Central District of California

          WASHINGTON – The Justice Department today filed a lawsuit in the Central District of California against California Auto Finance, alleging that it violated the Servicemembers' Civil Relief Act (SCRA) by repossessing protected servicemembers’ motor vehicles without obtaining the necessary court orders.

          The Justice Department initiated an investigation into the practices of California Auto Finance, which is based in the City of Orange, California, after United States Army Private Andrea Starks submitted a complaint to the Justice Department in November 2016.

          In April 2016, Private Starks notified California Auto Finance that she would be entering the military the following month. Despite this advance notice, California Auto Finance repossessed Private Starks vehicle without a court order on May 9, 2016, her first day of active military training. At the time of repossession, the vehicle was parked at the home of Private Starks grandmother in Cedar Rapids, Iowa. The complaint states that California Auto Finance had no process to determine customers’ military status – such as checking the Department of Defense’s publicly available database – prior to repossessing their cars.

          “The members of our armed forces should be able to devote their full attention to their duties without having to worry about whether their legal rights will be violated by lenders,” said Acting Assistant Attorney General John Gore of the Civil Rights Division. “Repossessing vehicles without required court orders is both wrong and illegal.  The Justice Department continues to ensure that we are doing all we can to protect and assist servicemembers, veterans, and their families from unlawful conduct by lenders.”

          “We have a solemn duty to protect the rights of the men and women who bravely serve in our nation’s armed forces,” said United States Attorney Nicola T. Hanna of the Central District of California. “By repossessing servicemembers’ automobiles without court orders, California Auto Finance allegedly violated their rights. We respect and honor the sacrifice that servicemembers have made to our country, and we will take whatever action we can to protect their rights.”

          In addition to monetary damages for affected servicemembers, the complaint asks for civil monetary penalties and injunctive relief to prevent future repossessions that violate the SCRA.

          California Auto Finance is a privately held indirect auto-lending company based in the City of Orange, California, that describes itself as a leading sub-prime lender in California. The complaint is an allegation of unlawful conduct. The allegations must still be proven in federal court.

          This case is being jointly handled by the U.S. Attorney’s Office for the Central District of California and the Justice Department’s Civil Rights Division.

          The SCRA protects servicemembers against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any vehicle repossession if the servicemember took out the loan and made a payment before entering military service. The court may delay the repossession or require the lender to refund prior payments to the servicemember. The court may also appoint an attorney to represent the servicemember, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the servicemember.

          The Department’s enforcement of the SCRA is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section, often in partnership with United States Attorney’s Offices. Since 2011, the Department has obtained over $467 million in monetary relief for over 119,000 servicemembers through its enforcement of the SCRA. The SCRA provides protections for servicemembers in areas such as evictions, rental agreements, security deposits, prepaid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance, and income tax payments. For more information about the Department’s SCRA enforcement, please visit www.servicemembers.gov.

          Servicemembers and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.

          LOS ANGELES – Two members of the Gardena Police Department were charged by a federal grand jury with participating in a scheme in which they purchased “off-roster” firearms not available to the general public and illegally operated businesses that resold the weapons.

          The two police officers were charged in a five-count indictment that was unsealed Friday afternoon. The indictment alleges that the officers conspired with each other and that each engaged in the business of dealing in firearms without a license.

          The two officers are collectively charged with illegally selling approximately 100 firearms, mostly .38-caliber pistols. The two defendants are:

• Carlos Miguel Fernandez, 42, of Norwalk, whose Instagram handle was “the38superman,” and

• Edward Yasushiro Arao, 47, of Eastvale.

          Both defendants have been summoned to appear on April 3 for arraignments in United States District Court.

          According to the indictment, Fernandez advertised firearms for sale – guns being offered by both himself, Arao and others – on his Instagram account. The vast majority of posts on the account contained images of firearms. Arao, who was the CEO of Ronin Tactical Group, which was a federal firearms licensee (FFL), similarly advertised guns on the company’s Instagram account. Additionally, both defendants marketed firearms at gun shows. Neither defendant was licensed individually to engage in the business of dealing in firearms when the illegal gun sales alleged in the indictment took place.

          Fernandez allegedly purchased “off-roster” firearms – mostly Colt .38-caliber handguns that were not available to the general public, but which could be legally purchased by law enforcement officers – and sold dozens of these weapons through private-party transfers. Similarly, Arao obtained “off-roster” weapons by transferring them to himself individually from the inventory of Ronin Tactical Group. Through messages on Instagram and other means, Fernandez and Arao negotiated the prices and terms of firearm sales, and they accepted payment for the guns once they were delivered, according to the indictment.

          The indictment in this case was unsealed Friday afternoon after two other defendants in the case were arraigned in federal court on charges that they engaged in a “straw purchase” transaction involving a gun sold through Fernandez. The indictment alleges that Oscar Morales Camacho Sr., 63, of Salinas, falsely certified that he was purchasing a firearm for himself in a 2017 private-party transfer, when he in fact was buying the gun for his son, Oscar Maravilla Camacho Jr., 34, also of Salinas. Camacho Jr. has a prior criminal conviction that prohibits him from possessing firearms. The indictment alleges that Fernandez and both Camachos “well knew [that] defendant Camacho Sr. was not the actual buyer of the firearm.”

          At their arraignments last week, both Camachos entered not guilty pleas and were ordered to stand trial on May 31.

          The indictment alleges a second “straw purchaser” transaction in which a South Los Angeles woman allegedly purchased two firearms for her boyfriend. As in the other straw purchase alleged in the indictment, Bianca Elizabeth Ibarria, 23, and Adalberto deJesus Vasquez Pelayo Jr., 24, also of South Los Angeles, are charged with making a false statement in a federal firearm licensee’s records during purchase of a firearm. Ibarria and Pelayo also have been directed to appear in federal court for arraignments on April 3.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          Each count in the indictment carries a statutory maximum penalty of five years in federal prison. Therefore, if convicted of all charges, Fernandez would face up to 15 years in federal prison, and Arao could be sentenced to as much as 10 years.

          This case is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Gardena Police Department provided its full cooperation during the investigation.

          The prosecution is being handled by Assistant United States Attorney Katherine A. Rykken of the Major Frauds Section.

          LOS ANGELES – A Pasadena man was sentenced today for the commission of a series of bank robberies culminating in an armed robbery at a Pasadena bank where he brandished a shotgun and placed it to the side of a bank employee’s head while demanding money.

          Shownee Shon Smith, 41, was sentenced today to over 10 years in prison by United States District Judge Percy Anderson for robbing a Wells Fargo Bank branch in East Pasadena while armed with a loaded shotgun. In addition to the prison term, Smith was sentenced to five years of supervised release and ordered to pay $20,285 in restitution to the victimized banks.

          On June 10, 2017, Pasadena Police Department officers responded to alarms and a 911 call from inside the Wells Fargo branch and arrested Smith immediately after he exited the bank.

          According to court records, Smith committed six bank robberies between May 15 and June 10, 2017. In addition to the Wells Fargo robbery in East Pasadena, Smith was charged with robbing branches of US Bank in Burbank on May 15, Wells Fargo in South Pasadena also on May 15, Chase Bank in East Pasadena on May 20, Chase Bank in North Hollywood on May 27, and Citibank in Tarzana also on May 27. Prior to the Wells Fargo robbery on June 10, Smith had allegedly used notes to demand money from bank employees.

          The case against Smith is the result of an investigation by the FBI, which received substantial assistance from the Pasadena Police Department, the South Pasadena Police Department, the Burbank Police Department, the Los Angeles Police Department, and the Santa Monica Police Department.

          The case is being prosecuted by Assistant United States Attorney Carolyn Small of the General Crimes Section.

          SANTA ANA, California – A jury has convicted an Irvine man of federal charges for running an investment scam that defrauded a businessman who believed he was investing in products related to stem cell research.

          Aiman Alexander Ataba, 52, was found guilty late Tuesday of eight counts of mail fraud and three counts of money laundering. The jury’s verdicts followed a two-day trial in United States District Court.

          The jury found that Ataba victimized a Riverside County man by convincing the victim to invest in his Fountain Valley business, Innovation Validation and Design Technologies. Ataba falsely claimed that the investments would be used to manufacture and sell a device that would be used in hospitals for stem cell research.

          The victim was given stock warrants that would purportedly enable him to purchase stock in Ataba's company at a discount. Ataba falsely claimed that his company was on the verge of being acquired. Based on the false claims, the victim invested $648,000 in Ataba’s company over a 4½-year period.

          “Immediately after receiving the victim’s money, however, [Ataba] immediately went about spending it on his own personal expenses,” according to a case summary filed by prosecutors. “The money was not invested in any company for the development of a device involving stem cell research. Instead, defendant used it to pay for his rent, various living expenses, dining out, gambling, etc. The victim never received any dividends or other form of return or profit on the investment.”

          Ataba diverted funds from his business account to his personal account and withdrew approximately $350,000 in cash withdrawals. Many of the withdrawals were made at casinos in Las Vegas and on Indian reservations. Some of the victim’s money was spent to purchase a new Toyota vehicle, which was seized in 2016 by the FBI.

          Ataba is scheduled to be sentenced by United States District Judge David O. Carter on July 9, at which time Ataba will face a statutory maximum penalty of 220 years in federal prison.

          The investigation into Ataba was conducted by the Federal Bureau of Investigation.

          The case was tried by Assistant United States Attorneys Robert J. Keenan and Gina J. Kong of the Santa Ana Branch Office.

          RIVERSIDE, California – A correctional officer employed by the U.S. Bureau of Prisons (BOP) at the Federal Correctional Complex in Victorville has been arrested on charges of sexually abusing two female inmates.

          Apolonio Gamez, 40, of Lake Elsinore, was arrested Thursday afternoon and is expected to make his initial court appearance this afternoon in United States District Court in Riverside.

          Gamez is charged in a criminal complaint filed on Wednesday that accuses him one count of sexual abuse of a ward.

          According to the affidavit in support of the criminal complaint, Gamez engaged in sexual activity with one inmate on two occasions in September 2016 while he was on duty as a correctional officer.

          Gamez allegedly directed a second female inmate to engage in a sexual act with him in May 2017 after he caught her attempting to steal food from a storage facility. Gamez alleged threated to send the victim to the “hole,” and then directed her to engage in sexual activity, which the victim did not resist because “she felt frozen and powerless with fear,” according to the affidavit.

          The complaint further alleges that Gamez exposed himself to a third inmate and attempted to engage in a sexual act with her in the summer of 2017.

          Gamez has worked for the BOP at several California locations since August 2012. He has been assigned to the Victorville complex since July 2016.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If he were to be convicted of the charge in the complaint, Gamez would face a statutory maximum penalty of 15 years in federal prison.

          The case against Gamez is being investigated by the Department of Justice Office of the Inspector General and the Federal Bureau of Investigation.

          The prosecution is being handled by Assistant United States Attorneys Julius J. Nam and Sean Peterson of the Riverside Branch Office.

          SANTA ANA, California – An Orange County man has been indicted on wire fraud charges that allege a $6 million scheme that bilked investors who were promised large profits from the resale of tickets to high-profile sporting events.

          Seyed Reza Ali Fazeli, 49, a professional poker player who resides in Aliso Viejo, was named in a two-count indictment returned Wednesday by a federal grand jury.

          The indictment alleges that Fazeli ran a Las Vegas-based ticket business called Summit Entertainment, which also operated under the names onlinetickets.com and pacertickets.com. From May 2016 through at least May 2017, Fazeli solicited investors in Orange County, Houston and Las Vegas, Nevada to send approximately $6.2 million to Summit to purchase tickets to the 2017 Super Bowl and the 2018 World Cup. Fazeli allegedly told investors that Summit would resell the tickets at a substantial profit and share the proceeds with the investors.

          Investors wired more than $6 million to Summit to purchase tickets for last year’s Super Bowl, but after the event Fazeli failed to provide any profit distribution to investors, according to the indictment. Fazeli allegedly falsely told the victims that the ticket sales did not go well because the NFL prohibited their resale and that he was working on a settlement with the NFL.

          According to court documents, Fazeli never purchased large amounts of Super Bowl or World Cup tickets as promised. Instead, he used the money for gambling expenses at the Aria and Bellagio casinos in Las Vegas and for personal expenses.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If he were to be convicted of the two charges in the indictment, Fazeli would face a statutory maximum penalty of 40 years in federal prison.

          Fazeli was arrested in this case by the FBI on February 14 pursuant to a criminal complaint. During a court hearing the next day, he was released on a $120,000 bond and was ordered to appear in United States District Court for an arraignment on March 26.

          Anyone who may have been victimized by Summit or Fazeli is encouraged to contact the FBI’s Los Angeles Field Office at 310-477-6565.

          The investigation into Fazeli is being conducted by the Federal Bureau of Investigation.

          This case is being prosecuted by Assistant United States Attorney Joseph T. McNally.

          SANTA ANA, California – A Laguna Beach man has pleaded guilty to a federal wire fraud charge and admitted that he stole $6.8 million from victims of three investment fraud schemes.

          Peter Heinrich Conrad Reinert, 63, pleaded guilty Wednesday before United States District Judge Josephine L. Staton.

          When he pleaded guilty, Reinert admitted running three separate schemes. In one scam, Reinert, who operated the Irvine-based Fazer Technologies, claimed he was developing, among other things, a product that could increase gas mileage for any car up to 150 miles per gallon. In another fraud, this one related to Global Encryption Imaging Corporation, Reinert claimed the company was developing, among other things, anti-counterfeiting technology to be used on state-issued identification documents. In the third scheme, Reinert told victims that another company he ran, Income from Waste Corporation, was developing a technology to convert used tires into oil.

          As part of the schemes, to gain legitimacy with victims, Reinert falsely claimed to be a United States Secret Service agent and a United States Marine. Reinert also falsely claimed that companies such as Tesla and General Electric were interested in Fazer’s product – and that Tesla had stolen Fazer’s technology and used it in their cars.

          Through various false claims, Reinert induced victims to send him approximately $6.8 million. The victims from these schemes came from around the nation and included farmers from Missouri.

          Instead of spending the victims’ money to develop the purported technologies, Reinert used the money to pay for personal expenses, luxury automobiles, sales commissions, purchases at Apple’s iTunes store, and wire transfers to an account in Poland.

          Judge Staton is scheduled to sentence Reinert on June 8, at which time he will face a statutory maximum sentence of 20 years in federal prison.

          As part of his plea agreement, Reinert agreed to forfeit approximately $300,000 that the FBI had seized in 2015, as well as a 2009 Mercedes Benz S63 AMG and a 2011 Mercedes Benz. 

          The investigation into Reinert was conducted by the Federal Bureau of Investigation and IRS Criminal Investigation. The Department of Defense, the United States Secret Service, U.S. Customs and Border Protection, the State Department, and the Laguna Beach Police Department provided substantial assistance. 

          The case is being prosecuted by Assistant United States Attorneys Vibhav Mittal and Daniel Lim of the Santa Ana Branch Office.

          SANTA ANA, California – A San Gabriel Valley doctor who pleaded guilty to a federal drug trafficking charge for illegally distributing the powerful opioid best known by the brand name OxyContin was sentenced today to over 13 years in federal prison.

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          Dr. Daniel Cham, 49, a Covina resident who formerly operated a clinic in La Puente, was sentenced today by United States District Judge Andrew J. Guilford.

          As he was sentencing Cham today, Judge Guilford expressed concern “that other doctors haven’t gotten the message of the seriousness of this activity.”

          Cham pleaded guilty in April 2016 to one count of distribution of oxycodone, a powerful and addictive painkiller marketed under various names, including OxyContin, Vicodin and Norco. Cham also pleaded guilty to one count of money laundering.

          In documents filed in relation to today’s sentencing, prosecutors wrote that Cham “stands before the court for selling prescriptions for massive amounts of oxycodone to persons he well knew were drug dealers and addicts, in exchange for hundreds of thousands of dollars in cash. Defendant’s illegal prescriptions killed at least two addicted youths, including a 22-year-old woman and 28-year-old man.”

