2 Charged in O.C. Investigation of Boiler Rooms : Crime: Dennis Connelly faces 29 fraud counts and, with his brother John, accusations of conspiracy, money laundering.
U.S. attorneys announced Wednesday they have charged Dennis Connelly of Laguna Niguel with fraud for operating a Costa Mesa office-products firm that took in more than $25 million in a boiler-room scam.
Dennis Connelly, 34, was charged with 29 counts of mail and wire fraud by U.S. attorneys who unsealed the charges Wednesday. Dennis and his brother, Newport Beach attorney John Connelly, 49, were both charged with conspiracy and money laundering.
The indictment alleges that Dennis operated numerous boiler rooms in the Orange County area from 1987 to 1993, fraudulently selling toner and other copy machine supplies to businesses across the United States.
John Connelly was arrested Oct. 27 at his home in Corona del Mar. Dennis Connelly is expected to be arraigned Monday, a U.S. attorney said.
Neither brother could be reached for comment.
“This was the result of a long investigation,” said Assistant U.S. Atty. Susan R. Ficcadenti, who is handling the case. “There are numerous victims.”
In 1991, a team of more than 100 investigators raided seven offices and two homes and seized a truckload of records that belonged to Dennis Connelly’s company, Internal Systems Corp.
The company and others operated by Connelly used telemarketers to sell toner for copy machines to small businesses. Typically, the company would sell the product at a discount price, then try to trick the customer into buying it at a higher price, according to the indictment.
On Wednesday, U.S. attorneys alleged that after the company was raided in 1991, Dennis went to his brother, who helped him conceal the company’s assets from the government.
According to the indictment, the money was transferred to various accounts, including casino bank accounts. The brothers made numerous trips to Las Vegas where they would gamble with a portion of the funds, and later claim they had lost the money gambling, the indictment alleges, adding that other funds were kept at a safe at John Connelly’s Corona del Mar home.
The charges filed Wednesday were part a joint investigation by the U.S. Postal Inspection Service, the Federal Bureau of Investigation and a division of the Internal Revenue Service.
If convicted, the maximum penalty or each count of mail fraud or wire fraud is five years’ imprisonment and a $1,000 fine. The maximum penalty under federal law for each offense of money laundering is 20 years in jail and a $500,000 fine.