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U.S. Attorney Joins FTC and Florida Attorney General to Spotlight Telemarketing Schemes Aimed at Defrauding Time-Share Unit Owners

FOR IMMEDIATE RELEASE
June 6, 2013

Sixty-nine defendants charged to date by USAO on timeshare resale telemarketing fraud

At a press conference held in Miami today, Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Darin M. Didier, Acting Supervisory Special Agent, Federal Bureau of Investigation (FBI), Miami Field Office, and Ronald Verrochio, Inspector in Charge, U.S. Postal Inspection Service, Miami Field Office, joined Charles A. Harwood, Acting Director, Federal Trade Commission’s (FTC) Bureau of Consumer Protection, Florida Attorney General Pam Bondi, and Jay Levenstein, Deputy Commissioner, Florida Department of Agriculture and Consumer Services, to highlight to their respective offices’ efforts in combatting timeshare property resale fraud in Florida and around the country.

According to the FTC, 191 actions were brought by the FTC and its law enforcement partners around the nation. Of these actions, the U.S. Attorney’s Office for the Southern District of Florida claimed 18 criminal cases, charging a total of 69 defendants, between 2011and 2013.

U.S. Attorney Wifredo A. Ferrer, focusing his remarks on Florida, stated, “We cannot allow our elderly and vulnerable real property owners to continue to be the target of fraud schemes. For that reason, our respective offices – federal and state, criminal and civil – have joined forces to combat Florida-based fraud schemes victimizing timeshare unit owners across the country. These victims, many of them elderly or in financial distress, looked to sell their units to help make ends meet or pay other bills. Instead, they were defrauded out of more than $14 million in total. Such fraud will not be tolerated.”

According to Charles A. Harwood, Acting Director of the Federal Trade Commission’s Bureau of Consumer Protection, “Timeshare resale scammers have cheated tens of thousands of timeshare owners out of tens of millions of dollars by convincing them to pay for a false promise. But law enforcement at virtually every level of government is working together to put an end to the problem.”

“We will continue to pursue scam artists who attempt to essentially steal from timeshare owners, and the Timeshare Resale Accountability Act that I worked with the Legislature on in 2012 is already having a great effect on ending this type of fraud. With strong partnerships among federal, state and local leaders, we will continue to protect Floridians,” stated Florida Attorney General Pam Bondi.

“If you think you are the victim of a timeshare scam, file a complaint with your state attorney general’s office and the Internet Crime Complaint Center,” said Darin M. Didier, acting Supervisory Special Agent assigned to FBI Miami Division. “To avoid becoming a victim of this type of crime take a few prudent steps such as; do not agree to anything on the phone or online until you have had a chance to check out the reseller, get all information in writing, verify that the reseller’s agents are properly licensed and ask about fees and timing. Go to the FBI’s and FTC’s websites for more important tips.”

Ronald Verrochio, Inspector in Charge, U.S. Postal Inspection Service, Miami Field Office, stated “The timeshare resale fraudsters sound legitimate and convincing, but put pressure on victims to make decisions quickly. Hopefully the arrests of these fraudsters and dismantling of their criminal organizations will bring light to this rising fraud and educate the community. Our goal is to stop the crime and educate community members on these scams so they don’t become victims.”

“These scam artists defrauded consumers in Florida and across the country out of millions of dollars, often through illegal telemarketing,” said Commissioner of Agriculture Adam H. Putnam. “We’re proud to partner with other state and federal officials to protect consumers from further harm and bring justice to those who have violated the law.”

Among the criminal cases recently prosecuted by the U.S. Attorney’s office are the following:

1. U.S. v. Pappalardo et al.,, 13-60049-CR-Dimitrouleas (15 defendants charged)
2. U.S. v. Faraguna et al.,11-60247-CR-Marra (13 defendants charged)
3. U.S. v. Zaidan,11-60190-CR-Cohn (1 defendant charged)
4. U.S. v. Davis, 11-60268-CR-Hurley (1 defendant charged)
5. U.S. v. Friedman et al., 12-60019-CR-Scola (4 defendants charged)
6. U.S. v. Spinelli et al., 12-60149-CR-Scola (5 defendants charged)
7. U.S. v. Crapella and Walker, 12-mj-6114-Rosenbaum (2 defendants charged

These seven cases charge a total of 41 defendants with various counts, including conspiracy to commit mail fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering.

