Affidavit in Support of Criminal Complaint — William Sadleir (Aviron Pictures PPP loans)

Summary

An affidavit of FBI Special Agent Nathan Cherney in support of a criminal complaint against and arrest warrant for William Sadleir for violations of 18 U.S.C. § 1343 (Wire Fraud), 18 U.S.C. § 1344(2) (Bank Fraud), 18 U.S.C. § 1014, 15 U.S.C. § 645(a) and 18 U.S.C. 1957. The affidavit states that in or about April 2020 Sadleir submitted three applications for loans to JPMorgan Chase, N.A. on behalf of three Aviron entities through the Paycheck Protection Program, and that Sadleir received a total of over $1.7 million. It states that the loans were obtained by false representations about payroll expenses, number of employees, operational status and use of proceeds, and that a significant amount was diverted to personal accounts. It also includes background on the PPP.

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                               AFFIDAVIT
I, Nathan Cherney, being duly sworn, declare and state as

follows:

                           I. INTRODUCTION
        1.   I am a Special Agent with the Federal Bureau of

Investigation (“FBI”) and have been so employed since January

2018.    I am currently assigned to a Complex Financial Crime

squad of the FBI’s Los Angeles Field Office, which is

responsible for investigating corporate and securities fraud,

including mail fraud, wire fraud, securities fraud, and insider

trading.

        2.   Since becoming an FBI Special Agent in 2018, I have

received approximately 19 weeks of formal training at the FBI

Training Academy in Quantico, Virginia, in financial analysis,

interviewing, surveillance, and other investigative techniques.

In June 2019, I also attended a multi-day Securities Industry

Essentials formal training sponsored by the FBI Economics Crimes

Unit.    At this training, I received formal training essential to

securities industry markets, regulatory agencies and their

functions, and prohibited practices.       Before joining the FBI, I

performed numerous financial audits while employed as an auditor

at a public accounting firm for approximately three years.      I

participated in many aspects of the audits including, but not

limited to, procedures for fraud detection, financial analysis,

and reviews of accounting and bank records.      I received

approximately eight weeks of formal training from the accounting

firm including, but not limited to, fraud, accounting
principles, financial analysis, and auditing principles.     I hold

a Bachelor of Arts degree in Economics from the University of

Michigan and a Master of Science in Accounting from Michigan

State University.   I am currently a Certified Public Accountant

in the state of California.

     3.   In addition to my formal training and personal

experience, I have learned from and worked alongside numerous

senior FBI agents with years of experience in various criminal

investigations including, but not limited to, corporate and

securities fraud, mail fraud, wire fraud, securities fraud, and

insider trading.    Throughout my experiences with these senior

agents, I have received guidance, training, and hands-on

experience in various investigative techniques including, but

not limited to, interviewing, surveillance, financial analysis,

and other investigative techniques, including with respect to

the identification and tracing of illicit proceeds.

                      II. PURPOSE OF AFFIDAVIT
     4.   This affidavit is made in support of a criminal

complaint against, and arrest warrant for, WILLIAM SADLEIR

(“SADLEIR”) for violations of 18 U.S.C. § 1343 (Wire Fraud), 18

U.S.C. § 1344(2) (Bank Fraud), 18 U.S.C. § 1014 (False

Statements to a Financial Institution), 15 U.S.C. § 645(a)

(False Statements to the Small Business Administration), and 18

U.S.C. 1957 (transactional money laundering).

     5.   The facts set forth in this affidavit are based upon

my personal observations, my training and experience, and

information obtained from various law enforcement personnel and


                                  2
witnesses.    This affidavit is intended to show merely that there

is sufficient probable cause for the requested complaint and

does not purport to set forth all of my knowledge of or

investigation into this matter.    Unless specifically indicated

otherwise, all conversations and statements described in this

affidavit are related in substance and in part only.

