Northern District of California

OAKLAND – Joseph Edward Conner was sentenced to 112 months in prison for possession with intent to distribute methamphetamine, announced United States Attorney Brian J. Stretch, U.S. Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin, Internal Revenue Service (IRS), Criminal Investigation, Special Agent in Charge Michael Batdorf, U.S. Postal Inspection Service, Inspector in Charge Rafael E. Nuñez, U.S. Customs and Border Protection Director of Field Operations Brian J. Humphrey, and Special Agent in Charge for U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Ryan L. Spradlin.  The sentence was handed down yesterday by the Hon. Haywood S. Gilliam, U.S. District Judge, following a guilty plea entered August 22, 2016, in which Conner admitted he intended to possess and distribute the drugs. 

According to his plea agreement, Conner, 47, of Bay Point, Calif., acknowledged that he negotiated the sale of methamphetamine on three separate occasions.  On August 22, 2014, Conner negotiated the sale of a half-pound of 99% pure methamphetamine for $3,000.  Conner sold the drugs to an undercover DEA Task Force Officer in the parking lot of the Sun Valley Mall in Concord, Calif.  Later, Conner used text messages to arrange another meeting with the undercover officer that would take place on November 6, 2014, at the same parking lot.  Upon meeting with the undercover officer, Conner handed the officer a pound of 99.5% pure methamphetamine in exchange for $5,400. The third transaction occurred on December 16, 2014, for three pounds of 97.5% pure methamphetamine.  On this occasion, Conner sought to sell the drugs for $14,400, but was arrested prior to completing the sale.

Conner was indicted by a federal grand jury on June 2, 2015.  He was charged with three counts of possession of methamphetamine with intent to distribute, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(C).  Under the plea agreement, Conner pleaded guilty to all three counts alleged in the indictment.

In addition to the prison term, Judge Gilliam sentenced Conner to a 3-year period of supervised release.  Following his arrest on December 16, 2014, Conner was released on a $150,000 secured bond.  Judge Gilliam ordered the defendant to surrender on or before June 9, 2017, to begin serving his sentence.

Assistant U.S. Attorneys Claudia A. Quiroz, Andrew Dawson, and David Countryman are prosecuting the case with the assistance of Lance Libatique and Carolyn Jusay.  The prosecution is the result of an investigation by the DEA, assisted by IRS Criminal Investigations, U.S. Postal Inspection Service, U.S. Customs and Border Protection, Homeland Security Investigations, Contra Costa County Sheriff’s Office, South San Francisco Police Department, Oakland Police Department, Oakland School Police Department, Walnut Creek Police Department, and San Ramon Police Department.

SAN FRANCISCO – Dr. John Compagno was sentenced today to 37 months in prison and was ordered to pay restitution in the amount of $5,426,239 announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

Compagno, 70, of Napa, Calif., pleaded guilty on December 14, 2016, to income tax evasion.  According to his plea agreement, Compagno is a medical physician specializing in pathology.  He is also the owner and operator of three corporations located in Hercules, Calif., including John Compagno, M.D., Inc., West Coast Pathology Laboratory, Inc., and Histopathology Reference Laboratory, Inc.

“As Dr. Compagno learned, no amount of success will insulate you from your civic responsibility to accurately report and pay your taxes,” said U.S. Attorney Stretch.  “The three-year prison term handed down by Judge Alsup is a fitting sentence for an individual who cheated the government out of millions of dollars of tax payments.”

“In today’s economic environment, it is more important than ever that the American people feel that everyone is playing by the rules and paying their fair share,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “Dr. Compagno overstated expenses and omitted dividends to avoid paying taxes to the IRS. The prosecution of individuals who intentionally evade taxes is vital in maintaining public confidence in our tax system.”

In his plea agreement, Compagno admitted he submitted both corporate and individual tax returns that understated his liability to the IRS.  For the tax years 2005 through 2011, Compagno caused a corporate tax return preparer to overstate the amount of expenses on the corporate tax return by including $10,679,080 in non-deductible expenses.  Because the amounts of non-deductible expenses were overstated, the amount of income taxes due were understated. This resulted in additional tax due of $3,859,060.  In addition, Compagno omitted $10,505,091 in constructive dividends from his 2006 through 2011 individual income tax returns.  This resulted in additional tax due of $1,567,179. In sum, Compagno acknowledged in his plea agreement he owed more than $5.4 million in unpaid taxes. 

Compagno was charged in an information filed November 16, 2016, with one count of tax evasion, in violation of 26 U.S.C. § 7201.  He pleaded guilty to the charge and acknowledged that he knowingly and willfully filed with the IRS a false 2010 corporate tax return.

The sentence was handed down by the Honorable William Alsup, U.S. District Judge.  In addition to the prison term and restitution, Judge Alsup ordered defendant to pay a fine of $75,000 and to serve three years of supervised release.  Judge Alsup also ordered the defendant to surrender on or before June 2, 2017, to begin serving his sentence.

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

SAN FRANCISCO - A federal grand jury in San Francisco indicted eight defendants with charges ranging from soliciting and accepting bribes in connection with State of California construction contracts, to conspiracy to defraud the United States in connection with a federal construction contract, and making false statements to federal investigators, announced United States Attorney Brian J. Stretch, Federal Bureau of Investigation Special Agent in Charge of the San Francisco Division John F. Bennett, and the Department of Energy Office of Inspector General. 

