Company president gets 14 years in $90 million work-at-home fraud
By CATHERINE WILSON <a href=www.heraldtribune.com>Herald Tribumne.com-AP Business Writer
A former jewelry company president received a 14-year prison sentence Friday for scamming 16,000 people in a $90 million work-at-home fraud that capitalized on a photo taken with President Clinton and used a Hispanic TV psychic as a pitchman.
About half of the money has been recovered, and the victims have been repaid about 30 percent of the money they paid Unique Gems International Corp. Officials say it was the biggest credit-card fraud of its time.
Former Unique Gems CEO Enrique Pirela said through tears that he was "truly repentant," his attorney said higher-ups are still active overseas, and an unmoved victim said Pirela deserved worse.
"This was a very extensive, very damaging crime," U.S. District Judge Ursula Ungaro-Benages said. "This program preyed on the naive hopes of some of the less sophisticated people in the community."
Famed Spanish-language psychic Walter Mercado promoted the company's hematite necklaces as a cure for cancer, sexual dysfunction and poverty, said Lewis Freeman, the court-appointed receiver who has worked for years to track down Unique Gems' money.
The Democratic National Committee handed over $15,000 to Freeman out of profits from a 1996 Clinton fund-raising dinner attended by 30 people from Unique Gems at the posh Biltmore Hotel in Coral Gables. The White House protested when the company used a Clinton-Pirela photo in widely circulated brochures.
The fraud, which operated internationally from 1995 to 1997, was a classic Ponzi scheme paying the first batch of necklace assemblers with money from newcomers.
People deposited $3,000 for necklace kits worth $100 and returned the completed necklaces to the company. They were told they could move up to "authorized merchants" earning commissions from a stable of "assemblers." The merchants needed to turn in $5,000 a month to keep their supervisory status.
Investigators who found 372,000 stockpiled necklaces said Unique Gems sold only $1,400 worth and consigned 2,900 for sale. Some had no clasps and were too small to fit over the head.
Assemblers given beads worth a penny from Thailand were told a necklace took 20 minutes to an hour to complete and would sell for $60.
Two people indicted with Pirela, Carlos Rodiles and Kazimierez Pac, are believed to be fugitives in Spain, and a third is thought to be dead.
Defense attorney Ruben Oliva considered Pirela "more of a puppet" used by others who were "very, very cunning, wily criminals who operated at the international level. ... Certainly he was not part of that group that continues to operate."
Pirela, 55, a flea market manager before joining Unique Gems, fled to Venezuela amid death threats when the company collapsed. He was arrested last year when he returned to the United States for a son's wedding. He could have faced 20 years in prison on his guilty plea to money-laundering conspiracy and fraud conspiracy.
"This man right here put my family through misery," Nelson Bauza told the judge, saying he lost his life savings, including his children's college fund. "He's evil. He knew exactly what he was doing."
Marianne Artega said she unwittingly set her "naive" father up with Rodiles, a former boss. She became a merchant but moved out of town and changed her name when the fraud was uncovered and assemblers threatened her baby.
As part of his sentence, Pirela was ordered to pay $30.2 million restitution, but any money will be repaid from his minuscule wages for prison labor.
A civil suit is pending against Wachovia Bank for handling $89 million in Unique Gems money, which Freeman said flowed at the rate of more than $1 million a day to the small European banking haven of Liechtenstein.
Another suit by the receiver seeks damages from a freight forwarder who imported the beads in an alleged money-laundering scheme.
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