                    III. SUMMARY OF PROBABLE CAUSE
     6.      Until recently, SADLEIR operated a film production

company called Aviron Pictures, LLC (“Aviron Pictures”) and its

related entities, all of which are based in Los Angeles,

California.    In or about April 2020, SADLEIR submitted three

applications for loans to JPMorgan Chase, N.A. (“JPMC”) on

behalf of three of the Aviron entities -- Aviron Group, LLC

(“Aviron Group”), Aviron Licensing, LLC (“Aviron Licensing”),

and Aviron Releasing, LLC dba Regatta (“Aviron Releasing”) --

through the Paycheck Protection Program established by the

Coronavirus Aid, Relief, and Economic Security Act.    JPMC

approved the loans, and SADLEIR received a total of over $1.7

million in funds as a result of these loans.    SADLEIR obtained

the loans by making false representations about each entity’s

payroll expenses, their number of respective employees, the

operational status of the companies, and how the loan proceeds

would be spent.    In fact, SADLEIR intended to use at least some

of the funds for personal and other prohibited expenses, and

immediately upon receiving the funds a significant amount was

diverted to SADLEIR’s personal accounts and used for personal

expenses.


                                   3
                 IV. STATEMENT OF PROBABLE CAUSE
     7.   Based on witness interviews I have conducted, my

review of documents obtained from third parties, reports of

interviews conducted by other law enforcement officers,

conversations with other law enforcement officers, and publicly

filed documents, I know the following:

     A.   The Paycheck Protection Program
     8.   The Coronavirus Aid, Relief, and Economic Security

(“CARES”) Act is a federal law enacted in or around March 2020

and designed to provide emergency financial assistance to the

millions of Americans who are suffering the economic effects

caused by the COVID-19 pandemic.       One source of relief provided

by the CARES Act was the authorization of up to $349 billion in

forgivable loans to small businesses for job retention and

certain other expenses, through a program referred to as the

Paycheck Protection Program (“PPP”).      In or around April 2020,

Congress authorized over $300 billion in additional PPP funding.

     9.   In order to obtain a PPP loan, a qualifying business

must submit a PPP loan application, which is signed by an

authorized representative of the business.      The PPP loan

application requires the business (through its authorized

representative) to acknowledge the program rules and make

certain affirmative certifications in order to be eligible to

obtain the PPP loan.   One such certification requires the

applicant (through its authorized representative) to affirm that

“[t]he [PPP loan] funds will be used to retain workers and

maintain payroll or make mortgage payments, lease payments, and


                                   4
utility payments; I understand that if the funds are used for

unauthorized purposes, the federal government may pursue

criminal fraud charges.”   In the PPP loan application, the small

business (through its authorized representative) must state,

among other things, its: (a) average monthly payroll expenses;

and (b) number of employees.   These figures are used to

calculate the amount of money the small business is eligible to

receive under the PPP.   In addition, businesses applying for a

PPP loan must provide documentation showing their payroll

expenses.

     10.    A business’s PPP loan application is received and

processed, in the first instance, by a participating financial

institution, then transmitted, for further review, to the Small

Business Administration (“SBA”) to assess the applicant’s

eligibility.   If a PPP loan application is approved, the

participating financial institution funds the PPP loan using its

own monies.

     11.    PPP loan proceeds must be used by the business on

certain permissible expenses -- payroll costs, interest on

mortgages, rent, and utilities.   The PPP allows the interest and

principal on the PPP loan to be entirely forgiven if the

business spends the loan proceeds on these expense items within

a designated period of time (usually eight weeks of receiving

the proceeds) and uses at least 75% of the PPP loan proceeds on

payroll expenses.




                                  5
     B.    SADLEIR and the Aviron Entities
     12.   Based on my review of law enforcement databases and

public source documents, I know that SADLEIR is an experienced

executive in the film industry who lives in Beverly Hills.       In

2015, he founded Aviron Pictures, a Los Angeles-based film

production company that, according to its website, “specializes

in the acquisition, marketing, and wide release distribution of

talent and story-driven theatrical films in North America.”

