Northern District of California

SAN JOSE – Diep Vo, aka Nancy Vo, pleaded guilty to conspiring to file false claims for tax refunds, submitting false claims for tax refunds, mail fraud, and aggravated identity theft, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.  The plea was accepted late yesterday by the Honorable Beth Labson Freeman, U.S. District Judge.

According to documents and information provided to the court, Vo, 74, of San Jose, conspired with codefendant Trong Nguyen, aka John Nguyen, to use the personal information of people, including homeless people in the San Jose Vietnamese community, to file fraudulent claims for refunds with the Internal Revenue Service (IRS).  Vo went to homeless shelters and halfway houses and falsely represented to individuals that she could get them money from a government program designed to assist people who had not worked in previous years.  Vo convinced people to write down their names and social security numbers and to sign blank income tax returns.  Vo and Nguyen then falsified the signed returns by including bogus income and income tax withheld amounts and sought fraudulent refunds from the IRS.  Vo and Nguyen directed the IRS to send the refund checks to private mailboxes they controlled.  On May 18, 2017, a federal grand jury indicted Vo charging her with one count of conspiracy to file false claims, in violation of 18 U.S. C. § 286; three counts of aiding and abetting in filing false claims, in violation of 18 U.S.C. §§ 287 & 2; two counts of mail fraud, in violation of 18 U.S.C. § 1341; and two counts of aggravated identity theft, in violation of 18 U.C.S. §§ 1028A & 2.  Pursuant to her plea, Vo pleaded guilty to all counts.

Nguyen previously pleaded guilty to submitting and conspiring to submit false claims for refund. 

Vo’s sentencing is scheduled for Nov. 14, 2017.  Vo faces a statutory maximum sentence of five years in prison on each count of conspiring to file false claims and submitting false claims for refund, 20 years in prison for each count of mail fraud, and a mandatory minimum sentence of two years in prison for aggravated identity theft.  Vo also faces a period of supervised release, restitution and monetary penalties.  Nguyen is scheduled to be sentenced on July 25, 2017. 

U.S. Attorney Stretch and Acting Deputy Assistant Attorney General Goldberg thanked Assistant U.S. Attorney Thomas Newman and Trial Attorney Gregory Bernstein of the Tax Division, who are prosecuting the case as well as the special agents of IRS Criminal Investigation who conducted the investigation. 
 

A California resident pleaded guilty yesterday to conspiring to file false claims for tax refunds, submitting false claims for tax refunds, mail fraud and aggravated identity theft, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

According to documents and information provided to the court, Diep Vo aka Nancy Vo, 74, conspired with codefendant Trong Nguyen aka John Nguyen, to use the IDs of homeless and unemployed individuals in the San Jose, California area to file fraudulent claims for refunds with the Internal Revenue Service (IRS). Vo went to homeless shelters and halfway houses and falsely represented to individuals that she could get them money from a government program designed to assist people who had not worked in previous years. Vo convinced people to write down their names and social security numbers and to sign blank income tax returns. Vo and Nguyen then falsified the signed returns including bogus income and income tax withheld amounts and sought fraudulent refunds from the IRS. Vo and Nguyen directed the refund checks to private mailboxes they controlled. Nguyen previously pleaded guilty to submitting and conspiring to submit false claims for refund.

Sentencing is scheduled for Nov. 14. Vo faces a statutory maximum sentence of five years in prison on each count of conspiring to file false claims and submitting false claims for refund, 20 years in prison for each count of mail fraud and a mandatory minimum sentence of two years in prison for aggravated identity theft. Vo also faces a period of supervised release, restitution and monetary penalties. Nguyen is scheduled to be sentenced on July 25.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS Criminal Investigation and the U.S. Postal Inspection Service, who conducted the investigation, and Assistant U.S. Attorney Thomas Newman and Trial Attorney Gregory Bernstein of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

OAKLAND – Daniel J. Rush pleaded guilty in federal court today to three felony counts: receiving an illegal payment as a union employee; honest services fraud; and conspiracy to commit structuring and money laundering, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett.  The plea was accepted by the Honorable Haywood S. Gilliam Jr., U.S. District Judge.

In pleading guilty, Rush, 56, of Crescent City, Calif. (formerly of Oakland, Calif.), admitted that between 2011 and 2015 he was employed by the United Food and Commercial Workers International (UFCW International) as the Organizing Coordinator for the unofficial medical cannabis and hemp division.  Rush had fiduciary duties to the UFCW International, and the UFCW International constitution prohibited him from accepting dual compensation or expenses related to the performance of his duties.  Notwithstanding these fiduciary duties, in today’s plea agreement, Rush admitted he violated the Taft-Hartley Act when he accepted compensation from employees in, or potentially in, a labor organization.  Rush also admitted he committed honest services wire fraud with the intent to deprive the UFCW of its right to his honest services and he conspired with attorney Marc TerBeek, 50, of Berkeley, Calif., to launder money and to evade reporting requirements in an effort to conceal the source of the money.  TerBeek pleaded guilty in February 2017 to making illegal payments to Rush in violation of the Taft-Hartley Act and to violating anti-structuring regulations.

According to Rush’s plea agreement, in January 2010, a marijuana entrepreneur loaned Rush $500,000 in cash, ostensibly to be used to develop pieces of real property under Rush’s control.  Rush promised to pay the entrepreneur $3,000 in interest per month for 5 years and then pay the balance in a lump sum in January 2015.  Rush knew that the money he borrowed had been earned in connection with illegal marijuana cultivation activities and that therefore the money was the proceeds of unlawful activity.  Rush acknowledged that he and TerBeek conspired to structure the loan proceeds into the banking system and they further agreed to falsely characterize the $3,000 per month payments as consulting fees.  

In January and February 2010, TerBeek made a series of deposits of less than $10,000 at Wells Fargo and Bank of America branches.  Once TerBeek had deposited sufficient funds, he paid off a $420,000 note on a property owned by Rush.  

TerBeek also began making the $3,000 monthly payments to the marijuana entrepreneur on Rush’s behalf.  In exchange for these payments and other compensation from TerBeek, Rush referred medical marijuana employers to TerBeek.  Terbeek provided assist to the employers regarding compliance and licensing.  The clients included owners of businesses in the marijuana industry that Rush was purporting to attempt to organize for the UFCW.  Rush did not disclose to the clients or the UFCW that he was receiving significant sums of money from TerBeek.  This kickback scheme violated Rush’s duty to provide his honest services to the UFCW.

By 2014, the individual who loaned money to Rush in 2010 was an employer in the medical marijuana industry that Rush was trying to unionize.  Rush used his position in the UFCW to make official recommendations to government entities for the individual’s marijuana business and accepted at least $250,000 of debt forgiveness from the individual.

The FBI’s investigation began with a tip from a medical marijuana dispensary owner regarding Rush’s activities.       

A federal grand jury indicted Rush on September 17, 2015.  He was charged with 15 felony counts, including one Taft-Hartley violation under 29 U.S.C. § 186(b)(1); ten counts of honest services fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 1346; attempted extortion under color of law, in violation of 18 U.S.C. § 1951; conspiracy, in violation of 18 U.S.C. § 371; and money laundering by concealment, in violation of 18 U.S.C. § 1956(a)(1)(B)(ii).  Under the plea agreement, Rush pleaded guilty to the Taft-Hartley violation, one count of honest services fraud, and one count of conspiracy to commit structuring and money laundering.

For his part in the scheme, on February 15, 2017, TerBeek was charged by information with one count of making a payment to a union employee, in violation of 29 U.S.C. § 186(a), and one count of willful violation of anti-structuring regulations, in violation of 12 U.S.C. § 1956.  He pleaded guilty to both counts on February 16, 2017.  TerBeek is scheduled to be sentenced by Judge Gilliam on August 21, 2017.

Rush is currently on release on a $100,000 bond.  Judge Gilliam scheduled his sentencing hearing for October 2, 2017.  The maximum statutory penalty for the Taft-Hartley violation is 5 years’ imprisonment and a $15,000 fine; the maximum statutory penalty for the honest services fraud count is 20 years’ imprisonment and a $250,000 fine; and the maximum statutory penalty for the conspiracy is 5 years’ imprisonment and a $250,000 fine.  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.

The prosecution is the result of an investigation by the FBI and the Internal Revenue Service-Criminal Investigation Division.
 

SAN FRANCISCO – Bobby Napier was sentenced to 48 months’ imprisonment for bribing a public official, announced Acting United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin. The sentence was handed down yesterday by the Honorable Charles R. Breyer, United States District Judge, following a guilty plea in which Napier admitted to committing the crime.

Napier, 47, of Stafford, Tex., pleaded guilty on January 11, 2017, to bribing a public official in order to smuggle drugs through passenger security screening at San Francisco International Airport (SFO).  The public official was an employee of a private company under contract to provide baggage and passenger screening services to the Transportation Security Administration (TSA).

The plea agreement describes five separate occasions between May 16, 2013, and April 17, 2014, in which Napier paid the public official for the purpose of smuggling cocaine through the security screening checkpoint at SFO.  According to the guilty plea, Napier also admitted that even before the instances described in his plea agreement, he had smuggled marijuana through SFO.  Napier acknowledged making payments in the form of cash deposits to the public official’s bank account, money orders or cash mailed to the official, and cash payments in face-to-face meetings.  Napier admitted the payments were intended to allow persons carrying drugs in carry-on luggage to pass through the security checkpoint undetected.  Napier facilitated the smuggling of a total of 23 kilograms of cocaine through the checkpoint and paid bribes totaling $13,500 to the TSA official. 

On January 10, 2017, Napier was charged by superseding information with one count of bribing a public official, in violation of 18 U.S.C. § 201(b)(1).  Pursuant to his plea agreement, Napier pleaded guilty to the charge.

In addition to the prison term, Judge Breyer sentenced Napier to three years of supervised release.  Judge Breyer ordered Napier to surrender on or before September 8, 2017, to begin serving his sentence. 

Assistant United States Attorney Laura Vartain Horn is prosecuting the case with the assistance of Rawaty Yim.  This case is the product of an investigation by the Drug Enforcement Administration and the Federal Bureau of Investigation.

SAN JOSE – Joseph Shayota and Adriana Shayota were sentenced to 86 months and 26 months in prison, respectively, for their roles in a conspiracy to traffic in counterfeit goods and conspiracy to commit criminal copyright infringement and to introduce misbranded food into interstate commerce. 

The announcement was made by United States Attorney Brian J. Stretch, Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett, and Food and Drug Administration (FDA) Office of Criminal Investigations’ Los Angeles Field Office Special Agent in Charge Lisa L. Malinowski.  The sentences were handed down yesterday by the Honorable Lucy H. Koh, U.S. District Court Judge, bringing an end to all but one of the cases brought against 11 defendants charged in a scheme involving the manufacture and sale of millions of bottles of the liquid dietary supplement 5-Hour ENERGY.

On November 28, 2016, a jury in San Jose found Joseph Shayota, 64, and his wife, Adriana Shayota, 45, (the Shayotas) guilty of conspiracy to traffic in counterfeit goods, as well as conspiracy to commit criminal copyright infringement and to introduce misbranded food into interstate commerce.  The criminal conduct began in late 2009 and ran through October 2012.  Over 3,700,000 bottles of counterfeit 5-Hour ENERGY were placed in the stream of interstate commerce.

Besides the Shayotas, other defendants charged with various roles in the scheme include: Justin Shayota, 33, of Spring Valley, Calif.; Walid Jamil, 57, of Troy, Mich.; Raid Jamil, 48, of West Bloomfield, Mich.; Kevin Attiq, 52, of El Cajon, Calif.; Fadi Attiq, 59, of El Cajon, Calif.; Leslie Roman, 63, Rancho Cucamonga, Calif.; Mario Ramirez, 56, of San Diego; Camilo Ramirez, 32, of San Diego; and Juan Romero, 70, of Mexico City, Mexico. 

“Acting out of pure greed, these defendants gambled with the health and safety of millions of users of this well-known consumer product," said U.S Attorney Brian Stretch.  "Consumers can rightly expect that the commercial products they buy are safe to ingest.  Those individuals who manufacture and distribute unsafe counterfeit food products will be prosecuted and sent to jail.”

“By trafficking in counterfeit dietary supplements, Joseph Shayota and Walid Jamil led an organized criminal conspiracy that violated intellectual property rights and endangered the health and safety of the public for their own financial gain,” said Special Agent in Charge Bennett.  “The FBI is committed to identifying, arresting, and prosecuting those who defraud US businesses and put consumers at risk in an attempt to line their own pockets.  I want to thank the FBI special agents and analysts, as well as our partners at the FDA and U.S. Attorney’s Office, for their tireless work on this investigation.”

“Criminals who mislead unsuspecting U.S. consumers by selling them counterfeit and false-labeled products cheat the American consumer and endanger the public’s health,” said Special Agent in Charge Malinowski. “We will continue to protect the U.S. consumer by working to bring to justice those who place profits above public health.”

At trial, the evidence demonstrated that the Shayotas, through their company Tradeway International Inc., (doing business as Baja Exporting, LLC), entered into an agreement with Living Essentials, LLC, to distribute 5-Hour ENERGY in Mexico.  Living Essentials owns 5-Hour ENERGY and registered and owns all 5-Hour ENERGY trademarks and related copyrights.  The company does not grant licenses to any individual or entity to manufacture 5-Hour ENERGY.  As part of the distribution agreement, Living Essentials manufactured and provided the Spanish-labeled 5-Hour ENERGY bottles to the Shayotas, who were unable to sell it in Mexico.  The Shayotas and their co-conspirators then removed the Spanish-language labels and replaced them with counterfeit English-language labels.  They also removed the true lot numbers and expiration dates placed on the bottles by Living Essentials and replaced them with false lot numbers and expiration dates.  The Shayotas and their co-conspirators sold this counterfeit-labelled product throughout the U.S.

The evidence at trial demonstrated that by early 2012, the Shayotas and their co-conspirators began to manufacture and sell an entirely counterfeit 5-Hour ENERGY product.  They manufactured the counterfeit 5-Hour ENERGY liquid at an unsanitary facility using untrained day workers, and mixed unregulated ingredients in vats in an attempt to mimic the real 5-Hour ENERGY products.  The Shayotas and their co-conspirators engaged a plastics manufacturer in Mexico to copy the 5-Hour ENERGY bottles and caps, and recruited co-conspirators in the San Diego area to create counterfeit display boxes and plastic sleeves (bottle labels), which appeared identical to the true boxes and labels.  The Shayotas and their co-conspirators also copied true lot numbers and expiration dates from genuine 5-Hour ENERGY and placed those numbers and dates on the counterfeit bottles that they had manufactured.

From approximately December 2011 through October 2012, the Shayotas and their co-conspirators ordered more than seven million counterfeit label sleeves and hundreds of thousands of counterfeit display boxes, and placed false lot and expiration codes on the bottles and boxes.  They often changed the lot and expiration codes on the counterfeit bottles and boxes to parallel the valid codes being used on the authentic product. 

The government filed a Superseding Information on June 29, 2016, charging each of the defendants with one count of conspiracy to traffic in counterfeit goods, in violation of 18 U.S.C. §2320(a), and one count of conspiracy to commit criminal copyright infringement and to introduce misbranded food into interstate commerce, in violation of 18 U.S.C. § 371.  Following this afternoon’s sentencing, the disposition as against eight of the defendants is as follows:

Defendant

Charges and Disposition

Sentence

Joseph Shayota

Found guilty by a jury on November 28, 2016, of

Conspiracy to Traffic in Counterfeit Goods, in violation of 18 U.S.C. § 2320(a), and Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced June 20, 2017, to 86 months in prison, 3 years of supervised release, a $144,868 fine, and forfeiture of $750,000.

Adriana Shayota

Found guilty by a jury on November 28, 2016, of

Conspiracy to Traffic in Counterfeit Goods, in violation of 18 U.S.C. § 2320(a) (Count One), and Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371 (Count Two).

Sentenced June 20, 2017, to 26 months in prison, 3 years of supervised release, and a fine of $144,868.

Walid Jamil

Pleaded guilty on

October 7, 2016, to Conspiracy to Traffic in Counterfeit Goods, in violation of 18 U.S.C. § 2320(a) (Count One), and Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371 (Count Two).

Sentenced on April 26, 2017, to 84 months on Count One and 60 months on Count Two, to be served concurrently; three years of supervised release; and $555,801.32 in restitution to Living Essentials.

Leslie Roman

Pleaded guilty on September 23, 2016, to Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced on May 24, 2017, to 32 months’ imprisonment, 3 years supervised release, and restitution of $91,065.91 to Living Essentials.

Raid Jamil

Pleaded guilty on September 13, 2016, Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced on May 17, 2017, to 24 months’ imprisonment, and three years of supervised release, and $268,936 in restitution to Living Essentials. This sentence was ordered to run consecutive to a 6-month sentence imposed in a separate case in the Eastern District of Michigan under Docket No. 16-CR-20623-001-JCO.

Kevin Attiq

Pleaded guilty on November 4, 2016, to Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced on June 14, 2017, to three years of probation (to include eight months of home confinement) and a $20,000 fine.

Justin Shayota

Pleaded guilty on

March 2, 2016, to Conspiracy to Traffic in Counterfeit Good, in violation of 18 U.S.C. § 2320(a), and Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced on June 14, 2017, to six months’ imprisonment, six months’ home confinement, three years of supervised release, and $555,801.32 in restitution to Living Essentials.

Mario Ramirez

Pleaded guilty on November 9, 2016, to Conspiracy to Commit Criminal Copyright Infringement and to Introduce

Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371.

Sentenced on February 15, 2017, to five years of probation (to include six months home confinement) and a $30,000 fine. Agreed to pay restitution of $133,606.09 to Living Essentials.

The government referred defendants Camilo Ramirez and Fadi Attiq to pre-trial diversion and Juan Romero remains a fugitive.  The charges against Romero are merely allegations that crimes have been committed.  As with all defendants, he must be presumed innocent until proven guilty beyond a reasonable doubt. 

Joseph and Adriana Shayota both were ordered to surrender on September 6, 2017, to begin serving their respective sentences.  

Assistant United States Attorneys Matt Parrella, Susan Knight, and Joseph Springsteen are prosecuting the case with the assistance of Lakisha Holliman and Elise Etter.  Assistant United States Attorney David Countryman assisted with forfeiture matters.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Food and Drug Administration Office of Criminal Investigations.

