Department of Justice FOR IMMEDIATE RELEASE CR FRIDAY, JUNE 28, 1996 (202) 616-2765 TDD (202) 514-1888 HUNDREDS OF VICTIMS OF AN ADA BUSINESS SCAM TO GET MONEY BACK WASHINGTON, D.C. -- Hundreds of people who spent millions of dollars buying phony disability-access inspector licenses and useless skid resistant chemicals, which actually can make surfaces more dangerous for wheelchair users, will be getting their money back. The scam, first detected in October 1994, was investigated by a multi-agency federal force involving the Justice Department, the Customs Service, the Internal Revenue Service, the U.S. Secret Service and the Postal Inspection Service. The repayment follows a federal grand jury indictment last February of six family members and two associates on charges of mail fraud, wire fraud and money laundering. Seven of the defendants have pleaded guilty and now face up to a maximum of five to ten years in prison. Under the scam, investors were told they could earn up to $45,000, per year inspecting businesses for violations of the Americans with Disabilities Act (ADA) -- a federal law requiring most businesses to improve access for people with disabilities. (MORE) 01-04834 - 2 - For up to $10,000, a sham company, National Consulting Institute, Inc. (NCI) sold people ADA inspector licenses -- even though the law does not authorize licenses. Using a standardized form, the NCI victims would inspect a business and for a $100 fee send the form back to the company for processing. When the form revealed potential violations, the victims would charge between $400 and $1000 to tell the business what steps it had to take to avoid a lawsuit. The information sought by the form was not adequate to determine whether the business was complying with the ADA. "The ADA is a common sense law that seeks to make businesses accessible to millions of Americans with disabilities," said Associate Attorney General John Schmidt. "We will not permit con artists and swindlers to scare businesses into thinking the ADA requires more than is reasonable." Under a second scam, investors were sold skid resistant adhesive chemicals to be used by businesses seeking to become safer for wheelchair users. There is no specific requirement for skid resistance under the ADA. The investors, who paid between $10,000 and $14,000 to store the chemicals, were told that company salesmen would sell the chemicals to businesses in their area and they would make $5 or more on each gallon sold. After an investor purchased the chemicals, the sham company would fake small orders of about $100 each for a few months. By (MORE) 01-04835 - 3 - the time a victim realized the fraud, the defendants were hidden behind layers of sham corporations and could not be located. The Justice Department today is sending out about 800 letters to individuals who invested in these scams notifying them that they may be able to get some of their money back. Federal agents have seized $3.1 million in cash and property. "This investigation uncovered a massive telemarketing, money laundering conspiracy to defraud hundreds of citizens out of millions of dollars," said George Weise, Commissioner, U.S. Customs Service. "Customs and other Treasury bureaus will strive to target, investigate and dismantle all facets of international money laundering." After each of the eight are sentenced, which is expected to begin in August, the U.S. District Court in Tampa will order the seized assets to be sold and the proceeds to be distributed. "Telemarketing fraud is one of the top prosecutorial priorities of the Middle District of Florida," said Charles Wilson, U.S. Attorney in Tampa. "This case will send a strong message that telemarketing criminals will be swiftly and severely prosecuted and deprived of all illegal proceeds." The ADA, passed in 1990, prohibits discrimination against persons with disabilities. One part of the ADA requires existing business facilities to be made more accessible where it is readily achievable, or can be done without much difficulty or expense. Whether a business must remove barriers to access (MORE) 01-04836 - 4 - depends on the size and resources of the business as well as the cost. Over the past three months, seven of the eight defendants have pleaded guilty to violating federal criminal statutes. Three defendants, Marvin Sherman, Irving Belsky, and Laurie Uhl, pleaded guilty to conspiring to commit mail and wire fraud. That charge carries a maximum penalty of five years in prison and a $250,000 fine. Two defendants, Craig and Ryan Sherman, Marvin's sons, pleaded guilty to conspiring to commit illegal money transactions. That charge carries a maximum penalty of 10 years in prison and a $250,000 fine. Maia and Rita Sherman, the wives of Ryan and Marvin, respectively, pleaded guilty to filing false tax returns. Wendy Jozina Peters, a 21 year old, a foreign national, was ordered to leave the country by the U.S. District Court. Anyone who believes they were mislead by NCI or any other party or has question about the ADA, should call the Justice Department's ADA Information Line at 800-514-0301 or 800-514-0383 (TDD). In 1994, Attorney General Janet Reno launched a nationwide public service campaign to educate Americans about their rights and obligations under the law. The Information Line, which was established as part of the education effort, receives over 75,000 calls each year. # # # 96-313 01-04837 MYTHS TOLD ABOUT THE ADA BY THE "NCI" SCAM ARTISTS Under the NCI scam, hundreds of people were defrauded by a group of defendants who used scare tactics about the Americans