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Wednesday, July 11, 2018

Five Charged for Elder Fraud Schemes


Five U.S. individuals were charged today and yesterday for their roles in three separate elder fraud schemes.  The schemes collectively defrauded tens of thousands of Americans, many of whom were elderly, out at least a hundred million dollars.  Four defendants were charged in the Eastern District of New York, the other was charged in Southern District of Florida.

“Earlier this year, when we announced the largest elder fraud sweep in history, we sent a clear message:  we will hold perpetrators of elder fraud schemes accountable wherever they are,” said Attorney General Jeff Sessions.  “When criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal – criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains.  Today’s indictment shows we are following through on this promise, and fraudsters everywhere should take note of it.”

Three Long Island Residents Indicted for Multi-Million Dollar Fraud Scheme

Three Long Island residents were charged with running a fraudulent mass-mailing scheme that tricked thousands of consumers into paying at least $30 million in fees for falsely promised prizes.

An indictment unsealed Wednesday charges Tully Lovisa, 55, of Huntington Station, New York; Shaun Sullivan, 37, of Merrick, New York; and Lorraine Chalavoutis, 61, of Greenlawn, New York, with mail fraud, money laundering, and conspiring to commit those offenses.  The indictment also charges Lovisa with perjury and additional wire fraud and money laundering offenses.  U.S. Postal Inspectors arrested all three defendants this morning.

“As alleged in the indictment, the defendants perpetrated a cruel hoax on their victims, many of them elderly and vulnerable, by sending promotional mailings that falsely claimed they would receive tens of thousands of dollars in prize money if they paid a fee,” said U.S. Attorney for the Eastern District of New York Richard P. Donoghue.  “In so doing, Lovisa violated prior court orders directing him to stop engaging in mass mailing operations and his co-conspirators were well aware of prior enforcement action to stop this conduct.  Protecting the elderly from brazen predators like the defendants is a priority of this Office and the Department of Justice.”

The defendants’ prize-promotion mailings led recipients, many of whom were elderly and vulnerable, to believe that they could claim a large cash prize in exchange for a modest fee, according to the indictment.  This was false; victims who submitted fees did not receive large sums of money, the indictment alleges. 

The scheme alleged in the indictment began after the Federal Trade Commission (FTC) sued Lovisa in 2010 for sending deceptive prize-promotion mailings.  In response to that suit, a court enjoined Lovisa from any involvement with prize-promotion mailings.  But, as alleged in the indictment, Lovisa did not stop.  Rather, the indictment alleges that he worked with Sullivan and Chalavoutis to set up numerous prize-promotion companies using straw owners and aliases to continue defrauding hundreds of thousands of consumers.  Chalavoutis, who provided various important operational services, allegedly helped conceal Lovisa’s and Sullivan’s control of the operation and misled others about the nature of the business.

The perjury charge against Lovisa relatedly stems from his submission to the FTC of a false compliance report, in which he claimed only to own a construction company and not be involved in prize-promotion mailings.  The additional wire fraud and money laundering charges relate to Lovisa’s alleged further deception of the FTC related to the court-ordered sale of a home he owned in Las Vegas.  According to the indictment, Lovisa arranged a sham sale of the house in September 2012 that allowed him to maintain control of the home and only disgorge $155,500 to the FTC.  Lovisa then allegedly sold the house in April 2015 for $540,000.

“For far too long, fraudulent solicitations such as these have flooded seniors’ mailboxes.  This indictment demonstrates a strong desire to end this conduct when administrative or civil remedies have been circumvented by these individuals at every opportunity,” said Chief Postal Inspector Guy Cottrell. “Today’s criminal charges show the continuing commitment by the U.S. Postal Inspection Service to rid the mail system of these pernicious threats to the livelihoods of the most vulnerable Americans.”

The mail fraud, wire fraud, and conspiracy charges each carry a statutory maximum sentence of twenty years in prison.  The money laundering charges each carry a statutory maximum punishment of ten years in prison.  The perjury charge carries a statutory maximum punishment of five years in prison.  Each charge also carries a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

An indictment is an accusation by a federal grand jury and is not evidence of guilt.  The defendants should be presumed innocent unless and until proven guilty.

The United States Postal Inspection Service investigated the case.  The case is being prosecuted by Trial Attorneys Daniel Zytnick and Timothy Finley of the Department of Justice’s Consumer Protection Branch and Assistant U.S. Attorney Charles P. Kelly of the Eastern District of New York.

List Broker Pleads Guilty to Conspiracy to Commit Mail Fraud

Steven Keats, of Bayside, New York, pleaded guilty to a charge of conspiracy to commit mail fraud.  In his plea allocution, Keats admitted that while working at a Connecticut-based list brokerage firm, he arranged for lists of consumers’ names and addresses to be provided to a fraudulent mailer.  The mailer, a Swiss entity, mailed deceptive solicitations to vulnerable victims.  The mailing pieces falsely informed recipients that they had won large cash prizes and could collect the winnings by paying the mailer of a $50 fee.  In reality, there was no prize, and the Swiss mailer simply collected victims’ payments.  Keats admitted knowing that the names and addresses that he supplied to the Swiss entity would be used to send these deceptive mailing pieces to victims across the United States.

As a participant in the conspiracy, Keats provided the names of tens of thousands of U.S. consumers to the Swiss-based fraudulent mailer.  The charge against Keats carries a statutory maximum penalty of 20 years in prison and a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

The United States Postal Inspection Service investigated the case.  The case is being prosecuted by Trial Attorneys Ehren Reynolds and Alistair Reader of the Department of Justice’s Consumer Protection Branch.

Florida Resident Charged with Conspiracy to Commit Mail Fraud

Eugene Marotta, of Fort Lauderdale, Florida, was charged by information with one count of conspiracy to commit mail fraud.  The charging document alleges that Marotta was part of a conspiracy to defraud consumers by sending thousands of vulnerable victims deceptive mailing pieces that falsely promised prizes.  The solicitations were from a shell company called Palm Beach Liquidation Gallery and were designed to deceive recipients into believing that they had won hundreds of thousands of dollars as well as an “exclusive liquidation asset.”  To claim their winnings and the “asset,” recipients were directed to pay a total of $161.25 as a “liquidation fee.”  In fact, there was no prize, and the “asset” was a cheap poster.  Marotta and his co-conspirators pocketed the money sent by victims.

The scheme allegedly caused more $1 million in losses to at least 6,000 victims.  The charge against Marotta carries a statutory maximum penalty of up to 5 years in prison and a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

A criminal information is an accusation and not evidence of guilt.  The defendant should be presumed innocent unless and until proven guilty.

The United States Postal Inspection Service investigated the case.  The case is being prosecuted by Trial Attorney Ehren Reynolds of the Department of Justice’s Consumer Protection Branch.

For more information about the Consumer Protection Branch, visit its website at www.justice.gov/civil/consumer-protection-branch.  For more information about the U.S. Attorneys’ Offices for the Eastern District of New York and Southern District of Florida visit their websites at www.justice.gov/usao-edny and www.justice.gov/usao-sdfl.

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