LOS ANGELES (CN) - A Los Angeles lawyer and two recidivist cronies defrauded people of $1.8 million "for a movie that was not made and, given the extent to which" the defendants just scooped the money up for themselves, "probably never could have been made," the SEC claims in court.
The SEC sued Samuel Braslau, 53, a Los Angeles attorney who oversaw the alleged scam;
Rand J. Chortkoff, 64, of Encino, a boiler room operator who was the subject of a cease-and-desist order in 2008 from the California Department of Corporations, for his role in the unregistered sale of securities in two other movies;
and Stuart E. Rawitt, 47, of Marina del Rey, who got 27 percent of the money he raised, and who had been permanently barred in 2010 from committing any more securities violations.
One would call this crew motley did they not seem to resemble one another so closely.
Braslau ran two companies, Mutual Entertainment and its successor, Film Shoot, "which offered and sold securities in the form of membership units for the purported purpose of financing a movie to be called 'Marcel,' later renamed 'The Smuggler,'" the complaint states.
"From April 2011 through August 2013, Braslau, through Mutual Entertainment and Film Shoot, raised more than $1.8 million from more than 60 investors nationwide through a boiler room operated by defendant Rand Chortkoff.
"The unregistered salespeople hired and supervised by Chortkoff - most notably, recidivist defendant Stuart Rawitt - sold investors the dream of a glamorous, multimillion-dollar movie production starring A-list celebrities sure to generate exorbitant returns through numerous revenue streams.
"In reality, almost every investor dollar was diverted to the defendants and their cohorts, either as sales commissions or purported 'consulting' fees, or otherwise spent on the facilitation of the offering.
"As a result of the defendants' actionable conduct, what remains of investor funds constitutes less money than it would take to produce a public service announcement, let alone a full-length motion picture capable of securing a theatrical release."
The SEC says that the men, acting with scienter, schemed to and did defraud their investors.
It seeks disgorgement, penalties and, since the first court orders worked so well, more injunctions.
All three defendants were arrested Thursday, the U.S. Attorney's Office said in a statement announcing parallel criminal charges. A fourth defendant, Robert Matias, 50, of Granada Hills, is a fugitive.
A 29-count grand jury indictment was unsealed Thursday before the men were arrested, the U.S. attorney said. Braslau's companies Mutual Entertainment LLC and Film Shoot LLC were named as defendants in that case, along with the four men. They are charged with mail fraud, wire fraud, attempted wire fraud and making false statements.