Federal Judge Sentences Two More Vendstar Execs For Sales Fraud

Posted On: 1/10/2017

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TAGS: vending business fraud, vending biz-op scam, fraudulent business opportunity, Multivend LLC, Vendstar, bulk vending, coin machine, Scott M. Doumas, Paul E. Raia, Judge Joan M. Azrack, Benjamin C. Mizer, Justice Department's Civil Division, Patrick Jasperse

DEER PARK, NY -- A federal judge sentenced two sales representatives here on Long Island to prison for fraudulently selling vending machine businesses. The defendants, who are the latest to be sentenced among 22 convicted in the scam, worked at Multivend LLC, d/b/a/ Vendstar, based in Deer Park, NY. The company marketed business opportunities for plastic vending machines that dispensed loose "bulk" candy and nuts for 25¢.

Scott M. Doumas, 44, of East Setauket, New York, was sentenced to serve four years in prison and ordered to pay $290,664 in restitution. Doumas worked as a sales executive at Vendstar from 1999 to 2009. He was found guilty of mail fraud and conspiracy after a six-week jury trial in 2015.

Paul E. Raia, 65, of Brookhaven, NY, was sentenced to serve three years in prison and ordered to pay $339,354 in restitution. Raia was a salesman at Vendstar from 2006 to 2010 and was found guilty at trial of wire fraud and conspiracy.

The latest sentences were imposed in early January by U.S. District Court Judge Joan M. Azrack of the Eastern District of New York.

The Vendstar investigation began in 2010 and resulted in criminal charges being filed against 22 individuals in 2012 and 2013. All 22 of those defendants were convicted, and 18 of them have now been sentenced. Before going out of business in July 2010, Vendstar reportedly generated about $10 million to $12 million in annual sales.

"The Department of Justice will work relentlessly to bring fraudsters to justice and to secure restitution for their victims," said principal deputy assistant attorney general Benjamin C. Mizer, head of the Justice Department's Civil Division. "The prison sentences imposed this week are the result of more than six years of hard work, and demonstrate the department's commitment to investigating, prosecuting, and punishing those who lie to steal other people's money without remorse."

Four additional defendants convicted of fraud in connection with Vendstar still await sentencing.

Vendstar advertised nationwide in newspapers and on the Internet. It reportedly promised to provide everything its customers would need to be successful, including the machines, candy, assistance in finding profitable locations and ongoing customer support.

According to the court, Vendstar sales representatives -- with the knowledge and approval of the crooked organization's managers -- misrepresented the business opportunities' likely profits, the amount of money that Vendstar's prior customers were earning and how quickly customers were likely to recover their investment, as well as the quality of locations that were available for the vending machines and the level of location assistance that customers would receive from locating companies recommended by Vendstar.

According to evidence introduced during the trial, Vendstar referred customers to locating companies that did not find profitable locations and regularly changed their names to stay ahead of constant complaints. Vendstar sales representatives also falsely claimed to operate their own profitable vending routes.

The case was prosecuted by Senior Litigation Counsel Patrick Jasperse and Alan Phelps of the Civil Division's Consumer Protection Branch. During the past 10 years, approximately 170 individuals have been convicted of fraudulently selling business opportunities in cases prosecuted by the Consumer Protection Branch.

SEE ALSO: Vendstar Verdict: Six Convicted On Vending Machine Biz-Op Fraud Charges

Judge Orders Jail Time For Two Vendstar Defendants

10 Indicted In Bulk Vending Biz-Op Scam