Fraudulent Business Opportunity
Boiler Room Telemarketers Sentenced Over $18 Million
Scam - US Attorney Reports Telemarketers Sentenced in Business
11/06 - LAWFUEL - R. Alexander Acosta, United States Attorney
for the Southern District of Florida, and Henry Gutierrez, Postal
Inspector in Charge, United States Postal Inspection Service, announced
that two boiler room telemarketers were sentenced today by United
States District Court Judge Jose E. Martinez in connection with
their participation in fraudulent business opportunity sales at
a Miami firm called Pantheon Holdings, a/k/a Internet Machine Company
Jeffrey Kuba, a/k/a “Jeffrey Cooper” was sentenced
to one hundred and eighty-eight (188) months' imprisonment, three
(3) years of supervised release, and ordered to pay $18,064,018.78
Blake Ladenheim was sentenced to sixty (60) months' imprisonment,
three (3) years of supervised release, and ordered to pay $1,944,805
Michael Press was sentenced to thirty-four (34) months’ imprisonment,
three years of supervised release, and ordered to pay $1,962,645
According to charging documents, Pantheon promoted the business
opportunities to consumers across the country through television
commercials, the Internet and other media, misrepresenting the
profits that could be earned by purchasing a Pantheon distributorship,
and urging consumers to call a telephone number that appeared in
Potential purchasers were told that for a purchase price of approximately
$18,000, Pantheon would, among other things: perform all the legwork
of the business and the purchaser only needed to plug in the kiosk
and wipe it down periodically; find appropriate, viable, and high-traffic
locations to place the kiosks; relocate any kiosk that underperformed;
place national advertisements on the kiosk; and only sell distributorships
in a limited geographic area.
Pantheon salespeople falsely represented to potential purchasers
that they would earn their investment back in nine months to a
Defendant Jeffrey Kuba, a/k/a “Jeffrey Cooper,” was
also the lead customer service representative who handled the most
vocal and dissatisfied customers whose complaints were not satisfied
by other customer service representatives Pantheon employed.
Defendant Kuba reassured purchasers of Pantheon’s intentions
to ship kiosks to viable locations and to make purchasers’ business
opportunities profitable. These assurances lulled purchasers into
a false sense of security, postponed inquiries and complaints,
and made the transaction less suspect. Defendant Kuba also converted
complaints into additional sales or “loads.”
Defendant Blake Ladenheim was a Pantheon “closer.” Closers
made several misrepresentations about the profit that would be
generated by the business, territorial limitations, the viability
of locations, and ongoing customer support and technical assistance
that Pantheon would be providing.
Defendant Michael Press was a Pantheon salesman known as a “Back-from-the-Dead,” or “BFD” salesman.
If a closer was unsuccessful in closing a deal, Press called the
potential purchaser back within a few days or weeks in an attempt
to resurrect the deal.
Press typically falsely represented that another person had cancelled
a large order of kiosks for personal reasons and that, as a result,
Pantheon could offer these kiosks to the purchaser for a substantially
Jeffrey Kuba, Blake Ladenheim, Michael Press, and their co-conspirators
fraudulently induced approximately 738 consumers to invest a total
of more than $18 million in Pantheon.
A boiler room president was sentenced on December 19, 2006, in
connection with his participation in fraudulent business opportunity
sales at a Miami firm called Pantheon Holdings, a/k/a Internet
Machine Company (“Pantheon”). United States District
Court Judge Alan S. Gold sentenced Alan Glaubman to 78 months'
imprisonment, three (3) years of supervised release, and ordered
him to pay $18,135,958.78 in restitution.
According to charging documents, defendant Glaubman was made the
nominee president of Pantheon by the firm's undisclosed principals.
Defendant Glaubman knew that he was named president because the
principals needed someone with a clean record to serve as the front
for the business. Glaubman pled guilty to conspiracy to commit
mail fraud, in violation of 18 U.S.C. § 1349, on October 6,
Mr. Acosta commended the investigative efforts of the Postal Inspection
Service. This is one of a series of cases in which defendants have
been convicted of similar schemes involving the sale of various
fraudulent business opportunities involving Internet terminals,
movie rental terminals, "cashless ATM machines" (which
provide a receipt which consumers convert to cash at the register
of the store where the machine was located), and other worthless "opportunities." The
Pantheon cases are being prosecuted by Jill Furman and Richard
Goldberg, Trial Attorneys, United States Department of Justice,
Office of Consumer Litigation.
