Aging Hucksters Busted In 9M Vending Scam

NEW YORK CITY -- A ring of seven alleged swindlers has been charged with one of the most ambitious nationwide business-opportunity vending scams in recent history, raking in $9 million.

Kenneth Levin, 68, the owner of multiple companies operating under at least seven different names, purportedly brought in close to $9 million from January 2005 through December 2011 by selling fraudulent vending machine business opportunities. His victims, according to law enforcement officials, included some 1,300 aspiring entrepreneurs across the country.

Also named in the indictment were Stephen Friedman, 78; Jonathan Campbell, 76; Taylor Levin, 33; Sears Hobbs, 51 (aka Kelly Chase, aka Karen White); James Conley, 58; and Marcel Harris, 51.

While the alleged scam resembles the perennial swindle of selling substandard equipment at inflated prices with promises of big profits, what makes this case unique is the age of the New York-based defendants, the majority of whom are in their late 50s to late 70s.

The indictment was unsealed on Mar. 3 by Preet Bharara, the U.S. Attorney for the Southern District of New York, along with acting assistant attorney general Benjamin C. Mizer of the Justice Department's Civil Division and postal inspector Ronald J. Verrochio.

The machines described in the indictment dispensed soft drinks, snack foods, and candy. Although prosecutors are not releasing the names of Levin's companies, a Google search for "Kenneth Levin" does reveal several likely candidates.

Each of the defendants is charged with one count of conspiracy to commit mail fraud and wire fraud, and one count each of mail fraud and wire fraud, each of which carries a maximum sentence of 20 years in prison.

As of this writing, Kenneth and Taylor Levin, Hobbs, Campbell and Friedman have all been taken into custody and will be presented before U.S. District Judge Katherine B. Forrest. Harris and Conley remain at large.

"As alleged, the defendants preyed on prospective customers by inventing facts and making false promises to make a proposed vending machine 'business opportunity' appear more attractive," Bharara said. "As I have noted before, we are taking a close look at fraud that targets consumers and we will aggressively prosecute such conduct wherever we find it."

According to the allegations contained in the indictment and statements made in court, the defendants perpetrated a scheme to defraud consumers by making material misrepresentations in an effort to induce those consumers to invest thousands of dollars in vending machine business opportunities.

Through a company located in Manhattan and multiple successor companies, the defendants and other employees allegedly falsely promised customers that if they purchased packages of five or 10 vending machines, they would be provided access to pre-established, high-profit locations and connected with experienced locators.

As stated in the indictment, Levin and his accomplices falsely promised to provide training and ongoing customer assistance. They also allegedly misled customers regarding the features of the vending machines, including purposefully concealing the fact the machines were manually operated, and accepted only exact change in coins, rather than automatically accepting bills and providing change.

Despite the defendants' claims to customers, there were allegedly no pre-sold locations available, locators were inexperienced and ill-equipped, and the companies delivered little or no follow-up service or assistance to customers.

The defendants are also accused of misleading prospective customers about the potential profits, including leading them to believe they had purchased profitable vending machines. The scamsters allegedly made these assertions knowing there were already scores of would-be operators who had lost their entire investments.

Federal prosecutors allege that Levin and his accomplices encouraged prospective customers to contact locating companies to verify that the purported locations were available. The owners of locating companies were allegedly directed to echo the false statements and affirm that high-traffic locations had already been found in the customers' geographic areas.

In reality, the indictment charges, the locating companies working with Levin did not have high-traffic locations or routes waiting in the prospective customers' area. And the locating companies possessed no special skills, tools or expertise in finding locations. In some instances, machines were allegedly placed in businesses that had not consented to placing them.

"Business opportunity fraud insidiously targets Americans in search of a better future for their families," said Mizer. "Instead of becoming successful entrepreneurs, customers become victims, and often lose their life savings."

Those with information related to the case are encouraged to contact the United States Attorney for the Southern District of New York at (212) 637-2200 or justice.gov/usao/nys/