with Disabilities Act (ADA). In NCI materials, the defendants relied on myths about the ADA to convince people that businesses need protection from the federal government. Actually, the Justice Department encourages businesses to seek technical assistance, without fear of prosecution, to make facilities more accessible. NCI MYTH: ADA suits are flooding the courts. "The scary fact is that the government is just now beginning to crack down on ADA violators." FACT: The ADA has resulted in a surprisingly small number of lawsuits -- only about 650 nationwide in the first five years of the law. And the Justice Department has filed fewer than 30 lawsuits. That's tiny compared to the 6 million businesses; 666,000 public and private employers; and 80,000 units of state and local government that must comply. NCI MYTH: "Every business is at risk of a Justice Department enforcement action" requiring the business to make expensive modifications. FACT: The ADA is based on common sense. It recognizes that altering existing structures is more costly than making new construction accessible. The law only requires that public accommodation (e.g. stores, banks, hotels, and restaurants) remove architectural barriers in existing facilities when it is "readily achievable", or where it can be done without much difficulty or expense. That depends on the size of the business and the cost of the repairs. Inexpensive, easy steps to take include ramping one step; lowering a paper towel dispenser; installing a bathroom grab bar; rearranging furniture; installing offset hinges to widen a doorway; or painting new lines for an accessible parking space. 01-04838 NCI MYTH: The Justice Department will sue any business found to be in violation of the ADA, and "over 30,000 complaints" have been filed. FACT: The Justice Department has filed fewer than 30 lawsuits under the ADA. The primary goal of the Department's enforcement program is to increase voluntary compliance through negotiation and technical assistance. Under existing rules, the Department may not file a lawsuit unless it has first tried to settle the dispute through negotiations -- which is why most every complaint settles. Hundreds of complaints are filed with the Department each year about accessibility--they are not lawsuits. Most of the complaints are resolved cooperatively. NCI MYTH: "Small businesses will be assessed huge penalties of $30,000 or more for any ADA violation." FACT: Only the Justice Department -- not private litigants -- may seek civil money penalties. The Department sought and obtained penalties from businesses in only a handful of cases -- a total of less than $200,000. The Department only seeks such penalties when the violation is substantial and the business has shown bad faith in failing to comply. Bad faith can take many forms, including hostile acts against people with disabilities, long-term failure even to inquire into what the ADA requires, or sustained resistance to voluntary compliance. The Department also considers a business's size and resources in determining civil penalties. NCI MYTH: There is such a thing as "certified and licensed ADA inspectors" who evaluate facilities for ADA violations and "no special training is required." FACT: The ADA does not authorize the "certification" or "licensing" of inspectors to do ADA compliance inspections. There are many qualified architects and others professionals across the country who provide assistance to businesses seeking to comply with the law, but none are licensed by the federal government. Anyone interested in hiring a private ADA consultant should consult the local Better Business Bureau, check professional references, and inquire into the professional and ADA experience of any consultant. No one should hire an ADA consultant who lacks training and professional experience. 01-04839 NCI MYTH: The ADA requires expensive "after market" products, like slip resistance chemicals, to make facilities accessible to persons with disabilities. FACT: The ADA does not require any particular products in order to improve accessibility in a facility. Even for stricter new construction requirements, the ADA does not mandate slip resistance nor the use of any specialized "after market" products. NCI MYTH: "All buildings are subject to the ADA." FACT: The ADA pertains to "public accommodations" (specifically identified types of businesses and operations that affect commerce) and "commercial facilities" (buildings "intended for nonresidential use" and "whose operations will affect commerce"). Some buildings are not included, such as apartment buildings and condominiums that do not provide services to the general public. NCI MYTH: "Tax credits are available to pay ADA consultants." FACT: The federal tax code permits a tax credit equal to 50% of "eligible access expenditures" in a year up to a maximum of $10,250; there is no credit for the first $250 of expenditures. The credit is available to businesses that have annual revenues of $1 million or less or have less than 30 employees. Tax deductions up to $15,000 are also available for removal of architectural or transportation barriers. NCI MYTH: "If anyone slips and falls on my floor..., they could sue me under the ADA." FACT: The ADA is not "slip and fall" law. The ADA is a statute that is intended to guarantee the civil rights of persons with disabilities and to remove the discriminatory effects of architectural, transportation, and communication barriers. The ADA only covers "qualified individuals with a disability," which is determined on a case by case basis. 01-04840