OAKLAND – Everardo Laurian pleaded guilty to theft of government money announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

Laurian, 26, of Daly City, pleaded guilty to theft of government money. The Honorable Jeffery S. White, United States District Judge, accepted the plea today. 

According to his plea agreement, between March and April 2015, Laurian participated in a conspiracy to illegally obtain money from the United States. The conspiracy involved filing false federal income tax returns in order to obtain fraudulent federal income tax refunds and cashing stolen U.S. Treasury checks at Walmart stores throughout the United States. Laurian became a member of the conspiracy knowing that the objective was to steal money from the federal government. 

In 2015, codefendants Gary Bostick, 39, and Ana Bostick, 37, both of Pittsburg, Calif., asked Laurian to participate in a scheme to cash stolen or fraudulently obtained U.S. Treasury Checks.  In March and April 2015, Laurian aided the Bosticks, co-conspirator Hugh Robinson, 46, of San Pablo, Calif., and others to cash fraudulently obtained or stolen U.S. Treasury checks.   Laurian’s role was to drive individuals to Walmart stores and cashed the stolen or fraudulently obtained U.S. Treasury checks. In addition, after the checks were cashed, Laurian delivered the proceeds to Gary Bostick and Ana Bostick.  In sum, Laurian conspired with others to cash a total of $88,826.41 in stolen U.S. Treasury checks as part of this joint undertaking. 

On November 5, 2015, a federal grand jury indicted Laurian and ten co-conspirators for various crimes in connection with the scheme.  For his part in the scheme, Laurian was charged with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371; two counts of theft of public money, in violation of 18 U.S.C. § 641; and two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  He pleaded guilty to two counts of theft of public money. 

On October 31, 2017, a jury found Hugh Robinson guilty of conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; seven counts of theft of public money, in violation of 18 U.S.C. § 641; and seven counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A, in connection with the scheme.  Judge White sentenced Robinson to 144 months in prison for his role in a conspiracy.  Ana Bostick was charged with conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; two counts of theft of public money, in violation of 18 U.S.C. § 641; and two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  On June 15, 2017, she pleaded guilty to all charges.  For his part in the scheme, Gary Bostick was charged with conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; four counts of wire fraud, in violation of 18 U.S.C. § 1343; and four counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  On June 15, 2017, he pleaded guilty to the conspiracy charge and to the wire fraud charges. 

Judge White scheduled Laurian’s sentencing for September 26, 2017.  The maximum sentence for theft of public money is ten years in prison and a fine of $250,000.    However, any sentence following conviction will 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. 

Gary Bostick’s sentencing is scheduled for September 19, 2017, and Ana Bostick’s sentencing is scheduled for November 14, 2017.

Assistant U.S. Attorneys Thomas Newman and Jose A. Olivera and Trial Attorney Gregory Bernstein and Paralegal Jonathan Deville of the Tax Division are prosecuting this case.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.

SAN JOSE – Raul Guadalupe Monjardin-Iribe was sentenced today to 175 months (14 years, 7 months) in prison for his part in a conspiracy to possess and distribute cocaine, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin. The sentence was handed down by the Honorable Edward J. Davila, U.S. District Court Judge, following a guilty plea entered in December of last year.

Raul Monjardin-Iribe, 36, a citizen of Mexico, pleaded guilty on December 20, 2016, to one count of conspiracy to possess with intent to distribute and to distribute cocaine, and one count of distribution and possession with intent to distribute cocaine.  The defendant entered a guilty plea without a written agreement.  In pleading guilty, he admitted to conspiring with other individuals to distribute 5 kilograms or more of cocaine in the Northern District of California between January 2015 and September 2015.  He further admitted that, on or about May 23, 2015, he distributed one kilogram of cocaine to a co-conspirator.  Monjardin-Iribe, who was living in the San Jose area at the time of the offense, was indicted by a federal grand jury on October 8, 2015.  He was charged with one count of conspiracy to possess with intent to distribute and to distribute cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(A)(viii); and one count of distribution and possession with intent to distribute cocaine, in violation of 21 U.S.C §§ 841(a)(1) and 841(b)(1)(B).  Monjardin-Iribe pleaded guilty to both counts in the indictment.

In addition to the prison term, Judge Davila sentenced Monjardin-Iribe to a 5-year period of supervised release.  The defendant has been in custody since his arrest on September 19, 2015, and will begin serving his sentence immediately.  

Assistant U.S. Attorney Chinhayi Cadet is prosecuting the case with the assistance of Patricia Mahoney.  This case is the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies. 

SAN FRANCISCO-  The Justice Department announced today that Genesis Healthcare, Inc. (Genesis) will pay the federal government $53,639,288.04, including interest, to settle six federal lawsuits and investigations regarding the submission of false claims for medically unnecessary therapy and hospice services, and grossly substandard nursing home care.  Genesis, headquartered in Kennett Square, Pennsylvania, owns and operates through its subsidiaries skilled nursing facilities, assisted/senior living facilities, and a rehabilitation therapy business.  According to the allegations in the lawsuits, companies and facilities acquired by Genesis violated the False Claims Act.  The settlement announced today resolves the claims and investigations into the allegations.  

“We are committed to protecting the federal health care programs and the patients who are enrolled in them,” said U.S. Attorney Brian J. Stretch. “We will continue to vigorously pursue companies and individuals who provide care that is grossly deficient or unnecessary.”

“We will continue to hold health care providers accountable if they bill for unnecessary or substandard services or treatment,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our unwavering commitment to protect federal health care programs against unscrupulous providers.”

This settlement resolves four sets of allegations.  First, the settlement resolves allegations involving Skilled Healthcare Group, Inc. (SKG) and its subsidiaries (collectively, the Skilled Companies).  Specifically, the settlement resolves allegations that from April 1, 2010 through March 31, 2013, SKG and its subsidiaries Skilled Healthcare, LLC (Skilled LLC) and Creekside Hospice II, LLC knowingly submitted or caused to be submitted false claims to Medicare for services performed at the Creekside Hospice facility in Las Vegas, Nevada by: (1) billing for hospice services for patients who were not terminally ill and so were not eligible for the Medicare hospice benefit and (2) billing inappropriately for certain physician evaluation management services. 

Second, this settlement resolves allegations that from January 1, 2005 through December 31, 2013, SKG and its subsidiaries Skilled LLC and/or Hallmark Rehabilitation GP, LLC knowingly submitted or caused to be submitted false claims to Medicare, TRICARE, and Medicaid at certain facilities by providing therapy to certain patients longer than medically necessary, and/or billing for more therapy minutes than the patients actually received.  The settlement also resolves allegations that those companies fraudulently assigned patients a higher Resource Utilization Group (RUG) level than necessary.  Medicare reimburses skilled nursing facilities based on a patient’s RUG level, which is supposed to be determined by the amount of skilled therapy required by the patient.

Third, this settlement resolves allegations that from January 1, 2008, through September 27, 2013, Sun Healthcare Group, Inc., SunDance Rehabilitation Agency, Inc., and SunDance Rehabilitation Corp. (collectively, the Sun Companies) knowingly submitted or caused the submission of false claims to Medicare Part B by billing for outpatient therapy services provided in the State of Georgia that were (1) not medically necessary or (2) unskilled in nature. 

Finally, this settlement resolves allegations that between September 1, 2003, and January 3, 2010, Skilled LLC submitted false claims to the Medicare and Medi-Cal programs at certain of its nursing homes for services that were grossly substandard and/or worthless and therefore ineligible for payment.  More specifically, the settlement resolves allegations that Skilled LLC violated certain essential requirements that nursing homes are required to meet to participate in and receive reimbursements from government healthcare programs and failed to provide sufficient nurse staffing to meet residents’ needs. 

The Skilled Companies were acquired by Genesis after the conduct at issue in this settlement.  The Sun Companies were acquired by Genesis in December 2012.

“Safeguarding federal health care programs and patients is a priority,” said Acting U.S. Attorney for the District of Nevada Steven W. Myhre. “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable for fraudulent billing of medically unnecessary treatments and services.  We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.”

“Health care providers that falsify claims for unauthorized or unnecessary services steal precious taxpayer dollars, and we will aggressively seek to recover those funds for the program that needs them,” said U. S. Attorney for the Northern District of Georgia John Horn.

“It’s disturbing when health care companies bill Medicare and Medicaid to care for vulnerable patients, but provide grossly substandard care and medically unnecessary services just to boost company profits,” said Special Agent in Charge Steven J. Ryan of the Department of Health and Human Services, Office of Inspector General.  “We will continue to crack down on medical providers who betray the public’s trust and the needs of vulnerable patients through fraudulent billing and irresponsible practices.”

“At a time when the cost of healthcare weighs heavy on many taxpayers, it is imperative that people who illegally bill our healthcare system are held accountable and forced to pay restitution,” said FBI Atlanta Special Agent in Charge David J. LeValley. “This case is an example of how committed the FBI and its partners are to keeping healthcare providers from abusing the system.”

The settlement, which was based on the company’s ability to pay, resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Joanne Cretney-Tsosie, Jennifer Deaton, Kimberley Green, Camaren Hampton, Teresa McAree, Terri West, and Brian Wilson, former employees of companies acquired by Genesis.  The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit.  In this case, the whistleblowers will receive a combined $9.67 million as their share of the recovery. 

The claims resolved by the settlement are allegations only; there has been no determination of liability.

The Northern District of California case is docketed as United States, ex rel. West v. Skilled Healthcare Group Inc., et. al., 11-02658-ED (N.D. Cal.).  Assistant United States Attorneys Kimberly Friday, Erica Blachman Hitchings, and Gioconda Molinari, with the assistance of Tina Louie, handled the West case and a related investigation.  Additional docketed matters include United States, ex rel. Cretney-Tsosie v. Creekside Hospice II, LLC, 2:13-cv-167-HDM (D. Nev.); United States ex rel. McAree v. SunDance Rehabilitation Corp., 1:12-CV-4244 (N.D. Ga.); United States ex rel. Deaton v. Skilled Healthcare Group, Inc. et al., Civ. 4:14-cv-00219 (W.D. Mo.); and United States ex rel. Wilson v. Skilled Healthcare Group, Inc. et al., Civ. 14-cv-860 (W.D. Mo.).  This case is the result of an investigation by the U.S. Attorneys’ Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada; the Department of Health and Human Services, Office of Inspector General; the U.S. Department of Justice Civil Division’s Commercial Litigation Branch; and the Department of Defense’s Defense Criminal Investigative Service.

If you have concerns about care being provided at a nursing home in California, you can contact the California Long Term Care Ombudsman at 1-800-231-4024, or your Local Long Term Ombudsman.  A directory of local services can be found at https://www.aging.ca.gov/programs/ltcop/.  You can also contact the United States Attorney’s Office for the Northern District of California at https://www.justice.gov/usao-ndca/elder-justice-task-force or 1-415-436-7102.

The Justice Department announced today that Genesis Healthcare Inc. (Genesis) will pay the federal government $53,639,288.04, including interest, to settle six federal lawsuits and investigations alleging that companies and facilities acquired by Genesis violated the False Claims Act by causing the submission of false claims to government health care programs for medically unnecessary therapy and hospice services, and grossly substandard nursing care. Genesis, headquartered in Kennett Square, Pennsylvania, owns and operates through its subsidiaries skilled nursing facilities, assisted/senior living facilities, and a rehabilitation therapy business.

“We will continue to hold health care providers accountable if they bill for unnecessary or substandard services or treatment,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Today’s settlement demonstrates our unwavering commitment to protect federal health care programs against unscrupulous providers.”

This settlement resolves four sets of allegations. First, the settlement resolves allegations that from April 1, 2010 through March 31, 2013, Skilled Healthcare Group Inc. (SKG) and its subsidiaries, Skilled Healthcare LLC (Skilled LLC) and Creekside Hospice II LLC, knowingly submitted or caused to be submitted false claims to Medicare for services performed at the Creekside Hospice facility in Las Vegas, Nevada by: (1) billing for hospice services for patients who were not terminally ill and so were not eligible for the Medicare hospice benefit and (2) billing inappropriately for certain physician evaluation management services.

Second, this settlement resolves allegations that from Jan. 1, 2005 through Dec. 31, 2013, SKG and its subsidiaries, Skilled LLC and Hallmark Rehabilitation GP LLC, knowingly submitted or caused to be submitted false claims to Medicare, TRICARE, and Medicaid at certain facilities by providing therapy to certain patients longer than medically necessary, and/or billing for more therapy minutes than the patients actually received. The settlement also resolves allegations that those companies fraudulently assigned patients a higher Resource Utilization Group (RUG) level than necessary. Medicare reimburses skilled nursing facilities based on a patient’s RUG level, which is supposed to be determined by the amount of skilled therapy required by the patient.

Third, this settlement resolves allegations that from Jan. 1, 2008, through Sept. 27, 2013, Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. knowingly submitted or caused the submission of false claims to Medicare Part B by billing for outpatient therapy services provided in the State of Georgia that were (1) not medically necessary or (2) unskilled in nature.

Finally, this settlement resolves allegations that between Sept. 1, 2003 and Jan. 3, 2010, Skilled LLC submitted false claims to the Medicare and Medi-Cal programs at certain of its nursing homes for services that were grossly substandard and/or worthless and therefore ineligible for payment. More specifically, the settlement resolves allegations that Skilled LLC violated certain essential requirements that nursing homes are required to meet to participate in and receive reimbursements from government healthcare programs and failed to provide sufficient nurse staffing to meet residents’ needs.

SKG and its subsidiaries were acquired by Genesis after the conduct at issue in this settlement. Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc. and SunDance Rehabilitation Corp. were acquired by Genesis in December 2012.

“Safeguarding federal health care programs and patients is a priority,” said Acting U.S. Attorney Steven W. Myhre for the District of Nevada. “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable for fraudulent billing of medically unnecessary treatments and services. We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.”

“We are committed to protecting the federal health care programs and the patients who are enrolled in them,” said U.S. Attorney Brian J. Stretch for the Northern District of California. “We will continue to vigorously pursue companies and individuals who provide care that is grossly deficient or unnecessary.”

“Health care providers that falsify claims for unauthorized or unnecessary services steal precious taxpayer dollars, and we will aggressively seek to recover those funds for the program that needs them,” said U. S. Attorney John Horn for the Northern District of Georgia.

“It’s disturbing when health care companies bill Medicare and Medicaid to care for vulnerable patients, but provide grossly substandard care and medically unnecessary services just to boost company profits,” said Special Agent in Charge Steven J. Ryan of the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “We will continue to crack down on medical providers who betray the public’s trust and the needs of vulnerable patients through fraudulent billing and irresponsible practices.”

“At a time when the cost of healthcare weighs heavy on many taxpayers, it is imperative that people who illegally bill our healthcare system are held accountable and forced to pay restitution,” said FBI Atlanta Special Agent in Charge David J. LeValley. “This case is an example of how committed the FBI and its partners are to keeping healthcare providers from abusing the system.”

The settlement, which was based on the company’s ability to pay, resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Joanne Cretney-Tsosie, Jennifer Deaton, Kimberley Green, Camaren Hampton, Teresa McAree, Terri West, and Brian Wilson, former employees of companies acquired by Genesis. The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The government may intervene and file its own complaint in such a lawsuit. The whistleblowers will receive a combined $9.67 million as their share of the recovery in this case.

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorneys’ Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada and HHS-OIG.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

The cases are docketed as United States, ex rel. Cretney-Tsosie v. Creekside Hospice II, LLC, Case No. 2:13-cv-167-HDM (D. Nev.); United States ex rel. McAree v. SunDance Rehabilitation Corp., Case No. 1:12-CV-4244 (N.D. Ga.); United States, ex rel. West v. Skilled Healthcare Group Inc., et. al., Case No. 11-02658-ED (N.D. Cal.); United States ex rel. Deaton v. Skilled Healthcare Group, Inc. et al., Case No. 4:14-cv-00219 (W.D. Mo.); and United States ex rel. Wilson v. Skilled Healthcare Group, Inc. et al., Case No. 14-cv-860 (W.D. Mo.).

SAN FRANCISCO – Eight current employees and one former employee of the U.S. Attorney’s Office in the Northern District of California are among the members of the Department of Justice recognized by Deputy Attorney General Rod Rosenstein, and Executive Office for U.S. Attorneys (EOUSA) Director Monty Wilkinson at the 33rd Director’s Awards Ceremony today in Washington D.C.  The awards ceremony took place in the Great Hall at the Robert F. Kennedy Department of Justice Building.  The local recipients of the awards include Doug Chang, Neill Tseng, Maryam Beros, Phil Villanueva, Sara Winslow, Alex Tse, Bruce Iwamoto, Mark Conrad, and Katie Griffin.
 
In his prepared remarks, Deputy Attorney General Rosenstein told the awardees: “These 179 award recipients embody the best of the Department of Justice.… Today’s honorees have earned the esteem of their colleagues.  But most importantly, you have earned the gratitude of your fellow citizens — whose communities you have made safer, whose lives you have improved, and whose trust you have rewarded. ” 
 
U.S. Attorney Brian J. Stretch expanded on the Deputy Attorney General’s remarks stating, "Today we celebrate the accomplishments of the extraordinary employees of this district.  The fair and impartial administration of justice requires tireless determination and hard work.  The recipients of these awards have unquestionably gone the extra mile on behalf of the American people and are to be commended for their selfless dedication to the Department of Justice.”
 
Doug Chang, Neill Tseng, Maryam Beros, Phil Villanueva, Sara Winslow, Alex Tse, and Mark Conrad (now an alumnus of the office) were recognized for their work as a team on the investigation into the activities of Morgan Stanley prior to the 2008 financial crisis.  The investigation resulted in a $2.6 billion settlement.  The team’s sweeping investigation revealed that Morgan Stanley failed to disclose critical information about the mortgages underlying its securities.  Many of the toxic loans securitized by Morgan Stanley defaulted, and investors across the nation sustained billions of dollars in losses.  The settlement achieved by this team holds accountable one of the banks whose conduct helped bring about one of the most devastating financial crisis.  In connection with the settlement, Morgan Stanley acknowledged in a statement of facts that it failed to disclose critical information to investors.  The team received the Director’s Award for Superior Performance by a Litigating Team.
 
