Central District of California

SANTA ANA, California – An Orange County physician who admitted that he illegally prescribed dangerous, addictive painkillers to “patients” he barely examined during meetings that were often held at Starbucks stores was sentenced late today to over 11 years in federal prison.

Alvin Mingczech Yee, 44, of Mission Viejo, was sentenced this afternoon to 135 months in prison by United States District Judge Andrew J. Guilford.

Yee pleaded guilty in April to seven counts of illegal distribution of a controlled substance by a practitioner. Yee specifically admitted that he prescribed drugs, such as oxycodone and alprazolam, “while intentionally acting outside the usual course of professional practice and without a legitimate medical purpose.”

According to court documents previously filed in this case, Yee met with numerous “patients,” including three undercover operatives, during evening meetings at Starbucks across Orange County, where he wrote prescriptions for drugs best known by brand names such as OxyContin, Vicodin and Xanax.

The investigation of Yee was conducted by the Drug Enforcement Administration, which received the assistance of the Orange Police Department, the Huntington Beach Police Department and the California Medical Board.

Release No. 13-122

LOS ANGELES – Kan-Di-Ki, LLC, doing business as Diagnostic Laboratories and Radiology (Diagnostic Labs), has agreed to pay $17.5 million to resolve allegations that it submitted false claims to Medicare and Medi-Cal (the State of California’s Medicaid program) that were tainted by a kickback scheme.

Diagnostic Labs, which is headquartered in Burbank, provides lab and x-ray services to patients at skilled nursing facilities (SNFs) in Southern California.  SNFs, commonly known as nursing homes, are a healthcare option for senior citizens who are in need of constant medical attention.

Diagnostic Labs allegedly charged SNFs below cost rates for Medicare Part A business, in exchange for the facilities’ provision of Medicare Part B and Medi-Cal business back to Diagnostic Labs.  This scheme is alleged to have violated the federal Anti-Kickback Act (42 U.S.C. § 1320a-7b(b)(2)(A)) and the federal and state False Claims Acts.

“When medical facility owners illegally offer discounts to customers to generate business, it results in inflated claims to government health care programs and increases costs for all taxpayers,” said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Department of Health and Human Services’ Office of Inspector General.  “This $17.5 million settlement demonstrates OIG’s ongoing commitment to safeguarding federal health care programs and taxpayer dollars against all types of fraudulent activities.”

The United States will receive $12.95 million of the settlement amount, and California will receive $4.55 million.

This settlement resolves a lawsuit filed under the qui tam, or “whistleblower,” provisions of the federal and state False Claims Acts, which allow private citizens with knowledge of fraud to bring civil actions on behalf of the federal and state governments and share in any recovery.  The case was filed in 2010 in federal court in Los Angeles by two former Diagnostic Labs employees, and is titled United States and State of California ex rel. Pasqua et al. v. Kan-Di-Ki, LLC, Civil Action No. CV10-0965 JST (RZx) (C.D. Cal.).  The two men who filed the lawsuit, Jon Pasqua and Jeff Hauser, will collectively receive $3,755,500 as their share of the federal recovery.  Their share of the state recovery has not yet been determined.

The United States Attorney’s Office for the Central District of California, the Justice Department’s Civil Division, and the California Attorney General’s Office handled the civil settlement.  This matter was investigated by the U.S. Department of Health and Human Services, Office of Inspector General.

Release No. 13-120

LOS ANGELES – A San Fernando Valley chiropractor, who was the second highest Medicare biller in California for chiropractic services, pled guilty yesterday to healthcare fraud in violation of 18 U.S.C. § 1347.

Between 2005 and 2012, Houshang Pavehzadeh aka “Danny Paveh” (41), owner of Sylmar Physician Medical Group, Inc. – a storefront chiropractic clinic located in a strip mall – defrauded Medicare by billing for patients he never treated.

The eleven count indictment alleges that Pavehzadeh submitted over $1.7 million in false and fraudulent claims to Medicare and was paid a little over $1 million on these claims.  As part of his guilty plea, Pavehzadeh admitted that, in an effort to conceal his fraud from Medicare auditors, he staged an early-morning car jacking outside his office and falsely reported to the Los Angeles Police Department that his patient files had been stolen.

“Those persons who seek to bilk the Medicare Program impact both our health care delivery system and the American consumer,” said United States Attorney André Birotte Jr. “Here, the defendant not only tried to bilk the system to the tune of more than $1.7 million, he also had the audacity to try and conceal his criminal activity by filing a bogus police report with the LAPD.” 

“Health care fraud in and of itself is a serious offense. Not content to stop there, however, Mr. Pavehzadeh sought to conceal that crime by committing yet another -- filing a false police report,” said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Office of Inspector General for the Department of Health of Human Services. “Those intent on breaking these laws should know that through the work of our special agents and auditors, OIG remains committed to seeking justice.”    

Pavehzadeh faces a maximum sentence of ten years imprisonment, a fine of $250,000 and three years of supervised release.  United States District Judge Manuel L. Real is scheduled to sentence defendant on January 14, 2014.

Release No. 13-119

Federal and State Grand Juries Indict 129 Defendants who Allegedly Assisted the Prison Gang or Were Involved in the Business of Numerous O.C. Street Gangs

SANTA ANA, California – Hundreds of law enforcement officials this morning fanned out across Southern California to conclude Operation “Smokin’ Aces,” an investigation conducted by the Santa Ana Gang Task Force that targeted the Orange County wing of the Mexican Mafia, which allegedly exercises control over Latino street gangs and is a powerful force in the local jail system.

A total of 129 defendants have been named in indictments issued by county and federal grand juries. Each of the defendants is linked to an Orange County street gang that claims allegiance to the Mexican Mafia, which is also called the Eme. Some of the federal defendants also are associates of the prison gang who allegedly worked directly with one of the two Mexican Mafia members who oversee the Orange County wing of the criminal enterprise.

During the course of the investigation, task force members made undercover purchases of 67 weapons (38 handguns and 29 rifles). They also seized 22 pounds of methamphetamine, 1.5 pounds of heroin and three pounds of cocaine.

Over the past three months, a federal grand jury in Orange County has returned 26 indictments that charge a total of 86 defendants. The indictments allege a wide range of criminal conduct, including murder and assault, extortion and “tax” collection, and the street-level distribution of narcotics.

As part of Smokin’ Aces, the Orange County District Attorney has also obtained indictments that charge a total of 43 defendants.

At the center of Smokin’ Aces is a federal racketeering indictment that focuses on the operations of the Mexican Mafia in Orange County, a criminal organization that for many years has been headed by Peter Ojeda, who allegedly ordered murders and assaults on behalf of the Mexican Mafia. (Ojeda is not formally charged in the indictment unsealed today, but he is currently pending trial in another racketeering case that was filed in 2011 in relation to Operation “Black Flag.”)

The racketeering indictment alleges a conspiracy to violate RICO, the federal Racketeer Influenced and Corrupt Organizations Act. The RICO indictment unsealed today charges 26 defendants associated with the Orange County branch of the Mexican Mafia, including those who implemented orders given by Eme leaders, gang members who collected and delivered “tax payments,” and women associated with the organization who serve the “crucial” function of moving messages from incarcerated Mexican Mafia operatives to their minions on the streets.

The Mexican Mafia is a powerful and violent prison gang that controls drug distribution and other illegal activities within the California penal system and on the streets of Southern California by organizing Latino street gang members for the purpose of establishing a larger network for the Mexican Mafia’s illegal activities. If a street gang does not comply with the demands of the Mexican Mafia, the prison gang will order the assault or murder the offending gang’s members, whether they are in custody or on the streets.

The majority of the federal indictments target gang members who allegedly trafficked in significant quantities of narcotics and firearms. Two of the indictments outline large drug trafficking conspiracies, one of which focuses on the Santa Ana-based Delhi gang. The gang members and their associates were paying “taxes” or “rent” to the Mexican Mafia, and this revenue stream fortified the control the Mexican Mafia has over members of gangs, whether they are on the street or in custody.

The first large drug distribution indictment charges 15 people and outlines the activities of an organization allegedly run by George “Monk” Martinez and John Terrones, who are alleged leaders of the Santa Ana-based Delhi gang and who are also named in the RICO indictment. The narcotics indictment alleges a conspiracy to distribute methamphetamine and heroin.

The second narcotics trafficking indictment charges a dozen individuals with participating in a methamphetamine distribution organization headed by Mario Franco, a member of a Santa Ana-based gang who also is named in the RICO indictment.

Operation Smoking Aces is the latest action by the Santa Ana Gang Task Force to target the Mexican Mafia and its control over Latino street gangs in Orange County. In July 2011, authorities announced Operation “Black Flag,” which led to charges against 99 defendants, including Peter Ojeda (see:  http://www.fbi.gov/losangeles/press-releases/2011/ninety-nine-members-and-associates-of-mexican-mafia-affiliated-gangs-charged-in-operation-black-flag).

Smokin’ Aces was an investigation conducted by the Santa Ana Gang Task Force, which is comprised of agents and officers with the Federal Bureau of Investigation; the Santa Ana Police Department; the Orange County Sheriff’s Department; the Bureau of Alcohol, Tobacco and Firearms and Explosives; and the California Department of Corrections and Rehabilitation – Special Service Unit. Special Agents with IRS – Criminal Investigation also participated in Operation Smoking Aces.

Multiple agencies assisted during today’s operation, including personnel with the United States Marshals Service; the Anaheim Police Department; the Newport Beach Police Department; the Fountain Valley Police Department; the Huntington Beach Police Department; the Brea Police Department; the Irvine Police Department; the Buena Park Police Department; and the Garden Grove Police Department.

Release No. 13-118

LOS ANGELES – A Santa Monica lawyer who was a partner at the Nixon Peabody law firm when he helped obstruct two separate investigations into an investment scheme that ultimately took $22 million from victims was sentenced this morning to 84 months in federal prison.

Attorney David Tamman, 46, was sentenced by United States District Judge Phillip S. Gutierrez, who also ordered the defendant to pay a $2,500 fine.

At today’s hearing, Judge Gutierrez said that, apart from the magnitude of the fraud Tamman helped cover up, the substantial sentence was warranted by the fact that the defendant lied to the Securities and Exchange Commission, and then compounded the matter by lying during his trial in 2012. Judge Gutierrez further indicated Tamman’s conduct was particularly troubling because he is a lawyer.

Following a bench trial last year, Tamman was found guilty of 10 counts that included obstruction of justice, altering records in a federal investigation, and being an accessory after the fact to the fraud scheme. The evidence presented at the trial showed that Tamman conspired with John Farahi, who operated the Ponzi scheme, to obstruct an SEC investigation into the fraud scheme. Tamman, who was suspended from practicing law earlier this year by the California State Bar, served as outside counsel for Farahi’s investment company, Newpoint Investment Services.

“Despite being a highly educated lawyer, defendant David Tamman has displayed a remarkable disrespect for the law and the legal system over the course of almost a decade,” prosecutors wrote in a sentencing brief that stated Tamman altered documents that caused the National Association of Securities Dealers (which is now known as FINRA) to close an investigation in 2004, thereby enabling Farahi to continue bilking victims for another five years.

Prosecutors said that in 2009, in response to an investigation being conducted by the Securities and Exchange Commission, Tamman and Farahi altered and created securities offering documents and promissory notes, as well as lied to the SEC and Tamman’s colleagues.

“But even after Farahi’s crimes were discovered, [Tamman] still did not stop obstructing justice,” prosecutors wrote in their sentencing memo. “In 2011, [Tamman] began obstructing the grand jury’s investigation of his own crimes,” which included lying to federal investigators, giving “false testimony” at his trial last November, and lying to a Probation Officer who was preparing a pre-sentence report after he was found guilty.

Farahi, a former investment fund manager and radio personality, was sentenced in March to 10 years in federal prison for running the $24+ million scheme (see http://www.justice.gov/usao/cac/Pressroom/2013/036.html). Farahi, who operated the Beverly Hills-based New Point Financial Services, Inc. and had a regular radio show on KIRN-AM, admitted bilking investors by falsely promising to purchase corporate bonds backed by the Troubled Asset Relief Program (TARP).

The case against Farahi and Tamman is the result of an investigation by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Bureau of Investigation. The SEC provided substantial assistance during the investigation.

“Today justice was served for Tamman’s attempted massive cover-up of John Farahi’s multi-million dollar Ponzi scheme in which Farahi lied to investors and claimed that he was investing in safe, TARP-backed corporate bonds,’ said Christy Romero, Special Inspector General for TARP (SIGTARP). “Contrary to his claims, Farahi used investors’ funds to bankroll his lavish lifestyle and high-risk trading which resulted in heavy losses for investors and TARP banks. As Farahi’s attorney, Tamman was Farahi’s enabler, falsifying and backdating business documents to hide the fraud, and as a result, Tamman will spend the next seven years in federal prison. If you exploit TARP or otherwise help others defraud taxpayers’ TARP investments, you’ll be held accountable by SIGTARP and our law enforcement partners and be forced to answer for your transgressions.”

The SEC filed a federal civil complaint alleging violations of the federal securities laws against Farahi and others in January 2010. The lawsuit alleged that Farahi and others conducted an unregistered offering fraud aimed at Iranian-Americans in the Los Angeles area (see: http://www.sec.gov/news/press/2010/2010-3.htm). The SEC subsequently obtained a permanent injunction, as well as orders freezing Farahi’s and New Point’s assets and appointing a receiver over New Point Financial Services.

Release No. 13-117

LOS ANGELES – A federal judge has ordered the owner of a home health agency that operated in the Westlake District of Los Angeles to pay nearly $15 million – or approximately three times the losses suffered by Medicare as a result of the company’s illegal practices.

United States District Judge Stephen V. Wilson previously issued a $14,902,832 default judgment against Hee Jung Mun, the former owner and operator of GreatCare Home Health Agency, who was commonly known as Angela Mun. The judgment resolves a “whistleblower” lawsuit filed by GreatCare’s receptionist.

The judgment against Mun and the conclusion of the whistleblower lawsuit was announced today when the U.S. Marshals service transferred to the United States Treasury $1,297,958 that was seized in March 2011 when federal agents executed a search warrant at GreatCare and executed seizure warrants on GreatCare’s and Mun’s bank accounts.

GreatCare paid kickbacks to physicians and others to induce them to refer patients to GreatCare in a $5 million Medicare fraud scheme.

In January 2012, Mun pleaded guilty to healthcare fraud charges for her central role in a scheme that paid kickbacks to physicians and marketers who referred patients to GreatCare (see: http://www.justice.gov/archive/usao/cac/Pressroom/2012/008.html). As part of the scheme, Medicare beneficiaries were also paid to sign up for GreatCare’s service, even though many of them were not eligible for home health services. GreatCare billed Medicare for services that were not rendered, were unnecessary, and/or were performed by unlicensed personnel. Mun is currently scheduled to be sentenced in February.

In June, one of the physicians who received kickbacks for referring patients to GreatCare and signed false certificates of medical necessity – Dr. Dong Shin – agreed to pay the United States $217,810 to resolve his civil liability for his role in the scheme.   The settlement amount was based upon Dr. Shin’s assessed ability to pay. Shin has paid $150,000 and has agreed to make monthly payments until the balance is paid off.

Also in June, Seonweon Kim, a physical therapist at GreatCare, agreed to pay the United States $205,000 to resolve his civil liability for his participation in the scheme. Kim pleaded guilty last year to healthcare fraud and admitted that he created false physical therapy notes that falsely indicated he had provided various services to patients. Kim is also scheduled to be sentenced early next year. Kim has already paid  $85,000 of the settlement amount; the remainder will be paid in monthly installments.

Another referring physician, Dr. Whan Sil Kim, pleaded guilty to receiving kickbacks and was sentenced last year to one year and one day in prison. In March, the Court entered a consent judgment against Dr. Kim pursuant to which she agreed to pay the United States $1,088,799 to resolve her liability in the civil action.

The judgment against Mun – which was filed by Judge Wilson on July 23 – and the settlements resolve the civil lawsuit United States ex rel. Kim v. GreatCare Home Health Agency, et al., a “whistleblower” lawsuit that alleged GreatCare billed Medicare for thousands of home health visits that were not rendered and/or were medically unnecessary. The lawsuit further alleged that GreatCare executed the scheme by recruiting Medicare beneficiaries and paying kickbacks to the beneficiaries and to doctors to induce referrals for home health services.

The Medicare fraud scheme came to light in March 2010 when GreatCare’s then-receptionist, Misha Kim, filed the qui tam lawsuit under the federal False Claims Act. United States District Judge Stephen V. Wilson unsealed the whistleblower lawsuit in October 2011. The United States did not intervene in the lawsuit, but actively participated in settlement negotiations and coordinated extensively with Relator’s counsel in bringing this case to completion.

The civil case was investigated by the Federal Bureau of Investigation and the Office of Inspector General of the U.S. Department of Health & Human Services.

Release No. 13-116

Grand Jury Indicts Fugitive for Possessing 6 Pipe Bombs Found in Palm Springs

RIVERSIDE, California – Federal authorities are seeking the public’s help in apprehending a man who was indicted this week on federal charges of illegally possessing pipe bombs that were strewn about residential neighborhoods in Palm Springs last year.

Edward Allen Costa, 48, was indicted yesterday on six counts of possessing unregistered destructive devices (pipe bombs) and one count of escape from custody. Costa, who pleaded guilty last year to being a felon in possession of a firearm, allegedly walked away from a “halfway house” in Rubidoux last month.

The indictment alleges that Costa illegally possessed six pipes bombs that were left in various locations in Palm Springs from May 8 through May 12 last year. Costa was initially charged in relation to the pipe bombs in a criminal complaint filed in June 2012, but those charges were dismissed to allow additional investigation. When that complaint was dismissed, Costa was charged in another case being a convicted felon in possession of a .357-magnum revolver, as well as 106 rounds of ammunition.

Costa pleaded guilty late last year to the felon-in-possession charge, and he was sentenced in January by United States District Judge Virginia A. Phillips to one year and one day in federal prison. By August, the Bureau of Prisons had assigned Costa to a residential re-entry center in Rubidoux. According to court documents, Costa signed out of the facility in order to go to a state-run employment office, but he never returned. Costa was initially charged with escape in a criminal complaint filed in federal court on August 16.

Special agents with the Federal Bureau of Investigation and the Bureau of Alcohol, Tobacco, Firearms and Explosives had continued to investigate the case involving the pipe bombs. That investigation concluded yesterday when a federal grand jury in Riverside returned the seven-count indictment against Costa.

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 charge of possession of an unregistered destructed device carries a statutory maximum penalty of 10 years in federal prison. The escape charge carries a statutory maximum penalty of five years in prison.

Costa is currently a fugitive being sought by federal authorities. Anyone with information about his whereabouts is encouraged to contact the FBI at this 24-hour number: 888-CANT HIDE (888-226-8443)

The case against Costa was investigated by the FBI and the ATF, which received substantial assistance from the Palm Springs Police Department and the Riverside County Sheriff’s Department. Also, the United States Marshals Service has provided substantial assistance in the effort to locate and arrest Costa.

Release No. 13-115

LOS ANGELES – Four members and associates of the Armenian Power gang, as well as four others, pleaded guilty late Monday to charges related to the activities of the Armenian Power criminal enterprise, including racketeering conspiracy, bank fraud, aggravated identity theft, drug-trafficking and illegal possession of firearms.

