Eastern District of California

SACRAMENTO, Calif. — Thomas Jaime Orozco, 35, of Stockton, was sentenced Wednesday by U.S. District Judge Kimberly J. Mueller to 12 years in prison for conspiring to distribute methamphetamine, Acting United States Attorney Phillip A. Talbert announced.

According to court documents, Orozco was the leader of a methamphetamine distribution conspiracy in San Joaquin County in 2012. He supplied five co-defendants with methamphetamine that they, in turn, sold to an undercover agent and others. On two occasions, an undercover agent purchased a total of about 1.7 pounds of methamphetamine from Orozco’s co-conspirators. On November 29, 2012, the undercover agent agreed to meet with Orozco in Lodi to purchase 10 pounds of methamphetamine. Co-conspirators Vincent Camarillo, 29, and Theodore Ohagen IV, 25, both of Stockton, came with Orozco. Agents arrested all three at the site of the deal and discovered that Camarillo was carrying a stolen, loaded handgun concealed in his waistband.

After the arrests, police found at the site of the last deal, which was a home occupied by co-conspirator Jeffrey Lamendola, 53, of Lodi, two additional loaded handguns, four pistol magazines, 70 rounds of ammunition, 55 grams of methamphetamine, a digital scale, baggies, needles, and 215 grams of marijuana. A Lodi residence shared by Camarillo and Ohagen contained two bulletproof vests, seven rifle magazines, one pistol magazine, about 700 rounds of ammunition, nearly $15,000 in cash, 12 cellphones, 24 grams of cocaine, and nearly 10 kilograms of marijuana.

This case was the product of an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Assistant United States Attorney Amanda Beck prosecuted the case.

“This sentence is a direct result of the tireless work HSI agents and our local law enforcement partners have carried out to disrupt and dismantle drug trafficking rings in a joint effort to keep our communities safe,” said Ryan L. Spradlin, Special Agent in Charge of HSI San Francisco.

After pleading guilty to conspiracy to distribute methamphetamine, Camarillo was sentenced to 10 years in prison on October 28, 2016, and Lamendola was sentenced to seven and a half years in prison on January 6, 2016.

The following defendants in the conspiracy pleaded guilty to using a cellphone for the purpose of drug trafficking and were sentenced as follows: On January 20, 2016, Sarah Torreblanca, 29, of San Jose, was sentenced to four years in prison; on April 9, 2014, Lisa Elliott, 55, of Lodi, was sentenced to three years in prison; and on March 2, 2016, Ohagen was sentenced to four years in prison.

SACRAMENTO, Calif. — Babulal Bera, 83, of La Palma, pleaded guilty today to making excessive campaign contributions and making campaign contributions in the name of another.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting United States Attorney Phillip A. Talbert made the announcement.

The charges were filed in the District Court in Sacramento on Monday. Earlier today, Bera was arraigned and pleaded guilty to both counts before United States District Judge Troy L. Nunley.

According to court documents, in 2010 and 2012, Bera’s son was a candidate for a seat in the United States Congress representing District 3 (2010) and District 7 (2012) from the state of California. With respect to both elections, the candidate’s official federal campaign committee was headquartered in Elk Grove. With respect to both elections, the defendant made the maximum allowable individual contributions to his son’s campaign, and he also solicited friends, family members and acquaintances to make contributions, which he then reimbursed with his own funds. Bera did this to make contributions to his son’s campaign in excess of the contribution limits established by federal law. With respect to the 2010 and 2012 elections, the government has identified over 130 improper campaign contributions involving approximately 90 contributors. To date, the government has identified over $220,000 in reimbursed contributions relating to the 2010 campaign, and over $40,000 in reimbursed contributions relating to the 2012 campaign.

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorneys John Vincent and Philip Ferrari, and Department of Justice Public Integrity Section Trial Attorney Richard Evans are prosecuting the case.

Bera, who was ordered released on his own recognizance, is scheduled to be sentenced by Judge Nunley on August 4, 2016. Bera faces a maximum statutory penalty of five years in prison on each count. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — A Lodi oncologist and his wife, who served as the doctor’s office administrator, have paid the United States $300,000 to settle allegations that they improperly billed Medicare for certain chemotherapy drugs purchased from an unlicensed foreign pharmaceutical distributor, Acting United States Attorney Phillip A. Talbert announced today.

The United States alleged that, between October 2010 and May 2011, Dr. John F. Kiraly and Rena Kiraly billed and received reimbursement from Medicare for such drugs in violation of the federal False Claims Act. Specifically, the Kiralys purchased chemotherapy drugs from Warwick Healthcare Solutions Inc., also known as Richards Pharma, a former United Kingdom-based drug distributer that distributed non-FDA approved drugs throughout the United States. The Kiralys administered certain of these drugs to their patients, billing Medicare. One medication they purchased from Warwick was Altuzan, a drug not approved by the FDA. In addition, the FDA tested a batch of Altuzan that the Kiralys had purchased from Warwick and determined that it was counterfeit, lacking the active ingredient bevacizumab.

“Our District has now pursued and resolved False Claims Act allegations against three doctors for improperly billing Warwick drugs to public insurers,” said Acting U.S. Attorney Talbert. “These cases demonstrate the commitment of our district to preserving the integrity of federal health care programs and ensuring that doctors participating in such programs provide their patients with safe and effective care.”

“Patients getting life-saving prescriptions from their doctors must be able to trust that their medicines have been FDA-proven as safe and effective,” said Steven Ryan, Special Agent in Charge of the Office of Inspector General of the U.S. Department of Health and Human Services. “Our investigators tirelessly pursue those who ignore requirements protecting patient health in order to increase profits.”

“Patients receiving cancer treatment drugs should be able to trust that these drugs have been the subject of the FDA-approval process, which requires that the drugs have been proven to be safe and effective for treating their medical conditions,” said Lisa L. Malinowski, Special Agent in Charge, FDA Office of Criminal Investigations’ Los Angeles Field Office. “The FDA will continue its vigilance over the prescription-drug supply chain to ensure that the drugs reaching patients have been proven to be both safe and effective, and that those who attempt to circumvent the agency’s oversight will be brought to justice.”

The case was investigated by the U.S. Department of Health and Human Services Office of Inspector General and the FDA’s Office of Criminal Investigations. Assistant United States Attorney Vincente A. Tennerelli represented the United States in this matter. The claims settled by this agreement are allegations only, and there has been no determination of liability.

FRESNO, Calif. — Rafael Guzman, 42, of Fresno, pleaded guilty today to conspiracy to distribute and possess with intent to distribute heroin, Acting United States Attorney Phillip A. Talbert announced.

Guzman was indicted on April 9, 2015, with six other defendants including Keith Foster, a former deputy chief of the Fresno Police Department. According to Guzman’s plea agreement, between December 23, 2014, and February 2, 2015, he conspired with Foster to acquire and distribute heroin.

This case is the product of an investigation by the Federal Bureau of Investigation and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Assistant United States Attorneys Melanie L. Alsworth and Duce W. Rice are prosecuting the case.

Guzman is scheduled to be sentenced by United States District Judge Anthony W. Ishii on August 15, 2016. Guzman faces a maximum statutory penalty of 20 years in prison and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Co-defendant Sarah Ybarra previously pleaded guilty to conspiring to distribute marijuana and was sentenced to a one year in prison. The charges against all of the remaining defendants, including Foster, are allegations only; they are presumed innocent until and unless proven guilty beyond a reasonable doubt.

FRESNO, Calif. — Juan Martin Torres, 28, of Firebaugh, was sentenced today by United States District Judge Anthony W. Ishii to 12 years and seven months in prison for enticing a minor to engage in unlawful sexual activity, Acting United States Attorney Phillip A. Talbert announced.

 

According to evidence presented at trial in February 2016, Torres was the director of the Firebaugh Boys and Girls Club. Torres was supervising a 14-year-old boy who often came to that Boys and Girls Club after school to complete 120 hours of community service. Torres sent the boy messages over Facebook that offered to shortcut his community‑service-hours requirement if the boy would agree to sexual acts with Torres. The boy reported the messages to law enforcement.

This case was the product of an investigation by the Firebaugh Police Department, the Fresno County Sheriff’s Office, and the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Assistant United States Attorneys Michael Tierney and Vincenza Rabenn prosecuted the case.

“We trust those in positions like the one held by the defendant to protect our children,” said Acting U.S. Attorney Talbert. “In committing this crime, the defendant committed an incredible breach of trust with the community, and we are grateful for the hard work by our partners in federal and local law enforcement to bring him to justice.”

 “Torres’ heinous violation of the trust afforded to him as a mentor and protector remains appalling,” said Ryan L. Spradlin, special agent in charge of HSI San Francisco. “The sentence is befitting of his disturbing crime and should be seen as a clear message that HSI and our law enforcement partners will make certain that anyone who chooses to exploit innocent children will be held accountable for their actions.”

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

FRESNO, Calif. — Timothy New, 33, of Pensacola, Florida, pleaded guilty today to shipping in interstate commerce, with intent to defraud, misbranded synthetic drugs, commonly known as “spice,” Acting United States Attorney Philip A. Talbert announced.

According to court documents, between September 2012 and May 2103, New and his co‑defendants utilized a manufacturing and distribution operation at a processing lab in Stockton to ship at least 24 tons of misbranded smokeable synthetic cannabinoids that contained the synthetic drugs AM-2201 and XLR11 to smoke shops and retail outlets throughout the United States. They generated in excess of $33 million as a result of the fraudulent sales.

Operating under the guise of legitimacy by companies called Zencense Incense Works LLC, ZenBio LLC, and Biozen LLC, New and his co-defendants received falsely invoiced raw synthetic cannabinoids from China that they used to manufacture and distribute as smokeable synthetic cannabinoids. The drugs were sold under the brand names Bizarro, Orgazmo, Headhunter, Defcon, Neutronium, Sonic Zero, Sonic Boom, Sonic Blast, Shockwave, Hampster, and Posh. To evade detection by federal law enforcement authorities, New and his co-defendants deliberately misbranded and marketed their product as “potpourri” or “herbal incense” that they claimed was “not for human consumption,” but fully intended to be used as a narcotic. New and his co-defendants distributed the drugs to the Stuffed Pipe smoke shops located throughout the Central Valley of California, as well as to numerous other retail establishments throughout the United States.

At the time of the illicit enterprise, AM-2201 was a Schedule I controlled substance and XLR11 was a controlled substance analogue that was publically noticed for scheduling in April, 2013, and was placed under Schedule I as a controlled substance in May, 2013.

Public health and law enforcement agencies have seen the emergence of synthetic drug use. State and local public health departments note that synthetic cannabinoids cause serious adverse health effects, including agitation, anxiety, nausea, vomiting, tachycardia, elevated blood pressure, tremor, seizures, hallucinations, and paranoid behavior. DEA scheduled XLR11 based, in part, on findings of the Center for Disease Control and Prevention that the drug causes kidney damage.

This case is the product of an Organized Crime Drug Enforcement Task Force (OCDETF) investigation by the Drug Enforcement Administration, Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), with assistance from the Food and Drug Administration and the Fresno County Sheriff’s Office. Assistant United States Attorney Karen A. Escobar is prosecuting the case.

 The OCDETF Program was established in 1982 to mount a comprehensive attack against organized drug traffickers. Today, the OCDETF Program is the centerpiece of the United States Attorney General's drug strategy to reduce the availability of drugs by disrupting and dismantling major drug trafficking organizations and money laundering organizations and related criminal enterprises. This OCDETF investigation was also part of a nationwide law enforcement effort coordinated by the DEA’s Special Operations Division.

New is scheduled for sentencing on August 1, 2016, by United States District Judge Dale A. Drozd. He faces a maximum statutory penalty of three years in prison and a $250,000 fine, or twice the gross gain from the crime. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Co-defendants Douglas Jason Way, 41, of Evanston, Illinois, Timothy Ortiz, 45, of Waukegan, Illinois, and Natalie Middleton, 28, of Clovis, California, have entered not guilty pleas and are next scheduled to appear in federal court in September. They are charged with drug and money laundering offenses, in addition to the misbranding charge, and face a maximum penalty of 20 years in prison and a $10 million fine. The charges against them are only allegations; Way, Ortiz, and Middleton are presumed innocent until and unless proven guilty beyond a reasonable doubt.

SACRAMENTO, Calif. — Nathan Penner, 26, of Yuba City, was sentenced today to 16 years and three months in prison for producing child pornography, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Phillip A. Talbert of the Eastern District of California, Special Agent in Charge Ryan Spradlin of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) San Francisco Field Division and Chief of Police Robert D. Landon of the Yuba City Police Department.

Penner pleaded guilty on November 5, 2015, to one count of production of child pornography. U.S. District Judge Troy L. Nunley sentenced Penner today and also ordered him to serve a lifetime term of supervised release.

In connection with his plea, Penner admitted to producing sexually explicit images and videos of a five-year-old girl in September and October of 2012. During the sentencing hearing, evidence revealed that Penner downloaded hundreds of files of child pornography located on his computer and distributed such material using an online chat messaging service.

“We are gratified by the sentence imposed today, which provides a measure of justice in response to a crime that inflicts tremendous suffering upon the most vulnerable of victims and sends a strong message that all children deserve a childhood free from such exploitation and harm,” said Acting U.S. Attorney Talbert.  “We are grateful for the hard work and collaboration of our local and federal law enforcement partners, and we will continue to aggressively investigate and prosecute those who engage in the exploitation of our children.”

Chief Robert D. Landon stated: “The Yuba City Police Department extends sincere appreciation to all agencies involved in this case. The collaborative effort of all who worked on the thorough investigation and successful prosecution of this child predator should be commended.”

This case was investigated by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Yuba City Police Department. Trial Attorney Reginald E. Jones of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS) and Special Assistant U.S. Attorney Josh F. Sigal of the Eastern District of California prosecuted the case. CEOS’ High Technology Investigative Unit assisted with computer forensic analysis for the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by the U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

 

SACRAMENTO, Calif. — A federal grand jury returned a four-count indictment today against Virendra “Vic” Maharaj, 49, and his wife, Rosalin Prasad, 40, both of Woodland, charging them with one count of conspiring to defraud the United States by impeding the IRS’s assessment of their income tax liability, and further charging Maharaj with three counts of tax evasion, Acting U.S. Attorney Phillip A. Talbert announced.

