NY BAGEL SCAM Washington Enforcement Order

A complaint filed by the Unhappy Franchisee website has resulted in the third state investigation and enforcement order against NY Bagel Cafe aka NYC Bagel & Sandwich aka New York Bagel Cafe & scammers Joe Smith & Dennis Mason.  The State of Washington Department of Financial Institutions Final Order (below) includes a long & detailed list of lawsuits and claims of fraud related to the NY Bagel Scam.

(UnhappyFranchisee.Com)  Unhappy Franchisee continues its campaign to end the blatantly fraudulent actions of Joe Smith of Fishkill, NY, Dennis Mason of Frenchtown, NJ, and the NY Bagel Cafe aka NYC Bagel and Sandwich Shop aka New York Bagel Cafe franchise opportunity they promote via Craigslist ads.

So far, our complaints to state franchise regulators have resulted in three investigations and enforcements orders of the NY Bagel Scam in Maryland, Virginia and, now, Washington.

Here are the State of Washington Entry of Findings & Final Orders to Cease & Desist issued to Joe Smith, Dennis Mason & NY Bagel Cafe.

NY Bagel WA Franchise Order

NY Bagel WA Final Order – Joe Smith

NY Bagel WA Final Order – Dennis Mason

Here is the full text of the Final Order for Dennis Mason:

STATE OF WASHINGTON DEPARTMENT OF FINANCIAL INSTITUTIONS SECURITIES DIVISION

Order No.: S-17-2159 17-FO02
IN THE MATTER OF DETERMINING Whether there has been a violation of the Franchise Investment Protection Act of Washington by:
New York Bagel Enterprises, Inc.; Joseph V. Smith; and Dennis K Mason, RESPONDENTS

 

ENTRY OF FINDINGS OF FACT AND CONCLUSIONS OF LAW AND FINAL ORDER TO CEASE AND DESIST AS TO DENNIS K. MASON

On July 28, 2017, the Securities Administrator of the state of Washington issued order number S-17-2159-17-SC01, a Statement of Charges and Notice of Intent to Enter Order to Cease and Desist (Statement of Charges) against New York Bagel Enterprises, Inc., Joseph V. Smith, and Dennis K. Mason.

The Statement of Charges, together with the Notice of Opportunity to Defend and Opportunity for Hearing (Notice of Opportunity for Hearing) and an Application for Adjudicative Hearing (Application for Hearing), was served on Dennis K. Mason on September 14, 2017.

The Notice of Opportunity for Hearing advised Dennis K. Mason that a written application for an administrative hearing on the Statement of Charges, must be received by the Securities, Division within twenty days from the date of receipt of the notice.

Dennis K. Mason, however, failed to request an administrative hearing, either on the Application for Hearing or otherwise, within twenty days of receipt of the Statement of Charges and Notice of Opportunity for Hearing.

The Securities Administrator, therefore, will adopt as final the following Findings of Fact and Conclusions of Law as written in the Statement of Charges:

 

FINDINGS OF FACT

Respondents

1.  New York Bagel Enterprises, Inc. is a New Jersey corporation formed in 2008 for the purpose of operating a bagel and deli franchise.  New York Bagel Enterprises, Inc. does business under the trademark New York Bagel Cafe & Deli, a trademark that the company does not own. New York Bagel Enterprises alternatively uses the names N Y. Bagel Enterprises, Inc., N.Y. Bagel Cafe & Deli, and NY Bagel Cafe & Deli. The company is located in Rutherford, New Jersey.

2. Joseph V. Smith is a resident of New York and acts as the principal of New York Bagel Enterprises.

3. Dennis K. Mason is a resident of New Jersey and arranges for the offer and sale of New York Bagel Enterprises. Dennis K. Mason has offered and sold franchises for other companies in the past, through his company Franchises Unlimited, Inc., a New Jersey corporation.  Dennis K. Mason uses aliases, including Keith Samuels and Brian Schofield, in his solicitation of New York Bagel Enterprises franchises.

