FBI New York Field Office Press Release:
Former Businessman Pleads Guilty in Manhattan Federal Court to Fraud in Connection with the Financing of ‘Rebecca—The Musical’
| U.S. Attorney’s Office July 29, 2013 |
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that one-time Long Island businessman, Mark Hotton, pled guilty today in Manhattan federal court to defrauding the producers of the Broadway show “Rebecca—The Musical” (“Rebecca”) through an elaborate scheme involving fictitious overseas “investors” and the possibility of a last-minute $1.1 million loan. Hotton also pled guilty to participating in a separate scheme to defraud a Connecticut-based real estate company through using many of the same deceptions he employed in the “Rebecca” fraud. Hotton pled guilty today before U.S. District Judge John G. Koeltl.
Manhattan U.S. Attorney Preet Bharara said, “With his guilty plea today, the curtain is finally closing on Mark Hotton’s elaborately staged fraud. Though his lies and deceits were the stuff of fiction, they caused real harm to his victims, and he now faces real consequences as a result—the prospect of jail.”
According to the complaint, the indictment, and statements made in Manhattan federal court:
Hotton once worked for a prominent investment bank and financial services firm and is a former stockbroker with ties to numerous corporate entities. From September 2011 to October 2012, he engaged in two separate schemes involving fictitious individuals and entities that he created in order to defraud his victims—the producers of “Rebecca,” a musical based on the novel by Daphne du Maurier, and a Connecticut-based real estate company.
The “Rebecca” Fraud
As of late January 2012, the producers of “Rebecca” were trying to raise an additional $4 million in order to mount the musical on Broadway. The budget for Rebecca was between $12 million and $14 million, and in late January 2012, the producers realized they were at least $4 million short of their minimum capitalization goal. To raise additional funds, on or about February 7, 2012, the producers’ company entered into an agreement with TM Consulting Inc., a company Hotton controlled. Under the agreement, Hotton undertook to raise money for “Rebecca” in return for a fee of $7,500, plus eight percent of any funds raised in excess of $250,000, plus tiered percentages of “Rebecca’s net profits.”
Over the course of the next few months, Hotton led the producers into believing that he had secured $4.5 million from four overseas investors—“Paul Abrams,” of Hawthorne, East Victoria; “Roger Thomas,” of St. Peter Port, Guernsey; “Julian Spencer,” of Crocker Hill, Chichester, Sussex, and “Walter Timmons,” of London, United Kingdom (the “Hotton investors”). Hotton provided the producers with purported e-mail contact information for these individuals and also furnished the producers with investment agreements purportedly signed by them. These individuals also purportedly wrote e-mails to the producers. For example, in April 2012, “Paul Abrams,” using the e-mail account info@cpsequity.com, wrote one of the producers an e-mail saying, “Mr. Hotton has spoken so highly about you....I look forward to meeting you and if any further participation in the musical is attainable outside of what I’m doing personally, please let Mr. Hotton know so he can organize it thru my kids Trust.”
Between February and June 2012, the producers made a number of payments to Hotton. Not only did they pay the $7,500 fee in February 2012, they also paid Hotton more than $17,000 between February and June 2012. Furthermore, in April 2012, Hotton demanded and was paid an “advance” against his eight percent commission, claiming that he needed the money to cover the costs of a purported safari he had taken with “Paul Abrams” and Abrams’ eldest son.
The investigation revealed, however, that the Hotton investors did not even exist. For example, some of the IP addresses used to access the e-mail accounts of the Hotton investors trace back to a Manhattan location where Hotton did business, and the businesses associated with some of the e-mail address for the Hotton investors have websites whose domain names were registered to Hotton and that he apparently created shortly before and during the fraud. Hotton used the decoy e-mail addresses to fabricate e-mail correspondence between himself and the Hotton investors, which he then forwarded to the producers. In some instances, he used the e-mail addresses to communicate directly with the producers.
In July 2012, as the producers pressed for the Hotton investors to wire the money they had promised to send by July 31, 2012, Hotton orchestrated the false illness, hospitalization, and subsequent untimely “death” of one of the main Hotton Investors, “Paul Abrams.” Hotton thereupon fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams.” Hotton claimed to be meeting with “Wexler” in England in August 2012 in an effort to make sure the contribution to “Rebecca” was still made. However, travel records indicate that Hotton had not left the United States since April 2012. Further, the e-mail address used by “Wexler” was associated with a domain that was set up and registered to Hotton.
