RUTLAND — Minutes before a federal judge sentenced him to seven years in jail for conspiracy to commit fraud and money laundering, Lou Soteriou stood before the court, paused and told a roomful of his victims that he still believes he can make good on the investments they made in the film “Birth of Innocence.”
“I’m pushing to have the investors paid with interest and the film be done,” Soteriou said of the movie, which remains unfinished a decade and $28 million after its production began in 2000. “I’m staying true to that line.”
The 56-year-old Middlebury, Conn., man also offered an apology to the people, mostly Vermonters, who invested thousands of dollars in the film and have seen nothing in return.
“No matter what I say, words will not affect the financial loss and emotional loss and the stress from enduring all this, and for that I’m sorry,” Soteriou said, standing before the defense table with his head bowed in U.S. District Court in Rutland on Monday.
Soteriou has been described as the silent partner in an enterprise that Judge Christina Reiss described in court Monday as both a “Ponzi scheme” and “one of the biggest, if not the biggest” fraud cases in Vermont history.
None of the victims who told the court Monday about the hardships of losing their life’s savings on the movie said they had ever met Soteriou before.
Investor Jerry Rule said he was approached by the other partner in the movie’s production, Vermont storyteller Malcolm “Mac” Parker — a man he had known and trusted for years.
“Mac knew me and knew the position I was in,” Rule said describing a series of tragic events that compelled him to sell his rubbish removal business in Bridport in 2008. “The $320,000 I gave him was a lifetime’s worth of money.”
But while Parker, who will be sentenced Wednesday for his role in the scheme, solicited money, Reiss said it was Soteriou who spent the lion’s share during a professed quest for spiritual enlightenment.
“The money tells the story here,” the judge said.
In the film’s first year of production, Parker raised $500,000 — all of which went to Soteriou. In 2001, $400,00 went to Soteriou, an equal amount went to the film’s production, and $11,000 went to pay interest to investors who were promised rates of return as high as 30 percent.
Parker, who testified against his former partner during the sentencing hearing, said his understanding was that Soteriou was using money from the film to finance a spiritual journey necessary for the film to succeed.
But the judge said evidence that both Soteriou and Parker used the money to “purchase luxury items and pay for living expenses” for a decade indicated that the spiritual enlightenment purported by the filmmakers was just a cover for a broad scam that involved swindling hundreds of investors.
“It’s called a Ponzi scheme, and it involves paying of early investors with new investments to keep them from squawking,” Reiss said. “The idea that this all had a higher purpose is undermined by where the money was going.”
About $9 million of the $28 million invested in the film was diverted, federal prosecutors said. About $4 million of that amount went to Soteriou, who the judge said used the funds to pay for expensive hotel rooms and medical care for his pets, among other things.
“If there truly was a higher purpose, the money would not flow in that direction,” she said.
In sentencing Soteriou to seven years in jail, the judge imposed the maximum punishment allowed under a plea deal agreed to by prosecutors and the defense.
Federal public defender Steven Barth asked the court to sentence Soteriou to only 2½ years in jail due to his client’s failing physical health, “delusional” mental illness and lack of any prior criminal record.
During the daylong hearing, Parker testified that during the latter years of the film’s production, Soteriou described a spiritual ascension he was progressing toward that would allow him to leave his body and travel back and forth through time. One of the goals of that process was to travel into the future to divine lottery numbers that the partners could pick to win.
“What we have here is a 56-year-old man who I think there is no question that he suffers significant mental health and physical health problems,” Barth said.
But prosecutors and three investors who addressed the court said anything short of the maximum sentence for Soteriou would be a crime.
“The court needs to send a message that crime does not pay,” said Assistant U.S. Attorney Michael Drescher.
Duxbury resident Gloria Rapalee said Soteriou and Parker should each go to jail for 10 years — a year for every year of the crime.
She didn’t get her wish because the maximum penalty under Soteriou’s plea agreement was capped at seven years. But she said after the hearing that the sentence imposed was enough.
“It was great,” Rapalee said. “It was the maximum. That’s all I ever wanted.”
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