The eight who pleaded guilty yesterday are among 70 people who were charged two years ago in a 140-count indictment that outlined the criminal activities of the Armenian Power gang. The indictment accused 29 defendants, including four of those who pleaded guilty yesterday, of participation in the Armenian Power racketeering conspiracy. The RICO count in the indictment alleges a host of illegal activities, including sophisticated fraud schemes involving identity theft, bank fraud, credit card skimming, counterfeit checks and money laundering. The indictment also alleged a variety of violent crimes, such as extortion, kidnapping and firearms offenses.

The racketeering indictment alleges a bank fraud and identity theft scheme that victimized hundreds of customers of 99 Cents Only Stores across Southern California. Through the scheme, defendants caused more than $2 million in losses when they secretly installed sophisticated “skimming” devices to steal customer debit card account information at cash registers, and then used the skimmed information to create counterfeit debit cards that were used to steal money from victims’ bank accounts.

The eight defendants who pleaded guilty yesterday before United States District Judge Dean D. Pregerson are: Karo Yerkanyan, also known as “Guilty,” 32, of Tujunga, who pleaded guilty to racketeering conspiracy, bank fraud, aggravated identity theft, conspiracy to possess with the intent to distribute marijuana, and felon in possession of a firearm;

Arman Tangabekyan, aka “Spito and “Thick Neck,” 34, of Encino, who pleaded guilty to racketeering conspiracy, bank fraud and aggravated identity theft;

Artur Pembejian, aka “Cham,” 36, of Burbank, who pleaded guilty to racketeering conspiracy;

Raymond Tarverdyan, aka “Rye,” 35, of Montrose, who pleaded guilty to racketeering conspiracy and bank fraud;

Simon Antonyan, aka “Simo,” 38, of Hollywood, who pleaded guilty to aggravated identity theft;

Khachatur Arakelyan, aka “Khecho,” 39, of Glendale, who pleaded guilty to aggravated identity theft;

Vartenie Ananian, 29, of Tujunga, who pleaded guilty to bank fraud; and

Adam Davoodian, 32, of Glendale, who pleaded guilty to conspiracy to possess with intent to distribute marijuana.

The eight defendants who pleaded guilty yesterday played various roles in the activities of the Armenian Power gang, including participating in bank fraud, drug distribution, access device fraud, identity theft and illegal firearm possession.

Yerkanyan, a member of the Armenian Power conspiracy, participated in a bank fraud scheme that obtained the personal identifying information and account information of victims. He and his co-conspirators used the information to open fraudulent bank accounts, loans and lines of credit at HSBC Bank and Bank of America without the knowledge of the victims. Yerkanyan also participated, along with Davoodian, in a scheme to steal approximately 207 pounds of marijuana, worth approximately $450,000, from another drug distributor.

Tangabekyan, another member of the Armenian Power conspiracy, participated in a bank fraud scheme by obtaining personal information and account information for victims and then obtaining or transferring over $475,000 in funds.

Pembejian, a member of the Armenian Power conspiracy, abetted the illegal possession of a firearm by a leader of the Armenian Power gang, Mher Darbinyan.

Tarverdyan, an Armenian Power member – along with Antonyan, Arakelyan and Ananian – participated in the scheme to secretly install the skimming devices at the 99 Cents Only Stores.

According to court documents, the Armenian Power street gang formed in the East Hollywood district of Los Angeles in the 1980s. The gang’s membership consisted primarily of individuals of Armenian descent, as well as of other countries within the former Soviet bloc. The Armenian Power has been designated under California state law as a criminal street gang and is believed to have over 250 documented members, as well as hundreds of associates. According to court documents, Armenian Power members and associates regularly carry out violent criminal acts, including murders, attempted murders, kidnappings, robberies, extortions, and witness intimidation in order to enrich its members and associates and preserve and enhance the power of the criminal enterprise.

The defendants who pleaded guilty this week are scheduled to be sentenced by Judge Pregerson beginning on November 25. At sentencing, Yerkanyan faces a maximum penalty of 102 years in prison. Tangabekyan faces a maximum penalty of 52 years in prison. Tarverdyan faces a maximum penalty of 50 years in prison. Ananian faces a maximum penalty of 30 years in prison. Pembejian and Davoodian each face a maximum penalty of 20 years in prison. And Antonyan and Arakelyan each face a maximum penalty of two years in prison.

Fifty-one other defendants have previously pleaded guilty in the racketeering case.

This case is being prosecuted by the United States Attorney’s Office in Los Angeles and the Department of Justice’s Organized Crime and Gang Section.

The case was investigated by the Eurasian Organized Crime Task Force, which is comprised of the Federal Bureau of Investigation, the United States Secret Service, the Los Angeles Police Department, the Glendale Police Department, the Burbank Police Department, the Internal Revenue Service - Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

In addition to the racketeering indictment targeting Armenian Power, federal authorities in 2011 obtained a second indictment that was filed in Orange County. The case charged 22 defendants (two of whom were also charged in the racketeering indictment). Similar to some of the schemes alleged in the racketeering indictment, the Orange County case alleges that AP members, working in conjunction with members of African-American street gangs, engaged in a bank fraud scheme that targeted elderly victims and caused losses of at least $10 million. All of the defendants charged in that case have been convicted, with two of them already receiving sentences of 25 years in federal prison.

Release No. 13-114

LOS ANGELES – A Ventura County man who kidnapped his former girlfriend and drove her to Mexico while threatening to kill her and dump her body was sentenced this morning to 293 months in federal prison.

Rudy Soto, 26, of Oxnard, was sentenced by United States District Judge Otis D.
Wright II.

Soto was convicted following a week-long jury trial in July 2012 of conspiring to kidnap and kidnapping. The evidence at trial showed that after a heated exchange between Soto and the victim on September 14, 2010, Soto traveled from Oxnard to the victim’s residence near downtown Los Angeles. When the victim refused to accompany him, Soto carried and dragged the victim, who was screaming and kicking him, to a waiting truck that was being driven by co-defendant Erin Nicole Fisher, 22. Soto, using the weight of his body, pinned the victim to the front passenger seat while Fisher drove the vehicle to Mexico.

During this drive, Soto told the victim he was taking her to Mexico, where she was going to die. Soto also contacted the victim’s family and advised her brother-in-law that he was taking the victim to Tijuana and would dump her there. When the victim tried to fight or escape, Soto held a knife to her throat and threatened to kill her.
Eventually, the victim accepted that she was going to be killed, and gave up trying to fight Soto and escape. During her testimony, she told the jury: “I was tired, and I just resigned myself. And I said if he is going to kill me, let him kill me.”

At the Otay Mesa checkpoint at the United States-Mexico border, Mexican authorities stopped the pickup truck, which prompted the victim to scream for help. After telling Mexican authorities about her plight and being threatened with a knife, Mexican authorities detained Soto, Fisher and the victim. After the victim was examined by a
Mexican army physician, she was released. Agents with United States Customs and
Border Protection helped return her to the United States.

“To carry out his plan, [Spoto] physically restrained her, struck her, terrorized her, and threatened to kill her with a knife that he brandished,”prosecutors wrote in a sentencing memo. “In addition, he psychologically tortured the victim, playing on her emotions and the nature of their tumultuous relationship.”

Fisher is being prosecuted separately and is participating in a court-ordered diversionary program.

This case was investigated by the Federal Bureau of Investigation, which received substantial assistance from the U.S. Department of Justice’s Office of
International Affairs, U.S. Customs and Border Protection, the Los Angeles Police
Department, the FBI’s Legal Attache in Mexico City, and officials with the Justice
Department and the State Department assigned to the United States Embassy in
Mexico.

Mexican authorities provided considerable assistance during this investigation, including the Secretaría de Marina - Armada de México (the Mexican Navy); the
Secretaría de la Defensa Nacional (the Mexican Army); and the Procuraduría General de la República (the Mexican Attorney General).

Release No. 13-112

SANTA ANA, California – A Seattle man with a long history of forcing women into the sex trade was arraigned this morning on new charges that accuse him of sex trafficking and could send him to prison for at least another 15 years.

William Earl Flavors, who is sometimes known as “Andre,” 40, pleaded not guilty this morning after a federal grand jury indicted him on one count of sex trafficking by force, fraud or coercion, and two counts of transportation into prostitution. Flavors allegedly brought two victims from Long Beach to Las Vegas where they were forced or coerced to work as prostitutes.

The sex trafficking count carries a mandatory minimum of 15 years in federal prison.

Flavors was previously prosecuted by the United States Attorney’s Office in a case that brought him a 14-year prison sentence in May 2000. In that case, Flavors admitted transporting two teen-age girls from Washington and forcing them to work as prostitutes in Orange County.

Flavors completed his sentence in late 2011 and was on supervised release until October 2012, when he was arrested by Long Beach police after a woman reported being attacked by Flavors. Authorities believe that Flavors began pimping women soon after being released from prison. Flavors pleaded guilty in state court last year to pimping and was sentenced to four years in prison.

In a document filed for the hearing to revoke Flavors’ supervised release, prosecutors wrote: “Placing women into prostitution, in addition to physically assaulting and threatening the women, to ensure that the women stayed with defendant and worked for defendant, cannot be described as anything other than deplorable. The fact that defendant committed these acts while under this court’s supervision for previously beating and forcing minors into prostitution makes the nature and circumstances of defendant’s acts even more appalling.”

United States District Judge Cormac J. Carney earlier this year found Flavors to be in violation of his supervised release, based on his state court pimping conviction. Judge Carney revoked his supervised release and sentenced him to a four-year prison term.

Judge Carney said the “violation offends a woman’s right to liberty, dignity and self-determination. Women have a fundamental right to be free from bodily exploitation and not have their bodies exploited by Mr. Flavors and others as a source of profit.”

At his arraignment, a trial was scheduled for November 5 before United States District Judge Josephine S. Tucker.

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

The sex trafficking charge carries a potential life sentence and a mandatory minimum sentence of 15 years in federal prison. The two counts of transportation into prostitution each carry a statutory maximum penalty of 10 years in prison.

The new case against Flavors was investigated by the Federal Bureau of Investigation and the Long Beach Police Department.

Release No. 13-113

RIVERSIDE, California – A former officer with the San Bernardino Police Department was arrested today after being indicted yesterday on federal civil rights charges for allegedly forcing two prostitutes to perform sex acts while he was in uniform and/or carrying a gun.

Jose Jesus Perez, 46, of Menifee, was arrested without incident today in Denton, Texas, by officers with the Denton Police Department at the request of the Federal Bureau of Investigation. Perez is expected to make his initial court appearance tomorrow in United States District Court in Sherman, Texas.

“The charges in this case describe disgraceful abuses of police authority that simply cannot be tolerated in our society,” said United States Attorney André Birotte Jr.  “The San Bernardino Police Department understands that this type of conduct deserves sure and swift action, and I thank them for promptly referring the matter to us and working with us to obtain this indictment. We are committed to ensuring that the public is lawfully served by its peace officers.”

A federal grand jury in Riverside yesterday returned under seal a four-count indictment that named Perez. The indictment, which was unsealed following Perez’s arrest, alleges that he forcibly had sex with two women who told investigators that they engaged in the sex acts demanded by Perez only because they feared for their well-being because he was a police officer.

“Mr. Perez allegedly violated the civil rights of victims he vowed to protect, instead of gaining their trust and providing them with the basic respect all members of a community deserve,” said Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “By his alleged actions, Mr. Perez also violated the trust of his fellow officers and the community he swore to serve as a police officer in the city of San Bernardino. The FBI values its relationship with partnering local police and appreciates the support provided by the San Bernardino Police Department in this case.”

The indictment alleges that on April 25, 2011, Perez groped a woman and caused her to perform oral sex by using force against her. According to the indictment, the attack resulted in bodily injury to the victim, constituted aggravated sexual abuse, involved the use of a dangerous weapon (Perez’s service weapon), and resulted in the kidnapping of the victim.

The remaining three counts in the indictment charge Perez with unlawfully having sexual intercourse with a woman on three occasions in August and September 2011. According to a criminal complaint filed last month and also unsealed today, this victim “feared that if she refused Perez’s sexual advances he could and would make her life difficult.” She told investigators that she believed she would experience “problems” if she did not cooperate with Perez’s requests, according to the complaint.

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

Each of the four counts in the indictment carry a statutory maximum penalty of life in federal prison.

Perez became a police officer in 1997, when he was hired by the Los Angeles Police Department. Perez worked for the LAPD until 2008, when he went to work for the San Bernardino Police Department. Perez was released from employment by SBPD in December.

The investigation into Perez was conducted by the San Bernardino Police Department and the FBI.

Release No. 13-111

Las Vegas Sands Corp. to Avoid Criminal Prosecution after Cooperating and Agreeing to Continue to Strengthen Internal Compliance Programs

LOS ANGELES – The Las Vegas Sands Corp., which operates the Venetian-Palazzo hotel complex in Las Vegas, has agreed to return $47,400,300 to conclude an investigation into the casino’s failure to alert authorities that a high-stakes gambler, who was later linked to international drug trafficking, made numerous large and suspicious deposits with the casino.

Pursuant to an agreement signed by officials with Las Vegas Sands last night, the company will return the money to the United States within 10 days. In exchange, federal prosecutors have agreed not to prosecute the casino for failing to file Suspicious Activity Reports for casinos (SARCs), which are required when a customer is involved in a transaction the casino knows, suspects, or has reason to suspect “had no business or apparent lawful purpose or was not the sort in which the particular customer would normally be expected to engage, and the casino knew of no reasonable explanation for the transaction after examining the available facts.” The Bank Secrecy Act requires casinos with annual revenue of at least $1 million to file SARCs, which are then analyzed by appropriate government agencies to investigate possible violations of the law.

The United States Attorney’s Office agreed to conclude a criminal investigation and not seek an indictment after Las Vegas Sands agreed to return the money and after prosecutors determined that the casino completely cooperated with the investigation – which included making full disclosures related to its conduct and failure to comply with federal law, as well as conducting a thorough internal investigation – and that the casino has made extensive efforts to enhance its internal compliance program.

“What happens in Vegas no longer stays in Vegas,” said United States Attorney André Birotte Jr. “For the first time, a casino has faced the very real possibility of a federal criminal case for failing to properly report suspicious funds received from a gambler. This is also the first time a casino has agreed to return those funds to the government. All companies, especially casinos, are now on notice that America’s anti-money laundering laws apply to all people and every corporation, even if that company risks losing its most profitable customer.”

The money being paid the United States represents money sent to the Venetian casino by or on behalf of Zhenli Ye Gon, who at the end of 2006 or early 2007 was “the largest all-cash, up-front gambler the Venetian-Palazzo had ever had to that point,” according to the non-prosecution agreement. In March 2007, Ye Gon’s residence in Mexico City was searched by law enforcement authorities, who seized approximately $207 million in United States currency from the residence in what remains the largest-ever seizure of currency by law enforcement.

Ye Gon was indicted by federal officials in the District of Columbia on narcotics charges, but that case was dismissed in 2009. Ye Gon is currently pending extradition to Mexico, which has charged him with drug trafficking offenses.

According to the agreement, prosecutors believe that in October 2006, prior to Ye Gon being publicly linked to drug trafficking as a result of the search of his residence, officials at the Venetian-Palazzo, should have identified as “suspicious” Ye Gon’s financial transactions, which included the wire transfer of approximately $45 million and depositing of approximately $13 million in cashier’s checks between February 2005 and continuing through March 2007. Casino officials should have filed one or more SARCs against Ye Gon in addition to a SARC it filed in April 2007, prosecutors contend.

For its part, the Las Vegas Sands, while unaware of Ye Gon’s alleged criminal activities prior to March 2007, acknowledges that “in hindsight...the Venetian-Palazzo failed to fully appreciate the suspicious nature of the information or lack thereof pertaining to Ye Gon in the context of the Venetian’s evaluation of whether to file additional SARCs against him earlier and in retrospect should have filed SARCs earlier, and should have filed a more complete SARC when it did file one.”

During his patronage at the Venetian, Ye Gon wire transferred money to the Las Vegas Sands Corp. and subsidiary companies from two different banks and seven different Mexican money exchange houses known as casas de cambios. The wire transfer originators included several companies and individuals the Las Vegas Sands Corp. could not link to Ye Gon. Ye Gon also transferred some funds from Mexican casas de cambios to a Las Vegas Sands Corp. subsidiary in Hong Kong for transfer to Las Vegas. In many instances, Ye Gon’s wire transfers lacked sufficient information to identify him as the beneficiary. The Las Vegas Sands also allowed Ye Gon to transfer funds several times to an account that did not identify its association with the Venetian, specifically an aviation account used to pay pilots operating the company’s aircraft. During its investigation, the government developed evidence that “when casino personnel asked Ye Gon to wire the money in larger lump sums, as opposed to breaking it up incrementally, and use consistent listed beneficiaries, Ye Gon stated that he preferred to wire the money incrementally because he did not want the government to know about these transfers.”

Anthony Williams, the Special Agent in Charge of the Drug Enforcement Administration in Los Angeles, stated: “Millions of dollars earned from illegal drug trafficking were transferred through casino accounts in a complex scheme designed to thwart law enforcement detection. The DEA will continue to work with our partners to pursue all means to deny criminals the profits they work so hard to conceal.”

Federal prosecutors also believe that compliance personnel at the Venetian-Palazzo: failed to adequately investigate Ye Gon, his respective companies, or his source of funds;

failed to conduct an appropriate deposit-pattern analysis of incoming front money deposits and marker payments by Ye Gon;

failed to understand and appreciate the layered manner in which Ye Gon wire transferred his funds;

failed to be appropriately suspicious of Ye Gon’s use of multiple third-party fund sources and multiple casas de cambios;

failed to be appropriately suspicious of the Venetian’s inability to link Ye Gon to nearly all of the companies he professed to own and/or control which originated wire transfers to the Venetian;

failed to be appropriately suspicious of Ye Gon making multiple wire transfers on the same day or consecutive days;

failed to be appropriately suspicious of Ye Gon originating payments in Mexico and routing them through the Venetian’s Hong Kong subsidiaries for final credit at the Venetian casino in Las Vegas; and

failed to conduct appropriate diligence into the reason for requests to use a non-casino-name account.

Release No. 13-110

LOS ANGELES – A Koreatown man was sentenced this afternoon to 30 months in federal prison for smuggling nearly 40,000 counterfeit erectile dysfunction pills that were discovered in a golf bag and other luggage when he entered the United States at Los Angeles International Airport.

Kil Jun Lee, 73, who resides in the Koreatown district of Los Angeles, was sentenced by United States District Judge Dean D. Pregerson, who said the sentence, in part, was due to the threat to public health posed by the counterfeit pills.

A federal jury in May found Lee guilty of three counts of smuggling and three counts of trafficking in counterfeit goods for bringing the phony pills into the United States in February 2012. The retail value of the pills would have been well over $750,000 had they been genuine products.

The counterfeit products – purporting to be Viagra, Cialis and Levitra – were discovered by customs officials at LAX when Lee returned from a trip to China that included a stop in his native Korea. Most of the pills were hidden in a golf bag.

Analysis of the pills showed that they were inconsistent with the genuine products. While many of the pills contained the active ingredient for the brand name product, they typically contained the wrong amount (up to 150 percent of the claimed dose) or contained the active ingredient for a competitor’s product (so the purported Viagra would contain the active ingredient found in Cialis). Some of the counterfeit pills had no active ingredient at all.

