Robert Boston found guilty of fraud and money landscaping
Spot News Writing
Bob Pockrass, ESPN.com
When federal prosecutors accused Robert Boston of fraudulently luring investors so, in part, he could fund his son Justin’s racing career, the four-day trial included arguments over whether racing is a viable marketing opportunity and how much should be spent by a startup company.
Robert Boston was found guilty Friday by a 12-member jury on all four charges: conspiracy to commit wire fraud, wire fraud, securities fraud and money laundering. Sentencing will come at a later date with a possible maximum sentence of 70 years.
The jury deliberated a little more than two hours to reach its verdict in a trial held at U.S. District Court.
Federal prosecutors argued Boston conned investors to pour money into the computer recycling center Zloop. They claimed that he and Zloop co-founder Robert LaBarge spent on a lavish lifestyle as well as more than $6 million for Boston’s son, Justin, to race.
Justin Boston was not involved in the scheme other than as being Robert’s son and driving the Zloop-sponsored race car. Boston won two ARCA races and had four top-10s in nine NASCAR Camping World Truck Series races. He has not raced in NASCAR since Zloop went bankrupt in 2015.
Robert Boston’s attorneys argued that Boston investors loved the idea but defective machinery hurt the ability of the start-up company to generate the necessary business.
“A failed business plan is not a crime. … There is no such thing as a spending crime,” Boston attorney Kevin Tate said in his closing argument.
Robert Boston did not testify in his defense. Tate argued that the racing was always part of the marketing plan, and it was obvious to investors. Zloop, according to testimony during the trial, paid $4.9 million directly to race teams (Kyle Busch Motorsports, Joe Gibbs Racing and Venturini Motorsports) and more than $6 million total when including seats and other items.
Venturini Motorsports sponsor reports filed into evidence indicated that the Zloop name earned approximately $3.8 million worth of television exposure in its name alone and more than $9 million when including things such as its website, the Zloop 150 ARCA race it sponsored and other Zloop-related programs. In 2013, the name “Zloop” or logo appeared or was mentioned for 3 hours, 22 minutes during ARCA telecasts.
Federal prosecutors argued that Justin racing was among the motives to commit crimes — that no start-up company would spend more than $6 million in marketing when it has taken in $33 million from investors and less than $4 million from third-party transactions.
“[They] spent more on their marketing than they did over their entire operational revenue,” federal prosecutor Taylor Phillips said in his closing argument.
In addition to Justin Boston’s racing, Zloop purchased suites and/or had sponsorship deals with the NFL’s Carolina Panthers as well as Bristol Motor Speedway, Kentucky Speedway and Pocono Raceway.
Many of them filed claims as part of the Zloop bankruptcy. Kyle Busch Motorsports released Boston nine races into the 2015 truck season after he stopped paying for the ride (the original two-year contract that had Boston/Zloop paying $3.2 million a year for Justin to drive a KBM truck) and just finished civil litigation in October. KBM had to return $462,500 to investors as part of the Zloop bankruptcy proceedings and then landed a judgment of $442,561 against Justin Boston.
Zloop co-founder LaBarge already had plead guilty in a plea deal in the case (his sentence is still being issued) and spent more than six hours on the stand as prosecutors tried to portray him as being at the mercy of Boston’s wishes. He described Boston as being indignant at times of attorneys who suggested for more disclosure of his past and said any suggestion by investors not to spend money on Justin Boston’s racing career was unacceptable. The testimony also showed spending on racing costs and personal items (such as watches) came in the days following an investor putting money into the company.
LaBarge also testified that $1.5 million of investor money was used to pay for a house and two condos. Boston’s attorneys claimed that money came from shares of the company that were purchased and Boston could do with it what he pleased.
As part of the plea deal, LaBarge admitted to removing references to Boston’s previous bankruptcy from documents that were sent to potential investors. Boston’s attorneys stressed that point and also brought up additional documents that included LaBarge’s name or signature but did not include Boston.
Boston’s attorneys repeatedly objected to the evidence of Boston’s past personal and company bankruptcy and a fraud lawsuit filed against him. They asked for a mistrial, potentially setting a basis for an appeal. They indicated in court they will file a request that the judge throw out the verdict.
Attorneys for both sides declined to comment following the verdict.