     13.   From my review of publicly available filings with the

California Secretary of State (“CA SOS”), I know that SADLEIR is

affiliated with several entities with the name Aviron.     For

example, SADLEIR is listed with the CA SOS as the manager of

both Aviron Licensing and Aviron Releasing.

     14.   According to counsel for Aviron Pictures, SADLEIR was

formerly in control of Aviron Pictures but was terminated from

all managerial roles at Aviron Pictures in approximately

December 2019.   According to J.B., the Vice President of Finance

for Aviron Pictures, who also manages payroll, SADLEIR did not

retain any involvement in the day-to-day operations of the film

production business of Aviron Pictures after December 2019.

     15.   Law enforcement officers asked J.B. and counsel for

Aviron Pictures whether either was aware of any ongoing

operations carried out by Aviron Group, Aviron Licensing, and

Aviron Releasing.   Neither was aware of any active operations.

     16.   SADLEIR retains signing authority over various bank

accounts associated with certain of the Aviron entities.    JPMC

records show that SADLEIR maintains a number of bank accounts


                                 6
with JPMC, both personal accounts and business accounts related

to the Aviron entities.    For example:

           a.   SADLEIR is a signatory to a JPMC business

checking account in the name of Aviron Group ending in 3760 (the

“Aviron Group JPMC account”).    The only other signatory to this

account is J.B., who, according to publicly filed documents with

the CA SOS, is the Vice President of Finance for Aviron Group.

           b.   SADLEIR is a signatory to a JPMC business

checking account in the name of Aviron Licensing ending in 6567

(the “Aviron Licensing JPMC account”).    J.B. is the only other

signatory to this account.

           c.   SADLEIR is a signatory to a JPMC business

checking account in the name of Aviron Releasing ending in 2786

(the “Aviron Releasing JPMC account”).    J.B. is the only other

signatory to this account.

           d.   SADLEIR has a JPMC personal checking account with

his wife, Hanan Kadadu (“Kadadu”), ending in 8832 (the “8832

Personal JPMC account”).   SADLEIR and Kadadu are the only

signatories to this account.

     17.   Based on my training and experience and publicly

available information regarding JPMC, I know that JPMC is a

financial institution, as that term is defined in 18 U.S.C.

§ 20, that is insured by the Federal Deposit Insurance

Corporation and is based in New York, New York.




                                  7
     C.      SADLEIR Submits Three Materially False Applications to
             JPMC for PPP Loans on Behalf of the Aviron Entities
     18.     From loan documents provided by JPMC and the SBA, I

know that in or around April 2020, SADLEIR submitted three

applications for PPP loans to JPMC, each requesting funds for a

different Aviron entity, and each was received by the SBA:

             a.   First, SADLEIR applied for a loan in the name of

Aviron Licensing, claiming that Aviron Licensing had average

monthly payroll expenses of $224,418 and a total of 33

employees.    The application listed SADLEIR as the principal and

listed SADLEIR’s home address in Beverly Hills as the loan

mailing address. 1   As proof of Aviron Licensing’s payroll

expenses, SADLEIR provided an IRS Form W-3, purporting to show

wage and taxes for Aviron Pictures for tax year 2019.

             b.   Second, SADLEIR applied for a loan in the name of

Aviron Releasing, claiming that Aviron Releasing had average

monthly payroll expenses of $224,418 and a total of 33 employees

(the same numbers used in the Aviron Licensing application).

The application listed SADLEIR as the principal and listed
SADLEIR’s home address in Beverly Hills as the loan mailing

address.   As proof of Aviron Releasing’s payroll expenses,

SADLEIR provided an IRS Form W-3, purporting to show wage and

taxes for Aviron Pictures for tax year 2019.    This was the same

IRS Form W-3 that SADLEIR submitted in support of Aviron

Licensing’s application.

     1 I know that this is SADLEIR’s home address based on
documents provided to me by Granite Escrow showing that SADLEIR
and Kadadu purchased this home in 2017 in the name of their
trust, Temerity Trust Management, LLC.

