UT Communication Foundation

The trailer for Homo Erectus, a 2007 movie written, directed by and starring Adam Rifkin, lasts two and a half painful minutes and features a montage of women being clubbed over the head, one naked butt and a few cuts of men kissing, the last an unsophisticated reference to the first word in the film’s title.

Roderick Hart, dean of the College of Communications, confirms what the trailer implies: “It was a terrible film.”

But UT and UT students helped make the movie. Homo Erectus was produced by Burnt Orange Productions, LLC, a company owned by the UT Communication Foundation. The University cannot legally own a for-profit company, but the foundation successfully circumvents that rule because the Communication Foundation is an external nonprofit. Its stated mission is to support the University.

In reality, the Communication Foundation was established  in 2003 to pay for Homo Erectus and other films with both public and private money. Those films, in their defense, provided a learning experience for UT students interested in filmmaking, a handful of whom worked behind the scenes and on the set. Radio, Television and Film students worked on four films produced by Burnt Orange Productions between 2003 and 2007.

The films were meant as an educational exercise, with the possibility that they would additionally generate revenue. Ellen Wartella, dean of the College of Communication when the Communication Foundation was established, explained in an interview: “We were hoping to set up a film production program that our students would work on that would actually produce films. We hoped it would develop into a source of income to keep production going with in the department. It was a way of connecting our students and getting them money for productions and getting them shown in theaters.”

In the past year, other external foundations collecting private money to support this public University have come under close scrutiny as part of a larger power struggle for control and oversight between the UT System Board of Regents and the UT administration.

In 2011, Lawrence Sager, former dean of the University of Texas Law School, resigned under pressure after he received a $500,000 forgivable loan using funds from the School of Law Foundation, a fact revealed by an open records request filed by disgruntled faculty members. Because the School of Law Foundation and the Communication Foundation are external to the University, the money they contribute is subject to different rules than public funds that come from other sources: the Texas Legislature (13 percent of the 2012 UT-Austin budget), the Permanent University Fund (the UT-System endowment) and federal funding from the U.S. Government.

In a state rabid about access to public information and transparency of government, the foundations operate in the shadows. The rules governing the money’s distribution are inconsistent and vague. The University wants to keep the regents at bay, but at a public institution, even private funds must be dispersed in a manner that is transparent and clear. This lack of transparency was truly the most objectionable characteristic of the Communication Foundation, the tastefulness of clubbing women aside.

The University was unable to provide records of Burnt Orange Productions’ expenditures, but the foundation “registered consistent negative balance of more than $760,000 on its tax forms since filmmaking ended in 2007,” according to an April 29 article in The Daily Texan. It continues, “By writing off its losses, the foundation registered a positive balance on its 2012 tax return of $22,000, but how those funds will be spent and whether or not the organization has any potential as a vehicle for funding at the University of Texas remains to be seen.” 

Should Homo Erectus and a filmmaking company described as a “sinkhole” for private and public money be a part of the mission of higher education? Many students involved directly in the project say “yes,” because the foundation provided them with valuable learning experience. One student told the Texan, “The main long-term benefit I received was working with high quality material.”

But any money flowing touched by foundations linked to the University — even money aimed ostensibly at enhancing the student experience — should be subject to all the transparency requirements of a public university in Texas. The intentionally opaque structures of many external foundations, which blur the lines between public responsibility and private interest, demand attention. 

Correction: Because of a copy editing error, an earlier verision of this article incorrectly said Lawrence Sager, former dean of the University of Texas Law School, gave himself $500,000 forgivable loan using funds from the School of Law Foundation. Sager did not give himself, but received the forgivable loan.

Editor’s Note: This is one story in a series of features on external UT foundations running through Wednesday.

When UT set out to offer students a way into Austin’s independent film scene in 2003, it was easy for administrators to get swept up in Hollywood ambition. They formed a public-private partnership that resulted in four feature films that flopped financially, but offered students a glimpse into how a traditionally funded project operates.  

Creating a financial and legal framework to allow private investment in UT-affiliated films meant forming the UT Communication Foundation, said Jeff Graves, UT associate vice president for legal affairs. Since UT cannot legally own a for-profit company, the foundation was formed and owned nine corporations that produced the movies, Graves said. The parent production corporation was called Burnt Orange Productions, LLC

When it comes to measuring the success of the company’s four years of filmmaking, opinions vary depending on who is asked and what metric is used.

University officials, investors, students and filmmakers agree that establishing the foundation to fund feature films — possibly a first by a public university — provided opportunities to work in a professional environment that otherwise would have been inaccessible to students.

Hart said it was also a learning experience for the administrators. 

“It’s like taking a course, you know,” he said. “You got a C on that first exam, but you’re hoping on getting a B on the second exam. We always had hope. Now we weren’t stupid. After a while we said, ‘I’ve had enough. Thank you very much.’ We’re not going to invest any more college money even though it was modest.”

The endeavor was a sinkhole for public and private money. 

The foundation’s company received $3.35 million from 14 private investors, according to Securities and Exchange Commission documents. The University also contributed money for the company’s buildings and University staff that worked on the projects, said radio-television-film professor Thomas Schatz. 

The University was unable to provide records of expenditures related to Burnt Orange Productions although The Daily Texan submitted a public information request for that information in February. Since none of the films turned a profit, the foundation registered a consistent negative balance of more than $760,000 on its tax forms since filmmaking ended in 2007.

