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Friday, May 1, 2015

MAN PLEADS GUILTY FOR PARTICIPATING IN BUSINESS OPPORTUNITY FRAUD SCHEMES

FROM:   U.S. JUSTICE DEPARTMENT I
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, April 29, 2015
U.S. Citizen Pleads Guilty in Connection with Internationally Based Business Opportunity Fraud Ventures

A U.S. citizen charged in connection with the operation of a series of fraudulent business opportunities based in Costa Rica pleaded guilty today in Miami, the Justice Department announced.

John White was charged in a Nov. 29, 2011, indictment in the Southern District of Florida with conspiracy to commit mail and wire fraud as well as mail fraud and wire fraud counts.  White was arrested on Feb. 9, 2012, in Costa Rica pursuant to the indictment, and extradited to the United States on Feb. 11.  As part of his guilty plea to the conspiracy charge, White, also known as Gregory Garrett, admitted that he and his co-conspirators fraudulently sold beverage and greeting card business opportunities to victims in the United States.

The case against White is part of the government’s continued nationwide crackdown on business opportunity fraud.  In addition to White, 11 other defendants have been charged in connection with related business opportunity fraud ventures that operated in Costa Rica.  Nine of those other defendants have been convicted in the United States with sentences ranging from three to 16 years in prison.  Two remaining defendants are not yet in the custody of the United States.

“Business opportunity schemes target innocent victims who simply want to work for the American dream,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to prosecute those who commit fraud and take advantage of those seeking to start a new business.”

As part of his guilty plea, White admitted that from 2005 to 2008, he and his co-conspirators 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. and The Coffee Man Inc.  White and his co-conspirators claimed that these opportunities would allow purchasers to sell coffee and greeting cards from display racks located at other retail establishments.  The business opportunities 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.

White admitted that the conspiracy used various means to make it appear to potential purchasers that the businesses were located entirely in the United States.  The companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.  In reality, White and his co-conspirators operated out of call centers in Costa Rica.

White admitted that he and his co-conspirators made numerous false statements to potential purchasers of the business opportunities, including that purchasers likely would 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 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.

As alleged in the indictment against White and others, 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 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 purchaser’s merchandise display racks.  White admitted that he worked as a fronter and reference using assumed names.

White faces a statutory maximum sentence of 25 years in prison, a fine and mandatory restitution on the conspiracy count.  U.S. District Court Judge Patricia A. Seitz set a sentencing hearing for Aug. 5 at 10 a.m., at the federal courthouse in Miami.

“This international and domestic investigation shows the Postal Inspection Service’s resolve to protect Americans from business opportunity scams,” said Postal Inspector in Charge Ronald J. Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division.

Principal Deputy Assistant Attorney General Mizer commended the investigative efforts of USPIS.  The case is being prosecuted by Trial Attorney Alan Phelps of the Civil Division’s Consumer Protection Branch.