Bruce Iwamoto is a Program Specialist who was recognized for his superior performance in administering the Organized Crime Drug Enforcement Task Force (OCDETF) Program for the Pacific Region since 2000.  The Pacific Region is comprised of the eleven judicial districts in the Pacific Northwest and the Pacific Islands.  Mr. Iwamoto has shown great leadership over many years as the chief administrative officer for the program in this region.  Mr. Iwamoto was recognized as having superior organizational skills, dedication, and commitment.  His efforts have paved the way for significant law enforcement accomplishments throughout the region from Guam to Idaho.  Mr. Iwamoto received the Director’s Award for Superior Performance in Administration. 
 
Also recognized was celebrated was Katie Griffin.  Before joining the Northern District of California in 2017, Ms. Griffin was an Assistant U.S. Attorney in the Western District of Texas.  As an AUSA in Texas, Ms. Griffin investigated and prosecuted Maverick County officials, including both a Commissioner and Justice of the Peace, for the their roles in a bribery, kickback, and bid-rigging scheme.  The defendants were convicted of manipulating the bidding process to guarantee that certain individuals were awarded construction contracts in exchange for thousands of dollars in kickback payments.  The persistent investigation and prosecution effectively rooted out corruption and restored faith and confidence to governance in Maverick County.  Ms. Griffin received the Director’s Award for Superior Performance as an AUSA-Criminal.
 
The Northern District of California was one of 35 districts represented at the ceremony. 
 

OAKLAND – Former Antioch police officer Gary Bostick and his wife, Ana Bostick, pleaded guilty to their respective roles in a scheme to illegally obtain money from the United States announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. 

Gary Bostick, 39, and Ana Bostick, 37, both of Pittsburg, pleaded guilty to their respective roles in a conspiracy to commit theft of public money and related charges.  The Honorable Jeffery S. White, United States District Judge, accepted Ana Bostick’s guilty plea on Tuesday, June 13, 2017, and accepted Gary Bostick’s guilty plea this morning. 

According to the Bosticks’ plea agreements, between January and April of 2015, the conspiracy involved filing false federal income tax returns in order to obtain fraudulent federal income tax refunds and cashing stolen U.S. Treasury checks at Walmart stores throughout the United States.  Specifically, Gary Bostick admitted that in January 2015, he assisted in filing false tax returns with the IRS in the names of deceased individuals.  The defendants obtained names, dates of birth, and Social Security numbers from websites such as www.rootsweb.ancestry.com and www.ssnvalidator.com.  In order to receive payment, the conspirators directed the IRS to mail the fraudulently obtained U.S. Treasury checks to addresses he and his co-conspirators could access.  The conspirators cashed the U.S. Treasury checks at various Walmart stores. 

Ana Bostick admitted that she aided her co-conspirators by, among other things, cashing two U.S. Treasury checks.  Ana Bostick admitted she requested another co-conspirator to send her photos of the two U.S. Treasury checks so that she could use the information on the checks to obtain fake identification that matched the names.  After obtaining the fake identifications, Ana Bostick cashed the two checks and kept the corresponding funds. 

Gary Bostick’s participation in the scheme included traveling with two co-conspirators to Los Angeles to obtain stolen U.S. Treasury checks and then to Walmart stores in various areas, including Kentucky, to cash the checks.  The former police officer acknowledged that he supervised other individuals in the scheme, including managers and runners, who were responsible for cashing the fraudulent or stolen U.S. Treasury checks.  In sum, the conspiracy involved $720,530.40 in stolen U.S. Treasury checks.   

On November 15, 2015, a federal grand jury indicted Gary Bostick, Ana Bostick, and their co-conspirators.  For her part in the scheme, Ana Bostick was charged with conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; two counts of theft of public money, in violation of 18 U.S.C. § 641; and two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  She pleaded guilty to all charges.  For his part in the scheme, Gary Bostick was charged with conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; four counts of wire fraud, in violation of 18 U.S.C. § 1343; and four counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  He pleaded guilty to the conspiracy charge and to the wire fraud charges.  Pursuant to the plea agreement, the identity theft charges were dismissed.  

Judge White scheduled Gary Bostick’s sentencing for September 19, 2017, and Ana Bostick’s sentencing for November 14, 2017.  The maximum sentence for conspiracy to commit theft of public money is five years in prison and a fine of $250,000.  The maximum sentence for theft of public money is ten years in prison and a fine of $250,000.  The maximum sentence for wire fraud is 20 years in prison and a fine of $250,000.  The maximum sentence for aggravated identity theft is a mandatory minimum of two years in prison and a fine of $250,000.  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 Thomas Newman and Jose A. Olivera and Trial Attorney Gregory Bernstein are prosecuting this case with assistance from Jonathan Deville of the Tax Division.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.

A Pittsburg, California man pleaded guilty to conspiracy to commit theft of government money and wire fraud, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

According to documents filed with the court, while employed as a police officer, Gary Bostick, 39, participated in a conspiracy to cash stolen U.S. Treasury checks and file tax returns in the names of deceased individuals to obtain fraudulent refunds. Bostick filed some of the fraudulent returns from his residence and he and his co-conspirators directed the refund checks to addresses they could access. Bostick and his coconspirators, to include Hugh Robinson, also acquired stolen tax refund and social security checks, which they cashed at stores in various areas, including Kentucky. Bostick recruited and directed others who participated in the scheme. He admitted to causing a tax loss of more than $720,530.

Sentencing is scheduled for Sept. 19. Bostick faces a statutory maximum sentence of five years in prison for the conspiracy count and 20 years in prison for the wire fraud count. He also faces a period of supervised release, restitution and monetary penalties. Robinson was previously convicted at trial and sentenced to 144 months in prison for his role in the conspiracy.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorneys Thomas Newman and Jose A. Olivera, and Trial Attorney Gregory Bernstein of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

SAN FRANCISCO – Michael Inman was sentenced to 34 months in prison for his role in a bank fraud conspiracy, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The sentence was handed down June 7, 2017, by the Honorable Charles R. Breyer, U.S. District Judge, following a guilty plea in which Inman admitted he participated in a scheme to steal checks, open fraudulent bank accounts, write fraudulent checks, and deposit stolen and fraudulent checks as part of a bank fraud scheme.

Inman, 55, of Los Angeles, Calif., pleaded guilty on February 8, 2017, to participating in the bank fraud conspiracy.  According to the plea agreement, Inman admitted that beginning in January of 2013, he agreed with at least one other person to commit bank fraud.  The plea agreement describes a number of transactions in which Inman stole high value cashier’s checks from the victim and he and his co-conspirators used the stolen identity of the victim to write and deposit fraudulent checks.  For example, in January of 2013, members of Inman’s conspiracy opened a bank account in the name of the victim and, in February of 2013, a co-conspirator deposited into the account a stolen $99,000 cashier’s check that had been made out to the victim.   Similarly, Inman admitted that in June of 2013, co-conspirators opened another two fraudulent accounts and deposited a $99,000 check.  Further, Inman admitted participating in a scheme in which people were provided checks drawn on the fraudulent bank accounts.

A grand jury indicted Inman on February 11, 2016, charging him with one count of conspiracy to commit mail fraud, wire fraud, and bank fraud, in violation of 18 U.S.C. § 1349.  Pursuant to the plea agreement, Inman pleaded guilty to the conspiracy count.

In addition to the prison term, Judge Breyer sentenced Inman to pay $198,000 in restitution to the victim and to forfeit $198,000.  Judge Breyer ordered the defendant to begin serving his sentence on or before August 2, 2017. 

Assistant U.S. Attorneys Marc Price Wolf and Claudia A. Quiroz are prosecuting the case with assistance from Kevin Costello, Yanira Osorio, and Lance Libatique.  The prosecution is the result of an investigation by the FBI.

SAN JOSE – Anthonio Rueda-Ayala was sentenced today to 120 months in prison for his role in a conspiracy to possess with the intent to distribute methamphetamine announced United States Attorney Brian J. Stretch and Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin.  The sentence was handed down by the Honorable Edward J. Davila, U.S. District Judge, following the entry of Rueda-Ayala’s guilty plea to the charge on December 19, 2016.

According to his plea agreement, Rueda-Ayala, 31, of San Jose, admitted that beginning in June of 2013, and continuing through December of that year, he entered into an agreement with codefendant Marco Antonio Ochoa-Valladares (“Valladares”) and others to possess with the intent to distribute methamphetamine.  Specifically, Rueda-Ayala admitted he received approximately fifteen pounds of methamphetamine from Valladares so that he could distribute the methamphetamine in various places in California.  The defendant admitted that in August of 2013, he put the methamphetamine in a hidden compartment located under the front passenger seat of his sport utility vehicle and traveled from Modesto to Chowchilla, Calif.  Along the way, Rueda-Ayala stopped in Whittier and Corona to distribute portions of the methamphetamine.  As he was traveling through Chowchilla, Rueda-Ayala was pulled over by the California Highway Patrol.  A search of his vehicle revealed thirteen one-gallon sized zip-lock bags containing crystal methamphetamine in the hidden compartment of the car.  Rueda-Ayala acknowledged the zip-lock bags contained 6,334 net grams of actual methamphetamine.

On January 16, 2014, a federal grand jury indicted Rueda-Ayala, Valladares, and three other co-conspirators for their alleged respective roles in the conspiracy to distribute methamphetamine.  Each of the co-defendants was charged with participating in the same conspiracy to possess with intent to distribute methamphetamine, in violation of 21 U.S.C. § 846, and 21 U.S.C. § 841(a)(1).  Pursuant to his guilty plea, Ramirez pleaded guilty to the charge. 

In addition to the prison term, Judge Davila ordered Rueda-Ayala to serve a five-year period of supervised release.  Rueda-Ayala currently is out of custody on a secured bond.  Judge Davila ordered the defendant to surrender on or before August 16, 2017, to begin serving his sentence. Valladeras pleaded guilty to his role in the conspiracy on January 30, 2017, and on April 20, 2017, Judge Davila sentenced Valladeras to 132 months in prison and five years of supervised release. 

Assistant U.S. Attorney Jeffrey Backhus is prosecuting the case with the assistance of Ryka Barghi.  This case is the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.

The founder and chief executive officer of a now-defunct Silicon Valley technology start-up company was charged in an indictment unsealed yesterday in Orange County, California with allegedly defrauding several of his company’s former employees by luring them to join his company based on false and misleading statements about his educational, professional and financial background, and by allegedly enticing them to continue working for his company by providing them with forged documents purportedly reflecting payments for unpaid salaries.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Brian J. Stretch of the Northern District of California and Special Agent in Charge John F. Bennett of the FBI’s San Francisco Field Office made the announcement.
 
Isaac Choi, aka Yi Suk Choi, aka Yisuk Choi, aka Yi Suk Chae, aka Isaac Chae, (Choi), 36, most recently of Orange County and previously of Santa Clara, California, was charged with five counts of wire fraud. 

The indictment alleges that Choi, while working at his company, known publicly as WrkRiot, falsely claimed that he received a degree from a prestigious New York business school, worked as an analyst at a major financial instution, had access to significant personal wealth, and was investing significant amounts of that money into the company. The indictment further alleges that after certain WrkRiot employees came to learn that WrkRiot’s bank accounts did not contain the capital that Choi claimed to have invested, Choi falsely claimed that a significant portion of the money he pledged to invest was tied up overseas and elsewhere. 

The indictment further alleges that in August 2016, Choi sent a series of individualized emails to WrkRiot’s employees stating that salary payments were forthcoming, and attaching documents purporting to confirm wire transfers from a U.S.-based bank to the bank accounts of the recipient WrkRiot employees. In reality, as alleged in the indictment, Choi sent forged wire transfer confirmations in order to induce WrkRiot employees to continue working for the company without being paid.

An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI investigated the case. Trial Attorneys Cory E. Jacobs and L. Rush Atkinson of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jeffrey B. Schenk of the Northern District of California are prosecuting the case.

SAN FRANCISCO –Alan Weissman was sentenced today to 30 months in prison for bank fraud, embezzlement from an employee pension benefit plan, and making false statements in documents required by the Employee Retirement Income Security Act (ERISA), announced United States Attorney Brian J. Stretch and the Employee Benefits Security Administration of the Department of Labor.  The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge, following a guilty plea in which Weissman admitted he stole assets from ERISA plans for which he was supposed to be acting as a trustee.

Weissman, 72, of Rancho Palos Verdes, Calif., pleaded guilty on March 1, 2017, to the fraud scheme.  According to the plea agreement, Weissman served as a professional trustee and fiduciary of pension plans covered by ERISA.  Weissman admitted that he embezzled money from two of the pension plans for which he was a trustee.  Specifically, Weissman admitted he moved money from plan bank accounts to bank accounts under his control, and then used the money for his own purposes.  The defendant admitted he did so without the authorization or knowledge of the pension plan owners, their plan sponsors, or their participants.  Further, Weissman admitted that he attempted to hide the illegal transactions by falsely recording payments to himself in such a way as to make the payments look like legitimate plan expenses.  Weissman also admitted he altered account statements to conceal missing funds.  In sum, Weissman admitted embezzling $787,762 in plan funds. 

A grand jury indicted Weissman on February 11, 2016, charging him with five counts of bank fraud, in violation of 18 U.S.C. § 1344; six counts of wire fraud, in violation of 18 U.S.C. § 1343; two counts of theft or embezzlement from an employee benefit plan, in violation of 18 U.S.C. § 664; and one count of making false statements and concealment of facts in relation to documents required by ERISA, in violation of 18 U.S.C. § 1027.  Pursuant to the plea agreement, Weissman pleaded guilty to one count of bank fraud, the two embezzlement counts, and the false statements and concealment count.

In addition to the prison term, Judge Breyer sentenced Weissman to serve 3 years of supervised release.  Judge Breyer scheduled a hearing on August 23, 2017, to determine the amount of restitution.  Judge Breyer ordered the defendant to begin serving his sentence on or before September 6, 2017. 

Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with assistance from Bridget Kilkenny and Beth Margen.  The prosecution is the result of an investigation by the San Francisco Field Office of the Employee Benefits Security Administration of the Department of Labor.

SAN JOSE – Gary Thornhill pleaded guilty today to wire fraud and mail fraud in connection with a scheme to steal more than a million dollars from a client’s trust account, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The plea was accepted by the Honorable Lucy M. Koh, U.S. District Judge.

On March 24, 2016, a federal grand jury indicted Thornhill, 64, of Santa Clara, on charges that he used his position in a boutique insurance brokerage to withdraw funds from a widow’s client trust account.  During today’s plea proceedings, Thornhill admitted he is a licensed insurance broker who owned and operated a boutique insurance brokerage in Santa Clara.  In 1998, he sold an insurance policy to a married couple and, after the husband passed away in 2005, the widow became the sole insured of the plan.  In or about February 2008, Thornhill became the trustee of the entity that was the legal owner of the policy.  Thornhill acknowledged that he owed a fiduciary duty to the widow both as his client and as the trustee for the entity that managed the insurance policy.  Thornhill admitted that instead of acting in his client’s best interest, he transmitted written requests for funds to be drawn against the cash value of the widow’s insurance policy—he did so without the widow’s prior knowledge, consent, or authorization.  

Specifically, on October 27, 2011, Thornhill faxed a request for disbursement from the existing cash value of the policy in the net amount of $800,000.  After receiving the check in the mail, Thornhill deposited it into a bank account of which he was the only authorized signatory; he thereafter transferred all of the funds into a personal bank account that he controlled.  Further, Thornhill admitted he spent all of the funds he had obtained from the policy on personal expenses that were unrelated to his client.  In sum, as a result of his scheme, the defendant obtained nearly $1.5 million in unauthorized funds from his client’s policy that he used for his own personal benefit and purposes. 

The grand jury charged Thornhill with one count of wire fraud, in violation of 18 U.S.C. § 1343, and one count of mail fraud, in violation of 18 U.S.C. § 1341.  Pursuant to today’s plea agreement, Thornhill pleaded guilty to both counts without a written agreement.  Judge Koh has set sentencing for September 14, 2017, at 10:00 a.m.  The defendant remains free on bond. 

The defendant faces a maximum sentence of 20 years’ imprisonment, a fine of $250,000, plus restitution for each of the two counts with which he was charged.  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. Timothy J. Lucey is prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation the by the Federal Bureau of Investigation. 

OAKLAND –D’mar Dwain Jennings Conway was sentenced today to 220 months in prison, and ordered to serve a lifetime on supervised release, for sexual exploitation of a child, announced United States Attorney Brian J. Stretch and Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin.  The sentence was handed down by the Honorable Jeffrey S. White, U.S. District Judge. 

Conway, 29, of Oakland, pleaded guilty on March 7, 2017, to sexual exploitation of children, in violation of 18 U.S.C. §§ 2251(a) and (e).  According to his plea agreement, Conway admitted to coercing a victim under the age of 12, for whom Conway was a caregiver, to engage in sex acts or sexually explicit conduct for the purpose of producing a visual depiction of the conduct.  Conway admitted that numerous pictures of Conway engaging in sex acts with a child who was approximately three to six years old were taken inside Conway’s residence. 

According to the criminal complaint filed in the case, HSI agents executed a federal search warrant at Conway’s residence in May of 2016.  During the search of Conway’s residence, agents seized a digital video camera from Conway’s bedroom that contained a SanDisc SD card.  Forensic software recovered numerous image files showing Conway sexually molesting a young child.  The government’s sentencing memorandum explained that the number of images located on the SanDisc SD card taken from Conway’s bedroom was close to 25,000, which showed Conway’s molestation of a particular victim.  The government’s sentencing memorandum also indicated that agents located over 460 images of child pornography using forensic software to analyze Conway’s smartphone.

A federal grand jury indicted Conway on June 16, 2016, charging him with one count of sexual exploitation of children, in violation of 18 U.S.C. §§ 2251(a) and (e); and one count of possession and access with intent to view child pornography, in violation of 18 U.S.C. §§ 2252(a) and (b).  Pursuant to the plea agreement, Conway pleaded guilty to the first charge.

“The conduct for which Mr. Conway was sentenced today is reprehensible and Judge White’s decision to sentence the defendant to more than 18 years in prison reflects the seriousness of that conduct,” said U.S. Attorney Stretch.  “We are thankful for the tireless efforts of our federal partners at Homeland Security Investigations whose hard work has removed this sexual predator from our streets.”

“Although justice was served today with this lengthy sentence, the damage this defendant inflicted on his innocent victims cannot truly be measured,” said Ryan L. Spradlin, HSI Special Agent in Charge. “Working with our partners, Homeland Security Investigations Special Agents will continue to relentlessly pursue those who are involved in exploiting our society’s most vulnerable.”

