VENTURA, CA -- A federal judge sentenced two California men and a woman to prison after they were convicted of running a Ponzi scheme that defrauded hundreds who invested in vending machine advertising displays.
The judge sentenced Alan G. Flesher, 65, the ringleader of the scam, to more than 17 years in federal prison. His brother, Wayne D. Flesher, 62, received a six-year sentence. Nancy Carol Khalial, 65, their housemate, was sentenced to four years in prison.
Federal prosecutors said the trio defrauded 790 investors between 2001 and 2005, raising an estimated $41 million. They claimed the funds would be used to purchase and mount Ad Toppers video screens on top of vending machines and ATMs to display advertisements.
Instead of using the funds to pay for the devices, prosecutors said the Ponzi scammers used money from new investors to pay off earlier ones. By the time the scheme was uncovered, investors had lost a total of $27 million.
The trio pleaded guilty in July, 2012, to 17 counts of mail fraud, according to a statement from the U.S. Attorney's office.
One of Fletcher's companies, d.b.a. The Media Stores, exhibited at the National Automatic Merchandising Association's spring trade show in Las Vegas in 2005. The program invited vending operators to merchandise prerecorded audio CDs and DVDs through their existing glassfront snack machines and generate incremental revenue through third-party advertising. TMS said it would equip operators' machines for DEX data capture and transmission, supply a video display system to mount atop the vending bank for advertising, and when volume warranted, provide them with an automated teller machine.