UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17658 / August 6, 2002
SECURITIES AND EXCHANGE COMMISSION v. HERITAGE FILM GROUP, LLC, et al., 02 Civ. 4364 (LDW) (U.S.D.C., E.D.N.Y.)
The Securities and Exchange Commission today charged 51 individuals and entities in connection with the fraudulent offer and sale of securities in three motion picture development companies. The defendants conducted these offerings between 1997 and 2001 and raised over $13.1 million from investors throughout the United States. The offerings were fraudulent because the defendants falsely stated that the funds would be used for business purposes when in fact a substantial portion of the offering proceeds went for undisclosed cash commissions to the persons who organized and conducted the offerings. The defendants include the issuers and their principals, the persons who orchestrated the offerings, 42 unregistered brokers who sold the securities to investors, and a lawyer who aided and abetted two of the fraudulent offerings.
The defendants named in the Commission's Complaint filed in the United States District Court for the Eastern District of New York include:
- Little Giant LLC ("Little Giant"), a California limited liability company whose business is the development, production, and marketing of a motion picture entitled "Carlo's Wake."
- Heritage Film Group LLC ("Heritage Film"), a California limited liability company whose business is the development, production, and marketing of a motion picture entitled "The Amati Girls."
- Out of the Black Partners LLC ("Out of the Black"), a California limited liability company whose business is the development, production, and marketing of a motion picture entitled "Out of the Black."
- James Alex ("Alex"), age 74, and a resident of Sherman Oaks, California, was the executive producer of "Carlo's Wake" and "The Amati Girls." Alex controlled Little Giant and Heritage Film.
- Karl Kozak ("Kozak"), age 38 and a resident of San Diego, California, controlled Out of the Black.
- Russell Finnegan ("Finnegan"), age 41 and a resident of Mission Viejo, California. Finnegan organized the Little Giant and Heritage Film securities offerings. Finnegan owned and was the Chief Executive Officer and President of defendant Double Eagle Capital Management, Inc. ("Double Eagle"), a California corporation.
- Michael Gonzales ("Gonzales"), age 38 and a resident of Redondo Beach, California, who organized the Out of the Black offering.
- James Leonard ("Leonard"), age 54 and a resident of Los Angeles, California, who is an attorney admitted to the California Bar. Leonard aided and abetted the Little Giant and Heritage Film fraudulent schemes.
In addition, the Commission's Complaint charges 42 individuals and entities that were unregistered brokers who cold-called investors to sell Little Giant, Heritage Film, and Out of the Black securities.
The Complaint alleges that the issuers, Little Giant, Heritage Film and Out of the Black, retained "offering managers," Finnegan, in the case of Little Giant and Heritage Film, and Gonzales, in the case of Out of the Black, who recruited a and coordinated a nationwide network of over 42 telemarketers called "Independent Sales Offices" or "ISOs" to market their unregistered securities offerings to investors. The Commission's Complaint alleges that particular defendants involved in each offering falsely stated that the investor funds would be used for business purposes and that sales commissions would be only approximately 10% to 20% when, in fact, the offering managers and the ISOs were paid undisclosed cash commissions of up to 45% to 55%. Further, according to the Complaint, Alex and Heritage Film made material misrepresentations in Heritage Film's offering materials suggesting that Olympia Dukakis and William Hurt had agreed to star in The Amati Girls when they had not reached any such agreement.
The Commission's Complaint charges the issuers, their principals, and the offering managers and unregistered brokers with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, and charges Leonard, a California lawyer, with aiding and abetting the Heritage Film and Little Giant fraudulent schemes. The Complaint further charges Finnegan, Gonzales and the unregistered brokers with violations of Section 15(a) of the Exchange Act.
The Complaint seeks a final judgment against the defendants, among other things, (i) enjoining them from future violations of the above-cited provisions; (ii) requiring all of the defendants except Heritage Film, Little Giant, and Out of the Black to disgorge their ill-gotten gains, plus pre-judgment interest; (iii) assessing civil penalties against all of the defendants except Heritage Film, Little Giant and Out of the Black; and (iv) as to Alex and Kozak, barring them from acting as officers or directors of any publicly traded company.
The following is a list of the 42 ISO defendants charged in the Commission's complaint:
- Abraham M. Daniels ("Daniels"), age 54, of North Miami, Florida, who controlled defendant Four Starz Productions Limited, Inc. ("Four Starz"), a Florida corporation.
- Anthony Liggio ("Liggio"), 70, a resident of Clover, South Carolina, who controlled defendant Associated Technology, Inc. ("Associated Technology"), a South Carolina Corporation.
- Cynthia Silver ("Silver"), 36, of San Clemente, California, an unregistered broker.
- Kurt Kranz ("Kranz"), 40, of Escondido California, who controlled defendant American Capital Acquisitions, Inc. ("American Capital"), a Nevada Corporation.
- Beverly Tedder ("Tedder"), 63, of Fort Pierce, Florida, who controlled defendant Atlantic Capital Trust, Inc. ("Atlantic Capital"), a Florida corporation.
- Ian Hahn ("Hahn"), 39, of Miami, Florida, who controlled defendant Benchmark Entertainment Group, Inc. ("Benchmark").
- Frank Rossi ("Rossi"), 41, of Buffalo, New York.
- Paul Dickau ("Dickau"), 39, of San Bernadino, California.
- Richard Jenkins ("Jenkins"), 49, of San Diego.
- Vincent Cavarra ("Cavarra"), 50, of Fort Lauderdale, who controlled defendant Southeast Research Film Foundation, Inc. ("Southeast Research"), a Florida corporation.
- Ken Zolo ("Zolo"), 53, of Fairfield, Iowa, who controlled defendant Lakshmi Film Corp., an Iowa corporation.
- Lisa Niksic ("Niksic"), 43, of San Diego, California.
- Laurence Bowsky ("Bowsky"), 63, of West Plam Beach, Florida.
- Rosemary Ingenito ("Ingenito"), 33, of Los Angeles, California.
- Philip Manzione ("Manzione"), 56, of Boca Raton, Florida.
- Donald O'Grady ("O'Grady"), 57 of Hobe Sound, Florida.
- Eric Thom ("Thom"), 46, of Los Angeles, California, and American Film Index, LLC ("American Film"), a California limited liability company.
- Nanci Silverstein ("Silverstein"), 50, of Secaucus, New Jersey.
- Anthony Stark ("Stark"), 40, of Mission Viejo, California, and Stark Entertainment Productions, Inc. ("Stark Entertainment").
- Howard Goodman ("H. Goodman"), 61, and his wife Mary Goodman ("M. Goodman"), 51, of Laguna Hills, California, who controlled defendant Through The Years Entertainment, Inc. ("TTYE"), a California corporation.
- Alberto Ferreiras ("Ferreiras"), 32 of North Miami Beach, Florida, who controlled defendants Trilink Entertainment Corp. ("Trilink") and One Trade Corp. ("One Trade"), both Florida corporations.
- Dana Valensky ("Valensky"), 52, of Laguna Niguel, California, who controlled Vanguard Entertainment Productions, Inc. ("Vanguard"), a California corporation.
- William Newsome ("Newsome"), 50, of Carlsbad, California, and Executive Services Group, LLC ("Executive Services"), a Nevada limited liability company.
- Kurt Penburg ("Penburg"), 41, of San Diego, California, and American Cinema Services, LLC ("American Cinema"), a Delaward limited liability company.
- James Frankfurth ("Frankfurth"), 63, of San Diego, California.
- Peter Emrich ("Emrich"), 61, of San Rafael, California.