As it became increasingly apparent that the commitments of the Hotton investors would fall through, Hotton purported to try to broker a $1.1 million loan for the producers, even offering up his own real estate and brokerage account as collateral for the loan. But there was no real loan or lender. Rather, Hotton had simply created a second set of apparently fictional characters and entities to generate payments for himself. Among other things, Hotton created the domain name of the title company he said could assist the producers in obtaining the loan; invented the business, SPS Equity, purportedly making the loan; used decoy e-mails to fabricate correspondence with individuals, including “Gus” and “Robert Phillips,” who purportedly worked for the lender; and invented a company that he said was a “commercial lending affiliate” of the bank that would facilitate his hollow offer to put up collateral for the loan. Through this part of the “Rebecca” scheme, Hotton was able to defraud the producers into paying in excess of $35,000 to him and companies he controlled, including $10,000 paid to him personally, as half of a fee for helping to broker the loan, and $23,000 paid to a bank account for the “lender” but which was really controlled by Hotton’s sister and administrative assistant.
The Connecticut Real Estate Fraud
Hotton employed a similar set of deceptive devices—including some of the same e-mail addresses and fictitious companies used to defraud “Rebecca”’s producers—in order to defraud a Connecticut-based real estate company (the “real estate company”) into paying hundreds of thousands of dollars to him and companies he controlled.
Beginning in September 2011, Hotton agreed to help the president of the real estate company (the “president”) obtain financing for various business ventures. Hotton promised that a California-based group called “Pacific Ventures” and its affiliate “Mezzanine Capital” would assist in providing a $20 million loan. Hotton provided as an e-mail address for a contact at “Pacific Ventures” the same e-mail address he told the Producers was used by “Paul Abrams” and which was then purportedly used by “Walter Timmons” as well as the assistants of “Paul Abrams” in the “Rebecca” scheme. Meanwhile, Hotton provided as an e-mail address for a contact at “Mezzanine Capital,” the same e-mail address he told the producers was used by “Roger Thomas,” one of the Hotton investors.
In March 2012, Hotton told the president that a third company, “CPS Equity,” would be able to process the loan but required a $200,000 upfront fee, which the president paid. CPS Equity was the company associated with, among other things, the e-mail address used by “Paul Abrams” when communicating with “Rebecca”’s producers. Following the initial $200,000 payment, Hotton further instructed the president to make additional payments in order to secure the loan.
Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Sarah McCallum, Edward B. Diskant, and Zachary Feingold are in charge of the prosecution.
Manhattan U.S. Attorney Preet Bharara said, “With his guilty plea today, the curtain is finally closing on Mark Hotton’s elaborately staged fraud. Though his lies and deceits were the stuff of fiction, they caused real harm to his victims, and he now faces real consequences as a result—the prospect of jail.”
According to the complaint, the indictment, and statements made in Manhattan federal court:
Hotton once worked for a prominent investment bank and financial services firm and is a former stockbroker with ties to numerous corporate entities. From September 2011 to October 2012, he engaged in two separate schemes involving fictitious individuals and entities that he created in order to defraud his victims—the producers of “Rebecca,” a musical based on the novel by Daphne du Maurier, and a Connecticut-based real estate company.
The “Rebecca” Fraud
As of late January 2012, the producers of “Rebecca” were trying to raise an additional $4 million in order to mount the musical on Broadway. The budget for Rebecca was between $12 million and $14 million, and in late January 2012, the producers realized they were at least $4 million short of their minimum capitalization goal. To raise additional funds, on or about February 7, 2012, the producers’ company entered into an agreement with TM Consulting Inc., a company Hotton controlled. Under the agreement, Hotton undertook to raise money for “Rebecca” in return for a fee of $7,500, plus eight percent of any funds raised in excess of $250,000, plus tiered percentages of “Rebecca’s net profits.”
Over the course of the next few months, Hotton led the producers into believing that he had secured $4.5 million from four overseas investors—“Paul Abrams,” of Hawthorne, East Victoria; “Roger Thomas,” of St. Peter Port, Guernsey; “Julian Spencer,” of Crocker Hill, Chichester, Sussex, and “Walter Timmons,” of London, United Kingdom (the “Hotton investors”). Hotton provided the producers with purported e-mail contact information for these individuals and also furnished the producers with investment agreements purportedly signed by them. These individuals also purportedly wrote e-mails to the producers. For example, in April 2012, “Paul Abrams,” using the e-mail account info@cpsequity.com, wrote one of the producers an e-mail saying, “Mr. Hotton has spoken so highly about you....I look forward to meeting you and if any further participation in the musical is attainable outside of what I’m doing personally, please let Mr. Hotton know so he can organize it thru my kids Trust.”
