Seven ‘Boiler Room’ Operators Plead Guilty to Mail Fraud
Seven owners and operators of a telephone marketing “boiler room” pleaded guilty Thursday in U.S. District Court in Los Angeles to 14 counts of mail fraud for using high-pressure sales techniques, subtle bribery, and lies to persuade office managers to buy excessive quantities of copy machine toner at grossly inflated prices--a swindle federal prosecutors said grossed more than $14 million in four years.
Assistant U.S. Atty. Gary S. Lincenberg said the owners and top managers of Copy Supply Warehouse were the first to be convicted in a recent crackdown on “boiler room” operations that specialize in the “toner phoner,” which U.S. Postal Service investigators said is popular among many illicit “boiler rooms” operating in the San Fernando Valley.
Copy Supply Warehouse, based in the Fairfax District of Los Angeles with at least seven offices nationwide, was one of the largest “toner phoner” operations in the country, Lincenberg said. Consumer bureaus and law enforcement officials received hundreds of complaints from hospitals, schools, and businesses whose office managers had fallen prey to the scheme, Lincenberg said.
Jonathan Levin-Epstein, the office manager of a small New York law firm who was scheduled to be a key prosecution witness if the case had gone to trial, told The Times in an interview last year that he was drawn into the scheme when a sales agent from the Copy Supply Warehouse called to ask him for a final order for copy machine toner for his office before a scheduled price increase.
Thinking he was dealing with the firm’s authorized supplier, he ordered two cases to take advantage of the lower prices. When the bill arrived, it was three times higher than the normal price for toner, he said. But a month later, Levin-Epstein was notified the rest of his order was being shipped, which he thought explained the high bill. The next four cases of toner were followed by another bill and a color TV that the Copy Supply Warehouse said that Levin-Epstein had won in a lottery for customers, he said.
Copy Supply Warehouse sent out gifts to “hook a mooch”--to turn office purchasing agents into willing collaborators by giving them gifts if they continued to pay for overpriced and excessive quantities of toner, the indictment said.
The owner of Copy Supply Warehouse, Miklos Rath, 56, pleaded guilty to three counts of mail fraud, and faces more than 15 years in state prison, Lincenberg said. Rath’s two sons--Peter Rath, 27, and Steven Rath, 26--and his sister-in-law, Ilana Baruch Pinhas, 43, each pleaded guilty to two counts of mail fraud, as did Alonso Enrique Campbell, 28, and Sydney Katchem, 24. Denise Eileen Derrico, 25, pleaded guilty to one count of mail fraud. Under the plea agreement , the seven will pay a total of $530,000 in fines and restitution.
