SEC Charges Former NY Gov. Paterson Charged in Connection to Movie Studio Fraud

By:
Chris Gaetano
Published Date:
Sep 26, 2016
By David Shankbone - Own work, CC BY-SA 3.0

Former New York Governor David Paterson settled with the SEC over failing to timely report stock transactions in the company while serving on the board of a company whose executives were charged with defrauding investors. 

The company, Moon River Studios (formerly Medient Studios), told investors that it was going to construct the largest movie studio in North America at a suburban location outside Savannah, Georgia, and that construction had already begun. The SEC, however, said that the founder, Manu Kumaran, and CEO, Jake Shapiro, both knew there wasn't nearly enough funding to actually build this so-called "Studioplex" by the dates they told investors. Further, the SEC accused the pair of backdating and falsifying promissory notes in order to issue common stock in exchange for financing. 

While the Studioplex never actually materialized, and the company eventually shut down, Kumaran and Shapiro both used investor money for personal use. Kumaran, said the SEC, spent about $1,700 a day on travel and other expenses, despite telling investors he drew no salary and that all money would go towards projects, while Shapiro allegedly used company funds for things such as buying a million dollar house. 

Former Governor Paterson, meanwhile, did not participate in the fraud, but failed to report their stock transactions in the company while serving on its board. 

"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,” said Walter Jospin, Director of the SEC’s Atlanta Regional Office.  "Koppelman, Paterson, and Mellon allegedly failed in their personal responsibility to comply with the beneficial ownership reporting requirements of the federal securities laws." 

Paterson, along with two other directors, agreed to pay $25,000 without admitting or denying the findings. 

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