Northern District of California

SAN FRANCISCO – Jason Blackard was sentenced today in United States District Court to 66 months in federal prison after pleading guilty to bank fraud, aggravated identity theft, fraudulent use of unauthorized access devices, and attempted mail theft, announced United States Attorney Stephanie M. Hinds and United States Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez.  Senior United States District Judge Maxine M. Chesney handed down the sentence.

Blackard, 38, of Concord, California, pleaded guilty on October 7, 2021.  In his plea agreement, Blackard admitted committing a series of frauds and theft that continued from January 2019 through February 2021.  On January 9, 2019, U.S. Postal Inspectors were surveilling a U.S. Postal Service (USPS) mail “relay” box at the corner of Sacramento Street and Powell Street in San Francisco.  The relay box had been the target of repeated thefts.  While watching, they saw Blackard approach and open the box.  Blackard was wearing a USPS hat and jacket and used a key belonging to USPS.  Blackard admitted in his plea agreement that he intended to steal mail from the relay box. 

Blackard further admitted in his plea agreement that he engaged in seven more crimes in the ensuing two years.  Three of those crimes involved bank fraud in which Blackard stole other individuals’ identities, impersonated them, and opened loans and wrote checks to buy big ticket items using their names and accounts.  Blackard admitted to fraudulently purchasing two automobiles and a new speedboat from dealerships in Chico, Ripon, and Vacaville.  Blackard also admitted using stolen identities to buy thousands of dollars in merchandise from large retailers in Walnut Creek, Redding, and Chico.   

In a memo filed for sentencing, the government detailed that Blackard’s fraud involved buying a $58,000 Toyota sportscar, a $98,000 speedboat and trailer, a $30,000 Mercedes automobile, $9,000 in goods from a high-end clothes retailer, $67,000 in goods from a big box hardware store, and $9,000 in goods from a tractor supply retailer.  Blackard’s crimes continued even after law enforcement executed a search warrant on his home in July 2020 and persisted until law enforcement arrested him in February 2021. 

Blackard’s fraud and theft caused losses in excess of $134,000 to identifiable banks, retailers, and individuals.  In his plea agreement, Blackard agreed that the total intended losses to his victims exceeded $250,000.   

In addition to imposing a 66 month prison term, Senior United States District Judge Maxine M. Chesney sentenced Blackard to a three year term of supervision upon his release from prison and ordered him to pay $134,908.32 in restitution to his victims. 

Blackard was in custody at his sentencing hearing and begins his sentence immediately. 

Special Assistant U.S. Attorney Christopher Vieira prosecuted the case with the assistance of Marina Ponomarchuk.  The federal prosecution arose from investigations by the USPIS, Hillsborough Police Department, California Highway Patrol, Chico Police Department, Ripon Police Department, Antioch Police Department, Walnut Creek Police Department, Pleasanton Police Department, Pleasant Hill Police Department, Vacaville Police Department, and the Danville Police Department, with assistance from the Butte County District Attorney’s Office, Contra Costa District Attorney’s Office, San Joaquin District Attorney’s Office, San Mateo County District’s Attorney Office, Solano County District Attorney’s Office, and the Tehama County District Attorney’s Office.

SAN FRANCISCO – A criminal complaint unsealed today in federal court charges Idowu Hashim Shittu for fraud in connection with a scheme to obtain pandemic-related unemployment benefits from numerous state agencies, announced United States Attorney Stephanie M. Hinds, United States Department of Labor Office of Inspector General (DOL-OIG) Special Agent in Charge Quentin Heiden, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.

According to the criminal complaint, between March and the end of July 2020, Shittu, 46, of Castro Valley, California, engaged in a scheme to use the personal information of other people to obtain pandemic-related unemployment benefits.  The complaint explains that in March of 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act, the federal government authorized the payment of hundreds of billions of dollars in unemployment benefits to those affected by the COVID-19 pandemic and, since then, many state authorities responsible for distributing those unemployment benefits to their residents have been inundated by fraudulent claims. According to the complaint’s allegations, Shittu fraudulently submitted requests for such benefits and then used some of those proceeds for his own personal gain.

The criminal complaint describes three occasions in which Shittu allegedly disposed of fraudulently obtained benefits.  In the first instance, the Washington State Employment Security Department (ESD) received a request for unemployment benefits on May 5, 2020.  The request was submitted in the name of a resident of Mercer Island, Washington – identified in the complaint only by the initials “S.O.”  The request included the supposed applicant’s correct date of birth and social security number.  The Washington ESD responded to the request by depositing more than $9,000 in an account linked to a reloadable debit card.  A subsequent investigation revealed the account was used by someone in California.  Specifically, a person withdrew cash from several automatic teller machines located in the Bay Area, including Hayward, Castro Valley, and San Jose.  According to the complaint, S.O. told investigating law enforcement that he was not been in California at any time during 2020.  A Walmart customer fitting Shittu’s description was captured on camera using an ATM to withdraw cash from that account. 

The criminal complaint describes two additional instances of unemployment benefits being issued by the Washington ESD to Washington residents – one from Seattle and the other from Olympia – after which ATMs in the Bay Area were used to withdraw that money from the accounts or the proceeds from those accounts were spent in Bay Area stores.  In each case, a person fitting Shittu’s description was photographed engaging in transactions relating to the accounts.  According to the complaint, Shittu fraudulently obtained more than $1 million in unemployment benefits from various state agencies, including the Washington ESD.

In sum, the complaint charges Shittu with three counts of access device fraud, in violation of 18 U.S.C. § 1029(a)(5).  Shittu faces a maximum statutory penalty of up to 15 years in prison for each count.  In addition, a court may order restitution, fines, a period of supervised release, and other penalties; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

The charges contained in the criminal complaint are mere allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.

Shittu made his initial federal court appearance today before United States Magistrate Judge Sallie Kim.  Magistrate Judge Kim scheduled Shittu’s next court appearance for Monday, January 31, 2022. 

Assistant U.S. Attorneys Andrew Paulson and Kevin Rubino are prosecuting the case with the assistance of Soana Katoa and Mark DiCenzo.  The prosecution is the result of an investigation by the U.S. Department of Labor Office of Inspector General and the Federal Bureau of Investigation. 

SAN FRANCISCO – Armando Daniel Calderon was sentenced today in United States District Court to 198 months in federal prison following convictions for two counts of methamphetamine trafficking, one count of conspiracy to traffic methamphetamine, and one count of carrying a firearm during drug trafficking, announced United States Attorney Stephanie M. Hinds and Drug Enforcement Administration (DEA) Special Agent in Charge Wade R. Shannon.  The sentence was handed down by Senior United States District Judge William Alsup.
 
On June 23, 2021, a federal jury convicted Calderon, 35, most recently from San Jose, of the following four counts:

• possession with intent to distribute 500 grams or more of a mixture or substance containing methamphetamine, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(A), on August 20, 2018;
• carrying a firearm during and in relation to a drug trafficking crime, in violation of 18 U.S.C. § 924(c), on August 20, 2018; 
• conspiracy to distribute and to possess with intent to distribute 500 grams or more of a mixture or substance containing methamphetamine, in violation of 21 U.S.C. § 846, during the month of September 2018; and 
• possession with intent to distribute 50 grams or more of methamphetamine, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(A), on September 25, 2018.

According to evidence presented at trial, on August 20, 2018, San Jose State University Police Department officers stopped Calderon’s pickup truck in the vicinity of Keyes Street and South 3rd Street in San Jose.  Calderon was the driver and sole occupant.  Police officers learned that Calderon had multiple outstanding arrest warrants and took him into custody.  Upon arrest, officers discovered $5,363 in cash and six .40 caliber bullets in Calderon’s pants pockets.  Inside the truck, officers found three bags.  One bag contained methamphetamine and .40 caliber ammunition.  The second contained methamphetamine.  The third contained a high-capacity pistol magazine loaded with 18 rounds of .40 caliber ammunition.  Officers also discovered a .40 caliber pistol loaded with nine rounds of .40 caliber ammunition next to the driver’s seat. 

In total, police recovered approximately 1.83 pounds of methamphetamine from Calderon’s truck.  
 
Further evidence presented at trial showed that in September 2018 – just weeks after the traffic stop – Calderon conspired to distribute a large quantity of methamphetamine.  In that month, Calderon repeatedly spoke on the phone and met in the San Mateo area with a prospective buyer to negotiate the sale of 15 kilograms (33 pounds) of methamphetamine.  The negotiations settled on a price of  $4,700 per kilogram of methamphetamine, for a total price of $70,500 for 15 kilograms.  During the negotiations, Calderon guaranteed the quality of the methamphetamine for the buyer and agreed to exchange it for other methamphetamine if the buyer was dissatisfied. 

On September 25, 2018, Calderon met with the buyer early in the day and agreed to deliver the methamphetamine to the parking lot of a Menlo Park shopping center.  Later in the day, Calderon and two others were arrested near that shopping center.  Calderon fled on foot when officers approached but was apprehended.  Law enforcement seized 989 grams (more than two pounds) of pure methamphetamine at that arrest scene.  During their search of a nearby stash house connected to Calderon, agents recovered an additional 6,492 grams (more than 14 pounds) of pure methamphetamine as well as documents bearing Calderon’s name. 
 
Trial evidence also showed that prior to his arrest on September 25, 2018, Calderon hid methamphetamine inside a red Mustang parked outside the stash house.  Law enforcement officers seized that methamphetamine too, which weighed 317 grams (more than two-thirds of a pound).

In a memorandum filed for sentencing, the government pointed out that Calderon exhibited dangerousness during his encounters with police in August and September of 2018.  During the August 20th traffic stop by San Jose University police officers, Calderon had a loaded firearm wedged between his driver’s seat and the truck’s center console.   During a September 11th traffic stop by law enforcement in San Mateo County, Calderon fled the scene and left behind a privately-made firearm without a serial number, also known as a “ghost gun.”  At his September 25th arrest, Calderon again fled on foot.  When apprehended, Calderon struggled with the officers, got his hands on an officer’s gun, and pointed the gun at officers before they overcame Calderon and placed him in handcuffs. 

In addition to imposing a 198 month prison term, Judge William Alsup sentenced Calderon to five years of supervision following his release from prison.  Calderon has been in custody since his September 25, 2018 arrest.  His sentence begins immediately. 
 
Assistant U.S. Attorneys Erin Cornell and Sloan Heffron prosecuted the case with the assistance of Patricia Mahoney, Andy Ding, Hector Lopez, and Madeline Wachs.  The prosecution is the result of an investigation by DEA, the San Mateo County Sheriff’s Office, the San Mateo County Narcotics Task Force, and the San Jose State University Police Department.

This investigation and prosecution are part of the Organized Crime Drug Enforcement Task Force (“OCDETF”), which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.

 

OAKLAND – Staccato Powell and Sheila Quintana were arrested and appeared in federal court today to face conspiracy, wire fraud, and mail fraud charges stemming from an alleged fraudulent scheme committed upon congregations of the AME Zion Church in California and private lenders, announced United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation (FBI) Special Agent in Charge Craig D. Fair.

According to the federal indictment filed January 6, 2022, and unsealed today, Powell, 62, of Wake Forest, North Carolina, and Quintana, 67, of Vallejo, were officers of the Western Episcopal District, Inc., an entity formed by Powell and Quintana in 2016 after Powell’s selection as bishop to the Western Episcopal District of the African Methodist Episcopal Zion Church (AME Zion Church), an historically African-American denomination of approximately 1.4 million adherents worldwide tracing its history to 1796.  The indictment alleges that Powell and Quintana conspired to defraud AME Zion Church congregations in Oakland, San Jose, Palo Alto, and Los Angeles by re-deeding the local congregations’ properties in the name of WED, Inc.  The indictment alleges that, prior to Powell and Quintana’s actions, these congregations had little or no mortgage debt on their local church properties, to include sanctuaries, residences for pastoral staff, and other structures used by the local congregations for religious purposes, and in some cases, the congregations had many years earlier paid off their mortgages. 

The indictment further alleges that Powell and Quintana used false statements and material omissions to obtain the grant deeds from local pastors, then used fake resolution documents purporting to memorialize the assent of the local congregations to new mortgages on the local church properties.  In fact, the local congregations did not authorize the new encumbrances on the local church properties.  The indictment further alleges that through WED, Inc., Powell and Quintana conspired, along with others not named in the indictment, to extract cash proceeds by using the fake resolution documents to obtain mortgages from private lenders, usually on terms unfavorable to the borrower.  Powell and Quintana did not inform the private lenders of the true facts, and they did not inform the local congregations of the new mortgages using the local church properties as collateral.  The indictment alleges that after taking control of the church properties, Powell, Quintana, and others used the real estate as collateral to obtain high interest loans, exceeding $14 million in net proceeds.  The indictment further alleges that Powell and Quintana diverted funds from the loans for their benefit, including the acquisition of properties in North Carolina by Powell, retiring mortgage debt on Powell’s personal residence in North Carolina, and cash payments to Quintana’s spouse.  On July 30, 2020, WED, Inc. filed for Chapter 11 bankruptcy protection and listed eleven churches in California, Arizona and Colorado among its assets.

In sum, the indictment charges Powell and Quintana each with one count of conspiracy to commit wire fraud and mail fraud, in violation of 18 U.S.C. § 1349, and two counts of wire fraud, in violation of 18 U.S.C. § 1343.  In addition, Powell is charged with one count of mail fraud, in violation of 18 U.S.C. § 1341.  The maximum statutory sentence for violations of 18 U.S.C. § 1341, 1343 or 1349 is 20 years in prison, a fine up to $250,000, and three years of supervised release following prison.  However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Powell was arrested today in Wake Forest, North Carolina and made his initial appearance in federal court in the Eastern District of North Carolina.  Quintana was arrested today in Vallejo, Calif., and made her initial appearance in Sacramento.  The defendants were ordered to appear for their initial appearances in the Northern District of California via Zoom on February 2, 2022, before the Honorable Kandis A. Westmore. 

The charges contained in the criminal indictment are only allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.

This case is being prosecuted by the Oakland Branch of the U.S. Attorney’s Office and is the result of an investigation by the Federal Bureau of Investigation with assistance from the Santa Clara County District Attorney’s Office.

SAN FRANCISCO – Lembrent Rubin was sentenced today in United States District Court to 89 months in federal prison after pleading guilty to robbery of a pharmacy and to brandishing a firearm during the robbery, announced United States Attorney Stephanie M. Hinds and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) San Francisco Field Division Special Agent in Charge Patrick T. Gorman. The sentence was handed down by United States District Judge Charles R. Breyer.

Rubin, 37, of Vallejo, pleaded guilty on October 13, 2021.  In a memorandum filed for the sentencing hearing, the government described the crime of Sunday, October 14, 2018.  That morning, a pharmacist showed up for work at his pharmacy located in a large grocery store in San Francisco.  Rubin was seated alone in the pharmacy’s waiting room.  As the pharmacist opened the pharmacy door with his key, the pharmacist turned his back on Rubin. When the pharmacist turned the key, Rubin forced his way into the pharmacy, pushing the pharmacist until they were both inside and behind the main counter.  Nobody could see in as the shades were shut.  The pharmacist spun around and saw Rubin brandishing a handgun.  Rubin demanded drugs and held a black bag.  The pharmacist opened the locked cabinet where controlled prescriptions were secured.  He began placing bottles of pills into the black bag.  A pharmacy alarm system sounded, and Rubin reached into the cabinet and swept more pill bottles into his bag.  Rubin fled the pharmacy and the grocery store, taking with him several hundred tablets of oxycodone and generic Vicodin, Adderall, and Ritalin.

Approximately two weeks later Rubin was located and arrested.  Officers who arrested him seized a loaded .40 caliber Glock pistol from his waistband.  A search of his apartment turned up more ammunition, including a loaded pistol magazine, and pills with imprints that matched the imprints on pills stolen from the pharmacy.

In addition to imposing the 89 month prison term, United States District Judge Charles R. Breyer sentenced Rubin to a three year term of supervision upon his release from prison.

Rubin was in custody at the sentencing hearing.  He is now being transferred in custody to face firearm and vehicle theft charges filed in Solano County Superior Court which arose from an arrest that followed the arrest in this case.   

Assistant U.S. Attorneys Casey Boome and Sailaja M. Paidipaty prosecuted the case with the assistance of Beth Margen and Ralph Bancshstubbs.  The prosecution is the result of an investigation by ATF and the San Francisco Police Department.

OAKLAND – Anthony Giovanni Montanelli and his father, Steven John Montanelli each pleaded guilty today to one count of conspiracy to commit mail fraud in connection with a scheme to divert medical equipment owned by Kaiser Foundation Hospitals and Health Plan, Inc. (Kaiser) for use in their own San Jose-based company, announced United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig Fair.  The guilty pleas were accepted by the Hon. Jon S. Tigar, U.S. District Judge.

Anthony Montanelli, 34, and his father Steven Montanelli, 63, both of San Ramon, pleaded guilty to the charges pursuant to separate plea agreements entered by the court.  According to the plea agreements, the defendants worked as biomedical engineers at Kaiser, responsible for repairing and servicing Kaiser ultrasound systems used at its medical facilities located throughout the Bay Area.  The defendants used their positions at Kaiser to order new ultrasound parts that were supposed to be used to repair, replace, and/or maintain Kaiser’s medical equipment, but instead were diverted to their own business, Pacific Coast Imaging (PCI). They then sold the diverted equipment through PCI for their own profit.  The father and son also admitted operating their scheme and business, which they did not disclose to Kaiser, while being paid by Kaiser to service Kaiser-owned equipment.  

The defendants admitted that, beginning February 2010 and continuing through about April 2018, they worked together to defraud Kaiser.  Specifically, the defendants rented storage units in which they stockpiled new, used, and decommissioned Kaiser-owned ultrasound systems and parts.  Some of the Kaiser inventory they ordered through Kaiser became PCI inventory, which they sold and leased to PCI customers.  The defendants acknowledged that for years they caused Kaiser’s procurement specialists to process, order, and have mailed to them an unknown number of ultrasound parts which they diverted to PCI.  Further, the defendants admitted that they recorded parts and systems as decommissioned when, in fact, the equipment was diverted to PCI.  In sum, the defendants both admitted they diverted Kaiser-owned equipment to PCI, operated PCI while employed by Kaiser, and used work hours paid for by Kaiser to operate PCI.  The defendants admitted that the loss to Kaiser resulting from the conspiracy exceeded $1,500,000.  

A federal grand jury issued a superseding indictment on June 10, 2021, charging each defendant with one count of conspiracy to commit mail fraud, in violation of 18 U.S.C. § 1349.  Both defendants pleaded guilty to the count.  The conspiracy charge carries a maximum statutory penalty of 20 years in prison and a fine of up to $250,000.  The court also may order additional terms of supervised release, fines, forfeitures, and restitution; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Thomas Green and Garth Hire are prosecuting the case, with the assistance of Kay Konopaske and Noble Hughes.  The prosecution was the result of an investigation by the Federal Bureau of Investigation. 

SAN FRANCISCO – Kealeon Shakur Dyer-Hogan was sentenced today in federal court to 120 months following his convictions for sex trafficking of a minor and for possession of child pornography, announced United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  The sentence was handed down by United States District Judge Maxine M. Chesney.

On July 13, 2021, a federal jury convicted Dyer-Hogan, 23, of Richmond, California, for the possession of child pornography.  Trial evidence revealed that Dyer-Hogan befriended a 16 year old high school sophomore and began to pick her up after her school day in his SUV.  One day the 16 year old girl entered Dyer-Hogan’s vehicle after school and saw a minor boy who she did not know sitting in the back.  Dyer-Hogan instructed her to get in the back, and once in the back, the boy pulled down his pants.  Dyer-Hogan filmed the incident on his cell phone, ignoring the 16 year old girl’s request to stop recording.  Later that day Dyer-Hogan asked the 16 year old girl to work for him as a prostitute, which she rejected.  The 16 year old eventually found one of the videos, which Dyer-Hogan had assured her were deleted, posted on social media.  After Dyer-Hogan’s arrest, police found on his phone five of his video clips depicting sexual activity involving minors.  

The jury convicted Dyer-Hogan of possessing child pornography.  After his conviction, he was allowed to remain out of custody while awaiting further court proceedings.

On July 22, 2021 – nine days after the jury convicted Dyer-Hogan and while he was awaiting further court proceedings – Dyer-Hogan was arrested again.  This time police found a 15 year old girl in his car. The government charged Dyer-Hogan with sex trafficking of the 15 year old minor, and he pleaded guilty to the charge on October 20, 2021.  Among other admissions in his plea agreement, Dyer-Hogan admitted that for the three weeks prior to his July 22nd arrest – a time when he was in court during the day on trial for the above child pornography charges – he transported the 15 year old girl to and from an Oakland location where prostitution is commonplace. 

In a memorandum filed for sentencing, the government described that the investigation of  Dyer-Hogan revealed he had three females working for him as commercial sex workers.   At least two of the females were minors.  Dyer-Hogan was a controlling, violent, and manipulative pimp, according to the sentencing memo. 

In addition to imposing a 120 month prison term, United States District Judge Maxine M. Chesney sentenced Dyer-Hogan to a five year term of supervision upon his release from prison, ordered him to pay $5,000 in restitution, and ordered Dyer-Hogan to stay away from and have no contact with the victims of his crimes.   

Assistant U.S. Attorneys Leif Dautch and Mari Overbeck prosecuted the cases with the assistance of Mark DiCenzo.  The prosecution is the result of investigations by the Federal Bureau of Investigation, the Richmond Police Department, and the Oakland Police Department.

This federal case was brought in U.S. District Court 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 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.justice.gov/psc.

SAN FRANCISCO – Wilmer Arteaga appeared today in United States District Court to face federal charges of being a felon in possession of a firearm and for possession of more than 40 grams of fentanyl with the intent to distribute it, announced United States Attorney Stephanie M. Hinds and Special Agent in Charge Wade R. Shannon of the Drug Enforcement Administration (DEA).    

According to the criminal complaint filed December 27, 2021, and unsealed in federal court today, Arteaga, 29, of Oakland, was arrested next to a white, two door BMW sedan following shots being fired at an apparent road rage incident in San Francisco’s Tenderloin District.  According the complaint, on November 9, 2021, at 6:30 p.m., San Francisco Police officers witnessed two cars, one of which was a white, two door BMW sedan, stop on Turk Street at the intersection with Van Ness Avenue in San Francisco.  The complaint describes the second car shifting into reverse and driving into the BMW, followed by the BMW’s driver getting out of the BMW with a pistol in hand.  Two shots were fired.  Both cars sped off.  The complaint alleges that 15 minutes later SFPD officers located the BMW parked a few blocks away and arrested Arteaga there.  According to the complaint, at Arteaga’s arrest, a loaded pistol was found in his possession and powder weighing approximately 1155 grams and testing positive for fentanyl was found in the BMW. 

