Two of the founders of a blast-fax company that scammed businesses in Kansas have been sentenced to federal prison.
John Persaud, 48, of Boca Raton, Fla., was sentenced to more than seven years in federal prison, and Richard Hagan, 48, of Melbourne, Fla., was sentenced to more than five years in federal prison, U.S. Attorney Lenny Welch announced on Friday.
Both men had pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering back in September.
In their pleas entered in federal court in Wichita, the two admitted that in the spring of 2003 they formed Prudential Business Services Inc., which later became PBS Global Inc. with Hagan serving as chief executive officer and Persaud working as director of sales.
According to the U.S. attorney, in advertising notices faxed to small businesses across the country, PBS Global offered to assist owners in finding buyers for the businesses.
Persaud recruited and trained sales force members and provided them with sales material that contained false and fraudulent claims, including a claim that PBS only made money when a business was sold.
At least eight businesses in Kansas and thousands nationwide received blast faxes from PBS, according to the indictment. Prosecutors say that PBS said they would find buyers from companies, but fraudulently matched clients with purported buyers who had no intention of purchasing their businesses.
In only 25 instances did PBS actually find a buyer for its customers. But between June 2003 and December 2005, PBS took in more than $18 million, nearly all of it consisting of fees it charged to provide supposedly independent third-party valuations to small-business customers.
From July 2003 to June 2004 it paid only $171,000 to the companies that did the evaluating. Persaud was paid more than $4 million and Hagan more than $1 million between 2003 and 2005.