Textor Privately Warned Of DD ‘Train Wreck’

Some great reporting coming from Jeff Ostrowski of the Palm Beach Post. In his latest piece he reveals testimony from various DD executives in a lawsuit filed by a former investor.

In an email sent from Textor to the investor:

“At this point, I am fairly certain that a train wreck is coming,” Textor wrote in an email to Stork on Feb. 9, 2010. “I have no choice but to deal with it because of the promises I have made to the state of Florida. I HAVE to deliver jobs.”

As a part of the deal to subsidize Digital Domain work in Florida, the state required that 500 jobs averaging a salary of $65,000 be created b 2014. That’s a pretty ambitious plan.

So how do you get a bunch of VFX professionals to move to Florida? Well if you’ve been watching the job postings you probably noticed the abundant number of STAFF position offerings in Florida.

And just like Sony New Mexico we see this:

“A lot of people left higher paying jobs that were contracts to come out here because they wanted that full time, guaranteed benefits, guaranteed salary. And it’s gone now. I don’t know how to explain it other than it’s absolutely terrible. It’s really sad,” said Holzschuh.

“It was what we wanted the effects industry to do, and they were actually doing it. And it was great, and people could raise kids with this plan. We could put down houses, and a lot of people did buy houses. And now, we’re left in an industry that is losing more and more jobs,” Holzschuh said sadly.

I don’t blame anyone for wanting to move to a lower cost area to raise a family and own a home but all these subsidies do is artificialize the market. It’s part of the reason why I’m working on a campaign to challenge these subsidies as they violate various trade agreements.

I’m sorry for anyone and their families for what happened. A year and a half ago I was very suspicious of the deal in Florida and posted on it.

Soldier On.

27 Responses to Textor Privately Warned Of DD ‘Train Wreck’

  1. gauta says:

    Of course Textor he knew the company was going down, he’s the one that drove it into the dirt. But calling all 300 DDFL employees into a lobby and telling them they “had nothing to worry about,” and that the “stock price has no effect on the artists” 2 days prior to resigning from the company is probably a new low. Of course, that wasn’t revealed until the following morning when he had one of his corporate subordinates break the news to everyone while he most likely vacated the town in an armored helicopter. It was nice to give the employees 2.5 hrs to pack their things and vacate the police-patrolled building though.

    • Paul says:

      Can someone clarify if Textor is liable to a degree? Or is he gonna walk away free and clear?

      • VFX in Venice says:

        What Textor will be found guilty of has yet to be determined. But, the first of what will likely be a string of lawsuits started yesterday, and it has been alleged that he is being investigated at federal, state and local levels.

  2. ion says:

    Again .. impossible for textor to make these decisions on his own. Most of the board voting for decisions would have to sanctioned in Venice L.A. due to voting numbers. Voting decisions are all filed each year in shareholder reports, a requirement of listed companies.

    That is why the DD plan to hopefully sell everything off on the cheap via a preplanned private sale to a vulture fund, rushed with no questions, is even more disgusting. When the judge lets it all go through rush-rush and hush-hush, with none of the bidders or the company facing any scrutiny, we will then have a legal green light and template provided for future, ever larger and larger IPO and short-selling scandals. Even larger assaults on tax payers, even larger rape of workers. You know that they had to reach certain employment targets? To present growth figures and projections for IPO. And to meet state assistance partnerships. Further enrich the directors renumerations beyond the dreams of avarice.

    It wasn’t just florida state enterprise funding, they were using employment growth, figures and an industry established staff base to present business growth projections to raise private investment, including the IPO for Wall Street investment. All in the prospectus, all there in print for a few years now. But of course, if you planned to ditch the staff and knew your Wall Street friends and judges will let you do that….. It’s a big club …… and you and I ain’t in it! You and I are not in the big club.

