Millions, 50 cents at a time Farm Fresh magnate indicted on charges of coupon fraud

November 20, 1998|By Michael James | Michael James,SUN STAFF

It wasn't the typical way to make $2.4 million: clipping and redeeming tens of thousands of price-chopping coupons that knock 50 cents off a loaf of bread or $1 off a box of detergent.

But according to FBI and IRS agents, that's how the president of a once-thriving Maryland supermarket chain illegally made part of his fortune.

An indictment filed this week in U.S. District Court in Baltimore charges Jack I. Millman with redeeming coupons that customers never turned in. The indictment alleges he paid people to clip coupons for dozens of products and turned them in himself, claiming that people had bought the items at one of his 10 Farm Fresh stores.

"Coupon fraud can turn into a big money-making machine, unfortunately," said Bud Miller, who heads a watchdog group in Virginia called the Coupon Information Center. "Those coupons for 39 cents add up very quickly-- nationwide, the fraud problem costs the industry about $500 million a year."

Millman, 73, of Pikesville, is well-known in Maryland's supermarket community, and at one time his Farm Fresh stores grossed about $100 million a year.

But the chain crumbled in 1995 under forced bankruptcy and allegations of check-kiting and mismanagement that prompted an FBI investigation.

Aron U. Raskas, one of Millman's attorneys reached last night at home in Baltimore, said, "Mr. Millman intends to plead not guilty to all of these [new] charges."

Members of Maryland's business community say Millman, who in the 1960s and 1970s rose to become one of the Baltimore area's most respected supermarket managers, didn't seem destined to end up with all the problems he has today.

"What is very sad about all this is that Jack Millman is a person who had a world of talent and was at one time on the right path to success," said Jeff Metzger, publisher of Food World, a regional supermarket trade newspaper that has covered Farm Fresh's woes. "He successfully built Farm Fresh, and he knew how to motivate people and how to run a store."

An indictment alleges that the coupon fraud occurred between January 1992 and September 1995. Millman is charged with two counts each of mail fraud and wire fraud. If convicted, he could be sentenced to five years in prison on each count.

Also charged in the scheme are three men who at the time of the alleged fraud were Millman's sons-in-law and worked in his stores: Kenneth Goldscher, 47; William Carter, 46; and Steven Cohen, 45, who all at one time lived in Owings Mills.

Each is charged in complaints with tax evasion and mail fraud. Goldscher also was charged with interstate transportation of stolen property. They either could not be reached or had no comment.

Court papers allege that Millman and his sons-in-law "misredeemed" $2.4 million worth of coupons, including products from Pillsbury, Procter & Gamble, R. J. Reynolds, Quaker Oats and Ralston Purina.

"The coupons were for products across the board: cornflakes, soups, detergents, you name it," said one federal agent who spoke on condition of anonymity. "It ran the gamut. If there was a coupon for it, they turned it in."

Millman and the other men had purchased the coupons from "individuals who were engaged in the business of clipping and selling such coupons," court papers indicated. They then turned in the coupons to a clearinghouse, NCH Promotional Services, in Lincolnshire, Ill., according to court papers.

Such clearinghouses act as an intermediary between coupon- issuing companies, such as Quaker Oats or Ralston, and supermarkets seeking to redeem legitimate coupons.

The clearinghouses pay the supermarket the cost of the redeemed coupon, then are reimbursed by whichever company issued the coupon. The store also receives a handling fee.

Miller, of the Coupon Information Center watchdog group, said the big loser in coupon fraud schemes are the companies that issue the coupons, which end up paying discounts and handling fees on products that were never bought.

Fraud artists have been perfecting the scheme for more than 20 years, Miller said. "Clippers" get the coupons from newspapers or advertising circulars and sell them to would-be redeemers, often for $10 per pound, Miller said.

A coupon fraud ring in Detroit redeemed $87 million at 700 food stores in 1992, the biggest case ever cracked by the FBI.

"It's a long-term industry problem," Miller said. "Ultimately, the consumer is the loser."

Officials at the FBI and Internal Revenue Service said Millman and his sons-in-law had been living beyond their means. At one time, Millman owned a home in Boca Raton, Fla., along with his $223,000 townhouse in Pikesville. Maryland motor vehicle records show a 1998 Cadillac registered in his name.

One of Millman's former partners, Benjy Green of the Baltimore food wholesaler B. Green and Co., sued Millman in Baltimore Circuit Court in July 1995, alleging that he was not given financial information he was entitled to as a shareholder in Farm Fresh.

Pub Date: 11/20/98

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