PHILADELPHIA, Pa. (WHTM) — The owner of New York Bagel was sentenced to three years and six months in prison, followed by three years of supervised release, and ordered to pay $2,100,450 in restitution for his scheme to defraud prospective franchisees.
According to a news release, back in Feb 2022, 57-year-old Joseph Smith of Fishkill, New York who is the owner of New York Bagel which operated in Pennsylvania and other states pleaded guilty to charges of conspiracy to commit wire fraud and tax evasion in connection with this scheme.
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Smith and another individual named Dennis Mason were charged separately for making misrepresentations to individuals interested in buying a New York Bagel franchise. These misrepresentations included a guarantee that New York Bagel could get financing for the prospective franchisee, the actual costs to open a franchise, the number of franchises that were already open or opening, and the profitability of existing franchises.
Both Mason and Smith charged prospective franchisees fees ranging between $7,500 and $44,500 to gain rights to open stores. When some prospective franchisees learned of the misrepresentations and demanded their money back, Smith refused to refund these fees.
“Individuals seeking to own and operate business franchises are seeking opportunity and financial stability for themselves and their families; they deserve honesty and forthrightness in their business dealings so they can make informed decisions,” said U.S. Attorney Romero. “Mr. Smith took advantage of his position to swindle millions of dollars from people seeking legitimate business opportunities, and for that crime, he will now spend years in prison.”
The case was investigated by the FBI and the IRS’ criminal investigation department.