HOW MANY ACCOUNTANTS DOES IT TAKE TO CHANGE A LIGHTBULB?

A: HOW MUCH MONEY HAVE YOU GOT?

An old joke, but unfortunately apt, especially in Canadian Show Business.


I've received enormous response to the experiences I related in chasing earnings made by some of the films I've made. Thanks to all of you who wrote. Apparently, many of us share the same pain.

And while it's comforting to know I haven't been singled out for special treatment; it also brings home the point that we have a serious problem in this country when it comes to accountability.

As I said in the original post, these issues could all be resolved if Telefilm Canada would simply allow the artists they were incorporated to support and the tax paying community that supplies film funding to verify that our government has the same numbers we do.

It wouldn't be a tough job. Just get somebody to put the paper I send over top of the one already on file -- hold it up to the light. If they match, they match. If they don't -- Lucy's got some 'splaining to do.

Until that happens, Telefilm retains its position along with an out of touch regulator and our mysteriously enriched production entities as the axis of weasel that keeps Canadian artists from realizing their full potential.


Among the items forwarded to me from readers was a study published by the Communications Department of Penn State in 2001 which states, "the Canadian television production industry has been able to grow and prosper to the point where Canada now ranks only second to the United States in exports of television productions to the international market..."

Wow, second only to the USA in foreign sales! Ahead of the UK, France, Germany, even Bollywood!?! And yet, somehow, these earnings never get that programming into profit nor trickle down to the country's artists....

Does that seem logical to you?

Someone else linked me to an article written by Doug Saunders for The Friends of Canadian Broadcasting entitled "A Cheaters Guide to Canadian Television" or "How to Bilk Taxpayers and Influence People". Among his many revelations, Mr. Saunders includes a reference to the exclusive and expensive Muskoka vacation area near Toronto and a body of water the locals have dubbed "Lake Telefilm" because of all the film and TV executive properties which dot its shoreline.

Some of those vacation homes belong to the same executives who regularly go hat in hand to the CRTC or publish financial statements claiming their programming hasn't made a dime.

On a more troubling level, I was also supplied figures from SOCAN (The Society of Composers, Authors and Music Publishers of Canada) suggesting that sales territories communicated to them by Alliance Atlantis on my films aren't listed in those provided to me and the Writers Guild of Canada.

So this whole affair begins to shade a little darker.

Not that my gut didn't tell me it was headed that way from the beginning.

The financial reports I'd received from Alliance on the Harlequin films were initially troubling because they didn't reconcile with the claims the company had made to their shareholders in its Annual Reports.


But if you recall, I said I departed Alliance because I couldn't align myself with the corporate culture. And that had nothing to do with an office dress code that seemed dictated by the latest "Banana Republic" catalogue or the constant feeling that at any moment somebody might stuff a couple of soup cans into my hands and ask me to take a "personality test".

All productions are rigorously budgeted and those budgets are often revised to reflect the realities of production. Unexpected costs, currency fluctuations and savings all conspire to alter the final numbers.

One of my final formal duties on the four films I co-wrote and executive produced was to deliver what's known as an EFC, an Estimate of Final Costs. The production's line producers, accountants and production managers gathered to compile that and we were all in a pretty good mood.

All our records indicated we were well under budget with only a couple of outstanding invoices in dispute for reasons related to rental car insurance or incomplete employment schedules. All quite normal and amounting to an insignificant future expense if they had to be paid.

I signed off the EFC and left for what I figured was a well-earned vacation.

Two weeks later, I was back in the office as a lawyer from Business Affairs handed me the final audited cost report I needed to sign. The bottom line number, however, was now over budget. I inquired about the discrepancy and asked to see the line item budget that would support it. He said that wasn't allowed.

Que?

I made it clear I wasn't autographing any budget I hadn't read. He suggested that would put me in breach of contract. I thought over the troubling incidents I'd shouldered aside to bring the films in on time and under budget, decided a breach of contract suit could be the least of my worries -- and walked.

Nobody sued.

About a year later, I received my first financial statement and requested the audited final costs of the films in the hope of figuring things out. After a bit of a tussle, my lawyer managed to acquire them.


Because government funding regulations in Canada require that final production costs are vetted by independent auditors, I decided to get in touch with those guys to see if they could shed any light.

There were two audits. One for the two Canadian location films and one for the two that we had filmed in Europe. Each had been done by a different audit firm.

The first had been published under an impressive scroll font indicating a triple name partnership of some repute. Despite the fact that Alliance was headquartered in downtown Toronto, this firm was tucked into "Suite 201" of an address on the far Eastern edge of the city. Initially, this didn't strike me as odd. When you find a good accountant, most producers will walk a mile of shattered glass to get to him.

