An Indian-origin man in the US has been indicted for committing wire fraud to the tune of USD 98 million, the Department of Justice said on Friday.
The 34-count indictment charges Gopalkrishna Pai from Texas, previously residing in Puerto Rico, of being engaged in a scheme to defraud merchant processors and others by submitting false information and falsified documentation to create merchant accounts in the name of straw companies to process credit card and electronic payments and to receive a substantial financial benefit.
The fraudulent scheme employed by Pai disguised his involvement and use of over 100 companies formed to facilitate the processing of approximately USD 98 million in gross revenue in online retail sales, the Department of Justice alleged.
As a part of the conspiracy, Pai owned and operated F9 Advertising LLC (F9), a for profit limited liability company organised in Puerto Rico in May 2014 and registered under the Export Services Act, Puerto Rico Act 20 of 2012.
F9 engaged in the sale of personal care products, including skin creams, through the internet utilising a negative option marketing model.
Negative option marketing is a category of commercial transactions in which sellers interpret a customer's failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.
Pai allegedly created over 100 liability companies (Straw Companies), obtained individual Employer ID Numbers (EINs) from the Internal Revenue Service (IRS) for each Straw Company and opened individual commercial bank accounts under his control for each straw company.
False documents were then created and submitted to merchant processers to create merchant accounts to process online sales, and to disguise Gopalkrishna Pai's involvement.
Federal prosecutors alleged that the true owner and operator of the Straw Companies was disguised through the falsification of bank records and EIN tax documents and other information in order to prevent merchant processors and their related financial institutions from having knowledge of the true owner and operator, which was the defendant.
Credit card and other payments processed by the merchant processors were paid to accounts in the name of the Straw Companies, controlled by the defendant, and transferred to F9.
As part of the scheme to defraud the merchant processors, Pai exchanged email communications and internet transmissions through interstate wire to submit documents, including applications, containing materially false representations and falsified documentation, which included real individuals' personal identification information like names, social security numbers and signatures.
This fraud scheme and conspiracy generated approximately USD 98 million in total revenue, processed based on materially false information, through the Merchant Processors in the names of the Straw Companies.
"This individual took advantage of Puerto Rico and Law 20 to create a company, F9 Advertising, to generate significant revenue through a fraudulent scheme based on lies and falsified documents," US Attorney Rosa Emilia Rodrguez-Vlez said.
"The indictment underscores the USAO's commitment to the investigation and prosecution of all types of fraud and to our continued efforts to ensure that Puerto Rico is not a safe haven for criminal activity," she said.