10 Indicted for Allegedly Fraudulent Business Opportunity Scheme

On November 20, 2019, the United States Department of Justice announced that 10 defendants have been charged in Manhattan federal court with running a nationwide telemarketing fraud scheme targeting the elderly.  The indictment charges the 10 individuals with conspiracy to commit wire fraud in connection with telemarketing.  Two of the defendants have also been charged with obstruction of justice.  

Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these 10 defendants, motivated by greed and the possibility of a quick payday, aggressively targeted the elderly and other vulnerable victims throughout the United States by convincing them to invest their money in various businesses, and then scammed those victims again after pushing them deep into debt.  In reality, allegedly these so-called opportunities were just fraudulent schemes to steal victims’ money, and the so-called ‘debt relief’ only further abused the trust innocent victims placed in the defendants.  Now, the defendants face time in prison for their alleged crimes.”

Another official involved in the investigation stated:  “Those charged in this investigation are purported to have taken advantage of our aging population by posing as telemarketers.  This criminal organization allegedly strategically gave false promises to continue their swindle and get as much money as possible while destroying the lives of their victims.  

Police Commissioner James P. O’Neill said:  “These charges reflect how criminals exploit the elderly and other individuals through telemarketing schemes.  I commend the NYPD detectives, our federal partners, and prosecutors of the U.S. Attorney, Southern District, for their efforts and cooperation in this investigation.  Together, we will continue to be relentless in fighting crime that impacts the people we serve wherever, and however, it occurs.”

According to the allegations in the Indictment:

The Business Opportunity Scheme

From at least 2012 until at least November 2019, the defendants allegedly carried out a telemarketing scheme that defrauded hundreds of victims throughout the United States, many of whom were senior citizens.  The government alleges that victims were sold purported “business services” in connection with the purported online businesses.

According to the government, some of the defendants and their co-conspirators sold “services” purporting to make the management of victims’ businesses more efficient or profitable, including tax preparation or website design services.  At the outset of the allegedly scheme, various participants employed by a “fulfillment” company sent the victims electronic or paper “pamphlets” or provided so-called “coaching sessions” regarding these purported online businesses. The government alleges that the victims never earned any of the promised return on their intended investment. 

The defendants and their co-conspirators allegedly engaged in a coordinated effort to traffic in lists of potential victims “leads.”  Leads were purportedly generated by sales floors operating in various states and a website.

Certain participants also allegedly told victims that the victims had qualified for a government grant, often in connection with starting a small business, and that the victims should purchase the business services offered as part of the business opportunity scheme as a way to earn money while waiting for the victim’s grant money to be received.  

The Debt Relief Scheme

When there were no more services to sell the victims as part of the purported business opportunity scheme and/or the victims had reached the maximum limit on his or her credit cards, the defendants and their co-conspirators allegedly effectively refinanced their victims’ participation in the business opportunity scheme into a new scheme, capitalizing on the business opportunity scheme victims’’ credit card debts by offering to consolidate or settle the victims’ debt in exchange for an up-front payment.

The perpetrators of the alleged debt relief scheme entered into revenue-sharing agreements with certain participants in the alleged business opportunity scheme by which the perpetrators of the debt relief scheme paid certain participants for leads based on a percentage of the sales made to victims.

Qualified FTC defense attorneys advise clients on mitigating liability exposure for those that operate in the high-risk debt relief niche. 

Obstruction of Justice 

According to the government, in or about January 2019, law enforcement conducted a search of the telemarketing sales floor at which two of the defendants were employed.  During the search, law enforcement seized several electronic devices. Following the search, the two defendants knowingly deleted, and attempted to delete, the data on those devices in an effort to prevent law enforcement from using that data in the instant investigation into the alleged business opportunity scheme.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  

Contact experienced FTC defense lawyers to discuss compliant telemarketing and business opportunity operations.

Richard B. Newman is on of the leading FTC defense lawyers in the digital marketing industry.  Follow him on Facebook @FTC Defense Lawyers and Twitter @FTC Defense Attorneys.

Informational purposes only. Not legal advice. May be considered attorney advertising.