Montgomery County Man Indicted For Deceptive Telemarketing Fraud Scheme That Allegedly Defrauded Clients Of More Than $6.265 Million
Allegedly Engaged in Deceptive Practices To Offer Debt Management Services
Greenbelt, Maryland - A federal grand jury today returned a superseding indictment against Richard A. Brennan, age 42, of Clarksburg, Maryland, which added charges of conspiracy, mail, wire and telemarketing fraud, and filing false tax returns, to the several gun charges contained in the original indictment. The original indictment was returned under seal on March 5, 2012, and was unsealed on March 12, 2014, upon Brennan’s arrest.
The superseding indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Acting Special Agent in Charge William P. McMullan of the Bureau of Alcohol, Tobacco, Firearms and Explosives - Baltimore Field Division; Postal Inspector in Charge Gary R. Barksdale of the U.S. Postal Inspection Service - Washington Division; Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office; and Maryland Attorney General Douglas F. Gansler.
According to the superseding indictment, Brennan was an attorney who operated law offices and other businesses in Frederick, Maryland and elsewhere, that offered debt management and settlement services. Brennan’s firms recruited customers from around the United States through telemarketers.
In 2007, the Maryland Attorney General’s Office began an investigation into allegations that Brennan’s firms engaged in unfair and deceptive trade practices, including: that they sold debt management services to customers and administered debt management plans from their offices in Frederick, although they could not lawfully do so in Maryland; that they held themselves out as non-profit credit counseling agencies, when they were for-profit entities; and that the employees of Brennan’s firms almost always recommended that the debt clients enter into debt settlement plans that were profitable for Brennan’s firms, but not necessarily an appropriate resolution of the clients’ financial problems. In addition, Brennan’s firms represented to clients that the funds collected from debt clients would be placed in a trust account and used to administer the clients’ debt management plans, with payments made timely to the clients’ creditors. Instead, the funds were used to pay Brennan’s business operation and personal expenses and the firms did not make timely payments to clients’ creditors because of lack of funding in the trust account.
On October 18, 2007, Brennan signed an agreement with the Maryland Attorney General’s Office acknowledging that he was responsible for creating and implementing the alleged unfair or deceptive practices of his companies and agreed to “cease and desist” such practices and abide by the requirements set out in the agreement.
The eight count superseding indictment alleges that between October 19, 2007 and April 2010, Brennan conspired with others to continue to make false representations to new and existing debt clients to convince them to engage or retain Brennan’s firms to negotiate settlement of their debts with creditor companies. Brennan and his co-conspirators used telemarketing to execute the scheme and, in doing so, victimized at least 10 people over the age of 55. Brennan and his coconspirators would mail or email contracts and power of attorney forms to clients, which authorized Brennan’s companies to make periodic debits from their accounts, but which failed to make disclosures required under the agreement with the Attorney General’s office, and which omitted any mention of his restrictions from providing such services. Brennan allegedly deposited all funds debited from debt clients’ accounts into one account which he then used to pay the operating expenses of his firms, as well as to fund lavish personal expenses, including several luxury vehicles, international travel, exotic firearms and furnishings for his residence.
The superseding indictment alleges that to evade the restrictions in the agreement, Brennan renamed his firm multiple times and moved its physical operating location on several occasions. In addition, Brennan and co-conspirators allegedly formed new entities in order to open bank accounts using entity names besides those of Brennan’s firms in order to disguise ownership and avoid scrutiny from regulatory authorities.
According to the superseding indictment, Brennan used the deceptive practices to defraud debt clients over more than $6.265 million during the course of the conspiracy.
The superseding indictment also charges that Brennan filed false tax returns in 2006 and 2007. For example, the indictment alleges that in 2007, Brennan reported an adjusted gross income of negative $576,273.10 when he had unreported business receipts that year of at least $9,229,802.
Finally, Brennan faces four gun charges, including: that he illegally possessed 11 machineguns; transported a handgun from Maryland to a person in Virginia who was not a licensed importer; manufactured firearms without having registered as required by law; and possessed an unregistered sawed off shotgun.
Brennan faces a maximum sentence of 20 years in prison for the conspiracy and mail fraud counts; a maximum of 10 years in prison, consecutive to any other sentence, for using telemarketing to victimize ten or more people over the age of 55 in the course of committing the fraud conspiracy; a maximum of three years in prison for each of the two tax charges; and a maximum of 10 years in prison for each of the four firearms charges. An initial appearance and arraignment on the superseding indictment is scheduled for April 7, 2014, at 1:30 p.m. in U.S. District Court in Greenbelt. Brennan is released under the supervision of U.S. Pretrial Services.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
United States Attorney Rod J. Rosenstein praised ATF, U.S. Postal Inspection Service, IRS-Criminal Investigation, and the Maryland Attorney General’s Office for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Adam K. Ake, who is prosecuting the case.