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Ex-NY Bagel Shop Owner Sentenced For $2M Scam

A former Hudson Valley resident is heading to federal prison for defrauding prospective franchisees of his bagel company.

Joseph Smith, age 57, is heading to federal prison for defrauding prospective franchisees of his bagel company, New York Bagel Enterprises, Inc.

Joseph Smith, age 57, is heading to federal prison for defrauding prospective franchisees of his bagel company, New York Bagel Enterprises, Inc.

Photo Credit: Google Maps street view/LinkedIn/nybagelcafe

Joseph Smith, age 57, formerly of Fishkill in Dutchess County, was sentenced to three and a half years behind bars after pleading guilty in February 2022 to charges of conspiracy to commit wire fraud and tax evasion.

Federal prosecutors said between 2014 and 2016, Smith sold more than 160 franchises of his company, New York Bagel Enterprises Inc., to individuals in Pennsylvania and other states.

The problem, prosecutors said, was that Smith misled operators by guaranteeing that New York Bagel could get them financing, which he later admitted was not true.

He also misrepresented the actual cost to open a franchise, the number of franchises that were already open or opening, and the profitability of existing franchises, prosecutors said.

Some franchisees were surprised with charges of up to $44,000 after they had already opened

When some operators demanded their money back, Smith refused to refund the fees, prosecutors said.

In all, Smith raked in more than $2.1 million from the scheme working with another man, Dennis Mason, who previously pleaded guilty to related charges and was sentenced to three years in prison in April 2022.

Prosecutors said Smith deposited more than $1.3 million in franchise fees into New York Bagel bank accounts and spent the money on personal items like rent, travel, and car payments.

He also failed to file corporate or individual income taxes for three years, evading nearly $175,000 in taxes due to the IRS, prosecutors said.

“Individuals seeking to own and operate business franchises are seeking opportunity and financial stability for themselves and their families; they deserve honesty and forthrightness in their business dealings so they can make informed decisions,” said US Attorney Jacqueline Romero.

“Mr. Smith took advantage of his position to swindle millions of dollars from people seeking legitimate business opportunities, and for that crime he will now spend years in prison.”

In addition to his prison time, Smith must also serve three years of supervised release and pay $2.1 million in restitution to his victims.

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