The allegations came out as part of a continuing $55-million defamation suit that Sullivan Entertainment launched in 1999 against three heirs of the deceased Prince Edward Island author, as well as their lawyer, Marian Hebb and public-relations firm, Media Profile.
In court documents, Sullivan and his business partner and wife, Trudy Grant, allege the 1985 TV movie, Anne of Green Gables, and its 1986 sequel have never made a net profit. Indeed, Sullivan alleges the shows, which have been sold in about 230 countries, have consistently reported net deficits.
Yesterday, defence lawyer Paul Schabas cross-examined Sullivan and pored over audited production statements for Anne I and Anne II, as they are referred to in this case. He said, according to the production audits, Sullivan Entertainment appeared to have basically broken even -- in other words, covered its production costs with equity investments and broadcast-licence fees -- before the cameras even started to roll. And Schabas also said his clients have asked Sullivan Entertainment to provide financial records that substantiate roughly $10-million that the company says, in court papers, it has paid to unnamed parties linked to the two programs, the highest-rated miniseries to air in Canada.
Yesterday, Schabas said Anne I cost a total of roughly $3.4-million to produce, and the company took in almost an identical sum (through equity investments from Telefilm Canada and others, broadcast-licence fees and sponsorship). "You were short of costs by roughly $2,000," the lawyer said. "Here you have 99 per cent of the equity covered," and Schabas asserted "no interest was owed" any broadcaster or investor.
Schabas laid out much the same pattern with Anne II, saying the audited production cost was $4.8-million, of which $2.3-million was covered through equity participation from investors such as Telefilm, Disney, PBS WonderWorks, CBC and Sullivan. Broadcast-licence fees for the second Anne totalled $2.4-million.
In court documents, Sullivan alleges an estimated $4.6-million in interest was owed on Anne I, and roughly $6-million on Anne II. During his cross-examination of Sullivan, Schabas pointed out "that's a lot of interest," and added his clients have never been given "any documents to back up that interest."
In May, 2002, under discovery, Schabas said Grant was quoted as saying "this information is being assembled." Yesterday, the lawyer said his clients are still waiting.
Earlier in the week, Schabas said that Sullivan and Grant, who together wholly own Sullivan Entertainment, took home roughly $35-million in dividends from 1996 to the first six months of 1999. "Dividends," the lawyer said in court, "get paid from the bottom line. From the profits of the company."
To which Sullivan responded: "I don't pretend to be a financial expert."
Sullivan testified this week that the Anne shows, "while the emblem people have come to know us by over the years," accounted for only 14 per cent of the company's $70-million in gross revenue earned to September, 1999. He told the court that his company has made roughly $10-million in producer/writer/director fees and distribution commissions linked to the Anne shows.
Sullivan Entertainment laun- ched its libel suit after Montgomery's heirs, including the author's 88-year-old daughter-in-law Ruth Macdonald and her daughter, held a 1999 press conference where they said they were owed substantial royalties that Sullivan Entertainment was refusing to pay or even acknowledge.
Sullivan says those statements -- and ones in a media release from the family -- tarnished the company's reputation, causing a planned initial public offering of its shares to fail.
Both parties agree the Montgomery heirs received $425,000 from Sullivan Entertainment in 1984 for the first Anne of Green Gables movie and $100,000 for its sequel, both of which attracted 5.4 million viewers each.
The spinoff Road to Avonlea is the highest-rated Canadian TV series of all time.
In court, Sullivan and Schabas have squabbled over the definition of many financial terms, including what constitutes "commercial success," "equity," "recoup" and "bottom line."
In 1998, Sullivan Entertainment delivered the calculations of net profit/deficit illustrating that the Anne I film and its sequel had not yet generated net profits. "Accordingly, no amounts were due to the Macdonalds in relation to the Anne I film or the Anne II film," said the plaintiff's amended statement of claim.
The author's heirs allege they are entitled to a percentage of the net profit generated from these evergreen programs.
