Chris’ Liquor and Deli has been a landmark Ocean Beach business since it was established in 1956, which is why it came as a surprise to residents when owner Gregg Stavros was arrested in August 2004 for wire fraud and income tax evasion.
Stavros entered into a plea agreement for the charges on Feb. 13 in U.S. District Court in San Diego before Judge Thomas Whelan. Stavros pleaded guilty to one count of wire fraud and pleaded no contest to filing a false tax return, according to a press release from United States Attorney Carol Lam’s office.
His sentencing is scheduled for Monday, May 14. Stavros faces a maximum concurrent sentence of five years for the two charges.
Stavros was arrested in connection with a $20 million insurance scam that lured investors by promising 99-year annuities, meaning investors would receive 100 percent of their investments for 99 years, the press release said. Seventeen individuals were initially charged alongside Stavros.
According to U.S. Attorney Stacey Sullivan, John Harrell, the ringleader of the scam, had many stories that he told investors to earn their trust. In one such story, Harrell claimed that the great-grandson of Mormon Church founder Joseph Smith had created a $1.6 trillion trust fund overseas. In order to get the money back into the Unites States, Harrell claimed he needed to raise enough capital to start an insurance company, The Good Samaritan Insurance Co.
Other claims regarded financing and operating insurance-related ventures, mining and refining gold, operating community social development centers and financing medical research and development, according to Lam’s press release.
Chris’ Liquor and Deli, which Stavros has owned since 1986, was the center of operation from 1998 until Harrell’s arrest in 2003. Millions of dollars were laundered through the deli.
According to Sullivan, some investors would transfer money directly from their accounts into the one Harrell created; others would write checks to co-conspirators. All the money would eventually end up at Chris’ Liquor and Deli, where it was converted into Western Union wire transfers and money orders that were then cashed and distributed to conspiracy members.
According to Jason Forge, a U.S. attorney prosecuting the case, Stavros or an associate approached either Harrell or one of the co-conspirators to get involved in the scam.
Stavros’ attorney, Michael McCabe, said Stavros heard that a group of businessmen were using the Western Union terminal at Mail Boxes Etc. in Point Loma, purchasing thousands of dollars a day in wire transfers. McCabe alleges that Stavros asked his store manager to keep an eye out for the gentlemen using the service, as he was interested in increasing business.
According to McCabe, Stavros was not aware of the scam and is one of Harrell’s many victims.
“He was like a father figure to me,” Stavros said of Harrell. “I never thought this person would screw anyone, let alone me.”
Stavros plead guilty to one count of wire fraud for his involvement in a $200,000 investment to Harrell.
According to the plea agreement between Lam, Forge and Stavros “” with the advice and consent of McCabe “” Stavros misrepresented himself to another investor, Norm King. Stavros, at the urging of Harrell, lied to King in order to coerce King into investing more money, $200,000, in order to close Harrell’s investment program.
According to McCabe, the FBI is claiming that Stavros was aware that the operation was a Ponzi scheme, which www.fbi.gov describes as an investment fraud where the operator promises high financial returns or dividends that are not available through traditional investments.
However, McCabe said this operation is not set up like a classic Ponzi scheme in which funds from new investors pay off old investors.
“In this scheme, with an exception of a couple of smaller investors who raised hell and threatened to go to the authorities, nobody ever got paid off,” McCabe explained.
Stavros plead no contest to filing a false tax return for the 2001-tax year, omitting $50,000 of income that he received that year.
According to McCabe, the $50,000 was a loan accepted with the understanding that it came from Harrell’s private funds, not investor funds. Stavros used the $50,000 to help pay for a new Porsche Turbo.
While Stavros faces a maximum five-year sentence, McCabe said he would be urging for a probationary sentence with community service.
Stavros adamantly denies he knew of any wrongdoing, saying the only thing he questioned was why it was taking so long to see returns.
“I would have never jeopardized my 20 years in business, my family or my reputation to ever get involved in any type of criminal activity,” Stavros said. “I had a good life until it was turned upside down by John Harrell. He ruined hundreds of lives, including mine.”
Despite vehement claims that he was a victim, Stavros signed a plea agreement last month that stated he was doing so “because, in truth and in fact, the defendant is guilty and for no other reason.”
Three other defendants in the case “” Kenneth Hodgell, John Reitz and Daniel Anderson “” also plead guilty; they face a maximum sentence of 8 to 10 years.
Harrell admitted to conspiracy that defrauded investors as well as 14 counts of wire fraud and 13 counts of money laundering.
Harrell, who was not offered a plea agreement, faces a maximum sentence of 335 years’ imprisonment.