Arteaga originally was charged in state court before the federal complaint was filed. 

Arteaga made his initial federal court appearance today in San Francisco before United States Magistrate Judge Sallie Kim.  Arteaga remains in custody; Magistrate Kim scheduled his next federal court appearance for January 20, 2022.  

The federal complaint charges Arteaga for being a convicted felon in possession of a firearm in violation of 18 U.S.C. § 922(g)(1), which carries a maximum possible statutory sentence of 10 years imprisonment, a three-year term of supervised release following imprisonment, and a maximum fine of $250,000.  The second federal charge in the complaint charges Arteaga with possessing with the intent to distribute 40 grams or more of fentanyl in violation of 21 U.S.C. §  841(a)(1), (b)(1)(B), which carries a maximum possible statutory sentence of 40 years imprisonment with a mandatory minimum imprisonment term of five years, a maximum fine of $5,000,000, and a term of supervised release following imprisonment of at least four years with a maximum of life.  However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The charges contained in the criminal complaint are only allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law. 

Assistant U.S. Attorney Lauren Harding is prosecuting the case with the assistance of Maribel Gallegos and Amala James.  The prosecution is the result of an investigation by DEA and the San Francisco Police Department. 

SAN FRANCISCO – Kerry Kit Yee Tang was arrested yesterday and appeared in federal court today to face bank fraud charges stemming from fraud committed upon her former employer, announced United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King.

According to the federal indictment unsealed today, Tang, 44, of San Francisco, was employed as the controller of a San Francisco-based company that provides interior design services.  The indictment alleges that Tang made unauthorized payments to herself and to outside companies from two of the victim company’s bank accounts, embezzling a total of about $1.9 million. 

The indictment alleges that from March 2019 to December 2020, Tang engaged in a scheme in which she obtained checks from her company’s bank accounts and inserted “Kerry Tang” on the payee line.  The indictment describes that Tang, without authorization to do so, signed the checks with the signatures of one or more of the authorized signers.  Tang then deposited these checks into her own personal bank accounts.  The indictment alleges that in this manner Tang obtained approximately 66 unauthorized checks from her company and deposited them to her personal bank accounts.  The total amount of these deposits exceeded $1.6 million.

The indictment further alleges that in November 2020 and December 2020 Tang wrote checks from a company bank account in amounts up to $99,000 to pay various companies for providing services to Tang’s company.  The indictment alleges that Tang signed each check with the signature of her company’s authorized signers.  However, Tang’s company never engaged the services of these companies, and Tang was not authorized to write the checks.  Moreover, the indictment describes that three of the companies shared the same location, a residential address in Bayonne, New Jersey.

Tang made her initial appearance in federal court today in San Francisco before United States Magistrate Judge Sallie Kim.  Her next court appearance is scheduled for March 15, 2022, at 2:30 p.m. before United States District Judge Richard Seeborg in San Francisco.  Tang is out of custody.

The federal indictment charges Tang with five counts of bank fraud in violation of 18 U.S.C. § 1344(2).  The maximum statutory sentence for a violation of 18 U.S.C. § 1344(2) is 30 years in prison, a fine up to $1,000,000 or twice the gross gain or loss amount, and five years of supervised release following prison.  However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The charges contained in the criminal indictment are only allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law. 

The case is being prosecuted by the Corporate and Securities Fraud Section of the United States Attorney’s Office.  The prosecution is the result of an investigation by Homeland Security Investigations (HSI) and the San Francisco Police Department.

OAKLAND – Ranbir Singh was sentenced today to 230 months in prison in Oakland federal court today for the production of child pornography, announced United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King.  The sentence was handed down by United States District Judge Haywood S. Gilliam, Jr.

“No statute of limitations exists for federal child pornography crimes, including the production of child pornography,” said United States Attorney Stephanie M. Hinds.  “This tragic child sexual abuse occurred nine years ago, yet we still obtained justice for these victims.  Their strength and perseverance in coming forward enabled our successful result.  For those who suffered at any time from a similar crime, please find the strength to come forward as these victims did.”   

“HSI special agents worked closely with Richmond Police Department and the U.S. Attorney’s Office for the Northern District of California to hold Singh accountable for the production of child sexual abuse material which involved the exploitation of a 16-year-old victim,” said Tatum King, Special Agent in Charge, Homeland Security Investigations (HSI) San Francisco. “Singh’s sentence will hopefully bring closure to the impacted victims and their families so they can begin the process of healing after surviving this horrible crime.”

Singh, 47, of San Pablo, California, pleaded guilty on September 15, 2021, to one count of production of child pornography.  In his plea agreement, Singh admitted that on March 13, 2013, he engaged in sexual acts in an Alameda County hotel room with a female high school student.  At the time, the minor female was 16 years old.  He was 38 years old. The plea agreement describes that Singh set up a video camera in the hotel room before the crime occurred.  Singh then persuaded the minor female to engage in sex acts.  Singh positioned the camera, he admitted, to record the acts.  The minor female repeatedly protested during sex and told Singh to stop, but he continued. 

Singh further admitted that earlier, in January 2013, he video-recorded the same minor female sitting in a car’s backseat in a compromising and exposed sexual position.

In a memo filed for sentencing, the government describes that Singh first contacted the minor female on Facebook after he observed her at a local temple when she was 14 years old.  He made in-person contact with her when she was 15 years old.  At that time Singh told her he was in his 20s, despite being 38 and married with three children.  In the months that followed, Singh picked up the minor female from her high school after classes or during breaks.  He made ongoing attempts to pressure her into sexual acts.  The sexual contact eventually occurred when the minor female was 16, a high school junior. 

Singh also admitted in his plea agreement that he traveled later, in May 2013, to a casino hotel in Placer County with a different minor female.  Singh admitted he knew this female was also a minor.  The government’s sentencing memo describes that Singh enticed the minor female onto the trip using a ruse about tickets to a concert.  Singh admitted in his plea agreement that he rented a casino hotel room for them and then showed this minor female a video recording depicting Singh’s sexual acts with the other minor female described above.  Singh admitted he engaged in sex with this minor female in the Placer County casino hotel room.

Singh’s conduct traumatized both minor female victims, as the government’s sentencing memo describes.  The first victim suffered severe adverse consequences that have become well documented.  The second victim could not, years later, describe what happened in the Placer County hotel without weeping uncontrollably. 

The initial federal charges were brought against Singh in a complaint filed March 1, 2021.  The complaint reflects that a local law enforcement investigation began when the two minor female victims came forward, but they did not know Singh’s true name.  After determining his identity, and years after Singh had sexually abused these minor victims, the video recordings were discovered on Singh’s laptop, having been stored there for years. 

The federal investigation began when the video recordings were discovered on Singh’s laptop.  There is no federal statute of limitations for charges relating to child pornography crimes, including production of child pornography, under 18 U.S.C. § 3299.

In addition to the 230 month prison term, United States District Judge Haywood S. Gilliam Jr. sentenced Singh, who was in custody at the sentencing hearing, to a 15 year term of supervised release to follow his release from prison.  He began serving his prison sentence immediately. 

Jonathan U. Lee is the Assistant U.S. Attorney who prosecuted the case, with the assistance of Leeya Kekona, Kay Konopaske, and Kathleen Turner.  The prosecution is the result of an investigation by Homeland Security Investigations (HSI) and the Richmond Police Department.

This federal case was brought in U.S. District Court 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 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.justice.gov/psc.

 

SAN JOSE - A jury found Elizabeth A. Holmes guilty of one count of conspiracy and three counts of wire fraud in connection with a multi-million-dollar scheme to defraud investors in Theranos, Inc., announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation (FBI) Special Agent in Charge Craig D. Fair; Food and Drug Administration (FDA) Acting Commissioner Janet Woodcock; and U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez.  The verdicts follow a 15-week trial before the Honorable Edward J. Davila, United States District Judge.  

“The jurors in this 15-week trial navigated a complex case amid a pandemic and scheduling obstacles,” said U.S. Attorney Hinds.  “I thank the jurors for their thoughtful and determined service that ensured verdicts could be reached.  The guilty verdicts in this case reflect Elizabeth Holmes’ culpability in this large-scale investor fraud and she must now face sentencing for her crimes.”

“Elizabeth Holmes chose fraud over business failure.  A jury has determined, beyond a reasonable doubt, that she intentionally misled investors,” said Special Agent in Charge Craig Fair. “I want to thank the FBI San Francisco agents and analysts who spent years investigating allegations of fraud within Theranos to uncover the truth and ensure justice in this case.”

“The FDA’s Office of Criminal Investigations (OCI) will continue to investigate and help bring to justice individuals and companies responsible for putting the public health at risk,” said FDA Assistant Commissioner for Criminal Investigations Catherine A. Hermsen. “FDA-OCI is proud to have partnered with the United States Attorney’s Office and its law enforcement counterparts to bring this prosecution.” 

“The U.S. Postal Inspection Service is committed to protecting consumers and investors from fraud,” said USPIS Inspector in Charge Nuñez. “We are proud of the dedication shown by Postal Inspectors and our partners at the U.S. FDA and the FBI by seeing this case through to a verdict.” 

Holmes, 37, of Woodside, Calif., founded Theranos in 2003.  Theranos was a blood testing company based in Palo Alto and Newark, Calif.  Holmes used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to induce investments.  She claimed Theranos had developed an analyzer, variously referred to as, among other things, the Theranos Sample Processing Unit (TSPU), Edison, or minilab.  She claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick.  She also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.  

The evidence submitted during the trial demonstrated Holmes knowingly made materially false representations to investors and potential investors about the analyzer.  For example, the evidence showed that Holmes knew the analyzer had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines.  Evidence also showed that Holmes resorted to using conventional machines bought from third parties to perform much of Theranos’s blood testing.

The trial included evidence that Holmes made numerous misrepresentations to potential investors about Theranos’s financial condition and its future prospects.  For example, the evidence showed that Holmes represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that Theranos expected to generate approximately $1 billion in revenues in 2015 when, in truth, she knew Theranos would generate only negligible or modest revenues in 2014 and 2015.  

Further, the evidence showed that Holmes represented to investors that Theranos had a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos’s technology had deployed to the battlefield when, in truth, Theranos had limited revenue from military contracts and its technology was not deployed in the battlefield.  The evidence showed Holmes represented to investors that Theranos had been comprehensively validated by numerous major pharmaceutical companies and provided reports to investors with logos from pharmaceutical companies falsely suggesting the pharmaceutical companies endorsed Theranos.  In addition, the evidence showed that Holmes represented to investors that Theranos would soon dramatically increase the number of Wellness Centers within Walgreens stores even though Theranos’s retail Walgreens rollout had stalled because of several issues.

Holmes was initially charged on June 14, 2018.  On July 28, 2020, a federal grand jury returned a superseding indictment charging Holmes with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and ten counts of wire fraud, in violation of 18 U.S.C. § 1343.  One of the conspiracy counts alleged Holmes defrauded investors while the second count alleged Holmes defrauded patients who used Theranos services.  Similarly, the indictment charged Holmes with ten counts of wire fraud, several of the counts alleging investor fraud and several alleging Holmes defrauded patients who were induced to purchase Theranos services.  

The jury convicted Holmes of the investor wire fraud conspiracy count and three substantive wire fraud counts relating to the scheme to defraud investors, including wire transfers totaling more than $140 million.  The jury acquitted Holmes of the patient-related conspiracy wire fraud count and three additional wire fraud counts.  One count of wire fraud relating to a Theranos patient was dismissed during the trial.  The jury could not reach a unanimous verdict with respect to three investor fraud-related counts.

Holmes faces a maximum sentence of twenty (20) years in prison, and a fine of $250,000, plus restitution, for the conspiracy count and each count of wire fraud.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

Judge Davila has not yet scheduled Holmes’s sentencing hearing.  She remains free on bond, pending further hearings.

Assistant U.S. Attorneys Robert S. Leach, Jeff Schenk, John C. Bostic, and Kelly Volkar are prosecuting the case with the assistance of Lakisha Holliman, Madeline Wachs, Elise Etter, Susan Kreider, and Leeya Kekona.  The prosecution is the result of an investigation by the FBI, USPIS, and FDA Office of Criminal Investigations.   

SAN FRANCISCO –The Department of Justice today announced nearly $126 million in funding to advance school safety under the STOP School Violence Act. The grants, awarded by the Office of Justice Programs’ Bureau of Justice Assistance (BJA) and the department’s Office of Community Oriented Policing Services (COPS Office), will help institute safety measures in and around primary and secondary schools, support school violence prevention efforts, provide training to school personnel and students, and implement evidence-based threat assessments.

“The Justice Department has no greater responsibility than protecting Americans from harm,” said Attorney General Merrick B. Garland. “Schools must be safe places to learn, and today’s investment of more than $125 million under the STOP School Violence Act will help ensure that they are.”

The Students, Teachers and Officers Preventing School Violence Act of 2018 (the “STOP School Violence Act”) gives the Justice Department the authority to provide awards directly to states, units of local government, Indian tribes, and public agencies (such as school districts and law enforcement agencies) to improve security at schools and on school grounds through evidence-based school safety programs. It also provides grants to ensure a positive school climate by helping students and teachers recognize, respond quickly to, and help prevent acts of violence.

The 78 BJA annual awards, totaling almost $74 million, are intended to support training and education for school personnel and students on preventing violence against others and themselves, including anti-bullying training and specialized training for school officials to respond to mental health crises. Funds also help develop and implement multidisciplinary threat assessment or intervention teams and design technology solutions such as anonymous reporting systems, hotlines and websites.

The COPS School Violence Prevention Program (SVPP) provides up to 75% of the funding for school safety measures in and around primary and secondary schools. The 153 SVPP awards, totaling almost $52 million, are statutorily obligated to be used for coordination with law enforcement; training for local law enforcement officers to prevent student violence; locks, lighting and other deterrent measures; technology for expedited notification of local law enforcement during an emergency; and other measures that provide a significant improvement in security.

The full list of SVPP awards can be found here:  https://cops.usdoj.gov/svpp-award.

A list of BJA awards, as they are made, can be found on the OJP Grant Awards page.

The COPS Office is the federal component of the Department of Justice responsible for advancing community policing nationwide. The only Department of Justice agency with policing in its name, the COPS Office was established in 1994 and has been the cornerstone of the nation’s crime fighting strategy with grants, a variety of knowledge resource products, and training and technical assistance. Through the years, the COPS Office has become the go-to agency for law enforcement agencies across the country and continues to listen to the field and provide the resources that are needed to reduce crime and build trust between law enforcement and the communities served. The COPS Office has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and tribal law enforcement agencies to fund the hiring and redeployment of more than 135,000 officers. 

The Office of Justice Programs provides federal leadership, grants, training, technical assistance and other resources to improve the nation’s capacity to prevent and reduce crime, advance racial equity in the administration of justice, assist victims and enhance the rule of law. More information about OJP and its components can be found at www.ojp.gov.
 

SAN FRANCISCO – A federal grand jury handed down a superseding indictment today adding wire fraud to the list of charges pending against Joseph Sullivan for his role in the alleged attempted cover-up of the 2016 hack of Uber Technologies Incorporated, announced Acting United States Attorney Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair.  The 2016 hack implicated approximately 57 million user and driver records—Sullivan already was charged with obstruction of justice and misprision of a felony in connection with the alleged attempted cover-up of the incident.   

Sullivan, 52, of Palo Alto, Calif., was serving as Uber’s Chief Security Officer when hackers revealed to him that they had accessed and downloaded an Uber database containing personally identifying information, or PII, including approximately 600,000 driver’s license numbers associated with certain Uber drivers.  The superseding indictment describes how Sullivan allegedly orchestrated the disbursement of a six-figure payment to two hackers in exchange for their silence about the hack.  The superseding indictment further alleges that Sullivan took deliberate steps to prevent persons whose PII was stolen from discovering that the hack had occurred and took steps to conceal, deflect, and mislead the U.S. Federal Trade Commission (FTC) about the data breach.

“Institutions that store personal information of others must comply with the law,” said Acting U.S. Attorney Hinds. “When hacks like this occur, state law requires notice to victims.  Federal law also requires truthful answers to official government inquiries.  The indictment alleges that Sullivan failed to do either.  We allege Sullivan falsified documents to avoid the obligation to notify victims and hid the severity of a serious data breach from the FTC, all to enrich his company.”

“If Mr. Sullivan had immediately reported the breach—instead of misleading the government by withholding information—the FBI could have been better able to assist Uber; also, the data breach of at least one additional large tech company may have been prevented,” said FBI Special Agent in Charge Fair.  “This case should serve as an example to corporations and company executives that working with the FBI is crucial when dealing with the aftermath of a breach; such communication is a best practice in preventing the loss of data and private information.”   

The newly filed allegations of wire fraud center around Sullivan’s attempt to defraud Uber’s drivers by failing to disclose the 2016 breach.  Specifically, the superseding indictment describes how California law, under certain circumstances, requires businesses operating in the state to notify residents whose information may have been stolen in such data breaches.  The superseding indictment further alleges that, rather than notify the drivers of the breach, Sullivan took deliberate steps to ensure Uber’s drivers and others did not learn the true nature of the incident.  Among the steps taken by Sullivan to suppress discovery of the breach was his plan to have two of the hackers execute non-disclosure agreements.  The non-disclosure agreements falsely stated the hackers had neither taken nor stored Uber’s data in the 2016 breach. In addition, Sullivan allegedly misrepresented to Uber’s new chief executive officer the nature and scope of the data that was compromised; falsely suggested to the new CEO that the incident was not a data breach; and sent an email falsely claiming that the data breach was not, in fact, a data breach at all, but rather an incident that was no more severe than other security incidents.  

The superseding indictment also incorporates the obstruction of justice and misprision of a felony charges described in previously filed documents.  Documents filed earlier in the case provide background for the charges.  For example, the documents describe how Sullivan played a pivotal role in responding to FTC inquiries about Uber’s cyber security.  Specifically, Uber had been hacked in September of 2014 and the FTC was gathering information about that 2014 breach.  After the FTC demanded responses to written questions and required Uber to designate an officer to provide testimony under oath on a variety of topics, Sullivan assisted in the preparation of Uber’s responses to the written questions and was designated to provide sworn testimony on a variety of issues.  On November 14, 2016, approximately 10 days after providing his testimony to the FTC, Sullivan received an email from a hacker informing him that Uber had been breached again. Sullivan’s team was able to confirm the breach within 24 hours of his receipt of the email. 

Rather than report the 2016 breach, Sullivan allegedly took deliberate steps to prevent knowledge of the breach from reaching the FTC.  For example, as described above, Sullivan arranged to pay off the hackers in exchange for them signing non-disclosure agreements that contained the false representation that the hackers did not take or store any data.  In addition, Sullivan sought to pay the hackers off by funneling the payoff through a bug bounty program—a program in which a third-party intermediary arranges payment to so-called “white hat” hackers who point out security issues but have not actually compromised data.  In addition, Uber paid the hackers $100,000 in BitCoin in December 2016, despite the fact that the hackers refused to provide their true names.  Uber was ultimately able to identify the two hackers in January 2017 and required them to execute new copies of the non-disclosure agreements in their true names.  The two hackers identified by Uber were ultimately prosecuted in the Northern District of California.  Both pleaded guilty on October 30, 2019, to computer fraud conspiracy charges and now await sentencing.  The separate guilty pleas entered by the hackers demonstrate that after Sullivan assisted in covering up the nature of the hack of Uber, the hackers were able to commit an additional intrusion at another corporate entity—Lynda.com—and attempt to ransom that data as well.  

The superseding indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  

Sullivan is charged with three counts of wire fraud, in violation of 18 U.S.C. § 1343; obstruction of justice, in violation of 18 U.S.C. § 1505; and misprision of a felony, in violation of 18 U.S.C. § 4.  If convicted, he faces a maximum statutory penalty of 20 years in prison for each count of wire fraud, five years in prison for the obstruction charge, and a maximum three years in prison for the misprision charge.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

Sullivan’s arraignment on the new charges has not yet been scheduled.  

Uber’s new management ultimately discovered the truth about the breach and disclosed the breach publicly, and to the FTC, in November 2017.  Since that time, Uber has responded to additional government inquiries.  

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office.  The prosecution is the result of an investigation by the FBI.   

SAN FRANCISCO – Former San Francisco City Hall public official Mohammed Nuru agreed in a plea agreement filed today to plead guilty to honest services wire fraud, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service–Criminal Investigation Special Agent in Charge Mark H. Pearson.  

Today’s development follows the January 15, 2020, 79-page federal complaint filed against then San Francisco Department of Public Works (DPW) Director Mohammed Nuru charging him with public corruption and describing a long-running scheme involving multiple bribes and kickbacks during his tenure as DPW’s Director.  Nuru, 59, of San Francisco, served as DPW’s Director from 2011 until charges were brought against him in 2020.  Nuru was also charged in a second federal complaint filed on January 28, 2020, with lying to a federal agent in the course of the San Francisco City Hall corruption investigation.  Today, in anticipation of entering his plea agreement resolving his cases, Nuru was arraigned today on an information – a charging document – that charges him with his sweeping scheme to defraud the San Francisco public of its right to his honest services in violation of 18 U.S.C. §§ 1343 and 1346.

“Mohammed Nuru admits to a staggering amount of public corruption in his plea agreement,” said Acting United States Attorney Stephanie M. Hinds.  “For years, Nuru held a powerful and well-paid public leadership position at San Francisco City Hall, but instead of serving the public, Nuru served himself.  He took continuous bribes from the contractors, developers, and entities he regulated.  He now faces a prison sentence for enriching himself at the expense of the public as he sat in high office.  Federal authorities will investigate public corruption wherever it leads in San Francisco and throughout the district.”  

“Today’s announcement, while significant, is by no means the end of the FBI’s investigation into the corrupt conduct we have uncovered in San Francisco city government,"  said FBI Special Agent in Charge D. Fair.  “We will continue to hold accountable those who seek to personally benefit by corrupting the fair administration of public business and we will persist in our commitment to protect the integrity of the institutions that serve the people of San Francisco.”

“Our communities place great trust and responsibility in our public figures.  Mohammed Nuru ultimately betrayed this trust when he abused his power to defraud the City and County of San Francisco and its people,” said IRS Criminal Investigation Special Agent in Charge Mark H. Pearson.  “We will not tolerate public corruption and will hold perpetrators accountable for their actions.  Today’s guilty plea is a direct result of the hard work and dedication of IRS Criminal Investigation and our law enforcement partners towards obtaining justice.”