When investigators searched Lee’s residence, they found a small number of counterfeit pills, as well as numerous counterfeit labels that were hidden under a rug.

“The danger of this conduct is substantial,” prosecutors wrote in a sentencing memorandum filed with the court. “Indeed, while the government is not aware of any inherently harmful chemicals contained in the pills, the prospect of a user ingesting pills that contain more active ingredient than is listed on the pill, or a different active ingredient than is supposed to be in that pill, raises serious medical concerns.”

The investigation in this case was conducted by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and U.S. Customs and Border Protection.

Release No. 13-109

LOS ANGELES – A Los Angeles man who recruited homeless people from the “Skid Row” section of Los Angeles as part of a widespread scheme to defraud Medicare and Medi-Cal by providing unnecessary health services was sentenced this morning to 18 months in federal prison.

Estill Mitts, 68, who lives near the Miracle Mile district of Los Angeles, was sentenced by United States District Judge George H. King. In addition to the prison term, Judge King ordered Mitts to pay more than $9.8 million in restitution.

In sentencing Mitts, Judge King stated that Mitts’ conduct was “fueled by greed to enrich himself,” and “breeds contempt for, leads to a lack of confidence in, and threatens the stability of” the Medicare program.

Mitts pleaded guilty in 2008 to conspiracy to commit health care fraud, money laundering and tax evasion. Mitts’ sentencing was delayed a number of times as he provided assistance to the government’s investigation that has led to 11 defendants being charged and convicted.

The Skid Row “capping” – or illegal referral – scheme was discovered in the fall of 2006 after local authorities observed some patients discharged from a local hospital being “dumped” on Skid Row. The patients subsequently reported that they had been paid to go to the hospital.

Mitts “was a ring-leader in a significant, long-term, serious crime that used the homeless as fodder for exploiting the Medicare and Medi-Cal programs,” prosecutors wrote in a sentencing memo filed with the court. Mitts admitted that he received more than $1 million in kickbacks from three hospitals that took in the illegally referred patients from Skid Row.

From 2004 until October 2007, Mitts operated the Assessment Center, a facility on East Seventh Street in downtown Los Angeles that was also known as 7th Street Christian Day Center. “Mitts employed individuals he called ‘stringers’ to recruit homeless people with promises of small payments,” according to the sentencing memorandum. “The Assessment Center was not a medical clinic, but a site that defendant used for the purpose of recruiting homeless Medicare and Medi-Cal beneficiaries for referral to three hospitals – City of Angels Hospital, Los Angeles Metropolitan Medical Center, and Tustin Hospital and Medical Center. Defendant and others working for him would recruit homeless beneficiaries for in-patient hospital admissions whether or not such hospitalizations were medically necessary.”

In relation to the tax evasion count, Mitts admits in the plea agreement that he failed to report more than $479,000 in income in 2005 and more than $620,000 in income in 2006. By failing to report this income, the Internal Revenue Service suffered losses of $349,857.

Mitts is the latest in a series of defendant to be sentenced in relation to the Skid Row investigation. For example, Robert Bourseau, one of the owners of City of Angels, was sentenced to 37 months in prison, and Dante Nicholson, the director of marketing at City of Angels, who also cooperated with the government in its investigation, was sentenced to one year in prison. Late last year, a doctor who admitted homeless patients to the Tustin Hospital and Medical Center after they had been driven from Skid Row was sentenced to one year in federal prison.

These cases are part of an investigation conducted by the U.S. Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; IRS - Criminal Investigation; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; and the Health and Law Enforcement Team (HALT), a multi-agency task force which is operated by the Los Angeles County Health Department.

Anyone with information that could assist in the investigation of health care fraud schemes is encouraged to contact investigators with the Department of Health and Human Services by calling 1-800-HHS-TIPS, or emailing HHSTips@oig.hhs.gov.

Release No. 13-107

LOS ANGELES – A German national who used to work for United Airlines pleaded guilty this morning to making false bomb threats against flights operated by the international air carrier.

Patrick Cau, who is also known as Patrick Kaiser, 40, who recently relocated to Dallas from Los Angeles, pleaded guilty today to one count of false information and hoaxes.

Cau pleaded guilty before United States District Judge Otis D. Wright II, who is scheduled to sentence the defendant on November 18. At sentencing, Cau faces a statutory maximum penalty of five years in federal prison.

While Cau pleaded guilty to one felony count, in a plea agreement filed in federal court earlier this month, he admitted making eight bomb threats to United from October 2012 through January 2013.

In the first phone call, on October 4, 2012, Cau used a pay phone near his home to call an internal United crew-scheduling number and state that a United flight from London to Los Angeles would be bombed later that day. The subsequent calls were made from pay phones in Los Angeles, New York City, Las Vegas and Seattle to 911, with all of the calls stating that a specific United flight would be bombed.

As a result of the hoaxes, multiple law enforcement agencies were forced to respond to the bomb threats made by Cau. These law enforcement responses included evacuating people from the targeted airplanes; towing the aircraft to a safe area; searching and re-screening all ticketed passengers, baggage and cargo; and searching the aircraft by human, canine and other detection methods.         

As a direct result of Cau’s threats, United experienced substantial disruption to its business operations and services, including cancellation of and delays to flights, transfer of aircraft, and significant inconveniences to United passengers. As a result of his actions, Cau has agreed to pay $267,912 in restitution to United. Cau is also expected to be ordered at sentencing to pay an as-yet-undetermined amount of restitution to law enforcement agencies that responded to the bomb threats.

The case against Cau was investigated by the Federal Bureau of Investigation; U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and the Los Angeles Airport Police.

Release No. 13-108

Rings Allegedly Smuggled Drugs into U.S. in Hidden Compartments

LOS ANGELES -- Thirty alleged members of two drug trafficking organizations that operated across Southern California have been indicted on federal narcotics charges following an investigation into the importation of cocaine and methamphetamine from Mexico into the United States.
The indictment, which was returned by a federal grand jury on August 8, was unsealed this morning after law enforcement authorities arrested seven defendants named in the indictment.

The indictment is the result of a 20-month investigation involving federal wiretaps and conducted under the auspices of the Southern California Drug Task Force/High Intensity Drug Trafficking Area (HIDTA) Task Force. The investigation, which was led by the Federal Bureau of Investigation and the Drug Enforcement Administration, was called Operation “Mountain Top” and charges many of the defendants in conspiracies to distribute narcotics and to import drugs from Mexico.

During the course of Operation Mountain Top, authorities seized approximately 92 pounds of methamphetamine and 50 kilograms of cocaine.

The indictment names 30 defendants, some of whom have not been completely identified (hence, some are known as “FNU” or “LNU” – First/Last Name Unknown). The defendants are:

Nicolas Santana Zuniga, 43, of Mexico, who allegedly operated one of the drug transportation rings;

Mayra Zarate Ruelas, 37, of Mexico, who allegedly assisted Zuniga;

Raul Cervera, of Mexico, who allegedly operated the second drug transportation network;

Marco Antonio Quiroga, 51, of Mexico, who allegedly assisted Cervera by storing narcotics smuggled from Mexico;

Karine Elizabeth Barajas, 35, of Loma Linda, who allegedly smuggled narcotics into the United States for Zuniga’s network and who was arrested this morning;

Luis Mendiaz Deniz, 57, of Mira Loma, who allegedly assisted Zuniga by receiving and delivering narcotics smuggled from Mexico and who was arrested this morning;

David Lopez Hernandez, 28, of Loma Linda, who allegedly transported smuggled narcotics for Zuniga’s network and who was arrested this morning;

FNU LNU, known as “Pajaro,” a Mexico-based drug trafficker who allegedly used both Zuniga’s and Cervera’s networks to smuggle narcotics into the U.S.;

Hipolito Gutierrez Nunez, 45, of Mexico, a Mexico-based drug trafficker who allegedly used Zuniga’s network to smuggle narcotics into the U.S.;

FNU LNU, aka “Benito,” of Mexico, a Mexico-based drug trafficker who allegedly used Zuniga’s network to smuggle narcotics into the U.S.;

Elias LNU, of Mexico, a Mexico-based drug trafficker who allegedly used Cervera’s network to smuggle narcotics into the U.S.;

FNU LNU, known as “Polo,” of Mexico, a Mexico-based drug trafficker who allegedly used Cervera’s network to smuggle narcotics into the U.S.;

Joel LNU, of Mexico, a Mexico-based drug trafficker who allegedly used Cervera’s network to smuggle narcotics into the U.S.;

Idania LNU, aka “Guera,” of Mexico, a Mexico-based drug trafficker who allegedly used Zuniga’s network to smuggle narcotics into the U.S.;

Joel Olivares, of Mexico, a Mexico-based drug trafficker who allegedly used Zuniga’s network to smuggle narcotics into the U.S.;

Octavio LNU, of Mexico, who allegedly assisted Cervera by coordinating the transportation of smuggled drugs to transporters;

David LNU, of Mexico, who allegedly assisted Cervera by coordinating the transportation of smuggled drugs to transporters;

Jose Cruz Gonzalez-Cordova, 55, who allegedly transported smuggled drugs for Zuniga’s network;

Rosa Venia Felix, 44, who allegedly transported smuggled drugs for Zuniga’s network;

Marcelino Meza Zamora, 56, of Los Angeles, who allegedly transported smuggled drugs for Zuniga’s network;

Julio Cesar Velazquez, 33, who allegedly transported smuggled drugs for Zuniga’s network;

Ladis Anthony Martinez, 25, of San Bernardino, who allegedly transported smuggled drugs for Zuniga’s network and who was arrested this morning;

Carlos Alfonso Marroquin-Flores, 35, of Mexico, who allegedly transported smuggled drugs for Cervera’s network and who was arrested this morning as he crossed the international border into the United States;

Jose Ricardo Garcia Vazquez, 26, of Mexico, who allegedly transported smuggled drugs for Cervera’s organization;

Mayra Alejandra Sandoval, 23, of Long Beach, who allegedly assisted a drug transporter working for Zuniga’s network and who was arrested this morning;

Cristian Ruben Ayala, 26, of Mexico, who allegedly transported smuggled drugs for Cervera’s network;

Edgar Antonio Luna Hernandez, 32, who allegedly transported smuggled drugs for Cervera’s network;

Victor Manuel Munoz, 30, of Hawaiian Gardens, who allegedly assisted Hernandez by storing smuggled drugs in his residence and who was arrested this morning;

Scott Daniel Mercado, 21, of San Diego, who allegedly transported smuggled drugs for Cervera’s network; and

Bonny Santos Portillo, 25, who is believed to be a resident of San Diego, who allegedly transported smuggled drugs for Cervera’s network.

Those arrested this morning will be arraigned on the indictment this afternoon in United States District Court in Los Angeles (although Marroquin-Flores will make his first court appearance this afternoon in San Diego).
If they are convicted of the charges in the indictment, each defendant would face a statutory maximum penalty of life in federal prison.

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

Operation Mountain Top is the result of an investigation by the FBI, the DEA, and the Torrance Police Department. A number of agencies affiliated with HIDTA assisted in today’s law enforcement operations, including U.S. Immigration and Custom

Release No. 13-106

LOS ANGELES -- A federal drug task force today arrested 18 people linked to three drug trafficking organizations that smuggled narcotics from Mexico in PVC pipes typically hidden in the axles of commercial trucks that ended up at truck yards located in South Los Angeles and southern Los Angeles County.

The 18 defendants arrested this morning are among 57 people charged in two indictments and one criminal complaint filed in United States District Court. Authorities continue to search for the remaining defendants.  During the course of an investigation that started in early 2011, authorities seized more than 2,400 pounds of methamphetamine, 30 kilograms of cocaine, 16 kilograms of white heroin, 20 kilograms of brown heroin, and more than $1.2 million in suspected narcotics proceeds, and recovered 18 firearms.  This morning’s enforcement resulted in the seizure of an additional 7 pounds of methamphetamine, 3 firearms, four vehicles, approximately $50,000 in cash and an operational methamphetamine laboratory. 

“As the means and methods that drug trafficking organizations use evolve, so will law enforcement evolve to meet the challenge,” said United States Attorney André Birotte Jr.  “The allegations here describe a wide-ranging conspiracy to exploit aspects of our nation’s trucking and transportation system and funnel enormous amounts of dangerous narcotics into this country.  The arrests we announce today dismantle that conspiracy and disrupt this threat to public safety.” 

The investigations that led to this morning’s takedown were conducted by the Los Angeles High Intensity Drug Trafficking Area (HIDTA)/Southern California Drug Task Force, a federally funded group comprised of federal and local law enforcement agencies to include the Drug Enforcement Administration (DEA), U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and Internal Revenue Service -Criminal Investigation and in coordination with the Azusa Police Department, South Gate Police Department, Los Angeles County Sheriff’s Department and Whittier Police Department. 

“Through the cooperation of federal, state and local law enforcement, thousands of pounds of methamphetamine, cocaine and heroin have been seized, with a combined street value in the tens of millions of dollars,” said Anthony Williams, DEA Special Agent in Charge. “These drugs were en-route to our communities and neighborhoods.  Today’s arrests have taken those responsible for distributing these dangerous drugs off our streets to face justice in federal court.”

“The criminal networks targeted in this case exploited one of the nation’s busiest transportation corridors to mask the movement of staggering amounts of contraband - the volume of methamphetamine being smuggled by these organizations is virtually unprecedented,” said Claude Arnold, special agent in charge for HSI Los Angeles. “Today, as a result of our collective enforcement efforts, we’ve literally knocked the wheels off of a highly sophisticated drug distribution scheme that had ties to at least five states.”   

The investigation initially looked into a drug trafficking organization run by the Mexico-based Miguel Angel Molinero-Castro. The Molinero organization used truck yards in South Gate and Wilmington to receive large quantities of controlled substances hidden in PVC pipes that were further concealed in tractor trailer axles.

According to the criminal complaint that charged Molinero and 37 others related his alleged drug trafficking ring, Molinero arranged for narcotics to be transported via truck from Mexico to Nogales, Arizona, where co-conspirators would take control of the shipments. The narcotics were then transported either to other distributors in Arizona or to the Los Angeles area.

The criminal complaint charges 38 defendants with two counts: conspiracy to distribute controlled substances and possession with intent to distribute controlled substances.

A related indictment charges eight defendants involved in another drug distribution ring that also allegedly smuggled narcotics from Mexico into the United States inside PVC pipes hidden inside truck axles.

An indictment in a third case charges eight defendants in a conspiracy to distribute heroin, cocaine and methamphetamine. This case concerns narcotics smuggled from Mexico in PVC pipes and distributed from a truck yard in South Gate.

Additional agencies that provided substantial assistance during this investigation and this morning’s takedown include. U.S. Customs and Border Protection, Los Angeles-SRT; the Azusa Police Department; DEA Offices in Bakersfield and Ventura, the Ventura County Combined Agency Team (VCAT), the California Highway Patrol; the Los Angeles Sheriff’s Department, California Multi-Jurisdictional Methamphetamine Enforcement Team; LA IMPACT, and the Anaheim Police Department.

Release No. 13-105

LOS ANGELES – A West Hollywood doctor pleaded guilty this afternoon to a federal drug trafficking charge for writing hundreds of prescriptions for various controlled substances after a federal order revoked his authority to prescribe drugs.

James William Eisenberg, 72, who resides in the Venice district of Los Angeles, pleaded guilty to one count distribution of hydrocodone, a drug best known by the brand names Vicodin and Norco.                       

Eisenberg wrote the prescriptions while he worked out of several medical offices in West Hollywood, including a Santa Monica Boulevard storefront he called Pacific Support Services. Eisenberg also issued “medical marijuana” recommendations from these West Hollywood locations.  He has been prohibited from issuing such recommendations and from practicing medicine at medical marijuana clinics as a condition of his release on bail.

In order to legally prescribe controlled substances such as hydrocodone, physicians must be registered with the United States Attorney General and have a valid DEA registration number. On December 14, 2011, a DEA administrative judge determined that Eisenberg acted as a “drug dealer” and suspended his registration number. The DEA issued an order permanently revoking Eisenberg’s registration on July 24, 2012.

The orders issued by the administrative judge were based on findings that Eisenberg, who at the time was working out of a “medical marijuana” club in Arizona, “lacked a legitimate medical purpose and acted outside of the usual course of professional practice” when he wrote prescriptions for oxycodone (the generic form of a drug often best known as the brand-name OxyContin) and Xanax in exchange for $150 cash payments. The DEA judge also found that Eisenberg wrote “medical marijuana” recommendations to undercover officers posing as patients, and that Eisenberg prescribed OxyContin to one of the undercover agents “before [Eisenberg] had even performed a physical examination.”

DEA investigators later learned that Eisenberg continued to prescribe controlled substances, including hydrocodone, in violation of the DEA’s orders. A review of a California Department of Justice database that can be used to track prescriptions showed that, following the suspension of Eisenberg’s registration number, patients filled more than 1,700 of his prescriptions for controlled substances, including more than 1,200 prescriptions for hydrocodone. As charged in the indictment, Eisenberg wrote one of those prescriptions on December 27, 2011, less than two weeks after his registration number was suspended.

DEA investigators executed a federal search warrant on one of Eisenberg’s West Hollywood offices on February 19, 2013. The affidavit in support of the search warrant outlines evidence, including surveillance and undercover operations, that Eisenberg continued to write prescriptions for controlled substances in violation of the DEA’s revocation order. The evidence included an operation in which an undercover agent, posing as a patient, obtained a prescription from Eisenberg for hydrocodone and alprazolam (the generic form of a drug best known as Xanax).

As a result of today’s guilty plea, Eisenberg faces a statutory maximum sentence of 10 years in federal prison when he is sentenced by United States District Judge Michael W. Fitzgerald on December 9, 2013.

The investigation into Eisenberg was conducted by the Drug Enforcement Administration.

Release No. 13-104

LOS ANGELES – A Denver man who billed himself as “The Credit Line Millionaire” has pleaded not guilty to federal fraud charges that accuse him of conspiring to obtain lines of credit worth hundreds of thousands of dollars through a host of misrepresentations and falsified documents.

Christopher Robert Wise, 34, was arraigned late yesterday in United States District Court after being arrested by Secret Service agents Wednesday night. Wise, who was taken into custody at Los Angeles International Airport after arriving on a flight from Puerto Vallarta, Mexico, was arrested pursuant to a four-count indictment that alleges he conspired to fraudulently obtain lines of credit from Wells Fargo Bank, Union Bank and City National Bank. One of these loan applications was approved, which gave Wise a line of credit worth $175,000.

At Wise’s arraignment yesterday, a trial date was scheduled for October 1. A United States magistrate judge set Wise’s bond at $150,000, but he remains in custody at this time.

The indictment alleges that Wise maintained a significant online presence, which includes his websites www.creditlinemillionaire.com and http://chriswise.com/. Wise billed himself as a credit guru who could help clients obtain loans for their small- and medium-size businesses. Wise referred his clients to several co-conspirators who controlled Inland Empire companies and who promised to help acquire financing.

Wise also attempted to obtain business lines of credit for himself through loan applications submitted to the victim banks on behalf of one of his companies. Wise used a co-conspirator as a “credit partner” to pose as a “personal guarantor” for the loans – in essence, using a “straw borrower” to apply for loans in exchange for giving the credit partner a percentage of the loan proceeds.