          The young woman, who was a resident of Oregon, died after ingesting narcotics prescribed by Cham to members of Oregon-based drug trafficking conspiracy. Cham issued prescriptions in the names of the Oregon drug traffickers – many of whom he had never met – and Cham created fake paperwork to make it falsely appear he had examined the “patients.” Investigators in Oregon identified over 12,000 pills of oxycodone that Cham illegally prescribed to the drug traffickers in that state.

          “There is an opioid-abuse epidemic in this nation, and some of that drug abuse is fueled by unscrupulous doctors like this defendant,” said United States Attorney Nicola T. Hanna. “The lengthy sentence imposed in this case is the direct result of this defendant’s profiting from prescribing narcotics to persons he knew to be addicts and drug dealers – actions that led to fatal overdoses for two people.”

          In a plea agreement filed in this case, Cham admitted that he unlawfully prescribed oxycodone to an undercover agent posing as a patient in March 2014 in exchange for $300 in money orders, which Cham then deposited into a bank account held in the name of another business. Cham made the deposit “knowing that the transaction was designed to conceal and disguise the nature and source of the money orders,” according to the plea agreement.

          Acting on tip about a pharmacy that was filling a large number of prescriptions written by Cham, special agents with the Drug Enforcement Administration discovered a “large-scale criminal operation” in which Cham was writing thousands of prescriptions for powerful painkillers, often in combination with alprazolam (often sold under brand name Xanax) or carisoprodol (often sold under the brand name Soma), according to court documents. “The combination of these drugs is particularly dangerous, and is associated with the majority of overdose deaths,” according to a sentencing memorandum filed in court.

          A doctor who specializes in pain management and addiction reviewed Cham’s history of writing prescriptions and found “gross and overwhelming evidence of inappropriate prescribing of narcotics and controlled drugs.” The expert also reviewed recordings made by undercover operatives who obtained prescriptions from Cham and found that the doctor was “essentially at that point dealing drugs.”

          An affidavit previously filed in this case discussed how an undercover officer made three visits to Cham’s La Puente office in 2014, and how Cham wrote prescriptions for controlled substances in exchange for $200 or $300 in cash or money orders. As discussed in the court document, Cham issued a prescription for oxycodone even though the undercover operative said he “had been high and drunk while receiving controlled substance prescriptions” previously from Cham. On another occasion, Cham prescribed oxycodone even though the undercover law enforcement officer presented, in lieu of photo identification, a written notice that his license had been suspended for driving under the influence.

          “Dr. Cham broke the Hippocratic Oath he swore to uphold when he became a physician – instead of serving the public good, his actions caused harm and death,” said DEA Special Agent in Charge David J. Downing. “Cham was no longer functioning as a healer but a common drug dealer, and his sentence should serve as a cautionary tale to other physicians who would choose this path for the sake of greed.”

          “Not only did defendant Cham abdicate his oath as a physician, he deliberately caused harm by continuously drugging addicts who were in need of rehabilitation,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI will continue to work with our partners to end illegal drug networks operating out of doctors’ offices.”

          In his plea agreement, Cham also agrees to forfeit to the government more than $60,000 in cash that he admits are “proceeds of illegal activity.”

          “While exploiting his patients’ addictions for his own personal gain, Cham laundered tens of thousands of dollars in cash and money orders through bank accounts held in fake business names such as Good Life 2 LLC. The good life Cham created for himself was fueled by a callous disregard for his patients’ well-being,” stated R. Damon Rowe, Special Agent in Charge for IRS Criminal Investigation. “IRS Criminal Investigation contributes our financial expertise in an effort to stop criminals who profit from the illegal trade of dangerous narcotics and take away any financial benefit they receive from their criminal activity.”

          The investigation into Cham was conducted by the Drug Enforcement Administration, the Federal Bureau of Investigation Los Angeles and Portland Field Offices, IRS Criminal Investigation, the Los Angeles County Sheriff’s Department’s Health Authority Law Enforcement Task Force, the California Medical Board, and the Los Angeles Police Department.

          The case against Cham was prosecuted by Assistant United States Attorney Benjamin Barron of the Organized Crime Drug Enforcement Task Force.

          LOS ANGELES – A South Los Angeles woman who describes herself on social media as “The Most Hated Hoe in LA” was indicted today on federal sex trafficking charges that include allegations that she used the internet to solicit two minor victims to engage in prostitution.

          Melanie Denae Williams, 22, who uses the moniker “Pretty Hoe” on several social media platforms, was named in a five-count indictment returned today by a federal grand jury.

          The indictment specifically alleges one count of sex trafficking an adult by force, fraud, or coercion; two counts of sex trafficking of a minor; and two counts of enticement of a minor to engage in prostitution.

          Williams has been held without bond in a federal jail since she was taken into custody on February 7 pursuant to a criminal complaint (she was initially arrested by local authorities on December 24). The affidavit in support of the complaint outlines allegations that Williams abused a woman she had recruited through social media to work as a prostitute. In one incident, Williams allegedly ordered the victim to strip off her clothes, and then Williams threw bleach on the woman and beat her with her hands and a broomstick, according to the affidavit.

          The indictment makes new allegations of sex trafficking involving two minor females.

          Williams is scheduled to be arraigned on the indictment on Friday in United States District Court.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If convicted of any of the charges in the indictment, Williams would face a potential life sentence. Each of the five charges carries a mandatory minimum sentence. The charge of sex trafficking by force, fraud or coercion carries a mandatory minimum penalty of 15 years in federal, and each of the four counts related to minors carries a mandatory minimum sentence of 10 years.

          The investigation into Williams is being conducted by the Federal Bureau of Investigation and the Los Angeles Sheriff’s Department as part of the Los Angeles Regional Human Trafficking Task Force, as well as the Los Angeles Police Department, South Bureau. 

          This case is being prosecuted by Assistant United States Attorneys Lana Morton-Owens and Joseph Axelrad of the Violent and Organized Crime Section.

A Los Angeles, California-based dentist was charged in an indictment unsealed on Monday for his alleged participation in a health care fraud and identity theft scheme.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Nicola T. Hanna of the Central District of California, Assistant Director in Charge Andrew W. Vale of the FBI’s Washington, D.C. Field Office and Assistant Director in Charge Paul D. Delacourt of the FBI’s Los Angeles Field Office made the announcement.
 
Benjamin Rosenberg, D.D.S., 58, of Los Angeles, was charged with six counts of health care fraud and two counts of aggravated identity theft.  Rosenberg was arrested yesterday morning and made his initial court appearance yesterday before U.S. Magistrate Judge Jean Rosenbluth of the Central District of California.  

The indictment alleges that Rosenberg billed various insurance companies, including Medicaid-funded Denti-Cal, for dental procedures that were never provided.  Rosenberg allegedly billed the insurance companies by using patients’ identification without their permission.  

An indictment is merely an allegation and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.  
    
This case was investigated by the FBI’s Washington and Los Angeles Field Offices.  Trial Attorney Emily Culbertson of the Criminal Division’s Fraud Section is prosecuting the case.  

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and the U.S. Department of Health and Human Services (HHS) to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.
 

          WASHINGTON – A Los Angeles-based dentist was charged in an indictment unsealed on Monday for his alleged participation in a health care fraud and identity theft scheme.

          Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, United States Attorney Nicola T. Hanna, Assistant Director in Charge Andrew W. Vale of the FBI’s Washington, D.C. Field Office and Assistant Director in Charge Paul D. Delacourt of the FBI’s Los Angeles Field Office made the announcement.

          Benjamin Rosenberg, D.D.S., 58, of Los Angeles, was charged with six counts of health care fraud and two counts of aggravated identity theft. Rosenberg was arrested yesterday morning and made his initial court appearance yesterday in Los Angeles before United States Magistrate Judge Jean Rosenbluth.

          The indictment alleges that Rosenberg billed various insurance companies, including Medicaid-funded Denti-Cal, for dental procedures that were never provided. Rosenberg allegedly billed the insurance companies by using patients’ identification without their permission.

          An indictment is merely an allegation and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

          This case was investigated by the FBI’s Washington and Los Angeles Field Offices. Trial Attorney Emily Culbertson of the Criminal Division’s Fraud Section is prosecuting the case.

          The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and the U.S. Department of Health and Human Services (HHS) to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

          LOS ANGELES – A man who was already serving a 25-year prison sentence for providing material support to a foreign terrorist organization pleaded guilty today to trying to kill the warden of the federal prison where he was serving his sentence.

          Fazliddin Kurbanov, 34, entered a guilty plea to one count of attempted murder of a federal officer before United States District Judge Virginia A. Phillips.

          In entering his plea, Kurbanov admitted to using a prison-made knife to attack the warden at the Federal Correctional Institute at Victorville on May 31, 2016, and attempting to slit his throat. The warden, who is now serving at another facility operated by the United States Bureau of Prisons, was seriously injured in the attack, but he has recovered.

          As a result of today’s guilty plea, Kurbanov faces a sentence of at least 15 years in federal prison to be served consecutively to the 25-year sentence imposed in 2016 by a federal judge in Idaho after Kurbanov was found guilty of conspiring and attempting to provide material support to a designated foreign terrorist organization and possessing an unregistered destructive device.

          Kurbanov is scheduled to be sentenced by Judge Phillips on June 4.

          The investigation into the attack on the warden was conducted by the Federal Bureau of Investigation.

          This case is being prosecuted by the National Security Division of the United States Attorney’s Office.

          LOS ANGELES – A Canoga Park man who worked with a tax preparer in a large stolen-identity and tax-refund fraud scheme was sentenced today to 52 months in federal prison.

          Arthur Bakunts, 40, was sentenced by United States District Judge Dale S. Fischer, who also ordered Bakunts to pay a total of $741,259 in restitution and to serve three years on supervised release after he is released from prison.

          Bakunts pleaded guilty in November to one count of wire fraud and one count of illegally possessing the means of identification of another person.

          The case against Bakunts stemmed, in part, from documents – including identity profiles, tax refund checks and other trappings of identity theft – found in his car when he was stopped at a sobriety checkpoint in Glendale in 2014.

          Subsequent investigation revealed that Bakunts was working with Ashrf Mohammed Aly, the former owner of Speedy Tax Service in West Covina, who used the stolen identity information to prepare fraudulent federal and state income tax returns in the names of the identity theft victims, which Bakunts then filed.

          The fraudulent tax returns led to tax authorities issuing refund checks – $612,259 from the U.S. Treasury and $129,000 from the state of California.

          In addition to these substantial losses, prosecutors noted that Bakunts’ crimes caused other significant harms, “including compromised financial accounts and liabilities incurred in the identity theft victims’ names, victims’ loss of the time needed to address these financial problems and restore credit, and the anxiety and sense of violation that identity theft causes.”

          Bakunts admitted in his plea agreement that approximately 341 fraudulent tax returns had been filed as part of the criminal scheme. Judge Dale S. Fischer pointed to the scope of the scheme when imposing the sentence against Bakunts today.

          During the period of supervised release, Bakunts will be required to do 20 hours of community service each week unless he is otherwise gainfully employed.

          Aly pleaded guilty in December to one count of wire fraud and is scheduled to be sentenced by Judge Fischer on April 9.

          This case was investigated by IRS Criminal Investigation. The prosecution is being handled by Assistant United States Attorney Ranee A. Katzenstein, Chief of the Major Frauds Section.

          LOS ANGELES – A Los Angeles man who admitted he illegally manufactured and sold firearms – specifically short-barreled AR-15-style assault rifles and silencers – was sentenced this afternoon to 46 months in federal prison.

          Axel Fernando Galvez, 37, who resides in Watts, was sentenced today by United States District Judge Christina A. Snyder.

          Once he completes the prison term, Galvez will be on supervised release for three years, during which time he will be subject to search at any time by law enforcement authorities. Judge Snyder also ordered Galvez to pay a $12,500 fine.

          Galvez pleaded guilty in December to two counts of unlicensed manufacturing and dealing in firearms. When he pleaded guilty, Galvez admitted that he purchased firearm components from different sources to disguise the quantity he was buying. Galvez then finished the parts and assembled the assault rifles at a South Los Angeles machine shop where he worked.

          On August 28, 2017, Galvez sold five of these assault rifles, through an intermediary, to an undercover operative with the United States Postal Inspection Service. Galvez believed that the undercover operative was a convicted felon and was going to resell the weapons in Egypt and the Philippines.

          In further discussions with the undercover operative, Galvez negotiated the sale of another 100 homemade assault rifles, offering a bulk discount.

          Galvez also admitted in court that he manufactured five silencers for firearms.

          A second man charged as a result of this investigation – Marcos Ernesto Chavarria, 31, of Inglewood – previously pleaded guilty to conspiring to distribute methamphetamine. Judge Snyder is scheduled to sentence Chavarria also on April 2, at which time he will face a statutory maximum sentence of 20 years in federal prison.

          During the investigation into Galvez, the Postal Inspection Service worked jointly with the Los Angeles Police Department Parcel Task Force. The Bureau of Alcohol Tobacco, Firearms and Explosives, as well as the Los Angeles Joint Regional Intelligence Center, provide substantial assistance.

          This case is being prosecuted by Assistant United States Attorney Andrew Brown of the Major Frauds Section.

          LOS ANGELES – A personal injury attorney who was recently suspended by the California State Bar was indicted today on federal charges that allege he stole the majority of a multi-million dollar client settlement, most of which should have been paid to the victim of an automobile accident.

          Philip James Layfield, 44, who was arrested in New Jersey last week after returning to the United States from his new residence in Costa Rica, was named in a three-count indictment returned this afternoon by a federal grand jury.

          Layfield, who is also certified public accountant, is charged with mail fraud and two counts of money laundering. Layfield will be arraigned on the indictment once he arrives in Los Angeles after being transported from New Jersey by the United States Marshals Service.

          Layfield owned and operated the Layfield & Barrett law firm (L&B), which maintained offices in Irvine, Los Angeles, and other locations. Faced with declining revenues, Lawfield decided to close the firm and relocate to Costa Rica. Around that time, according to the indictment, Layfield took a number of steps that defrauded his clients, including filing unnecessary litigation to trigger increased attorney’s fees, settling personal injury cases without advising L&B clients, and stealing settlement funds that should have been paid to clients.

          The indictment specifically alleges that Layfield entered into an agreement to represent an individual who was struck by an automobile in Orange County in 2016 and suffered significant injuries. After negotiating a $3.9 million settlement related to the accident, Layfield allegedly misappropriated most of money due to the victim – approximately $2 million. The indictment alleges that he transferred some of the victim’s share to his personal bank accounts and some on L&B payroll. The indictment states that the car accident victim received only $25,000 of the settlement proceeds.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If he were to be convicted of the three counts in the indictment, Layfield would face a statutory maximum sentence of 60 years in federal prison.

          This matter is being investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, IRS Criminal Investigation, and the Federal Bureau of Investigation.

          The case against Layfield is being prosecuted by Assistant United States Attorneys Mark Aveis and Eddie A. Jauregui of the Major Frauds Section.

          LOS ANGELES – Four San Fernando Valley residents – including an alleged career conman already under indictment in a foreclosure-avoidance and bankruptcy fraud scam – were arrested this morning pursuant to a new federal indictment that alleges a $17 million scheme that defrauded – and in some cases stole homes from – distressed homeowners, many of whom were elderly victims.

          The four defendants arrested this morning by federal authorities are:

• Michael “Mickey” Henschel, 68, of Van Nuys, who was originally indicted last summer in the bankruptcy fraud scheme and who allegedly continued to defraud homeowners while free on bond;

• Camerino “Mino” Islas, 40, of North Hollywood;

• Claudia “Jessica” Islas, 42, of Reseda; and

• Juan Carlos Velasquez, 43, of Sylmar.

          A fifth defendant named in the superseding indictment returned yesterday by a federal grand jury – Eugene “Gene” Fulmer, 83, of Encino – is currently a fugitive being sought by federal authorities.

