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Home Charity

San Diego’s worst white collar crime these days

May 6, 2021
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San Diego’s worst white collar crime these days
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Anyone’s stash will do.

iluhanos / iStock / Getty Photographs Plus

Anybody’s stash will do.

White-collar criminals are available in all sizes and types, however they share a motive: to steal cash. Anybody’s stash will do. In accordance with the FBI, they’re consultants at “deceit, concealment, [and] violation of belief.” Of the lot, probably the most complicated to prosecute and the likeliest to weasel a lightweight or “deferred” sentence are the fraudsters whose open secret is to look legit: the neighborly criminal, the nice egg from church. Cash launderers, work-site embezzlers, pyramid scammers, phony safety merchants — good folks like Gina Champion-Cain. The newest basket time period for crimes perpetrated on the close to and perhaps pricey is “affinity fraud,” tricking these the swindler is aware of, usually intimately.

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Reader Cover 2021 05 06 Fraudsters CREDIT Fanatic Studio GettyImages t360

Illustration by Fanatic Studio, GettyImages

The Securities and Change Fee notes that the affinity con targets individuals with frequent pursuits: “non secular or ethnic communities, language minorities, the aged, or skilled teams.” Such scammers stage a business enterprise to lure their buddies in, just like the Chicago ex-Marine who blew his fellow Marines’ financial savings together with his “hedge fund;” or the fanatic who entices the witless to join end-times’ housing, the best way Jim Bakker sold condos to evangelicals within the Ozarks, protected from the Apocalypse. Affinity fraud depends on a relationship the con artist has already nurtured, which he then exploits.

What follows is a perp stroll of current fraudsters who’ve been charged with a criminal offense, are awaiting trial or sentencing, or have pled responsible. Deceit and deceiver have been documented by a number of companies, together with the FBI, the IRS, the U.S. Postal Inspection Service, and america Legal professional’s Workplace, Southern District of California. Trump-appointed U.S. legal professional Robert Brewer, who resigned by request of the Biden administration, led prosecutions for these scams. Three of the 5 circumstances are within the bag, with fines, restitution orders, and, in some circumstances, jail time or time served; two are pending. With protection motions and covid-19 protocols, the wheels of justice flip extra slowly than ever.

Dr Jennings Ryan Staley t360

Till Dr. Jennings Ryan Staley was indicted final December for fraudulently procuring the controversial “Covid drug” hydroxychloroquine and promoting it to purchasers at his Skinny Seashore Med Spas right here and in Los Angeles, his Yelp scores have been largely laudatory.

The Miracle Covid Treatment

Till Dr. Jennings Ryan Staley of San Diego was indicted final December for fraudulently procuring the controversial “covid drug” hydroxychloroquine and promoting it to purchasers at his Skinny Seashore Med Spas right here and in Los Angeles, his Yelp scores have been largely laudatory. The thin on Staley was that his physique wellness procedures have been protected and efficient — therapies resembling nonsurgical ultrasound face lifts, Pico laser zits and scar elimination, Brazilian/bikini waxes for ladies and men, and CoolSculpting.

One lady wrote on Yelp that she obtained a “phenomenal deal on my tattoo elimination.” One other extolled the best way Staley practiced “outdoors the field.” “Whereas underneath his care, I can attest to restoring my vitality ranges with correct assessments and remedy that I couldn’t get from my main care doctor, who’s certain by medical insurance technocrats sitting behind a desk for deciding my wellness.”

However when the physician failed greater than as soon as to refund cash for “assured” therapies, a number of purchasers began barking. They complained of Groupon offers dishonored, delayed appointments, pores and skin rashes and blisters after laser procedures, weight-loss medicines by no means delivered. Then, final spring, Skinny Seashore closed its doorways. Staley was charged with hocking “remedy kits” for covid-19, calling the package a “concierge medication expertise” providing foolproof cures for the virus.