Nuru signed today’s plea agreement and the agreement has been filed with the United States District Court in preparation for Nuru’s upcoming appearance to enter his guilty plea orally.  As the plea agreement outlines, before Nuru was appointed Director of DPW in 2011 he became DPW’s Deputy Director of Operations in 2000.  The Deputy Director of Operations is DPW’s second most senior position, behind only the Director.  In 2014, Nuru was also appointed to the Board of the Transbay Joint Powers Authority (TJPA) and eventually served as its Chair.  As Deputy Director and eventually Director of DPW, and as Chair of the TJPA, Nuru exercised great influence over San Francisco (the City) business and policy, including public contracts, permits, and construction projects.  His power and influence extended beyond DPW’s jurisdiction to numerous other City departments and agencies, making him one of the most powerful public officials in the City.

Nuru admits in his plea agreement to a spectrum of public corruption involving bribery and kickbacks he received while in DPW leadership.  His admissions are summarized below:

Walter Wong:

In his plea agreement, Nuru admits he received a stream of bribes from Walter Wong.  Wong did business in the City through Walter Wong Construction, among other businesses. In exchange for Wong’s bribes, Nuru helped Wong secure City contracts.  Sometimes Nuru provided Wong with confidential insider City information on competitors’ bids or specifications.  At other times Nuru allowed Wong to structure the requirements for the City’s Request for Proposals (RFP) for projects ahead of time, to tailor their requirements to ensure that Wong’s company would be the most-qualified bidder.  Nuru also helped Wong expedite permit approvals.

Nuru admits in his plea agreement that his “corrupt relationship” with Wong began in approximately 2008 when Nuru was the Deputy Director for Operations at DPW.  Wong installed a gate for free at Nuru’s San Francisco home in exchange for future business with DPW and the City. Wong continued to perform construction services for free, or nearly free, at Nuru’s San Francisco home and later primarily at Nuru’s vacation ranch property in Colusa County. 

Nuru admits that, in exchange for Wong providing construction and other things of value, he exercised his official influence and took actions to benefit Wong.  In one example outlined in the plea agreement, Nuru used DPW’s emergency contract process, which did not require a public bidding process, to direct construction work to Walter Wong Construction on a navigation center located at 1515 South Van Ness Street and on the Jelani House (a housing shelter), resulting in City payments to Wong’s company during fiscal years 2017-2018 and 2019-2020.  In another example, Nuru used his position and official influence to direct DPW, the Market Street Association, and the San Francisco Public Utilities Commission to purchase Christmas lights from one of Wong’s businesses, regularly leading to tens of thousands of dollars’ worth of purchases.

Nuru further admits in his plea agreement that:

 o between approximately 2008 and January 2020, Wong provided in excess of $260,000 in labor and materials for work on Nuru’s San Francisco home and Colusa County ranch.  o Wong paid for home furnishings for Nuru, including a chandelier, kitchen appliances, and furniture.  o Wong paid for Nuru to travel to China multiple times and to South America on one occasion, which included reimbursing Nuru in cash for the cost of international flights.  Wong paid for Nuru and Sandra Zuniga, his girlfriend at the time, to accompany Nuru to South America and paid for their stay at the Ritz-Carlton in Santiago, Chile.   o On multiple occasions, Wong handed Nuru envelopes of cash, often as much as $5,000 at a time. 

Walter Wong was charged in June 2020 with conspiracy to defraud the public of its right to honest services and with conspiracy to engage in money laundering, both involving Nuru.  Wong entered a guilty plea and agreed to cooperate with the government’s San Francisco City Hall corruption investigation.

Multimillion-Dollar Mixed-Use Development:

Nuru admits he received free travel, gifts, and benefits, for working with Walter Wong to use Nuru’s official position to benefit a billionaire developer from China, referred to as DEVELOPER 1 in the plea agreement, who was developing a large multimillion-dollar mixed use project in San Francisco.  Wong, who worked as a consultant for DEVELOPER 1 on several of his large developments in the City, introduced Nuru to DEVELOPER 1.  Nuru met with Wong, another Department of Building Inspection official, DEVELOPER 1, and others over dinner on multiple occasions and discussed DEVELOPER 1’s projects.  Nuru never paid for the dinners.  Nuru admits that he also met with DEVELOPER 1 multiple times in China.  According to Nuru, DEVELOPER 1 owned multiple hotels in China, including five-star hotels.  Nuru received gifts from him, including free hotel stays. 

Nuru admits that, in exchange, he used his official position and influence to help DEVELOPER 1 obtain necessary approvals for his large, multimillion-dollar mixed-use project.  Nuru admits, among other things, that he told Sandra Zuniga that DEVELOPER 1 was upset because he had spent large amounts of money and had provided “a whole list of things” that Nuru said “we need to get done[.]”  Nuru admits that whenever DEVELOPER 1 or one of his employees notified him of an issue, Nuru directed one of his DPW managers to solve the problem and expedite the process.  Nuru also used his official influence with other City officials to solve problems encountered by DEVELOPER 1 that fell within the other City officials’ area of responsibility.

Recology:

Recology Inc. is a waste management company headquartered in San Francisco and the parent company of Sunset Scavenger Company, Golden Gate Disposal & Recycling Company, and Recology San Francisco (referred to as the “SF Recology Group” and, collectively with Recology Inc., as “Recology”).  Recology Inc. provided refuse collection and disposal services for residential and commercial customers in the City, as well as for the City itself, through the SF Recology Group.

As Director of DPW, Nuru presided over the process governing the rates Recology could charge in San Francisco.  Nuru recommended to the Rate Board whether to approve any rate increase for Recology.  Nuru also influenced “tipping fee” rates that Recology charged DPW when DPW dumped materials at a Recology facility, Sustainable Crushing.  Nuru could approve, deny, or affect operational changes that Recology wanted to make in San Francisco which, Nuru admits in his plea agreement, gave him the ability in his official capacity to affect Recology’s business. 

Nuru admits he accepted numerous valuable items from Recology and used his official position to help Recology’s business.  Among other things, Recology paid for soil to be delivered to Nuru’s ranch property in Colusa County, for expensive meals for Nuru, and for a two-night trip to New York on the City’s business in December 2017. 

Nuru admits that he also requested Recology to pay, and Recology did pay, hundreds of thousands of dollars to a San Francisco non-profit (Non-Profit A) in the form of donations for a cleaning program known as Giant Sweep.  Non-Profit A would then donate the payments to another non-profit that administered funds for the Giant Sweep program.  Nuru admitted he could then access the funds for a variety of other uses—including procuring goods and services for staff meals and appreciation events, volunteer programs, merchandise, community support, and events from specific vendors—in addition to their originally designated purpose for Giant Sweep.  From 2014 through the end of 2019, Recology donated approximately $150,000 per year for Giant Sweep, in $30,000 installments—for a total of approximately $750,000.

Nuru also admits he requested Recology hire his son.  Recology hired him and paid him, between 2015 and 2017, approximately $17,000.  Recology also funded a paid internship for Nuru’s son at a different non-profit organization and, between 2017 and 2018, paid approximately $23,600 to fund the paid internship.

Nuru admits he requested that Recology fund his DPW holiday parties.  Between 2016 and 2019, Recology paid approximately $60,000 for that purpose.  Recology made the payments through the Lefty O’Doul’s Foundation, a non-profit organization run by Nick Bovis. 

Two former Recology executives, Paul F. Giusti and John F. Porter, have been charged in this investigation.  Giusti was charged in November 2020, and Porter was charged in April 2021.  Both men were charged with bribery of Nuru and money laundering involving Nuru.  Giusti pleaded guilty in August 2021 to engaging in a conspiracy to bribe Nuru and is cooperating with the government’s San Francisco City Hall corruption investigation.  Porter’s charges remain pending.

The three subsidiaries of Recology, Inc. now have new leadership and have implemented enhanced corporate compliance programs to end any corrupt practices.  Recology resolved corporate charges brought against them through a deferred prosecution agreement with the government.  Pursuant to the agreement, the companies paid a $36 million fine, agreed to implement enhanced corporate compliance programs, and agreed to fully cooperate in the government’s San Francisco City Hall corruption investigation.

Nick Bovis:

Nuru admits in his plea agreement that he received multiple bribes from restaurateur Nick Bovis.  The bribes were in exchange for Nuru using his official acts and influence to assist, or to promise to assist, in public business opportunities with the City.  The bribes included free meals and entertainment for Nuru, his family, and associates at restaurants owned by Bovis and thousands of dollars in free appliances for Nuru’s ranch property.  Nuru also anticipated and expected tens of thousands of dollars in kickbacks from proceeds that Bovis would earn from the City concessions or contracts awarded due to Nuru’s official acts or influence to assist Bovis.

In one plea agreement example, Nuru admits he helped Bovis in a plan to win a bid for a restaurant lease at San Francisco International Airport (SFO).  Bovis expected to make money from the SFO concession, and Nuru expected Bovis would continue to provide bribes in exchange for Nuru’s help with the airport concession process and other public contracts.

In another example, Nuru admits he gave Bovis a price list of appliances that Nuru wanted for his ranch in or about 2018, a time when Bovis was seeking Nuru’s assistance with the SFO concession and other City business opportunities.  Bovis purchased the appliances and brought them to Nuru’s ranch.  Nuru accepted them as an exchange for his continued official acts and influence to help Bovis, and he did not pay for them.  The appliances were worth approximately $22,000.

Nick Bovis pleaded guilty in May 2020 to wire fraud and honest services wire fraud involving Nuru and agreed to cooperate in the government’s San Francisco City Hall corruption investigation. 

Florence Kong:

Nuru admits in his plea agreement that he accepted a gold Rolex watch from Bay Area businesswoman Florence Kong.  The watch was valued at approximately $36,550.  Nuru admits he used his official position to benefit Kong’s businesses and did so in exchange for the Rolex and for cash, free meals, and other items of value provided by Kong, including an iron fence that Kong installed at Nuru’s ranch.  In one example, Nuru states that he used his official position to direct business to SFR Recovery Inc., a recycling business that Kong owned. 

Florence Kong was charged and pleaded guilty to bribery of Nuru and to making false statements to FBI agents during the investigation.  She was sentenced in February 2021 to one year and one day in prison and ordered to pay a $95,000 fine.

Balmore Hernandez, William Gilmartin, & Alan Varela:

Nuru admits in his plea agreement that between 2013 and January 2020 he accepted a series of bribes and kickbacks from Balmore Hernandez, William Gilmartin, and Alan Varela in exchange for past and future official actions benefitting their City business ventures.  Nuru received free meals and entertainment, cash, and free labor and materials for his ranch – including a brand new tractor.  Nuru also expected to receive a portion of the proceeds  from anticipated City contracts awarded to them or their associates as a result of Nuru’s official acts or influence on their behalf.

In one example, Nuru admitted he helped Varela and Gilmartin’s joint venture win a DPW supply contract and a related lease with the Port of San Francisco (the “Port”) to operate an asphalt recycling plant and a concrete plant on the Port’s land.  In the early stages, Nuru helped the group prepare their proposal by providing them inside non-public information on the project.  The non-public information was delivered to Hernandez through emails or phone calls or through regular dinning meetings in San Mateo with Gilmartin and Hernandez.  Gilmartin paid approximately $20,000 for the dinners, with the parties agreeing that Nuru’s dinners were worth approximately $7,000.

Nuru admits that Gilmartin promised him $100,000 for his official assistance to pressure a large developer to select one of Gilmartin and Varela’s joint-venture partners for a large project in San Francisco.  The large developer complied with Nuru’s request because, as Nuru admits, the large developer needed DPW approvals for the project and for other large developments in the City.

Nuru admits that he received approximately $25,000 in cash from Hernandez and received approximately $250,000 in free labor and materials from Hernandez at Nuru’s ranch. 

Nuru also requested the group give him a tractor.  In February 2019, Alan Varela delivered a new tractor to the Nuru’s ranch, a benefit valued at approximately $20,000.

Balmore Hernandez was also charged in connection with this investigation.  He pleaded guilty to honest services wire fraud in October 2020 and agreed to cooperate in the government’s San Francisco City Hall corruption investigation. 

William Gilmartin was charged in connection with this investigation.  He pleaded guilty to conspiracy to commit honest services wire fraud in May 2021 and agreed to cooperate in the government’s San Francisco City Hall corruption investigation.
Alan Varela was charged in connection with this investigation.  He pleaded guilty to conspiracy to commit honest services wire fraud and was sentenced in September 2021 to two years in prison and ordered to pay a $127,000 fine. 

Sandra Zuniga Money Laundering:

Nuru admits that in or about 2010 he bought a 10-acre lot in Colusa County and developed it into his vacation ranch with free labor and materials provided by City contractors seeking favors from him. Nuru admits he also used the proceeds of his crimes to pay the mortgage.  To conceal and launder the source of the proceeds, Nuru states he funneled the money through Sandra Zuniga who made the monthly $1,000 mortgage payments out of her checking account. Nuru admits that from 2014 through August 2017, he typically gave Zuniga approximately $1,000 per month, generally in cash, and she deposited the money into her bank account.  She then made the $1,000 payment towards the mortgage.  In this way, Zuniga paid at least $42,000 of the mortgage.

Zuniga was charged and pleaded guilty in March 2021 to engaging in a conspiracy to launder money with Nuru.  She agreed to cooperate in the government’s San Francisco City Hall corruption investigation.

Other Bribes:

Nuru admits in his plea agreement that around 2018 he accepted a bribe of $20,000 in cash from a former government employee in exchange for Nuru using his position to help a particular person obtain an engineering job with the City. Nuru received the cash in three installments of $10,000, $5,000, and $5,000.  Ultimately, the individual failed to maintain employment with the City.

Nuru also admits he accepted cash bribes from a prominent developer in San Francisco.  The cash bribes usually consisted of a few thousand dollars.  The developer would later call Nuru when he had any problems with DPW-related approvals or other matters that Nuru could help resolve. 

In his plea agreement, Nuru admits guilt and agrees to plead guilty to one count of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346.  If convicted of the count, he faces a maximum penalty of 20 years in prison and a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss of the crime. 

The government indicates in the plea agreement its intent to ask for up to a 108 month (9 year) sentence for Nuru.  However, any sentence imposed by the court will follow only after the court’s consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Today, in a procedural step towards orally entering his guilty plea, Nuru was arraigned and pleaded not guilty before United States Chief Magistrate Judge Joseph C. Spero to an information charging him with a count of honest services wire fraud in violation of 18 U.S.C. §§ 1343 and 1346. 

Nuru’s next appearance is currently set before United States District Judge Susan Illston on January 14, 2022, at which he is currently scheduled to formally enter his guilty plea pursuant to his plea agreement.  Nuru remains out of custody on bond.
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This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco.  To date, 12 individuals and three corporate entities have been charged, including two high-ranking San Francisco public officials, Nuru and Harlan Kelly.  Multiple city contractors and facilitators have been charged.  Allegations in the complaint filed against Harlan Kelly assert that he received thousands of dollars in airfare, meals, jewelry, and travel expenses, along with repair work on his house.   

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office.  The case is being investigated by the FBI and IRS-Criminal Investigation. 

SAN FRANCISCO – Andrew James Chapin was sentenced in federal court today to 36 months in prison after pleading guilty to wire fraud, bank fraud, and securities fraud, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  Chapin was also ordered to pay over $8 million in restitution to his victims.  The sentence was handed down by United States District Judge Maxine M. Chesney.

Andrew James Chapin, 33, of San Francisco, started a company in Boston and in 2016 moved it to San Francisco and renamed it Benja Inc.  He was Benja’s CEO.  As a digital advertising company, Benja provided “shoppable media” by placing digital advertisements for a company’s overstocked goods that allowed shoppers to purchase products in the advertisement itself without being redirected to another website.   

From June 2019 through September 2020 Chapin was looking for additional investors and lines of credit for Benja.  He told creditors and prospective investors that Benja generated $6,200,000 and $13,200,000 in revenue in 2018 and 2019, respectively, and had signed large contracts with numerous well-known national sportswear companies to place advertisements for their excess inventory. 

Chapin admitted in his plea agreement that these statements were false.  He further admitted that he had no contracts with these companies and that he falsified Benja’s revenue.  On a Benja investor call, Chapin admitted he arranged for people to impersonate employees from the well-known national corporations to bolster Chapin’s false representations of business relationships with the companies. 

Chapin detailed in his plea agreement that he repeatedly submitted false information about Benja to a victim bank to obtain a credit line totaling $5,000,000.  Chapin took advances on the line of credit for his company and used the money to pay off creditors and personal credit cards and to put money into his personal cryptocurrency exchange account.

Chapin also admitted his misrepresentations induced investors to fund Benja.  His false statements produced investments of $1,000,000 from one venture capital firm and $1,800,000 from a SAFE (simple agreement for future equity) fundraising round involving multiple individual investors.  To obtain these investments, Chapin created documents showing that Benja had millions in revenue and account receivables from companies that had never contracted with Benja. 

In one example outlined in his plea agreement, on March 23, 2020, Chapin directed a New York venture capital firm to Benja’s virtual data room that displayed a spreadsheet showing Benja’s total 2019 revenue exceeded $13,000,000 and also listed contracts with national sportswear companies that provided over $7,000,000 of Benja’s total 2019 income.  Benja, however, had no contracts with the sportswear companies.  Chapin fabricated the spreadsheet.  Chapin also admitted that in a reference call he paid a Benja employee to impersonate a national running shoe company’s representative and arranged for another individual to impersonate a national sportswear company’s representative.  The venture capital firm relied on these misrepresentations and invested $1,000,000 in Benja.  Chapin used the money to pay off a creditor.

Chapin admitted defrauding individual investors too.  In his plea agreement Chapin admitted that in November 2018 he emailed false financial statements to an individual investor that reflected Benja had revenue of more than $4,000,000 in 2018.  Chapin told the individual that a St. Louis, Missouri, venture capital firm was considering a $1,500,000 investment in Benja, although Chapin knew the firm had already declined to invest in Benja.  Chapin also arranged for a person to impersonate the St. Louis venture capital firm’s manager during a reference call with the investor. The impersonator told the individual investor that a third party had verified Benja’s financials and had made customer reference calls about Benja that produced positive results.  Chapin then provided false contact information for the St. Louis venture capital firm’s manager which  allowed Chapin – not the venture capital firm’s manager – to respond to the individual’s questions about Chapin’s shareholder agreement.  As a result, the individual investor signed the shareholder’s agreement and purchased 1,278 shares of common stock in Benja for $100,000.  Chapin used the money to pay personal credit card bills and to fund his personal cryptocurrency accounts. 

In a memo filed for sentencing, the government tallied the losses from Chapin’s bank fraud, his fraud upon a venture capital firm, and his fraud upon 11 individual investors.  The loss amount from Chapin’s frauds totaled $8,069,900.  Of that amount, at least $1.8 million came from defrauding the individual private investors.   

Chapin was originally charged by federal complaint on November 23, 2020, and later by information on May 27, 2021.  He pleaded guilty on June 16, 2021, to bank fraud in violation of 18 U.S.C. § 1344, wire fraud in violation of 18 U.S.C. § 1343, and securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5. 

The case is prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office.  The prosecution is the result of an investigation by the Federal Bureau of Investigation.  The United States Attorney’s Office and the Federal Bureau of Investigation thank the San Francisco Regional Office of the Securities and Exchange Commission, which conducted a parallel investigation.

 

SAN JOSE –Michael Kail, the former Vice President of IT Operations at Netflix, was sentenced today to 30 months in federal prison for his convictions for honest services wire, mail fraud, and money laundering, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Craig D. Fair, and IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson.  Kail was also ordered to forfeit $700,000, pay a $50,000 fine, and serve a three term of supervision upon release from prison.  The sentence was handed down by the United States District Judge Beth Labson Freeman. 

Kail was indicted April 26, 2018, and charged with nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering, in violation of 18 U.S.C. §§ 1343 (wire fraud), 1341 (mail fraud), 1346 (honest services fraud), and 1957 (money laundering).  

On April 30, 2021, after a three-week trial, a jury returned guilty verdicts on 28 of the 29 counts charged.  The jury also made findings to support the forfeiture of property Kail had purchased with the proceeds of his fraud.  

“Bribery and kickbacks are pernicious crimes that stifle Silicon Valley’s culture of competitive innovation,” said Acting United States Attorney Stephanie M. Hinds. “Michael Kail used his highly compensated Netflix position to siphon cash and valuable stock options from his tech vendors, the same vendors whose Netflix contracts he signed and whose technologies he pushed his teams to use.  Such crimes come with a cost, as reflected by the prison sentence that Kail will now serve.”  

“As alleged in the indictment, Mr. Kail chose which IT contracts were awarded by Netflix according to how he was able to bribe those companies to provide him with financial compensation, rather than choosing them on their merit,” said FBI San Francisco Special Agent in Charge Craig D. Fair. "Mr. Kail not only defrauded Netflix, but he also allowed for a ‘pay-to-play’ scheme, which he concocted, to take precedence over the free and fair competitive business environment that drives our economy." 

“Mr. Kail’s greed to enrich himself cost Netflix and its shareholders money and property by agreeing to contracts for goods and services beyond what the company needed or would have paid for,” stated IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson.  “Mr. Kail abused a position of trust and facilitated a scheme that benefited himself.  IRS-Criminal Investigation is committed to uncovering these heinous acts of greed and prosecute such malevolent crimes.”

Kail, 52, of Los Gatos, was employed at Netflix as the Vice President in charge of IT Operations from 2011 until July 2014.  Netflix policies prohibited conflicts of interest by its employees by its Code of Ethics and its “Culture Deck,” which required the disclosure of actual or apparent conflicts of interest and the reporting of gifts from entities seeking to sell products or services to the company.

Kail, as Netflix’s Vice President of IT Operations, approved the contracts to purchase IT products and services from smaller outside vendor companies and authorized payments to them.  Evidence produced at trial proved that Kail solicited and received bribes and ‘kickbacks’ from nine tech companies providing products or services to Netflix.  In exchange, Kail approved millions of dollars in contracts for goods and services provided by them to Netflix.  Kail received over $500,000 and stock options from the outside companies.  He used his kickback payments in multiple ways, including to pay his personal expenses and to buy a home in Los Gatos, California.  

Kail facilitated the payments, the evidence at trial showed, by creating and controlling a limited liability corporation called Unix Mercenary, LLC.  The LLC was created on February 7, 2012, and it had no employees and no business location.  Kail was the sole signatory to its accounts.  

