Story detailed in Savannah paper:
Posted September 24, 2016 05:17 am
By Katie Nussbaum katie.martin@savannahnow.com
SEC charges Effingham studio CEOs with fraud
Suit alleges movie studio CEOs Kumaran, Shapiro defrauded investors, misused company funds
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Manu Kumaran
Jake Shapiro
The Securities and Exchange Commission has filed a lawsuit against Effingham-based Moon River Studios in the U.S. District Court for the Southern District of Georgia.
The lawsuit, which was filed Friday alleges that Manu Kumaran, founder and CEO of what was initially Medient Studios, which later changed to Moon River Studios, conspired with his successor CEO Jake Shapiro to make false and misleading statements in reports filed with the SEC.
The SEC also claims that Kumaran, Shapiro and Roger Miquel, CEO of Fonu2 — which also operated under the name Moon River — backdated and falsified promissory notes as a scheme to issue common stock in exchange for financing.
Miquel has agreed to settle the charges against him without admitting or denying the allegations. He’s barred from participating in any penny stock offerings or serving as a public company officer or director for five years.
Futhermore, the suit claims that Moon River claimed licensed video game rights, but never owned or licensed any such rights; published false press releases that contained misleading information about the construction of their studio campus; spending of company funds; and falsely claimed to have sufficient investor capital to cover overhead expenses.
The complaint also says Kumaran spent about $1,700 per day of company funds to pay for his travel and personal expenses while claiming he didn’t draw a salary. Shapiro allegedly also misused company funds after becoming CEO in 2014 and lived in a house worth nearly a million dollars that was paid for by the company.
Messages seeking comment from Kumaran and Shapiro’s legal counsel were not returned on Friday.
Three company directors, whom the SEC found did not participate in the fraud, were charged separately with violating federal securities laws by failing to report their stock transactions while serving on the board. Former New York Democratic Governor David Paterson and music producer Charles A. Koppelman each agreed to pay $25,000 penalties to settle the charges against them without admitting or denying the findings.
An administrative proceeding was brought against businessman Matthew Mellon II, who served on the board for 15 months before resigning in early 2014. The matter will be scheduled for a public hearing before an administrative judge who will determine what action is appropriate, according to the SEC.
“We allege that Kumaran and Shapiro preyed upon investor interest in the movie industry and financed their own lifestyles rather than build the promised Studioplex,” Walter Jospin, Director of the SEC’s Atlanta Regional Office said in a statement on Friday.
“Koppelman, Paterson, and Mellon allegedly failed in their personal responsibility to comply with the beneficial ownership reporting requirements of the federal securities laws.”
Plans to build what was initially a $90 million movie studio and entertainment facility near Old River Road and Interstate 16 in Effingham County were first introduced in 2013. Since then the company has been plagued by debt, high turnover and lawsuits — including one filed by Kumaran after he was ousted in 2014 and another by former President of Corporate Affairs Jay Self for $60,000 in back pay.
The SEC also temporarily suspended trading of the company’s stock in mid-2014 due to concerns about the company’s financial health.
After Kumaran left he was replaced by Shapiro who changed the studio’s name to Moon River and revised the development plan. In October 2015 the 1,560 acre plan was cut to 51 acres, but the paperwork was never signed. In April the company relinquished rights to all 1,560 acres of the land, which was owned by Effingham county’s Industrial Development Authority, ending the plan for the complex.
Moon River had announced a number of projects that never materialized. Among them were a documentary on James Brown and a two-picture deal with director Penny Marshall that was later canceled.
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