PROMISSORY NOTES SCAM: Feds Bust Another Alleged ‘Wholesale’ Business; Jenifer Devine Faces Wire Fraud Charge In Ponzi Case Brought By Obama Task Force; ‘Wholesale Business Was Wholesale Fraud,’ U.S. Attorney Says

The FBI has arrested Jenifer Devine, saying the Fair Lawn, N.J., woman was operating a promissory notes Ponzi  scheme through a purported wholesale business that claimed to sell clothing and electronics.

Similar charges were brought earlier this year in New Jersey against Nevin Shapiro. Prosecutors said Shapiro, who has pleaded guilty, was running an $880 Ponzi scheme in Florida that purported to sell groceries wholesale.

Like the case against Shapiro, the case against Devine, 39, was brought by President Obama’s interagency Financial Fraud Enforcement Task Force.

“As alleged in the complaint, Devine’s wholesale business was wholesale fraud,” said U.S. Attorney Paul Fishman, whose office also prosecuted Shapiro. “Victims who were promised huge returns paid the tab for [Devine’s] vacation and designer goods. This case reminds investors: always be wary of a sure thing.”

More than 15 investors plowed more than $8 million into Devine’s scheme, operated through a company known as Devine Wholesale of Carlstadt, N.J. Investors were told they were helping Devine finance the business and would receive a speedy return of 25 percent. Some investors were shown bogus lists of inventory Devine said she sold, prosecutors said.

“In reality,” prosecutors said, “Devine Wholesale had no active wholesale clothing or electronics business during the relevant time period, and had virtually no business sales.”

In classic Ponzi fashion, “Devine instead used new investor funds to make principal and interest payments to existing investors, as well as to fund her own lifestyle. Devine stole tens of thousands of dollars to pay for personal expenses, including a Royal Caribbean cruise and purchases at luxury retailers such as Burberry, Gucci and Coach. Devine also transferred over $26,000 to her mother, who had no role with Devine Wholesale,” prosecutors said.

Investors losses were estimated at $2 million, but may be higher, prosecutors said. If convicted, Devine faces up to 20 years in federal prison and a fine of up to $1 million.

Read the criminal complaint against Devine.

“It is a difficult thing to convince people to be prudent and cautious with their financial
investments when people like Ms. Devine make grandiose promises,” said David Velazquez, assistant special agent in charge of the FBI’s office in Newark.

“Criminals know how easily greed can override good judgment and they use that basic human flaw to victimize other people,” Velazquez said about the promissory-notes scheme that promised 25 percent interest. “We hope this matter will serve the public as an educational tool in preventing investment fraud as the disruption and dismantling of these schemes remains an important part of our work at the FBI and with our partners.”

Separately, Paul J. LoPapa, 64, of Livingston, N.J., pleaded guilty today in federal court in New Jersey to duping investors investors in a scheme involving fictitious overseas investments sold though a company known as Skyline Equities Inc.

LoPapa also pleaded guilty of defrauding the Social Security Administration of $145,000 in disability payments beginning in 2001, claiming he had not worked since 1990.

Skyline Equities’ referred to its investment program as the “Bank Guarantee Program,” which was billed as a “sophisticated international financial instrument facilitated through well-known financial institutions,” prosecutors said.

Investors dumped about $815,000 into the scam, prosecutors said.

The money was used to pay for “five high-end Mercedes-Benz automobiles” and other personal purchases, prosecutors said.

LoPapa potentially faces decades in prison.