On August 27, 2018—one year and one day after announcing Cinefamily’s closure—Dan Harkham signed Cinefamily’s 2017 tax forms before submitting them to the California Attorney General’s Registry of Charitable Trusts. The tax return—the IRS Form 990—describes Cinefamily’s 2017 fiscal year (FY17), which runs from November 1, 2016 through October 31, 2017.
Although the document is a legal government filing, it appears improper in both form and substance:
Vast sections of the filing are left blank.
They claim no revenue—zero—on at least ten months of operations.
Where Cinefamily does claim specific numbers—as with executive compensation and assets—there is reason to be skeptical.
For balance sheet information, the “beginning of year” figure frequently (and improperly) matches the “end of year” figure—as though no operations had occurred.
The list of directors appears lifted from five years earlier, and does not comport with contemporaneous sources.
Though Cinefamily’s 2017 Form 990 was filed in California, there is no indication Harkham filed with the IRS. Cinefamily has not filed taxes for 2015 or 2016 in any jurisdiction.
Neither Harkham nor tax preparer Eric Gronroos have responded to outreach for this story.
If these are the numbers the Harkhams would have us believe—if these are the numbers they think will cast them in a positive light—what must the real numbers look like?
Cinefamily revenue
Cinefamily was open and operating for the first ten months of the year, yet the FY17 Form 990 reports zero Cinefamily revenue for the year.
If accurate, unpublished financials show Cinefamily with over $2 million of revenue for FY16 and FY15. In FY14, the last year Cinefamily filed with the IRS, they had $1.4 million in revenue.
Assuming Cinefamily was on track in FY17 to hit revenues equal to the previous three years’ average, and discounting for two closed months, we would expect to see over $1.5 million in revenue listed.
Cinefamily assets
At the end of FY14, Cinefamily listed assets worth $128,145. The majority of these assets were newly-acquired theater equipment. The balance was mostly cash and accounts receivable.
Cinefamily’s latest tax filing claims assets of $48,374 as of October 31, 2017. It lists neither equipment nor accounts receivable. How did nearly a hundred thousand dollars’ worth of equipment disappear?
Harkham’s FY17 filing explains in three different ways. At one point, the filing claims depreciation of $835 on equipment of unspecified value. Another part of the document claims Cinefamily began the year with equipment worth $835, and claimed a depreciation expense of $16,170. A schedule to the document claims depreciation of $16,170 on assets worth $16,170. None of these descriptions are coherent.
The tax filing also claims Cinefamily ended FY17 with $44,557 in cash. Where is that cash today?
Cinefamily executive compensation
The 2017 Form 990 reports no CInefamily compensation to Executive Director Hadrian Belove during the ten months of operation. Other documents, however, indicate that in 2017, the Executive Director made a $90,000 salary.
Cinefamily liabilities
Cinefamily’s FY17 Form 990 indicates $6,795 in accounts payable. This may refer to money Cinefamily still owes to distributors, vendors, and members.
The filing also indicates $10,328 in federal income tax liability. Cinefamily has had many state and local tax liens filed against it, and appears to have approximately $60,000 outstanding in aggregate.
Cinefamily directors
Cinefamily’s website and its past Forms 990 were broadly aligned on the composition of the board of directors. The 2017 filing, however, presents a radical change. Without explaining the discrepancy from previous filings or from Cinefamily’s own contemporaneous public statements, Harkham names 7 officers and directors for FY17 (down from 18 directors in previous years):
Daniel Harkham
Samuel Harkham
John Wyatt
Larry Karaszewski
Nancy Willen
Josh Olsen
Hadrian Belove
These are the same seven directors listed in the FY12 Form 990. Nothing else in the record supports the notion that Karaszewski, Willen, or Olsen were active in Cinefamily governance during FY17.
Cinefamily disclosure
As in past filings, Cinefamily states that “copies of the governing documents and financial statements are available by written or oral request to any member of the board of directors.” As we have reported before, this website has made such requests in writing starting in October 2017; no records have ever been made available.