According to court documents, between January 2005 and January 2010, Maharaj and Prasad conspired to defraud the United States by impeding the Internal Revenue Service in its attempt to assess the couple’s tax obligations for the years 2005, 2006, and 2007. Additionally, Maharaj, who worked at multiple car dealerships in Sacramento and Woodland, attempted to evade or defeat the assessment of his tax obligations for those same tax years. In an attempt to conceal the source and amount of his income, Maharaj caused part of his wages to be paid directly to Prasad. He caused Wage and Tax Statements on W-2 forms to be issued in Prasad’s name for wages actually paid to him, and in amounts that recorded only part of the wages he received. Maharaj took some of his compensation from the car dealerships in cash, and this compensation was not recorded on the W‑2 forms. Maharaj also caused the dealership to pay some of his compensation directly to one of Prasad’s creditors to pay for a loan, and these payments were not recorded on the W‑2 forms.

According to the indictment, tax returns were filed for Prasad for the tax years 2005, 2006, and 2007, reporting the wages on the W-2 forms that underreported the income received for Maharaj’s work. Maharaj failed to file tax returns for any of the years in question.

This case is the product of an investigation by the Internal Revenue Service, Criminal Investigation. Assistant U.S. Attorney Nirav Desai is prosecuting the case.

The defendants are scheduled to be arraigned on the indictment on May 6, 2016.

If convicted of the conspiracy offense, Maharaj and Prasad each face a maximum statutory penalty of five years in prison and a $250,000 fine. If convicted on the tax evasion counts, Maharaj faces a maximum statutory penalty of five years in prison and a $100,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

SACRAMENTO, Calif. — A federal grand jury returned a 22-count indictment today against Juan Carlos Montalbo, 54, of San Antonio, Texas; Wayne Arthur York II, 47, of Albuquerque, New Mexico; and Marco Antonio Ramirez-Zuno, 31, of Cancun, Mexico, charging them with wire fraud and conspiracy to commit wire fraud in relation to a timeshare-resale scheme, Acting U.S. Attorney Phillip A. Talbert announced.

According to court documents, between 2011 and 2012, the defendants conducted a timeshare resale fraud scheme based in Puerto Vallarta, Mexico. Montalbo conducted sales meetings to convince prospective customers to purchase a timeshare vacation package marketed under the names Platinum Access Program or World Luxury Destinations. If customers had existing timeshare properties, Montalbo (also known as John Monte) assured them that another company, Continental Resources, would arrange for their sale. When the customers returned from Mexico, they were contacted by York (also known as Tim Hamick or Michael Halston), who claimed to represent companies named Property Marketing Group or Eagle Market Solution and claiming that a bona fide purchaser had been found and was ready to purchase their existing timeshares. Others were contacted directly by York without first giving their information to Montalbo.

According to court documents, York and others would then extract a series of upfront payments from the victims, which York claimed were required to be wired to bank accounts in Mexico in order for the guaranteed sale to be completed. York and the others would falsely claim that a buyer for the timeshare had already been located, and that all the prepaid fees wired to Mexico were being held in escrow and would be refunded to the victims as soon as the transaction was completed. After the victims wired the money to Mexico, York and the others would break off all contact with them. According to court documents, Ramirez Zuno managed the Mexican bank accounts used in the fraud, trained co-conspirators on how to conduct the fraud, and managed the disbursement of the proceeds of the fraud.

This case is the product of an extensive and ongoing investigation by the Federal Bureau of Investigation. Assistant United States Attorney Matthew G. Morris is prosecuting the case.

On October 15, 2015, Montalbo was arrested in Phoenix, Arizona and has been released on bond. His next scheduled court appearance is May 12, 2016, before U.S. Magistrate Judge Kendall J. Newman.

On March 30, 2016, York was arrested in Albuquerque, New Mexico, and was ordered held without bond. On April 14, 2016, Ramirez Zuno was arrested in Miami, Florida and remains in custody pending further proceedings.

York and Zuno were arraigned today in Sacramento before U.S. Magistrate Judge Edmund F. Brennan and entered pleas of not guilty. They are next scheduled for a status conference on June 28, 2016, before U.S. District Judge John A. Mendez at 9:15 a.m.

If convicted, each defendant faces a maximum statutory penalty of 20 years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant are presumed innocent until and unless proven guilty beyond a reasonable doubt.

SACRAMENTO, Calif. — David M. Lewis, 62, of Sacramento, was sentenced today by United States District Judge Morrison C. England Jr. to three years and 10 months in prison and a $75,000 fine for health care fraud, Acting United States Attorney Phillip A. Talbert announced.

According to court documents, beginning approximately in late 2008, Lewis, a dentist practicing in Sacramento, began targeting United Parcel Service employees for dental treatment because their health care plan under the Northern California General Teamsters Security Fund provided 100 percent coverage without any annual limits. Lewis offered cash and other incentives to UPS patients for receiving dental treatment or for recruiting other UPS employees to receive such treatment.

The UPS health care plan was administered by Delta Health Systems. In some instances, Lewis caused claims to be submitted to Delta that falsely billed the plan for work that was never performed. In many other instances, Lewis performed unnecessary dental work on UPS employees, including root canals, and claims were submitted to Delta for payment for these unnecessary services.

Lewis created false narratives for dental work that was not performed or created false statements about purported pre-existing dental conditions to justify the work performed. In some instances, Lewis drilled into teeth to install temporary filings and instructed his assistants to take X-rays of the temporary filings. Lewis then submitted claims to Delta with X-rays of the temporary fillings, falsely claiming that the X-rays depicted tooth decay justifying further restorative procedures.

“This defendant went well beyond the lies one normally finds at the root of a fraud scheme,” said Acting U.S. Attorney Talbert. “He not only plundered funds meant to provide essential services, he inflicted pain and suffering on his patients through the performance of unnecessary medical procedures, all in the name of additional profit. We are gratified by today’s sentence, and thankful for the critical work done by our partners in the Department of Labor and the State of California.”

“Today’s sentencing demonstrates that those who commit heath care fraud will be held criminally accountable. We will continue to work with our law enforcement partners to safeguard the health benefits of union workers from medical providers seeking self‑enrichment,” stated 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.

“Dr. Lewis put his own financial interests ahead of his patients’ dental health, causing them harm instead of healing,” commented Jean Ackerman, Regional Director for EBSA. “This case is indicative of our close and continued partnership with fellow federal agencies to vigorously pursue those who commit crimes against employee benefit plan participants.”

A restitution hearing is set for June 23, 2016, and Lewis is scheduled to self‑surrender to begin serving his sentence on July 14, 2016.

An employee at Lewis’s dental practice, Nichol Ramirez aka Nichol Lomack, previously pleaded guilty to one count of health care fraud for her part in the fraud scheme in a separate case. (2:14-cr-056 MCE) Lomack is scheduled to be sentenced on September 1, 2016. She faces a maximum statutory penalty of 10 years in prison and a fine of $250,000 or twice the gross loss or gain of the scheme. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

These cases are the product of an investigation by the U.S. Department of Labor, Office of Inspector General-Office of Labor Racketeering and Fraud Investigations and the U.S. Department of Labor, Employee Benefits Security Administration, with assistance from the California Dental Board and the California Attorney General’s Office. Assistant United States Attorney Todd A. Pickles is prosecuting the cases.

SACRAMENTO, Calif. —Jarrail Lamont Smith, 23, of Cleveland, Ohio, pleaded guilty today to two counts of interstate transportation of a minor for the purpose of prostitution, Acting United States Attorney Phillip A. Talbert announced.

According to court documents, in August 2015, Smith traveled from Cleveland to California with two minor victims with the expectation that they would engage in commercial sex acts with others for his benefit. Once they arrived in Northern California, he directed them to post advertisements for sexual services online. The investigation revealed multiple advertisements posted in the Bay area and Sacramento that featured photographs of both victims. After receiving a tip that one of the minors was being trafficked at a motel in Sacramento, the FBI initiated a sting operation to recover her. The operation was successful, and agents also found the other minor victim in the same hotel room. One of the minors had two black eyes when the FBI located her.

This case is the product of an investigation by the FBI’s Child Exploitation Task Force, which is made up of FBI agents and detectives from the Sacramento Police Department. Assistant United States Attorney Michele Beckwith is prosecuting the case.

Smith is scheduled to be sentenced by United States District Judge Troy L. Nunley on August 4, 2016. Smith faces a maximum statutory penalty of life in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — A federal jury found William Louis Filter, 46, of Live Oak, guilty on Tuesday of unlawful baiting and unlawful taking of a migratory game bird by aid of bait, Acting United States Attorney Phillip A. Talbert announced.

The evidence at the two-day trial showed that Filter baited a field on his family’s hunting ranch in the Sutter Buttes by covering it with birdseed to attract mourning doves. On September 1, 2015, which is opening day of mourning dove season, Filter returned to that baited field with his three hunting buddies. Altogether, Filter and his friends shot and killed 34 mourning doves over the baited fields.

Mourning doves are a migratory game bird. It is lawful to hunt mourning doves during the appropriate hunting season. It is unlawful, however, to hunt mourning doves using bait. Baiting means placing, distributing, or scattering of salt, grain, or other feed that could serve as a lure or attractions for migratory game birds to any areas where hunters are attempting to take them.

This case is the product of an investigation by the United States Fish and Wildlife Service and California Department of Fish and Wildlife. Special Assistant United States Attorneys Benjamin Nelson and Elliot Wong prosecuted the case.

Filter is scheduled to be sentenced on June 6, 2016, by United States Magistrate Judge Allison Claire. Filter faces a maximum statutory penalty of one year in prison, a $100,000 fine, and a one-year term of supervised release. The actual sentenced will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — Leonardo Cesar Pulido-Escamilla, 39, a Mexican national who previously resided in Yuba City and other California cities, pleaded guilty today to making a false statement in an application for a United States Passport, Acting United States Attorney Phillip A. Talbert announced.

According to court documents, Pulido-Escamilla fraudulently applied for a U.S. Passport in 2012, using another person’s name and birth certificate in connection with the application. Pulido-Escamilla had been deported from the United States in 1997 and 2004, and on March 20, 2016, he was apprehended by border patrol agents in Arizona.

This case is the product of an investigation by the U.S. Department of State’s Diplomatic Security Service. Assistant U.S. Attorney Nirav Desai is prosecuting the case.

Pulido-Escamilla is scheduled to be sentenced by United States District Judge Kimberly J. Mueller on July 20, 2016. Pulido-Escamilla faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — A company and its subcontractor have paid a total of $13 million to resolve allegations under the False Claims Act that they overcharged the government in various ways under the Defense Transportation Coordination Initiative contract in part by billing the cost of moving freight by air when it was actually shipped by ground, Acting United States Attorney Phillip A. Talbert announced today.

Menlo Worldwide Services Inc. has paid the United States $10 million, and Estes Forwarding Worldwide, on behalf of itself and its parent Estes Express Lines, has paid $3 million.

“This settlement demonstrates our commitment to protecting the integrity of federal contracts and ensuring the government only pays for the actual services rendered as required under the contract,” said Acting U.S. Attorney Talbert.

The civil settlement resolves a lawsuit filed in the Eastern District of California under the qui tam, or whistleblower, provisions of the False Claims Act. These provisions allow private citizens to bring civil actions on behalf of the United States for false claims and share in a portion of the government’s recovery. The whistleblowers in this case will collectively receive $2.86 million of the recovery proceeds.

This settlement was the result of a coordinated effort among the U.S. Attorney’s Office for the Eastern District of California, the United States Transportation Command, the Defense Criminal Investigative Service, the Defense Contract Audit Agency, the U.S. Army Criminal Investigation Command, and the Department of Justice’s Civil Division, Commercial Litigation Branch. Assistant United States Attorneys Kelli Taylor and Colleen Kennedy handled the matter for the United States.

The claims settled by this agreement are allegations only, and there has been no determination of liability. Menlo Worldwide Services Inc., Estes Forwarding Worldwide, and Estes Express Lines cooperated with the United States’ investigation of this matter.

SACRAMENTO, Calif. — Richard C. Sihner, 54, of Elk Grove, was sentenced today to two years and six months in prison for a scheme to fraudulently obtain bonuses in a recruitment program for the California National Guard, Acting United States Attorney Phillip A. Talbert announced.

On January 22, 2016, after a seven-day trial, a jury found Sihner guilty of 18 counts of wire fraud relating to his scheme to receive unearned recruiting bonuses relating to California National Guard enlistees. The jury also convicted Sihner of one count of making false statements to a federal agent.

In sentencing Sihner, United States District Judge John A. Mendez rejected the suggestion that any blame for the crime rested with others involved in the process. “You, and you alone, are responsible,” said Judge Mendez.

“Integrity is a California National Guard core value, and we're committed to holding our soldiers and airmen accountable if they elect to commit fraud,” said Maj. Gen. David S. Baldwin, Adjutant General for the California National Guard. “These cooperative efforts by the U.S. Attorney's Office continue to help us ensure we remain not only a capable force, but also an ethical force worthy of the people's trust.”

Sihner is a retired member of the California National Guard and participated in the Guard Recruiter Assistant Program (G-RAP). The United States Army contracted with Document and Packaging Broker Inc. (DOCUPAK) to administer G-RAP. Under G-RAP, members of the California National Guard served as recruiting assistants (RA). If an RA referred a potential Guard member to a recruiting office and that person ultimately enlisted, the RA was eligible to receive monetary compensation disbursed by DOCUPAK. RAs would typically receive a $1,000 payment when a nominee enlisted and a second $1,000 payment when the nominee left for boot camp. Ultimately, the G-RAP program was discontinued following the discovery of widespread fraud. Recruits who walked into recruiting offices entirely on their own initiative and were not referred by an RA, were claimed by corrupt RAs in DOCUPAK’s system, often with the assistance of corrupt recruiters.

According to evidence produced at trial, from December 27, 2007 to April 16, 2010, Sihner was an RA in the G-RAP program. A recruiter gave him information about new recruits so that Sihner could falsely claim to have referred them. Sihner made false claims and wrote elaborate falsehoods in the notes section of the DOCUPAK online portal indicating that he had referred the recruits. In fact, the recruits had made contact with the Guard to discuss potential enlistment for reasons entirely unrelated to Sihner. Sihner was paid $95,000 in compensation for purportedly referring 51 soldiers to enlist. Of the 39 recruits federal agents contacted prior to indictment, none had been referred to the Guard by Sihner. When confronted, Sihner lied to federal law enforcement agents investigating the fraud by repeatedly claiming that he had personally referred all of the new soldiers and that he had taken them to the recruiting office to introduce them.