According to the indictment, Wise spoke at a seminar where he told those in attendance that he was in the process of obtaining a $1 million line of credit – even though he had bad credit and his business did not qualify for a loan – by leveraging other people’s credit.

That indictment, which was unsealed after Wise’s arrest, charges him with one count of bank fraud conspiracy and three counts of making false statements to a financial institution. The four charges in the indictment naming Wise 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.

Previously in this investigation, five co-conspirators have pleaded guilty and are pending sentencing.

This case is the result of an investigation by the United States Secret Service.

Release No. 13-103

LOS ANGELES – A member of the LulzSec hacking group was sentenced this morning to one year and one day in federal prison for participating in an extensive computer attack that compromised the computer systems of Sony Pictures Entertainment and resulted in personal information of more than 138,000 people being posted on the Internet.

Raynaldo Rivera, known by the online moniker “neuron,” of Chandler, Arizona, 21, was sentenced by United States District Judge John A. Kronstadt. In addition to the prison sentence, Judge Kronstadt ordered Rivera to serve 13 months of home detention, to perform 1,000 hours of community service and to pay $605, 663 in restitution.

Rivera pleaded guilty last October to conspiring to cause damage to a protected computer after participating in the attack on Sony Pictures in 2011.

Lulzsec’s goal in the attacks on Sony Pictures and other corporate and government entities, according to a court document, was to see the “raw, uninterrupted, chaotic thrill of entertainment and anarchy” and to provide stolen personal information “so that equally evil people can entertain us with what they do with it.”

Another member of LulzSec, Cody Andrew Kretsinger, who used the online moniker “recursion,” was sentenced in April to one year and one day in federal prison. In addition to the prison term, Judge Kronstadt ordered Kretsinger to serve one year of home detention following the completion of his prison sentence, to perform 1,000 hours of community service, and to pay $605,663 in restitution.

Rivera and Kretsinger studied together at the University of Advancing Technology in Tempe, Arizona. Kretsinger first joined LulzSec, and then he recruited Rivera to join the group, prosecutors said.

Rivera, Kretsinger and others involved in the intrusion obtained confidential information from Sony Pictures’ computer systems by using an “SQL injection” attack against Sony Pictures’ website. The attackers distributed the stolen data on the Internet, information that included names, addresses, phone numbers and e-mail addresses for tens of thousands of Sony customers.

LulzSec is known for its affiliation with “Anonymous,” which is a loose collective of computer hackers and others around the world who conduct cyber attacks and disseminate confidential information stolen from victims’ computers. In 2011, LulzSec engaged in “a two-month rampage of cyber attacks against various corporate and government entities in the United States and the United Kingdom,” according to a sentence memorandum filed by prosecutors.

This investigation into the attack on Sony Pictures’ computer systems was conducted by the Electronic Crimes Task Force (ECTF) in Los Angeles.  The ECTF is comprised of agents and officers from the FBI, the United States Secret Service, the Los Angeles Police Department, the Los Angeles County Sheriff’s Department, the United States Attorney’s Office, the Los Angeles County District Attorney’s Office and the California Highway Patrol.

Release No. 13-102

SANTA ANA, California – A 19-year-old South Los Angeles man is scheduled to appear in federal court Wednesday to face charges that accuse him of acting as a pimp for underage prostitutes whose services were advertised online.

Curtis Maurice Canady, 19, also known as “Cash,” was charged last week in a criminal complaint filed in United States District Court in Santa Ana with two counts of child sex trafficking.

Because the victims were between the ages of 14 and 18, Canady would face a mandatory minimum sentence of 10 years in federal prison if he is convicted of either count. The statutory maximum penalty for the offenses is life in federal prison.

After his arrest on July 25 as part of an FBI-led initiative called Operation “Cross Country,” Canady was charged by the Orange County District Attorney’s Office with two counts of human trafficking with the intent to pander, two counts of pandering a minor by procuring, and one count of attempted pimping. At a court appearance this morning in the Orange County Superior Court, the District Attorney’s Office agreed to Canady’s release from custody so he could be taken into federal custody. Canady is scheduled to appear in United States District Court in Santa Ana tomorrow at  2:00 p.m.

“As we focus our efforts on sex traffickers who prey upon young, vulnerable victims, we are developing new ways to identify the problem and deal with offenders,” United States Attorney André Birotte Jr. said. “This case demonstrates the value of collaborative law enforcement to most effectively bring justice to the victims of this most troubling offense.”

Officers with the Anaheim Police Department identified Canady as a trafficking suspect after interviewing victims who were working as prostitutes. Canady was subsequently arrested by members of the Orange County Child Exploitation Task Force during Operation Cross Country, which was conducted to identify sex trafficking rings and underage victims.

According to the federal complaint, Canady drove female prostitutes to Anaheim, including two girls who are 15 and 16. On July 25, task force investigators located one of the victims in a motel room in Los Angeles, and she not only admitted to working as a prostitute for Canady, she also said she accompanied Canady and another minor to Las Vegas, where they worked as prostitutes. During the investigation, investigators also identified one of the victims as the subject of an online advertisement for prostitution services in the Palmdale area.

“The U.S. Attorney and I will coordinate efforts to take these modern-day slave owners and human traffickers off the streets and prosecute them for the greatest possible punishment under the law for sexually exploiting children for their greedy purposes,” said Orange County District Attorney Tony Rackauckas.

FBI Assistant Director in Charge Bill Lewis stated: “The targeting of minors for prostitution is on the rise in the United States. Law enforcement and the community must work together to identify victims in our own backyards, and to end the cycle of oppression endured by our nation’s children, as well as adult victims, who may be forced into prostitution against their will.”

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

The case against Canady is the result of an investigation by the Anaheim Police Department and the FBI.

Release No. 13-101

Cartel Initiated Alliance with Prison Gang that is also Targeted in Second Indictment for Exercising Control Over Large South L.A. County Street Gang

LOS ANGELES – A coalition of federal, state and local authorities this morning arrested eight defendants named in a federal grand jury indictment that outlines an alliance between the Mexican Mafia prison gang and the La Familia Michoacàna drug cartel that sought to protect and expand the cartel’s drug trafficking activities across the nation.

The seven-count indictment – which names six members of the Mexican Mafia, three associates of the prison gang, and four people directly linked to the La Familia cartel – outlines a venture between the criminal organizations that participants referred to as the “Project,” and which involved the highest levels of La Familia. The indictment alleges that participants in the Project sought to give La Familia members “free rein” to sell methamphetamine in Southern California and to provide protection for incarcerated cartel members in exchange for money and methamphetamine going to Mexican Mafia members.

“Today’s salvo against the Mexican Mafia is part of a 20-year fight to curb the influence of the prison gang both inside prison walls and on the streets of Southern California,” said United States Attorney André Birotte Jr. “We successfully dismantled the gang’s leadership structure in prior cases, causing chaos throughout the organization. Now we have demonstrated our ability to stop the Mexican Mafia from realizing a new power base by disrupting the gang’s plot to establish a threatening alliance with a major drug trafficking organization.”

The indictment that outlines the Project and related drug trafficking activities names 13 defendants, eight of whom were arrested this morning. Four were already in custody prior to today’s arrests and one is a fugitive. During the course of this investigation, authorities seized more than 600 pounds of methamphetamine and charged an additional six defendants in state court.

A second indictment unsealed this morning concerns the Mexican Mafia and its control over the Florencia 13 criminal street gang in south Los Angeles County. This indictment charges 31 defendants and alleges violations of the federal racketeering (RICO) statute, as well as a host of narcotics, firearms, and fraud offenses. Florencia 13 is one of the largest, most powerful and oldest street gangs in Southern California. Several members of the gang have risen through its ranks to become leaders of the Mexican Mafia. The indictment unsealed today follows a 2007 crackdown on the gang that led to more than 100 members and associates being charged, and five of them receiving sentences of life without parole in federal prison (see: http://www.justice.gov/usao/cac/Pressroom/pr2010/025.html). The indictment unsealed today focuses on how the gang has generated illicit profits through the sale of drugs and firearms, fraud, and extortion. The indictment alleges that two incarcerated Mexican Mafia members are the leaders of the Florencia 13 gang, and that they directed the activities of the street gang from a California state prison and received payments derived from the gang’s illegal activities. During this morning’s takedown, 14 of the 31 defendants named in this indictment were taken into custody. Three of the defendants were previously arrested in this case before today’s enforcement activities, and eight are fugitives. An additional six defendants were already in custody prior to today’s takedown in connection with state charges.

“These two investigations disrupted the criminal activities of the Mexican Mafia, the Los Angeles street gang Florencia 13, and the Mexican Mafia’s relationship with the La Familia drug cartel, which is responsible for using firearms to commit violent crimes and trafficking hundreds of thousands of pounds of controlled substances into the United States,” Said Steven J. Bogdalek, ATF Special Agent in Charge of the Los Angeles Field Division. “By combining law enforcement resources, we were able to curtail their ability to build alliances and prevent their violence from spreading further into our communities.”

The Mexican Mafia is a powerful prison gang that controls much of the drug trade and other criminal activities within California state prisons, county jails and some federal prisons, according to the indictments unsealed this morning. The Mexican Mafia, whose members are generally senior members of street gangs such as Florencia 13, also exercises control over and directs the narcotics trafficking activities of Latino street gangs across Southern California and in prisons. The indictment concerning the Mexican Mafia-La Familia Project represents the largest crackdown on the prison gang’s members since the United States Attorney’s Office brought a series of RICO cases against the leadership of the prison gang in the 1990s.

La Familia Michoacana and it successor, Los Caballeros Templarios (the Knights Templar), is a major drug cartel based in the Mexican state of Michoacàn and “is responsible for the trafficking of hundreds of thousands of pounds of controlled substances, including methamphetamine, from Mexico into the United States,” according to the indictment.

The members of La Familia named in the indictment allegedly oversaw the distribution of methamphetamine and marijuana in the Southern California area, as well as provided money and drugs at discounted prices to members of the Mexican Mafia.

Anthony Williams, DEA Special Agent in Charge, commented: “This multi-agency, coordinated investigation identified a network of drug traffickers tied directly to one of the most violent Mexican drug cartels – La Familia or the Knights Templar. Today’s enforcement efforts will help to reduce the damaging impact of this brutal organization by arresting key members and associates of the La Familia cartel and disrupting their distribution networks in the Los Angeles area.”

As part of the alliance between the criminal enterprises, the indicted members and associates of the Mexican Mafia helped La Familia distribute narcotics “by ordering, instructing, and informing Hispanic gang members to protect La Familia drug shipments and sales, to prevent criminal taxation of La Familia drug shipments and sales, and to collect drug debts,” according to the indictment, which also alleges that Mexican Mafia members would protect incarcerated members of La Familia.

Los Angeles County Sheriff Lee Baca stated: “The successful results of this joint operation allowed law enforcement to intervene in the development of a very strong and powerful merger between dangerous criminal organizations. We believe that we have initiated a crippling effect to those members who are still loyal to the Mexican Mafia criminal organization.”

Larry Miranda, Chief of the Office of Correctional Safety for the California Department of Corrections and Rehabilitation, said: “One of the most chilling aspects of this investigation was the budding relationship between the Mexican Mafia and the La Familia/Knights Templar, showing how two powerful organizations attempted to combine their efforts to control prison facilities and the communities in which we live. The investigators have done a magnificent job at thwarting this relationship. Their tireless efforts, commitment to their agencies, and dedication to their communities have led law enforcement to a victory in the continuing battle against the gangs and drugs that plague our communities.”

Those named in the indictment are:

Jose Rodriguez-Landa, also known as “Fox” and “Fox Tapia,” 49, of Michoacàn, an alleged Mexican Mafia member currently in custody in a Los Angeles County jail;

Michael Moreno, aka “Boo,” 55, of Fresno, an alleged member of the Mexican Mafia, who was arrested this morning;

Fred Anthony Montoya, aka “Fast Freddy,” 46, of Antioch, California, an alleged Mexican Mafia member who is currently in custody in a California state prison;

Freddie Montes, 44, of Castaic, an alleged member of La Familia, who was arrested this morning;

Luis Gerardo Vega, aka “Little” and “Little One,” 30, of the Pico-Union district of Los Angeles, an alleged Mexican Mafia member who is currently in custody in a Los Angeles County jail;

Manuel Larry Jackson, aka “Cricket,” 49, of Monterey Park, an alleged Mexican Mafia member, who was arrested this morning;

Jimmy Ruben Soto, aka “Rube” and “Old Man,” 77, of Visalia, an alleged member of the Mexican Mafia, who was arrested this morning;

Raymond Lozano, 36, of San Diego, an alleged Mexican Mafia associate who is currently incarcerated in a federal prison;

Efrain Isak Rosales, aka “Tucàn,” 35, an alleged member of La Familia who resides in Michoacàn and who is currently being sought by authorities;

Sonia Apodaca, aka “Shorty,” 44, of El Monte, an alleged “secretary” of the Mexican Mafia, who was arrested this morning;

Claudia Garcia, aka “Giggles,” 42, of the Gramercy Park district of Los Angeles, an alleged associate of the Mexican Mafia, who was arrested this morning;

Adam Rios, aka “Blanco,” 35, of Slymar, an alleged associate of La Familia, who was arrested this morning; and

Omar Hugo Robles, 30, of Sylmar, an alleged associate of La Familia, who was arrested this morning.

All 13 defendants are charged in count one of the indictment, which outlines the Mexican Mafia-La Familia alliance and alleges a conspiracy to distribute narcotics. Various defendants are charged in six other counts in the indictment that allege substantive narcotics-distribution offenses, five of which relate to methamphetamine and one of which concerns marijuana.

The conspiracy charge and the counts related to methamphetamine each carry a mandatory minimum sentence of 10 years in federal prison (20 years if the defendant has a prior drug conviction, which may affect about half of the defendants in the indictment) and a maximum statutory sentence of life without parole. The marijuana count carries a mandatory minimum sentence of five years in federal prison (10 years if the defendant has a prior narcotics conviction) and a statutory maximum sentence of 40 years in prison.

The indictments targeting the Mexican Mafia and the La Familia drug cartel are the result of an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Los Angeles Sheriff’s Department; and the Los Angeles High Intensity Drug Trafficking Area (HIDTA)/Southern California Drug Task Force, a federally funded group led by the Drug Enforcement Administration (DEA). The Southern California Drug Task Force is comprised of federal and local law enforcement agencies, including the DEA, the ATF, the Los Angeles Police Department and the Pasadena Police Department.

This investigation into the Mexican Mafia started in May 2010 and also involved the Montebello Police Department, the Bakersfield Police Department, the Long Beach Police Department, the Glendale Police Department, the United States Marshals Service, the United States Secret Service, the Stanislaus Drug Enforcement Agency, the United States Bureau of Prisons, the California Department of Corrections and Rehabilitation-Special Services Unit, and the Huntington Park Police Department.

Release No. 13-100

LOS ANGELES – A fraud artist who was a fugitive from justice for over a decade was sentenced this morning to 11 years in federal prison for running a nearly 15-year foreclosure-rescue scam that fraudulently delayed foreclosure sales for more than 800 distressed homeowners.

 Glen Alan Ward, 48, a former Los Angeles resident who fled to Waterloo, Canada, was sentenced today by United States District Judge Dale S. Fischer. In addition to his prison term, Ward was ordered to pay $59,961 in restitution and to forfeit approximately $100,000 in cash and property previously seized by law enforcement authorities.

Ward pleaded guilty in April to three separate sets of charges stemming from his 15-year fraud scheme. In 2000, Ward failed to appear in United States District Court in Los Angeles after agreeing to plead guilty and fled to Canada.

In 2002, while he was a fugitive, Ward was indicted on multiple counts of bankruptcy fraud in San Francisco. One year ago, in the third case, Ward was indicted on mail fraud, aggravated identity theft and additional bankruptcy fraud counts in Los Angeles.

While in Canada, Ward recruited Frederic Alan Gladle, who was indicted by federal prosecutors in Los Angeles on bankruptcy fraud and identity theft charges in 2011. Gladle was sentenced last year to 61 months in federal prison (see: http://www.justice.gov/opa/pr/2012/May/12-crm-576.html).

On April 5, 2012, Ward was arrested in Canada by the Royal Canadian Mounted Police (RCMP) and the Waterloo Regional Police Service. On Dec. 21, 2012, Ward was extradited to the United States to answer all three sets of charges.

Ward’s capture was the result of innovative investigative work, as well as close coordination between United States and Canadian authorities. After fleeing the United States in 2000, Ward continued his scheme while in Canada. To avoid being detected while accessing websites he needed for his scheme, Ward used a laptop computer in wireless hotspots away from his home. He also arranged for clients’ monthly payments to be deposited in the bank account of a person in Texas, which he could access with an ATM card. Upon receiving confirmation that client funds had been deposited, Ward would withdraw the funds at one of many Waterloo-area ATMs. Federal agents in the United States were able to identify Ward’s most-frequented wireless locations and his most-frequented ATMs. Using near-real-time information, these agents repeatedly passed along information on Ward’s current or expected whereabouts to Waterloo and RCMP authorities in Canada. These Canadian authorities would then visit the locations as soon as possible, usually missing Ward by only minutes. Finally, Canadian authorities established “stake outs” on multiple ATMs after Ward had received confirmation of a deposit. When Ward visited one of these ATMs, Canadian authorities identified Ward and arrested him.

According to a global plea agreement, Ward led a scheme that solicited and recruited homeowners whose properties were in danger of imminent foreclosure with promises that Ward would delay their foreclosures for as long as the homeowners could afford his $700 monthly fee. Once a homeowner paid the fee, Ward accessed a public bankruptcy database, retrieved the name of a debtor who had recently filed a bankruptcy petition, and directly the client to record a grant deed transferring a tiny interest in their distressed home. Then, after stealing the debtor’s identity, Ward faxed a copy of the bankruptcy petition, a notarized grant deed and a cover letter to the homeowner’s lender, directing it to stop the impending foreclosure sale due to the bankruptcy.

Because bankruptcy filings give rise to automatic stays that protect debtors’ properties, the receipt of the bankruptcy petitions and deeds in the debtors’ names forced lenders to cancel foreclosure sales. The lenders, which included banks that received government funds under the Troubled Asset Relief Program (TARP), could not move forward to collect money that was owed to them until getting permission from the bankruptcy courts, thereby repeatedly delaying the recovery of money for months and even years. Additionally, if a distressed homeowner wanted to complete a loan modification or short sale, they were left to the mercy of Ward to send them forged deeds, supposedly signed by the debtors, to re-unify their title as required by most lenders.

As part of the scheme, Ward delayed the foreclosure sales of approximately 824 distressed properties by using at least 414 bankruptcies filed in 26 judicial districts.  During that same period, Ward admitted to collecting more than $1.2 million from his clients who paid for his illegal foreclosure-delay services.

The investigation in this case was conducted by SIGTARP and the FBI, which received substantial assistance from the U.S. Trustee’s Office. In addition, the Office of International Affairs of the Department of Justice, Canadian Waterloo Regional Police Service and Royal Canadian Mounted Police provided assistance in connection with Ward’s arrest and extradition.

This case was prosecuted by the United States Attorney’s Offices in Los Angeles and San Francisco, and the Department of Justice, Criminal Division, Fraud Section.

