$1M 'Upfront Fee' Scheme: Jury Convicts Freehold Man, Two Others

NEWARK, N.J. – A man from Freehold and two others were convicted by a federal jury for defrauding a company through a $1 million “upfront fee” scheme, U.S. Attorney Philip R. Sellinger announced today.

Jerrid Douglas, 49, of Freehold; Harold Mignott, 60, of Voorhees; and Roy Johannes Gillar, 50, of Las Vegas, were each convicted on Oct. 21 in U.S. District Court of wire fraud conspiracy and four counts of wire fraud, the U.S. Attorney's office said.

Gillar and Douglas were also each convicted of one count of transacting in criminal proceeds.

In 2016, the men set up a shell company to convince the victimized company that it could provide a standby letter of credit for 1 billion euros, the U.S. Attorney's office said. The victim company planned to buy raw gold from overseas and sell it to gold refineries, the office explained.

As part of the agreement, the victim company had to pay a $1M upfront bank fee to the defendants securing the supposed standby letter of credit.

According to documents in this case and evidence at trial, the matter unfolded like this:

From March 2016 through June 2016, Douglas, Gillar and Mignott, along with a fourth conspirator, "agreed to defraud the owners of the victim company of approximately $1 million," the U.S. Attorney said.

The defendants fraudulently induced the two company owners to enter a joint venture agreement with the defendants’ New Jersey-based shell company.

The defendants falsely represented that their company could acquire and provide a “standby letter of credit” backed by either €1 billion in cash or highly lucrative Mexican gold bonds. A standby letter of credit is a guarantee of payment issued by a bank on behalf of a client should the client fail to fulfill a contractual commitment with a third party, the U.S. Attorney's office noted.

The victim company wanted the standby letter of credit so it could purchase raw gold overseas and sell it to gold refineries.

As part of the agreement, the company agreed to pay the defendants $1 million for the bank fee associated with the standby letter of credit.

"In order to cover up the scheme and convince the victims to approve the transfer of the funds, the defendants made numerous verbal and written misrepresentations, including providing the victims with a phony letter from a major international bank saying that it was ready, willing, and able to provide a €1 billion standby letter of credit to the defendants’ shell company," the U.S. Attorney's office said in a news release.

However, after the victim company owners transmitted $800,000 of the $1 million to the men, the defendants failed to provide the standby letter or anything of value. Instead, the defendants misappropriated the money for their personal use, the U.S, Attorney's office said.

The wire fraud conspiracy charge and the wire fraud charges each carry a maximum potential penalty of 20 years in prison and a $250,000 fine. The transacting in criminal proceeds charges each carry a maximum potential penalty of 10 years in prison and a $250,000 fine.

Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, with the investigation leading to the conviction.

The government is represented by Assistant U.S. Attorneys Jason S. Gould and Joshua L. Haber of the U.S. Attorney’s Office Criminal Division in Newark.

Defense counsel for Douglas, the Freehold man, was Kristen Santillo and Fern Mechlowitz, New York.