NEW YORK -- A former stockbroker was arrested Monday on suspicion of concocting a cast of phantom investors to defraud producers of the planned Broadway musical "Rebecca," which was canceled for lack of financing a few weeks before its scheduled November opening.
The announcement by the FBI and the U.S. Attorney in Manhattan, Preet Bharara, followed weeks of speculation on Broadway and in entertainment publications over the show's fate, which had hinged upon millions of dollars that Mark C. Hotton vowed were coming from investors he claimed to know. In reality, those investors -- including an Australian man who purportedly died after falling ill while on safari -- did not exist, according to a 19-page complaint.
"A convincing portrayal on stage can earn you a Tony. A convincing act that fleeces a production's backers can earn you a prison term," said Mary E. Galligan, the FBI's acting assistant director-in-charge of the agency's New York office. Bharara said Hotton, who was arrested at his Long Island home, perpetrated a "stranger-than-fiction" fraud that included, among other things, creating investors who "turned out to be deep-pocketed phantoms."
"To carry out the alleged fraud, Hotton faked lives, faked companies and even staged a fake death, pretending that one imaginary investor had suddenly died from malaria," he said.
"Rebecca," which is based on a 1938 novel by Daphne du Maurier, had been scheduled to open last April and had a budget of about $12 million. But rehearsals and the opening were repeatedly put off amid financing problems. Those came to a head in August when a chief investor named Paul Abrams was reported to have contracted malaria and died, leaving the show's two chief producers without the $4.5 million Hotton claimed Abrams was good for.
Hotton then allegedly created someone named Wexler, who was supposedly the executor of Abrams' estate and responsible for ensuring his investment reached "Rebecca's" producers.
Prosecutors say the producers had been dealing with Hotton and his company, TM Consulting Inc., since January and paid him tens of thousands of dollars in fees and commissions in exchange for Hotton rounding up investors. Authorities began investigating Hotton in September after the money he had promised -- first from Abrams and then from Wexler -- never materialized. They quickly uncovered a trove of fake email addresses, business websites, and fictitious names and addresses. All of them led back to Hotton, according to the complaint, and a review of IP addresses showed that most of the emails were sent from computers in New York linked to Hotton.
"Using the decoy e-mail addresses and other trappings he had devised, Hotton fabricated e-mail correspondence between himself and the ... investors, and forwarded that correspondence to Rebecca's producers," according to the complaint. "Hotton pretended to have traveled overseas to meet with and woo the Hotton investors. Hotton even went so far as to orchestrate, through e-mail correspondence, the false illness and subsequent untimely 'death' of one of the Hotton investors, namely, 'Paul Abrams.'"
From January through the end of September, Hotton was able to carry out the fakery, prosecutors say, despite never arranging face-to-face meetings between his purported investors and the producers. By the time the fraud became clear, prosecutors say, "Rebecca's" producers had spent at least $6 million of other genuine investors' money on the would-be musical -- money the "Rebecca" producers promised to refund if they failed to reach their goal of raising at least $12 million by year's end.
Hotton, 46, was charged with two counts of wire fraud. Each carries a maximum prison term of 20 years.