The Matrix Movies’ Millions Causes Australian Investors to Take Legal Action

Chinese cinemagoers flock to the new Shanghai's Paradise Cinema for the premier of 'The Matrix Reloaded' in Shanghai 13 July 2003. STR/Getty Images

Besides being a box office hit, The Matrix film’s went on to even greater success when it became the “No. 1 best-selling DVD of all time” in 2000 exceeding 3 million units sold in the United States alone. The movie was filmed in Sydney, Australia, and Warner Bros, the U.S. distributor, made $171 million at the U.S. box office and it became Warner Bros highest grossing film in 1999. Now more than a decade later, Australian investors National Australia Bank (NAB) and the construction giant Leighton Holdings are contesting their share of the film’s earnings.

According to the Sydney Morning Herald, a Los Angeles based auditor, Elaine Douglas, who is an expert in movie accounting scrutinized Warner Bros books, according to testimony heard on July 5 at the NSW Supreme Court.

Douglas reported that there were problems identified with the science action film’s earnings accounts.

Another auditor, NAB and Leighton are accusing Warner Bros of having short-changed them by up to $80 million, based on a duration of their six-year contract by supplying the film too cheaply to Warner television companies, and exaggerating expenses and inaccurately accounting for the millions paid to the stars, Keanu Reeves and Laurence Fishburne.

As the hearing progressed it was revealed that the Leighton Holdings motive for investing in the film was to achieve a tax break, which in hindsight seems to have become a costly exercise. Former Leighton executive Peter Janu testified that that Leighton’s equity share of the venture was slightly above $4.5 million US.

Leighton made a 100 percent tax deduction for their part of the investment and NAB was assured an income of $US13 million and guaranteed capital recovery of $US38 million, the court heard. The total amount from both parties is equivalent to the total Leighton is suing for.

“The only variable that could affect that outcome was if the Tax Office took an adverse view,” said Senior  Counsel for Warner Bros Justin Gleeson.

“Whether a single dollar was earned under the distribution agreement was irrelevant,” Gleeson said. Janu concurred with this statement.