                                   8
           c.   Third, SADLEIR applied for a loan in the name of

Aviron Group, claiming that Aviron Group had average monthly

payroll expenses of $236,250 and a total of 33 employees (the

same number of employees SADLEIR used in the Aviron Licensing

and Aviron Releasing applications).   The application listed

SADLEIR as the principal and listed SADLEIR’s home address in

Beverly Hills as the loan mailing address.   As proof of Aviron

Group’s payroll expenses, SADLEIR submitted what appears to be a

list of employees at Aviron Group and Aviron Pictures.     The

document was not dated.

     19.   I have reviewed additional certifications SADLEIR made

on and submitted with each loan application package (and which

were required by the SBA).   Among other things, SADLEIR

certified the following:

           a.   SADLEIR certified that each entity “was in

operation on February 15, 2020 and had employees for whom the

Applicant paid salaries and payroll taxes or paid independent

contractors.”

           b.   SADLEIR also again certified that “the funds will

be used to retain workers and maintain payroll or make mortgage

interest payments, lease payments, and utility payments.”

     20.   Based on witness interviews and a review of the

documentation SADLEIR submitted with the three loan

applications, there is probable cause to believe these

certifications were false.

           a.   SADLEIR submitted the same 2019 Aviron Pictures

W-3 as proof of payroll expense to support separate loan


                                 9
applications in two different entities’ names: Aviron Licensing

and Aviron Releasing.   For the third application, in Aviron

Group’s name, SADLEIR submitted a list of employees and their

purported salaries.   The list claimed that many of the employees

in question were employed by Aviron Pictures, the same entity

whose W-3 SADLEIR submitted in support of the other two

applications.

          b.    J.B. and counsel for Aviron Pictures informed law

enforcement that Aviron Pictures has never applied for PPP

loans.

          c.    Former employees of Aviron Pictures and J.B.

informed law enforcement that at least 50 percent of Aviron

Pictures employees were laid off in or about January 2020 and

all remaining employees but just a few have been laid off since

due to a forced restructuring.   Former employees of Aviron

Pictures and J.B informed law enforcement that, by February 15,

2020, Aviron Pictures had far fewer than 33 employees.

          d.    The laid-off Aviron Pictures employees include

G.F., I.L., and C.H. The names of all three employees appear on

the employee list SADLEIR submitted in support of his payroll

expense claim on the Aviron Group loan application.   However, in

or around May 2020, G.F., I.L, and C.H. each separately

confirmed to law enforcement that they were not employees of

Aviron Group, Aviron Licensing, or Aviron Releasing as of

February 15, 2020, and that they have not been asked to return

to Aviron Pictures as employees or been told that their




                                 10
employment may be restored.    I.L. and C.H. are now employed

elsewhere.

     D.      JPMC Initially Funds the Loans Based on the
             Information Provided by Sadleir
     21.     Based on the information provided by SADLEIR, JPMC

approved the loans that SADLEIR applied for in the names of

Aviron Group, Aviron Releasing, and Aviron Licensing.

     22.     On or about May 1, 2020, JPMC funded the PPP loans,

wiring the approved funds to the respective Aviron JPMC

accounts, for a total of approximately $1,712,715:

             a.   JPMC wired approximately $561,045 into the Aviron

Licensing JPMC account.    The balance in the Aviron Licensing

JPMC account the day before this deposit (April 30, 2020) was

approximately $330.52, meaning that virtually all funds in the

account after the deposit were from the PPP loan.

             b.   JPMC wired approximately $590,625 into the Aviron

Group JPMC account.    The balance in the Aviron Group JPMC

account the day before this deposit (April 30, 2020) was

approximately $27, meaning that virtually all funds in the

account after the deposit were from the PPP loan.

             c.   JPMC wired approximately $561,045 into the Aviron

Releasing JPMC account.    The balance in the Aviron Group JPMC

account the day before this deposit (April 30, 2020) was

approximately $17.35, meaning that virtually all funds in the

account after the deposit were from the PPP loan.

