Attorney General Gurbir S. Grewal today announced that the owner of a now-shuttered go-go bar in Roxbury, his wife, and seven associates have been indicted on charges that they conspired in an elaborate scheme in which they used stolen credit card information – and illegally acquired gift cards – to steal more than $12 million.
The defendants were charged in an investigation called “Operation Smiles” led by the Division of Criminal Justice and the Roxbury Police Department.
The Division of Criminal Justice Gangs & Organized Crime Bureau yesterday obtained a 19-count state grand jury indictment charging each of the following nine defendants with racketeering (1st degree), conspiracy (1st degree), and three counts of money laundering (all 1st degree).
Two of the defendants, Patel and Ferguson, were arrested this morning. The other defendants were arrested previously.
Kevin Lipka, 63, of Livingston, N.J., a retired dentist, was co-owner with his wife of the company She-Kev Inc., which did business as Smiles II, a strip-club bar on Route 46 West near Route 10 in Roxbury. He allegedly led the criminal enterprise with the help of key associates.
Shelly Lipka, 62, of Livingston, N.J., is Kevin Lipka’s wife.
Kevin Bae, 30, of Edgewater, N.J., allegedly partnered with Kevin Lipka in the scheme involving stolen credit cards and illegally acquired gift cards. He shared a bank account with Kevin Lipka, into which millions of dollars were transferred.
Eric Olsen, 49, Roxbury, N.J., was daytime manager of Smiles II and handled finances for the business. He allegedly participated in the criminal enterprise, spending hours at a time processing transactions with stolen gift cards and credit cards at the bar.
Peter Vasilipous, 73, of Elizabeth, N.J., was nighttime manager of Smiles II. It is alleged that he also spent hours at a time processing transactions with stolen gift and credit cards at the bar.
Kevin Rodriguez, 25, of Whitehall, Pa., allegedly brought stolen credit cards and illegally acquired gift cards to Lipka and his associates and shared in the profits.
Jordan Turner, 25, of Jamaica, N.Y., allegedly brought stolen credit cards and illegally acquired gift cards to Lipka and his associates and shared in the profits.
Chintan Patel, 34, of Edison, N.J., allegedly brought stolen credit cards and illegally acquired gift cards to Lipka and his associates and shared in the profits.
Adam Ferguson, 26, of Bronx, N.Y., allegedly brought stolen credit cards and illegally acquired gift cards to Lipka and his associates and shared in the profits.
The Roxbury Police initiated the investigation in 2015 and enlisted the Attorney General’s Office. Most of the defendants were arrested in July 2016, when search warrants were executed for Smiles II, Kevin Lipka’s home, his vehicle, and other locations. Thousands of gift cards were seized as well as documents related to the alleged schemes. The Livingston Police assisted in the arrests and searches.
Officials say in addition to the racketeering, money laundering and conspiracy charges, all of the defendants, with the exception of Ferguson, face one or two counts of receiving stolen property (2nd degree).
According to authorities, Kevin Lipka, Bae, Rodriguez and Turner are each charged with one or two counts of theft by deception (2nd degree). Kevin Lipka faces an additional count of first-degree money laundering, and he and Shelly Lipka are charged with misconduct by a corporate official (2nd degree), two counts of filing a fraudulent tax return (3rd degree), and two counts of failure to file a tax return (3rd degree). Bae also is charged with failure to file a tax return (3rd degree).
Officials say Turner faces additional counts of receiving stolen property (3rd degree) and credit card theft (4th degree), while Olsen faces a charge of hindering prosecution (3rd degree).
The investigation revealed that from April 2014 to July 2016, the defendants allegedly conspired to steal over $12 million by defrauding retailers, banks, credit card processing companies and credit card holders.
According to authorities, the scheme involved using stolen credit card information and fraudulently obtained gift cards. Stolen credit card information was purchased on the “dark web” and “cloned” onto blank plastic cards with magnetic strips using a machine that produces useable cards. The cloned cards were printed to look like legitimate cards. They were used to buy pre-paid gift cards issued by credit companies such as Master Card, Visa and American Express at retail stores, including Target and Home Depot.
The defendants allegedly obtained gift cards from crews of “runners” who used the cloned credit cards to buy gift cards at stores across the regions where they operated, including Southeast Pennsylvania and Brooklyn, N.Y.
The gift cards allegedly were converted to cash through phony transactions at Smiles II, and the proceeds were divided between the individuals who supplied the cards – including Rodriguez, Turner, Patel, Ferguson, and the other runners – and Kevin Lipka, Bae and the other partners at Smiles II. It is alleged that Kevin Lipka and his partners at Smiles II typically took 20 percent of the proceeds, with 80 percent going to the individuals who supplied the gift cards.
Officials say the defendants allegedly swiped the cards through card processing devices to generate proceeds that went into the business accounts of She-Kev Inc. In some instances, defendants allegedly purchased liquor for Smiles II using stolen credit cards or illegally acquired gift cards.
The investigation further revealed that the defendants allegedly acquired gift cards through various other criminal schemes. In one scheme, vehicles were fraudulently offered for sale through eBay and Craigslist. Unsuspecting purchasers would be directed to pay for the vehicle with pre-paid gift cards from credit companies, and those gift cards also were allegedly processed through Smiles II.
The vehicles were never shipped to the victims.
In other instances, the defendants allegedly obtained gift cards through variations on the common “grandparent” scam, in which an elderly victim is contacted by someone posing as the grandchild or nephew of the victim and claiming to need bail money to be released from jail. The victim would be told to pay the bail by purchasing gift cards and providing the gift card information by phone to a “police officer’ involved in the arrest.
It is further alleged that Kevin Lipka and certain associates, including Bae and Rodriguez, would fraudulently return expensive merchandise, particularly high-end power drills, to The Home Depot that had been stolen from the retail chain. The returns were made without a receipt for store credit. The defendants then allegedly would sell the store credit on a website that engages in gift card buybacks, or Kevin Lipka would use the credit for items related to the construction of a luxury home he was building in Livingston. It is alleged that Kevin Lipka was involved in approximately $368,000 in illegal returns to The Home Depot.
The investigation began when an out-of-state law enforcement agency contacted the Roxbury Police Department with information that they had tracked gift cards purchased with stolen credit card information to Smiles II, where they had been processed and “cashed out.” The Roxbury Police began investigating the bar and brought in the Division of Criminal Justice Gangs & Organized Crime Bureau.
In connection with the racketeering case, the Division of Criminal Justice has placed liens on the bar in Roxbury, two homes owned by the Lipkas in Livingston worth a total of about $4 million, two homes owned by Kevin Lipka in Essex Fells and Belvedere, a vehicle, and multiple bank accounts.
The first-degree charges carry a sentence of 10 to 20 years in prison and a fine of up to $200,000. The racketeering charge includes a mandatory period of parole ineligibility equal to 85% of the sentence imposed. The money laundering charges include parole ineligibility equal to one-third to one-half of the sentence imposed. They carry a fine of up to $500,000 and an added money laundering penalty of up to $500,000.
Second-degree charges carry a sentence of five to 10 years in prison and a fine of up to $150,000, while third-degree charges carry a sentence of three to five years in prison and a $15,000 fine.
The indictment is merely an accusation and the defendants are presumed innocent until proven guilty.