This prosecution is part of efforts underway by President Obama's Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. For more information on the task force, visit www.stopfraud.gov.

Release No. 13-099

VENTURA, California – Federal and local authorities this morning arrested eight individuals linked to a mortgage fraud scheme that filed loan applications on behalf of lower-income, primarily Spanish-speaking individuals, generating substantial loan fees and commissions and causing lending institutions to suffer millions of dollars in losses when homes went into foreclosure.
This morning’s arrests are the result of a grand jury indictment that charges the eight defendants in a conspiracy to commit bank fraud and wire fraud. The investigation, which was started by the Ventura County District Attorney’s Office, determined that members of the scheme generated dozens of mortgage loans for unqualified borrowers. The indictment specifically outlines a series of allegedly fraudulent loans worth more than $11 million.

The federal investigation that resulted in the indictment unsealed this morning was conducted by the Federal Bureau of Investigation; the Federal Housing Finance Agency, Office of Inspector General; the U.S. Department of Housing and Urban Development, Office of the Inspector General; and the United States Secret Service.

The indictment details a scheme led by Camarillo resident Jose Garcia and run out of an Oxnard-based company called New Concepts Home Loans (NCHL), where members of the alleged conspiracy prepared mortgage applications that contained false information about borrowers’ income, employment and assets. As part of the scheme, according to the indictment, Jose Garcia’s wife and others obtained bogus “CPA letters” from tax preparers that falsely stated the mortgage applicants were engaged in a particular business.

The defendants in these cases generated huge commissions and fees through the mortgage application process – typically at least $10,000 per mortgage.

The victim lenders who suffered losses as a result of the alleged scheme include Washington Mutual Bank, Wells Fargo Bank, Countrywide Bank, IndyMac Bank, SunTrust Bank, World Savings Bank and JPMorgan Chase Bank.
“Jose Garcia and his cohorts are alleged to have lured unsophisticated borrowers with promises of putting them into homes they clearly could not afford,” said United States Attorney André Birotte Jr. “But this American dream quickly turned into a nightmare for these borrowers when they realized they could not afford their new homes. All the while, real estate professionals like Jose Garcia reaped huge profits from the fraudulent loans that they brokered.”

District Attorney Gregory D. Totten stated: “These arrests for serious federal crimes illustrate the tenacity of state and federal law enforcement to continue our years-long effort to bring to justice those who perpetrated real estate fraud-based crimes against unsuspecting, often monolingual, victims in our communities.”
FBI Assistant Director in Charge Bill L. Lewis commented: “Mr. Garcia allegedly directed his workforce, including unlicensed individuals acting as realtors, to peddle the dream of home ownership in the poorest neighborhoods of Oxnard, where they easily found people eager to buy. This case and others were made based on the cooperative relationship among federal and local investigators working as a team to combat mortgage fraud in Ventura County.”

The indictment charges:

Jose “Joe” Bautista Garcia, 46, of Camarillo, a real estate broker who in addition to NCHL owned Century 21 Premier Realty, who allegedly directed agents to go door-to-door and “cold call” unqualified borrowers in Ventura County;

Lucy Ann Garcia, Jose Garcia’s wife, 46, also of Camarillo, who co-owned NCHL;

Jose Fernando Murguia, 47, of Oxnard, a loan officer at NCHL;

Sesilia Garcia, one of Jose Garcia’s sisters, 30, of Oxnard, a loan officer at NCHL;

Lili Ayala Hernandez, 41, of Oxnard, a loan officer at NCHL;

Lidubina “Lido” Mendoza Perez, 41, of Moreno Valley, a loan officer who worked at NCHL’s office in Bakersfield;

Gregg Scott Quinn, 40, of Camarillo, a loan officer at NCHL; and

Cesar Rodriguez Azamar, 36, of Santa Paula, an employee of NCHL.

All of the defendants in this case face a statutory maximum sentence of 30 years in prison if they are convicted of the conspiracy count in the indictment.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

The defendants arrested today will begin making their initial court appearances this afternoon in United States District Court in Los Angeles.

The investigation was conducted by the Federal Bureau of Investigation; the Ventura County District Attorney’s Bureau of Investigation; the Federal Housing Finance Agency, Office of Inspector General; the U.S. Department of Housing and Urban Development, Office of the Inspector General; and the United States Secret Service.

Release No. 13-098

SANTA ANA, California – A San Clemente man who owned and operated a string of nine illegal marijuana stores that generated at least $25 million in profits was sentenced today to 262 months in federal prison.

John Melvin Walker, also known as “Pops,” 56, of San Clemente, was sentenced by United States District Judge James V. Selna. In addition to the prison term, Judge Selna ordered Walker to pay the Internal Revenue Service $2,415,409.29 and California State Board of Equalization $1,857,280.00 in restitution.

Walker pleaded guilty in April to two felony counts – one count of conspiring to distribute well over a ton of marijuana and maintaining drug-involved premises, and one count of tax evasion.

 “Drug use and addiction continue to have devastating impact on far too many lives. Today's sentence demonstrates DEA's commitment to our communities and children by working with our law enforcement partners to investigate and bring to justice those who supply these dangerous drugs,” said Special Agent in Charge Anthony D. Williams.

Walker was the lead defendant in a 14-defendant indictment returned by a federal grand jury last fall. The indictment outlined a drug-trafficking conspiracy led by Walker, who owned and operated at least nine marijuana stores in cities across Los
Angeles and Orange counties. The nine marijuana stores were located in Long Beach, Dana Point, Garden Grove, Santa Ana, Santa Fe Springs, Costa Mesa, Whittier, and San Juan Capistrano.

Walker was “the kingpin of a large, organized criminal enterprise awash in narcotics, firearms, and, most of all, money,” prosecutors wrote in a sentencing brief.

Walker admitted in the federal tax case that he earned approximately $25 million from marijuana sales over the course of six years. Walker specifically admitted that he earned $11.4 million in 2009, but reported to the Internal Revenue Service only a tiny fraction of that income. As part of his plea agreement, Walker agreed to pay the IRS more than $2.4 million in back taxes for years 2006 through 2011, as well as $1.8 million in restitution to the California Board of Equalization. In addition to the $4.2 million he has agreed to pay to federal and state tax authorities, Walker agreed to forfeit to the government $25 million in illegally obtained income, which includes, among other assets, more than $500,000 in cash previously seized by law enforcement authorities, his multi-million dollar home in San Clemente, a string of mobile homes in Mammoth Lakes, rental properties in Long Beach, and his interest in two strip clubs.

The sentencing memo filed by prosecutors argued that Walker’s “conduct was not the result of some misplaced idealism or altruistic instinct, but was rather driven by his insatiable quest for the massive illicit profits generated by his crimes, and the luxurious lifestyle those profits bought.”

Walker, a twice convicted felon, also admitted that he possessed firearms in relation to the drug-trafficking offense. Authorities discovered in one of Walker’s “stash houses” an AK-47-style assault rifle, three other firearms and ammunition.

Walker “wanted to be called ‘Pops’ for a reason,” according to the government’s sentencing memorandum. “He was in charge of this criminal organization. This was his scheme and he was the only authority that mattered in his criminal enterprise.”

Walker has been in custody since pleading guilty in this case on April 1.

The investigation into Walker’s chain of marijuana stores was conducted by the Orange County Sheriff’s Department; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; IRS-Criminal Investigation; the California Board of Equalization; and the Orange County District Attorney’s Office.

Release No. 13-096

LOS ANGELES – A Florida man who sold paintings stolen from a Los Angeles art gallery – and who took elaborate steps to avoid paying taxes over several years – has been sentenced to 90 months in federal prison for the art-related and tax offenses.

Matthew Taylor, 45, of Vero Beach, Florida, was sentenced yesterday afternoon by United States District Judge John A. Kronstadt.

In addition to the prison term, Judge Kronstadt ordered Taylor to pay $1,244,190 in restitution – $106,152 to two art galleries, and $1,138,038 to the Internal Revenue Service for back taxes, penalties and interest. The judge also ordered that during the period of supervised release following his prison term, Taylor may not work in or own “any business involving antiques and or art” without the approval of a probation officer.

Taylor was found guilty by a federal jury in August 2012 of five separate federal felonies, including wire fraud, possession of stolen property which had crossed state lines, and two counts of tax evasion for the years 2005 and 2006. The jury also convicted Taylor of structuring cash transactions to avoid federal reporting requirements by making $226,000 in cash withdrawals in smaller amounts so as to avoid possible seizure of the funds by authorities – and found that he committed the structuring offense while free on bond in the art fraud case.

The evidence presented at trial showed that Taylor stole several paintings from the Los Angeles Fine Art Gallery, including a Granville Redmond painting called “Seascape at Twilight” and an untitled painting by Lucien Frank. Taylor later sold the Redmond painting to a different gallery for $85,000, falsely claiming that his mother had owned it for several years. Taylor took the Frank painting to Florida, erased Frank’s signature from the artwork, and then attempted to sell the painting to an art collector, claiming it was by a different artist.

The evidence presented at trial also showed that Taylor took elaborate steps to evade paying more than $400,000 in federal income taxes owed for 2005 and 2006, including creating bogus companies with names similar to well known companies (like Microsoft), using false social security numbers to hide his bank accounts, and using post office boxes to open other post office boxes to use as mail drops. Taylor also moved money to an off-shore bank account in the Bahamas as part of his attempts to evade the payment of taxes. Taylor falsely claimed that his mother had controlled all of his bank accounts and LLCs, and that he had relied on her to file tax returns for him – even though she was in failing health and suffering from dementia.

Taylor’s “repeated attempts to blame his mother for his crimes are demonstrative of his history and characteristics,” prosecutors wrote in a sentencing memo filed with the court. “In short, defendant has demonstrated that he is a con man, a thief, a tax-cheat, and a liar, who has no compunctions about using others (such as his girlfriend) and blaming others (such as his mother or his pretrial officer) if it is to his advantage. He has steadfastly refused to accept responsibility for his crimes, and has repeatedly acknowledged that he moved money around to avoid seizure by the IRS.”

The investigation into Taylor was conducted by the FBI’s Art Crime Team, the Los Angeles Police Department’s Art Theft Detail, and IRS Criminal Investigation.

Release No. 13-095a

LOS ANGELES – Biopharmaceutical company Amgen Inc. today paid the United States more than $15 million to resolve allegations that the Ventura County company provided illegal financial incentives to physicians and physician groups to induce them to prescribe the cancer drug Xgeva.

Amgen, which is headquartered in Thousand Oaks, paid the money today pursuant to a settlement agreement with the United States to resolve allegations that it violated the Medicare Anti-Kickback Statute and the federal False Claims Act. The Medicare Anti-Kickback Statute prohibits anyone from offering, paying, soliciting or receiving anything of value to generate referrals for items or services payable by any federal health care program.

Xgeva, which is the brand name of the drug denosumab, was approved by the Food and Drug Administration in late 2010 for use with certain cancer patients undergoing chemotherapy. It is most commonly prescribed for patients with metastatic bone disease in order to prevent skeletal-related adverse events.

In order to increase sales of Xgeva, Amgen used data purchase agreements – which the company called the “Deep Dive” contracts – to provide financial incentives to oncologists and urologists to prescribe Xgeva. The original plan for the Deep Dive contracts called for Amgen to pay doctors to fill out a short survey on the Internet on how they were treating patients with bone cancer, including which drugs were used – whether or not Xgeva was prescribed. However, Amgen altered the original Deep Dive program design by increasing the amount of money it would pay doctors, and by offering such payments only to doctors who prescribed Xgeva for their patients. Amgen’s Xgeva marketing team also was not supposed to know the identities of the doctors who received Deep Dive contracts, but team members had access to that information. Additionally, in a further effort to influence doctors to prescribe Xgeva, Amgen provided cash payments characterized as honoraria to oncologists and urologists for participating in audience response sessions, data market research surveys, and “treatment trends” advisory board programs which touted the benefits of Xgeva.

This settlement resolves a lawsuit filed under the qui tam, or “whistleblower,” provisions of the False Claims Act, which allow private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery. The case, which was filed last year in federal court in Los Angeles by two Amgen employees – United States ex rel. Davis et al. v. Amgen Inc., et al., CV12-00570-R (MRWx) – was unsealed Tuesday after the United States elected to take over part of the case and negotiated the settlement with Amgen. The two men who originally filed the lawsuit, William Davis and Spencer Miller, will collectively receive $2.75 million as part of the settlement.

The United States Attorney’s Office for the Central District of California, and the Justice Department’s Civil Division, handled the civil settlement. This matter was investigated by the U.S. Department of Health and Human Services, Office of Inspector General.

Release No. 13-095

LOS ANGELES – An undercover operation dubbed “Wild Web” today resulted in charges against five Southern California residents who are accused of selling endangered species and animal parts, including pelts taken from wild cats, through online auction sites such as Craigslist.

The charges contained in four criminal cases filed in United States District Court in Los Angeles stem from an investigation coordinated by the United States Fish & Wildlife Service and which involved investigators and prosecutors across the United States and in three Southeast Asian countries.

Operation Wild Web was designed to disrupt the trafficking of illegal wildlife on the Internet. Across the United States, the Wild Web task force conducted more than 150 undercover purchases of endangered wildlife over the course of two weeks last August (see: http://www.fws.gov/home/newsroom/operationwildwebNR07112013.html). Investigators posing as buyers focused on endangered or protected wildlife, as well as invasive species that threaten the native fish species in the United States.

The four cases filed in Los Angeles this morning charge five defendants with violations of federal environmental laws. The defendants charged are:

Hanna Karim, 44, and his wife, Margarita Licomitros, 36, both of Huntington Beach, who are accused of selling a Sumatran Tiger skin for $8,000 after the item was advertised on Craigslist. Karim and Licomitros are charged with offering an endangered species for sale, and, if convicted, each could be sent to federal prison for up to one year. Tigers are critically endangered throughout the world, with estimates that there are less than 500 Sumatran tigers remaining in the wild. This case is being prosecuted by Assistant United States Attorney Rupa S. Goswami.

Rene De La Peza, 42, of Hacienda Heights, who is accused of selling a jaguar skin for $15,000 after advertising the item of Craigslist. De La Peza is charged with offering an endangered species for sale and, if convicted, could be sent to federal prison for up to one year. Jaguars, the largest cat found in the Americas, have been listed as endangered for 40 years. This case is being prosecuted by Assistant United States Attorney Rupa S. Goswami.

Michael Roy McIntire, 59, of Encino, who is accused of selling three migratory bird mounts in violation of the Migratory Bird Treaty Act of 1918. If convicted, McIntire would face up to six months in prison. All migratory birds – such as the birds involved in this case: a canvasback, a cinnamon teal and a mallard – are protected under treaties between the United States, Russia, Canada and Mexico, and even legally hunted birds cannot be sold. This case is being prosecuted by Assistant United States Attorney Amanda Bettinelli.

Rodrigo Macedo, 29, of Hesperia, who is accused selling two Western Scrub Jays in violation of the Migratory Bird Treaty Act, a charge that carries a maximum penalty of six months in federal prison. This case is being prosecuted by Assistant United States Attorney Amanda Bettinelli.

As part of Operation Wild Web, state and federal prosecutors across the nation have filed well over 100 criminal cases, with most of the cases being filed in California, Texas and Florida. In addition to the animals and animal parts involved in the cases filed in federal court in Los Angeles, Operation Wild Web led to cases involving the illegal sale of a bear skin and a walking catfish that were filed by the Los Angeles County District Attorney’s Office. Other cases resulting from Operation Wild Web – involving native wildlife and invasive species, such as live piranha – were recently filed by the Orange County District Attorney’s Office, the Santa Barbara County District Attorney’s Office, and the Los Angeles City Attorney’s Office. Seven cases were charged in Thailand and Indonesia where animals and parts of animals – such as leopards, tigers, Great Hornbills and Javan eagles – were sold through the Internet.

Law enforcement authorities were assisted by several non-profit organizations that donated resources to the operation, including the Humane Society of the United States, the International Fund for Animal Welfare, and the Freeland Foundation. The Association of Southeast Asian Nations – Wildlife Enforcement Network organized the law enforcement efforts in Thailand, Indonesia and Singapore, where it is working to stop the wildlife trade in source countries in Southeast Asia.

Release No. 13-093

RIVERSIDE, California – A federal grand jury has indicted 14 defendants on various fraud charges, including theft of government benefit funds and passport fraud.

Over the past two weeks, a federal grand jury issued indictments, with the final cases being filed yesterday afternoon. The grand jury has now returned 13 indictments, one of which charges two defendants.

Eleven of the 14 indicted defendants are charged with theft of government property. These defendants allegedly took and spent government benefit payments to which they knew they were not entitled. Some of these cases involve payments the government had issued to their deceased family members, while others concern payments made after the defendants made false statements to the government. The alleged false statements related to, among other things, identities, social security numbers, military service history, and employment or marital status.

The remaining three defendants are charged with making false statements to the Department of State to obtain United States passports. These false statements related to, among other things, the defendants’ identities, dates and places of birth, and social security numbers.

The 13 indictments are the result of a joint enforcement initiative by the United States Department of Veterans Affairs’ Office of Inspector General, the Social Security Administration’s Office of Inspector General, the Department of State’s Diplomatic Security Service, and the United States Attorney’s Office.

The 11 defendants charged with theft of government property in excess of $1,000 are: Audrey Owens, 60, of Upland, who is scheduled to be arraigned on the charges on July 24;

Sarah Rose, 57, of San Bernardino, who is scheduled to be arraigned on the charges on July 24;

Michele King, 42, of San Bernardino, who is scheduled to be arraigned on the charges on July 24;

James Cramer, 78, of Banning, for whom an arrest warrant has been issued;

Wilma Welsh, 82, of Perris, who is scheduled to be arraigned on the charges on July 31;

Zandria Rhone, 61, of Riverside, who is scheduled to be arraigned on the charges on July 31;

Thomas Fothergill, 73, of Perris, who is scheduled to be arraigned on the charges on August 7;

Martin Munoz Villa, 42, of Riverside, who is also charged with aggravated identity theft and who is scheduled to be arraigned on the charges on August 7;

Josie Lee Anderson, 64, of San Bernardino, who is also charged with submitting a false written statement to a government agency and for whom an arrest warrant has been issued;

Walton Monagan, 70, of Hemet, who is scheduled to be arraigned on the charges on August 7; and

Editha Pagdilao, 66, of Redlands, who is scheduled to be arraigned on the charges on August 7.

All of the defendants who have received summons for arraignments have been directed to appear in United States District Court in Riverside.

Arrest warrants have been issued for the three defendants charged with passport fraud in connection with this initiative. Those three defendants are:

Nelida Alcauter, 36, of Temecula; Maria Altemose, of Temecula; and

Angela Alicia Sanker, 56, of San Bernardino.

Indictments contain allegations that a defendant has committed a crime. Every defendant is presumed innocent unless proven guilty in court.

Those convicted of theft of government property in excess of $1,000 or passport fraud face a maximum statutory penalty of 10 years in federal prison. Those convicted of submitting a false written statement to a federal agency face a maximum statutory penalty of five years in federal prison. Those convicted of aggravated identity theft face a statutory minimum, consecutive sentence of two years in federal prison.

Release No. 13-094

LOS ANGELES -- A teacher at Royal Oak Middle School in Covina, who was arrested last month following an undercover sting in his classroom, was indicted today for child exploitation offenses. 

