Jan. 24, 2012 — -- Flamboyant con artist Eric Stein, who served six years in prison after stealing as much as $50 million in a telemarketing fraud, is back in federal custody after allegedly inventing a new scam that preyed on the love of pet owners for their lost pets.
Stein was arrested Tuesday on charges that he duped thousands of victims into investing in franchises of Return-A-Pet, in which the would-be entrepreneurs would sell pet owners dog and cat collars stamped with a telephone number. Owners would be reunited with their lost pets when callers used the Return-A-Pet number. According to authorities, there was no Return-A-Pet pet registry or any real franchise business.
In Las Vegas in the 1990s, Stein drove a different Bentley and wore a different Rolex for each day of the week while running what Fortune magazine called the biggest investment con in Nevada history. Nearly 2,000 investors lost $34 million to $50 million by sending Stein money to buy direct-response TV ads for gadgets like a pet vacuum and a Christmas tree fire alarm.
Investors contacted by telemarketers paid a minimum of $5,000 to buy into the scam. The pet vacuum didn't work, according to Stein – "It just made the dog feel good, [and he] smiled in the commercial" -- and the alarms melted easily, but Stein wasn't really buying many TV ads for them anyway. Instead, he spent the money on himself.
While in a federal prison camp in Massachusetts, according to Franchise Times, Stein taught franchising courses to fellow inmates. Upon his release in 2005, the then 45-year-old Stein found a $100 a day telemarketing job. He also taught a marketing course at a New York City area college, and launched a website called startmybiznow.com to sell how-to DVDs to would-be entrepreneurs.
"A lot of doors closed," he told the publication. "I have vendors who won't work with me because of the felony." He said he couldn't date because felons are not date material and couldn't buy an apartment because the U.S. government had to approve the purchase.
Prosecutors say that by 2007, Stein had launched the Return-A-Pet scam. According to federal sources, it was more modest, but no less vicious, and again played off Stein's franchising skills.
Using the name Robert Philips, say authorities, Stein took out internet and print ads promising that entrepreneurs could become part of "America's Most Popular Pet Registry." "Philips" would sell his alleged victims newly distributorships for at least $5,000 apiece. The distributors would receive "Return-A-Pet" packages for $5 per package that could then be resold to worried pet owners for $20.
According to U.S. Postal Inspectors, the scam continued through January 2010, and reaped at least $500,000. Investors lost between $5,000 and $50,000 each.
"To lure individuals into paying him thousands of dollars in upfront fees," says the criminal complaint, " Stein made fraudulent statements and representations, and provided phony references, to convince victims that they were purchasing a bona fide business opportunity. After making payments to Return-A-Pet, the victims never received the materials and services promised to them as part of the distributorships. Rather, Stein simply kept their money."
"Return-A-Pet is no start-up venture," boasted one of the ads quoted in the complaint. "It was created three years ago and has since seen approximately 750,000 pets registered in the U.S. and Canada."
Feds: Texas Victim Sent Stein $50,000
After contacting the company, according to postal inspectors, the alleged victims spoke to a male individual on the phone who called himself either "Robert Philips" or "Eric Stein." One victim in Texas allegedly wired $50,433.22 to a Return-A-Pet bank account and received only 50 collar tags and 200 brochures in return. After becoming suspicious, the victim called the toll-free number listed on the pet tags and left a message with the answering service, pretending to have found a lost dog. The call was never returned.
Postal inspectors said they had read interviews that Stein had conducted with the media while he was in prison, and that during those interviews Stein had described methods, including providing references, that he had allegedly used in the Rent-A-Pet scam as well. "It's all about the packaging and the picture that you paint for them," Stein told the Wall Street Journal, "the image, all about the dream you're making for them."
In 2005, after his release from prison, Stein told Franchising Times that franchising was the perfect vehicle for felons because, among other reasons, they've learned to get along with a variety of people ("In prison, you learn social skills or else," he says), they're used to hard work and following orders.
And, they've learned their lesson, he contended; they don't want to go back to prison.
"All the remorse in the world won't get you your integrity back," he said