Film Fraudster or Failure: Which Steve to Believe?

It must feel like déjà vu for Stephen Carlis. His former company, the Shooting Gallery, which he co-founded with Larry

It must feel like déjà vu for Stephen Carlis. His former company, the Shooting Gallery, which he co-founded with Larry Meistrich, met its ignominious-and litigious-demise in the wake of the dot-com bust. Now Mr. Carlis finds himself on the brink of another legal struggle as his former employer, Steven Rosenbaum, the head of CameraPlanet-which closed its doors in December 2004-readies a civil lawsuit against him based on over 8,000 e-mails and documents recovered from his hard drive when he left the company in October 2004. Mr. Rosenbaum is also pursuing criminal action through the D.A.’s office. Among other financial improprieties, Mr. Rosenbaum alleges that while Mr. Carlis was in his employ as chief operating officer and co-president of CameraPlanet Pictures, he was using his relationships with filmmakers and producers to divert potential production projections away from CameraPlanet and into third-party companies that he’d set up on the side without Mr. Rosenbaum’s knowledge. In legal terms, he was a faithless employee who breached his fiduciary duty.

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“Mr. Carlis was never a partner in CameraPlanet. He was an employee who used his office to lure partners, investors and projects to a company that he formed less than two years into his employment,” wrote Mr. Rosenbaum in a letter to The Observer. He added, “This is a business built on passion and trust. When someone uses those emotions to gain your confidence, and then tears apart a well-respected and longstanding institution … those actions must have consequences.”

To say the least, Mr. Carlis sees matters differently.

“There is not a single project that I diverted that Steve Rosenbaum was not aware of or a part of,” said Mr. Carlis over the phone. (He was traveling at the time.) “This is probably one the sickest things anybody’s ever done. I really did a lot of wonderful things for this man. I befriended him. He told dozens of people that I saved his business after 9/11. Without me, he would have been out of business.”

With or without the help of Mr. Carlis, Mr. Rosenbaum’s CameraPlanet Pictures eventually did go out of business. But for a time, the two were the typical odd couple, with Mr. Carlis playing the sharp, good-looking smooth talker-the salesman-to Mr. Rosenbaum’s short, blunt, socially awkward documentary filmmaker. Mr. Rosenbaum adored Mr. Carlis. He gave him the title of co-president after a year on the job. Nor did he mind when the two were described as partners, although Mr. Carlis was never officially-or legally-one. And Mr. Carlis was always ready to defend Mr. Rosenbaum, to be the relationships guy, the guy whom everyone loved and wanted to be around. They were tight. Tight with money. Tight together-at least at the beginning.

“Everything that Carlis was, Rosenbaum loved,” said a documentary filmmaker who worked with the pair.

In spring 2001, when Mr. Carlis landed on CameraPlanet, Mr. Rosenbaum thought he was getting a deal. Mr. Carlis could charm the shirts off the backs of investors, and he thought big, say those who worked with him. And big was what Mr. Rosenbaum wanted his small but profitable TV-documentary production company to become-he wanted to branch out into feature-film production.

“The cable business was changing,” said Mr. Carlis. “And he knew that he needed someone like me to figure out how to be more of a talent magnet.”

Up until that point, Mr. Rosenbaum’s company, which he founded in 1984 straight out of college, was best known for its MTV News Unfiltered program, which gave audience members the opportunity to tell their own stories with handheld cameras. It was profitable, yet some in the business referred to it as a “sweatshop,” full of young talent working for little pay-not unusual in the TV-documentary industry. But the documentary landscape was changing, and Mr. Rosenbaum didn’t want to be left behind. Under Mr. Carlis’ direction, 7 Days in September-a documentary directed by Mr. Rosenbaum, made with amateur footage of the Sept. 11 attacks and their aftermath, and released around the company’s first anniversary-would soon become their biggest hit. (When the company was in dire straits last winter, Mr. Rosenbaum attempted to sell off his vast library of 9/11 footage valued at $3 million. So far, there have been no takers.)