During the sentencing hearing, Judge White described Conway’s conduct as “truly devastating,” noting that the young victims are sentenced to a life of damaged psyches.  Judge White noted that this was an extremely difficult case for the Court and indicated that fortunately federal district courts do not have many of these cases, which involve such grave consequences to young victims.

In addition to the prison term and a lifetime of supervised release, Judge White ordered Conway to register as a sexual offender as required by state law and to have no contact with the victims or minors without the permission of his probation officer.  Conway currently is in custody and will begin serving his sentence immediately.

Assistant U.S. Attorneys Christina McCall and Erin Cornell are prosecuting the case with the assistance of Vanessa Vargas Quant and Trina Khadoo.  The prosecution is the result of an investigation by Homeland Security Investigation’s Cyber Crimes Child Exploitation Group.

Members of the public who have information regarding suspected child predators or suspicious activity should contact HSI through the toll-free Tip Line at 1-866-DHS-2-ICE or by completing its online tip form at https://www.ice.gov/webform/hsi-tip-form.  Both are staffed around the clock by investigators.  Suspected child sexual exploitation or missing children may also be reported to the National Center for Missing & Exploited Children, an Operation Predator partner, via its toll-free 24-hour hotline, 1-800-THE-LOST.

SAN FRANCISCO – Muzaffar Hussain was sentenced today to 18 months in prison and ordered to pay $495,000 in restitution for his failure to account for and pay over trust fund taxes, announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.   The sentence follows a guilty plea entered last year in which Hussain admitted he did not account for and pay over funds withheld from the wages of employees of Crossroads Home Health Care, Inc. (Crossroads).

Hussain, 69, of Pleasanton, Calif., and Houston, Texas, pleaded guilty on June 10, 2016, to failing to account for and pay over the trust fund taxes.   According to the plea agreement, Hussain was the Chief Financial Officer of San Francisco Bay Area-based Crossroads.  Hussain admitted that for each pay period between July 1, 2004, and February 27, 2008, he received a Payroll Summary showing wages that had been paid and the employment taxes due.  After receiving the Payroll Summary, the defendant transferred funds from Crossroads’ bank account in an amount equal, or close to, the amount of employment taxes, to bank accounts he controlled.  Hussain used the transferred monies, including the trust fund taxes, for his own personal use, including funding his other business interests.  Defendant also admitted that he intentionally caused a payroll service to prepare and file false Employer’s Quarterly Federal Tax Returns [Forms 941], informing the payroll service that Crossroads had paid fewer wages than it actually paid. 

Hussain, was indicted by a federal grand jury on July 30, 2015.  He was charged with making or subscribing false tax returns, in violation of 26 U.S.C. § 7206(1); willful failure to truthfully account for and pay over taxes, in violation of 26 U.S.C. § 7202; and structuring transactions to evade reporting requirements, in violation of 31 U.S.C. § 5324(a)(3).  Pursuant to his guilty plea, Hussain pleaded guilty to one count of willful failure to truthfully account for and pay over taxes.  The remaining counts were dismissed.   

The sentence was handed down by the Honorable Jon Tigar, U.S. District Judge.  In addition to the prison term and restitution, Judge Tigar also sentenced the defendant to a three-year period of supervised release.  Judge Tigar ordered the defendant to begin serving the sentence on or before August 2, 2017. 

Assistant U.S. Attorney Cynthia Stier is prosecuting the case.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation. 

OAKLAND – Saleem Mohammad Khan was arrested today following an indictment by a federal grand jury in San Francisco charging him with conspiracy and seven counts of securities fraud, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.

According to the indictment unsealed this morning, Khan, 53, of Dublin, Calif., is alleged to have participated in an insider trading scheme in which an unnamed co-conspirator provided Khan with confidential, non-public, material, inside information about the financial performance of Ross Stores, Inc., then headquartered in Pleasanton, Calif.  Using the information, Khan allegedly bought and sold securities issued by Ross Stores traded on the NASDAQ stock exchange.  Khan sometimes tried to conceal this scheme to defraud by using the brokerage accounts of one or more third persons.  According to the indictment, between in or about August 2009 and late 2012, Khan and others generated illegal profits in excess of $8.2 million as a result of this insider trading scheme.  Khan is charged with one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349, and seven counts of securities fraud, in violation of 18 U.S.C. § 1348.

Khan was arrested this morning in Dublin, and made his initial appearance in federal court in Oakland today before U.S. Magistrate Judge Kandis A. Westmore.  Magistrate Judge Westmore released Khan on a $300,000 bond and scheduled further hearings, including arraignment, before U.S. Magistrate Judge Donna Ryu for June 7, 2017. 

An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the defendant faces a maximum sentence of 25 years in prison, and a fine of $250,000 for each count of conviction, plus restitution, if appropriate.  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. 

Assistant U.S. Attorneys Kyle F. Waldinger and Adam A. Reeves are prosecuting the case with the assistance of Allen Williams and Bridget Kilkenny.  The prosecution is the result of a five year investigation by the FBI and United States Securities and Exchange Commission.

SAN JOSE – Mario Cardenas was sentenced yesterday to 100 months in prison based on his conviction on charges of Racketeer Influenced and Corrupt Organizations (RICO) conspiracy and use of a firearm, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The sentence was handed down by the Honorable Edward J. Davila, U.S. District Judge, and represents the sixteenth conviction resulting from a proactive operation by the FBI’s Santa Clara County Violent Gang Task Force targeting gang members committing violent crimes and selling methamphetamine in San Jose. 

Cardenas, 22, of San Jose, pleaded guilty on February 22, 2017, to being a member of Sur Santos Pride (SSP) and to using a gun during an in relation to a crime of violence.  According to the plea agreement, Cardenas was a member of SSP for at least five years from January 2009 through January 2014.  Cardenas acknowledged SSP was made up of Sureño gang members and associates from San Jose who coordinated and engaged in criminal activity together.  The objective of SSP was to have its members and associates commit acts of violence including murder, attempted murder, and robbery for the benefit of the gang.  To carry out their violent crimes, the SSP gang regularly collected money for firearms for the gang.  Like other Sureño gangs in San Jose, SSP pledged their loyalty to the Mexican Mafia prison gang and followed its directives.  Cardenas admits in his plea agreement that he participated in meetings during which money was collected so SSP could buy more guns; SSP members decided to extort local pimps for money and to use violence (including assaults with firearms) to enforce SSP’s demands for money, if necessary; SSP members collected money to pay as “taxes” to the Mexican Mafia; and gang members decided which people would hold guns for the group. 

Cardenas was among 27 Sureño gang members in San Jose indicted on March 19, 2014, with various charges.  For his part in the scheme, Cardenas was charged with RICO conspiracy, in violation of 18 U.S.C. § 1962(d); conspiracy to commit murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5); conspiracy to assault with a dangerous weapon in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(6); and use and possession of a firearm in furtherance of a crime of violence, in violation of 18 U.S.C. § 924(c).  Pursuant to his plea agreement, Cardenas pleaded guilty to the RICO conspiracy and § 924(c) charges. 

The investigation leading to the indictment was part of the FBI’s crackdown on Sureño gangs in Santa Clara County.  Fifteen of the other charged defendant have already been sentenced as reflected in the chart below.  Several other defendants are scheduled to be sentenced in the coming months.  Three defendants are in custody pending trial, and a status conference is scheduled for June 5, 2017. 

Defendant

Charges

Sentence

JOSE DAVID SANCHEZ a/k/a “Joker”

Distribution of Methamphetamine

Sentenced on 10/21/14 to 77 months in prison

JUAN CHAVEZ

a/k/a “Dukester”

Distribution of Methamphetamine

Sentenced on 10/30/14 to 77 months in prison

ANDY LAMB LOPEZ a/k/a “Solo”

Felon in Possession of Firearm

Sentenced on 2/23/15 to 45 months in prison

MIGUEL MIRANDA

a/k/a “Payaso”

Distribution of Methamphetamine

Sentenced on 2/23/15 to 120 months in prison

MARIO GUERRERO

a/k/a “Lil Junior”

Distribution of Methamphetamine

Sentenced on 8/27/15 to 85 months in prison

FRANCISCO RAMIREZ a/k/a “Cisco”

Distribution of Methamphetamine

Sentenced on 11/2/15to 46 months in prison

JORGE RODRIGUEZ a/k/a “Brownie”

RICO Conspiracy and VICAR Attempted Murder

Sentenced on 2/1/16 to 160 months in prison

RICARDO MONTOYA

a/k/a “Necio”

RICO Conspiracy and VICAR Attempted Murder

Sentenced on 5/16/16 to 108 months in prison

JOSE MORENO

a/k/a “Lil Chocolate”

RICO Conspiracy and Use of a Firearm

Sentenced on 8/4/16 to 160 months in prison

MARCOS LOMELI

a/k/a “Cookie”

RICO Conspiracy and Use of a Firearm

Sentenced on 9/26/16 to 127 months in prison

FERNANDO CRUZ

a/k/a “Nano”

RICO Conspiracy

Sentenced on 11/10/16 to 87 months in prison

FRANCISCO FONSECA

a/k/a “Griffo”

RICO Conspiracy, Distribution of Methamphetamine, Felon in Possession of a Firearm

Sentencing Scheduled for 6/5/17

DANIEL CORTEZ

a/k/a “Lil Temper”

RICO Conspiracy

Sentenced on 12/19/16 to 60 months in prison

FELIX HERNANDEZ CRISTOBAL a/k/a “Pato”

RICO Conspiracy

Sentenced on 12/19/16 to 80 months in prison

BENITO CANALES

a/k/a “Dopey”

RICO Conspiracy

Sentenced on 3/10/17 to 24 months in prison

DENNIS SANDOVAL

a/k/a “Criminal”

VICAR Attempted Murder

Sentenced on 1/23/17 to 108 months in prison

Assistant United States Attorneys Stephen Meyer, Cynthia Frey, and Amie Rooney are prosecuting the case with the assistance of paralegals Nina Burney and Kevin Costello.   The case is the result of an investigation by the FBI.

SAN FRANCISCO –Howard Hsu was sentenced to 33 months in prison and his mother, Tracy Chang, was sentenced to 12 months and a day in prison today following their convictions on tax fraud charges, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.  The sentences were handed down by the Honorable William H. Orrick, U.S. District Judge, following a one-week trial at the conclusion of which a jury found the defendants guilty of conspiring to file fraudulent corporate income tax returns, filing false tax returns, and aiding the preparation of false tax returns. 

According to the evidence presented at trial, Hsu, 36, owned and operated Didsee Corporation (Didsee), a business incorporated in Nevada, that provided advertisement marketing services to online websites and marketplaces.  Chang, 65, was Disdee’s bookkeeper and listed as the President, Secretary, Treasurer, and Director.  Chang opened bank accounts for the business, transferred money between accounts, signed the company’s tax returns, and paid Didsee’s bills.

“Today’s sentences are a cogent reminder to all business owners that the obligation to faithfully pay taxes amounts to more than a simple duty to be fair and honest,” said U.S. Attorney Stretch.  “It is a legal obligation that, if flouted, can land you in prison.”

“Every taxpayer is required to file accurate returns and to pay their fair share,” said Acting Deputy Assistant Attorney General Goldberg.  “Mr. Hsu ignored that responsibility, and with today’s prison sentence is held fully to account for deducting personal expenses as business expenses and filing false returns.”

“We want everyone who files a tax return to take advantage of the deductions and credits to which they are entitled by law, however, no one is entitled to defraud the United States and the American taxpayers,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI).   “After paying a large tax bill, Tracy Chang and her son, Howard Hsu endeavored to virtually eliminate any future tax due from their company, Didsee Corporation. Those who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t. IRS-CI and the Department of Justice will investigate and prosecute those who violate our tax system.”
 
The evidence at trial established that Hsu and Chang conspired together to file fraudulent 2008 through 2009 corporate income tax returns, and an amended 2007 corporate tax return, cheating the Internal Revenue Service (IRS) out of approximately $500,000.  Hsu provided false summaries to Didsee’s return preparers, which claimed business expenses that were not incurred and included Hsu’s personal expenses.  Chang signed the fraudulent returns as Didsee’s President.    On January 29, 2015, a federal grand jury indicted Hsu and Chang; the indictment charged Chang with two counts of making and subscribing false tax returns, in violation of 26 U.S.C. § 7206(1); Hsu with three counts of aiding and assisting the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2); and both defendants with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371.  One of the aiding and assisting charges against Chang was dismissed before trial and on February 13, 2017, the jury found defendants guilty on all of the remaining charges.
 
In addition to the prison terms, Judge Orrick ordered Hsu and Chang both to serve three years of supervised release, to pay restitution to the IRS in the amount of $396,306, and to pay costs of prosecution in the amount of $8,570.95. Further, Judge Orrick ordered Hsu to pay a fine of $75,000 and Chang to pay a fine of $7,500.  Judge Orrick ordered the defendants to surrender on or before August 1, 2017, to begin serving their sentence.
 
Assistant U.S. Attorney Colin Sampson and Trial Attorney Matthew J. Kluge of the Tax Division, who prosecuted the case.  Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS–Criminal Investigation who conducted the investigation.

San Francisco residents, Howard Hsu and his mother, Tracy Chang, were sentenced to prison today following their convictions on tax fraud charges, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

Hsu was ordered to serve 33 months in prison and Chang was ordered to serve 12 months and one day in prison.  Hsu and Chang were found guilty following a one-week trial for conspiring to file fraudulent corporate income tax returns, filing false tax returns and aiding the preparation of false tax returns.  According to the evidence presented at trial, Hsu, 36, owned and operated Didsee Corporation (Didsee), a business incorporated in Nevada, that provided advertisement-marketing services to online websites and marketplaces.  Tracy Chang, 65, was Disdee’s bookkeeper and listed as the President, Secretary, Treasurer and Director.  Chang opened bank accounts for the business, transferred money between accounts, and paid Didsee’s bills.

“Every taxpayer is required to file accurate returns and to pay their fair share,” said Acting Deputy Assistant Attorney General Goldberg. “Mr. Hsu ignored that responsibility, and with today’s prison sentence is held fully to account for deducting personal expenses as business expenses and filing false returns.”

“Today’s sentences are a cogent reminder to all business owners that the obligation to faithfully pay taxes amounts to more than a simple duty to be fair and honest,” said U.S. Attorney Stretch.  “It is a legal obligation that, if flouted, can land you in prison.”

“We want everyone who files a tax return to take advantage of the deductions and credits to which they are entitled by law, however, no one is entitled to defraud the United States and the American taxpayers,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI).   “After paying a large tax bill, Tracy Chang and her son, Howard Hsu endeavored to virtually eliminate any future tax due from their company, Didsee Corporation. Those who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t. IRS-CI and the Department of Justice will investigate and prosecute those who violate our tax system.”

Hsu and Chang conspired together to file fraudulent 2008 through 2009 corporate income tax returns, and an amended 2007 corporate tax return, cheating the IRS out of approximately $500,000.  Hsu provided false summaries to Didsee’s return preparers, which claimed business expenses that were not incurred and included Hsu’s personal expenses.  Chang signed the fraudulent returns as Didsee’s President.   

In addition to the terms of imprisonment, Hsu and Chang were ordered to serve three years of supervised release and to pay $396,306 in restitution to the IRS and to pay a fine of $75,000 and $7,500, respectively.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS-Criminal Investigation, who conducted the investigation and assisted the prosecution team at trial, and Assistant U.S. Attorney Colin Sampson and Trial Attorney Matthew J. Kluge of the Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

SAN FRANCISCO – Edward Shia was sentenced to 84 months in prison for possession of child pornography, announced United States Attorney Brian J. Stretch and Homeland Security Investigations (“HSI”) Special Agent in Charge Ryan Spradlin.  The sentence was handed down yesterday by the Honorable Vince Chhabria, U.S. District Judge.

According to papers filed with the court, Shia, 32, of San Francisco, admitted that he searched for and downloaded child pornography online.  A search of Shia’s San Francisco residence resulted in the discovery of more than 12,400 images and 150 videos of child pornography. The majority of the videos depicted children between the ages of three and ten years of age.  Shia admitted in an interview that he used the term PTHC (“pre-teen hard core”) to search for and download images of child pornography. He further admitted that he viewed downloading these images as a “release” and that he continued to battle with his sexual desires for children.  On May 7, 2015, a federal grand jury indicted Shia, charging him with possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B).  Judge Chhabria found Shia guilty of the charge, following a bench trial based on stipulated facts agreed upon by the parties, on December 6, 2016.

In addition to the prison term, Judge Chhabria ordered Shia to serve a five-year period of supervised release.  Shia has been free on bond; Judge Chhabria ordered him to surrender on or before July 21, 2017, to begin serving his sentence. 

Assistant U.S. Attorney Rita Lin is prosecuting the case.  The prosecution is the result of an investigation by the HSI, the San Jose Police Department, and the San Francisco Police Department.

Suspected child sexual exploitation or missing children may be reported to the National Center for Missing & Exploited Children, via its toll-free 24-hour hotline, 1-800-843-5678.

SAN JOSE - Grant Ridder was arraigned yesterday on federal charges of production of child pornography, distribution and possession of child pornography, cyberstalking, and coercion and enticement of a minor, announced United States Attorney Brian J. Stretch and United States Secret Service Assistant Special Agent in Charge Philip A. Pesavento.  The arraignment follows an indictment handed down by a federal grand jury on May 18, 2017.

Ridder, 26, is a resident of Mountain View.  According to a search warrant filed publicly in the case, law enforcement agents began investigating Ridder after a minor victim, 16, reported that her Facebook account had been accessed without her consent and sexually explicit photographs of her had been posted on her Facebook page.  An investigation determined that Ridder owned the IP address that accessed the victim’s account when the photographs were being posted.  The minor victim had recently ended a relationship with Ridder. 

The search warrant also identifies a second minor victim.  The second victim, 13, reported that Ridder requested that she send him sexually explicit photographs of herself.  When she refused, Ridder told her that he would show her mother other photographs the victim had previously sent to him depicting the victim in a state of undress.  According to the search warrant, the victim reported that she “became scared” and took several sexually explicit photographs and sent them to Ridder.  According to the warrant, Ridder admitted in an interview with law enforcement that he distributed the sexually explicit photographs to others. 