The eight defendants are charged as follows: 

• Eric Worthen, 45, of Pleasant Hill, former Assistant Deputy Secretary for Administrative Affairs, California Department of Veterans Affairs, is charged with:
  • Conspiracy to Receive A Bribe and Reward By Agent of Organization Receiving Federal Funds, in violation of Title 18, United States Code, Section 371; and
  • Two counts of Receiving A Bribe and Reward By Agent of Organization Receiving Federal Funds, in violation of Title 18, United States Code, Section 666(a)(1)(B).

• Taj Armon Reid, also known as Taj Reid, 46, of Oakland, is charged with: 
  • Conspiracy to Receive A Bribe and Reward By Agent of Organization Receiving Federal Funds, in violation of Title 18, United States Code, Section 371;
  • Two counts of Receiving A Bribe and Reward By Agent of Organization Receiving Federal Funds, in violation of Title 18, United States Code, Section 666(a)(1)(B); and
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371.

• Derf Butler, 53, of Vallejo, President of Butler Enterprise Group, LLC in San Francisco, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371; and
  • Making a False Statement, in violation of Title 18, United States Code, Section 1001(a)(2).

• Anton Kalafati, 33, of San Francisco, President of B Side Inc. in San Francisco, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371; and
  • Two counts of Making a False Statement, in violation of Title 18, United States Code, Section 1001(a)(2).

• Clifton Burch, 49, of San Lorenzo, President of Empire Engineering and Construction, Inc. in Oakland and San Francisco, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371.

• Peter McKean, 48, of San Mateo, Vice President of Townsend Management, Inc. in San Francisco, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371.

• Len Turner, 56, of San Leandro, Chief Financial Officer of Turner Group Construction in Oakland, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371.

• Lance Turner, 57, of Oakland, Chief Operating Officer of Turner Group Construction in Oakland, is charged with:
  • Conspiracy to Defraud the United States, that is, the United States Department of Energy, in violation of Title 18, United States Code, Section 371.

The indictment was filed late yesterday along with a Notice of Related Case.  The documents describe three schemes that are related to each other and to previous cases filed by the U.S. Attorney’s Office.

The first scheme charged in the indictment involves Worthen’s employment in the Homes Division of the California Department of Veterans Affairs, also known as CalVet.  According to the indictment, in 2013, defendants Worthen and Reid conspired to offer a specific developer an inside advantage on two CalVet construction projects.  The first construction project, for residential facilities, involved a veterans’ home in Ventura, Calif.  In exchange for $10,000 cash, Worthen and Reid allegedly offered to use Worthen’s position at CalVet to circumvent the normal bidding process for the project and award the construction project to the developer.  The second construction project involved a kitchen remodel at the veterans’ home in West Los Angeles.  For this project, Worthen allegedly took inside information from the CalVet office so that Worthen and Reid could provide the information to the developer in exchange for $2,000 cash.  For both construction projects, the “developer” to whom Worthen and Reid were providing an inside track on the CalVet contracts was, in actuality, a source working under the direction of the FBI.  The source was posing as a developer willing to pay bribes in order to obtain contracts with public agencies. 

In the second scheme, defendants Reid, Len Turner, and Lance Turner are alleged to have conspired to engage in an illegal contract-bidding scheme in connection with a contract to renovate a Department of Energy-owned building at Lawrence Berkeley National Laboratory (Lawrence Berkeley Lab), in Berkeley.  Acting undercover, the same FBI source described above represented to the defendants that he had been promised a contract by a DOE contracting officer, but the officer needed several higher bids in order to justify awarding the contract to the source.  The source made these representations as part of the joint investigation by the FBI and DOE OIG.  The indictment alleges that Reid and the Turners colluded to assist the source by having Turner Group Construction submit a bid in an amount higher than the bid being submitted by the source.  The indictment alleges that Reid and the Turners participated in this scheme in order to defeat the DOE’s lawful process for awarding contracts through a fair, honest, and competitive process.  According to the indictment, the defendants were motivated by either a financial reward or the promise of construction work from the developer that would materialize after the developer was awarded the contract. 

In the third scheme charged in the indictment, defendants Derf Butler, Anton Kalafati, Clifton Burch, and Peter McKean are alleged to have engaged in a similar conspiracy in connection with the same DOE construction contract at Lawrence Berkeley Lab.  According to the indictment, these defendants agreed to take steps to ensure that the same “developer” won the contract. The indictment alleges that the defendants colluded to submit bids for the Lab building renovation from B Side Construction, Empire Engineering and Construction, and Townsend Management.  Each company was to submit bids in amounts dictated by the developer and for the purpose of ensuring that the developer’s bid was the lowest bid on the contract.  Again, the indictment alleges that the defendants engaged in this conspiracy in order to gain financial reward or construction work from the developer. 

The indictment also alleges false statement offenses against defendants Butler and Kalafati.  Specifically, the indictment charges that when interviewed by agents of the FBI and DOE Office of Inspector General, defendants Butler and Kalafati made material false statements to the investigators. 

The investigation that led to the charges in the indictment arose out of the FBI’s 2012-2014 public corruption investigation of San Francisco political consultant Keith Jackson and then-State Senator Leland Yee, and the related organized crime investigation of Raymond “Shrimp Boy” Chow.  The FBI source who was posing as the developer and acting undercover in connection with the CalVet and DOE contracts described above was also involved in the investigation of Jackson and Yee.  In furtherance of the same type of corrupt activities for which he was convicted in 2015, Jackson introduced the source to defendants Worthen, Reid, and Butler. 