Staley boasted to associates and staff that he was shopping for hydroxy in bulk from China; baggage of powder labeled “yam extract” that may sail via customs. He bragged in emails of a “magic bullet” and an “wonderful weapon” towards covid. He promised purchasers that after a primary telemedicine session, he’d ship kits with six two-tablet containers of Azithromycin; an antibiotic, Xanax, “to keep away from panic;” and 4 packets of the hydroxy powder. He professed to abide by the “scientific pointers set forth by Harvard Medical College and the CDC.” What’s extra, he provided “unique entry to a medical hyperbaric oxygen chamber at separate charges” and “at residence and in-store intravenous drips.” The kits have been priced at $595 a pack, for one individual and $3995 for a household of 4 with particular add-ons.

In a single occasion, Staley copied prescription info for hydroxy from a feminine worker. Utilizing her identify, he counterfeited bogus prescriptions, crammed them at pharmacies, and even pretended to be the lady, who suffered from lupus, when ordering on-line.

Over the telephone, an spy ordered the remedy package for his household. Within the prison grievance, Staley informed the agent on the pickup that within the occasion of 1 member of the family getting sick, “I can be dosing it. I’ll activate it. We’ll load [the hydroxy] and prophylax all of you.” Then, Staley put the promote in overdrive: “It’s unbelievable. There’s by no means been earlier than, apart from hepatitis C, within the historical past of medication . . . the place a drugs is totally healing of a virus. You can be wanting breath and coughing at midday right this moment, and if I begin your hydroxychloroquine loading dose, you’ll really feel 99% higher by midday tomorrow.”

Evaluation revealed the majority hydroxy was faux: The 26.5 kilos of so-called “candy potato” extract despatched from China was truly baking soda. After a number of wronged staff spoke up, the feds swooped in. Staley is charged with mail fraud, importation opposite to regulation, false assertion, and aggravated id theft. He has pled not responsible. Most time for the set of crimes, 47 years. A yr after the indictment, his case remains to be pending; protection delays to this point whole 46 continuance filings.

Swindling the Needy

To some, the married pair known as their charitable group On Your Ft, and to others, Household Useful resource Heart. In reality, each entities have been the identical — tax-exempt, nonprofit purveyors of clothes and sneakers for the needy. Starting in 2009, Geraldine and Clayton Hill of Bonita collected donations from clothes retailers resembling Eternally 21, Feed the Youngsters, and Brooks Sports activities. As tax-deductible items, firms gave overstock, unsold, and retro objects, believing the Hills wouldn’t promote the products for a revenue however slightly dispense them to organizations right here and in Mexico. The Hills agreed. To show their intent, they lower inside labels in half or defaced them with a everlasting marker.

In June 2015, Eternally 21 donated 161 pallets of clothes, retail worth, $5.6 million. The next yr, the Hills informed Eternally 21 that they deliberate a “Christmas Giveaway” and requested extra items; the corporate ponied up 16 extra pallets, valued at $314,371. Between 2011 and 2016, Eternally 21 and Feed the Youngsters gave $16 million price of attire, sneakers, toys, home goods, and different assist to On Your Ft. The charity claimed these donations would help “low-income households and people in want to raised their residing situations and high quality of life.” Beneficiaries included native shelters, missions, board and care services, faculties, hospitals, emergency catastrophe reduction teams — the care checklist went on and on.

Such was the Hills’ declare. It stood unchallenged till a number of wily staff from Walt Disney, whose logos are used on clothes offered by Eternally 21, noticed attire with depictions of Simba and Mulan in new situation on the market at low cost clothes shops and flea markets. Apprised of the fraud, the native U.S. legal professional’s workplace started digging into the {couples}’ operation.

Investigators described the Hills as “brazen,” motivated by “private greed and an indulgent way of life.” They have been promoting donated items to for-profit middlemen and wholesalers — for money. The money proceeds have been sizeable; over a five-year interval, they pocketed $1.34 million. Some $380,000 of that went for holidays and leisure, a $124,000 Mercedes-Benz, and lease on a Bonita residence with seven bedrooms and 7 loos. Phony tax stubs put their qualifying earnings to lease at $100,000 a yr. They tithed a wholesome potful to their church.

As a tax-exempt nonprofit, the Hills filed false charitable tax returns, claiming they earned lower than $50,000 per yr. Ultimately, the U.S. legal professional’s workplace known as within the IRS, which found an unpaid tax legal responsibility of $50,933.

