Peters' Personal Spending Spurs Axanar Accounting

HEARSAY Peters’ $150,000 Contribution. This amount has only recently been quoted by Peters, presumably encompassing money he claims to have given Axanar from proceeds of the recent auction by Propworx, another company he owns that also uses office space, apparently rent-free, in Peters’ paid-for-by-donors commercial studio. However, the amount he claims grows by the week. He originally claimed to “donate” $20,000, but over the course of two weeks, the figure had grown to $45,000 with no explanation.

The trouble with the claim Peters put “$150,000 of his own money into Axanar” is that there is absolutely no way to confirm that he did or that was the actual amount. Peters has produced no records to substantiate his claim.

DUBIOUS STUDIO OWNERSHIP His claim of paying the rent for Axanar’s studio is troubling because it’s unclear if Axanar even owns the lease to the building anymore. The facility is now run as a commercial soundstage called Industry Studios, whose ownership appears to include Peters in limited liability companies established in Georgia and California by Peters’ attorney, Sheldon Friedman. However, Peters steadfastly refused to clarify the ownership of the studio.

UNPAID RENT In addition, Peters admitted, under oath, in his deposition, that his separate company, Propworx, has paid no rent for its use of the facility.³⁾ So if Propworx’ auction proceeds did eventually go to Axanar, wouldn’t that more properly be classified as back rent rather than Peters’ claimed generosity?

Finally, why? Given the amount of money Peters should have had on hand following his two successful crowdfunding campaign, why was the infusion of an additional $150,000 even necessary — particularly given estimates of as much as $200,000 in additional revenue (e.g., direct donations for Axanar, so-called “retroactive donations” entitling donors to Blu-ray copies of Prelude to Axanar, Donor Store merchandise sales, etc.). Without documentation, Peters’ statement merely asks people to trust him, a dubious proposition given the evidence the plaintiffs found in discovery.

MOSTLY FALSE Not Kept a Single Dollar. The statement conflates Peters’ payments to himself in such a way as to obscure the fact he was by his own admission paid a salary. The plaintiffs claimed Peters personally financially benefited from his production, through his salary, paid travel expenses and personal expenses. “Direct financial benefit” is one of the causes of action in their copyright suit against him. So even if he paid back those expenses two years later, Peters still financially benefited from having paid himself at the time; replacing the money later does not erase that fact.

Peters’ ‘not kept a single dollar’ claim directly contradicts the financial records Peters turned over to the studios’ lawyers, and which the plaintiffs have filed with the court. In recent public statements, Peters accused opposing counsel of lying:

“It just amazes me that some people are stupid enough to believe that just because CBS/Paramount’s lawyers put something in a document it is true. Let’s be clear, the [CBS and Paramount] lawyers at Loeb & Loeb were given lots of facts that they ignored, and twisted facts to suit their narrative.”⁴⁾

EASY TO PROVE, HARD TO DISCLOSE Never mind that CBS and Paramount’s lawyers’ sworn declarations are based on evidence Peters himself turned over in discovery, and that lying could get them disbarred. Of course, it would be easy for Peters to prove his claim by simply making Axanar’s financial information public, at least to his donors — something he had repeatedly promised but never produced. Moreover, his attorney, Erin Ranahan, already notified the court of her intention to have the financials excluded as evidence from Axanar’s upcoming trial.⁵⁾

HOW REPORTED TO IRS? Peters appears to be claiming that any money he was paid as a “salary,” has been more than repaid by contributions he claims to have made to keep Axanar afloat — but the repayments happened two years later. So how was his salary originally reported to the Internal Revenue Service? According to its own FAQ, Axanar Productions has no employees; everyone who works there (including Peters) is an independent contractor. Axanar should’ve reported each contractors’ income to the IRS, and each one would have had to pay their own taxes on that amount. (N.B., it’s quite possible that classifying those people as contractors violates how the IRS instructs employers to differentiate between contractors and employees — a common problem among independent film productions.)⁶⁾

PARTLY TRUE Accountant’s Review. While it is likely true that an accountant at some point has reviewed Peters’ financials, it’s not clear who conducted this review, when it was conducted and when a report was completed. The truth is, Peters and his attorney have contradicted one another (and Peters has contradicted himself) about the supposed review of Axanar’s financials, as documented in an earlier AxaMonitor Fact Check:

CONTRADICTORY Which Financial Data? It’s unclear precisely which financial information Peters, his attorney and the studios’ lawyers are talking about, with each party describing the records quite differently.

