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'Cents-Off' Scam : Food Market Owner Helps Authorities Trap Suspected Coupon Con Artists Who Steal Thousands From Producers

March 21, 1988|RONALD L. SOBLE | Times Staff Writer

As Malibu food market owner Jerry Alexander recalls his role in the sting, he was "not in the least" scared. But his wife, Kaye, "was petrified," he said.

Alexander, 48, volunteered to be used as bait to catch a suspected con artist allegedly linked to a scam which has the food industry increasingly concerned--the cashing of "cents-off" food coupons without any products ever being bought.

"Wired up" last month by detectives from the Los Angeles County sheriff's forgery/fraud detail, Alexander huddled with an individual who called himself "Marrio" in the small office in the back of Alexander's Trancas Grocery on Pacific Coast Highway near Zuma Beach. Deputies eavesdropped from next door.

'A Lot of Money'

Marrio had showed up for a payoff, cash generated by a coupon plan which, he claimed, would make both of them "a lot of money," Alexander said. Specific dollar amounts were not mentioned, Alexander recalled. Instead, he said, Marrio allegedly declared that profits would be good enough so that "you'll be able to take trips to the Orient, Europe. . . ."

Under the scheme, there was no need to collect coupons from customers at checkout counters. No products had to be purchased. Instead, Marrio would supply the coupons for cash redemption and split the profits with Alexander.

For his part, all Alexander had to do was vouch that the coupons were generated by sales at his Malibu market and at another store he owns in Farmers Market in Los Angeles. The big loser: coupon-issuing manufacturers, producing everything from soap to cereal, which reimburse market owners such as Alexander.

As a result of the sting, Marrio--Martin O. Smythe, 50, of Simi Valley--was arrested by sheriff's detectives Feb. 12. Smythe has declined to comment on the charges.

Competitive Marketplace

The Los Angeles area breeds dozens of "Marrios," law enforcement and industry officials said, because of the hotly competitive grocery business here. Coupon con men have been the targets of federal and local investigators for years, but officials said it is unusual for a market owner to volunteer to stick his neck out, as Alexander did.

The incentive to break the law, said Steven Koff, president of the 1,200-member Southern California Grocers Assn., is "the volume, particularly in Southern California, where the stores are offering (to) double and triple (manufacturers') coupons in a competitive price war. It's a big market."

Last month, for example, based on an investigation by U.S. Postal Service investigators, a federal grand jury returned a fraud indictment against three individuals allegedly operating a coupon fraud ring through a Long Beach-based chain of 45 small liquor and convenience stores called Eddies Markets. One of the defendants, Edward Albert Snow, was president of Supreme Euphoria Inc., which owned the markets.

In a three-month period in 1983, Assistant U.S. Atty. Harriet Rolnick charged, the suspects received more than $124,000 from the operation. Two of the three defendants also were charged with using Harrisons Market in Reseda to redeem more than $26,000 worth of coupons in about the same time period. Harrisons Market was not charged with any wrongdoing.

Billions of Coupons

Just how big a business coupon hustlers run is reflected in national figures: In 1986, the year for which the latest numbers are available, 203 billion cents-off coupons were generated by about 2,000 companies, according to the Manufacturers Coupon Control Center of Clinton, Iowa, the nation's biggest coupon clearing house. This represents about a 70% increase over the previous five-year period.

Of the more than 200 billion coupons, most ended up in the trash. Judy Farrell, the firm's coupon control manager, said about 7 billion coupons were cashed in--translating into about $3 billion worth of redemptions.

Coupon crooks, she estimated, are collecting as much as 10% of this "cents-off" cash in schemes of "mis-redemption," as the industry calls it.

Law enforcement officials said coupon con artists tend to prey primarily on small and middle-sized independent operators such as Alexander. A veteran grocery executive, he knows this, and is ready for the inevitable get-rich-quick calls. Marrio was not the first to make such a pitch.

In August, Alexander recalled, another coupon hustler, "Bobbie," told him that he had been lying on Zuma Beach with his girlfriend when he noticed the market up the road. He promised Alexander $1.5 million over three years if he would cooperate with him, Alexander said.

No Stranger to Operation

Bobbie, in his 30s and apparently well-educated, suggested to Alexander that he was no stranger to the coupon scam operation.

"He said he learned the business from his father, who did it in the New York-New Jersey area," Alexander said. "He said he'd been doing the coupon thing for nine years and that he had a lot of clients."

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