Ovitz suffers setback in deal to advise French bank.

Talent agency rival Berg scores off CAA's chairman

Jeffrey Berg, chairman of International Creative Management Inc., has apparently landed a blow to Michael Ovitz in the escalating war of the Hollywood talent agencies.

Berg has been griping that Ovitz should not be allowed to have his talent agency also act as a consultant to studios which hire talent. Now Ovitz, chairman of Creative Artists Agency, is apparently about to be pressured by the three major Hollywood trade guilds to modify CAA's consulting arrangement with French bank Credit Lyonnais SA.

Sources at the guilds confirmed that they were preparing an announcement, not yet released as of press time, that Ovitz has agreed to play a smaller consulting role by being restricted to Metro-Goldwyn-Mayer Inc. and not getting involved with the bank's worldwide $3 billion entertainment portfolio, as originally announced by the bank.

Credit Lyonnais has a $1 billion investment in beleaguered MGM and a 98.5 percent stake in the company. But it must sell the studio by 1997 under a federal court order. The guilds were expected to impose a monthly reporting structure on Ovitz, forcing him to disclose to them details of his MGM work. CAA is also expected to create a "Chinese wall" separating its talent division from its consulting operation.

These details were being batted around at press time because the three guilds were not unified in their approach to the growing controversy that has pitted the two most powerful agents in Hollywood against each other.

Despite the guilds' expected restrictions on Ovitz, Berg was not appeased and has instructed his attorneys at the law firm of Skadden Arps Slate Meagher & Flom to put pressure on the Justice Department to investigate Ovitz's involvement in MGM as a possible violation of the Sherman Anti-Trust Act and federal laws governing the talent industry. Berg wants Ovitz to withdraw from representing MGM entirely and questions the guilds' complicity in sanctioning Ovitz's dual industry role as a talent agent and an adviser trying to help resuscitate MGM.

Ovitz has already begun devising strategies for MGM, which might include restarting its television division and resurrecting the United Artists logo, according to reports in the Wall Street Journal. The studio has sustained losses of $519 million in the last two years and Ovitz's mandate from Credit Lyonnais is to get it healthy and then sold.

Some in Hollywood are rooting for Ovitz to succeed with MGM, seeing the economic benefits of a healthy MGM outweighing conflict of interest and anti-competition issues raised by Berg. They see Ovitz's role at MGM as just one conflict of interest in an industry rife with such conflicts.

However, there is a growing contingent that argues Ovitz has accumulated too much power and it should be curbed. Ovitz not only represents a powerful roster of stars and directors, but he has a consulting arrangement already with Paramount Pictures Corp. and served as Matsushita Electric Industrial Co.'s consultant when it acquired MCA Inc.

The guilds have been divided over the issue. The Screen Actors Guild wanted to be lenient with Ovitz, while the Writers and Directors guilds pushed for greater restrictions, sources indicated.

Ovitz, through intermediaries, has floated the premise that if he is forced to withdraw from MGM, the bank might abandon its attempt to revive the studio and would instead sell it to a company that would liquidate the studio's assets. The Berg camp said there is no buyer interested in MGM and most of the fabled studio's assets, such as its classic film library, have already been sold off.

Berg said he wants to see a healthy MGM, but insists there are industry-wide issues at stake. He has directed his attorneys to push for a Senate banking committee investigation into Credit Lyonnais' Hollywood lending practices, which have resulted in several lawsuits.

Some observers in Hollywood doubt the government will now step in and deliver a crushing blow to Ovitz.

A major entertainment attorney said, "The guilds' restrictions are as close to a victory as he (Berg) will get. Governments are slow beasts and, if the industry guilds seem to accept the arrangement, they (government officials) may follow suit.

"Ovitz can't back down now, he has to fight it out," the attorney said. "He can't admit he did something wrong because it would give a major leg up to his competition, and he can't live with that."