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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
UNITED STATES OF AMERICA .
* UNDER SEAL,
* — CRIMINALNO.C.CH “IL. -0 >
BRIAN WALLEN *
and * (Conspiracy to Commit Mail Fraud, 18
ANDREW STAFFORD * US.C. § 1349; Mail Fraud, 18 U.S.C. §
* 1341; Forfeiture, 18 U.S.C. §
Defendants. = 9B1(a)(1)(C); 21 U.S.C. § 8515 28 USC.
= § 2461)
INDICTMENT
COUNT ONE
(Conspiracy to Commit Mail Fraud)
‘The Grand Jury for the District of Maryland charges that:
Introduction
Atall times relevant to this Indictment:
1, Defendant BRIAN WALLEN (“WALLEN”) was a resident of Lutherville-
Timonium, Maryland,
2. Defendant ANDREW STAFFORD (“STAFFORD”) was a resident of Bel Air,
Maryland,
Midway Industries,
On or about March 24, 2003, Midway Industries, LLC and Johnson Distributing,
LLC were incorporated in the State of Maryland, each with the stated purpose to engage in retail
sales of light bulbs and cleaning supplies, among other activities.
4, Between on or about July 22, 2008, and on or about April 18, 2014, WALLEN
and Person #1 incorporated and caused to be incorporated additional corporate entities, toinclude B&E Industries, LLC, Champion Industries, LLC, Commercial Industries, LLC,
Commercial Industries of Delray Beach, LLC, Commercial Industries of Palm Beach, LLC,
Environmental Industries, LLC, Essex Industries, LLC, Hansen Supply, LLC, Mid-Atlantic
Industries, LLC, Midway Management, LLC, Midway Industries of Delray Beach, LLC,
National, LLC, National of Delray Beach, LLC, Pacific Supply, LLC, Standard Industries, LLC,
State Power and Electric, LLC, and State Power and Lighting, LLC in the States of Maryland or
Florida (collectively “the Shell Entities”). For the purpose of this Indictment, Midway
Industries, LLC, Johnson Distributing, LLC, and the Shell Entities will collectively be referred to
as “Midway.”
5. Atvarious different times, Midway and the entities comprising Midway were
owned, in whole or in part, by WALLEN and Person #1. WALLEN held the title of CEO, and
exercised supervision over the practices at Midway.
6. Andrew STAFFORD held the title of President and exercised supervision over
the practices at Midway.
‘THE CONSPIRACY AND THE SCHEME TO DEFRAUD
7. From in or about 2007 through in or about 2014, in the District of Maryland and
elsewhere, the defendants,
BRIAN WALLEN
and
ANDREW STAFFORD,
did knowingly and willfully conspire, confederate, and agree with each other and with others
known and unknown (“the Midway co-conspirators”) to commit mail fraud, that is to knowingly
and willfully devise and intend to devise a scheme and artifice to defraud and to obtain money
and property from various businesses, by means of materially false and fraudulent pretenses,representations, and promises regarding light bulb and cleaning supply orders (“the scheme to
defraud”), and for the purpose of executing and attempting to execute such scheme to defraud,
did knowingly place and cause to be placed in an authorized depository for mail matter to be
delivered by the United States Postal Service, and did cause to be delivered by mail and by any
private and commercial interstate carrier, any matter and thing, according to the direction
thereon, in violation of 18 U.S.C. § 1341.
OBJECT OF THE CONSPIRACY AND SCHEME TO DEFRAUD
8. It was the object of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators obtained money from thousands of victim.
businesses by deceiving the businesses’ authorized representatives into paying exorbitant prices
for light bulbs and cleaning supplies, as well as paying for products that the businesses never
ordered.
MANNER AND MEANS
9. It was part of the conspiracy and scheme to defraud that, from in or about 2007
through in or about July 2014, WALLEN, STAFFORD, and the Midway co-conspirators made
and caused to be made phone calls to victim businesses on behalf of the Midway companies.
10, It was further part of the conspiracy and scheme to defraud that, in those phone
calls to victim businesses, WALLEN, STAFFORD, and the Midway co-conspirators sought to
conceal Midway’s true locations in Reisterstown, Maryland, as well as in Florida, and avoid in
person contact with victim businesses.
11, Itwas further part of the conspiracy and scheme to defraud that, WALLEN,
STAFFORD, and the Midway co-conspirators used Post Office boxes throughout Maryland to
‘cause the victim businesses to believe that each company was a different and unrelated company.False Representations Made to Businesses
12, Itwas further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators made and caused to be made “cold calls” to
representatives of the victim businesses with authority to place an order (“authorized
representatives”), who were often maintenance employees.
13, It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators made and caused to be made false and fraudulent
representations to authorized representatives on cold calls, including:
a, Mistepresenting that the victim business had an existing business relationship
with Midway;
b. Misrepresenting the purpose of the phone call; and
. Misrepresenting that Midway would send a “half box” of light bulbs along with a
catalog, when in truth and fact, there were never any half boxes. The “half box”
was a deceptive technique used to understate the volume and price of shipments,
and disguise various unwanted future shipments, Moreover, Midway did not send
catalogs.
