WASHINGTON– A Newport Beach, California, man pleaded guilty today for his role as a salesman at fraudulent debt relief firms that offered to settle credit card debts but instead took victims' payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.
John Vartanian, 57, pleaded guilty to one count of an indictment alleging conspiracy to commit mail fraud and wire fraud in connection with companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter). According to the indictment, the conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements. The conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.
“This defendant preyed upon victims that were already burdened by significant debt,” said U.S. Attorney Eileen M. Decker for the Central District of California. “He gave them false hope while stealing the money that could have been used to reduce their obligations.”
“These scams take advantage of vulnerable consumers trying to climb out of debt,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division. “The Department of Justice will continue to prosecute fraudulent debt relief schemes.”
“We are gratified with today's plea, not only on behalf of our postal inspectors who exposed these conspirators for the scammers they were, but for the many unsuspecting victims who were seeking to climb out from their debts but instead were thrown into even deeper financial holes,” said Inspector in Charge Regina L. Faulkerson of Criminal Investigations, U.S. Postal Inspection Service. “People who rely on the U.S. mail expect what they receive will be truthful, honest communication – free from false statements and from attempts to further victimize them. I appreciate the work of the Consumer Protection Branch in bringing the last of these fraudulent credit repair conspirators to justice.”
The scheme ran from February 2010 to September 2012. Vartanian admitted that he did not tell customers during sales calls that the companies charged significant up-front fees. Additionally, he admitted that he falsely told customers that the companies were backed by a law group and that money would be refunded if customers were not satisfied. When his co-conspirators changed the name of the company from Nelson Gamble to Jackson Hunter in 2011 because of customer complaints, Vartanian continued to make the same pitch without disclosing that the new company was essentially the same as the old company. In speaking with unhappy customers, the conspirators at Jackson Hunter blamed past problems on Nelson Gamble and denied requests for refunds of money paid to Nelson Gamble.
Vartanian faces a statutory maximum sentence of 20 years in prison. The court set a sentencing date of Oct. 17 before U.S. District Judge Dale S. Fischer in Los Angeles. Four other defendants previously pleaded guilty in connection with the same scheme: Jeremy Nelson of Laguna Nigel, California, Elias Ponce of Santa Ana, California, Christopher Harati of Anaheim, California, and Athena Maldonado of Lake Forest, California. The defendants have not yet been sentenced.
In September 2012, the Federal Trade Commission brought a civil case against Nelson and the companies, alleging that the defendants misrepresented debt relief services offered to consumers. (Seehttps://www.ftc.gov/enforcement/cases-proceedings/122-3030-x120048/nelson-gamble-associates-llc-et-al). The case was settled by entry of a consent decree in August 2013.
Principal Deputy Assistant Attorney General Mizer commended the Postal Inspection Service team assigned to the Civil Division's Consumer Protection Branch for their investigative efforts and thanked the U.S. Attorney's Office for the Central District of California for their contributions to the case. The case is being prosecuted by trial attorneys Alan Phelps and James Harlow of the Consumer Protection Branch.
For more information about the Consumer Protection Branch, visit its website athttp://www.justice.gov/civil/consumer-protection-branch.
Topic: Consumer Protection Financial Fraud Updated July 11, 2016
Central District of California DOJ / 16-798 / July 11, 2016