In the indictment, Ridder is charged with two counts of production of child pornography, in violation of 18 U.S.C. § 2251(a); three counts of distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2); one count of possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B); three counts of cyberstalking, in violation of 18 U.S.C. § 2261A; and one count of coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b). 

An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.  If convicted of violating 18 U.S.C. § 2251(a), the defendant faces a mandatory minimum prison sentence of 15 years, a maximum sentence of 30 years, and a fine of $250,000 plus restitution, if appropriate.  If convicted of violating 18 U.S.C. § 2252(a)(2), the defendant faces a mandatory minimum prison sentence of 5 years, a maximum sentence of 20 years, and a fine of $250,000 plus restitution, if appropriate.  If convicted of violating 18 U.S.C. § 2252(a)(4)(B), the defendant faces a maximum prison sentence of 10 years and a fine of $250,000, plus restitution, if appropriate.  If convicted of violating 18 U.S.C. § 2261A(2), the defendant faces a maximum prison sentence of 5 years and a fine of $250,000 plus restitution, if appropriate.  If convicted of violating 18 U.S.C. § 2422(b), the defendant faces a mandatory minimum prison sentence of 10 years, a maximum sentence of life, and a fine of $250,000 plus restitution, if appropriate.  Additional fines and a term of supervised release also may be imposed, 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.

Ridder was arrested and remanded to the custody of the U.S. Marshal on May 24, 2017.  His next court appearance is scheduled for 1:30 p.m. on May 31, 2017, before United States Magistrate Judge Nathanael Cousins for a hearing to determine whether he should be released or remain in custody pending trial.

Assistant U.S. Attorney Maia Perez is prosecuting the case.  The prosecution is the result of an investigation by the United States Secret Service, the Contra Costa District Attorney’s Office, the Stockton Police Department, and the Martinez Police Department.

SAN FRANCISCO – Howard Webber was sentenced yesterday to serve 84 months in prison for stealing identities and conspiring to file fraudulent tax returns, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg, of the Justice Department’s Tax Division.  The sentence follows a two-week trial before the Honorable Richard Seeborg, U.S. District Judge, at the conclusion of which a jury found Webber guilty of the criminal conduct.

On January 24, 2017, a jury found Webber, 52, of San Francisco, guilty of conspiring to commit mail and wire fraud, mail fraud, and aggravated identity theft.  According to the evidence presented at trial, from June 2010 through January 2012, Webber conspired with Clifford Bercovich to obtain the names and social security numbers of fellow inmates while Webber was incarcerated at several prisons and jails, including San Quentin State Prison, Santa Clara County jail, and the Milwaukee Secure Detention Facility in Milwaukee, Wisconsin. The evidence demonstrated Webber and Bercovich convinced inmates to give them their names and social security numbers by explaining that they could help the inmates take advantage of government stimulus programs or secret tax loopholes.  Webber and Bercovich recruited inmates to help them solicit the identities of other inmates and created a limited-liability company, Inmate Assets Recovery and Liquidation Services LLC, to make their scheme appear legitimate.

Webber and Bercovich used the identities they obtained to file false federal income tax returns with the Internal Revenue Service (IRS). The returns falsely represented that the individuals earned wages or other income.  The returns also fraudulently claimed refunds.  Webber and Bercovich opened a post office box which they listed on each false return and used to receive the fraudulently obtained refund checks. In some cases, the defendants also directed that refunds be wired to bank accounts, which they opened and controlled.  According to the evidence presented at trial, Webber and Bercovich filed more than 700 false returns and received over $600,000 in fraudulently obtained income tax refunds. 

In addition to the term of prison imposed, Judge Seeborg also ordered Webber to serve 3 years of supervised release.  A hearing has been scheduled for June 12, 2017, to determine restitution to the Internal Revenue Service.

Assistant U.S. Attorney William Frentzen and Trial Attorneys Gregory Bernstein and Arthur J. Ewenczyk of the Tax Division prosecuted the case.  U.S. Attorney Stretch and Acting Deputy Assistant Attorney General Goldberg thanked the special agents of IRS–Criminal Investigation who conducted the investigation.

A San Francisco man was sentenced to serve 84 months in prison yesterday for stealing identities and conspiring to file fraudulent tax returns, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg, of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

In January, at the conclusion of a two-week trial, a federal jury in the Northern District of California convicted Howard Webber, 52, of conspiring to commit mail and wire fraud, mail fraud, and aggravated identity theft.  According to the evidence presented at trial, from June 2010 through January 2012, Webber conspired with Clifford Bercovich to obtain the names and social security numbers of fellow inmates while Webber was incarcerated at several prisons and jails, including San Quentin State Prison and Santa Clara County jail in California, and the Milwaukee Secure Detention Facility in Milwaukee, Wisconsin.

Webber and Bercovich convinced inmates to give them their names and social security numbers by explaining that they could help the inmates take advantage of government stimulus programs or secret tax loopholes.  Webber and Bercovich recruited inmates to help them solicit the identities of other inmates, and created a limited-liability company, Inmate Assets Recovery and Liquidation Services LLC, to make their scheme appear legitimate.

Webber and Bercovich used the identities they obtained to file false federal income tax returns with the Internal Revenue Service (IRS). The returns falsely represented that the individuals earned wages or other income and fraudulently claimed refunds.  Webber and Bercovich opened a post office box, which they listed on each false return and used to receive the fraudulently obtained refund checks. In some cases, they also directed that refunds be wired to bank accounts, which they opened and controlled.  According to the evidence presented at trial, Webber and Bercovich filed more than 700 false returns and received over $600,000 in fraudulently obtained income tax refunds.

In addition to the term of prison imposed, Webber was also ordered to serve three years of supervised release.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS–Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney William Frentzen and Trial Attorneys Gregory Bernstein and Arthur J. Ewenczyk of the Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

SAN FRANCISCO – Brandon Robinson was sentenced today to serve 54 months in prison for aggravated identity theft and conspiring to steal government funds, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. The sentence, handed down by the Honorable Jeffrey S. White, U.S. District Judge, follows a guilty plea entered earlier this year.

According to documents filed with the court, from about August 2013 through April 2015, Robinson, 35, of El Cerrito, and his co-conspirators, stole names of deceased individuals and used them to file federal tax returns seeking refunds. Robinson paid cashiers at stores in the Richmond-area to cash the fraudulently obtained refund checks. Robinson also cashed stolen tax refund and social security benefit checks that were intended for other individuals. Robinson admitted that he and his co-conspirators attempted to cash more than $500,000 in fraudulently obtained and stolen checks. 

On November 5, 2015, a federal grand jury indicted Robinson and charged him with one count of conspiracy to commit theft of public money, in violation of 18 U.S.C. § 371; three counts of theft of public money, in violation of 18 U.S.C. § 641, and three counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  On February 14, 2017, Robinson pleaded guilty to the conspiracy count and one count of aggravated identity theft.  Pursuant to the plea agreement, the remaining counts were dismissed. 

In addition to the term of prison imposed, Judge White also ordered Robinson to serve three years of supervised release and to pay $30,111.90 in restitution to the Internal Revenue Service.  Judge White ordered Robinson to begin serving his prison term on July 13, 2017.

Assistant U.S. Attorneys Thomas Newman and Jose A. Olivera, and Trial Attorney Gregory Bernstein of the Justice Department Tax Division prosecuted the case.   U.S. Attorney Stretch and Acting Deputy Assistant Attorney General Goldberg commended the special agents of IRS–Criminal Investigation who conducted the investigation.

An El Cerrito, California, man was sentenced to serve 54 months in prison today for aggravated identity theft and conspiring to steal government funds, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

According to documents filed with the court, from about August 2013 through April 2015, Brandon Robinson, 35, and his co-conspirators, stole names of deceased individuals and used them to file federal tax returns seeking refunds. Robinson paid cashiers at stores in the Richmond-area to cash the fraudulently obtained refund checks. Robinson also cashed stolen tax refund and social security benefit checks that were intended for other individuals. Robinson admitted that he and his co-conspirators attempted to cash more than $500,000 in fraudulently obtained and stolen checks.

In addition to the term of prison imposed, Robinson was also ordered to serve 36 months of supervised release and to pay $30,119 in restitution to the Internal Revenue Service.  Robinson previously pled guilty in February to aggravated identity theft and conspiracy to commit theft of public money.  

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorneys Thomas Newman and Jose A. Olivera, and Trial Attorney Gregory Bernstein of the Justice Department Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

SAN FRANCISCO – Gregg Jaclin, an attorney and resident of New Jersey, was indicted today for his role in an alleged securities fraud scheme, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  According to the indictment, Jaclin, through the law firms at which he worked, conspired with another individual in a scheme to create and sell public shell companies with no ongoing business but which, in on their Securities and Exchange Commission (SEC) filings, were represented to be owned and controlled by various individuals and were legitimate businesses.  In reality, they were shell companies created by one individual and meant for one purpose—selling them to others, who in some cases used them as vehicles for securities market manipulation schemes.  Jaclin and the other individual also allegedly obstructed multiple SEC investigations into their conduct.

According to the indictment filed today, since at least March of 2008, Jaclin, 47, of Princeton Junction, New Jersey, was a licensed attorney who specialized in creating and taking public small companies.  After helping companies through what the indictment alleges was referred to as his “self-filing process” to take companies public, Jaclin would frequently facilitate the sale of the companies that he and his co-conspirator created, in a “reverse merger” with a privately traded company owned by others.  According to the indictment, Jaclin conspired to misuse this process in a way that violated federal law.  Specifically, with Jaclin’s knowledge, his co-conspirator allegedly found individuals who would serve as sham nominee chief executive officers (CEOs) of the companies.  These nominee CEOs, on paper, served as majority shareholders and sole directors of the companies.  Nevertheless, in reality they did little more than receive payment for signing documents.  The nominee CEOs exerted no control over the companies and took directions from Jaclin’s co-conspirator.  Similarly, Jaclin’s co-conspirator allegedly recruited sham minority shareholders as part of the scheme.  With Jaclin’s knowledge, money was fronted to these shareholders to purchase the securities of the companies, and fraudulent business plans were drafted for the companies, purporting to demonstrate the companies had real plans to engage in business and grow.  In actuality, the companies were created and maintained for the sole purpose of being sold as a shell to purchasers who, either individually or as a group, wished to control all of the shares of the company.  The companies were then, in most cases, used as a vehicle for a reverse merger, and the stock of the resulting companies was, in some instances, subject to market manipulation.

To assist in the scheme, Jaclin allegedly prepared and directed the filing of numerous fraudulent documents to create the companies, register their shares for public sale, and sell the companies in a reverse-merger transaction.  According to the indictment, the documents that Jaclin and his co-conspirator filed with the SEC contained misrepresentations, promises, and omissions that allowed the shares of the companies to become publicly tradable.  Following the reverse mergers, later investors who looked at the SEC filings would be misled into believing that the companies had legitimate histories of actual business and numerous shareholders when, in reality, the original company was a shell with only one person controlling all the stock.  Jaclin is also accused of corruptly obstructing and impeding the proceedings on the SEC with respect to two separate companies.

In sum, Jaclin was charged with conspiracy, in violation of 18 U.S.C. § 371; securities fraud, in violation of 15 U.S.C. §§ 78j(b), 78ff and 17 C.F.R. § 240.10b-5; false filing under the Securities Exchange Act of 1933, in violation of 15 U.S.C. §§ 78j(b) and 78ff; false filing under the Securities Act of 1933, in violation of 15 U.S.C. §§ 77q(a) and 77x; scheme to conceal a material fact from a government agency, in violation of 18 U.S.C. § 1001(a)(1); false writings to a government agency, in violation of 18 U.S.C. § 101(a)(3); and two counts of obstruction of the proceedings of the SEC, in violation of 18 U.S.C. § 1505. 

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the maximum penalty for conspiracy is five years’ imprisonment and a $250,000 fine, the maximum penalty for securities fraud and false filing under the Exchange Act of 1934 is 20 years’ imprisonment and a $5,000,000 fine; the maximum penalty for false filing under the Securities Act of 1933 is five years’ imprisonment and a $10,000 fine; the maximum penalty for scheme to conceal a material fact from a government agency, false writings to a government agency, and each count of obstruction of proceedings before the Securities and Exchange Commission is five years of imprisonment and a $250,000 fine.  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.

Jaclin is scheduled to appear on June 8, 2017, at 9:30 a.m., before U.S. Magistrate Judge Laurel Beeler for arraignment.    

Assistant U.S. Attorney Benjamin Kinglsey is prosecuting the case with the assistance of Claudia Hyslop, Denise Oki, and Bridget Kilkenny.  The prosecution is the result of an investigation by the Federal Bureau of Investigation.

SAN FRANCISCO- Steve McVay was sentenced today to 56 months in prison for concealing assets in a bankruptcy proceeding, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The sentence was handed down by the Honorable Lucy H. Koh, U.S. District Judge, following a guilty plea entered by McVay on January 25, 2017.

According to papers filed in connection with the case, McVay, 68, of Morgan Hill, Calif., bought and sold real estate and did “hard-money” lending, whereby he regularly acquired real estate in foreclosure actions.  Between 2004 to 2009, McVay became involved in several business ventures that ultimately failed.  McVay filed a voluntary petition for bankruptcy in the U.S. Bankruptcy Court for the Northern District of California on February 24, 2010.  Through the petition, McVay sought relief for approximately $1.5 million in debts.  McVay admitted that he signed documents knowingly and fraudulently concealing two bank accounts.  One of the accounts McVay opened in his wife’s name and he used the account to receive and transmit funds under his exclusive control.  The two bank accounts contained a total of more than $45,000.  McVay acknowledged he signed the bankruptcy documents with the intent to hide assets from his creditors, the United States Trustee, the court, and other persons charged with control or custody of the bankruptcy estate.

A federal grand jury indicted McVay on April 28, 2016, charging him with two counts of concealing assets in bankruptcy, in violation of 18 U.S.C. § 152(1), and one count of presenting false testimony in bankruptcy proceedings, in violation of 18 U.S.C. § 152(2).  Pursuant to the plea agreement, McMay pleaded guilty to the first count of concealment; the remaining charges were dismissed at sentencing.

In addition to the prison sentence, Judge Koh sentenced McVay to three years of supervised release and scheduled a hearing for June 14, 2017, to determine the amount of restitution McVay must pay his victims. McVay will begin serving his prison sentence on June 28, 2017.

Assistant U.S. Attorney Timothy Lucey is prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation by the FBI.

SAN FRANCISCO- A federal grand jury indicted 23 individuals, 22 of whom are Bay Area residents, for their respective roles in a conspiracy to engage in an extensive drug trafficking network, announced United States Attorney Brian J. Stretch and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin.  The indictment was unsealed today.

The seventeen-count indictment charges that between March 22, 2016, and April 27, 2017, nineteen of the defendants engaged in a conspiracy to distribute at least 500 grams of methamphetamine and more than five kilograms of cocaine and heroin.  In addition, the indictment accuses all but one of the defendants of possession with intent to distribute drugs.  The defendant not accused of possessing and distributing drugs is charged with being a felon in possession of a firearm.  The precise charges against each defendant, as well as their ages and places of residence, are set out in the chart below.

Defendant

Age/

Residence

Charges

Statute

Felix Galindo

32/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 5 Kilograms or More of Cocaine

21 U.S.C.

§§ 841(a)(1) and (b)(1)(B)(ii)(II)

Natalie Hernandez

21/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 5 Kilograms or More of Cocaine

21 U.S.C.

§§ 841(a)(1) and (b)(1)(B)(ii)(II)

Pedro Lopez-Galindo

30/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 5 Kilograms or More of Cocaine

21 U.S.C.

§§ 841(a)(1) and (b)(1)(B)(ii)(II)

Carolina Soto

28/

Daly City

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 5 Kilograms or More of Cocaine

21 U.S.C.

§§ 841(a)(1) and (b)(1)(B)(ii)(II)

Rafael Romero-Rodriguez

20/

Fresno

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute Cocaine 500 Grams or More of Cocaine

21 U.S.C. § 841(a)(1) and (b)(1)(B)(ii)(II)

Ismael Rodriguez Loreto

33/

Fresno

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute Cocaine 500 Grams or More of Cocaine

21 U.S.C. § 841(a)(1) and (b)(1)(B)

Possession With Intent to Distribute 5 Kilograms or More of Cocaine

21 U.S.C. § 841(a)(1) and (b)(1)(B)(ii)(II)

Carlos Ferran Leon

33/

Hayward

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. § 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

(2 Counts)

21 U.S.C. § 841(a)(1) and (b)(1)(A)(viii)

Possession With Intent to Distribute 28 Grams or More of Cocaine Base

21 U.S.C. § 841(a)(1) and (b)(1)(B)(iii)

Possession With Intent to Distribute 50 Grams or More of A Mixture and Substance Containing Methamphetamine

(5 counts)

21 U.S.C. § 841(a)(1) and (b)(1)(B)(viii)

Possession With Intent to Distribute Heroin

(2 counts)

21 U.S.C. § 841(a)(1) and (b)(1)(C)

Jesus Chavez Espinoza

26/

San Jose

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C.

§§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(A)(viii)

Efrain Torres

28/

San Jose

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(A)(viii)

Henry Javier Lopez Alverto

29/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Xavier Eriberto Sanchez Hernandez

25/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 50 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(B)(viii)

Juan Jose Flores Jr.

38/

Daly City

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Yader Rubi-Morales

25/

San Pablo

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Branko Budimir

29/

San Francisco

Felon in possession of a firearm

18 U.S.C. § 922(g)

Julio Covarrubias

38/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute Heroin

(3 counts)

1. U.S.C. § 841(a)(1) and (b)(1)(C)

Possession With Intent to Distribute 50 Grams or More of A Mixture and Substance Containing Methamphetamine

(5 counts)

1. U.S.C. § 841(a)(1) and (b)(1)(B)(viii)

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(A)(viii)

Theresa Carter

27/

San Francisco

Possession With Intent to Distribute 28 Grams or More of Cocaine Base

21 U.S.C. § 841(a)(1) and (b)(1)(B)(iii)

Jose Villanueva-Canchola

28/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Anthony Balenzuela

56/

San Francisco

Possession with Intent to Distribute 50 Grams or More of a Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(B)(viii)

Lillian Larios

37/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Antonio Serranorivas

21/

San Francisco

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(A)(viii)

Stephen Asmus

25/

Redding

Possession With Intent to Distribute Heroin

21 U.S.C. § 841(a)(1) and (b)(1)(C)

Lucy Lopez

40/

San Leandro

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C.

