A now-defunct project near Savannah to build the largest movie studio in North America was not only a dud, but also a fraud, federal regulators said Friday.
The Securities and Exchange Commission filed a civil lawsuit against three key executives tied to Medient Studios and its successor Moon River Studios, claiming they were operating a microcap or “penny stock” fraud.
Medient announced its audacious plans in early 2013, and captured a lot of buzz amid the relatively early days of Georgia’s recent boom in film and television production.
But unlike the cash-flush backers of Pinewood Studios in Fayette County or EUE/Screen Gems in south Atlanta, Medient was a tiny company with virtually no money and little track record to suggest viability.
There were other red flags. An Atlanta-Journal Constitution analysis at the time showed Medient's own auditors warned it was in danger of failing, yet despite its spotty finances Medient's stock was touted by paid promotions as a "can't miss" for investors.
In June 2014, the SEC suspended trading of Medient stock over questions concerning the accuracy of its financial disclosures.
The SEC alleges former CEO Manu Kumaran and successor Jake Shapiro made false and misleading statements in securities filings and in press releases. Medient allegedly misled investors with statements about construction and projected opening dates despite lacking funds to build the complex.
Another executive, Roger Miguel, is accused along with Kumaran and Shapiro of falsifying and back-dating loan documents used by the studio firm to issue stock in exchange for cash to run the company.
The SEC said the defendants issued billions of shares at a discount through the bogus promissory notes to third party financiers who dumped their shares on the public markets.
The SEC alleges “Kumaran used Medient to fund a lavish, globetrotting lifestyle that saw him spend an average of over $1,700 per day on travel and personal expenses” during one three-month stretch of 2014.
Attorneys for Kumaran and Shapiro did not return messages.
Miguel settled the case without admitting or denying the claims, the SEC said, but agreed to be banned from participating in penny stock offerings or being a director or officer of a public company for five years.
Shapiro and Miguel later tried to restart the project as Moon River Studios under a separate publicly traded company called FONU2. But it, too, soon fizzled without building the studio or releasing a single movie shot on Georgia's coast, despite many grand promises, including a purported deal with director Penny Marshall.
The SEC said three Medient directors not involved in the alleged fraud were charged with civil violations of federal securities laws by failing to properly report stock transactions.
Former New York Gov. David Paterson, entertainment mogul Charles Koppelman and Matthew Mellon II, heir of a banking fortune, were accused of failing to timely report stock transactions at various times while serving as directors.
Paterson and Koppelman agreed to pay penalties totaling $25,000 each to settle the claims, the SEC said, but did not admit nor did they deny wrongdoing. Mellon will face an SEC administrative hearing at a later date.
