Lutherville man accused of $50 million scam

Posted at 12:41 AM, May 11, 2016
and last updated 2016-05-11 00:41:53-04

The owner of a Reisterstown telemarketing business was charged Tuesday in a nationwide office supply scam.

Brian Keith Wallen, 52, of Lutherville, Md. allegedly billed thousands of businesses more than $50 million for exorbitantly priced light bulbs and cleaning products that were never ordered. Thousands of businesses and non-profit organizations, including churches, schools and homeless shelters were victims of the fraudulent scheme.

On April 28, 2016, Wallen was reported missing. The Baltimore County Police Department is currently conducting a missing person investigation. Anyone with information concerning Wallen's whereabouts is urged to call police at 410-307-2020. 

"We are asking for the public's help in finding Brian Wallen," said U.S. Attorney Rod J. Rosenstein. "Mr. Wallen reportedly left a note referencing his death, but law enforcement is still searching for him." 

According to the affidavit supporting the complaint, Wallen and others primarily operated out of Maryland and Florida. They used a variety of company names. A company called Midway Industries as well as related shell entities were used to distribute products and collect money from the victims. 

Wallen owned and/or managed in part all of the shell entities and oversaw the Reisterstown-based operations. He and others handled the accounts of large, repeat victims. 

The affidavit alleges that from 2010 to 2014, Wallen and others telephones authorized representatives of businesses and non-profit organizations on behalf of individual shell industries. During these phone calls, the conspirators falsely stated that: "the victim businesses had an existing business relationship with the shell entities; the purpose of the call was to provide an updated phone number or to send catalogues; and that the shell entities would send a "half box" of light bulbs, when in fact there were never any half boxes." 

Wallen and his co-conspirators ordered light bulbs and cleaning supples from a company in New Jersey, according to the affidavit. The supplier was instructed to send invoices directly to the shell entities. The conspirators then sent inflated invoices to the victims. 

The price billed to victims allegedly had no correlation to the product being sent. The price was determined based on what they believed the victim would pay without suspecting a scheme. Invoices were regularly as much as 900 percent above the supplier cost.

After a victim paid one invoice, subsequent invoices could be greater than 8,000 percent over the supplier's prices. 

The Federal Trade Commission (FTC) consumer protection database documented more than 500 complaints regarding the shell entities from January 1, 2011 to June 2, 2014.

On July 1, 2014, the FTC filed a civil complaint in federal court alleging telemarketing and consumer fraud. The court temporarily enjoined the shell entities, and Wallen individually, from operating the businesses, and froze assets.  Business operations were halted on July 23, 2014.

Midway and the shell entities allegedly sent fraudulent invoices to victim companies for more than $100 million and received more than $50 million in payments on those invoices.

Wallen faces a sentence of 20 years in prison.