BALTIMORE, Md. -- Federal prosecutors here charged a former supermarket operator with running an alleged coupon scam they claim netted him $2.5 million in illegal redemptions.
Jack Millman, 73, the former president and majority stockholder of the Baltimore-area Farm Fresh chain, which is not related to the Farm Fresh chain operated by Virginia-based Richfood Holdings, was charged last week with two counts each of mail fraud, wire fraud and interstate transportation of stolen property, according to Stephen Schenning, first assistant U.S. Attorney, Maryland District.
If convicted, Millman, who also operated another supermarket, Family Finest, faces a maximum penalty of five years in jail and a $250,000 fine on the mail and wire fraud counts and 10 years and $250,000 on the transportation charge.
The 11 stores Millman operated have since closed.
According to Schenning, investigators said coupons meant for retail customers were instead used by Millman and some of his family members to bilk manufacturers and coupon clearing houses in Illinois and Texas, as well as a wholesaler, out of tens of thousands of dollars at a time.
The indictment handed up last week was the result of a joint investigation by the FBI and IRS that began after the supermarkets were forced into bankruptcy in 1995. The stores folded amid an FBI probe of alleged mismanagement and check-fraud charges that grew out of a lawsuit brought by one of Millman's former shareholders. Millman is scheduled for arraignment on Dec. 4 and plans to plead not guilty, his attorney told SN.
Three others were also named in the indictment. Authorities said William Carter, 46, Kenneth Goldscher 47, and Steven Cohen, 45, -- all identified as Millman's sons-in-law who worked as Farm Fresh store managers -- have all been charged with various counts of mail fraud and tax evasion for their parts in the scheme. Neither those defendants nor their lawyers could be reached for comment.
In court papers filed by the U.S. Justice Department, prosecutors accuse Millman and the others of paying unnamed "individuals who were engaged in the business of clipping and selling coupons." According to authorities, between approximately Jan., 1992 and Sept., 1995, the coupons were "mixed...with the coupons that the grocery stores legitimately redeemed" and later "submitted to the clearinghouses and manufacturers for payment as if they had been properly accepted in the grocery stores in exchange for purchases of the products reflected on the coupons."
Also during that time, according to the charges, Millman's stores were being supplied by Virginia-based wholesaler Richfood and "entered into a coupon redemption agreement with Richfood" that resulted in that company becoming a victim of the scam as well. In the agreement, invoices for the coupons sent to manufacturers and the two clearinghouses were faxed to Richfood, which in turn sent a check for that amount to Farm Fresh and was later reimbursed, minus various charges, by the manufacturers.
"There are endless sorts of ways people come up with to violate federal laws and in the food industry, manufacturers and the clearing houses of these coupons are vulnerable," Schenning told SN.
Millman's attorney said his client "will plead not guilty to all of the charges." He declined further comment.
Millman, who splits his time between Florida and Pikesville, Md., recently underwent heart-bypass surgery. Schenning does not anticipate Millman will be ordered held on bail pending resolution of the case.