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coupon clearinghouse allegedly responsible for $250 Million in coupon fraud!

"I don't like the coupon business, never did,"
"It's a lying, cheating, dirty business,"
- Chris Balsiger, former CEO of IOS

International Outsourcing Services LLC (IOS) is a clearinghouse for coupons. As such, IOS receives coupons from retailers, processes them, receives payments from manufacturers, and pays retailers after subtracting fees for its services.

Former IOS Plant Managers, Ovidio Enriquez and David J. Howard have Plead Guilty to obstruction-of-justice charges that they lied to federal investigators and took part in a scheme to destroy company records.

Enriquez and Howard were among nine executives of International Outsourcing Services who were charged in 2007 in a scam which laundered coupons through large retail accounts, including CVS, HEB Stores, Food Lion, Hannaford Brothers, Winn-Dixie and Kash n’ Karry Stores, without the knowledge of the retailers. They face up to five years in prison.

There were 25 counts. Several months later, the U.S. Attorney’s office got two more counts added, these for conspiracy to commit fraud and obstruct justice. All but one — the conspiracy to obstruct justice charge — were dropped for the two men who pleaded guilty.

The seven remaining executives have pleaded not guilty and remain free on bond. If convicted, the defendants could face up to 20 years of prison and fines up to $250,000 for each charge.

Among the allegations contained in the indictment:
• That IOS and the individual defendants included fraudulent coupons in shipments of coupons redeemed at IOS’ larger retail clients including HEB, Food Lion, Winn-Dixie and other major retailers

• That IOS and individual defendants submitted false invoices to coupon providers and their agents to make it appear as if the fraudulent coupons had been redeemed at IOS’ larger clients

• That Balsiger and Bruce Furr sent a private investigator into Mexico to forcibly obtain physical evidence held by a witness in that country.
As of March 23, 2007, IOS is under new management. Bruce Furr has resigned as Chairman of the Board, Chris Balsiger has resigned as Chief Executive Officer and Bill Babler has resigned as Chief Financial Officer. These individuals are no longer serving as management of IOS LLC.

Balsiger, remains on the company's board and retains an 18% ownership stake. He still claims innocence. "I have seen my reputation destroyed, I have seen my firm raped and destroyed, and I am not happy," he says. "We are proceeding to go to trial because I want the truth to come out."

update 5/31/11:

after a recent ruling, a good portion of the key evidence is off limits to the prosecution.

Balsiger refuses to give up the documents, even though he claims they do not contain damning evidence “Because it is my right. My dad fought in World War II and he is now dead for that right.” so much for what he said about wanting the truth to come out!

the moral of the story? if a retailer is concerned about receiving excessive chargebacks for fraudulent coupons, maybe they should examine the clearinghouse's records rather than "cracking down" on their customers.

my sources:
el paso, inc
el paso, inc
washington post
huffington post
cic press release
copy of indictment
wall street journal
el paso times
el paso, inc