According to the charging documents and other documents filed with the court, Timeshare Mega Media and Marketing Group, Inc. (TMMMG) was a timeshare telemarketing room that operated in Fort Lauderdale, Florida, from July 2009 through May 2010. According to the allegations in the indictment, the defendants conspired to unlawfully enrich themselves by making false representations over the telephone to individuals who were trying to sell their time-share units. Among the false statements, the defendants would tell customers, most of who lived outside of the State of Florida, that the defendants had successfully sold their time-share unit and asked the customer to pay a fee to finalize the sale, which fee would purportedly be refunded at closing. This fee ranged from at least $1,996 to as much as $10,000. In fact, however, there were no buyers for their units, and the defendants kept the victims’ money for their personal use. During the ten months that TMMMG was in business, it fraudulently induced more than 2,000 victims to send approximately $5,000,000 to TMMMG.

Among the 41 defendants are the owners of TMMMG, Pasquale Pappalardo and Joseph Crapella, 33 top salespeople, and 6 others who handled customer service, verification, leads, payroll and other vital functions for TMMMG. To date, 23 of the 41 defendants charged in these 7 related cases have pled guilty and have received sentences ranging from 5 years to 3 months in prison, 6 defendants have pled guilty and are awaiting sentencing, 2 defendants are fugitives, 1 defendant is deceased, and the remaining 9 defendants are pending trial. If convicted, the defendants face a maximum statutory sentence of up to 20 years in prison on each count of conspiracies to commit mail fraud, wire fraud, and money laundering. This series of cases is being prosecuted by Assistant U.S. Attorney Jeffrey Kaplan.

In addition to the cases identified above, the Northern Division of the United States Attorney’s Office prosecuted 11 cases, which charged a total of 28 defendants with various counts, including conspiracy to commit mail fraud and conspiracy to commit wire fraud. These 11 cases involved two timeshare fraud rings which operated in Palm Beach County, but solicited victims throughout the United States. The defendants would typically operate a company for 4 to 10 months, and then, to avoid detection by law enforcement, close the company and reopen under a new name. The new company would operate in the same fashion as the original company with many of the same owners, managers and salespeople.

The first ring involved 6 companies which solicited approximately $7 million in advance fees from approximately 3,000 timeshare owners. The second ring involved 7 companies which solicited approximately $2.7 million from approximately 1,200 timeshare owners. According to the charging documents and other documents filed with the court, both rings involved essentially the same scheme. Defendants in these cases cold called timeshare owners and made false representations to induce them to pay advance fees for purported timeshare marketing and sales services. Among the false statements, the defendants would tell customers that the companies had successfully sold or would sell their timeshare units, that the companies would handle the appraisals, title searches, closings, and other services associated with the sales, and that the companies would use the advance fees to cover the necessary costs associated with the sales. In truth, the defendants never located a single buyer, never completed a single sale of a timeshare unit, and never used the advance fees for anything other than their own personal benefit.

Among the 28 defendants prosecuted in connection with these 2 rings were the company owners, managers, top salespeople, and an individual who allowed one of the companies to use his merchant account to process victim credit card payments. To date, 18 of the 28 defendants charged in these 11 cases have pled guilty and received sentences ranging from 6 months to 151 months, 5 defendants have pled guilty and are awaiting sentencing, 4 defendants are scheduled to plead guilty, and 1 is a fugitive. The defendants in these cases face a maximum statutory sentence of up to 20 years in prison on each conspiracy count. These cases are being prosecuted by Assistant U.S. Attorneys Adrienne Rabinowitz and Kerry Baron.

A complete list of the cases prosecuted by the United States Attorney’s Office for the Southern District of Florida is attached.

Mr. Ferrer commended the investigative efforts of the FBI and U.S. Postal Inspection Service in the criminal cases. Mr. Ferrer also recognized the invaluable support and assistance provided by the FTC during these investigations.

Attachment:

List of Cases (PDF)

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A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

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