All language subtitles for American Greed s10e07 Sick Profits Hollywood Swinging.eng

In this episode of American Greed, a
mother and son from Ukraine live like

American royalty of a $50 million fraud
perpetrated on U .S. taxpayers.

They had million -dollar homes in Staten
Island. They drove $100 ,000 -plus

cars. But when hidden cameras catch them
paying kickbacks to Medicare patients,

they learn they can't keep their secret
forever.

And when the Department of Justice puts
the squeeze on Mommy Dearest, only one

question remains.

It came down to, was a mother going to
let her son take the fall for her?

And later, are you interested in the
movies? Do you like to make money?

The leaders of a makeshift movie studio
use a telemarketing scheme to trick

investors all across the country to buy
into the Hollywood dream.

What they're doing, they're selling
hope, right?

But despite its fairytale promises,
Gigapix Studios isn't equipped to be

anything other than a $21 million bust.

Nobody else there ever produced
anything.

Not a movie, not a birthday party,
nothing.

In a Russian neighborhood of Brooklyn,
New York, a man enters a medical

called Bay Medical Clinic.

Using his Medicare card, he signs in at
the front desk and is directed towards

the back to receive physical therapy.

Once his therapy is over, he is directed
into a small room.

where a clinic administrator talks fees
for services provided.

It seems like a normal transaction

at a health care clinic, but something
more sinister is actually happening.

The woman isn't telling the patient how
much he owes the clinic.

She's telling the patient how much the
clinic owes him.

In March 2007, the U .S. Department of
Justice creates the Medicare Fraud

Force.

Combining the resources of the DOJ,
Health and Human Services, the FBI, and

state and local law enforcement, it is
designed to combat health care fraud

perpetrated throughout the country.

But one place in particular stands out
for this multi -billion dollar a year

fraud.

Brooklyn, New York.

At the time, there was more physical
therapy being billed for in Brooklyn,

York than anywhere else in the entire
country.

And according to Health and Human
Services Special Agent in Charge Scott

Lampert, the high rate of billing at one
Brooklyn clinic gets their attention.

Brooklyn was high. Bay Medical was high
for Brooklyn. It really stood out when

we looked.

Something was wrong at this particular
building.

Opened in 2005 in the Russian
neighborhood of Brighton Beach, Bay

is a facility for post -Soviet
immigrants, run by post -Soviet

And one immigrant in particular rules
with an iron fist.

Irina Shelikova, she was the mastermind
behind it. She controlled the checkbook,

really controlled where the money went.

She controlled who was hired, who was
fired.

She was the boss. She was definitely the
boss.

In 1993, the 30 -year -old Shelikova
leaves Ukraine with her family and

immigrates to New York.

Ten years later, she begins working at a
health clinic on Coney Island.

where she meets its lead physician, Dr.
Gustav Drivas.

Two years later, they join forces to
open Bay Medical and go from healing to

stealing.

Soon, they're billing Medicare millions
of dollars a year for services provided

to mostly elderly patients.

The strike force wants to take a closer
look inside, but nearly 20 years after

the disillusion of the Soviet Union, The
Iron Curtain is still difficult to

penetrate. We needed undercovers who
were from, like, the old Soviet bloc

And we got married up with the Medicaid
Fraud Control Unit out of New York and

Mark Morgan.

Mark Morgan immigrates to the United
States in the early 90s from the Eastern

European country of Georgia after the
dissolution of the Soviet Union.

In 2002, he enters law enforcement
training to serve his new country.

Morgan joins the New York Medicaid

Fraud Control Unit to fight for U .S.
taxpayers.

And in fact, even before his agency is
incorporated into the National Strike

Force in August of 2009, he has
neighborhood informants telling him

inner workings of Bay Medical.

Almost everybody knew in the
neighborhood what was going on.

According to Morgan, neighborhood news
is passed liberally through word of

among residents, and everyone is saying
the same thing.

Patients at Bay Medical are getting
kickbacks for allowing the clinic to

Medicare for procedures that either
aren't necessary or aren't performed at

If they came in for physical therapy,
there was a certain flat rate.

If they complained of dizziness, they
can have a dizziness test.

