Michigan man sentenced for defrauding business opportunity buyers of more than 5 million dollars


Date: June 28, 2022

Contact: newsroom@ci.irs.gov

A Michigan man was sentenced today to 48 months in prison for defrauding victims of more than $5 million in connection with the sale of medical-related business opportunities, U.S. Attorney Philip R. Sellinger announced.

Vijay Reddy, of Milan, Michigan, previously pleaded guilty before U.S. District Judge Robert B. Kugler to an information charging him with one count of conspiracy to commit wire fraud and one count of wire fraud.

According to documents filed in this case and statements made in court:

From December 2015 through November 2020, Reddy and his conspirators, David Weinstein and Kevin Brown, advertised business opportunities for sale on various websites. They purported to sell "blocks" of contracts with medical providers who allegedly wanted to outsource their medical billing, collections, appeals, answering, credentialing, or transcription functions. The buyers would then provide the contracted services to the medical providers and earn a profit. The conspirators promised to deliver a specified number of providers and pledged that their proprietary marketing efforts would provide a guaranteed client base to the buyers.

To induce buyers to purchase the business opportunities, the conspirators created fake references purporting to be buyers who vouched for their prior business purchases from the conspirators. In fact, the references were Reddy, Weinstein, and their friends and family members, and they used aliases and disguised phone numbers to speak with potential buyers.

After agreeing to purchase the blocks of medical providers, victims entered contracts with companies represented by Weinstein or Reddy and wired down payments ranging from $15,000 to $240,000 to accounts controlled by Weinstein or Brown. The remainder of each purchase price was payable when the conspirators fulfilled the contract by delivering the agreed-upon number of providers.

After receiving the down payments, Weinstein and Reddy typically delivered to each victim only a small number of medical providers. Despite not fulfilling the contracts of any of the buyers identified by law enforcement, the conspirators continued to sell blocks of medical providers to new buyers and refused to provide refunds for their failures to satisfy the terms of the contracts. The conspirators also periodically sold batches of previously signed contracts and disclaimed further responsibility for those contracts to insulate themselves from complaints or legal action from disgruntled buyers.

Brown acted as the business broker for most of the transactions and received a commission for the sales he brokered. Reddy or Weinstein acted as the seller and signed the contracts with the victims. At least 77 victims sent more than $5 million to accounts controlled by the conspirators. The conspirators spent the victims' money on personal expenses and business investments.

Weinstein was sentenced in December 2021 to 12 years in prison; Brown pleaded guilty in February 2022 and is scheduled to be sentenced on Sept. 8, 2022.

In addition to the prison term, Judge Kugler sentenced Reddy to three years of supervised release and ordered him to pay restitution of $5.93 million.

U.S. Attorney Sellinger credited special agents of the special agents of IRS - Criminal Investigation, under the direction of Acting Special Agent in Charge Tammy Tomlins in Newark; FBI's South Jersey Resident Agency, under the direction of Special Agent in Charge Jacqueline Maguire in Philadelphia; and postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Damon Wood in Philadelphia, with the investigation leading to today's sentencing.

The government is represented by Assistant U.S. Attorneys Daniel A. Friedman and Diana V. Carrig of the U.S. Attorney's Office in Camden.