It's not a hoax, parts of it exist. Maybe the whole movie wasn't filmed, but there are scenes from it (incomplete ones) on YouTube. Here's the links:
http://www.youtube.com/watch?v=NLZ327Hsyu0
http://www.youtube.com/watch?v=2jA699zaY0s
http://www.youtube.com/watch?v=afTW0E_iNQg
Granted, there's no footage of Clooney, Dern, or Sheen, but Deborah Foreman is in one of the scenes, as is Louise Fletcher. Clooney has, in a recent roundtable interview, acknowledged the movie's existence. Here's the link for that interview:
http://www.newsweek.com/id/96123
Here's a piece of the conversation:
Clooney: You couldn't get a job without getting into the Screen Actors Guild, so everybody I knew, including myself, would make up these credits just to get in. They didn't have the Internet at the time, so you could get away with anything. I remember lying to a casting director, Barbara Claman, about this movie called "Cat People." She was, like, "You were in that, were you?" I was, like, yep. And she goes, "Because I cast that." I finally just said, "I can't get in SAG. Help me out." She helped me get a job on a film then called "The Predator." We shot it in Hungary. It was Charlie Sheen and Laura Dern and I, all three of our first jobs. As big as they became later, the movie never came out, that's how bad a film it was. But I got my SAG card.
Page: I would like to see that.
Clooney: I would, too. The guy—and I'm not kidding—the guy who financed it went to jail.
McAvoy: Because he made the film.
Clooney: Yes, as a matter of fact. If you'd seen me in it, you would understand why.
He mentions that the movie was shot, but that it was never released due to the director having been arrested. (Or, at least, that's what I gather from the statement.)
My opinion? The movie didn't get finished, that's probably why it was never released. I've read bits about how the effects weren't finished, I've also read that the movie was unwatchable, but, in my opinion, it sounds as if the movie was never completed and may never be officially released. There is supposedly a workprint of it floating around, but other than the few YouTube scenes, it's pretty much impossible to come by.
Incidentally, here's a link to a site that claims to have seen the workprint of the movie (minus any of the grizzly effects):
http://www.critcononline.com/total%20weirdness.htm#Grizzly%202
It's midway down the page under the listing GRIZZLY 2: THE PREDATOR.
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