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U.S. Citizen Extradited from Costa Rica in Connection with International-Based Business Opportunity Fraud Ventures

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A U.S. citizen charged in connection with the operation of a series of fraudulent business opportunities was extradited from Costa Rica to the United States, the Justice Department announced today. 

John White was charged in a Nov. 29, 2011, indictment in the Southern District of Florida with conspiracy to commit mail and wire fraud, five counts of mail fraud and 13 counts of wire fraud.  White was arrested on Feb. 9, 2012, in Costa Rica pursuant to the indictment, which charges that White and his co-conspirators sold fraudulent beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses, to victims in the United States.  The charges in the indictment form 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 have yet to be received into the custody of the United States.   

“Business opportunity fraud takes a heavy financial toll on victims who believe they are buying a piece of the American dream,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division.  “The Department of Justice will continue its push to prosecute those who defraud consumers whether from here in the United States or abroad.” 

Beginning in May 2005, White and his coconspirators 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. and The Coffee Man Inc.  According to the indictment, the business opportunities the defendant 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 defendant, 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, White and his co-conspirators operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities, the indictment alleges. 

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 were also 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.

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 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.  The indictment alleges that White, using assumed names, worked as a fronter and a reference.

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, New Mexico; Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colorado; Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nevada; 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. 

White faces a statutory maximum sentence of 25 years in prison, a possible fine and mandatory restitution on the conspiracy count.  He also faces a statutory maximum sentence of 25 years in prison on each of the mail and wire fraud counts, possible fines and mandatory restitution.

“Business opportunity fraud hurts those who are simply trying to fulfill their dream of running their own business.” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “We will continue to prosecute those who seek to enrich themselves by committing fraud at the expense of innocent victims.” 

“The Postal Inspection Service will continue to aggressively investigate and combat business and investment fraud through the use of the U.S. mail,” said Postal Inspector in Charge Ronald Verrochio of the U.S. Postal Inspection Service Miami Division.

Acting Assistant Attorney General Branda and U.S. Attorney Ferrer commended the investigative efforts of the U.S. Postal Inspection Service.  The Justice Department’s Office of International Affairs provided assistance with the extradition.  The case is being prosecuted by Trial Attorney Alan Phelps of the Civil Division’s Consumer Protection Branch.

An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

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