That determine, as IRS restitution, was a part of the 2020 indictment of the Hills; one other order of restitution for “donor victims” stays within the works. Husband and spouse pled responsible to conspiracy to commit mail fraud and tax evasion. Geraldine Hill obtained 15 months in jail, Clayton Hill, 9.

U.S. Legal professional Robert Brewer famous that “the conduct by the Hills is especially offensive as a result of they’ve undermined the religion of donors in charitable giving.” Charities function — or ought to function — on belief between donors and receivers that what’s given will get to the poor. Primarily based on such belief, organizations obtain tax-exempt standing. The perfect information to assessing whether or not that standing is respected is charitynavigator.org. On Your Ft, which stays open, retains a “excessive advisory concern.” The warning is for “criminality, improper conduct, or organizational mismanagement.”

Shawn Heffernan CREDIT CA Dept of Insurance t360

Greater than a dozen fixed-income seniors with nest eggs signed contracts with Shawn Heffernan and the insurance coverage firm whose annuities he offered. From the corporate, Heffernan pocketed a gross sales fee; the bigger the nest egg, the extra he made.

Elder Fraud

Insurance agent Shawn Heffernan arrange his store in Mission Valley in 2004, which, in response to his LinkedIn web page, would assist “retirees and pre-retirees plan their “second life.” In reality, he specialised “in retirement way of life planning with an emphasis on tax effectivity and lifelong earnings.” He slathered on the self-lauding: He was president of The Heffernan Group (a one-man operation), managed greater than $100 million in property, volunteered as a coach with the San Diego State Aztec soccer crew, and sported an A+ score from the Higher Enterprise Bureau. No shock; most of it was unfaithful.

Day by day, he labored the telephones, however he additionally placed on hotel-based “Funding Seminars.” After enlisting seniors, he stored linked to them with dinners, present playing cards, the occasional banquet. His wealth automobile was the annuity: lifetime earnings generated by a lump-sum or recurring funding, backed by a good monetary planner (Heffernan) who actively manages a stock-and-bond portfolio. As he wrote, he provided “a brand new method to consider cash, investing, and retirement planning.” He added that his methods meant the aged individual’s “cash will final so long as they do.”

Greater than a dozen fixed-income seniors with nest eggs signed contracts — with Heffernan and the insurance coverage firm whose annuities he offered. From the corporate, Heffernan pocketed a gross sales fee; the bigger the nest egg, the extra he made. Many seniors want cash now, not sooner or later. So Heffernan offered them a variable annuity, which can produce the next earnings than a extra conservative fastened annuity. The upper the earnings the consumer sought, the larger the funding’s threat.

To “decrease their threat,” as he informed traders, Heffernan used an unlawful maneuver known as “churning.” As soon as he obtained Mrs. Smith to purchase an annuity, he satisfied her to promote it for an additional one which disbursed larger quantities, took a ten p.c “give up” price for the sale (greatest executed within the first yr), and both repeated the acquisition for an additional annuity or informed the lady she ought to make investments straight together with his high-earning, self-managed portfolio. Every “new funding” introduced him an administrative price. One senior’s outsized account was churned a number of occasions. The ultimate tab in give up charges was $490,000, with Heffernan’s commissions totaling $280,000.

The San Diego Regional Fraud Activity Power indicted Heffernan in 2017, and he pled responsible to a raft of felonies in 2018. There have been a number of counts of elder fraud and grand theft, one among forgery, and one among submitting a fraudulent tax return. He stole property or siphoned cash from two dozen individuals, half of them seniors. His ill-gotten achieve totaled $1.5 million. He spent his earnings on the same old froth: a Maserati, three rental condos, luxurious holidays, jewellery, and an expensive marriage ceremony for himself and his fiancée. His insurance coverage agent’s license revoked, Heffernan is serving 9 years in state jail.

A white-collar crime enhancement was added to the plea, which let prosecutors freeze and seize his property for restitution. By promoting Heffernan’s condos and sports activities automotive and including $75,000 — that’s, what was left of others’ actively managed funds — the state obtained 14 victims $320,000, round a fifth of what they misplaced.