By writing off its losses, the foundation registered a positive balance on its 2012 tax return of $22,000, but how those funds will be spent and whether or not the organization has any potential as a vehicle for funding at the University of Texas remains to be seen, Graves said. 

“The foundation is a non-profit set up to support the University, just as all the other foundations are,” Graves said. “So it could be used for other purposes, although I don’t think that was ever contemplated.”  

While the foundation has been inactive since 2007, College of Communication dean Roderick Hart said he still spends $15,000 each year from his dean’s discretionary fund to cover insurance costs related to the project.

“I don’t like paying that, but if there were any lawsuits to come at us, we’d need it,” Hart said. Hart inherited the foundation from his predecessor Ellen Wartella in 2004. 

Wartella said she spent part of her time as dean soliciting investments for the project and she had hoped it would make enough money to continue production with the college.  

It may not have taken a blockbuster, but some commercial success would have been necessary to keep Burnt Orange Productions going, Hart said. 

Investor Eddie Safady said he and the others who invested in the project had more philanthropic goals in mind than profits.

“It wasn’t a good financial investment because everyone lost money, but most of the investors, including myself, went into it not ever thinking they were going to make money,” Safady said. “I think it was a great exercise for those who got to participate. We shouldn’t have started without having a lot more money dedicated to the project up front.”

Documents filed with the SEC indicate the organization had an $8 million fundraising goal, but Hart said raising that much money proved more difficult and time consuming than anticipated. 

Making the Films

Once the company formed, the University hired Carolyn Pfeiffer, an established independent-film producer, as CEO and rented a warehouse downtown on Fifth Street for the project. 

Scripts for films that could be made on budgets ranging from $500,000 to more than $2 million poured in, said Gregory Kirr, development director for the movies. Kirr said he cataloged and read between 400 and 500 scripts, chose the best ones and forwarded them to Pfeiffer. 

UT administrators on the foundation’s board of directors had final approval on content, Hart said. Vice president for legal affairs Patricia Ohlendorf and vice president and chief financial officer Kevin Hegarty and Hart were on the board of directors.

“We would listen to them, and I think if anybody had suggested something crazy, people like Patti and I would listen and step in if we had to,” Hart said. “We wouldn’t have wanted anything that was too risque. We wouldn’t want that associated with the college.” 

Ultimately, administrators decided to cease production after the films generated little financial or critical success, Hart said. 

Each film had a crew of students and professionals and more than 200 students, including 2005 radio-television-film alumnae Kate Ridgway, worked on the films. Ridgway, who has built a career in television and film in Los Angeles, said her experience working for Burnt Orange on the set of “The Quiet” as a post-production assistant jump-started her Hollywood career. 

“Actually working on a film that wasn’t just a school thing was a really important experience,” Ridgway said. “To be able to cope with some of those real-world issues like data security and to have a budget — I’ve never seen a student system like the one we worked on at Burnt Orange. Man, it was crazy.”

Librado Lozano, another 2005 alumnus who worked for Burnt Orange, said he still uses some of the work he produced with the company when meeting with
potential employers. 

“The main long-term benefit I received was working with high quality material,” Lozano said. “Some of my Burnt Orange stuff is still on my demo that I still use.”

Overall, Lozano said his time at Burnt Orange met expectations. 

“I didn’t go into it thinking I was going to work on a really big blockbuster,” Lozano said. “I did go into it thinking I was going to get hands-on experience in films.” 

The most financially successful film the company had any involvement in was not one that students worked on or that was produced by the company. Schatz said the company likely received a “couple thousand dollars” for allowing the crew of the 2006 film “A Mighty Heart” to use its offices for a couple of days to film in Austin. By using Burnt Orange, the film could bypass the process of filing more paperwork to get tax incentives for filming in Austin, Schatz said. The film starred Angelina Jolie and was produced by Brad Pitt. It grossed more than $9 million domestically.

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Gross Receipts: $0

Total assets, 2011: $89,237

Total liabilities, 2011: $857,156

Net assets: $767,919

Gross Receipts: $0

Total assets: $133,100

Total liabilities: $110,905

Net assets: $22,195 

Year founded: 2003

Number of people on board: 3

Employees: 0

The UT Communication Foundation went inactive in 2007, but in the few short years it existed, it provided a financial vehicle that produced four feature films.

The foundation formed to bypass a state law that prevents the University from owning a private corporation. The foundation fully owned smaller companies that partnered Hollywood directors and 200 students with private investments to create the films.

Although the Foundation’s first movie, “The Quiet,” found moderate financial success in theaters nationwide, the subsequent three films produced by the Foundation did not, and the organization was unable to sustain itself financially.

The board of directors once consisted of University officials and investors, but now consists only of Roderick Hart, dean of the College of Communication; Patricia Ohlendorf, vice president for legal affairs; and John McCall, associate vice president of payroll accounting.

The foundation ran a negative balance in excess of $760,000 until January of this year, when it decided to write off the amount. There are no plans to use the foundation for more fundraising at this time, said Jeff Graves, associate vice president for legal affairs.

“The foundation is a nonprofit set up to support the University, just as all the other foundations are, so it could be used for other purposes, although I don’t think that was ever contemplated,” Graves said.