Indian-American among 3 arrested in USD 3 mn fraud case in US

Washington: An Indian-American from Michigan has been arrested along with two others on charges of conspiring to defraud at least 43 victims of more than USD 3 million through the sale of phony business opportunities, a US attorney has said.

David Weinstein, 61, Vijay Vanam Reddy, 45, and Kevin Brown, 61, have been charged with one count of conspiracy to commit wire fraud.

Reddy on Thursday made an appearance in a Detroit federal court. Brown and Weinstein were arrested on December 8. Brown was released on USD 50,000 bond and Weinstein a day later.

From September 2015 through August 2018, the three advertised business opportunities for sale on various websites. They purported to sell blocks of contracts with medical providers who allegedly wanted to outsource their medical billing, collections, appeals, answering, credentialing or transcription functions.

The buyers would then provide the contracted services to the medical providers and earn a profit. The conspirators promised to deliver a specified number of providers and pledged that their proprietary marketing efforts would provide a guaranteed client base to the buyers.

To induce buyers to purchase the business opportunities, they created fake references purporting to be buyers who vouched for their prior business purchases from the conspirators.

In fact, the references were Reddy’s family member and Weinstein, using aliases to speak with potential buyers, federal prosecutors alleged.

After agreeing to purchase the blocks of medical providers, victims entered contracts with companies represented by Weinstein or Reddy and wired down payments ranging from USD 15,000 to USD 255,000 to accounts controlled by Weinstein or Brown. The remainder of each purchase price was payable when the conspirators fulfilled the contract by delivering the agreed-upon number of providers.

After receiving the down payments, Weinstein and Reddy delivered to each victim only a small number of medical providers, federal prosecutors alleged.

Despite not fulfilling the contracts of any of the buyers identified by law enforcement, the conspirators continued to sell blocks of medical providers to new buyers and refused to provide refunds for their failures to satisfy the terms of the contracts.

The conspirators also periodically sold batches of previously signed contracts and disclaimed further responsibility for those contracts to insulate themselves from complaints or legal action from disgruntled buyers, the Department of Justice said.

Brown acted as the business broker for most of the transactions and received a commission for the sales he brokered. Weinstein or Reddy acted as the seller and signed the contracts with the victims.

At least 43 victims sent more than USD 3 million to accounts controlled by the conspirators.

Law enforcement agents have tentatively identified an additional 21 victims who collectively paid an additional USD 1.1 million to the conspirators.

The defendants spent the victims’ money on personal expenses and transferred money to other bank accounts controlled by them or their family members, the Department of Justice added.