Valley Firms Ordered to Halt Web Solicitation

State officials have filed desist-and-refrain orders against more than a dozen entertainment companies, including two based in the San Fernando Valley, for allegedly seeking investors over the Internet without notifying authorities.

One company promised investors huge returns for taking stakes in a low-budget horror flick called “Video Pirates From Mars.” Another sought money to produce a “mystical romantic love story set within the riches of Beverly Hills and the mystical old world of enchanting Mexico,” state officials said.

One Los Angeles company even attempted to raise $2 billion by advertising on its Web site that it would produce 500 feature films during the next 20 years.

The California Department of Corporations said Wednesday that it ordered 12 companies to take investment solicitations off their Web sites over the past two weeks. State officials also sued Alpine Pictures Inc. of Van Nuys for not complying with an earlier desist-and-refrain order.

Bill McDonald, enforcement director of the Department of Corporations, said the companies failed to register with state officials and the federal Securities and Exchange Commission. They also did not publish the required investment prospectus detailing risks to investors.

Many of the entertainment ventures also downplayed the risks, McDonald said.

“Some of these companies essentially said they were making the next ‘Titanic,’ ” McDonald said. “Those kind of representations are fraudulent, because entertainment projects are very risky.”

Dynamo Bunny Productions of Valley Village tried to raise $75,000 to finish a movie called “Miasma,” which the Web site billed as “a hilarious dark comedy about romance and recovery from a man’s point of view.” For $150, producer Ryan Effner offered investors a signed script and a special mention in the film credits.

Effner said he didn’t think the offering was illegal, because he was selling something--the script and the credit.

“It’s not the same thing as an investment,” said Effner, 30, a special effects craftsman.

State officials, however, said the value of Effner’s script is based on the success of the movie, and because risk is a factor, the sale of the scripts should have been registered as a security. Effner said he will comply with the order to change his Web site as soon as he can figure out how to do it.

Porter Ranch-based Beverly Hills Love Story was also hit with a desist-and-refrain order. The company was seeking investors for its mystical Beverly Hills-Mexico love story. Since the order was issued last week, the company has removed the solicitation from its Web page.

The orders announced this week cap a monthlong sweep in which state investigators posed as potential investors, penetrated chat rooms and downloaded thousands of entertainment-related Web sites looking for unauthorized investment solicitations.

Within the last year, the Department of Corporations has issued 77 desist-and-refrain orders and filed several civil and criminal cases against businesses that have allegedly violated state securities rules.

The movie business is an especially fertile area for fraud, McDonald said.

“Entertainment is a really popular item right now, because so many people think there’s money to be made in getting in on the ground floor,” McDonald said. “That’s fine. Our goal is just making sure the companies play by the rules so nobody gets scammed.”