cineSOURCE magazine

Straight Shooter: Rose Duignan and the Kerner Closing
by Doniphan Blair

Rose Dugnian with her beloved dog at a Kerner party when things were still flying high in October 2010. photo: D. Blair

Until the spring of this year, Rose Duignan worked at Kerner Optical. An attractive and open—but also tough—minded woman, Dugnian was a sort of den mother who directed sales, fielded calls, and executive produced all their action miniature work. Indeed, with her straight shooting manner, business degree from Berkeley/Columbia's prestigious Executive MBA program, decades of experience at Industrial Light and Magic AND business plan, which called for focusing on action miniatures, Dugnian would have been a remarkable Kerner CEO.

Born in Palo Alto, where she was head cheerleader at Gunn High School, Dugnian got into film while attending her "local college," the world-famous Stanford University. There she developed and directed a sex education film called the "Female Orgasm: Out in the Open."

Soon after graduation, she joined Lucasfilm in Los Angeles, working as Production Coordinator on "Star Wars," (1975). Although Duignan had ambitions—as her college film suggests, and she said, "I wanted to bring a women's perspective to media"—when General Manager Tom Smith left ILM in 1985, she turned down the job offer to focus on having a family. Over the next 15 years, she worked for Rhythm & Hues and Tippett Studio directing marketing and for Expression College, Emeryville, doing industrial relations and career counciling.

Duignan in US Army boot camp in1979, undercover for a film project. photo: courtesy R. Duignan

Once her three kids—Riley, Danny, Ava—were finishing high school, however, she decided to return to college to earn an MBA degree from UCB/Columbia, studying finance to be an even better General Manager. After graduation, in 2007, Duignan happened to stop by Kerner, recently privatized from ILM, to visit her old friends. She found the place bustling with energy and projects.

Naturally wanting in on the action, Duignan was hired to head sales, executive producer and be the Business Developer for the newly founded film division. She tried to be the voice of reason, avoiding or objecting to dubious behavior, over-ambitious plans or lack of discipline. "Focus or fail," a mantra she learned at business school, was precisely what Kerner needed.

If someone had the sense to advance her to the corner office, we probably wouldn't be having this conversation right now. Nevertheless, as Duignan gamely claims with her ever-bright outlook and equally intense shining eyes, "We can rise like a phoenix from the ashes!"

We met at a cafe in Berkeley, where she resides, although she's been hanging a lot in New Orleans, which she enjoys immensely. She currently runs HUB Project Management which specializes in managing theme park work and visual effects out of Louisiana, a state offering 30-35% rebates on all media work. We began by discussing the parameters of CineSource's coverage of Kerner's demise and her reasons for doing an interview when so many people refused to go on the record.

Duignan arrived for our meeting at a cafe on University Avenue, Berkeley, in a smart business suit racing from another meeting. photo: D. Blair

Rose Duignan: The main purpose in talking to you is so that I can protect the integrity of the work force [at Kerner]. I believe that out of the ashes can arise a phoenix, this talent pool—the best action miniature people in the world—can continue to provide services to the film industry.

That is my intention, to plant the seed for companies in the Bay Area and Los Angeles. So they know that you can still hire the people who worked for ILM and Kerner for 30 years. We can work as a guerrilla unit—zero overhead—a great economical approach to continue doing what we do: Build beautiful stuff and blow it up!

CineSource: To have an investing pool, we have to police ourselves. Our intention is to tell a truthful tale that will inform the film community. The crux of the matter is that it seems like there were some corrupt individuals at the top of Kerner.

(Sigh) Yeah, yeah. I have no factual information about the bankruptcy proceedings. I don't know what the lawsuits are about.

There aren't any law suits, that is the irony, the only suits are the ones against Kerner from Bon Air for back rent. But what I heard from a number of people and read on the Internet is that Joe Siuicki [Kerner's CEO 2006-09] is a con man.

Right.

The question becomes who got conned and when. Mark Anderson [who engineered the buy-out of Kerner from Lucasfilm and ILM in 2006] seems to be a decent guy.

Absolutely.

But somehow he got hooked up with Siuicki?

I will tell you what I know. When I heard Kerner had split off from ILM, I went by to see all my friends [Duignan worked at ILM from 1975-1991]. I was in business school at the time. I stopped by in September, 2006, and the stages were packed, everyone was so busy—they were doing 'Pirates [of the Caribbean: At World's End,' 2007].

