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CHARLOTTE, N.C. – Today, a criminal indictment was unsealed in federal court, charging Robert M. Boston, 53, and Robert S. LaBarge, 50, both of Hickory, N.C., with conspiracy relating to a fraud totaling at least $25 million, to include wire fraud, securities fraud, bank fraud, and money laundering, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.
John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, joins U.S. Attorney Rose in making today’s announcement.
According to allegations contained in the indictment, Boston and LaBarge defrauded franchisees, investors, and lenders of their company, Zloop. The indictment alleges that, through their fraud, the defendants obtained millions of dollars, much of which was spent on expensive personal real estate, a private plane, and the racing career of Boston’s son.
The indictment alleges that Boston and LaBarge founded Zloop, an electronic waste recycling firm, in 2012 and began marketing Zloop franchises in or about July 2012. Federal law requires potential franchisors, like Zloop, to disclose certain litigation and bankruptcy matters in a franchise disclosure document. As alleged in the indictment, Zloop franchise disclosure documents omitted required information, including that Boston’s former company had filed bankruptcy, that Boston had filed personal bankruptcy, and that Boston had been held liable in an action alleging that he had knowingly submitted false financial documentation to obtain a $2.9 million line of credit.
The indictment further alleges that, beginning in or about December 2012, Boston and LaBarge caused Zloop to raise money through the sale of equity. To sell equity in the company, the indictment alleges that Boston and LaBarge caused a misleading private placement memo (“PPM”) to be sent to investors who ultimately invested approximately $2.5 million in Zloop. According to the indictment, the PPM contained material half-truths and omissions, including the omission of the litigation and bankruptcy history of Boston, and the fact that Boston and LaBarge had already caused Zloop to spend more than $1.5 million on their personal real estate.
When Zloop investors sought the return of their money in or about the middle of 2013, the indictment alleges that Zloop sought to repay them with a loan from an individual identified as Victim 1. In doing so, Boston allegedly induced Victim 1 to provide a $3 million loan by offering to file a lien on Zloop’s equipment for Victim 1’s benefit. Instead, after Victim 1 provided the loan used to repay Zloop’s other investors, LaBarge allegedly sent a fraudulent financing statement that purportedly was filed with the North Carolina Secretary of State.
The indictment also alleges that, after receiving the fraudulent UCC financing statement, Victim 1 agreed to secure a multi-million line of credit from Patriot Bank, a federally insured financial institution. After Boston and LaBarge caused Zloop to draw approximately $3.5 million from the Patriot Bank line of credit, the indictment alleges that they promptly spent hundreds of thousands of dollars on, among other things, a private plane, a new Corvette, and a new Grand Cherokee. After Zloop subsequently drew an additional $1.3 million from the credit card line, the indictment alleges that more than $500,000 was spent on racing-related expenditures and approximately $79,808 on a suite at a professional football stadium.
The indictment charges Boston and LaBarge each with one count of conspiracy to commit wire and bank fraud; one count of wire fraud; one count of securities fraud; one count of bank fraud; and one count of money-laundering conspiracy. LaBarge is also charged with false writing in connection with an FBI investigation.
The defendants appeared today in the United States District Court in Charlotte. The conspiracy charge and bank fraud charge each carry a maximum prison term of 30 years. The wire fraud charge and the securities fraud charge each carry a maximum prison term of 20 years. The maximum penalty for the money-laundering conspiracy charge is 10 years in prison, and the maximum prison term for false writing is five years in years in prison.
All the charges contained in the indictment are allegations. The defendants are presumed innocent until proven guilty beyond reasonable doubt in a court of law.
The FBI led the investigation. Assistant U.S. Attorneys Taylor J. Phillips and Daniel Ryan, of the U.S. Attorney’s Office in Charlotte, are in charge of the prosecution.