By Eric Francis
Special To The Standard
SOUTH WOODSTOCK – Federal prosecutors are poised to seize the home of a Woodstock business man who they claim engaged in four separate schemes that allegedly defrauded investors of his companies. Federal officials say that Paul S. Hendler blatantly misused for personal gains over $300,000, part of which was used for the purchase of his house on Orchard Hill Way.
Last week a federal grand jury in Burlington handed down the 11-count fraud indictment against Hendler, the founder of now-defunct JavaPop soda company, charging that he helped himself to a $100,000 company line of credit, pocketed the money from the sale of vehicles belonging to the corporation, siphoned off a $140,000 investment made by a New York City doctor, and billed another Woodstock-based company for thousands of dollars worth of expenses that he never really incurred.
The alleged misdeeds that came to the attention of federal investigators span from 2006 to 2010 and begin at JavaPop, a soft-drink company based in an office that was above a dress shop on Central Street where Hendler and his business partners were hoping America’s love for flavored coffees would extend into the realm of carbonation.
On the first of December 2006, Bank of America made a $100,000 line of credit available to JavaPop, but the grand jury charges that less than two weeks later, without the knowledge or approval of JavaPop’s board of directors, Hendler opened a checking account in JavaPop’s name at Bank of America and put what was then his own address in Taftsville on the account information, rather than that of the company’s offices on Central Street.
A month later, Hendler opened another account in his own name at the bank and then on the same day drew down $60,000 from the line of credit into the JavaPop checking account and then immediately transferred that over to his personal account, the indictment charges, claiming, “Hendler thereafter used the (money) from the JavaPop line of credit for his own benefit and enjoyment.”
It would be less than a month before Hendler pulled all but a thousand dollars of the remainder of that credit line out and transferred it through the chain of accounts to a personal account at a bank in Vermont, according to federal prosecutors who concluded, “Hendler never paid back any portion of the $99,000 he drew against the JavaPop line of credit.”
A year later, when JavaPop found itself in a “precarious financial situation,” the board of directors instructed Hendler to sell off four Honda Elements that had been purchased the previous year for the company’s widely traveled sales representatives. In all, the feds charge, Hendler received four checks totaling over $56,000 for the vehicles, all of them made out to “JavaPop Inc.,” but none of which ended up being turned over to the company. “In fact, he transferred most of (the money) into personal accounts…in Vermont,” the affidavit alleges.
A similar fate allegedly befell what was apparently to have been a short-term loan to JavaPop put up by Dr. Paul Brown of New York City who wrote Hendler a check for $140,000 in September 2006. According to the indictment, “Hendler made materially false and fraudulent representations and promises in inducing Dr. Brown to make the investment (including saying) that his investment would be repaid, with interest by December 2006.”
Instead, the indictment charges that Hendler deposited the money directly into a personal bank account in Vermont and then used it to, among other things, make a $56,000 down payment on his current home on
Orchard Hill Way in rural South Woodstock.
The fourth and final alleged scheme involved the smallest amounts of money out of the eleven counts – a $3,000 payment and one for $2,226.81 – that were garnered during Hendlers’ turn as Chief Operating Officer for Green Mountain Digital, a post Hendler held for a year-and-a-half, listing himself as a co-founder of the successful company which continues to market a popular line of digital bird and nature guides.
Noting that Hendler paid for some company related expenses out-of-pocket and then sought reimbursement for them, the indictment charges that in 2009 and 2010 he submitted “falsified and fraudulent documentation” to Green Mountain Digital that allegedly inflated the amount of the expenses to which he was entitled resulting in substantial overpayments to him.
In addition to the possibility of substantial jail time, the federal prosecution filed a forfeiture notice along with the indictment saying that, if they succeed in convicting Hendler of the charges now pending against him, they plan to go after all “proceeds obtained directly or indirectly” as a result of the alleged fraud, including the property on Orchard Hill Way.
Federal Prosecutor Gregory Waples said Wednesday that Hendler will shortly receive a summons to appear for an arraignment at the federal courthouse in Burlington. That hearing will likely take place in the next week or so, after which Hendler will be released pending trial.
Waples said the case against Hendler began as a complaint filed with the Woodstock Police Department in 2009 which then expanded into a federal investigation conducted by the Internal Revenue Service.
“It’s been going on for awhile,” Waples said, adding that was likely to be true of the trial phase as well, “These more complicated fraud cases take a while because there is a lot of discovery in these white collar cases because there are a lot of bank records and so forth.”
Most of the fraud charges that were filed carry a maximum penalty of 20 years in federal prison; however, any actual sentence would be determined with the help of federal sentencing guidelines if Hendler were to be convicted on the individual charges.
This article first appeared in the September 29th print edition of the Vermont Standard.