UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Case No. 02-60255 - Civ. (Ferguson)

Amended Complaint

I. Preliminary Statement

Plaintiff Securities and Exchange Commission ("Commission"), for its Amended Complaint against Defendants Joseph Rubbo ("J. Rubbo"), Angela Rubbo Sr. ("A. Rubbo Sr."), Angela Rubbo Jr. ("A. Rubbo Jr."), Pasquale Rubbo ("P. Rubbo"), Nicholas Rubbo ("N. Rubbo") (collectively, "Rubbo Defendants"), Peter D. Ragofsky ("Ragofsky"), Make It Reel Productions, Inc. ("MIR"), and Cine Star, Inc. ("Cine Star") (collectively with Rubbo Defendants, "Defendants") alleges and states as follows:

1. From at least January 2002 through February 2002, MIR maintained an Internet web-site which solicited investors to purchase "Class A Preferred Stock" in MIR at $100 per share. According to the web-site, MIR was attempting to raise $90 million through this offering in order to fund several independent film projects, including a film entitled "New Horizons." MIR's Offering Memorandum, which was available on its web-site, falsely represented that MIR had entered into an agreement that entitled it to 50% of the anticipated $320 million in profits from New Horizons. It also falsely stated that New Horizons will star major film actors Tom Cruise and Catherine Zeta-Jones. In fact, MIR had no agreement to receive profits from New Horizons and Tom Cruise and Catherine Zeta-Jones had never been approached about such a film.

2. "Salespersons" associated with MIR and Cine Star cold-called members of the public to pitch the MIR offering. In addition, individuals who called the telephone number listed on MIR's web-site were directed to salespersons who solicited investors to participate in MIR's offering. On February 6, 2002, Ragofsky, a MIR salesperson, actively solicited an undercover agent from the Ohio Attorney General's Office ("Ohio AG"), who was posing as an investor who had seen MIR's web-site, to purchase preferred shares in MIR. Ragofsky baselessly claimed that the agent would likely earn returns of five times his initial investment amount and that MIR had already raised close to $15 million. Ragofsky also touted his previous "Wall Street" experience, but failed to disclose the fact that the National Association of Securities Dealers ("NASD") had barred him from associating with any member firm.

3. As a result of Defendants' fraudulent conduct, from January 2002 through February 2002, at least six investors invested at least $80,500 in the offering.

4. MIR's "Class A Preferred Stock" offering was not registered with the Commission and did not qualify for any exemption from the registration requirements of the Securities Act of 1933 ("Securities Act").

5. The Defendants, directly or indirectly, singly or in concert, have engaged in transactions, acts, practices and courses of business that constitute violations of Sections 5(a), 5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

6. Unless permanently enjoined, Defendants will continue to engage in the transactions, acts, practices and courses of business described herein, and in similar transactions, acts, practices and courses of business. By this action the Commission seeks to permanently enjoin Defendants from future violations of the Securities Act and Exchange Act and to obtain other equitable relief, including an order directing defendants MIR and Cine Star to give an accounting of their assets, and an order directing Defendants to disgorge the amount of their ill-gotten gains, plus prejudgment interest. The Commission also seeks civil money penalties.

II. Defendants

7. MIR was incorporated in the State of Florida on March 13, 2001. MIR purported to be a film and media company with rights to various film and television projects. MIR and Cine Star operated a boiler room and offered and sold MIR securities from an office that the two companies shared in Fort Lauderdale, Florida.

8. Cine Star was incorporated in the State of Florida on September 28, 2001. Cine Star and MIR operated a boiler room and offered and sold MIR securities from an office that the two companies shared in Fort Lauderdale, Florida.

9. J. Rubbo, age 40, resides in Deerfield Beach, Florida. J. Rubbo was a control person of Cine Star and was identified in the Offering Memorandum as the Chairman and CEO of MIR.

10. A. Rubbo Sr., age 58, resides in Florida. She is the mother of J. Rubbo, N. Rubbo, P. Rubbo, and A. Rubbo Jr. A. Rubbo Sr. was a control person of MIR and Cine Star and participated in the day-to-day operations of the MIR/Cine Star boiler room.

11. A. Rubbo Jr., age 29, resides in Florida. She is the sister of J. Rubbo, N. Rubbo, and P. Rubbo, and the daughter of A. Rubbo Sr. A. Rubbo Jr. is listed in MIR's Offering Memorandum as the president of MIR.

12. P. Rubbo, age 35, resides in Florida. He is the brother of J. Rubbo, N. Rubbo, and A. Rubbo Jr., and the son of A. Rubbo Sr. P. Rubbo supervised the MIR/Cine Star boiler room.

