The producers of the Broadway musical “Rebecca” have filed a $100 million fraud lawsuit against former Oppenheimer & Co. broker Mark Hotton because they say he scammed them by pretending to raise $4.5 million from investors for the play while they paid him and his entities $60,000. Hotton was arrested earlier last week and charged with wire fraud not just in this alleged financial scam, but also for his supposed involvement in a separate scheme in which he is accused of using similar deceptive practices to con a real estate company into paying $750,000 to him and the entities.
In the financial fraud involving “Rebecca,” which is based on Daphne Du Maurier’s novel, Hotton allegedly made fake investors and businesses to deceive the producers, who were about $4 million short of making their budget. They signed a deal with his TM Consulting Inc. earlier this year in an agreement that gave Hotton a $7,500 fee and an 8% guarantee on any money he raised above $250,000.
Hotton made it seem as if he had found four investors to put in the $4.5 million-yet these supposed individuals didn’t actually exist. Instead, he allegedly pretended to be them. When the producers asked him for the money, Hotton even claimed that one of the investors, Paul Abrams, had died abruptly from malaria.
By the time the producers discovered that Hotton never had the $4.5 million, they had already spent $6 million on “Rebecca.” According to the New York Post, the musical, which was supposed to open in November, has been cancelled for now.
The funds that the producers paid Hutton included over $15,000 in commissions and fees between March and June of this year. In April, he demanded and was paid an $18,000 advance against his 8% commission. Hotton said he needed the funds to pay for a safari he had taken with Abrams and the latter’s eldest son.
In the wake of its investigation that began in September, the FBI quickly found that these investors never existed and the fake investors’ email addresses and related IP addresses actually all led back to Hotton. He even allegedly created the websites and domain names for these fictitious investors and sent fake email correspondence from these supposed individuals. Lead producer Ben Sprecher even says that he spoke to Hotton’s “investors” over the phone.
Then, after it became obvious that the investments committed by Hotton’s investors weren’t going to come through, he allegedly tried to broker a $1.1 million loan for the play’s producers, proceeding to create another batch of bogus entities and individuals, including a fictitious lending affiliate that was supposed to help push through his fake offer to put up his own real estate and brokerage account as collateral. Via this portion of the scam, he got the producers to pay him over $35,000, including $10,000 to him for his help in brokering the loan and $23,000 that was to go to the lender, which was really controlled by Hotton’s sibling and an administrative assistant.
NBC New York reports that over the last two decades, Hotton has been the target of a number of fraud complaints, including securities fraud lawsuit filed by a couple that claim that when he was an Oppenheimer broker he defrauded them of close to $5.4 million-their life savings. According to FINRA records, Hotton was fired from MS Farrell and Co. for alleged misconduct in 1997. He was also named in complaints at Ladenburg Thalmann & Co. Hotton denies the allegations found in his FINRA filings. Also, although he was supposed to go work with Obsidian Financial Group earlier this year, he had to be let go after failing to get through the registration process due to, according to the firm’s president, “too many issues.”
Manhattan U.S. Attorney and FBI Acting Assistant Director in Charge Announce Arrest of Long Island Businessman for Allegedly Defrauding Broadway Producers of ‘Rebecca-The Musical’, FBI, October 15, 2012
“Rebecca” Producer Claims Fraud Over Fake Investor, NBC New York, October 5, 2012
More Blog Posts:
JPMorgan Chase Must Pay Oil Heiress’s Trust $18M For Derivatives Investments, Account Mismanagement, and Unsuitable Investment Advice, Stockbroker Fraud Blog, October 12, 2012
$18.7M Securities Fraud Case Involving Former Linkbrokers Derivatives Brokers is A Prime Example of How Trade Markups Involving Pennies Can Eventually Cost Investors Millions, Stockbroker Fraud Blog, October 10, 2012