Officials Target Civil Business Opportunity Cases

   (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:  

www.justice.gov/opa/pr/2012/October/12-civ-1217.html

    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.

     Source: Financial Fraud Enforcement Task Force

Debate Will Focus on Corporate Reponsibility

   NEW YORK- (BUSINESS WIRE) - 8/23/2011 - Is sustainability sustainable for the bottom line? If corporate responsibility programs erode or reduce returns, why do companies pursue them? On the other hand, if they are profitable, why do executives and CFOs steer away from these valuable strategies? Four leaders in investment management and academic analysis will debate these questions in an Oxford-style debate on whether shareholder value is eroded or enhanced when companies integrate sustainability strategies and pursue corporate responsibility initiatives. In this unique format, two teams will debate, and seek to sway the audience with their compelling positions, arguments and rebuttals.
    In partnership with the New York Stock Exchange (NYSE), Corporate Responsibility magazine’s COMMIT!Forum will assemble an unprecedented summit of professionals working to improve corporate responsibility and sustainability. The event will be held Sept. 26-27 at the Javits Center in Manhattan, a global investment hub.
    The team arguing that “shareholder value is eroded by sustainability and corporate responsibility” is Gerry Sullivan, Portfolio Manager of the VICE Fund (ticker: VICEX – www.usamutuals.com) and Dr. Aneel Karnani, PhD, from the University of Michigan and author of "The Case Against Corporate Social Responsibility,” published in The Wall Street Journal.
    “In general, the capital markets reward companies that exceed expectations and shareholders benefit from that success. I have only seen anecdotal evidence that sustainability enhances shareholder value. Of 11 selected ‘Green Funds’ only 2 have one-year performance better than the S&P 500. It will be difficult to show that sustainability has sufficient evidence compared to the everyday markets that are hyper-efficient and serve the best interest of investors,” said Sullivan, developer of the NASDAQ OMX Industry Leaders Index.
   A former Salomon Bros. corporate finance analyst and O'Connor & Associates options trader, Sullivan holds an MBA from the University of Chicago and an undergraduate degree from Columbia University.
    “As society faces many large challenges such as climate change, environmental degradation, pervasive poverty, and disease epidemics, a critical issue is determining the appropriate roles for business and government in addressing these problems. This debate will explore the arguments about the role of business in society,” said Karnani, associate professor of strategy at the University of Michigan; and the author of Fighting Poverty Together. Karnani holds a doctorate from Harvard Business School as well as an MBA from the Indian Institute of Management and a B.A. from the Indian Institute of Technology.
    The team advocating that “shareholder value is enhanced by sustainability and corporate responsibility” includes R. Paul Herman, Chief Executive and Chief Investment Officer of HIP Investor Inc. (www.HIPinvestor.com), and Dr. Vinay Nair, chief investment officer of Ada Investments (www.adainvestments.com) and Associate Professor at the Columbia Business School.
    “We will show that investors have the potential to enhance their upside and limit their downside when investing for positive change,” said Nair, CEO and CIO of the New York based Ada Investment Management LP and adjunct associate professor at the Columbia Business School. The co-author of Investing for Change and a Senior Fellow at The Wharton School, Nair holds a doctorate from NYU’s Stern School and a B.Tech from the Indian Institute of Technology in Madras.
    “This spirited, but civil, debate will put front-and-center the real value of business to society and the potential for more profitable and lower-risk investor portfolios from the implementation of sustainability,” said Herman. The author of The HIP Investor: Make Bigger Profits by Building a Better World and a lecturer at The Presidio Graduate School (MBA) and Thammasat Business School (Thailand), he holds a B.Sci in Economics from Wharton.
    The debate will take place on September 26th as part of the COMMIT!Forum (www.commitforum.com) in New York City and is open to the public. The debaters will present their cases for and against the resolution, “RESOLVED that when companies expend resources on corporate responsibility and sustainability they destroy economic value.”
    About CR Magazine’s COMMIT!Forum:
    The COMMIT!Forum is named for its focus on innovators, leaders and companies making real commitments to improving society through business and investing. Staged by Corporate Responsibility magazine, publisher of the renowned “100 Best Corporate Citizens List,” in partnership with NYSE Euronext, this Forum provides a venue for debate, inspiration, and engagement. The Forum takes place September 26-27, 2011 at the Javits Center in New York City. Register today at http://www.commitforum.com.
    Support for the COMMIT!Forum has been received from Platinum Sponsor HP as well as ABBOTT, AHA!, The Clorox Company, ConAgra Foods, Future 500, Green Mountain Coffee Roasters, MolsonCoors, REC Solar, SAP, and State Street Corporation. Program partners include NYSE Euronext as well as American Society for Quality, Chicago Clean Energy Alliance, Corporate Voices for Working Families, Environmental Defense Fund, Global Environmental Management Initiative, Global Reporting Initiative, The Humane Society, National Democratic Institute, and U.S. Green Building Council’s Center for Green Schools.