The defendants are scheduled to make their initial appearances before United States Magistrate Judge Joseph C. Spero in San Francisco on April 17, 2017. 

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 defendants face a maximum statutory sentences as follows:

• Each violation of Title 18, United States Code, Section 371 and Title 18, United States Code, Section 1001(a)(2) carries a maximum penalty of five years imprisonment, a three-year term of supervised release, a $250,000 fine, and a $100 special assessment.
• Each violation of Title 18, United States Code, Section 666(a)(1)(B) carries a maximum penalty of  ten years imprisonment, a three-year term of supervised release, a $250,000 fine, and $100 special assessment. 

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 United States Attorneys Susan Badger, William Frentzen, and David Countryman are prosecuting the case with the assistance of Rosario Calderon and Bridget Kilkenny.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and United States Department of Energy, Office of Inspector General. Additional assistance was provided by the California Department of Veteran’s Affairs.

SAN FRANCISCO – Ming Lian Zhou was sentenced today to six months in community confinement to be followed by another six months home detention, along with over $7,000 in fines and restitution, for concealing the underpayment of wages from the U.S. Department of Labor, announced United States Attorney Brian J. Stretch and Department of Labor Office of the Inspector General Special Agent in Charge Abel Salinas.  The sentence was handed down by the Honorable Richard Seeborg, U.S. District Judge, following Zhou’s September 16, 2016, guilty plea.

According to the guilty plea, Zhou, 58, of San Francisco, admitted he covered up the fact that he had not paid proper overtime wages to employees at two San Francisco restaurants he formerly owned, Hong Kong Lounge and Hong Kong Lounge II.  Zhou failed to pay his employees $92,966.51 in overtime wages.  A Department of Labor investigation uncovered Zhou’s conduct and, on March 16, 2012, the Department of Labor’s Wage and Hour Division notified Zhou that he was required to repay these employees.  Zhou admitted that, on or about March 27, 2012, he signed and submitted to the Wage and Hour Division two Forms WH-56, in which he represented and agreed that he would pay his employees the assessed amount and would mail proof of that payment to the Wage and Hour Division.  In April 2012, he deliberately signed and submitted to the Wage and Hour Division 46 Forms WH-58, in which he reported that he had paid 46 employees their overtime back wages.  In truth, he had not paid the employees their overtime back wages.  He nevertheless signed the forms, and asked his employees to sign the forms, confirming that the employees had received their wages.

Zhou was indicted by a federal grand jury on September 17, 2015.  He was charged with one count of concealing a material fact from a government agency, in violation of 18 U.S.C. § 1001(a)(1), and three counts of interfering with commerce by threats of economic harm, in violation of 18 U.S.C. § 1951.  Zhou pleaded guilty to concealing a material fact from a government agency.  The remaining charges were dismissed.

This case originated with an investigation by the Department of Labor’s Wage and Hour Division into whether restaurants in the Bay Area were in compliance with the Fair Labor Standards Act.

“The high cost of living in the Bay Area makes restaurant workers particularly vulnerable to being cheated out of their lawful wages,” said U.S. Attorney Stretch.  “Restaurant workers often work long hours for low wages.  As in this case, workers frequently are punished or retaliated against for seeking the wages they have earned.  They cannot afford to lose their jobs, so they are forced to accept an illegal wage.  They should not have to fight this fight alone.  Restaurant owners who cheat their employees out of fairly earned wages will be prosecuted by the Department of Justice.”

“The Office of Inspector General will continue to investigate individuals like Zhou, who exploit vulnerable workers and then conceal their actions by obstructing compliance investigations conducted by the Department of Labor’s Wage and Hour Division. We are committed to working with our partner agencies to preserve the integrity of all U.S. Department of Labor enforcement programs,” stated Special Agent in Charge Salinas. 

Judge Seeborg sentenced the defendant to a three-year term of probation.  For the first six months, the defendant will be required to reside in community confinement, otherwise known as a halfway house, where he will not be able to leave except for work and other limited activities.  Following release from the halfway house, defendant will be required to serve a six-month period of home detention while wearing a location monitor to ensure his compliance.  For the entire three years of his probation, the defendant’s home and businesses will be subject to searches by his probation officer to ensure that he is not involved in any other illegal activities.  The Court ordered the defendant to pay a $5,000 fine, and restitution of $2,471.80 to three of the employees that the defendant forced to pay kickbacks.

The case was prosecuted by Assistant U.S. Attorneys Katherine Lloyd-Lovett and John Hemann, with the assistance of Marina Ponomarchuk and Matthew Swartsfager.  The prosecution is the result of a multi-year investigation by the Department of Labor’s Office of the Inspector General and Wage and Hour Division.

SAN JOSE – Ramon Daniel Quezada was sentenced today to 120 months in prison for his role in a conspiracy to possess heroin and possession with intent to distribute heroin, 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 the entry of Quezada’s guilty plea to the charges on November 15, 2016.

According to his plea agreement, Quezada, 26, of San Jose, admitted that in April and May of 2016, he lived with two individuals with whom he sold methamphetamine and heroin.  He acknowledged distributing methamphetamine, collecting money from the sale of the drugs, and using his cellular telephone to communicate with potential buyers and arrange the sales of the drugs.  Quezada also admitted that on May 27, 2016, he was present at his home, in possession of a firearm, when law enforcement agents conducted a search of his residence and found approximately 1,745 grams of methamphetamine and over 1000 grams of heroin. 

