The whole nine yards: Elie Samaha hangs on as Franchise Pictures is revamped.

To hear Elie Samaha tell it, little has changed at his production house, Franchise Pictures, after a string of big-budget bombs, including this past summer's "The In-Laws" and "Alex and Emma."

The smooth-talking nightclub owner drops the names of Tinseltown friends like Sylvester Stallone, star of another Franchise clunker, "Driven," and with whom he is exploring a possible TV series set in the Middle Eastern state of Dubai. Asked about Franchise's track record, Samaha declares that even "Battlefield Earth," the John Travolta box-office disappointment, was a moneymaker.

"It didn't do well in theatrical," Samaha said. "But it sold 1.2 million DVDs. It's done well in Europe. And my friend John was happy to make it. Would you call that a failure?"

But reality has, indeed, set in for Samaha.

Financial setbacks have forced him to share the reins at Franchise with vulture investor David Bergstein, who along with construction magnate Ronald Tutor has helped fund its ongoing legal battle with a former partner, German media firm Intertainment A.G.

The lawsuit, in which Intertainment accuses Franchise and banking giant Comerica Inc. of "fraud and deceit," is set to go to trial in federal District Court Los Angeles in April. Samaha and Bergstein also said Franchise is sparring with another former partner, auto importer James Robinson's Morgan Creek Productions, the production house behind "Major League" and "Ace Ventura: Pet Detective." Bergstein has already made his presence felt. Besides picking up the tab and bringing in a new legal team, he said he has revamped the way Franchise finances and produces films. He has also contributed a bit to the creative end, by picking up Pierce Brosnan's upcoming drama, "The Laws of Attraction," which features the James Bond star as a lawyer who falls in love with his courtroom rival during a litigation.

The next step: improving the lineup of films. To do this, Samaha and Bergstein both said Franchise would start developing its own projects next year instead of just picking up the star-driven castoffs on which it has made its name.

Samaha is the Lebanese emigre who arrived in the United States in 1975, moved to Los Angeles in the early 1980s and started a chain of dry-cleaning shops before teaming up with nightclub impresarios Chris Breed and Brad Johnson to open 1990s nightspots, such as the now-closed Roxbury and the Sunset Room.

By 1995, Samaha was producing B-movies such as the action thriller "Hollow Point," which featured his then-wife, Tia Carrere. Relationships with stars and agents from talent powerhouses CAA and the William Morris Agency led to more film gigs.

Franchise produced film projects that Samaha's Hollywood pals wanted to do and bankrolled them by pre-selling foreign movie rights and making deals with German tax shelters known as film funds. His Hollywood stature rose in 1998 when Samaha sealed a 15-picture deal with Morgan Creek, then signed up with Warner Bros. for a multi-year deal. By 1999, Intertainment agreed to provide $750 million to finance a slate of 60 Franchise films.

Initially, they struck pay dirt with the Bruce Willis mobster comedy, "The Whole Nine Yards." But then came "Battlefield Earth," which cost $52 million to produce and managed to garner only $21.5 million at the box office.

Other bombs followed: "The Art of War," "3000 Miles to Graceland" and "Driven," which grossed just $32.7 million during it brief theatrical run--far less than its reported $70 million price tag.

Battlefield court

In December 2000, Intertainment filed suit against Franchise, Comerica and Samaha, demanding at least $76 million in damages and an unspecified amount in legal fees. In its complaint, Intertainment alleges Franchise--with the help of Comerica--lured it into financing budgets that were "fraudulently inflated" by as much $124 million in order to collect higher producer fees, then declared Intertainment in default after it uncovered the fraud and refused to pay up.

Franchise denies the charge. In a counterclaim, it accuses Intertainment of backing out of the deal because the firm couldn't pay up, then filing the lawsuit in order to drag Samaha's name in the mud.

"They screwed me," said Samaha. "Their executives took money out of the company and then have the nerve to accuse me of fraud."

"It's silly that they would say that," said Intertainment attorney Scott Edelman. "But I guess they're suggesting we should have kept spending money on these pictures even after their fraud was discovered. That's total hogwash. They admitted the budgets were completely phony. Why would my clients keep paying once they discovered that?"

Franchise managed to find new backers including German bank Commerzbank (now part of Dutch financial services firm ABN Amro), which poured $180 million into a series of duds, including the futuristic action flick "Ballistic: Ecks vs. Sever." But with legal bills rising to $7.5 million and having lost at least $30 million in producer fees according to Bergstein, Samaha said he had to scour for a helping hand.

That July, he said he got something of an assist from Tarrant Apparel Chairman Gerard Guez, who had already lent Franchise $2.5 million in order buy out one of Samaha's partners. According to Samaha, Guez introduced him to Tutor, chairman of construction firm Tutor-Saliba, and Bergstein, a former real estate developer who bought into distressed firms such as home video merchandiser DVD.com.

Originally looking to buy the Barfly nightclub from Guez and his partners in order to expand the nearby Le Dome restaurant, Bergstein said he and Tutor began talking to Samaha about a deal. Six months later, Bergstein and Tutor said they formed a limited liability company called R2D2 which invested at least $20 million in Franchise in exchange for a 50 percent stake.

Potential for profits

In Franchise, Tutor and Bergstein said they saw a production house that could make money despite its poor box office record through home video sales and broadcast rights. The major studios also made out because their distribution deals with Franchise were fee-only arrangements. Warner Bros., which charges a 15 percent fee plus recovery of marketing costs, earned $60 million since striking its deal with Franchise, according to sources familiar with both sides of the deal. (Warner Bros. declined comment.)

But Franchise could still use a little help. Worries about the suit--as well as Samaha's own indifference to the financial end of the business--led to Franchise making deals with German and British investors through intermediaries, Bergstein said. That resulted in an inability to fully control production of its films, he said.

Bergstein moved into Franchise's offices and began building direct relationships with film finance outfits such as Canada's Grovesnor Park. Since then, Bergstein said Franchise has rounded up another $100 million in film tax shelters to finance its films.

"David's really intelligent and he got this business quickly," said Comerica Senior Vice President Jared Underwood.

By January, Samaha and Bergstein said Franchise expects to build up a development staff to pick out better-quality film projects. It's also separating production into three different lines, including an art house division and a direct-to-video line that will co-produce four films with Stallone, they said. (Stallone's publicist, Michelle Bega, said the action star declined to comment.)

Samaha and Bergstein are optimistic about next year's slate of films, which will include a $55 million sequel to "The Whole Nine Yards" and "Spartan," a spy flick directed by David Mamet. Another possibility according to Samaha: a deal with director-producer Michael Bay.

Meanwhile, its legal woes continue with the Morgan Creek's lawsuit, which is currently being tried in Los Angeles Superior Court.

According to Bergstein, Morgan Creek is demanding $2 million in damages in a dispute over proceeds from one of Franchise's films. Morgan Creek declined to comment. Samaba claims the suit is nothing but sour grapes on the part of Morgan Creek Chairman Robinson, whose own deal with Warner Bros. wasn't renewed.

"Jim Robinson's just mad because I'm still with Warner and he's been thrown off the lot," said Samaha. "Look, I made more films last year than he did. He made none. Results speak for themselves."