IOS / A QUESTION OF SLIGHT OF HAND / AN INSIDE LOOK AT THE COUPON FRAUD FROM THE FEDERAL POINT OF VIEW AND OURS
INTERNATIONAL OUTSOURCING SERVICES
A QUESTION OF SLIGHT-OF-HAND
Or
MISDIRECTION
AN INSIDE LOOK AT THE IOS FRAUD
On June 28, 2007 FBI Special Agent, Stephen P. Vitale presented an affidavit to the United States District Court, Eastern District of Wisconsin which details numerous issues relating to the IOS fraud and the actions of Bruce Furr, Lance Furr and Steven Furr. Special Agent Vitale is the lead case agent in the IOS matter, with assignment to investigate U.S. violations of mail and wire fraud.
His affidavit details the efforts of the law firm of Greenberg Traurig a defense on behalf of IOS and its principles that the business practice of “store tag defense”, is a business practice and method used by IOS and its predecessor corporation International Data Inc. They practiced “store tag” methods in accounting for coupon redemption for small independent owned grocery stores by submitting consumer coupons for redemption to International Data, (IOS) coupon redemption processing coupling them with large grocery chain coupon submissions.
The affidavit explains the practice that was submitted by the defense attorneys for Furr’s that “store tag defense” appeared to be nothing more than an accounting practice. In an explanation of the “store tag defense”, IOS would bundle the submitted coupons from small grocery stores with large submissions from such corporate clients as Pathmark, Winn Dixie etc. As the practice of coupling the submissions to manufacturers for payment under the mask of Pathmark (as an example) the submission may have been in the amount of $1 million dollars for payment to IOS by the manufacturers and its representatives. Research finds that the average monthly submission by Pathmark often does not exceed $400,000 of consumer coupons submissions. Pathmark was not involved; Winn-Dixie had no knowledge of these excessive submissions. Only IOS, Lance Furr and others within IOS not only knew but also participated.
The defense presented by Furr’s attorneys (remember IOS was released from criminal liability in a cooperation agreement), met with the U.S. attorney’s office in Milwaukee, asserting that “since IOS invoiced coupons a certain way, the company had in fact committed no fraud.” The defense strategy asserted that although coupons from small stores were sent along with coupons from larger stores on the same IOS invoice (listing only the larger stores) it was done only as a matter of convenience. The coupons were processed at the same location and efficiency and even saving toner was the logic. The defense poised that although the coupons were shipped together, no one could have been defrauded because each packet of coupons contained a “store tag” that accurately listed the store at which they purportedly had been redeemed.
S/A Vitale investigation into this defense lasted for several weeks. The government learned from a combination of multiple witnesses and physical evidence that this defense was FALSE. Indeed it was fabricated by IOS perhaps more than a year earlier with the intent that its attorneys pass the falsehood on to the government in a bid to prevent the government from going forward with its indictment for coupon fraudulent invoicing practices. The invoicing “example” also was revealed as a fraudulent document that had been prepared for members of the joint defense group during a plant tour in March 2006.
Between February and April 2007 in the context of litigation in the grand jury matter in Case No. 07-Misc-26, IOS lawyers from the Scott Hulse law firm, assisted by Greenberg Traurig, cited the “store-tag defense” as their key argument against application of the crime-fraud exception to certain subpoenaed documents. Counsel’s reliance on this defense was withdrawn after the United States presented IOS’s lawyers and the Court with evidence indicating that the defense was a sham.
S/A Vitale explained that in April 2007 during an interview with a Greenberg Trauig attorney, the attorney had concluded that the “store tag” defense likely rested on false factual information.
The investigation has revealed that each of the Furr defendants would have known that the “store tag” defense was false. Multiple witnesses have described the Furrs’ participation in the alleged diversion scheme. Lance Furr had admitted the diversion and the reasons for it to an IOS auditor. Exhibits A & B (encompassing Lance Furr’s description of IOS’s “deuce strategy” and further indicating that in 2000 alone, over $49,000,000 in small store coupons had been billed out under the name larger retailers such as Pathmark. Likewise in late 2005 Bruce Furr admitted that IOS had billed out small-store coupons as if they had been redeemed at large stores, claiming this had been a “bad business decision” but not illegal. Similarly, a cooperating defendant has reported that in early 2007, Steve Furr had a conversation with him specifically addressing the January 10, 2007 presentation of the false “store tag” defense to the government.