John David Boyle, 49, of Glendora, who is detained pending trial based on a Court finding that he is a danger to the community, has been charged in a six count indictment.  The indictment charges Boyle with enticement of a minor to engage in criminal sexual activity over the Internet, which allegedly resulted in the molestation of a 14-year-old boy.  Boyle has also been charged with advertisement of child pornography on the Internet, as well as distribution, receipt, attempted receipt, and possession of child pornography.

“Crimes against children violate the most vulnerable among us,” said United States Attorney André Birotte Jr. “This case demonstrates the need for constant vigilance - both online and in our schools – to protect our children and preserve our future generations.”

After communicating with a U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) special agent in an Internet chat room, the teacher invited the agent -- who had been acting in an undercover capacity -- to meet on school premises to view and trade child pornography.

According to the indictment and complaint in this matter, during the course of HSI's investigation, Boyle is alleged to have engaged in online chats with an undercover agent, believing that the agent shared his sexual interest in young boys.  Boyle then set up an in-person meeting in his middle school classroom on Sunday, June 2, 2013, for the purpose of engaging in sexual activity while watching child pornography.  When the undercover agent arrived for the meeting and presented Boyle with what he believed was a thumb drive containing child pornography, Boyle took possession of it.  At that time, additional HSI agents entered the classroom, interviewed Boyle, and seized his digital devices containing alleged child pornography.  Shortly thereafter, Boyle was arrested and charged in a criminal complaint with distributing child pornography.  Upon further investigation, HSI agents were able to identify a 14-year-old boy victim of Boyle's unlawful sexual contact -- as alleged in Count One of the Indictment.

“We entrust teachers to serve as role models for our children and safeguard their welfare,” said Claude Arnold, Special Agent in Charge for HSI Los Angeles. “HSI is particularly vigorous in pursuing these kinds of cases because our experience has shown that, in many instances, those who collect and distribute child pornography are also hands-on offenders.”

Boyle is due in court on Tuesday, July 11, 2013 for his post-indictment arraignment. If convicted of the charges in the Indictment, Boyle faces a maximum possible penalty of life in prison.

Anyone with information about this matter is encouraged to call HSI's toll-free tip line at 1-866-DHS-2ICE (1-866-347-2423) or submit information using HSI's online tip form at http://www.ice.gov/exec/forms/hsi-tips/tips.asp.

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

The investigation into Boyle is being conducted by HSI and the Internet Crimes Against Children ("ICAC") Task Force.

Release No. 13-092

LOS ANGELES - A San Fernando Valley real estate agent and self-described real estate investor was sentenced yesterday afternoon to five years in federal prison and remanded into custody for her offenses.

Celia Gallardo, 42, of North Hills, was sentenced in the fraud case by United States District Court Judge Dean D. Pregerson.

During the sentencing hearing, Judge Pregerson described the fraud as a "pure rip off" and cited the need for punishment as a deterrent.  He stated that the victims present at the sentencing had the right to see Gallardo be remanded into custody.

Gallardo pleaded guilty in October 2012 to wire fraud, admitting in court that that she defrauded investors from September 2007 through September 2008 by falsely promising them high rates of return for investing in her purported real estate program.

Gallardo admitted that instead of investing victims' money in real estate transactions, she spent the vast majority of the money on house payments, foreign luxury travel, cash withdrawals, and Ponzi-syle payments to earlier investors.

Judge Pregerson also ordered Gallardo to pay $2.389 million in restitution to dozens of victims, who primarily resided in California and Arizona.

The case against Gallardo resulted from an investigation conducted by the Federal Bureau of Investigation.

Release No. 13-091

RIVERSIDE, California – Two brothers who owned and managed the El Toro Market in Hemet have been charged by a federal grand jury in a scheme to obstruct a United States Department of Labor investigation that determined they failed to pay overtime to more than a dozen employees.

Jafar “Jeff” Rahman, 44, of San Jacinto, the general manager of the store, was arrested at the store this morning without incident. His brother, Jalal “Jim” Rahman, 50, of Vista, remains at large.

The Rahman brothers were charged in an indictment returned on June 12 that alleges a plot to make false statements to the Labor Department and to obstruct the agency’s investigation that concluded El Toro Market owed 13 current or former employees $47,155 in overtime pay.

The indictment also charges Jeff Rahman with obstruction of justice for attempting to coerce El Toro employees to lie about receiving their back pay.

“Business owners must play by the rules and treat all of their employees fairly,” said United States Attorney André Birotte Jr. “The Rahman brothers not only tried to take advantage of their workers by not paying them money they earned, they also lied to federal investigators in an attempt to cover up their illegal actions.”

In March 2008, the Department of Labor’s Wage and Hour Division conducted an investigation and determined that the Rahmans’ company had violated federal laws related to overtime. The Labor Department instructed the store to pay back wages to its employees, but continued investigation showed that the Rahmans lied to their employees about the orders from the Labor Department, according to the indictment.

In the fall of 2008, the Rahmans had the affected employees sign paperwork indicating they had received their back pay, which they had never received. The Rahmans also had the employees sign checks for the amounts they were owed, but then they allegedly withheld the checks from the workers. Jeff Rahman, the indictment alleges, sent documents to the Labor Department that included false statements that the employees had received their overtime pay.

In the summer of 2012, as a grand jury began considering the case and issued subpoenas to El Toro employees, Jeff Rahman paid off or attempted to pay off three current or former employees to try to get them to lie to the grand jury, according to the obstruction of justice charges in the indictment. Jeff Rahman allegedly also threatened a fourth employee with loss of his job if he insisted that he had never received his back wages.

“Today’s indictment demonstrates the OIG’s commitment to continue working with our law enforcement partners to investigate those who allegedly obstruct Federal investigations to defraud workers of their wages,” said Abel Salinas, Special Agent in Charge of the Los Angeles Regional Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations.

The indictment charges both Rahmans with one count of conspiracy, eight counts of making false statements and eight counts of obstruction of proceedings. Each of these charges carry a statutory maximum penalty of five years in federal prison.

The indictment further charges Jeff Rahman with four counts of obstruction of justice. Each of these obstruction charges carries a statutory maximum penalty of 20 years in prison.

The Rahmans are expected to be arraigned this afternoon in United States District Court in Riverside.

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

The investigation in this case was conducted by the United States Department of Labor’s Office of Inspector General and Wage and Hour Division. Assistance was provided by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

Release No. 13-090

SANTA ANA, California – The owner and chief executive officer of a comprehensive outpatient rehabilitation facility pleaded guilty today to mail fraud for submitting claims to Medicare for services that were not prescribed by treating doctors.

Tuan Duc Tran, 53, of Westminster, pleaded guilty before United States District Judge Josephine Staton Tucker.

This case involves Medicare billings by Fountain Valley Healthcare Center (FVHC), a rehabilitation facility that Tran operated. Tran admitted that he submitted bills to Medicare based on false claims that Medicare beneficiaries had been referred to FVHC for physical and respiratory therapy. These claims for payment violated Medicare rules because, as Tran acknowledged, the treating doctors had not referred the beneficiaries for rehabilitation.

Pursuant to a plea agreement, Tran will be required to pay $777,291 in restitution to Medicare.

Judge Tucker scheduled Tran’s sentencing for November 8.

The mail fraud count carries a maximum statutory sentence of 20 years in federal prison.

Release No. 13-089

SANTA ANA, California – An immigration service officer with U.S. Citizenship and Immigration Services (USCIS) was indicted today on federal charges that allege she took thousands of dollars in bribes from three immigrants who were seeking either citizenship or lawful permanent resident status in the United States.

Mai Nhu Nguyen, 47, of Irvine, was charged in a three-count indictment returned by a federal grand jury. The indictment specifically alleges three counts of solicitation and receipt of a bribe by a public official.

Nguyen was arrested on June 6 after allegedly accepting a $2,200 bribe from an immigrant who was seeking United States citizenship.

In addition to the bribe earlier this month, the indictment alleges that Nguyen solicited and took bribes from immigrants in 2011.  In one case, Nguyen is accused of taking $1,000 from an immigrant seeking a “Green Card” and 200 egg rolls from an immigrant seeking citizenship.

Nguyen, who has worked at USCIS’s Santa Ana office for approximately eight years, is an immigration service officer with the power to approve or deny applications for immigration benefits that are submitted by immigrants.

Nguyen is scheduled to be arraigned on the indictment on July 1 in United States District Court in Santa Ana.

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

Each count of bribery by a public official carries a statutory maximum penalty of 15 years in federal prison.

After being arrested, prosecutors filed a criminal complaint against Nguyen, who made her initial court appearance before a United States Magistrate Judge on June 7. Nguyen was released on a $20,000 bond and was ordered to appear for the arraignment next month.

The case against Nguyen is the product of an investigation by the Federal Bureau of Investigation and the Department of Homeland Security Office of Inspector General.

Release No. 13-087

RIVERSIDE, California – An Upland attorney surrendered this morning after being charged with stealing approximately $129,795 in social security benefits.                 

Audrey Owens, 60, a deputy public defender for Riverside County, was charged in a criminal complaint filed in federal court on June 10 with theft of government property in a scheme that spanned 12 years. Owens is charged with one felony count that carries a statutory maximum penalty of 10 years in federal prison.

Owens was taken into custody by special agents with the Social Security Administration, Office of the Inspector General, Office of Investigations. Owens will make her initial court appearance this afternoon in federal court in Riverside.

From June 2000 through August 2012, according to the affidavit in support of the complaint, Owens fraudulently obtained social security benefits intended for her grandmother, who died in May 2000. After her grandmother’s death, Owens changed the address of a joint account she shared with her grandmother and continued to receive social security payments intended for her grandmother. Owens allegedly used these social security payments to pay bills and to pay expenses that included contributions to the Riverside County Employee Campaign.

Release No. 13-086

LOS ANGELES – General Electric Aviation Systems (GEAS) has agreed to pay $6.58 million to settle allegations that it submitted false claims in connection with multiple Department of Defense contracts, the Justice Department announced today. GEAS, headquartered in Ohio, manufactures and sells integrated systems and components for commercial, corporate, military and marine aircraft. The company operates a manufacturing facility in Santa Ana, California, where certain parts for military aircraft are fabricated and where the conduct at issue in this case took place.

GEAS contracted to manufacture and deliver to the Navy external fuel tanks (EFTs) for use on the F/A-18 Hornet strike fighter jet. GEAS manufactured the EFTs at its Santa Ana plant, which it acquired when it purchased another aerospace company in 2007. In March 2008, a GEAS-manufactured EFT failed government testing, which led to a multi-year investigation by the California offices of the Defense Contract Management Agency, the Defense Contract Audit Agency, the Defense Criminal Investigative Service and the Navy Criminal Investigative Service. As a result of that investigation, the United States alleged that GEAS knowingly failed to comply with contract specifications and failed to undertake proper quality control procedures in connection with 641 EFTs it delivered to the Navy between June 2005 and February 2008.

Most of the settlement announced today – $6.25 million – relates to the EFTs manufactured in Southern California.

“Defense contractors agree to provide the government with a quality product, and in doing so, they promise to follow strict manufacturing and testing protocols to ensure that our military receives only the best equipment,” said André Birotte Jr., the U.S. Attorney for the Central District of California.  “In this case, some of the hardware sold to the government did not meet quality-control standards, and that failure could have put our service members at risk. This multimillion dollar settlement is designed to ensure that General Electric Aviation Systems does not engage in this type of misconduct in the future, and this case should serve as a warning to any government contractor who thinks it can cut corners.”

In addition, the settlement resolves allegations that, between June 2010 and June 2011, GEAS knew that it falsely represented to another government contractor that GEAS had performed a complete inspection of 228 drag beams to be used on Army UH-60 Blackhawk helicopters, and that those 228 drag beams conformed to all contract specifications. These parts were also manufactured in Santa Ana.

 “This case demonstrates the Department of Justice’s commitment to ensure that our military receives quality products to perform the important mission of protecting and defending our country,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. “The department will aggressively pursue those who put that mission at risk.”

Allegations about GEAS’s misconduct at the Santa Ana facility were included in a lawsuit filed by former GEAS Santa Ana employee Jeffrey Adler under the qui tam or whistleblower provisions of the False Claims Act, which permit private individuals called “relators” to bring lawsuits for false claims on behalf of the United States, and to receive a portion of the proceeds of any settlement or judgment.  Mr. Adler’s share of the settlement has not yet been determined.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Central District of California; the U.S. Attorney’s Office for the Southern District of Ohio; the Defense Contract Management Agency; the Defense Contract Audit Agency; the Defense Criminal Investigative Service; and the Navy Criminal Investigative Service in investigating and resolving the allegations.

The qui tam lawsuit, filed in the U.S. District Court for the Southern District of Ohio, is captioned United States ex rel. Adler v. General Electric Aviation Services (1-CV-00313). The claims resolved by the settlement are allegations only and do not constitute a determination of liability.

Release No. 13-088

LOS ANGELES – The founder of the Releford Foot and Ankle Institute has been sentenced to 24 months in federal prison for his conviction on federal fraud charges related to a bank fraud scheme that used stolen identities to cause two financial institution to suffer $3 million in losses.

Dr. Bill Releford, 53, who resides in downtown Los Angeles, received the two-year sentence yesterday afternoon from United States District Judge Terry J. Hatter Jr. In addition to the prison term, Judge Hatter ordered Releford to pay $218,237 in restitution and a $10,000 fine.

Releford pleaded guilty in May 2012 to participating in a scheme to defraud Bank of America and Wells Fargo Bank, specifically admitting that he participated in the scheme to obtain money for his medical practice, which has offices in Beverly Hills and Inglewood.

At yesterday’s sentencing hearing, Judge Hatter told Releford that if he was “man enough to do the crime,” then he had to be “man enough to do the time.” Judge Hatter noted Releford’s attempts to rehabilitate himself – such as Releford’s offer to immediately pay $1,500 in restitution and his recent participation in charitable projects – and said this effort spared Releford from a longer prison sentence.

Releford and five other co-defendants operated a scheme to defraud financial institutions by using stolen identities to establish business lines of credit which were fraudulently drawn down to provide money that was used for their personal expenses. After obtaining stolen personal identifying information – including dates of birth, Social Security numbers, credit profiles and driver’s license numbers from victims with high credit scores, including another physician from Pasadena – members of the conspiracy submitted fraudulent applications for business lines of credit to various banks. Once the applications were approved, the defendants liquidated the credit lines.

Over the course of the scheme, Releford helped the other defendants open at least two credit lines that provided funds for Releford’s medical practice. Releford also attempted to open a third credit line valued at up to $500,000, which he planned to use to fund a clothing business. Releford further participated in the scheme by helping to launder thousands of dollars from other fraudulently obtained credit lines.

A federal grand jury indicted Releford and five others in May 2011 (see: http://www.fbi.gov/losangeles/press-releases/2011/six-los-angeles-residents-charged-in-bank-fraud-scheme-where-stolen-identities-were-used-to-establish-lines-of-credit). The five co-defendants – Andrea Avery Kirkland Charles, William Earl Gordon, Annita Hawes and James Arthur Booker – previously pleaded guilty and received sentences of up to 88 months in federal prison.

In total, the scheme caused more than $3 million in losses to Bank of America and Wells Fargo Bank. The scheme used identities stolen from more than 70 individual victims.

This case was investigated by agents with the Federal Bureau of Investigation, the United States Postal Inspection Service and IRS - Criminal Investigation Division.

Release No. 13-083

LOS ANGELES – A Long Beach man who allegedly forced a 17-year-old girl to work as a prostitute has been named in a federal criminal complaint that charges him with child sex trafficking.

Ralph Allen Jackson Jr., 40, who was known by the alias  “Mac Wimp,” was arrested by Long Beach Police Department vice detectives last Tuesday night on state charges after they responded to a domestic disturbance call at his residence. Jackson was named in a criminal complaint filed late Friday in United States District Court.

Following Jackson’s arrest last Tuesday, vice detectives determined that the incident involved child sex trafficking and contacted special agents from U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

Jackson, who is expected be turned over to federal authorities tomorrow, is expected to make his initial appearance in federal court tomorrow afternoon.

The criminal complaint filed Friday charges Jackson with sex trafficking of children by force. If he is convicted, he would face a mandatory minimum sentence of 15 years and statutory maximum penalty of life in federal prison.

“The sex trafficking of women and juveniles is a horrible offense that warrants an immediate and assertive response,” said United States Attorney André Birotte Jr. “The charges demonstrate that we are prepared to quickly respond to such cruel conduct.  Together with our partners in law enforcement, such as the Long Beach Police Department, we will continue to pursue and prosecute anyone who engages in the vile exploitation of women or children.”

According to the affidavit in support of the criminal complaint, the teenage victim told investigators that she met Jackson in March and, following a series of phone calls and text messages, met him for dinner earlier this month. The girl told Jackson that she was 17, which allegedly prompted Jackson to tell her this would be their “secret.”

The victim told investigators that Jackson subsequently forced her into prostitution, arranging for her to have sex with dozens of male clients and warning her that she would be beaten if she resisted. The affidavit states the victim was required to work the streets approximately 12 hours a day and was allowed only one daily meal.

“The actions of those who prey on the vulnerability of young women in our community and exploit them through threats and intimidation will not be tolerated,” said Long Beach Police Chief Jim McDonnell. “We will continue to join forces with our federal partners to ensure these individuals are being prosecuted to the fullest extent possible.”

Claude Arnold, special agent in charge for HSI Los Angeles, stated: “Forcing anyone, much less a child, to prostitute themselves from morning until night with no rest, little food and threats of physical harm is not only criminal – it is morally reprehensible. That what amounts to modern slavery occurs here in the 21st century is unconscionable. HSI is committed to ensuring that those involved are held accountable for their crimes.”

According to the affidavit, in mid-June Jackson took the victim to a tattoo shop and ordered her to get a tattoo that included his street name: “Mac Wimp’s bitch.” The victim told investigators that Jackson threatened to harm her if she did not comply.

After the teen victim fled Jackson’s residence about eight days ago, Jackson allegedly sent her text messages threatening to harm her family if she did not return. When the victim went to Jackson’s home last Tuesday to retrieve her things, there was an altercation, which prompted the domestic disturbance call to the Long Beach Police Department.

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

Authorities believe there may be unknown victims of Jackson. Anyone with information about this matter is encouraged to call HSI’s toll-free tip line at 1-866-DHS-2ICE (1-866-347-2423) or submit a information using HSI’s online tip form at http://www.ice.gov/exec/forms/hsi-tips/tips.asp.

Release No. 13-083

LOS ANGELES – The CEO and co-owner of a Diamond Bar investment company was sentenced this morning to 151 months in federal prison for enticing investors to put $49 million into his bogus day-trading venture as part of a Ponzi scheme that caused more than $30 million in losses.

Syed Qaisar Madad, 66, of Diamond Bar, was sentenced to 151 months in prison by United States District Judge Percy Anderson. At the conclusion of today’s hearing, Judge Anderson remanded Madad into the custody of the United States Marshal.

During the sentencing hearing, Judge Anderson said that Madad, who had emigrated to the United States in 1972, had squandered the “priceless treasure” of becoming a lawful resident of this country by not fulfilling his “obligation and responsibility to respect the rule of law.”

Judge Anderson will hold a restitution hearing on August 12 to establish the amount Madad should repay his victims, a figure prosecutors believe should be approximately $32.7 million.