This case was the product of an ongoing investigation by the Army Criminal Investigative Command Major Procurement Fraud Unit, the Defense Criminal Investigative Service, and the Federal Bureau of Investigation. Assistant United States Attorneys Matthew G. Morris and Katherine T. Lydon prosecuted the case.

Other National Guard members and recruiters have been charged in similar recruiting‑fraud schemes in the Eastern District of California. The following defendants have pleaded guilty and await sentencing.

• 2:14-cr-153 TLN — Brian Kaps, 42, of Chico, pleaded guilty on November 21, 2014, to one count of wire fraud. Sentencing is set for August 18, 2016.

• 2:14-cr-152 TLN — Sarah Nattress, 28, of Paradise, pleaded guilty on October 23, 2014, to one count of wire fraud. Sentencing is set for May 26, 2016.

• 1:14-cr-108-LJO — Nicholas Huerta, 33, of Fresno, pleaded guilty on September 14, 2015, to one count of wire fraud. Sentencing is set for November 14, 2016.

• 1:14-cr-106 DAD — Joaquin Cuenca, 38, of San Diego, was a recruiter. On February 2, 2016, a jury found him guilty of three counts of wire fraud for fraudulent bonuses. He is scheduled for sentencing on July 18, 2016.

FRESNO, Calif. — Two Nuestra Familia gang members were sentenced today for racketeering offenses, and a third defendant who held a leadership role in the gang was also recently sentenced, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Phillip A. Talbert of the Eastern District of California announced.

Earlier today, United States District Judge Lawrence J. O’Neill sentenced Joe Anthony Felix, 36, of Modesto, to 12 years and seven months in prison for conspiring to engage in racketeering and sentenced him to an additional, consecutive term of nine months in prison for a supervised release violation on a 2004 case. Judge O’Neill also sentenced Jesus Gomez Felix, 32, of Modesto, today to two and a half years in prison for assault with a deadly weapon in aid of racketeering. Previously, on April 11, Gary Anthony Romero, 50, of Stockton, was sentenced to 20 years in prison for conspiring to engage in racketeering.

According to court documents, Nuestra Familia is a prison gang that originally formed in the California state prison system in the 1960s. Nuestra Familia leaders control and direct the gang’s criminal activities both inside and outside of the prison system.

According to court documents, Romero has been a member of Nuestra Familia for approximately 20 years and reached one of the highest levels of authority in Nuestra Familia. He ordered various crimes to be committed for the benefit of the gang in Stanislaus County, including aggravated assaults, robberies and drug dealing. Romero ordered a home invasion robbery in Turlock in which the robbers wielded firearms and made off with a vehicle and several other items. While Romero was in custody at the Stanislaus County Jail, he ordered the “removal” of several Nortenos who had violated Nuestra Familia rules. A “removal” involved assaulting the individuals with homemade weapons, as well as fists and feet. Several of the victims suffered stab wounds. Romero also directed a gang member to set up subsets of the gang throughout Stanislaus County to collect money from the members, including proceeds of their drug trafficking activities, and to put the funds in Romero’s account at Stanislaus County Jail.

Joe Felix was a Norteno, a gang under the Nuestra Familia umbrella, who provided direction to other Nortenos to commit various crimes, including attempted murder and drug trafficking in Modesto. Joe Felix participated and directed others to participate in an assault on two individuals who had dropped out of the gang. Jesus Felix participated in this assault and exchanged gunfire with someone from the opposing side during the incident. No one was shot, but as a result of the attack, one of the victims suffered a fractured orbital bone and injury to his eye. Joe Felix also directed the sales of methamphetamine by other Nortenos, and profited from the drug trafficking operation.

This case was the product of an investigation by the Central Valley Gang Impact Task Force under the FBI’s Safe Streets Initiative, with the assistance of the Stanislaus County District Attorney’s Office, the Stanislaus County Sheriff’s Office, the Modesto Police Department, the Ceres Police Department, the California Highway Patrol, the California Department of Corrections and Rehabilitation, the Bureau of Prisons, and the Stanislaus County Probation Department.

Stanislaus County District Attorney Birgit Fladager said, “I would like to thank the United States Department of Justice and the hard work of the federal prosecutors who prosecuted this case. We will remain committed to working collaboratively with our federal partners to pursue criminal gang members who commit violent crimes and pose a threat to the citizens of Stanislaus County.”

The case was prosecuted by Trial Attorneys Louis A. Crisostomo and Kelly Pearson of the Criminal Division’s Organized Crime and Gang Section and Assistant United States Attorneys Kimberly A. Sanchez and Laurel J. Montoya of the Eastern District of California.

FRESNO, Calif. — Kevin Nouthai Yang, aka Thai Yang, 49, of Fresno, was sentenced today to three years and 10 months in prison, to be followed by three years of supervised release, for conspiring to cultivate, distribute and possess with intent to distribute marijuana grown on property that he owned in Hay Fork in the Shasta Trinity National Forest, Acting United States Attorney Phillip A. Talbert announced.

In sentencing Yang, U.S. District Judge Lawrence J. O’Neill also ordered the forfeiture of the property and a firearm.

According to court documents, Yang, who was then a high school teacher’s aide for the Central Unified School District, was found armed at the Hay Fork property during the execution of a federal search warrant. Yang was in the process of harvesting marijuana and was in possession of 324 pounds of marijuana and 200 marijuana plants. He was also in possession of restricted-use pesticides that had been transported across public land for use in the marijuana cultivation operation. Yang has since resigned from his teaching position.

U.S. Forest Service agents obtained the search warrant after seeing hundreds of large, mature marijuana plants growing on Yang’s property. Some of the marijuana grown on Yang’s property had already been transported to Fresno for distribution.

This case was the product of an investigation by the U.S. Forest Service and the Trinity County Sheriff’s Office. Assistant United States Attorney Karen A. Escobar prosecuted the case.

SACRAMENTO, Calif. — Kulvir Singh Cheema, 55, of Ripon, was arraigned today before U.S. Magistrate Judge Edmond F. Brennan on bankruptcy fraud charges, United States Attorney Benjamin B. Wagner announced.

On March 31, 2016, a federal grand jury returned an indictment against Cheema, charging him with false bankruptcy declaration, concealment of bankruptcy assets, and fraudulent transfer. At the arraignment, Cheema entered a plea of not guilty. A status conference is scheduled for May 20, 2016 before U.S. District Judge Garland E. Burrell Jr.

According to court documents, when Cheema filed for bankruptcy in April 2011, he provided false information about his employment and wages that he received, his current income, his residence, and whether he had lost a piece of property in the past. He is also alleged to have concealed income that he received, as well as assets such as trucks and bank accounts that he controlled and that were held in other names. In January 2010, in contemplation of filing for bankruptcy, Cheema knowingly and fraudulently transferred ownership of his residence in Ripon from himself to another person.

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant U.S. Attorneys John K. Vincent and Brian A. Fogerty are prosecuting the case.

If convicted, Cheema faces a maximum statutory penalty of five years in prison for each of the three bankruptcy counts and up to a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

SACRAMENTO, Calif. — Cesar Caballero, 46, of Diamond Springs, was found guilty on Tuesday after a two-day jury trial for failing to surrender for service of sentence, United States Attorney Benjamin B. Wagner announced.

According to court documents, on August 30, 2011, Caballero was convicted of obstruction of mail for submitting Official Federal Mail Forwarding Change of Address Order forms to the U.S. Postal Service for the purpose of diverting mail addressed to the Shingle Springs Band of Miwok Indians to himself. After he was sentenced, Caballero appealed, and the Ninth Circuit affirmed his conviction on two of the three counts against him. He was resentenced on June 29, 2015, to a sixty day term of incarceration.  He was ordered to surrender to begin serving his sentence by September 8, 2015.

As the evidence at trial demonstrated, Caballero failed to surrender as ordered on September 8, 2015, or any day thereafter. He was subsequently arrested by the El Dorado County Sheriff’s Office on February 28, 2016.

This case is the product of an investigation by the United States Marshals Service, with the assistance of the United States Postal Inspection Service, the Federal Bureau of Prisons, and the El Dorado County Sheriff’s Office. Special Assistant United States Attorneys Elliot Wong and Benjamin Nelson prosecuted the case.

Caballero is scheduled to be sentenced on May 17, 2016, by United States District Judge John A. Mendez. Caballero faces a maximum statutory penalty of one year in prison, a $100,000 fine, and a one-year term of supervised release. The actual sentenced will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. – After collecting and destroying 5.5 million pounds—2,762 tons—of unused prescription drugs in the past five years, the U.S. Drug Enforcement Administration is continuing its efforts to take back unused, unwanted and expired prescription medications. The DEA invites the public to bring their potentially dangerous, unwanted medicines to one of over 5,000 collection sites around the country that are manned by more than 3,800 of DEA’s tribal and local law enforcement partners. This service is free of charge, with no questions asked.

The public can find a nearby collection site by visiting www.dea.gov, clicking on the “Got Drugs?” icon, and entering their zip code into the search window, or they can call 800-882-9539. Only pills and other solids, like patches, will be accepted—the public should not bring liquids, needles or other sharps to take back sites.

America is presently experiencing an epidemic of addiction, overdose and death due to abuse of prescription drugs, particularly opioid painkillers. 6.5 million Americans abuse prescription drugs, according to the most recent National Survey on Drug Use and Health, more than abuse cocaine, heroin, and hallucinogens combined.

“The abuse of prescription drugs is America’s fastest-growing drug problem, and too many people are dying or being seriously injured for the misuse of such drugs,” U.S. Attorney Wagner stated. “Young people are particularly at risk. Since most people who abuse prescription drugs say that they get them from family members or friends, it is imperative that we all take steps to dispose of unwanted drugs.”

“Unused prescription drugs that languish in the home are susceptible to diversion for misuse and abuse,” said DEA Special Agent in Charge John J. Martin. “You can make your home and our community safer by taking advantage of this free and anonymous service.”

Drug overdoses are now the leading cause of injury-related death in the United States, eclipsing deaths from motor vehicle crashes or firearms. The removal from homes of unwanted prescription pills that can be abused, stolen or resold is an easy way to help fight the epidemic of substance abuse and addiction.

According to the DEA, in the previous 10 take-back events, approximately 302,427 pounds or 151 tons of unused medication were collected from Northern California and Central Valley residents.

SACRAMENTO, Calif. — Sergio Roman Barrientos, 62, of Poway, was arrested on Wednesday in San Diego. On Thursday, April 14, a federal grand jury returned a six-count superseding indictment against Barrientos that added co-defendant Zalathiel Aguila, 42, of Fairfield, to the indictment originally brought on March 3, 2016, United States Attorney Benjamin B. Wagner announced.

According to the indictment, Barrientos, Aguila, and Omar Anabo, 53, of Vallejo, engaged in a foreclosure rescue fraud scheme that began in September 2004 and continued to February 2008. Barrientos and Aguila are charged with conspiracy to commit and the commission of wire fraud affecting a financial institution, bank fraud, and conspiracy to make and making false statements on loan applications. On January 15, 2016, Anobo pleaded guilty to conspiring to make false statements on loan applications (case number 2:16-cr-001 GEB). He is scheduled for sentencing on November 4, 2016.

According to court documents, Barrientos owned Capital Access LLC, in Vallejo, and along with Aguila and Anabo, preyed on homeowners nearing foreclosure. The defendants’ “Keep Your Home” program purported to be a temporary rescue plan whereby “qualified investors” took over the mortgages while the homeowners paid rent and worked on rebuilding their credit. It is alleged that he defendants convinced homeowners to sign over title to their homes, which were then sold to straw buyers. The straw buyers obtained loans under fraudulent pretenses by claiming on loan applications that, for example, they intended to occupy the homes as primary residences and that no part of the down payment for the purchase was borrowed. In fact, it is alleged that Capital Access provided the down payment amounts, and the straw buyers never intended to live in the properties. The defendants stripped the equity from the homes and used it to pay the operational expenses of the scheme and personal expenses. Vulnerable homeowners across California lost their homes as a result of the alleged scheme, and lenders lost an estimated $10.47 million from the fraud.

This case is the product of an investigation by the Federal Bureau of Investigation and the United States Postal Inspection Service. Assistant U.S. Attorney Matthew M. Yelovich is prosecuting the case.

If convicted, the defendants face a maximum statutory penalty of 30 years in prison and a $1 million fine for each count of wire fraud, bank fraud, and false statement, as well as for the conspiracy to commit wire and bank fraud count. If convicted of conspiracy to make false statements on loan applications, they face a maximum statutory penalty of five years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

SACRAMENTO, Calif. — Stacy Miranda Phillips, 29, of Montague, pleaded guilty today to aggravated ID theft related to her participation in a bank fraud and identity theft scheme, United States Attorney Benjamin B. Wagner announced.

According to court documents, between September and December of 2015, Phillips worked with others in Siskiyou County to execute a scheme to steal from banks and merchants in the Siskiyou County. Phillips admitted that as part of her scheme she stole U.S. Mail and other personal property of local residents. Phillips and her associates targeted certain victims, postal customers, and mail receptacles utilized by those victims. Phillips used the checks, credit or debit cards, account numbers, names, PINs, and signatures found in the stolen mail to obtain cash and purchase items. Phillips also attempted to open a line of credit in the name of a Weed, California victim. Phillips stole mail from the following Siskiyou County Post Offices: Hornbrook, Grenada, and Montague.

This case is the product of an investigation by the United States Postal Inspection Service, the Siskiyou County Sheriff's Department, and the Yreka Police Department. Assistant United States Attorney Michelle Rodriguez is prosecuting the case.

Phillips is scheduled for sentencing on July 28, 2016, before U.S. District Judge Troy L. Nunley. Phillips faces a mandatory minimum sentence of two years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — United States Attorney Benjamin B. Wagner has announced his resignation effective midnight on April 30, 2016. Wagner has served as the U.S. Attorney for the Eastern District of California for six and a half years, and he served as an Assistant U.S. Attorney and Supervisory AUSA for over 17 years before that.

During his tenure as United States Attorney, Wagner served for three years on the Attorney General’s Advisory Committee under Attorney General Eric Holder, and was appointed to co-chair the White Collar Crime Subcommittee of the AGAC by Attorney General Loretta Lynch. He served on numerous other AGAC subcommittees, and for five years was a co-chair of the Mortgage Fraud Working Group of the President’s Financial Fraud Enforcement Task Force.

“Serving as the United States Attorney for the Eastern District of California has been the most fulfilling and exciting experience of my professional career,” said Wagner. “I have the greatest respect for the women and men in this office who seek to do justice each day, and I am proud of all that we have been able to accomplish together.”

