Community Corner

Victims of B-Movie Ponzi Scam Describe Their Ordeal

The victims of a Laguna Niguel B-movie producer's ponzi scheme describe losing their life-savings and being unable to pay for cancer treatments after being bilked to invest in movies staring actors such as rapper Flavor Flav.

Victims of a Laguna Niguel B-movie producer's Ponzi scheme involving five films told an Orange County Superior Court judge today how their failed investments financially wrecked them.

Mahmoud "Mike" Karkehabadi, 55, owner of Alliance Group Entertainment, was scheduled to be sentenced today, but Orange County Superior Court Judge Richard Toohey rescheduled the hearing for the end of the month when the defendant's attorney asked for another delay.

Toohey, however, heard impact statements from victims because most flew in from out of state for today's hearing.

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"Every month we wait for our Social Security check and all of it goes to our loan so we can hold on to our home," Dixie Gibbens told Toohey. "Our bills? Let me tell you, we don't do bills very well... And our credit rating? You don't want to know."

Gibbens said losing her nest egg has also affected her health as she and her husband skip taking physicals because they can't afford it.

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"This way we don't get another bill," she said. "That son of a you know what there doesn't care about anyone else."

Gibbens found it particularly galling that Karkehabadi would tell her to pray for him.

"He kept saying, 'Pray for me,' but that son of a gun should be the one praying," Gibbens said.

Marsha Vincelette said her sister, who is afflicted with muscular sclerosis, lost her home in the investment deal.

"I realize Mr. Karkehabadi is not charged with murder, but in a lot of ways he's taking years off the lives of a lot of people."

According to Vincelette, one victim could not afford the cancer treatment she needed and has since died.

Vincelette admitted she did not naively fall victim to the investment.

"I wasn't forced to invest, but I felt like I did my homework," Vincelette said. "But it was a scam."

Vincelette said she has no retirement in her future.

"At this point I will be working for the rest of my life," she said.

Vincelette's sister, coincidentally, is co-defendant Deanna Ray Salazar, who pleaded guilty June 27 and was sentenced to a two-year prison term.

Salazar testified during the trial.

Karkehabadi was convicted Jan. 24 of 51 felony counts, most of which involved the fraudulent sale of securities and grand theft. He faces up to 34 years in prison, Assistant Attorney General Patricia Mary Fusco said.

The scheme stemmed from the production of five independent movies that featured mixed martial arts fighter Quinton "Rampage" Jackson and rapper Flavor Flav, among others.

Prosecutors alleged it was a $9 million Ponzi scheme, but jurors found the loss was between $500,000 to $3 million for 21 investors.

Prosecutors argued that more than 150 investors from across the country made loans to Alliance Group Entertainment to produce B-movies since 2005, including "Confessions of a Pit Fighter," which starred Flavor Flav, and "Hotel California."

Karkehabadi promised investors they would get their money back in a year no matter how well the movie did with audiences, prosecutors said. The promised returns were between 18 to 35 percent.

Karkehabadi persuaded investors to roll their "loans" over into another project after a year or agree to extensions on repayment of the loans, according to the prosecution.

Bank records showed most of the money in Alliance's accounts was from investors and their money was used to pay principal and interest to earlier investors, prosecutors said. Records showed deposits of more than $11 million from the investors and only $535,000 in revenue from the movies, prosecutors said.

The attorney general's office began its investigation in 2008 after receiving a referral from the Department of Corporations, which was prompted to look into the accounts when investors complained.

The attorney general in 2003 won a $5 million judgment against Karkehabadi for deceptive marketing of credit cards that couldn't be used in stores and for violating California's false advertising and unfair business practices laws.

Karkehabadi declared bankruptcy after that, but did not tell his investors, prosecutors said.

 - City News Service


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