Two days before Unix Mercenary was registered with the California Secretary of State, Kail signed a Sales Representative Agreement to receive cash payments from Netenrich, Inc., amounting to 12% of any billings from Netenrich to Netflix for staffing and IT services.  Later in 2012, Kail’s Unix Mercenary began to receive 15% of all billing payments that VistaraIT, LLC, a wholly owned company of Netenrich, received from Netflix.  From 2012 to 2014, Netenrich paid Unix Mercenary approximately $269,986, and VistaraIT paid Unix Mercenary approximately $177,863.  

These payments stopped in late 2014, after Kail left Netflix.  

Evidence at trial showed that several more companies paid Kail.  Neither Netenrich, Vistara, nor any of the other companies were charged with criminal conduct.  Only Kail was charged with devising the criminal scheme that defrauded Netflix. 

In 2013, the trial evidence showed, Platfora, Inc. sought to do business with Netflix.  In June 2013 – at a time Kail was seeking to buy his expensive Los Gatos residence – he met with Platfora employees and signed an evaluation agreement for Netflix engineers to test Platfora’s product, a data analytics software program.  On July 13, 2013, Kail met with Platfora’s CEO for drinks and later thanked him in an email saying, “I look forward to helping you in both a Netflix and Advisory capacity.”  Two days later, Kail signed an “advisory” agreement with Platfora that provided him with the right to purchase up to 75,000 options, approximately .25% of the company.  Shortly thereafter, Kail provided Platfora with Netflix’s internal information about Platfora’s competitors’ prices.  In September 2013, while he was a compensated “advisor” to Platfora, Kail signed, on behalf of Netflix, a multi-stage $250,000 per year contract with Platfora.  Internally, Kail urged his Netflix employees to use the product, despite their satisfaction with a competing product for which Netflix was already paying.  When an inquiry from the Netflix CEO ensued, Kail falsely denied that he was formally working with Platfora.  Kail resigned from his advisory position at Platfora the following week.  

Additional evidence showed that Kail received payments or compensation from other companies doing business with Netflix.  In June 2012, he became an “advisor” to and received options for shares from the company Sumo Logic, Inc.  The next month, Kail authorized and signed, on behalf of Netflix, a vendor agreement between Netflix and Sumo Logic.  The agreement led to over $300,000 in payments by Netflix, approved by Kail, to Sumo Logic.  Kail then approved a further $800,000 two-year contract with Sumo Logic.  

Similarly, trial evidence showed Kail received $5,000 per month consulting for Netskope, Inc., and also received options to purchase 106,000 shares of Netskope stock options.  Kail authorized Netflix to enter a $112,500 contract with Netskope just weeks before Kail resigned from Netflix.  Kail also purchased, on behalf of Netflix, a small amount of storage from Maginatics, Inc., and then became an “advisor” to Maginatics, allowing him to purchase up to 30,000 shares.  Kail thereafter increased Netflix’s purchase of storage from Maginatics by tenfold.  Kail made approximately $120,000 when Maginatics was sold the next year.  Kail also was promised stock options in the company ElasticBox, Inc., and thereafter signed a June 2013 Netflix order for a $600,000, 3-year subscription to ElasticBox’s cloud services.  Later that year, he signed an additional $850,000 contract for more cloud services.  Kail also accepted an “advisor” position with Numerify, Inc. in February 2014 that provided him an early option to purchase 36,000 shares. Three months later Kail, on behalf of Netflix, signed an $85,000 subscription agreement for Numerify’s software. Also in February 2014, Kail signed a $120,000 contract with Docurated, Inc., which had previously compensated him with two rounds of options, some of which Kail had already exercised. 

The evidence at trial further showed that Netflix IT employees involved with testing some of these products did not know that many of the startups’ software was being paid for by Netflix; rather, they assumed many of the products were unpaid “pilots” of untested software, a routine practice in the tech industry. The employees further did not know that Kail was being paid by the companies.

United States District Judge Beth Labson Freeman further ordered Kail to surrender on March 8, 2022, to begin serving his prison sentence.  

Assistant U.S. Attorneys Colin Sampson, Kyle Waldinger, Christopher Kaltsas, and Daniel Kaleba (former) prosecuted the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.

SAN FRANCISCO – The Department of Justice announced today that it has awarded more than $17.5 million in grants to support the Project Safe Neighborhoods (PSN) Program. Funding will support efforts across the country to address violent crime, including the gun violence that is often at its core. The San Diego Association of Governments was awarded $409,699 to administer PSN grant funds in the Northern District of California. 

The Bureau of Justice Assistance (BJA), part of the department’s Office of Justice Programs (OJP), will administer the 88 grant awards, which are being made to designated fiscal agents to support local PSN projects that work in partnership with U.S. Attorneys’ Offices.

“This latest Project Safe Neighborhoods grant is critical to addressing the violent crime threatening cities and towns all across our country,” said Deputy Attorney General Lisa O. Monaco. “Ensuring the safety of all Americans is the highest priority for the Department of Justice, but when it comes to violent crime, there is not a one-size-fits-all solution. We have to work closely with local public safety agencies as well as community organizations to craft individual strategies unique to each community’s needs. Programs like Project Safe Neighborhoods and the funding it provides allow us to do just that.”

Grant funds in the Northern District of California will support ongoing efforts for violence reduction by identifying individuals who are most at risk of either engaging in gun violence or falling victim to gun violence. This work will focus on violence interruption strategies that are based on well-known models which have been rigorously evaluated and found to be successful at significantly reducing severe violence and reducing the re-arrest rate among program participants.

“Investing in our communities, supporting victims and building a justice system that both keeps people safe and earns their trust – these are mutually reinforcing goals that stand at the heart of Project Safe Neighborhoods,” said Principal Deputy Assistant Attorney General Amy L. Solomon for OJP. “The Office of Justice Programs is pleased to join with our U.S. Attorneys’ Offices, and with jurisdictions across the country, as we work together to meet the challenges of crime and violence and achieve our shared aspirations of public safety and community trust.”

In May 2021, Attorney General Merrick B. Garland announced a new effort to reduce violent crime, including the gun violence that is often at its core. Integral to that effort was the reinvigoration of PSN, a two-decade old evidence-based and community-oriented program focused on reducing violent crime. The updated PSN approach, outlined in the department’s Comprehensive Strategy for Reducing Violent Crime issued by Deputy Attorney General Monaco, is guided by four key principles: fostering trust and legitimacy in our communities, supporting community-based organizations that help prevent violence, setting focused and strategic enforcement priorities and measuring the results of our efforts. The fundamental goal is to reduce violent crime, not simply to increase the number of arrests or prosecutions.

This fall, U.S. Attorney’s Offices across the country have enhanced their violent crime reduction efforts to ensure alignment with the department’s comprehensive violent crime reduction strategy. U.S. Attorneys’ Offices have engaged in outreach to law enforcement and other agencies and organizations serving communities to identify the most significant drivers of violence in their districts. Working together with a broad coalition of stakeholders, the U.S. Attorneys’ Offices are addressing the most pressing violent crime issues in their district to make our neighborhoods safer for all.

PSN programs are led by U.S. Attorneys’ Offices in collaboration with local public safety agencies, community stakeholders and other agencies and organizations that work to reduce violent crime. 

For a list of all grantees, please visit: LINK HERE.
 

OAKLAND – Delaney Tang was sentenced today to 60 months in prison for solicitation of child pornography and conspiracy to commit cyberstalking in connection with a sexual extortion scheme, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations Special Agent in Charge Tatum King.  The sentence was handed down by the Hon. Haywood S. Gilliam, U.S. District Judge.

Tang, 22, of Oakland, pleaded guilty to the charges on April 28, 2021.  The plea agreement describes how Tang used Instagram to harass, threaten, and successfully extort a 12 year old victim into sending him nude photos and videos of herself.  The agreement further describes how Tang provided instructions to the victim specifying what she must wear, say, and do in her photos and videos as well as how Tang also attempted to coerce the victim into filming a video of herself performing additional sex acts with an underage male.  Tang received assistance executing the scheme from co-defendant Vincenz Sison, 21, of Concord.  Sison attempted to convince the victim to comply with Tang’s extortion requests. Ultimately, Tang publicly posted to Instagram and other sites sexually explicit images and videos of the 12-year-old victim after she stopped responding to Tang’s requests for additional photos and videos.

The government’s memorandum regarding Tang’s sentencing further explains how Tang used Instagram to extort additional victims, including seven identified underage victims who were between 11 and 14 years old. 

On February 10, 2021, the United States filed a criminal information charging Tang and Sison with conspiracy to commit cyberstalking, in violation of 18 U.S.C. §§ 371 & 2261A(2)(B), and charging Tang with an additional count of solicitation of child pornography, in violation of 18 U.S.C. § 2252A(a)(3)(B).  Tang pleaded guilty to both counts charged against him.

In addition to the prison term, Judge Gilliam ordered Tang to serve an eight year period of supervision following his release from prison.  Tang will surrender to begin serving his sentence on January 19, 2022. Tang’s next scheduled appearance is on January 12, 2022, at 10:00 a.m., for a hearing to determine restitution for his victims. 

For his part in the scheme, Sison pleaded guilty to conspiracy to commit cyberstalking on April 28, 2021.  Judge Gilliam scheduled Sison’s sentencing for February 2, 2022, at 10:00 a.m.

Special Assistant U.S. Attorney Christopher Vieira is prosecuting the case with the assistance of Marina Ponomarchuk.  The prosecution is the result of an investigation by the San Francisco Police Department and the Department of Homeland Security.

OAKLAND - Sergio Luiz Cruz Esparza was sentenced today to 210 months in prison for producing child pornography, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Yvonne Gonzalez Rogers, U.S. District Judge.   

Cruz Esparza, 23, of Bay Point, pleaded guilty to the charge today and was sentenced during the same proceeding.  According to the guilty plea, Cruz Esparza admitted that during 2019 and 2020, when he was 20 or 21 years old, he used social media applications, including Snapchat, to communicate with female minors for the purpose of requesting or persuading the minors to meet him in person and have sexual contact.  Cruz Esparza admitted he told the minors he was younger than his real age.  The plea agreement describes Cruz Esparza’s encounter with a 15-year-old in June of 2019.  In the plea agreement, Cruz Esparza acknowledged how he initiated contact with the 15-year old on Snapchat, told the girl he was 17 years old, and sent the teenage girl images depicting sexually explicit conduct involving minors. Cruz Esparza arranged to meet this teenage minor in June 2019.  During the meeting, Cruz Esparza molested her; and, using his telephone, created digital images as the intercourse occurred.  Further, according to his guilty plea, Cruz Esparza sent images in March of 2020 to another user of a social media application of sexually explicit conduct by a minor female.

According to the sentencing memorandum filed by the government, during 2019-2020, Cruz Esparza enticed thirteen minor victims to send him images depicting sexually explicit conduct using social media platforms, and he had sexual contact with five of the victims, including sexual intercourse with four of them.

On December 14, 2020, the United States filed a three-count Superseding Information charging Cruz Esparza with one count each of distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2) and (b)(1); coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b); and production of child pornography, in violation of 18 U.S.C. § 2251(a).  Cruz Esparza pleaded guilty to the production count; the other two counts were dismissed.

In addition to the prison term, Judge Gonzalez Rogers ordered a 10-year term of supervised release and set a restitution hearing for February 9, 2022.  Cruz Esparza is in custody and will begin serving his prison term immediately.   

Assistant U.S. Attorney Jonathan U. Lee is prosecuting the case with the assistance of Jessica Gonzalez Rodriguez and Kathleen Turner.  The prosecution is the result of an investigation by the Department of Homeland Security, Homeland Security Investigations, and the Silicon Valley Internet Crimes Against Children Task Force. 
 

OAKLAND–John Russell Bellhouse appeared today in federal court to face the charge of sexual abuse of a prison ward, announced Acting U.S. Attorney Stephanie M. Hinds, Department of Justice Office of the Inspector General Los Angeles Field Office Special Agent in Charge Zachary Shroyer, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.

According to the complaint filed November 29, 2021, and unsealed today, Bellhouse, 39, of Pleasanton, was employed as a correctional officer at the Federal Correctional Institute Dublin (FCI Dublin), an all-female correctional institution that houses federal prisoners and is operated by the Federal Bureau of Prisons (BOP).  Bellhouse held the position of Safety Administrator.  As a correctional officer, he supervised and had disciplinary authority over female inmates incarcerated at FCI Dublin.  Bellhouse was trained in BOP policies and procedures, which included training that sexual, financial, and social relationships with inmates are prohibited.  

The complaint charges that in 2020 Bellhouse engaged in sexual acts with an inmate.  The complaint describes that Bellhouse began to express an interest in a particular female inmate and started calling the inmate his “girlfriend.”  Among other benefits, he allegedly provided the female inmate with a gift of earrings and allowed her to use an office phone.  The complaint further alleges that Bellhouse began to engage in sexual touching with the inmate and eventually engaged in oral sex on two occasions.  The complaint describes that on one of those occasions oral sex allegedly occurred in the Safety Office, a space inside the prison accessible to both BOP staff and inmates.  Another inmate acted as a “lookout” during at least one of the sexual encounters, according to the complaint’s allegations.

In March 2021, Bellhouse was put on administrative leave due to the allegations described in the complaint.  

Bellhouse was arrested yesterday and made his initial court appearance today in U.S. District Court in Oakland before United States Magistrate Judge Donna M. Ryu.  His next court appearance is scheduled for January 10, 2022, at 1:00 p.m. before U.S. Magistrate Judge Ryu.  

Bellhouse is charged with one count of sexual abuse of a ward in violation of 18 U.S.C. § 2243(b).  If convicted, Bellhouse faces a maximum statutory sentence of 15 years imprisonment, a three-year term of supervised release, and a $250,000 fine.  However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The charges contained in the criminal complaint are allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.  

Assistant U.S. Attorney Molly K. Priedeman is prosecuting the case with the assistance of Leeya Kekona.  The prosecution is the result of an investigation by the Department of Justice Office of the Inspector General and the Federal Bureau of Investigation. 
 

A California man was sentenced to 82 months in prison for committing a federal hate crime in connection with attacking a Black man with a knife in Santa Cruz, California. The sentence was handed down by the Hon. Edward J. Davila, U.S. District Judge for the Northern District of California.

Ole Hougen, 45, of Santa Cruz, California, was convicted of the crime on April 9. According to evidence presented at trial, Hougen confronted a 29-year-old Black man who was crossing the street in Santa Cruz. Hougen began screaming racial slurs at him. Hougen then brandished a nine-inch knife and slashed multiple times at the man’s head, chest and stomach, while yelling the racial slurs. A witness testified that Hougen slashed and stabbed at the victim’s head and chest approximately 10-20 times. At the time of the attack, Hougen was on probation after pleading no contest to state charges that he committed a racially motivated assault on a different Black man in 2018. The trial also included evidence of several other incidents where Hougen threatened or committed violent acts while yelling racial slurs. This conviction represents Hougen’s fourth known racially motivated attack against Black men in the last seven years.

A federal grand jury indicted Hougen on Nov. 17, 2020, charging him with a violation of the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act. After a six-day trial, a jury convicted Hougen of the charge. It is the first conviction and sentencing in the Northern District of California under the Shepard-Byrd Act, which was signed into law by President Barack Obama in 2009.

“Racially motivated crimes have no place in our society. This defendant has attacked at least four people because they are Black, and for his most recent racially motivated attack of a Black man the defendant has been convicted,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Justice Department will continue to vigorously prosecute bias-motivated crimes in an effort to secure justice for victims of these crimes and the communities they are meant to target and intimidate.”

“Racially motivated violent attacks cannot be tolerated in any society,” said Acting U.S. Attorney Stephanie Hinds for the Northern District of California. “The Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act provides significant penalties for violence motivated by racism and other group-hate.  This office will use this and every other tool to ensure prosecutions are brought down on criminals committing violence motivated by animus towards our community’s protected groups.”

“Ole Hougen’s violent assault didn't just attack an individual, he attacked the entire community associated with the victim,” said Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division. “All crime is unacceptable, but hate crimes are particularly cruel. They strike at an unchangeable, fundamental, and defining part of a victim's identity. In this way, they attack everyone who identifies with this victim. Hate crimes are the highest priority of the FBI’s Civil Rights Program because each crime threatens the freedoms and protections guaranteed to all our communities.”

In addition to the prison term, Judge Davila also sentenced Hougen to three years of supervised release.

Assistant U.S. Attorney Marissa Harris and Trial Attorney Michael J. Songer of the Civil Rights Division are prosecuting the case on behalf of the government. The FBI San Francisco Field Office conducted the investigation with the assistance of the Santa Cruz Police Department.

For more information and resources on the department’s efforts to combat hate crimes, visit www.justice.gov/hatecrimes. If you believe you have been a victim of a civil rights violation, please visit: https://civilrights.justice.gov/ to file a report.

SAN JOSE –Ole Hougen was sentenced to 82 months in prison for committing a federal hate crime in connection with attacking a Black man with a knife on a street in Santa Cruz, Calif.  The sentence was handed down by the Hon. Edward J. Davila, United States District Judge.

Hougen, 45, of Santa Cruz, California, was convicted of the crime on April 9. According to evidence presented at trial, Hougen confronted a 29-year-old Black man who was crossing the street in Santa Cruz. Hougen began screaming racial slurs at him.  Hougen then brandished a nine-inch knife and slashed multiple times at the man’s head, chest and stomach, while yelling the racial slurs. A witness testified that Hougen slashed and stabbed at the victim’s head and chest approximately 10-20 times. At the time of the attack, Hougen was on probation after pleading no contest to state charges that he committed a racially motivated assault on a different Black man in 2018. The trial also included evidence of several other incidents where Hougen threatened or committed violent acts while yelling racial slurs. This conviction represents Hougen’s fourth known racially motivated attack against Black men in the last seven years.

A federal grand jury indicted Hougen on Nov. 17, 2020, charging him with a violation of the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act. After a six-day trial, a jury convicted Hougen of the charge. It is the first conviction and sentencing in the Northern District of California under the Shepard-Byrd Act, which was signed into law by President Barack Obama in 2009.

“Racially motivated violent attacks cannot be tolerated in any society,” said Acting U.S. Attorney Hinds.  “The Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act provides significant penalties for violence motivated by racism and other group-hate.  This office will use this and every other tool to ensure prosecutions are brought down on criminals committing violence motivated by animus towards our  community’s protected groups.”

“Racially motivated crimes have no place in our society. This defendant has attacked at least four people because they are Black, and for his most recent racially motivated attack of a Black man the defendant has been convicted,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Justice Department will continue to vigorously prosecute bias-motivated crimes in an effort to secure justice for victims of these crimes and the communities they are meant to target and intimidate.”

"Ole Hougen’s violent assault didn't just attack an individual, he attacked the entire community associated with the victim,” said Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division. “All crime is unacceptable, but hate crimes are particularly cruel. They strike at an unchangeable, fundamental, and defining part of a victim's identity. In this way, they attack everyone who identifies with this victim. Hate crimes are the highest priority of the FBI’s Civil Rights Program because each crime threatens the freedoms and protections guaranteed to all our communities."

“Justice was served in this landmark investigation,” said Special Agent in Charge Craig Fair of the FBI San Francisco Field Office. “This case shows how critical it is for the community to report hate crimes to law enforcement. Thanks to the work of our FBI Special Agents, the Santa Cruz Police Department, and the brave reporting of members of our community, Ole Hougen was convicted of a federal hate crime by a jury of his peers and will now serve his sentence in federal prison.”

When announcing his sentence from the bench, Judge Davila stated that it was “profoundly wrong to attack someone because of their race” and told Hougen to use his time in prison to “remove the hate from his heart.”  In addition to the prison term, Judge Davila also sentenced Hougen to a three-year term of supervised release.  Hougen will begin serving his prison term immediately. 

Assistant U.S. Attorney Marissa Harris and Trial Attorney Michael J. Songer of the Civil Rights Division are prosecuting the case on behalf of the government. The FBI San Francisco Field Office conducted the investigation with the assistance of the Santa Cruz Police Department.

For more informat

OAKLAND – A federal criminal complaint unsealed today charges Traci Austin with aiding and assisting in the preparation of fraudulent tax returns, announced Acting U.S. Attorney Stephanie M. Hinds and Internal Revenue Service, Criminal Investigation, and IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson.    

The complaint describes Austin, 44, of Brentwood, Calif., as the owner of a tax return preparation business called Emeryville Tax Services (“ETS”).  According to the complaint, Austin prepared materially false and fraudulent tax returns for her clients by including false and/or inflated Schedule A expenses, false and/or inflated Schedule C income and expenses, and false dependents.  By doing this, Austin fraudulently reduced her clients’ taxable income and tax liability, thereby resulting in larger refunds for the client and higher return preparation fee income for Austin.  The investigation has revealed that Austin allegedly assisted in the preparation of at least 42 fraudulent tax returns and an estimated tax loss of well over $697,000 to the federal government.

In addition to the false and fraudulent tax return preparation scheme, the complaint also alleges that since 2016, Austin has hosted a “Tax School” through ETS and charged a fee of at least $200 for students to attend the tax school.  According to the complaint, the goal of the tax school was to hire the attendees as preparers for ETS and prepare tax returns for ETS clients as well as the attendees’ own clients.  During the tax school, Austin allegedly instructed prospective tax preparers how to fraudulently manipulate tax returns to generate the maximum tax refund, and thus the maximum tax preparation fee by listing fictitious side businesses under Schedule C and fake business expenses on Schedule A, for example, the complaint describes how Austin taught her students how she created a fictitious dog grooming business for a client, created a fictitious profit and loss statement for the fake business, and how she instructed the client to print out some photos of dogs to support the idea of her fictitious business.

Austin is charged with aiding and assisting in the preparation of false and fraudulent federal income tax returns, in violation of 26 U.S.C. § 7206(2).  

The charges in the complaint are merely allegations and the defendant is presumed innocent unless proven guilty in a court of law.   

If convicted, Austin faces a maximum penalty of three years in prison and a $100,000 fine; however, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Austin made her initial federal court appearance this morning before United States Magistrate Judge Kandis A. Westmore.  Austin remains out of custody and her next scheduled appearance is at 10 a.m., on February 24, 2022, for a status conference before Magistrate Judge Westmore.        

Assistant U.S. Attorney Abraham Fine is prosecuting the case with the assistance of Kay Konopaske and Helen Yee.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
 

SAN JOSE – Kishore Kumar Kavuru was sentenced late yesterday in federal court to 15 months in prison for making false statements in foreign worker visa applications, announced Acting United States Attorney Stephanie M. Hinds, U.S. Department of Labor Office of Inspector General Special Agent in Charge Quentin Heiden, Los Angeles Region, and Homeland Security Investigations Special Agent in Charge Tatum King.  The sentence was handed down by United States District Judge Edward J. Davila.   

