Opinion ID: 3160112
Heading Depth: 4
Heading Rank: 1

Heading: The Trial Evidence Against Baker

Text: In 2001, Hartford hired Baker as an “associate producer” at Cinamour. Baker was working as a telemarketer soliciting money for Forbidden Warrior when he was arrested and jailed in March 2003 for a parole violation. Baker went back to working for Cinamour in January 2004 and, with his partner, worked for Cinamour out of their home in Coachella Valley, California until 2009. UNITED STATES V. LLOYD 29 In March 2004, Baker and his partner, doing business as Independent Essentials, entered into a written agreement with Cinamour for a 20 percent commission on the money they raised working as telemarketers and closers soliciting investments in From Mexico With Love. From January 2005 to January 2007, Baker closed $200,000 in From Mexico With Love investments. Baker also earned a commission for the investments that Lloyd closed using Baker’s investor list from Forbidden Warrior. Lloyd used Baker’s investor information to reload those who had sent money for Forbidden Warrior, producing more money for From Mexico With Love. In 2007, Cinamour stopped soliciting for From Mexico With Love and turned to soliciting money from investors for Red Water. Baker and his partner ran the Red Water fundraising. Baker hired codefendant Bart Slanaker, who had experience operating telemarketing boiler rooms. Baker’s partner managed the money, received investor checks, and paid commissions. Baker gave Slanaker Red Water sales materials and paid him a 15 percent commission. Baker contacted prospective investors from lead lists. Diane Houseknecht testified that in a letter and conversations, Baker told her that investors would receive 90 cents on every dollar the film earned until they got back all the principal they had paid plus 10 percent. Baker also promised her that the return would be fast. He did not reveal that he would earn a 15 to 20 percent commission. Instead, he emphasized that the investors would get paid before the promoters or salespeople received anything and that the invested funds would be used to make and market the movies, not to pay promoters or salespeople. Houseknecht, who had no investment experience, invested $25,000 in Forbidden Warrior, $10,000 30 UNITED STATES V. LLOYD in cash and $15,000 from her retirement account. She got back $1,000. Lloyd later convinced Houseknecht to invest another $20,000 in From Mexico with Love, using $10,000 in cash and $10,000 from her retirement account. Gary Tranter testified that Baker called him in 2002 to solicit an investment in Forbidden Warrior. In the telephone call, Baker compared Forbidden Warrior to the well-known and commercially successful film Crouching Tiger, Hidden Dragon. Baker stated that a majority of the Forbidden Warrior units had already been sold and that Tranter needed to act quickly. Baker told Tranter that Forbidden Warrior was ready for release in theaters in the near future; it was not. Baker also said that investors would be paid back first and that promoters and sales personnel would be paid only after the investors. Baker did not disclose the fact or amount of commissions he and others were getting. Tranter worked as a wholesale broker of indoor houseplants and had little financial or investment experience. He invested $10,000 in Forbidden Warrior and got back $800. Baker unsuccessfully tried to reload Tranter in From Mexico With Love but did get him to send another $5,000 for Red Water. Tranter never got any of his investment in Red Water back. Another investor, Thomas Beacham, an office manager for a paint shop, testified that Baker cold-called him in 2002 about investing in Forbidden Warrior. Baker told Beacham that Forbidden Warrior would be a “big moneymaker” because it was comparable to Crouching Tiger, Hidden Dragon. When Beacham said that he did not have the money to invest, Baker emphasized that this was a limited-time offer and asked if Beacham had retirement savings he could use. When Beacham pointed out that he did not meet the requirements for an accredited investor—including that his UNITED STATES V. LLOYD 31 net worth was far below the $1 million minimum—Baker urged him not to “worry about that. It’s just in there for formality. We can make an exception in your case.” Beacham invested $5,000 from his retirement account in Forbidden Warrior. Baker successfully convinced Beacham to invest another $10,000 from his retirement account in From Mexico With Love after Beacham participated in a reloading conference call run by Lloyd and Agler. Beacham lost all the money he invested except “a hundred bucks or so.” Beacham testified that he had lost his job in 2008 and had to cash out his retirement account, which was “15 grand shorter than it probably should have been.” FBI Special Agent Sean Sterle, who worked undercover posing as a Florida businessman interested in investment opportunities, also testified. After a cooperating witness introduced Baker to Sterle, five or six telephone conversations followed in which Baker tried to convince Sterle to invest in Red Water. Sterle recorded his conversations with Baker and the jury heard them at trial. The recordings included Baker’s statements that Red Water had secured $5.4 million in presale commitments to distribute the film in 31 countries; that the presales revenues would pay investors a 110 percent return; that Sterle would receive a 110 percent return in eight to ten months, get his full investment back within the year, and triple his money in two years; and that the sales personnel received no commissions. The evidence showed that the promises Baker repeatedly made were either false or made without any reasonable basis to believe that they were true. 32 UNITED STATES V. LLOYD