March 2, 2018 / 8:28 PM / 16 days ago

Film producer convicted in U.S. of investment fraud

(Reuters) - A California movie producer who headed a boutique merchant bank has been convicted on charges he defrauded investors in hedge funds overseen by a New York-based investment adviser out of $26 million, prosecutors said on Friday.

David Bergstein, who served as executive producer of the 2015 film “In the Heart of the Sea,” was found guilty by a federal jury in Manhattan on Thursday of charges including investment adviser fraud and securities fraud.

Bergstein, a resident of Hidden Hills, California, who at the time of his arrest in 2016 was the chief executive of merchant banking firm Cyrano Group Inc, is scheduled to be sentenced on June 8.

A lawyer for Bergstein, 55, did not respond to a request for comment on Friday.

Bergstein was indicted in November 2016 along with Keith Wellner, the former general counsel of Weston Capital Asset Management, whose hedge fund investors were defrauded by the defendants, according to prosecutors.

Wellner later pleaded guilty and cooperated with prosecutors.

Prosecutors said Bergstein and Wellner from 2011 to 2012 engaged in a scheme to conceal information from Weston investors about transactions involving their money, and transferred funds from one pool of Weston investors to make payments to another.

The indictment said they also misappropriated some investor funds for their own and others’ benefit. Manhattan U.S. Attorney Geoffrey Berman in a statement said the fraud cost investors more than $26 million.

According to court papers, the case related to a probe of individuals including investment banker Jason Galanis involved in market manipulation for reinsurer Gerova Financial Group Ltd.

Weston had done a deal with Gerova in 2010 that prosecutors said prompted the first of two schemes involving Bergstein and Wellner. Galanis in 2016 pleaded guilty to securities fraud in connection with the Gerova fraud.

Albert Hallac, Weston’s founder, pleaded guilty in 2016 to charges that he schemed to defraud Weston investors.

Bergstein previously controlled several movie production companies including ThinkFilm and Capitol Films Development. He took an advisory role in Walt Disney Co’s 2010 sale of Miramax to an investor group that included a business partner.

His movie credits include serving as an executive producer of 2004’s “The Whole Ten Yards” and 2007’s “Before the Devil Knows You’re Dead.”

In 2010, five of Bergstein’s film companies including Capitol Films and ThinkFilm were forced into bankruptcy at the urging of a group of creditors, court records showed.

Reporting by Nate Raymond in Boston; Editing by Tom Brown

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