13. N. Rubbo, age 32, resides in Florida. He is the brother of J. Rubbo, P. Rubbo and A. Rubbo Jr., and the son of A. Rubbo Sr. N. Rubbo was a control person of Cine Star.

14. Ragofsky, age 37, resides in Florida. Ragofsky was employed as a broker for several firms between 1990 and 1999. During this period, Ragofsky was the subject of numerous customer complaints and disciplinary proceedings by state securities regulators and the NASD. In January 2001, the NASD barred Ragofsky from associating with any member firm.

III. Jurisdiction and Venue

15. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), 77v(a)]; and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), 78aa].

16. The Southern District of Florida is a proper venue for this action. Certain actions and transactions alleged and stated herein constitute violations of the Securities Act and the Exchange Act and have occurred within the Southern District of Florida. MIR and Cine Star maintained their offices in Fort Lauderdale, Florida from which MIR shares were offered and sold to U.S. investors by Ragofsky and others. In addition, individuals were instructed by Ragofsky to wire money to Cine Star bank accounts located within the Southern District of Florida.

17. The Defendants, directly or indirectly, singly or in concert, made use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or of the mails, in connection with the transactions, acts, practices and courses of business alleged herein.

IV. The Fraudulent Scheme

A. The Offering

18. From at least January 2002 through February 2002, the Defendants offered and sold preferred stock of MIR through a purported private placement pursuant to Rule 506 of Regulation D of the Securities Act. Through the offering, the Defendants attempted to sell up to 900,000 shares of preferred stock at a purchase price of $100 per share, to raise a total of $90 million.

19. The Defendants solicited investors through two principal means. First, Defendants placed MIR's Offering Memorandum on the web-site www.makeitreelproductions.com, which was accessible by any member of the general public with access to the Internet. Second, Defendants solicited investors through oral and written communications including communications over the telephone and through the mail.

B. MIR'S Offering Materials

20. MIR's Offering Memorandum stated that MIR "is engaged in the business of identifying and obtaining rights and ownership of various independent motion pictures, TV productions, DVD's, CD's, video games and other entertainment sources." As set forth in greater detail below, the Offering Memorandum represented that MIR had entered into agreements with several entities that provided MIR with rights to a percentage of the profits that would be generated from various film and television projects.

21. All of the Rubbo Defendants participated in the preparation and dissemination of the Offering Memorandum by providing information, reviewing drafts, and suggesting content and transmitting it to MIR's web-site provider so it could be posted on the Internet. MIR's web-site was registered to J. Rubbo.

1. The "New Horizons" Project

22. The Offering Memorandum represented that MIR planned to use $75 million in proceeds from its preferred stock offering to fund the production of "New Horizons," a film written by Tony Tarantino (the father of celebrity director Quentin Tarantino). The Offering Memorandum stated that:

[MIR] has entered into an agreement with Tarantino Productions to provide funds for the production of "New Horizons", a feature film written for Tom Cruise and Catherine Zeta-Jones. In exchange for the funds, Tarantino Productions has agreed to distribute 50% of the net profits from the film and all ancillary revenues to [MIR]. The Preferred shareholders will receive a distribution equal to 50% of the profits received by [MIR] from the film and its ancillary revenues.

These statements are false. Tony Tarantino, the sole principal of Tarantino Productions, has not entered into any agreements with MIR and MIR is not entitled to any of the profits from the New Horizons project.

23. "New Horizons" is described in the Offering Memorandum as a film "starring Tom Cruise and Catherine Zeta-Jones" and MIR's web-site contained a "Target Cast" list that included several other well known stars such as Al Pacino and Paul Newman. These statements are false and misleading because none of these actors were approached about New Horizons, nor had they agreed to star in the project.

24. The Offering Memorandum stated that the "[m]usic for `New Horizons' alone is expected to be a hit." It stated that "Jerry Cupit who has received 82 gold records . . . has written the soundtrack for `New Horizons' available on a promotional CD." These statement are false and misleading because Jerry Cupit has only written two gold records. Although Jerry Cupit has written a soundtrack for New Horizons, the only recording that has been made consists of a small sampling of his "New Horizons" compositions that was prepared for Tony Tarantino.

25. The Offering Memorandum stated that "[i]ncredible special and visual effects with some unbelievable stunts will be coordinated by SFX expert John Mesa (the 6th Day [sic], Water world [sic], Deep Blue Sea)." These statements are false and misleading because John Mesa had not agreed to work on New Horizons and had nothing to do with The Sixth Day or Water World.