Offer of Franchises in Washington

4. From approximately January 2017 through March 2017, New York Bagel Enterprises advertised through Craigslist the sale of New York Cafe & Deli licenses in and Snohomish counties

5. Dennis K. Mason paid for the posting of these Craigslist advertisements, which he ran every few weeks.

6. For an initial fee of $27,500, New York Bagel Enterprises offered prospective licensees the right to own and operate New York Bagel Cafe & Deli stores in Washington under the New York Bagel Cafe & Deli trademark. Dennis K. Mason represented that prospective licensees could operate these New York Bagel Cafe & Deli stores within protected territories.

7. As part of the fee, New York Bagel Enterprises also offered prospective licensees assistance in opening new stores and performing financial analyses. Additionally, New York Bagel Enterprises claimed that it would provide prospective licensees with training on the operation and management of the licensee’s new store.

8. These Craigslist advertisements directed prospective licensees to call New York Bagel Enterprises listed telephone number or to visit the company’s website, where the company continues to generally offer the sale of New York Bagel Cafe & Deli franchises.

9. In their online advertisements, New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason represented that New York Bagel Enterprises had a history of successful operations, however, New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason failed to disclose their lengthy legal and financial history described below.

Respondents’ Legal and Financial History

10. New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason have at least the following legal and financial history:

a. From 1987 to 2009, Dennis K. Mason filed for bankruptcy twice. He was also named as a defendant in at least ten commercial lawsuits, nearly all alleging fraud in connection with the offer and sale of franchises. The Superior Court of New Jersey destroyed the records for three of these cases, but the defendants were found liable or settled the claims in the other seven lawsuits.

b. In 2011, an arbitrator ruled against New York Bagel Enterprises, ordering the company to fully refund the franchisee’s $29,500 franchise fee

c. In 2011, an arbitrator awarded a franchisee a $22,000 judgment against New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason in a dispute related to the franchisee’s New York Bagel Enterprises franchise.

d. In 2011, a franchisee sued New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason in connection with his purchase of a New York Bagel Enterprises franchise. In 2013, a court ruled that New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason violated the New Jersey Franchisee Practices Act and the New Jersey Consumer Fraud Act and entered a judgment against the defendants.

e. In 2011, franchisees sued New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason for fraud, negligent misrepresentation, violations of the New Jersey Consumer Fraud Act and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, and breach of contract in connection with the sale of a New York Bagel Enterprises franchise in Pennsylvania. In 2012, the parties settled the lawsuit.

f. In 2012, a franchisee sued New York Bagel Enterprises, Joseph V. Smith, and Dennis K Mason for violations of the North Carolina Deceptive Trade Practices Act in connection with the defendant’s sale of a New York Bagel Enterprises franchise. In 2013, a court entered default judgment of $839,976.96 against New York Bagel Enterprises Joseph V Smith and Dennis K Mason finding that the defendants willfully violated the North Carolina Deceptive Trade Practices Act.

g. In 2012, franchises sued New York Bagel Enterprises, Joseph V. Smith, and Dennis IC. Mason for violations of New York State General Business Law in connection with the sale of a New York Bagel Enterprises franchise in New York. In 2014, a judge ruled that New York Bagel Enterprises, Joseph V. Smith and Dennis K Mason violated New York  State General Business Law.

h. In 2013, an arbitrator issued a franchisee an award against New york Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason in a dispute related to the franchisee’s New york Bagel enterprises franchise.

i. In 2013, franchisees sued New York Bagel Enterprises and Joseph V. Smith for violations of the New Jersey Franchisee Practices Act, fraud , unjust enrichment, and breach of contract in connection with the sale of a New York Bagel Enterprises franchise in New Jersey. A default judgment was entered against New York Bagel Enterprises and Joseph V. Smith that same year.

j. In 2015, franchisees sued New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason for fraud, negligent misrepresentation, violations of the New Jersey Consumer Fraud Act and the New Jersey Franchise Practices Act, breach of contract, and unjust enrichment in connection with the sale of a New York Bagel Enterprises franchise. In 2016, a default’ judgment was entered against New York Bagel Enterprises.

