Men from Oregon and Pennsylvania Sentenced to Federal Prison Terms for Defrauding New Mexico-Based Company

ALBUQUERQUE – Two men were sentenced to federal prison terms yesterday afternoon in Albuquerque, N.M., for participating in a 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).

Johannes Jarvis, 43, of Portland, Ore., was sentenced to 46 months in prison followed by three years of supervised release, and John A. “Jack” Hope, 68, of Huntingdon Valley, Pa., was sentenced to 37 months followed by three years of supervised release.  The defendants were ordered to pay restitution to Kinesio USA in the amount of $2,008,450.00.  The sentences were announced U.S. Attorney Damon P. Martinez, Carol K.O. Lee, Special Agent in Charge of the Albuquerque Division of the FBI, and Ismael Nevarez, Jr., Special Agent in Charge of the Phoenix Field Office of IRS Criminal Investigation.

Jarvis and Hope were charged in an indictment filed on July 11, 2013, with a wire fraud conspiracy and 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 previously 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.

Jarvis and Hope each entered a guilty plea to the conspiracy to commit wire fraud alleged in the indictment.  Jarvis entered his guilty plea on May 7, 2014, and Hope entered his guilty plea on May 5, 2014.

This case was investigated by the Albuquerque office of the FBI and IRS Criminal Investigation in Albuquerque and was prosecuted by Assistant U.S. Attorney C. Paige Messec.