U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22929 / February 20, 2014
Securities and Exchange Commission v. Samuel Braslau et al., Civil Action No. CV14-01290 (C.D. Cal., filed February 20, 2014)
SEC Charges Three California Residents Behind Movie Investment Scam
The Securities and Exchange Commission charged three California residents with defrauding investors in a purported multi-million dollar movie project that would supposedly star A-list celebrities and generate exorbitant investment returns.
The SEC alleges that Los Angeles-based attorney Samuel Braslau was the architect of the fraudulent scheme that raised money through a boiler room operation spearheaded by Rand Chortkoff of Encino, Calif. High-pressure salespeople including Stuart Rawitt of Marina del Rey, Calif., persuaded more than 60 investors nationwide to invest a total of $1.8 million in the movie first titled Marcel and later changed to The Smuggler. Investors were falsely told that well-known actors ranging from Donald Sutherland to Jean-Claude Van Damme would appear in the movie when in fact they were never even approached. Instead of using investor funds for movie production expenses as promised, Braslau, Chortkoff, and Rawitt have spent most of the money among themselves. The investor funds that remain aren't enough to produce a public service announcement let alone a full-length motion picture capable of securing the theatrical release promised to investors.
In a parallel action, the U.S. Attorney's Office for the Central District of California announced criminal charges against Braslau, Chortkoff, and Rawitt.
According to the SEC's complaint filed in U.S. District Court for the Central District of California, Braslau set up companies named Mutual Entertainment LLC and Film Shoot LLC to raise funds from investors for the movie project. In January 2011, Mutual Entertainment spent $25,000 to purchase the rights to Marcel, an unpublished story set in Paris during World War II. Shortly thereafter, Mutual Entertainment began raising money from investors through a boiler room operation that Chortkoff operated out of Van Nuys, Calif.
The SEC alleges that Braslau, Chortkoff, and Rawitt claimed that 63.5 percent of the funds raised from investors would be used for "production expenses." However, very little if any money was actually spent on movie expenses as they instead used the vast majority of investor funds to pay sales commissions and phony "consulting" fees to themselves and other salespeople. Rawitt made numerous false claims to investors about the movie project. For instance, he flaunted a baseless projected return on investment of about 300 percent. He falsely depicted that they were just shy of reaching a $7.5 million fundraising goal and the movie was set to begin shooting in summer 2013. He instilled the belief that Mutual Entertainment was a successful film company whose track record encompassed the Harold and Kumar movies produced by Carsten Lorenz. And he falsely stated that investors would realize revenues from action figures and other products tied to the movie when in fact no such licensing rights had been sold.
According to the SEC's complaint, Rawitt was the subject of a prior SEC enforcement action in 2009, when he was charged for his involvement in an oil-and-gas scheme.
The SEC's complaint alleges that Braslau, Chortkoff, and Rawitt violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The complaint further alleges that Chortkoff and Rawitt violated Section 15(a) of the Exchange Act, and Rawitt violated Section 15(b)(6)(B) of the Exchange Act. The SEC seeks financial penalties and a permanent injunction against Braslau, Chortkoff, and Rawitt.
The SEC's investigation, which is continuing, has been conducted by Peter Del Greco and Marc Blau of the Los Angeles office. The SEC appreciates the assistance of the U.S. Attorney's Office for the Central District of California and the Federal Bureau of Investigation.