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

In addition to the prison term, Judge Freeman ordered Quezada to serve a five-year period of supervised release and ordered him to forfeit a handgun and assorted magazines and ammunition.  Quezada is in custody and will begin serving the sentence immediately.

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.

SAN JOSE—Sanjiv Kakkar was sentenced today to 48 months in prison and ordered to pay $4,208,565.36 in restitution to the victim for wire fraud and making misstatements to a bank announced U.S. Attorney Brian J. Stretch and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jill Snyder.  The sentence was handed down by the Honorable Edward J. Davila, U.S. District Judge, after a twelve-day jury trial ending with a guilty verdict on all counts.

The evidence at trial demonstrated Kakkar, 55, of Saratoga, presented false information to a bank in connection with refinancing a hotel property he owned in Boulder Creek, Calif.  In November of 2008, Kakkar sought to secure a $6 million loan to refinance the Brookdale Inn and Spa.  In connection with the loan, he submitted bogus documents to a bank, including falsified income information and tax returns, which overstated his business income.  Kakkar also did not comply with his continuing obligation under the terms of the loan to provide the bank with updated financial records and further tax documents.  Further, between January and June 2009, Kakkar submitted false and fraudulent documents to an escrow company.  Kakkar induced the escrow company to advance hundreds of thousands of dollars in wire progress payments that were earmarked for reimbursement of construction costs.   

A federal grand jury issued a superseding indictment against Kakkar on June 2, 2016, charging him with one count of making misstatements to a bank, in violation of 18 U.S.C. § 1014, and six counts of wire fraud, in violation of 18 U.S.C. § 1343.  On November 8, 2016, a jury found Kakkar guilty of all the charges presented in the superseding indictment.

In addition to the prison term, and restitution, Judge Davila ordered Kakkar to pay a $20,000 fine and to serve three years of supervised release.  Kakkar currently is released on bond and has been ordered to surrender on or before June 22, 2017, to begin serving his sentence.  

Assistant U.S. Attorneys Amie Rooney and Maia Perez are prosecuting the case with assistance from Nina Burney and Elise Etter.  The case is the result of an investigation by the ATF.

SAN FRANCISO – Golden Gate Pharmacy Holdings and its wholly owned subsidiaries, Golden Gate Pharmacy Services (GGPS) and Ross Valley Compounding Pharmacy (Ross Valley), have agreed to pay $717,250 to settle allegations by the U.S. Department of Justice that the companies failed to keep and maintain adequate records pertaining to controlled substances at their San Rafael, California facility, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin. 

The settlement agreement, signed earlier today by Justice Department officials, was reached to resolve allegations by the government that a September 2014 DEA inspection uncovered multiple violations by GGPS and Ross Valley of the Controlled Substances Act, 21 U.S.C. § 801.  According to the agreement, San Rafael-based companies GGPS and Ross Valley each was, at the relevant time, registered with the DEA as a Retail Pharmacy providing them with authorizations to handle Schedules II, III, IIIN, and IV controlled substances.  GGPS and Ross Valley both acknowledged they had an obligation to “keep and maintain” records related to its receipt, manufacturing and distribution of controlled substances in connection with operations at their San Rafael, California facility.  According to the agreement, following the DEA’s inspection, the government concluded that between September 4, 2012, and September 4, 2014, GGPS and Ross Valley failed to record or maintain adequate inventory records or “records of the receipt, storage or shipment of controlled substances in at least 5,161 instances.”  In addition, according to the agreement, an employee at the San Rafael facility pilfered approximately 8,000 oxycodone tablets.  According to the terms of the agreement, Golden Gate Pharmacy Holdings, GGPS, and Ross Valley Pharmacy will pay the government $717,250 to resolve all civil claims related to the recordkeeping violations identified in the investigation. 

Assistant U.S. Attorney Jonathan U. Lee handled this matter with the assistance of Garland He and Jessica Hurtado.

SAN FRANCISCO – Eutimio Reyna-Ceron (a/k/a “Tony,” a/k/a “Gordo,” a/k/a “Little Tony”) pleaded guilty in federal court in San Francisco yesterday to charges of conspiracy to distribute heroin and methamphetamine, distribution of heroin, and money laundering, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin.  Reyna-Ceron’s plea was accepted by the Honorable Vince Chhabria, U.S. District Judge, in San Francisco and represents the twelfth guilty plea accepted by the court in this 20-defendant drug conspiracy case.

In pleading guilty, Reyna-Ceron, 29, of Santa Rosa, Calif., admitted that he and others operated a drug distribution ring in Santa Rosa, and that they distributed an average of a half-kilogram of heroin per week over a period of at least seven months.  Reyna-Ceron admitted that, at any given time, he had three couriers working for him delivering drugs, and that he and his couriers sold drugs in quantities ranging from a gram to multiple ounces at a time.  The defendant also admitted to laundering the proceeds of those transactions, which amounted to between $2,500 and $3,000 per day. 

On July 19, 2017, Reyna-Ceron was charged in a 33-count Superseding Indictment along with 19 other defendants. For his part in the conspiracy, Reyna-Ceron was charged with one count of conspiracy to distribute and possess with intent to distribute heroin and methamphetamine, in violation of 21 U.S.C. § 846; seven counts of distribution and possession with intent to distribute heroin, in violation of 21 U.S.C. § 841; one count of distribution and possession with intent to distribute methamphetamine, in violation of 21 U.S.C. § 841; one count of conspiracy to launder drug proceeds, in violation of 18 U.S.C. § 1956(h); and ten counts of international money laundering, in violation of 18 U.S.C. § 1956(a)(2)(B).  Pursuant to yesterday’s plea agreement, Reyna-Ceron pleaded guilty to one count each of conspiracy to distribute heroin and methamphetamine, distribution of heroin, and money laundering.