Between February and June 2012, the producers made a number of payments to Hotton. Not only did they pay the $7,500 fee in February 2012, they also paid Hotton more than $17,000 between February and June 2012. Furthermore, in April 2012, Hotton demanded and was paid an “advance” against his eight percent commission, claiming that he needed the money to cover the costs of a purported safari he had taken with “Paul Abrams” and Abrams’ eldest son.
The investigation revealed, however, that the Hotton investors did not even exist. For example, some of the IP addresses used to access the e-mail accounts of the Hotton investors trace back to a Manhattan location where Hotton did business, and the businesses associated with some of the e-mail address for the Hotton investors have websites whose domain names were registered to Hotton and that he apparently created shortly before and during the fraud. Hotton used the decoy e-mail addresses to fabricate e-mail correspondence between himself and the Hotton investors, which he then forwarded to the producers. In some instances, he used the e-mail addresses to communicate directly with the producers.
In July 2012, as the producers pressed for the Hotton investors to wire the money they had promised to send by July 31, 2012, Hotton orchestrated the false illness, hospitalization, and subsequent untimely “death” of one of the main Hotton Investors, “Paul Abrams.” Hotton thereupon fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams.” Hotton claimed to be meeting with “Wexler” in England in August 2012 in an effort to make sure the contribution to “Rebecca” was still made. However, travel records indicate that Hotton had not left the United States since April 2012. Further, the e-mail address used by “Wexler” was associated with a domain that was set up and registered to Hotton.
As it became increasingly apparent that the commitments of the Hotton investors would fall through, Hotton purported to try to broker a $1.1 million loan for the producers, even offering up his own real estate and brokerage account as collateral for the loan. But there was no real loan or lender. Rather, Hotton had simply created a second set of apparently fictional characters and entities to generate payments for himself. Among other things, Hotton created the domain name of the title company he said could assist the producers in obtaining the loan; invented the business, SPS Equity, purportedly making the loan; used decoy e-mails to fabricate correspondence with individuals, including “Gus” and “Robert Phillips,” who purportedly worked for the lender; and invented a company that he said was a “commercial lending affiliate” of the bank that would facilitate his hollow offer to put up collateral for the loan. Through this part of the “Rebecca” scheme, Hotton was able to defraud the producers into paying in excess of $35,000 to him and companies he controlled, including $10,000 paid to him personally, as half of a fee for helping to broker the loan, and $23,000 paid to a bank account for the “lender” but which was really controlled by Hotton’s sister and administrative assistant.
The Connecticut Real Estate Fraud
Hotton employed a similar set of deceptive devices—including some of the same e-mail addresses and fictitious companies used to defraud “Rebecca”’s producers—in order to defraud a Connecticut-based real estate company (the “real estate company”) into paying hundreds of thousands of dollars to him and companies he controlled.
Beginning in September 2011, Hotton agreed to help the president of the real estate company (the “president”) obtain financing for various business ventures. Hotton promised that a California-based group called “Pacific Ventures” and its affiliate “Mezzanine Capital” would assist in providing a $20 million loan. Hotton provided as an e-mail address for a contact at “Pacific Ventures” the same e-mail address he told the Producers was used by “Paul Abrams” and which was then purportedly used by “Walter Timmons” as well as the assistants of “Paul Abrams” in the “Rebecca” scheme. Meanwhile, Hotton provided as an e-mail address for a contact at “Mezzanine Capital,” the same e-mail address he told the producers was used by “Roger Thomas,” one of the Hotton investors.
In March 2012, Hotton told the president that a third company, “CPS Equity,” would be able to process the loan but required a $200,000 upfront fee, which the president paid. CPS Equity was the company associated with, among other things, the e-mail address used by “Paul Abrams” when communicating with “Rebecca”’s producers. Following the initial $200,000 payment, Hotton further instructed the president to make additional payments in order to secure the loan.
* * *
Hotton, 46, of West Islip, New York, pled guilty to two counts of wire fraud, each of which carries a maximum term of 20 years in prison. In connection with his guilty plea, Hotton also agreed to forfeit $500,000 and to make restitution payments to the victims of his schemes in the amount of $500,000. Hotton is scheduled to be sentenced by Judge Koeltl on November 1, 2013.Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Sarah McCallum, Edward B. Diskant, and Zachary Feingold are in charge of the prosecution.
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