Mark Anderson was there and he was so thrilled. It was a very healthy looking future. Mark was the hero in this story because Lucasfilm had decided to shut [Kerner] down and move on.

With an easy laugh and relaxed manner, Duignan laid out her observations of the Kerner collapse which included hubris and mismanagement, in her view, not criminality. photo: D. Blair

Why?

I think there was a belief that the use of action miniatures was on the decline—which has proved to be the case.

During the first two years [after Anderson's acquisition], ILM was very generous to Kerner and we felt like we were all part of the family. They hired Kerner to do large miniature jobs, first on 'Pirates' and then 'Indiana Jones,' both huge projects. That was Mark Anderson's intent when he bought the company.

When [ILM] said they were going to close the doors, he said, 'No, I am going to find a funder, I am going to keep it open.' So he got word out on the street and out of the blue comes this Joe Siuicki. He knew Mark Anderson was searching for funding.

My understanding is that Joe was simply at a restaurant with the Duncan family [where they happened to be dining] and he overheard [references to] Duncan Oil and the cabernet they make, Silver Oak Cellars, and he thinks 'Great, a mark.'

He brought Duncan in as a first investor and Duncan was able to negotiate the deal with Mark. That is how those three got connected. Because Joe brought in the investor, he became a one third owner.

Wow, that's a finder's fee.

[laughs] Should've just been a finder's fee.

So the company is up and running, the action miniatures are bringing in all the money, but Mark and Joe were entirely focused on the potential 3D stereo market. I don't know if Kevin Duncan was a big believer or not, but the whole 3D stereo craze was just catching fire. Because we are a camera engineering company, just as ILM had been for so many years, it seemed like a really great fit to build 3D stereo rigs at Kerner.

The focus became: Let's ride this 3D hysteria—hystereo [laughs]—into the future. They hooked up with a TV manufacturing company who invested a couple of million bucks into building the stereo rigs and developing this TV technology.

Things were looking great. I joined in April 2007. Mark was on vacation, so my first day was with Joe Siuicki. I had three days with him and [after that] I knew he was a person with totally crazy energy [laughs].

Duignan at 'The Academy of Visual Effects Bakeoff' in Los Angeles where the Academy of Motion Picture members vote for the visual effects nominees. photo: courtesy R. Duignan

I didn't know anything about any conman history but they did disclose to me, right at the beginning, that 'Yes, he did serve time.' But everyone's interpretation was that is was acceptable white collar crime, tax evasion. Apparently there is proof that he was a con man and there was a Ponzi scheme and he was convicted of defrauding investors in an oil and gas scheme.

I don't think they had any idea of that, otherwise they wouldn't have done business with this man. He presented it as a relatively benign tax evasion situation and that he’d done his time, so all was forgiven.

I was brought in as an executive producer and sales agent. After spending three days with Joe, I said to Mark, 'I want nothing to do with Joe, or the 3D stereo business. You need me to help you keep solvent the action miniature division.'

In my perspective, this was the only REAL thing the company had to offer: to provide the very best action miniatures in the business. So I put all my efforts into that part of Kerner.

Did you feel Siuicki was malevolent?

No. I felt he was completely and wildly scattered. I just thought I can't be around his energy. He was entirely unfocused and his train of thought was wacky, twenty directions at once—but he was amazing at bringing people through the facility. The man had connections, unbelievable. And he’d spin everything… it was all about the spin.

And he is charming?

No. He isn't charming. [But] he brought everyone through and it really felt like this might happen. We were rolling in dough because ILM was supplying us with a lot of action miniature work and we had that investment on the 3D stereo cameras.

But I sat in meetings where Joe was not truthful to people and I was not going to have any part of that. I said to Mark, 'I will work with the Kerner action miniature part. I will help you bring in work and manage that work and be the executive producer.'

From that day on, I had nothing to do with Joe and his team and the whole 3D stereo thing. After a while, 3D stereo money dried up. We could not attract any more investors after that initial investor out of LA.

Because 3D was a bubble?

No. I think it is because people were no longer believing in what Joe had to offer. There was just too much overhead and a huge lack of focus. Mark and Joe and the next owner, Eric Edmeades, were all very unfocused. None of them believed in the action miniature piece which to me was the only legitimate and realistic part of the business that could have been nurtured and become sustainable.

Mark came up through business, did he start as a teen?

Early twenties. He was running all of the departments having to do with practical effects and managing the stages.

