Mahmoud Karkehabadi Guilty of Running Ponzi Scheme That Hooked Investors in Bad Movies

Truth be told, last week was a bitch because it seemed everything happened at once in O to the C when it came to crime, convictions and other assorted mayhem. Consequently, the idea of untangling a tangled web got shoved aside when it came to the conviction of an Orange County B- (D-?) movie producer and the acquittal of his clueless partner.

These guys were, in fact, responsible for the Citizen Kane of direct-to-DVD pit fighter movies including Flavor Flav and MMA's/Irvine's Quinton “Rampage” Jackson on its cast roll.

Mahmoud Karkehabadi, 55, of Laguna Niguel, and Timothy Cho, 56, of Newport Beach, were partners in Alliance Group Entertainment, the producers of five films with crime themes and/or featuring mixed martial arts fighters.

Among them was 2005's Confessions of a Pit Fighter, which received a 23 percent positive audience approval rating on Rotten Tomatoes. Art Camacho directed and co-wrote the script that has troubled fighter Eddie Castillo (Hector Echavarria) released from jail with a vow to never re-enter the underground pit circuit that put him behind bars. But when a vicious new fighter (Jackson) kills his brother in the pit, Eddie must go back to seek revenge, helped by a fellow named Lucky (Flav) and hindered by a bad-ass named Argento (Armand Assante).

The federal government brought a case alleging Alliance would raise millions of dollars from investors in a picture with promises of huge returns but that the money would mostly be used to pay back those who put money in an earlier Alliance project–in other words, a Ponzi scheme.

An example cited to jurors was 2008's Hotel California, whose stars included Erik Palladino (Buried, TV's 666 Park Avenue), Simon Rex (MTV VJ-turned-actor in Scary Movies 3 and 4) and The Fresh Prince of Bel-Air's Tatyana Ali. Director/co-writer Geo Santini has three LA thugs rehashing the past in the dingy hotel room before the twisted world of crime roars back at them.

The twisted world of financial crime roared back at Alliance's Hotel California. Jurors were told that Karkehabadi, under the name Mike Karkeh, pitched to investors the picture had a $15 million distribution deal and they were guaranteed returns of 18 to 35 percent whether audiences came or not. The economy imploding in 2008 was blamed for the supposed distribution deal falling apart and investors being convinced to roll their “loans” into a second film.

The federal government investigation began after investors told a state agency they had been ripped off by Alliance. The feds had called this a $9 million Ponzi scheme, but in the end jurors agreed that losses for 21 investors was $500,000 to $3 million.

But they did convict Karkehabadi on 51 felony counts, including grand theft and the fraudulent
sale of securities. He faces up to 30 years in prison at his March 15 sentencing. His attorney has vowed to appeal.

Cho was acquitted on all charges. His defense was he did not know his partner's real name was Mahmoud Karkehabadi, that Karkehabadi had lost a $5 million false advertisement judgment in California for a credit card scheme involving cards that could not be used in this state and that Karkehabadi had filed for bankruptcy. (Hat tip to Patch.)

A third co-defendant, Deanna Ray Salazar, pleaded guilty last June to counts that drew her a two-year prison term running concurrently with another federal
sentence she received for an unrelated Ponzi scheme.

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