Some Context as to Why Richwater Films Ceased Operations in 2016

British 'Carry On' Producer at Center of Series of Fraud Allegations

5/30/2016 by Alex Ritman / www.hollywoodreporter.com

Getty Images / Jonathan Sothcott

A Facebook page set up against Jonathan Sothcott is "just the tip of the iceberg," claims one former employee, as several others come forward with allegations of scores of unpaid wages and major financial mismanagement.

British film fans of a certain age have a special place in their hearts for the Carry On movies.

The silly, slightly bawdy comedy franchise, which produced 31 films between 1958 and 1992, harkens back to a simpler time: when sexual provocation meant a wee double entendre and a flash of boob. Never a major success outside the country — the films were filled with in-jokes about the National Health Service and English history — the Carry On movies remain a British institution, as beloved as warm beer and the brand of football played with a round ball without using your hands.

So news last week that a British producer was set to revive the films was greeted with a wave of nostalgia by the local press, who devoted countless column inches to the story and reveled in the prospect of the first new Carry On title in 25 years.

A look behind the headlines, however, shows how treacherous such nostalgia can be. Consider Jonathan Sothcott, the producer at the center of the Carry On reboot and a man, according to a number of industry figures, with a trail of bad debt and bankrupt film companies to his name.

Several former employees of Sothcott have accused the producer of scamming them and countless others working on the lower rungs of the British film industry as he moved from one title to another. Indeed, a Facebook page entitled "Jonathan Sothcott Fraud Investigation,"was set up anonymously three months ago encouraging alleged victims to get in touch. The page has already pushed some 250 actors, writers, extras, consultants and others come forward. Many of the page's followers have detailed how they still haven’t been paid, sometimes years after working on Sothcott’s films.

But the matter isn’t simply one for grievances on social media. The British police has also been looking into matters, THR has learned, along with the governmental tax department HMRC. While the HMRC never comments on investigations, it has been sent evidence — from both individuals and the police — and provided a case number.

As one producer, who wished to remain unnamed, tells THR: “We were just waiting for him to do something newsworthy, and then came the Carry Onstory.”

Filmmaker J.K. Amalou was among the first to file a complaint with the police. The director shot underworld action film Assassin, which Sothcott produced, in 2013. The movie starred Danny Dyer, a familiar face from low-budget British gangster titles, and now a star on long-running BBC soap EastEnders.

To make the movie, which had a budget of $220,000 (£150,000), Sothcott set up Assassin Productions Limited, a so-called Special Purpose Vehicle (SPV) company and placed the money from the film's investors — £140,000 — into it. This is standard practice in the film industry. SPV's are a kind of firewall against liabilities. If a film goes way over budget, or flops badly, the SPV goes bust, not the producer's main production company.

Amalou, however, soon became suspicious that Sothcott was using Assassin Productions Limited as his own private piggy bank. Sothcott claimed Amalou had gone £50,000 over budget on the movie but, according to the director, evaded meetings to discuss the problem. When Amalou tried to check the company finances, he found Sothcott had failed to file the required bank mandate giving him access. But when he eventually did get into the accounts, the director said he immediately spotted evidence of fraud.

"The minute I looked at the bank statement, I saw straight away that he was taking huge amounts from the account," he tells THR. "I saw companies that had no connection with my film whatsoever. It was obvious he was using the bank account — my investors’ money, my film’s money — to do other things."

Among the outgoings were expensive lunches, events organizers and, notably, transfers to other film companies set up by Sothcott and payments for invoices on other films, including another gangland thriller, Top Dog.

Dougie Brimson, whom Sothcott hired to write and co-produce Top Dog (adapted from Brimson’s own novel), said he had similar suspicions of wrongdoing connected to that film and its SPV, Top Dog Limited.

Although he was a director and shareholder of the company, Brimson says that he was refused access to all bank statements and invoices. He estimates that "at least £487,000" was raised for the film, including a £350,000 pre-sale to Universal Pictures.

"Top Dog Ltd was more than well capitalized," he says, suggesting that similar films were made for around £200,000-£250,000. And yet the company was eventually declared bankrupt, with Brimson saying that it owed "tens of thousands of pounds."

Although he never had full access to the finances, Brimson says he managed to obtain evidence of false accounting, including an invoice of £1,500 entered into the accounts as £15,000 and a fee for the director Martin Kemp (formerly of U.K. pop music group Spandau Ballet) almost 50 percent higher than his agreed remuneration.

