Individual Arrested in Connection withCosta Rica-based Business Opportunity Fraud Ventures
Operation Had Connections to Florida, New Mexico, Colorado, Nevada,Wisconsin and Pennsylvania
A dual United States and Costa Rican citizen charged in connection with the operation of a series of fraudulent business opportunities was arrested today in Chicago following his indictment by a federal grand jury in Miami on Nov. 29, 2011, the Justice Department and the U.S. Postal Inspection Service announced today. Sean Rosales was arrested based on charges that he and his co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charges in the indictment form part of the government’s continued nationwide crackdown on business opportunity fraud.
Prior to Rosales’ arrest, 11 other individuals were charged in connection with business opportunity fraud ventures based in Costa Rica. Seven of those other individuals have been convicted in the United States.
“Business opportunity fraud imposes significant financial hardship on innocent, hardworking victims who are simply trying to make better lives for themselves and their families ,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice will continue its push to prosecute those who defraud Americans to make a quick buck.”
Beginning in May 2005, Rosales and his coconspirators are alleged to have fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc. and Powerbrands Distributing Company. According to the indictment, the business opportunities the defendant sold cost thousands of dollars each, and most purchasers paid at least $10,000. Each company operated for several months, and after one company closed, the next opened. The various companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere, according to the indictment.
The indictment alleges that the defendant, using aliases, participated in a conspiracy that used various means to make it appear to potential purchasers that the businesses were located entirely in the United States. In reality, Rosales operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities, the indictment alleges.
According to the indictment, the companies made numerous false statements to potential purchasers of the business opportunities. Among the misrepresentations alleged in the indictment are that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands. The indictment alleges that potential purchasers also were falsely told that the profits of some of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.
The indictment also alleges that the companies employed various types of sales representatives, including fronters, closers, and references. A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement. A closer subsequently spoke to potential purchasers to close deals. References spoke to potential purchasers about the financial success they purportedly had experienced since purchasing one of the business opportunities. According to the indictment, the companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchasers’ merchandise display racks.
The indictment alleges Rosales, using assumed names, was a fronter and reference for USA Beverages, a fronter and reference for Twin Peaks, a fronter, locator and reference for Cards-R-Us, a fronter, locator and reference for Premier Cards, a fronter, locator and reference for Coffee Man, and a locator for Powerbrands.
According to the allegations in the indictment, each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States. USA Beverages was registered as a Florida and New Mexico corporation and rented office space in Las Cruces, N.M. Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo., and Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev. Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia, and The Coffee Man was registered as a Colorado corporation and rented office space in Denver. Powerbrands was registered as a Wisconsin corporation and rented office space in Glendale, Wis., and Palm Beach Gardens, Fla.
The defendant was charged with conspiracy to commit mail and wire fraud, and with committing this offense via telemarketing. In addition, the defendant was charged with seven counts of mail fraud and 13 counts of wire fraud. If convicted of conspiracy, Rosales faces a maximum statutory term of 25 years in prison, a possible fine and mandatory restitution on the conspiracy count. He also faces a maximum statutory term of imprisonment of 25 years on each of the mail and wire fraud counts, a possible fine and mandatory restitution.
“Fraudulent business opportunity sellers must realize that all financial fraud will be prosecuted vigorously, even if the schemers conduct their fraudulent operations from abroad,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida . “Increased international law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas.”
“This international and domestic investigation illuminates the Postal Inspection Service’s resolve to protect the American public from business opportunity scams, and to ensure that the U.S. Mail is not used as a conduit for fraudsters to prey on the American public.” said Tony Gomez, Acting U. S. Postal Inspector in Charge in Miami.
Principal Deputy Assistant Attorney General Delery commended the investigative efforts of the Postal Inspection Service. The case is being prosecuted by trial attorneys Jeffrey Steger and Alan Phelps with the U.S. Department of Justice Consumer Protection Branch.
An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.