Ouch...AV123

Mark is in hot water.

Link; http://www.timescall.com/News_Story.asp?ID=20988

Longmont man accused of charity fraud


By Scott Rochat
© 2010 Longmont Times-Call



A grand jury has indicted 53-year-old Mark L. Schifter of Longmont on suspicion of stealing $180,034 through a charity fraud.

Colorado Attorney General John Suthers announced the indictment Friday. He said the grand jury accused Schifter of running 27 illegal charity raffles online at his company’s main Web site, www.AV123.com, and then keeping most of the money for himself.

“Of that amount, only $29,500 was ever given to the ostensible recipients of the donated raffle money,” the grand jury said in its indictment. “Many charities that Mark Schifter said would receive large amounts of donations from his raffles, in fact, received nothing.”

Schifter heads Perpetual Technologies, a company that sells high-end audio equipment. According to the indictment, he is believed to have run the raffles between Oct. 18, 2004, and Aug. 25, 2009, through an online forum at the AV123 site. At one point, the indictment said, he even set up a PayPal account to make it easier to donate.

Each raffle included an expensive piece of audio equipment as a prize, the indictment said, as well as an emotional appeal for help written by Schifter.

“The scam not only defrauded Colorado consumers, but it also preyed on their generosity,” Suthers said in a statement Friday.

A total of 707 people from across the United States gave to the raffles, Suthers said. The causes promoted by the raffles included the Dana-Farber Cancer Institute, The Children’s Hospital of Denver, Russian orphanages, the Salvation Army and the American Red Cross efforts to help victims of Hurricane Katrina, according to the indictment.

Schifter ran each raffle without a license and without permission to use the names of the charities, the indictment claims.

“In fact, most of the organizations were unaware that a so-called raffle was being held to benefit them,” the grand jury said in its indictment.


The grand jury indicted Schifter on five counts, consisting of:

• Theft of $20,000 or more.

• Committing a computer crime to scheme or defraud $20,000 or more.

• Violating raffle law by failing to get a charitable gaming license.

• Charitable fraud.

• Use of an organization’s name without authorization in connection with a charitable fraud.

Suthers said his office worked with the Longmont Police Department to get the indictment.

Suthers also said that those wanting to investigate a Colorado charity can go online to www.checkthecharity.org.

Charities also can be checked out through the Boulder/Denver office of the Better Business Bureau at www.denver.bbb.org/charity.

There's been a ton of chatter on the forums about this since last Friday evening - AVS, Audioholics, Tweak City Audio, and lots of other places. About the only place that it is not being discussed at all is AV123's forum, which I was banned from last September for pressing Mark to do something about the growing concerns about the raffles having been "underfunded" (to the term Mark used when he admitted to having taken money from at least two raffles) and asking for acknowledgement of their forum moderation policies. Their moderation policies kicked in late Friday or early Saturday, and any post that seems at all to be referring to the situation is deleted - often accompanied by entire threads on unrelated subjects.

The company has been struggling since late 2008 due to an assortment of problems, but they are still going and still selling speakers (the weekly sales emails that I've been to lazy to unsubscribe from have made sure I'm aware of that). This may be the final straw, though, and a lot of long-time company supporters are deeply upset about the situation. It's generated a lot of online anger (justifiably, in my opinion, based on the charities involved and the circumstances of the crimes) that has spilled out in a lot of different directions. There's even been something of an inter-forum war going between Audioholics and Tweak City in recent days (sparked by heated debate about Mark's indictment but also tied closely to existing disagreements between the two forums' owners), something that I'm glad to say the saloon has not had to endure. It's a terribly sad mess - one man's misdeeds have hurt a lot of people, both directly and indirectly.

Hard to believe that you actually got banned from a forum gonk...

Ever since I heard about this (not being a regular at av123, I think I heard the first inkling about this from gonk), I have avoided them altogether. Gonk, what was it that led everyone to discover that the raffles were "underfunded"?

There was a series of events involved in discovering the raffle thefts. I don't think I have all the facts (there were some offline communications between some donors, some charities, and the Colorado authorities), but here's what I do know.

