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JUNE 6, 2002 TWO CONVICTED IN TELEMARKETING SCHEME AFTER FOUR WEEK JURY TRIAL Baltimore - United States Attorney Thomas M. DiBiagio, Lynne A. Hunt, Special Agent-in-Charge of the Federal Bureau of Investigation, Baltimore District, and Andrew Clemmons, Postal Inspector in-Charge, Washington Division, announced today that after a four week trial, a federal jury convicted Joel Katz, 63, of Ruxton, Maryland of 35 counts of mail fraud or wire fraud, 8 counts of money laundering and 1 count of conspiracy. The same jury convicted Judith Lugo, 32, of Yonkers, New York of 26 counts of mail or wire fraud and 1 count of criminal conspiracy. The charges arose from a telemarketing scheme that defrauded more than 16,000 consumers of over $1.6 million. The trial was held before United States District Judge Andre M. Davis. Joel Katz was also convicted in October 2001 in separate jury trials of being a felon in possession of a gun and bankruptcy fraud. He is scheduled for sentencing on all charges on August 29, 2002. Prosecutors presented evidence at trial that Katz operated a telemarketing business and controlled bank accounts in the names of the following corporations: Telennium, Ltd.; Southern Belle Security Systems; Bulk Long Distance, Inc.; Kiss'n Tell Communications, Inc.; The Money Club, Inc,; Multicard Services, Inc; and VIP Billing and Collections, Inc. Jeffrey Augen, who previously pled guilty to mail fraud and who testified at trial, functioned as Katz's second in command in the telemarketing business. Shawn Hatfield and Judith Lugo were both employees of Katz and supervised a telemarketing room which, in 1999-2000, was located at 2405 York Road in Baltimore, Md. Hatfield, who also pled guilty to wire fraud charges, testified at trial as well. Evidence presented at trial also showed that telemarketing representatives located in Baltimore and in telemarketing rooms throughout the United States, using scripts written by Katz, spoke on the telephone with consumers to persuade them to purchase a program called "The Money Club", "The Tele-Money Club", "Smart Savers Club", "Cash Card Club", "Cash Card Express" and "National Consumers Benefits Club" for prices ranging from $49.95 - $149.95. Consumers were told that in exchange for their money, they would receive benefits, including a credit card for which the consumer had been "pre-approved," a line of credit for which they were "approved right now over the phone for $150," and 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. The package that was sent to consumers contained, not a credit card, but a list of banks to which the consumer could apply for a credit card, a coupon book, and CD rom which Katz purchased for $3.47. During the time period from June 1999 - March 2000, over 16,000 consumers lost in excess of $1.6 million to the scheme to defraud. The jury also convicted Katz of laundering the proceeds of the fraud by transferring funds from the telemarketing scheme to his girl friend, Martha Ann Tuxford, and to her personal bank account and using the funds to pay for a Bentley automobile and a house at 6 Ruxton Green Court. Defendant Katz waived a forfeiture verdict on the assets and U.S. District Judge Andre M. Davis will decide the asset forfeiture issues. The maximum penalty faced by Katz on the conspiracy and mail, wire and bankruptcy fraud conviction is 5 years imprisonment and/or a $250,000 fine per count. The maximum penalty for each money laundering conviction is 20 years imprisonment and a $500,000 fine and the maximum sentence for being a felon in possession of a firearm is 10 years imprisonment. The actual sentence will be determined using the federal sentencing guidelines. Sentencing for Mr. Katz is set for August 29, 2002. Ms. Lugo faces possible imprisonment of 5 years and/or a $250,000 fine on the conspiracy, mail and wire fraud counts. Her sentencing will also be on August 29, 2002. The remaining co-defendants, Mark Cohn, of San Francisco, CA, Daniel Connor of Milford, Connecticut and Four Star Financial Services, LLC of San Francisco, CA are scheduled for trial in May, 2003. The case was investigated by the Federal Bureau of Investigation and the U.S. Postal Inspection Service and is being prosecuted by Assistant U.S. Attorney Joyce K. McDonald and Robert R. Harding. |