A copy of this press release may be found on the website of the
United States Attorney's Office for the Southern District of Florida
at www.usdoj.gov/usao/fls . Related court documents and information
may be found on the website of the District Court for the Southern
District of Florida at http://www.flsd.uscourts.gov/ or on http://pacer.flsd.uscourts.gov/
Ant Farm Scammer Put to Death
BEIJING 02/07 — A Chinese business executive
was sentenced to death for swindling $385 million from investors
in a bogus ant-breeding scheme.
Wang Zhendong, chairman of Yingkou Donghua Trading Group Co.,
had promised returns of up to 60 percent for buying kits of ants
and breeding equipment from two companies he set up. He promoted
his products through advertising and drew in more than 10,000 investors
between 2002 and June 2005 when investigators shut down his companies.
While ants are used in some traditional and high priced Chinese
medicinal remedies, Wang sold the kits, which cost $25, for $1,300.
Prosecutors told the court in northeast China that one investor
committed suicide after realizing he had been duped, and only $1.28
million of the swindled money had been recovered by the time the
case was filed with the court last June.
Fake investments and pyramid investment schemes have become common
during China's transition from a planned economy to a free market.
Chinese leaders have tried to eradicate the scams, fearing widespread
losses could add to already percolating social unrest.
The death penalty is used broadly in China. Though usually reserved
for violent crimes, it is also applied for nonviolent offenses
that involve large sums of money or are deemed to have a pernicious
social impact. Fifteen managers of the company were given
prison terms ranging from five to 10 years and fined from $12,800
Vending Scam Targetted Hispanics
05/06 - Soda and snack vending machine businesses were among the
ventures deceptively sold to a group of Hispanics in Nevada, according
to the Federal Trade Commission. As a result of the scams, the
FTC announced a ban on selling any type of business ventures for
a group of Las Vegas companies and their officers.
The United States District Court for the District of Nevada ordered
the defendants to pay almost $9.3 million after finding that they
duped consumers into paying for vending machine business opportunities.
The court banned all of the corporate defendants, and three of
the four individual defendants from selling business ventures.
The fourth individual defendant is prohibited from violating Section
5 of the FTC Act or the Franchise Rule. The relief defendant in
the case is ordered to pay more than $560,000. A relief defendant
is not accused of wrongdoing, but has allegedly received ill-gotten
gains and does not have a legitimate claim to them.
The FTC charged the defendants with deceptively marketing their
snack and soda vending machine business venture -- with many marketing
efforts specifically targeting Spanish-speaking consumers. According
to the FTC complaint, the defendants claimed that the vending machines
would yield "a 700% - 2000% Return on Investment!," and
that for a $9,995 investment, the vending machines would generate
earnings of $700-$900 per week.
The FTC also alleged that the defendants used company insiders
to pose as successful vending machine operators. Numerous buyers
who relied on the scam lost money -- and some buyers did not even
receive the vending machines they paid for. The FTC also alleged
that the defendants failed to provide accurate and complete disclosure
documents, which the government requires to help consumers avoid
investing in fraudulent business opportunities.
The defendants' telemarketing boiler room was based in Las Vegas,
Nevada, as were some of the individual defendants. The companies
also operated out of Socorro, New Mexico. The defendants in this
case are: National Vending Consultants, Inc.; Success Vending Group,
Inc.; USA Candy Express, Inc.; Patrick Abeyta, Jr.; Debra Abeyta;
Larry Welli; Richard Savard; and Darlene Savard, aka Darlene Robarge.
Welli is the defendant excluded from the ban on selling business
ventures. Darlene Savard is the relief defendant. The judgment
and order were entered in the U.S. District Court for the District
of Nevada on March 22, 2006.