Brimson asserts that Kemp was still owed money from Assassin, in which he also starred, suggesting that the inflated figure from Top Dog could well have been an attempt to pay off this debt.

Another individual paid from the accounts of Top Dog was Ricci Harnett. Like Kemp, Harnett starred in the film, and was paid in full for his work.

But when Sothcott hired him to make his directing debut on another title, Reign of the General, Harnett saw that part of his fee was also paid out of Top Dog Ltd's accounts. Other money, he says, came from the account of WSKTOW, another now-defunct SPV set up for We Still Kill the Old Way, yet another London gangster film produced by Sothcott.

Harnett said he had to return to work as a motorcycle courier and relied on support from his family to pay the legal bills in his suit that, finally, resulted him him getting the money he was owed.

Another director, Jonathan Glendening, tells THR he was three weeks into shooting the Sothcott-produced comedy-horror Strippers v. Werewolves before he eventually received a £4,000 payment — the only money he received for his work — via former Sothcott collaborator Simon Phillips (who now tells THR he is also owed money by the producer) and from a different company account.

After the film's wrap party, in which the director says Sothcott praised him and his work on the film, Glendening claims he was fired for "gross incompetence," (something Sothcott has confirmed to THR) locked out of the edit and told his "fantastic footage was suddenly awful." Glendening also asserts that one of the principal actresses in the film was fired after coming out in support of an unpaid makeup artist, with Sothcott casting his then-girlfriend in a new part.

The final "awful" release, which still bares Glendening's name, was rushed out without effects, and the director says, looks "remarkably different" to the original scenes he cut himself.

“But that’s not the point, the point is I shot the entire film for him and wasn’t paid for it," he adds.

Reign of the General, Top Dog, We Still Kill the Old Way and others, including Age of Kill, were made through Sothcott’s production banner Richwater Films, launched in 2013, and now — like many of the producer’s outfits — dissolved. Another one of Sothcott’s now defunct outfits, Black and Blue Films Limited — which was behind Strippers v. Werewolves — was put into liquidation with reported debts of more than £500,000. Sothcott is believed to have had at least 10 of his companies dissolved, and has resigned from four others (including Assassin Productions Limited).

“Ultimately, I know his scam,” says Amalou. “He sets up limited companies (and) raises some money knowing full well that he’ll have enough to deliver a film to a distributor, but not enough to pay everyone involved.”

Among the scores to have contacted the Facebook page is an extras agency that says it is owed £10,000, a cinematographer who claims to be owed £6,000 and a catering company owed “many thousands.” Several have said that when they put their grievances online they were instantly warned by Sothcott's legal council. "When we posted something on Twitter about us he sent us a lawyers letter saying we were bad-mouthing him," claims one.

Amalou says that in order to pay those owed on Assassin (Sothcott eventually resigned from the company, leaving him to deal with the debts), he had to sell off his 20 percent stake in the film.

“So I have no shares whatsoever. I didn’t make a penny from the film, even though it’s now making money.”

When media reports of the financial disputes surrounding Sothcott first emerged earlier this month, the producer told The Mail of Sunday that the Facebook page had been set up by “some stalker making it all up," claiming that “none of it’s true — I don’t even know who the nutter is."

But the volume of complaints being leveled against the individual indicate that it’s far from just one stalker, and that the issue has been going on for a number of years (one report of unpaid wages dates back to 2010 zombie horror film Devil’s Playground).

In a response to THR, Sothcott rejects the allegations made against him in this article, claiming that he himself is owed money from Assassin and denies he attempted to block Amalou from seeing the company accounts. He also asserts that he resigned from the company "because I simply didn’t want my name associated with such a terrible film." (THR has seen evidence that Sothcott attempted to buy himself back into the "terrible" film as a producer)

Sothcott also rejects that any threats have been made — beyond legal letters "relating to defamation" to Brimson and Amalou — to any individual regarding any grievances, and even denies to have received any claims for outstanding sums on any of his films, something in direct conflict with the many who have spoken out via the Facebook page.

Among the suggested reasons why Sothcott has seemingly managed to avoid any major legal proceedings thus far is that those left chasing unpaid invoices aren’t millionaire film executives with teams of sharp-suited legal experts at their disposal.

“I could go after Sothcott in a big way with my lawyer, but it would cost me a minimum of £30,000,” says Amalou, who filed a report with the police some 18 months ago.

Sothcott's legal representative has a letter dated May 20 from the regarding the police investigation into him that says the case will "not be proceeded with," but THR has learned that some of the evidence gathered has been passed from the police to British tax authorities.

