Royal Bank of Scotland (RBS) has agreed to a $275 million settlement with plaintiffs in a class-action case that pitted investors against RBS and others over the sale of mortgage-backed securities.
In addition, a former Merrill Lynch broker got 10 years in prison after a guilty plea and FINRA took action against one firm for unfair pricing and another for inappropriate fees.
SEC Charges Three in Movie Investment Scam
Three California residents, Los Angeles-based attorney Samuel Braslau, Rand Chortkoff of Encino and Stuart Rawitt, were charged by the SEC with defrauding investors in a purported multimillion-dollar movie project that would supposedly star well-known actors and generate blockbuster investment returns.
Braslau masterminded the scheme, and set up companies named Mutual Entertainment LLC and Film Shoot LLC to raise funds. In January 2011, Mutual Entertainment spent $25,000 to purchase the rights to Marcel, an unpublished story set in Paris during World War II. After that, Mutual Entertainment began raising investor money through a boiler-room operation that Chortkoff operated out of Van Nuys.
High-pressure salespeople, including Rawitt, sucked in more than 60 investors across the country and bilked them out of a total of $1.8 million for the movie, which was first titled Marcel and later changed to The Smuggler. Investors were promised that high-profile actors like Donald Sutherland and Jean-Claude Van Damme would appear in the movie, but none of the actors were even approached about the project.
Instead of using investor funds for movie production expenses as promised — investors were told that 63.5% was destined for such expenses — Braslau, Chortkoff and Rawitt took the money and spent it, leaving barely a pittance remaining — certainly not enough for a full-length feature film, as investors were promised.
That was far from the only lie investors were told. Rawitt said the movie would bring in a 300% return on investment, claimed that they had nearly reached their fundraising goal of $7.5 million and that the movie would begin shooting in the summer of 2013. He also managed to give investors the impression that Mutual Entertainment was a successful film company whose track record encompassed the Harold and Kumar movies produced by Carsten Lorenz. To top it off, he promised investors returns on action figures and other movie tie-ins, when nobody had bothered to try to sell any such rights.
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 investigation is continuing. In a parallel action, the U.S. Attorney’s Office for the Central District of California has announced criminal charges against Braslau, Chortkoff and Rawitt.
Former Merrill Lynch Broker Gets 10 Years for Ponzi Scheme
Gary Lane, a former Bank of America Merrill Lynch broker who pleaded guilty to running a Ponzi scheme that bilked investors of $2.7 million, was sentenced to 10 years in prison. During the scheme, which ran from 2005 to 2011, Lane told his investors, who were either elderly or inexperienced, that if they put money into a non-BofA account he would put it into U.S. Treasury bonds that would pay more than 6% interest and mature in only two years. But, according to Daniel Bogden, the U.S. attorney for the District of Nevada, those bonds never existed, and the money instead went into Lane’s wife’s ETrade account, where Lane used it to pay for everything from interest to earlier investors to his own personal expenses.
In September, Lane pleaded guilty to mail fraud and tax evasion. The firm, which was not named in any of the lawsuits that resulted from Lane’s activities, reported him to law enforcement officials and have also made restitution to Lane’s customers.
Lane, who was fired from Merrill in March 2011 when the firm learned what he was up to, was also barred by FINRA from association with any member firms in September of the same year.
RBS Settles MBS Litigation for $275 Million