Madad pleaded guilty in February to wire fraud and tax fraud, admitting in court that investors lost more than $30 million when his scheme collapsed in March 2011.

Madad, a native of Pakistan, formed Technology for Telecommunication and Multimedia, Inc. (TTM) in 1993, and by 2005 Madad was using the company to tout his alleged mastery as an investor. Friends, family and professional colleagues of Madad – as well as associates of his wife, a medical doctor who operated a practice in Lynwood –  entrusted their money to Madad, who promised to use a day-trading strategy that would generate consistent, substantial profits. However, over the course of a 5½-year scheme, Madad’s investments resulted in losses of more than $9 million.

Notwithstanding these significant losses, Madad sent victims monthly account statements that always showed gains in their TTM accounts. These detailed account statements falsely reassured victims that their investments were safe and increasing in value. Some victims gave Madad additional funds based solely on these fictitious account statements. In October 2009, for example, Madad reported that the value of all the investments being held by TTM was more than $50 million – but TTM’s assets at the time were only $825,000, notwithstanding the fact that investors had deposited at least $1.2 million during that month. The daily profit reported on the statements sent to investors was also false. Madad would simply decide on the amount of profit to be claimed for each day covered by the statement, and then allocate the purported profit to all of the investors on a pro rata basis.

Madad also falsely promised investors that he would not take any fees or compensation for managing the invested funds. Madad admitted in court that he spent well over $15 million of investors’ money on personal expenses, including real estate, jewelry for his wife and daughters, vehicles, and cash disbursements to himself and family members. As detailed in the prosecutors’ sentencing brief, these expenditures included the purchase of a 5.25-carat diamond ring and a $180,000 sapphire and diamond necklace; a $600,000 down payment on a house for his daughter; and approximately $6 million to pay personal credit cards bills – including charges for numerous luxury items. Madad also used $1.3 million of investor money to pay for improvements to his personal residence, and an additional $1 million of victim money to purchase an empty lot next door.

The investors were also reassured by Madad’s prominence in his community, which he enhanced with interviews and profiles in media serving Pakistani-Americans.  During these interviews, Madad touted his day-trading technique, which he claimed was always profitable. Madad used victims’ money to make contributions to numerous charities in Pakistan, India, Egypt and the United States. More than $1 million donated to charity and U.S. political figures was money that Madad misappropriated from victims. Many of the victim-investors were invited to fundraisers and other events that Madad hosted, including a dinner with former Pakistan President General Pervez Musharref at Madad’s home in Diamond Bar.

Although Madad returned approximately $17.7 million to investors, much of this was through Ponzi payments, meaning that the money came from funds entrusted to him by other investors, rather than from profits or interest he had earned.

“Nothing can account for defendant’s criminal conduct other than arrogance and greed,” prosecutors wrote in a sentencing brief.

Madad’s scheme collapsed in March 2011 when one investor asked for his money back and Madad was unable to return it. Madad claimed that the investor’s money was in UBS accounts in Switzerland, which he attempted to corroborate with “account statements.” However, these statements were fake, and prosecutors established at the sentencing hearing that Madad created them himself in an effort to cover-up his scheme. The significant sentence that Judge Anderson imposed today was partially based on the fact that Madad attempted to obstruct justice by giving these phoney UBS statements to the government in an effort to derail its investigation. 

More than 40 victims attended the hearing this morning, with six of them addressing the Court and explaining that their losses represented life savings that they had hoped to use to pay for their children’s education and their own retirement.        Madad was also sentenced today for his conviction on tax fraud charges for failing to report the income he generated from the Ponzi scheme. Madad admitted in court that he under-reported his income for tax year 2009 by approximately $4.9 million on tax returns filed with the Internal Revenue Service, and the government established that Madad had under-reported his income for tax years 2007-2008 and 2010 by an additional $9.4 million.

Judge Anderson emphasized the deterrent effect of the sentence he imposed today. “The tax system and our system of justice rely on honesty and the good faith of the American public,” the judge said. “The integrity of these systems rests on deterrence.”

Prior to and following Madad’s arrest in October 2012, pursuant to court-authorized warrants, the government seized a Mercedes-Benz C63, numerous pieces of diamond and other precious gemstone jewelry, and funds that were traceable to investor money. The government has also recovered the victim money donated to some of the charities. As part of his agreement with the government, Madad has agreed to forfeit his Diamond Bar mansion, the Mercedez-Benz, 68 pieces of jewelry, and other luxury items, including silk and wool handmade Turkish carpets. Madad also agreed to pay the IRS approximately $5 million in unpaid taxes for tax years 2006 through 2010.

The case against Madad is the result of an investigation by the Federal Bureau of Investigation and IRS - Criminal Investigation.

Release No. 13-084

SANTA ANA, California – Seven Los Angeles-area residents have been charged with conspiracy to commit bank fraud for allegedly participating in an identity theft scheme that targeted hundreds of JP Morgan Chase & Co. account holders across the nation and caused more than $1 million in losses.

Six of the defendants were taken into custody earlier this week by special agents with the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and the United States Secret Service. The seventh defendant is a fugitive who is currently being sought by authorities.

According to a criminal complaint filed in federal court on June 13, the defendants obtained confidential information belonging to Chase account holders, including birthdates and Social Security numbers. Armed with the stolen information, members of the organization posed as bank clients and withdrew money from the accounts of Chase customers, many of whom were elderly victims.

The accused ringleader – Hardy Jones, 64, of South Los Angeles (90043) – was arrested Wednesday. During his initial court appearance Wednesday afternoon, Jones was ordered held without bond and an arraignment was scheduled for him and the other defendants on July 8.

The criminal complaint alleges that, after obtaining confidential information belonging to Chase clients, Jones directed “runners” to go to Chase branches to obtain money from victims’ accounts. The runners received a cut as payment, typically one-fourth to one-third of the amount withdrawn. In addition to banks in the Los Angeles area, the criminal complaint describes unauthorized withdrawals at Chase branches in Illinois, Texas and Wisconsin.

When federal investigators executed a search warrant at Jones’ residence in March, they recovered numerous counterfeit driver’s licenses, Social Security cards and credit cards bearing the names of Chase account holders. Investigators also recovered detailed ledgers containing the names of Chase clients, their bank account numbers and other identifying information.

Also charged in the criminal complaint is Llewellyn Dickson, 48, of South Los Angeles (90044). Dickson, who also was taken into custody Wednesday, is suspected of helping oversee the fraud scheme and transporting runners to the banks to make the unauthorized withdrawals.

The remaining defendants named in the complaint allegedly served as runners who impersonated bank clients. They are: Raymond Goodie, 56, of Long Beach; who was arrested Wednesday;

Takisha Johnson, 37, of South Los Angeles (90061); who surrendered on Thursday;

Andrea Hadley, 44, of South Los Angeles (90044); who surrendered on Thursday;

Patricia Green, 59, of the Watts district of Los Angeles; who surrendered on Thursday; and

Brigette Boylan, 50, of Inglewood, who is fugitive being sought by authorities.

All seven defendants are charged with conspiracy to commit bank fraud, which carries a statutory maximum penalty of 30 years in federal prison.

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

In addition to the FBI, HSI and the Secret Service, the United States Postal Inspection Service has provided substantial assistance with the case.

Anyone with information about this case – or who has information concerning the whereabouts of Boylan – is encouraged to contact the FBI at (310) 477-6565 or HSI at 1-866-DHS-2ICE (or visit http://www.ice.gov/exec/forms/hsi-tips/tips.asp).

Release No. 13-081

Richard A. Bailey, 57, of Las Vegas, Nevada has been convicted of securities fraud involving the willful distribution of unregistered shares in Gateway Distributors, Ltd., United States Attorney André Birotte Jr. announced today.    Following a three-day trial in federal district court in Los Angeles, on June 13, 2013 a jury returned a unanimous verdict finding Bailey had violated the securities laws in April and May 2004.

According to evidence presented at trial, Bailey, the former CEO and Chief Operating Officer of Gateway Distributors Ltd., a publicly-traded company whose main business involved the sale of nutritional supplements, paid over $1 million dollars worth of the corporation’s stock to Stephen Owens during a two-month period in 2004 as purported consulting fees for services provided by Owens.   Shortly thereafter, Owens liquidated the shares and wired hundreds of thousands of dollars to escrow accounts where Gateway was purchasing a resort in Utah and an office building in Las Vegas.  Prosecutors charged that the stock payments to Owens were a sham and violated the securities laws because they were not paid to Owens for bona fide services he actually performed and were paid instead with the illegal intention of raising capital for the corporation.  

At trial, the government presented evidence that the company’s financials were in trouble in 2004 and that the large stock distributions to Owens, which were immediately liquidated for the benefit of the company, were used as a means to raise capital for the company in a manner that violated the securities laws.   

The case results from an investigation by the Federal Bureau of Investigation and the United States Internal Revenue Service - Criminal Investigation Division.  Bailey is scheduled to be sentenced on September 23, 2013 by United States District Judge Otis D. Wright II.

Release No. 13-081

LOS ANGELES – A former Arizona resident who previously admitted running a “work-at-home” telemarketing fraud scheme that caused thousands of victims to lose more than $16 million has been sentenced to 78 months in federal prison.

Matthew Craig Rubin, 46, who until 2006 resided in Scottsdale, Arizona, was sentenced yesterday afternoon by United States District Judge R. Gary Klausner. In addition to the 6½-year prison term, Judge Klausner ordered Rubin to pay a $16 million judgment obtained for his fraud victims by the Federal Trade Commission.

Matthew Rubin – along with his brother, Andrew Rubin – ran Medicor, LLC, a Van Nuys-based marketing company that deceived customers into believing that the customers could set up home-based medical billing businesses. Matthew Rubin and his brother executed a scheme to defraud consumers who purchased medical billing software, in part by making false claims about customers receiving a list of doctors who needed medical billing services.

Medicor placed advertisements in the “help wanted” section of numerous publications. Generally, the advertisements stated that a person could earn $20 to $40 an hour from home by helping doctors submit medical bills to insurance companies. Between July 1999 and March 2001, Medicor sold more than 30,000 Kwic-Claim Medical Billing Software packages for approximately $400 each, but only 65 people were actually able to successfully bill using Medicor software.

Matthew Rubin also set up National Business Information Systems (NBIS), which functioned solely as a reference for Medicor. Following a script provided by Matthew Rubin, Medicor employees referred potential Medicor customers to NBIS, which existed solely to provide positive references for Medicor.

In September 2005, Matthew Rubin pleaded guilty to two counts of money laundering and one count of witness tamperingadmitting that he laundered the proceeds of a telemarketing fraud scheme through foreign bank accounts. Matthew Rubin also admitted that he persuaded the former controller of his company to lie in the Federal Trade Commission case against him and his company.

In 2006, Andrew Rubin, pleaded guilty to two counts of money laundering related to the telemarketing fraud scheme and, in 2007, was sentenced to three years in prison and three years of supervised release. Two weeks ago, Judge Klausner sentenced Andrew Rubin to another year in prison for violating the terms of his supervised release.

In 2001, the Federal Trade Commission filed a civil lawsuit against Medicor and the Rubins in United States District Court in Los Angeles. During this litigation, Rubin convinced the Medicor controller to lie for him so that he would be excluded from a federal court injunction and asset freeze order. Free from the asset freeze, Rubin wire transferred his fraud proceeds from New Zealand to the U.S. and withdrew $665,000 in $100 bills from his bank account. In 2002, the FTC prevailed in the lawsuit, and a federal judge ordered Medicor and the Rubins to pay more than $16.5 million (see: http://www.ftc.gov/opa/2002/07/medicor.shtm).

In 2006, just before he was to be sentenced in this case, Matthew Rubin was arrested in Arizona on suspicion of committing another fraud. He was released on bond in that case, and he fled to Mexico, where he remained a fugitive for well over five years. With the assistance of the U.S. Postal Inspection Service and the Mexican government, Rubin was returned to the United States last year.

The criminal case against Rubin was investigated by the IRS - Criminal Investigation and the United States Postal Inspection Service.

Release No. 13-079

LOS ANGELES – The latest federal enforcement actions against the commercial marijuana industry in California came today as federal authorities moved against 103 illegal marijuana stores across Los Angeles County.

Out of the 103 storefronts targeted today, federal authorities sent warning letters to 28 stores in Long Beach, 71 in Los Angeles, and four in the Antelope Valley. Two of the stores in Long Beach are housed in buildings that are the subject of asset forfeiture lawsuits that were filed today in United States District Court.

Today’s federal actions involve all known marijuana stores in the City of Long Beach; the City of Lancaster; the high desert community of Pearblossom; and the parts of Los Angeles served by the Newton, Rampart and Harbor divisions of the Los Angeles Police Department.

In federal court this afternoon, prosecutors filed two asset forfeiture lawsuits against properties in Long Beach where marijuana stores are currently operating. The two civil asset forfeiture complaints state: “Under federal law, the distribution of marijuana (a Schedule I controlled substance under Title 21) is prohibited except under very limited circumstances not applicable here. The government further alleges on information and belief that the operation of a marijuana store on the defendant property was not (and is not) permitted under California law.”

The forfeiture lawsuits allege that the owners of the properties knowingly allowed commercial marijuana stores – and, in one case, a commercial grow – to operate. The buildings in Long Beach named in the asset forfeiture lawsuits currently house:

The Healing Tree Holistic Association (in a store which, in 2011, operated under the name Royalty Collective) and a related indoor marijuana cultivation facility in a strip mall at 3721 East Anaheim Street, which have been the subject of at least five state search warrants over the past two years; and

Naples Wellness Center at 5750 East 2ND Street, which has received at least 15 administrative citations from the City of Long Beach over the past 15 months, and in April was the subject of two state search warrants executed by the Long Beach Police Department.

In February 2012, Long Beach enacted an ordinance banning marijuana stores in the city.

In conjunction with the filing of the asset forfeiture complaints, the United States Attorney’s Office today mailed out letters to the property owners and operators of 26 additional marijuana stores that are either currently operating or were recently closed in Long Beach. The warning letters give the operators and landlords 14 days to come into compliance with federal law or risk potential civil or criminal actions.

“Marijuana dispensaries have posed significant challenges to the City of Long Beach. We always welcome the opportunity to partner with federal authorities in an effort to address these illegal operations that affect the quality of life in our community,” said Long Beach Police Chief Jim McDonnell.

In addition to the marijuana stores in Long Beach, federal prosecutors sent warning letters to three pot shops in Pearblossom, one in Lancaster and 71 in Los Angeles. The areas in Los Angeles that were targeted are served by three LAPD divisions: Newton, which serves portions of South Los Angeles and downtown; Rampart, which serves areas west and northwest of downtown; and Harbor, which serves San Pedro, Wilmington and Harbor Gateway.

Today’s enforcement actions in Los Angeles County follow similar actions across the seven-county Central District of California. Starting in October 2011, prosecutors began filing asset forfeiture lawsuits and sending letters to marijuana operations in selected areas in the Central District of California (see, for example: http://www.justice.gov/usao/cac/Pressroom/2013/053.html).

With the lawsuits filed this morning, the United States Attorney’s Office has filed a total of 32 asset forfeiture complaints against properties housing illegal marijuana operations in the district. Twenty-three of those actions have been resolved with the closure of the marijuana stores and consent decrees. In some cases, consent decrees required property owners to disgorge rent payments made by a marijuana store operator, and in all cases the consent decrees required the property owners to agree, among other things, that they would no longer rent to people associated with illegal marijuana operations or the property would be subject to an immediate forfeiture to the government.

Including today’s efforts in Long Beach, Los Angeles and the Antelope Valley, federal enforcement actions – asset forfeiture lawsuits, warning letters and related activity – have now targeted more than 625 illegal marijuana businesses in the Central District of California. The majority of those businesses previously targeted are now closed, are the subject of eviction proceedings by landlords, or have been the subject of additional federal enforcement actions.

In October 2011, the four United States Attorneys in California announced the coordinated enforcement actions targeting illegal marijuana cultivation and trafficking (see: http://www.justice.gov/usao/cac/Pressroom/2011/144a.html).

As part of this project, the United States Attorney’s Office is working with the Drug Enforcement Administration and IRS - Criminal Investigation. Today’s enforcement actions involved the cooperation of the Los Angeles District Attorney’s Office.

Release No. 13-080

LOS ANGELES – A teacher at Royal Oak Middle School in Covina, who allegedly met an undercover operative in his classroom so they could view child pornography, has been arrested after investigators determined that he was distributing child pornography via the Internet.

John David Boyle, 49, of Glendora, was arrested yesterday by special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) after their investigation determined that Boyle may have molested children. Boyle, who is currently in custody, has a bond hearing scheduled for this afternoon.

During the course of this investigation, Boyle engaged in online chats with an undercover agent, believing that the undercover agent shared his sexual interest in young boys, according to the affidavit in support of the complaint. Boyle set up an in-person meeting with the undercover agent in his classroom at the school on Sunday, believing that the purpose of the meeting was to engage in sexual activity while watching child pornography together. When the undercover agent arrived and presented Boyle with child pornography, he took possession of it. At that time, other agents entered the classroom to interview Boyle.

While Boyle was not arrested at that time, he made statements to investigators and allowed them to takeover several of his online accounts, which included JuniorHighCoach@yahoo.com. While working with that account late Sunday and Monday, agents discovered that Boyle had used the account to distribute child pornography, the complaint alleges. Agents were also able to access Boyle’s Skype account, where they found evidence that he may have had sexual contact with minors.

Agents obtained a search warrant for Boyle’s computer systems, and on Tuesday they discovered videos depicting child pornography. As a result of this investigation, Boyle was arrested Wednesday morning.

Based on the evidence obtained in this case, authorities believe there may be unknown victims of child molestation by Boyle. Anyone with information about this matter is encouraged to call HSI’s toll-free tip line at 1-866-DHS-2ICE (1-866-347-2423) or submit a information using HSI’s online tip form at http://www.ice.gov/exec/forms/hsi-tips/tips.asp.

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

The charge of distribution of child pornography carries a mandatory minimum penalty of five years in federal prison and a maximum possible penalty of 20 years in prison.

The investigation into Boyle is being conducted by HSI and the Internet Crimes Against Children Task Force (ICAC).

Release No. 13-078

LOS ANGELES – Two brothers who made tens of thousands of dollars of contributions to charitable organizations operating under the umbrella of a New York-based orthodox Jewish group known as Spinka pleaded guilty today to tax fraud for taking tax deductions for contributions that were refunded by the non-profits.

Alan Goldstein, 78, and David Goldstein, 74, both of the Hancock Park district of Los Angeles, pleaded guilty before United States District Court Judge John F. Walter. Alan Goldstein pleaded guilty to one count of subscribing to a false income tax return and one count of tax evasion. David Goldstein pleaded guilty to two counts of tax evasion.

According to court documents, the Goldsteins each entered into an arrangement under which they would make contributions to Spinka charitable organizations -- including Yeshiva Imrei Yosef, Mosdos Hachesded, Central Rabbinical Seminary, and Kollel Ner A’Avrohom – and in return agents of Spinka would secretly refund 90 percent of the contributions through various third parties. In addition, agents of Spinka would mail charitable contribution receipts for the full amounts of the contributions.

