Securities Law News

Producer Arrested for BlackRock Pilfering, Covid Loan Fraud (2)

May 22, 2020, 4:11 PMUpdated: May 22, 2020, 8:13 PM

William Sadleir, the founder and former owner of Aviron Group LLC, misappropriated more than $25 million from a BlackRock trust using a fake company and forged signatures, the DOJ and the SEC said Friday in New York federal district court.

Sadleir, the executive producer behind films starring Matthew McConaughey and Anne Hathaway, misappropriated millions after BlackRock Multi-Sector Income Trust invested at least $75 million in his film distribution business, the Securities and Exchange Commission said in the U.S. District Court for the Southern District of New York.

He was arrested Friday on related criminal charges, the Justice Department said.

Sadleir also allegedly used coronavirus relief funds for personal expenses after falsely certifying the money would go toward Aviron subsidiaries’ payroll expenses, DOJ said.

He lost control of Aviron and its subsidiaries in December 2019 after defaulting on a BlackRock note, the SEC said. Attorneys for Sadleir weren’t listed on the civil docket and couldn’t be identified for comment.

Sadleir “fraudulently diverted” $25 million to a fake company—GroupM Media Services LLC—he claimed was affiliated with a legitimate marketing firm, the SEC complaint said. He posed as “Amanda Stevens,” a fake employee at his fake company, to convince BlackRock that Aviron had spent the money on pre-paid media credits with a subsidiary of real advertising firm GroupM Worldwide Inc., according to the DOJ complaint unsealed Friday in the same court.

He misappropriated at least $13.8 million for his personal use, including the purchase of a luxury car and a Beverly Hills mansion, the SEC said. He used some of the money to pay a private jet charter company and Tesla Motors, whose 2017 Model X he currently owns, according to the complaint.

Sadleir also forged the signatures of BlackRock personnel to authorize the release of collateral worth around $3 million, the SEC said. The trust had secured its Aviron investment by obtaining liens on intellectual property and other assets relating to the company’s films, DOJ said.

DOJ charged Sadleir with two counts of wire fraud and one count of aggravated identify theft. He faces up to 20 years in prison for each of the alleged wire fraud charges. There’s a mandatory two-year prison sentence for the identity theft charge, DOJ said.

Alleged Coronavirus-Related Fraud

Sadleir’s arrest also stemmed from allegations he applied for $1.7 million in loans under the Paycheck Protection Program and used relief funds for personal expenses. The PPP was created by the CARES Act to help small businesses meet payroll obligations and cover other business expenditures.

“This film producer allegedly made a series of misrepresentations to a bank and the Small Business Administration to illegally secure taxpayer money that he then used to fund his nearly empty personal bank account,” U.S. Attorney Nicola T. Hanna of the Central District of California said.

Sadleir allegedly submitted loan requests on behalf of three Aviron entities, then diverted some of the money to his personal accounts. Sadleir wasn’t supposed to be involved in Aviron’s day-to-day operations after his December ouster, but retained signing authority over some of the entities’ bank accounts, according to a DOJ complaint unsealed Friday in the U.S. District Court for the Central District of California.

He applied for three loans in April and attached copies of the entities’ wage and tax information as proof of their payroll expenses. At least one of the entities—Aviron Pictures—never actually applied for a PPP loan, the company told DOJ investigators.

Sadleir allegedly used more than $87,000 in PPP funds to pay off personal credit cards. Another $69,000 went to a law firm to cover past invoices and a retainer, DOJ said.

The cases are United States v. Sadleir, S.D.N.Y., No. 20-cr-05114, complaint unsealed 5/22/20, SEC v. Sadleir, S.D.N.Y., No. 20-cv-03997, complaint filed 5/22/20, United States v. Sadleir, C.D. Cal., No. 20-mj-02326, complaint unsealed 5/22/20.

(Updated with additional details on coronavirus-related fraud allegations.)

To contact the reporter on this story: Jennifer Bennett in Washington at jbennett@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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