After they came a successive number of
times and they built up a number of

claims, then they could come in and they
can collect their kickbacks.

Even worse, the procedures often aren't
even performed by actual physicians.

Dr. Drevis almost never makes an
appearance at his own clinic.

He should have seen each patient that a
claim was submitted in his name for. He

should have treated them, evaluated
them, and prescribed a proper treatment

for whatever their ailment was.

Instead, he did nothing more than sign
his name to medical charts when, in

he never even treated the patients to
begin with.

From the beginning, the true queen of
the realm is Irina Shalikova.

And under her direction, from March
2005, To July 2010, the clinic

rakes in $50 million of taxpayers'
money.

What to do with all that cash?

Ask your son.

When American Greed returns, a Ukrainian
immigrant turns himself into an

American playboy at the taxpayers'
expense.

He was the biggest jerk you could
imagine.

I mean, there are some criminals you
might like. This one is not one of them.

In November 2009, investigator Mark
Morgan is looking for informants willing

carry hidden cameras into Bay Medical to
record the clinic paying kickbacks to

patients. But in a community that
largely grew up in the Soviet Union,

recruitment isn't going to be easy.

Back to the Soviet Union, people were
afraid to tell the truth.

But there's always one in a million
right person to come forward and help

country.

To recruit locals to take cameras into
Bay Medical, Morgan encourages them to

pledge allegiance to their new country.

I explain that all of you are receiving
many benefits for this country.

If you have contributed anything in your
life in the past to this country, we

need your help. All we ask is to tell
the truth.

Morgan's plea works.

Two informants agree to take video and
audio recording devices into the clinic.

Over a seven -month period, the task
force runs 25 undercover operations and

gains an intimate knowledge of Bay
Medical's inner workings.

It really kind of painted an exact
picture on what was happening in that

and how brazen this fraud scheme really
was.

that a judge approves installing a
camera inside the clinic's office.

The footage shows exactly what the
strike force hopes.

Patient after patient, getting cash
kickbacks laid right into their hands.

And on the wall in front of them, a
threatening reminder.

And he said that, be careful, those
days, even walls have ears.

From the spring to the summer of 2010,
we saw no less than 1 ,000 people or so

who came in and received kickbacks over
a period of six weeks, which allowed us

to estimate that there was about $500
,000 that had been given out in

just in that period alone.

Over the five years of the fraud...

The total of kickbacks paid out to
mostly poor elderly Medicare patients

be more than $7 million.

I mean, it could be $10 ,000 to $15 ,000
on a given day. I mean, it was so

blatant to the point that at certain
times, people paying the kickbacks would

run out of money, and they would have to
hide in another room away from the

patients while they called, usually Max,
and said, Max, go to the bank. We need

more money.

Max is Irina Shelikova's son.

Max Shelikov.

And when masterminding a fraud, paying
kickbacks isn't as simple as cutting

checks to complicit patients.

Steps have to be taken to disguise it.

You can't pay him in checks because how
are you going to explain that to, you

know, the IRS?

It's not a deductible business expense,
I don't believe.

So this is how we set up our estimation,
if you remember.

Eric Kreisman and Caroline Polisi.

represent a client who they say is a
victim of Bay Medical's elaborate

conspiracy to launder cash into kickback
payments.

My client, Elena Galper, got involved
because she was friends with Larissa

Shalabadova. And without my client's
knowledge, Ms. Shalabadova opened up

companies and signed my client's name as
the president.

Larissa Shalabadova is an associate of
Irina Shalakova.

and conspires with Bay Medical to open
multiple companies in various people's

names, purporting to be vendors for Bay
Medical.

But in reality, the only service these
vendors provide is turning Medicare

payments into cash.

So what you need to do is you need to
figure out a way to get that cash.

hide the fact that you own that cash.

So what they did was they made checks
out to these phony companies that would

normal vendors in the line of a medical
clinic.

The phony companies then cash the
checks, take a little for themselves,

the rest of the cash back to Bay Medical
to pay kickbacks.

So you give them $10 ,000, you'll
take... I don't know, a $1 ,000 fee from

for laundering that. And here's your $9
,000.

Now you have your $9 ,000 in cash.

Kreisman says his client, Yelena Galper,
never sees a dime.