k. In 2015, the Securities Division of the Office of the Attorney General of Maryland issued an Order to Show Cause against New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason alleging fraud in connection with the sale of a New York Bagel Enterprises franchise in Maryland. In 2015, the Maryland Securities Commissioner issued a Final Order against New York Bagel Enterprises, Joseph V. Smith, and Dennis K. Mason after they failed to respond to the Order to Show Cause. The Final Order ordered that New York Bagel Enterprises Joseph V Smith and Dennis K Mason permanently cease and desist from violations of the Maryland Franchise Law.

l. In 2016, the State Corporation Commission of thee Commonwealth of Virginia issued a Rule to Show Cause against New York Bagel Enterprises, Joseph V Smith and Dennis Mason alleging fraud in connection with the sale of New York Bagel Enterprises franchises in Virginia. In 2017, the State Corporation Commission issued a Judgment Order against New York Bagel Enterprises, Joseph V. Smith and Dennis K Mason after they failed to appear at a hearing on the Rule to Show Cause. The Judgment Order assessed a total of $675,000 in fines and $20,899.33 in costs against New York Bagel Enterprises, Joseph V. Smith, and Dennis K Mason, ordered restitution for New York Bagel Enterprises franchises in Virginia, and permanently enjoined New York Bagel Enterprises from operating any franchises in Virginia.

11. Many of the franchisees involved in the lawsuits described above first learned about the opportunity to purchase a franchise through online advertisements.

12. In the lawsuits described above, in many instances, the plaintiffs have been unable to collect on their judgments, and the defendants are not current in many of their settlement payments.

 

Registration Status

 

13. New York Bagel Enterprises and Joseph V. Smith are not currently registered to offer or sell franchises in the state of Washington and have not been previously registered to do so.

14. Dennis K. Mason is not currently registered as a franchise broker with the state of Washington and has not been previously registered to do so.

Based upon the above findings of fact, the following conclusions of law are made:

CONCLUSIONS OF LAW

1. Dennis K. Mason’s offer of New York Bagel Cafe & Deli licenses in Washington constitutes the offer of a franchise as defined in RCW 19.100.010(6) and RCW 19.100.010- (12).

2. Dennis K. Mason violated RCW 19.100.140 by offering franchises  for sale in Washington without registering with the state to do so.

3. In violation of RCW 19.100.170(2), Dennis K. Mason’s representations in his online advertisements of a history of successful New York Bagel Enterprises operations constitute untrue statements of a material fact or omissions of a material fact necessary in order to make the statements made in light of the circumstance under which they were made not misleading.

FINAL ORDER

Based upon the foregoing and finding it in the public interest:

IT IS HEREBY ORDERED that Dennis K Mason shall and desist from offering or selling franchises in violation of RCW 19.100.140, the franchise broker registration section of the Franchise Investment Protection Act.

IT IS HEREBY ORDERED that Respondent Dennis K. Mason shall cease and desist from violating RCW 19.100 170 the anti-fraud section of the Franchise Investment Protection Act,
This ORDER is entered pursuant to RCW 19.100.248 and is subject to the provisions of Chapter 34.05 RCW

WILLFUL VIOLATION OF THIS ORDER IS A CRIMINAL OFFENSE

SIGNED and ENTERED this 17th day of November 2017.

Approved by:
Suzanne Sarason Chief of Enforcement

William M. Beatty
Securities Administrator

Presented by:
Eric Palosaari
Financial Legal Examiner

Reviewed by:

Jack McClellan
Financial Legal Examiner Supervisor
ENTRY OF FINDINGS OF FACT AND CONCLUSIONS OF LAW AND FINAL ORDER TO CEASE AND DESIST

Special note of thanks to Washington Financial Legal Examiner Eric Palosaari for his excellent research work!

ALSO READ:

NY Bagel Scam website

NY Bagel Scam links on Unhappy Franchisee

NY BAGEL CAFÉ Franchise: How Many Have Closed? [UPDATED]

NY Bagel Café Franchise Scam Overview

FRANCHISE DISCUSSIONS by Company

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