§§ 846, 841(a)(1) and (b)(1)(A)

Robert Zander Seaton

33/

San Francisco

Possession With Intent to Distribute 50 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. § 841(a)(1) and (b)(1)(A)

The indictment follows the filing of a criminal complaint on April 25, 2017, and updates the charges against the six defendants who were named in that original complaint: Pedro Lopez-Galindo, Felix Lopez-Galindo, Natalie Hernandez, Carolina Soto, Ismael Rodriguez-Loreto, and Rafael Romero-Rodriguez.  According to the complaint, the DEA had been investigating a drug trafficking organization since November of 2016, and believed that the organization distributed large quantities of heroin, cocaine, and methamphetamine in California and other states.  The complaint accuses Felix Lopez-Galindo of running the organization with the help of his brother, Pedro Lopez-Galindo.  Pedro is described in the complaint as Felix’s “right-hand man.”   Also described in the complaint are two seizures by the DEA of cocaine.  As a result of the first seizure, on April 13, 2017, the DEA intercepted at least 500 grams of cocaine headed from Fresno to Northern California.  The second seizure occurred April 20, 2017, and resulted in the confiscation of more than 5 kilograms of cocaine.  

The indictment unsealed today includes all the charges made in the original complaint and adds an additional 17 defendants.  The indictment also describes more than a dozen additional transactions in which two or more of the defendants are alleged to have possessed, purchased, or sold cocaine, heroin, or methamphetamine. 

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.  The maximum statutory penalties for the crimes of which the defendants have been accused are as follows:

Conspiracy to Possess With Intent to Distribute 5 Kilograms or More of Cocaine, 500 Grams or More of Methamphetamine, and Heroin

21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A)

Minimum 10 years prison

Maximum lifetime imprisonment

Minimum 5 years supervised release following incarceration

Maximum lifetime supervised release

Maximum $10,000,000 fine

Possession With Intent to Distribute Cocaine 500 Grams or More of Cocaine

21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(ii)(II)

Minimum 5 years prison

Maximum 40 years

Minimum 4 years supervised release following incarceration

Maximum lifetime supervised release

Maximum $5,000,000 fine

Possession With Intent to Distribute Cocaine 5 Kilograms or More of Cocaine

1. U.S.C. §§ 841(a)(1) and (b)(1)(A)(ii)(II)

Minimum 10 years prison

Maximum lifetime imprisonment

Minimum years supervised release following incarceration

Maximum lifetime supervised release

Maximum $10,000,000 fine

Possession With Intent to Distribute 500 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. §§ 841(a)(1) and (b)(1)(A)(viii)

Minimum 10 years imprisonment

Maximum lifetime imprisonment

Minimum 5 years supervised release following incarceration

Maximum lifetime supervised release

Maximum $10,000,000 fine

Possession With Intent to Distribute 28 Grams or More of Cocaine Base

21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)

Minimum 5 years prison

Maximum 40 years

Minimum 4 years supervised release following incarceration

Maximum lifetime supervised release

Maximum $5,000,000 fine

Possession With Intent to Distribute 50 Grams or More of A Mixture and Substance Containing Methamphetamine

21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(viii)

Minimum 5 years prison

Maximum 40 years

Minimum 4 years supervised release following incarceration

Maximum lifetime supervised release

Maximum $5,000,000 fine

Possession With Intent to Distribute Heroin

1. U.S.C. §§ 841(a)(1) and (b)(1)(C)

Maximum 20 years imprisonment

Maximum lifetime supervised release following incarceration

Minimum 3 years supervised release

Maximum $1,000,000 fine

Felon in Possession of a Firearm

18 U.S.C. § 922(g)(1)

Maximum 10 years in prison

Maximum 3 years supervised release

Maximum $250,000 fine

Further, additional fines, forfeitures, denial of federal benefits, deportation, 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. 

Several of the defendants were arrested yesterday as part of a criminal enforcement operation.   The coordinated arrests and searches took place in San Francisco, Daly City, and San Jose.  The first district court appearance for defendants is on June 15, 2017, before the Honorable William H. Orrick

Assistant U.S. Attorneys Sheila Armbrust and Rita Lin are prosecuting the case.  The prosecution is the result of an investigation by the DEA with assistance from the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives; the U.S. Marshals Service; Daly City Police Department Redwood City Police Department; San Francisco Police Department; South San Francisco Police Department; California Highway Patrol; San Bruno Police Department; San Mateo Narcotics Task Force; Alameda County Sheriffs Office; Richmond Police Department; San Francisco Sherriff’s Department; and the Long Beach Police Department.  The investigation is part of this district’s Organized Drug Enforcement Task Force program.

SAN FRANCISCO - A federal grand jury indicted Bryan Petersen and Ryan Michael Spencer yesterday with conspiracy to distribute and receive child pornography, distribution of child pornography, receipt of child pornography, and possession of child pornography, announced United States Attorney Brian Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.

According to the papers filed publicly in the case, the FBI began investigating Petersen, 24, of Tiburon, after a witness reported to law enforcement that Petersen had child pornography on his computer and in a Dropbox account.  After executing a search warrant at Petersen’s residence, the FBI learned that Petersen had allegedly received thousands of images and videos containing child pornography from Spencer, 19, of Aptos.  The FBI also learned that the two men worked with children—Petersen as a babysitter, chess coach, and tutor in Tiburon and Spencer as a babysitter, camp counselor, and teacher-in-training in Aptos—and that they had allegedly been taking and exchanging lascivious photographs of children entrusted to their care. 

Petersen was arrested on April 26, 2017, and Spencer was arrested the following day.  Each defendant was charged in the indictment with one count of conspiracy to distribute and receive child pornography, in violation of 18 U.S.C. § 2252(a)(2) and (b)(1); distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2); receipt of child pornography, in violation of 18 U.S.C. § 2252(a)(2); and possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B). Both defendants are in custody and are scheduled to be arraigned on May 16, 2017, at 9:30 a.m., before United States Magistrate Judge Joseph C. Spero.          

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted of any of the charges, the defendants face a maximum sentence of twenty years’ imprisonment and a fine of $250,000, plus potential restitution.  If convicted of distribution, receipt, or conspiracy to distribute and receive child pornography, the defendants will also be subject to a mandatory five-year minimum prison term.  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. 

Assistant U.S. Attorney Julie D. Garcia is prosecuting the case with the assistance of Heidi Dittmer.  The prosecution is the result of an investigation by the Federal Bureau of Investigation. 

The FBI has created an email for parents and guardians who have reason to believe their child/children may be a victim in this investigation.  Please email BayAreaTips@ic.fbi.gov and include your full name, phone number, your child’s full name and age, why you believe your child may be a victim, the date range in which your child may have been in contact with the subject and the venues where your child may have been in contact with the subject.  This email address has been set up specifically for this investigation.  An agent may contact you to gather further information.  Your patience is appreciated at this time.
 

SAN FRANCISCO – A federal grand jury indicted Regina Berny on charges of bank fraud and wire fraud announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.

According to the indictment unsealed earlier today, from January 2011 until August 2015, Berny, 42, of San Francisco, took over $530,000 from her two separate employers and fraudulently deposited the money into her own personal bank accounts.  She worked as an executive assistant for these employers who were corporations with headquarters in San Francisco – one a global commercial property developer of distribution facilities and the other a global chain of perfume and cosmetics stores.  During her employment, Berny allegedly stole mail belonging to her employers that contained checks made payable to the employers.  Once in possession of the checks, Berny allegedly wrote on the back of the checks “for deposit only,” and deposited them into her personal bank account.  In addition, the indictment alleges Berny deposited the checks at automated teller machines so that she was not questioned or confronted about her authority to deposit the checks into her personal account.  The indictment further alleges some of the checks were sent to Berny’s employers by third party vendors for overpayments made by the employers to the vendors while other checks were tax refund payments sent to the employers by counties, cities, or states. 

Berny is charged with six counts of bank fraud, in violation of 18 U.S.C. § 1344, and six counts of wire fraud, in violation of 18 U.S.C. § 1343.  Berny was arrested this morning and appeared before U.S. Magistrate Judge Joeseph C. Spero.  She was released on bond and is scheduled to make her next appearance in federal court in San Francisco on May 23, 2017, at 10:30 a.m., before U.S. District Court Judge Vince Chhabria for arraignment.

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of thirty years in prison and a fine of $1,000,000 for each count of bank fraud.  In addition, the defendant faces a maximum sentence of twenty years in prison and a fine of $250,000 for each count of wire fraud.  Additional terms of supervised release and restitution also may be ordered, 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. 

Assistant U.S. Attorney Hallie Hoffman is prosecuting the case with the assistance of Heidi Dittmer.  The prosecution is the result of an investigation by the FBI.

OAKLAND– Karim Akil (also known as Scott Kinney) was sentenced today to 120 months in prison for conspiracy to commit mortgage fraud and money laundering, announced U.S. Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation (“IRS-CI”), Special Agent in Charge Michael T. Batdorf.  The Honorable Phyllis J. Hamilton, Chief U.S. District Judge, handed down the sentence following a guilty plea entered July 10, 2012, in which Akil admitted his role as the organizer and leader of a mortgage fraud scheme. 

According to Akil’s plea agreement, he knowingly conspired with others to commit wire fraud, involving the purchase of properties located in the Northern and Eastern Districts of California.  Akil, 50, of Vallejo, acknowledged he directed co-defendants to create and submit loan applications that contained materially false information to financial institutions.  Akil acknowledged that the conspiracy involved using the names of fictitious persons and straw buyers, the creation of purchase contracts that reflected inflated sale properties above the original sales price, and the submission of fraudulent loan applications for 100 percent financing based upon the properties’ inflated purchase prices.  Akil agreed that more than 18 properties were involved in the conspiracy to defraud, and agreed that he was an organizer and leader of five or more participants in the conspiracy.  Akil directed an escrow officer to distribute “profits” to co-conspirators and to businesses that he owned or controlled, including Hiddenbrooke Mortgage and Marsh Group. 

“Mr. Akil enjoyed a lavish lifestyle, with outrageous expenditures,” said Michael T. Batdorf, Special Agent in Charge, IRS-CI. “Akil left a path of destruction, from properties that went into default and foreclosure, to straw buyers whose credit was ruined, to an escrow company that went out of business.  Although this sentence cannot reverse the damage caused by Akil and his co-conspirators, it highlights the ongoing commitment of IRS-CI and our law enforcement partners to hold accountable those involved in these types of crimes.”

On October 29, 2009, a federal grand jury indicted Akil and six co-conspirators, for their alleged roles in this extensive scheme.  For his part, Akil was charged with one count of conspiracy to commit mail fraud, in violation of 18 U.S.C. § 1349, 34 counts of wire fraud, in violation of 18 U.S.C. § 1343, and 16 counts of money laundering, in violation of 18. U.S.C. § 1957(a).  On July 10, 2012, Akil pleaded guilty to the conspiracy charge and one count of money laundering.

While out on pretrial release, between late 2012 and early 2013, Akil became involved in a series of new acts, which involved violating the terms of his plea agreement.  During the sentencing hearing, Judge Hamilton found that Akil breached his plea agreement in seven different ways.  These acts constituting breaches of the plea agreement included convincing a San Francisco property owner to take out a loan against a valuable property she had inherited.  The lender foreclosed on the property after Akil received $493,514 in net proceeds from the loan and loan payments were not made.  In a second alleged scheme, Akil also defrauded a victim in Southern California by promising to provide a $1.1 million stand-by letter of credit.  Akil received $197,600 in fraudulent proceeds from that victim.  That victim never received a legitimate letter of credit and never got his money back from Akil or anyone else involved in the alleged scheme.  In a third alleged scheme, Akil also forged numerous documents to gain control of a Southern California property and did a cash-out finance without the owner’s knowledge or permission.  Akil channeled almost $270,000 in net proceeds from the alleged fraudulent activity in that scheme through his other financial accounts, and spent all the money.

Judge Hamilton emphasized at the sentencing hearing that “individuals’ lives [  ] are ruined or significantly impacted by people who are gaming the system in some way, who are gaming the individuals.” Judge Hamilton found Akil’s “behavior to be entirely disturbing and suggestive of not only a failure to accept responsibility for his criminal conduct but a level of incorrigibility.”   The judge also stated, “I ponder whether or not any sentence will deter Mr. Akil.”  Judge Hamilton voice her concern that Akil’s statements to the Court during the sentencing hearing did not reflect true remorse for having ruined people’s financial lives. 

In additional to the prison term, Judge Hamilton ordered Akil to serve a three-year period of supervised release, and ordered him to submit his person, residence and any property under his control to a search by Probation Officers or law enforcement officers at any time, with or without cause.  Akil will begin serving the sentence immediately.  The restitution hearing, scheduled for July 12, 2017, will determine the amounts Akil will be ordered to pay to the victims of his crimes. 

Co-defendants Amy Schloemann (Akil’s former wife), Darnell Thomas, and Louisa Wonda Kidd each pleaded guilty to related crimes and were sentenced for their respective roles in the scheme.  On June 12, 2013, Schloeman was sentenced to 36 months for her role in the scheme and on November 7, 2012, Thomas was sentenced to 36 months of imprisonment for his role in the scheme.  On November 20, 2013, Kidd received a sentence of 36 months of probation for her role.  Co-defendants Michelle McGuire and Kashka Clay have entered guilty pleas and are scheduled to be sentenced on June 28, 2017. 

Assistant U.S. Attorney Christina McCall prosecuted the case with the assistance of Allen Williams, Noble Hughes, Vanessa Vargas, and Kathleen Turner.  The prosecution is the result of an investigation by IRS-CI with the assistance of the Alameda County District Attorney’s Office. 

SAN FRANCISCO - Krisinda Messer, aka Krisinda Garay, pleaded guilty in federal court in San Francisco today to bank fraud, announced United States Attorney Brian J. Stretch and Michael T. Batdorf, Special Agent in Charge Internal Revenue Service.  The plea was accepted by the Honorable Charles R. Breyer, U.S. District Judge, in San Francisco.

In pleading guilty, Messer, 37, of Pacifica, admitted she was employed as a bookkeeper by delicatessens in San Francisco from 2007 to 2011.  Beginning in May 2008, and continuing through August 2011, Messer created 130 fraudulent checks totaling $436,396.52, all but two of which she made payable to her father’s company, American Backflow Company (“ABC”).  Messer acknowledged ABC was not a creditor of the delicatessens and there was no business relationship between them.  Messer also admitted she forged the signature of the delicatessens’ owner on most of the checks.  Additionally, in order to conceal these checks from her employers, Messer created a fake company account on QuickBooks and used the fake company to produce checks written to ABC so that they would not appear in the books.  Messer also admitted she did not report the income on her federal income tax returns for 2008 through 2011, inclusive. 

A federal grand jury indicted Messer on May 12, 2015.  She was charged with 12 counts of bank fraud, in violation of 18 U.S.C. § 1344(2); four counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1); and three counts of subscribing to false tax returns, in violation of 26 U.S.C. § 7206(1).  Under today’s plea agreement, Messer pleaded guilty to one count of bank fraud and the remaining counts will be dismissed.

Messer was released on a $50,000 bond.  Judge Breyer scheduled Messer’s sentencing for October 17, 2017, at 10:00 a.m.  The maximum statutory penalty for the bank fraud violation is 30 years in prison and a fine of $1,000,000, plus restitution.  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. Attorney Cynthia Stier is prosecuting the case.  The prosecution is the result of an investigation by the Internal Revenue Service. 

SAN JOSE – Daniel Laine Kyle pleaded guilty to tax fraud and structuring currency transactions to avoid reporting requirements announced United States Attorney Brian J. Stretch and Internal Revenue Service (IRS), Criminal Investigation, Special Agent in Charge Michael T. Batdorf.  The plea was accepted earlier today by the Honorable Edward J. Davila, United States District Judge.

According to the plea agreement, since November 1997, Kyle, from Carmel, Calif., owned and operated Kyle Racing, a performance motorcycle parts and tuning business in Sand City, Calif.  Kyle acknowledged that he did not issue invoices to customers who paid cash.  He also admitted that he instructed his employees to not issue invoices to cash-paying customers.  Kyle admitted he took these steps to underreport his income to the IRS and used the cash he received from his customers to purchase money orders from various United States Post Offices.

In addition, Kyle admitted that between August 8, 2007, and March 22, 2014, he “structured” his cash purchases of money orders to avoid detection.  He admitted that he knew anyone purchasing $3,000.00 or more in postal money orders in one day is required to submit a transaction report.  Instead of submitting the report, Kyle admitted he intentionally purchased less than $3,000 per day to avoid triggering reporting requirements. 

According to his plea agreement, between August 8, 2007, and March 22, 2014, Kyle purchased, with cash, more than $825,000 worth of money orders.  Kyle used the money orders to purchase cars and jewelry from Audi Financial, BMW of Monterey, Tiffany and Company, Christies, Porsche Financial Services, Capital One Bank, Citibank, Monterey Credit Union, and Wells Fargo Bank.   Kyle acknowledged that the tax loss for 2007 through 2013 resulting from his scheme was between $500,000 and $1,500,000.   

On March 22, 2017, Kyle was charged by felony information with willfully making and subscribing a false individual income tax return for the 2007 calendar year, in violation of 26 U.S.C. § 7206(1), and structuring currency transactions to avoid reporting requirements, in violation of 31 U.S.C. § 5324(a)(3) and 31 U.S.C. § 5324(d)(2).  Pursuant to today’s plea agreement, Kyle pleaded guilty to both counts in the information.

The maximum sentence for willfully making and subscribing to a false tax return is three years in prison and a fine of $250,000.  The maximum sentence for and structuring currency transactions to avoid reporting requirements is ten years in prison and a fine of $500,000.  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. 

Kyle remains free on bond and is scheduled to appear before Judge Davila on August 21, 2017, at 1:30 p.m. for sentencing.

Assistant U.S. Attorney Gary G. Fry is prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation, and the United States Postal Inspection Service.

