Judge Gerald Pappert of the United States District Court sentenced Joseph Smith, 57, formerly of Fishkill, to three years and six months in prison, three years of supervised release, and a $2,100,450 restitution order for his scheme to defraud prospective franchisees of more than $2.1 million in total.
Smith admitted guilt to counts of conspiracy to commit wire fraud and tax evasion in connection with a plot to deceive prospective franchisees in February 2022.
Smith was the owner of New York Bagel Enterprises, Inc. (“New York Bagel”), which operated in Pennsylvania and other states. Smith and Dennis Mason, who was accused separately, allegedly misled people looking to purchase a New York Bagel franchise in numerous ways, according to court documents and testimony given in court.
An assurance that New York Bagel could secure funding for the potential franchisee was among these misrepresentations, as were the costs involved in creating a franchise, the number of franchises that were already operational or about to do so, and the profitability of existing franchises.
To obtain the right to open stores, Smith and Mason assessed prospective franchisees’ fees ranging from $7,500 to $44,500.
Smith refused to reimburse these costs when several potential franchisees discovered the false statements and wanted their money back.
Through the deception, Smith and New York Bagel were able to sell over 160 franchises and earn over $2.1 million in franchise fees.
Smith transferred more than $1.3 million in franchise fees into New York Bagel bank accounts that he controlled between 2014 and 2016.
The defendant used these monies to pay for personal expenses unrelated to the firm, such as living costs, home rent, travel, and automobile payments.
Smith failed to submit business or individual income tax returns for these three years, nor did he make the required IRS payments.
Mason earlier entered a guilty plea to charges linked to the offence and was given a three-year jail term in April 2022.
According to U.S. Attorney Romero, people who are interested in owning and operating business franchises want to provide opportunity and financial security for themselves and their families.
As a result, they deserve honesty and openness in their business dealings so that they can make wise decisions.
“Mr Smith will now serve years in prison for his crime of taking advantage of his position to scam millions of dollars from people looking for legitimate business possibilities.”
Mr Smith’s approach only aimed to deceive and cheat potential franchisees, according to IRS Criminal Investigation Special Agent in Charge Yury Kruty.
“Additionally, he took actions to conceal his earnings from the IRS, so minimizing his tax due. All Americans who follow the law will benefit from his imprisonment.
According to Jacqueline Maguire, special agent in charge of the FBI’s Philadelphia Division, “Joseph Smith sold potential franchisees what appeared to be a tremendous opportunity.”
But once they committed, they discovered he had actually been selling something different. Smith regarded the franchise payments as if they were unclaimed money.
It was a blatant case of deception, and Mason earlier entered a guilty plea to related crimes and received a three-year prison term in April 2022.
According to U.S. Attorney Romero, people who are interested in owning and operating business franchises want to provide opportunity and financial security for themselves and their families.
As a result, they deserve honesty and openness in their business dealings so that they can make wise decisions.
“Mr Smith will now serve years in prison for his crime of taking advantage of his position to scam millions of dollars from people looking for legitimate business possibilities.”
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Mr Smith’s approach only aimed to deceive and cheat potential franchisees, according to IRS Criminal Investigation Special Agent in Charge Yury Kruty.
“Additionally, he took actions to conceal his earnings from the IRS, so minimizing his tax due. All Americans who follow the law will benefit from his imprisonment.
According to Jacqueline Maguire, special agent in charge of the FBI’s Philadelphia Division, “Joseph Smith sold potential franchisees what appeared to be a tremendous opportunity.”
But once they committed, they discovered he had actually been selling something different. Smith regarded the franchise payments as if they were unclaimed money.
This judgment, which places him in prison and gives some justice to his victims because it was a blatant case of fraud, puts him behind bars.