According to him, Larissa Shalabadova
takes the commissions all for herself.

She would fly to Miami Beach, stay at
the Trump International, have a nice

dinner, go anywhere she wanted, buy
anything she wanted.

And it's all in Yelena Galper's name.

The business bank card saying Moss
Creations Plus, Yelena Galper, our

And whose picture is it? None other than
Larissa Shalabadova.

No matter who the actual owners of these
companies may be, Max Shalakoff runs

back and forth between more than 20
different shell companies to collect the

laundered cash.

and he has some fast cars to expedite
the trip.

Max Shelikov owned no less than five or
six cars that were valued individually

at almost $100 ,000 or more apiece.

In a scheme that deals in so much cash,
the Department of Justice has a

difficult time determining just how much
money Irina Shelikova and her family

take home. But they do know they take it
to nice homes.

They had million -dollar homes in Staten
Island. They drove $100 ,000 -plus

cars. They bought hundreds of thousands
of dollars in other trinkets, expensive

jewelry, Louis Vuitton bags.

Max Shelikoff forfeited a 4 .2 -carat
ring that was valued at $165 ,000

that he gave as an engagement ring to
his fiancée.

There's no question.

Big money is flowing through Bay
Medical's offices.

But it's about to end.

Like the poster says, the walls have
ears.

When American Greed returns, the FBI is
ready to move.

But Irina Shalakova has ears out there
of her own.

There was an arrest warrant sworn out
for her.

And she and her son subsequently got on
a plane and went to the Ukraine.

On Friday, July 16, 2010, the Medicare
Fraud Strike Force raids Bay

Medical. Unfortunately, when they
arrive, the queen of the operation,

Shelikova, is not there.

She was recovering from cosmetic
surgery, so we did not put her in

that time. She was supposed to turn
herself in on Monday, and she never

up. And it turned out she'd gotten on a
plane.

and flown to Ukraine.

Max Shelikov is not named in the
original complaint, but he can sense how

winds are blowing and follows his mother
to Ukraine.

Months later, Max is also indicted. But
still, in Ukraine, his and his mother's

arrests seem unlikely, but not
impossible.

We wait, and we're patient, and we wait
till they travel.

According to Kathy Batt, the FBI has a
lot of ears around the world.

And the weekend of November 12, 2011,
they hear that Max is traveling to

possibly with intentions of sneaking
back into the United States.

And when Max left Ukraine to go to
Canada, we knew that he was on that

And we called Canada. We talked to the
Mounties.

And we got the Mounties to meet him at
the airplane.

The Mounties put Max on a flight to JFK,
where Kathy Batt is there to arrest

him.

But Max isn't the real catch.

The big fish is Irina Shelikova, and now
law enforcement has the bait to lure

her in.

Max is staring at a possible 15 years in
prison if he's convicted.

But the feds will recommend a severely
reduced sentence for cooperating.

if he gets his mother to come back to
the U .S. to take her medicine.

We told Max what our expectation would
be, and Max presumably had several

conversations with his mother and
convinced her that returning to the

States was the best thing for him.

Shelikova returns to the United States
on June 15, 2012, and is arrested like

her son at JFK Airport.

Irina, her son Max, her ex -husband
Sergei, and her niece Elina Gorinko all

plead guilty to the fraud, as does one
of the masterminds of the money

laundering operation, Larissa
Shalabadova.

Others, however, decide to fight it,
including Dr.

Gustav Dribas.

He had so much to lose. It didn't pay
for him to plead guilty.

He was going to lose his medical
license, and he was going to go away.

Anyway, so he rolled the dice.

Others accused of money laundering
rolled the dice with him and go to

including Eric Kreisman's client, Yelena
Galper.

Despite who is actually on trial,
Kreisman says the villain of this fraud

obvious to the jury.

When Max Shelikov takes the stand, the
jury's disdain of him is evident.

The first thing, he sold his mother out,
right? Number two, he used all of the

money and was a brat. I mean, he lived
like he was entitled to this. He didn't,

you know, he became a citizen of this
country, and instead of doing something

decent, he actually stole from our
government.

It was palpable. The jury hated him.

Dr. Dreeva's performance at trial
doesn't come off any better.