26. The Offering Memorandum touted the future success of New Horizons by stating that "[b]ased on research of recent genre-related films, `New Horizons' is expected to yield worldwide box office revenues of $320,000,000.00." It went on to state that "Mission Impossible, another Tom Cruise driven action film, yielded $450,000,000.00 on it first release; Mission Impossible 2 yielded $575,000,000.00." These statements are false and misleading because the Offering Memorandum does not disclose the fact that, unlike the Mission Impossible movies, Tom Cruise had not agreed to star in New Horizons.

2. Righteous Man Productions

27. The Offering Memorandum stated that MIR had entered into an agreement with Righteous Man Productions, a Florida-based production company that has completed several films, one of which is titled "Betty Blue Eyes." The Offering Memorandum stated that MIR will own 75% of the profits from "Betty Blue Eyes" and that the movie is "completed and `in the can.'" These statements are false and misleading because Betty Blue Eyes is not a completed movie, and is nothing more than a script. Furthermore, neither Righteous Man Productions nor MIR owned any rights to the script.

3. "Cruisin TV"

28. The Offering Memorandum stated that MIR had entered into an agreement with "`Cruisin TV', a syndicated television show filmed in various nightclubs and restaurants, and currently appearing on WAMI Television." This statement is false and misleading because Cruisin TV never appeared on WAMI Television and there were no plans for Cruisin TV to be aired on WAMI Television in the future. Furthermore, Cruisin TV has not been aired on any television station since around August 2000.

4. Use of Proceeds

29. The Offering Memorandum stated that MIR "intends to pay commissions and expenses, but in no event will such sales commissions and expenses exceed fifteen (15) percent." Another portion of the Offering Memorandum stated that, of the total $90 million that MIR plans to raise, $76.5 million (or 85%) will be used to fund MIR's various projects. According to the Offering Memorandum, $75 million had been allocated to New Horizons, $1 million had been allocated to Betty Blue Eyes, and $500,000 had been allocated to Cruisin TV. These statements were false or misleading because none of the money raised in connection with the MIR offering has been used to fund any of MIR's purported projects and at least 60% of the proceeds raised were spent by the Rubbo Defendants, either on personal expenses, or for expenses related to the MIR/Cine Star boiler room operation.

C. Direct Investor Solicitations

30. From at least January 2002 through February 2002, the Rubbo Defendants, Ragofsky, and other "salespersons" operated from an office shared by MIR and Cine Star and solicited individuals to invest in MIR.

31. The Rubbo Defendants ran the MIR/Cine Star boiler room operation as if it were a fraudulent "family business." J. Rubbo hired, and P. Rubbo supervised, the salespersons, including Ragofsky. At direction of the Rubbo Defendants, these salespersons instructed investors to wire their funds to Cine Star bank accounts, which were controlled by J. Rubbo, A. Rubbo Sr., and N. Rubbo. A. Rubbo, J. Rubbo, and N. Rubbo all signed checks drawn on the Cine Star accounts in order to pay salesperson commissions and other expenses related to the boiler room. Prospective investors received by mail a package that contained the Offering Memorandum, a subscription agreement signed by J. Rubbo, and a cover letter signed by A. Rubbo Jr. The cover letter, printed on letterhead labeled "Cine Star/Make It Reel Productions, Inc.," identified A. Rubbo Jr. as its "President."

32. On February 6, 2002, an agent from the Ohio AG, posing as an investor, recorded several telephone conversations with A. Rubbo Sr. and Ragofsky. During these conversations, both A. Rubbo Sr. and Ragofsky actively solicited the agent to purchase preferred shares in MIR at $100 per share. A. Rubbo Sr. falsely told the agent that MIR was a production company for the "New Horizons" project.

33. Ragofsky touted his prior experience on "Wall Street" as he told the agent about the benefits of investing in MIR. Ragofsky claimed that MIR had already raised $15 million and would sometimes receive "seven wires for fifty grand" in a single day. Ragofsky also promised the agent that he would double his money, even if the New Horizons project were only to "break even," and that he would likely earn a return of five times his initial investment amount within six months. These claims were false and misleading because MIR raised only approximately $80,500 and never received seven wires from investors in a single day. Ragofsky's predictions on the rate of return of the investment are completely baseless and he also failed to disclose that the NASD had barred him from associating with any member firm.

34. When the agent agreed to invest $50,000 in MIR, Ragofsky responded by providing him with wire transfer instructions for a Cine Star bank account located at Bank of America in Fort Lauderdale, Florida. Ragofsky followed up by mailing the agent a package of materials that included the Offering Memorandum, a subscription agreement signed by J. Rubbo, and written wire instructions for the Cine Star account.