Do the Math - Avoid the Bath
Buying into any business opportunity can be expensive. Decide
how much money you can afford to lose then don't let anyone talk
you into investing more. If the business is successful, you can
expand it later. Determine how much income you need from the business.
Talk to other "verified" investors to see if they are
making near that much after meeting their expenses.
Figure out how much you will have to sell, and at what price,
to recover your investment. Be sure that the prices you need to
charge are competitive.
Check out the promoter by calling the legal department
of the company whose merchandise is being promoted. Find out whether
the promoter is affiliated with the company. Ask if they have ever
threatened trademark action against the promoter.
Question promises that your entire investment will go for
display racks and initial inventory. The promoter's sales commissions
on your purchase of products may eat up as much as 30-40% of your
Ask the promoter if you'll be charged wholesale or retail
prices for your initial and future inventory. If you pay retail,
you'll have to mark up the price to make a profit. That means you
probably won't move much inventory. Even if the promoter agrees
to sell you inventory at wholesale prices, you may get out-of-date
merchandise that never sold in the first place. Either way, you
Check out the locator companies which are third-party firms,
usually recommended by the promoter, that you hire to locate display
rack sites. The firms may claim they've done market surveys in
your area. Ask for copies. Typically, a firm charges you $200 per
site; the locator gets half the fee. Since high-traffic stores
could sell popular consumer products on their own the locators
may be able to secure low traffic locations only.
Try to verify claims made by the company and the company's
references. Visit existing locations and the anticipated locations
for your machines or racks. You may be able to determine from conversations
with shop owners and managers whether the machines and racks are,
or ever will be, successful. Ask them how many people come through
their establishment daily, what these customers are interested
in buying; and why, and at what cost, they would allow you to use
their floor space.
Get a list of previous investors, as well as their addresses
and phone numbers. The FTC's Franchise Rule requires it, and any
legitimate business should be happy to provide it. If possible,
visit one or two investors and their locations, in person. If you
call, you may be talking to a "singer" or a "shill",
a person hired by the promoter to give a favorable report on the
Get earnings claims in writing as well as substantiation. Insist
that the promoter give you written substantiation in the disclosure
document required by the Franchise Rule. Be sure this includes
the number and percent of others who have earned at least as much
as the promoter claims. If the promoter hesitates or refuses, walk
away. Don't believe what they say about sales, profits, or income
without ironclad written and verified proof.
Man Gets 3 Years In Medical Billing Software
02/07 - (CBS) LOS ANGELES A man who used telemarketers
to dupe some 30,000 people into spending $400 on software in the
hope of setting up a home-based medical billing business was sentenced
Monday to three years in federal prison.
Andrew Rubin was the general manager of Van Nuys firm Medicor LLC, according
to the government.
Authorities say Medicor's telemarketers told victims that they could
make $5 to $7 per claim processed, which added up to $20 to $45 per hour.
Medicor also placed advertisements in newspapers and other publications
claiming that a person could earn $20 to $40 an hour from home by doing
medical billing, according to a spokesman for the IRS' criminal investigations
In pleading guilty last year to charges of engaging in transactions with
criminally derived property, Rubin admitted that he and his brother,
Matthew Rubin -- who authorities say was part of the scam -- knew that
these assertions were false.
Andrew Rubin also admitted knowing that the telemarketers would mislead
customers by telling that they would receive a list of doctors who needed
their services, and by telling them that they did not have to do any
work to obtain the doctor clients.
From July 1999 to March 2001, Medicor sold more than 30,000 Kwic-Claim
medical billing software packages for about $400 each.
Andrew Rubin had agreed to split the profits from Medicor 40-60 with
his brother, according to the government.
When the two learned the business was under investigation, Andrew Rubin
funneled nearly $300,000 of his profits to a bank account that was held
by a trust of which his brother was a beneficiary, according to the IRS.
Matthew Rubin also pleaded guilty, but failed to appear in court for
a January sentencing hearing, court records show.
Andrew Rubin was sentenced by U.S. District Judge Gary Klausner, who
ordered that he begin serving his sentence immediately.
In addition to the criminal charges, the Federal Trade Commission obtained
a $16 million judgment against the Rubins, according to court papers
filed by prosecutors.