A Hollywood producer, who founded and was the chief executive officer of a publicly-traded television production and distribution company, was indicted today by a federal grand jury for allegedly orchestrating a fraud scam designed to artificially inflate the company’s revenue and stock price.
A 13-count indictment returned today by a federal grand jury in Los Angeles charges Drew Savitch Levin, 54, of Pacific Palisades. Levin was the founder of Team Communications Group, Inc., and he served as the CEO of the company until early 2001. He was charged with conspiracy, falsifying Team’s books and records, making false statements in Team’s annual and quarterly reports filed with the Securities and Exchange Commission, making false statements to Team’s outside auditors, and giving false testimony to the SEC in a deposition.
A former managing director of Team’s subsidiary in the United Kingdom previously pleaded guilty to one count of conspiracy for assisting Levin in the fraud scheme. Noel Desmond Cronin, 60, of Herts, England, entered his guilty plea before United States District Judge Dean D. Pregerson in Los Angeles on February 26. Cronin is cooperating with the government’s investigation.
Team was in the business of producing and distributing television programming, including made-for-television movies. As part of its distribution business, Team licensed its programming to other companies for distribution fees. Team’s shares were traded publicly on the NASDAQ stock exchange.
According to the indictment, Levin perpetrated a scheme to falsely overstate Team’s annual and quarterly revenue to make Team appear to be profitable, when Team actually was operating at a substantial loss. The indictment charges Levin with causing Team to book revenue in violation of the accounting rules applicable to television producers and distributors. For example, Team licensed television programming to customers for inflated distribution fees. When the customers were unable to pay the inflated fees, Levin caused Team to send them millions of dollars of Team’s own money, which the customers then used to make payments to Team. Levin disguised these “circular payments” by routing them through third parties, purportedly to buy television programming.
The indictment details an example where Team licensed a collection of films known as the “Prestige Library” to a Cronin-controlled company in England called String of Pearls, who committed to pay Team $5.375 million for the films. However, String of Pearls was unable to pay that fee to Team. Levin had String of Pearls buy a second collection of films from a third party for $500,000. Team then bought that same collection from String of Pearls for $2.535 million. String of Pearls used $500,000 of Team’s money to pay the third party, and sent $2 million back to Team, supposedly to make a payment for the Prestige Library. Levin allegedly lied to Team’s outside auditors by claiming there was no relationship between the Team-String of Pearls deal for the Prestige Library and the Team-String of Pearls deal for the second collection of films.
According to the indictment, Levin profited from the revenue-inflation scheme in several ways. For example, he received a $335,000 bonus based on Team’s reportedly profitable 1999 performance, when in fact Team had a loss that year and Levin was not entitled to any performance-based bonus. Levin also allegedly pledged more than 500,000 shares of Team as collateral for a loan to buy a $1.5 million ranch in Big Sky, Montana.
Near the end of 2000, Team’s Board of Directors started an internal investigation of Team transactions. The indictment alleges that Levin obstructed the internal investigation by, among other things, firing Team’s chief financial officer and restricting the investigators’ access to Cronin.
In 2001, Team restated its 1999 fiscal results, going from a $1.791 million profit to a $4.25 million loss. For the year 2000, Team reported a loss of more than $42 million. Ultimately, in 2002, Team filed for bankruptcy protection.
The SEC sued Levin in federal court in Los Angeles in 2005, and that civil case is pending. In the indictment filed today, Levin is accused of giving false testimony to the SEC in a deposition. The SEC and its attorneys have cooperated extensively with the government’s criminal investigation.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
Levin is expected to self-surrender to authorities on Friday and to make his initial appearance Friday afternoon in United States District Court in Los Angeles.
If convicted of the 13 counts in the indictment, Levin faces a statutory maximum penalty of 200 years in federal prison.
Cronin is currently scheduled to be sentenced by Judge Pregerson on January 26, 2009.
The charges in the indictment are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and the United States Postal Inspection Service.
CONTACT: Assistant United States Attorney Jeremy D. Matz
Major Frauds Section
Assistant United States Attorney Christine M. Adams
Major Frauds Section
Release No. 08-029