B-Movie Producer Sentenced To 27 Years In Prison For Running Multimillion-Dollar Ponzi Scheme
A B-movie producer who graced us with such movies as Confessions of a Pit Fighter starring Flavor Flav and Hotel California was sentenced today to 27 years in prison for running a multimillion dollar Ponzi scheme. Mahmoud "Mike" Karkehabadi of Laguna Niguel was convicted in January of 51 felony counts related to the fraudulent sale of securities and grand theft, according to City News Service. Altogether Karkehabadi convinced investors to sink $11 million into five independent movies that only brought in $535,000 in revenue. He promised investors returns between 18 and 35 percent.
He also convinced investors to roll over their loans for his projects and agree to extensions on repayment of the loans, prosecutors argued. Bank records showed that Karkehabadi used money from new investors to pay older investors—a classic Ponzi scheme.
There were 21 investors altogether. Prosecutors alleged the scheme was $9 million but the jury found that the losses were somewhere between $500K and $3 million (which seems like a large discrepancy).
Some of the investors got angry, and the state attorney general began investigating the company in 2008. Karkehabadi had a record bilking people. The state won a $5 million judgment against him for deceptively marketing credit cards that couldn't be used in stores. He declared bankruptcy after that, but his investors had no idea.