Multiple Max Bialystocks in Movie Scam Indictment

July 6, 2016

Because of the intervening July 4th holiday, you might have missed the recent announcement of a criminal case that sounds far too much like a real-life version of the 1968 film classic "The Producers." As explained in a June 28, 2016, press release from the United States Department of Justice, we got what looks like three, count 'em, three, Max Bialystocks, allegedly involved in a $12 million fleecing of investors in feature films and documentaries. Among my favorite tidbits of purported misdeeds was the bank account showing a $1.5 million balance except, in reality, the account was devoid of any funds. Then there was the ever-popular $3.5 million bank account guaranteed by company -- and we know the company guaranteed the balance because its Managing Director sent a letter confirming the guarantee; but, hold on, turns out that the guaranteeing company never heard of this particular Managing Director. 

As much as I would love to put my own spin on things and punch up what is usually a somewhat dry recitation of criminal charges in a DOJ press release, I have to take my hat off to the author of this effort. As such, ladies and gentlemen, Blog is please to present: 

Department of Justice
U.S. Attorney's Office
Southern District of New York
Tuesday, June 28, 2016

Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced today the unsealing of charges against JAMES DAVID WILLIAMS, STEVEN BROWN, and GERALD SEPPALA for allegedly defrauding victims out of more than $12 million as part of an advance fee scheme in which victims were asked to invest in film projects based on false promises and misrepresentation.  The Indictment charges WILLIAMS, BROWN, and SEPPALA with wire fraud and wire fraud conspiracy, and WILLIAMS and BROWN are also charged with laundering the proceeds of this fraud. WILLIAMS was arrested this morning in Los Angeles, California, and is expected to be presented and arraigned later today in the Central District of California before United States Magistrate Judge Jacqueline Chooljian.  BROWN was arrested in this morning in New York City and is expected to be presented and arraigned in the Southern District of New York before United States Magistrate Judge James L. Cott.  SEPPALA was arrested this morning in Wayzata, Minnesota, and was presented and arraigned this afternoon in the District of Minnesota before United States Magistrate Judge Becky R. Thorson.

Manhattan U.S. Attorney Preet Bharara said: "With lies about making feature-length films and documentaries, the defendants allegedly defrauded victims into investing over $12 million with them.  Rather than making movies, the defendants perpetrated an advance fee scheme, allegedly using the investors' money to pay themselves and pay other investors back."

FBI Assistant Director-in-Charge Diego Rodriguez said: "As alleged, Williams, Brown, and Seppala didn't provide marketing expertise to feature films or invest their own millions into film projects as they promised investors.  Rather, they defrauded and deceived to acquire more than $12 million of investor funds to pay back previous duped investors or fund personal expenses. Any level of fraud to honest investors is wrong, whether it's a fraud in the hundreds of dollars or millions dollars."

According to the Indictment unsealed in Manhattan federal court:[1]

From at least 2012 through June 2016, JAMES DAVID WILLIAMS, STEVEN BROWN, and GERALD SEPPALA participated in an advance fee scheme in which WILLIAMS and BROWN portrayed themselves as experts in the marketing of feature-length films and documentaries and, along with SEPPALA, solicited investments in these films from investors by typically promising guaranteed returns and participation in profits, which never materialized.

In order to solicit these investments, WILLIAMS, BROWN, and SEPPALA made material misrepresentations about, among other things, their own investments in the films for which they were soliciting money, as well as investments that they claimed to have received from other investors.  To support their claims, WILLIAMS, BROWN, and SEPPALA frequently sent the victims falsified financial records that reflected investments that had never actually been made.  For example, in an effort to secure a $2 million investment in one of the movies from one individual ("Victim-1"), WILLIAMS assured Victim-1 that WILLIAMS himself had also contributed $2 million of his own money to the project.  As proof of WILLIAMS's purported investment, WILLIAMS sent Victim-1 what appeared to be a bank statement showing a balance of just over $1.9 million in the account maintained for the movie, which represented, according to WILLIAMS, what was left of his $2 million after some initial expenditures.  True and accurate records for that account, however, show that on the date WILLIAMS sent that statement to Victim-1, there was actually no money in the account and, indeed, there was never any money in that account until Victim-1 provided the solicited $2 million investment.

Similarly, in an effort to get another individual ("Victim-2") to invest $500,000 in another movie, WILLIAMS represented that WILLIAMS had invested $3 million of his own money, while BROWN claimed to have invested an additional $500,000 of his own money as well.  BROWN and WILLIAMS also told Victim-2 that the entire investment would be guaranteed by a company called "Woodlawn Holdings" ("Woodlawn").  In support of these claims, BROWN sent Victim-2's attorney a letter from someone who claimed to be a "Managing Member" ("Individual-1") at Woodlawn guaranteeing Victim-2's investment, while WILLIAMS sent what appeared to be a bank statement for the company responsible for producing the movie, showing a balance of more than $3.5 million.  Subsequent investigation, however, revealed that no one with Individual-1's name worked at Woodlawn, nor had representatives at Woodlawn heard of WILLIAMS, BROWN, SEPPLA, or the movie they claimed to be making.  In addition, true and accurate records from the relevant bank account revealed that there was only $500,200 in the account at the time that WILLIAMS sent Victim-2 the statement showing a balance of more than $3.5 million. Furthermore, the other money in that bank account was from neither WILLIAMS nor BROWN.

In total, WILLIAMS, BROWN, and SEPPALA solicited more than $12 million from their victims that was allegedly to be used for either marketing or production costs associated with the various films.  In reality, however, the money that was received from these investors was used to fund other projects, pay back previously defrauded investors, or pay the personal expenses of WILLIAMS, BROWN, and SEPPALA, including, among other things, the purchase of a car and a house for WILLIAMS.

*          *          *

WILLIAMS, 54, of Calabasas, California, and BROWN, 46, of Santa Monica, California, are each charged with one count of conspiring to commit wire fraud, one count of wire fraud, and one count of conspiring to commit money laundering.  SEPPALA, 47, of Wayzata, Minnesota, is charged with one count of conspiring to commit wire fraud and one count of wire fraud. Conspiring to commit wire fraud and wire fraud each carry a maximum term of 20 years in prison. Conspiring to commit money laundering carries a maximum term of 10 years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.

If you believe you are a victim of the above-described fraud, please call the FBI at 212-384-1000 or email Email links icon. This email account is taking tips only on these alleged crimes.

The prosecution of this case is being handled by the Office's Complex Frauds and Cybercrime Unit. Assistant United States Attorney Patrick Egan is in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.


And a final word to all of you would-be movie moguls. If you're going to invest in films, you still have to do your due diligence. The fact that some slick, fast-talkin' promoter tells you that "you ought to be in pictures" doesn't mean that you should. Always, always, always do your due diligence and check out the bona fides of all the supposed big shots and their purportedly plush bank accounts. Watching a Looney Tune is not due diligence. Porky Pig is not a real person and even if someone swears that they have access to Porky's $3 million guaranteed bank account, you do know that a cartoon can't actually have a bank account, right?  Daffy Duck, however, is an entirely different matter. As Mr. Duck's lawyer, I am authorized to offer you an exclusive option on his next film for the one-time charge of $1.5 million.  Make that check out to "Consolidated Animation Securities Holdings" . . . tell you what, just make it out to the initials of the company: C . . . A . . .S . . . H. I'll deposit that right away and you should be hearing back from me soon. Real soon. Thaaaaaaaat's all folks!