FBI Investigating Scam Patent Firm That New AG Advised

(CN) – Shut down by the Federal Trade Commission for defrauding thousands of hopeful inventors, the scam patent firm whose advisory board included Acting Attorney General Matt Whitaker now faces a criminal probe.

Then-Iowa Republican senatorial candidate and former U.S. Attorney Matt Whitaker watches before a live televised debate in Johnston, Iowa, on April 24, 2014. President Donald Trump announced in a tweet that he was naming Whitaker as acting attorney general after Attorney General Jeff Sessions was pushed out on Nov. 7, 2018, following more than a year of blistering and personal attacks from Trump over his recusal from the Russia investigation. (AP Photo/Charlie Neibergall, File)

The Wall Street Journal confirmed the existence of an active FBI investigation into World Patent Marketing late Friday, as new evidence comes to light regarding the role in scam played by the man tapped to succeed Jeff Sessions, who resigned Wednesday at the request of President Donald Trump.

Known as WPM for short, the Florida company that promised would-be entrepreneurs thousands of dollars to patent and promote their inventions paid a judgment of more than $25 million to the Federal Trade Commission this past May. As civil litigation over the now-defunct company trudges on, financial records show that the company paid Whitaker at least $9,375 between October 2014 and late February 2016, and owed him $7,500 more for work between May 2016 and February 2017.

Sessions tapped Whitaker as his chief of staff in September 2017, some seven months after that last scheduled payment.

Whitaker’s new position will allow him to oversee the FBI, whose Miami bureau is in charge of the active WPM investigation, according to the Journal’s report.

The Department of Justice declined to comment on whether Whitaker returned what WPM paid him for his role on the 12-member “Invention Team Advisory Board.” Jonathan Perlman, a receiver in charge of the court-ordered investigation of WPM, told the Journal that Whitaker had not. Perlman also characterized the advisory board to be a sham designed to “impress customers and foster sales.”

“In addition to deceptive and unfair sales practices detailed by the FTC in its papers, the receiver’s investigation has confirmed that WPM continued deceptive sales acts through March 2017, including falsely telling customers that their idea had been reviewed and approved by a ‘board,’” Perlman wrote in his receiver’s report last year.

Perlman did not respond to an email that sought elaboration on Whitaker’s role in the scheme.

Attorney Norm Eisen, the former ethics czar under Obama who heads an anti-corruption watchdog, said Whitaker has an ethical obligation to pay back his money to benefit those who were defrauded.

“What he knew about this company and when he knew it may turn out to be yet another reason he is not fit to serve,” Eisen said in an interview. “Even if he too was fooled, what does that say about his ability to oversee investigations as acting AG? As for repayment, that’s an intricate legal question, turning upon his knowledge, as well as on which state and federal laws may apply.”

Ironically, Whitaker’s profile in the archives of WPM’s now-defunct website touts his work sniffing out “scams” at his former post in the U.S. Attorney’s Office in Iowa between 2004 and 2009.

An email uncovered from the FTC litigation appears to show Whitaker threatening an unhappy WPM customer named A. Rudsky.

“I am a former United States Attorney for the Southern District of Iowa and I also serve on World Patent Marketing’s advisory board,” the Aug. 21, 2015, email states. “Your emails and message from today seem to be an apparent attempt at possible blackmail or extortion.”

The recipient, whose email address is shielded in court documents, called out Whitaker for his “scare tactics.”

“You are party too [sic] a scam that is driving allot [sic] of traffic to WPM site,” A. Rudsky wrote four days later. “You will be exposed…. I hope I make myself clear Mr. Whitaker.”

Two years later, the FTC would echo this heated language in a federal complaint, which does not mention Whitaker’s name.

“For the last three years, defendants have operated an invention-promotion scam that has bilked thousands of consumers out of millions of dollars,” the 17-page document states.

Whitaker’s email address, which was still live as of Thursday, links to his former Des Moines-based firm Whitaker Hagenow & Gustoff, now Haganow & Gustaff.

An email request for comment sent to that address was ignored.

Other ties to the Trump administration abound. Three years ago WPM released a promo video titled “Donald Trump – What World Patent Marketing Customer’s [sic] Can Learn.” Republican Rep. Brian Mast, an enthusiastic Trump-backer from Florida, also was listed as a WPM advisory board member.

Mast’s name is not listed on the same WPM financial ledger showing Whitaker’s payment, but the congressman returned a $5,400 donation to his campaign from the company’s CEO Scott Cooper. He denied association with the company.

For his part, Trump denied even knowing Sessions’ replacement at a press conference this morning.

“I don’t know Matt Whitaker,” the president told ABC News on Friday morning. “He was very, very highly thought of, and still is highly thought of. But this only comes up because anybody that works for me, they do a number on them.”

At the press conference, Trump was not asked about Whitaker’s ties to WPM. Instead the president was grilled about the new attorney general’s open opposition to Special Counsel Robert Mueller’s investigation of Russian interference in the 2016 presidential elections.

Aside from FTC litigation, the Courthouse News database shows that WPM had been a party in 16 cases in Florida, Illinois and New York. WPM, which was headquartered in Miami, is the business name of Desa Industries, a company organized in Delaware and based in New York.

Chicago-based attorney Scott Verhey, who sued WPM on behalf of one of its creditors, noted that the company’s former CEO Scott Cooper had a reputation for telling tall tales.

“I think he had on there at one point that his security team included Israeli soldiers,” Verhey said in a phone interview.

A federal class action filed in the Southern District of New York noted that Cooper bragged about these “commandos” in an article posted on WPM’s website.

“Cooper has even taken the unprecedented step of hiring a World Patent Marketing Security Force, made up of former Israeli commandos that previously protected the Prime Minister of Israel,” the article said, according to the lawsuit.

Cooper ultimately agreed to pay $976,330 to the commission, which did not respond to a request for comment.

The class action against WPM, Desa and Cooper remains pending in Manhattan.

Cooper’s attorney in that case, Kenneth Robinson in the Florida-based firm Rice Pugatch Robinson & Schiller, did not respond to a request for comment.

Representing an estimated class of 1,400 WPM customers, attorney Joseph LoPresti said in an email that his allegedly defrauded named clients – Steven Harris and Crystal Carlson – did not have any personal brush with the new attorney general.

“Although my clients received threatening letters from WPM lawyers, none were from Whitaker,” LoPresti said in an email.

Discovery has not yet begun in the’ case, which U.S. District Judge Jed Rakoff stayed until Jan. 30, 2019.

Their 34-page complaint details how WPM lured would-be inventors with grandiose promises.

Harris, a North Carolina resident, says he paid the firm close to $20,000 for his invention “Teddy’s Ballie Bumper,” described as an inflatable bladder-type device used as a bumper for small objects. WPM advertised his invention as a “success story,” even though Harris claims they never even got him a patent.

Touted as another WPM “success,” Arizona resident Carlson said she forked over more than $34,000 for the company to help her patent and promote a baby car seat monitoring system. She said that WPM promised to run her invention by a so-called “Ivy League Research Lab,” which rated her invention on a deceptive “Marketability Study.”

“Carlson’s invention scored a 72, which fell into the ‘Probably Successful’ range,” the complaint states.

Though she believed her baby car seat monitoring system was unique, Carlson said that she learned it was not and never got a patent.

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