The 2017 film “Bitter Harvest” would not, by many
definitions, be considered a success.
“It’s a bad sign when even the prayers in this movie are
crappy,” observed one reviewer, who contributed to the film’s 15% critic rating
on Rotten Tomatoes.
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It pulled in less than $600,000 in the United States.
But that did not mean it did not still have moneymaking potential abroad. All
investors needed to do was help buy the rights to distribute it and a number of
other films in Latin America, Africa and New Zealand. Major distribution deals
with HBO and Netflix were on the cusp of being formalized, they were told. Once
those fell into place, the investors would get returns of at least 35%.
That is the essence of what the Securities and Exchange
Commission and federal prosecutors are calling a Ponzi scheme run by Zachary J.
Horwitz, a not particularly famous actor with a rather extravagant home.
Horwitz, who went by the stage name Zach Avery, was arrested Tuesday on wire
fraud charges. He is accused of defrauding investors of at least $227 million
and fabricating his company’s business relationship with HBO and Netflix.
“We allege that Horwitz promised extremely high returns
and made them seem plausible by invoking the names of two well-known
entertainment companies and fabricating documents,” Michele Wein Layne,
director of the SEC’s Los Angeles regional office, said in a news release
Tuesday.
Prosecutors said that correspondence Horwitz had
forwarded to clients, which featured HBO and Netflix email addresses, was as
fictitious as the subject matter of his most recent film, the horror movie “The
Devil Below” (Rotten Tomatoes critic score: 0%). Horwitz did not star in any of
the 50 or so films he promised could make investors millions, according to Thom
Mrozek, a spokesperson for the U.S. Attorney’s Office in Los Angeles.
Horwitz was in jail on Wednesday, Mrozek said. Attempts
to reach other employees of One in a Million Productions, whose website
featured the tagline “When Odds Are One in a Million. Be That One,” were
unsuccessful. (Later Wednesday afternoon, the site had been taken down.)
Horwitz’s lawyer, Anthony Pacheco, did not respond to a
request for comment.
The Ponzi scheme began to unravel when an investor
wanted money refunded in 2019 and could not get it, Mrozek said.
For several years, 1inMM — as the company styles its
name — found ways to pay investors, according to the SEC. Court documents do
not list all of the films investors thought they had helped buy rights to, but
the complaint features an image from 1inMM’s “library”; the 1989 Jean-Claude
Van Damme movie “The Kickboxer” and the 2013 romantic comedy “The Spectacular
Now” are included.
The way that money can be made in the movie distribution
world is to say, “I’ll give you $100,000 for Latin America rights,” for
example, Mrozek said, adding, “I go to HBO or whomever and say, ‘Give me
$200,000 to show the movie.’”
It’s possible that the company did succeed in buying
international distribution rights to a handful of films or even that it started
with good intentions, Mrozek said. But what it did not have was the
relationship with HBO and Netflix that Horwitz told investors it did. It was
that relationship that he said essentially guaranteed them returns of 35% or
more within six months or a year.
“I believed that if HBO was involved, my investment was
safe,” one investor told the SEC.
At first, Horwitz was able to follow through on his
promises. In typical Ponzi scheme fashion, earlier investors got money from
newer investors, Mrozek said. His clients could go on believing that investing
in viewings of “The Kickboxer” in New Zealand and Latin America was smart.
But at some point, there wasn’t enough money flowing in
to maintain the illusion — even with the help of the Johnny Walker Blue Label
scotch Horwitz sent to principals, according to FBI agent John Verrastro, who
outlined the scheme in a complaint. Horwitz was also inappropriately using
investor funds on a $5.7 million home and $700,000 in fees for a celebrity
interior designer, according to the SEC.
Since December 2019, 1inMM has defaulted on more than
160 payments, according to court documents. An investor in Chicago who was owed
more than $160 million in principal and $59 million in profits wanted his
returns and could not get them, Mrozek said. That investor contacted the
authorities.
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