$11 Million Movie Production Ponzi Scheme Nets 27-Year Sentence for Mastermind

A film producer who promised investors exorbitant returns through the production of independent movies, including one starring reality TV star Flavor Flav, was sentenced to serve 27 years in prison.  Mahmoud "Mike'' Karkehabadi, 55, received the sentence after he was previously convicted on fifty-one criminal counts, including grand theft and the fraudulent sale of securities.  While Karkehabadi was convicted at trial, his business partner, Timothy Cho, was acquitted of all charges.  

Karkehabada, also known as Mike Karkeh, was a partner in Alliance Group Entertainment ("AGE") along with Cho.  AGE produced a total of five movies, each having a crime or mixed martial arts theme, and starring a host of lower level celebrities, including Flavor Flav, Quinton "Rampage" Jackson, and Armand Assante.  Investors were solicited to contribute to the production costs of the movies, under the premise that Karkeh had already secured a lucrative distribution deal and that returns of 18% - 35% were guaranteed - even if the audiences never showed.  When the economy began faltering in 2008, Karkeh told investors that the distribution deal had supposedly fallen apart, and solicited them to 'roll over' their investment into a second film.  In total, 21 investors contributed over $11 million to Karkeh and AGE.

However, the films did not net the exorbitant returns advertised by Karkeh, but instead brought in only $500,000 of revenue.  Faced with returns far less than promised, Karkeh used incoming investor funds to pay distributions of profits and principal to existing investors - a classic hallmark of a Ponzi scheme.  

Ironically, a third co-conspirator, Deanna Ray Salazar, was also involved with an unrelated Ponzi scheme.  She pled guilty last June to her role in the scheme and received a two-year prison sentence.