Largest Telemedical Medicare Fraud Ever

Within the annals of elder fraud — conning People over 65 who’re Medicare, Medicaid, Medi-Cal, or army beneficiaries — this San Diego-based rip-off is to white-collar crime what Recreation of Thrones is to TV drama: one of many highest grossing spectacles of all time. The 2 originating, native actors in all probability had no concept that over a four-year interval, they and dozens of co-conspirators, a.okay.a. underlings, would defraud the federal government out of practically $1 billion!

Starting in 2014, businessmen Charles Burruss and Ardalaan “Armani” Adams created two healthcare “administration” firms to promote orthotics — leg, arm, again, and neck braces — to aged sufferers for whom such units have been “medically obligatory:” these with painful knees, weak backs, injured or deformed spines, diseased limbs, in addition to shoulder, wrist, and ankle issues — power or post-surgery. Medically obligatory merchandise should be permitted by a health care provider’s in-person examination at a “staffed bodily facility.” Burruss and Adams provided sufferers new units “free of charge.” To clean the deal, they’d facilitate contact with a affected person’s doctor or with a health care provider from their checklist.

Within the meantime, the pair created a bunch of shell firms, which contracted with Medicare. The principle one was Ever Prime DME, integrated in 2017, whose goal was to umbrella 30 firms, transfer “Sturdy Medical Tools,” and invoice Medicare, Medi-Cal, or the army. The 30 firms have been registered to subsidiary “nominee” or straw house owners. Burruss and Adams managed all of them.

The pair subsequent employed subordinates to rent “entrepreneurs.” These subcontractors ran the core swindle, buying or stealing affected person info with “private identifiers” resembling a beneficiary ID or a signed physician’s order for a sturdy medical machine. Understanding of India, the Philippines, and Mexico, high-pressure salespeople cold-called the infirm aged — medical gear, no cost.

As soon as “belief” or “confusion” with a consumer was established, the upsell started. The last word bundle was the “Iron Man Package” — two wrist braces, two arm/shoulder braces, two knee braces and one again brace. This costly package, produced by medical brace producers, was offered to individuals who wanted just one brace, but they have been instructed to maintain the opposite units for potential future use. Sufferers have been assured that both their physician or “a” physician had pre-approved the product. If they’d questions, they may communicate to a doctor on the telephone who would do a telemedical examination. All these braces have been despatched free of charge, with out co-pays, and billed to the federal government.

For his or her half, aged and army sufferers figured, appropriately, that this was how healthcare merchandise have been offered — by personal contractors, working with approval from their docs or HMOs. So long as the gear got here within the mail, few disputed the profit, although some did attempt to return unused units, to no avail.

On the monetary finish, Burruss and Adams paid “advertising and marketing charges” of $280 for each brace the entrepreneurs offered. As soon as the braces have been delivered to purchasers, the 2 males charged Medicare and different applications a number of thousand {dollars}, sometimes, for every “Iron Man Package.” From August 2017 to January 2019, gross sales skyrocketed, between $2 and $4 million per thirty days. Ultimately, the nationwide multi-level operation offered gear to 181,218 Medicare beneficiaries, which included 11,312 Californians. The claims Burruss and Adams submitted totaled practically $872 million, of which their “revenue,” minimally shared with their machine pushers, got here to just about $425 million.

An excessive amount of cash for 2 males to make with out drawing consideration. The radar of the native U.S. Legal professional’s workplace pinged. Linking up with a number of companies, the workplace playfully named their sting, “Operation Brace Your self.” Defendants Burruss and Adams have been charged on September 28, 2020 in New Jersey, Florida, and California with conspiracy to commit wire fraud and prison forfeiture. Utilizing “deceit, craft, and trickery,” they fraudulently billed authorities applications, hid the con, and paid kickbacks and bribes to straw house owners and cold-callers. Greater than 250 docs and medical professionals (their names stay unpublished) who participated within the rip-off have misplaced their “Medicare billing privileges.”

Final September, as a part of the Burruss and Adams indictments, 345 nongovernment defendants in 51 federal districts have been introduced up on expenses of medical fraud. These defendants submitted faux claims to non-public insurers and Medicare and army applications to the tune of $6 billion.

