The CEO and a senior manager of a Long Island, New York, company that fraudulently sold vending machine business opportunities were sentenced to prison, the Justice Department announced today. Both defendants worked at Multivend LLC, dba Vendstar, based in Deer Park, New York. Before closing in July 2010, Vendstar made approximately $10 to $12 million in sales per year.
The sentences were imposed Thursday by U.S. District Court Judge Joan M. Azrack of the Eastern District of New York. The two defendants sentenced on Thursday were among six defendants who were found guilty after a six-week jury trial before Judge Azrack last fall.
Edward Morris “Ned” Weaver, 43, of Perrysburg, Ohio, was sentenced to serve 60 months in prison. Weaver was the president and chief executive officer of Vendstar from 2004 to 2010. Weaver was convicted of conspiracy, mail fraud, wire fraud, and making a false statement to a federal law enforcement agent.
Lawrence A. Kaplan, 58, of Brooklyn, New York, was sentenced to serve 54 months in prison. Kaplan was Vendstar’s technical support manager, whose primary job was to suppress the large number of complaints Vendstar received. Kaplan was convicted of conspiracy, mail fraud, wire fraud and making a false statement.
“Ned Weaver, Lawrence Kaplan and their co-conspirators stole millions of dollars from people who had the misfortune to trust them and believe their lies,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to prosecute fraud and hold accountable those who scam everyday Americans out of their hard-earned money.”
“The U.S. Postal Inspection Service will continue to work with our partners to ensure that our citizens are protected from these types of predatory schemes,” said Inspector in Charge Antonio J. Gomez of U.S. Postal Inspection Service, Miami Division, which led the investigation. “It is an essential part of our core mission as Postal Inspectors that the U.S. mail isn’t used in furtherance of these fraudulent schemes that often target hard-working individuals.”
Vendstar sold business opportunities for plastic bulk vending machines that, for 25 cents, dispensed loose candy and nuts. Vendstar advertised nationwide in newspapers and on the Internet. Vendstar promised to provide everything its customers would need to be successful, including the machines, candy, assistance in finding profitable locations and ongoing customer support. Vendstar sales representatives – with Weaver’s and Kaplan’s knowledge and approval – misrepresented the business opportunity’s likely profits, the amount of money that Vendstar’s prior customers were earning, how quickly customers were likely to recover their investment, the quality of locations that were available for the vending machines and the level of location assistance that customers would receive from locating companies recommended by Vendstar. Vendstar referred customers to locating companies that did not find profitable locations and regularly changed their names to stay ahead of constant complaints. Vendstar sales representatives also falsely claimed to operate their own profitable vending routes, according to evidence introduced during the trial.
Twenty-two individuals have been charged with fraud in connection with Vendstar, including Vendstar managers, Vendstar sales representatives and the operators of locating companies recommended by Vendstar. In addition to the two defendants who were sentenced on Thursday, three defendants were sentenced last year and 16 other defendants are awaiting sentencing.
Principal Deputy Assistant Attorney General Mizer commended the U.S. Postal Inspection Service for its thorough investigation. The case was prosecuted by Senior Litigation Counsel Patrick Jasperse and Alan Phelps of the Civil Division’s Consumer Protection Branch.
The Consumer Protection Branch (CPB) handles criminal as well as civil cases. During the last 10 years, the CPB has convicted approximately 150 individuals of fraudulently selling business opportunities.