With all the questions swirling around Gary Howsam since his Nov. 5 arrest, the most pointed are directed at Comerica Bank of California and Peace Arch Entertainment for doing business with an alleged bank fraudster.

The former Peace Arch CEO was arrested for an alleged film financing scam conducted in 1999 and 2000 while he was CEO of Toronto movie prodco Greenlight Film and Television (GFT). Howsam entered a plea of not guilty when formally arraigned on Dec. 3 for seven counts of fraud.

Peace Arch executives have consistently said that Howsam’s alleged scheme to defraud Comerica Bank of California took place before he secured operating control of the prodco in late 2002.

‘[Howsam] still hasn’t been convicted of anything,’ Peace Arch president and COO John Flock also points out to Playback.

But a look at Peace Arch’s corporate filings reveals that there are ties that bind Howsam, Comerica and Peace Arch.

A Dec. 18, 2002 press release announcing that Peace Arch had acquired the ‘forward business’ of GFT Entertainment also makes mention of separate debt refinancing agreements with Fremantlemedia Enterprises and Comerica.

The Comerica agreement aimed to ‘release’ Peace Arch – which then had depleted capital reserves – from a security guarantee for a prior loan of US$1.075 million.

Peace Arch today insists the US$1.075 million loan from Comerica, and the $7 million Howsam secured from the same bank through allegedly fraudulent means, represent separate and unrelated transactions.

But why did Comerica agree in December 2002 to refinance a loan to a company to be led by someone who, it believed, had earlier tried to pass off faked loan agreements?

A spokesman for Dallas-based Comerica declined specific comment on its case against Howsam, beyond indicating it has its own pending action against him in the Los Angeles Superior Court for alleged fraud.

However, court papers indicate Comerica knew of Howsam’s alleged film-financing scam when he took over at Peace Arch.

A Nov. 6, 2007 affidavit filed in the Los Angeles Superior Court by FBI agent Jennifer Teasedale after Howsam’s arrest states Comerica learned of the alleged fraud ‘in approximately the spring of 2001, and subsequently filed a law suit in the California Superior Court.’

In a separate January 2003 U.S. Securities and Exchange Commission filing, Peace Arch warned that if its ‘financing transaction’ with Comerica fell through, it would leave the company without operating capital going into 2003.

‘If…we are unable to raise capital from outside sources, we would be unable to make the contracted payments or meet the financial covenant requirements of our debt, causing our lenders, including Fremantle and Comerica, to demand immediate repayment of our debt obligations,’ Peace Arch stated.

‘In such event, if we are unable to renegotiate our debt with our creditors, it is likely that we will be unable to continue operations,’ it continued.

While accommodating Peace Arch, Comerica took a different tack with Howsam.

The civil suit Comerica Bank v. GFT Going Back Films Inc. et al. was eventually heard in 2004. In that case, Comerica outlined many of the allegations contained in the current criminal indictment against Howsam – namely that he partnered with international sales agent Hilltop Entertainment to create fake and forged documents to obtain film financing from Comerica for the movie Going Back.

The bank’s civil suit pointed to two types of documents central to what was, in essence, a contractual dispute. The first were ‘Loan and Security Agreements’ that Howsam signed to receive financing for seven films. As part of the loan agreements, Howsam allegedly showed documentation indicating he had secured licence fees from foreign distributors.

Comerica argued that Howsam also produced a ‘Notice and Acknowledgement Assignment’ for each film that indicated he had those licence fees. It alleged that the loans, totaling around $7 million, were not repaid, and that Howsam had forged the signatures of film distributors.

In the end, lawyers for Howsam managed to stay the civil suit by successfully arguing that Comerica’s claims be sent to binding arbitration.

Comerica unsuccessfully argued that its loan agreements with GFT provided that its commercial dispute could be litigated in court.

Legally, the precedent-setting Comerica civil suit against Howsam had the effect of henceforth warning contractual parties in California to examine their loan documentation to ensure they could litigate disputes.

But that was of little consolation to Comerica, as its civil suit against Howsam never went to arbitration, and remains unsettled.

But the 2004 civil suit was followed by a three-year FBI investigation that led to Howsam’s arrest on Nov. 5. Hilltop’s Harel Goldstein, who allegedly helped Howsam fake the distribution contracts, made a plea agreement with the U.S. Attorney’s Office in Los Angeles and agreed to work with the FBI to build a case against Howsam, according to court papers.

Peace Arch was certainly intimately aware of the 2004 civil suit. Comerica initially named Peace Arch and GFT as co-defendants, but soon afterwards Peace Arch was dismissed.

‘Ultimately, once the case was dismissed, we had no more direct involvement in it,’ says Peace Arch’s Flock.

But as late as September 2007, Peach Arch re-signed Howsam to a new contract through to September 2009.

Flock has characterized the 2004 civil suit as a business disagreement between Howsam and a bank that never went anywhere.

‘Gary was named along with a half a dozen parties, some related. He denied all of the allegations. We believed his denial to be true,’ Flock says.

Howsam, who remains free on bond, is next set to appear in a Los Angeles courtroom on Jan. 14 for a status conference.