The Ponzi producer

To provide the reader of this article with the background to a scam and the steps and precautions that could have been taken to protect against fraud, I have created a case study using approved scams as examples. A television show that shows scams of all kinds is American greed, which tunes in CNBC. In this article I have included a synopsis of a scam profiled in an episode of American greedand how investors could have carried out due diligence on the opportunity presented to generate red flags.

Year: Early 2000

Amount of fraud: 5.5 million dollars.

Number of people defrauded: 70

Perpetrators:

Joseph Medawar had minor success as a Hollywood movie producer, but his next production would make him famous as a con artist.

Swindle:

Medawar touted himself as an investor-seeking movie producer in his latest television series called DHS that will profile actual incidents from the files of the Department of Homeland Security. He claimed to have 26 episodes that were all in some stage of production and that both FOX and HBO were vying for the right to buy the episodes.

In 2003, Medawar showed the trailer to Congressman Dana Rohrabacher of California. To help producers make the television series as real as possible, Rohrabacher introduces Medawar to government officials from the Department of Homeland Security. He was able to have a photo taken with these government officials and other members of Congress. Through his attendance at various fundraising dinners, he finally met and had his picture taken with President Bush. Medawar posted these photos on her website to increase the legitimacy of her business.

He showed potential investors the trailer created as part of the “pilot film.” It turns out that the trailer was actually just snippets stolen from other movies edited together to make it look like it was actual footage shot as part of the finished TV series. Investors were able to buy shares in his company, Steeple Entertainment, for $ 1 a share, telling them that the company was about to “go public.”

Later, Medawar went to small churches in Southern California to claim that his series had a religious message and that it will air on religious television networks. A church member took a $ 57,000 equity loan from his Watts home where he had raised 13 children to invest in Medawar’s “movie.” When his investment was not returned in the promised time, he was unable to keep his house payments and eventually lost his house. She regrets the fact that she will not be spending Thanksgiving or Christmas with her family at their home. In all, Medawar scammed 3 million unsuspecting churches and parishioners.

Another investor who learned of the “opportunity” from a colleague at work took out a second mortgage on his home for more than $ 100,000 to buy the $ 1 stock. He said he hoped once Steeple Entertainment had its public offering. initial IPO, you could sell it for $ 40 a share.

Due diligence on financial pornography:

Potential investors may have contacted the California State Securities Division asking if Steeple Entertainment had notified the state to sell securities in the State of California or if they had ever heard of Joseph Medawar. Investors could have hired a private investigator who may have uncovered the fact that Medawar had been cited for stock fraud at another company in 2001.

Understanding the securities laws would have given investors a red flag that only accredited investors can invest in many pre-IPO stocks. While it may be difficult for the general public to gain this kind of access, an FBI agent spoke with several investment banks who said they had never worked with Medawar or Steeple Entertainment for the purpose of going public.