EIGHT INDICTED IN TELEMARKETING SCHEMES CORRECTION

Baltimore - United States Attorney Stephen M. Schenning, Lynne A. Hunt, Special Agent in Charge, Federal Bureau of Investigation and William Kezer, Acting Postal Inspector in Charge, Washington Metro Division, announced that on July 10th a federal grand jury returned two indictments against seven individuals and a company, charging them in telemarketing schemes that defrauded more than 27,000 consumers of over $3.3 million.

The Indictments charge Joel Katz, 62, of Ruxton Green Court in Baltimore, with mail, wire, and bankruptcy fraud, money laundering, being a felon in possession of a gun, as well as a forfeiture charge. Martha Tuxford, 45, of Baltimore is charged with bankruptcy fraud. Jeffrey Augen, 58, and Judith Lugo, 32, both of Baltimore, Mark Cohn, 45, of Woodside, California, Shawn Hatfield of Timonium, Daniel Connor, 36, of Milford, Connecticut and Four Star Financial Services, LLC, of Burbank, California, are charged with mail and wire fraud. A press release on July 10th indicating that Augen, Lugo, Cohn, Hatfield, Connor and Four Star were charged with money laundering and a forfeiture charge was incorrect.

According to the Indictments, Joel Katz operated a telemarketing business and controlled bank accounts in the names of the following corporations: Telennium, Ltd.; Southern Belle Security Systems, Inc.; Bulk Long Distance,Inc.; Kiss'n Tel Communications, Inc.; The Money Club, Inc.; Multicard Services, Inc.; and VIP Billing and Collection, Inc. Jeffrey Augen functioned as Katz' second in command and became a consultant to Four Star Financial Services, LLC, where Mark Cohen was general counsel and executive vice president. Daniel Connor was also an employee at Four Star Financial Services, LLC. Shawn Hatfield and Judith Lugo were both employees of Katz, where they supervised telemarketing rooms. The Indictments allege that telemarketing representatives, using scripts written by Joel Katz, spoke on the telephone with consumers to persuade them to purchase programs entitled The Money Club, The Tele-Money Club, etc., for prices ranging from $49.95 to $149.95. Consumers were told that in exchange for the fee, they could become a member of the club and receive a package of benefits, including a credit card for which the consumer had been "pre-approved," valuable coupons and discounts. The telemarketing representative would persuade the consumer to agree to the automatic debit of their bank account to pay for club membership.

According to the Indictments the package that was sent to the consumer contained, not a credit card, but some or all of the following items: a list of banks which the consumer had to contact to apply for a card or a bank card application, a coupon package purchased for $3.47 or coupons purchased for $.01 each, a CD Rom for an internet connection purchased for $.37 per CD, and a telephone calling card.

The Indictment alleges that in around May, 2000, after approximately 15,416 consumers had lost approximately $1, 556,327, Mark Cohn, Four Star Financial Services, LLC, Jeffrey Augen, Shawn Hatfield, Daniel Connor and Judith Lugo decided to continue the scheme without Joel Katz, marketing the National Consumer Benefits Club program. Joel Katz continued operating the scheme through entities he controlled.

Also during the period December 1999 through May, 2000, the Indictment alleges that Joel Katz transferred proceeds of the telemarketing scheme to his girlfriend, Martha Ann Tuxford and to her personal bank accounts, with the intent to conceal the nature, location, source and ownership of those funds.

On June 15, 2000, Katz declared personal bankruptcy. The Indictment alleges that Katz submitted a false Statement of Financial Affairs to bankruptcy authorities, which did not include all of his bank accounts, falsely stated that his income in 1999 was $85,000 and in 2000 was $19,000, when in fact, the Indictment alleges he received $400,000 during that period. In addition, the Indictment charges that Katz continued to make cash payments to Martha Tuxford, as well as depositing checks, drawn on accounts that were concealed from the bankruptcy trustees, to Tuxford's personal bank accounts. These gifts and transfers were also not reported on Katz' Statement of Financial Affairs.

The maximum penalty faced by the defendants on the mail, wire and bankruptcy fraud charges is 5 years imprisonment and a $250,000 fine. The maximum penalty for money laundering is 20 years imprisonment and a $500,000 fine and the maximum for being a felon in possession of a firearm is 10 years imprisonment. No initial appearance has been set for any of the defendants.

United States Attorney Stephen M. Schenning praised the work of investigators, citing especially the assistance of the Better Business Bureau. "Consumers should know that their complaints to the Better Business Bureau are taken seriously. This indictment is a perfect example of law enforcement working together with the community to get results."

This case was investigated by the Federal Bureau of Investigation and the U.S. Postal Inspection Service and is being prosecuted by Assistant U.S. Attorneys Joyce K. McDonald and Robert R. Harding.