“Ben Wagner has served the people of the Eastern District of California with distinction for nearly a quarter of a century, spending more than 17 years as a prosecutor in the office before becoming U.S. Attorney in 2009,” said Attorney General Loretta Lynch. “Throughout his career with the Department of Justice, he has accepted a wide range of responsibilities – from coordinating his district’s anti-terrorism and hate crimes efforts to representing the department overseas as our Resident Legal Advisor in Indonesia. As U.S. Attorney, he has worked tirelessly to combat the most serious offenses, including gang violence and child exploitation. He has been a leader in the department’s outreach to Arab and Muslim Americans, helping to ensure strong relationships and defend against bigotry. He has vigorously prosecuted cases of mortgage fraud, securing record sums from banks for their role in the 2008 financial crisis. And he has provided critical insight and valuable advice as a member of my Advisory Committee, where I appointed him co-chair of the Subcommittee on White Collar Crime. I am grateful to Ben for his outstanding record of service to the Department of Justice and to the American people, and I wish him the very best in his future endeavors.”

In civil and asset forfeiture cases, the Eastern District had several years of record recoveries under Wagner’s leadership. A few of the significant civil cases handled by the office over the past six years include the following:

• The recent $5.06 billion multiparty settlement with Goldman Sachs relating to the securitization and sale of residential mortgage-backed securities. The settlement included a $2.385 billion payment to the Department of Justice as a result of efforts by attorneys in the Eastern District — the largest civil recovery in the history of the district.

• The $13 billion multiparty settlement with JPMorgan Chase announced in 2013 relating to the securitization and sale of residential mortgage-backed securities. The settlement included a $2 billion payment to the Department of Justice as a result of the Eastern District’s work.

• The settlement with Sierra Pacific Industries announced in 2012, valued at approximately $122 million, relating to its role in the huge Moonlight Fire that damaged tens of thousands of acres of U.S. Forest Service land. The settlement agreement required the transfer of 22,500 acres of wilderness to the USFS in California.

• Health care fraud and false billing settlements against Adventist Health, Catholic Health Care West, Medtronic Inc., Biotronik, and Quest Diagnostics, resulting in total recoveries of nearly $40 million between 2011 and 2015.

  In criminal cases, the office expanded its prosecution of financial and health care fraud cases, firearms trafficking, human trafficking and child exploitation cases. In the area of narcotics enforcement, the office focused on the prosecution of high-level and violent offenders, while seeking more lenient sentences for lower-level and nonviolent offenders. A few of the significant criminal cases handled by the office include the following:

• The conviction of nearly 300 defendants in complex mortgage fraud cases, many involving schemes that fleeced homeowner victims of many millions of dollars. Sentences imposed ranged up to 30 years in prison.

• The convictions and lengthy sentences obtained in the Wannakuatte and Vassallo cases, involving the largest Ponzi schemes in the history of the district, in which investors lost about $150 million.

• The RICO conviction of Scott Salyer, CEO of SK Foods, and nine other officers of food product companies in a series of prosecutions involving fraud and commercial bribery in the tomato products industry.

• The conviction of approximately 70 leaders of the hyper-violent Nuestra Familia criminal organization in a series of prosecutions in both Fresno and Sacramento. Most defendants received lengthy prisons sentences.

• The extradition and prosecution of Shiraz Malik, the leader of an international drug trafficking organization, who was based in Poland.

  During Wagner’s tenure, the number of Assistant U.S. Attorneys in the Eastern District increased by over 12 percent. He established a National Security Unit within the office, created a Civil Rights/Human Trafficking Working Group, expanded the White Collar Unit in the Fresno Division, and opened a new branch office in Bakersfield. He also conducted extensive outreach to underserved populations in the district, including the Muslim, Sikh, Southeast Asian, and LGBT communities.

  As of May 1, 2016, Phillip A. Talbert will assume leadership of the office as Acting U.S. Attorney. Talbert, who is currently the First Assistant U.S. Attorney, has had a distinguished career in more than 13 years in the office. He previously served as Appellate Chief and as a prosecutor in the Narcotics and Violent Crime Unit, and served in the Department of Justice’s Office of Professional Responsibility before coming to the Eastern District of California. Before joining the Department of Justice, he was in private practice. He is a graduate of Harvard University and the UCLA School of Law.

  As a supervisor and line prosecutor in the office before becoming U.S. Attorney, Wagner worked in all three units of the criminal division and prosecuted a wide range of cases, including investment fraud, tax evasion, violent crime, public corruption, money laundering, domestic terrorism, and hate crimes. He tried 19 cases to verdict and argued numerous appeals in the Ninth Circuit Court of Appeals. At various times he served as the district antiterrorism coordinator, the hate crimes and civil rights coordinator, and the Violence Against Women Act coordinator. He was awarded a national Director’s Award for Superior Performance by an AUSA three times, and was also presented with the national IRS Criminal Investigation Chief’s Award, and with a Meritorious Honor Award by the State Department. In 2005-06, he was stationed in Jakarta as the first Department of Justice Resident Legal Advisor in Indonesia.

  Some of the notable cases which Wagner handled as an Assistant U.S. Attorney include the prosecution of Blue Shield of California in an audit obstruction case; the prosecution of reproductive health care clinic serial arsonists Rachelle Shannon and Richard Andrews; the prosecution of the leaders of Anderson Ark & Associates, an international money laundering and tax evasion organization; the prosecution of 10 defendants including doctors, a CPA and an attorney, in three offshore tax evasion scheme cases; the prosecution of 17 defendants, including a CPA and an attorney, in seven investment fraud cases; the prosecution of two corrupt State Department employees and several others in a scheme to obtain visas through bribes; the hate crime prosecution of the Williams brothers, who torched three synagogues in Sacramento; the public corruption prosecution of Monte McFall and various officials from San Joaquin County, including the elected sheriff; the prosecution of five defendants, including three attorneys, in an asylum application fraud scheme; and the prosecution of two cross-burning cases.

After his resignation, Wagner plans to seek employment at a law firm in the Northern California area.

U.S. Attorney Benjamin B. Wagner for the Eastern District of California has announced his resignation effective midnight on April 30.  U.S. Attorney Wagner has served as the U.S. Attorney for the Eastern District of California for six and a half years and he served as an Assistant U.S. Attorney (AUSA) and Supervisory AUSA for over 17 years before that.

During his tenure as U.S. Attorney, he served for three years on the Attorney General’s Advisory Committee (AGAC) under Attorney General Eric Holder and was appointed to co-chair the White Collar Crime Subcommittee of the AGAC by Attorney General Loretta E. Lynch.  He served on numerous other AGAC subcommittees and for five years was a co-chair of the Mortgage Fraud Working Group of the President’s Financial Fraud Enforcement Task Force.

“Serving as the U.S. Attorney for the Eastern District of California has been the most fulfilling and exciting experience of my professional career,” said U.S. Attorney Wagner.  “I have the greatest respect for the women and men in this office who seek to do justice each day and I am proud of all that we have been able to accomplish together.”

“Ben Wagner has served the people of the Eastern District of California with distinction for nearly a quarter of a century, spending more than 17 years as a prosecutor in the office before becoming U.S. Attorney in 2009,” said Attorney General Lynch.  “Throughout his career with the Department of Justice, he has accepted a wide range of responsibilities – from coordinating his district’s anti-terrorism and hate crimes efforts to representing the department overseas as our Resident Legal Advisor in Indonesia.  As U.S. Attorney, he has worked tirelessly to combat the most serious offenses, including gang violence and child exploitation.  He has been a leader in the department’s outreach to Arab and Muslim Americans, helping to ensure strong relationships and defend against bigotry.  He has vigorously prosecuted cases of mortgage fraud, securing record sums from banks for their role in the 2008 financial crisis.  And he has provided critical insight and valuable advice as a member of my Advisory Committee, where I appointed him co-chair of the Subcommittee on White Collar Crime.  I am grateful to Ben for his outstanding record of service to the Department of Justice and to the American people and I wish him the very best in his future endeavors.”

In civil and asset forfeiture cases, the Eastern District had several years of record recoveries under U.S. Attorney Wagner’s leadership.  A few of the significant civil cases handled by the office over the past six years include the following:

• The recent $5.06 billion multiparty settlement with Goldman Sachs relating to the securitization and sale of residential mortgage-backed securities.  The settlement included a $2.385 billion payment to the Department of Justice as a result of efforts by attorneys in the Eastern District — the largest civil recovery in the history of the district.
• The $13 billion multiparty settlement with JPMorgan Chase announced in 2013 relating to the securitization and sale of residential mortgage-backed securities.  The settlement included a $2 billion payment to the Department of Justice as a result of the Eastern District’s work.
• The settlement with Sierra Pacific Industries announced in 2012, valued at approximately $122 million, relating to its role in the huge Moonlight Fire that damaged tens of thousands of acres of U.S. Forest Service (USFS) land.  The settlement agreement required the transfer of 22,500 acres of wilderness to the USFS in California.
• Health care fraud and false billing settlements against Adventist Health, Catholic Health Care West, Medtronic Inc., Biotronik and Quest Diagnostics, resulting in total recoveries of nearly $40 million between 2011 and 2015.

In criminal cases, the office expanded its prosecution of financial and health care fraud cases, firearms trafficking, human trafficking and child exploitation cases.  In the area of narcotics enforcement, the office focused on the prosecution of high-level and violent offenders, while seeking more lenient sentences for lower-level and nonviolent offenders.  A few of the significant criminal cases handled by the office include the following:

• The conviction of nearly 300 defendants in complex mortgage fraud cases, many involving schemes that fleeced homeowner victims of many millions of dollars.  Sentences imposed ranged up to 30 years in prison.
• The convictions and lengthy sentences obtained in the Wannakuatte and Vassallo cases, involving the largest Ponzi schemes in the history of the district, in which investors lost about $150 million.
• The RICO conviction of Scott Salyer, CEO of SK Foods and nine other officers of food product companies in a series of prosecutions involving fraud and commercial bribery in the tomato products industry.
• The conviction of approximately 70 leaders of the hyper-violent Nuestra Familia criminal organization in a series of prosecutions in both Fresno and Sacramento.  Most defendants received lengthy prisons sentences.
• The extradition and prosecution of Shiraz Malik, the leader of an international drug trafficking organization, who was based in Poland.

During U.S. Attorney Wagner’s tenure, the number of Assistant U.S. Attorneys in the Eastern District increased by over 12 percent.  He established a National Security Unit within the office, created a Civil Rights/Human Trafficking Working Group, expanded the White Collar Unit in the Fresno Division and opened a new branch office in Bakersfield.  He also conducted extensive outreach to underserved populations in the district, including the Muslim, Sikh, Southeast Asian and LGBT communities.

As of May 1, Phillip A. Talbert will assume leadership of the office as Acting U.S. Attorney.  Talbert, who is currently the First Assistant U.S. Attorney, has had a distinguished career in more than 13 years in the office.  He previously served as Appellate Chief and as a prosecutor in the Narcotics and Violent Crime Unit and served in the Department of Justice’s Office of Professional Responsibility before coming to the Eastern District of California.  Before joining the Department of Justice, he was in private practice.  He is a graduate of Harvard University and the UCLA School of Law.

As a supervisor and line prosecutor in the office before becoming U.S. Attorney, U.S. Attorney Wagner worked in all three units of the criminal division and prosecuted a wide range of cases, including investment fraud, tax evasion, violent crime, public corruption, money laundering, domestic terrorism, and hate crimes.  He tried 19 cases to verdict and argued numerous appeals in the Ninth Circuit Court of Appeals.  At various times he served as the district antiterrorism coordinator, the hate crimes and civil rights coordinator and the Violence Against Women Act coordinator.  He was awarded a national Director’s Award for Superior Performance by an AUSA three times and was also presented with the national IRS-Criminal Investigation Chief’s Award and with a Meritorious Honor Award by the State Department.  In 2005 to2006, he was stationed in Jakarta as the first Department of Justice Resident Legal Advisor in Indonesia.

Some of the notable cases which U.S. Attorney Wagner handled as an Assistant U.S. Attorney include the prosecution of Blue Shield of California in an audit obstruction case; the prosecution of reproductive health care clinic serial arsonists Rachelle Shannon and Richard Andrews; the prosecution of the leaders of Anderson Ark & Associates, an international money laundering and tax evasion organization; the prosecution of 10 defendants including doctors, a CPA and an attorney, in three offshore tax evasion scheme cases; the prosecution of 17 defendants, including a CPA and an attorney, in seven investment fraud cases; the prosecution of two corrupt State Department employees and several others in a scheme to obtain visas through bribes; the hate crime prosecution of the Williams brothers, who torched three synagogues in Sacramento; the public corruption prosecution of Monte McFall and various officials from San Joaquin County, including the elected sheriff; the prosecution of five defendants, including three attorneys, in an asylum application fraud scheme; and the prosecution of two cross-burning cases.

SACRAMENTO, Calif. — John James Kash, 53, of Redding, was sentenced today by United States District Judge Kimberly J. Mueller to six and a half years in prison for conspiracy to distribute marijuana, manufacturing marijuana, and conspiracy to launder monetary instruments, United States Attorney Benjamin B. Wagner announced.

Kash was convicted on November 18, 2015, after a six-day jury trial. The evidence at trial demonstrated that Kash was part of an interstate marijuana trafficking conspiracy that diverted marijuana from California to Pennsylvania from 2009 through 2013. Kash was arrested in 2013 after being found in a warehouse in Redding, California that had been converted into an indoor marijuana grow. The warehouse contained four separate marijuana grow rooms with plants in various stages of development to allow for year-round marijuana production.

Kash and his co-conspirators shipped marijuana that had been grown in the Redding area to Pittsburgh, Pennsylvania. Kash, a native of Pennsylvania, coordinated the marijuana distribution in the Pittsburgh area. In May 2013, Kash and co-defendant James Massery shipped 158 one-pound bags of marijuana concealed within shrink-wrapped barrels from California to Pennsylvania. Kash and co-conspirators Massery, Glen Meyers, and Aimee Burgess were all arrested in Pennsylvania as they were unloading the marijuana from the barrels.

Kash recruited his family and friends to assist with the concealment and transport of the cash proceeds of drug trafficking. During an eight-month period between August 2010 and April 2011, Kash and others attempted to launder $382,000 in drug proceeds through credit unions in Pittsburgh and Redding. Kash was arrested in May 2012 in Utah attempting to drive $60,000 in cash from Pittsburgh to Redding.

The United States ultimately seized approximately $1 million in drug proceeds from various bank accounts and other assets that Kash and his co-conspirators controlled.