Burruss and Adams are every out on bond of $10,000. Thus far, Burruss has forfeited one ill-got checking account containing $718,500. Additional confiscation, complicated plea offers, and jail time for the kingpins look as probably as tomorrow’s dawn.

Rabbi Yisroel Goldstein CREDIT Sarah Biggart Flickr t720

As early as November 2016, the FBI had begun monitoring Chabad of Poway’s funds. Federal brokers had gone undercover, analyzing Rabbi Yisroel Goldstein’s charitable work and so-called items to the synagogue from rich donors.

{Photograph} by Sarah Biggart, Flickr

The Poway Rabbi and His Cohorts

Chabad of Poway is acquainted to most of us from the assault that rocked the synagogue on April 27, 2019. Twenty-year-old Josh Earnest shot his way into the Chabad on the final day of Passover providers. He wounded three, killed member Lori Gilbert-Kaye, and maimed the fitting hand of Rabbi Yisroel Goldstein, who misplaced his index finger. In the course of the assault, witnesses mentioned Gilbert-Kaye gave her life, shielding Goldstein from the gunman’s hearth. President Trump visited and invited the rabbi to the White Home. In each venues, he turned the voice of calm, the persona of peaceful meeting and mourning.

And but, as early as November 2016, the FBI had begun monitoring the Chabad’s funds. Federal brokers had gone undercover, analyzing the rabbi’s charitable work and so-called items to the synagogue from rich donors — very massive sums, in reality. Test by examine, investigators slowly unraveled an extremely complicated fraud that started with the rabbi and some associates within the Nineteen Eighties.

That’s when Goldstein based the Chabad, a tax-exempt group that serves its Jewish congregants, in a Poway storefront. He helped erect a 20,000-square-foot new residence for the group with cash from members and from FEMA. Over time, Goldstein directed some solicitations to charity applications for members—outreach providers, housing wants, recruitment. The Chabad account fattened with funds for emergencies, authorities awards for group applications, and personal loans from banks to help these with mortgages or these behind on funds. Constructing rapport with three Fortune 500 firms, he claimed sure congregants and associates carried out a whole lot of community-service hours whose good deeds made the Chabad one among Poway’s greatest tax-free companions.

The contributions, nevertheless, were dirty. Sometimes, the rabbi obtained a whole lot of hundreds of {dollars}, up to a couple million, funneled 90 p.c of it again to the donor, and stored 10 p.c for himself — not the Chabad. The donor claimed the cash as a charitable deduction, evading taxes and garnering accolades for his putative generosity. At occasions, Goldstein paid the 90 p.c kickback with money, gold cash, gold ingots, or as funds to a donor’s collectors for residence building or school tuition. (One son of a co-conspirator had his dental college tuition, graduate diploma included, paid by Goldstein: $368,000!) He’d textual content a donor — known as the “baker” — that his cash — termed the “challah” — was all set: “The baker got here in early and has right this moment 22 [$22,000] challah prepared for pickup.”

Goldstein’s 9 convicted cohorts included his brother, Mendel, who cheated the IRS out of $156,000. Presumably the crookedest of the co-conspirators was actual property agent Alexander Avergoon. Avergoon recruited donors and put their cash in quite a few financial institution accounts and shell firms. One was known as “Creativeness Development Firm” pun supposed — which promised repairs on the Chabad after the 2007 Witch Creek Hearth. Avergoon hid his and others’ cash like Jeffrey Epstein’s accountant.

For providers to the Chabad, he faked aggressive bids for grants, then used the do-re-mi to pay low-bid contractors for precise work or to pocket funds with out doing any enhancements. What’s extra, Avergoon constructed a separate actual property Ponzi scheme, faking the acquisition of rental property with phony deeds of belief and mortgage notes in addition to “fictitious names.” New traders, lulled in with faux mortgage agreements, have been paid “rental” dividends from beforehand lulled-in traders. These retirees — who, it ought to be famous, had nothing to do with the kickback scheme — have been fleeced of $12 million.