SAN JOSE – Trong Minh Nguyen, aka John Nguyen, pleaded guilty for his role in a conspiracy to file false claims announced United States Attorney Brian J. Stretch, United States Postal Inspection Service Inspector in Charge Rafael Nuñez, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

According to the plea agreement entered yesterday afternoon, Nguyen, 57, of San Jose, began preparing false federal income tax returns in May of 2012 for individuals in the San Jose area.  Nguyen told unemployed individuals that he was able to secure a tax refund on their behalf.  He then obtained the individuals’ names and social security numbers and used that information to prepare tax returns.  In each case, he claimed the person was employed and had earned income.  Nguyen charged each person a fee of between $50 and $500 for preparing the false tax return and was typically paid after the IRS issued a tax refund check related the false claim he filed.  When completing the false tax returns, Nguyen included fictitious information.  For example, instead of using a taxpayer’s real home address, Nguyen used an address where he was able to intercept the mail.  Nguyen also included false information for wages, federal tax withholdings, earned income tax credit, making work pay credit, and tax refund amounts.

In addition, in June of 2012, Nguyen conspired with others to file false federal income tax returns.  As part of the conspiracy, Nguyen and his co-conspirators solicited individuals in the San Jose area, asking only for their names and social security numbers.  Nguyen received forms that were signed by the individuals and then altered information on the forms by, among other things, inserting figures into the document.  Nguyen also rented several private mailboxes and used numerous addresses on Senter Road in San Jose as well as other residential addresses in order to collect the tax refund checks that were issued by the IRS.  In total, Nguyen and his coconspirators filed about 1,700 false federal income tax returns that claimed more than $1.5 million in fraudulent tax refunds. 

A grand jury indicted Nguyen on June 10, 2015, and charged him with conspiracy to submit false claims, in violation of 18 U.S.C. § 286, and twenty-one counts of submitting false claims, in violation of 18 U.S.C. § 287.  Pursuant to yesterday’s plea agreement, Nguyen pleaded guilty to one count of conspiracy and four counts of filing false claims.  The remaining counts will be dismissed.

The maximum sentence for conspiracy to file false claims is ten years in prison and a fine of $250,000.  The maximum sentence for submitting file false claims is five years in prison and a fine of $250,000.  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. Attorney Thomas Newman and U.S. Department of Justice Trial Attorney Gregory Bernstein are prosecuting the case.  The prosecution is the result of an investigation by the U.S. Postal Service and the Internal Revenue Service, Criminal Investigation.

OAKLAND - A federal grand jury in Oakland indicted Eugene Latrell McNeely on April 20, 2017, for transporting a minor from Oregon to California with the intent that the minor engage in prostitution, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation, Special Agent in Charge, John F. Bennett. 

According to the indictment unsealed today, on October 3, 2015, McNeely, 34, of Oakland, transported a person who was under the age of 18 from Oregon, where she then resided, to Oakland, Calif. with the intent that she engage in prostitution.  The indictment charges McNeely with one count of transportation of a minor for prostitution, in violation of 18 U.S.C. § 2423(a). 

McNeely was arrested this morning in Oakland and made his initial appearance in the Oakland federal courthouse today before U.S. Magistrate Judge Kandis A. Westmore.    McNeely is currently in federal custody pending further hearings, the next of which is scheduled for 9:30 a.m. on May 9, 2017, before U.S. Magistrate Judge Nandor J. Vadas, for identification of counsel and status regarding detention.

The maximum statutory penalty for a violation of 18 U.S.C. § 2423(a), is life in prison, a $250,000 fine, and a lifetime term of supervised release.  McNeely also faces a mandatory minimum sentence of 10 years in prison and a mandatory minimum 5-year term of supervised release.  In addition, the court may order forfeiture 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. 

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

Assistant U.S. Attorney Bill Gullotta is prosecuting the case with the assistance of Trina Khadoo.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Oakland Police Department. 

Anyone who suspects instances of human trafficking are encouraged to call the FBI or the Human Trafficking Hotline at 1-888-373-7888.  Anonymous calls are welcome.

Suspected child sexual exploitation or missing children may be reported to the National Center for Missing & Exploited Children, via its toll-free 24-hour hotline, 1-800-843-5678.  Indeed, a NCMEC tip led to the discovery and rescue of the victim in this case. 

SAN JOSE – Victor Francisco Ramirez, Jr., was sentenced today to 120 months in prison for his role in a conspiracy to possess with the intent to distribute methamphetamine announced United States Attorney Brian J. Stretch and Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin.  The sentence was handed down by the Honorable Beth Labson Freeman, U.S. District Judge, following Ramirez’s guilty plea on November 15, 2016.

According to his plea agreement, Ramirez, 20, of San Jose, admitted that in April and May of 2016, he knowingly participated in two methamphetamine sales in the San Jose area.  Ramirez admitted that on April 28, 2016, he delivered approximately 487.3 grams of a mixture and substance containing methamphetamine to another individual at a parking lot on West Capitol Expressway in San Jose in exchange for a payment of $3,000.  Ramirez further admitted that on May 19, 2016, he delivered approximately 1056.5 grams of a mixture and substance of containing methamphetamine to an individual in a parking lot on East Capitol Expressway in exchange for a payment of $6,800. 

On July 7, 2016, a federal grand jury indicted Ramirez and three co-conspirators for their respective roles in the conspiracy to distribute methamphetamine.  For his part, Ramirez was charged with one count of conspiracy to possess with intent to distribute methamphetamine, in violation of 21 U.S.C. § 846, and two counts of possession with intent to distribute methamphetamine, in violation of 21 U.S.C. § 841(a)(1).  Pursuant to his guilty plea, Ramirez pleaded guilty to the conspiracy charge, and the possession with intent to distribute charges were dismissed.

In addition to the prison term, Judge Freeman ordered Ramirez to serve a five-year period of supervised release.  Ramirez is currently out of custody on a $100,000 secured bond.  Judge Freeman ordered the defendant to surrender on or before July 6, 2017, to begin serving his sentence.        

Assistant U.S. Attorney Jeff Nedrow is prosecuting the case with the assistance of Susan Kreider.  The prosecution is the result of an investigation by the DEA.

OAKLAND – A 64-count second superseding indictment was unsealed today charging eight defendants for their respective roles in an interstate firearms trafficking conspiracy announced United States Attorney Brian J. Stretch and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jill Snyder.  Two of the defendants were also charged with conspiracy to commit robbery affecting interstate commerce, and the use of firearms in furtherance of a crime of violence.  Additionally, one defendant was charged with drug trafficking crimes.

The defendants are Oakland residents Andre Martel Winn, 31, and Edgar De La Cruz, 19; Reno, Nev. residents Richard Straight, 27, Jenna Jeanne Allec, 26, Jonathan Salevao, 28, and Kaleka Mile Kam, 23; Elko, Nev. resident Kenneth Lee Kemp, 32; and Sparks, Nev. resident Daniel Taylor Taufi, 24.  According to the indictment, all eight defendants conspired to engage in a scheme to purchase dozens of firearms in Nevada and have them transported to and sold in California.  The indictment alleges that Allec, Kemp, Kam, and Taufi purchased the firearms from licensed Nevada salespersons and then negotiated with Salevao and Straight to sell the arms to Winn and De La Cruz.  Further, according to the indictment, Winn and De La Cruz traveled from Oakland to Reno to retrieve the firearms.  Winn and De La Cruz then transported the firearms to the San Francisco Bay Area where they were sold, mostly in exchange for cash or drugs.  A number of the firearms trafficked during the conspiracy have been recovered in Oakland and elsewhere in the Bay Area by local police officers in the course of law enforcement operations.  The indictment further alleges Winn and Straight were prohibited from possessing or receiving firearms in light of previous criminal convictions.  Listed in the indictment is an array of transactions from March of 2015 through October of 2016 by which dozens of firearms allegedly were illegally purchased, transported, and sold in violation of federal firearms laws. 

Moreover, in addition to the firearms charges, the indictment charges De La Cruz with possession with the intent to distribute cocaine and marijuana, and charges both De La Cruz and Winn with robbery affecting interstate commerce and conspiracy to commit robbery affecting interstate commerce, and brandishing firearms during the robbery. The indictment alleges that Winn and De La Cruz brandished firearms during an armed heist at a gas station on High Street in Oakland in 2015.

“The indictment unveiled today is the result of hard work and coordination by the Bureau of Alcohol, Tobacco, Firearms and Explosives and local law enforcement agencies across California and Nevada,” said U.S Attorney Stretch.  “We appreciate the efforts of the many law enforcement officials whose selfless dedication has brought an end to this gun running scheme.  The removal from our neighborhoods of illegal firearms will remain a priority of this office.”

“One of the missions of the Bureau of Alcohol, Tobacco, Firearms and Explosives or ATF is to protect our communities from the illegal use and trafficking of firearms,” said Special Agent in Charge Jill Snyder.  “ATF's Crime Gun Intelligence Center or CGIC identifies firearms trafficking trends and patterns. As with this case, ATF is then able to utilize that information and take action to prevent firearms from going into the hands of prohibited and potentially dangerous people.  ATF would like to thank the San Leandro Police Department, Oakland Police Department, Reno Police Department, Sparks Police and the U.S. Attorneys Office. It's through partnerships that law enforcement agencies across the board are able to continue to make our neighborhoods a safer place daily.”

In sum, the defendants have been charged with the following crimes and face the following maximum statutory sentences:

Defendant

Charge

Statute

Maximum Sentence

(Each Count)

Andre Martel Winn

Conspiracy to Commit Robbery (Interference with Commerce by Robbery

18 U.S.C. § 1951(a)

20 years in prison

$250,000 fine

3 years supervised release

Robbery (Interference with Commerce by Robbery), and Aiding and Abetting

18 U.S.C. §§ 195l(a) and 2

20 years in prison

$250,000 fine

3 years supervised release

Possessing/Brandishing a Firearm in Furtherance of a Crime of Violence, and Aiding and Abetting

18 U.S.C. §§ 924(c)(l)(A)

and 2

Life in prison

(7 years mandatory minimum, consecutive to sentence imposed on any other count

$250,000 fine

5 years supervised release

Felon in Possession of a Firearm

18 U.S.C. § 922(g)(l)

10 years in prison

$250,000 fine

3 years supervised release

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(54 counts)

18 U.S.C. §§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Traveling Interstate to Promote Illegal Firearms Trafficking

(two counts)

8 U.S.C. §§ 924(n) and 2

10 years in prison

$250,000 fine

3 years supervised release

Edgar De La Cruz

Conspiracy to Commit Robbery (Interference with Commerce by Robbery

18 U.S.C. § 1951(a)

20 years in prison

$250,000 fine

3 years supervised release

Robbery (Interference with Commerce by Robbery), and Aiding and Abetting

18 U.S.C. §§ 195l(a) and 2

20 years in prison

$250,000 fine

3 years supervised release

Possessing/

Brandishing a Firearm in Furtherance of a Crime of Violence, and Aiding and Abetting

8 U.S.C. §§ 924(c)(l)(A)

and 2

Life in prison

(7 years mandatory minimum, consecutive to sentence imposed on any other count)

$250,000 fine

5 years supervised release

Possession with Intent to Distribute Cocaine

(two counts)

21 U.S.C. §§ 84l(a)(l) and (b)(l)(C)

20 years in prison

$1 million fine

Supervised release for life

Possession with Intent to Distribute Marijuana

21 U.S.C. §§ 84l(a)(l) and (b)(l)(D)

20 years in prison

$250,000 fine

Supervised release for life

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(54 counts)

18 U.S.C. §§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Traveling Interstate to Promote Illegal Firearms Trafficking

(two counts)

8 U.S.C.

§§ 924(n) and 2

10 years in prison

$250,000 fine

3 years supervised release

Richard Straight

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(39 counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Traveling Interstate to Promote Illegal Firearms Trafficking

8 U.S.C. §§ 924(n) and 2

10 years in prison

$250,000 fine

3 years supervised release

Jenna Leanne Allec

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(18 counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Kenneth Lee Kemp

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(21 counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Jonathan Salevao

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(15 counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Traveling Interstate to Promote Illegal Firearms Trafficking

8 U.S.C.

§§ 924(n) and 2

10 years in prison

$250,000 fine

3 years supervised release

Kaleka Mile Kam

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(six counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

Daniel Taylor Taufi

Conspiracy to Deal in Firearms Without a License

18 U.S.C. § 371

5 years in prison

$250,000 fine

3 years supervised release

Dealing in Firearms Without a License

(nine counts)

18 U.S.C.

§§ 922(a)(l)(A)

and 2

5 years in prison

$250,000 fine

3 years supervised release

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  Additional fines, forfeitures, and special assessments also could be imposed.  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. 

Six of the eight defendants are currently in law enforcement custody in various jurisdictions, including in the custody of the United States Marshals Service. Winn, De La Cruz, Allec, and Kam are scheduled to appear May 8, 2017, 9:30 am before U.S. Magistrate Judge Vadas in Oakland for arraignment on the second superseding indictment. The remaining defendants are scheduled to appear tomorrow in Reno to be arraigned.

The prosecution is the result of an investigation by the ATF Crime Gun Intelligence Center, San Francisco Field Division (SFFD). The U.S. Attorney for the Northern District of California thanks the Reno Office of the U.S. Attorney’s Office for the District of Nevada for its assistance.

OAKLAND– Shawan I. Spragans and Merl J. Simpson were sentenced in federal court in Oakland today to serve prison sentences of 23 years and 20 years, respectively, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The defendants each were also ordered to pay $2,014 in restitution stemming from an armed robbery spree committed in the Bay Area between approximately February 1, 2016, and April 21, 2016.  The sentence was handed down by the Honorable Yvonne Gonzalez Rogers, U.S. District Judge, following guilty pleas entered by the defendants on January 13, 2017, to conspiracy, attempt, and multiple robberies affecting interstate commerce (Hobbs Act robbery).  The defendants each also pleaded guilty to discharging a firearm in furtherance of Hobbs Act robbery, and being a felon in possession of firearms. 

According to their plea agreements, on March 3, 3016, Spragans, 41, of Oakland, and a co-conspirator entered a Berkeley pharmacy wearing masks, gloves, and dark-colored clothing, pointed a firearm at employees and customers, and stole cash from a register.  Simpson, 47, of Antioch, drove the getaway vehicle.  On March 20, 2016, Spragans and a co-conspirator entered a barbecue restaurant in Berkeley wearing masks and dark clothing, and forced three employees at gunpoint to stand still while Spragans and his co-conspirator robbed the restaurant.  They also robbed the employees of personal cash.  They fled the restaurant with the stolen cash, and Simpson drove them away in the getaway vehicle.  On April 7, 2016, Spragans and a co-conspirator entered an Ethiopian restaurant in Berkeley wearing masks and dark clothing.  They each pointed revolvers at two female employees and robbed them of the restaurant’s cash.  Spragans entered the kitchen and encountered another employee, who struggled with Spragans as the employee attempted to escape.  During that physical encounter, Spragans fired a bullet at the employee from his revolver.  The bullet missed the employee.  Spragans and his co-conspirator then fled the restaurant with the stolen cash, and Simpson drove them away in the getaway vehicle.  Simpson also admitted that, earlier on April 7, 2016, prior to robbing the Ethiopian restaurant, he and a co-conspirator robbed a pizzeria in San Francisco at gunpoint.  Finally, on April 21, 2016, Spragans and Simpson attempted to rob a bar in San Francisco at gunpoint.  However, police already were in place conducting surveillance on the location and arrested the defendants as they attempted to flee the area.  The police also arrested a co-conspirator, who was waiting in the getaway car. 

Spragans and Simpson were indicted by a federal grand jury on June 30, 2016.  They have remained in federal custody since they made their initial appearances in federal court on July 7, 2016.  They pleaded guilty on January 13, 2017. 

In addition to the prison terms, Judge Gonzalez Rogers also sentenced each defendant to a five-year term of supervised release.

Assistant U.S. Attorney Bill Gullotta is prosecuting the case with the assistance of Michelle Alter Eck and Trina Khadoo.  The prosecution is the result of an investigation by the FBI and the Berkeley, San Francisco, San Leandro, and Albany Police Departments.   

SAN FRANCISCO – Naum Morgovsky and Irina Morgovsky were charged today for their respective roles in an alleged scheme to export components for the production of night vision rifle scopes in violation of the Arms Export Control Act, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The superseding indictment supplements bank fraud charges that were leveled in September of last year against Naum Morgovsky and Mark Migdal. 

According to the superseding indictment, Naum and Irina Morgovsky owned night vision businesses in the United States and purchased numerous scope components including image intensifier tubes and lenses.  The superseding indictment alleges the Morgovskys conspired to ship these items to a night vision manufacturing company in Moscow, Russia that was partly owned by Naum Morgovsky.  The United States Munitions List prohibits export of the items unless the exporter obtains a license from the Department of State, Directorate of Defense Trade Controls.  According to the superseding indictment, the Morgovskys did not have such a license. 

In addition, the superseding indictment alleges the Morgovskys took steps to conceal their crimes so that they could continue to run their illegal export business undetected.  According to the superseding indictment, Naum Morgovsky laundered the proceeds of the export conspiracy, used a bank account in the name of a deceased person to conceal the ownership and control of the scheme’s proceeds.  The superseding indictment further alleges that Irina Morgovsky allegedly used a passport that she fraudulently obtained in the name of another individual to travel to Russia three times in 2007.

The superseding indictment includes the charges against Naum Morgovsky and Mark Migdal in the indictment filed in September of 2016.  Specifically, the superseding indictment repeats that between June 2009 and April 2016, Morgovsky and Migdal conspired to defraud two federally-insured banks, now Bank of America and EverBank, by seeking those banks’ approval for a short sale of two condominiums owned by Migdal.  The two condominium units were in the same building in Kihei, Maui.  The superseding indictment alleges that Morgovsky and Midgal conspired to convince the banks to allow the properties to be sold in a short sale to an individual who was, in reality, deceased.  A short sale is a sale in which a lender allows a property to be sold at a price that is less than the amount owed on the loan.  According to the superseding indictment, the conspiracy also involved submission of false statements to the bank about Midgal’s employment status and income.  After the banks approved the short sales in 2009 and 2010, Migdal continued to treat the property as his own, including collecting rent and paying taxes and homeowners’ association dues.  The properties allegedly were transferred to Migdal’s wife in 2016.   