But my suspicions were aroused when I pulled into the parking lot of a rundown strip mall and further heightened when I discovered "Suite 201" was on the lone floor over a Korean nail salon.

I went upstairs to discover not one large suite which might house three accounting partners, but a warren of tiny offices. "201" bore the nameplate of a single accountant. But the name didn't match any on my audit letterhead.

I entered a sparse office with a single desk, one chair and a polite man of South Asian descent working on a pile of receipts. I apologized for interrupting and told him I was looking for the triumverate of auditors. He visibly tightened.

"They're not here."

I told him I'd realized that much, asked if maybe I had the address wrong or they'd moved since the document I was holding had been created. He asked to see the papers. I handed them over and said I just needed to ask the auditors a few questions. He was perusing the document now and looked scared.

"Who's asking questions?"

I told him right now it was just me. But he was getting really nervous. So I assured him that I knew he hadn't created the audit and just wanted to find the guys who had. He handed back the papers.

"Sometimes they use this office."

I looked around at the single desk and chair. "All three of them?" I asked.

He looked trapped. I wish I could account for that with my imposing presence and threatening nature. But it's far from the reality.

"They're in Montreal. That's all I can say."

I tried to ask a few more questions, but he didn't want to know. So I thanked him for his help and left.

But it got me wondering why a respectable Canadian production giant would farm out a government required audit to a firm in Montreal that would then feel the need to publish it under a Toronto address that they and the production company both knew they didn't occupy.

It didn't fall into any category I could define as "the normal course of business".

A few days later, I saw the photograph of an RCMP Officer I'd interviewed for "Top Cops" in the Business section of the Globe and Mail. He'd retired from the Mounties to work as an investigator for an accounting firm. I called to congratulate him and related my story. He laughed for an uncomfortably long time and invited me down to "meet some people" he thought I needed to meet.

His people were forensic accountants who soon uncovered other aspects to the audits that seemed normal to me but drifted off that scale for them. One audit, for example, had been generated less than 48 hours after the reporting period it covered. Something that people who do this work find somewhat unusual.

The forensics guys were also able to define specific dollar amounts for costs that didn't reconcile with anything in my crammed bankers boxes of related documents. Two of their repeated questions were, "Where's the Government in all this?" and "Why did Ottawa accept these numbers?".

I told them I didn't know. Production company records disappear into a black hole at Telefilm impermeable to even the Freedom of Information Act. There is no way to access what a film or television program earns in those foreign markets we apparently excel at selling, nor is there any way to be certain the audited costs of those same productions are accurate.

That said, some accuracy in financial reporting may soon arrive through the foreign investment of Goldman-Sachs in the CanWest purchase of Alliance-Atlantis and the film and television library in which my films reside.

Interestly, the current head of Telefilm and others intimately connected with many of those library titles suggested the Goldman Sachs acquisition was a "threat" to our cultural integrity. And perhaps threatened something else of greater concern to these players...

I say that because the executives at Goldman-Sachs must deal with two words foreign to most Canadian corporate accounting -- Sarbanes Oxley.

The Sarbanes-Oxley laws were enacted in America in 2002, in response to the outrages at Enron, Worldcom, Adelphia, Tyco and others, making corporate executives personally accountable for their company's financial reporting. I hope the powers that be at Goldman-Sachs knew what they were buying into up here. If not, I'm certain they are quickly learning.

Wouldn't it be ironic if the system put in place when television arrived here in 1952 and Parliament stipulated "Canadian television must safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada" might finally be realized through the intervention of foreign ownership from the very nation Parliament was trying to protect us from.


As I write this, Karlheinz Schreiber and former Prime Minister Brian Mulroney are converging on Ottawa to explain envelopes of cash exchanged in hotel rooms. David Radler of Canada's once eminently respected Hollinger Inc. reports to prison in Pennsylvania while his partner Conrad Black faces the same fate next week in Chicago. Across town, executives for Nortel, once our largest, most prestigeous corporate citizen, await arrest warrants that may send their top echelon of executives to the crowbar hotel for a very long time.

The impression given by some of our once respected Captains of Industry (and any number of quotes in the NY Times by Wall Street heavies) is that corporate governance in this country is unreliable if not downright crispy.

If the film and television business managed to escape that malaise, our Federal Government and Telefilm is in the perfect position to prove it. If we slipped, maybe it's time to come clean, balance the long overdue accounts to our artists and taxpayers and figure out where we go from here.

But if my own suspicions prove correct, there could also be a lot of lakefront property in Muskoka available real soon.