According to Kreisman, he doesn't
provide any more medical service at

he did at his clinic.

During a break, one of the defendants
actually started thinking he was having

some heart problems, heart pain, and
maybe he was having a heart attack.

And all of a sudden it was like, is
there a doctor in the room? And everyone

looks around and sees Dr. Trevis, and
he's basically looking away, he's

you know, not me.

Three of the money laundering defendants
who supposedly own shell companies,

including Yelena Galper, are acquitted.

But Drivas isn't so lucky.

He's convicted and sentenced to 12 years
and seven months in prison.

Yelena Gorinko is sentenced to three and
a half years.

Max pleads guilty to one count of
conspiracy to commit health care fraud

count to commit money laundering.

But his sentence could have been much
worse. Thanks to his mother's sacrifice,

he is sentenced to only 30 months in
prison. He is now free.

Irina, on the other hand, gets hit with
15 years for conspiracy to commit money

laundering. She is scheduled to be
released in 2025.

The fall of Bay Medical's $50 million
scam on U .S. taxpayers leaves one man

proud to have helped his adopted
country.

All this country asks you to be a good
citizen, honest, and contribute

to this country.

I feel I contributed back to this
country what this country gave to me.

Next on American Greed, a beverage
salesman named Chris Blauvelt fancies

a movie mogul, but his dreams may just
be another cautionary tale from

Hollywood.

The pitch never changed.

We're going to be the next Pixar.

You're going to be rich.

Meanwhile, Gigapix is struggling to stay
afloat.

On March 12, 2012, Chris Blauvelt enters
the FBI offices in Los Angeles.

His company, Gigapix Studios, is under
investigation for a possible $21 million

fraud perpetrated on investors
throughout the country.

And Blauvelt wants to set the record
straight with the FBI.

But in a surprise twist, Blauvelt
doesn't act like he's defending a fraud,

uncovering one.

I think that there's a possibility that
there's enough evidence or enough

problems here that if you...

could go through and do a forensic
accounting of what's happened with the

company, I think you'll find things that
are pretty interesting.

Gigapix has been raising money from
investors claiming to be the next big

studio.

But after 10 years, it has almost
nothing to show.

The FBI wants answers.

And according to Blauvelt, so does he.

That's why I figured I'd come in and
meet with you. And whatever I'm guilty

I'm guilty of. But let's see.

Perhaps Blaubelt suggests it's not a
matter of fraud, just poor bookkeeping.

Chris Blaubelt may not know

anything about accounting, but it could
be argued that he doesn't know anything

about filmmaking either.

When he opens Gigapix Studios in 2002,

The 46 -year -old career salesman has
worked in industries from beverage

dispensers to telecommunications, but he
has almost no experience in the

entertainment business.

But like the young actor getting off the
bus in Hollywood, he has a dream.

His whole idea was he wanted to produce
animated movies.

Which, in theory, it's a great idea.

It sounds like a wholesome idea. The
problem he came into was the way in

he was going about pursuing that idea
and raising money for it.

Chris Blauvelt appears to think he can
create the next great movie studio

utilizing the age -old and eternally
annoying method of telemarketing.

He moves GigaPix into a 32 ,000 -square
-foot facility in Chatsworth,

California.

Presumably, the facility will be home to
the next great studio.

But in reality, it's little more than a
call center for telemarketers to go

after potential investors.

Are you interested in the movies? And if
someone says yes, do you like to make

money? Yes, I've got a great opportunity
for you. We've got a chance here, a

really good chance to make a tremendous
amount of money.

Are you interested?

The money was being raised as an
ownership interest in Gigapix. So these

investors would kind of get a shiny
sheet of paper basically saying that now

own a piece of Gigapix.

The pitch raises enough money to keep
the company plugging along.

But after years of promises, Gigapix has
practically no product to sell.

They had absolutely nothing to show.

They had a very nice studio. They had
some very high -tech equipment at the

time. And they had a large workforce.

But they had never been able to return
maybe pennies to the investors that had

put in before them.

According to the FBI, it appears that
may have been Blauvelt's plan from the

beginning at Gigabix.

It was wrought with fraud.

