State of California Sues Movie Producers Over Alleged Ponzi Scheme

The suit claims a 2009 movie starring Simon Baker and Paz Vega cheated investors, many of them senior citizens, out of millions of dollars.

The state of California has sued Windsor Pictures, Skyline Pictures and a group of related financial entities and individuals charging them with operating a Ponzi scheme and committing fraud in raising more than $23 million to make and distribute movies.

According to a lawsuit filed Thursday in Los Angeles Superior Court and obtained by The Hollywood Reporter, the defendants used the money raised to pay large commissions, skim money to various interrelated companies and distribute dividends to investors until that abruptly stopped in August 2011.

Read the Complaint Here.

“Defendants specifically targeted unsophisticated senior investors,” says the suit, filed by the state's corporations commissioner Jan Lynn Owen. The targets allegedly were invited to “free” seminars where they were told they would get investment advice and were then offered a “no risk” investment in movies that would have “high rates of return.”

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Michelle Kenen Seward is named in the suit as CEO and executive producer for Windsor Pictures; a partner in Skyline Pictures; as well as CEO and president of affiliated entities Protégé Financial; and CEO and more of Saxe-Coburg.

Dror Soref is named as CEO of Skyline Pictures and is alleged to have been the director of the 2009 movie Not Forgotten, a thriller described on IMDB as the story of a man and his wife on the Texas-Mexico border who must face a tortured past in order to save their kidnapped daughter. The movie, which starred Simon Baker, Paz Vega, Ken Davitian and Claire Forlani, grossed just $54,000 in theaters, according to IMdb.

A call to Skyline Pictures reached a number that has been disconnected.

Seward, says the suit, formed Protégé Financial in 2004 and beginning in late 2006, it “offered and sold unqualified, non-exempt securities…in the form of agreements related to Windsor, from promissory notes to bridge loans to convertible debentures."

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The company allegedly told senior citizens it was a safe investment that would pay a higher return than the savings and investments they currently held: “In many instances investors entrusted their entire life savings to the defendants with the hopes of earning substantial returns to protect them during their golden years,” the suit alleges.

From November 2006 through March 2010, at least $10.4 million worth of securities related to Not Forgotten were sold in about 91 transactions, according to the suit.

Not Forgotten money, according to bank records cited in the suit, was diverted and comingled with other funds. The defendants allegedly “misrepresented to investors that their investment funds would be used to produce, finance, distribute and market Not Forgotten, when in fact investor monies would be used to pay prior investors in a Ponzi scheme.”

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The checks to investors stopped coming and in 2011 investors allegedly were informed the movie had not made any return. “Many investors face significant hardships,” says the suit, “including an inability to pay for basic necessities such as housing and medical care.”

The state is asking for a preliminary injunction and permanent injunction to stop the defendants and their companies from selling any more securities, from conducting business as investment advisors and from transferring any property or money that was raised by the schemes.

The state also wants restitution for investors in the amount of at least $23.2 million. The suit also seeks civil penalties of $25,000 for each violation of the Corporate Securities Act, and repayment for costs and expenses of the investigation and their attorneys.


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