First Claim

(Offer of Unregistered Securities in Violation Of Sections 5(a) and 5(c) of the Securities Act)

35. The Commission realleges and incorporates paragraphs 1 through 34 by reference as if fully set forth herein.

36. From at least January 2002 through February 2002, the Defendants, directly and indirectly, singly and in concert, have made use of the means or instruments of transportation or communication in interstate commerce, or of the mails, to offer and sell securities through the use or medium of a prospectus or otherwise when no registration statement has been filed or was in effect as to such securities and when no exemption from registration was available.

37. As part of and in furtherance of this fraudulent conduct, Defendants offered and sold unregistered securities to the public through the Internet, and telephone and mail solicitations. There were no registration exemptions available for this offering.

38. By reason of the foregoing, the Defendants have violated, and unless enjoined, will continue to violate, Sections 5 (a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

Second Claim

(Fraud in Violation of Section 17(A) of the Securties Act)

39. The Commission realleges and incorporates paragraphs 1 through 38 by reference as if fully set forth herein.

40. Defendants, directly and indirectly, singly and in concert, knowingly or recklessly, by the use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or by the use of the mails, in the offer or sale of securities, have: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of, or otherwise made untrue statements of material fact, or omitted to state material facts necessary to make the statements, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, acts, practices and courses of business which operated or would operate as a fraud or deceit upon purchasers of securities.

41. As part of and in furtherance of this violative conduct, Defendants, as more fully described above, directly or indirectly, made materially false statements and omitted to state material facts. These transactions, acts, practices, and courses of business operated, or would operate, as a fraud or deceit on investors in the offer or sale of MIR securities.

42. By reason of the foregoing acts, omissions, practices, and courses of business set forth in this Complaint, the Defendants have violated and, unless enjoined, will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

Third Claim

(Fraud in Violation of Section 10(B) of the Exchange Act and Rule 10b-5 Thereunder)

43. The Commission realleges and incorporates paragraphs 1 through 42 by reference as if fully set forth herein.

44. Defendants, directly and indirectly, by the use of the means and instrumentalities of interstate commerce, or of the mails, or of the facilities of a national securities exchange in connection with the purchase and sale of securities, knowingly or recklessly, have: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon any person.

45. As part of and in furtherance of this violative conduct, Defendants, as more fully described above, directly or indirectly, made material false statements and omitted to state material facts. These transactions, acts, practices, and courses of business operated, or would operate, as a fraud or deceit on investors in connection with the purchase or sale of MIR securities.

46. By reason of the foregoing, the Defendants have violated and, unless enjoined, will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

Relief Requested

WHEREFORE, Plaintiff Commission respectfully requests that the Court enter a final judgment:

A. Permanently enjoining the Defendants, their agents, servants, employees, attorneys in-fact, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

B. Ordering Defendants MIR and Cine Star to file with this Court and serve upon the Commission a verified written accounting, signed by an authorized representative of MIR and Cine Star under penalty of perjury, of:

1. All assets, liabilities and property currently held directly or indirectly by or for the benefit of MIR and Cine Star, including but not limited to, bank accounts, brokerage accounts, investments, business interests, loans, lines of credit, and real and personal property wherever situated, describing each asset and liability, and its current location and amount;

2. All money, property, assets, and other income received by MIR and Cine Star, or for their direct or indirect benefit, in or at any time from January 1, 2001 to the date of the accounting, describing the source, amount, disposition and current location of each of the items listed;

3. The names and last known addresses of all bailees, debtors, and other persons and entities which are currently holding the assets, funds or property of MIR and Cine Star; and

4. All assets, funds, securities, real or personal property received by MIR and Cine Star, or any other person controlled by MIR and Cine Star, from persons who provided money to MIR or Cine Star in connection with the offer, purchase or sale of investments of any kind, and the disposition of such assets, funds, investments, and real or personal property.

C. Ordering the Defendants to disgorge their ill-gotten gains from the violative conduct alleged in this Complaint, and to pay prejudgment interest thereon.

D. Ordering the Defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] for the violations alleged herein.

E. Ordering that all previous orders issued by the Court in this action be maintained in full force and effect.

F. Granting such other relief as the Court deems just and proper.

Dated : May 8, 2002

New York, New York

Of Counsel:
Wayne M. Carlin
Edwin H. Nordlinger
Mark K. Schonfeld
Caren N. Pennington

http://www.sec.gov/litigation/complaints/complr17513.htm