They lied, either direct lies about what
was going on.

things that they were working on, how
successful they had been, the fact that

things were in production, or they
omitted to tell them things, such as

paying 15 % to 25 % commissions plus
overhead plus other sales expenses.

They forgot to mention that this was
their first rodeo. They had never done

before.

But then a strange thing happens in
2006.

It appears legitimacy walks in the door
in the form of a seasoned Hollywood

producer, David Pritchard.

Mr. Pritchard had won five Emmys for
various projects he'd worked on

I believe it included The Simpsons, King
of the Hill, some other projects.

When Pritchard joins Gigapix, all of a
sudden it seems like this boiler room

might become an actual movie studio.

He even makes a promotional video.

touting Gigapix's bright future.

I believe we can not only execute the
films that we have in our development

slate, we can execute them and have them
become successful.

So it's a big deal to blob out. He
touted the fact that now we have

working at our company. Now we're
legitimate.

Legitimate is a strong word.

Unfortunately, Pritchard's arrival only
gives Gigapix another tale to tell

investors to take their money.

when American Greed returns.

It looks like Gigapix is about to make
its first actual foray into filmmaking.

But a bad break leaves that scene on the
cutting room floor.

It was a complete 180 reversal that
absolutely sucker -punched Gigapix, and

sure sent all of this reeling.

Entertainment fraud has become an
epidemic in Southern California.

Learn about it at cnbcprime .com slash
American Greed.

Feeling greedy?

Want your share of behind -the -scenes
dirt?

Follow us at AmericanGreedTV on Twitter.

We'll be right back.

Five -time Emmy Award winner David
Pritchard joins Gigapix in 2006.

It's a shot in the arm for a company
that has been promising quality

for years, but has yet to deliver.

This is a studio that is capable of
producing really serious, smart,

film. You can look forward to the next
couple of years as being the years where

you actually start to get the rewards of
your investment early on.

Telemarketers now have a whole new story
to sell.

They supplement their phone calls with
full information packets that provide

even more outrageous misrepresentations
about investing with gigapix.

As you can see, it's very colorful. It's
very shiny. It's to grab their

attention. Again, it's all about height.

Mr. Pritchard is one of the most
recognized and influential names in the

animation industry worldwide.

Look at these pretty pictures. Look at
this projection.

You know, look at what Shrek made. Look
what...

all these other Pixar and Jungworks and
all these other animated films made.

This is what we're going to do.

Eventually, Gigapix has pockets of
investors all across the country in

thousands of miles away from Hollywood,
in distance and in spirit.

Places like Sheridan, Wyoming.

Penny McClurg lives just outside
Sheridan in her childhood home.

A former police officer in Anchorage,
Alaska, she returns home after injury

forces her to retire.

The reason I had to quit, because I got
in a really bad fight.

This guy had killed his daughter, and he
was beating up his wife when I

arrived at the scene.

It's a dangerous situation for the 22
-year law enforcement veteran.

He was huge, 6 '8", 283 pounds.

He was so high on drugs.

And I broke his arm in two places, and
he never felt a thing.

When backup and paramedics arrived, the
subdued killer isn't the only one who

needs medical attention.

And the doctor said, Penny, we need to
look at your shoulder.

I said, I'm fine.

He said, no, you're not.

The injury ends her police career, and
she returns to Wyoming.

She earns a pension from the Anchorage
Police Department.

But in 2007, her brother goes through a
divorce and needs financial help. Some

friends nearby tell her about Gigapix.

They invested over $100 ,000 in this
company.

And I'm going, if they've done this,

then certainly it's legitimate.

I thought this would be a good thing.

At first, she invests $5 ,000, but over
the next few years comes to invest

$50 ,000.

She even tells more friends in the area
about the opportunity.

All of a sudden, a handful of people in
rural Wyoming are now Hollywood

filmmakers.

It's the same story all across the
country.

They were retired school teachers,
retired army veterans.

Some folks were labor union members.

And they were sold on the fact that they
thought that by investing in these

animated movies, they'd be a part of
Hollywood.

And despite all of Gigapix's deceptive
practices, it looks like Pritchard might

actually make their dreams come true.

In 2008, Pritchard hires producer Kip
Conweiser to produce a series of

first real feature films.