In June 2005, S/A Vitale reports that Pathmark, one of IOS’s largest clients, expressed concern that IOS may be using Pathmark’s name when billing out coupons purportedly redeemed at small stores. Steve Furr wrote Pathmark the (1) only Pathmark coupons are invoiced under Pathmark’s name, (2) all small store coupons were invoiced under specific well-recognized small store designation and (3) small store coupons were processed at a location 500 miles apart from where IOS processed coupons redeemed at large stores like Pathmark.
This is inconsistent with the “store-tag” defense presented in the claim that the coupons were processed in the same place and included on a single invoice to reduce costs.
S/A Vitale continues to describe IOS’s position and efforts to obstruct justice by intimidation of witnesses, employees and using financial threats and holding back payments to resigned employees as a method to have the employee agree to sign an agreement to remain silent to the FBI and then the money would be released. Agreements were drawn up by attorneys of Greenberg Trauig in these matters on behalf of IOS. (See affidavit for further details).
RAPID PAY PROGRAMS
International Data 12/31/00 Memo of “Rapid Pay Program”
“Rapid Pay” type programs are for Mom & Pop type grocery stores which need coupons processed. These are funded programs with average terms of 14 days from receipt of the coupons. There are three general types of programs”;
DEPOSITS
These programs usually require a deposit before payments are remitted to the retailers. The purpose of the deposits is to cover International Data (International Outsourcing Services) exposure on manufacturer chargeback’s generated from coupon shipments. Manufacturers payment denials often are the based on coupon expiration, foreign coupons (coupons sent to wrong manufacturer), not able to substantiate purchase volumes, not having the proper forms on file show that the customer even exists. The chance for fraudulent coupons in the small grocery stores is greatly higher than the large funded programs.
Normally deposits are not paid directly by the retailer, but rather most of the time deposits represent retailer payments for coupons received from the manufacturer that are held by the clearinghouse ( basically the first few coupon shipments are run through the system and payments to the retailer is withheld as a deposit until a deposit threshold is met. Once the initial deposit levels are reached and retailer payments start. The deposit levels continue to be monitored and compared against chargeback’s generated to cover clearinghouse exposure.
To mitigate the higher chargeback rates, International Outsourcing (ID) has invoiced RP coupons under other big funded programs that have lower chargeback rates. ID is a major player in the Rapid Pay type program. With the purchase of UCCH (Coupon Express) and NCRS programs, they have solidified their market share. Since these purchases, ID has kept the names in tact and has not advertised that they purchased these companies. Therefore, the smaller retailers don’t have a clue that all of the programs are the same company ID. This creates a problem for ID in that store owners jump from clearing house programs to other programs. ID has had trouble merging the information to transfer the data on chargeback’s from the stores to the new accounts within the ID operation. To do so, they transferred the information data gathering to their operating in El Paso to move the chargeback’s and deposits to the store with most current shipments. ID is still trying to complete the store merger program.
The purpose of Rapid Pay is to reduce the chargeback’s from the manufacturers and get a higher collection percentage from the manufacturer for the Rapid Pay customers. This reduces ID’s chargeback’s receivables.
One can question the issue of fraudulent submissions to the manufacturers by ID to increase levels of payment from the manufacturers and reduction of chargeback’s by coupling the Rapid Pay program with the larger more stable chain grocery stores.
NCRS – National
B&M
Rapid Pay includes Coupon Express, Priority and Rapid Pay.
(See Memo dated 12/31/00)
International Data memo dated 12/31/00
“Deuce Memo and Analysis”
The “Deuce” strategy – (a) all coupons are received through Rapid Pay – The retailers are paid through Rapid Pay for all coupons received.
“Some Rapid Pay coupons are still invoiced to the manufacturers through the Rapid Pay program.
Deuce coupons are invoiced to the manufacturers through the 5 programs mentioned using specific invoice ranges (8000-9000). The range is distinctive from the programs normal invoice range to make them easily identifiable.
The invoicing is loaded onto the A/R system in the respective program that it was invoiced under.
Manufacturers pay the program and the cash is applied on the A/R in each program that it was invoiced under.
The shortfall in the Rapid Pay program between total Rapid Pay audited receipts paid to the retailer compared to the amounts received from the manufacturer for Rapid Pay invoices shows up as a negative inventory gain.
The surplus in the other five programs between the audited receipts paid to the retailer compared to the regular program invoice and deuce program invoice manufacturer receipts shows as additional inventory gain for the programs.
The end result is a lower rate of deductions from the manufacturer since they do not see Rapid Pay as the invoicing entity.
