When Andy Vajna, the producer of such Hollywood blockbusters as Rambo, Die Hard with a Vengeance, and Terminator, decided to settle in Hungary, he hit the jackpot. In the United States, as a result of his questionable business activities, he had been harassed by the Internal Revenue Service (IRS) for fourteen years and was lucky not to land in jail. In Hungary the Orbán government makes sure that Andy can carry on with his shady activities absolutely undisturbed. In fact, he knows that the boss of the mafia state, which Hungary has become in the last five years, will make sure that his by now numerous business activities will thrive.
For a while, between the late 1980s and 2010, Vajna split his business activities between Los Angeles and Budapest, but then there came a time when he had to realize that his heady days in Hollywood were over. His last hurrah was Terminator 3, which he produced with his old business partner, Mario Kassar. At the time an article appeared in Entertainment which described Vajna and Kassar as has-beens or worse. “A dozen years ago, Kassar and Vajna were names that could open doors. But by 2003 half the town thought they were dead, and the other half figured they were probably in self-imposed exile. That’s the kind of reputation you get when you find yourself at the center of one of the great flameouts in Hollywood history.” The article indicated that the two “spent wildly on unworkable projects and unmentionable extravagances. Soon enough came federal investigations and bankruptcy proceedings.”
Vajna’s and Kassar’s company, Carolco Pictures, did exceedingly well, especially after 1986 when it completed a $50 million debt offering in the junk bond market. Between 1986 and 1989 Carolco’s staff grew from six to 100. The company, however, was being watched by the IRS because Carolco’s finances were anything but transparent. Behind the complicated business setup and clever machinations was a tax lawyer, Peter Hoffman, who soon enough was accused of filing false tax returns for 1989. The prosecution alleged that “Hoffman evaded taxes by tapping into a deferred compensation plan and calling the payments loans while he was chief executive of the film production company Carolco Pictures.” Hoffman’s first trial, held in October 1997, ended in a mistrial. Reporting on the result, the Los Angeles Times wrote that “the government’s failure to convict Hoffman puts a dent in an ongoing larger criminal tax fraud investigation into Hoffman’s former colleagues at Carolco, producers Mario Kassar and Andrew G. Vajna.” The same article described the business network of Kassar and Vajna as a “system of byzantine offshore companies.”
Less than a year later, at a retrial, Hoffman was fined $5 million but avoided jail time. It was a “much watched case, one that federal prosecutors had hoped would assist them in a bigger criminal tax fraud investigation of movie producers Andrew Vajna and Mario Kassar.” But this was not to be. Later Vajna said that Hoffman was a good man who refused to cooperate with the federal investigators and testify against them.
Magyar Narancs, in an article published in 2011, expanded on the “system of byzantine offshore companies.” In 1989, the same year in which Hoffman filed false tax returns, Andy Vajna decided to get out of Carolco Pictures, in which he had a 36% stake, for which he received $100 million. He was supposed to pay $40-50 million in taxes on the sale, but with Hoffman’s help he managed to move his money into shell companies in Panama and the Netherlands Antilles. Of course, in movie land it was not only Vajna and Kassar who went to great lengths to avoid paying the taxes they owed. About this time the IRS set up a special unit to investigate Hollywood moguls it suspected of tax fraud. In fact, the investigation into Carolco had begun even before Vajna decided to leave the company, and it was most likely this investigation that prompted his exit. The “byzantine system” was so complicated that even market analysts were unable to navigate through the maze of companies. As a result of Hoffman’s machinations, the company made barely any money. A few million a year.
The IRS was after Vajna and Kassar for fourteen years. Among other things, the investigators uncovered large interest-free loans from the company to Vajna and Kassar. In 1988 alone, according to Magyar Narancs, they received $8 million, which they spent on art work and real estate, as well as on covering their gambling losses. The IRS alleged that between 1988 and 1990 Vajna and Kassar sold 75% of Corelco’s stock, in the amount of $286 million, through their offshore companies, on which they paid no taxes. Vajna’s share of the loot was $107 million. The tax case was settled out of court. Instead of the $41.1 million the IRS said it was owed, Vajna paid $6.5 million.
Vajna’s next business venture in the United States, Cinergi Pictures Entertainment, wasn’t exactly a success story. It was established in 1990. By 1993 it lost $4.2 and in the following year, $16.1 million. By April 1997 it was announced that “the troubled independent film company, hammered by losses from such films as ‘The Scarlet Letter,’ ‘Judge Dredd’ and ‘Nixon,’ will pass virtually all of its library over to Walt Disney Co. in lieu of paying Disney $38.4 million advanced to Cinergi to make movies.” Cinergi IPO’d at $14.50 a share in 1992. By 1997 its stock price was just a little over $1. The Los Angeles Times reported that “the company has said it has not been identified by the U.S. attorney as a target of the probe,” although Vajna himself was “the subject of a federal grand jury investigation involving his personal tax returns.”
Five months later, in September 1997, Cinergi’s fate as a public company was sealed. It agreed to a management buyout offer of $2.30 per share, or about $31 million. “Under the deal, Cinergi would merge with CPEI Acquisition Inc., a company formed for the buyout by Andrew Vajna, Cinergi’s president and chief executive, and Valdina Corp.” CPEI Acquisitions, registered in Delaware, still exists on paper, but there is no information about it online. Valdina Corp. is an even more mysterious entity. Bloomberg Business couldn’t identify any of its key executives, but it did learn that Valdina has a P.O. Box in Castorweg in the Netherlands Antilles.
Vajna and Karras got together again after 2000 and produced a number of films, the best known of which was Terminator 3, which was a financial success. Sometime before 2010 Vajna decided to give up his career in Hollywood to become Viktor Orbán’s commissioner in charge of the Hungarian film industry. And to start his shady business dealings all over again, this time in a more congenial environment.