they like before the financing’s in place.  That way the producer simply will be shopping the talent’s name, rather than the property itself.  Given the way that market works, I’m not sure there’s any other way to move things forward, but the agents still hated it nonetheless.  A lot of times producers say they have talent committed, when in fact they have nothing of the sort.  It would be as much of a surprise to the talent to hear they were involved with the movie as it would be to the financier to find out they weren’t.

I didn’t invent this way of financing movies in the independent film business – Lew Horowitz did.  But, at the time, there was plenty of room for everybody.  I kept doing it until circa 2006, which was the advent of the so-called sub-prime mortgage crisis.  All of a sudden I could see the market starting to get crispy around the edges.  Nothing was in default.  Each production got made; investors knew they would get made, because they were backed by completion bonds.  The portfolio of movies wasn’t at risk, because financing commitments were in place and the entire portfolio was backed by residual value insurance.  Still, the interest rate assumptions were changing.  The market was becoming more hesitant.  The collateral values, and corresponding bankable commitments, just weren’t there any more, at least not commensurate with the bottom-line hard dollar cost to make the movie.  This made it increasingly difficult to qualify productions.  The sub-prime mortgage crisis proved to be just the tip of the market.  It morphed into the full-fledged bank crisis of 2008, which continues to the present day.  And now it’s the Euro under siege.  My point being that none of this could be done now.  I’m glad I got out of it when I was at the top of my game.

Back then, spending anything more than $5 million but less than $75 million on a movie was a real danger zone.  You never would end up with enough collateral to finance the production.  You could end up selling off territories, but then you’d run out of territories, have no rights left to sell, and still need more money – a dilemma I called “progressive de-collateralization.”  I saw it happen in dozens of cases.  Only big studios made expensive movies.  It’s a completely different business that has nothing to do with independent films.  Now, I wouldn’t make a movie for $100,000.  I’m working on several projects with a budget in the $10,000 range, all of which are internet-targeted.  They may make money, maybe not, but the point is I don’t care.  Because, as much as I repudiated this doctrine when financing movies, I now can do what I feel like based on scripts or premises I find appealing.

Last I heard Kroonenburg had entered into an agreement with a gullible Canadian television executive named Daniel L’Heureux.  At the time L’Heureux was President of a company called I Cinema Television Inc., then later a company called I Studio Inc.  Kroonenburg and L’Heureux optioned rights to make a movie based on the life of the dissolute trumpet player Chet Baker, to be funded by Tony Oleshanksy and Bill Bannon.  “Leonardo Decaprio is going to star in it,” Kroonenburg said.  But then he had all kinds of problems getting rights from Baker’s large and fractious set of heirs, all of whom thought it should be worth a million dollars.  I helped him out with contacts and what not, he promised me I’d produce the movie with him, but then one day he mysteriously vanished and I’ve never seen or heard of him since.  This wasn’t the first time I’d encountered the mystery of the disappearing producer, nor would it be the last.  It seems like an odd business practice, to spend a lot of time, energy, attention and effort cultivating a relationship with someone then to just dematerialize.  He had gotten a large settlement for some participation he had in the movie Shakespeare in Love and from what I know retired to watch tennis games, one of his passions.

Howsam’s fate is less pleasant.  In 2010 he was accused of defrauding lenders by using forged distribution agreements.  The prosecutors even had wiretaps.  He was charged criminally, although the prosecutors subsequently dropped the case.  His foreign sales agent, Harel Goldstein, went to jail.  This is something to be avoided.  In January 2011, in an arbitration case (where he evidently didn’t participate), Howsam was ordered to pay $18 million to Comerica Bank, plus interest and legal fees.  Seems unlikely they’ll be able to collect.  I don’t know if Kroonenburg still was in partnership with Howsam at the time or what his involvement was with the case.

I’m not being critical of the fact that not all of the movies on the Kroonenburg/Howsam slate eventually got made.  Independent film producers shouldn’t be in the business of optioning and developing properties.  They only should pay money for an option on the day formal preproduction starts.  Don’t worry, the movie won’t go anywhere else.  Rather, my criticism is the exact reverse: Kroonenburg had built up a lot of momentum to get some of these projects made, but then, for whatever reason, wasn’t able to see it through.  This business takes tenacity.  Unless the titles got changed, here they are:

Absolon, written by Brad Mirman, director t/b/d, to star Christophe Lambert, with a budget of $8 million.  Status: made in 2003, directed by David DeBartolomé, starring Christopher Lambert, Kelly Brook and Lou Diamond Phillips.