• Financial “Summary”. In its October 27 emergency (ex parte) motion, the plaintiffs described the document this way:

The only document Mr. Peters has turned over relating to the expenditure of the $1.4 million he raised from Star Trek fans to create Star Trek: Axanar is a financial summary prepared by his accountant. … This document shows the amounts and dates on which Mr. Peters paid himself and his colleagues, and paid for his personal expenses with funds from Star Trek fans.⁷⁾

Federal Magistrate Judge Charles F. Eick‘s October 31 order appeared to apply to this document since it was the one described in the ex parte motion, and it was the one in Eick’s October 28 order approving the plaintiffs’ request to file the financial summary with the court under seal (i.e., not available to the general public).⁸⁾

• Reviewed by Accountant. The plaintiffs’ description of the document as a summary comported with how Peters himself described the document on October 29:

The financials are complete and have been reviewed by an accountant and show me not having taken one dollar from Axanar over the TWO AND A HALF YEARS I have worked full time on this project. Every dollar donated is accounted for.⁹⁾

• Preliminary Quicken Notes. Yet in her October 28 opposition brief Ranahan described the earlier records named in the ex parte motion as “certain highly sensitive financial information consisting of thousands of pages of Alec Peters’ Quicken financial notes … not prepared by an accountant.”¹⁰⁾
  
  
• Revised Quicken Notes. The defense appeared to have handed over a new set of documents, described as “a revised version of Mr. Peters’ Quicken notes” on October 28. Both it and the revised records, thanks to the judge’s order, were now available for the plaintiffs to use in depositions with looser restrictions.

DUBIOUS Restoring Donor Confidence. The idea of having an independent committee review Axanar’s financials and report to donors sounds like a good idea but the vague terms of the proposal raise more questions than they answer. For example:

Industry Professionals. Which industry? Film? Accounting? Most filmmakers are not known for being accountants (that’s why they hire them), so it’s unclear what accounting expertise other film industry people are supposed to being to this endeavor. And if it’s accounting professionals, why create a committee instead of just hiring one to examine the financials and report back?

Donors Which donors? Chosen by Peters? How does his being able choose the donors to be members of the committee ensure its independence and impartiality? If not Peters, then who? And how will that person’s independence and impartiality be ensured?

Cost. Who is paying for this committee? How many members? How will they be compensated for their time? Will this expense also come out of donor dollars?

From this vaguely worded proposal, it’s unclear what value such a review committee would add to a review of Axanar’s financials and Peters’ spending already being conducted by an accountant, other than a public relations move calculated to mollify increasingly worried donors.

Peters’ Compensation The statement appears to acknowledge some impropriety in the idea of a fan producer having been paid a salary or otherwise reimbursed for expenses. Yet Peters has always defended being paid. Why the flip-flop? Does it concede the plaintiffs’ allegation that Peters gained a “direct financial benefit” as a result of his copyright infringement, while at the same time claiming his paying back those financial benefits make them disappear, or merely redistributed?

