This is an UPDATE of an article that was originally published in "Street Sweeper" on September 30, 2011.
How's this sound to you?
I've got an amazing business opportunity. Sit down. Lemme buy you a cup of Jo and a danish - waddya want, cheese, cherry, apple? Okay, so, take your time, have a sip and a bite.
You ready now?
So, here's my pitch. You see that coffee cup in your hand? That's my business opportunity. Coffee. The juice that gets us up and through the day. And I'm offering you a ground floor shot at this. We're talking coffee vending machines. I'm offering you top of the line, can't miss, heavy-trafficked locations where those machines are going to be placed.
Now, you say you don't know nothing about the coffee business? My friend, what the hell is there to know? I'm going to handle the entire daily grind for you - ha ha, yeah, that's coffee biz humor. Pretty funny, no?
You do this deal with me and I'm throwing in the machines, the locations, on-going support, and whatever assistance you need to keep everything perky - perky, perking, perk . . . you get the pun there? Bottom line, these machines will sell enough coffee to recoup your investment in 12 to 18 months.
Now, while I've largely made all of that up, it seems that federal prosecutors heard a similar tale about Manuel Rodriguez, about a co-conspirator of his, and M & D Gourmet Coffee Inc. of Boca Raton, Fla., Coffee Heaven LLC of Deerfield Beach, Fla., and Divino Trio Coffee & Vending Company of Ft. Lauderdale. All of which prompted prosecutors to issue an Indictment.
During a federal criminal trial in Fort Lauderdale, FL, witnesses pretty much told the jury a tale similar to the one that I related. Unfortunately, those witnesses, many victims of Rodriquez's scheme, claimed to have lost from $15,000 to $192,000 in his scheme.
Seems that the promised high-quality locations weren't so fancy-schmanzy and, as a result, the sales just dripped in - oh my, now I've caught the coffee biz humor bug. Of course, for many of the victims, there was nothing funny at all about his scam - in some cases, not a single coffee vending machine was even delivered.
On September 29, 2011, after a two-week trial in which 14 witnesses took the stand, the jury found Rodriguez guilty on one count of conspiracy and six counts of wire fraud. He is scheduled to be sentenced in December 2011.
For another take on Business Opportunity Fraud, see Pennies From Hell: Business Opportunity Scam Ends with Jail Terms (Street Sweeper, July 1, 2011)
On December 7, 2011, Rodriguez was sentenced to 120 months in prison plus three years supervised release; and ordered to pay more than $1.1 million in restitution.
I'm sure that many of you enjoy of nice hot cup of coffee at Starbucks, Dunkin' Donuts, Caribou, or your local coffee house. Maybe some of you have even looked into opening a place and got price lists for coffee from the likes of the Coffee Holding Company or you looked into those prepackaged portions from Green Mountain Coffee Roasters. Hey, that's the spirit of American entrepreneurship. You get an idea. You look into it. You decide whether it's a business for you. Some of you will make a bundle. Some will barely break even. Others will go belly up. That's free enterprise - no promise, no guarantees.
On the other hand, there's also rarely a short-cut to success but there are many quick routes to failure and disappointment. Among the many lessons from this case is that you rarely should buy into a business that you don't understand. Yeah, I know, many of these investors were duped and defrauded. I get that. On the other hand, what did most of these folks truly know about the vending machine business - and what in-depth research had they done about coffee vending machines?
It's nice to go and sit in an established business - be it a large franchise operation or a mom-and-pop - and to enjoy your hot cup of Jo and look around and wonder if this could be yours. If that's the case, do the leg work, get the paperwork, and hire the professionals to crunch the numbers and verify the sites.
Ultimately these business opportunity scams depend upon the laziness of many investors. The fraudsters count on the fact that you're not going to ask questions. The con artists know that far too many of their pigeons will be dazzled by the chance to plunk down a few thousand dollars and leave it all to someone else - the siting, the maintenance, the re-supply.
In the end, you don't want to lament the loss of your investment by simply bemoaning the fact that you were lied to by folks who lie for a living. It's not enough to just ask questions. You have to demand answers and you need to confirm the truth of what you've been told. Sometimes the best investment is the one that you didn't make.