WARNING: This does not make independent filmmakers look good. Thankfully, the vast majority of us plow our own money into projects at a rate that surpasses our investors, because film is our passion! And we want our work to see the light of day! These people apparently saw a weakness, and exploited it. Not cool.
By NIKKI FINKE | Friday June 17, 2011 @ 1:45pm PDT
The feds released info today that FBI and IRS agents this week arrested and charged 18 people who now face fraud and money laundering charges relating to a telemarketing “boiler room” scam that solicited $25 million in so-called investments in indie films with false promises of up to 1,000% returns. The scam was run in Southern California and Florida. While some of the movies were actually produced, the indictments allege that the defendants lied, gave half-truths and concealed material facts from investors around the nation.
A former CIA agent who ran a Burbank movie company called Q Media Assets has already pleaded guilty to conspiracy, mail fraud, and tax charges in relation to the fraudulent boiler rooms. Also fingered are the activities of Cinamour Entertainment LLC, which allegedly bilked investors who put money into independent motion pictures called From Mexico With Love and Red Water: 2012. It follows the May 2009 apparent suicide of Glen Hartford, the 45-year-old chairman-CEO-founder of Cinamour Entertainment.
The charged defendants and other telemarketers cold-called investors from “lead lists” and solicited investments with false claims, such as that 93% of investor money would be used to produce and promote the films, and that investors would receive returns up to 1,000%. According to the indictment, the telemarketers failed to disclose that they would receive commissions when, in fact, often more than 1/3 of the investments went into their pockets. Little more than 1/3 of investor funds were used to actually produce and promote From Mexico With Love.
During the course of the Cinamour scheme – which the indictment alleges ran from early 2004 through May 2009 – the defendants collected approximately $15 million for From Mexico With Love from about 450 victim-investors. The movie cost about $5 million to produce and generated approximately $550,000 in its theatrical release in October 2009. The defendants raised about $2.7 million for the Red Water movie from about 100 victim-investors, but essentially none of the money was used to produce the film, which was never made.
The second indictment alleges that telemarketers for Q Media Assets LLC fraudulently raised funds for films called Eye of the Dolphin and its sequel, Way of the Dolphin (which was later called Beneath the Blue). Telemarkers associated with Q Media also bought “lead lists” from the same San Clemente company that sold lists to the Cinamour telemarketers. As in the Cinamour case, telemarketers seeking investments in the Dolphin movies allegedly “made material misrepresentations, told material half-truths, and concealed material facts, when speaking to investors,” specifically concealing information about commissions and promising returns of up to 1,000%.
The defendants in the Q Media case raised approximately $5 million for Eye of the Dolphin and about $4 million for Way of the Dolphin from about 250 investors. “Eye of the Dolphin” made about $70,000 in ticket sales in its theatrical release, while “Way of the Dolphin” went straight to video.
