They promised investors that the movie would feature actors such as Donald Sutherland and Jean-Claude Van Damme.
Screen stars of that caliber would appear in a movie originally titled Marcel, later changed to The Smuggler.
"Instead this one should be titled, 'The Wolves of Hollywood,'" said David Peirez, a corporate attorney in New York.
The U.S. Securities and and Exchange Commission on Thursday, Feb. 20 charged three California men with raising $1.8 million for the supposed film through a boiler-room fundraising operation that allegedly bilked more than 60 investors from coast to coast. Separately, the U.S. attorney's office in Los Angeles announced criminal charges against the trio and a fourth figure.
Sutherland and Van Damme were never even approached about starring in the would-be movie, the government said.
In a second indictment unsealed in Los Angeles, two more Southern California were charged in a 19-count indictment with fraudulently inducing investments in a movie to be titled "Beyond the Mat."
The SEC's fraud suit, filed in federal court in Los Angeles, accuses Samual Braslau of being the architect of the scheme, Rand Chortkoff of spearheading the operation and Stuart Rawitt as being the salesman who coaxed people into investing. All three were charged in a 29-count indictment, along with a second salesperson, Robert Matias, 50, who is a fugitive.
The defendants allegedly spent most of the money on themselves, leaving too little money to produce even a public service announcement, let alone a feature-length movie that could win a promised theatrical release.
Braslau allegedly gave the operation a veneer of credibility by setting up companies named Mutual Entertainment LLC and Film Shoot LLC to raise money. In early 2011, Mutual Entertainment spent $25,000 on the rights to Marcel, an unpublished story set in Paris during World War II, the suit charges.
Soon thereafter, the company began raising money, with Rawitt flaunting a projected return on investment of about 300 percent and telling investors that the venture was just shy of its $7.5 million fundraising goal, with shooting to begin in the summer of 2013, the SEC said.
The three defendants allegedly promised that 63.5 percent of investors' funds would go for "production expenses," when in truth, most of the money went for sales commissions and phony consulting fees to themselves.
In announcing the charges, Lori Schock, director of the SEC's Office of Investor Education and Advocacy, urged would-be marks to get on the internet and look up the individual making the offer.
In this case, she said, a quick search of the SEC's web site would have revealed a copy of a prior SEC enforcement action against Rawitt in 2009, when he was charged for his role in an oil-and-gas scheme.
In the second case, Mack Machen, 70, the president of a San Fernando Valley firm, C22, and Anthony David Millan, 37, the firm's CEO, were charged. The indictment accuses them of defrauding about 80 victims of more than $3 million by telling them the money would be used as short-term "bridge loans." It said that Machen and Millan issued promissory notes and promised returns of up to 13 percent per year.
Machen agreed to surrender to authorities, while Machen was arrested later in the day.
"Sadly these six guys understood how sexy the movie industry is to the average person," said Peirez, a partner in Garden City, N.Y.-based Reisman, Peirez, Reisman and Capobianco.
"We are a nation with 'quick buck' mentalities, and all too often in our capitalistic, free enterprise society, there are those who prey upon the fantasies of people who see a quick buck to be made."
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