David's dream for Gigapix, and what I
was there to execute, was to take family

pictures that were as if they were
written by kids, for kids, made by kids.

Think The Hangover for kids.

Kids get themselves into trouble. Kids
have to take responsibility and get

themselves out of trouble.

And it's hysterical all along the way.

Kahnweiser has won multiple Emmys and
film festival awards of his own. And

according to him, the reason he comes to
Gigapix is David Pritchard.

There are very few people that I can
work for who understand the whole

from concept to delivery respectfully as
well as I do.

He's one of those few people.

We're going to turn over, hopefully, two
films a year that we're going to be

able to produce and put into
distribution.

And the first one of those is Field Trip
Blackbeard, and it's an action comedy.

It's really funny, and it should be in
the theaters in the first quarter of

2010.

Blackbeard is the first movie of what we
intended to be five movies produced in

Iowa, or produced wherever, but it
became Iowa because of the tax

Iowa is offering a 50 % tax credit for
the entertainment industry to work in

state.

Conweiser never works with Gigapix's
telemarketing center.

He gets financing for the film the way
films often do.

He uses the tax credit to secure
financing from multiple established

institutions.

According to Conweiser, the tax credit
helps Gigapix and helps Iowa. We are

building a ship, a pirate ship.

In the South Ridge Mall, which was a
decrepit area of Iowa, beaten up, that

were revitalizing with our movie,
literally, providing jobs and people

back and schools, all kinds of things
happening because we're making

there.

They are even featured in the local
news.

Built in a boat in the middle of Iowa,
how often do you get the opportunity to

do something like that?

I mean, our goal is to build an industry
here and to build our company here. And

we want to build the company here
because there's a tax incentive here

allows us to do that with a lot more
flexibility.

Unfortunately for Blackbeard, that
flexibility is shackled when Iowa

dissolves the tax credit.

We were two weeks from shooting.

In prep, the last two weeks are the most
expensive weeks.

You've made 100 % of your commitments to
all of your crew.

and about 85 % of your commitments to
your cast.

You've also made about 90 % of your
commitments to your vendors.

At that time, I think that the LLC was
exposed with probably a million and a

half dollars of commitments.

According to Kahnweiser, it puts Gigapix
in an irreparable situation.

He leaves Gigapix, and Blackbeard is
abandoned at a huge loss.

Production, total production expenses
were approximately... FBI Special Agent

Adam Storder acknowledges that the
decision in Iowa is damaging to Gigapix.

But he believes they have no one to
blame but themselves.

If they were reputable and they were
able to self -sustain prior to that,

wouldn't have been in that same
situation.

They had misappropriated millions upon
millions of investor dollars prior to

that fiasco ever occurring.

For years, according to Assistant U .S.
Attorney Byron McLean, Gigapix has been

using investors' money for things other
than what they promise investors.

So the first place where the money went
to was that it cost money to raise

money, but these investors weren't told
that. But Gigapix spent probably 40 % of

the money alone just trying to raise
money from investors.

It got used up in sales commissions. It
got used up to pay for the sales

offices, the phone services that they
have.

Ridiculous amounts of money was being
used for things other than production.

Blauvelt and Pritchard used investor
money to pay for over $600 ,000 of

expenses, trips, jewelry, luxury hotels.

Blauvelt was paying for massages, which
were costing upwards of $1 ,000, as well

as the salaries they paid themselves,
which totaled about $2 million.

According to law enforcement, Gigapix's
fraud puts them in the bind in Iowa in

the first place.

And to get out of the bind, they resort
to a familiar Hollywood money grab.

The sequel.

The solution to the fraud was more
fraud.

When American Greed returns,

Chris Blaubelt wants to talk to the FBI.

But much to their surprise, Blauvelt
goes off script.

I feel like I'm being set up to take a
responsibility for something I didn't

necessarily handle or do.

In 2009, Gigapix is in serious financial
trouble, and it seems to be a strain on

the relationship between CEO Chris
Blauvelt and President David Pritchard.

And many of the problems appear to stem
from Blauvelt's professionalism at the

office. He seemed to be completely on
another agenda and had no idea how to

a movie.

None.