This case was the product of an investigation by the Internal Revenue Service – Criminal Investigation and the Sacramento Valley Financial Crimes Task Force, with assistance from the Pennsylvania State Police, the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Drug Enforcement Administration, Pennsylvania’s Washington County Drug Task Force, and the Utah Highway Patrol. Assistant United States Attorneys Michele Beckwith, Christiaan Highsmith, Kevin Khasigian, and Justin Lee prosecuted the case.

Kash is the last of four defendants to be sentenced. Co-defendant Glen Meyers was sentenced to eight years and two months in prison; James Massery was sentenced to six years and three months in prison; and Aimee Burgess was sentenced to five years in prison.

SACRAMENTO, Calif. — Nicholas Torrieri, 43, of Redding, was sentenced today by United States District Judge Kimberly J. Mueller to 14 years in prison for receiving child pornography, United States Attorney Benjamin B. Wagner announced. Upon release, he will be required to register as a sex offender and will be supervised by the court for the rest of his life.

According to court documents, in October 2014 and again in January 2015, agents identified a computer offering files depicting minors engaged in sexually explicit conduct through a file-sharing network. The computer’s Internet Protocol address was traced to Torrieri’s residence. On February 11, 2015, agents searched the residence and seized several digital devices. A subsequent forensic review of these devices uncovered more than 600 images and 240 videos containing child pornography.

During the course of the investigation, law enforcement discovered a videotape of a 1998 television talk show about how to protect children from sexual abuse. Torrieri appeared on the show and claimed that he had participated in hundreds of incidents of victimizing children, including both encouraging minors to expose themselves and actual molestation. At today’s sentencing, Judge Mueller noted that he has “a compulsion that he has been unable to control.”

“Criminals who create and distribute pornographic images of children often fuel the behavior of like-minded predators who covet this despicable content. Innocent victims are left with permanent scars that can never be entirely healed,” said Ryan L. Spradlin, special agent in charge for HSI San Francisco. “This sentencing is a testament to the dedicated HSI agents and our law enforcement partners who work tirelessly to root out predators and make them face the judgment they deserve.”

This case was the product of an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Special Assistant United States Attorney Josh F. Sigal prosecuted the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

SACRAMENTO, Calif. — Shihong Chen, 51, of Elk Grove, was sentenced today by United States District Judge Kimberly J. Mueller to one year and one day in prison for growing marijuana inside homes in Elk Grove and Sacramento, United States Attorney Benjamin B. Wagner announced.

According to court documents, Chen participated in scheme to grow marijuana inside homes in Sacramento and Elk Grove. On January 30, 2013, law enforcement executed federal search warrants at seven residential homes in Sacramento County, including the four houses where Chen cultivated marijuana: 9761 McKenna Drive, Sacramento; 8270 Cliffcrest Way, Sacramento; 8108 Gwerder Court, Elk Grove; and 3713 45th Avenue, Sacramento. Altogether, authorities seized more than 1,000 plants.

The investigation started when law enforcement learned of abnormally high power consumption at 8646 Everidge Court in Sacramento, owned by Green Ventures LLC. During their investigation, law enforcement observed Oakland-based real estate agent Zhiqiang Liu traveling frequently to and from the Everidge Court house. On January 30, 2013, law enforcement executed a federal search warrant at Everidge Court and found 867 growing marijuana plants, approximately 31.8 kilograms of cultivated marijuana, and $7,070 in cash.

Chen is the fifth and final defendant to be sentenced in this case. Four other defendants have been sentenced:

1. March 23, 2016, Zhiqiang Liu was sentenced to three years in prison.

2. March 16, 2016, Jun Mou Peng was sentenced to one year and one day in prison.

3. October 28, 2015, Qinghong Li was sentenced to one year and one day in prison.

4. December 17, 2015, Huanhao Chen was sentenced to one year of probation.

This case was the product of an investigation by the Drug Enforcement Administration and the Elk Grove Police Department. Assistant United States Attorney Christiaan Highsmith prosecuted the case.

SACRAMENTO, Calif. — Scott Anthony Orton, 57, of Puyallup, Washington, pleaded guilty today to transmitting interstate threats, United States Attorney Benjamin B. Wagner announced.

According to court documents, Orton posted several threatening statements on a popular news website in which he expressed his intent to travel to Placerville, California to kill an officer of the Placerville-based company, Stem Express LLC. On July 16, 2015, among other threats, Orton wrote, “The management of StemExpress should be taken by force and killed in the streets today. Kill StemExpress employees. I'll pay you for it.” Orton also identified the target of his threats by name, and wrote “I’ll pay ten grand to whomever beats me to [the target].”

“Terrorizing others through threats of violence, whether communicated in person or through media websites, is cruel, dangerous and disruptive, and is also a federal crime,” said U.S. Attorney Wagner. “As Mr. Orton now knows, those who seek to terrorize others online will be identified and prosecuted.”

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorney Brian A. Fogerty is prosecuting the case.

Orton is scheduled to be sentenced by United States District Judge John A. Mendez on August 2, 2016. Orton faces a maximum statutory penalty of five years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

FRESNO, Calif. — Humberto Ceballos-Rangel (Ceballos), 38, of Tuxpan, Jalisco, Mexico, was sentenced today to three years in prison in connection with his involvement in a large marijuana cultivation operation found by law enforcement last summer in the Sierra National Forest in Madera County, United States Attorney Benjamin B. Wagner announced.

According to court documents, Ceballos was found at a campsite within a marijuana cultivation site that caused significant damage to public land and natural resources. Native vegetation was cut to accommodate the marijuana plants, foot trails, and cooking and sleeping areas. Water was also diverted from a nearby creek to irrigate the marijuana plants. Agents found and removed from the site insecticide, propane tanks, and a large quantity of trash and hose line. Ceballos pleaded guilty on January 19, 2016.

In sentencing Ceballos, U.S. District Judge Lawrence J. O’Neill ordered Ceballos to pay $8,750 in restitution to the U.S. Forest Service for the costs of cleaning up the site.

The case was the product of an investigation by the U.S. Forest Service, the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the California Department of Justice’s Campaign Against Marijuana Planting (CAMP), the California Department of Fish and Wildlife, and Madera County Narcotic Enforcement Team (MADNET). Assistant United States Attorney Karen A. Escobar prosecuted the case.

FRESNO, Calif. —Macedonio Madrigal-Herrera (Madrigal), 44, of Michoacán, Mexico, pleaded guilty today to conspiring to manufacture, distribute and possess with intent to distribute marijuana, in connection with a large-scale cultivation operation located in the Brush Creek drainage in the Sequoia National Forest in Tulare County, United States Attorney Benjamin B. Wagner announced.

According to court documents, Madrigal was responsible for watering 2,719 marijuana plants in the National Forest. The marijuana cultivation activities caused extensive damage to the public land and natural resources. Zinc phosphide, a toxic pesticide from Mexico, was found at the site, along with fertilizer and trash. Trees and plants, newly generated following the 2002 McNally Fire, were cut down to make room for the marijuana. Water was diverted from a nearby stream that supports trout. As part of the plea agreement, Madrigal will pay $4,190 in restitution to the U.S. Forest Service for the damage caused by his wrongful conduct.

Madrigal is scheduled for sentencing on July 18, 2016. He faces a maximum statutory penalty of 20 years in prison and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an investigation by the U.S. Forest Service, the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the California National Guard, the California Department of Fish and Wildlife, and Tulare County Sheriff’s Office. Assistant United States Attorney Karen Escobar is prosecuting the case.

FRESNO, Calif. — Timothy Brian Grayson, 58, of Bakersfield, was sentenced today by United States District Judge Lawrence J. O'Neill to four years and 9 months in prison for possessing child pornography, United States Attorney Benjamin B. Wagner announced.

According to court documents, between September and October 2013, Grayson possessed on a laptop computer and hard drive at least 300 image files with visual depictions of minors engaging in sexually explicit conduct.

This case was the product of an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Assistant United States Attorney Grant B. Rabenn and Special Assistant U.S. Attorney Katherine A. Plante prosecuted the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education. 

FRESNO, Calif. —Pablo Cesar Sahagun, 26, a citizen of Mexico and resident of Bakersfield, was sentenced to 18 months in prison for aiming the beam of a laser pointer at a Kern County Sheriff’s helicopter, United States Attorney Benjamin B. Wagner announced.

On January 11, 2016, Sahagun pleaded guilty to aiming a beam of a laser pointer at an aircraft. According to court documents, he repeatedly struck and tracked a Kern County Sheriff’s helicopter, Air-1, with the beam of a green laser pointer. The laser pointer was key-activated and labeled as a Laser 301, a device that purports to emit a one-watt laser beam, which is 2,000 times more powerful than what is legally permissible for a laser pointer. The laser strikes caused the airmen to experience flash blindness, glare, blurry vision, eye discomfort, headache and irritation.

In sentencing Sahagun, United States District Judge Dale A. Drozd stated: “This is an egregious case of a laser strike. … The circumstances are inexplicable.”

Reports of laser attacks on aircraft have increased dramatically in recent years as powerful laser devices have become more affordable and widely available to the public. From 2011 to 2015, there have been over 23,000 laser illumination incidents in the United States reported to the Federal Aviation Administration (FAA). This year there have been over 22 laser strikes reported in the United States every day. In the Eastern District of California, which encompasses 34 counties in the eastern portion of California, there were 214 reported laser incidents in 2015. Lasers can completely incapacitate pilots who are trying to fly safely to their destination, endangering their crew members, passengers and people on the ground.

This case was the product of an investigation by the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Kern County Sheriff’s Office, and the Bakersfield Police Department. Assistant U.S. Attorney Karen A. Escobar prosecuted the case.

SACRAMENTO, Calif. — Neil Van Dyck, 64, of Roseville, was sentenced today by United States District Judge Garland E. Burrell Jr. to three years in prison and a $10,000 fine for committing healthcare fraud, United States Attorney Benjamin B. Wagner announced.

According to court documents, Van Dyck was a California-licensed podiatrist who operated a podiatry practice in Roseville called Placer Podiatry. Van Dyck offered “spa”-like treatments and performed routine foot care at his practice. Between 2009 and 2014, however, Van Dyck submitted over $2.8 million in fraudulent claims for reimbursement to Medicare, Medi-Cal, Tricare and private insurers. He falsely claimed that he performed more expensive procedures than he actually performed, or that the routine foot care that was provided was justified because of illness or symptoms that were not present. Often the treatments were performed by unlicensed staff, sometimes when Van Dyck was not present at his practice. Additionally, Van Dyck altered a single-use skincare patch by cutting it into pieces and billed Medicare for multiple applications. In 2011, in response to a request for documents from an investigator for Medicare, Van Dyck altered patients’ medical records to justify his fraudulent bills. Medicare, Medi-Cal, Tricare, and the private insurers paid Van Dyck over $1 million for his fraudulent claims.

“Van Dyck schemed to increase his profits at the expense of patients and taxpayers,” said Steven Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Instead, along with our law enforcement partners, my agents ensured that he ended up paying a high price, indeed, for his criminal actions.”

The Court previously entered an order requiring Van Dyck forfeited $1.2 million from a retirement account into which proceeds of the healthcare fraud scheme were traced. Most of this money is expected to be used to pay restitution to the insurance victims. The date for a further restitution hearing is set for May 27, 2016.

This case was the product of an investigation by the Department of Health and Human Services and the Federal Bureau of Investigation. Assistant United States Attorney Todd A. Pickles prosecuted the case.

SACRAMENTO, Calif. — This week, prior to the annual tax return filing deadline, four individuals, including two current IRS employees, were charged in separate cases with federal tax crime, United States Attorney Benjamin B. Wagner announced today.

Longtime IRS Employees Arrested Today in Fresno

Two long-time IRS employees were arrested today at the IRS facility in Fresno as they came to work. On April 14, 2015, a 38-count indictment was brought against Della Ornelas, 48, and Randall Ruff, 52, both of Fresno, charging them with aiding others in the preparation of false tax returns, and making their own fraudulent tax returns as employee of the United States.  According to the indictment, Ornelas and Ruff are married to each other, and are longtime employees of the Internal Revenue Service in Fresno. They are charged with helping themselves, family and friends file false tax returns that claimed false dependents, generating large tax refunds that were diverted into bank accounts they controlled. They allegedly defrauded the United States of approximately $146,561 over a seven-year period.

This case is the product of an investigation by the Treasury Inspector General for Tax Administration and the Internal Revenue Service-Criminal Investigation. Assistant U.S. Attorney Mark J. McKeon is prosecuting the case. (case # 1:16-cr-054)

Fairfield Resident Indicted for Tax Evasion

On Thursday, April 14, 2016, a federal grand jury returned an indictment against Bobby Louis Sanders, 52, of Fairfield, charging him with two counts of tax evasion. According to the indictment, Sanders failed to pay the tax due of $31,061 for tax years 2009 and 2010 and failed to file tax returns for tax years 2009 and 2010. The indictment alleges that Sanders willfully provided false information on W-4 forms claiming exemptions he was not entitled to claim.

This case is the product of an investigation by the Internal Revenue Service. Assistant U.S. Attorney William S. Wong is prosecuting the case. (case # 2:16-cr-081)

Citrus Heights Man Indicted for Failure to File Tax Returns

On April 12, 2016, Donnie Francis Schroeder, 52, of Citrus Heights, was charged with four-counts of failure to file income taxes for tax years 2009 through 2012. According to court documents, between 2009 and 2012, Schroeder willfully did not file income taxes on income he earned as a 50 percent partner in a sweeping and cleaning business that operates in Sacramento and Reno, Nevada.

This case is the product of an investigation by the Internal Revenue Service – Criminal Investigation. Assistant U.S. Attorney André M. Espinosa is prosecuting the case. (case # 2:16-cr-080)

If convicted, Ornelas and Ruff face a maximum statutory sentence of three years in prison for each count of aiding and abetting false tax returns and five years in prison for making fraudulent tax return by an employee of the United States. If convicted, Sanders faces a maximum statutory penalty of five years in prison and a $100,000 fine on each count. If convicted, Schroeder faces a maximum statutory penalty of one year in prison and a $25,000 fine for each count. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges against each of the foregoing defendants are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

In addition to the above, so far in 2016, eight individuals have been indicted, five have been convicted and 14 were sentenced for either submitting false claims for refunds or evading taxes. For more information, see the press release also issued this week.