          The four defendants arrested this morning are scheduled to be arraigned on the superseding indictment this afternoon in United States District Court.

          According to the superseding indictment that was unsealed this afternoon, Henschel – who used various aliases, including “Frank Winston,” “Steve Lopez,” and “Ron Berman” – and his associates tricked homeowners into signing fraudulent deeds on their properties. Henschel and his co-defendants then allegedly used the fraudulent deeds to extort money from homeowners, charge homeowners illegal fees to delay foreclosure and eviction actions, and to steal some homes outright. The new indictment adds charges based on the fraudulent deeds.

          The indictment alleges that Henschel and the others collected more than $17 million from the scheme.

          In the newly alleged portion of the scheme, Henschel and his co-conspirators identified distressed homeowners who were in default on mortgages or were experiencing financial troubles, even though some had large amounts of equity in their properties. These homeowners allegedly were told that Henschel was a sophisticated real estate investor and attorney interested in purchasing their properties, or, if they wanted to keep their homes, he could help protect the homes from creditors. Henschel and the others promised distressed homeowners that they could refinance mortgages or restructure real estate holdings to insulate the properties from creditors, and that Henschel and other co-conspirators could manage the properties on an ongoing basis.

          Henschel and other co-conspirators allegedly convinced homeowners to sign fraudulent documents that were recorded on titles to their homes, including trust deeds that recorded secured interests in their homes based on fictional loans that the homeowners supposedly guaranteed, and grant deeds that supposedly conveyed properties to entities that Henschel controlled.

          Henschel and the others used the fraudulent filings to steal some properties outright, according to the indictment. In other cases, they allegedly exploited the fraudulent filings in a number of ways, including by initiating foreclosure proceedings on the properties, demanding money from homeowners before properties sold, and making extortionate settlement demands based on the filings.

          Henschel and other co-conspirators are alleged to have leveraged the high cost of bringing and defending civil actions to extort settlement payments from homeowners, relying on the fact that it would often be less expensive for homeowners to pay the co-conspirators than to fight them in court. The indictment describes unscrupulous litigation tactics allegedly used by Henschel and his co-conspirators, which included pretending to be licensed attorneys, tricking victims into signing legal documents, fabricating documents and forging victims’ signatures.

          In the bankruptcy fraud part of the scheme originally alleged in last summer’s indictment, Henschel and his co-conspirators used fraudulent filings to charge homeowners fees to delay foreclosure and eviction actions. In this part of the conspiracy, Henschel and the others had homeowners sign fraudulent deeds that transferred interests to debtors in bankruptcy cases – but the bankruptcies allegedly were fraudulent and were filed on behalf of fictional people and entities. The superseding indictment alleges that Henschel and his co-conspirators sent the fake deeds and the fraudulent bankruptcy petitions to trustees to stop foreclosure sales. Henschel and his associates allegedly delayed evictions in a similar way, mainly by sending bogus documents to sheriff’s offices.  Henschel and other co-conspirators allegedly charged monthly fees for the illegal services, and some homeowners were charged large fees to clear title to their properties.

          The superseding indictment charges all five defendants with one count of conspiracy and eight counts of mail fraud. Henschel is additionally charged with eight counts of bankruptcy fraud. 

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If the defendants were to be convicted, they each would face a statutory maximum sentence of five years in federal prison on the conspiracy count and 30 years for each of the mail fraud counts. If convicted, Henschel would also face five years in prison for each of the eight bankruptcy fraud counts.

          Two other individuals – Shara Surabi, 34, of Burbank, and Lidia Alvarez, 54, of Bell Gardens – previously pleaded guilty to federal charges related to this scheme.

          The cases against Henschel and the others are the result of an investigation by the Federal Bureau of Investigation, and the Federal Housing Finance Agency - Office of Inspector General. These agencies received substantial assistance from the Alameda County District Attorney’s Office, the United States Trustee’s Office for the Central District of California, the Los Angeles County Recorder’s Office, the Alameda County Recorder’s Office, and the San Diego County Recorder’s Office.

          This case is being prosecuted by Assistant United States Attorney Kerry L. Quinn of the Major Frauds Section

          LOS ANGELES – A Monterey Park woman has been sentenced to 24 months in federal prison for injecting a woman with a foreign substance for the purpose of buttock enhancement.

          Ana Bertha Diaz Hernandez, 47, was sentenced Monday by United States District Judge Philip S. Gutierrez. In addition to the prison term, Diaz was ordered to pay a $95,000 fine and $30,000 in restitution to the victim.

          Diaz pleaded guilty last July to receiving and delivering an adulterated and misbranded medical device. According to a plea agreement filed in the case, the victim – who is identified as “I.T.” – filed a complaint with the California Medical Board after seeking treatments from Diaz to enhance her buttocks. I.T. stated that the product Diaz injected into her buttocks migrated to her “back, hips and legs.”

          During a series of treatments that cost thousands of dollars, Diaz explained to I.T. that she was injecting a “natural product,” at points claiming the injections were “lamb’s fat.” However, after a series of treatments, I.T. began to suffer pain and experience serious medical complications, which led her to seek the assistance of a doctor in Colombia who specializes in reversing cosmetic procedures.

          During Monday’s sentencing hearing, I.T. explained that she has experienced a great deal of pain, suffered from infections and complications, and was hospitalized for more than three weeks due to the injections administered by Diaz. I.T. underwent a major surgery to remove the substance injected into her buttocks and received skin grafts to repair the damage. The victim will need further reconstructive medical procedures. I.T. told the court that Diaz had lied to her and that she believed Diaz when Diaz said that the product was safe and would never move.

          Diaz never told I.T. or her other customers that the product she was injecting into their buttocks had been illegally smuggled into the United States from Mexico, that the product was a medical device that was not approved for use in the United States for the purpose of enhancing buttocks or body contouring, and that she was not licensed in the United States to perform any such medical procedure.

          Diaz intentionally defrauded and misled her customers regarding the safety of the substance and the nature of her qualifications to use the illegally smuggled medical device for body contouring purposes. Diaz injected the liquid substance into at least 10 customers – earning at least $40,000 from her illegal conduct. Despite the risk of death or serious bodily injury to her customers, and notwithstanding complaints from customers that they had suffered injuries from the procedure, Diaz recklessly continued to inject her customers with the smuggled and illegal substance.

          This case was investigated by the United States Food and Drug Administration – Office of Criminal Investigations and the California Medical Board.

          This case was prosecuted by Assistant United States Attorney Joseph O. Johns, Chief of the Environmental and Community Safety Crimes Section, and Assistant United States Attorney Amanda M. Bettinelli of the Environmental and Community Safety Crimes Section.

          LOS ANGELES – A lieutenant in the Pasadena Police Department was taken into custody this morning on federal charges related to the illegal sale of approximately 100 firearms.

          Vasken Kenneth Gourdikian, 48, of Sierra Madre, who is currently on administrative leave, self-surrendered this morning to federal authorities.

          Gourdikian was named by a federal grand jury yesterday in a four-count indictment that accuses him of engaging in the business of dealing in firearms without a license, making false statements on ATF Forms, and possessing an unregistered short-barreled rifle.

          The federal indictment charges that, from March 2014 through February 2017, Gourdikian sold over 100 firearms without a license. Gourdikian allegedly used his official status as a police officer to purchase firearms that were not available to the general public, and then sold the “off-roster” firearms through third-party transfers to members of the public, according to the indictment.

          Gourdikian’s status as a police officer also enabled him to purchase more than one handgun in a 30-day period. Moreover, upon obtaining the requisite authorizations from his employer, Gourdikian’s status as a police officer allowed him to take possession of a firearm before the otherwise applicable ten-day waiting period lapsed.

          “In these days of escalating gun violence, it is important to enforce our firearms laws vigorously,” said United States Attorney Nicola T. Hanna. “Those who sell guns illegally need to be held accountable, especially those who abuse a position of public trust.”

          Gourdikian is also charged with twice having falsely certified on ATF forms that he was the actual buyer of a firearm, when at the time of the certification he had already agreed to sell the firearm to another person.

          Special agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives executed a federal search warrant at Gourdikian’s residence in Sierra Madre in 2017 and seized approximately 62 firearms, including an unregistered short-barreled rifle. The indictment further charges Gourdikian with illegally possessing this unregistered weapon.

          “This investigation started through routine analysis of multiple sales and trace reports by ATF’s LA Crime Gun Intelligence Center,” said Bill McMullan, Special Agent in Charge of the ATF Los Angeles Field Division. “As alleged in the indictment, Mr. Gourdikian used his position as a law enforcement officer to buy firearms from gun dealers that the general public could not. He then repeatedly sold those firearms at a profit. Bringing a case against a law enforcement officer is never pleasant, but we hold public safety and a commitment to justice above everything. We are grateful for the Pasadena Police Department’s cooperation in this case.”

          Gourdikian is expected to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

          If convicted of the charge of dealing firearms without a license, Gourdikian would face a statutory maximum sentence of five years. Convictions of making a false statement and possessing an unlicensed firearm each carry a maximum sentence of ten years. If convicted on all four counts, Gourdikian would face a statutory maximum sentence of thirty-five years in federal prison.

          This matter is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives.

          The case is being prosecuted by Assistant United States Attorneys Jennifer Chou of the Violent & Organized Crime Section and Elisa Fernandez of the Public Corruption & Civil Rights Section.

          LOS ANGELES – A former staffer for a Member of the United States Congress was found guilty today of bribery and attempted extortion after demanding and accepting $5,000 to prevent the closure of a marijuana shop in the City of Compton.

          Michael Kimbrew, 44, of Carson, was convicted by a federal jury of two felony counts related to his shakedown of the shop in March through May 2015.

          The evidence presented during the three-day trial in United States District Court showed that Kimbrew attempted to extort a marijuana dispensary in Compton, threatening to shut down the shop if the owners did not pay him a $5,000 bribe. In exchange for the payoff, Kimbrew also promised to help the shop obtain a lucrative permit to continue operating.

          According to the defendant’s statements, Kimbrew claimed to “oversee all activities in Compton,” and threatened the shop’s owners, an employee of the shop, and later an undercover FBI agent in recorded meetings that he was going to shut down the shop unless he received the money. He claimed that, by virtue of his federal employment for the Congress member, he had “authority” and “jurisdiction” over what Compton public officials and departments did. In exchange for the $5,000, he promised to exercise that authority and jurisdiction to keep the shop in business.

          Ultimately, during a lunch meeting in Compton, Kimbrew accepted $5,000 in cash hidden inside of a restaurant menu from the undercover agent. When he pocketed the cash, Kimbrew pledged his “undying support” to protect the shop.

          After approximately four hours of deliberation, the jury convicted Kimbrew of bribery and attempted extortion.

          United States District Judge R. Gary Klausner is scheduled to sentence Kimbrew on June 4, at which time he will face a statutory maximum penalty of 18 years in federal prison.

          This case was investigated by the Federal Bureau of Investigation.

          The case is being prosecuted by Assistant United States Attorney Lindsey Greer Dotson of the Public Corruption and Civil Rights Section.

          LOS ANGELES – Two doctors were arrested this morning on federal fraud charges stemming from more than $250 million in allegedly fraudulent bills related to the 1-800-GET-THIN Lap-Band surgery business.

          Julian Omidi, 49, of West Hollywood, and Mirali Zarrabi, 55, of Beverly Hills, were arrested pursuant to a federal indictment that alleges a host of criminal charges stemming from GET THIN’s Lap-Band (or bariatric) surgery and sleep study programs between May 2010 and March 2016.

          Two corporations controlled, in part, by Omidi – Surgery Center Management, LLC (SCM), and Independent Medical Services, Inc. (IMS) – are also named in the 37-count superseding indictment that was unsealed today.

          The indictment contains charges of mail fraud, wire fraud, false statements, money laundering and aggravated identity theft.

          Omidi, a physician whose license was revoked in 2009, controlled, in part, the GET THIN network of entities, including SCM and IMS, that focused on the promotion and performance of elective, Lap-Band weight-loss surgeries. Omidi established procedures requiring prospective Lap-Band patients – even those covered by insurance plans he knew would never cover Lap-Band surgery – to have at least one sleep study, and employees were incentivized with commissions to make sure the studies occurred, according to the indictment. The purpose of the sleep studies was to find a second reason – a “co-morbidity,” such as sleep apnea – that GET THIN would use to convince the patient’s insurance company to pre-approve the Lap-Band procedure.

          After patients underwent sleep studies – often with little indication that any doctor had ever determined the study was medically necessary – GET THIN employees, acting at Omidi’s direction, allegedly often falsified the results to reflect that the patient had moderate or severe sleep apnea, and that they suffered from severe daytime sleepiness. Omidi then caused those falsified sleep study reports to be used in support of GET THIN’s pre-authorization requests for Lap-Band surgery.

          Relying on the false sleep studies – as well as other false information, including patients’ heights and weights – insurance companies authorized payment for some of the proposed Lap-Band surgeries. The indictment alleges that GET THIN received at least $38 million for the Lap-Band procedures.

          Even if the insurance company did not authorize the surgery, GET THIN still was able to submit bills for approximately $15,000 for each sleep study, receiving millions of dollars in payments for these claims, according to the indictment. The insurance payments were deposited into bank accounts associated with the GET THIN entities.

          The victim health care benefit programs include TriCare, Anthem Blue Cross, UnitedHealthcare, Aetna, Cigna and others.

          “The scheme outlined in the indictment focuses on bogus sleep studies that the defendants utilized to engage in a much more lucrative fraud involving Lap-Band procedures,” said Acting United States Attorney Sandra R. Brown. “Patients were harmed as a result of this fraud scheme when they were subjected to unnecessary medical procedures, and insurance providers were harmed when they paid out tens of millions of dollars after receiving fraudulent bills.”

          Zarrabi allowed his electronic signature to be used by GET THIN to make it falsely appear that he had reviewed and interpreted the falsified sleep studies, even though he knew the reports were being altered, according to the indictment. Zarrabi also allegedly demanded to be paid for the use of his electronic signature on hundreds of prescriptions for devices to treat sleep apnea. Zarrabi allegedly did not review the prescriptions, which were sent with the falsified sleep study reports to durable medical equipment providers that billed for sleep apnea equipment that patients often did not need.

          “While the defendants in this case were scheming victims who had hopes of ‘getting thin,’ they were also busy getting rich by defrauding the insurance companies and exploiting unwitting victims in many cases,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI and its law enforcement partners worked collaboratively to reach this successful result and will continue to hold the perpetrators of health care fraud accountable.”

          “The FDA takes seriously its responsibility to protect patients by requiring truthful, non-misleading, and accurate information in the labeling of FDA-regulated products, such as medical devices,” said Lisa L. Malinowski, Special Agent in Charge, FDA Office of Criminal Investigations’ Los Angeles Field Office. “Patients, who may be influenced by false or misleading information, need to be fully aware of the risks of any surgical procedure.”

          “Doctor Zarrabi and former physician Omidi victimized countless patients when they allegedly provided medically unnecessary treatment in order to boost their own profits to the tune of tens of millions of dollars,” said California Insurance Commissioner Dave Jones. “Medical provider fraud is multi-billion dollar problem that drives up health insurance premiums and creates a drain on our economy.”

          In 2014, the government seized more than $110 million in funds and securities from accounts held by individuals and entities involved in the criminal scheme described in the indictment, including Omidi. The government is seeking forfeiture of some or all of those funds in the criminal case, and also intends to pursue civil forfeiture of some or all of the assets.

          “Driven by greed, Omidi and Zarrabi allegedly sought to cheat their way to riches by bilking millions of dollars from Tricare and other health care providers,” stated R. Damon Rowe, Special Agent in Charge for IRS Criminal Investigation. “Those who betray patients and commit health care fraud steal from taxpayers‎ and insurance providers, while corrupting the integrity of our nation’s health care system. IRS Criminal Investigation and our law enforcement partners will investigate and criminally prosecute such fraud schemes to the fullest extent of the law.”

