Could UBS Have Stopped a “Con” on Investors in a Bull Durham Musical?

[1]

Have you ever heard a film producer or financier say, “I have access to half the financing”? It’s often followed by, “If you have the other half, we can do this.”

I’ve heard this, many times.

Words like these can be the start of a successful deal, or of a scheme to defraud.

Take the case of a Broadway producer seeking investment in a musical version of Bull Durham, the 1988 hit film starring Kevin Costner. A recent civil complaint against Swiss banking giant UBS sheds light on an alleged “half the money” finance scam that, in this case, allegedly succeeded. [2]

The Bull Durham Case – Overview

In the alleged scam, the Broadway producer was conned into depositing other investors’ cash into a supposedly safe bank account, by would-be co-financiers who promised dollar-for-dollar matches that never arrived. Instead, the “co-financiers” allegedly stole the investor monies.

The frauds alleged in the Bull Durham and related cases may involve Broadway shows, Hollywood movies and megabanks, but they are just the latest versions of classic confidence tricks that con artists have played for centuries.

Multiple Choice Test

Is the “half the money” scam alleged in the Bull Durham complaint:

**        a Romance Scam?

**        a Rain Maker Scam? or

**        a Spanish Prisoner Scam?

For the answer, keep reading.

The Alleged Bull Durham Scam

Per allegations in the complaint, the Bull Durham scam worked as follows:

Weathervane Productions and Forrest Capital offered to match, dollar-for-dollar, other investor monies raised by the producer plaintiff.[3] The parties entered into a detailed Funding Agreement, and the plaintiff deposited $2.5M into a “Master Account” at UBS which was to be jointly controlled. Forrest Capital was to use the $2.5M deposit to seed a UBS “Line of Credit” in double that amount, and then borrow $2.5M on the line to sit alongside the $2.5M of investor funds in the Master Account. The aggregate $5M in cash would then be transferred into the plaintiff’s “Production Account”, toward capitalization of the Broadway show.

Sketchy?

The alleged scammers’ proposition, in essence, was: “Give me your money so I can access my money, then I’ll give you back your money plus my money.” If this sounds too good to be true, it apparently was. Per the complaint, notwithstanding contractual safeguards, Weathervane and Forrest Capital almost immediately began looting the prior investor monies and, within three months, the entire account had been drained. Eventually, UBS informed the plaintiff that the secure account arrangements promised in the Funding Agreement were never put in place.

The thrust of the plaintiff’s complaint is that if UBS had performed its Know Your Customer protocols and done what it was otherwise supposed to do, the fraudsters would not have gotten as far as they did.

Confidence Tricks – Theory and Practice

At this point, a few words about the theory and practice of confidence tricks.

A confidence trick, or “con”, often starts with a “con artist” enlisting accomplices in a scheme to defraud. In a “long con”, which can take days, weeks or even months to pull off, the con artist may use false or exaggerated “credentials” to gain the confidence of a “mark” (that is, the victim) in support of a “great deal”, typically involving a “device” for transfer of the mark’s money.

Per the Bull Durham complaint:

The principals of Weathervane and Forrest Capital were co-conspirators in a “long con”. The plaintiff Broadway producer was the “mark”. The matching of funds was the “great deal”. The “device” for taking investor monies was a carefully prepared Funding Agreement. The producer plaintiff was led to believe that Weathervane and Forrest Capital were bona fide film financiers interested in branching out into theater – a less-than-complete backstory that formed part of the con artists’ false or exaggerated “credentials”.

UBS’ Know Your Customer Failure

In the plaintiff’s telling, the sine qua non of the con artists’ success was UBS’ failure to perform required Know Your Customer-type diligence which would have inevitably uncovered similar and even identical prior frauds worked by Weathervane and Forrest Capital. If lawsuits going back to 2014 are to be believed, Weathervane and Forrest Capital were a veritable Bonnie & Clyde of film finance fraud, barnstorming across the hinterlands before bringing their act to Broadway. Indeed, in August 2019, the U.S. Attorney in South Florida criminally indicted Forrest Capital principal Benjamin McConley, former Wells Fargo employee Benjamin Rafael and the principal of Weathervane for a run of film finance cons, some amazingly elaborate, which bilked investors of tens of millions of dollars. [4] McConley and Rafael have since pleaded guilty to one count of the indictment, while the Weathervane principal awaits trial.

Classification of Cons

Now back to the multiple choice questions and the classification of cons.

Romance Scam

Is the fraud alleged in the Bull Durham case a Romance Scam?

Short answer – no. In a classic Romance Scam, the con artist presents him or herself as a damsel in distress and attempts an online seduction for which there is a costly obstacle to consummation – say, an airline flight from Eastern Europe. After the lovestruck mark pays for the ticket, the con artist is never heard from again. Of course, there are many variations on the Romance Scam – see my post here.

Rain Maker Scam

Is the Bull Durham fraud a Rain Maker Scam?

