A Long Island businessman has been arrested and charged with bilking the producers of an upcoming Broadway musical by claiming that he had secret investors who had committed millions of dollars to the project.

Businessman Mark Hotton was charged Monday by federal prosecutors with defrauding the producers of the Broadway show “Rebecca – The Musical” by fabricating the prospect of $4.5 million in financing commitments and the possibility of a $1.1 million loan, so that they would pay him, and entities he controlled, more than $60,000 in fees and commissions.

Hotton, 46, was also charged with a second fraudulent scheme in which he tricked a Connecticut-based real estate company into paying him and entities he controlled $750,000 by using some of the same deceptions he employed in the “Rebecca” scheme. He was arrested Monday morning at his Long Island residence, and is expected to be presented in federal court in Central Islip, N.Y.

Stranger than Fiction
“As described in the criminal complaint, Mark Hotton perpetrated stranger-than-fiction frauds both on and off Broadway,” said Manhattan U.S. Attorney Preet Bharara in a statement. “As part of one alleged scheme, Hotton concocted a cast of characters to invest in a major musical – investors who turned out to be deep-pocketed phantoms. To carry out the alleged fraud, Hotton faked lives, faked companies and even staged a fake death, pretending that one imaginary investor had suddenly died from malaria. As also alleged, Hotton enlisted his same cast of invisible men to carry out a real estate scam. Ultimately, Hotton's imagination was no match for the FBI which uncovered, with lightning speed, his alleged financial misdeeds.”

Hotton allegedly engaged in the schemes since September of last year trying to bring to the stage a musical production of Daphne Du Maurier’s Gothic novel “Rebecca,” which was also the basis for Alfred Hitchcock’s first Hollywood film.

“In his alleged scheme to defraud investors, Mark Hotton wrote, directed and starred in the work of fiction he took to Broadway,” said FBI acting assistant director-in-charge Mary Galligan. “He even allegedly played the supporting characters – phantom investors who existed only in fictitious emails and Hotton's bogus assertions about them. A convincing portrayal on stage can earn you a Tony. A convincing act that fleeces a production's backers can earn you a prison term.”

The budget for “Rebecca” was between $12 million and $14 million. In January 2012, the show’s producers realized they were $4 million short of their minimum capitalization goal, and began looking for new ways to raise the money. On Feb. 7, 2012, the producers’ company entered into an agreement with TM Consulting, Inc., a company controlled by Hotton, to raise the additional funds. Under the agreement, Hotton received a fee of $7,500, and a guarantee of 8 percent of any funds he 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 to believe 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. Hotton allegedly provided the producers with purported email contact information for the four men and gave them investment agreements the fictitious investors had purportedly signed. The producers also received emails that supposedly came from the fictitious investors.

Under the terms of the agreement between Hotton and the producers, they paid him over $15,000 in fees and commissions between March and June 2012. In April 2012, Hotton also demanded and was paid an additional $18,000 “advance” against his 8 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, which began late last month, quickly revealed that Hotton had concocted an elaborate fraud, according to prosecutors, and that the Hotton investors did not in fact exist. For example, the purported investors’ email addresses were controlled by Hotton, and some of the IP addresses used to access their email accounts traced back to a location in Manhattan where Hotton did business. The businesses associated with some of the email addresses for the Hotton investors also have Web sites, the domain names of which were registered to Hotton and which he apparently created shortly before and during the fraud. The investigation revealed that Hotton used the email addresses to fabricate correspondence between himself and the fictitious investors, which he then forwarded to the producers. In some instances, he used the email addresses to communicate directly with the producers.

When the producers began pressing for Hotton’s fictitious investors to wire the money they had promised to send by July 31, 2012, Hotton orchestrated the false illness, hospitalization, and untimely “death” of one of his main investors, “Paul Abrams.” Hotton then fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams,” and with whom he claimed to be meeting in England in August 2012 in an effort to ensure that the contribution to “Rebecca” was still made. However, travel records indicate that Hotton has not left the United States since April 2012. Further, the email address used by “Wexler” is associated with a domain name that was set up and registered to Hotton.

As it became increasingly apparent that the commitments of the fictitious investors would fall through, Hotton then 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 created a second set of apparently fictional individuals and entities. He created the domain name of the title company he said could assist the Producers in obtaining the loan; invented the business, SPS Equity, that was purportedly making the loan; manufactured email 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 phony offer to put up collateral for the loan.

Hotton used this part of the scheme to lure the producers into paying him and entities he controlled in excess of $35,000. This included $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.

Real Estate Fraud
In the other case under investigation, beginning in September 2011, Hotton agreed to help an unidentified president of a real estate company obtain financing for various business ventures. He told the president that a California-based group called “Pacific Ventures” and its affiliate, “Mezzanine Capital,” would assist in providing a $20 million loan. Hotton provided the same email address he told the producers in the “Rebecca” scheme was supposedly used by “Paul Abrams,” Abrams’ assistants, and “Walter Timmons” as the email address for “Pacific Ventures.” He also provided the same email address that was used by “Roger Thomas” in the “Rebecca” scheme as an email address for a contact at “Mezzanine Capital.”

In March 2012, Hotton told the real estate company president that a third company, known as “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 the email address used by “Paul Abrams” when communicating with the producers of “Rebecca.” Following the initial $200,000 payment, Hotton further instructed the real estate company president to make additional payments in order to secure the loan. The president did so, providing payments totaling $101,685.43 in May, and an additional $450,000 between May 2012 and October 2012. Some of that money was wired to the same bank account into which “Rebecca’s Producers” wired $23,000 – a bank account controlled by Hotton’s sister and administrative assistant.

To date, the real estate company has still not received any of the funding that Hotton promised to arrange. Nevertheless, Hotton has continued to send messages to the president in connection with the scheme, and has done so as recently as October 11.

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