It is understood that the large grocery chains, Pathmark, Winn-Dixie, and others similar to the large grocery chains have an approximate 14% coupon rejection rate from the manufacturers, while its known in the redemption business that the Mom-Pop grocery stores, small independent stores experiences nearly a 60% return rate.
This explains why IOS and other redemption centers concentrate on the larger legitimate grocery chains. Past experiences shows that coupon fraud by organized coupon redemption rings, terrorist groups and criminal enterprises submit bulk coupons to redemption houses which submit to the centralized clearing house like NCH- NuWorld who represents manufacturers redemption programs.
It is alleged that IOS and its predecessor International Data (ID) used a method of deception, fraud and intimidation to protect its interests. Where is Nu-World in its role between the manufacturers and the coupon redemption processing houses?
Where is Supervalu is the scheme of things? They are a 25% share holder in IOS; two Supervalu executives are on the Board of IOS. Supervalu owns NAFTA, while NAFTA has a business relationship, partial ownership of IOS.
Which Supervalu stores were submitting coupons to IOS? Were they in the Rapid Pay program or the Deuces program?
Where did the money from the difference in the submissions of “Mom/Pop” stores submitted under the banner of Pathmark find its resting home? Whose pockets were lined with the excess cash collected from the coupon submissions of the bulk co-mingled manufacturers payments?
We’ve seen over the past 20 years organized groups, some associated with international terrorism, others funding terror activities, and more directly a New York operation that helped finance the 1993 Bombing of the World Trade Center, killing six and injuring more than 1000, all using coupon redemption from listed Mom/Pop grocery stores.
Without the proper verification by such systems as “Rapid Pay” and the co-mingled submissions of coupons to manufacturers questions the intent of IOS and its former ID behavior as a means of greed, while inadvertently assisting the financing of terror operations within the United States.
Such programs fuel fraud, diversion and criminal behavior by individuals and corporations. In the IOS matter, the original offenders all Middle Eastern grocery store owners or registered coupon brokers obtained payment from IOS and transferred funds to Ramallah, Palestine. Where did this money go? Too whom? What for? We need answers!
Let us know what you think!!!
This is a look inside the IOS Fraud. While the company has been released from criminal liability, the principles of IOS, officers, specific employees and others are awaiting criminal prosecution, therefore they are innocent until found guilty. This report is an explanation of the details of a portion of the fraud presented to the United States Court in response to criminal proceedings.
A QUESTION OF SLIGHT-OF-HAND
Or
MISDIRECTION
AN INSIDE LOOK AT THE IOS FRAUD
On June 28, 2007 FBI Special Agent, Stephen P. Vitale presented an affidavit to the United States District Court, Eastern District of Wisconsin which details numerous issues relating to the IOS fraud and the actions of Bruce Furr, Lance Furr and Steven Furr. Special Agent Vitale is the lead case agent in the IOS matter, with assignment to investigate U.S. violations of mail and wire fraud.
His affidavit details the efforts of the law firm of Greenberg Traurig a defense on behalf of IOS and its principles that the business practice of “store tag defense”, is a business practice and method used by IOS and its predecessor corporation International Data Inc. They practiced “store tag” methods in accounting for coupon redemption for small independent owned grocery stores by submitting consumer coupons for redemption to International Data, (IOS) coupon redemption processing coupling them with large grocery chain coupon submissions.
The affidavit explains the practice that was submitted by the defense attorneys for Furr’s that “store tag defense” appeared to be nothing more than an accounting practice. In an explanation of the “store tag defense”, IOS would bundle the submitted coupons from small grocery stores with large submissions from such corporate clients as Pathmark, Winn Dixie etc. As the practice of coupling the submissions to manufacturers for payment under the mask of Pathmark (as an example) the submission may have been in the amount of $1 million dollars for payment to IOS by the manufacturers and its representatives. Research finds that the average monthly submission by Pathmark often does not exceed $400,000 of consumer coupons submissions. Pathmark was not involved; Winn-Dixie had no knowledge of these excessive submissions. Only IOS, Lance Furr and others within IOS not only knew but also participated.
The defense presented by Furr’s attorneys (remember IOS was released from criminal liability in a cooperation agreement), met with the U.S. attorney’s office in Milwaukee, asserting that “since IOS invoiced coupons a certain way, the company had in fact committed no fraud.” The defense strategy asserted that although coupons from small stores were sent along with coupons from larger stores on the same IOS invoice (listing only the larger stores) it was done only as a matter of convenience. The coupons were processed at the same location and efficiency and even saving toner was the logic. The defense poised that although the coupons were shipped together, no one could have been defrauded because each packet of coupons contained a “store tag” that accurately listed the store at which they purportedly had been redeemed.