Around this time, Mr. Carlis had hopes to expand the company further-hopes that he said were dashed by Mr. Rosenbaum. Mr. Carlis envisioned a joint venture between well-known documentary filmmakers, producers and production companies that would be run by Mr. Carlis and Mr. Rosenbaum. In its development stages, it was referred to as New Co. (as many prospective projects are). Later it would be renamed Enable. Mr. Rosenbaum claims that he never knew about Enable.

“Never was I aware that there was a company named Enable that was incorporated by Steve Carlis in May 2003 and that negotiated with my clients,” said Mr. Rosenbaum. “That would have been a fireable offense.”

As late as May 2003, though, Mr. Rosenbaum was happy with Mr. Carlis and wanted to make him a partner. Mr. Rosenbaum brought in Barry Shereck, a financial consultant and “dear friend,” to mediate a deal to make Mr. Carlis a partner. (Mr. Carlis denies Mr. Shereck’s involvement.)

“He placed a very high value on Carlis’ services, at least as Carlis was representing them,” said Mr. Shereck.

According to both parties, a partnership deal was never consummated between the two, although negotiations went on through September. Mr. Carlis appeared to have had different plans. A source close to CameraPlanet said that around the fall of 2003, Mr. Carlis said he was setting up another company and that he would soon be leaving CameraPlanet. (Mr. Carlis denies this.)

“I think Carlis had a way of bringing you in close to him and somehow making it seem that it was a good idea not to talk to Rosenbaum about it,” a former employee of CameraPlanet said. “He was very charming, very smart and very manipulative in a way that would be easy to go along with.”

According to Mr. Rosenbaum and others at CameraPlanet, Mr. Carlis became more and more elusive, disappearing for meetings not on anyone’s calendar.

“They knew that they were tight on cash,” said Mr. Shereck, who for a time in 2003, was an interim C.F.O. at CameraPlanet. “And they were out very aggressively trying to get projects. And Steve Carlis kept saying ‘I have this project’ and ‘I have that project,’ listing all of these fantasy projects that were going to bring in all kinds of money. And the projects just didn’t materialize.”

Mr. Rosenbaum soon became suspicious, and on the advice of an attorney downloaded and printed out the contents of Mr. Carlis’ hard drive.

On Nov. 18, 2004, Mr. Rosenbaum announced on the CameraPlanet Web site that he had fired Mr. Carlis for cause. Mr. Carlis claims that the separation was planned and amiable until Mr. Rosenbaum dragged his heels, forcing Mr. Carlis to resign. CameraPlanet would last only another two weeks.

Peter Gilbert, who made With All Deliberate Speed for CameraPlanet and the Discovery Channel’s “Discovery Doc” series, sees Mr. Rosenbaum’s legal crusade as another example of Mr. Rosenbaum shirking responsibility. Mr. Gilbert was never paid by CameraPlanet for Speed.

“I didn’t like his management style and those things that we talked about,” he said. “And when I read all of this stuff [on the Internet], it plays in to what I saw from him. When things were good, he wanted to take responsibility. When things were bad, he wanted to pass the buck.”

Mr. Carlis, it appears, has a hard time taking responsibility as well.

In its heyday, the Shooting Gallery shined with the promise of 90’s entrepreneurial verve. They produced and released Slingblade in 1996 and You Can Count On Me in 2001; they had a profitable partnership with Loews; they had expanded their Gun for Hire production and post-production facilities into Vancouver, Toronto, Miami and Los Angeles; and they had interactive divisions that produced Web content, all under one roof. In the final days of the Internet bubble, when Itemus attempted to purchase the Shooting Gallery in the winter of 2000, the company turned to sand and poured through its fingers. After the Shooting Gallery finally closed in June 2001 in a maelstrom of accusations and bad vibes, there were reportedly 13 pending lawsuits, many of which listed Mr. Carlis as a defendant. Most of them were the usual bankruptcy proceedings. But those complaints brought by individual investors, like Peter Dapuzzo, a former Shooting Gallery employee, alleged that Mr. Carlis had co-mingled funds, diverting investments meant for specific films into other parts of the rapidly growing company. (The Dapuzzo case settled out of court for an undisclosed sum.)

