According to the Sacramento Bee, a would-be movie studio executive, Carissa Carpenter, pleaded not guilty last week to defrauding investors of at least $5 million during her failed 17-year attempt at creating a movie studio in Northern California.  Over the 17-year period, she shifted Movie Reels.jpgthe location of her planned studio several times.  Her last purported studio location was in Dixon, California where she proposed building a $2.8 billion complex that was supposed to have opened in October 2015.  On October 30, 2014, Carpenter was indicted by a federal grand jury, charging that she spent 17-years making a string of studio pitches in a fraudulent attempt to raise money from investors and spend it on her own extravagant lifestyle. 

We always come across these stories in which investors are bilked out of huge sums of money.  The first question that pops into our heads when we read these stories is, “well, did anyone run a background check on the fraudster before forking over their life savings?”  Most times, it appears the answer is probably no, and we’ve blogged about it over and over (here, here and here).  This case seems to be no different.   We ran a quick litigation search on Carpenter in one of our commercial databases and came up with 6 cases against a Carissa Carpenter in California.  Because we didn’t pull the records, we can’t be sure that all of those cases are against the movie studio Carissa Carpenter.  But we know that at least two of the cases are, one of which is for contractual fraud, since one of her companies is also listed as a defendant.   Carissa Carpenter isn’t an exceedingly common name, so there is a decent chance the other four cases may be suits against movie studio Carpenter as well. 

The presence of litigation against a person doesn’t necessarily mean that you should steer clear of investing with them, but it should give you pause and cause you to look into the facts surrounding the lawsuits.  Investors usually come to us too late in the game.  They hire us after they’ve already been defrauded by someone, and they are looking to grab any remaining assets.  Too often, when performing these after-the-fact asset searches, we find that the person that defrauded our client has a long history of being accused of fraud, amongst other red flags.  If our clients had asked us to do a little due diligence before investing money, they probably would not have lost it in the first place.