And honestly, in my estimation, no idea
how to run a business.

Other employees tell law enforcement
similar tales.

There were stories of the fact that he
was smoking marijuana in the office and

that it could be smelled throughout the
office, that he had a lot of girlfriends

in and out of the office.

He would go to the bars with other
salespeople in the middle of the day.

would go to strip clubs, things like
that.

It was not a typical work environment,
to say the least.

But the real point of contention for
Pritchard seems to be the call center.

He actually wanted to move the
production piece of the company to a

location, separate from the sales,
because he didn't want to deal with, you

know, the salespeople, because he kind
of knew that what they were saying was

not true.

The problem is that Pritchard didn't do
anything about it.

In fact, Pritchard takes full advantage
of the call center.

Gigapix starts reaching out to more
investors to invest in an animated film

based on The Wizard of Oz called Oz 3D.

You would go through the same thing. I'm
an associate producer.

Have you ever watched The Wizard of Oz?

This is your grandkids' version of The
Wizard of Oz.

So we've really focused a lot of our
assets and a lot of our attention on

building a kids' business.

And The Wizard of Oz is a really core
part of that.

But once again, the cash raised by
Gigapix doesn't go towards getting a

the silver screen.

65 % of the funds were supposed to be
used for actual production and release

costs to get that film out in the
theaters so it can make a return for

investors.

What actually ended up happening, and
when we reviewed the financials, It

65%. It wasn't 50%. It was like 5%. The
money that was coming in, they were

using to pay off these past contracts
and the money that was owed, the debt

they owed, instead of actually to make
the Oz 3D movie.

It's possible Pritchard is trying to
help Gigapix repay its debts to stay

viable. But he is lying to investors to
make it happen.

The pitch never changed.

This was a great company, great
opportunity.

We're going to be the next Pixar.

You're going to be rich.

He would write investors, letters to
investors that had misrepresentations in

them. Gigabit Studios is set to become a
publicly traded company.

That was not true. That was a lie.

Oz 3D is in production.

That is not true. Again, that is another
lie.

He also controlled the financials. and
he was aware and authorized the movement

of Oz3D funds into Gigapix Studios.

He controlled those funds. He was part
of that fraud.

When you're talking with investors, are
you going through the risk factors with

them? The FBI starts looking into
Gigapix while investigating other

studios using telemarketing to defraud
investors.

When Blauvelt hears about their
interest, he decides to get out in front

I really had no choice but to come to
you.

Really, the only way to do it is to go
through the banks and find out how much

money came in and how all the money was
spent.

And I think, well, let the chips fall
where they may have.

The chips don't fall in his favor.

On June 5, 2014, he's arrested.

David Pritchard is arrested the same
day.

When he speaks to FBI Special Agent Eric
Podosek, he professes his innocence.

But when the facts are laid out, Podasek
says that Pritchard comes to understand

the gravity of his situation.

I asked him if his investors would have
liked to have known that 5 % of the

money raised for Oz 3D was going to be
used for production before they

And he agreed that he should have told
that to his investors. I asked him if he

disclosed the true state of the company
after Iowa.

And he replied that...

You know, he didn't, and he probably
should have.

And then when I asked him if he
committed fraud, he

didn't give me a yes or no answer, but
he just looked down, and he told me, I

get it.

I fucked up.

Nevertheless, both Blauvelt and
Pritchard decide to take the case to

A jury finds each of them guilty on 12
counts, including mail fraud and wire

fraud. The court sentences Blauvel to
eight years in federal prison and

Pritchard to five.

Despite the convictions, some things can
never be recovered.

Here's $6 ,000, $10 ,000, $5 ,000.

What a mess.

I'd like to push him up against the wall
and hit him, you know, for

doing this.

What a scam.

Penny McClurg's investment wasn't just
for her.

It was to support her brother as well.

When he finds out the money is gone, he
takes his own life.

McClurg can't bring herself to talk
about it.

Time out.

As the curtain falls on the Gigapix
story, victims like Penny McClurg learn

hard way that greed can cost far more
than just money.

People say that white -collar crime, the
impact isn't as significant as violent

crime. But in some circumstances, you
know, they...

The victims experienced equally tragic
outcomes.

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