          Omidi and Zarrabi, along with the corporate defendants, are scheduled to be arraigned on the indictment this afternoon in United States District Court.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

          If they were to be convicted in this case, Omidi and Zarrabi potentially would face decades in federal prison, including a statutory maximum penalty of 20 years in prison for each of the 31 mail fraud and wire fraud counts alleged in the indictment.

          This case is the product of an investigation by the U.S. Food and Drug Administration, Office of Criminal Investigations; the Federal Bureau of Investigation; the Defense Criminal Investigative Service; IRS Criminal Investigation; the California Department of Insurance; and the California Department of Justice.

          The GET THIN case is being prosecuted by Assistant United States Attorneys Kristen A. Williams and Cathy J. Ostiller of the Major Frauds Section.

          LOS ANGELES – Two men have been arrested on charges of scheming to avoid the payment of federal excise taxes on duty-free cigarettes that should have been sent abroad, but instead were diverted to local retail outlets.

          Yong “David” Lu, 54, of Arcadia, and Wenzhu Guo, also 54, of Monterey Park, were arrested Thursday morning by federal authorities.

          Lu and Guo, both Chinese nationals, were named in a one-count indictment returned by a federal grand jury on Wednesday. The indictment charges both men with conspiring to defraud the United States, with Lu allegedly responsible for the diversion of duty-free cigarettes and Guo allegedly acting as his primary distributor of the untaxed cigarettes.

          At their arraignments Thursday afternoon, Lu and Guo entered not guilty pleas, were ordered freed on bond, and were ordered to stand trial on April 10.

          The arrests in this case are part of a wider investigation into cigarette diversion schemes designed to avoid the payment of excise taxes. In addition to the arrests, federal authorities on Thursday executed 10 search warrants on homes, storage lockers and vehicles in San Gabriel, Arcadia, Rosemead and Monterey Park. As a result of the searches, special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI); IRS Criminal Investigation; the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); and the Alcohol & Tobacco Tax & Trade Bureau (TTB) seized more than 2 million contraband cigarettes and more than $45,000 in cash.

          The case against Lu and Guo focuses on the diversion of untaxed cigarettes from tobacco export warehouses and foreign trade zones (FTZ), and the other two investigations that led to some of Thursday’s searches concern cigarettes being shipped through the mails from China.

          Lu operated Great Pacific Coast Corporation, which provided supplies to cargo vessels docked in the Port of Los Angeles, including consumable goods, such as export-only cigarettes, for the personal use of the ship’s crew. Over the past two years, according to the indictment, Lu “made numerous purchases of export-only cigarettes” from two tobacco export warehouses that stored untaxed tobacco products pending their shipment outside the United States. When foreign cigarettes are imported into the United States and warehoused in a tobacco export warehouse or FTZ, the government does not impose excise taxes if they are to be exported or consumed outside the U.S.

          Lu purchased the cigarettes from the warehouses under the pretense that they would be exported on ships docked in the port. However, the indictment alleges, the cigarettes were not delivered to cargo vessels, but were instead diverted into the local retail market.

         After obtaining the cigarettes from the warehouses, Lu or his associates delivered some or all of the cigarettes to Guo, who in turn distributed the cigarettes, the indictment alleges.

          Lu and Guo are not the first to be prosecuted for illegally diverting duty-free cigarettes into the Los Angeles retail market. Un Hag Baeg, a resident of Korea who at the time of the offense resided in Marina Del Rey, pleaded guilty in October to conspiring to defraud the Unites States out of more than $7 million in federal excise taxes by diverting tens of millions of export-only cigarettes to the local retail market. Baeg is scheduled to be sentenced on April 16.

          The United States imposes a federal excise tax on all cigarettes meant for consumption within the United States of $50.33 per 1000 cigarettes sticks. TTB is responsible for administering and enforcing federal excise tax laws pertaining to tobacco products, and U.S. Customs and Border Protection Agency is responsible for the assessment and collection of duties, taxes and fees on merchandise imported into the United States.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

          If they were to be convicted of the conspiracy count alleged in the indictment, Lu and Guo each would face a statutory maximum sentence of five years in federal prison.

          The case against Lu and Guo is being investigated by HSI and IRS-CI, with assistance from ATF and TTB.

          The case is being prosecuted by Assistant United States Attorneys James C. Hughes and Valerie Makarewicz of the Tax Division.

          SANTA ANA, California – A federal judge has convicted a Los Angeles man of three counts of aggravated identity theft for using the secret codes of elderly Bank of America customers to make fraudulent withdrawals at ATMs in Los Angeles and Orange County.

          In a written order issued yesterday, Daniel Jermaine Usher, 26, of South Los Angeles, was found guilty of three counts of aggravated identity theft. The verdict was issued by United States District Judge Cormac J. Carney, who presided over a two-day bench trial.

          The trial came after Usher pleaded guilty last month to five counts of bank fraud and admitted that he illegally withdrew cash from Bank of America ATMs.

          Judge Carney convicted Usher on the same day the Justice Department announced cases against more than 250 defendants who targeted the elderly in fraud cases.

          The evidence presented at Usher’s trial showed that Usher engaged in “shoulder surfing” to obtain bank customer PIN numbers. Usher loitered near Bank of America ATMs and covertly watched as customers entered their PINs to conduct various transactions. When customers left the ATMs without concluding their sessions, Usher quickly re-entered PIN he had covertly obtained, which allowed him to fraudulently withdraw cash.

          The accountholders targeted in Usher’s shoulder-surfing activity were elderly and minority individuals. The three victims of the identity theft charges – two of whom required translators at trial – testified that they had not given Usher or anyone else permission to use their account information.

          In his ruling, Judge Carney found that “Mr. Usher piggybacked off of the victims’ use of their ATM cards and the encoded information therein and misrepresented himself as the victims by re-entering their PIN to fraudulently withdraw funds.”

          Judge Carney scheduled a sentencing hearing for May 21, at which time Usher will face a statutory maximum sentence of 30 years in federal for each of the five bank fraud counts, and a mandatory two-year sentence for the aggravated identity theft counts.

          The investigation into Usher’s shoulder-surfing activity was conducted by the United States Secret Service. 

          The case is being prosecuted by Assistant United States Attorneys Paul C. LeBlanc and Daniel S. Lim of the Santa Ana Branch Office.

          LOS ANGELES – A medical doctor was arrested this morning on federal charges of illegally selling prescriptions without a legitimate medical purpose to undercover operatives who visited the physician’s Victorville medical office.

          Wendell Mark Street, 66, of Las Vegas, was arrested this morning without incident at his residence by special agents with the Drug Enforcement Administration.

          Today’s arrest is the result of a 10-count indictment returned by a federal grand jury on February 9. The indictment charges Street with five counts of illegally distributing the painkiller oxycodone and five counts of illegally distributing the tranquilizer alprazolam (often sold under the brand name Xanax). Street allegedly issued the prescriptions in 2013 in exchange for cash “while acting and intending to act outside the usual course of professional practice and without a legitimate medical purpose.”

          Street allegedly wrote prescriptions without performing any physical examinations in exchange for $200 to $300 in cash from each of two undercover investigators with the California Medical Board and an informant.

          Street is expected to make his initial appearance this afternoon in United States District Court in Las Vegas.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

          The five counts related to illegal distribution of oxycodone each carry a statutory maximum penalty of 20 years in federal prison. The five counts related to alprazolam each carry a sentence of up to five years in prison.

          During the investigation into Street, investigators executed a search warrant at his Victorville office in 2014. Street surrendered his California medical license in 2016.

          This case is being prosecuted by Assistant United States Attorney Victoria A. Degtyareva of the Organized Crime Drug Enforcement Task Force.

          LOS ANGELES – The Justice Department today reached a settlement with Atlantis Events, Inc., a cruise and resort vacation company with offices in West Hollywood, to ensure that individuals who are deaf or hard of hearing are provided effective communication when travelling with the company.

          The settlement agreement resolves complaints under the Americans with Disabilities Act (ADA) in which individuals who are deaf alleged that Atlantis failed to provide them with effective communication on a cruise. Atlantis – which buys and resells cabins on cruise ships and rooms at resorts – cooperated with the Justice Department throughout the investigation.

          Under the agreement, Atlantis will ensure that interpreters, transcription services, written exchanges, assistive listening devices, captioning, or other auxiliary aids and services are provided to individuals with hearing disabilities free of charge when necessary for effective communication. The company also agreed to designate an ADA liaison on every cruise to respond to disability-related requests from passengers.

          In addition, Atlantis will pay a civil penalty of $10,000 to the United States and $9,000 in damages to the complainants.

          “The ADA guarantees people with disabilities equal access to public accommodations, including communications access,” said Acting Assistant Attorney General John Gore of the Civil Rights Division. “People with disabilities who are deaf or hard of hearing must be given the opportunity to fully participate on cruises and at resorts, and enjoy the services and activities a vacation company offers.” 

          “Individuals with disabilities, including those who are deaf or hard of hearing, have a right under federal law to the equal enjoyment of the services that travel companies provide to the public,” said United States Attorney Nicola T. Hanna. “Atlantis is to be complimented for acknowledging its obligations under the Americans with Disabilities Act, and agreeing to implement policies and practices to ensure equal access and effective communication.”

          LOS ANGELES – A Houston, Texas man was indicted today on multiple felony counts for allegedly staging a phishing attack that used the Los Angeles County Superior Court (LASC) computer system.

          Oriyomi Sadiq Aloba, 32, was named in an 11-count indictment returned this afternoon by a federal grand jury.

          The indictment specifically charges Aloba with five counts of unauthorized access to a protected computer to obtain information, one count of unauthorized impairment of a protected computer, and five counts of aggravated identity theft.

          According to the indictment, over the course of a week in late July 2017, Aloba used the stolen username and passwords of multiple LASC employees to log into LASC servers and send phishing emails. The phishing attack targeted email addresses outside the LASC system, and Aloba also allegedly sent test emails to himself to test the security features and ensure that he had full access to the accounts.

          The phishing emails purported to be a communication from American Express and led victims to a webpage that asked for American Express login credentials, personal identifying information and credit card information. The link for the fake American Express website used a source code that designated Aloba’s account as the delivery address for the information that the victims input into the website.

          Aloba allegedly accessed at least 18 different LASC employee accounts and sent out approximately 2 million phishing emails.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

          Aloba is scheduled to be arraigned on the indictment on March 8.

          If Aloba were to be found guilty of the charges in the indictment, he would face a statutory maximum sentence of 10 years for the unauthorized impairment count, five years for each of the unauthorized access counts, and a mandatory two-year sentence for each the identity theft counts.

          Aloba was initially charged by the Los Angeles County District Attorney, but the matter was referred to the United States Attorney’s Office for federal prosecution. Aloba was initially charged in federal court on January 10. He made his initial appearance in the federal case on January 17, at which time he was ordered released on a $10,000 bond.

          This matter is being investigated by the Federal Bureau of Investigation.

          The case is being prosecuted by Assistant United States Attorney Robyn Bacon of the Cyber and Intellectual Property Crimes Section.

          SANTA ANA – A Sun Valley man was sentenced late Monday afternoon to 54 months imprisonment for his participation in a large-scale international identity theft scheme that fraudulently obtained tax refunds by using bogus Republic of Armenia passports and then engaged in money laundering of over $14 million of these criminal proceeds. 

          Karen Pogosian, 47, was sentenced by United States District Judge Andrew J. Guilford.  In addition to the prison term, Judge Guilford ordered Pogosian to pay restitution of $277,617 to the Internal Revenue Service.

          Pogosian pled guilty in September of last year to one count of bank fraud and one count of aggravated identity theft. 

          According to documents filed with the court, the scheme involved over 7,000 false tax returns that together claimed approximately $38 million in refunds. Approximately $14 million obtained through the fraud scheme was then deposited into bank accounts to conceal its illegal source. The tax returns were filed using identity information stolen from thousands of victims.

          From August 2012 through March 2014, Pogosian opened mailbox and bank accounts using fraudulent identification with the names and personal information of identity theft victims. Pogosian also used the identification documents to create other IDs. For example, Pogosian used a foreign passport in the name of another person to obtain a Costco membership card also in that same person’s name, but with Pogosian’s photograph.

          Pogosian’s use of stolen identities resulted in approximately $277,617 in loses. According to court records, defendant was present illegally in the U.S. at the time he committed the crimes and had been receiving public benefits.

          The case against Pogosian is part of a larger investigation in which 14 defendants have been charged, nine defendants have pled guilty (eight have been sentenced), two are fugitives, two are pending trial and one is awaiting extradition.

          The ongoing investigation into money laundering involving fraudulently obtained tax refunds and related frauds is being conducted by IRS Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the Federal Bureau of Investigation.

          The case is being prosecuted by Assistant United States Attorney Charles Pell of the Santa Ana Branch Office. Assistant United States Attorney Frank Kortum represents the United States in the civil forfeiture action.

          LOS ANGELES – The U.S. Attorney’s Office for the Central District of California hosted a roundtable discussion yesterday on Sexual Harassment in Housing for community organizations, U.S. Attorney Nicola T. Hanna announced.

          The event included local legal services offices, fair housing organizations, shelters and transitional housing providers. Each organization was invited because they often work with the Central District of California’s most vulnerable populations, who could also become victims of sexual harassment in housing.

          The Department of Justice, through the U.S. Attorney’s Offices and the Civil Rights Division, enforces the Fair Housing Act, which prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin, and disability. Sexual harassment is a form of sex discrimination prohibited by the Act. Sexual harassment by landlords, property managers, maintenance workers, and others with power over housing often affects the most vulnerable populations – single parents, individuals who have financial difficulties, and people who have suffered sexual violence in their past. These individuals often do not know where to turn for help.

          “Sexual harassment in housing is often underreported, but it is an egregious violation of a person’s right to fair housing,” U.S. Attorney Hanna said. “Landlords and property managers using the power they have over tenants to extort sexual favors, or even commit assaults, is intolerable. My Office is dedicated to uncovering such violations where they exist and vigorously enforcing the law.”

          In October 2017, the Justice Department’s Civil Rights Division announced the Sexual Harassment Initiative, an effort to combat sexual harassment in housing. The Justice Department’s initiative seeks to identify barriers to reporting sexual harassment in housing, increase awareness of its enforcement efforts – both among survivors and those they may report to – and collaborate with federal, state, and local partners to increase reporting and help survivors quickly and easily connect with federal resources.

          The Justice Department is hosting a series of roundtable discussions on this topic around the country and this was the first one on the West Coast. The U.S. Attorney’s Office for the Central District of California is collaborating with the Civil Rights Division to spread the word about options to help individuals experiencing sexual harassment within the seven districts that comprise the Central District of California: Los Angeles, Orange, Riverside, Santa Barbara, San Bernardino, San Luis Obispo, and Ventura counties. Community organizations, such as legal services offices, fair housing organizations, shelters and transitional housing providers, can identify the misconduct and recommend that individuals report sexual harassment to the Justice Department.

          The Justice Department brings cases each year involving egregious conduct, including allegations that defendants have exposed themselves sexually to current or prospective tenants, requested sexual favors in exchange for reduced rents or making necessary repairs, made unrelenting and unwanted sexual advances to tenants, and evicted tenants who resisted their sexual overtures.

          In 2017, the Justice Department recovered for harassment victims more than $1 million in damages. Many instances of sexual harassment in housing continue to go unreported. The Justice Department’s investigations frequently uncover sexual harassment that has been ongoing for years or decades and identify numerous victims who never reported the conduct to federal authorities.

          The Justice Department encourages anyone who has experienced sexual harassment in housing, or knows someone who has, to contact the Civil Rights Division by calling (844) 380-6178 or emailing: fairhousing@usdoj.gov.

          Individuals who believe they may have been victims of discrimination may also file a complaint with the U.S. Attorney’s Office Civil Division’s Civil Rights Section.

          LOS ANGELES – United States Attorney Nicola T. Hanna announced today that his office collected $219,179,887 in criminal and civil actions in Fiscal Year 2017. Of this amount, nearly $56 million was collected in criminal cases, and more than $163 million was collected in civil actions.