UNCONFIRMED Nonprofit Status. This is not news. AxaMonitor debunked Axanar’s nonprofit myth eight months earlier, in March. In an April interview on TrekZONE with editor Carlos Pedraza, spokesman Bawden admitted he didn’t see what benefit obtaining nonprofit status would confer on Axanar’s operations.¹¹⁾

Nonetheless, Axanar has continued to use the words “donate” and “nonprofit organization” together in attempts to entice people to donate toward the production of the film despite its actual status as a for-profit California corporation. This in spite of California’s Non-Profit Integrity Act, which makes it illegal to portray an organization as nonprofit in order to solicit donations.¹²⁾

APPLICATION PROGRESS There’s a process for Axanar to follow to become a federal tax-exempt non-profit organization, starting with formal incorporation as a non-profit in California. That must be done before applying for the IRS 501 status. For example:

• Has Axanar drafted or filed articles of incorporation as a non-profit?
• Has it constituted a board of directors?
• Has it registered with California’s state agency governing charitable organizations?¹³⁾
• Has it prepared or submitted its 501(c)(3) application to the IRS?
• Has it drafted its bylaws?
• Has it prepared its systems for the specific reporting requirements to which non-profits are subject, like IRS Form 990?

At what point in the process does Axanar find itself? What does “we’re working on it” actually mean? Given the lack of clarity about Axanar’s nonprofit intentions, it’s unclear why this was included in a statement about the lawsuit.

MISLEADING Not One Dime from Studio. Virtually all public information regarding Industry Studios reveals little about its ownership or operation so it’s impossible to know whether this statement is true. The asset transfer has never been confirmed, despite AxaMonitor‘s repeated questions of Bawden in the months since Peters’ announcement.

CONVOLUTED CONNECTIONS revealed in AxaMonitor’s investigation of Axanar’s “Industry Studios” and a web of multi-state companies.

AxaMonitor‘s investigation of the company supposedly operating the studio revealed a tangled web of shell companies stretching between California and Georgia, all represented by Peters' personal attorney, with no clarity about whether Peters’ is part of any ownership group separate from Axanar Productions Inc. or why he was able to offer part-ownership to departed chief technologist Terry McIntosh in May.

Moreover, “not one dime” earned from the studio makes it appear as if Axanar wasn’t trying to earn money until now. What appears to actually be the case is that the soundstage simply wasn’t ready until recently to rent out to film or television productions.

Though Peters boasted in May that the studio would be operating the following month, it turned out the facility needed additional work before it could officially open for business, including upgrading the fire sprinkler system to meet fire department codes. Peters contracted with a firm to assist him in getting the studio to pass the permit process and be certified for film, television and photo projects.¹⁴⁾

MOSTLY FALSE Disinformation about Axanar. This statement, echoed in court documents as well by Peters’ attorneys, paints a portrait of a vast disinformation campaign leveled against Axanar. While it’s true the lawsuit and Peters himself often attract vitriolic attacks against him, he has identified almost no specific instances of inaccuracy or disinformation. The furthest he’s gone is only general condemnation for news sources he doesn’t like, such as The Mary Sue and AxaMonitor.

In fact, given its hundred thousand Twitter followers, tens of thousands of fans on Facebook, claimed 14,000 donors and the national (even international) positive news articles from such outlets as Space.com, Newsweek, Bloomberg, the Washington Post, and Wired, it’s difficult to see how a disinformation campaign with a far smaller reach could threaten Axanar.

HIDING DISSENT Meanwhile, since the lawsuit was filed in December 2015, Peters has purged hundreds of former fans from its various Facebook pages, blocked many from its Twitter feed and, after failing to silence critics with a combination of refunds and non-disclosure agreements, forced refunds on backers in order to delete their critical posts in Axanar’s Kickstarter comment section and posted dozens of spam messages on Kickstarter in order to obscure critics’ comments by moving them down the web page.

DISINGENUOUS Copyright Concerns The language sounds conciliatory but Axanar’s actions through its lawyers tell a different story. In their motion for summary judgment, Peters’ attorneys claim the studios have no copyright interest in the story of Axanar, and that the film would copy Star Trek in no way that wasn’t generic to the genre of science fiction. Months of settlement talks have fizzled because it’s clear Axanar cannot address the studios’ copyright concerns without a court ruling in their favor.