Judge Chhabria has scheduled Reyna-Ceron’s sentencing for June 27, 2017, at 10:30 a.m., in San Francisco.  As part of his plea, Reyna-Ceron agreed to a forfeiture money judgment of $1,080,000, which he agreed was an approximation of the amount of proceeds his distribution network received during the period of the conspiracy.  The statutory minimum prison term for the violation of 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(B), as charged in count one of the superseding indictment, is 10 years’ imprisonment; the statutory maximum for the charge is life in prison.  The maximum statutory penalties for the distribution and money laundering to which Reyna-Ceron has pleaded guilty is 20 years in prison.  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.

Eleven of Reyna-Ceron’s co-defendants have pleaded guilty to certain crimes related to the drug distribution and money laundering conspiracy.  Reyna-Ceron’s brother, Marcelino Reyna-Ceron, pleaded guilty to conspiracy to distribute drugs and conspiracy to launder proceeds charges.  Reyna-Ceron’s brother-in-law, Raymundo Doval Duran, pleaded guilty to illegal use of a communications facility in connection with the drug operation.  In addition, Reyna-Ceron’s niece, Elizabeth Reyna-Rodriguez, and two nephews, Marcelino Reyna-Rodriguez and Eutimio Reyna-Rodriguez, pleaded guilty to money laundering charges, and his niece’s husband, Ramon Medina, pleaded guilty to drug charges. None of these co-defendants has been sentenced.  Sentencing hearings for these defendants will take place in August and September of 2017.

This case was 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.  In this case, the United States Attorney’s Office, the Sonoma County District Attorney’s Office, the Drug Enforcement Administration, the Santa Rosa Police Department, and the Internal Revenue Service, worked together, with assistance from other federal and state agencies, including the Petaluma Police Department, to investigate and prosecute the offenders.

SAN FRANCISCO – Benford Chavis, the former director of three Oakland charter schools, collectively known as the American Indian Model Schools, was charged with mail fraud and money laundering in connection with the schools’ applications for federal grant funds, 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.  Chavis was apprehended this morning in North Carolina and has been ordered to appear in Oakland to face the charges in the Northern District of California. 

According to the indictment, unsealed today, from early 2006 through May of 2012, Chavis, 59, from Lumberton, North Carolina, and others devised and implemented a scheme to defraud the California School Finance Authority by causing three charter schools to request federally funded grants in violation of federal conflict of interest regulations.  At times between 2000 and 2012, Chavis served as the director and in various additional capacities for three Oakland charter schools – the American Indian Public Charter School, the American Indian Public High School II, and the American Indian Public High School – as well as the schools’ umbrella organization, the American Indian Model Schools (AIMS).  The indictment alleges Chavis caused the schools to apply for more than $2.5 million in competitive federal grant funds for the purpose of paying the costs of leasing facilities that Chavis owned or controlled through his companies American Delivery Systems and Lumbee Properties, LLC.  Chavis allegedly concealed his interest in the facilities in the grant applications.  The indictment further alleges that the schools obtained more than $1.1 million in federal grants as a result of this fraud, and that Chavis used fraud proceeds to promote the fraud scheme as to each school.  In sum, Chavis is charged with three counts of mail fraud, in violation of 18 U.S.C. § 1341, and three counts of promotional money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A).

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the maximum term of imprisonment for mail fraud is 20 years and the maximum term of imprisonment for money laundering is 10 years for each count.  Additional periods of supervised release, fines, 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.

Chavis was released on a personal recognizance bond and was ordered to make his initial appearance in the Oakland Courthouse of the Northern District of California before the Honorable Haywood S. Gilliam, U.S. District Judge, on or before April 14, 2017.

Assistant U.S. Attorney Hartley West is prosecuting the case with the assistance of Claudia Hyslop, Maryam Beros, and Patricia Mahoney.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigations.

A federal jury sitting in Oakland, California convicted Janel McDonald today for her role in a conspiracy to cash stolen and fraudulently obtained U.S. Treasury checks, 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.

McDonald was charged, along with 10 codefendants in November 2015, with conspiracy to commit theft of public money, theft of public money and aggravated identity theft. According to the indictment and evidence presented at trial, from August 2013 through April 2015, McDonald’s co-conspirators stole deceased individuals’ personal identifying information from California death records and used it to file federal tax returns seeking refunds. They also obtained social security and refund checks that were stolen from the U.S. mail system. McDonald provided fake California IDs to her co-conspirators who used them to cash the stolen and fraudulently obtained U.S. Treasury checks.

Sentencing is scheduled for Aug. 1. McDonald faces a statutory maximum sentence of five years in prison for conspiracy to commit theft of public money, 10 years in prison for theft of public money and a mandatory minimum sentence of two years in prison for aggravated identity theft. She also faces a period of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of the Internal Revenue Service–Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Thomas Newman and Assistant U.S. Attorney Jose 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.

