Justice Department’s Tax Division Acting Deputy Assistant Attorney General Stuart M. Goldberg and the United States Attorney Jacqueline C. Romero announced that Joseph Smith, 57, formerly of Fishkill, New York, was sentenced this week to three years and six months in prison, three years of supervised release, and ordered to pay $2,100,450 in restitution for his scheme to defraud potential franchisees of more than th
The defendant, who was the proprietor of New York Bagel Enterprises, Inc. (“New York Bagel”), a company that had operations in Pennsylvania and other states, entered a plea of guilty to charges of conspiracy to commit wire fraud and tax evasion in connection with this scheme in February 2022.
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 opportunity to open stores, the defendant and Mason demanded payment ranging from $7,500 to $44,500 from potential franchisees.
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.
Additionally, Smith paid more than $1.3 million in franchise fees into accounts he controlled at New York Bagels between 2014 and 2016.
The defendant used this cash for personal, non-business-related expenses like home rent, travel, automobile payments for personal vehicles, and daily living costs.
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 serve years in prison for using his position to defraud people looking for honest business possibilities out of millions of dollars.”
In addition to cheating investors out of their franchise fees, Smith avoided paying approximately $175,000 in taxes on that money, according to Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.
Business owners who pay their fair share of taxes to the IRS ought to be able to compete on an even playing field. Competitors who try to avoid paying their fair share of taxes and other fees should be aware that they will be looked into and prosecuted.
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According to IRS Criminal Investigation Special Agent in Charge Yury Kruty, Mr Smith’s scam had no other objective but to deceive and cheat potential franchisees.
“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 else. Smith regarded the franchise payments as if they were unclaimed money.
This sentence puts him in jail and gives his victims some justice because it was a blatant case of fraud. The FBI will continue to work to prosecute criminals like this.