    There you have it! Enticing and employing industry talent into a business plan, present that as evidence to investors and state enterprise councils and there you have a formula for printing money! Because of course, you can just cast off those staff who were central to your plan of raising finance, with no consequence. And walk away from your investors and state officials. Perhaps that can become the defacto business model in the USA going forward? Until 20 years from now, when you wake up wondering why the US then begins to ressemble somalia or the Congo.

    C’mon, sing along!

    O say can you see by the dawn’s early light,
    What so proudly we hailed at the twilight’s last gleaming,
    Whose broad stripes and bright stars through the perilous fight,
    O’er the ramparts we watched, were so gallantly streaming?
    And the rockets’ red glare, the bombs bursting in air,
    Gave proof through the night that our flag was still there;
    O say does that star-spangled banner yet wave,
    O’er the land of the free and the home of the brave?

      • Brian says:

        Soldier, check out your own link, but click on “Management”:

        http://phx.corporate-ir.net/phoenix.zhtml?c=246637&p=irol-govmanage

        Pretending Evil Textor was living on a different planet
        and the management of DD Venice was unaware of anything
        is hilarious… BTW, where’s Plumer, Libreri and Miller today?

        Check it out, Ed’s so worried about DD, what’s the first thing he does?
        Updating his linkedin profile:
        http://www.linkedin.com/pub/ed-ulbrich/7/a87/950
        This guy is really special… Pirate soul??? Yeah, right…

      • VFX Soldier says:

        I’m not here to defend the management at DD but it’s simply not correct to imply they were on the board. Maybe Scott Ross can give some insight but if I’m not mistaken it’s was Textor and board of directors that made the decision to open up in Florida.

      • Scott Ross says:

        Digital Domain has had so many different corporate structures since I sold the Company in 2006 that I find it difficult to track. There was DD, DDP,DDPI, DDMG, DDI, DD land holdings, Wyndcrest DD, Wyndcrest Digital Holdings etc. So as to a definitive statement about DD boards it is a rather difficult thing to do. One would need to carefully track all the companies, its boards, the time frames, who wound up owning whom, etc.Hopefully some regulatory or law enforcement agency will do that shortly!

        But, here is my overall take… and just for the record, is pure conjecture as I have not been an insider since 2006.

        In 2006 and for a few years after, the newly acquired DD was similar to the DD that I started… VFX for features and commercials. That board seemed to be comprised of the Wyndcrest folks ( textor, teaford, stork, lundford, bay) old school DD management ( ulbrich, macaluso) new school DD management ( ILM’ers miller, plumer, libreri) and several outside folks ( scully, bryce). People probably rotated thru… new outside guys…. people quit (macaluso) etc.

        My understanding was that this board (s) took DD thru its first (failed) attempt at an IPO.

        After the failed IPO, Textor made comments that he pulled the IPO because he wasn’t getting the kind of valuation he felt he should have gotten from the Street and that he could get a much higher valuation from Private Equity. It seemed to me that the Street said ” You’re nuts..” and so there was no deal there and it seemed to me that textor also was unable to get the value that he thought he could get from Private Equity…at that time the Company was bleeding cash… margins on SPEEDRACER, the additional infrastructure that the new ILM folks demanded, the acquisition of The Foundry, the additional stratospheric management salaries, the additional space in NorCal ( ILM guys) and textor, teaford and storks comp.

        At this point, with little cash and no new cash infusions, the Company started jettisoning expenses… libreri…. the Foundry…. miller…. staff….Major contractions… smaller board… very difficult times.

        And then there was FLA!!!!

        Having run out of possible cash infusions from almost every source ( private equity, high net worth individuals, the failed IPO), textor found a new fountain of cash… the taxpayer.

        At this point, IMHO (and again no inside info… purely conjecture) Textor was now fully in charge. The board was textor’s boys in FLA…. his FLA homies, and while DD ( the VFX company) might have had a board (?) IMHO, all decisions regarding the over all DD(MG) were being made by Textor. I can only imagine the disbelief of ulbrich, watching what textor (his boss) and the FLA board was doing to the Company. Again, I’m not sure of what happened behind those closed doors, but Ed Ulbrich, for 13 years prior, went to the University of Scott Ross and saw how a VFX company was managed correctly… I can’t imagine he was part of the warped realities of John Textor and his FLA gang.

