Peace Arch Entertainment’s Los Angeles brain trust is moving swiftly behind the scenes to cut loose CEO Gary Howsam after his arrest Monday in Los Angeles on allegations of bank fraud dating back to 1999 and 2000.

A day after placing Howsam on administrative leave and installing activist shareholder Jeff Sagansky as interim CEO, Peace Arch executives insist the Toronto-based prodco and distributor is not implicated in the current U.S. federal investigation into the film-finance dealings between Comerica Bank of California and Howsam that gave rise to the latter’s arrest while in Santa Monica to attend the American Film Market.

‘The complaint against Gary is against Gary only,’ Peace Arch president John Flock tells Playback Daily from his Los Angeles base.

Howsam and his affiliate companies produced a series of films in 1999 and 2000 using bank financing, in part from Comerica.

The affiliate companies included Greenlight Film and Television, which Howsam launched in 1997 to produce feature films. Those finance dealings became the subject of a 2004 civil suit brought by Comerica against Howsam that apparently led to the current criminal investigation. Peace Arch was named in the original 2004 civil litigation, but was soon cleared of any role and dismissed from the lawsuit, Flock says.

In addition, Comerica separately lent money to Peace Arch before Howsam and CPC, his investment vehicle, acquired a controlling interest in the then-Vancouver-based production outfit in 2003.

At the time of that takeover, Peace Arch renegotiated its outstanding loan from Comerica. The Dallas-based bank, which has extensive roots in international film financing, subsequently exercised a privilege to convert the loan into Peace Arch stock. Around the same time, Peace Arch did a similar debt-to-equity swap with Fremantle Enterprises.

Flock insists the debt-to-equity conversion by Comerica and Fremantle had nothing to do with Comerica’s earlier financing of Howsam’s movie projects.

‘That’s a completely different transaction from the current [criminal] proceedings,’ he says.

Flock adds that he believes the 1999-2000 titles produced by Howsam are no longer in the Peace Arch catalog. The 30 or so theatrical and TV movies Howsam produced between 1997 and 2003 were eventually licensed by the likes of Lionsgate Entertainment, Artisan Entertainment, Trimark, HBO, Blockbuster, Showtime, Hallmark Entertainment and Encore.

It is anticipated that Howsam, who has a 21% stake in Peace Arch, will soon resign as CEO. He is expected to be replaced by either Sagansky or Flock.

The news of Howsam’s arrest and ouster sent Peace Arch shares down $0.43 on Tuesday, closing at $2.08 on the Toronto Stock Exchange. But the shares stabilized on Wednesday, ending trading at $2.05.

To underline its continued business dealings, Peace Arch on Wednesday unveiled a distribution deal with U.S.-based Genius Products for the DVD release of four titles stateside.

Howsam, who remains in Los Angeles, according to Flock, and is free on bail, was not available for comment.