(USDOJ) - 11/15/2012 - The Justice Department announced on Nov. 15 the filing of several criminal
and civil business opportunity fraud cases, initiated as part of a joint
sweep with the Federal Trade Commission and several states. Business opportunity fraud schemes take advantage of people
looking for work by luring them in with false promises of big profits
and leaving them worse off than they started. The cases include criminal charges against 14 individuals and civil cases against three businesses. The criminal and civil cases announced today are part of a series of investigations named “Operation Lost Opportunity.”
The Justice Department’s cases are part of the efforts of the
President’s Financial Fraud Enforcement Task Force and are being handled
by the Civil Division’s Consumer Protection Branch, in coordination
with the U.S. Attorney’s Offices for the Central District of California,
the Southern District of California, the Southern District of Florida,
the District of Oregon, the Western District of North Carolina, the
Western District of Pennsylvania and the Southern District of Texas.
Seven different business opportunity schemes are the targets of the Justice Department’s actions.
According to the charging documents, the criminal schemes
involved placement of advertisements online and in newspapers that
touted the profits that could be earned by purchasing a business
opportunity to own and operate vending machines or display racks.
The United States alleges that the schemes operated as follows:
Salespeople explained that consumers who purchased the opportunity would earn substantial income from the equipment.
According to the sales pitch, the vending machines or display
racks would be placed in store locations in the purchaser’s hometown and
would offer candy, refreshments or jewelry, depending on which
opportunity was being offered.
According to the sales pitch, the purchaser would then receive
profits based upon sales from the vending machines or display racks.
“In an attempt to lure wary consumers, fraudsters have crafted business
opportunity schemes that promise what appear to be more realistic
returns backed up by false success stories,” said Tony West, Acting
Associate Attorney General.
“But we are more determined than ever to bring to justice those
who are defrauding Americans out of their time, money, and faith in our
economic system – this law enforcement sweep represents a coordinated
effort to combat business opportunity fraud on multiple fronts.”
Enticed by the promise of a “turnkey” business, hundreds of consumers
lost millions of dollars purchasing the fraudulent business
opportunities targeted in this sweep.
The four businesses involved in the criminal component of the sweep include the following:
·
Mark Five Inc., a Houston company that promoted a jewelry business opportunity.
O n November 12, 2012 and November 14,
2012, the Department of Justice filed criminal informations charging
Billie Joyce Sanders and Michael Cupina in connection with their conduct
at Mark Five.
Each defendant was charged with conspiracy, which carries a maximum prison term of five years.
According to the charging documents, Mark Five salespeople
referred potential business opportunity buyers to Sanders and Cupina,
who falsely claimed to own and operate successful jewelry display racks.
One other individual was previously charged in connection with Mark Five.
In February 2012, a grand jury in Houston indicted Mark Five
principal Robert King on charges of conspiracy to commit mail and wire
fraud, and substantive mail and wire fraud.
King’s trial is scheduled for February 2013.
·
The Lauren Jewelry Collection, an Atascocita, Texas, company that promoted a jewelry business opportunity.
On November 13, 2012, the Department of Justice filed a
criminal information in the Southern District of Texas charging Regina
Rush in connection with the Lauren Jewelry Collection.
Rush was charged with one count of conspiracy, which carries a maximum prison term of five years.
According to the charging document, Rush served as the
proprietor of the firm and made false representations about the success
of distributors and the authenticity of references.
The charges state that Rush encouraged potential purchasers to
call references who made false statements about their experiences with
the Lauren Jewelry Collection.
·
American Vending Systems (AVS), a Colorado company that promoted energy candy business opportunities.
On November 14, 2012, the Department of Justice filed a
criminal information in the Western District of Pennsylvania charging
Pearl Pastilock in connection with her conduct at AVS.
Pastilock was charged with one count of conspiracy, which carries a maximum prison term of five years.
According to the charging document, AVS salespeople referred
potential buyers to Pastilock, who falsely claimed to own and operate
successful energy candy vending machines.
Five other individuals were previously charged for their conduct at AVS and related firms.
Richard Black, Gary Luckner, Lou Gubitosa, Trey Friedmann and
Mel Hendricks were all charged and pleaded guilty to conspiracy charges
for this conduct.
·
Multivend LLC, dba Vendstar, a New York company that promoted candy vending machine business opportunities.
On Oct. 10, 2012, a grand jury in the Southern District of
Florida indicted 10 individuals for misrepresenting a number of facts in
connection with the sale of Vendstar business opportunities.
More information about these charges can be found at:
The charging documents referred to above contain only accusations against the defendants and are not evidence of guilt.
The defendants should be presumed innocent unless and until proven guilty.
The civil cases the Justice Department filed allege that three
businesses violated the Federal Trade Commission’s Business Opportunity
Rule.
The businesses include:
·
The Zaken Corp., also doing business as The Zaken Corporation, QuickSell and QuikSell, (Zaken).
Zaken is alleged to be a Thousand Oaks, Calif., corporation that offers a work-at-home business opportunity.
According to the complaint against Zaken and its corporate
officer Tiran Zaken, the defendants offer consumers a business plan to
locate and contact businesses with excess inventory to sell.
The complaint alleges that Zaken represents that once purchasers
of the opportunity identify businesses interested in selling excess
inventory, Zaken will find a buyer for the inventory and give the
purchaser a “finder’s fee” equal to half of the total sales price.
Among other allegations, the complaint filed by the Justice
Department alleges that Zaken makes unsubstantiated claims, including
that purchasers “can make thousands of dollars monthly for working just 2
to 4 hours a week from home.”
This case was filed in the U.S. District Court for the Central District of California.
·
Christopher Andrew Sterling, doing business as Sterling Visa, Rebate Data Processors and Credit Card Workers.
Sterling is alleged to have run several work-at-home schemes from Southern California. According to the complaint, Sterling represents that purchasers
of his opportunity will make a substantial income by “processing”
applications for product rebates or credit card applications. Among other allegations, the government’s civil complaint
alleges that Sterling failed to make required disclosures under the
FTC’s Business Opportunity Rule and made unsubstantiated earnings
claims.
This case was filed in the U.S. District Court for the Southern District of California.
·
Smart Tools LLC, a Tualatin, Ore., company.
The complaint against Smart Tools and its corporate officer,
Kirstin Hegg, alleges that the defendants have marketed a work-at-home
business opportunity that teaches purchasers to locate people who are
eligible for a partial refund of their FHA mortgage loan insurance
premium.
According to the complaint, the defendants tell potential
buyers that they can charge a fee for information on how to obtain the
refund.
The defendants allegedly sent postcards to potential buyers
stating that purchasers can earn up to $38,943 per year without stating
what, if any, substantiation supports the earnings claim.
Such a claim violates the FTC’s Business Opportunity Rule.
This case was filed in the U.S. District Court for the District of Oregon.