     23.     J.B. told law enforcement that she recalled seeing the

May 1, 2020 deposit of PPP loan funds into the Aviron Releasing



                                  11
JPMC account, which she regularly checks as part of her duties

at Aviron Pictures.   She reported that, the same day, she called

SADLEIR about the deposit.   According to J.B., on the call,

SADLEIR confirmed that he was aware of the deposit.   J.B. also

told law enforcement that about one month before the deposit,

SADLEIR called her and asked for Aviron Pictures’ payroll

information.   J.B. told law enforcement that she did not provide

the payroll information to SADLEIR because she did not have it.

     E.    SADLEIR Uses the PPP Loan Funds for Personal Expenses
     24.   After these funds were deposited into the Aviron

Group, Aviron Licensing, and Aviron Releasing JPMC accounts,

records and information provided by JPMC show that SADLEIR did

not use these funds for the business expenses allowed under the

PPP but rather used a substantial portion of the funds to pay

his and his wife’s personal expenses.

     25.   On or about May 1, 2020, the day the loan funds were

deposited in the three JPMC accounts in each of the applicant-

entities’ names, all of the loan funds -- more than

approximately $1.7 million -- were consolidated into the Aviron

Group JPMC account.   As discussed above, supra ¶ 22.b, because
the balance in this account the day before this transfer was

approximately $27, the funds in the Aviron Group JPMC account

were almost exclusively composed of the PPP loan funds for the

three Aviron entities.

     26.   On or about the next day, May 2, 2020, $966,000 was

transferred from the Aviron Group JPMC account into the 8832

Personal JPMC account.   Prior to this transfer, the 8832


                                12
Personal JPMC account had approximately $349.05 in funds,

meaning that virtually all funds in the account after the

deposit were from the PPP loans that had been funneled into the

Aviron Group JPMC account.

     27.   Between approximately May 2, 2020, and May 5, 2020, a

significant portion of the funds in the 8832 Personal JPMC

account, which was composed almost entirely of the PPP loan

funds transferred from the Aviron Group JPMC account, was used

to pay for various personal and other expenses via interstate

wires, contrary to the representations in the loan applications

that the funds would be used for the specified business expenses

allowed under the PPP.   The expenditures included the following:

           a.   On or about May 4, 2020, approximately $67,295.25

was paid to American Express.   Records from American Express

show that, on or about May 2, 2020, there was a payment of

approximately $26,180.31 made on an American Express credit card

in SADLEIR’s name and a payment of approximately $40,114.94 made

on an American Express credit card in Kadadu’s name.    Both of

these credit cards appear to be personal credit cards.   For

example, the statements of the credit card in SADLEIR’s name

include charges at the Apple.com record store, the movie theater

Arclight Hollywood, and the wine and liquor store Wally’s in

Beverly Hills, among other expenses.   Similarly, the statements

of the credit card in Kadadu’s name include charges at clothing

stores and various PayPal charges, among other expenses.

           b.   On or about May 4, 2020, a payment of

approximately $20,510.10 was sent to Bank of America VISA.     Bank


                                13
of America records show that this payment was for a Bank of

America credit card account in SADLEIR’s name.    The statements

for this credit card in the months leading up to this payment

show what appear to be personal expenses, such as purchases at

the Disney Store, CVS Pharmacy, and the Los Angeles-based

restaurant Spago.

             c.   On or about May 4, 2020, SADLEIR sent two wire

transfers for a total of approximately $69,117.10 to the law

firm of Antoni Albus LLP for “SADLEIR INVOICES” and “SADLEIR

RETAINER.”

             d.   On or about May 5, 2020, approximately $40,000

was paid to U.S. Bank, N.A.    U.S. Bank records show that this

payment was for a car loan in SADLEIR’s name.    This payment was

reversed on the basis that JPMC had implemented a freeze on the

8832 Personal JPMC account by this date.

             e.   SADLEIR incurred other non-payroll expenses

between approximately May 1, 2020 and May 5, 2020, including at

restaurants such as Eataly.

