Ex-N.Y. Governor Paterson Fined Over Stake in Microcap Firm

  • SEC claims directors failed to file timely stock transactions
  • Paterson, two others to pay $25,000 apiece to settle claims

Former New York Governor David A. Paterson was among those accused of violating U.S. securities laws in connection with a proposal to build the largest movie studio in North America.

Paterson, 62, agreed to pay $25,000 to settle Securities and Exchange Commission claims stemming from his involvement with Moon River Studios, the regulator said in a statement Friday. Moon River founder and former chief executive officer Manu Kumaran is facing SEC allegations that he defrauded investors by spending shareholder money on globe-trotting travel and personal expenses.

The SEC said Paterson and two other Moon River directors failed to file timely stock-transaction reports tied to the construction of the studio near Savannah, Georgia. Music producer Charles A. Koppelman and Matthew T. Mellon II, former chairman of the New York Republican Party Finance Committee, were the other directors named by the regulator.

“Koppelman, Paterson and Mellon allegedly failed in their personal responsibility to comply with the beneficial ownership reporting requirements of the federal securities laws," the SEC said in its statement.

Paterson, a Democrat, became New York’s governor in 2008 when Eliot Spitzer resigned after he was caught patronizing a prostitution ring. In July, Stifel Financial Corp. said Paterson was joining the firm as a wealth-management adviser.

“Gov. Paterson and Mr. Koppelman were not complicit in any of the alleged wrongful conduct by the company,” Michael Ference, their attorney, said in a telephone interview. This was “an administrative issue, which was then resolved,” he said.

The SEC said that in addition to misusing investors’ money, Kumaran schemed with his successor, Jake Shapiro, to make false statements in press releases and company filings about the pace of the studio’s development, the regulator said.

“They allegedly claimed that construction was underway and projected dates by which the studio would be operational while knowing full well they did not have anywhere near sufficient funding to begin building,” according to the statement.

The SEC filed its complaint against Kumaran, Shapiro and their firm in federal court in Manhattan. The agency says its investigation is continuing.

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