SACRAMENTO, Calif. — U.S. Attorney Ben Wagner held a roundtable discussion today with Muslim and Sikh community leaders and senior law enforcement officials to discuss community concerns over potential bias incidents and hate crimes, the need for reporting by victims of those incidents, and the need to build solid relationships between the community and law enforcement. The group also discussed how law enforcement can assist in building resilient communities that can resist radicalization to violence. After the discussion, local media was invited to talk with participants.

Today’s meeting was one of 14 events in 11 federal judicial districts across the United States designed to build on both the Justice Department’s prosecutorial work in countering post-September 11th backlash, as well as its outreach efforts, including the new interagency initiative to combat religious discrimination throughout the country.

U.S. Attorney Wagner stated: “The Muslim community is a strong ally in combatting radicalization and terrorism.  We want the Muslim community to know that we stand with them against Islamophobia and hate.  Those who seek to target or harass them should be on notice that such conduct will be investigated by law enforcement.”

Since Sept 11, 2001, the Department of Justice has investigated over 1,000 incidents involving acts of violence, threats, assaults, vandalisms and arsons targeting Arab, Muslim, Sikh and South Asians, and those perceived to be members of these groups. The Civil Rights Division and U.S. Attorneys’ offices throughout the country have brought prosecutions against more than 60 defendants in such cases, with 57 convictions to date.

The Civil Rights Division is leading an interagency initiative to combat religious discrimination, which includes combatting illegal restrictions on religious properties like mosques.

SACRAMENTO, Calif. — Daniel Albert Crowninshield, 53, of Sacramento, pleaded guilty today to unlawfully manufacturing and dealing in firearms and possession of an unregistered machinegun, United States Attorney Benjamin B. Wagner announced.

In his plea agreement, Crowninshield, who was also known by his online moniker “Dr-Death,” admitted that he operated an unlicensed firearms manufacturing business out of C&G Tool, a metal shop in North Sacramento. Using sophisticated computer controlled machines, Crowninshield manufactured lower receivers for AR-15s and other firearms. Crowninshield did not conduct background checks, enforce waiting periods, or complete firearm transaction paperwork.

Crowninshield advertised such services on at least one online firearm enthusiast forum. This website mainly consists of forums where people ask and answer questions related to firearms. Crowninshield, using the moniker “Dr-Death” was a prolific poster on the website. Additionally, other members frequently posted about Dr-Death, including review of service provided and recommending that other users visit his shop.

“The manufacturing and unlicensed sale for profit of high-capacity firearms is a serious threat to public safety,” said U.S. Attorney Wagner. “We will continue to vigorously investigate unlicensed gun dealers and prosecute violations of the federal firearms laws.”

“Daniel Crownshield, AKA: Dr. Death owned and operated a machine shop where he allowed customers with unknown backgrounds to use his machinery to unlawfully manufacture firearms for profit,” said Special Agent in Charge Jill A. Snyder. “ATF regulates the firearm industry, and it is illegal to manufacture and sell firearms without possessing a federal firearms license, and without conducting background checks. ATF’s goal is to keep firearms out of the hands of prohibited individuals and prevent violent crime.”

This case is the product of an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the California Department of Justice’s Bureau of Firearms, with the assistance of the Sacramento Police Department, the Sacramento County Sheriff’s Department, and the California Highway Patrol. Assistant United States Attorneys Justin Lee and Matthew Yelovich are prosecuting the case.

Crowninshield is scheduled to be sentenced by Judge Troy L. Nunley on June 30, 2016. Crowninshield faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Daniel Albert Crowninshield, 45, of Sacramento, California, pleaded guilty today to unlawfully manufacturing and dealing in firearms and possession of an unregistered machinegun, announced U.S. Attorney Benjamin B. Wagner for the Eastern District of California.

In his plea agreement, Crowninshield, who was also known by his online moniker “Dr-Death,” admitted that he operated an unlicensed firearms manufacturing business out of C&G Tool, a metal shop in North Sacramento.  Using sophisticated computer controlled machines, Crowninshield manufactured lower receivers for AR-15s and other firearms.  Crowninshield did not conduct background checks, enforce waiting periods, or complete firearm transaction paperwork.

Crowninshield advertised such services on at least one online firearm enthusiast forum.  This website mainly consists of forums where people ask and answer questions related to firearms.  Crowninshield, using the moniker Dr-Death was a prolific poster on the website.  Additionally, other members frequently posted about Dr-Death, including review of service provided and recommending that other users visit his shop.

“The manufacturing and unlicensed sale for profit of high-capacity firearms is a serious threat to public safety,” said U.S. Attorney Wagner.  “We will continue to vigorously investigate unlicensed gun dealers and prosecute violations of the federal firearms laws.”

“Daniel Crownshield aka Dr. Death owned and operated a machine shop where he allowed customers with unknown backgrounds to use his machinery to unlawfully manufacture firearms for profit,” said Special Agent in Charge Jill A. Snyder for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).  “ATF regulates the firearm industry and it is illegal to manufacture and sell firearms without possessing a federal firearms license and without conducting background checks.  ATF’s goal is to keep firearms out of the hands of prohibited individuals and prevent violent crime.”

This case is the product of an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the California Department of Justice’s Bureau of Firearms, with the assistance of the Sacramento Police Department, Sacramento County Sheriff’s Department and California Highway Patrol. Assistant United States Attorneys Justin Lee and Matthew Yelovich are prosecuting the case.

Crowninshield is scheduled to be sentenced by U.S. District Judge Judge Troy L. Nunley for the Eastern District of California on June 30.  Crowninshield faces a maximum statutory penalty of 10 years in prison and a $250,000 fine.  The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

SACRAMENTO, Calif. — Matthew Keys, 29, former web producer and network site administrator for KTXL FOX40, a Sacramento television station, was sentenced today to two years in prison for inciting, assisting, and conducting a weeks-long campaign of online attacks against FOX40 and The Los Angeles Times, United States Attorney Benjamin B. Wagner and FBI Special Agent in Charge Monica M. Miller announced.

On October 7, 2015, following an eight-day trial, a jury found Keys guilty of one count of conspiracy to make unauthorized changes to the Tribune Company’s websites and damage its computer systems, one count of transmitting malicious code, and one count of attempted transmission of malicious code.

At sentencing, United States District Judge Kimberly J. Mueller stated: “Ultimately, his downfall came from playing his former employer against Anonymous, while holding himself out as a professional journalist. … The mask that Mr. Keys put on appeared to allow a heartless character to utter lines that are unbecoming a journalist.” Judge Mueller ordered Keys to begin serving his sentence on June 15, 2016.

 “Although this case has drawn attention because of Matthew Keys’ employment in the news media, this was simply a case about a disgruntled employee who used his technical skills to taunt and torment his former employer,” said U.S. Attorney Wagner. “Although he did no lasting damage, Keys did interfere with the business of news organizations, and caused the Tribune Company to spend thousands of dollars protecting its servers. Those who use the Internet to carry out personal vendettas against former employers should know that there are consequences for such conduct.”

“Matthew Keys will spend the next two years in prison,” said Assistant Special Agent in Charge Tom F. Osborne. “This sentence serves as a warning that those who engage in this type of behavior face harsh penalties.”

According to evidence produced at trial, Keys was a site administrator for FOX40’s access to Tribune Company’s content management system (CMS). Tribune Company’s various broadcast and print media properties all used the CMS to publish their news content on the Internet. Keys had an argument with his supervisor on October 28, 2010, after which time FOX40 terminated Keys’ CMS user account, and Keys never returned to work. Secretly, Keys had maintained an unauthorized access point through a set of unauthorized “super user” credentials.

In his own words, Keys later admitted that he was “angry” and “hurt.” Initially, he refused to relinquish control over the station’s Twitter and Facebook accounts. On November 3 and November 22, 2010, Keys used his unauthorized CMS access to download the email list of FOX40 viewers who had given the station their personal information as part of a rewards program. Then, beginning on December 1, 2010, Keys used that list to send anonymous emails denigrating the station and implying that viewer information was not secure. Simultaneously, Keys sent anonymous emails to his former supervisor at FOX40 taunting him that Tribune Company’s CMS was not secure and that corporate information security cannot defend against an insider who decides to “go rogue.” During this time, Keys also used his unauthorized network access to repeatedly deactivate the credentials of the person who took over his duties at FOX40.

According to the evidence at trial, on December 8, 2010, Keys, using the moniker “AESCracked,” appeared in chatrooms used by Anonymous. This was during the time of “Operation Payback,” when Anonymous initiated attacks on various entities that had acted against the interests of WikiLeaks. In the Anonymous chatroom, Keys posted super user credentials to the Tribune Company CMS and exhorted those present to “go f--- s--- up.” He instructed those present on what Tribune Company’s “bread and butter assets” were and what media organizations should be targeted for the “largest impact.” Keys also tutored Anonymous members on how to navigate the CMS and create super user credentials that blended in more easily on the network.

Anonymous did not immediately use the credentials for malicious purposes, and Keys spent the next few days advocating an attack on Tribune media properties. When one member said he was researching the network, Keys responded, “I did not give you those passwords for research. I want you to f--- s--- up.” On December 9, 2010, Keys posted a link to a Los Angeles Times story critical of WikiLeaks and characterized it as “yet another reason why the Times must be demolished.” On December 10, 2010, when a member of Anonymous stated opposition to attacking a media site, Keys replied, “FOX News is not media, it’s ‘infotainment’ for inbreds. I say we target them.”

At the same time that he was instigating an attack against Tribune Company and the Los Angeles Times, Keys sought credit as a journalist for predicting it. On December 12, 2010, in an email and a recorded telephone conversation, Keys declared that he had acquired “documents pertaining to future operations,” including “operations” against The Los Angeles Times.

On December 14, 2010, an Anonymous member who used the moniker “Sharpie” used backdoor credentials to deface a story on the website of the Los Angeles Times. What readers noticed on the front side of the CMS was limited because editors quickly noticed what had happened. They were able to repair the defacement within 40 minutes of the desktop site and a day on the mobile site. The next day, Keys tried to help Sharpie put up altered front-page layouts on several Tribune Company properties, but failed.

Keys’ actions involved disclosure of super user credentials and required the Tribune Company to conduct a damage assessment that lasted to late January or early February of 2011. Five high-level Tribune Company information technology professionals testified at trial that they and their subordinates spent an urgent night searching for and deactivating unauthorized credentials on the CMS. They reset every password on the network. Information security then spent weeks assessing the extent of the compromise and how the breach had occurred. They did not know whether CMS server logs themselves had been altered and whether even the authentication system itself had been compromised. Information security managers had to review whether the attack had changed archived news stories, changed newspaper circulation information, accessed payment systems, or altered the systems that printed actual newspapers. According to trial testimony, this involved “literally hundreds of servers with thousands of pages and archives and things of that nature.”

The case was the product of an investigation by the Federal Bureau of Investigation. Assistant U.S. Attorneys Matthew D. Segal and Paul A. Hemesath of the Eastern District of California and Deputy Chief James A. Silver of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) prosecuted the case.

SACRAMENTO, Calif. — With the annual tax filing deadline approaching, U.S. Attorney Benjamin B. Wagner noted that his office had taken a number of criminal enforcement actions in recent months in tax evasion cases in the Eastern District of California. The U.S. Attorney’s Office works with the Internal Revenue Service – Criminal Investigation and other law enforcement partners to enforce federal tax laws.

“This is an appropriate time of year to remind those few individuals who set out to cheat or evade their tax obligations that such conduct can result in prosecution,” said U.S. Attorney Wagner. “Every year some deliberately fail to file required returns or file false and fraudulent returns in order to evade the assessment and payment of tax due. It is the obligation of this office to pursue and prosecute them for their criminal conduct.”

“All Americans have a responsibility to pay taxes. In today’s economic environment, it’s more important than ever that people feel confident that everyone is playing by the rules and paying the taxes they owe,” said Michael T. Batdorf, IRS-CI Special Agent in Charge of the Oakland Field Office. “Those who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t. IRS-CI and the Department of Justice will investigate and prosecute those who violate our tax system.”

Cases involving IRS employees are investigated jointly by the Inspector General for Tax Administration (TIGTA) and IRS-CI. Rod Ammari, Special Agent-in-Charge of TIGTA’s San Francisco Field Division stated: “It is very important that the American taxpayers have confidence in the IRS and its functions. When IRS employees use their insider knowledge to file fraudulent tax returns, we are committed to prosecuting these individuals to the fullest extent of the law. IRS employees committing tax fraud cannot be tolerated.”

Indictments in the Eastern District of California so far in 2016:[1]

U.S. v. Davis — Indicted on March 31, 2016. Sherrell Davis, 42, of Benicia, allegedly submitted fraudulent claims for tax refunds in the names of other people and assisted in preparing fraudulent tax returns seeking thousands of dollars in refunds. (2:16-cr-072)

U.S. v. Black — Indicted on March 24, 2016. Kenley Black, 41, formerly of Burney, allegedly failed to file tax returns for tax years 2009 to 2013 and evaded paying more than $225,000 in taxes for those years. (2:16-cr-062)

U.S. v. Boone et al. — Indicted on February 10, 2016. Marty Boone, 54, and his wife Ronda Boone, 53, both of Vallejo, allegedly filed separate false tax returns claiming million-dollar refunds. Marty Boone was paid approximately $1.9 million, which they laundered by moving it through various accounts, including one in Cyprus. (2:16-cr-020)

U.S. v. Rocha, et al. — Indicted on January 14, 2016. Lorita Marie Rocha, 35, of Fresno, and Nereida Rodriguez, 28, of Firebaugh, allegedly filed fraudulent tax returns using stolen identities of over two dozen individuals that Rocha obtained through her employment with the IRS as a seasonal tax examiner. They claimed over $100,000 in refunds. (1:16‑cr‑001)

U.S. v. Chambers et al. — Indicted on January 14, 2016. Denna Chambers, 33, of Woodland, and Starsheka Mixon, 32, of Pinole, allegedly filed approximately 178 fraudulent income tax returns requesting more than $900,000 in refunds. (2:16-cr-010)

Convictions in 2016:

U.S. v. Cooper et al. — On April 12, 2016, Tiana Naples, 29, of Vallejo pleaded guilty to conspiring to submit false claims. On February 9, 2016, her co-defendant Leticia Roque, 49, of Vallejo, was sentenced to 30 months in prison, for conspiring to submit false claims and aggravated identity theft. Together, Naples and Roque submitted 60 false tax returns requesting more than $200,000 in refunds in the names of other people. (2:14-cr-022)