          The United States Attorney’s Office for the Central District of California worked with other U.S. Attorney’s Offices and components of the Department of Justice to collect another $431,216,222 in cases that were pursued jointly with at least one other office. The vast majority of this money was collected in civil actions. Overall, the Justice Department collected just over $15 billion in civil and criminal actions in the 2017 fiscal year, which ended on September 30, 2017.

          Additionally, the United States Attorney’s office, working with partner agencies and divisions, collected $34,749,352 in asset forfeiture actions in FY 2017. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.

          “Each and every year, this office is involved in the collection and recovery of tens of millions of dollars that are used to assist crime victims, as well as help fund important government programs,” said United States Attorney Hanna. “The United States Attorney’s Office is dedicated to recovering criminal restitution owed to the victims of federal crimes and recouping losses sustained by taxpayers as a result of fraud.”

         The United States Attorneys’ Offices, along with the Justice Department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the United States, as well as criminal debts owed to victims of federal crimes. Federal law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to victims, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.

          Of the approximately $56 million collected in criminal cases this past year, approximately $44.6 million in restitution was collected and disbursed directly individuals and private entities, and $1.6 million was paid directly to the Crime Victims Fund. Most of the remaining $10 million was disbursed to federal agencies that suffered losses.

          The largest civil collections last year were from affirmative civil enforcement cases in which the United States recovered government money lost to fraud or other misconduct, or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights and environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, the U.S. Department of Health and Human Services, the Internal Revenue Service, the Small Business Administration and the Department of Education.

          During fiscal year 2017, prosecutors in the Central District of California recovered $42 million from a settlement with Pacific Alliance Medical Center to resolve allegations that the medical center had improper financial relationships with referring physicians.  Additionally, the Office recovered $26.5 million from a settlement with the City of Los Angeles Department of Water and Power for environmental and property damage sustained as a result of the 2013 Powerhouse Fire, which scorched more than 30,000 acres in northern Los Angeles County and destroyed 58 structures.

          The United States Attorney’s Office for the Central District of California is based in Los Angeles and has branch offices in Santa Ana and Riverside. Currently, approximately 275 Assistant United States Attorneys serve nearly 20 million residents of the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.

          Assistant United States Attorney Indira Cameron-Banks is the Chief of the Financial Litigation Section in the Civil Division. The Financial Litigation Section coordinates efforts to collect criminal and civil debts owed to victims of federal crimes and the United States, including restitution, fines, civil settlements, penalties and defaulted federal loans. These efforts include locating debtors’ assets and initiating enforcement actions to secure collection on the outstanding debts.

          LOS ANGELES – The former chief of the National Police in Guatemala’s second-largest city was arrested today on visa fraud charges in relation to his procurement of a “green card” after he allegedly failed to disclose to U.S. immigration authorities that he had been charged with murdering two political activists in Guatemala.

          Catalino Esteban Valiente Alonzo, 77, of Fontana, who was the chief of the National Police in Quetzaltenango, Guatemala, was arrested after being charged in a one-count indictment returned on Tuesday by a federal grand jury.

          The indictment specifically alleges that Valiente entered the United States in April 2013 with a Lawful Permanent Resident card he fraudulently obtained by failing to disclose that he had been arrested and tried for kidnapping and murder in Guatemala.

          In late 1987, Valiente and others were charged in Guatemala with the kidnapping and murder of two people affiliated with the Agronomy Department at the Centro Universitario de Occidente in Quetzaltenango. Valiente was convicted twice, but both convictions – and two 30-year sentences – were overturned on appeals, and the matter was remanded to a trial court for further proceedings in 1993. An arrest warrant for Valiente was issued in July 1993, and it renewed twice, but the warrant was rescinded in 2015. It is unclear if charges remain pending against Valiente in Guatemala.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          Valiente is expected to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.

          If he were to be convicted of visa fraud, Valiente would face a statutory maximum penalty of 10 years in federal prison.

          This case was investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), Document and Benefit Fraud Task Force (DBFTF), in coordination with the HSI Attaché in Guatemala City and U.S. Citizenship and Immigration Services, Fraud Detection and National Security Directorate.

          The investigation was supported by ICE’s Human Rights Violators and War Crimes Center (HRVWCC). Established in 2009 to identify, track and prosecute human rights abusers, the HRVWCC leverages the expertise of a select group of agents, lawyers, intelligence and research specialists, historians and analysts who direct the agency’s broader enforcement efforts against these offenders.

          Members of the public who have information about foreign nationals suspected of engaging in human rights abuses or war crimes may call the ICE tip line at 1-866-DHS-2423 (1-866-347-2423). Callers may remain anonymous.

          This case is being prosecuted by Special Assistant United States Attorney Stacey R. Fernandez of the Violent and Organized Crime Section.

          LOS ANGELES – A Montecito resident has been arrested pursuant to a federal grand jury indictment that accuses him of running two fraudulent investment schemes and violating a court order prohibiting him from selling securities.

          Efstratios “Elias” Argyropoulos, 71, was arrested at his office in Santa Barbara Wednesday morning by federal agents.

          At his arraignment Wednesday afternoon in United States District Court, Argyropoulos pleaded not guilty, was ordered released on a $300,000 bond, and was ordered to stand trial on March 20.

          According to the 21-count indictment unsealed after his arrest, Argyropoulos operated two Santa Barbara investment services firms – Prima Capital and Prima Ventures – and engaged in two fraudulent schemes by soliciting investments in companies such as Facebook and Twitter, as well as investments in a fictitious estate settlement.

          In the first alleged scheme, Argyropoulos faces six fraud charges related to false promises to use investor funds to purchase securities, including pre-IPO shares of Facebook and Twitter. Instead of purchasing the stocks, Argyropoulos allegedly diverted the investor funds for other uses, such as day-trading in stocks unrelated to the promised investments and personal expenses, such as his mortgage, car payments and casino debts. According to the indictment, from October 2010 through October 2015, Argyropoulos solicited $4,947,360 from investors victimized in this scheme.

          In the second scheme, Argyropoulos faces seven fraud charges for allegedly marketing shares in an investment known as the “Laurence Miles Giant Estate Settlement,” which was also called the “Laurence Miles Trust.” According to the indictment, Argyropoulos falsely told investors that the beneficiary of the Trust was a very ill woman who needed medical treatments and was the heir to a large estate, which was worth more than $1 billion. According to the bogus story, the estate was tied up in probate proceedings, and money was needed to cover the heir’s medical expenses. Once the probate proceedings were finished, Argyropoulos allegedly told victims, the assets would become available for transfer, at which point, investors would receive a large return – as much as 1,000 percent. In truth, there was no estate to be settled and no “ill woman” with large medical bills. According to the indictment, Argyropoulos’ investors lost over $760,000 in the scam. 

          The final eight counts of the indictment charge Argyropoulos with criminal contempt. These counts allege that Argyropoulos’ solicitation of investments in the Laurence Miles Trust violated the terms of an injunction that Argyropoulos consented to in a suit brought by the Securities and Exchange Commission, which was based on the fraudulent Facebook and Twitter scheme. The injunction prohibited Argyropoulos from selling fraudulent investments and acting as an unlicensed broker.

          An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed to be innocent until and unless proven guilty in court.

          If convicted of the 13 fraud charges in the indictment, Argyropoulos would face a statutory maximum sentence of 20 years in federal prison for each count. There is no statutory maximum sentence for the eight contempt charges.

          The case against Argyropoulos is being investigated by the Federal Bureau of Investigation.

          The case is being prosecuted by Assistant United States Attorney Scott Paetty of the Major Frauds Section.

          WASHINGTON – The Justice Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) will hold a media call on WEDNESDAY, FEBRUARY 7, 2018 at 12:00 p.m. EST -  9:00 a.m. PST, to announce criminal charges against individuals around the world for their alleged roles in an Internet-based cybercriminal organization that defrauded over $530 million from victims.

WHO:          Deputy Assistant Attorney General David Rybicki
                       U.S. Attorney Dayle Elieson for the District of Nevada
                       Special Agent in Charge Joseph Macias of HSI Los Angeles

WHAT:       Announcement of significant enforcement actions around the world dismantling an Internet-                       based cybercriminal organization

WHEN:      WEDNESDAY, FEBRUARY 7, 2018
                      12:00 p.m. EST - 9:00 a.m. PST

WHERE:    Domestic Media Dial in Number (Toll Free)        1-877-883-0383
                       International Media Dial in Number                      1-412-902-6506
                       Dial in Code: 0791953

NOTE: Please RSVP to press@usdoj.gov and Nicole Navas Oxman at Nicole.Navas@usdoj.gov. Press inquiries regarding logistics or interviews should be directed to the Office of Public Affairs at 202-514-2007.

          SANTA ANA, California – A former captain with Alaska Airlines has agreed to plead guilty to federal charges of piloting a plane carrying passengers while he was under the influence of alcohol.

          David Hans Arntson, 62, of Newport Beach, agreed to plead guilty to operating a common carrier while under the influence in a plea agreement filed this morning in United States District Court.

          According to court documents, Arntson was the pilot of two Alaska Airlines flights on June 20, 2014. The first flight was from San Diego International Airport to Portland, Oregon. He then flew a plane from Portland, Oregon, to John Wayne Airport in Orange County.

          After landing at John Wayne Airport, Arntson was selected for random drug and alcohol testing by Alaska Airlines. A technician for Alaska Airlines performed two breathalyzer tests that showed the pilot had a blood alcohol concentration of 0.134 percent and 0.142 percent. “Those percentages were well above the federal limit of 0.04 percent for pilots,” according to the plea agreement.

          After the technician informed Alaska Airlines of the test results showing alcohol in his system, the airline removed Arntson from all safety-sensitive duties. Following the June 20, 2014, incident, Arntson retired from the Alaska Airlines, and the Federal Aviation Administration revoked his ability to pilot a plane.

          “This pilot worked for the airline for more than 20 years, and we now know that he was an alcoholic who flew commercial flights while under the influence of alcohol,” said United States Attorney Nicola T. Hanna. “When he was finally caught, the evidence indicates that he had flown with an alcohol level more than three times the legal limit. Thankfully, Mr. Arntson was never involved in an accident, but his conduct could have resulted in tragic consequences. Very few people will ever hold the lives of so many people in their hands at one time.”

          In the plea agreement filed today, the parties have agreed that the appropriate sentence in this case is one year and a day in federal prison, to be followed by three years of supervised release.

          United States District Judge Cormac J. Carney will schedule a hearing for Arntson to enter his guilty plea.

          The investigation into Arntson was conducted by the United States Department of Transportation, Office of Inspector General.

          “This guilty plea demonstrates that ensuring the safety of the travelling public within the nation’s air transportation system remains a high priority for both the Office of Inspector General (OIG) and the Department of Transportation (DOT),” said William Swallow, DOT-OIG Regional Special Agent-in-Charge. “Working with the Federal Aviation Administration and prosecutorial partners, we will continue our efforts to prevent and punish those who seek to compromise the safety of our national airspace system.”

          This case is being prosecuted by Assistant United States Attorneys Dennis Mitchell and Mark A. Williams of the Environmental and Community Safety Crimes Section.

          LOS ANGELES – A Valencia resident convicted of filing a federal tax return that failed to report income that he received by having his company pay for many of his personal expenses was sentenced today to 24 months in federal prison.

          Walter Daniel Prezioso, 47, the former vice president and manager of the now-defunct GSP Precision, Inc., was sentenced today by United States District Judge John F. Walter.

          A federal jury in November convicted Prezioso of one count of willfully subscribing to a false 2013 federal income tax return.

          In the early 1990s, Prezioso began working at GSP Precision, a Burbank-based machine shop owned by his father and a third party. In 1997, his father sold half of his shares to Prezioso, making him a 25 percent owner. By 2001, Prezioso had full control of GSP’s operations and held sole authority over the corporate checking account.

          According to the evidence presented at trial, by 2007, Prezioso was using his control over GSP’s checking account and corporate lines of credit to make payments for many of his personal expenses, including luxury automobile leases and the construction of a tennis court and swimming pool at his residence.

          Between 2007 and 2013, according to court documents, Prezioso used GSP funds to pay for hundreds of thousands of dollars in personal expenses. He concealed the expenditures as legitimate business expenses on GSP’s books and records, thereby ensuring that his true income from GSP would not be reported on his Forms W-2 or as officer compensation on GSP’s corporate tax returns.

          According to the government’s evidence, Prezioso failed to report any of the additional compensation on his individual income tax returns, resulting in a tax loss of more than $751,000.

          The jury that convicted Prezioso of subscribing to a false 2013 individual income tax return acquitted the defendant of seven additional counts.

          The investigation into Prezioso was conducted by IRS Criminal Investigation.

          The case was prosecuted by Assistant United States Attorneys Paul H. Rochmes, Valerie L. Makarewicz and James C. Hughes of the Tax Division.

          RIVERSIDE, California – A Murrieta man pleaded guilty this afternoon to a federal offense of traveling to Britain to engage in illegal sexual activity with a 15-year-old girl.

          Derek Lorenzo Longoria, 29, pleaded guilty to one count of travel with intent to engage in illicit sexual conduct. When he pleaded guilty before United States District Judge Jesus G. Bernal, Longoria admitted that he made a video recording of sexual contact he had with the girl.

          In a plea agreement filed in this case, Longoria admitted traveling to the United Kingdom in September 2011, and again in January 2012, for the purpose of engaging in sexual activity with a girl he knew was under the age of 16. During the trip in early 2012, Longoria, who was 23 at the time, engaged in sexual activity with the girl and used his smartphone to video record the incident.

          Longoria used the internet and telephone calls to communicate with the victim over a two-year period, during which he convinced the victim to take sexually explicit photos and videos of herself, which she then sent to Longoria. In his plea agreement, Longoria admitted that he knowingly possessed a child pornography video depicting another victim. Federal investigators discovered this child pornography when they searched Longoria’s residence in March 2015 after the victim contacted law enforcement authorities in Britain.

          After Longoria pleaded guilty, Judge Bernal scheduled a sentencing hearing for May 7. The parties agreed in the plea agreement that a sentence of between seven years and 10 years in prison is appropriate, but the court is not obligated to follow that recommendation.

          Once he is released from custody, Longoria will be required to register as a sex offender.

          This case was investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

          Assistant United States Attorney Joseph B. Widman, chief of the Riverside Branch Office, is litigating this case.

          LOS ANGELES – A federal grand jury today named an Aliso Viejo man in an indictment that accuses him of traveling to China to engage in illegal sexual activity with a 16-year-old and taking sexually explicit photographs of the victim.

          Ezequiel Christopher Barragan, 51 – who previously was a Spanish teacher at Dana Hills High School, as well as a youth baseball coach – was charged today in a three-count indictment that accuses him of producing child pornography, traveling with the intent to engage in illicit sexual conduct with a minor, and engaging in illicit sexual conduct with a minor in a foreign place.

          According to the indictment, Barragan traveled to China in August 2009, where he allegedly coerced a boy to engage in sexual conduct “for the purpose of producing a visual depiction of such conduct.”

          The charge of producing child pornography carries a mandatory minimum prison sentence of 15 years and a maximum of 30 years. The charges of international travel and engaging in illicit sexual activity each carry a statutory maximum sentence of 30 years in federal prison.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          Barragan, who is currently serving a state prison sentence in an unrelated case, will be arraigned on the indictment in the coming weeks. The case against Barragan was investigated by the United States Postal Inspection Service, which received substantial assistance from the Los Angeles Joint Regional Intelligence Center and the Orange County Child Exploitation Task Force.

          This case was indicted by Assistant United States Attorney Vanessa Baehr-Jones of the Violent and Organized Crime Section.

          LOS ANGELES – Glow Industries, Inc., a tobacco related product distributor headquartered in Perrysburg, Ohio, was sentenced on Monday in United States District Court after pleading guilty to a felony violation for shipping hazardous materials in packaging that did not display a required hazardous material label or marking on the package. United States District Judge Stephen V. Wilson sentenced Glow to a five-year term of probation and a fine of $250,000.

