Six Convicted On Business Opportunity Fraud Charges

Nov. 18, 2015

A jury in Central Islip, New York, convicted six men yesterday on felony charges of conspiracy and fraud in the sale of candy vending machine business opportunities, the Department of Justice announced

Edward Morris “Ned” Weaver, 42, of Perrysburg, Ohio, and Lawrence A. Kaplan, 57, of Brooklyn, New York, were convicted of conspiracy, six counts of fraud and one count each of making false statements to federal agents during a related criminal investigation.  Scott M. Doumas, 43, of East Setauket, New York, was convicted of one count of conspiracy and one count of mail fraud.  Richard R. Goldberg, 43, of Bay Shore, New York, and Richard Linick, 73, of Coram, New York, were each convicted of conspiracy and one count of wire fraud.  Paul E. Raia, 64, of Brookhaven, New York, was convicted of conspiracy and two counts of wire fraud.

The convictions followed a six-week trial before U.S. District Court Judge Joan M. Azrack in federal court in the Eastern District of New York.  Each of the defendants faces a statutory maximum sentence of 10 years in prison on the conspiracy count and 25 years in prison on the fraud counts.  Weaver and Kaplan face a statutory maximum sentence of five years in prison on the false statements charges.

“These defendants promised their victims the American dream, but knew that what they in fact were offering was a worthless business opportunity,” 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 those who seek to scam out of everyday Americans the hard-earned money in their retirement accounts and life savings.”

According to evidence presented at trial, managers, sales representatives and operators of “locating companies” associated with Multivend LLC, d/b/a Vendstar, made material misrepresentations about the profits customers would make from bulk candy vending machines. During the telemarketing calls, Vendstar’s sales representatives falsely claimed to operate their own profitable vending machine businesses.

Additional evidence at trial described how Vendstar advertised nationwide in newspapers and on the Internet.  Vendstar sales representatives promised to provide consumers with everything they needed to operate a successful business, including vending machines, an initial supply of candy, assistance in finding locations for the vending machines, training and ongoing customer assistance.  The locating companies who worked with Vendstar to close deals had no special skills, tools or expertise in finding locations and generally placed consumers’ machines wherever they could as quickly as they could, often in businesses that had not consented to housing the machines and that soon demanded that the machines be removed.  The vending machines generated little business and Vendstar’s customers lost all or nearly all of their investments.  The typical customer paid about $10,000 for the business opportunity.

Prior to this trial, 16 other Vendstar managers, Vendstar sales representatives and locating company operators pleaded guilty to federal felony charges for related conduct at Vendstar.  Evidence presented at trial established that from 2005 to 2010, the Vendstar scheme cost consumers $60 million.

Principal Deputy Assistant Attorney General Mizer commended the U.S. Postal Inspection Service for their investigative efforts.  The case was prosecuted by Trial Attorneys Patrick Jasperse and Alan Phelps of the Civil Division’s Consumer Protection Branch.