Now, while the average behind-the-scenes employee on one of Sothcott’s low-budget titles might be put off from chasing a few thousand pounds of missing payments due to the costs involved, HMRC wields considerably more clout. Accusations that Sothcott has abused the U.K.’s producer tax relief, which is now as much as 25 percent of production expenditures, could see tax investigators move in. Sothcott says this is "absolutely not true and a serious allegation," something rejected by Amalou, who points to payments made to cast and crew – such as Kemp and Harnett – from other film accounts and the movement of money between SVPs.

"He’s pretending that stuff is connected to the film and is claiming the 20-25 percent off it, which the tax man gives back to him," says the director, while Glendening adds that he has "always wondered" if tax relief was claimed on his unpaid director’s fee.

What happens with Sothcott's proposed Carry On titles remains to be seen, but it's clear that there are many who would prefer the producer wasn't allowed to have any further involvement in filmmaking, let alone on such an iconic franchise.

"He is a blight on our industry," one producer told THR. "His actions damage the legitimate attempts by every independent producer in the country to make films and, in some ways, give us all a bad name."

2019

A Different Opinion About Fraud from producer Jonathan Sothcott

Producer Jonathan Sothcott: EIS for film production is total fraud

By Ldn-Post May 8, 2019
The London Post

As the Enterprise Investment Scheme celebrates its 25th anniversary it is casting a dark cloud over the British film industry, which it has become the single most important source of funding for.

The scheme, which allows qualifying investors to write off 30% of their investment against their income tax (along with other incentives) has been an incredibly popular one and has allowed hundreds of British films to be made. The wheels appeared to come off last year, however, when the rules were changed with the introduction of a ‘risk to capital condition’ which effectively precluded investments in film production, even though HMRC’s guidelines suggest it is still achievable.

Producers need to receive ‘Advance Assurance’ from HMRC that their business plan will qualify for EIS tax relief and since Spring 2018 what initially appeared to be long delays soon became a log jam of rejections.  Earlier this year, Ingenious, one of – if not the – biggest source of EIS funding for films – pulled all of their EIS media offerings and while some producers are prepared to wait more than a year for a decision on whether they qualify from HMRC, many others think the game is up.

American movie bible Variety recently ran an article about fund Great Point Media’s new (media, but non-production) EIS investments but noted “The Enterprise Investment Scheme structure in the U.K. has been extensively used to help finance independent film, but following an overhaul of the rules by British authorities the relevance of EIS funding for film and TV has been questioned.”

Talking exclusively to us, Jonathan Sothcott, one of the UK’s most established and prolific independent film producers and an expert on tax efficient film investment gave us his views on the uncertain film finance/EIS landscape. “I think the idea that there are hoops you can jump through to qualify film production for EIS is total fraud. It is dead in the water and the industry either doesn’t want to or simply hasn’t woken up to it yet. The film companies getting the advance assurance are basically technology offerings in a media wrapper which just aren’t sexy enough for investors.”

HMRC did not respond to our request for clarification but a tax specialist at a leading law firm, who wished to remain anonymous told us: “EIS for film production is dead and buried. Too many producers spoiled it with pre-sales which basically secured investors’ money so they were getting tax relief with no risk. But its frustrating because I think the DCMS have a duty to support the British Film Industry and there’s no sign of any alternative structure. There’s going to be huge fall out from this.”

Sothcott also told us “it really is the era of investor beware – there are some naughty producers claiming to have advance assurance for film production and even listing the benefits on their websites. They’re either telling porkies or out to rob people which is sadly all too common in this game.”

Of course, there’s still the UK Film Producer’s Tax Credit, a rebate producers can claim back from HMRC once production wraps, usually equating to around 20% of the budget. Although some producers use this as ‘first money back’ for investors, it lacks the old EIS benefits of no capital gains tax, loss relief if the business fails and even the basic security of comfort from HMRC. City rumours suggest that the Tax Credit could be raised to as much as 30% but Sothcott is sceptical “even if this was true, it will benefit American films being made at our studios more than anyone else – it’s a rebate on spend, not an incentive to invest in homegrown creativity. There’s an important difference. Similarly there’s talk of more soft money from the British Film Institute but to me that goes completely against the grain of being an independent. I want to make films my audience wants, not films some public body approves.”

We expect this issue to become more prominent after  the hoopla of Cannes subsides as without an alternative the independent sector of the British film industry could well be headed for a crisis.