Three Long Islanders, including two Huntington residents, were arrested Wednesday of on charges of committing federal mail fraud and money laundering, accused of participating in a fraudulent mass-mailing scheme that tricked hundreds of thousands of consumers, many of them elderly, into paying at least $30 million in fees for falsely promised cash prizes.
Charged were Lorraine Chavaloutis, 61, of Greenlawn, Tully Lovisa, 55, of Huntington Station, and Shaun Sullivan 37, of Merrick.
Attorney General Jeff Sessions, Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Peter R. Rendina, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the indictment.
According to the indictment, the defendants’ prize-promotion mailings claimed that recipients could receive a large cash prize in exchange for paying a modest fee but none of them did.
The scheme began after the Federal Trade Commission sued Lovisa in 2010 for sending deceptive prize-promotion mailings.
In response to that suit, a federal court in the Northern District of California enjoined Lovisa in December 2010 and April 2012 from any involvement with prize-promotion mailings. Despite these orders, Lovisa conspired with Sullivan and Chalavoutis to set up numerous prize-promotion companies using straw owners and aliases to continue defrauding consumers. Chalavoutis, who provided operational services, including opening companies and bank accounts in the name of straw owners, helped conceal the involvement of Lovisa and Sullivan in controlling the operation. The indictment also charges Lovisa with perjury for submitting a false compliance report to the FTC in which he claimed not to be involved in prize-promotion mailings.
The additional wire fraud and money laundering charges involve Lovisa’s further deception of the FTC related to the court-ordered sale of a house he owned in Las Vegas. According to the indictment, Lovisa arranged a sham sale of the house for $155,500 in September 2012 that allowed him to maintain control of it and only give the FTC proceeds of that sale. Lovisa sold the house in April 2015 for $540,000.
If convicted, the defendants face up to 20 years’ imprisonment for mail fraud, wire fraud and conspiracy. Each charge also carries a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.
The case is being prosecuted by Assistant United States Attorney Charles P. Kelly of the Office’s Long Island Criminal Division, with Trial Attorneys Daniel Zytnick and Timothy Finley of the Justice Department’s Consumer Protection Branch.
“Earlier this year, when we announced the largest elder fraud sweep in history, we sent a clear message: we will hold perpetrators of elder fraud schemes accountable wherever they are,” said Attorney General Jeff Sessions.
The 12-count indictment was unsealed Wednesday in federal court in Central Islip.