• A pair of raffles were run with the proceeds to be split between an orphanage in Russia and the Sloan Kettering charity. The Sloan Kettering money was in honor of Dave Fabrikant's late father (died of cancer). Dave is the president of Ascend Acoustics, and he encouraged friends and family to contribute. A friend happened to call Sloan Kettering some time after the raffles and found that no money had been delivered. When confronted about it via email, Mark produced a check for $3,000. The other $3,750 was never delivered. This took many months to leak into the forums.
• A set of raffles were held to benefit the dying friend of a forum member. When the friend died months after the raffles ended, Mark had still not delivered any of the funds. The forum member was generally quiet about it, partly because he was so upset, but word did creep out.
• A series of at least four raffles was held to benefit a family on AV123's forum because their daughter had diabetes and other medical problems that had produced significant medical bills. These raffles raised around $35,000. At last report, perhaps $2,000 or $3,000 of the funds collected directly by Mark had been delivered to the family. Some money went directly from a single donor to the family. Eventually, the father started posting about the lack of funds.

All that information started surfacing at least a year ago, and that's when Mark admitted to "underfunding" two raffles. That's all he would say. Later, reports surfaced that Ballet Nouveau Colorado (the ballet company where Mark's granddaughter dances, and beneficiary of three raffles) had not received all of its money, including the money raised by the original raffle in 2004. That's about all anybody knew prior to the indictment, though, at which point the scope of the theft appeared to be even worse than it had seemed initially. Starting some time last fall (possibly earlier, I don't know all the details), the Colorado Attorney General started working with police in Longmont and with several of the charities to build a criminal case against Mark. That's what led to February's indictment.

I hope he gets whatever justice he deserves!!

This was really sleezy, and with the "personality cult" nature of the AV123 following could well put them out of business.
I know this was a major factor in my recent decision to buy an LFM-1EX as apposed to an MFW-15.

That seems like a good choice to me. The MFW-15 may cost less (especially the assorted open box and B-stock deals they've been running in recent months), but I haven't heard of LFM's routinely requiring customers to re-do wiring to fix hum, replace multiple bad amps, replace drivers, deal with stripped or missing screws on the drivers, or some of the other QA issues that have plagued the MFW. The LFM's also come with a user manual - rash idea, I know, but after over two years of selling the sub AV123 has still not posted or printed a user manual for the MFW-15.

I have had a couple good experiences from dealing with AV123 (budget speakers). I have also been tempted to try out the MFW-15, but some of the problems that have plagued this subwoofer, I did not want to take the chance (besides what a pain to have to return ship a 125lb box). It is really unfortunate that they have the QA issues and a questionable business model ( super sales, raffles, shutting down forums, banning members for raising issues), many other ID companies are surviving these economic times and offering a good product. I have to wonder how long they will survive with the legal issues now compounding an unsteady business.

hi guys,..
i am new in this forum,..
i found that it is very helpful for me because it contains very informative posts and sharing s,..thanks

Welcome to the saloon, prince! Glad to hear it's providing you some good info.

Wow and I was considering a purchase of the AV123 LS6 Speakers. Good information to know before making any purchase. Just seems wrong.

Certainly hard to recommend putting that much money (or even a tenth of that much money) into any of their products at this point. There are so many other good speakers on the market that aren't such a risk and that aren't associated with such wanton mistreatment of their customer base. If you really want some line source speakers, you might look at the used market, but even there you have to be exceptionally careful considering the frequency of manufacturing defects that made it out the door on the LS's over the last year or so. Sean Parque was selling a set of LS6's a couple weeks ago that he had built out himself (online classified here - it's a long story involving AV123 yanking him around for several years, including a six-month delay after sending an incomplete shipment last year that was only resolved because Sean took them to small claims court) that would be a safe choice.

I pre-paid for AV123 LS9 speakers 2 years ago and, after 9 months of waiting and no speakers in sight, canceled my order. It's been more than 18 months since that cancellation and I'm still without a refund. When I paid for the speakers, the owner (Mark) instructed payment to an account which turns out was his personal wholesale business and not associated with AV123. It wasn't until I canceled the order and Mark refused to provide a refund that I researched and realized the account was not associated with AV123. Neither Mark nor AV123 would refund my money for AV123 LS9 speakers. All communications (phone and email) with Mark requesting a refund were met with excuses or reasons for delay.

