AMC Network Accused of Hollywood Accounting in ‘The Walking Dead’

MANHATTAN (CN) — “The Walking Dead” creator Frank Darabont and Creative Artists Agency sued the AMC network for $10 million in licensing fees Thursday, claiming an audit showed AMC hid millions of dollars of revenue through “shady accounting practices.”

Represented by Jerry Bernstein with Blank Rome in New York County Supreme Court, the complaint claims AMC underreported revenue earned by “The Walking Dead” from October 2011 through Sept. 30, 2014.

Darabont sued AMC in 2013 in the same court. That lawsuit is pending Judge Eileen Bransten. The new filing draws from an audit of AMC’s financial records and license records produced during separate, parallel lawsuits against AMC by “The Walking Dead” comic book creator Robert Kirkman and other profit participants, in New York County and Los Angeles Superior Court.

The new complaint states: “Having recently completed its audit of AMC’s accounting records, it is now clear that AMC’s wrongful conduct extends well beyond artificially deflated license fees. In addition to withholding hundreds of millions of dollars from the creators of the hit television series ‘The Walking Dead’ through improper self-dealing, which is the subject of litigation between the parties currently pending in this court, AMC has used a variety of shady accounting practices, described below, to withhold tens of millions more.”

Kirkman’s agreement with AMC showed that the network had a different self-dealing provision than it did with Darabont, which required that AMC to use an actual license fee, rather than an imputed license fee, for all its transactions with affiliates, and that this actual license fee is subject to self-dealing protection, requiring arms-length, fair market license fees, according to the new, 27-page complaint.

AMC Networks attorney Orin Snyder, with Gibson, Dunn & Crutcher, responded to the new lawsuit with heat: “At the heart of this lawsuit — and all the litigation related to ‘The Walking Dead’ — is the greed of CAA. Their goal is every dollar for themselves, with total disregard for contracts, clients, fairness or even basic decency.

“This is just another opportunistic lawsuit orchestrated by the most powerful lawyers and Hollywood agents seeking an unjustified windfall and we are confident that it will be defeated in court.”

Snyder added: “AMC was the only network willing to take a risk on ‘The Walking Dead,’ after many others passed. AMC has been an honest steward of the series and has paid all of its creative partners handsomely and appropriately.”

But Darabont and CAA claim that AMC reported only 20 percent of its earnings from licensing the show to Apple, concealing $18 million in licensing the show to electronic platform and underreported licensing from Fox International Channels by $2.8 million.

They say AMC also concealed $3.4 million of gross receipts from merchandise and licensing from brand management firm Striker Entertainment LLC.

During the audit period, AMC also failed to account for more than $1.5 million from product integration fees from Gerber and Hyundai, according to the complaint.

Darabont and CAA say they will conduct a supplemental audit of all profit participation statements following the previous audit period that ended Sept. 30, 2014.

Darabont’s 2013 lawsuit against AMC seeks $280 million in damages.

That trial is tentatively set for this year.

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