Jerry Seppala promised to bring Hollywood to the Iron Range, opening a movie studio in an old hockey rink in the basement of Chisholm's City Hall.
Now Seppala and two California men stand accused of bilking investors out of $12 million meant to finance films.
Seppala, 47, a businessman and political fundraiser, was arrested Tuesday in Wayzata and made an appearance before U.S. Magistrate Judge Becky Thorson in St. Paul. He was released on a $25,000 bond.
Seppala; James D. Williams, 54, of Calabasas, Calif., and Steven Brown, 46, of Santa Monica were all charged in federal court with wire fraud and wire fraud conspiracy. Williams and Brown were also charged with laundering the proceeds.
In a news release announcing the unsealed indictment, U.S. Attorney Preet Bharara in New York City said the men used "lies about making feature-length films and documentaries" to lure investors. The indictment did not name the films.
Neither Seppala, nor assistant federal public defender Doug Olson who represented him, returned calls for comment.
It's not known whether any of the allegedly defrauded investors are in Minnesota, and Seppala's Ironbound Studios Minnesota isn't mentioned in the indictment.
Ironbound's website describes Seppala as a political fundraiser and businessman, and said he founded the studio with film producer Jeffrey D. Erb. It describes the space as "a base infrastructure for the burgeoning film industry taking place in Minnesota's Iron Range."
But Chisholm's city administrator John Tourville said he's seen little activity in the space, and that Seppala is behind on his rent, which is $500 a month under a lease signed last fall.
"There is no studio," Tourville said. "There is basically some wide open space the city was trying to repurpose somehow."
News of Seppala's legal problems surprised him, he said.
"It's not good for the Minnesota film industry, it's not good for the Iron Range and it's not good for the family members who live here," Tourville said. "I hope it's not true."
Seppala filed for Chapter 7 bankruptcy in 2014. Court records show he listed assets worth $669,793 and liabilities of $933,366. The same year, an investor filed a lawsuit against Seppala, Williams and Brown in Los Angeles federal court.
Louisiana businessman Bill A. Busbice Jr., who stars in the A&E reality show "Country Buck$," claimed that he and two companies lost $10.9 million in a web of "audacious lies and material misrepresentations."
The lawsuit said investors' money was supposed to finance four feature-length films: "Made in America," "The Letters," "Left Behind" and "Angels Sing," starring such notables as Nicolas Cage, Willie Nelson and Harry Connick Jr.
According to the complaint, money was instead funneled to personal expenses including a $3.5 million house for Williams, private school tuition for his children and yacht club membership fees.
It was Seppala who first approached Busbice in 2013, and introduced him to Williams, who was held out as a prominent Hollywood executive, Busbice said in a 2014 court document.
The lawsuit settled, but the criminal complaint echoes Busbice's allegations.
Prosecutors in the criminal case said that between 2012 and this month, Williams, Brown and Seppala ran an "advance fee" scheme, soliciting money from investors to help market and produce film projects. The indictment says the men falsified financial records to show nonexistent contributions that they used to entice new investors.
Investors' money was actually used to fund other projects, pay back other investors and cover the personal expenses of Williams, Brown and Seppala, according to the indictment.
The indictment does not detail any personal expenses for Seppala.
Seppala is chief executive and co-founder of Ironbound Studios Minnesota. Tourville, the city administrator, said the city did not give Seppala or his studio any financial assistance.
Last fall Seppala said the cameras were ready to roll on the studio's first film "The Legend of Grimrock."
He's also been involved in various Republican fundraising efforts and worked as fundraising consultant. His LinkedIn profile states he was the finance director in 1995-1996 for People for Boschwitz '96.
Eric Cantor, the one-time U.S. House majority leader, paid Seppala's company, GR Seppala & Associates, at least $366,000 between 2006 and 2010, federal campaign finance records show.
Sarah Janecek, a GOP operative in Minneapolis, said she's known Seppala for decades.
"He's always been a convivial person who I've seen at many political events over the years," Janecek said. "He never seemed like the kind of person who had the cunning to pull off a massive fraud."
The Associated Press contributed to this report.