     28.     J.B. informed law enforcement that Sadleir has never

provided Aviron Pictures with PPP loan funds for its payroll

expenses.    As described above, the government has interviewed

three former Aviron Pictures employees, G.F., I.L, and C.H.,

laid off before February 15, 2020, and whom SADLEIR listed as

employees in support of the Aviron Group loan application.      Each

told law enforcement that they have never been asked to return

to Aviron Pictures or any other Aviron entity.




                                  14
     F.    SADLEIR Emails JPMC After JPMC Freezes His Accounts
           and Acknowledges the Purpose of the PPP Loans
     29.   Based on documents provided by JPMC, I know that JPMC

placed a hold on the Aviron Group, Aviron Licensing, and Aviron

Releasing JPMC accounts on or about May 5, 2020, and a hold on

the 8832 Personal JPMC account on or about May 7, 2020, to

prevent SADLEIR from dissipating the funds from these accounts.

The current balances of these accounts are as follows:

           a.    The current balance of the Aviron Group JPMC

account is approximately $662,038.14.

           b.    The current balance of the Aviron Licensing JPMC

account is $0.

           c.    The current balance of the Aviron Releasing JPMC

account is approximately $17.

           d.    The current balance of the 8832 Personal JPMC

account is approximately $497,988.

     30.   On or about May 7, 2020, SADLEIR emailed D.M.E., an

employee of JPMC, in reference to a call SADLEIR had with D.M.E.

the day before in which D.M.E. informed SADLEIR that “Aviron’s

corporate bank accounts, as well as my wife and my personal bank

accounts, have been put on hold by Chase.”   SADLEIR then wrote:

     The Aviron PPP loans were reviewed by Chase, submitted
     to and approved by the SBA, and funded last Friday.
     As required to satisfy the SBA loan forgiveness
     provisions, we were prepared and ready to hire full-
     time employees this week to engage in film acquisition
     and production (Aviron Licensing), in film marketing
     and administration (Aviron Group), and in film
     distribution (Aviron Releasing), all employment
     restored before the required June 30, 2020 deadline.
     (emphasis added). Chase’s actions have impaired our
     ability to satisfy these requirements and has
     potentially damaged our business viability.


                                 15
     I would appreciate the benefit of being able to
     explain how we intended to also finance, through the
     pledge of personal assets, including our home,
     Aviron’s revived operations so that not only would
     employment be restored, but long-term viability of the
     companies be sustained beyond the June 30, 2020
     period.

     We, along with our attorney—copied here, would
     appreciate a reply today, along with the contact
     information of the Chase officer reviewing the PPP
     loans, so that we can immediately remedy the harm
     caused Chase’s misinformed and inappropriate actions.

                              * * * *

     31.   Based on the above information, there is probable

cause to believe that SADLEIR made material false statements to

JPMC and the SBA in the PPP loan applications submitted on

behalf of three Aviron entities and that he improperly used the

PPP funds he acquired through these loans from JPMC for personal

expenses rather than for the business expenses for which the

loan applications certified they would be used.

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                          V. CONCLUSION
     32.   For all the reasons described above, there is probable

cause to believe that SADLEIR violated 18 U.S.C. § 1343 (Wire

Fraud), 18 U.S.C. § 1344(2) (Bank Fraud), 18 U.S.C. § 1014

(False Statements to a Financial Institution), 15 U.S.C.

§ 645(a) (False Statements to the Small Business

Administration), and 18 U.S.C. § 1957.


                                                  V
                                      Nathan Cherney, Special Agent
                                      Federal Bureau of
                                      Investigation

Attested to by the applicant in
accordance with the requirements
of Fed. R. Crim. P. 4.1 by
telephone on this 21st day of May,
2020.



HONORABLE PEDRO V. CASTILLO
UNITED STATES MAGISTRATE JUDGE




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