“I think it was a tough economy,” Mr. Carlis told The Observer at the time. “The film business is tough, and the Internet bottomed out.”

Mr. Rosenbaum doesn’t buy that line anymore. He is currently pursuing both criminal and civil legal action, and he is cooperating with the district attorney’s office in an investigation. An official for the D.A.’s office said that “the Steve Carlis matter’s been referred to us, and we’re looking at it.”

For his part, Mr. Carlis said: “This is going to be part of my slander and defamation suit that will be hitting his desk, as his only motive there is to try to damage my reputation.”

Mr. Rosenbaum has also retained John Siegal, an attorney who specializes in such disputes at the high-powered firm Proskauer Rose.

“Mr. Carlis left behind a long and twisted road of documentary evidence,” said Mr. Siegal. “And CameraPlanet is following that trail and seeking to determine what the appropriate actions will be.”

Whether or not either of these cases goes to trial in the end, Mr. Carlis should consider putting his attorney on speed-dial, because an investor lawsuit filed in the aftermath of the Shooting Gallery’s collapse is being revved up as well, naming him and an auditing firm as co-defendants. Donald Carter, the former owner of the Dallas Mavericks, who invested $27.5 million-reportedly almost twice as much as Itemus-into the Shooting Gallery, has retained new counsel, Robert Gold of Sullivan and Worcester. His specialty? Litigation.

“The hoof beats are loud and thunderous,” said Mr. Gold over the phone from his midtown office. “We are bringing enormous energy and resources to this case until discovery is over.”

Mr. Gold has placed a Sept. 30 deadline on discovery (meaning everyone involved in the case will be deposed by that date). If they haven’t settled by then, he wants the case marked for trial on Oct. 1.

And there’s more. Daniel Victor, executive producer of the Ron Mann documentary Go Further starring Woody Harrelson, is suing Mr. Carlis, along with CameraPlanet, for a breach of contract and fiduciary duties. Around early April 2001, Mr. Carlis and Mr. Victor created DVSC, a company whose sole purpose was to raise $400,000 for the film. When Mr. Carlis failed to raise the money, Mr. Victor alleges that Mr. Carlis went behind his back in January 2002 and negotiated a separate deal with director Mann that allowed him to seek financing elsewhere, thereby reducing the profits for Mr. Victor. The complaint was filed on Dec. 1, 2004, yet no further action has been taken and Mr. Carlis has yet to receive a formal complaint.

“The only people in all of this who are 100 percent innocent are myself and my investors,” said Mr. Victor, who admitted that in the near future he’ll be spending far more time in L.A. than in New York. “And on behalf of them, I’m willing to spend my own money to get justice.”

Currently, Mr. Carlis said he is working with filmmakers, producers and investors to set up a new company-a nonfiction studio, just like the one he envisioned at CameraPlanet. Sources in the industry said that he has been talking about doing a documentary about former Shooting Gallery and CameraPlanet employee Ilario Pantano, who was charged recently with murdering two Iraqis while on military duty. Mr. Carlis vehemently denies this, as do both Mr. Pantano and his attorney.

“I don’t consider myself unlucky,” said Mr. Carlis. “I picked somebody [after the Shooting Gallery], and I shouldn’t have picked a mom-and-pop.” He added, “I really enjoyed [Mr. Rosenbaum], and he enjoyed me, and we became very close personally. And I don’t think he ever had a friend like this. And I think, like a bad divorce, it really, really hit him that I was really pursuing [things] on my own, I was really leaving, and I had a real agenda-and that the agenda I had no longer included him.”

For the time being, however, it appears their futures are inextricably linked, from the conference room to the courtroom.

Film Fraudster or Failure: Which Steve to Believe?