Kavuru, 49, of Sunnyvale, California, pleaded guilty to one count of visa fraud on May 24, 2021.  In his plea agreement, Kavuru stated he owned, operated, and was CEO of four different staffing companies.  His companies specialized in obtaining H-1B visas for foreign skilled workers and placing these individuals in the United States at technology firms seeking qualified H-1B contractors.  Known as H-1B Specialty Occupation Workers program, the H-1B visa program allows an employer to temporarily hire a skilled foreign worker in the United States on a nonimmigrant basis.  The position must qualify as a “specialty occupation,” that is, one that requires the application of specialized knowledge and a bachelor’s degree or equivalent in the specialty.  At the four staffing companies he owned and ran, Kavuru was responsible for creating H-1B visa applications for foreign workers and submitting them to the appropriate government agencies of the United States.

Kavuru admitted in his plea agreement that from 2009 through at least 2017 he engaged in a scheme to obtain H-1B visas from government agencies by submitting H-1B applications that contained false and fraudulent statements.  Kavuru admitted to submitting more than one hundred applications that falsely described available H-1B positions and falsely stated that the H-1B workers were to be placed at the positions at specific companies.  Kavuru admitted he knew at the time he submitted the applications that the companies did not have the named jobs and that he did not intend to place the workers at those companies.  None of those foreign skilled workers were ever placed at those companies.  Kavuru – or one of his employees at Kavuru’s direction – nevertheless signed the visa applications attesting under penalty of perjury to the truth of those false statements. 

Kavuru further admitted that he required the H-1B foreign skilled workers to pay him thousands of dollars in cash for the cost of preparing and submitting their H-1B visa petitions, which is a violation of U.S. Department of Labor (US DOL) regulations.  He also admitted requiring his H-1B visa recipients to go unpaid for months while he looked for legitimate H-1B positions for them, violating US DOL regulations by failing to pay H-1B workers while they are “benched” in this manner.

In a memo filed for sentencing, the government calculated that Kavuru orchestrated the submission of over 100 fraudulent H-1B visa applications that earned him more than $1.5 million in fraudulently-obtained proceeds.

In addition to his 15 month prison sentence imposed for visa fraud in violation of 18 U.S.C. § 1546(a),  United District Judge Edward J. Davila entered a forfeiture money judgment in the amount of $533,350.03.  The sentence also included a three year period of supervision following Kavuru’s release from prison. 

Kavuru will surrender to begin serving his sentence on February 10, 2022. 

Assistant United States Attorney Maia T. Perez prosecuted the case, with the assistance of Lakisha Holliman.  The prosecution is the result of an investigation by the U.S. Department of Labor, Office of Inspector General and Homeland Security Investigations.

SAN JOSE – The U.S. Attorney’s Office has filed new federal criminal charges against former Silicon Valley Bank vice president Mounir Gad adding document tampering, identity theft, and criminal contempt to the list of federal charges the convicted fraudster now will face, announced Acting U.S. Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  The new charges are filed in connection with allegedly false and altered documents Gad submitted to the federal court for his sentencing in his securities fraud case. 

The criminal complaint was filed on November 19, 2021, and unsealed today.  According to the complaint, on October 27, 2021, Gad, 35, of Los Gatos, submitted to the federal court 12 letters of support in advance of his sentencing for two counts of securities fraud.  The criminal complaint alleges that half of these letters were improperly altered or entirely fabricated.  Specifically, of the twelve letters submitted, Gad altered three of them without the authors’ knowledge, adding additional language praising Gad.  Additionally, Gad submitted three more letters that were not written by the purported authors and without the purported authors’ knowledge.  On November 3, 2021, before the alleged problems with the sentencing documents had come to light, the Honorable Lucy H. Koh, U.S. District Judge, sentenced Gad to two years of probation, a $500 fine, and a $200 assessment for each count of securities fraud.  Gad now faces criminal charges in connection with the documents he submitted for that sentencing.

This sentencing followed Gad’s guilty plea to two counts of securities fraud, in violation of 15 U.S.C. § 78j(b) and 78ff, 17 C.F.R. §§ 240.10b-5, 240.10b5-1, and 240.10b5-2, 18 U.S.C. § 2.  In connection with the guilty plea, Gad admitted he was a trained investment banking professional who repeatedly received training and guidance about the proper use of material non-public and confidential information.  Gad also admitted he knew about the prohibitions against the improper use of such information including how the use of such information for personal gain may violate the insider trading laws.  Gad nevertheless violated the insider trading laws on two occasions.  Specifically, in April of 2015 and again in August of 2016, Gad obtained material non-public information through his employer when the bank advised clients about financial matters related to the acquisition of certain companies; Gad shared the non-public information with a codefendant who used the information to execute securities transactions.  

After accepting Gad’s request to enter a plea of guilty, Judge Koh scheduled Gad’s sentencing hearing for November 3, 2021.  According to the criminal complaint, one of Gad’s references, identified as B.L., prepared a letter for the court in advance of the hearing and emailed the letter to Gad.  B.L. then attended the November 3 sentencing hearing.  The criminal complaint describes how B.L. heard at the sentencing hearing the court reference statements in a letter submitted in her name that she had not written and were not true.  B.L. contacted Gad’s defense attorney who, in turn, notified the Court.  The criminal complaint further describes how the Court scheduled a subsequent hearing on November 10, 2021, at which Judge Koh stated, “What I considered and what I found to be very compelling about this letter, are lies that Mr. Gad put in the letter.” 

In addition, the criminal complaint further describes how Gad allegedly altered the letters of two additional persons who submitted letters on Gad’s behalf.  In each case, the alterations included praise of Gad’s good character, including praise for having “the highest integrity and character,” for being “productive in a moral and ethical way,” and for how Gad “saved [B.L.’s] life with his story, with his accountability, and with his dignity.”  Furthermore, the complaint describes how Gad allegedly submitted three letters to the Court without the purported authors’ knowledge.  The bogus letters were from Gad’s ex-fiancé, and two additional people who previously submitted letters on behalf of Gad in connection with other litigation.  

In sum, the criminal complaint charges Gad with document tampering, in violation of 18 U.S.C. § 1512(c)(1); identity theft, in violation of 18 U.S.C. § 1028(a)(7); and criminal contempt, in violation of 18 U.S.C. § 401(1).

A criminal complaint contains allegations only. Gad is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.  If convicted, Gad faces a maximum statutory penalty of 20 years in prison and a fine of $250,000 for document tampering and 5 years in prison and a $250,000 fine for identity theft. There is no statutory maximum penalty for criminal contempt.  The court also may order additional terms of supervised release and fines; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

Gad made his initial federal court appearance today before U.S. Magistrate Judge Kandis Westmore.  Magistrate Judge Westmore scheduled Gad’s ’s next appearance on the new charges for November 26, 2021, for detention and identification of counsel.  Gad also is scheduled to appear December 8, 2021, before Judge Koh for further proceedings related to the securities fraud charges.  

Assistant U.S. Attorney Sarah E. Griswold is prosecuting this case with assistance from Lynette Dixon.  The case is being investigated by the FBI.

SAN FRANCISCO – Aramis Alvarez-Arroyo pleaded guilty in federal court today to attempted murder in aid of racketeering, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.

A federal grand jury indicted Alvarez-Arroyo on April 15, 2021.  In the plea agreement that Alvarez-Arroyo, 20, of San Francisco, entered today, he admitted that from 2018 through April 2021 he aspired to join the Norteños, a street gang operating in San Francisco’s Mission District (SFMD) whose members enrich themselves and the gang by robbery, drug dealing, firearms trafficking, and other crimes.  Violence quickly earns prestige in the gang, Alvarez-Arroyo acknowledged in his plea agreement, and SFMD Norteños members and associates commit acts of violence, including murder and attempted murder, against perceived gang rivals to gain prestige and promotion within the gang. 

Alvarez-Arroyo pleaded guilty to an attempted murder charge based on a shooting he committed on April 9, 2020, in order to gain entrance into the SFMD Norteños.  Alvarez-Arroyo admitted the details of his crime in his plea agreement, which describes the events in the late afternoon of April 9 near Richland Avenue and Mission Street in San Francisco.  Red is the color claimed by Norteños, and Alvarez-Arroyo was walking in the area at that time wearing red pants and a red bandana.  Outside of a restaurant, four people were sitting in a parked car, with one person sitting in the driver’s seat (Vicim-1) and another in the front passenger seat (Victim-2).  In his plea agreement, Alvarez-Arroyo acknowledged that he recognized Victim-1 as an associate of the Sureño gang.  The Sureño gang is a primary rival of the SFMD Norteños gang.  According to the plea agreement, Alvarez-Arroyo approached the parked car while carrying a loaded .40 caliber pistol and called out to Victim-1 by name.  Victim-1 saw Alvarez-Arroyo, put the car into drive, and fled.  Alvarez-Arroyo stated he fired three shots at the car as it drove away, hitting the front, side, and back windows of the car, as well as the front passenger headrest.  He missed the car’s occupants.  In his plea agreement, Alvarez-Arroyo admitted that he intended to kill Victim-1 and Victim-2. 

Alvarez-Arroyo also admitted in his plea agreement that in the days following he bragged about the shooting in posts and messages on Instagram, stating that next time he “won’t miss.”  Around the same time, Alvarez-Arroyo sent messages referring to an assault rifle he was assembling and expressed his interest in finding rivals from another gang, Army Street.

The indictment charged one count of attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5), to which Alvarez-Arroyo pleaded guilty today.  The maximum sentence for a violation of 18 U.S.C. § 1959(a)(5) is 10 years in prison and a fine of $250,000, plus restitution and forfeiture.  However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Alvarez-Arroyo’s sentencing hearing is scheduled for March 7, 2022, at 2:30 pm, before United States District Judge Vince Chhabria in San Francisco.  Alvarez-Arroyo remains in custody. 

The United States Attorney’s Office’s Organized Crime Strike Force is prosecuting the case.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and San Francisco Police Department.

SAN FRANCISCO – Ryan Mark Ginster was arrested today in Los Angeles on federal charges filed in San Francisco of wire fraud and money laundering, announced Acting United States Attorney Stephanie M. Hinds and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service-Criminal Investigation Washington D.C. Field Office.  Ginster will appear in Los Angeles federal court, the first step in a procedure to obtain Ginster’s appearance in United States District Court in San Francisco.  

The complaint’s affidavit alleges that Ginster, 34, of Corona, California, engaged in an online investment fraud scheme that began as early as February 2018 and continued to February 2021.  During this time, Ginster ran multiple websites, including one he created and operated named Socialprofimatic.com.  Socialprofimatic.com offered a high-yield investment program that promised outlandishly high returns on investments with little or no risk to investors.  Investors could only invest with cryptocurrency, which creates transactions that are irrevocable even in instances of fraud.  The complaint describes that the Socialprofimatic.com website falsely represented that investors’ funds would be used to support social media marketing campaigns, that the invested funds would generate returns of 8% per day, and that investors could withdraw funds at any time.  Socialprofimatic.com received approximately $844,667 from investors, and then it shut down without warning after only 38 days of operation.  The complaint affidavit describes that Ginster used proceeds of this fraud for his own personal benefit.  

Ginster ran other similar investment websites during the fraud scheme time period, according to the complaint.  Those websites included MyMicroProfits.com, Automaticbitcome.com, eProfithub.io, and YourNetProfits.com.  As did Socialprofimatic.com, each website promised enormously high yields on investments and required individuals to invest only with cryptocurrencies.  Also like Socialprofimatic.com, the websites were short-lived, shutting down or ceasing to communicate with investors within weeks after taking in the investors’ cryptocurrency.  Lastly, as with Socialprofimatic.com, Ginster diverted investors’ funds to himself.

The cryptocurrency received from investors in the above five websites, including Socialprofimatic.com, was valued at the time at more than $5 million.  

Ginster is charged by a federal complaint with one count of wire fraud in violation of Title 18, United States Code, Section 1343, and six counts of engaging in monetary transactions to conceal or disguise (money laundering), in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i).  Title 18, United States Code, Section 1343 carries a maximum sentence of 20 years in prison.  Title 18, United States Code, Section 1956(a)(1)(B)(i) carries a maximum sentence of 10 years in prison.  Both statutes carry a fine as well as mandatory restitution.  Any sentence following conviction, however, would be imposed by a judge only after its consideration of the United States Sentencing Guidelines and the federal statute governing sentencing, 18 USC § 3553. 

Charges contained in a criminal complaint are mere allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California.  This prosecution is the result of an investigation by the IRS-CI Washington D.C. Cyber Crimes Unit. 

The Los Angeles Regional Office of the Securities and Exchange Commission also announced today the filing of a civil enforcement action against Ginster in the Central District of California.

If you believe you have been a victim of this fraud scheme, please contact IRS-Criminal Investigation at emsvictim@ci.irs.gov.  The criminal complaint in this matter can be viewed on PACER and by visiting the U.S. Attorney’s Office for the Northern District of California website at www.usdoj.gov/usao/can.
 

SAN FRANCISCO – The Department of Justice today announced more than $139 million in grant funding through the department’s Office of Community Oriented Policing Services (COPS Office) COPS Hiring Program (CHP). The awards provide direct funding to 183 law enforcement agencies across the nation, allowing those agencies to hire 1,066 additional full-time law enforcement professionals. In the Northern District of California, San Francisco County received $6,250,000 and Alameda County received $375,000 for a total of $6,625,000 in funding.

“We are committed to providing police departments with the resources needed to help ensure community safety and build community trust,” said Attorney General Merrick B. Garland. “The grants we are announcing today will enable law enforcement agencies across the country to hire more than 1,000 additional officers to support vitally important community oriented policing programs.”

“Community policing is proven to be a valuable tool in crime prevention,” said Acting U.S. Attorney Stephanie M. Hinds.  “The millions of dollars in funding from the Department of Justice that is being announced today represents critical resources to enhance the capacity for community policing programs in our neighborhoods. We are proud to announce the availability of these funds to ensure that community policing will remain an integral part of a comprehensive crime prevention strategy.”

CHP is a competitive award program intended to reduce crime and advance public safety through community policing. CHP provides funds directly to law enforcement agencies to hire new or rehire additional career law enforcement officers, thereby increasing their community policing capacity and crime prevention efforts. Of the 183 agencies awarded grants today, approximately half will use the funding to focus on building legitimacy and trust between law enforcement and communities; 41 agencies will seek to address high rates of gun violence; 21 will focus on other areas of violence; and 19 will focus CHP resources on combating hate and domestic extremism or supporting police-based responses to persons in crisis. The complete list of awards can be found here. 

Since its creation in 1994, COPS has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and Tribal law enforcement agencies to fund the hiring and redeployment of more than 135,000 officers. CHP, COPS’ flagship program, continues to be in demand today: In FY21, COPS received 590 applications requesting nearly 3,000 law enforcement positions. For FY22, President Biden has requested $537 million for CHP, an increase of $300 million.

To learn more about CHP, please visit https://cops.usdoj.gov/chp-award. For additional information about the COPS Office, please visit https://cops.usdoj.gov/. 

The COPS Office is the federal component of the Department of Justice responsible for advancing community policing nationwide. The only Department of Justice agency with policing in its name, the COPS Office was established in 1994 and has been the cornerstone of the nation’s crime fighting strategy with grants, a variety of knowledge resource products, and training and technical assistance. Through the years, the COPS Office has become the go-to organization for law enforcement agencies across the country and continues to listen to the field and provide the resources that are needed to reduce crime and build trust between law enforcement and the communities served.

SAN FRANCISCO – Miranda Devlin, aka Miranda M., aka Miranda P., was sentenced today in United States District Court to 18 months in federal prison for making false statements in a loan application for federal government pandemic relief funds and for mail fraud involving the stealing of California attorneys’ identities and practicing law, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Treasury Inspector General for Tax Administration J. Russell George.  The sentence was handed down by United States District Judge Maxine M. Chesney. 

Devlin, 37, of San Francisco, pleaded guilty on July 21, 2021.  In her plea agreement, Devlin described multiple crimes she committed from March 2012 through May 2020 to defraud individuals and the government.  In one of her schemes, Devlin – who has never been an attorney – admitted she stole the identities of two female attorneys licensed by the State Bar of California and deceived people into believing she was a licensed attorney.  Beginning in 2012, Devlin started to assume attorneys’ names and used their license numbers.  She even paid one attorney’s State Bar dues, without knowledge of the attorney, to keep the attorney’s license active.  Devlin further admitted to submitting change of address requests to the U.S. Postal Service in order to have other people’s mail forwarded to her, including one attorney’s State Bar license card.  Several people hired Devlin as their attorney.  Devlin admitted she represented multiple individuals in the courtrooms of Bay Area county Superior Courts. 

Devlin further admitted engaging in a scheme to defraud the federal government’s pandemic relief program of $368,800.  To commit one fraud, Devlin submitted a Paycheck Protection Program (PPP) borrower application form requesting money from the United States Small Business Administration (SBA) program. The PPP arose out of the CARES Act passed by Congress in March 2020 that authorized forgivable PPP loans to small businesses, to promote job retention and cover specified business expenses during the pandemic.  Devlin’s PPP application contained several deliberately false statements that Devlin certified as true.  Her statements included that she had a business named Common Nucleus of Cancer (CNC) and that it had 2019 payroll expenses and also had paid taxes in 2019.  CNC was, however, only a shell company.  In her plea agreement, Devlin admitted that CNC had no employees and no business expenses.  Devlin admitted that with her PPP loan application she submitted false tax forms and records for 2019 as evidence of the salaries and business expenses she purportedly paid.  As a result of that application, Devlin received a PPP loan of $32,700.  Devlin admitted that she did not pay any purported business expenses or salaries with that money but rather used it for her own personal benefit. 

Devlin further admitted that she continued the scheme and applied for and eventually received a larger, additional loan in the amount of $336,100 from the SBA.  In all, Devlin admitted that she unlawfully received a total of $368,800 from the SBA in government pandemic relief loans.

In addition to her 18 month prison sentence imposed for mail fraud in violation of 18 USC § 1341 and making false statements in a loan application in violation of 18 USC § 1014,  United District Judge Maxine M. Chesney ordered that Devlin pay restitution in the amount of $565,355.  The sentence also included a 5 year period of supervision following Devlin’s release from prison. 

Devlin has been in custody since March 2, 2021, and begins her sentence immediately.

The United States Attorney’s Office Special Prosecutions Section prosecuted the case.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Treasury Inspector General for Tax Administration (TIGTA).

SAN FRANCISCO- A federal grand jury returned a second superseding indictment charging 13 current and former Bay Area residents for a broad range of racketeering crimes, including allegations that many defendants participated in gang-related murders and attempted murders as part of a racketeering conspiracy, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King.  The second superseding indictment handed down on November 4, 2021, and is now unsealed includes new allegations against defendants previously indicted on February 18, 2020, and adds charges against three new defendants.

“We will never stop seeking justice for murder,” said Acting U.S. Attorney Hinds.  “The new indictment reflects our commitment to a partnership of federal, state, and local law enforcement to protect our community against violence, especially from criminal street gangs such as MS-13.”

“Public safety is paramount for the HSI San Francisco investigative team,” wrote HSI Special Agent in Charge Tatum King. “Our agents and analysts are focused on apprehending the most dangerous criminals. This new indictment contains allegations that should concern everyone and is the result of effective collaboration with the San Francisco Police Department, the U.S. Attorney’s Office, and local law enforcement agencies, all of whom are committed to holding criminals accountable for their actions.”

According to the second superseding indictment, the defendants were members of the transnational criminal organization MS-13.  MS-13 operates in El Salvador, Honduras, Guatemala, Mexico, and at least 20 states in the United States.  The MS-13 clique in San Francisco is the 20th Street clique.  The second superseding indictment describes how the 20th Street clique relies on crime to operate, including to avoid detection by law enforcement, to initiate new recruits, to enhance the reputation of the gang and individual gang members, to maintain control of drug distribution channels, and to intimidate people who might testify against or otherwise defy the gang. 

The second superseding indictment builds on the February 18, 2020 indictment by describing additional violent crimes the defendants have allegedly committed, including three murders.   It alleges that, on or about March 17, 2017, Elmer Rodriguez, a/k/a “Gordo,” ordered another gang member to kill a victim perceived to be a gang rival outside the Beauty Bar in the Mission District of San Francisco.  It further alleges that on May 25, 2017, Edwin Alvarado Amaya, a/k/a “Muerte,” murdered a fellow member of the 20th Street clique with a bladed weapon in Bernal Heights under the direction of Rodriguez because they believed the victim had violated gang rules.  Finally, it alleges that on February 13, 2018, Abner Marroquin Alegria, a/k/a “Coche” or “Chapin,” Jose Maria Tercero Perez, a/k/a “Delito,” Kevin Reyes Melendez, a/k/a “Neutron,” Kevin Guatemala Zepeda, a/k/a “Mision,” and Fernando Romero Bonilla, a/k/a “Black,” all played a culpable role in the murder, or its aftermath, of a suspected gang rival in the parking lot of the Gray Whale Cove trail in Pacifica.  According to the indictment, Tercero Perez, Reyes Melendez, Guatemala Zepeda, and Romero Bonilla encountered the victim at the Mission Playground, which is at the heart of the gang’s territory.  Marroquin then drove Tercero Perez, Reyes Melendez, and the victim to the Gray Whale Cove parking lot, where Reyes Melendez and Tercero Perez attacked and murdered the victim with a bladed weapon and a 9mm firearm.  Guatemala Zepeda and Romero Bonilla later arrived on scene to remove potentially incriminating evidence. 

The second superseding indictment also alleges that on April 20, 2018, Tercero Perez, Reyes Melendez, and Brigido Josue Gonzales Sales, a/k/a “Inocente” or “Kiko” attempted to murder a suspected gang rival near South Van Ness Avenue and Adair Street in the Mission District of San Francisco. 