OAKLAND– A federal jury convicted Janel McDonald today for her role in a conspiracy to cash stolen and fraudulently obtained U.S. Treasury checks, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

McDonald, 38, of Los Angeles, was charged, along with 10 codefendants in November 2015, with conspiracy to commit theft of public money, theft of public money, and aggravated identity theft.  According to the indictment and evidence presented at trial, from August 2013 through April 2015, McDonald’s co-conspirators stole deceased individuals’ personal identifying information from California death records and used it to file federal tax returns seeking refunds.  They also obtained social security and refund checks that were stolen from the U.S. mail system.  McDonald provided fake California IDs to her co-conspirators who used them to cash the stolen and fraudulently obtained U.S. Treasury checks. On November 5, 2015, McDonald was charged in a superseding indictment 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 & 2; and two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.  Pursuant to today’s verdict, McDonald was found guilty of all the charges.

Sentencing is scheduled for Aug. 1.  McDonald faces a statutory maximum sentence of five years in prison for conspiracy to commit theft of public money, 10 years in prison for theft of public money and a mandatory minimum sentence of two years in prison for aggravated identity theft.  She also faces a period of supervised release, restitution and monetary penalties. However, any sentence following conviction 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.

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

SAN FRANCISCO – Yee Man Lui was sentenced to serve 40 months in prison for aggravated identity theft and access device fraud announced U.S. Attorney Brian J. Stretch and United States Postal Inspection Service Inspector in Charge Rafael Nuñez.  The sentence was handed down by the Honorable Maxine M. Chesney, U.S. District Judge, following Lui’s September 14, 2016, guilty plea. 

According to the guilty plea, from February through July of 2014, Lui, 36, of San Francisco, engaged in a scheme to defraud several financial institutions by opening new credit accounts in the names of unsuspecting individuals. Lui admitted that as part of the scheme, she took over existing credit card and debit card accounts and then, using the personal identifying information of the account holders without their knowledge or consent, created and used new credit accounts. She acknowledged applying for 42 credit cards via the Internet using the personal identifying information of her victims.  In addition, Lui admitted she used credit and bank cards in the names of at least two individuals to make purchases.  In sum, Lui admitted causing over $30,000 in actual and over $120,000 in intended losses to her victims.   

On August 6, 2015, Lui was charged in a five-count indictment with two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1), two counts of access device fraud, in violation 18 U.S.C. § 1029(a)(2) and (b)(1), and one count of conspiracy to commit access device fraud, in violation of 18 U.S.C. § 1029(b)(2). On September 14, 2016, Lui pleaded guilty to one count each of aggravated identity theft and access device fraud. The remaining charges were dismissed.

In addition to the prison term, Judge Chesney also ordered Lui to serve 36 months of supervised release and to pay restitution.  Judge Chesney has not yet set a hearing date to determine the amount of restitution that Lui will be ordered to pay.

Assistant United States Attorney Sarah Hawkins is prosecuting the case with the assistance of Patricia Mahoney.  This prosecution is the result of an investigation by the United States Postal Inspection Service.

SAN FRANCISCO- Allison Bushart was sentenced today to 33 months in prison for misapplication and embezzlement of credit union funds and making and subscribing a false tax return 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.  The sentence was handed down by the Honorable Richard Seeborg, U.S. District Judge, following Bushart’s December 20, 2016, guilty plea.

According to her plea agreement, Bushart, 54, of Rohnert Park, Calif., was employed at the Rohnert Park branch of Patelco Credit Union (Patelco) from approximately May 2003 to early 2015, where her duties included processing member transactions, including cash withdrawals. Bushart acknowledged that, beginning no later than 2010, she began taking cash withdrawals from numerous account holders’ accounts without their knowledge.  Among the methods she used to complete the unauthorized withdrawals was to fill out withdrawal slips for specific amounts related to individuals’ accounts and then to forge the account holders’ signatures on the slips.  She then took the corresponding amounts of cash home at the end of the day or deposited the cash into her own, or a relative’s, account.  Bushart acknowledged that she made unauthorized withdrawals from the accounts of at least ten different individuals, some of whom were legally “vulnerable” because of their age and mental condition.  Bushart also admitted that total amount of unauthorized withdrawals that she made pursuant to her embezzlement scheme exceeded $150,000.  In imposing his sentence, Judge Seeborg concluded that the unauthorized withdrawals exceeded $250,000.

In addition, Bushart admitted as part of her plea agreement that she never declared as income any of the funds she obtained through the unauthorized withdrawals she made.  As a result of failing to declare the income on her annual federal income tax returns, she failed to report $105,000 in income for tax year 2014, resulting in a tax loss suffered by the Internal Revenue Service that year in the amount of $24,469. 

Bushart was charged by information on November 23, 2016, with one count of misapplication and embezzlement of credit union funds, in violation of 26 U.S.C. § 7206(l), and one count of making and subscribing a false tax return, in violation of 18 U.S.C. § 981(A)(1)(C).  Pursuant her plea agreement she pleaded guilty to both counts in the information. 

In addition to the prison sentence, Judge Seeborg sentenced Bushart to three years of supervised release.  The court scheduled a hearing on May 2, 2017, at 10:00 a.m., to determine the amount of restitution that Bushart will be ordered to pay.  Bushart was ordered to surrender no later than May 26, 2017, to begin serving her sentence.   

Assistant U.S. Attorney Kyle Waldinger is prosecuting the case with the assistance of Patricia Mahoney.  The prosecution is the result of an investigation by the FBI and IRS, Criminal Investigation.

SAN FRANCISCO- Marc Christopher Harmon was sentenced today to 30 months in prison for his role in a conspiracy to commit wire fraud and 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.  The sentence was handed down by the Honorable Richard Seeborg, U.S. District Judge, after Harmon was tried and found guilty by a federal jury.