          On July 18, 2012, Glow shipped a package containing 72 butane cartridges from its Riverside, California facility to a smoke shop in Anchorage, Alaska. Butane is a highly flammable liquid used in lighters. The package containing the cartridges did not display any hazardous material warning. After being transported by air to Anchorage, the package was damaged; consequently, the butane cartridges were found inside. Investigation later revealed that a Glow employee had inverted the package so that the hazardous material marking originally placed on the package would not be visible.

          According to the plea agreement, Glow admitted that it had directed and instructed various managers and employees, who were responsible for packaging and/or shipping products, to conceal the hazardous nature of Glow’s hazardous material products from its shippers. Pursuant to that policy, butane cartridges, which were originally shipped by suppliers to Glow in boxes containing a hazardous material warning, were intentionally removed from the marked boxes and inserted into boxes that had no hazardous material marking or labeling. Glow further admitted that ozium, another hazardous material product sold by Glow, would be delivered to Glow in a box that displayed a hazardous material warning. However, prior to shipping the ozium to its customers, Glow employees would razor out the hazardous material warning and then provide the box to its shipper without the box displaying any hazardous material warning.

          Shipping companies rely upon hazardous material products bearing required labeling in order to properly handle and transport such items. Among the conditions of probation ordered by the Court, Glow is required to maintain an extensive compliance program which includes in person training for its employees or contractors and periodic audits to assure that Glow complies with any federal or local requirements for the labeling and shipping of hazardous materials.

          The matter was investigated by the U.S. Department of Transportation, Office of the Inspector General. The case was prosecuted by Assistant United States Attorney Dennis Mitchell and Assistant United States Attorney Amanda Bettinelli of the Environmental and Community Safety Crimes Section.

          LOS ANGELES – A Riverside woman who worked at Fannie Mae offices in Irvine faces fraud charges alleging that she earned more than $1 million from a scheme in which she took bribes and approved discounted sales of Fannie Mae-owned properties to herself and to brokers in exchange for cash kickbacks.

          Shirene Hernandez, 45, of Corona, was arraigned Friday afternoon on two counts of wire fraud.  After entering a plea of not guilty and being released on a $65,000 bond, Hernandez was ordered to stand trial on March 20, 2018.

          As alleged in the indictment, at all relevant times Hernandez was a real estate owned (REO) foreclosure specialist at the Federal National Mortgage Association (Fannie Mae). Fannie Mae is a government-sponsored entity under conservatorship of the Federal Housing Finance Agency (FHFA). As part of its operations, Fannie Mae acquires properties – sometimes called REO properties – through foreclosure and otherwise, and it then manages and sells those properties for Fannie Mae’s benefit. Under FHFA’s conservatorship, since at least 2012 Fannie Mae’s profits have gone to the United States Treasury Department, for the benefit of the American taxpayer.

          As an REO foreclosure specialist, Hernandez’s duties included assigning Fannie-Mae owned properties to listing brokers and approving sales of those properties based on offers submitted by those brokers. During the scheme, which is alleged to have begun no later than April 2011 and continued through at least July 2016, Hernandez allegedly approved sales of Fannie Mae-owned properties at discounted prices to herself and to brokers who paid her cash kickbacks, and she allegedly received bribes, in the form of cash payments, gifts, and other things of value, from brokers in exchange for listing opportunities and the resulting commissions that brokers earned on sales.

          According to the indictment, one of the Fannie-Mae owned properties that Hernandez purchased was purchased through intermediaries and alter egos who rented out the property and provided rent proceeds to Hernandez.

          The indictment alleges that Hernandez’s profits from the fraud exceeded $1 million.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If Hernandez were to be convicted of the two charges in the indictment, she would face a statutory maximum sentence of 20 years in federal prison on each count.

          The case is being investigated by the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG).  Agents continue to investigate this case and other allegations of bribes accepted by other Fannie Mae employees.  If you believe you have information relevant to this investigation, please contact FHFA-OIG Senior Special Agent James Shields at 202-730-4013.

          The prosecution of Hernandez is being handled by Assistant United States Attorney Kerry L. Quinn of the Major Frauds Section.

          SANTA ANA, California – A former member of the Planning Commission for the City of Westminster was sentenced today to 18 months in federal prison for taking a $15,000 bribe to help a person obtain a liquor license.

          Dave Vo, 43, of Westminster, was sentenced by United States District Judge James V. Selna.

          Following a three-day jury trial, Vo was convicted in September of one count of bribery.

          Vo, who is an attorney, served as a Planning Commissioner in the Orange County city from early 2009 through early 2013. By virtue of his position, he had influence over the issuance of conditional use permits.

          In 2011, Vo solicited a $15,000 bribe from a confidential informant. The informant reported to the FBI that Vo had solicited a bribe in relation to the issuance of a liquor license. During August 2011, over the course of four meetings, Vo received cash payments that totaled $15,000 in exchange for pushing the liquor license permit through the city’s approval process.

          During the trial, the jury heard audio recordings of Vo soliciting the bribe – at one point telling the informant to “stay quiet” and “don’t even mention what’s going on” – and then saw video recordings of the payments being made.

          “To line his pockets, [Vo] made a calculated decision to help a bribe payer at the expense of law-abiding members of the community who sought conditional use permits and liquor licenses through legitimate channels,” prosecutors wrote in a sentencing memorandum filed with the court. “In so doing, [Vo] sold his influence on the Planning Commission, giving (as he called it) ‘inside’ access for ‘under the table’ money. That conduct reflects a profound breach of the public’s trust.”

          The case against Vo was investigated by the Federal Bureau of Investigation.

          The case is being prosecuted by Assistant United States Attorney Daniel H. Ahn of the Santa Ana Branch Office.

          LOS ANGELES – A Riverside woman who was the controller at a Fontana-based metal forging company was sentenced this morning to one year and one day in federal prison for embezzling more than $1.5 million from her employer.

          Jacquelin Dyer, 68, who was the controller and co-general manager at Pacific Forge, Inc., was sentenced by United States District Judge George H. Wu. In addition to the prison term, which Dyer will begin serving next week, Judge Wu ordered her to pay $1,365,556 in restitution to the victim company.

          As the controller of Pacific Forge, Dyer was responsible for all aspects of accounting at the company, and she was authorized to sign corporate checks for amounts up to $5,000. According to court documents, Dyer used Pacific Forge corporate checks to pay her personal bills for about 10 years. Dyer printed and signed corporate checks that she made appear would be used to pay Pacific Forge vendors, but in reality were mailed to pay her personal expenses.

          Dyer pleaded guilty in September to a mail fraud charge specifically related to a $4,752 check that she mailed to American Express on January 11, 2013 to pay her personal credit card bill. Dyer made false entries in the Pacific Forge books to make this check appear to be a payment to a vendor.

          “[F]or about a decade, [Dyer] embezzled and stole over $1.5 million of funds that had been entrusted to her by her employer,” prosecutors wrote in papers filed with the court. “[Dyer] used this money to pay her credit card expenses, her mortgage, her car repairs, and other personal expenditures.”

          In total, Dyer embezzled approximately $1,525,556 of Pacific Forge funds to pay for her mortgage, personal tax payments, and vehicle repair expenses.

          Dyer has already paid $160,000 in restitution.

          This case was investigated by the Federal Bureau of Investigation, which received substantial assistance from the Fontana Police Department.

          The case against Dyer was prosecuted by Assistant United States Attorney Bilal A. Essayli of the Riverside Branch Office.

          LOS ANGELES – A Monterey Park man has been sentenced to five months in federal prison after pleading guilty to a smuggling charge stemming from the seizure of three king cobras hidden in potato chip canisters.

          Rodrigo Franco, 35, was sentenced Monday morning by United States District Judge George H. Wu. In addition to the prison term, Judge Wu ordered Franco to pay a $4,500 fine and to serve two years of supervised release after he is released from prison.

          Franco was sentenced after pleading guilty in September to one count of wildlife smuggling. In a plea agreement filed in United States District Court, Franco admitted that he was responsible for three illegal shipments of king cobras that contained approximately 23 snakes.

          In a sentencing memorandum filed earlier this month, prosecutors pointed out two key issues with the illegal smuggling: “King Cobras are venomous snakes that are: (1) legally protected because they are a vulnerable species at risk for extinction; and (2) deadly because they possess lethal venom that can kill an adult within 30 minutes if the person is bitten and anti-venom is not available (and, at the time of the offense, there was no known King Cobra anti-venom in Los Angeles).”

          According to court documents, United States Customs and Border Protection in March 2017 intercepted a package sent from Hong Kong and discovered three live king cobra snakes, each of which was approximately two-feet long. In addition to the three snakes, the parcel contained three albino Chinese soft-shelled turtles.

          On the same date, March 2, Franco mailed six protected turtles from the United States to Hong Kong, but that shipment also was intercepted by the United States Fish and Wildlife Service.

          Because of the danger associated with the cobras, the snakes were seized from the package that had come from Hong Kong. The United States Postal Inspection Service made a controlled delivery of the soft-shelled turtles to Franco’s residence. During a subsequent interview with authorities, Franco admitted that he had previously received 20 king cobras in two prior shipments – but he said all of those snakes had died in transit.

          The investigation in this case was conducted by the United States Fish and Wildlife Service (USFWS), Office of Law Enforcement; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and the United States Postal Inspection Service.

          The case against Franco was prosecuted by Assistant United States Attorney Erik M. Silber of the Environmental and Community Safety Crimes Section.

          LOS ANGELES – A federal jury has convicted a Monrovia man for his role in an international money laundering organization that conspired to move millions of dollars in proceeds for narcotics traffickers that included the Sinaloa Cartel.

          Harinder Singh, 32, who also goes by “Sonu,” was found guilty late Friday of conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business.

          The jury deliberated for less than two hours on January 19 before finding Singh guilty of all three charges. With the verdicts against Singh, prosecutors have convicted 18 defendants who were named in a 2015 grand jury indictment that was the first major case in the United States involving “hawala” transfers of drug money.

          The evidence presented during the two-week trial in United States District Court – which included Punjabi language wiretap calls, Punjabi-speaking witnesses and a money laundering expert – showed that Singh participated in a “hawala” conspiracy that was moving money generated from drug sales in Canada to the United States to pay for multi-kilogram drug shipments that were purchased in Los Angeles and then routed back to Canada for distribution.

          According to the indictment, a hawala is an alternative form of money remittance which operates outside of traditional banking or financial systems. The transfer of monetary value occurs between the brokers – who are typically located in different countries, but sometimes in different cities in one nation – based solely upon the trust that exists between the brokers. The hawala system, which originated on the Indian subcontinent, does not rely on promissory instruments; rather, it relies on trust and long-established connections between brokers that are typically based on familial, ethnic, religious, regional and/or cultural grounds. Through hawala transactions, only the value of the money is transferred, not the money itself.

          Singh was stopped by the California Highway Patrol in October 2012, which led to the discovery of $274,980 in United States currency in rubber-banded stacks wrapped in black plastic. While the traffic stop was being conducted, special agents with the Drug Enforcement Administration were conducting surveillance and observed Singh’s wife exiting the couple’s apartment complex carrying a bag – which later revealed $388,100 in United States currency, again rubber-banded in stacks and similarly wrapped in black plastic.

          Prior to the traffic stop and the seizure at Singh’s apartment complex, a federal wiretap intercepted Punjabi language calls indicating that Singh and co-conspirators communicated over multiple telephones to arrange for the pick-up, transport and delivery of large amounts of United States currency – in amounts of up to $800,000 – across the Los Angeles area.

          In this case, drug traffickers used a traditional hawala network of brokers spanning the United States, Canada and India to secretly transfer millions of dollars of drug proceeds to the United States, where brokers such as Singh delivered money to couriers acting on behalf of the Canadian drug traffickers and Mexican drug cartels.

          During the course of a four-year investigation by the DEA’s LA Strike Force and IRS Criminal Investigation, authorities seized nearly $15.5 million in bulk United States currency, 321 kilograms of cocaine, 98 pounds of methamphetamine, 11 kilograms of MDMA (“ecstasy”) and nine kilograms of heroin.

          Previously in this case, 17 defendants have pleaded guilty, and several have already been sentenced, receiving prison terms as high as 70 months. The indictment also charges four other defendants who are currently fugitives.

          Singh is scheduled to be sentenced by United States District Judge Christina A. Snyder on April 30. At the time of sentencing, Singh will face a statutory maximum penalty of 20 years in federal prison for the conspiracy count, and five years for each of the other two charges.

          The investigation in this case was conducted by the Drug Enforcement Administration and IRS Criminal Investigation. These agencies received assistance and support from the Santa Ana Police Department, the Beverly Hills Police Department and the Pomona Police Department.

          This case is being prosecuted by Assistant United States Attorneys Carol Alexis Chen of the Organized Crime Drug Enforcement Task Force and Ellen E. Lansden of Cyber and Intellectual Property Crimes Section.

          LOS ANGELES – A former employee of the Glendale City Attorney’s Office has been sentenced to 15 months in federal prison after she admitted embezzling nearly $700,000 in a scheme that used false documents to make it appear the money was being used to pay civil claims against the city.

          Cassandra Alexander, 53, who resides in the Winnetka district of Los Angeles, was sentenced Monday by United States District Judge George H. Wu.

          Alexander pleaded guilty in October to one count of theft from an organization receiving federal funds and admitted that she embezzled money for more than 15 years.

          Alexander was a claims and litigation support supervisor at the Glendale City Attorney’s Office, where she was responsible for assembling “Settlement Packets” that were used to resolve claims against Glendale for personal injury or property damage. Each Settlement Packet contained approval of the settlement by a member of the City Attorney’s Office and the City Council, as well as authorization for the city’s Finance Department to issue a check to the claimant. Alexander, who had unlimited authority to sign documents directing the Finance Department to issue checks, was responsible for picking up the checks and providing them to claimants’ attorneys.

          Beginning in July 2001, and continuing through March 2017, Alexander created and submitted fraudulent Settlement Packets that caused the Finance Department to issue 30 checks to her family members and acquaintances, according to a plea agreement filed in this case. Alexander also created bogus settlement agreements and fake minutes of City Council meetings.

          After the Finance Department prepared the checks, Alexander took possession of the checks and provided them to the payees, who cashed them and transferred the money to Alexander.

          “For over 15 years, Alexander forged City documents, lied to her coworkers, and stole over $600,000 from the City, all while pretending to be a dedicated employee who earned the trust of her supervisors and rose through the ranks to a position of trust,” prosecutors wrote in a sentencing memorandum filed with the court. “She continuously exploited the trust that her supervisors and two successive City Attorneys placed in her.”

          Alexander embezzled just over $692,000 from the city, which includes an uncashed check for $82,500 that was recovered from her residence. In addition to the prison term, which she will begin serving next month, Alexander was ordered to pay the city $609,764.84 in restitution.

          This case was investigated by the Federal Bureau of Investigation, which received substantial assistance from the Glendale Police Department and the full cooperation of other city departments.

          This case was prosecuted by Assistant United States Attorney Patricia A. Donahue of the Public Corruption and Civil Rights Section.

Federal authorities arrested Yi-Chi Shih, 62, and Kiet Ahn Mai, 63, on Jan. 19, on federal charges that allege a scheme to illegally obtain technology and integrated circuits with military applications that were exported to a Chinese company without the required export license.

 

The announcement was made by Acting Assistant Attorney General for National Security Dana J. Boente; U.S. Attorney Nicola T. Hanna for the Central District of California; Assistant Director in Charge Paul Delacourt of the FBI’s Los Angeles Field Office; Special Agent in Charge R. Damon Rowe of IRS Criminal Investigation; Special Agent in Charge Richard Weir of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Los Angeles Field Office.

 

“According to the complaint, the defendants allegedly schemed to illegally export semiconductors having military and civilian applications to a Chinese company,” said Acting Assistant Attorney General Boente.  “Protecting this type of technology and preventing its illegal acquisition by our adversaries remains a key priority in preserving our national security.”

