Owner of Cash Rewards, Inc., Accused of $7 Million Fraud
|U.S. Attorney’s Office May 27, 2011|
ALEXANDRIA, VA—A federal grand jury late yesterday indicted David Maloy, 57, of Coppell, Texas, for his involvement in a fraud scheme that caused more than $7 million in losses.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI Washington Field Office, made the announcement today.
According to the indictment, Maloy owned and operated a company called Cash Rewards, Inc. (CRI), which he marketed to retail businesses as an advertising tool they could use to entice prospective customers with a time-deferred, mail-in cash reward of up to $10,000 with the purchase of an item. To participate in the program, the retail businesses were required to pay a one-time setup fee to CRI of approximately $2,500 and, thereafter, to pay 15 cents on the dollar to the CRI “claim fund” for each cash reward certificate provided to a customer. Recipients of the cash reward certificates were eligible to redeem their certificates for cash after a three-year waiting period.
As part of his sales pitch, Maloy represented that the money paid into the CRI claim fund was placed in an escrow account that was maintained by an independent escrow agent and that CRI had no access to the account. However, the indictment alleges that almost all of the money deposited into the supposed claim fund was transferred to accounts over which Maloy had control. In addition, a significant percentage of money paid by retail businesses that was supposed to be deposited into the claim fund was instead allegedly deposited directly into bank accounts over which Maloy had control. The indictment accuses Maloy of using funds from the CRI claim fund to purchase items such as expensive jewelry, cars, life insurance, and a condominium.
Maloy also represented that an independent third party administrator, rather than CRI, made the sole decision as to whether a cash reward certificate had been properly redeemed. The indictment alleges that in reality, Maloy required that the third party administrator send all certificate packages approved for payment to CRI’s offices so that they could be reviewed by Maloy and other CRI employees. Maloy allegedly made the final decision as to whether a certificate had been properly redeemed and, on some occasions, overturned the third party administrator’s determination that a certificate holder had satisfied the requirements to receive a cash reward.
Maloy is accused of receiving a total of approximately $9.4 million from more than 700 businesses that participated in the CRI program between 2003 and 2009. None of the program participants who were issued cash rewards certificates after May 2006 received payment on their certificates. CRI declared bankruptcy in 2009.
The charges in the indictment include mail fraud, which carries a maximum penalty of 20 years in prison, and money laundering, which carries a maximum penalty of 10 years in prison.
This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorney Marla B. Tusk is prosecuting the case on behalf of the United States.
The public is reminded that an indictment only contains charges and is not evidence of guilt. A defendant is presumed innocent unless and until proven guilty.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.