Two Individuals Arrested in Connection with Costa Rica-based Business Opportunity Fraud Ventures
Operation Had Connections to Florida, New Mexico, Colorado, Nevada and Pennsylvania
A U.S. citizen and a Canadian citizen were arrested last week in Costa Rica in connection with the operation of a series of fraudulent business opportunities following their indictment by a federal grand jury in Miami on Nov. 29, 2011, the Justice Department and the U.S. Postal Inspection Service announced.
John White, an American, and Kerry Michael Deevy, a Canadian, were arrested based on charges that they and their co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charg es in the indictment form part of the government’s continued nationwide crackdown on business opportunity fraud. Prior to these arrests, eight other individuals were charged and arrested in connection with business opportunity fraud ventures based in Costa Rica. Seven of those eight other individuals have been convicted in the United States. The eighth individual, Jeffrey Pearson, is in custody in Costa Rica.
Beginning in May 2005, White, Deevy and their co-conspirators 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 Nation West Distribution Company. According to the indictment, the business opportunities the defendants 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 defendants, 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, according to the indictment, White and Deevy operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities.
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. 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, according to the indictment.
The indictment 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.
The indictment alleges that White, using assumed names, was a fronter and reference for USA Beverages, a fronter and reference for Twin Peaks, a fronter and reference for Cards-R-Us, a fronter, closer and reference for Premier Cards, and a fronter, closer and reference for Coffee Man.
The indictment alleges that Deevy, using assumed names, was a fronter and reference for Cards-R-Us, a fronter and reference for Premier Cards, a fronter for Coffee Man, and a fronter and reference for Nation West.
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. Nation West was registered as a Colorado corporation and also rented office space in Denver.
Both defendants were charged with conspiracy to commit mail and wire fraud, and with committing their offenses via telemarketing. In addition, both defendants were charged with five counts of mail fraud and 13 counts of wire fraud. If convicted of conspiracy, White and Deevy face a maximum statutory term of 25 years in prison, a possible fine and mandatory restitution on the conspiracy count. They also face a maximum statutory term of 25 years in prison on each of the mail and wire fraud counts, a possible fine and mandatory restitution.
“Business opportunity fraud is a serious crime. Fraudsters carefully construct legitimate-sounding self-employment opportunities, complete with professional-looking materials and convincing but fake research to back up their claims, then target hardworking individuals who are looking for a chance to make life better for themselves and their families,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Often, fraudsters use a variety of techniques—U.S.-based postal addresses, reincorporated U.S. businesses that went defunct years before, or U.S.-based toll-free numbers—to make it appear as if the business opportunity they’re offering is legitimate and is based in the U.S. In fact, these schemes are sometimes perpetrated from overseas. That’s why the Justice Department has been vigilant in working with our overseas law enforcement partners so that borders are no barrier to justice being served.”
“Fraudulent business opportunity sellers must realize that all financial fraud will be prosecuted vigorously, even if the schemers operate their fraud 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 investigation, conducted both here and abroad, shows the Postal Inspection Service’s resolve to protect the American public from business opportunity scams,” said Henry Gutierrez, U. S. Postal Inspector in Charge in Miami.
The United States intends to seek the extradition of White and Deevy from Costa Rica.
Assistant Attorney General West 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.