 

“This case outlines a scheme to secure proprietary technology, some of which was allegedly sent to China, where it could be used to provide companies there with significant advantages that would compromise U.S. business interests,” said U.S. Attorney Hanna.  “The very sensitive information would also benefit foreign adversaries who could use the technology to further or develop military applications that would be detrimental to our national security.”

 

“The FBI, working jointly with our law enforcement partners, remains committed to bringing to justice those who seek to illegally export some of our nation’s most sensitive technologies to the detriment of our national security and hard-working United States companies,” said Assistant Director in Charge Delacourt.  “Rest assured, the FBI will continue to diligently pursue any and all leads that involve the illegal exportation of U.S. technology which will cause harm to our long-term national security interests.”

 

“Today’s actions serve as a reminder that the government will hold individuals accountable who fraudulently procure and export unlawfully protected United States technology and attempt to conceal their criminal activity through international money laundering,” said Special Agent in Charge Rowe.  “The IRS plays an important role in tracing illicit funds through both domestic and international financial intuitions. The IRS is proud to partner with the FBI and Department of Commerce and share its world-renowned financial investigative expertise in this investigation.”

 

“Today’s arrests demonstrate the Office of Export Enforcement’s strong commitment to enforcing our nation’s export control and public safety laws,” said Special Agent in Charge Weir.  “We will continue to work with our law enforcement partners to identify, deter, and keep the most sensitive U.S. origin goods and technology out of the most dangerous hands.”

 

Shih, an electrical engineer who is a part-time Los Angeles resident and a naturalized U.S. citizen originally from Taiwan, and Mai who resides in Pasadena, California and is a naturalized U.S. citizen originally from Vietnam, were arrested on Jan. 19, without incident by federal agents.

 

Shih and Mai, who previously worked together at two different companies, are named in a criminal complaint unsealed on Jan. 19, that charges them with conspiracy.  Shih is also charged with violating the International Emergency Economic Powers Act (IEEPA), a federal law that makes illegal, among other things, certain unauthorized exports.

 

The complaint alleges that Shih and Mai conspired to illegally provide Shih with unauthorized access to a protected computer of a U.S. company that manufactured specialized, high-speed computer chips known as monolithic microwave integrated circuits (MMICs).  The conspiracy count also alleges that the two men engaged in mail fraud, wire fraud and international money laundering to further the scheme.

           

According to the affidavit in support of the criminal complaint, Shih and Mai executed a scheme to defraud the U.S. company out of its proprietary, export-controlled items, including technology associated with its design services for MMICs.  As part of the scheme, Shih and Mai accessed the victim company’s computer systems via its web portal after Mai obtained that access by posing as a domestic customer seeking to obtain custom-designed MMICs that would be used solely in the United States.  Shih and Mail allegedly concealed Shih’s true intent to transfer the U.S. company’s technology and products to the People’s Republic of China.

 

The victim company’s proprietary semiconductor technology has a number of commercial and military applications, and its customers include the Air Force, Navy and the Defense Advanced Research Projects Agency.  MMICs are used in electronic warfare, electronic warfare countermeasures and radar applications.

 

The computer chips at the heart of this case allegedly were shipped to Chengdu GaStone Technology Company (CGTC), a Chinese company that established a MMIC manufacturing facility in Chengdu.  Shih was the president of CGTC, which in 2014 was placed on the Commerce Department’s Entity List, according to the affidavit, “due to its involvement in activities contrary to the national security and foreign policy interest of the United States – specifically, that it had been involved in the illicit procurement of commodities and technologies for unauthorized military end use in China.”  Because it was on the Entity List, a license from the Commerce Department was required to export U.S.-origin MMICs to CGTC, and there was a “presumption of denial” of a license.

 

The complaint outlines a scheme in which Shih used a Los Angeles-based company he controlled – Pullman Lane Productions, LLC – to funnel funds provided by Chinese entities to finance the manufacturing of MMICs by the victim company.  The complaint affidavit alleges that Pullman Lane received financing from a Beijing-based company that was placed on the Entity List the same day as CGTC “on the basis of its involvement in activities contrary to the national security and foreign policy interests of the United States.”

 

Mai acted as the middleman by using his Los Angeles company – MicroEx Engineering – to pose as a legitimate domestic customer that ordered and paid for the manufacturing of MMICs that Shih illegally exported to CGTC in China, according to the complaint.  It is the export of the MMICs that forms the basis of the IEEPA violation alleged against Shih.  The specific exported MMICs also required a license from the Commerce Department before being exported to China, and a license was never sought or obtained for this export.

           

Shih and Mai are expected to made their first court appearances on Jan. 19, in U.S. District Court in downtown Los Angeles.

 

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.  If convicted, Mai faces a maximum sentence of five years in prison, and Shih faces a maximum sentence of 25 years in prison.  The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes. If convicted of any offense, the sentencing of the defendants will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

 

This case is being investigated by the FBI; the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement; and IRS Criminal Investigation.

 

This case is being prosecuted by Assistant U.S. Attorneys Judith A. Heinz, Melanie Sartoris and Khaldoun Shobaki of the Central District of California, and Trial Attorney Matthew Walczewski of the National Security Division Counterintelligence and Export Control Section.

          LOS ANGELES – Federal authorities this morning arrested two local men on federal charges that allege a scheme to illegally obtain technology and integrated circuits with military applications that were exported to a Chinese company without the required export license.

          Yi-Chi Shih, 62, an electrical engineer who is a part-time Los Angeles resident, and Kiet Ahn Mai, 63, of Pasadena, were arrested this morning without incident by federal agents.

          Shih and Mai, who previously worked together at two different companies, are named in a criminal complaint unsealed this morning that charges them with conspiracy. Shih is also charged with violating the International Emergency Economic Powers Act (IEEPA), a federal law that makes illegal, among other things, certain unauthorized exports.

          The complaint alleges that Shih and Mai conspired to illegally provide Shih with unauthorized access to a protected computer of a United States company that manufactured specialized, high-speed computer chips known as monolithic microwave integrated circuits (MMICs). The conspiracy count also alleges that the two men engaged in mail fraud, wire fraud and international money laundering to further the scheme.

          According to the affidavit in support of the criminal complaint, Shih and Mai executed a scheme to defraud the U.S. company out of its proprietary, export-controlled items, including technology associated with its design services for MMICs. As part of the scheme, Shih and Mai accessed the victim company’s computer systems via its web portal after Mai obtained that access by posing as a domestic customer seeking to obtain custom-designed MMICs that would be used solely in the United States. Shih and Mail allegedly concealed Shih’s true intent to transfer the U.S. company’s technology and products to the People’s Republic of China.

          “This case outlines a scheme to secure proprietary technology, some of which was allegedly sent to China, where it could be used to provide companies there with significant advantages that would compromise U.S. business interests,” said United States Attorney Nicola T. Hanna. “The very sensitive information would also benefit foreign adversaries who could use the technology to further or develop military applications that would be detrimental to our national security.”

          “According to the complaint, the defendants allegedly schemed to illegally export semiconductors having military and civilian applications to a Chinese company,” said Acting Assistant Attorney General Boente. “Protecting this type of technology and preventing its illegal acquisition by our adversaries remains a key priority in preserving our national security.”

          The victim company’s proprietary semiconductor technology has a number of commercial and military applications, and its customers include the Air Force, Navy and the Defense Advanced Research Projects Agency. MMICs are used in electronic warfare, electronic warfare countermeasures and radar applications.

          “The FBI, working jointly with our law enforcement partners, remains committed to bringing to justice those who seek to illegally export some of our nation’s most sensitive technologies to the detriment of our national security and hard-working United States companies,” said Paul Delacourt, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Rest assured, the FBI will continue to diligently pursue any and all leads that involve the illegal exportation of U.S. technology which will cause harm to our long-term national security interests.”

          The computer chips at the heart of this case allegedly were shipped to Chengdu GaStone Technology Company (CGTC), a Chinese company that established a MMIC manufacturing facility in Chengdu. Shih was the president of CGTC, which in 2014 was placed on the Commerce Department’s Entity List, according to the affidavit, “due to its involvement in activities contrary to the national security and foreign policy interest of the United States – specifically, that it had been involved in the illicit procurement of commodities and technologies for unauthorized military end use in China.” Because it was on the Entity List, a license from the Commerce Department was required to export U.S.-origin MMICs to CGTC, and there was a “presumption of denial” of a license.

          The complaint outlines a scheme in which Shih used a Los Angeles-based company he controlled – Pullman Lane Productions, LLC – to funnel funds provided by Chinese entities to finance the manufacturing of MMICs by the victim company. The complaint affidavit alleges that Pullman Lane received financing from a Beijing-based company that was placed on the Entity List the same day as CGTC “on the basis of its involvement in activities contrary to the national security and foreign policy interests of the United States.”

          Mai acted as the middleman by using his Los Angeles company – MicroEx Engineering – to pose as a legitimate domestic customer that ordered and paid for the manufacturing of MMICs that Shih illegally exported to CGTC in China, according to the complaint. It is the export of the MMICs that forms the basis of the IEEPA violation alleged against Shih. The specific exported MMICs also required a license from the Commerce Department before being exported to China, and a license was never sought or obtained for this export.

          “Today’s actions serve as a reminder that the government will hold individuals accountable who fraudulently procure and export unlawfully protected United States technology and attempt to conceal their criminal activity through international money laundering,” stated Special Agent in Charge R. Damon Rowe with IRS Criminal Investigation. “The IRS plays an important role in tracing illicit funds through both domestic and international financial intuitions. The IRS is proud to partner with the FBI and Department of Commerce and share its world-renowned financial investigative expertise in this investigation.”

          “Today’s arrests demonstrate the Office of Export Enforcement’s strong commitment to enforcing our nation’s export control and public safety laws,” said Richard Weir, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Los Angeles Field Office. “We will continue to work with our law enforcement partners to identify, deter, and keep the most sensitive U.S. origin goods and technology out of the most dangerous hands.”

          Shih and Mai are expected to make their first court appearances this afternoon in United States District Court in downtown Los Angeles.

          A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If they were to be convicted of the charges in the criminal complaint, Mai would face a statutory maximum sentence of five years in federal prison, and Shih could be sentenced to as much as 25 years in prison.

          This case is being investigated by the Federal Bureau of Investigation; the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement; and IRS Criminal Investigation.

          The case against Shih and Mai is being prosecuted by Assistant United States Attorneys Judith A. Heinz, Melanie Sartoris and Khaldoun Shobaki of the National Security Division, and Trial Attorney Matthew Walczewski of the Department of Justice’s National Security Division.

          LOS ANGELES – A Los Angeles County deputy sheriff who allegedly agreed on two occasions to oversee the delivery of narcotics and other contraband in exchange for cash payments was arrested this morning, along with three other men, on federal narcotics charges.

          Special agents with the Federal Bureau Investigation this morning arrested Deputy Sheriff Kenneth Collins and the other three after they arrived in Pasadena, allegedly to provide “security” for the transport of nearly 45 pounds of cocaine and more than 13 pounds of methamphetamine. During the FBI’s undercover investigation, Collins allegedly agreed that he and his team would accompany the narcotics and take calculated steps to prevent legitimate law enforcement from intercepting the drugs – in exchange for cash payments as high as $250,000.

          Collins and two other men were charged in a federal criminal complaint filed last week. Collins and these two co-defendants allegedly provided security in November for the transport of what they thought was six kilograms of methamphetamine, as well as marijuana and counterfeit cigarettes.

          In justifying the high fees for his services, Collins allegedly told an undercover FBI agent “we’re cops” and “all of our transports make it through.”

          Those named in the complaint are:

• Deputy Sheriff Collins, 50, of Chino;

• David Easter, 51, of the Hyde Park District of Los Angeles; and

• Grant Valencia, 34, of Pomona.

          The fourth man arrested this morning – Maurice Desi Font, 56, of South Los Angeles – is expected to be charged by federal prosecutors in a second criminal complaint later today.

          The four defendants – who are charged with conspiracy to distribute controlled substances – are expected to make their first court appearances this afternoon in United States District Court in downtown Los Angeles.

          “Deputy Collins sold his badge to assist an individual he thought was a drug trafficker,” said United States Attorney Nicola T. Hanna. “The deputy allegedly used his status as a law enforcement officer as a guarantee when he promised safe travels for large quantities of illegal narcotics. This case is part of our long-standing and ongoing commitment to root out corruption, particularly when it involves sworn law enforcement officers.”

          “Deputy Collins used his position of trust and appropriated his authority to conduct lucrative criminal activity with others at the expense of Los Angeles County residents,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI and the Los Angeles County Sheriff’s Department address many crime areas jointly and share the goal of identifying and addressing internal problems when they arise. Sheriff McDonnell, who continues to reform the Los Angeles County Sheriff’s Department, cooperated fully with the investigation. While our investigation continues to determine whether others may have been involved, this should not be viewed as an indictment of the many dedicated servants at the Los Angeles County Sheriff's Department, some of whom brought this unlawful activity to our attention. Today’s arrest exemplifies the FBI’s commitment to weeding out corruption by public officials and restoring trust in our law enforcement professionals.”

          The affidavit in support of the complaint filed last week outlines a scheme in which Collins agreed to accept tens of thousands of dollars in cash in exchange for his “team” providing security during the transportation of large quantities of drugs from the Los Angeles area to Las Vegas, Nevada.

          On November 14, after Collins negotiated a $25,000 payment in exchange for providing security during the transport of contraband, Collins, Easter and Valencia participated in a caravan that traveled to Las Vegas.

          The trio was arrested this morning after allegedly agreeing to provide security for the transport of 20 kilograms of cocaine, six kilograms of methamphetamine and cash from Pasadena to Las Vegas, in exchange for $250,000. During negotiations, Collins said he would bring a larger team than used during the November transport, and those additional members would include other law enforcement officers. When the team arrived this morning at the pre-determined location, Font was the fourth member of the team.

          According to the affidavit, the FBI had been investigating Collins in relation to a scheme to accept cash payments in exchange for providing security for illegal marijuana grow facilities, as well as assisting in the distribution of controlled substances.

          An undercover FBI agent – who was posing as a family member of a wealthy investor looking to finance an illegal marijuana grow house – first met with Collins in August 2017. Collins offered to provide security for an illegal marijuana grow house and claimed to have three “teams” that already provided security for drug operations across San Bernardino and Los Angeles counties.

          During one of the August meetings, Collins displayed his Sheriff’s Department badge and lifted his shirt to reveal a firearm hidden in his waistband, which investigators believe was to emphasize that he was a law enforcement officer and his services therefore were more valuable to a drug organization. According to the affidavit, this meeting concluded with the undercover agent paying Collins $5,000 in “good faith” money for future services.

          Over the course of several meetings, Collins also offered to “fix problems” for the undercover agent, including by physically assaulting people, in exchange for cash. According to the affidavit, Collins claimed to have a very “professional” “team” comprised of “cops” who “travel...with guns.” He described how he and two others recently “handled” a situation for a “client” in Boston by setting a luxury truck on fire.

          During a meeting in September, the undercover agent told Collins that he was having an “issue” with a person in Northern California, and, in exchange for $2,000, Collins performed and delivered a “work-up” on that person, which included obtaining that person’s home address and driver’s license number, according to the affidavit. When Collins delivered the “work-up” in early October, the deputy sheriff allegedly said that he could provide additional services in relation to the Northern California person: “We can definitely, you know, kind of impact him a little bit.”

          As part of negotiations with the undercover agent, Collins also facilitated the sale of two pounds of marijuana to the agent, which Easter delivered. If this smaller “test run” sale of marijuana went well, Collins offered to facilitate the sale of up to $4 million worth of marijuana every month to the agent, according to the affidavit.

          In relation to the November transport of what Collins and his co-conspirators understood to be methamphetamine and marijuana, Collins provided a team of three – one of whom drove ahead of the transport vehicle to scout for law enforcement, one of whom accompanied an undercover agent driving the drug transport vehicle, and Collins in a follow car. According to the affidavit, Collins and his team received a total of $25,000 for this transport.