At the Kerner Halloween party last year, Duignan's 'date' is a dummy of Frankenstein, perhaps in honor to Kerner's dummy makers, second only to their model makers. photo: courtesy R. Duignan

He has a good management style?

He's awesome, awesome with people, knows how to fix everything. He was a great leader there. Unfortunately, once he hooked up with Joe and had this unrealistic vision of turning [Kerner] into this big 3D stereo money making company, then he lost focus.

I once gave him a speech; I said 'Focus or fail.' I had just come out of business school. I knew that as a startup you could maybe do two things. I believed in the action miniature piece; that's what should have been grown.

We should have brought in investors to bring us into the digital era, where we could have become the Masters of Destruction. That was our niche. Let's just build on what we know how to do: blowing up beautiful things. We should have become a hybrid company combining both digital and practical real world effects to produce the next generation of action miniature shots.

But no effort was made in that direction, no investors were approached with that idea. By the time Eric Edmeades took over and Joe was unmasked—

Was he?

I think so because he was pushed out. He and Mark made a deal with Eric. They basically handed over their shares in the company and left. Eric became two-thirds owner and the Duncans retained their one third.

Why did Mark bail out with Siuicki? That seems like he was leaving a sinking ship.

There were a lot of complex emotions going on. I think there were some personal finance issues. He just had to get out.

The big question is: Did Mark Anderson go over to the dark side?

No.

Basically, you just blame them for being inept. It is like the difference between the 9/11 conspiracy theorists and the people who say no, the United States is just very inept.

[laughs] Everyone had high hopes for what Eric could do. I never did. I believed Eric was not the right person to lead the company. He is a motivational speaker—and I’m sure he is very good at that—but he came into our business without any background or network in the industry and without a realistic plan for the company.

Plus, he didn't cut enough overhead. That was our problem. The company should have been scaled down to support what the action miniatures could bring in. We should have been in one building, not had three executives. It should have been a lean machine with a clear focus.

Instead Eric’s idea was to expand even further and create multiple Kerner companies, none of which actually seemed real to me. Kerner Minneapolis? Kerner Canada? Kerner Japan? Kerner New York? What the hell?

[CORRECTION provided by Ms. Duignan: Kerner New York was started by Joe Suicki, before Eric Edmeades took over company. When I referred to Kerner Minneapolis, I was actually referring to KG Funding LLC, a Minneapolis based company that held Kerner 3D technologies and Kerner Works. Kerner Japan was never actually formed as an entity as far as I know, but when I saw Japanese business people handing out Kerner Japan cards at a Kerner party, I assumed this was a real company.]

I continued to just ignore all of the Kerner expansion plans and focus on the miniature work. As we know, that is a shrinking pool in the marketplace, for many reasons, but it still is utilized. [Edmeades] didn't have experience in our world.

A perfect storm happened to the poor company: the recession, the end of miniatures, picking up a con man when looking for an investor.

But there is still a need for miniatures, there is still a use for them, it is just a smaller piece of the vx pie than before.

And some people say they look better.

They do! They look much more real. For the big climactic destruction shots…you just can't beat the real thing.

Out of these ashes the Kerner true talent pool can reassert itself. We can rebuild as a guerrilla unit and go after jobs and still bring the work to the Bay Area. So what if we don't have a stage that we are paying $60,000 a month for? You rent a stage when you need it.

Duignan kisses a Ronald Reagan dummy at 'The Academy of Visual Effects Bakeoff.' photo: courtesy R. Duignan

You are actively pursuing this?

That is why I am talking to you. I'm a believer. I have my own company, Hub Project Management and I have a few VFX clients working out of Louisiana—I am going after the 30% rebate that Louisiana offers for all production and post-production work. I am pitching what I call The Louisiana Solution to studios and it is working.

But I would also love to provide the Bay Area with a regrouping of the post-Kerner team of artists and technicians who can still provide the best action miniatures in the world for feature effects. I don't have a name for this team yet. Guerrilla FX?

I really can’t speak to any of the legal sides of the situation. I know nothing about any lawsuits or any of the details of the bankruptcy. I didn't get involved in any illegalities and I never saw any obvious illegal activities whatsoever. I am not even following the case. I think Kevin Duncan is still hopeful he will find an investor but it is not a sustainable business model with that rent and huge overhead in the way.

Kevin Duncan? But he's in bankruptcy.

But he is still trying to find a buyer. They've got a lot equipment, a lot of very useful equipment.

So, from your perspective, there wasn't that much criminality?