        Hope this helped.

      • DDTruth says:

        The Digital Domain Productions Board (DD West Coast) was comprised of Textor as Chair and Florida employees as Board members post IPO (and post Plummer). It’s doubtful that they ever convened

    • Anonymizer says:

      Where solid facts are valued, interpretations and opinions without solid evidence are plenty and cheap, and mostly worthless. it always amuse me how some conclusion derives from opinion without facts.

      • william s speare says:

        The bottom line.. IMHO …DD wasnt run like a vfx company.. DD was run like a high price cash cow.. who ever buys DD now will have to alot work ahead getting the states, studios and artists to trust them… better off to start a new vfx company from the ashes of DD…

  3. JustPassingBy says:

    Bumped into someone’s intriguing take into DD’s bankruptcy
    Seems Hudson Bay Master Fund pulled the moves..
    Thought I’d share.

    http://forums.drpennystock.com/pink-sheet-stocks/ddmgq-digital-domain-media-group-inc-pink/msg130763/#msg130763

  4. ion says:

    Yes, it is sooooo obvious now that the narrative being painted (and that the judge will no doubt present as well) is that everything was all due to one rogue person (textor) and that innocent venice DD was duped like eveyone else, and so a private fire-sale should be rushed through post-haste. Of course, it is very plausible that a rush sale emergency could have been setup in advance. We will see afterwards, if the judge has even considered it. It classic conology in many areas – remember AIG, Lehmans, MF Global, weapons-of-mass destruction. Any used car salesman will tell you “make a decision, make it quick, I got someone else looking at it ….”.

    Impossible in a listed company. Hop on over to the NYSE and federal securities and exchange commission to go see the clearly presented regulations for corporate governance. Director voting is recorded including requests for objections and reservations. So are we saying in this merry-go-round of directors shifting multiple seats and locations in the space of six years that not once was a reservation or objection (required by each member to comment or decline) raised? What are we saying here? Complicity or ‘yes’ men taking the dollar? Hopefully the judge will consider this.

    What they did was a new paradigm shift, an ubrupt gear change in vfx business. A sink into the abyss of human lows. It’s always been a boom-and-bust business but honestly, I can’t think of one of the past big failures where you coudn’t just say ‘that was plain bad luck or over ambition’. There has always been that feeling that there was an attempt to meet payroll. Heck, even Meteor did eventually pay people. And when those kind of folk were using their own money, well who cares if they reward themsleves handsomely – they have been putting there personal wealth on the line. No, this is different, this has a stink of shafting people in the most obscene way, through high-finance shenanigans. Think of it this way, Venice carries on all fine and dandy – despite over-extending during Tron, Transformers, Thor, etc., in a three year period, adding to financial woes, then subsidises its sale by swiping payroll. Ruthlessly shafting people on modest incomes to line the pockets. Think about that when choosing your project partners in future. That how it looks. *** of coursethere will be some legal decision soon to further glean*** But, we just have to hope the legal process explores all these questions and determines that the US is not a bannana republic.

  5. ion says:

    William Sphere – wow, that’s real interesting from the court documentation. The same people on the rush fire-sale are the same people invloved in some interesting behaviour in the background. Again, all in a days work inside the world of vulture funds and wall street. Its a real kicker when hundreds of honest workers are used as pawns in their chess games. The casino world of wall street now has its tentacles on vfx, this could be the first of many in this new paradigm.

    http://www.kccllc.net/Docket/SearchResults.asp?T=3376

    “Digital Domain owed 45 million in total debt when they refinanced their notes in May of this year. As part of the refinancing, the new secured noteholders demanded that Digital Domain keep at least 6 or 7 million in cash available at all times.