14. Itwas further part of the conspiracy and scheme to defraud that, on initial calls,
WALLEN, STAFFORD, and the Midway co-conspirators regularly promised and caused to be
promised small items, such as gift cards from retail stores like Wal-Mart and Bass Pro Shop, to
authorized representatives in order to induce them to place initial orders or to provide personal
information, including the authorized representatives’ home addresses and personal phone
numbers.
15, It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators avoided divulging the price of any products to
victim businesses by engaging in a practice called the “price blow-off,” in which they falselystated that they did not have the price in front of them, but that it would be at the corporate
discount,
16. It was further part of the conspiracy and scheme to defraud that, ifa victim
business did not become aware of the fraud, WALLEN, STAFFORD, and the Midway co-
conspirators placed and caused to be placed subsequent sales calls to the victim businesses,
wherein they made further false and fraudulent representations, including:
a. Misrepresenting that the “completion,” “balance,” or “remainder” of the victim
business’ order had recently been shipped, despite no order having yet been made
by the victim business, and no actual shipment having yet been sent; and
b. Misrepresenting that the victim business’ “regular seasonal order” had recently
been shipped, despite no order having yet been made by the victim business, and
no actual shipment having yet been sent;
17. It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators would regularly call and cause to be called
authorized representatives repeating the above-referenced false representations so long as the
victim businesses continued paying Midway's invoices.
18. It'was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators called authorized representatives under the guise
of different Midway companies in order to repeat the process using cleaning supplies, rather than
light bulbs.
Price Markups and Collections
19, It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators placed and caused to be placed orders for light
bulbs and cleaning supplies with a company located in New Jersey identified as Company A. Atthe Midway co-conspirators’ instruction, Company A shipped light bulbs and cleaning supplies
to the victim businesses without an invoice, and sent its invoices directly to Midway.
20. It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators sent and caused to be sent invoices to the billing
departments of the victim businesses, which were often different departments from those of the
authorized represent
:s, for amounts greatly inflated from the amounts charged by Company
A.
21. It was further part of the conspiracy and scheme to defraud that WALLEN,
STAFFORD, and the Midway co-conspirators sent and caused to be sent invoices to the
businesses that were regularly 900% above the prices Midway paid Company A for the same
light bulbs and cleaning supplies. After victim businesses had paid one invoice, the Midway co-
conspirators sent and caused to be sent invoices to the victim businesses that were sometimes
greater than 8,000% above the prices Midway paid Company A for the same light bulbs and
cleaning supplies.
22. It was further part of the conspiracy and scheme to defraud that, when victim
businesses did not remit payment, the Collections Department at Midway repeatedly called and
made demands on victim businesses in order to force them to pay the overly-inflated invoices
sent to them by Midway. Midway co-conspirators in the Collections Department made
additional false and fraudulent representations to victim businesses, including:
a, Misrepresenting that an order had actually been placed with Midway, and falsely
using as proof of an order that the authorized representative had received a gift
card, or provided his home address and personal phone number;
b. Mistepresenting that the product shipped to the victim business had been on back
order;¢. Mistepresenting that the shipment was a re-shipment of a previously-damaged
shipment;
4. Misrepresenting that Midway had placed the victim business on a credit hold, and
that the second shipment was simply the remainder of the original order;
¢. Misrepresenting that the shipment was the completion of the order; and
£, Misrepresenting that no other products would be sent to the victim business.
23. It was further part of the conspiracy and scheme to defraud that, in the event
victims threatened to contact law enforcement or the Better Business Bureau, the Midway co-
conspirators offered to revise the invoice to a discounted rate or, on occasion, to take back a
product for either a “re-stocking fee” or “at cost,” any of which were substantially greater than
the cost of the products purchased from Company A.
Additional Fraudulent Techniques
24. It was further part of the conspiracy and scheme to defraud that, on multiple
occasions, when the authorized representative at a victim company could not be reached by
phone, WALLEN, STAFFORD, and the Midway co-conspirators would “just ship,” or “I/S,”
‘meaning to cause a product and inflated invoice to be sent'to a victim business, even though the
victim business had placed no order with Midway. This practice was also commonly referred to
as “taking a shot,” and Midway co-conspirators often sought the approval of WALLEN and
in this practice.
STAFFORD, in their capacity as supervisors, in order to engage
25. It was further part of the conspiracy and scheme to defraud that, on multiple
‘occasions, when WALLEN, STAFFORD, and the Midway co-conspirators learned that the
authorized representative at a victim company had quit, been fired, or even passed away, they
caused a product and inflated invoice to be sent to the victim company knowing that the
‘company would be unable to dispute the validity of the order. This practice was referred to bythe Midway co-conspirators as a “down the road,” and Midway co-conspirators regularly sought
the approval of WALLEN and STAFFORD, in their capacity as supervisors, in order to engage
in this practice.
26. It was further part of the conspiracy and scheme to defraud that, between 2010
and 2014, Midway sent fraudulent invoices to victim companies for more than $100,000,000,
and received more than $50,000,000 in payments on those invoices.