U.S. v. Kuzmenko et al. — On April 8, 2016, Aleksandr Kuzmenko, 32, of Loomis, pleaded guilty to conspiring to defraud the U.S. in connection with his participation in a tax refund fraud scheme. Kuzmenko conspired with others to file approximately 90 fraudulent tax returns with the IRS for the 2008 tax year using various identities, including some that were stolen. The fraudulent claims totaled approximately $695,000, which resulted in a loss of more than $570,000 to the IRS. (2:14-cr-044)

U.S. v. Shchirskiy et al. — On April 7, 2016, Vladislav Atamanyuk, 28, of Sacramento County, pleaded guilty to conspiring to submit fraudulent claims for tax refunds using the identities of various individuals, some of which were stolen. Atamanyuk and his co‑conspirators claimed more than $650,000 in fraudulent refunds, although the IRS issued about $88,000 in connection with the scheme. (2:14-cr-198)

U.S. v. Miller — On February 5, 2016, Linda J. Miller, 63, of Woodland, pleaded guilty to filing a false tax return. Miller provided bookkeeping services, and she admitted that on her 2008 tax return, she did not report $138,000 in checks she received. (2:15‑cr‑066)

U.S. v. Knockum — On January 29, 2016, Kenneth Knockum, 48, of Vallejo, was found guilty at trial of filing false returns seeking large refunds — two returns requested refunds of over $1.4 million each — he generated false 1099-OIDs and other tax forms to support the claimed income and taxes. The IRS caught the majority of the false returns but over $125,000 in fraudulent refunds were issued. (2:14‑cr-115)

Sentences in 2016:

U.S. v. Castro — On April 6, 2016, Yolanda Castro, 48, a 20-year employee of the IRS in Fresno, was sentenced to one year in prison and ordered to pay $37,387 in restitution for aiding in the preparation of a false tax return. Between 2007 and 2013, she prepared and filed false federal income tax returns for herself, her family members and others in which she fraudulently claimed tax deductions and credits. (1:15-cr-050)

U.S. v. Williams — On March 31, 2016, Jasmine Ann Williams, 26, of Sacramento, was sentenced to three years of probation for using her position as a volunteer tax preparer to steal two tax refunds totaling $10,745 from two individuals. Williams was also ordered to pay restitution to the two victims. (2:15-cr-206)

U.S. v. Eidson — On March 21, 2106, Brandon Adam Eidson, 34, of Turlock, was sentenced to three years and one month in prison and ordered to pay $433,205 in restitution for structuring cash transactions and filing false tax returns. Between 2008 and 2010, he underreported approximately $1.2 million in gross receipts for his business Hooked Up Hydroponics. Eidson deposited more than $1.5 million in increments of $10,000 or less in an attempt to prevent his bank from filing Currency Transaction Reports. (1:15‑cr-085)

U.S. v. Bonderer et al. — On March 10, 2016, Clint D. Bonderer, 37, of Stockton, was sentenced to three years in prison for conspiring to submit false claims. Co-defendant Slavic Khudoy, 36, of Loomis, pleaded guilty today, April 13, 2016. Bonderer and Khudoy submitted 842 fraudulent tax returns, requesting more than $600,000 in refunds in the names of other people and in most cases, kept the refunds for themselves. (2:15‑cr‑028)

U.S. v. Bolanos — In 2008, seven defendants submitted false tax returns claiming they were owed more than $33 million in refunds. In response, the IRS issued approximately $400,000 in unearned refunds. On March 7, 2016, Gaylene Lynnette Bolanos, 58, of Fresno, was sentenced to 10 years in prison and ordered to pay $429,300 in restitution; Leroy Donovan Combs, 74, of Fresno, was sentenced to three years and nine months in prison; Charles Wayne Uptergrove, 57, of Madera County, was sentenced to three years and three months in prison; and Ladonna Lee Moon, 55, of Texas, was sentenced to one year and nine months in prison. On February 29, 2016, Louis Calles, 67, of Fresno, was sentenced to 16 months in prison; and James Schwartz, 61, of Fresno, was sentenced to one year and a day in prison. On January 11, 2106, Oswald Georgner, was sentenced to 18 months in prison. (1:13-cr-362)

U.S. v. Ruiz — On February 3, 2016, Manuel Ruiz, 47, of Sacramento, was sentenced to 18 months in prison for making false claims for tax refunds on federal income tax returns for clients of his home-based tax preparation business. In total, between tax years 2009 and 2011, Ruiz made false claims on more than 180 returns that resulted in over $650,000 paid out by the IRS. After payments to clients, Ruiz retained at least $192,000 from the false claims. (2:14-cr-009)

U.S. v. Richards — On January 21, 2106, James Stewart Richards, 69, of West Sacramento, was sentenced to two years in prison for tax evasion. Richards is an attorney and a member of the bar in California and Hawaii. Between 1994 and 2003, Richards evaded paying over $170,000 in federal income taxes. He filed a false “Offer in Compromise” to the IRS that omitted bank accounts and six rental properties. He used a client trust account to hold his own assets. He also made false statements about his assets to a bankruptcy court and to the IRS. (2:10-cr-089)

More criminal tax investigations are underway.

 

---

[1] The charges in an indictment are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

 

FRESNO, Calif. — United States District Judge Dale A. Drozd sentenced Shane Paul Young, 45, of Fresno, on Monday to 30 years in federal prison for receipt and distribution of child pornography, United States Attorney Benjamin B. Wagner announced.

On January 22, 2016, after a three–day trial, a federal jury returned a guilty verdict. According to evidence presented at trial, federal investigators in Fresno received a lead regarding an email address in Fresno that was distributing child pornography. Investigators determined that Young was the user of that Fresno email account. The evidence showed that Young sent and received hundreds of videos and images containing child pornography over the Internet with users across Europe and North America. The child pornography that Young received and distributed was not only voluminous, but also included graphic images of infants and toddlers being sexually abused. Both the nature of Young’s offense and his significant prior criminal history factored into the sentence that was imposed.

This case was the product of an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Fresno County Sheriff’s Department, the Kings County District Attorney’s Office, and the Fresno Internet Crimes Against Children (ICAC) task force. ICAC is a federally and state-funded task force with agents from federal, state, and local agencies. The Fresno ICAC investigates online child exploitation crimes, including child pornography, enticement, and sex trafficking. Assistant United States Attorneys Mark J. McKeon and Jeffrey A. Spivak prosecuted the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. . Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

FRESNO, Calif. — Tyrell Richmond, 33, of Visalia, was sentenced today by U.S. District Judge Lawrence O’Neill to 12 years and seven months in prison for sex trafficking a minor, United States Attorney Benjamin B. Wagner announced.

According to court documents, on June 21, 2014, FBI’s Fresno Child Exploitation Task Force and members of the Fresno Police Department’s Vice Unit conducted undercover operations targeting prostitution rings that appeared to utilize underage victims. During the investigation, they detained three 16-year-old girls, all of whom were runaways, at a motel in Fresno. Further investigation revealed that Richmond had prostituted the girls for about one week, first in Visalia and then in Fresno. Richmond collected all of the money received by the girls, and did not permit them to leave their motel rooms, other than to get ice. Richmond pleaded guilty on December 14, 2015.

At the sentencing hearing, one of the victims delivered powerful testimony about the trauma she endured at the hands of Richmond. In imposing the sentence, Judge O’Neill described Richmond’s conduct as “horrid” and noted the serious impact it had on the victims in this case.

“Today's sentencing highlights the commitment of the FBI, the Fresno Police Department, and the Visalia Police Department to combating the commercial sexual exploitation of minors in the region and the success of Operation Cross Country,” said Supervisory Special Agent Robert Guyton of the FBI Sacramento field office Fresno resident agency's violent crime squad. “Richmond's sentence offers justice for his victims and serves as a warning to others who may attempt to exploit minors.”

This case was the product of an investigation by the Federal Bureau of Investigation, the Visalia Police Department, and the Fresno Police Department. Assistant United States Attorney Vincenza Rabenn prosecuted the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

FRESNO, Calif. B Aseel Al-Saber, 24, of Fresno, was sentenced today by United States District Judge Lawrence J. O’Neill to one year and a day in federal prison for conspiring to structure cash transactions, United States Attorney Benjamin B. Wagner announced. In addition, co-defendant Brandon Thomas, 26, of Fresno, pleaded guilty today to conspiring to structure cash transactions. He is scheduled to be sentenced on August 29, 2016, before Judge O’Neill.

According to court documents, Al-Saber and seven co-defendants opened and maintained bank accounts for the purpose of funneling cash proceeds of marijuana trafficking from Florida and other states back to California. Al-Saber’s bank account was used to deposit and withdraw more than $72,000 in cash in amounts of $10,000 or less to prevent Currency Transaction Reports from being filed by the banks on those transactions. The cash funneled through Al-Saber’s bank account was the proceeds marijuana trafficking. In addition, Al-Saber recruited two other individuals to have more than $30,000 in proceeds of marijuana trafficking funneled through their respective bank accounts.

According to his plea agreement, over $700,000 passed through accounts opened and maintained by Thomas in structured transactions.  In total, the government alleges that members of the conspiracy involving Al-Saber and Thomas structured more than $7.5 million in cash that was the proceeds of marijuana trafficking.

This case is being brought as part of Operation Footprint, a nationwide law enforcement initiative led by the U.S. Attorney’s Offices, the Internal Revenue Service- Criminal Investigation, the Drug Enforcement Administration, and the United States Postal Inspection Service. Operation Footprint targets large drug trafficking organizations by identifying the transfer of drug proceeds through financial institutions, bulk cash smuggling and other forms of money transfers. Operation Footprint is focused on bringing criminal charges based on Bank Secrecy Act violations in addition to violations of the Controlled Substances Act and the Money Laundering Control Act.

This case is also the product of the Organized Crime Drug Enforcement Task Force (OCDETF), a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies. Assistant U.S. Attorney Grant B. Rabenn is prosecuting the case.

Previously, co-defendant Chad Riffle was sentenced to five years imprisonment and co-defendant Jeremy Murphy was sentenced to fifteen months in prison. In addition, co-defendants Peter Capodieci, Miguel Gonzalez and Bree Benson have pleaded guilty to conspiring to structure financial transactions and are awaiting sentencing. The maximum statutory penalty for conspiracy to structure is five years in prison and a $250,000 fine. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Co-defendant Ashley Starling Thomas is scheduled for trial on May 24, 2016. The charges against Ashley Thomas are only allegations; she is presumed innocent until and unless proven guilty beyond a reasonable doubt.

FRESNO, Calif. — United States District Judge Anthony W. Ishii sentenced Aruna Kumari Chopra, 66, of Modesto, today to one year and one day in prison, to be followed by a year of home confinement, for her mail fraud conviction in connection with a mortgage fraud scheme, United States Attorney Benjamin B. Wagner announced.

According to court documents, in 2008, Chopra purchased property on Dale Road in Modesto that she intended to develop into a shopping center to be called “The Plaza at Dale.” She defrauded lenders by filing documents with the Stanislaus County Recorder=s Office that contained forged signatures in an attempt to conceal liens on the property from her lenders. The loans made by the defrauded lenders on the property totaled approximately $8.9 million. Chopra pleaded guilty on November 30, 2015.

This case was the product of an investigation by the Federal Bureau of Investigation, the Stanislaus County District Attorney’s Office, and the Federal Housing Finance Office, Office of Inspector General, working together through the San Joaquin Mortgage Fraud Task Force. The U.S. Attorney and the FBI created the San Joaquin Valley Mortgage Fraud Task Force in 2009 to further the prosecution of mortgage fraud cases arising out of the southern half of the Central Valley. Assistant United States Attorney Mark J. McKeon prosecuted the case.

SACRAMENTO, Calif. – The Justice Department, along with federal and state partners, announced today a $5.06 billion settlement with Goldman Sachs related to Goldman’s conduct in the packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Goldman to pay a $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in consumer relief, including relief to underwater homeowners, distressed borrowers, and affected communities in the form of loan forgiveness and financing for affordable housing. Goldman will also pay $875 million to resolve claims by other federal entities and state claims. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007.

The FIRREA penalty announced today is the largest recovery ever in a case handled by the U.S. Attorney’s Office for the Eastern District of California. The settlement is the latest in a string of five multibillion dollar settlements announced by the RMBS Working Group. Of those five, two have been handled by the Eastern District of California — today’s settlement and the $2 billion FIRREA penalty obtained from JPMorgan Chase as part of the $13 billion settlement with the RMBS Working Group announced in November 2013.

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said U.S. Attorney Benjamin B. Wagner. “Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from. I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable. The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities, Goldman will pay: $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois, and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country. This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis. $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.

The settlement includes a statement of facts to which Goldman has agreed. That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which it would protect investors in Goldman RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

• Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.” But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”

• Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.” Goldman has acknowledged that it “failed to do this even when the samples included significant numbers of loans with credit exceptions.”

• Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman. Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.” As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by New Century loans, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems.

• Goldman has acknowledged that, for one August 2006 RMBS, the due diligence results for some of the loan pools resulted in an “unusually high” percentage of loans with credit and compliance defects. The Mortgage Capital Committee was presented with a summary of these results and asked “How do we know that we caught everything?” One transaction manager responded “we don’t.” Another transaction manager responded, “Depends on what you mean by everything? Because of the limited sampling . . . we don’t catch everything . . .” Goldman has now acknowledged that the Mortgage Capital Committee approved this RMBS for securitization without requiring any further due diligence.

• Goldman made detailed representations to investors about its “counterparty qualification process” for vetting loan originators, and told investors and one rating agency that Goldman would engage in ongoing monitoring of loan sellers. Goldman has now acknowledged however, that it “received certain negative information regarding the originators’ business practices” and that much of this information was not disclosed to investors.

• For example, Goldman has now acknowledged that in late 2006 it conducted an internal analysis of the underwriting guidelines of Fremont Investment & Loan (an originator), which found many of Fremont’s guidelines to be “off market” or “at the aggressive end of market standards.” Instead of disclosing its view of Fremont’s underwriting, Goldman has acknowledged that it “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.” Fremont was shut down by federal regulators within several months of these statements.

• In another example, Goldman was aware in early-mid 2006 of certain issues with Countrywide Financial Corporation’s origination process, including a pattern of non-responsiveness and inability to provide sufficient staff to handle the numerous loan pools Countrywide was selling. In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock. Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded “If they only knew …”

• Meanwhile, “[around the end of 2006], Goldman employees observed signs of uncertainty in the residential mortgage market [and] by March 2007, Goldman had largely halted new purchases of subprime loan pools.”

