Mahmoud 'Mike' Karkehabadi
Mahmoud ‘Mike’ Karkehabadi’s 27-year sentence was affirmed by the appellate court Monday. Photo courtesy of the Torrance Police Department
Mahmoud ‘Mike’ Karkehabadi’s 27-year sentence was affirmed by the appellate court Monday. Photo courtesy of the Torrance Police Department

A panel of Fourth District Court of Appeal justices Monday affirmed the conviction and the 27-year prison sentence of a Laguna Niguel B movie producer for a multi-million-dollar Ponzi scheme that convinced investors to back production of a series of independent films.

Mahmoud “Mike” Karkehabadi, 57, was convicted in January of 2013 on 51 felony counts, most involving the fraudulent sale of securities and grand theft. The scheme stemmed from the production of five movies featuring mixed martial arts fighter Quinton “Rampage” Jackson and rapper Flavor Flav, among others, according to prosecutors.

Karkehabadi raised numerous issues in his appeal from a denial of a right to present a defense, lack of evidence, prosecutorial misconduct on the part of the Attorney General’s Office, judicial bias, ineffective assistance of his attorney, as well as errors in jury instructions and sentencing. All of the claims were denied.

Karkehabadi’s company promised investors 18- to 25-percent interest on loans, according to the appellate ruling. The information sent to investors assured them the defendant’s company was part of another production company that had been doing business for 25 years and included “Alien” as one of its financial successes.

Karkehabadi promised investors they could get their money back in a year no matter how well the movie did at the box office, according to prosecutors. Karkehabadi convinced some investors to roll over their loans into another project after a year or agree to extensions on repayment of the loans, prosecutors said at the trial.

More than 150 investors from across the country loaned money to Alliance Group Entertainment to produce B movies such as “Confessions of a Pit Fighter” and “Hotel California.”

The state won a $5 million judgment in 2003 against Karkehabadi for deceptive marketing of credit cards that could not be used in stores and for violating the state’s false advertising and unfair business practices laws. The defendant declared bankruptcy after that, but he did not tell his investors that.

“Ultimately, between September 2006 and April 2009, more than 20 named investors loaned AGE/Film Projects approximately $3 million,” according to the appellate panel.

“AGE/Film Projects also received approximately $6.5 million more from other, unnamed investors. During this time, AGE/Film Projects paid about $1.7 million to various members of defendant’s family, and defendant authorized AGE/Film Projects to spend over $10 million producing films, but he collected only slightly more than $800,000 in revenue.”

Karkehabadi argued in the appeal that the information he failed to disclose to investors about the bankruptcy was relevant or showed he lied to investors or withheld relevant facts. The panel disagreed.

“Here, a reasonable investor would likely consider the $5 million judgement against defendant, his prior bankruptcy, and his other legal problems important in deciding to invest in AGE,” the panel wrote in the ruling.

— City News Service

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