Two former business partners were sentenced Thursday after pleading guilty to wire fraud.
Sentenced was Bernadino J. Pavone, Jr., 48, of Macomb, Michigan, and Abood Samaan, 50, of Ypsilanti, Michigan. Pavone was sentenced to 48 months in prison and Samaan was sentenced to 12 months and one day by U.S. District Judge Nancy G. Edmunds. Judge Edmunds also ordered the defendants to pay $554,000 to the Federal Trade Commission.
The scheme to defraud was executed throughout the United States and involved the sale of a credit repair service by ICR Services (ICR), a multilevel marketing company owned by Pavone and managed with Samaan's help. Pavone and Samaan falsely claimed to have a "proprietary software" program, often called "the magic disk," which could erase negative and derogatory information from consumer credit reports. Relying on this false promise, over 180,000 consumers paid for the worthless product which brought over $50 million into ICR.
Pavone and Samaan were well versed in the consumer protection rules and regulations contained in the Fair Credit Reporting Act. By taking advantage of these protections through false statements and claims, they were able to temporarily remove negative items from consumer credit reports. For a short time this allowed
unsuspecting consumers to disguise their true credit-worthiness and to trick potential lenders into risky credit relationships.
United States Attorney McQuade stated, "These defendants preyed upon consumers who were desperate to repair their credit and who would be reluctant to report the crime to law enforcement."
Sentencing for co-defendant Gloria Tactac is scheduled for November 14, 2013 at 10:30. Sentencing for co-defendant Todd Renzt is scheduled for November 19, 2013 at 2:00
The case was investigated by the FBI with assistance from the Chicago Regional Office of the Federal Trade Commission.
Local 4 Defenders on the case
The Local 4 Defenders uncovered the happenings of Bennie Pavone in 2013. Federal investigators say Pavone stole between $40 and $80 million from investors in, and customers of, his "magic disc," a computer program which worked like a virus, wiggling its way into data banks at credit reporting companies. It miraculously cleans up credit histories.
"It generated millions of dollars and some people invested huge sums of money in this bogus scam to avoid having to live up to their own credit report history," said Keith Corbett, former assistant U.S Attorney.
Corbett said the smooth-talking Pavone was saying all the right things at exactly the right time. Fear was running rampant. The economy was in the dumps. People were losing their homes. Car companies were refusing to give loans. Even business owners could not borrow money without perfect credit. The "whiz kid" Pavone had the secret, illegal, solution.
"This guy created a scheme whereby he convinced people that he had access to a computerized system that allowed him to get into your credit report and take away any bad information on your credit report and all together get it out of the system," said Corbett.
Of course, there was no real "magic disc," only a story. Customers and investors bought the story up in droves.
"Just by some magical means, presumably, getting out of the system, and thousands of people invested thousands of dollars and wanted to prevail themselves of this service which did not, in fact, exist," said Corbett.
Pavone increased his credibility by producing his own autobiography. It is a touching story of how he turned from a life of crime to creating one of America's fastest-growing companies. Yet, it was all part of his record-setting scam. Before his run was over, Pavone had acquired a beautiful million-dollar home in the hills of California. His next-door neighbor was mega movie star Eddie Murphy.
"It's hard to believe that people gave away so much money as part of that scam," Corbett said.
His victims paid a huge price and now provide a lesson to all of us.
"We are a remarkably gullible people. People buy anything people are selling. The people that step back and say, 'Well, let me check this out,' they end up being the ones that don't get burned," said Corbett.
Pavone is headed back to prison, trading in his Mercedes and mansions for a cell.
"For the people whose lives have been ruined, for the people whose financial futures are destroyed because they bought into his theory, they may not think it's long enough," said Corbett.