18 US.C. § 1349COUNTS TWO THROUGH FOUR
(Mail Fraud)
1. Paragraphs 1 through 6, and 8 through 26 of Count One of this Indictment are
hereby incorporated by reference as though fully set forth herein,
2. Onor about the dates listed below, in the District of Maryland and elsewhere,
BRIAN WALLEN
the defendant herein, having knowingly and willfully devised and intending to devise a scheme
and artifice to defraud and to obtain money and property from various businesses by means of
materially false and fraudulent pretenses, representations, and promises regarding light bulb and
cleaning supply orders, and for the purpose of executing and attempting to execute such scheme
and artifice to defraud, did knowingly cause to be placed in an authorized depository for mail
matter to be delivered by the United States Postal Service, and did cause to be delivered by mail
and by any private and commercial interstate carrier, any matter and thing, according to the
direction thereon, the following matters as set forth below:
COUNT DATE DESCRIPTION
Two 10/19/2012 | Johnson Distribution invoice mailed from Maryland to Victim
Business #1 in Minneapolis, Minnesota for $594.90 in light bulbs
ordered from Company A with a cost of $54.69.
Three | 10/19/2012 _| Johnson Distribution invoice mailed from Maryland to Vietim
Business #1 in Minneapolis, Minnesota for $999.45 in light bulbs
ordered from Company A with a cost of $117.01.
Four 3/13/2013 | Standard Industries invoice mailed from Maryland to Victim
Business #2 in Bangor, Maine for $799.45 in cleaning supplies
ordered from Company A with a cost of $39.12.
I8US.C. § 1341
I8US.C.§2COUNTS FIVE THROUGH SEVEN
(Mail Fraud)
1. Paragraphs 1 through 6, and 8 through 26 of Count One of this Indictment are
hereby incorporated by reference as though fully set forth herein.
2. Onor about the dates listed below, in the District of Maryland and elsewhere,
ANDREW STAFFORD
the defendant herein, having knowingly and willfully devised and intending to devise a scheme
and artifice to defraud and to obtain money and property from various businesses by means of
materially false and fraudulent pretenses, representations, and promises regarding light bulb and
cleaning supply orders, and for the purpose of executing and attempting to execute such scheme
and artifice to defraud, did knowingly cause to be placed in an authorized depository for mail
‘matter to be delivered by the United States Postal Service, and did cause to be delivered by mail
and by any private and commercial interstate carrier, any matter and thing, according to the
direction thereon, the following matters as set forth below:
COUNT DATE DESCRIPTION
Five 8/12/2013 | Environmental Industries invoice mailed from Maryland to
‘Victim Business #3 in Brooklyn, New York for $579.56 in
cleaning supplies ordered from Company A with a cost of $35.03.
Six 1/14/2014 _ | Midway Industries invoice mailed from Maryland to Victim
Business #4 in Atlanta, Georgia for $3,750.05 in light bulbs
ordered from Company A with a cost of $156.70.
Seven 1/14/2014 | Midway Industries invoice mailed from Maryland to Victim
Business #4 in Atlanta, Georgia for $4,999.40 in light bulbs
ordered from Company A with a cost of $217.30.
18 U.S.C. § 1341
18 US.C. §2FORFEITURE
1, The allegations contained in Counts One through Seven of this Indictment are
hereby incorporated by reference for the purpose of alleging forfeiture pursuant to Title 18,
United States Code, Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c).
2. Upon conviction of the offenses in violation of Title 18, United States Code,
Section 1341 set forth in Counts One through Seven of this Indictment, the defendants,
BRIAN WALLEN
and
ANDREW STAFFORD,
shall forfeit to the United States of America, pursuant to Title 18, United States Code, Section
981(a)(1)(C) and Title 28, United States Code, Section 2461 (c), any property, real or personal,
which constitutes or is derived from proceeds traceable to the offense(s)..
3. The property to be forfeited includes, but is not limited to:
a. A sum of money equal to the proceeds of the scheme to defraud, which amount is
at least $58,656,369.
b. Any and all funds up to $1,347,598.81 in TD Ameritrade Account Number ending
in 1720, and TD Bank Check Number ending in 5148,
c. Real property located at $14 Wyngate Road, Lutherville, Maryland 21093.
4, Ifany of the above-described forfeitable property, as a result of any act or
omission of the defendant:
a, cannot be located upon the exercise of due diligence;
b. has been transferred, sold to, or deposited with a third party;
c. has been placed beyond the jurisdiction of the court;
d. has been substantially diminished in value; or€. has been commingled with other property which cannot be divided without
difficulty,
it is the intent of the United States, pursuant to 21 U.S.C. § 853(p), as incorporated by 28 U.S.C.
§ 2461(c), to seck forfeiture of any other substitute property of the defendant's up to the value of
the forfeitable property described above.
18 USC. § 981(ay(1)(e)
I8 U.S.C. § 1956(€)(7)
18 U.S.C. § 1961(1)
28 U.S.C. § 2461(c)
Fed. R. Crim. P. 32.2(a)
A TRUE BILL:
Foreperson,
Date: June 30, 2016