Pair Sentenced in Telemarketing Scheme

Partners in two Van Nuys-based petroleum-products companies have been sentenced in federal court for their roles in a fraudulent multimillion-dollar telemarketing scheme, U.S. Atty. Nora M. Manella said.

U.S. District Court Judge Consuelo B. Marshall on Monday sentenced Steven Smason, 64, of Sherman Oaks to two years probation and ordered him to serve 2,000 hours of community service. The judge also ordered him to pay $50,000 in restitution.

Smason’s partner, Steven Tinsley, 54, a former San Fernando Valley resident currently serving a federal sentence for wire fraud in another case, was sentenced to 70 months in federal prison.

The case is the result of a joint investigation by the criminal investigation division of the Internal Revenue Service and the FBI.

Smason was co-owner of two companies that defrauded victims out of an estimated $7.5 million by inducing them to invest in worthless distributorships to sell fuel additives, Assistant U.S. Atty. Carl Moor said.

Smason’s other partner, Kenneth Gilson, 65, of Northridge, began serving a 33-month prison sentence in February, Moor said.

Employees of Smason and Gilson worked as telemarketers for two companies, S&G; Enterprises and Astro Petroleum, Moor said. The employees were instructed to tell potential distributors that the products they purchased had already been bought by customers.

In fact, Moor said, there were no promised customers for the products. As a result, distributors lost virtually their entire investment because they had no one to sell the products to.

Tinsley initially supervised the fraudulent sales for Smason and Gilson in late 1991, Moor said. He became a full partner with the pair in the operation a year later.

Smason and Gilson also failed to report on corporate and individual tax returns the more than $2.6 million collected from victims, Moor said.

The Internal Revenue Service estimates that Smason evaded individual income taxes in excess of $220,000 and corporate taxes of $370,000, Moor said.