Rutland man gets jail for baby food fraud
By Brent Curtis
staff Writer | March 06,2014
A Rutland man was sentenced to 33 months in jail this week for a fraudulent coupon scheme that federal prosecutors say cost baby food companies as much as $500,000.
Jon A. Bilodeau, 44, pleaded guilty in October to a federal charge of fraud. The owner of the Sweet Revival thrift store in Rutland was sentenced Monday in U.S. District Court in Burlington.
Federal Judge William Sessions ordered Bilodeau to surrender to police to begin serving his sentence April 8 and he fined him $6,000.
But on the highly contentious issue of restitution that Bilodeau should pay to the companies, the judge determined that “restitution determination is impracticable based upon complex issues of fact related to the amount of the victims’ losses,” according to court records.
Bank statements show that baby-food companies were tricked into honoring $571,357 worth of coupons that Bilodeau bought at discounted values on online auction sites, according to federal prosecutors.
For example, Bilodeau would pay 50 cents to 80 cents for a $1 baby formula coupon, prosecutors said.
He then started his own business, SELLZ4LESS, and a website purporting to sell baby formula to “members.” But federal prosecutors say the company name and website were just a cover and he never sold baby formula to anyone.
Instead, he cashed in the coupons, pocketing about $114,000, according to a sentencing memorandum written by his defense attorney, Steven Barth.
“He exploited the coupon check system entirely for his own benefit, turning the companies’ promotion and loyalty program into a personal cash machine,” Assistant U.S. Attorney Eugenia Cowles wrote in a sentencing memoranda.
In addition, Cowles said Bilodeau’s fraud, which operated from early 2009 to 2011, was carried out while he was on probation for a previous drug conviction.
Barth didn’t deny his client’s guilt or need to serve jail time, but he asked for a 13-month sentence — far less than the 31-to 41-month range sought by the prosecution. He argued that restitution was impossible to calculate because those families who sold coupons were still likely to buy formula for their infants and he said Bilodeau’s scheme didn’t defraud the companies of any products.
Barth also argued that his client wasn’t the only one abusing the coupon system — a fact he said the companies are aware of but continue to engage in for business purposes.
“Why? The answer is marketing and market share ... Even the coupons that are misused represent the possibility of increased market share,” he wrote.
The prosecutor found that business formula hard to swallow.
“Amazingly, he suggests that the companies somehow still benefited even if their coupons were fraudulently exchanged rather than used to purchase products because coupon recipients might remain loyal to the company that gave them the coupon,” Cowles wrote.
“While, no doubt, the individuals profiting from this scheme may have held warm feelings toward the companies they defrauded, it appears highly doubtful that their nonpurchasing loyalty brought any benefit to the companies,” she said.