Now, A ‘B-Movie’ Ponzi Scheme: Producer Mahmoud Karkehabadi Charged With 89 Felonies, Faces $11 Million Bail, California AG Says

EDITOR’S NOTE: If you’re keeping a Bubba Blue notebook on how to have a Ponzi scheme — as opposed to shrimp — here’s one for your list.

UPDATED AT 12:33 P.M. June 6, 2013. See Comments thread below. Mahmoud Karkehabadi has been sentenced to 27 years in state prison . . .

A producer of “B-movies” such as “Confessions of a Pit Fighter” scammed investors in a $9 million Ponzi scheme by accepting “movie production loans” and promising returns of up to 35 percent no matter how the films performed, California Attorney General Jerry Brown said.

Mahmoud Karkehabadi, also known as Mike Karkeh, was charged with 89 felonies, including grand theft and securities fraud. Two alleged accomplices who helped bring money to Karkehabadi’s film company by selling unregistered securities also were charged.

Karkehabadi, 53, listed an address in the Orange County, Calif., community of Laguna Niguel.

Before producing a series of four movie flops, Karkehabadi was charged with ripping off customers in a credit-card venture known as First National Credit, according to records. In the 2001 credit-card scheme, customers were told they’d receive a “gold card” with a $15,000 limit and encouraged to pay up to $43 for “rush processing and delivery.”

The card proved to be a card that could be used only with a “catalog” business. Authorities secured a $5 million judgment in the case, and Karkehabadi declared bankruptcy, according to records.

By 2005, he was making B-movies, and never told investors about the huge judgment from the credit-card case or the bankruptcy, Brown’s office said.

“This con artist sold securities under the guise of a loan to fool investors and try to avoid following the rules,” Brown said. “He ran a cold and calculated scam, making promises he never intended to keep and using the funds of new victims to pay off the earlier ones.”

Karkehabadi’s bail was set at $11 million.

His alleged accomplices in the movie scheme were identified as Timothy Cho, also known as Hin-Kong Cho, 54, of Newport Beach, Calif., and Deanna Salazar, 53, of Yucca Valley, Calif. Salazar has agreed to surrender, but Cho “remains at large,” Brown’s office said.

At least 150 investors were affected by the scheme. Records show that Karkehabadi’s movie company — Alliance Group Entertainment — gathered more than $11 million. The movies generated only $535,000 in revenue, Brown’s office said.

“Karkehabadi and his agents told investors they would get their money back within a year, regardless of a project’s success, with returns of 18 to 35 percent ,” Brown’s office said. “When the year was up, Karkehabadi convinced investors to roll their ‘loans’ over into the latest movie project or agree to extensions on the date for repayment.”

Among the movie flops was a film titled “Hotel California,” Brown’s office said.