US agencies smash 'virtual offices' fraud scheme

LOS ANGELES - US federal agencies announced Friday the smash of a scheme to use "virtual offices" in over a dozen of cities to engage in mail fraud and money laundering with over one thousand victims and a loss of millions of dollars.

The announcement of the latest action against mail fraud and money laundering served as a warning as Americans started their Thanksgiving and Christmas shopping season.

US Attorney Kenneth Magidson announced that eight people from Las Vegas and Los Angeles had been arrested and charged with conspiracy, wire and mail fraud and money laundering.

According to the indictment, the eight defendants used a number of different named companies to conduct their telemarketing timeshare resale scheme targeting timeshare owners throughout the United States and Canada.

The timeshare owners were allegedly solicited to pay advance fees in exchange for The Jariv Companies providing willing buyers for their timeshare properties or points, when in fact, the defendants did not have buyers for the timeshare owners'  interests and did not market or sell the property.

A timeshare is a property with a particular form of ownership or use rights. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week, and almost always the same time every year) in which they may use the property.

Units may be on a partial ownership, lease, or "right to use" basis, in which the sharer holds no claim to ownership of the property.

"The IRS is committed to investigating those individuals who engage in corruption and money laundering," said Bernard Butler, assistant special agent in Charge, Internal Revenue Service-Criminal Investigation, in a statement.

"Working with our law enforcement partners IRS-CI is committed to unraveling complex financial transactions and money laundering schemes. We will continue to aggressively pursue those who victimize the elderly," Butler added.

According to court records, the Jariv companies were registered in various states in the United States, including Texas, Nevada, California, Illinois and Washington and conducted business at multiple addresses in Houston, Las Vegas, Los Angeles, Chicago and Seattle.

The defendants allegedly used mailing addresses or "virtual office suites" in Las Vegas, Houston, Chicago and Seattle for receiving monies from timeshare owners via US Mail or commercial interstate carriers like Fed Ex, all the while maintaining call center offices in Las Vegas, Houston, Chicago, and the greater Los Angeles-area from which the defendants, using telephones and email, contacted and communicated with timeshare owners, in an alleged scheme to defraud the timeshare owners of money.

The defendants and their employees falsely represented that they had buyers for the timeshare owners interests (either timeshare weeks or points) and solicited fees, ranging from hundreds of dollars to several thousand dollars from each timeshare owner, the indictment indicates.

The defendants allegedly falsely represented that the fees were fully refundable at closing and were used to secure the owners' place in an acquisition involving corporate buyers, as well as to pay for legal expenses such as title searches, estoppel letters and closing costs.

The indictment alleges closings were not scheduled, purported sales did not occur and no payments were made to timeshare owners for the sale of their property, nor have there been payments by corporations (or other buyers) to the Jariv companies for the purchase of timeshare properties.

The defendants and employees of the Jariv companies did not devote their resources to marketing the timeshare owners' properties and simply pocketed the advanced fees paid by the timeshare owners with a sizeable percentage of the money used to pay telemarketers, according to the indictment.

The balance of advance fees was allegedly kept by defendants to be deposited into bank accounts controlled by them and frequently transferred to personal bank accounts or other unrelated corporate bank accounts.

According to the indictment, between Feb 1, 2011, and Jan 31, 2012, the defendants would and did victimize approximately 1,000 victims living in Canada and throughout the United States including the Southern District of Texas, and deposited into eight bank accounts approximately 6,925,137.04 dollars in fraudulently obtained timeshare owner funds.

Approximately $5,945,433.04 in victim funds were retained by, and subsequently transferred into, other accounts controlled by the defendants.

The charges are the result of an investigation conducted by US Secret Service and IRS-CI with assistance by the FBI - Las Vegas field office and the San Francisco office of the Environmental Protection Agency.