Second American
Arrested in Connection
With Costa Rica Based
Fraud
A second U.S. citizen
charged in connection
with the operation of a
series of fraudulent
business opportunities
was arrested on Friday
in Costa Rica following
his indictment by a
Miami federal grand jury
on Nov. 20, 2008, the
Justice Department and
the U.S. Postal
Inspection Service
announced today.
Stephen Schultz was
arrested based on
charges that he and a
co-conspirator, Jeffrey
Pearson, purported to
sell beverage and
greeting card business
opportunities, including
assistance in
establishing,
maintaining and
operating such
businesses. The charges
form part of the
government's continued
nationwide crackdown on
business opportunity
fraud.
Pearson was arrested on
Dec. 9, in Costa Rica.
The United States
intends to seek the
extradition of Schultz
and Pearson from Costa
Rica.
Beginning in May 2005,
Pearson and Schultz 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., The
Coffee Man Inc., and
Powerbrands Distributing
Company. According to
the indictment, the
business opportunities
the defendants sold cost
thousands of dollars
each, and most
purchasers paid at least
us$10,000. Each company
operated for several
months, and after one
company closed, the next
opened. The various
companies used bank
accounts, office space,
a printing company and
other services in the
Southern District of
Florida and elsewhere.
The defendants, using
aliases, employed Voice
Over Internet Protocol
(VoIP) phone service and
virtual offices in the
U.S. to handle mailings
to make it appear to
potential purchasers
that the defendants were
located in the United
States. In reality,
Pearson and Schultz
operated out of Costa
Rica to fraudulently
induce potential
purchasers in the United
States to buy the
purported business
opportunities.
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 the
companies were based in
and operated out of the
United States; 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 also were
falsely 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.
In addition, potential
purchasers were falsely
told that the companies
were established years
earlier, had a
significant number of
distributors across the
country and had a track
record of success.
Potential purchasers
also were told that they
would receive their
merchandise racks,
merchandise and
locations promptly, even
though many purchasers
received nothing at all.
Potential purchasers
were referred to
references who,
according to the
indictment, told false
tales of their success
as business opportunity
owners.
The indictment alleges
that Schultz, a/k/a
Allen Pheifer, was an
employee of USA
Beverages who typically
discussed with potential
customers the locations
available for placement
of the merchandise
stands in their area.
Schultz also worked with
Twin Peaks and
Cards-R-Us, according to
the charges.
The indictment alleges
that Pearson, a/k/a Paul
Clayton, a/k/a Tim
Harris, a/k/a Ray
Garrett, was a salesman
for and manager of USA
Beverages. Pearson,
using various assumed
names, operated, managed
and worked as a salesman
for Twin Peaks,
Cards-R-Us, Premier
Cards, Coffee Man and
Powerbrands. He also was
listed on Costa Rican
corporate documents as
the president of Twin
Peaks.
"We greatly appreciate
the effort and
cooperation of Costa
Rican authorities in
arresting these two
defendants," said
Gregory G. Katsas,
Assistant Attorney
General for the Justice
Department's Civil
Division. Assistant
Attorney General Katsas
commended the
investigative efforts of
the Postal Inspection
Service offices based in
Reno, Nev., and Miami.
"The Postal Inspection
Service investigated a
virtual office in Reno,
Nevada, and learned that
it and the U.S. Mail
were being used as part
of a international fraud
scheme aimed at United
States citizens. Our
investigation discovered
a web of deception that
led to Costa Rica. With
international
cooperation, we have now
arrested two of the
leaders of this scheme."
said U. S. Postal
Inspector in Charge Pete
Zegarac, based in
Phoenix.
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.
-- The Coffee Man was
registered as a Colorado
corporation and rented
office space in Denver.
-- Powerbrands was
registered as a
Wisconsin corporation
and rented office
space in Glendale, Wis.,
and Palm Beach Gardens,
Florida.
Both Pearson and Schultz
were charged with
conspiracy and with
committing their
offenses via
telemarketing. Pearson
also was charged with 12
counts of mail fraud and
seven counts of wire
fraud. Schultz also was
charged with eight
counts of mail fraud and
three counts of wire
fraud.
If convicted, Pearson
and Schultz face a
maximum statutory term
of 10 years'
imprisonment, a possible
fine and mandatory
restitution on the
conspiracy count. They
also face a maximum
statutory term of
imprisonment of 25 years
on each of the mail and
wire fraud counts, a
possible fine and
mandatory restitution.
The case is being
prosecuted by trial
attorneys Alan Phelps
and Jeffrey Steger with
the U.S. Department of
Justice Office of
Consumer Litigation.
An indictment is merely
an allegation, and every
defendant is presumed
innocent until proven
guilty beyond a
reasonable doubt.
SOURCE U.S.
Department of Justice
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