The Eastern District of California’s investigation into Goldman’s conduct in connection with RMBS was led by Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

“Goldman Sachs had a fiduciary responsibility to investors, which they blatantly side stepped,” said Deputy Inspector General for Investigation Rene Febles for the FHFA-OIG. “They knowingly put investors at risk and in so doing contributed significantly to the financial crisis. The losses caused by this irresponsible behavior deeply affected not only financial institutions but also taxpayers and one can only hope that Goldman Sachs has learned the difference between risk and deceit. Two Federal Home Loan Banks suffered significant losses so we are pleased to see both entities receive a portion of this settlement. We will continue to work with our law enforcement partners to hold those accountable who have engaged in misconduct.”

“Goldman took $10 billion in TARP bailout funds knowing that it had fraudulently misrepresented to investors the quality of residential mortgages bundled into mortgage backed securities,” said Special Inspector General Christy Goldsmith Romero for TARP. “Many of these toxic securities were traded in a taxpayer funded bailout program that was designed to unlock frozen credit markets during the crisis. While crisis investigations take time, SIGTARP is committed to working with our law enforcement partners to protect taxpayers and bring accountability and justice.”

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts, and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado, and New York Attorney General Eric Schneiderman.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at www.StopFraud.gov.

The Justice Department, along with federal and state partners, announced today a $5.06 billion settlement with Goldman Sachs related to Goldman’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  The resolution announced today requires Goldman to pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing.  Goldman will also pay $875 million to resolve claims by other federal entities and state claims.  Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007. 

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Acting Associate Attorney General Stuart F. Delery.  “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.” 

“Today’s settlement is another example of the department’s resolve to hold accountable those whose illegal conduct resulted in the financial crisis of 2008,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Viewed in conjunction with the previous multibillion-dollar recoveries that the department has obtained for similar conduct, this settlement demonstrates the pervasiveness of the banking industry’s fraudulent practices in selling RMBS, and the power of the Financial Institutions Reform, Recovery and Enforcement Act as a tool for combatting this type of wrongdoing.”

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California.  “Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from.  I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable.  The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability.  In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct.  $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country.  This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.  $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.

The settlement includes a statement of facts to which Goldman has agreed.  That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which Goldman would protect investors in its RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

• Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.”  But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”
• Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.”  Goldman has acknowledged that it “failed to do this even when the samples included significant numbers of loans with credit exceptions.” 
• Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman.  Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.”  As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by loans originated by New Century Mortgage Corporation, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems.
• Goldman has acknowledged that, for one August 2006 RMBS, the due diligence results for some of the loan pools resulted in an “unusually high” percentage of loans with credit and compliance defects.  The Mortgage Capital Committee was presented with a summary of these results and asked “How do we know that we caught everything?”  One transaction manager responded “we don’t.”  Another transaction manager responded, “Depends on what you mean by everything?  Because of the limited sampling . . . we don’t catch everything . . .”  Goldman has now acknowledged that the Mortgage Capital Committee approved this RMBS for securitization without requiring any further due diligence.   
• Goldman made detailed representations to investors about its “counterparty qualification process” for vetting loan originators, and told investors and one rating agency that Goldman would engage in ongoing monitoring of loan sellers.  Goldman has now acknowledged, however, that it “received certain negative information regarding the originators’ business practices” and that much of this information was not disclosed to investors. 
• For example, Goldman has now acknowledged that in late 2006 it conducted an internal analysis of the underwriting guidelines of Fremont Investment & Loan (an originator), which found many of Fremont’s guidelines to be “off market” or “at the aggressive end of market standards.”  Instead of disclosing its view of Fremont’s underwriting, Goldman has acknowledged that it “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.”  Fremont was shut down by federal regulators within several months of these statements.
• In another example, Goldman was aware in early-mid 2006 of certain issues with Countrywide Financial Corporation’s origination process, including a pattern of non-responsiveness and inability to provide sufficient staff to handle the numerous loan pools Countrywide was selling.  In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock.  Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded “If they only knew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”
• Meanwhile, as Goldman has acknowledged in this statement of facts, “[Around the end of 2006], Goldman employees observed signs of uncertainty in the residential mortgage market [and] by March 2007, Goldman had largely halted new purchases of subprime loan pools.”  

Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor of the Eastern District of California investigated Goldman’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

“Goldman Sachs had a fiduciary responsibility to investors, which they blatantly side stepped,” said Deputy Inspector General for Investigation Rene Febles of FHFA-OIG.  “They knowingly put investors at risk and in so doing contributed significantly to the financial crisis.  The losses caused by this irresponsible behavior deeply affected not only financial institutions but also taxpayers and one can only hope that Goldman Sachs has learned the difference between risk and deceit.  Two Federal Home Loan Banks suffered significant losses so we are pleased to see both entities receive a portion of this settlement.  We will continue to work with our law enforcement partners to hold those accountable who have engaged in misconduct.”

“Goldman took $10 billion in TARP bailout funds knowing that it had fraudulently misrepresented to investors the quality of residential mortgages bundled into mortgage backed securities,” said Special Inspector General Christy Goldsmith Romero for TARP.  “Many of these toxic securities were traded in a taxpayer funded bailout program that was designed to unlock frozen credit markets during the crisis.  While crisis investigations take time, SIGTARP is committed to working with our law enforcement partners to protect taxpayers and bring accountability and justice.”

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis.  The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country.  The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.  This settlement is the fifth multibillion-dollar RMBS settlement announced by the working group.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at www.StopFraud.gov. 

SACRAMENTO, Calif. — Jason S. Wymer, 44, of Citrus Heights, pleaded guilty today to sexual exploitation of children, United States Attorney Benjamin B. Wagner announced. Previously, on March 25, 2016, co-defendant Stormy M. Avers, 36, of Placerville, pleaded guilty to sexual exploitation of children.

According to court documents, the case began when a parent accidentally texted a photo of her eight-year-old to a wrong number who turned out to be Wymer. Thinking he received the picture from a child, Wymer responded and began a dialog. The parent brought the cellphone to the FBI, and an undercover employee, pretending to be an eight-year-old child, continued the dialog with Wymer, whom investigators were subsequently able to locate.

Upon his arrest, law enforcement found photos of Wymer and co-defendant Avers molesting a child, who was approximately three years old, in order to create child pornography. Avers had custody and control of the child at the time. In pleading guilty, Wymer admitted to this conduct, and also to a separate instance of sexual exploitation of a four-year-old child in August of 2011.

A third defendant, Jolene Davis, 40, of Stockton, is charged with having participated with Wymer in the sexual exploitation of a child of whom she had control or custody. Davis is scheduled to appear for a status conference before Judge Burrell on April 22, 2016. The charges against Davis are only allegations; she is presumed innocent until and unless proven guilty beyond a reasonable doubt.

Wymer is scheduled to be sentenced by U.S. District Judge Garland E. Burrell Jr. on July 29, 2016. Wymer faces up to 30 years in federal prison. Ayers is scheduled to be sentenced on June 24, 2016. She faces up to 20 years in federal prison. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case is the product of an investigation by the Federal Bureau of Investigation and the Sacramento Internet Crimes against Children Task Force. Assistant United States Attorney Matthew G. Morris is prosecuting the case.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

SACRAMENTO, Calif. — Ligia Sandoval Spafford (Sandoval), 48, of Roseville, was sentenced Thursday by U.S. District Judge Troy L. Nunley to two years and three months in prison for a scheme to defraud distressed homeowners, United States Attorney Benjamin B. Wagner announced. Sandoval was ordered to self-surrender on June 9, 2016.

Sandoval paid $115,065.00 in restitution, the full amount of restitution ordered by the Court, to compensate the victims for the losses that they incurred as a result from this fraud scheme. In February 2015, Sandoval and her then husband, Martin Wayne Flanders, 51, of Roseville, pleaded guilty to mail fraud for the fraud scheme. On October 29, 2015, Flanders was sentenced to six years and five months in prison.

In sentencing, Judge Nunley stated: “She knew what was going on and enticed these people to become part of this scheme. They trusted her. … She ruined some peoples’ lives. That she paid restitution does not do anything to take away from the anxiety and fear they [the victims] had at the time that this was occurring. These victims were devastated.”

According to court documents, between 2008 and 2010, Flanders charged clients advance fees in exchange for a number of financial services, including loan modifications, mortgage loan audits, credit repair, debt relief, bankruptcy filings, and a program to sell homes to “investors” with a rent-to-own option. Sandoval and Flanders marketed these services to economically distressed homeowners with particular emphasis on those who were Spanish speakers. Sandoval, a Spanish-speaker, promoted the services she and Flanders, who was not a fluent Spanish speaker, offered during a radio program that aired twice weekly on a Bay Area Spanish‑language Christian radio station, Radio Luz. Sandoval who was a licensed real estate agent, further assisted Flanders in the fraud scheme by interacting with and explaining the services to Spanish-speaking clients. The services offered by Flanders and Sandoval were also advertised on a Spanish-language television station, Univision, and in Spanish-language magazines. About 98 percent of the defendants’ clients were of Hispanic descent, some of whom spoke little to no English.

Sandoval and Flanders made numerous false statements to investors as to the success of the programs being offered or refunds that would be available if the programs were not successful. “Ghost offers” – i.e., fictitious offers to purchase the victim’s property through short sale – and “skeleton bankruptcies” – i.e., sham bankruptcy petitions that were quickly dismissed by the bankruptcy court – were also used by Sandoval or Flanders to try to stall the foreclosure process. At least 25 to 30 individuals paid for services and did not receive them or did not receive refunds when the programs failed to deliver as promised. The total loss to the victims is at least $115,000. Some homeowners who were not able to obtain relief were foreclosed upon by their lenders.

This case was the product of an investigation by the Federal Bureau of Investigation. Assistant U.S. Attorneys Todd A. Pickles and Shelley Weger prosecuted the case.

SACRAMENTO, Calif. — Melvin Lee Gregory, 33, of Oroville, was sentenced today by U.S. District Judge Garland E. Burrell Jr. to three years in prison: two years for participating in a bank fraud and identity theft scheme and one year for violating terms of probation, United States Attorney Benjamin B. Wagner announced.

According to court documents, on April 2, 2015, Gregory was released from federal prison after serving a four-year sentence for a previous conviction. Between April 2, 2015, and August 22, 2015, while on probation, Gregory opened a bank account and deposited several forged checks. On August 22, 2015, Gregory was observed attempting to break into and steal U.S. Mail from a Roseville mailbox, and minutes later he successfully stole U.S. Mail from a Rocklin mailbox. When Gregory was arrested by Rocklin Police, he was in possession of stolen U.S. Mail, burglary tools, and stolen identification documents. Gregory pleaded guilty on November 17, 2015.

San Francisco Division Inspector in Charge Rafael Nunez of the U.S. Postal Inspection Service stated: “We are working closely with the U.S. Attorney’s Office and our partners in law enforcement to arrest and prosecute those responsible for complex Identity Fraud Schemes and to protect postal customers’ mail and personal information from theft.”

This case was the product of an investigation by the United States Postal Inspection Service and the Rocklin Police Department. Assistant United States Attorney Michelle Rodriguez prosecuted the case.

SACRAMENTO, Calif. — Ricky Lee Richardson Jr., 39, of Stockton, was arrested on Monday, April 4, 2016, charged with sex trafficking of a minor and possession of child pornography, United States Attorney Benjamin B. Wagner announced.

A two-count indictment, unsealed after his arrest, was returned by a federal grand jury in Sacramento on March 31, 2016. According to court documents, between November 2011 and March 2012, Richardson transported, harbored, and maintained a minor victim, knowing that the minor would be caused to engage in prostitution. Richardson also possessed images of child pornography.

This case is the product of an investigation by the Federal Bureau of Investigation with assistance from the Stockton Police Department. Assistant United States Attorney Brian A. Fogerty is prosecuting the case.

Richardson is scheduled to be arraigned today before United States Magistrate Judge Carolyn Delaney.

If convicted of sex trafficking of a minor, Richardson faces a minimum of 10 years in prison and a maximum statutory penalty of life in prison. The possession of child pornography charge carries a maximum statutory penalty of 10 years in prison. Both charges carry a maximum fine of $250,000. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute those who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. Click on the “resources” tab for information about Internet safety education.

SACRAMENTO, Calif. — On Friday, April 1, 2016, Alvaro Rios-Madrid, 57, of Guamuchil, Sinaloa, Mexico, was formally extradited to the United States by Mexico to face federal narcotics charges, United States Attorney Benjamin B. Wagner announced.

On December 13, 2012, a federal grand jury in Sacramento indicted Rios-Madrid on one count of conspiring to distribute cocaine and two counts of using phones to facilitate the distribution of narcotics.

According to court documents, the government alleges that Rios-Madrid regularly exported large quantities of cocaine from Mexico to the United States and used a U.S.-based distribution cell to move his cocaine through a nationwide network of couriers to several states including Utah, Minnesota, Indiana, Ohio, Massachusetts, and California. Rios-Madrid is alleged to have regularly smuggled multi-kilogram quantities of cocaine into the United States through various ports of entry, including Nogales, Arizona, and San Ysidro, California. The cash proceeds from the sale of Rios-Madrid’s cocaine totaled, on average, between $500,000 and $1.3 million every month. Operatives in the United States arranged for those proceeds to be sent to Rios-Madrid in Mexico. As a result of a long-term investigation, the DEA and other state and federal agencies seized large quantities of cocaine and over $1 million in cash.

This case is the product of an investigation by the U.S. Drug Enforcement Administration; the United States Marshals Service; the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); the Department of Homeland Security, U.S. Customs and Border Patrol; the Sacramento County Sheriff’s Department; the Central Valley HIDTA; the Sacramento Police Department; the California Department of Justice (Cal MMET); the San Joaquin County Metropolitan Narcotics Task Force; the Elk Grove Police Department; the San Joaquin County Sheriff’s Department; the Stockton Police Department; the Los Angeles County Sheriff’s Department; the Galt Police Department; the California Highway Patrol; the Nevada State Highway Patrol; the Minnesota Highway Patrol; the Kansas State Highway Patrol; the Massachusetts State Highway Patrol; and the Iowa State Highway Patrol. The U.S. Department of Justice’s Office of International Affairs provided assistance with the extradition. Assistant United States Attorneys Michael M. Beckwith and Paul A. Hemesath are prosecuting the case.

If convicted of the conspiracy, Rios-Madrid faces a maximum statutory penalty of 10 years to life in prison, a $10 million fine, and five years to life of supervised release. If convicted of using a cellphone to facilitate a drug trafficking offense, Rios-Madrid faces a maximum statutory penalty of four years in prison and a $250,000 fine for each count. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.