Jenifer Devine, 39, of Fair Lawn, owner of Devine Wholesale, pleaded guilty before U.S. District Judge Claire C. Cecchi in Newark federal court to an Information charging her with wire fraud.

According to documents filed in this case and statements made in court:

From December 2008 through September 2010, Devine, through Devine Wholesale, solicited investors from New Jersey and throughout the United States, telling them she would use their money to fund her wholesale clothing and electronics business. Devine admitted that to induce the investors to make 30- to 60-day investments she promised returns of up to 25 percent per investment. Devine also showed some investors false and fraudulent inventory lists of products she was purportedly reselling. As a result of these solicitations, more than 15 investors sent over $8 million to Devine and Devine Wholesale during this time period.

Devine admitted that, contrary to her representations to investors, Devine Wholesale was not a legitimate business. Devine admitted that instead of using the investor money to purchase clothing or electronics, she used the vast majority of new investor funds to make principal and interest payments to existing investors in Ponzi scheme fashion. Devine also used a portion of the investors’ money on various personal expenses, such as a Royal Caribbean cruise and purchases at luxury retailers such as Burberry, Gucci and Coach.

Devine admitted that as a result of her conduct, investors lost more than $2 million.

The wire fraud count to which Devine pleaded guilty carries a maximum potential penalty of 20 years in prison and a fine of up to $250,000 or twice the amount of gain to Devine or loss to victims as a result of her criminal conduct. Sentencing before Judge Cecchi is scheduled for Dec. 20, 2011.

U.S. Attorney Fishman credited Special Agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation leading to today’s guilty plea.

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Homeowners in Little Falls received a mailed letter that begins, “STATEMENT OF YOUR BENEFITS,” and states, “The Payment Security Administration (PSA) has determined that you shall receive entitlements and a Financial Recovery Award of up to $27,500.00.”

The letter asks recipients to mail a “Benefit Consent Form” to a post office box in Canada, along with a “Processing Fee” of $29.97 paid by check, money order, or credit card authorization.

The fine print on the back page includes language about sweepstakes rules. State and federal law, however, are clear that that no sweepstakes can require consumers to make a payment in order to receive a prize.

View example of Scam Letter

“Consumers should be extremely cautious with any request that they send money to an unknown person or business,” Thomas R. Calcagni, Director of the Division of Consumer Affairs, said. “By sending a check, you are giving the recipient your bank account information and the bank’s routing number. With this information, or with an authorization to charge your credit card, you expose yourself to unauthorized withdrawals of your hard-earned money.”

Calcagni noted that consumers should beware of any mailer or advertisement that, like the “Payment Security Administration” mailer, has any of these signs of a possible scam:

• Offering huge prizes in exchange for small, up-front payments;
• The use of an official-sounding but unverifiable name; for example, if an Internet search reveals that an agency by that name may not actually exist;
• Fine print that includes unclear or confusing language; or
• The request that payments be sent outside the United States.

“Anyone who receives this mailer should immediately contact the Division of Consumer Affairs,” Calcagni continued. “The residents of New Jersey’s flood-affected areas have experienced enough stress and suffering, without the additional insult of being scammed.”

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“Ponzi” schemes promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, however, the con artist pays “dividends” to initial investors using the funds of subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.”

This type of fraud is named after its creator—Charles Ponzi of Boston, Massachusetts. In the early 1900s, Ponzi launched a scheme that guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.

Tips for Avoiding Ponzi Schemes:

• Be careful of any investment opportunity that makes exaggerated earnings claims.
• Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework.
• Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing.

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Reverse mortgages, also known as home equity conversion mortgages (HECM), have increased more than 1,300 percent between 1999 and 2008, creating significant opportunities for fraud perpetrators.

What are reverse mortgage scams?

Reverse mortgage scams are engineered by unscrupulous professionals in a multitude of real estate, financial services, and related companies to steal the equity from the property of unsuspecting senior citizens or to use these seniors to unwittingly aid the fraudsters in stealing equity from a flipped property.

In many of the reported scams, victim seniors are offered free homes, investment opportunities, and foreclosure or refinance assistance. They are also used as straw buyers in property flipping scams. Seniors are frequently targeted through local churches and investment seminars, as well as television, radio, billboard, and mailer advertisements.

A legitimate HECM loan product is insured by the Federal Housing Authority. It enables eligible homeowners to access the equity in their homes by providing funds without incurring a monthly payment. Eligible borrowers must be 62 years or older who occupy their property as their primary residence and who own their property or have a small mortgage balance.

Tips for Avoiding Reverse Mortgage Scams:

• Do not respond to unsolicited advertisements.
• Be suspicious of anyone claiming that you can own a home with no down payment.
• Do not sign anything that you do not fully understand.
• Do not accept payment from individuals for a home you did not purchase.
• Seek out your own reverse mortgage counselor.

If you are a victim of this type of fraud and want to file a complaint, please submit information through the FBI electronic tip line or through your local FBI office. You may also file a complaint with HUD-OIG at www.hud.gov/complaints/fraud_waste.cfm or by calling HUD’s hotline at 1-800-347-3735.

This message has been brought to you by the New Jersey attorneys at Garces & Grabler, P.C.

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