There are a plethora of speakers in the market, including ones from vendors with a history of top notch customer service. There would seem to be better choices, however, than dealing with AV123 given its refusal to refund customer payment (I am one of several with this issue), frequency of manufacturing defects on multiple product lines (detailed on other forums), and the owner's self-admittance to "underfunding" charity raffles.

Anyone interested in line source speakers might try the secondary market as Gonk suggests.

Rob

Sorry that you are still without a refund. Mark's assortment of criminal and unethical business practices have hurt a lot of people, which is another reason I'm not comfortable with the idea of doing business with the company. (For point of comparison, candyman's post would be deleted from the AV123 forum - and if he received any message about the deletion, it would be an instruction to communicate directly with Mark on these matters. It's a policy that they refuse to publicly admit but that they've been employing consistently for almost a year now.)

How does someone accept payment for a set of speakers, not deliver them, and then refuse a refund NOT wind up in the pokey? Seems like a pretty cut and dried case of fraud.

I'm just sayin...

In addition to the various unrefunded LS-9's, there are some unrefunded RSL-II betas (at $6,000 a pop) as well. In each case, it is clearly not legal for him to keep those funds. Unfortunately, those are probably civil cases rather than criminal - and they are so spread out (individuals all over the country, each out just enough to be on the margins of it being a small claims matter or a more significant case) that most folks haven't pursued a civil case against him. Any way you slice it, though, it stinks.

I am not sure how credit cards work in the U.S. I made an inquiry once to Visa in regards to the possibility of non delivery of goods after using a credit card. They explained that they (Visa) goes after the vendor rather than the customer.

In most cases, though, the charges were processed in 2009 or 2008 - once you get past around 60 days, most credit cards aren't able to help so much. For the folks (and there were many of them) who paid Mark directly through PayPal, it gets even harder. If they used a credit card, the card can only go after PayPal. PayPal is less likely to help, especially since Mark seems to have abandoned that account entirely. Basically, he stalled folks long enough that they have little recourse for recovering their money. One former employee (Sean Parque, the one selling some LS's that he built out himself) went to small claims court and won, but if you aren't local it's hard to justify travel expenses for what could be several court dates - it took Sean three hearings and one postponed hearing to get his parts.

It is these kind of scams that make people leery of dealing with I.D. companies. While I have dealt with them before and the transaction has been positive (so far) it is highly unlikely that I would deal with them again. Living in Canada, would make any recovery even more difficult if something were to go wrong.

My only question would be "why?" People can build legitimate I.D. companies, sell a good product(s) and make a decent living. Everyone wins.

It is unfortunate. Folks like Outlaw, OPPO, HSU Research, and many others have proven that internet direct can offer some really good quality products and first-rate customer support at reasonable prices. The problem is that any approach to business can be run badly (unethically, outright criminally, or even just plain stupidly) and hurt its customers as a result - in the world of consumer electronics, it's a risk with I.D., "boutique" brick & mortar, and mass market.

You'd think a few of those victimized by AV123 would band together and go after them. Doesn't seem like much of a stretch to be able to show a pattern of fraud here. People like that need to be in prison. Surely there must be some sort of actionable criminal complaint that can be pursued in addition to civil remedies.

If someone stole a few grand from me, I think I'd go the extra mile to see some justice done, even if it ended up costing me a little more in the end.

Per the OP, the Colorado AG is already after him for fraud, and what's happened with the speakers not being delivered seems like they'd simply be more counts of the same (the first two counts listed specifically). If this happened to you, there's no reason not to send a note with the particulars of your situation to his office.

Today AV123 went 'tits-up', as the Brits like to say. Pity, as they sold some nice speakers, but a bad economy and a worse business reputation did them in.

Nomoneybutgoodsound mentioned that in this thread yesterday. The economy didn't get them, though. Insane business practices combined with the owner's criminal activities. The timing is particularly interesting, as they announced the closure one business day after Schifter got a plea agreement and plead guilty to two felonies.