No. In a classic Rain Maker Scam, the con artist’s proposition is: “I’ll do a dance, you’ll pay me, it will rain.” And a reverse variant: “I’ll do a dance, you’ll pay me, the rain will stop.”

A classic Rain Maker Scam is a fixer who promises to grease the wheels on an immigration visa; the fixer does nothing; the applicant gets his visa anyway; and the fixer extracts a fee which the immigrant is unable to contest for fear of prosecution or deportation.

A Reverse Rain Maker Scam may now be in the making re: CoVid-19. A political leader has repeatedly said that even without a vaccine or cure, CoVid is “fading away, it’s going to fade away” [5] and words of similar effect. The reverse scam would arguably be complete if the leader were to win votes on the notion that he presided over a decline in cases.

The Correct Answer

So, is the alleged Bull Durham investment fraud a Spanish Prisoner Scam?

For all of you skilled test takers, that’s the remaining choice, and it’s the best answer. Yes, it’s a classic Spanish Prison Scam, which itself is a subcategory of Advance Fee Scams.

The New York Times reported a classic Spanish Prisoner Scam on March 20, 1898 (not a typo), which can be distilled as follows. A foreign aristocrat in a distant country was, allegedly, wrongly imprisoned, separating him from buried treasure he needed for escape. A mark was beseeched to send cash for a ransom, in exchange for a promise of one-third of the treasure. The ransom was supplied, but the scammer disappeared with the money.

The matching funds promised by the alleged con artists in the Bull Durham case play the role of buried treasure; the producer’s deposit of investor monies is the disappearing ransom.

Con artists aren’t called “artists” for nothing . . .

What You Can Do

The marks in the Bull Durham case might have headed off the alleged con if they had:

**        Obtained true third party verification of the financial wherewithal of Forrest Capital, the supposed source of the promised matching funds.

**        Directly managed the implementation of promised financial controls, such as signature cards, at the account level.

**        Provided the mark’s half of the funds via a credit mechanism, such as a letter of credit, rather than in cash via a supposed side-by-side deposit.

**        Ordered litigation searches against Forrest Capital, Weathervane and their principals.

**        Or simply Googled them. (Remember, Google can be your friend.)

Final Words of Advice

Press your banker to do their Know Your Customer diligence. And study the classics – the classic cons!

 

[1] Ezra Doner is an entertainment and copyright lawyer who focuses on the film, TV and other content sectors. He worked as an in-house business and legal executive before becoming a private lawyer. He is based in New York and is admitted to practice in New York and California. He does not represent any of the parties in this case.

[2] Summons and Complaint, Player to be Named Later, LLC, et al., v. UBS Financial Services, Inc., et al., Index no. 651977/2020 (N.Y. Sup.Ct. May 26, 2020)

[3] For convenience, I refer to “plaintiff” and “producer”, in the singular, but in the Bull Durham case, there are actually two plaintiffs, two producers, two alleged scams and two theater projects, the second being a revival of Smokey Joe’s Café. Per the complaint, the allegedly fraudulent deals on the two projects were “essentially identical”. In this Alert, I have focused on the Bull Durham project.

[4] See Indictment, United States Of America vs. Benjamin Forrest McConley, Jason Van Eman, And Benjamin Rafael, No. 1:19-cr-20447 (S.D. Fla. July 25, 2019). In addition to the Bull Durham case, since 2014, Weathervane and/or Forrest Capital have been accused of financial fraud in at least nine civil suits, including Adana Investing, Inc. v. Forrest Capital Partners, Inc., et al., No. 1:15-cv-24038 (S.D. Fla. Oct. 28, 2015); Adana Investing, Inc. v. Wells Fargo Advisors, LLC, et al., No. 1:16-cv-21562 (S.D. Fla. May 2, 2016); Baker Film Fund, LLC v. Weathervane Productions, Inc., et al., No. 2:16-cv-07979 (C.D. Cal. October 26, 2016); Victoria Burrows v. Forrest Capital Partners, Inc., et al., No. CACE16009336 (Fla. 17th Cir. Ct. May 19, 2016); Anthony Buzbee v. Gayle Dickie, et al., No. 4:14-cv-03431 (S.D. Texas December 1, 2014); James Thomas Productions Events & Entertainment, Inc., et al., v. Weathervane Productions, Inc., et al., No. BC569062 (Sup. Ct. Cal. January 12, 2015); Dane A. Miller v. Benjamin Forrest McConley, Case No. 0:14-cv-62449-WPD (S.D. Fla. Oct. 28, 2014); Superhuman International Pty Ltd. v. Benjamin Forrest McConley, et al., No. 1:15-cv-22690 (S.D. Fla. July 17, 2015); and Vandermolen Film Co. Ltd., et al., v. Wells Fargo Bank, N.A., et al., No. 2016-031707-CA-01 (Fla. 11th Cir. Ct. December 12, 2016).

[5] See, for example, https://time.com/5855541/trump-coronavirus-fade-away/