S/A Vitale investigation into this defense lasted for several weeks. The government learned from a combination of multiple witnesses and physical evidence that this defense was FALSE. Indeed it was fabricated by IOS perhaps more than a year earlier with the intent that its attorneys pass the falsehood on to the government in a bid to prevent the government from going forward with its indictment for coupon fraudulent invoicing practices. The invoicing “example” also was revealed as a fraudulent document that had been prepared for members of the joint defense group during a plant tour in March 2006.
Between February and April 2007 in the context of litigation in the grand jury matter in Case No. 07-Misc-26, IOS lawyers from the Scott Hulse law firm, assisted by Greenberg Traurig, cited the “store-tag defense” as their key argument against application of the crime-fraud exception to certain subpoenaed documents. Counsel’s reliance on this defense was withdrawn after the United States presented IOS’s lawyers and the Court with evidence indicating that the defense was a sham.
S/A Vitale explained that in April 2007 during an interview with a Greenberg Trauig attorney, the attorney had concluded that the “store tag” defense likely rested on false factual information.
The investigation has revealed that each of the Furr defendants would have known that the “store tag” defense was false. Multiple witnesses have described the Furrs’ participation in the alleged diversion scheme. Lance Furr had admitted the diversion and the reasons for it to an IOS auditor. Exhibits A & B (encompassing Lance Furr’s description of IOS’s “deuce strategy” and further indicating that in 2000 alone, over $49,000,000 in small store coupons had been billed out under the name larger retailers such as Pathmark. Likewise in late 2005 Bruce Furr admitted that IOS had billed out small-store coupons as if they had been redeemed at large stores, claiming this had been a “bad business decision” but not illegal. Similarly, a cooperating defendant has reported that in early 2007, Steve Furr had a conversation with him specifically addressing the January 10, 2007 presentation of the false “store tag” defense to the government.
In June 2005, S/A Vitale reports that Pathmark, one of IOS’s largest clients, expressed concern that IOS may be using Pathmark’s name when billing out coupons purportedly redeemed at small stores. Steve Furr wrote Pathmark the (1) only Pathmark coupons are invoiced under Pathmark’s name, (2) all small store coupons were invoiced under specific well-recognized small store designation and (3) small store coupons were processed at a location 500 miles apart from where IOS processed coupons redeemed at large stores like Pathmark.
This is inconsistent with the “store-tag” defense presented in the claim that the coupons were processed in the same place and included on a single invoice to reduce costs.
S/A Vitale continues to describe IOS’s position and efforts to obstruct justice by intimidation of witnesses, employees and using financial threats and holding back payments to resigned employees as a method to have the employee agree to sign an agreement to remain silent to the FBI and then the money would be released. Agreements were drawn up by attorneys of Greenberg Trauig in these matters on behalf of IOS. (See affidavit for further details).
RAPID PAY PROGRAMS
International Data 12/31/00 Memo of “Rapid Pay Program”
“Rapid Pay” type programs are for Mom & Pop type grocery stores which need coupons processed. These are funded programs with average terms of 14 days from receipt of the coupons. There are three general types of programs”;
DEPOSITS
These programs usually require a deposit before payments are remitted to the retailers. The purpose of the deposits is to cover International Data (International Outsourcing Services) exposure on manufacturer chargeback’s generated from coupon shipments. Manufacturers payment denials often are the based on coupon expiration, foreign coupons (coupons sent to wrong manufacturer), not able to substantiate purchase volumes, not having the proper forms on file show that the customer even exists. The chance for fraudulent coupons in the small grocery stores is greatly higher than the large funded programs.
Normally deposits are not paid directly by the retailer, but rather most of the time deposits represent retailer payments for coupons received from the manufacturer that are held by the clearinghouse ( basically the first few coupon shipments are run through the system and payments to the retailer is withheld as a deposit until a deposit threshold is met. Once the initial deposit levels are reached and retailer payments start. The deposit levels continue to be monitored and compared against chargeback’s generated to cover clearinghouse exposure.