In all, the second superseding indictment alleges 15 overt acts of violence – including murders, attempted murders, and assaults with a dangerous weapon – allegedly perpetrated by the defendants in furtherance of the racketeering conspiracy.  The charges pending against each defendant are as follows:

Defendant

Age

Charges

Maximum Statutory Penalty

ROGELIO BELLOSO ALEMAN

a/k/a “Smiley”

28

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

EDWIN ALVARADO AMAYA

a/k/a “Muerte”

24

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Attempted Murder in Aid of Racketeering

18 U.S.C. §§ 1959(a)(5) and 2

10 years in prison

Fine of $250,000

FERNANDO ROMERO BONILLA

a/k/a “Black”

24

Racketeering Conspiracy

18 U.S.C. § 1962(d)

20 years in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

KENNETH CAMPOS,

a/k/a “Nesio”

32

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering (two counts)

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

EVERT

GALDAMEZ

CISNEROS

a/k/a “Talentoso”

23

Racketeering Conspiracy

18 U.S.C. § 1962(d)

20 years in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

 

 

LUIS VELIS DIAZ

a/k/a “Popa”

23

Racketeering Conspiracy

18 U.S.C. § 1962(d)

20 years in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

BRIGIDO JOSUE GONZALES SALES a/k/a “Inocente” or “Kiko”

 

21

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Attempted Murder in Aid of Racketeering

18 U.S.C. § 1959(a)(5) and 2

10 years in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

ABNER MARROQUIN ALEGRIA

a/k/a “Coche” or “Chapin”

41

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

KEVIN REYES MELENDEZ

a/k/a “Neutron”

28

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Attempted Murder in Aid of Racketeering (two counts)

18 U.S.C. §§ 1959(a)(5) and 2

10 years in prison

Fine of $250,000

Discharge of a Firearm During and in Furtherance of a Crime of Violence

18 U.S.C. § 924(c)

Life in prison

(Mandatory minimum of 5 years (7 years if brandished, 10 years if discharged))

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

ELMER RODRIGUEZ

a/k/a “Gordo”

32

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Attempted Murder in Aid of Racketeering

18 U.S.C. §§ 1959(a)(5) and 2

10 years in prison

Fine of $250,000

Discharge of a Firearm During and in Furtherance of a Crime of Violence

18 U.S.C. § 924(c)

Life in prison

(Mandatory minimum of 5 years (7 years if brandished, 10 years if discharged)

Fine of $250,000

KEVIN RAMIREZ VALENCIA     

a/k/a “Delincuente”

24

Racketeering Conspiracy

18 U.S.C. § 1962(d)

20 years in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

JOSE MARIA TERCERO PEREZ a/k/a “Delito”

28

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Attempted Murder in Aid of Racketeering

18 U.S.C. §§ 1959(a)(5) and 2

10 years in prison

Fine of $250,000

KEVIN GUATEMALA ZEPEDA

a/k/a “Mision”

25

Racketeering Conspiracy

18 U.S.C. § 1962(d)

Life in prison

Fine of $250,000

Assault with a Dangerous Weapon in Aid of Racketeering

18 U.S.C. §§ 1959(a)(3) and 2

20 years in prison

Fine of $250,000

The court also may order additional terms of supervised release, fines, and restitution.  Nevertheless, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. 

This case is being prosecuted by the Organized Crime Strike Force of the Office of the United States Attorney.  The prosecution is the result of an investigations by HSI, the San Francisco Police Department Homicide unit and Community Violence Reduction Team, San Mateo County Sheriff’s Office Gang Intelligence Unit and Investigations Bureau, Daly City Police Department, Pinole Police Department, Redwood City Police Department Street Crimes Reduction Team, and San Pablo Police Department. 

SAN FRANCISCO – Debby Dutton appeared today in federal court in Houston, Texas, to face the charge filed in San Francisco federal court of interference with an aircraft flight by assault upon a flight attendant, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  Today’s hearing in Houston federal court initiates the first steps in a procedure to obtain an order directing Dutton to appear to face the charge against her in San Francisco federal court.  

According to the complaint, Dutton, 50, of Cypress, Texas, was a passenger onboard a United Airline flight from Alaska to San Francisco International Airport (SFO) on June 29, 2021.  Early in the flight, flight attendants broadcasted several safety announcements over the plane’s intercom.  The broadcasts included multiple announcements about the federal mask mandate on commercial flights.  The broadcasts announced that passengers must wear their masks at all times and further advised the passengers that their masks will likely fall off and, if while asleep, a flight attendant will wake them up to put their masks back on, which may upset them.  

The complaint affidavit describes that approximately three and a half hours into the four and a half hour flight, a flight attendant walked down the aisle to collect trash and check passengers for face mask compliance.  The flight attendant noticed several passengers without face masks and asked  them to put their face masks back on. One passenger was asleep, and his face mask had fallen from his face.  According to the complaint, the flight attendant used two fingers to tap that passenger on the shoulder and asked him to put his face mask back on.  The passenger complied.  

Dutton was the wife of that passenger and was sitting next to him.  As the flight attendant continued down the aisle, the complaint affidavit describes that Dutton got up from her seat and angrily shouted at the flight attendant.  The flight attendant tried to explain that the passenger had not been wearing his face mask, but Dutton continued to scream and walked towards the flight attendant.  

The complaint affidavit describes that Dutton pushed the flight attendant.  The force of the push on the flight attendant’s right arm caused the attendant to step back to maintain balance.  Dutton pushed the flight attendant again, once more on the flight attendant’s right arm. The flight attendant told Dutton to stop.  The passenger asked his wife Dutton to return to her seat, which Dutton eventually did.  The flight attendant immediately reported the incident to the captain.

The flight attendant, as described in the complaint, was caught off guard and felt threatened and afraid.  The flight attendant further described the assault as painful and forceful.  The pushes left bruising on the flight attendant’s right bicep.  The flight attendant sought medical attention after the flight.  

Law enforcement officers subsequently interviewed multiple passengers who either saw or heard part of the incident.

Dutton initially appeared on the federal complaint today before a United States Magistrate in Houston, Texas.  Dutton’s next appearance is scheduled for Tuesday, November 16, in Houston federal court.  Dutton is out of custody.    

Dutton has been charged with one count of interference by assault, threat, or intimidation with flight crew members or attendants, in violation of Title 49, United States Code, Section 46504.  The charge carries a maximum possible sentence of 20 years in prison and a fine.  Any sentence following conviction, however, is imposed by a court only after the court’s consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 USC § 3553. 

Charges contained in a criminal complaint are mere allegations.  As in any criminal case, the defendants are presumed innocent unless and until proven guilty in a court of law.

The case is being prosecuted by the General Crimes Section of the U.S. Attorney’s Office for the Northern District of California.  The prosecution is the result of an investigation by the FBI, with thanks to the San Francisco Police Department, the San Mateo County Sheriff's Office, United Airlines, and the San Francisco International Airport for their cooperation.  

SAN FRANCISCO — The Justice Department today filed a lawsuit against Uber Technologies Inc. (Uber) for charging “wait time” fees to passengers who, because of disability, need more time to enter a car. Uber’s policies and practices of charging wait time fees based on disability have harmed many passengers and potential passengers with disabilities throughout the country. The lawsuit, filed in the U.S. District Court for the Northern District of California, alleges that Uber violated Title III of the Americans with Disabilities Act (ADA), which prohibits discrimination by private transportation companies like Uber.

In April 2016, Uber began charging passengers wait time fees in a number of cities, eventually expanding the policy nationwide. Wait time fees start two minutes after the Uber car arrives at the pickup location and are charged until the car begins its trip.

The department’s complaint alleges that Uber violates the ADA by failing to reasonably modify its wait time fee policy for passengers who, because of disability, need more than two minutes to get in an Uber car. Passengers with disabilities may need additional time to enter a car for various reasons. A passenger may, for example, use a wheelchair or walker that needs to be broken down and stored in the car. Or a passenger who is blind may need additional time to safely walk from the pickup location to the car itself. The department’s lawsuit alleges that, even when Uber is aware that a passenger’s need for additional time is clearly disability-based, Uber starts charging a wait time fee at the two-minute mark.  

The lawsuit seeks relief from the court, including ordering Uber to stop discriminating against individuals with disabilities. Additionally, the department asks the court to order Uber to modify its wait time fee policy to comply with the ADA; train its staff and drivers on the ADA; pay money damages to people subjected to the illegal wait time fees; and pay a civil penalty to vindicate the public’s interest in eliminating disability discrimination.

“Uber’s wait time fees take a significant toll on people with disabilities,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “Passengers with disabilities who need additional boarding time are entitled to access ridesharing services without discrimination. This lawsuit seeks to assist people with disabilities to live their lives with independence and dignity, as the ADA guarantees.” 

“People with disabilities deserve equal access to all areas of community life, including the private transportation services provided by companies like Uber,” said Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division. “This lawsuit seeks to bring Uber into compliance with the mandate of the Americans with Disabilities Act while sending a powerful message that Uber cannot penalize passengers with disabilities simply because they need more time to get into a car. Uber and other companies that provide transportation services must ensure equal access for all people, including those with disabilities.”

If you believe you have been a victim of disability discrimination by Uber because you, or someone you were traveling with, were charged wait time fees, please contact 833-591-0425 (toll-free), 202-305-6786, or send an email to Uber.Fee@usdoj.gov.  For more information on the ADA, please call the department’s toll-free ADA Information Line at 1-800-514-0301 (TDD 800-514-0383) or visit www.ada.gov.  For more information on the Civil Rights Division, please visit www.justice.gov/crt. The complaint can be viewed on PACER and by visiting the U.S. Attorney’s Office for the Northern District of California website at www.usdoj.gov/usao/can. 

SAN JOSE – A federal grand jury has indicted Peter Kisang Kim, a former Broadcom engineer, with trade secret theft involving Broadcom trade secrets, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation, Special Agent in Charge Craig D. Fair.  

The indictment, filed November 4, 2021, and unsealed today, alleges that Kim, 50, a resident of Ben Lomond, worked as a principal design engineer at Broadcom and had been employed by the company for over twenty years.  Broadcom is headquarted in San Jose and its products include networking chips used in equipment sold worldwide, including for enterprise and data center networking.  

In the days before his July 17, 2020, departure from Broadcom, the indictment alleges that Kim stole Broadcom trade secrets from the company that were associated with a Broadcom family of chips often used in high-volume data centers.  According to the indictment, the trade secrets were stored in non-public document repositories that were restricted to Broadcom employees within the same suborganization, or to Broadcom employees working on a project.  

About ten days after his departure from Broadcom, Kim began working at the director level for Company-1, a China-based startup company focused on chip design and the market for networking chips, according to the indictment.  The indictment alleges that Kim received a laptop for his work at Company-1 and, during the nine months following his departure from Broadcom and the start of his work at Company-1, that Kim possessed and repeatedly used Broadcom trade secrets on the newly-issued laptop and on other electronic devices.  These trade secrets were associated with test plans, design verification environment files, and design specifications for the Broadcom family of chips.  

The indictment charges Kim with eighteen counts trade secret theft, in violation of 18 U.S.C. § 1832(a).  An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, Kim faces a maximum statutory sentence of 10 years of imprisonment, a $250,000 fine, and three years of supervised release, for each count.  The court also may order additional assessments, forfeiture, and restitution; however, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

This afternoon, Kim made his initial appearance in federal court in San Jose, where he was arraigned on the indictment and entered a plea of not guilty to the charges.  Kim was released on a $500,000 bond and ordered to surrender his passport and other travel documents.  Kim is next scheduled to appear at 1:30 pm on January 31, 2022, before the Honorable Edward J. Davila, U.S. District Judge.

The prosecution is being handled by Assistant U.S. Attorneys Eric Cheng and Kyle Waldinger of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California, with the assistance of Kathy Tat and Margoth Turcios.  The prosecution is the result of an investigation by the Federal Bureau of Investigation.

SAN JOSE – The Office of the United States Attorney has filed federal firearms charges against nine individuals in connection with a crackdown against illegal firearms trafficking and possession, announced Acting U.S. Attorney Stephanie M. Hinds; Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) San Francisco Field Division Special Agent in Charge Patrick T. Gorman; and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge Wade R. Shannon.

The operation, spearheaded by the ATF, involved close coordination with the U.S. Drug Enforcement Administration (DEA), the California Highway Patrol, the Monterey County District Attorney’s Office, the Monterey County Sheriff’s Office, the Salinas Police Department, and the Watsonville Police Department.  The operation reflects the continued efforts of federal and state law enforcement to work jointly to combat violent crime in South Bay counties by targeting the illegal sale of firearms and the illicit possession of firearms.  In addition to federal charges levied against nine defendants, the Monterey County District Attorney’s Office has filed similar charges against a number of defendants that stem from same operation.

“This operation has removed over 80 firearms from the street, including privately made firearms also known as a “ghost guns” and conversion devices that enable firearms to function as fully automatic weapons,” said Acting U.S. Attorney Hinds. “Operations such as this one target the pipeline of firearms to the street.  By reducing the availability of illegal firearms, we take an important step toward reducing violent crime.”

“Earlier this year, the Department of Justice announced the launch of Cross- Jurisdictional Firearms Trafficking Strike Forces,” said ATF Special Agent in Charge Gorman.  “The Cross-Jurisdictional Firearms Trafficking Strike Forces were developed to help reduce gun violence by disrupting illegal firearms trafficking in key regions across the United States.  The Bay Area was listed as one of those key regions. ATF works closely with our partners to track the illegal movement of firearms which creates an avenue for criminals and violent offenders to gain access to firearms. There were numerous firearms seized in this case that we allege were trafficked across state lines. We will continue to work diligently alongside our partners to honor our commitment to reducing violent gun crime in our communities.”

Criminal complaints were filed against the nine federal defendants on November 2, 2021; the complaints were unsealed earlier today. The complaints are supported by five separate affidavits that describe the alleged crimes, including the dates that the defendants unlawfully possessed and sold guns, as well as the types of guns that were sold.  According to the affidavits, between February of 2020 and September of 2021, ATF, utilizing undercover methods, purchased from the nine federal defendants a total of at least 35 firearms (including machine guns), numerous rounds of ammunition, and quantities of methamphetamine.  Additional firearms were seized from defendants who were charged in the Monterey County courts as part of the same operation.  The sales occurred in various locations in Salinas and Watsonville, including the parking lots of local businesses and the defendants’ residences.  In addition, at least 50 firearms were seized in connection with the arrests of the defendants on November 4.

The affidavits also describe the wide variety of firearms and ammunition that were purchased from the defendants during the operation.  The weapons purchased were handguns, including handguns with high-capacity magazines; rifles, including a short-barreled rifle; shotguns, including a short-barreled shotgun; and machine guns.  The complaints also allege that many of the defendants sold privately manufactured firearms, also known as “ghost guns.” 

Further, as described in the affidavits, ATF purchased eight machine gun conversion devices – called “switches” or “sears” – from the federal defendants.  According to the complaints, a switch is a machine gun conversion device that allows a semi-automatic firearm to function as a fully automatic weapon.  The sear functions similarly.  According to the complaints, the switches were used to convert semi-automatic pistol-type weapons to fire fully automatically and the sear was used to convert a semi-automatic AR-type rifle to fire fully automatically.  The possession and/or transfer of these devices are illegal under federal law.

Six of the defendants are alleged to be convicted felons, and therefore, ineligible to possess firearms under federal law.  In addition, each of the defendants facing gun charges is alleged to have either engaged in the business of dealing firearms without a license, or to have illegally possessed firearms, or illegally transferred firearms as follows:

Defendant

Charges

Maximum Statutory Penalties

Gregory Cabrera, 34, Salinas

18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

 

18 U.S.C. § 922(a)(1)(A) (dealing firearms without a license)

5 years of imprisonment, $250,000 fine, 3 years of supervised release

Francisco Javier Jaramillo, a/k/a “Chito,” 27, Salinas

18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

18 U.S.C. §922(a)(1)(A) (dealing firearms without a license)

5 years of imprisonment, $250,000 fine, 3 years of supervised release

Martin Campos, Jr., a/k/a “Silent,” 24, Springdale, Ariz.

18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

Cody Lee Moreno, 23, Salinas

18 U.S.C. § 922(o) (illegal possession and transfer of a machinegun)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

Gabriel Penuelas-Garcia, 43, Aromas, Calif.

 

18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

Ruben Adolfo Pimentel, 29, Salinas

18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

 

21 U.S.C. § 841(a)(1) (distribution of methamphetamine)

20 years of imprisonment, $1,000,000 fine, not less than 3 years of supervised release to life

Gregory Smith, a/k/a “GNutty,” 50, Salinas

21 U.S.C. § 841(a)(1) (distribution of methamphetamine)

20 years of imprisonment, $1,000,000 fine, not less than 3 years of supervised release to life

Carlos Manuel Ruiz-Montanez, 20, Watsonville

 

18 U.S.C §§ 922(o) and 2 (aiding and abetting the illegal possession and transfer of machineguns)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

 

18 U.S.C. § 922(a)(1)(A) (dealing firearms without a license)

5 years of imprisonment, $250,000 fine, 3 years of supervised release

Ramon Castillo, 25, Watsonville

18 U.S.C. § 922(o) (illegal possession and transfer of machineguns)

10 years of imprisonment, $250,000 fine, 3 years of supervised release

In connection with the arrests of the defendants today, ATF seized approximately 50 firearms, including AR-type rifles, short-barrel rifles, shotguns, handguns, ghost guns, a machinegun, and over 5000 rounds of ammunition.  Additionally, ATF made an arrest in Madera, California, that stemmed from this operation.  The suspect was charged by the United States Attorney’s Office in the Eastern District of California by complaint alleging a violation of 18 U.S.C. § 922(o) (illegal possession and transfer of a machinegun) and 26 U.S.C. § 5861(d) (possession of an unregistered National Firearms Act weapon)

The some of the defendants are anticipated to make their initial federal court appearances on November 5, 2021. The criminal complaints merely allege that crimes have been committed, and each defendant is presumed innocent until proven guilty beyond a reasonable doubt.  

Assistant U.S. Attorney Neal C. Hong is prosecuting the case with the assistance of Elise Etter.  These prosecutions are the result of investigations by the ATF in coordination with the DEA, California Highway Patrol, the Monterey County District Attorney’s Office, the Office of the Monterey County Sheriff, and the police departments of Salinas and Watsonville. 

OAKLAND – Scott A. Wilson was sentenced today to sixty months in prison and ordered to pay more than $4 million in restitution for executing a multi-year embezzlement scheme targeting his former employer, Operating Engineers Local No. 3, announced Acting United States Attorney Stephanie Hinds, Federal Bureau of Investigation San Francisco Division Special Agent in Charge Craig D. Fair, and U.S. Department of Labor Office of Inspector General, Special Agent in Charge, Los Angeles Region, Quentin Heiden. The sentence was handed down by the Honorable Jeffrey S. White, U.S. Senior District Judge.

“Scott Wilson abused his authority as the IT director of the Operating Engineers Local 3 by creating a complex scheme to steal millions of dollars in union funds. Today’s sentencing affirms the U.S. Department of Labor Office of Inspector General’s commitment to safeguard union funds from those who seek to enrich themselves at the expense of union members,” said Special Agent-in-Charge Quentin Heiden.

Wilson, 54, formerly of Tracy, Calif., has been residing in Texas since 2017 and pleaded guilty to the charge on July 6, 2021.  Wilson was the director of the union’s information technology department where he had authority to purchase goods and services.  According to his plea agreement and other documents in the case, while working for the union, Wilson set up a front company called OST.  Using the alias, “John Lasson,” Wilson used OST to receive funds from the union, at first directly and then through two other front companies set up by a friend and a relative under Wilson’s direction.  Between 2011 and 2017, Wilson used these front companies to fraudulently invoice the union for IT-related goods and services that were never to be delivered, taking some funds directly through OST, and others through kickbacks paid by his friend and relative.  Wilson also used the front companies to conceal payments made with union funds to his own family members, primarily for work that was never done.  At one point, Wilson arranged for the union funds to be withdrawn from the front companies’ accounts and delivered to him in the form of cash wrapped in bundles.

Over the course of six years, Wilson fraudulently misdirected at least $3.98 million to the front companies, $2.44 million of which was kicked directly back to Wilson in various ways.  In the plea, Wilson admitted that he used the embezzled funds to, among other things, purchase land in Corsicana, Texas, and build himself a house there. 

Wilson was charged by information with one count of embezzlement of labor organization assets, in violation of 29 U.S.C. § 501(c).  He pleaded guilty to the count.

In sentencing Wilson to the five-year prison term, Judge White pointed out that Wilson committed more than a single fraudulent act—instead, the defendant engaged in “hundreds of decisions to steal money” and that he was “embarking on a campaign to cover up” the offense with “perjury, false statements” and “fantastical” stories.  Judge White stated, “[it is] hard to conceive of a white-collar offense significantly more serious than this one.”

In addition to the prison term, Judge White also ordered White to pay restitution of $4,669,577 and to serve a three-year term of supervised release.  Judge White ordered Wilson to surrender and begin serving his prison term on or before January 3, 2022.

This case is being prosecuted by Assistant United States Attorney Colin Sampson of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and Department of Labor Office of Inspector General.

 

SAN JOSE – Kevin Chao and Richard Sze, who worked together as executives at a prominent Silicon Valley technology company, were arrested and each charged today in separate federal criminal complaints with conspiracy to commit honest services wire fraud and money laundering based on a kickback scheme that defrauded their technology company, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Chao was additionally charged with substantive wire fraud and honest services wire fraud in the complaint against him.  

According to the federal complaint unsealed today, Chao, 62, of Mountain View, and Sze, 54, of Saratoga, began working for “Company-1” in 2005 after Company-1 acquired the business where Chao and Sze were employed.  Company-1 is considered a global leader in industrial automation and digital transformation and provides hardware and software productions, solutions, and services to its clients.  Company-1’s common stock is traded on the New York Stock Exchange.  

Chao rose to the position of Global Business Director of Company-1.  Sze became a Manager of Software Engineering.  Sze reported directly to Chao.       

The criminal complaints for each defendant allege that in 2012, Company-1 switched from its established software development vendor to a new company.  The new software development company had been incorporated in China at about that time and was 80% owned by an individual who worked at the previous software development vendor for Company-1.  That individual seemed to know Chao, according to a former supervisor of Chao.  

The complaints describe that beginning in 2016 or earlier and continuing through 2020, Chao and Sze orchestrated a kickback scheme with the new software development company.  In the scheme, Chao and Sze steered software development work from Company-1 to the new software development company.  Inflated or false invoices were submitted to Company-1 for the software development work.  Chao and Sze authorized or otherwise caused Company-1 to pay the invoices.  The paid funds were then funneled to Chao and Sze through a California limited liability company named Mooteec.  Mooteec was entirely controlled by Chao and Sze.  According to the complaint’s affidavit, Mooteec produces no product or service, has a P.O. box as its mailing address, has no physical office, and appears to be a shell corporation designed to conceal and move kickback money.  Money that moved through Mooteec passed to Chao, Sze, and Chao-related bank accounts.  

Company-1 paid the new software company more than $30 million, which was deposited into the software company’s bank account, according to the complaint.  From 2016 until early 2020, the complaint describes that nearly $17 million was deposited from the new software company’s bank account into a Mooteec account.  Withdrawals from the Mooteec account reflect that more than $5.4 million was sent to Chao’s accounts and over $1.3 million went to Sze’s accounts.