    Digital Domain fell below this amount only a few weeks ago. Now, here is where it gets interesting, and here is where the attempted theft by the secured noteholders is obvious.

    The secured noteholders created penalties of over 24 million if Digital Domain fell under that cash balance. There was no money owed. The default was due to the cash balance, and that default triggered all money due. Of course, the secured noteholders knew this was happening in short order. They knew it for months. So, they first hired the restructuring guy (Katzenstein). After a few weeks on the job he pulled the plug on the Florida operations, and days later Digital Domain filed for Bankruptcy.

    All along, the secured noteholders (Hudson group), had their buyers lined up for the assets. This way, they were guaranteed to get their money back and be done with it. But life isn’t so easy when you attempt an obvious scam like this.

    Palm Beach Capital will be contesting the usurious ridiculous penalty of 24 plus million that was tacked on to the 45 plus million in debt. Palm Beach Capital has about 20 million shares that will not be sold into this tiny float (John Textor has another 10 million).

    This will be a huge battle, and equity has a legit chance of getting something out of this. The assets of Digital Domain are worth well over 45 million, and probably over 70 million, but that last 24-25 million is nonsense penalty interest that is basically attempted theft and borderline criminal. “

    • DDTruth says:

      Please be aware that Textor and the Board approved those terms in that loan. It is very likely that the need for additional cash to buy out the former primary lender (Comvest) was immediate and this was the only option. Large scale secured debt lenders tend to look a lot like “loan sharks”.

  6. ion says:

    DDtruth – exactly. ‘Bait-and-switch’. Hopefully the legal system will perform and not allow them get away with it and renegade on payroll and other innocent creditors.

    • Scott Ross says:

      my faith in America’s legal system started to wane with OJ…. and was completely devastated with Wall Street….

      • Tom Toad says:

        Well, you certainly held out a lot longer than me.

        My faith in America’s legal system started to wane with Iran-Contra…and was completely devastated with the repeal of Habeas Corpus- you know, the foundation and cornerstone of all western law.

        By contrast, the whole Wall Street and Financial Crisis business, while certainly, ahem- extra-legal, strikes me more as a symptom of a delusional nation-wide suicide pact.

        In fact, its my understanding that as part of the original plans outlined for the various byzantine bank bailouts and wall street wealth transfers, sufficient monies were to be set aside in a special government fund administered by Goldman Sachs to be used to issue every United States citizen a pair of tennis shoes and a jump suit.

  7. ion says:

    Can you believe the bare faced cheek of this?!?!?! They are at it again!!

    http://vfxjobs.com/job/2149/digital-domain-seeks-3d-matte-painter-venice-ca-at-digital-domain-venice/

    They are advertising and seeking ‘staff’ again. For the suckers who fall for this latest scam, you should insist on money upfront, either cash or banking transfer that must clear before starting, to cover the entire period up front.

    People who plan to work for the mafia, in the black economy, be fully aware of the world you are entering. Or go and work for the 90% of other firms who act in a reasonable manner and pay people for their services!

  8. Ron Anderson says:

    Scott Ross, if you had the chance and the financials, would you start another DD or completely just do something non-related to VFX.

    DD’s exploits of the Tax payers of Florida isn’t any different of many other production companies following the Tax Credit game in the creation of jobs.

  9. Scott Ross says:

    After over 25 years in the VFX industry, having managed and founded major VFX companies… I believe it’s time for others, much younger to run such organizations. And, yes, I believe that you will find out, over time, that DDMG and John Textor ‘s play in FLA is VERY different than production company tax credits in FLA.

  10. […] miller, plumer, libreri) and several outside folks ( scully, bryce) Go here to see the original:  Textor Privately Warned Of DD 'Train Wreck' « VFX Soldier hopfeed_template=''; hopfeed_align='left'; hopfeed_type='IFRAME'; hopfeed_affiliate_tid=''; […]

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  12. […] As I pointed out on my blog years ago, John Textor privately warned of a “train wreck” pertaining to the Florida deal. […]

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