No, no. Nobody was bilking people. But Joe attracted a sleazy underbelly of potential investor. There were a lot of get rich-quick schemers circling. The brand of Kerner was greatly diminished. They would license out the name to people in all these different states. We would get calls, 'We are looking for so-and-so from Kerner New York,' and the receptionist had never heard of Kerner New York.

That sounds like criminal scamming. From what I heard, every step of the way [Edmeades] was getting bamboozled. It is hard to get corroborating evidence. But a lot of other factors point to crime: like the creation of shell companies. We found 20 of them.

Were those started by Joe Siuicki or Eric Edmeades? Both of them were starting tons of them. That was one of my major disagreements. Let's focus on what we really do. Everyone wanted to expand and create all these complicated companies that seemed to have no purpose or nothing real to offer. (NOTE: I am referring here both to new entities setup by Edmeades, such as Kerner Works and Kerner Camera, but also his strategy of separating Kerner into divisions and renaming them, Kerner Fx, Kerner Studios, Kerner Productions, these were not setup as separate companies, to my knowledge, just a naming convention.)

It seems like Eric was not arbitraging or scamming but he is a bit of a user. I have another associate who volunteered for Eric a lot, drove him around, hoping to get some work. Eric kind of used him.

But that is not criminal, is it?

Eric's theory was to bring people in and have them buy their own chair, as it were. He had the guy from Sega coming in and he was going to do Kerner Games.

And there is nothing wrong with that. Eric is a visionary and Eric has great belief in himself and his capabilities but, ultimately, he is a motivational speaker who gets people to go beyond themselves. He stepped into the film business and he was over his head—but not criminal. The only criminal here was Joe Siuicki and he served his time.

The Kerner Optical team in the summer of 1975, when they were doing 'Star Wars; Duignan is in the first standing row, sixth from the left. photo: courtesy R. Duignan

But Eric is not suing them, this is the weird thing, and the allegations are serious.

Bottom line is that Eric failed to attract any new investment to the company. What we needed to take the company to a new level and succeed was serious investment in the 3D camera rig and/or building a digital pipeline to go along with our practical action miniature pipeline. And he failed.

There was way more overhead than a little action miniature company could support. It was clearly not sustainable. He never delivered on the primary objective. The company couldn’t survive without some capital investment and when that didn’t materialize, the company had to shut down. End of story. All this intrigue and all this blame! Let’s move on.

Now all these great talents, people who have worked in this business 20-30 plus years, are searching for work. I am hoping Henry Selick [stop motion director and producer who did 'The Nightmare Before Christmas,' 1993 and 'Coraline' 2009] will hire a bunch of them, they would be perfect for his movies.

I would love to see something rise out of the ashes, something that would do honor to all these great workers, all these great artists, who do not deserve to have the name Kerner dragged through the mud. The brand was severely diminished in the hands of Joe Siuicki and continued to be diminished with the next round of owners.

Well, they have some things going like KernerWorks making—

Animatronic dummies.

Right. Then there was that guy, Dean ahh—

Yurke.

Right. He got slapped down by ILM because he was going to make a movie at Kerner. I thought that was a little oversensitive for ILM but maybe they knew something was not right in Denmark.

ILM and Lucasfilm could not have been more generous with Kerner in the first two or three years. They let us use the name ILM all over our website because we were very respectful and we had been part of the family. They wanted us to succeed so we could be there for them. Lucas was very generous to let us ride the coattails of Lucasfilm and Industrial Light and Magic.

But Eric Edmeades took over and Mark left—the old guard was out and the new guard was in. Lucas didn't want Eric to ride the coattails of Lucasfilm. Eric is a master of PR. We suddenly had press releases every friggin' week about something. We would have a party and there would be a huge amount of press around it.

That's Eric's MO. He overused the George Lucas name so Lucasfilm had to step in and say, 'Stop it!' That was about the same time as the Yurke thing. After that, Eric was very respectful and stopped doing it.

So him running around, that's his MO. He didn't really know how a regular producer might go down to LA make a few calls, have dinner with some people—

He had his own style and it was very showy, a lot of press, a lot of stories that were ultimately about nothing, in my opinion. [laughs] Raising a lot of expectations but in the end not delivering on any of it.

In the end, I want this piece to be about how we can still do business. if you need action miniatures and I’ll pull together all my talented friends from Kerner and we’ll do a great job at a really low price!

Posted on Sep 30, 2011 - 12:07 PM