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Boiler Room Telemarketers Sentenced Over $18 Million Scam - US Attorney Reports Telemarketers Sentenced in Business Opportunity Scam

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 (“Pantheon”).

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 in restitution.

Blake Ladenheim was sentenced to sixty (60) months' imprisonment, three (3) years of supervised release, and ordered to pay $1,944,805 in restitution.

Michael Press was sentenced to thirty-four (34) months’ imprisonment, three years of supervised release, and ordered to pay $1,962,645 in restitution.

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 the advertisements.

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 year.

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 reduced price.

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, 2006.

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 . Related court documents and information may be found on the website of the District Court for the Southern District of Florida at or on

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 to $64,000.

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 investment.

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 lose.

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 business.

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 Scam

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 division.

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.

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