U.S. Attorney's Office
Central District of California
(213) 894-2434
December 8, 2014

Leader of Fraudulent Internet Firm and Longtime International Fugitive Sentenced to 10 Years in Federal Prison

SANTA ANA, CA—A former Newport Beach resident who was a fugitive for well over a decade was sentenced today to 120 months in federal prison for running a fraudulent Internet company that bilked hundreds of victims out of approximately $13 million.

James Eberhart, 73, was sentenced this morning by United States District Judge Cormac J. Carney. In addition to the prison term, Judge Carney ordered Eberhart to pay $12,838,045 in restitution to more than 800 victims across the United States.

Eberhart pleaded guilty in September to two counts of mail fraud. His prosecution in United States District Court follows Eberhart’s arrest in Malaysia in 2012 after he was a fugitive for more than 12 years.

In the late 1990s, Eberhart and co-defendant Eugene M. Carriere operated a fraudulent Newport Beach company called YES Entertainment Network, Inc. According to court documents, they used dozens of “boiler room” telemarketing firms and a Hollywood celebrity spokesman to raise millions of dollars by telling investors that YES was creating an 18-channel, multimedia, family-oriented website that would carry various forms of entertainment programs.

Investors were told that YES would generate profits through the sale of advertising on the website, and that their investment funds would be used to build and market the website. Eberhart and Carriere also told investors that the company planned an initial public offering of its stock for the fall of 1999, which would potentially make early investments worth millions of dollars.

These claims were false. Only one percent of investor funds were used to build the YES website, which was little more than a façade used to reassure investors. No money was used for advertising, but approximately 45 percent of the funds were used to pay sales commissions to the telemarketers. Most of the rest of the money was wired to bank accounts in Hong Kong and Singapore that Eberhart had formed with the help of an attorney.

In late 1999, while Eberhart was under investigation by the U.S. Securities and Exchange Commission for an earlier investment fraud scheme, and shortly after FBI agents had executed search warrants at the offices of telemarketing companies affiliated with YES, Eberhart, Carriere, and another employee destroyed company documents and fled the country. Carriere was a fugitive for six years before being arrested in Thailand in April 2005. In 2007, Carriere pleaded guilty to two counts of mail fraud and was sentenced to three years in federal prison and ordered to pay $12,838,045 in restitution.

In addition to Carriere, five other defendants—including the owners of telemarketing operations used by YES—were indicted, pleaded guilty, and were sentenced to as much as 142 months in federal prison.

Eberhart remained a fugitive until May 2012, when the FBI Legal Attaché in Kuala Lumpur, acting on a tip that Eberhart was residing in Malaysia, coordinated with Malysian authorities to arrest him. At the time of his arrest, Eberhart was living on a custom-built, 58-foot yacht, which he has entered into sailboat races. Prosecutors said that after Eberhart fled, he asked a Costa Rican family to legally adopt him—at age 58—so that he could become a Costa Rican citizen, which would prevent the Costa Rican government from extraditing him to the United States.

The criminal case against Eberhart and the other defendants is the result of an investigation by the Federal Bureau of Investigation and the U.S Postal Inspection Service. The SEC provided substantial assistance on the case.

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