Blowing Smoke, written by James Orr and James Cruickshank, to be directed by James Orr, to star Patrick Swayze and Bruce Greenwood, with a budget of $2.8 million.  Status: never made.

Crime Spree, written by Brad Mirman, to be directed by Brad Mirman, to star Christophe Lambert, Jean Renaud and Keifer Sutherland, with a budget of $8 million.  Status: made in 2003, starring Gérard Depardieu, Harvey Keitel and Johnny Hallyday.

Del Rio, Mi Amor, written by Tomas Romero and Dror Soref, to be directed by Dror Soref with Carlos Gallardo, Eva Mendes, Ruben Blades, Elizabeth Pena and Maria Conchita Alonso with a budget of $2.25 million.  Status: never made.

Double Bind, written by Chuck Konzelman and Cary Solomon, to be directed by Chuck Konzelman and Cary Solomon, to star Bridget Fonda and Barry Pepper, with a budget of $6 million.  Status: never made.

Frost and Fire, written by Buz Alexander from the novel by Ray Bradbury, to be directed by Buz Alexander, to star Elijan Wood, with a budget of $8 million.  Status: never made.

Helga, A True Story written by Kit Frewer, Fred Kennedy and Matt Frewer, to be directed by Brenton Spencer, starring Matt Frewer, with a budget of $5 million.  Status: never made.

Mint, written by Agita Fanucci, to be directed by Paul Tarantino, to star Harvey Keitel and Jennifer Tilley, with a budget of $4 million.  Status: never made.

Morgan, written by Alan Moyle, to be directed by Alan Moyle, to star Robert Downey, Jr., with a budget of $10 million.  Status: never made.

Murderer, written by James Deardon, to be directed by James Dearden, starring Gary Oldman, Dan Akroyd, Bob Hoskins, Alicia Silverstone and Julia Ormond, with a budget of $16 million.  Status: never made.

Night Talk, written by Don Shebib, to be directed by Don Shebib, starring Deborah Unger and Jason Patric, with a budget of $3 million.  Status: never made.

Ocean Warrior, written by Keith Ross Leckie, to be directed by Paul Street, to star Brendan Fraser, Pierce Brosnan and Martin Sheen, with a budget of $48 million.  This was about Paul Watson, the co-founder of Greenpeace, who became even too radical for this semi-radical organization so he set up his own company.  It was going to be an action adventure movie along the lines of a contemporary Moby Dick.  Kroonenburg was particularly enamored with this project and we had several meetings with Mr. Watson.  Status: never made.

Partners in Action, written by Eddie Matalon, to be directed by Sidney J. Furie, starring Armand Assante, with a budget of $3 million.  Status: made in 2004, Timothy Prager and Richard Rionda Del Castro added as writers, starring Armand Assante, Douglas Smith and Larry Day.

Pursued, written by David Lenkov, to be directed by Jonathan Lynn, to star Matthew McConaheigh, with a budget of $20 million.  Status: made in 2004, writer changed to Maggie April, director changed to Kristoffer Tabori, starring Christian Slater, Gil Bellows and Estella Warren.  Budget estimated at $5.5 million.

Special Interest, written by David Winkler and Irving Winkler, to be directed by David Winkler, with a budget of $20 million.  Status: never made.

The Limit, written by Matt Holland, to be directed by Lewin Webb, starring Lauren Bacall, Claire Forlani, Jessica Pare, Pete Postlethwaite, Ian Tracy, Tony Nardi and Gian-Paola Venuta, with a budget of $4 million.  Status: made in 2004 starring Lauren Bacall, Claire Forlani and Henry Czerny.

UPDATE: This post formerly was entitled “Fake Producers I Have Known.” On February 13, 2013 we received a letter via Federal Express from Charles M. Coate, an attorney with the law firm of Costa Abrams & Coate, LLP, threatening a lawsuit on the grounds the title “Fake Producers I Have Known” was defamatory (evidently he had no problem with the contents of the post – in particular, ceding the truth of the unfortunate circumstances in which Mr. Howsam now finds himself, and Mr. Kroonenburg’s former partnership with Mr. Howsam).  Not wishing to affend Mr. Coate’s refined sensibilities, we changed the title from “Fake Producers I Have Known” simply to “Producers I have Known.”  We suggest, however, that Mr. Coate seek supervision and familiarize himself with the provisions of California’s anti-SLAPP legislation before exercising himself unduly, an area within which we have specialized expertise.