Former principal of Jreck Subs relocated from federal prison to halfway house

Dec. 23—WATERTOWN — The former principal of Jreck Subs convicted of wire fraud and tax evasion has been relocated from federal prison into a halfway house in Pennsylvania.

Christopher M. Swartz, 52, has been released from Federal Correctional Institute, Otisville, into a residential reentry center in Pittsburgh operated by the Federal Bureau of Prisons, according to an online inmate lookup operated by the federal prison system.

Mr. Swartz, of Watertown, is serving a 12 1/2 -year prison sentence imposed in July 2017 in U.S. District Court, Utica, after pleading guilty in September 2016 to wire fraud and tax evasion counts.

He was also ordered to pay $25.7 million in restitution to the victims of his crimes and to forfeit any interest he had in the Jreck sandwich chain. The U.S. Marshals Service held an auction for Jreck's assets, and Fresh Start Franchising, headed by Matthew G. Darrah, Ponte Vedra Beach, Florida, took control of the business.

In addition to controlling Jreck, Mr. Swartz also was president and director of North Country Hospitality Inc., which at one point owned Alteri Bakery, Sackets Harbor Brewing Co., Sackets Cantina, Goodfellos Brick Oven Pizza and Wine Bar.

According to a plea agreement in the case, Mr. Swartz induced lenders and investors into giving him funds while making false promises to repay them at high interest rates and making fraudulent representations about how the money would be spent. He also gave investors "stock kickers" and equity interests in the businesses, providing a purported share of the assets and funds held by the companies.

When he failed to repay the investors and legal action was threatened, he alleviated concerns by making limited payments to the investors, including using many checks that he knew would bounce because of insufficient funds, "hoping to convince lenders that he intended to repay in full." Many of these promises of payments or excuses for nonpayment were transmitted over interstate wire or mail, leading to the wire fraud charge.

Mr. Swartz also concealed and disguised his assets and income from the investors to prevent recovery of their funds. According to the agreement, he commingled funds in bank accounts, made extensive use of cash transactions, caused multiple name changes to businesses he controlled, including Jreck, "to make the traceability of ownership more difficult" and to disguise his control of multiple business entities.

The agreement states that Mr. Swartz used corporate, partnership and business bank accounts to "divert monies for his own benefit without reporting such diversions as income." He disguised diversion of money from corporate accounts for personal use by characterizing in the business's books that the money was being used for loans, fixed-asset expenditures, various business expenses and other false entries. He used multiple bank accounts to "commingle, transfer and disperse monies he took out of the businesses," making "extensive use of cash transactions to diminish the traceability of funds."

He also filed false individual income tax returns and partnership returns for Jreck. The agreement states that Mr. Swartz failed to declare "substantial additional wages and salaries he earned" and substantial additional income he received in the form of personal diversions from Jreck.

Mr. Swartz's scheduled release date from prison is Jan. 12, 2027, but the Bureau of Prisons has the authority to place an inmate in a residential release center while serving the remainder of a sentence. The purpose of the program, according to the bureau's website, is to help reintegrate an inmate who is nearing release into the community and provides employment counseling, job placement, financial management assistance and other programs and services.

The length of stay at a center can vary based on the bureau's assessment of an inmate's need for transitional services, but will not be for longer than a year. The bureau's inmate lookup site does not indicate when Mr. Swartz entered the program.

Mr. Darrah, whose Fresh Start Franchising Inc. became the winning bidder at the 2019 auction for Jreck's franchise rights, trademarks and other brand-related property, has embarked on "refreshing the brand" for the company that has had a loyal customer base since it was started in the Watertown area 55 years ago.