"Legal Battle Unfolds as Robert Downey Jr.'s Unusual Deal and Beijing's Attempt to Acquire Taiwan's Sole Broadcast Network Clash."
Production executive Chris Fenton of "Iron Man 3" filed a contentious lawsuit in 2019 against his former employer, DMG Entertainment, a once-soaring studio that facilitated the distribution of Hollywood films in China.
Fenton's case is finally going to trial next week after a protracted legal battle that included a DMG countersuit that was eventually dropped. It is anticipated to reveal some of the murky ways China conducted business in Hollywood prior to tensions between the United States and the communist superpower blowing up in 2021, which will force studios to reevaluate their strategies for the market. The California Superior Court is set to open Fenton v. DMG on October 23. Neal Moritz, the producer of the tentpole film, and Robert Downey Jr. are anticipated to be called as witnesses.Fenton, a 17-year DMG employee and former William Morris agent, is well-liked in Hollywood and active in Washington, D.C., serving as a member of the Council on Foreign Relations, but his case was perceived as a bit of a David vs. Goliath battle. It effectively set him up against Venable, a business with strong legal representation and close relations to the People's Republic of China. However, the case has been anything but foreseeable during the next five years. Documents filed on June 14 state that Venable withdrew from the dispute, and two firms—Altview Law Group and Sherman Law Group—took its place.
Fenton's lawsuit for $30 million alleging breach of contract and promissory fraud centers on his assertion that the founders of DMG, a company valued at $5 billion at its peak, defrauded him of funds obtained from an IPO in 2014 and then destroyed the business.
DMG, which debuted as a public company on the Shenzhen stock exchange in 2014, gained attention from Hollywood after co-producing and funding movies including "Looper" and the thriller "Transcendence," starring Johnny Depp. However, in 2018, the year Fenton was fired as motion picture head and accused of raising concerns about the company's procedures, the stock price fell sharply. Eventually, the Shenzhen stock exchange delisted the business.
The initially censored facts of Fenton's case have come to light in recent months. Among them is the alleged plan by DMG to use odd deals made to A-list celebrities like Downey Jr. and Moritz to boost the stock price of an affiliated company. The "Iron Man" star was to provide $20 million a year for three years in exchange for $90 million later, with $36 million going to the actor upon his execution, according to the proposed arrangement for Downey Jr., whose name was blacked in the original lawsuit. According to recent court documents, Fenton and Tom Ara, the former chief attorney of DMG and current co-chair of DLA Piper's entertainment group, were encouraged by DMG founder Dan Mintz to present Moritz with a comparable offer. Moritz was working on the Vin Diesel film "Bloodshot" at the time, which was based on a Valiant comic. (In 2018, DMG purchased Valiant.)
According to court documents, Fenton and Ara were worried that Mintz would try to manipulate Yinji's stock price by passing off the revenue from these trades as profit and hiding the associated liabilities. It was reported at the time that Moritz's lawyer voiced his own reservations about the potential sale failing to "pass the smell test." In the end, Downey Jr. and the "Fast & Furious" producer rejected both suggestions.
The lawsuit further claims that DMG bribed Chinese officials, including the former head of China Film Group Han Sanping, and that Mintz, along with co-founders Bing Wu and Peter Wenge Xiao, borrowed hundreds of millions of dollars secured by DMG stock, using the money to purchase a $30 million Bombardier jet, a $20 million Beverly Hills mansion, and high-end automobiles like Ferrari, Rolls-Royce, and Bentley. The lawsuit asserts that, in an odd turn of events, the founders incurred millions of dollars in debt to fund novel regenerative medical treatments.
Plaintiff's attorney Duane Bartsch states, "After five years, Chris and his family are grateful to finally have their day in court."
John Begakis, DMG's lawyer at Altview, is criticizing the lawsuit, calling it "full of scandalous and irrelevant accusations." "The reality is that most of Mr. Fenton's claims have already been dismissed, either by the Court or on his own initiative," he continues. "This dispute boils down to whether Mr. Fenton is entitled to a bonus despite earning a generous salary and costing DMG millions of dollars due to his incompetence during his tenure? Mr. Fenton is still unable to specify the nature or amount of the bonus." We think the truth will win out and the facts will speak for themselves.
Fenton has however previously overcome a number of obstacles in the judicial system, including getting DMG's countersuit dropped. His case was successful in January when he filed a move for summary judgment. A wealth of information about Beijing's soft power aspirations emerged from that motion, including the allegation that a business it controlled almost bought Taiwan's sole broadcast network, a concerning possibility given the nation's recent saber-rattling against Taiwan.
According to a Fenton disclosure submitted this year, "Mintz wanted DMG to purchase Eastern Broadcasting Company ("EBC"), a Taiwanese television station." "Mintz needed a document from a respectable U.S. bank certifying that DMG had at least $300 million in a U.S. account in order to get the approval of Taiwanese authorities. Mintz set up the money's transfer from China to an American bank account. Mintz wished for Taiwanese regulators to remain unaware of a Chinese company's bid to acquire EBC. To achieve this, Mintz claimed he was "moving money around."
The document also describes how U.S. citizens and Hollywood stakeholders who were hoping to conduct business in the Middle Kingdom were allegedly pushed to cede control of their assets to a Chinese surrogate. In DMG's instance, Chinese national Wenge Xiao controlled the DMG shares in a surrogate capacity on behalf of Bing Wu, Fenton, and Mintz. According to the complaint, DMG's founders were borrowing money against the company's shares over this entire period.
A roadmap of how Chinese corporations exploited several offshore entities to conduct business with Hollywood is also provided in court filings. The company involved in the Depp movie "Transcendence" was DMG Hong Kong Group Limited. In a similar vein, the Chinese government had a significant role in influencing Hollywood productions. DMG was compelled to follow China Film Group's directives regarding the number of days to shoot a particular film in China, the actors to cast, the number of Chinese production crew to use, the sound stages that needed to be reserved, and—possibly most problematic—the script elements that had to be used pertaining to Chinese culture in order to get "Iron Man 3" released in Chinese theaters. Hollywood has long faced criticism for self-censoring on everything from "World War Z" to "Dr. Strange" and caving in to the titan of the box office. "Iron Man 3" made an incredible $121 million in China before grossing $1.22 billion worldwide at the box office.
Given the current state of U.S.-China relations, attitude toward anything China-related may work in favor of Fentor as jury selection gets set to begin on Monday. In the case of a Chinese attack, the United States would defend Taiwan, as President Biden and his administration have stated on multiple occasions.