According to plea agreements filed in federal court, in 2005 and 2006, Alan Goldstein made $135,000 in contributions to charitable organizations operating under the Spinka umbrella. Alan Goldstein accepted kickbacks equaling 90 percent of his contributions on these Spinka-related contributions. Similarly, for the same two years, David Goldstein made $145,000 in contributions to Spinka-related entities, and he received 90 percent of the money back through kickbacks. David Goldstein received $356,400 in kickbacks on behalf of himself and his brothers.

Both defendants filed their respective 2005 and 2006 tax returns claiming the inflated contribution amount for the purpose of tax fraud. Consequently, the tax loss to the government was $45,961 with respect to Alan Goldstein, and $46,531 with respect to David Goldstein, according to the plea agreements.

Spinka is a religious group within Orthodox Judaism that operated a variety of charitable organizations, contributions to which could be tax deductible under the Internal Revenue Code. Prior to the Goldsteins, 16 other defendants pleaded guilty to charges arising from an investigation of kickbacks provided by Spinka charitable organizations to wealthy contributors.

The Goldsteins are scheduled to be sentenced by Judge Walter on August 19, 2013. At sentencing, Alan Goldstein faces a statutory maximum sentence of eight years in federal prison and a fine of $500,000. David Goldstein faces a statutory maximum sentence of 10 years in prison and a fine of $500,000. In addition, each defendant may be ordered to pay full restitution for the tax loss, which is estimated to be $55,145 for Alan Goldstein and $70,039 for David Goldstein.

The investigation and prosecution of the Goldsteins was conducted by IRS Criminal Investigation’s Los Angeles Field Office.

Release No. 13-076

SANTA ANA, California – A retired colonel in the California Army National Guard who admitted running an investment scheme that caused two dozen victims to suffer a losses of nearly $3 million was sentenced today to 97 months in federal prison.

Timothy Melvin Murphy, 70, of Orange, was sentenced this afternoon by United States District Judge David O. Carter. In addition to the prison term, Judge Carter ordered Murphy to pay full restitution – $2,953,758 – to his fraud victims.

In April 2012, Murphy pleaded guilty to one count of mail fraud, admitting that he executed a scheme through his business, the Orange-based Capital Investors Inc., by offering fraudulent investment opportunities that typically yielded annual returns of 12 percent and, in some cases, came with “guaranteed” rates of return. Murphy falsely told most of the investors that their money would be invested in truck-leasing companies based in Gulfport, Mississippi. As part of the scheme, Murphy created false account statements to mislead his clients into thinking that their money was properly invested and was generating the promised income. The false documentation included bogus account statements that appeared to be issued by “The Sterling Trust Company,” a third-party financial services firm.

Instead of using the victims’ money to make investments, Murphy used the funds to make Ponzi payments to earlier investors and to pay for a variety of personal expenses, including refurbishing and maintaining classic automobiles, making payments on home loans and buying a members at a weight loss clinic.

While in the California Army National Guard, Murphy served as the commanding officer of the Joint Forces Training Base in Los Alamitos.

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

Release No. 13-073

Former Chief of KPMG’s Audit Practice in Southwest Admits He Passed Confidential Information in Exchange for Cash Bribes

LOS ANGELES – A former senior partner at the accounting firm KPMG LLP has agreed to plead guilty to securities fraud for his involvement in an insider trading scheme in which he provided confidential information to a man who paid him with cash bribes and luxury items.

Scott London, 50, of Agoura Hills, who oversaw KPMG’s audit practice for the Pacific Southwest, was charged today in a criminal information with one count of securities fraud through insider trading. In a plea agreement also filed today in United States District Court, London agreed to plead guilty to the felony count that carries a statutory maximum penalty of 20 years in federal prison.

According to court documents, London provided confidential information about KPMG clients to Bryan Shaw, a close friend of his, over a period of several years. Shaw then used this information to make highly profitable securities trades that Shaw has admitted earned him more than $1 million dollars in illegal proceeds.

“Over the course of several years, Mr. London secretly fed confidential, insider information to a man he knew would use that information to make trades,” said United States Attorney André Birotte Jr. “Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field. As a result of his illegal conduct, Mr. London has agreed to plead guilty and will face a lengthy prison term.”

Bill L. Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office, stated: “This case illustrates the FBI’s commitment to investigating insider trading and working to ensure integrity in our financial markets. “We will continue to work with our partners to identify, investigate and prosecute securities fraud cases in order to maintain that confidence in the marketplace.”

London was a senior partner at KPMG who supervised more than 500 accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA, Inc. As a result of his position, London had access to confidential information about KPMG’s clients before that information was disclosed to the public. In his plea agreement, London admitted that he disclosed inside information to Shaw regarding at least 14 separate earnings announcements or acquisitions for KPMG clients, including:

Herbalife’s May 2, 2011 Earnings Announcement;

United Rentals’ December 16, 2011 Announcement of its Acquisition of RSC Holdings;

Herbalife’s February 21, 2012 Earnings Announcement;

Deckers Outdoors’ February 23, 2012 Earnings Announcement;

Union Bank’s March 12, 2012 Announcement of its Acquistion of Pacific Capital Bancorp; and

Deckers Outdoors’ April 26, 2012 Earnings Announcement

Shaw has admitted that he gave London tens of thousands of dollars in cash in exchange for the inside information about KPMG’s clients. According to court documents, Shaw also said that he typically arranged to meet London on a side street near Shaw’s business so that he could give London bags containing $100 bills wrapped in $10,000 bundles. Shaw also said that he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.

On two occasions earlier this year, acting at the direction of the Federal Bureau of Investigation, Shaw met with London and gave him cash as supposed payment for confidential information about KPMG clients, according to court documents. In the first instance, London met with Shaw on a street corner in Encino and accepted a bag with $5,000 in cash as payment for confidential information about Herbalife’s earnings announcement in February 2013. London later met with Shaw in a parking lot in Woodland Hills and accepted another bag with $5,000 in cash, which was supposedly London’s share of the illegal profits from trades based on confidential information about Decker’s February 2013 earnings announcement.

London is scheduled to appear in United States District Court on June 17 for an arraignment.

Shaw pleaded guilty to a conspiracy charge on May 20 before United States District Judge George H. Wu, who scheduled a sentencing hearing for Shaw on September 16 (for background on Shaw’s plea, see: http://www.justice.gov/usao/cac/Pressroom/2013/063.html).

The criminal investigation into the insider trading scheme was conducted by the Federal Bureau of Investigation.

In a separate action filed last month, the U.S. Securities and Exchange Commission filed a civil lawsuit against London and Shaw (see: http://www.sec.gov/litigation/litreleases/2013/lr22670.htm).

Release No. 13-074

LOS ANGELES – Three Ventura residents were sentenced today to federal prison – with one defendant being ordered to serve more than 17 years – for their roles in an investment scheme that victimized hundreds of investors across the United States and caused losses of more than $27 million.

The three defendants – two brothers and woman, all of whom share a house in Ventura – fraudulently raised money by telling victim-investors that funds would be used to purchase Ad Toppers, a video device that can be placed on ATMs or vending machines and used to display advertisements.

The defendants sentenced today were: Alan G. Flesher, 65, the leader of the scheme, who was sentenced to 210 months in federal prison;

Wayne D. Flesher, 62, Alan’s brother, who was sentenced to 72 months in prison; and

Nancy Carol Khalial, 65, who was sentenced to 48 months in prison.

All three were sentenced by United States District Judge Terry J. Hatter Jr., who also ordered the defendants collectively to pay $27,377,470 in restitution.

All three defendants pleaded guilty last July to 17 counts of mail fraud and admitted that they used Oxnard companies called Unlimited Cash, Inc. (UCI) and Douglas Network Enterprises, Inc. (DNE) to run the Ponzi scheme. The defendants told victims that UCI would sell ATM machines and “Ad Toppers” – computer monitors capable of displaying video advertisements – and DNE would place the devices in commercial locations that would generate income. Victims were told they would earn income from ATM transaction fees and advertisement revenue generated by Ad Toppers which would show ads for companies such as Coca-Cola, Gold’s Gym and Paramount Pictures. Even though the scheme took in approximately $41 million from approximately 790 victim-investors from approximately 2001 to 2005, the defendants did not place most of the ATMs and Ad Toppers sold to investors.

“In other words, defendants sold nonexistent ATMs and Ad Toppers and paid the later investors with the funds from the earlier investors,” prosecutors wrote in court documents filed in relation to today’s sentencings.

The defendants used the majority of investor funds to pay personal expenses and to continue operating the fraudulent scheme by paying personal salaries, sales commissions and by making Ponzi-style payments.

This investigation was conducted by the FBI and the United States Postal Inspection Service, which received assistance from the Securities Exchange Commission.

Release No. 13-072

LOS ANGELES – The owner of a Mission Hills medical clinic who sold a bogus cancer cure to dozens of victims across the country as part of a “treatment” program that prosecutors said was “despicable, cruel and heinous” and hastened the death of some patients was sentenced today to 14 years in federal prison.

Christine Daniel, 58, of Santa Clarita, who operated a clinic under names such as the Sonrise Wellness Center, was sentenced to 168 months in prison by United States District Judge Robert J. Timlin, who remanded Daniel into custody following today’s hearing.  In addition to the prison term, Judge Timlin ordered that Daniel forfeit a total of $1,277,083.

Following a federal court trial in September 2011, a jury convicted Daniel of four counts of mail and wire fraud, six counts of tax evasion and one count of witness tampering.

The basic facts of the case are that Daniel, a medical doctor and prominent Pentecostal minister, fraudulently marketed and collected more than $1 million for a medical treatment that she and her employees claimed could cure many diseases and conditions, including cancer, multiple sclerosis, stroke, Alzheimer’s Disease, Parkinson’s Disease, diabetes and hepatitis. Daniel claimed that her bogus cancer cure had a success rate of between 60 percent and 80 percent for the most advanced forms of cancer.

The evidence presented at trial showed that Daniel’s treatment did not cure anyone of cancer, nor was it was made from herbs from around the world or blended for an individual patient, as she has promised patients. Chemical analyses determined that the product contained sunscreen preservative and beef extract flavoring, among other ingredients, none of which could have had any effect on cancer or other diseases, according to expert testimony.

“The scope of Daniel’s fraud was breathtaking,” said United States Attorney André Birotte Jr. “Daniel robbed victims of more than money - she also stole their hopes and dreams for a cure.  Daniel is responsible for a shockingly cold-hearted fraud that has brought her a richly deserved federal prison sentence.”

 Lisa Malinowski, Special Agent in Charge of the Food and Drug Administration’s Office of Criminal Investigations (OCI), Los Angeles Field Office, stated: “The defendant in this case exhibited a blatant and heartless disregard for the desperately sick and vulnerable patients she repeatedly victimized. Today’s sentence aptly reflects the consequences of Dr. Daniel’s actions and demonstrates OCI’s commitment to relentlessly investigating modern-day snake oil salesmen that prey on sick and defenseless victims.”

The evidence presented during the trial showed that Daniel used her status as a Pentecostal minister to create a bond of trust with members of the Evangelical Christian community, an affinity that gave her access to victims to whom she sold bogus hope and worthless treatments. Daniel promoted the product under a variety of names – including “C-Extract,” “the natural treatment” and “the herbal treatment” – through a program televised on the Trinity Broadcasting Network.

Daniel and her employees falsely claimed that the product was made with herbs from around the world and was manufactured in a laboratory according to the needs of each patient. Depending on the purported level or strength of the herbal product, Daniel would charge her customers up to $4,270 for one week’s worth of the herbal product.  She offered a six-month treatment program for between $120,000 and $150,000.

Daniel “personally met with her victims in her medical office, looked them in the eyes, and represented that she had a miracle, herbal cancer cure that could save their lives,” according to the government’s sentencing memorandum.

During the trial, the jury heard testimony from 28 victim-patients, or close family members of victims who had died while taking Daniel’s product. Some described how Daniel urged them to avoid conventional cancer treatments, such as radiation or chemotherapy, because such therapies would reduce the efficacy of Daniel’s herbal “cure.” Family members testified that Daniel also forbid her cancer patients to take any pain relief medication for the same reason. Some of these patients spent the last few months of their lives in agony as the cancers spread throughout their bodies. The evidence presented at trial showed that a significant percentage of Daniel’s patients died within three to six months after they started taking Daniel’s bogus cure.

According to testimony at trial, one victim who had been diagnosed with metastatic breast cancer contacted Daniel and was told that chemotherapy would not help. After the victim traveled to Southern California, Daniel told the victim that the herbal treatment program would shrink her tumors and kill her cancer cells. For almost five months, the victim and her husband paid Daniel thousands of dollars for the herbal product. After taking the herbal “cure” for four months and within two weeks after Daniel pronounced her to be cancer-free at a party held for patients, the victim died. The cancer had spread from her breasts to her bones and brain.

“Daniel repeatedly demonstrated a merciless and callous indifference to the suffering of her patients and their family members,” prosecutors wrote in court papers.

Daniel and employees working at her direction induced approximately 60 victims to send more than $1.2 million to Daniel’s Sonrise clinic. In an attempt to operate the business under the guise of a non-profit organization, Daniel instructed patients to classify their medical service payments as donations. According to documents filed with the court, for the tax years 2002 through 2004, Daniel failed to report nearly $1.3 million on her corporate income tax returns, which resulted in a tax loss to the government of approximately $438,809. Similarly, Daniel failed to report approximately $315,109 on her personal income tax returns for the same time period, resulting in an additional tax loss to the government of $73,895.

“Christine Daniel used her position of trust -- as a medical doctor and Pentecostal minister -- to defraud vulnerable cancer patients in a $1.2 million dollar scheme,” said Jose A. Gonzalez, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “Defendant Daniel’s convictions for failing to pay federal income taxes on the proceeds of her fraudulent cancer fraud scheme confirm her greed and the criminal nature of her character.  Today, Justice is served, and Christine Daniel is being held accountable for her criminal actions.”

The evidence presented at trial showed that Daniel attempted to influence the testimony of at least two witnesses who were called to testify before the grand jury.  One of those witnesses, a long-time patient of Daniel, admitted during trial that he lied to both law enforcement officers and the federal grand jury after being improperly influenced by her.

The investigation of Daniel was conducted by IRS - Criminal Investigation, the U.S. Food and Drug Administration’s Office of Criminal Investigations, and the Medical Board of California.

Release No. 13-071

LOS ANGELES – A father and son team from Orange County who were described by prosecutors as being “at the apex of the rhino horn smuggling pyramid within the United States” each were sentenced today to spend several years in federal prison for their convictions on federal smuggling and money laundering charges.

Vinh Chuong “Jimmy” Kha, 49, of Garden Grove, was sentenced to 42 months in federal prison for overseeing a U.S.-based operation that prosecutors argued played a direct role in a huge increase in rhinoceros poaching in Africa over the past several year.

Felix Kha, 27, the son of Jimmy Kha, also of Garden Grove, was sentenced to 46 months in federal prison for working with alongside his father in the scheme that generated millions of dollars that provided them with profits, as well as money to purchase more contraband rhino horns and pay bribes to customs officials in at least one other nation.

The Khas and Win Lee were sentenced this afternoon by United States District Judge Christina A. Snyder, who said the Khas engaged in “conduct not acceptable by anyone in the world.” Calling the matter a “serious crime against the environment and wildlife,” Judge Snyder said: “There are portions of Africa where the rhino is gone, and Lord knows if they will ever come back.”

In addition to the prison terms, the Khas were each ordered to pay a $10,000 fine. Additionally, Judge Snyder ordered them to pay a cumulative total of more than $185,000 in tax fraud penalties to the Internal Revenue Service. Both Khas, along with the father’s company, were also ordered to pay a total of $800,000 in restitution to the Multinational Species Conservation Fund, a fund managed by the U.S. Fish and Wildlife Service (FWS) to support international efforts to protect and conserve rhinos and other critically endangered species around the world.

“The Khas’ smuggling operation fueled international demand and played a significant role in driving the price of rhino horn to nearly $25,000 per pound,” said United States Attorney André Birotte Jr. “It was that rising value of rhino horn that encouraged ruthless poachers to scour the South African wilderness in search of profits. The Khas played a role in pushing species like the African black rhino to the brink of extinction, which is why we aggressively prosecuted this case and sought lengthy prison terms.”

A third defendant in the case, Win Lee Corporation, which is owned by Jimmy Kha, was sentenced today to five years of probation and ordered to pay a $100,000 fine after it pleaded guilty to charges of smuggling and wildlife trafficking.

The Khas each pleaded guilty last September to five felony counts – conspiracy, smuggling, wildlife trafficking in violation of the Lacey Act, money laundering and tax evasion. The Khas were among 14 individuals charged with federal crimes as a result of “Operation Crash,” an ongoing FWS-led investigation named for the word used to describe a herd of rhinoceros (see, for example:  http://www.fws.gov/home/feature/2012/servicecrashesrhinotrafficking1.html).

“On average, a rhino is slaughtered in Africa every 11 hours to feed the black market for their horns,” said FWS Director Dan Ashe. “Criminals in this country who are cashing in on this illegal trade should know that the United States will hold them accountable for their crimes and do everything possible to protect wild populations of rhinos.”

With no known predators other than humans, rhinoceros are a prehistoric species and one of the largest herbivores on earth. All rhinoceros species are protected under United States and international law, and the black rhinoceros is listed as an endangered species. Despite national and international protection efforts dating back nearly 40 years, the demand for rhino horn and black market prices has skyrocketed in the past several years due to the value that some cultures have placed on the horns for ornamental carvings, good luck charms or alleged medicinal purposes. For several decades, rhino poaching was a relatively isolated event in countries like South Africa, where the number of wild rhinos illegally killed there averaged 15 animals per year – at least until 2008 when the Khas began trafficking rhino horns. At the peak of the Khas’ wildlife trafficking conspiracy in 2011, 448 wild rhinos were slaughtered that year for their horns in South Africa alone. Between 2007 and the end of 2011, the poaching of wild South African rhinos increased 3,400 percent.

In sentencing papers filed in United States District court, prosecutors argued that “although they themselves did not shoot the rhinos, defendants Jimmy and Felix Kha share direct culpability for the recent spike in the price of rhino horn, the increase in Vietnamese and Chinese demand for rhino, and thus the consequent wholesale slaughter of rhinos in the wild in Africa in recent years.”

Over the course of about two years – from January 2010 through February 2012 – the Khas conspired with individuals throughout the United States to purchase white and black rhinoceros horn with the full knowledge that these animals were protected by federal law as endangered and threatened species. The horns acquired by the Khas during the course of their conspiracy had a market value of up to $2.5 million.

In their plea agreements, both defendants admitted that they purchased the horns in order to export them overseas to be sold and made into libation cups or used for traditional medicine, made at least one illegal payment to Vietnamese customs officials to ensure clearance of horn shipments to that country, and evaded income taxes owed in 2009 and 2010.

 “The Khas engaged in egregious criminal conduct by taking the horns of a species on the brink of extinction and making millions of dollars in the illegal trade in rhino horns,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “The Khas’ sentence sends a strong message that those who violate the law by illegally trading in rhino horns will be held accountable to the fullest extent of the law.”

Operation Crash is an investigation being conducted by the U.S. Fish and Wildlife Service, which has received extensive assistance from the U.S. Postal Inspection Service, IRS - Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The case against the Khas was prosecuted by the United States Attorney’s Office for the Central District of California and the Department of Justice’s Environmental Crimes Section.

Release No. 13-070