San Francisco Brothers Plead Guilty To Charges Stemming From Fraudulent Billing Scheme
SAN FRANCISCO – Roy Lin and John Lin pleaded guilty yesterday afternoon to charges stemming from a fraudulent billing scheme, United States Attorney Melinda Haag announced.
According to their plea agreements, between April 2007 and June 2009, Roy Lin and John Lin ran INC21.com Corporation (INC21), including its affiliates GlobalYP, JumPage Solutions and GoFaxer. These companies were based in San Francisco and provided Internet-based services. These companies charged consumers through the use of what is referred to as Local Exchange Carrier (LEC, or telephone company) billing.
LEC billing enables third-party vendors such as INC21 to charge customers for products and services by placing charges on the customers’ local telephone bills. In order to obtain approval for this type of billing, the third-party vendors provided information to the telephone companies through various billing aggregation companies.
The billing aggregators and the carriers approved service providers, such as the INC21companies, to place charges on customer bills based on information submitted on application forms. In his plea agreement, Roy Lin admitted that between April 2007 and June 2009, he provided false and misleading information on these application forms in order enable the INC21 companies to place charges on telephone customers’ bills. Roy Lin also admitted that, as a result of this scheme, the INC21 companies were able to collect revenues of between $2,500,000 and $7,000,000 from thousands of consumers.
Roy Lin also admitted in his plea agreement that, on June 6, 2008, he committed money laundering by transferring $260,000 – funds he knew constituted at least in part property obtained from the scheme set forth above – from a bank account at Bank of America into another Bank of America account under his control.
In his plea agreement, John Lin admitted that on Aug. 14, 2008, he caused the mailing of an application for GlobalYP to bill on a carrier’s telephone bills. This document falsely stated that GlobalYP never had access to billing services terminated, never had public utilities complaints and never had other known complaints filed against it. John Lin was aware that these misrepresentations were being made for the purposes of attempting to conceal that GlobalYP had had its billing services terminated by a telephone carrier for excessive consumer complaints of placing unauthorized charges on their phone bills and attempting to conceal that GlobalYP had had complaints filed against it by numerous state agencies.
Roy Lin, 43, and John Lin, 41, both of San Francisco, were indicted on March 27, 2012. Roy Lin and John Lin were each charged with conspiracy to commit mail fraud, six counts of mail fraud, and three counts of money laundering. Roy Lin pleaded guilty to one count of mail fraud and one count of money laundering and John Lin pleaded guilty to one count of mail fraud.
In 2010, the Federal Trade Commission filed a complaint for injunctive and other equitable relief against Roy Lin, John Lin, INC21, and several of its related companies. The FTC complaint alleged that the defendants in that case had engaged in cramming of unwanted and unauthorized charges on consumers’ telephone bills. In 2009, the United States also filed a separate civil asset forfeiture action. In September 2010, Judge William H. Alsup granted summary judgment in the FTC case against the defendants in that case, ordered restitution in the amount of $37,970,929.57, and permanently enjoined the defendants from billing customers, either directly or through an intermediary, by placing any charges onto any telephone bill. On March 30, 2012, the Ninth Circuit Court of Appeals affirmed Judge Alsup’s decision.
Sentencing is scheduled for April 9, 2013, at 2 p.m. before United States District Court Judge William H. Alsup in San Francisco. The maximum statutory penalty for each count of mail fraud, in violation of 18 U.S.C. § 1341, is 20 years’ in prison, and a fine of $250,000, or twice the gross gain or loss, whichever is greater, plus restitution if appropriate. The maximum statutory penalty for each count of money laundering, in violation of 18 U.S.C. § 1957, is 10 years’ in prison, and a fine of $250,000, or twice the gross gain or loss, whichever is greater, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Hallie Hoffman and Kyle Waldinger are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Elizabeth Garcia and Rayneisha Booth. The prosecution is the result of an investigation by the United States Postal Inspection Service and the Criminal Investigation Division of the Internal Revenue Service.