U.S. Citizen Pleads
Guilty in Connection with Costa Rica-Based
Business Opportunity Fraud Scheme
Stephen Schultz entered a guilty plea in
federal district court in Miami to 12 counts
of an indictment pending against him, the
Justice Department and the U.S. Postal
Inspection Service said. Schultz pleaded
guilty Thursday to one count of conspiracy
to commit mail and wire fraud, eight counts
of mail fraud, and three counts of wire
fraud. The actions against Schultz are part
of the government's continued nationwide
crackdown on business opportunity fraud.
Schultz was arrested on Dec. 12, 2008, in
Costa Rica following his indictment by a
federal grand jury in Miami on Nov. 20,
2008. According to the charges against him,
Schultz and a co-conspirator, Jeffrey
Pearson, purported to sell beverage and
greeting card business opportunities,
including assistance in establishing,
maintaining, and operating such businesses.
Following his arrest in Costa Rica, Schultz
was extradited to the United States.
Schultz worked for USA Beverages Inc., Twin
Peaks Gourmet Coffee Inc. and Cards-R-Us
Inc. Beginning in 2005, USA Beverages sold
business opportunities to own and operate
coffee beverage display racks. USA Beverages
rented office space in Las Cruces, N.M., and
otherwise made it appear to potential
purchasers that USA Beverages' operations
were fully within the United States.
However, USA Beverages actually operated
from Costa Rica.
After USA Beverages, Schultz worked for Twin
Peaks, which was a Florida and Colorado
corporation. Twin Peaks sold business
opportunities to own and operate coffee
beverage sale display racks. Twin Peaks
rented office space in Fort Collins, Colo.,
to make it appear to potential purchasers
that its operations were fully within the
United States. In truth, Twin Peaks also
operated from Costa Rica.
Schultz next worked for Cards-R-Us, which
was a Nevada corporation that sold business
opportunities to own and operate greeting
card sale display racks. Cards-R-Us rented
office space in Reno, Nev., to make it
appear to potential purchasers that
Cards-R-Us' operations were fully within the
United States. Like USA Beverages and Twin
Peaks, Cards-R-Us actually operated out of
Costa Rica.
Schultz and his co-conspirators made, and
caused others to make, numerous false
statements to fraudulently induce the
purchase of business opportunities.
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 were referred to references who
told false tales of their success as
business opportunity owners. Through these
and other misrepresentations, purchasers of
the business opportunities were led to
believe that they would likely earn
substantial profits.
"Business opportunity fracud targets
Americans who are working hard to start a
business and earn an honest living. While
these fraud schemes may sometimes operate
beyond our borders, they aren't beyond the
reach of United States law," said Tony West,
Assistant Attorney General for the Civil
Division of the Department of Justice. "The
Justice Department is committed to
prosecuting those who steal through false
promises of financial success."
In pleading guilty, Schultz admitted that
his role in the conspiracy resulted in
between $2.5 million and $7 million in
losses to investors and harmed more than 250
victims. Schultz faces a maximum sentence of
10 years in prison on the conspiracy count,
and 25 years on each of the mail and wire
fraud counts. He also faces a possible fine
and mandatory restitution.
Assistant Attorney General West commended
the investigative efforts of the agencies
involved in this matter, the Postal
Inspection Service and the Federal Trade
Commission, which previously brought a
related civil suit and made a criminal
referral. The Justice Department's Civil
Division is handling the criminal
prosecution.
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