          Following the success of the November transport, Collins discussed with the primary undercover agent another, larger shipment. During a meeting on January 5, Collins agreed to bring Easter and Valencia – as well as other team members – to oversee the transport of 20 kilograms of cocaine, six kilograms of methamphetamine and cash. Although the undercover agent initially offered $75,000 as payment to Collins and his team, according to the affidavit, Collins pushed for more, saying that his “guys” are used to providing security for “bigger loads.” Collins ultimately agreed to provide his team’s services in exchange for $250,000.

          When they arrived at the agreed-upon location this morning where the drug transport was to begin, FBI agents arrested Collins and the other three men without incident.

          A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          If they were to be convicted of the drug trafficking conspiracy alleged in the criminal complaints, each defendant would face a sentence of up to life in prison.

          The case against Collins and his co-defendants is the result of an investigation by the Federal Bureau of Investigation.

          This case is being prosecuted by Assistant United States Attorney Lindsey Greer Dotson of the Public Corruption and Civil Rights Section.

          SANTA ANA, California – Three Southern California men have been indicted on federal mail fraud charges that allege they solicited homeowners on the verge of foreclosure with bogus promises of loan modifications with interest rates as low as 2 percent.

          The three men charged – Michael Paul Paquette, 34, of San Juan Capistrano; Allan Jessie Chance, 34, of Temecula; and Dennis Edward Lake, 59, of Costa Mesa –were arrested Thursday pursuant to an eight-count indictment returned by a federal grand jury on December 20.

          Paquette, Chance and Lake were arraigned on the indictment yesterday afternoon in United States District Court, where they all entered not guilty pleas and were ordered to stand trial on March 6. All three defendants were released on $15,000 bonds.

          According to the indictment, Paquette and Chance operated under aliases and told distressed homeowners that they worked for the Laguna Hills-based HAMP Services – which sounded similar to the Home Affordable Modification Program (HAMP), a legitimate government program which permanently reduced mortgage payments to affordable levels for qualifying buyers.

          Paquette and Chance told victims that they were approved for a government-affiliated loan modification, but they needed to make three “trial payments” before the loan would be modified, according to the indictment. They also falsely told the victims that their money would be held in a trust or escrow account. Chance falsely claimed that he had experience in getting home loans modified because he had worked at Bank of America.

          After victims began making “trial payments,” their files were referred to Lake, who ran a Newport Beach-based business called JD United. The indictment alleges that Lake and his employees told victims that they were working on loan modifications, furthering hope that the loan modifications promised by Paquette and Chance were coming and that there was no need to contact law enforcement about the “trial payments” that had been paid.

          When being pitched on the loan modification service, the victims were never told that $800 of the “trial payments” went to JD United, and that Paquette and Chance received commission payments taken directly from the accounts where the “trial payments” were deposited. The indictment further alleges that none of the victim money went to the lenders or a government agency for a loan modification.

          Investigators believe that over 500 victims nationwide paid at least $2.5 million dollars to the defendants and others in “trial payments.”

          The scheme allegedly ran from the beginning of 2014 through April 2015.  Paquette and others originally started soliciting victims claiming that they worked for Hope Services. After victims made many complaints about Hope Services, new victims were solicited using the name HAMP Services starting in late 2014. 

          Two other defendants involved in the scheme have pleaded guilty to federal charges and are pending sentencing.

          Paquette, Chance, and Lake are charged with conspiracy to commit mail fraud. Additionally, Paquette is charged in three substantive mail fraud counts, Chance in four mail fraud counts, and Lake in six mail fraud counts. If they were to be convicted, each defendant would face a statutory maximum sentence of 30 years in federal prison for each count.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          The case against Paquette, Chance and Lake is the result of an investigation by the Federal Bureau of Investigation and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The Federal Trade Commission provided substantial assistance.

          This case is being prosecuted by Assistant United States Attorney Vibhav Mittal of the Santa Ana Branch Office.

          LOS ANGELES – A former contract officer with the United States Department of Veterans Affairs was charged today with filing a false federal tax return and lying to VA investigators when he denied taking bribes from the operator of parking lots at the VA’s Los Angeles medical campuses.

          Ralph Tillman, 58, of Whittier, who was a VA contract officer until he resigned in 2014 after being confronted by special agents with the VA’s Office of Inspector General, was named in a criminal information filed today that charges him with making false statements and subscribing to a false tax return.

          In a plea agreement also filed today, Tillman agreed to plead guilty to the two felony offenses and admitted that he took well over $250,000 in bribes from the parking lot operator, Richard Scott, the owner of Westside Services LLC (WSS), which for years had a contract to operate parking lots across the VA Greater Los Angeles Healthcare System (VA GLAHS).

          Scott, 58, faces charges – including conspiracy and major fraud against the United States – contained in a 15-count indictment returned by a federal grand jury last month. Scott allegedly paid bribes to Tillman to conceal a scheme in which he allegedly failed to pay the VA more than $11 million generated by his operation of parking facilities at VA GLAHS. The vast majority of the activity authorized under the WSS contract took place at the West Los Angeles VA Medical Center near Westwood.

          As part of his duties at the VA, Tillman was responsible for managing contracts with “sharing partners,” such as WSS, which were required to perform services for the VA and share revenues with the agency. In his plea agreement, Tillman admitted that he approached Scott in late 2003 and solicited a bribe to pay for a family matter. One to two years later, Scott began making monthly cash payments to Tillman, with Scott personally delivering the bribes in sealed FedEx envelopes, according to the plea agreement.

          In return for the cash bribes, Tillman admitted in the plea agreement that he failed to scrutinize annual statements from WSS that Tillman knew contained inaccurately reported revenues and expenses. Tillman also admitted that he knew Scott was defrauding the VA out of millions of dollars, and that he entered into a contract extension with WSS in 2011 to continue the fraud and bribery scheme.

          During an interview with special agents with VA’s Office of Inspector General in September 2014, Tillman denied accepting money or anything of value from Scott. This conduct forms the basis of the false statements charge.

          Tillman specifically admitted that he took $286,250 from Scott from 2003 through last year. According to the plea agreement, Tillman continue to receive money from Scott after his retirement and these payments constituted “hush money.”

          Tillman failed to report the bribe payments on his federal tax returns, and he agreed to plead guilty to subscribing to a false tax return for the 2014 tax year.

          Tillman has agreed to appear in United States District for an arraignment on January 31.

          Once he pleads guilty to the two offenses charged in the criminal information, Tillman will face a statutory maximum sentence of eight years in federal prison.

          The VA contract with WSS was terminated in early 2017 after the VA settled a lawsuit that challenged the VA’s use of its West Los Angeles campus for any purposes not specifically related to the care and housing of veterans. Pursuant to an agreement, WSS was allowed to continue to operate the parking lots until this month.

          During an arraignment last month, Scott pleaded not guilty to the charges contained in the indictment. He is currently scheduled to go on trial before United States District Judge R. Gary Klausner on February 6.

          An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

          The cases against Tillman and Scott are the result of an ongoing investigation being conducted by the United States Department of Veterans Affairs, Office of Inspector General; the Federal Bureau of Investigation; and IRS Criminal Investigation.

          These cases are being handled by Assistant United States Attorney Ruth C. Pinkel of the Public Corruption and Civil Rights Section.

          SANTA ANA, California – A federal judge today sentenced the former owner of Pacific Hospital in Long Beach to 63 months in prison for overseeing a 15-year-long health care fraud scheme that involved more than $40 million in illegal kickbacks paid to doctors and other medical professionals in exchange for referring thousands of patients who received spinal surgeries.

          The scheme operated by Michael D. Drobot led to more than $500 million in fraudulent bills being submitted during last five years of the scheme – much of which was paid by the California worker’s compensation system.

          Drobot, 73, of Corona Del Mar, was sentencing this morning by United States District Judge Josephine L. Staton, who noted that Drobot “introduced greed into the doctor-patient relationship.”

          Drobot pleaded guilty in 2014 to charges of conspiracy and paying illegal kickbacks, admitting that he orchestrated a wide-ranging fraud scheme in which “[t]housands of patients received surgeries at Pacific Hospital not knowing that [Drobot] bribed their physician to perform their surgery at Pacific Hospital,” prosecutors wrote in a sentencing memorandum filed with the court. Drobot “was motivated by greed and ultimately profited millions of dollars through the scheme.”

          From at least 1997 through 2013, Drobot, who owned and/or operated Pacific Hospital during this time, ran a scheme in which he billed workers’ compensation insurers hundreds of millions of dollars for spinal surgeries performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.

          “The patients believed that they were receiving conflict-free medical advice when, in fact, [Drobot] illegally incentivized their physician to perform the surgery at Pacific Hospital,” prosecutors said in court documents.

          The kickbacks were financed largely by money generated from Drobot’s sale of medical devices implanted into state workers’ comp patients during spinal surgeries. Drobot set up a scheme that exploited a now-repealed California law known as the spinal “pass-through” legislation, which permitted hospitals to pass on to workers’ comp insurers the full cost of medical devices implanted in spinal surgery patients.

          Drobot generated the kickback money through his own medical hardware company – the Newport Beach-based International Implants (I2) – to sell hardware used in spinal surgeries performed at Pacific Hospital. I2 submitted bills to Drobot’s Hospital and tacked on an additional $250 per device knowing that the “pass-through” law required to state to pay the full amount of the invoices.

          “Through the operation of I2, [Drobot] generated substantial profits that he used to pay at least $40 million dollars in kickbacks,” prosecutors wrote in court papers. “According to the former CFO of Pacific Hospital, his income, bonuses, and other compensation at the hospital was in excess of $20,000,000.”

          As part of the health care fraud scheme, Drobot paid bribes to California State Senator Ronald Calderon in exchange for Calderon performing official acts to keep the spinal pass-through law on the books. Calderon is currently serving a 3½-year sentence in federal prison after admitting that he took bribes from Drobot and undercover FBI agents.

          Drobot typically paid a kickback of $15,000 per lumbar fusion surgery and $10,000 per cervical fusion surgery. Some of the patients lived as much as hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities.

          Drobot and his co-conspirators concealed the kickback payments by entering into bogus contracts with the doctors, chiropractors, and others who received kickbacks. In reality, the contracts merely provided a cover story for the kickback payments.

          In addition to the prison term, which Drobot will begin serving on June 4, Judge Staton imposed a $500,000 criminal fine and issued an order directing Drobot to forfeit $10 million to the government. As part of the forfeiture judgment, which Judge Staton signed on Wednesday, Drobot was ordered to liquidate assets that include real estate and a 1965 Aston Martin, a 1958 Porsche, and a 1971 Mercedes Benz.

          Judge Staton has scheduled a restitution hearing for May 11.

          In addition to Drobot, prosecutors have charged seven other defendants in relation to the kickback scheme. The seven additional defendants – which include Drobot’s son, Michael R. Drobot – have pleaded guilty and are scheduled to be sentenced by Judge Staton over the next two months.

          The ongoing investigation into the spinal surgery kickback scheme is being conducted by the Federal Bureau of Investigation; IRS Criminal Investigation; the California Department of Insurance; and the United States Postal Service, Office of Inspector General.

          The case against Drobot was being handled by Assistant United States Attorneys Joseph T. McNally and Scott D. Tenley of the Santa Ana Branch Office, and Ashwin Janakiram of the Major Frauds Section.

          LOS ANGELES – A Connecticut man was charged today in federal court with a felony computer hacking offense related to a phishing scheme that gave him illegal access to over 250 Apple iCloud accounts, many of which belonged to members of the entertainment industry in Los Angeles.

          George Garofano, 26, of Northford, Connecticut, was named today in a criminal information that accuses him of violating the Computer Fraud and Abuse Act.

          In a plea agreement that was also lodged today in United States District Court in Los Angeles, Garofano agreed to plead guilty to one count of unauthorized access to a protected computer to obtain information.

          While the case was filed by federal prosecutors in Los Angeles, the parties have agreed to transfer the case to the District of Connecticut for the entry of Garofano’s guilty plea and sentencing. Once he enters the guilty plea, Garofano will face a statutory maximum sentence of five years in federal prison.

          According to the plea agreement, from April 2013 through October 2014, Garofano engaged in a phishing scheme to obtain usernames and passwords for iCloud accounts. Garofano admitted that he sent e-mails to victims that appeared to be from security accounts of Apple and encouraged the victims to send him their usernames and passwords, or to enter them on a third-party website, where he would later retrieve them.

          Garofano used the usernames and passwords to illegally access his victims’ iCloud accounts, which allowed him to steal personal information, including sensitive and private photographs and videos, according to his plea agreement. In some instances, Garofano traded the usernames and passwords, as well as the materials he stole from the victims, with other individuals.

          The charge against Garofano stems from an investigation into the leaks of photographs of numerous female celebrities in September 2014 known as “Celebgate.”  Although many of Garofano’s victims were members of the entertainment industry in Los Angeles, many non-celebrities who live in Connecticut were also victimized. By illegally accessing the iCloud accounts, Garofano gained access to at least 250 accounts.

          The case against Garofano is the fourth case stemming from the Celebgate investigation. Chicago resident Emilio Herrera has pleaded guilty and is scheduled to be sentenced next month in United States District Court in Chicago after federal prosecutors in Los Angeles charged Herrera in a phishing scheme that gave him illegal access to more than 550 Apple iCloud and Gmail accounts. Another Illinois man was sentenced last year to federal prison. In the third case, a Pennsylvania man was sentenced in 2016 to 18 months in prison.

          The Celebgate investigation is being conducted by the Federal Bureau of Investigation.

          The case against Garofano was filed by Assistant United States Attorney Ryan White of the Cyber and Intellectual Property Crimes Section.

          LOS ANGELES – A La Crescenta man was sentenced today to nine years in federal prison after pleading guilty to federal fraud charges stemming from two schemes – one that bilked a string of payroll companies, and a second involving fraudulent bills sent to entities ranging from small businesses to local school districts that never received any services.

          David William Bell, 55, received the 108-month sentenced from United States District Judge Virginia A. Phillips, who additionally ordered Bell to pay just over $1 million in restitution to payroll companies, hundreds of small businesses and other entities.

          Bell was sentenced after he pleaded guilty in August to one count of wire fraud and one count of mail fraud.

          Bell ran a company called UST Development, Inc. – which operated in Ontario and Pomona under a string of names, including US Telecom – that he used to defraud a host of victims through two separate schemes. Bell used different titles while at UST, including president, director and CEO.

          In the first scheme, which ran from 2008 through 2010, Bell convinced a series of third-party payroll companies to fund UST’s payroll – and then failed to reimburse the companies for paying himself and his employees. In some cases, Bell sent checks to the payroll companies from accounts that did not have sufficient funds to cover the checks.

          Over the two-year period, Bell retained or attempted to retain companies that included Paychex, Ceridian and Automated Data Processing (ADP), according to a plea agreement filed in this case. Prosecutors said in court documents that, in a few instances, Bell repaid a fraction of what UST received from the payroll companies. “After filing for bankruptcy, and changing his company name, he started a new scheme,” according to a sentencing memorandum filed with the court.

          In the second scheme, which related to the mail fraud charge, Bell and his employees sent out mailers that fraudulently appeared to be bills to thousands of small businesses and other entities, most of which were located across Southern California. The mailers – which were sent through the end of 2011 and used words like “invoice,” “statement” and “past due” – told recipients that they owed UST $175 or $350 for “Telecom Maintenance/Service Call.” Many victims paid UST based on the fraudulent claims, when in reality they did not owe UST any money.

          Bell “is a fraudster, a trickster. He deceives people into giving him money or services. He has done this for a long time,” according to the sentencing memorandum.

          The case against Bell was investigated by the United States Postal Inspection Service and the Federal Bureau of Investigation.

          This case was prosecuted by Assistant United States Attorneys Sean D. Peterson and Abigail W. Evans of the Riverside Branch Office.