Harmon, 44, formerly of San Leandro, Calif., was charged in an indictment filed July 3, 2014, along with co-conspirator Jason George Rivera, Jr., 38, of Danville, Calif., in a scheme to defraud multiple investors of more than $3 million.  The evidence at trial demonstrated that between October 2008 and January 2011, Harmon and Rivera used a Nevada corporation known as Executive Members Management Group, or EMMG, as a vehicle to defraud investors.  The scheme involved promises that EMMG would purchase or trade collateralized mortgage obligations (CMOs) using funds provided by the investors, or would invest their funds in other lucrative transactions.  Rivera and Harmon convinced victims to invest substantial sums of money, by promising, among other things, high rates of returns by participating in exclusive trading markets overseas and funding short-term loans for banks.  The evidence at trial demonstrated Harmon’s role included recruiting investors to EMMG and making many false representations to induce the investors to contribute to non-existent investment programs. 

On July 3, 2014, a grand jury returned an indictment charging defendants with eight counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.  Rivera also was charged with two counts of tax evasion, in violation of 26 U.S.C. § 7201.  On July 29, 2015, Rivera pleaded guilty to the conspiracy to commit wire fraud charge and the two tax evasion counts.  As against Harmon, the government dismissed two counts of fraud and the jury convicted him of all the remaining charges.  Following trial, on October 11, 2016, Harmon entered into a post-trial plea agreement with the government in which he pleaded guilty to one count of fraud.

In addition to the prison sentence, Judge Seeborg sentenced Harmon to three years of supervised release and $1,837,500 in restitution.   Harmon is in custody and will begin serving his sentence immediately. 

Rivera was sentenced on February 8, 2017, to 33 months of imprisonment, three years of supervised release, and $2,045,207 in restitution.

Assistant U.S. Attorneys Benjamin Kingsley and Shailika Kotiya are prosecuting the case with the assistance of Bridget Kilkenny.  The prosecution is the result of an investigation by the FBI and IRS, Criminal Investigation.

OAKLAND – Antoine King pleaded guilty today to his role in a conspiracy to manufacture counterfeit Xanax pills and to launder the proceeds gained by the illegal scheme, announced United States Attorney Brian J. Stretch; Drug Enforcement Administration Special Agent in Charge John J. Martin; Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf; and U.S. Food and Drug Administration Office of Criminal Investigations Special Agent in Charge Lisa L. Malinowski.  The Honorable Jeffrey S. White, U.S. District Judge, accepted the plea.

According to the guilty plea, King, 27, of Oakland, Calif., admitted that from October 6, 2014 through December 12, 2015, he was involved in a conspiracy with his co-defendant David Beckford and others to manufacture and distribute pills that were designed to resemble Xanax® pills as nearly as possible.  King admitted that he knew his co-defendants and others obtained the components and equipment to manufacture the counterfeit Xanax pills from foreign sources.  King further admitted that from October 6, 2014, through December 12, 2015, he sold counterfeit Xanax pills that were created as part of the operation. 

On May 12, 2016, a federal grand jury returned a 33-count indictment charging King and four co-defendants, David Beckford, Stephan Florida, Isaiah Clayton, and Beau Sankene, with numerous crimes related to the conspiracy.  For his role, King was charged with one count of conspiracy to manufacture, distribute, and possess with intent to distribute a controlled substance, in violation of 21 U.S.C. § 846; one count of conspiracy to commit international money laundering, in violation of 18 U.S.C. § 1956(h); four counts of international money laundering, in violation of 18 U.S.C. § 1956(a)(2)(A); and one count of trafficking in a counterfeit drug, in violation of 18 U.S.C. § 2320(a)(4).  Pursuant to today’s plea agreement, King pleaded guilty to violating one count each of 21 U.S.C. § 846, 18 U.S.C. § 1956(h), and 18 U.S.C. § 2320(a)(4).  The maximum statutory sentence for a violation of 21 U.S.C. § 846 is 5 years, the maximum statutory sentence for a violation of 18 U.S.C. § 1956(h) is 20 years, and the maximum statutory sentence for a violation of 18 U.S.C. § 2320(a)(4) is 10 years.  However, any sentence following conviction 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.

On February 9, 2017, Judge White sentenced David Beckford, 28, of Oakland, Calif., to serve 123 months in prison to be followed by a three-year period of supervised release for his role in the scheme.  Judge White also ordered forfeiture of currency, firearms, ammunition, and custom jewelry.  Co-defendants Stephan Florida, 27, of San Francisco, Calif., and Isaiah Clayton, 24, of Oakland, Calif., were sentenced to 14 months’ imprisonment and 36 months’ probation, respectively, for their roles in the scheme.  Beau Sankene of Oakland, Calif., has pleaded guilty to crimes related to her roles in the conspiracy.  A date for Sankene’s sentencing has not yet been scheduled. 

Assistant U.S. Attorneys Sheila Armbrust and Marc Wolf are prosecuting the case with the assistance of Ana Guerra and Yanira Osorio.  The prosecution is the result of an investigation by the Drug Enforcement Administration, Internal Revenue Service, Criminal Investigation, and U.S. Food and Drug Administration Office of Criminal Investigations.

OAKLAND – Shiv D. Kumar pleaded guilty in federal court in Oakland today to making and subscribing false U.S. corporation income tax returns, announced U.S. Attorney Brian J. Stretch, Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, and Internal Revenue Service Special Agent in Charge Michael T. Batdorf.  The plea was accepted by Honorable Judge Jon S. Tigar, U.S. District Judge.
 