In late 2019, an employee who was resigning from Company-1’s employment reported that “something funny” was happening between Chao and the new software development company.  The complaint describes that the report led Company-1 to begin an internal investigation.  In December 2019, Chao and Sze resigned on the same day from Company-1.  

Chao and Sze are scheduled to make their initial appearance in San Jose federal magistrate court to face the charges in their respective criminal complaints on October 29, 2021, at 1 p.m.  

Chao is charged in his complaint with wire fraud, honest services wire fraud, and conspiracy to commit wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 1349, and money laundering in violation of 18 U.S.C. § 1956.  Sze is charged with conspiracy to commit honest services wire fraud in violation of 18 U.S.C. § 1349 and money laundering in violation of 18 U.S.C. § 1956.  If convicted of wire fraud, honest services wire fraud, or conspiracy to commit wire fraud, the maximum sentence for each count is 20 years in prison and a fine of $250,000 or twice the gross gain or gross loss.  If convicted of money laundering, each defendant faces a maximum sentence of 20 years in prison and a fine of $500,000 or twice the value of the property involved.  Any sentence following conviction, however, would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

A complaint merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California and forfeiture is being handled by the Office’s Asset Forfeiture Unit.  The prosecution is the result of an investigation by the FBI.  
 

OAKLAND – The founder of a Russian bank was sentenced today for his felony conviction of filing a false tax return.  As required under his plea agreement, prior to sentencing Oleg Tinkov, aka Oleg Tinkoff, paid $508,936,184, which is more than double the amount he sought to escape paying to the U.S. Treasury through renouncing his U.S. citizenship and concealing from the IRS large stock gains, which he knew were reportable.  This payment includes $248,525,339 in taxes, statutory interest on that tax, and a nearly $100 million fraud penalty. Tinkov was additionally fined $250,000, which is the maximum allowed by statute, and sentenced to time served and one year of supervised release.  The sentence was handed down by United States District Judge Jon S. Tigar.

Tinkov was indicted in Sept. 2019 for willfully filing false tax returns and was arrested on Feb. 26, 2020, in London, United Kingdom (UK). The United States sought extradition from the UK, and Tinkov contested extradition on medical grounds. In public records, Tinkov has disclosed that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease which has rendered him immunocompromised and unable to safely travel in the foreseeable future.

On October 1, 2021, Tinkov entered a plea to one count of filing a false tax return, a felony.  According to the plea agreement, Tinkov was born in Russia and became a naturalized United States citizen in 1996.  From that time through 2013, he filed U.S. tax returns.  In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services.  Through a foreign entity, Tinkov indirectly held the majority of TCS shares.  

In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company.  As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO reached a fair market value of more than $1.1 billion.  

Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, and relinquished his U.S. citizenship. 

As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement.  This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation.  The taxpayer is then required to report and pay tax on the gain from any such constructive sale. 

Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant.  When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million.  When his accountant later inquired whether his net worth was under $2 million, rather than answering the question Tinkov filled out the expatriation form himself and falsely reported that his net worth as only $300,000.  On February 26, 2014, Tinkov filed a 2013 individual tax return that falsely reported his income as only $205,317.  In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion nor did he pay the applicable taxes as required by law.  In total, Tinkov caused a tax loss of $248,525,339, and he has now paid that in full with substantial penalties and interest as part of his plea, together with tax liabilities for other years.

Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California, Acting Deputy Assistant Attorney General Stuart M. Goldberg, and Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office made the announcement. 

The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the UK secured Tinkov’s arrest overseas.

Assistant U.S. Attorney Michelle J. Kane, along with Assistant U.S. Attorneys Katherine Lloyd-Lovett and Colin Sampson and former Assistant U.S. Attorney Jose A. Olivera, of the U.S. Attorney’s Office for the Northern District of California and Trial Attorney Peter Anthony and former Assistant Chief Yael T. Epstein of the Tax Division prosecuted the case.
 

SAN FRANCISCO – Nathaniel A. Brown and Benjamin J. Wylam and were sentenced to 22 months and 366 days in prison, respectively, for their separate roles in a scheme to engage in transactions in corporate securities using material nonpublic information about Sunnyvale-based Infinera Corporation (“Infinera”), announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentences were handed down by the Honorable Edward M. Chen, United States District Judge, following their guilty plea.

Brown, 49, and Wylam, 42, both of San Jose, Calif., pleaded guilty to the charges in separate plea agreements on July 14, 2021.  Further, in a related case, on March 31, 2021, Naveen Sood, 49, of Campbell, Calif., signed a written agreement in connection with submitting his guilty plea.

According to Brown’s plea agreement, Brown admitted that, between 2011 and 2017, he was employed as a Senior Revenue Manager at Infinera.  The technology company’s common shares were registered pursuant to Section 12(b) of Securities Exchange Act of 1934 and publicly traded on the NASDAQ Stock Market under the ticker symbol INFN. During Brown’s employment at Infinera, he was regularly privy to material nonpublic information about Infinera’s financial performance and financial projections. Beginning in or about April 2016 and continuing until the termination of his employment from Infinera in November 2017, Brown admitted that he regularly shared material nonpublic information that he obtained during his employment with Wylam. Brown admitted he knew Wylam intended to, and did, use the material nonpublic information to purchase Infinera securities in advance of Infinera’s quarterly public earnings announcements.

According to Wylam’s plea agreement, Wylam admitted that between April 2016 and November 2017, he obtained material nonpublic information about Infinera, and then engaged in transactions in Infinera securities. Wylam admitted that he obtained this material nonpublic information directly from Brown. As with Brown, Wylam admitted Infinera’s common shares were registered pursuant to section 12(b) of Securities Exchange Act of 1934 and publicly traded on the NASDAQ Stock Market under the ticker symbol INFN. Wylam acknowledged the gross gains he made from trading based on material nonpublic information belonging to Infinera that he received from Brown amounted to approximately $999,959.

The plea agreements further revealed the steps Brown and Wylam took to conceal their actions and relationship. Both men admitted to having begun using the messaging application WhatsApp to communicate with each other because of its encrypted communications and as an extra measure to conceal the facts that Brown was providing Wylam with material nonpublic information and that the two were friends. Both men admitted that Wylam also “unfriended” Brown on Facebook to achieve these ends.

According to Sood’s plea agreement, Sood admitted he used his own and another person’s brokerage accounts to execute trades based upon material nonpublic information and that he acquired no less than $215,000 in criminal proceeds from violations of the law that are described in his plea agreement.

Brown, Wylam, and Sood each were charged with one count of securities fraud, in violation of 18 U.S.C. § 1348, and each defendant pleaded guilty to the count. 

During Brown’s and Wylam’s sentencing proceedings, in addition to prison terms, Judge Chen also ordered forfeiture money judgments against the two defendants.  As to Wylam, the court ordered a forfeiture money judgment in the amount of $999,000; as to Brown, the court ordered a forfeiture money judgment in the amount of $30,000.  In addition, both defendants were ordered to serve a three-year term of supervised release to begin after their prison term.  The defendants will begin serving their prison terms on or before January 10, 2022.

Judge Chen scheduled Sood’s sentencing for December.

Assistant U.S. Attorney Kyle Waldinger of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California is prosecuting the case with assistance from Kathy Tat. This case was investigated by the FBI. The Department of Justice appreciates the assistance of the Securities and Exchange Commission.
           

SAN FRANCISCO –Ramil Heydarov and Orkhan Aliyev pleaded guilty today to conspiracy charges related to a scheme to defraud purchasers of vehicles on the Craigslist website by rolling back the odometers on vehicles before reselling them, announced Acting United States Attorney Stephanie M. Hinds, Homeland Security Investigations Special Agent in Charge Tatum King, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  The guilty pleas were accepted by the Honorable Susan Illston, Senior U.S. District Judge, and, along with the October 12, 2021, guilty plea of Seymur Khalilov, establishes that all three defendants charged in the case have now pleaded guilty to fraud conspiracy charges.

According to the defendants’ plea agreements, from at least October 2017 through December 2020, Khalilov, 32; Heydarov, 31; and Aliyev, 32, all of San Jose, conspired to purchase high-mileage vehicles, roll back the odometers, and falsify documentation to make the vehicles appear newer.  Specifically, the co-conspirators altered the odometers of numerous vehicles and altered registrations and titles, among other items, to fraudulently decrease the mileage readings of the vehicles and, thus, increase their sales value.  The co-conspirators then posted advertisements of the vehicles on Craigslist to advertise the vehicles to victims who were not aware of the fraudulent alterations. Additionally, the defendants admitted using doctored driver’s licenses containing their photograph but the names of prior vehicle owners to facilitate the sale of these vehicles. The co-conspirators each acknowledged that the goal of the conspiracy was to sell vehicles to victims for an increased price based on the fraudulent odometer readings. According to the plea agreements, the co-conspirators sold at least 78 vehicles with rolled back odometer readings, resulting in a total loss to the victims of greater than $550,000.

All three defendants were charged in a single criminal complaint filed on May 3, 2021, and each was charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.  As a result of today’s proceedings, all three defendants now have pleaded guilty to the charge. In addition, the defendants each have agreed as part of their plea agreements to pay restitution to the victims of the conspiracy in amounts reflecting the defendant’s respective role in the conspiracy.  Khalilov has agreed to pay restitution in an amount between $360,000 and $534,072 that will be set by the court. Heydarov agreed to pay restitution in the amount of $379,235 and Aliyev agreed to pay restitution in the amount of $196,578.

Judge Illston scheduled the defendants’ sentencing for February 4, 2022.  In addition to restitution, the conspiracy charge carries a maximum statutory prison term of up to 20 years and a $250,000 fine.  The court also may order a term of supervised release to follow the prison term.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Leif Dautch and Ankur Shingal are prosecuting the case with the assistance of Marina Ponomarchuk and Soana Katoa.  The prosecution is the result of an investigation by Homeland Security Investigations and the Federal Bureau of Investigation with assistance from the California Department of Motor Vehicles Investigations Division in Vallejo, the San Ramon Police Department, and the National Highway Transportation Safety Administration Office of Odometer Fraud Investigations.

SAN FRANCISCO – Cassidy Migan Lavorini-Doyle was sentenced today in federal court to 192 months (16 years) in prison for his convictions of attempted sex trafficking of a child, attempted production of child pornography, traveling with the intent to engage in illicit sexual conduct, and the receipt of child pornography, announced Acting United States Attorney Stephanie M. Hinds, Homeland Security Investigations Special Agent in Charge Tatum King, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentence was handed down by United States District Judge Charles R. Breyer. 

Lavorini-Doyle, 38, a Yale-educated oral surgeon and Oakland resident, entered into a plea agreement and pleaded guilty to the above charges on May 26, 2021.  In the plea agreement, Lavorini-Doyle admitted to numerous acts that involved sexual abuse or intended sexual abuse of children.  Lavorini-Doyle admitted in his plea agreement that in 2018 he met an adult prostitute online and asked her to arrange “sex dates” with female children.  He eventually met with the prostitute in person in Berkeley to further the plans.  Lavorini-Doyle arranged the timing, location, and payment for sex with minor girls when he communicated with the adult prostitute.  Lavorini-Doyle admitted that he had sex dates with each of two girls, and he believed they were minors.  During these encounters, he recorded the sex acts without the girls’ permission.  He saved the videos with file names that included “14 yo” and “12YO”, referencing his understanding of their ages.  Subsequently, one of the two females was identified and determined to have been 18 years old at the time of the sex date, despite her youthful appearance.

Lavorini-Doyle also admitted in his plea agreement that in the evening hours of December 6, 2019, he approached a woman and her two minor daughters, aged 10 and 11, in a Walnut Creek parking lot. The woman worked as a janitor for an office building and had brought her two daughters to work that night.  When she went outside to a dumpster in the parking lot, Lavorini-Doyle spotted the mother and approached them.  He offered the mother $30,000 to buy her two daughters for the night.  He admits that he intended to engage in sex acts with the children.  As outlined in a sentencing memo filed by the government, the mother yelled “no” and called 911. 
 
Lavorini-Doyle further described in his plea agreement that the next day, December 7, 2019, he traveled from San Francisco to Cambodia.  He admitted his purpose for traveling to Asia was to engage in commercial sex with minors.  He withdrew $10,000 in cash from his bank account before the trip so that he could pay for the sex acts when abroad.  He also purchased zip ties and duct tape at Home Depot and a digital camera and SD card at Target.  His cell phone reflects that, when in Cambodia, he made plans to engage in commercial sex acts with a minor.  He admits that he sent a text message with words to the effect of: “Is super skinny 9yo avAO.”

On December 11, 2019, law enforcement searched Lavorini-Doyle’s home in Oakland and seized several of his electronic devices.  Lavorini-Doyle returned to the United States from Cambodia on December 12, 2019.  When he landed at San Francisco International Airport, law enforcement officials seized several of his electronic devices.  In his seized devices, Lavorini-Doyle possessed over 100 videos of child pornography, which he had downloaded from the internet.  Sexual conduct depicted in the videos involved minors who had not attained the age of 12, violent sexual conduct, and sexual abuse of infants or toddlers. 

In addition to the 192 month prison term, U.S. District Judge Breyer sentenced Lavorini-Doyle, who was in custody at the sentencing hearing, to a lifelong term of supervised release upon his release from prison.  A restitution hearing will be held in 90 days.

Kevin Rubino and Noah Stern are the Assistant U.S. Attorneys prosecuting the case with the assistance of Ralph Branchstubbs.  The prosecution is the result of an investigation by Homeland Security Investigations, the Federal Bureau of Investigation, the Walnut Creek Police Department, and the Contra Costa Human Trafficking Task Force.

Lavorini-Doyle is next scheduled to appear in custody in Contra Costa County Superior Court, where he faces related child sex trafficking state criminal charges being prosecuted by the Contra Costa County Office of the District Attorney.  
 
This federal case was brought in U.S. District Court 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 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.justice.gov/psc.

SAN FRANCISCO– Khari Moore and Malik Lott were sentenced today to 87 months and 12 months and one day in prison for their respective roles in a scheme to obtain marijuana from a Redwood City drug dealer for distribution, announced Acting United States Attorney Stephanie M. Hinds and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge, San Francisco Field Division, Patrick Gorman.  Moore also sentenced after pleading guilty to brandishing a weapon during the attempted drug deal.  The sentence was handed down by the Honorable Susan Illston, Senior U.S. District Judge.

On July 9, 2021, Lott pleaded guilty to one count of conspiracy to distribute and possess with intent to distribute marijuana, in violation of 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(D).  On July 20, 2021, Moore pleaded guilty to  the conspiracy charge and, in addition, to one count of brandishing of a firearm during and in relation to and in furtherance of a drug trafficking crime, in violation of 18 U.S.C. § 924(c)(1)(A)(ii).  The facts underlying the convictions were set out in the defendants’ plea agreements.

According to the plea agreements, Moore made contact on the Internet with a person who agreed to sell marijuana.  Lott admitted that in the days before April 8, 2018, he communicated with the seller of the marijuana via text message and settled the details of the drug transaction.  Lott and Moore admitted that on April 8, 2018, they both travelled with others from Stockton, Calif., to Redwood City and with the purpose of purchasing four pounds of marijuana for the agreed-upon price of $4,000.  Further, Moore and Lott acknowledged that the purpose of obtaining the marijuana was to resell the drugs for a profit.  At the time of meeting, Moore and Lott met with the seller of the marijuana and another individual in a pickup truck that was parked in the parking lot of a liquor store in Redwood City.  At some point during the meeting in the pickup truck, Moore brandished a .45 caliber handgun and fired it multiple times.  The driver of the pickup truck was shot multiple times in the face and back, causing extensive injuries.  Moore and Lott then fled the scene and returned to Stockton without the marijuana from the seller.

On July 13, 2021, Moore was charged with the drug distribution conspiracy and weapons charge.  He pleaded guilty to both counts.  Lott was charged by indictment on October 1, 2020, with the conspiracy charge, as well as additional drug trafficking, robbery, and conspiracy to commit robbery charges.  As part of his plea agreement, Loot pleaded guilty to the drug distribution conspiracy charge and the other charges were dismissed. 

The defendants both will begin serving their prison terms immediately.  In addition to the prison terms, Senior District Judge Illston ordered the defendants to serve five years and three years of supervised release and ordered Moore to pay restitution.

Assistant U.S. Attorney Ross Weingarten is prosecuting the case with the assistance of Linda Love.  The prosecution is the result of an investigation by the ATF and Redwood City Police Department.

SAN FRANCISCO – A federal grand jury has indicted Alan Anderson, charging him with wire fraud and securities fraud charges related to a scheme to use materially false and fraudulent pretenses to induce investors to make contributions to three businesses that were marketed as providing child-friendly internet services, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. 

The indictment filed October 13, 2021, and unsealed today, describes how Anderson, 59, of Walnut Creek, used misrepresentations to solicit investments for the three businesses.  According to the indictment, Anderson owned and controlled Imbee, Inc., a Delaware corporation based in Walnut Creek marketed as a child-friendly social media platform; Fanlala, a California corporation marketed as a service providing internet-based music streaming for children; and Fruit Punch, a California corporation marketed as providing music-streaming service for children.  The indictment alleges that beginning as early as April of 2010 through May of 2019, Anderson raised money for his companies by making false representations and creating false documents to support his bogus claims.  For example, the indictment alleges Anderson created fraudulent income statements and profit and loss statements and misrepresented the companies’ profitability to investors and potential investors; that Anderson created and altered contracts to represent falsely that one or more of his companies would be acquired by larger companies; and that Anderson created and altered contracts to make fraudulent claims that his companies created partnerships with other existing companies.  In addition, the indictment describes how Anderson emailed an investor to falsely claim Imbee was worth $21.6 million and that the investor owned 70% of the company.    

In sum, the indictment charges Anderson with four counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff and 17 C.F.R. 240.10b-5.  Anderson was arrested today in Walnut Creek.  He will make his initial federal court appearance tomorrow at 10:30a.m., before U.S. Magistrate Judge Thomas S. Hixson, in San Francisco. 

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, each count of wire fraud carries a maximum sentence of 20 years in prison and a maximum $250,000 fine. The securities fraud charge carries a maximum 20 years of imprisonment and a $5,000,000 fine.  In addition, the court also may order a term of supervised release, fines or other assessments, and restitution, if appropriate.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Christiaan Highsmith and Scott Joiner of the Office’s Corporate and Securities Fraud Section are prosecuting this case with the assistance of Claudia Hyslop, Morgan Byrne and Ralph Banchstubbs.  This prosecution is the result of an investigation by the FBI. 

SAN FRANCISCO – A federal indictment filed today charges Harlan Kelly, the former General Manager of the San Francisco Public Utilities Commission (PUC), and Victor Makras, a locally prominent San Francisco real estate investor, with bank fraud and conspiracy to commit bank fraud, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service-Criminal Investigation Special Agent in Charge Mark H. Pearson.  The indictment also charges honest services wire fraud and conspiracy to commit honest services wire fraud in connection to a bribery scheme that was first leveled against Kelly in a November 2020 federal complaint.  That complaint is superseded by today’s federal indictment. 

Today’s indictment alleges, as did the November 2020 complaint, that Kelly, 59, engaged in a long-running bribery scheme and corrupt partnership with an individual identified in the indictment as “Contractor #1.”  Kelly was appointed General Manager of the San Francisco PUC in 2012 and held that position until November 30, 2020, when he resigned upon the filing of criminal charges in the federal complaint.  Contractor #1 is a San Francisco construction company executive and permit expediting consultant who ran or controlled multiple entities doing business with the City of San Francisco.  Today’s indictment alleges that Kelly provided confidential internal PUC documents and information to Contractor #1 to give Contractor #1 competitive advantages during public contract bidding competitions.  In exchange, Contractor #1 lavished Kelly with personal financial benefits, including discounted construction work on Kelly’s residence and an international vacation for Kelly and his family that included Contractor #1 paying for hotel charges, hundreds of dollars for meals, and jewelry.

The indictment’s further allegations, made public for the first time today, describe the conduct leading to the indictment’s bank fraud and bank fraud conspiracy charges against Kelly and Victor Makras.  Makras, 63, who resides in San Francisco, is a San Francisco real estate broker and the principal of Makras Real Estate.  He also brokered a consortium of individual real estate investors (here referred to as Makras Investors) that collectively made residential real estate loans secured by San Francisco Bay Area real property and real property elsewhere.  Makras sat on a number of San Francisco public agency commissions and boards, including the San Francisco PUC, the San Francisco Port Commission, and the San Francisco Employees Retirement System Board.

According to the indictment’s allegations, Kelly and Makras conspired to defraud Quicken Loans, the financial lending institution, in a $1.3 million dollar real estate loan to Kelly.  The indictment describes that in applying for the $1.3 million loan, Kelly and Makras represented to Quicken Loans a falsely inflated debt amount that Kelly owed on his existing real estate loan to Makras Investors.  That falsely inflated amount allowed Kelly to obtain an increased amount of loan funds from Quicken Loans and at a lower loan rate. The alleged conspiracy also involved concealing from Quicken Loans the other outstanding debts of Kelly, including thousands of dollars owed to Contractor #1 for extensive remodel work on Kelly’s residence and a $70,000 personal loan made earlier by Makras to Kelly.  The scheme further included repaying Kelly’s undisclosed debts using the loan proceeds from Quicken Loans.  The undisclosed debts are alleged to have been paid, with the assistance of Makras, in a method designed to conceal that Quicken Loans’ loan proceeds were used to repay these other debts.  

Kelly will make his initial appearance on the indictment tomorrow, October 20, in San Francisco federal court at 10:30 a.m. before United States Magistrate Judge Thomas S. Hixson. 

The court date for the initial appearance of Makras on today’s indictment has not yet been set. 

Kelly is charged with one count of honest services wire fraud and one count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 1349.  If convicted, each count carries a maximum statutory penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss.  Kelly and Makras are both charged in one count of bank fraud and one count of conspiracy to commit bank fraud, in violation of 18 U.S.C. §§ 1344(1),(2) and 1349.  If convicted, each count carries a maximum statutory penalty of 30 years imprisonment and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross loss.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

The charges contained in the criminal indictment are mere allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.

This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco.  To date, twelve individuals have been charged, including two high-ranking San Francisco public officials, Mohammed Nuru and Harlan Kelly.  Multiple city contractors and facilitators have been charged.  According to the charges earlier filed against Mohammed Nuru and others, Nuru allegedly took hundreds of thousands of dollars in bribes in cash, meals, and work on his vacation home from contractors who obtained San Francisco public contracts.

