Men From Oregon and Pennsylvania Plead Guilty
to Defrauding New Mexico-Based Company
ALBUQUERQUE – Two men have pleaded guilty to conspiracy to defraud Kinesio USA LLC, a New Mexico-based company that sells therapeutic elastic tape and related products, and its related company, Kinesio Holding Corporation (together, “Kinesio”), announced Acting U.S. Attorney Damon P. Martinez, Carol K.O. Lee, Special Agent in Charge of the Albuquerque Division of the FBI, and Dawn Mertz, Special Agent in Charge of the Phoenix Field Office of IRS Criminal Investigation.
Johannes Jarvis, 41, of Portland, Ore., and John Hope, 66, of Huntingdon Valley, Pa., each entered a guilty plea to Count 22 of a 38-count indictment charging them with conspiracy to commit wire fraud. Jarvis entered his guilty plea this morning and Hope entered his guilty plea on May 5, 2014.
Jarvis and Hope were charged in a 38-count indictment that was filed on July 11, 2013, and charged them with a wire fraud conspiracy count, 21 counts of wire fraud and 16 counts of money laundering. The indictment alleged that from late 2007 through April 2010, Jarvis and Hope conspired to defraud Kinesio of approximately $4.3 million, at least $1.2 million of which Jarvis and Hope retained as profits. At the time, Jarvis was the Director of Marketing for Kinesio and Hope owned a printing business that operated in China that had been hired to produce marketing materials for Kinesio.
According to court filings, in 2007, Kinesio began looking for a new manufacturer for its therapeutic elastic tape and Jarvis suggested searching for a manufacturer in China. Thereafter, Jarvis lied to Kinesio and reported that he had located a suitable manufacturer in China but that Kinesio would have to work through a broker to coordinate the business relationship. In April 2008, Jarvis and Hope incorporated Grace International (HK) Limited (“Grace International”) in Hong Kong, of which they were the sole owners. Jarvis told Kinesio that Grace International was an experienced company, when in reality it had no other clients. Jarvis represented to Kinesio that Grace International would broker the relationship between Kinesio and the tape manufacturer. In their plea agreements, Jarvis and Hope admitted that they concealed their ownership of the company because they knew that Kinesio would not have agreed to use Grace International as a broker if Kinesio had been aware that Jarvis and Hope were involved in it.
Relying on Jarvis’s misrepresentations, Kinesio entered into a contract with Grace International pursuant to which Kinesio paid Grace International to produce therapeutic elastic tape between July 2008 and Jan. 2010. During this period, Jarvis and Hope defrauded Kinesio by having Grace International charge Kinesio a significant undisclosed markup above the manufacturer’s price for the tape, which Jarvis and Hope hid from Kinesio. Jarvis and Hope shared the profits generated by the markup on a 65/35 split with Jarvis getting the larger share. As a means of continuing the deception, Jarvis and Hope sent emails to personnel at Kinesio that purported to be from employees at Grace International. The emails were composed in broken English so as to make it appear that they were written by a native Chinese speaker.
At sentencing, Jarvis and Hope each face a maximum statutory penalty of 20 years in federal prison. They also will be required to pay restitution to Kinesio in an amount to be determined by the court. Both men remain on conditions of release and under pretrial supervision pending their respective sentencing hearings, which have yet to be scheduled.