Federal prosecutors from the U.S. Attorney’s office in Los Angeles attended a “status conference” Monday to discuss documents pertaining to charges of conspiracy, fraud and money laundering involving an Eagle Rock resident in an independent film production scam.
The resident, David Nelson, 40, is among 11 defendants who pleaded not guilty to the charges over the past week, said Stephen A. Cazares, an assistant U.S. attorney who is the deputy chief of the major frauds section and one of the two prosecutors in the case. Cazares and Assistant U.S. Attorney Ellyn Marcus Lindsay discussed the documents regarding the case with U.S. Federal Judge John F. Walter at the Federal courthouse on Spring Street.
According to a 32-page, 45-count Grand Jury indictment, Nelson and his co-defendants have been charged with conspiring to defraud investors by using high-pressure sales tactics to solicit some $17 million from them after feeding them half-truths and concealing vital facts about their investments from 2004 through 2009. (See the pdf file to your right for details of the Grand Jury indictment.)
Nelson, who worked as a “telemarketing closer” for Cinamour Entertainment, a Sherman Oaks-based film production and distribution company, allegedly cold-called individuals over the phone and, posing as an executive producer, promised them returns totaling 300 percent to 1,000 percent or more on their investments, according to the indictment.
Many of the investors were retired people—the demographic most likely to be at home and to answer the telephone. Those among them who had savings in retirement accounts were encouraged to liquidate those accounts and open self-directed IRAs (individual retirement accounts) aimed at permitting investments in films, says the indictment.
Their investments, the investors were falsely informed, would help finance a number of films—some of which were in fact never made or were developed only for DVD. The defendants raised $2.7 million for a film, Red Water, that wasn't made, resulting in a total loss to about 100 investors, says the indictment.
As many as 450 people ended up investing a combined $15 million in a single film, From Mexico With Love, which, the investors were told, had a budget of $5 million, according to the indictment. (The film grossed $550,000, according to the Internet Movie Database website.)
Further, Nelson and his co-defendants falsely assured the investors that they would start seeing returns on their investments soon after investing—often within six months—and that they could expect additional revenues and profits from the development of video games based on the films as well as other spinoff projects such as movie soundtracks.
What the investors weren’t told was how safe their investments were. Despite assurances to the investors that none of the film units would be sold on the basis of performance-based remuneration, the defendants pocketed large amounts of the investments as commissions.
The scam allegations follow a three-year joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service. FBI agents are looking for a twelfth suspect, Daryl Van Snowden, of Chatsworth, CA, who, like Nelson, is identified in the indictment as a telemarketing closer and is a fugitive, Cazares said.
An additional five people from another film company, Burbank-based Q Media Assets, have also been charged with 33 counts of fraud, money laundering and conspiracy, according to the Grand Jury indictment. Q Media raised $9 million for two films, one of which bombed, earning just $700,000; the other film resulted in a DVD.
Nelson surrendered to U.S. Marshals on the morning of Thursday, June 23, following an arrest warrant for him, Cazares said. Nelson was released Thursday afternoon on a $25,000 unsecured affidavit of surety signed by him, Cazares added.
All but three of Nelson’s co-defendants have been released from custody on bonds, Cazares said. Those still under federal custody include Joel Lee Craft Jr., a San Clemente resident who owned American Information Strategies, a corporation that sold lists of potential investors to companies and telemarketing firms, including Cinamour Entertainment, whose owner and president, Daniel Toll, is one of Nelson's co-defendants.
Another status conference with Judge Walter is scheduled at 1 p.m. on July 22 in courtroom 16 of the Federal courthouse, located on 312 N. Spring Street. “By that time a trial date will be set,” Cazares said.