On October 17, 2018, six months earlier than the taking pictures, brokers with the IRS and the FBI executed search warrants of the Chabad and Goldstein’s residence. Conscious that he was underneath investigation, the rabbi warned his co-conspirators, writing in an e mail that “the web will not be a [sic] most secure place” to debate transactions. The scoundrels panicked and tried to cover the conspiracy, together with Avergoon, who left the nation. One defendant to whom Goldstein had given $1 million in cash, introduced them to the rabbi’s residence at midnight on the day of the raid. The cash have been later confiscated.

Who have been the victims of this fraud? For starters, tax cheats victimize all of us; Goldstein’s faked invoices to federal and state emergency providers resulted in an $860,000 loss to these companies. The overall quantity of “contributions” is estimated at $6.2 million with Goldstein stashing 10 p.c, greater than half 1,000,000. Twenty cheaters have been in on the grift—among the many worst different offenders have been Bijan Moossazadeh, Yusef Shemirani, Boris Shkoller, Stuart Weinstock, proprietor of a grocery enterprise in Escondido, and Qualcomm engineer, Rotem Coope. Collectively, they owe greater than $1.5 million to the IRS.

Different hurt, a few of it direct, was generously unfold.

Three massive firms requested staff to donate and every company matched the present, with some firms doubling the quantity; Chabad members have been unaware that sure members had, because the rabbi lied, carried out a whole lot of hours of group service on behalf of their “sentencing necessities for prison offenses;” legit donors to the Chabad basis, the “Friendship Circle of San Diego,” have been misled that their items supported the needy and Chabad teaching programs, with, in a single occasion, the fraudsters thieving a $600,000 grant from the Clarence Brooks Basis; 5 individuals have been snookered by the true property Ponzi scheme; and the Chabad members who believed they have been getting new carpeting, an air-conditioning improve, and substitute copies of used or broken non secular texts noticed none of this stuff materialize.

As well as, a promise to the Chabad of an historical Iranian Torah, purchasable with an in-kind donation, turned out to be a hoax. The $1.2 million floated to purchase the textual content was faked, its appraisal was faked, its provenance was faked, and the e book itself by no means existed. (Lest we decide too severely, all of the paperwork appeared actual.) The crime was born as soon as the swindler, Bruce Baker, deducted 10 p.c of the acquisition worth, $120,000, and his “appraisal price,” $20,000, from his taxes.

It’s little identified that Chabad is an Orthodox Jewish Hasidic motion whose beliefs and rituals, girded by basic and mystical Judaic texts, are strictly adopted. The sect provides humanitarian assist and training to the underserved, particularly Jewish teams, all through the world. Maybe the worst affinity crime is one which preys on ethnic and spiritual bonds amongst these with greater than a standard curiosity – a calling, because it have been, to Orthodox Judaism.

After Alexander Avergoon was present in Latvia and extradited to San Diego, he signed a plea deal: wire fraud, aggravated id theft, and cash laundering. He faces a most wonderful of $1 million, most jail-time of 42 years. He’s forfeited his property and $5.2 million in money. He owes restitution to a dozen people, authorities applications, and a basis: that debt is the biggest, $7.01 million, on account of a plaintiff with the initials A.U.. Avergoon can be sentenced quickly.

A number of the eight different swindlers have obtained a “deferred prosecution settlement,” a little bit of cooperative leniency the U.S. Legal professional’s workplace parlays with a defendant. The phrases state that one admits guilt, agrees to stipulations like testifying towards others, notably the ringleaders, and pays the prescribed restitution. If one follows the pact for 2 years, the case is dismissed and the conviction expunged.

Rabbi Goldstein, who can be sentenced in October, might obtain the least onerous settlement of all, contemplating how lengthy and corrupt his deception turned. The U.S. Legal professional’s workplace has mentioned it is going to search no jail time for the rabbi. As a substitute, the workplace seeks to mitigate his guilt by boldly asking the decide to forgive Goldstein. He has admitted the crime, cooperated with the investigation, forfeited the lion’s share of his $2.5 million lucre, and helped “heal the group” after the Chabad taking pictures, whilst he knew the U.S. legal professional would expose his fraud. In accordance with Brewer, now retired, Goldstein’s “position after the 2019 terrorist assault was exemplary. He turned a major advocate for peace.” One among Brewer’s bequests is that the rabbi deserves the mercy of the courtroom.

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