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Hollywood Executive Charged With $28M BlackRock Fraud

Tiomkin Law Offices of Elliott Tiomkin > Legal News  > Hollywood Executive Charged With $28M BlackRock Fraud

Hollywood Executive Charged With $28M BlackRock Fraud

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Law360 (May 22, 2020, 8:29 PM EDT) — Hollywood distribution executive William Sadleir was accused Friday of spiriting some $28 million out of his distribution company — cheating funder BlackRock, which had poured in $75 million — and separately misusing a $1.7 million coronavirus relief payment.

Sadleir, 66, was set for arraignment Friday in Los Angeles on two counts of wire fraud and one of aggravated identity theft concerning the BlackRock-related charges, which were unsealed the same day in Manhattan; the U.S. Securities and Exchange Commissionfiled parallel civil charges in Manhattan the same day. At publication time the outcome of the arraignment was unclear.

Prosecutors said Sadleir transferred millions out of his company, Aviron Pictures LLC, defrauding a fund that had poured $75 million into Aviron starting in October 2015. That fund is identifiable in the SEC complaint as BlackRock Multi-Sector Income Trust, or BIT. BlackRock confirmed that fact Friday.

According to Manhattan U.S. Attorney Geoffrey Berman, Sadleir “orchestrated a massive fraud,” the largest component of which was Sadleir’s alleged removal of about $25 million from Aviron as supposed payment for false invoices from an entity he owned whose name closely mimicked that of a legitimate global advertising company, GroupM.

Lawyers who have represented Sadleir in previous matters were not immediately available for comment.

Berman’s office said roughly $14 million of that money paid for the 2017 purchase of a Beverly Hills mansion for Sadleir and $127,000 went to Tesla Motorsfor a Model X.

Sadleir allegedly spurred the fraud along by creating a fake GroupM employee named “Amanda Stevens” and sending emails that appeared to be from her.

In a second component of the alleged fraud, Sadleir also allegedly forged a BlackRock fund manager’s name on documents in order to release $3 million worth of assets securing the funder’s money, before sweeping those assets into a pass-through entity created specifically for the purpose. BlackRock reportedly fired the fund manager in February for a conflict of interest.

SEC Asset Management Unit co-head Adam Aderton said Friday in a statement, “When private companies and individuals solicit or accept investments, including from investment companies, they must comply with the federal securities laws.”

BlackRock sued Aviron in December 2019 in New York state court to have Sadleir removed from his position, according to prosecutors. A spokesperson for the fund said Friday evening, “BlackRock is pleased that the government has moved swiftly to investigate and bring Mr. Sadleir to justice.”

Sadleir was separately charged Friday with misusing $1.7 million in Paycheck Protection Program funds intended for businesses experiencing catastrophic losses because of the coronavirus pandemic.

Sadleir allegedly used the money “to pay off his personal credit card debts and other personal expenses,” Main Justice Criminal Division head Brian Benczkowski said in a statement announcing the PPP charges.

Meanwhile, the BlackRock-related allegations are not the only claims of investor fraud Sadleir has faced in the last year.

A group of Florida- and Iowa-based investors last year sued him and others — including a prominent Los Angeles lawyer and a BigLaw firm — over claims that they misappropriated millions of dollars intended to fund a huge distribution push for the animated movie “Legends of Oz: Dorothy’s Return,” and purposely sandbagged the movie’s nationwide release in order to keep invested money.

“Sadleir stole millions from the `Legends of Oz: Dorothy’s Return’ investors. He worked with his CFO and his director of publicity and chief financial officer to do this,” the investor group, led by Scott Meide, claimed.

One of the many other parties alleged to have participated was Manatt Phelps & Phillips’ John Gatti. “We believe that John Gatti profited from the conspiracy in several ways including participating in the crimes as well as not reporting the crimes to authorities against the many participants,” the Meide group said. Gatti was not immediately available for comment. The group also named O’Melveny & Myersas a participant; a firm spokesman and the O’Melveny partner listed as representing the firm against the claims were not immediately available for comment.

The Meide suit, filed pro se, was dismissed and is now on appeal in the Ninth Circuit, this time with attorney representation.

Aviron has been involved with the distribution of 2015’s “My All American,” a biopic starring Aaron Eckhart as University of Texas football player Freddie Steinmark, and the 2019 Anne Hathaway-Matthew McConaughey thriller “Serenity.”

The U.S. Attorney’s Officefor the Southern District of New York is represented by Jared Lenow.

Counsel information for Main Justice in the coronavirus-related case was not immediately available.

The SEC is represented by Salvatore Massa of the Asset Management Unit and Dugan Bliss of the New York Regional Office.

Counsel information for Sadleir was not immediately available.

The BlackRock-related cases are U.S. v. Sadleir, case number 1:20-mj-05114, and SEC v. Sadleir, case number 1:20-cv-03997, in the U.S. District Court for the Southern District of New York.

Case name and number were not immediately available for the coronavirus-relief charges.

–Editing by Peter Rozovsky.

For a reprint of this article, please contact reprints@law360.com.

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