To mitigate the higher chargeback rates, International Outsourcing (ID) has invoiced RP coupons under other big funded programs that have lower chargeback rates. ID is a major player in the Rapid Pay type program. With the purchase of UCCH (Coupon Express) and NCRS programs, they have solidified their market share. Since these purchases, ID has kept the names in tact and has not advertised that they purchased these companies. Therefore, the smaller retailers don’t have a clue that all of the programs are the same company ID. This creates a problem for ID in that store owners jump from clearing house programs to other programs. ID has had trouble merging the information to transfer the data on chargeback’s from the stores to the new accounts within the ID operation. To do so, they transferred the information data gathering to their operating in El Paso to move the chargeback’s and deposits to the store with most current shipments. ID is still trying to complete the store merger program.
The purpose of Rapid Pay is to reduce the chargeback’s from the manufacturers and get a higher collection percentage from the manufacturer for the Rapid Pay customers. This reduces ID’s chargeback’s receivables.
One can question the issue of fraudulent submissions to the manufacturers by ID to increase levels of payment from the manufacturers and reduction of chargeback’s by coupling the Rapid Pay program with the larger more stable chain grocery stores.
NCRS – National
B&M
Rapid Pay includes Coupon Express, Priority and Rapid Pay.
(See Memo dated 12/31/00)
International Data memo dated 12/31/00
“Deuce Memo and Analysis”
The “Deuce” strategy – (a) all coupons are received through Rapid Pay – The retailers are paid through Rapid Pay for all coupons received.
“Some Rapid Pay coupons are still invoiced to the manufacturers through the Rapid Pay program.
Deuce coupons are invoiced to the manufacturers through the 5 programs mentioned using specific invoice ranges (8000-9000). The range is distinctive from the programs normal invoice range to make them easily identifiable.
The invoicing is loaded onto the A/R system in the respective program that it was invoiced under.
Manufacturers pay the program and the cash is applied on the A/R in each program that it was invoiced under.
The shortfall in the Rapid Pay program between total Rapid Pay audited receipts paid to the retailer compared to the amounts received from the manufacturer for Rapid Pay invoices shows up as a negative inventory gain.
The surplus in the other five programs between the audited receipts paid to the retailer compared to the regular program invoice and deuce program invoice manufacturer receipts shows as additional inventory gain for the programs.
The end result is a lower rate of deductions from the manufacturer since they do not see Rapid Pay as the invoicing entity.
It is understood that the large grocery chains, Pathmark, Winn-Dixie, and others similar to the large grocery chains have an approximate 14% coupon rejection rate from the manufacturers, while its known in the redemption business that the Mom-Pop grocery stores, small independent stores experiences nearly a 60% return rate.
This explains why IOS and other redemption centers concentrate on the larger legitimate grocery chains. Past experiences shows that coupon fraud by organized coupon redemption rings, terrorist groups and criminal enterprises submit bulk coupons to redemption houses which submit to the centralized clearing house like NCH- NuWorld who represents manufacturers redemption programs.
It is alleged that IOS and its predecessor International Data (ID) used a method of deception, fraud and intimidation to protect its interests. Where is Nu-World in its role between the manufacturers and the coupon redemption processing houses?
Where is Supervalu is the scheme of things? They are a 25% share holder in IOS; two Supervalu executives are on the Board of IOS. Supervalu owns NAFTA, while NAFTA has a business relationship, partial ownership of IOS.
Which Supervalu stores were submitting coupons to IOS? Were they in the Rapid Pay program or the Deuces program?
Where did the money from the difference in the submissions of “Mom/Pop” stores submitted under the banner of Pathmark find its resting home? Whose pockets were lined with the excess cash collected from the coupon submissions of the bulk co-mingled manufacturers payments?
We’ve seen over the past 20 years organized groups, some associated with international terrorism, others funding terror activities, and more directly a New York operation that helped finance the 1993 Bombing of the World Trade Center, killing six and injuring more than 1000, all using coupon redemption from listed Mom/Pop grocery stores.
Without the proper verification by such systems as “Rapid Pay” and the co-mingled submissions of coupons to manufacturers questions the intent of IOS and its former ID behavior as a means of greed, while inadvertently assisting the financing of terror operations within the United States.
Such programs fuel fraud, diversion and criminal behavior by individuals and corporations. In the IOS matter, the original offenders all Middle Eastern grocery store owners or registered coupon brokers obtained payment from IOS and transferred funds to Ramallah, Palestine. Where did this money go? Too whom? What for? We need answers!
Let us know what you think!!!
This is a look inside the IOS Fraud. While the company has been released from criminal liability, the principles of IOS, officers, specific employees and others are awaiting criminal prosecution, therefore they are innocent until found guilty. This report is an explanation of the details of a portion of the fraud presented to the United States Court in response to criminal proceedings.
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Labels: 2007, Coupon Fraud, Crime, IOS
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