LOS ANGELES (CN) - A band of scam artists hoodwinked elderly investors with a Ponzi scheme focused on a film featuring actor Simon Baker, California says in court.
Read Courthouse News' Entertainment Law Digest.
Five companies and three individuals targeted seniors for the scheme, which involved four offerings and investments in 2009 thriller "Not Forgotten" starring Baker and Paz Vegas, according to the complaint. Neither Baker, who stars on the CBS drama "The Mentalist," nor Vegas are parties to the lawsuit in Los Angeles Superior Court.
Michelle Kenen Seward, who founded the senior-planning company Protege Financial, and "Not Forgotten" writer-director Dror Soref hatched the scheme through Skyline Pictures and its subsidiary Windsor Pictures, according to the complaint.
Seward's insurance agency Saxe-Coburg and its vice-president Scott Walter Foulk also allegedly participated.
"Beginning in or about at least November 2006, and continuing thereafter, defendants offered and sold unqualified, non-exempt securities in this state in the form of 'Not Forgotten' 'operating' agreements; Windsor Pictures 'bridge' loans, 'promissory' notes, 'class A membership' interests, and 'convertible' debentures; Protege Financial 'bridge' loans and 'promissory' notes; and Saxe-Coburg 'promissory' notes in issuer transactions by means of fraud, totaling in excess of $23.2 million in approximately 215 transactions to known investors," California says.
Many investors committed all their life savings to the scheme "with the hopes of earning substantial returns to protect them during their golden years," the 26-page complaint states.
Investors were assured of high returns, but the alleged co-conspirators stopped paying interest payments or returns roughly a year ago, California says.
With free seminars and one-on-one consultations, Seward lured investors by telling them she "was tired of seeing seniors being taken advantage of by the financial industry," according to the complaint. She also allegedly claimed that she would sell her million-dollar home before investors would lose a penny, and she insisted that the opportunity was no Ponzi scheme.
Two of the offerings diverted and commingled millions in investor funds, paying $400,000 to the Kristy Alley Family Trust, California says.
Saxe Coburg has clients who invested in actress Kristy Alley's company Organic Liaisons, according to the firm's website, but neither Alley nor her company are parties to the lawsuit.
Patty Salazar Deputy Commissioner of California Department of Corporations told Courthouse News that it has not been able to officially identify the trust's owner.
The defendants also concealed more than $1 million in sales agent commissions, and told investors they were protected from losses in Windsor Pictures by a $50 million insurance policy, California claims.
California Corporations Commissioner Jan Lynn Owen said that the elderly are a common target of investment scams.
"It is at the core of our mission at the Department of Corporations to hold licensees who violate our state financial laws accountable for their unscrupulous behavior," he said in an email. "We hope our actions will bring relief to investors who have been harmed."
Seward's attorney, Pamela Johnston with Foley & Lardner, insisted that her client "is not and has never been an owner of Soref's companies." Johnston insisted that Soref's scheme actually hurt Seward as well.
"We tried to meet with the state's attorney, but the state's lawyer refused to do so," Johnston said in a statement. "The state did not want to discuss the facts - they were more interested in racing to the courthouse to file a civil lawsuit that is riddled with errors than learning about what Dror Soref did and how he victimized a lot of people including Michelle Seward. Michelle is a respected insurance agent who has been terribly hurt by Dror Soref and his activities. If the state had agreed to speak with Ms. Seward's counsel, the State would have learned that Michelle Seward has been working with her insurance clients, lenders, and others to resolve this situation as fairly as possible."
California seeks an injunction, restitution and civil penalties for violations of securities law. It names as defendants: Protege Financial & Insurance Service dba Senior Retirement Specialists and Teacher Retirement Specialists; Saxe-Coburg Insurance Solutions LLC, Not Forgotten LLC, Windsor Pictures LLC, Seward, Soref, Foulk and 50 unnamed entites.
Blaine Noblett represents the California corporations commissioner.
Skyline Pictures could not be reached for comment.
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