A Long Island businessman has pleaded guilty in a Manhattan federal court to defrauding the producers of the Broadway show “Rebecca – The Musical” through an elaborate scheme involving fictitious overseas “investors” and the possibility of a last-minute $1.1 million loan.
The defendant, Mark Hotton, 46, of West Islip, N.Y., also pled guilty to participating in a separate scheme to defraud a Connecticut-based real estate company through using many of the same deceptions he employed in the “Rebecca” fraud. Hotton pled guilty Monday before U.S. District Judge John G. Koeltl.
Hotton pled guilty to two counts of wire fraud, each of which carries up to 20 years in prison. He also agreed to forfeit $500,000 and to make restitution payments to the victims of his schemes in the amount of $500,000. Sentencing is scheduled for November 1.
“With his guilty plea today, the curtain is finally closing on Mark Hotton’s elaborately staged fraud,” Manhattan U.S. Attorney Preet Bharara said in a statement. “Though his lies and deceits were the stuff of fiction, they caused real harm to his victims, and he now faces real consequences as a result—the prospect of jail.”
According to prosecutors, Hotton once worked for a prominent investment bank and financial services firm, and is a former stockbroker with ties to numerous corporate entities. From September 2011 to October 2012, he engaged in two separate schemes involving fictitious individuals and entities that he created in order to defraud his victims—the producers of “Rebecca,” a musical based on the novel by Daphne du Maurier, and a Connecticut-based real estate company (see Fraudster Concocted Fake Investors for Broadway Musical).
In late January 2012, the producers of “Rebecca” were trying to raise an additional $4 million to mount the musical on Broadway. The budget for “Rebecca” was between $12 million and $14 million, and the producers realized they were at least $4 million short of their minimum capitalization goal. To raise enough funds, their company entered into an agreement in February with TM Consulting Inc., a company Hotton controlled. Under the agreement, Hotton undertook to raise money for “Rebecca” in return for a fee of $7,500, plus 8 percent of any funds 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, in the United Kingdom. Hotton provided the producers with purported email contact information for these individuals and also furnished them with investment agreements purportedly signed by the investors. The purported investors also wrote fake emails to the producers. For example, in April 2012, “Paul Abrams,” using the email account firstname.lastname@example.org, wrote one of the producers an email saying, “Mr. Hotton has spoken so highly about you… I look forward to meeting you and if any further participation in the musical is attainable outside of what I’m doing personally, please let Mr. Hotton know so he can organize it thru my kids Trust.”
Between February and June 2012, the producers made a number of payments to Hotton. Not only did they pay the $7,500 fee in February 2012, they also paid Hotton more than $17,000 between February and June 2012. Furthermore, in April 2012, Hotton demanded and was paid an “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 revealed, however, that the investors did not even exist. For example, some of the IP addresses used to access the email accounts of the Hotton Investors were traced back to a Manhattan location where Hotton did business, and the businesses associated with some of the email address for the investors had Web sites whose domain names were registered to Hotton and that he apparently created shortly before and during the fraud. Hotton used the decoy email addresses to fabricate email correspondence between himself and the phony investors, which he then forwarded to the producers. In some instances, he used the email addresses to communicate directly with the producers.
In July 2012, as the producers pressed for Hotton’s fictitious investors to wire the money they had promised to send by July 31, Hotton orchestrated the false illness, hospitalization, and subsequent untimely “death” of one of the main investors, “Paul Abrams.” Hotton thereupon fabricated correspondence with a man named “Wexler,” who had purportedly been named the executor of the estate of “Paul Abrams.” Hotton claimed to be meeting with “Wexler” in England in August 2012 in an effort to make sure the contribution to Rebecca was still made. However, travel records indicate that Hotton had not left the United States since April 2012. In addition, the email address used by “Wexler” was associated with a domain that was set up and registered to Hotton.
As it became increasingly apparent that the commitments made by Hotton’s bogus investors would fall through, Hotton claimed he was trying 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. Instead, Hotton had simply created a second set of apparently fictitious characters and entities to generate payments for himself. Hotton not only created the domain name of the title company he said could assist the producers in obtaining the loan, he also invented the business, SPS Equity, that was purportedly making the loan. He also used decoy emails to fabricate correspondence with individuals, including “Gus” and “Robert Phillips,” who purportedly worked for the lender, and he invented a company that he said was a “commercial lending affiliate” of the bank that would facilitate his hollow offer to put up collateral for the loan.
Through this part of the “Rebecca” scheme, Hotton was able to defraud the producers into paying in excess of $35,000 to him and companies he controlled, including $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
Hotton employed a similar set of deceptive devices—including some of the same email addresses and fictitious companies used to defraud the “Rebecca” producers—in order to defraud a Connecticut-based real estate company into paying hundreds of thousands of dollars to him and companies he controlled, according to prosecutors.
Beginning in September 2011, Hotton agreed to help the president of the real estate company obtain financing for various business ventures. Hotton promised that a California-based group called “Pacific Ventures” and its affiliate “Mezzanine Capital” would assist in providing a $20 million loan. Hotton provided as an email address for a contact at “Pacific Ventures” the same email address he told the producers was used by “Paul Abrams” and which was then purportedly used by “Walter Timmons” as well as the assistants of “Paul Abrams” in the “Rebecca” scheme. Meanwhile, Hotton provided as an email address for a contact at “Mezzanine Capital” the same email address he told the producers was used by “Roger Thomas,” one of his fictitious investors.
In March 2012, Hotton told the real estate company president that a third company, “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, among other things, the email address used by “Paul Abrams” when communicating with the “Rebecca” producers. Following the initial $200,000 payment, Hotton also instructed the president to make additional payments in order to secure the loan.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access