Three Illinois men are headed back to federal prison for masterminding a Ponzi scheme they concocted in prison that promised lucrative returns through the distribution of comic book rights. Daniel Parrilli, 62, John Lauer, 48, and Christopher Anderson, 57, received 70-month, 31-month, and 95-month prison sentences, respectively, after previously pleading guilty to fraud charges. The scheme raised more than $7 million from over 150 investors.
After meeting in prison, the trio formed Sundown Entertainment Inc. ("Sundown"), which purported to specialize in the distribution of film and comic-book rights. Beginning as early as 2006, the trio solicited investors for Sundown, telling them that their funds would be used to purchase the rights to old film footage in order to produce and distribute movies and documentaries. Investors were told that the venture was extremely profitable, and that they could expect interest rates on short-term investments of up to 150%. Based on these representations, over 150 investors eventually entrusted more than $7 million to the trio.
However, while at one point Sundown actually did engage in comic book and film production, the realized revenues were, not surprisingly, insufficient to sustain the exorbitant returns promised to investors. For example, over a 2-month period from November 1, 2007 to December 31, 2007, less than $8,000 of deposits to Sundown's bank account came from the sale of movies, while nearly $1.7 million came from new investors. This was not disclosed to investors, and the men continued to promise high returns in a classic Ponzi scheme that avoided collapse by paying existing investors with funds raised from new investors.
The men concocted the scheme after they met while serving time in a Wisconsin prison, where each had been convicted of fraud-related charges. Indeed, a background check would have raised a number of red flags, as Andersen had been convicted of selling fraudulent investments, Parrilli had been convicted of bank fraud, and Lauer had been engaged in an investment scheme that caused losses of more than $20 million.
Each of the men was also ordered to pay restitution to scheme victims.