Kidnapped Entrepreneur Ran Allegedly Bogus Firms

Christopher Rawlings, the Woodland Hills entrepreneur who was killed last week during a botched kidnapping, was running several allegedly bogus businesses suspected of bilking more than $19 million from people, many of whom thought they were investing in records and movies, a federal prosecutor said Tuesday.

Rawlings, 30, was under investigation by FBI agents for money laundering, mail fraud and securities fraud at the time of his death and detectives are investigating whether his business practices were related to his death, authorities have said.

Federal court documents made public Tuesday said that Rawlings and two other men operated UST & T, Skyline Entertainment, International Cosmetics and WRI Holdings Inc., all telemarketing firms based in or around the San Fernando Valley.

WRI Holdings promoted investment in unreleased recordings by the Beatles and Marvin Gaye, UST & T promoted investments in a public utilities company, International Cosmetics in cosmetics and Skyline Entertainment in motion picture production, according to a court affidavit.

The companies, the affidavit said, sold unregistered stock and took commissions of up to 80% without disclosing to investors that they were doing so.

The documents were made public in connection with the arrest over the weekend of John Charles Watson, who Assistant U.S. Atty. Brent Whittlesey described as “a manager” of WRI Holdings, though he is listed in corporate documents as the president of the company.

Watson, who authorities described as an associate of Rawlings, was charged with money laundering, mail fraud and securities fraud.

In a brief appearance in court Tuesday, Watson--dressed in black and with short, cropped bleached blond hair--displayed little of the flash that characterized Rawlings, who drove a Bentley, wore a Rolex, and leased a spacious home in a well-to-do Woodland Hills neighborhood. Watson told federal Magistrate Rosalyn M. Chapman that his funds were limited to “a couple hundred dollars” in a savings account and that he could not afford to pay for an attorney.

Outside the courtroom, Whittlesey described Watson as “an economic danger to the community” and said he had requested that the defendant be held without bond. Chapman is expected to rule on that request Thursday.

According to court documents, Scott Courtney and Peter Aro were the other principals in the companies. Whittlesey said Courtney is awaiting trial in an earlier fraud case and that an arrest warrant has been issued for Aro.

Meanwhile, Los Angeles Police Department investigators were tight-lipped about any link between Rawlings’ killing and the federal fraud probe.

“They’re working their case. We’re working ours. We’re comparing notes from time to time,” said Sgt. Rick Swanston of the LAPD’s West Valley homicide unit. Whittlesey declined to comment on what link, if any, the federal case may have to Rawlings’ death.

Rawlings was beaten in his garage by two men who stuffed him in the trunk of his Bentley and fled in it just as police--summoned by Rawlings’ wife--drove up to investigate. In the chase that followed, the Bentley crashed into another car and hit a utility pole, ejecting Rawlings, who later died of his injuries. The kidnappers escaped.

FBI agents armed with a search warrant raided WRI Holdings corporate office at 20501 Ventura Blvd. in December. Agents seized telephone sales scripts or “pitches,” blank certificates for preferred stock and blank subscription agreements for investors.

According to documents subpoenaed by FBI agents, WRI Holdings entered into an agreement with Gary Walters to raise $1 million for his record company, Walters Records Inc. According to the affidavit, WRI holding made an offering of $5 million worth of unregistered stock in the company.

But according to the affidavit, only about $1 million of the money that was raised would be contributed to the business of making records, with the remaining 80% of the proceeds going toward sales commissions to WRI holdings. The affidavit said investors were misled by written scripts which projected a return of 450%.

Seized documents show that 90 investors contributed more than $1 million between June and December of last year alone, according to the affidavit.

Watson, who was held without bond pending the hearing on Thursday, is accused of helping Rawlings, Courtney and Aro launder the profits, according to the FBI affidavit based on interviews with former employees of the companies and victims of the alleged scams.

Watson, who was in charge of day-to-day operations at WRI Holdings, would issue company checks to various individuals and have those individuals cash the checks and turn the proceeds over to him, the affidavit says. He in turn would turn over the cash--allegedly hundreds of thousands of dollars--to Rawlings, Courtney and Aro, leaving no trace of the payments, the affidavit alleges.

Watson was paid a commission of 7% to 10% of the cash, prosecutors contend. One former employee told agents that Rawlings warned salespeople not to let potential investors push them around and “to get straight to the money.”

Former employees and purported victims said the other companies run by Rawlings, Courtney and Aro ran similar operations, according to the affidavit.

Utah securities officials in April ordered Rawlings, his brother Douglas and other sales representatives from Skyline Entertainment to stop calling consumers in that state. The order followed an undercover investigation in which a Utah securities official posed as a potential investor and recorded Rawlings and other telemarketers as they allegedly made misrepresentations about the company.

According to the order, Rawlings identified himself as a “co-executive producer” for the firm and said Skyline had lined up Keanu Reeves to star in a film titled “Great Jones Street.” Utah authorities said there was no such agreement.

Times staff writer Jeff Leeds contributed to this story.