The case is being prosecuted by the Corporate And Securities Fraud Team of the U.S. Attorney’s Office.  The case is being investigated by the FBI and the Internal Revenue Service-Criminal Investigation (IRS-CI).

SAN FRANCISCO – The U.S. Attorney’s Office has charged eight defendants with conspiracy, each in connection with the activities of one of two drug trafficking organizations that are alleged to have supplied the Tenderloin district of San Francisco with copious amounts of narcotics, including several varieties of fentanyl, announced Acting United States Attorney Stephanie M. Hinds, Drug Enforcement Administration (DEA) Special Agent in Charge Wade D. Shannon, and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge, San Francisco Field Division, Patrick Gorman.  The charges were made in two complaints, both filed October 14, 2021, and unsealed hours ago, that provide details of the large-scale drug distribution conspiracies.  

The complaints signal the continued commitment of the Office of the United States Attorney to coordinate efforts of federal and local law enforcement to deal with the endemic drug dealing in the Tenderloin District.

“The disturbing upward trend of organized fentanyl sales in our cities is a triple threat: fentanyl is deadly, its organized trade attracts violent offenders, and its sales and use devastates neighborhoods,” said Acting U.S. Attorney Hinds.  Our prosecutions target those who seek to turn our city streets into open fentanyl marketplaces.”

“Fentanyl, regardless of color, can be lethal in the smallest amounts. Whether it is pink, blue, green, purple, red, or silver, it all can be fatal. Marketing gimmicks, such as changing the color, are not uncommon, but nevertheless can be dangerous,” said DEA Special Agent in Charge Shannon. “As overdoses continue to plague the Tenderloin, so will our efforts to investigate those who supply the region with deadly drugs.”  

“Through the collaboration of local, state, and federal agencies, law enforcement works diligently to remove key distributors of narcotics from our communities,” said ATF Special Agent in Charge Gorman.  “Throughout this case, ATF has worked side by side with our partners at DEA & the San Francisco Police Department to fulfill one of our core duties to the public. That duty being to ensure the safety of the public. ATF will continue to work hard every day alongside our partners to honor our pledge to this city.”

“The staggering loss of life we’ve seen due to drug overdoses is a public health calamity San Franciscans haven’t witnessed since the height of the AIDS crisis,” said Chief of Police Bill Scott. “Our street drug trade has been nearly twice as deadly as COVID-19 in San Francisco. While the primary chemical culprit is fentanyl, drug-related gun violence is beginning to take an increasingly troubling toll. We are incredibly thankful to Acting U.S. Attorney Stephanie M. Hinds; DEA Special Agent in Charge Wade D. Shannon; ATF Special Agent in Charge Patrick Gorman and their enormously dedicated investigators and prosecutors who’ve been our full partners in this operation.”

The first complaint describes a conspiracy allegedly headed by Luis Ochoa, 24, of Alameda, and his brother Roger Arteaga, 28, of Berkeley.  The complaint alleges that since at least May of 2021, Ochoa, Arteaga , and three co-conspirators participated in a drug trafficking organization whose members distribute primarily fentanyl. The name of one of the co-conspirators has been redacted from court papers.

According to the complaint, the defendants supplied narcotics for resale to multiple local narcotics re-distributors.  Some of the co-conspirators also allegedly engaged in street-level drug sales.  The complaint describes several cell phone conversations intercepted by wiretaps in which Ochoa allegedly is heard receiving orders for drugs and arranging to have the drugs delivered to customers. 

The complaint also describes a branding scheme by which the organization sought to sell fentanyl to customers by colors, each color reflecting a type of fentanyl that either burns a particular color or has been dyed a particular color.  Intercepted communications described in the complaint reveal the large array of colors or types of fentanyl that the organization allegedly sold, including fentanyl that burns or has been colored blue, yellow, pink, green, purple, red, and silver.  The complaint describes how members of the organization colored some of the fentanyl themselves using different dyes.

The complaint also describes the large quantities of fentanyl sold by the organization.  A single seizure by law enforcement resulted in the recovery of approximately one kilogram of fentanyl, a quantity with the potential to create 500,000 lethal doses of the drug.  Among the items seized at the time of Ochoa’s arrest was four pounds (about 1.8 kilograms) of fentanyl.  

The second complaint describes a separate drug-distribution organization led by Fernando Viera, 27, of Oakland.  According to the complaint, Viera is a mid-level drug trafficker in the Bay Area who allegedly supplied drugs to multiple resellers and street-level dealers.  The street-level dealers, in turn, sold the drugs in the Tenderloin.  The complaint describes several transactions indicating that in addition to fentanyl, numerous other drugs continue to be sold in the Tenderloin. For example, a recent seizure by law enforcement from one co-conspirator recovered more than 250 grams of fentanyl, as well as ounce quantities of methamphetamine, heroin, cocaine, and cocaine base. 

According to both complaints, the investigation of these drug distribution organizations took over a year and involved law enforcement resources of the DEA, the ATF, and the San Francisco Police Department.

In sum, the defendants in the two cases include the following:

OCHOA COMPLAINT

Defendant

Aliases

Age

Luis Ochoa

Luis Valle

Luis Castro-Valle

Panda

24

Roger Arteaga

Jorge Miguel Casco-Raudales

Alfredo Zuniga

Rorro

28

Rosales Avila

Jamileth Avila

29

Jose Aguilar

Joe Aguilar Estrada

Danny

22

VIERA COMPLAINT

Defendant

Aliases

Age

Fernando Viera

Oscar F Viera

Oscar Fernando Viera Rodriguez

Tata

27

Edgardo Aguilar-Cruz

Jose

22

Nelson Casteneda

 

42

Nolan Ramos

Nelson Ramos

26

The complaint contains allegations only and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. 

All defendants are charged with engaging in a conspiracy to distribute controlled substances, in violation of 21 U.S.C. §§ 841(a)(1)(C) and 846.  If convicted, each defendant faces a statutory maximum of 20 years in prison, a maximum fine of $1,000,000, and between 3 years and a lifetime term of supervised release.  Further, additional fines, forfeitures, and restitution may be ordered; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

The defendants made the following appearances and are next scheduled to appear as follows:  

OCHOA COMPLAINT

Defendant

Initial Appearance

Next Appearance

Luis Ochoa

October 15, 2021

October 20, 2021, at 10:30 a.m. for detention hearing

Roger Arteaga

October 15, 2021

October 20, 2021, at 10:30 a.m. for detention hearing

Rosales Avila

Pending Arrest

--

Jose Aguilar

Pending Arrest

--

VIERA COMPLAINT

Defendant

Initial Appearance

Next Appearance

Fernando Viera

October 15, 2021

October 25, 2021, at 10:30 a.m. for detention hearing

Edgardo Aguilar-Cruz

October 15, 2021

October 22, 2021, at 10:30 a.m. for detention hearing

Nelson Casteneda

Pending Transfer to Federal Custody

--

Nolan Ramos

--

October 19, 2021 at 10:30 a.m. for initial appearance and arraignment

Assistant U.S. Attorneys Sailaja Paidipaty, Kristina Green, Sloan Heffron, and Kenneth Chambers are prosecuting the case.  The prosecution is the result of an investigation by the DEA, ATF, and San Francisco Police Department.

This investigation and prosecution are part of the Organized Crime Drug Enforcement Task Force (“OCDETF”), which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.     

SAN FRANCISCO – Joseph Albert Corey pleaded guilty in federal court today to one count of wire fraud conspiracy and three counts of wire fraud involving a multimillion-dollar medical device loan scheme, announced Acting United States Attorney Stephanie Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.

Corey, 56 and last known to live in or near Los Angeles, earlier pleaded guilty to mail fraud in a separate federal criminal case.  He was released from custody in that case and then absconded from his February 2020 sentencing hearing.  While a fugitive, he continued committing a second fraud scheme.  Corey remained a fugitive until he was detained by Mexican immigration authorities in January 2021 and deported to the United States.

Today Corey pleaded guilty to the second fraud scheme.  He now awaits sentencing in both fraud cases.

Corey pleaded guilty today to a wire fraud conspiracy to defraud medical device lenders that began no later than March 2019 and continued through October 2020.  According to his plea agreement, Corey assumed the identities of multiple medical doctors.  In the scheme, Corey would impersonate an actual doctor and apply to a loan company for a loan to purchase an expensive medical device from a medical device supply company.  Once the lender approved the loan for the doctor Corey impersonated, Corey directed the lender to deposit the loaned purchase funds into a specific bank account.  The bank account was opened earlier in the scheme under an account name that closely resembled or was identical to the name of a legitimate medical device supply company, and Corey controlled that bank account.  Once the unsuspecting lender deposited the funds into the account, Corey appropriated the money and, under a different false identity, used the money to purchase gold from a precious metals dealer, thus obscuring the trail of the stolen loan money.

Corey admitted in his plea agreement that he defrauded more than 10 victims in this scheme and that the scheme caused losses of at least $3.5 million.

In the earlier mail fraud case from which Corey absconded, Corey was charged for depositing fraudulent checks into an account opened under a false name and then purchasing gold with the deposited money.  Corey entered a guilty plea in November 2019 to the charge of mail fraud in that case and, while out on bond, failed to appear at his February 2020 sentencing hearing.

According to a filing by the government, when Corey was detained in January 2021 he possessed numerous false identifications, including one identifying him as a “special agent” of the CIA.

The sentencing of Corey on both criminal cases is scheduled for January 6, 2022, at 10 a.m. before the Honorable Edward M. Chen, U.S. District Court Judge.

Corey pleaded guilty today in the more recent case (CR 20-481 EMC) to one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349 and three counts of wire fraud in violation of 18 U.S.C. § 1343.  The conspiracy and wire fraud charges carry a maximum sentence of 30 years in prison and a $1,000,000 fine.  The plea agreement specifies that restitution to the victims shall be ordered in an amount no less than $3.5million.

In his earlier case (CR 19-530 EMC), Corey pleaded guilty in November 2019 to one count of mail fraud in violation of 18 U.S.C. § 1341.  In that case, he faces a maximum sentence of 20 years in prison and a maximum fine of $250,000, along with restitution in an as-yet unspecified amount.

While these are the maximum possible penalties, in a criminal case a court imposes a sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Mohit Gourisaria is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Maddi Wachs and Maribel Gallegos.  The prosecution is the result of an investigation by the Federal Bureau of Investigation.
 

SAN JOSE – Amanda Christine Riley pleaded guilty in federal court today to wire fraud in connection with a scheme to solicit donations from individuals to help her pay for cancer treatments she never needed nor received, announced Acting United States Attorney Stephanie M. Hinds and Internal Revenue Service (IRS) Criminal Investigation, Special Agent in Charge Mark H. Pearson.  The Honorable Beth Labson Freeman, U.S. District Judge, accepted the plea.

According to the written plea agreement, Riley, 36, admitted that in September 2012, when she was living in San Jose, she devised and executed a plan to obtain money from donors by falsely claiming she had Hodgkin’s lymphoma, a type of cancer.  Riley acknowledged her intent was to deceive people into believing she had cancer and, in doing so, to convince them to donate money to her.  She continued to execute that plan until at least January 3, 2019.

In approximately October 2012, Riley began documenting her purported illness on social media, including on Facebook, Instagram, and Twitter.  She also created a blog located at http://lymphomacansuckitblogspot.com/.  On these social media platforms, she posted photos of medications, photos of herself at hospitals, and photos of herself allegedly suffering the side effects of chemotherapy.  Riley added captions to the photos with false statements claiming that she was taking cancer drugs and receiving cancer treatment. She even shaved her head to make it appear as if she had lost her hair as a result of chemotherapy.  

Riley admitted taking additional steps to raise money for her phony illness. For example, Riley’s blog included a link to a support page, http://www.supportamanda.com, which also included false information about Riley’s purported “battle with cancer.”  The support page featured a clickable “donate now” icon for visitors to donate money online, and encouraged visitors to donate money to “support Amanda” and help “Amanda’s battle with cancer.”  In addition, Riley organized several fundraisers, including in-person fundraisers at the Family Community Church in San Jose, to solicit donations and raise money for her supposed cancer-related expenses. 

In reality, Riley did not have – and has never had – Hodgkin’s lymphoma, or any other type of cancer.  When people donated to Riley over the internet or at in-person fundraisers, they believed their donations would be used to pay Riley’s cancer-related expenses.  In fact, Riley had no cancer-related expenses, and donors’ funds were simply deposited into Riley’s personal bank account.  In total, Riley admitted she received over four-hundred donations worth approximately $106,272 from her fake cancer fundraising scheme.

Today, Riley pleaded guilty to one count of wire fraud in violation of 18 U.S.C. § 1343.  Riley was charged on January 6, 2021, by felony information.

Judge Freeman scheduled Riley’s sentencing for February 22, 2022.  Riley faces a maximum statutory penalty of up to 20 years in prison and a fine of $250,000 (or twice the gross gain or loss resulting from the scheme).  In addition, the court may order additional terms of supervised release and restitution.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Scott Simeon and Michael G. Pitman are prosecuting the case with the assistance of Sahib Kaur.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation, and the San Jose Police Department.  
 

SAN JOSE – A federal jury convicted Araceli Mendoza today of conspiracy and sex trafficking of children, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  The conviction follows a two-week trial before the Honorable Beth Labson Freeman, U.S. District Judge.

At trial, the government proved that Mendoza, 29, of San Jose, conspired with three co-defendants to operate an unlawful prostitution venture in cities throughout the South Bay, including San Jose and Santa Clara.  Between September 2014 and January 2016, these four individuals collaborated to sell the sexual services of adult women and minor girls.  The government demonstrated that, Ariel Guizar-Cuellar, 41, of San Jose, was the leader, primary facilitator, and main financial beneficiary of the unlawful commercial sex venture.  He used social media networks to identify victims, took pictures of women and girls, and then posted the pictures online on “backpage.com” to advertise sexual services.  Mendoza worked with Guizar-Cuellar; Jocelyn Contreras, 26, of Redwood City; and Alyssa Anthony, 27, of Gilroy, to recruit women and girls to work as prostitutes and exotic dancers, transport them to and from prostitution dates, book hotel rooms for the prostitution dates, collect money after the dates, and create and post prostitution advertisements on the internet.  The jury found that Mendoza both conspired with her codefendants to facilitate the sex trafficking venture and specifically sex trafficked one minor girl by recruiting, enticing, harboring, providing, and transporting her for the purpose of commercial sex or by benefitting financially from the girl’s exploitation.  

On April 7, 2016, a federal grand jury indicted all four coconspirators charging them with one count of conspiracy to commit sex trafficking of children, in violation of 18 U.S.C. § 371, and three counts of sex trafficking of children, in violation of 18 U.S.C. § 1591 as to each minor victim.  Guizar-Cuellar also was charged with one count of sexual exploitation of children, in violation of 18 U.S.C. § 2251(a) and (e).  Guizar-Cuellar, Contreras, and Anthony all previously pleaded guilty and await sentencing.  

At trial, Mendoza asserted a duress defense.  Nevertheless, today the jury convicted Mendoza of conspiracy and substantive sex trafficking as to one of the minor victims.  The jury acquitted Mendoza of sex trafficking for a second minor victim and failed to reach a verdict as to the sex trafficking of the third minor victim.

Judge Freeman scheduled a sentencing status hearing for all four defendant on October 19, 2021.  The 18 U.S.C. § 1591 charge carries a mandatory minimum sentence of 10 years. The statutory maximum sentence for the charge is life in prison.  The maximum statutory penalty for the conspiracy charge is five years in prison.  In addition, restitution is mandatory to all victims of sex trafficking.  However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Marissa Harris, Annie Hsieh, and Sarah Griswold are prosecuting the case with the assistance of Nina Burney, Sahib Kaur, and Elise Etter.  The prosecution is the result of an investigation by the FBI, the San Jose Police Department, and the Santa Clara County District Attorney’s Office Bureau of Investigation, with assistance from the Santa Clara County Human Trafficking Task Force. 
 

SAN FRANCISCO – Adrian Kyle Benjamin was sentenced today in federal court to 135 months in prison for his conviction for the receipt of child pornography, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  The sentence was handed down by United States District Judge Susan Illston. 

Before sentencing today, Benjamin, 25, of San Mateo, pleaded guilty to the July 30, 2018, receipt of child pornography.  Benjamin admitted in his plea agreement filed today that in 2018 he began communicating with a girl based in Washington state whom he knew was 14 years old.  Benjamin enticed the 14 year old to engage in sexually explicit conduct and to send him visual depictions of her engaging in the conduct.  Benjamin admitted he received approximately seven images and three videos from this minor depicting sexually explicit conduct.

Benjamin further admitted in his plea agreement that he similarly exploited three other minor victims, enticing them also to engage in sexually explicit conduct and to send him visual depictions of it.  He admitted that he communicated in 2018 with a minor victim based in Australia who told him she was 13 years old.  Benjamin convinced her to make and send him three videos of herself engaging in sexually explicit conduct.  Similarly, Benjamin admitted that he communicated in 2018 with a minor girl in Texas who informed him she was 15 years old.  He convinced her to send images and videos of her sexually explicit conduct, and she made and sent Benjamin 50 images and four videos.  In at least two of these videos, Benjamin provided specific instructions as to the conduct to be recorded.  Benjamin further admitted in his plea agreement that in 2019 he communicated with a minor Canadian high school student.  As stated in a sentencing memorandum filed by the government, in one communication Benjamin joked that the minor victim was “old” because she was 17 years old.  Benjamin convinced her to send five videos and one image of her engaged in sexually explicit conduct.

Benjamin also admitted in his plea agreement that he attempted to entice at least two other minor victims to engage in sexually explicit conduct and send visual depictions of the conduct to him.  One of them lived in California, and the other lived in Connecticut.  These minor girls told Benjamin that they were between 14 and 15 years old. 

The 135 month prison sentence for Benjamin was handed down today following Benjamin’s guilty plea to the receipt of child pornography in violation of 18 U.S.C. § 2252(a)(2) and (b)(1).  United States District Judge Susan Illston also sentenced the defendant to a ten year period of supervised release following his release from prison.

Mohit Gourisaria and Molly Priedeman are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Veronica Hernandez and Maribel Gallegos.  The prosecution is the result of an investigation by the Federal Bureau of Investigation.

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 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.justice.gov/psc.

The founder of a Russian bank pleaded guilty today to filing a materially false tax return.

“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”

“Oleg Tinkov brazenly violated United States tax law,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “No one who enjoys the immense benefits of United States citizenship, as Tinkov did, may avoid the corresponding obligation to support the country he chose. Tax evaders should take notice of the long reach of U.S. law enforcement.”

“Tinkov renounced his U.S. Citizenship shortly after receiving millions of dollars,” said Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office. “Despite his knowledge of U.S. tax reporting requirements, he substantially understated his wealth on filings with the IRS. International tax cheats remain a priority for my office and our agency; and as such, the International Tax and Financial Crimes D.C.-based group will continue to aggressively pursue those committing international tax crimes.”

According to the plea agreement, Oleg Tinkov, also known as Oleg Tinkoff, was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares. 

In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO had a fair market value of more than $1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, to relinquish his U.S. citizenship.

As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.

Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answer the question, Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only $300,000. On Feb. 26, 2014, Tinkov filed a false 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339.

Tinkov was arrested on Feb. 26, 2020, in London, United Kingdom (UK), on these charge. Since that time, he has been contesting extradition on medical grounds. Tinkov has provided to the government and a court in the UK expert medical reports supporting his claim that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease, which has rendered him immunocompromised and unable to safely travel. As part of the plea, Tinkov has agreed to make the expert reports available to the court.

Tinkov’s sentencing hearing is scheduled for Oct. 29 before U.S. District Judge Jon S. Tigar. Under the terms of the plea agreement, Tinkov agrees to pay no less than $506,828,377, which includes the 2013 taxes, the civil fraud penalty, and statutory interest on that tax, totaling $448,957,108 as well as tax liabilities for other years that Tinkov acknowledged he owes. Per the terms of the plea agreement, the parties have agreed to recommend a custodial sentence of time served, followed by one year of supervised release, and an additional fine of $250,000. This recommendation binds the court once it accepts the plea agreement.

The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the United Kingdom secured Tinkov’s arrest overseas.

Assistant Chief Yael T. Epstein of the Tax Division and Assistant U.S. Attorney Michelle J. Kane of the U.S. Attorney’s Office for the Northern District of California are prosecuting the case.

OAKLAND – The founder of a Russian bank pleaded guilty today to filing a materially false tax return.

“Oleg Tinkov brazenly violated United States tax law,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “No one who enjoys the immense benefits of United States citizenship, as Tinkov did, may avoid the corresponding obligation to support the country he chose. Tax evaders should take notice of the long reach of U.S. law enforcement.”

“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”

“Tinkov renounced his U.S. Citizenship shortly after receiving millions of dollars,” said Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office. “Despite his knowledge of U.S. tax reporting requirements, he substantially understated his wealth on filings with the IRS. International tax cheats remain a priority for my office and our agency; and as such, the International Tax and Financial Crimes D.C.-based group will continue to aggressively pursue those committing international tax crimes.”

According to the plea agreement, Oleg Tinkov, also known as Oleg Tinkoff, was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares. 

In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO had a fair market value of more than $1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, to relinquish his U.S. citizenship.

As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.

Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answer the question, Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only $300,000. On Feb. 26, 2014, Tinkov filed a false 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339.

Tinkov was arrested on February 26, 2020, in London, United Kingdom (UK), on the charges.  Since that time, he has been contesting extradition on medical grounds. Tinkov has provided to the government and a court in the UK expert medical reports supporting his claim that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease, which has rendered him immunocompromised and unable to safely travel. As part of the plea, Tinkov has agreed to make the expert reports available to the court.

Tinkov’s sentencing hearing is scheduled for October 29 before U.S. District Judge Jon S. Tigar. Under the terms of the plea agreement, Tinkov agrees to pay no less than $506,828,377, which includes the 2013 taxes, the civil fraud penalty, and statutory interest on that tax, totaling $448,957,108 as well as tax liabilities for other years that Tinkov acknowledged he owes. Per the terms of the plea agreement, the parties have agreed to recommend a custodial sentence of time served, followed by one year of supervised release, and an additional fine of $250,000. This recommendation binds the court once it accepts the plea agreement.

The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the United Kingdom secured Tinkov’s arrest overseas.

Assistant Chief Yael T. Epstein of the Tax Division and Assistant U.S. Attorney Michelle J. Kane, with the assistance of Katie Turner and Kay Konopaske, of the U.S. Attorney’s Office for the Northern District of California are prosecuting the case.