In addition, the superseding indictment alleges that, during 2009 and 2010, Migdal submitted false statements to a federally insured bank.  According to the superseding indictment, Migdal sought to obtain loan modifications for his residence in Portola Valley and his rental property in Mountain View by falsely stating he had rented part of his residence, by submitting a false employment offer letter, and by falsely stating his rental property in Mountain View was his principal residence.

In sum, the charges and maximum statutory sentences against Naum Morgovsky are as follows:

Count

Charge

Statue

Maximum Sentence

One

Conspiracy to Commit Bank Fraud

18 U.S.C. § 1349

30 years; $1,000,000 fine

Two

Bank Fraud

18 U.S.C. § 1344

30 years; $1,000,000 fine

Three

Bank Fraud

18 U.S.C. § 1344

30 years; $1,000,000 fine

Four

Aggravated Identity Theft

18 U.S.C. § 1028A

2 years consecutive to any other sentence; $250,000 fine

Nine

Armed Export Control Act Conspiracy

22 U.S.C. § 2778

20 years; $1,000,000 fine

Ten

Money Laundering

18 U.S.C. § 1956(a)(1)(B)(i)

20 years; $500,000 fine or twice the value of funds involved

Eleven

International Money Laundering

18 U.S.C. § 1956(a)(2)(A)

20 years; $500,000 fine or twice the value of funds involved

The charges against Irina Morgovsky are as follows:

Count

Charge

Statue

Maximum Sentence

Six

Misuse of Passport

18 U.S.C. § 1544

10 years; $250,000 fine

Nine

Armed Export Control Act Conspiracy

22 U.S.C. § 2778

20 years; $1,000,000 fine

The charges against Mark Migdal are as follows:

Count

Charge

Statue

Maximum Sentence

One

Conspiracy to Commit Bank Fraud

18 U.S.C. § 1349

30 years; $1,000,000 fine

Two

Bank Fraud

18 U.S.C. § 1344

30 years; $1,000,000 fine

Three

Bank Fraud

18 U.S.C. § 1344

30 years; $1,000,000 fine

Five

Aggravated Identity Theft

18 U.S.C. § 1028A

2 years consecutive to any other sentence; $250,000 fine

Seven

False Statement to Federally Insured Financial Institution

18 U.S.C. § 1014

30 years; $1,000,000 fine

Eight

False Statement to Federally Insured Financial Institution

18 U.S.C. § 1014

30 years; $1,000,000 fine

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.  The Superseding Indictment also seeks forfeiture of the false passport, a residence in Portola Valley, a condominium in Mountain View, and the two Hawaii condominiums. 

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

The defendants are scheduled to be arraigned on the superseding indictment on Tuesday, May 2, 2017, at 9:30am, before the Honorable Jacqueline Scott Corley, United States Magistrate Judge. 

The case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s office in San Francisco and the Counterintelligence and the Export Control Section of the Department of Justice’s National Security Division.  The prosecution is the result of an investigation by the Federal Bureau of Investigation, Internal Revenue Service, Criminal Investigation, and the Department of Commerce.

A Ukiah, California restaurateur was sentenced to serve 24 months in prison today for corruptly endeavoring to obstruct the internal revenue laws and harboring illegal aliens for profit, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

According to documents filed with the court, Yaowapha Ritdet, 56, hired Thai nationals who were illegally present in the United States to work at her restaurants, Ruen Tong Thai Cuisine and Walter Café, both located in Ukiah. Ritdet underpaid these employees and instructed them not to speak to anyone about their immigration status. Ritdet also paid her employees in cash and did not pay employment taxes on the cash wages.

Ritdet filed false individual income tax returns for 2007 through 2011 that underreported the gross receipts, sales, and income she received from her two restaurants, and failed to report rental income and a foreign bank account she held in Thailand.

In addition to the term of prison imposed, Ritdet was ordered to serve three years of supervised release and to pay approximately $567,755.65 in restitution to include $70,768.65 to underpaid employees and $496,987 to the Internal Revenue Service (IRS). Ritdet pleaded guilty in August 2016.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS–Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, who conducted the investigation, and the U.S. Department of Labor, Wage and Hour Division, which identified the underpayment of wages and overtime, and Trial Attorney Charles O’Reilly of the Tax Division and Assistant U.S. Attorney José A Olivera, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

SAN FRANCISCO – Yaowapha Ritdet, a Ukiah, California, restaurateur, was sentenced today to 24 months in prison for corruptly endeavoring to obstruct the internal revenue laws and harboring illegal aliens for profit, announced U.S. Attorney Brian J. Stretch, Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.  The sentence was handed down by the Honorable Judge Edward M. Chen, U.S. District Judge, following the entry of a plea agreement in August 2016 in which Ritdet admitted committing the crimes.

According to her plea agreement, Ritdet, 56, of Ukiah, admitted she hired Thai nationals who were illegally present in the United States to work at her restaurants, Ruen Tong Thai Cuisine and Walter Café, both located in Ukiah. Ritdet underpaid these employees and instructed them not to speak to anyone about their immigration status.  Ritdet also paid her employees in cash and did not pay employment taxes on the cash wages.  Ritdet also admitted she willfully filed false individual income tax returns for 2007 through 2011 that underreported the gross receipts, sales, and income received from her two restaurants. In addition, Ritdet acknowledged she failed to report she had a financial interest in an account at a Thai bank. 

On August 2, 2016, Ritdet was charged in a superseding information with one count of corrupt endeavor to impede and impair the lawful administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a), and one count of harboring illegal aliens for private financial gain, in violation of 8 U.S.C. § § 1324(a)(1)(A)(iii), and (B)(i).  She pleaded guilty to both counts on August 17, 2016.

In addition to the 24-month prison term and restitution, Judge Chen ordered Ritdet to pay more than $560,000 in restitution— $496,987.00 to be paid to the IRS and $70,768.65 to be paid to the employees whose wages she underpaid. Further, Judge Chen ordered Ritdet to serve three years of supervised release.

Assistant U.S. Attorney José A. Olivera and Trial Attorney Charles O’Reilly of the Tax Division are prosecuting the case. U.S. Attorney Stretch and Acting Deputy Assistant Attorney General Goldberg thanked the prosecutors as well as special agents of IRS–Criminal Investigation; Homeland Security Investigations, who conducted the investigation; and the U.S. Department of Labor, Wage and Hour Division, who identified the underpayment of wages and overtime. 

The Department of Justice announced today that Braden Partners, L.P., doing business as Pacific Pulmonary Services, has agreed to pay $11.4 million to resolve allegations against it and its general partner, Teijin Pharma USA LLC, for violating the False Claims Act by submitting claims for reimbursement to Medicare and other federal healthcare programs for oxygen and related equipment supplied in violation of program rules, and for sleep therapy equipment supplied as part of a cross-referral kickback scheme with sleep clinics.

“This settlement demonstrates our continued pursuit of health care providers who take advantage of federal healthcare programs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “We will investigate and take action against providers who cut corners and pay kickbacks.”

California-based Pacific Pulmonary Services furnishes stationary and portable oxygen tanks and related supplies, and sleep therapy equipment, such as Continuous Positive Airway Pressure, Bi-level Positive Airway Pressure masks and related supplies, to patients’ homes in California and other states. The government alleged that, beginning in about 2004, Pacific Pulmonary Services began submitting claims to the Medicare, TRICARE and Federal Employee Health Benefits programs for home oxygen and oxygen equipment without obtaining a physician authorization, as required by program rules.

Beginning in 2006, certain of the company’s patient care coordinators also allegedly agreed to make patient referrals to sleep testing clinics in exchange for those clinics’ agreement to refer patients to Pacific Pulmonary Services for sleep therapy equipment. The government alleged that this conduct violated the Anti-Kickback Act, which prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and/or other federally funded programs.

“The U.S. Attorney’s Office is committed to taking all appropriate action against companies that disregard patients’ medical needs in pursuit of company profits,” said U.S. Attorney Brian J. Stretch for the Northern District of California. “Patients in federal health care programs expect and deserve medical care that is free from any undue influence and complies with the program safeguards that are in place to protect patients.”

“Home oxygen equipment and related supplies are some of the most fraudulently billed items of durable medical equipment,” said Special Agent in Charge Steven J. Ryan of the Office of Inspector General for the U.S. Department of Health and Human Services. “Medicare suppliers more concerned with profits than compliance will be met with investigation and enforcement.”

This settlement resolves allegations filed in a lawsuit by a former sales representative of Pacific Pulmonary Services, in federal court in San Francisco, California. The lawsuit was filed by Manuel Alcaine under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Alcaine will receive $1.824 million of the recovered funds.

The settlement was the result of a coordinated effort by the U.S. Attorney’s Office of the Northern District of California, the Civil Division’s Commercial Litigation Branch, the U.S. Department of Health and Human Services Office of Inspector General, and the various other agencies that administer the federal health care plans at issue.

The case is captioned United States ex rel. Alcaine v. Braden Partners, L.P., dba Pacific Pulmonary Services, et al., Case No. 10-cv-4597 (N.D. Cal.). The claims resolved by the settlements are allegations only; there has been no determination of liability.

SAN FRANCISCO – Braden Partners, L.P., doing business as Pacific Pulmonary Services, has agreed to pay $11.4 million to resolve allegations against it and its general partner, Teijin Pharma USA LLC, for violating the False Claims Act.  The government has accused the entities of submitting claims for reimbursement to Medicare and other federal healthcare programs in violation of program rules and as part of a cross-referral kickback scheme with sleep clinics.  The announcement was made by U.S. Attorney Brian J. Stretch, Acting Assistant Attorney General for the Justice Department’s Civil Division Chad A. Readler, and Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services Steven J. Ryan.

California-based Pacific Pulmonary Services furnishes stationary and portable oxygen tanks and related supplies, and sleep therapy equipment, such as Continuous Positive Airway Pressure, Bilevel Positive Airway Pressure masks and related supplies, to patients’ homes in California and other states.  The government alleges that, beginning in about 2004, Pacific Pulmonary Services began submitting claims to the Medicare, TRICARE and Federal Employee Health Benefits programs for home oxygen and oxygen equipment without obtaining a physician authorization, as required by program rules.  Further, beginning in 2006, certain of the company’s patient care coordinators also allegedly agreed to make patient referrals to sleep testing clinics in exchange for those clinics’ agreement to refer patients to Pacific Pulmonary Services for sleep therapy equipment.

“The United States Attorney’s Office is committed to taking all appropriate action against companies that disregard patients’ medical needs in pursuit of company profits,” said U.S. Attorney Stretch.  “Patients in federal health care programs expect and deserve medical care that is free from any undue influence and complies with the program safeguards that are in place to protect patients.”

“This settlement demonstrates our tenacity in pursuing health care providers who seek to take advantage of federal healthcare programs,” said Acting Assistant Attorney General Readler.  “Providers who cut corners and pay kickbacks should be aware that they may face serious consequences.”

“Home oxygen equipment and related supplies are some of the most fraudulently billed items of durable medical equipment,” said Special Agent in Charge Ryan. “Medicare suppliers more concerned with profits than compliance will be met with investigation and enforcement.”

The settlement resolves allegations filed in a lawsuit by a former sales representative of Pacific Pulmonary Services, in federal court in San Francisco, California.  The lawsuit was filed by Manuel Alcaine under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The Act also allows the government to intervene and take over the action, as it did in this case.  In this case, Mr. Alcaine will receive $1,824,000 of the recovered funds.

Assistant U.S. Attorney Gioconda Molinari handled the case with the assistance of Tiffani Chiu.  The settlement was the result of a coordinated effort by the United States Attorney’s Office, the Civil Division of the Department of Justice, the Health and Human Services Office of Inspector General, and the various other agencies that administer the federal health care plans at issue.     

The claims resolved by the settlements are allegations only; there has been no determination of liability. 

OAKLAND – Marco Antonio Ochoa, aka Alfredo Ochoa Valladares, was sentenced today to 132 months in prison for his role in a conspiracy to possess with the intent to distribute methamphetamine announced United States Attorney Brian J. Stretch and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin.  The sentence follows a guilty plea entered January 30, 2017, in which Ochoa admitted he participated in the conspiracy.

According to his plea agreement, Ochoa, 38, of Oakland, acknowledged that he conspired to possess with the intent to distribute no less than 6,334 net grams of methamphetamine.  Specifically, Ochoa admitted that on May 23, 2013, he received instructions from his co-conspirators to travel to Los Angeles so that he could retrieve methamphetamine and payment for his distribution services.  He made the trip on May 24, 2013, and received from a co-conspirator 20 pounds (or at least 9 kgs) of methamphetamine and the payment for his services.  Ochoa drove back to Oakland and on the next day, he received further instructions to distribute the methamphetamine.  Ochoa ultimately provided a co-conspirator with at least 6,334 net grams of the methamphetamine.  Further, Ochoa admitted that on September 19, 2013, he traveled to Whittier, Calif., and met with a co-conspirator at a car wash where he retrieved another 20 pounds of methamphetamine for distribution.

In addition to the methamphetamine, Ochoa also admitted possessing with the intent to distribute approximately 2 kilograms of heroin.  In June 2014, he received instructions to travel to Fresno where he could retrieve heroin from a co-conspirator.  On June 20, 2014, Ochoa traveled to Fresno and retrieved 2,774 net grams of heroin.  While driving back to Oakland, he was stopped by a California Highway Patrol officer; the officer searched Ochoa’s car and recovered multiple Ziploc bags that contained the heroin.  As part of his plea agreement, Ochoa admitted he possessed the heroin with the intention of selling it.

A federal grand jury indicted Ochoa on January 16, 2014, and charged him with one count of conspiracy to possess with intent to distribute methamphetamine, in violation of 21 U.S.C. §§ 846 and 841(a)(1).  Pursuant to his plea agreement, Ochoa pleaded guilty to the charge.

The sentence was handed down by the Honorable Edward J. Davila, U.S. District

Judge.  In addition to the prison term, Judge Davila sentenced Ochoa to a 5-year period of supervised release.  Ochoa has been in custody since his arrest in June of 2014 and will begin serving his sentence immediately.

Assistant U.S. Attorneys Jeffrey Backhus is prosecuting the case with the assistance of Ryka Barghi and Ana Guerra.  This case is the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.

SAN FRANCISCO - Three East Bay residents were indicted for their respective roles in an alleged conspiracy to commit wire fraud announced United States Attorney Brian J. Stretch, Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

Earlier today, a federal grand jury returned a five-count indictment charging Kenneth Taylor, of Oakland, Sharon Ringgenberg, of Martinez, and Craig Scott, of Lafayette, with wire fraud and wire fraud conspiracy.  According to the indictment, from 2008 until at least 2012, the defendants used two entities, Raigold LLC and Success Bullion USA, to market and sell fraudulent financial instruments including what the defendants referred to as “Proof of Funds Statements” and “Standby Letters of Credit.”  The indictment alleges defendants fraudulently represented to their clients that the Proof of Funds Statements and Standby Letters of Credit could be used to collateralize high-value loans, to lease assets from Success Bullion USA, and to obtain lines of credit for, among other things, accessing high-yield private trading platforms. The indictment further alleges that Taylor and Ringgenberg created fictitious account statements that falsely stated Success Bullion USA managed $500 million on behalf of its clients. Taylor and Ringgenberg also allegedly misrepresented to clients that they transmitted Success Bullion USA’s financial instruments to Europe and elsewhere; specifically, they represented to clients that Taylor owned a separate entity, Centerlink LLC, and the company transmitted the financial instruments using an interbank telecommunication network.  In sum, all three defendants were charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; Taylor and Ringgenberg were charged with two counts of wire fraud, in violation of 18 U.S.C. § 1343; and Taylor was charged with two counts of subscribing to false tax returns (one count for each of the 2009 and 2010 tax years), in violation of 26 U.S.C. § 7206(1).

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. The maximum penalty for wire fraud conspiracy, in violation of 18 U.S.C. § 1349, is 20 years in prison and a $250,000 fine. The maximum penalty for wire fraud, in violation of 18 U.S.C. § 1343, is 20 years in prison and a $250,000 fine. The maximum sentence for filing a false tax return, in violation of 26 U.S.C § 7206(1), is 3 years in prison and a fine of $250,000. 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. The defendants have been scheduled to appear for initial appearances on May 4, 2017, before U.S. Magistrate Judge Kandis A. Westmore in Oakland.

Assistant United States Attorney Colin Sampson and Department of Justice Tax Division Trial Attorney Gregory Bernstein are prosecuting the case.  This case is the product of an investigation by the Federal Bureau of Investment and Internal Revenue Service, Criminal Investigations.

SAN FRANCISCO – Antoine Aroche, aka Antoine Aroache, was sentenced today to 120 months in prison for possessing with the intent to distribute methamphetamine announced United States Attorney Brian J. Stretch and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin.  The sentence follows a guilty plea entered January 25, 2017, in which Aroche admitted he did in fact possess with the intent to distribute the drugs.

According to his plea agreement, Aroche, 33, of San Francisco, acknowledged that on April 24, 2015, he met with a drug courier in a parking lot on Cesar Chavez Avenue in San Francisco.  Aroche admitted he drove with the courier to a nearby location on Cesar Chavez Avenue where Aroche had a gray Nissan sedan waiting for him in another parking lot.  The courier provided Aroche with about a pound of 96.8% pure methamphetamine hydrochloride, constituting approximately 431 grams of pure methamphetamine.  Aroche carried the drugs to the gray sedan where he placed the methamphetamine inside the vehicle and walked away.  Law enforcement officers conducted surveillance on the gray sedan until someone drove the car out of the lot and officers from the San Francisco Police Department stopped the car, searched it, and found the drugs under the driver’s seat. 

A federal grand jury indicted Aroche on July 2, 2015.  He was charged with one count of conspiracy to possess with intent to distribute and to distribute methamphetamine, in violation of 21 U.S.C. §§ 846, and one count of possession with intent to distribute methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1).  Pursuant to his plea agreement, Aroche pleaded guilty to the possession count and the conspiracy count was dismissed.

The sentence was handed down by the Honorable James Donato, U.S. District

Judge.  In addition to the prison term, Judge Donato sentenced Aroche to a 5-year period of supervised release.  Aroche has been in custody since entering his guilty plea on January 25, 2017, and will begin serving his sentence immediately.

Assistant U.S. Attorneys Laura Vartain Horn and Christiaan H. Highsmith are prosecuting the case with the assistance of Ana Guerra and Theresa Benitez.  The prosecution is the result of an investigation by the DEA and the San Francisco Police Department.  This case is the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force, (OCDETF) a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.