1) Design an "order form" that looks deceptively like a renewal form for the regular local yellow pages. The goal is to confuse the recipient that this is a renewal for your local yellow pages that you already subscribe to. Make the return address of your company say "YELLOW PAGES." Take advantage of the fact that the term Yellow Pages and the walking fingers logo are not copyrighted.
2) Have your shady lawyer review your order form and add enough disclaimers to cover your ass and comply with postal regulations. Everything is spelled out in the fine print. This is not a bill. You are ordering a service to be included in our book. We are not affiliated with your local phone company. We are not even going to send this book to anyone except other "subscribers" and a few libraries, etc. We will also put you on a website.
3) Mass mail this "Order Form" to your database of business names across the country. The response rate is small. But as the $300 fee is relatively high and your actual cost is negligible, the payoff is worth it. Note that by ordering you are set up to auto renew your $300 order. The book is published twice a year.
4) Send customers a bill. Charge credit card, get a check. Note that this could be an area where the prosecutor vastly overestimated the dollar amounts involved The total count of incoming mail was for order form replies. A smaller fraction of those recipients would actually have paid the bill which presumably arrived later.
-If customer uses a credit card to pay, set up auto renewal, per terms of order form.
5)Have book of names printed. How many to print? Well, you actually aren't obligated to print more than a handful, per the terms of the solicitation. Here is the crucial number to optimize because printing those books actually costs money. You need to print just enough to send to customers to show they got something. Did they send one to each customer? The prosecutor is alleging they did not based on records from the printer. Again though, they never said they would publish any specific amount or that as a subscriber you would get a copy yourself. Assuming they did actually send a book to each subscriber, then the scope of the dollar amounts involved would be much smaller than alleged, though still quite lucrative.
So why print and mail books at all? Two reasons. One is to maintain some defensibility to the business in case you ever end up in court (cough.) The second is so you have something to show the smaller subset of your customers who pay but end up complaining. When they try to file a credit card chargeback you can send them a book and prove some service was provided.
Now. Up to this point, we could be within the bounds of legality. But the prosecutor seems to be alleging something more. Specifically that the number of names actually printed in the book was far below the number of paid orders. This would clearly be fraud. But maybe they did print every paid customer's name in the book. Maybe the prosecutor indeed has his accounting wrong and maybe United was hyper careful to keep their records in order. This is where the crux of the case will probably lie. To get access to the books though, the prosecutor had to get the indictment, and that's why he filed with the information he had.
6) Test, optimize,repeat. Mailings aren't cheap. You've got to try to keep that response rate up. Which zip codes do you mail to? Which customers can continue to be charged year after year? Are repeat mailings worth it? How many chargebacks can you handle before your credit card processor dumps you? Some database work is required to keep that mailing list optimal.
7) Build a website so you can provide additional "service" to your customers to increase response rates and cut down on the need to pay for all those expensive printed books. Hell, maybe even creating a web directory for small business might actually provide some value. Start looking around for people who can help you build a website.
8) So now you've got this cash cow, but the problem is it is a deceptive business at best. You want to be a respected member of the community, and flash some cash out on the beach. No one can know what these mailings of yours look like. So you put your PO box in one state under one name, and you put your office in another state where you live under a name that sounds impressive. United Directories. You can tell everyone at cocktail parties that you are the premier publisher of B2B directories for specialized verticals, yada yada.. But that's not enough. You want to be part of something really fun and sexy, so you invest in this new software consultancy. Despite having very little to add to the business other than cash, charisma and perhaps innovative bookkeeping skills, you get to be Chairman and CFO. Finally. Respect.
9) Everything's cool. Ignore those letters of inquiry from the FTC. You can make this work. Your brother was an idiot and got too sloppy. Maybe it's time for a new Porsche.
10) Somehow despite that fact that you are a total sleazeball, you've managed to fund a great company and stand back enough to avoid destroying it. When the shit hits the fan, it's time to call in some favors.
ego can help build empires but it is often their downfall.
Just my interpretation.
Here's the indictment. Guess I'm good at hacking something.
Yeah, Bernie Madoff was respected "in the community" as well. Usually the interface between the dark side and the shiny respectable businesses are folks just like these two. They want the respect and have the charisma and flexible ethics it takes to pull off the double life.
If I were Obie, I would cut the cord with these clowns and work on salvaging hashrocket, even if it means shutting it down and starting again free of financial entanglements with these two.
If your Chief Financial Officer is indicted for money laundering, it is a bit of a problem. Even if the charges are related to a completely separate company.
The two executives charged seem to be a bit more than passive investors, considering they are right on Hashrocket's site. One is the CFO. That's not good.
This kind of deceptive business is quite common, and they usually get away with it. It would be naive to think that the Feds have the resources to go after every company that engages in deceptive marketing. There is something more here. They have taken the trouble to get access to bank accounts, this is no minor step. I think they saw enough in those accounts to warrant going after this. While there may well have been a sweep account involved, the document seems to clearly imply that they looked at the pattern of individual deposits coming in from the "customers." To say that this is some overzealous prosecutor desperate for fame seems a bit hasty.
Consider that they pulled records of how many business reply cards came into the PO box and compared that to how many names were actually published in the book. They compared that to the bank accounts. While I have my doubts that the actual solicitation was illegal and that the total dollar amounts were so high, there seems to be more here than just an out of control prosecutor.
If United billed far more names than they actually published in the book, that would be fraud.
And another thing. Why in the hell would you run a yellow pages company if your brother is already a "fugitive" for doing the same thing. Really? Don't you think that might be a sign... I mean... Really?
So on taking a further look at the court filing I think what we have here is your basic "real world spam" business model. Unfortunately these things are all over the place as they are a proven way to generate money by sending out a firehose of solicitations for an essentially useless "service".
Looking at the solicitation it clearly covers it's ass with all sorts of disclaimers, despite looking deceptively like a bill at first glance. I don't think the solicitation itself will hold up in court as being fraudulent alone. What they are alleging is that they did not even bother to put all the names in the book, and they did not send out as many books as they said they would.
You might ask yourself how such a mailing could be successful. Well, it is a sad truth that there are many aging business owners in many small towns across this country who are not quite on the ball enough to read the fine print anymore. Who falls for all those Nigerian emails? Obviously someone. Basically what these guys are doing is vacuuming up small checks from old man Higgins who is still running the ole' TV repair shop in downtown Podunk, even if nobody much bothers to fix their VCR anymore and the new Wal-Mart has got em for $49 anyways.
At some level this is along the lines of those "Who's Who" books that select you to be in a book of awesome people, and wouldn't you like to buy a copy? That kind of thing is pointless and deceptive, but not illegal. There seems to be more going on here.
A few questions:
Why get mail at a PO Box in Atlanta if this business is in Florida and it is so legitimate?
Illegal or not, do you really think this is the kind of ethics you want in your CFO? Or was it a deal with the dark side that had to be made?