In pleading guilty, Kumar, 60, of Dublin, admitted he was the sole shareholder and president of A-Paratransit Inc. (API), a company that provided transportation services to disabled individuals.  Kumar filed false corporate tax returns with the Internal Revenue Service for tax years 2009 and 2010, which underreported API’s gross receipts by $2,229,216 and $2,412,435, causing a tax loss of $1,584,055.  Kumar attempted to conceal those gross receipts from the IRS by diverting those gross receipts into two bank accounts that he failed to disclose to his accountant. The unreported funds were used for personal expenditures, including purchasing real property in the area of Vallejo, Calif. 
 
Kumar was charged by information with one count of making and subscribing a false tax return, in violation of 26 U.S.C. § 7206(1). Under the plea agreement, Kumar pleaded guilty to the single count.

Kumar’s sentencing hearing is scheduled for July 7, 2017, at 9:30 a.m. before Judge Tigar. The maximum statutory sentence for making and subscribing a false tax return in violation of 26 U.S.C. § 7206(1) is three years in prison and a fine of $250,000.  However, any sentence following conviction 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 José A. Olivera and Trial Attorney Rebecca J. Sable of the Tax Division are prosecuting the case with the assistance of Ed Solis and Kathy Tat. The prosecution is the result of an investigation by the Internal Revenue Service.

Underreported His Company’s Sales by More than $4.6 Million

A Dublin, California man pleaded guilty today in U.S. District Court in the Northern District of California to filing a false tax return, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Brian Stretch for the Northern District of California.

According to documents filed with the court, Shiv D. Kumar, 60, of Dublin, California, was the sole shareholder and president of A-Paratransit Inc. (API), a company that provided transportation services to disabled individuals. Kumar filed false corporate returns with the Internal Revenue Service (IRS) for tax years 2009 and 2010, which underreported API’s gross receipts by $2,229,216 and $2,412,435, causing a tax loss of $1,584,055. Kumar deposited API’s receipts into three separate bank accounts held at different banks. To conceal API’s true gross receipts, Kumar provided his accountant with false books and records, which omitted gross receipts that he diverted to two of API’s accounts. Kumar used the unreported funds for personal expenditures, including purchasing property in the Vallejo, California area.

Sentencing is scheduled for July 7, 2017. The statutory maximum sentence for filing a false return is three years in prison. Kumar also faces a period of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Brian Stretch thanked special agents of IRS-Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney José A. Olivera and Trial Attorney Rebecca J. Sable 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 JOSE –San Jose cleric Hien Minh Nguyen was convicted on bank fraud charges announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.  The guilty verdict followed a bench trial before the Honorable Beth Labson Freeman, United States District Judge.

From 2005 through 2011, Nguyen, 57, was a priest for the Diocese of San Jose (the Diocese), a pastor of St. Patrick’s Church (St. Patrick’s) and the director of the Vietnamese Catholic Center, also known as the Trung Tam Cong Giao (VCC).  The evidence at trial showed that while employed as a priest in the Diocese, Nguyen received donations for St. Patrick’s from parishioners, some of which he deposited into his own personal bank account.  Nguyen also signed checks drawn on VCC’s bank accounts to pay his personal expenses. 

Further, the evidence demonstrated that Nguyen received from parishioners fourteen separate checks made payable to the VCC, which the parishioners intended would be used for the benefit of VCC.  Rather than depositing those checks into VCC’s bank accounts, Nguyen intentionally deposited them into his personal bank account.  On December 1, 2015, Nguyen was charged by way of a superseding indictment with fourteen counts of bank fraud, in violation of both 18 U.S.C. §§ 1344(1) and 1344(2), and four counts of tax evasion, in violation of 26 U.S.C. § 7201.  He pleaded guilty to the tax evasion charges on August 9, 2016.  With today’s verdict, the Court concluded Nguyen also was guilty of all fourteen counts of bank fraud.

Nguyen is scheduled to be sentenced on June 30, 2017, at 9:00 before Judge Freeman in San Jose.  The maximum statutory penalty for bank fraud, in violation of 18 U.S.C. § 1344(2), is thirty years in prison and a $1,000,000 fine or twice the gain/loss from the offense.  The maximum statutory penalty for tax evasion, in violation of 26 U.S.C. § 7201, is five years in prison and a $250,000 fine. However, any sentence following conviction 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 Michael G. Pitman and Thomas Moore and Trial Attorney Gregory Bernstein of the Tax Division are prosecuting the case.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.

SAN FRANCISCO – Christine Hill pleaded guilty today to tax evasion announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.  The plea agreement was accepted by the Hon. Richard Seeborg, U.S. District Judge, following the filing of an information in which Hill was charged with tax evasion.

Hill, 54, of Vallejo, pleaded guilty to knowingly and willingly filing a fraudulent 2010 U.S. Individual Income Tax Return, Form 1040.  According to the plea agreement, Hill is the Director of Operations at John Compagno, MD, Inc., with offices in Hercules, Calif.  She is responsible for the payroll including collecting time sheets and processing paychecks.  Hill acknowledged she knew that bonus payments are subject to federal income tax withholding and that she processed numerous bonus checks for herself and other employees in which federal taxes were withheld and bonus payments were reported on IRS Forms W-2.   Nevertheless, Hill also admitted she received additional year-end bonus payments from at least 2003 through 2011.  These bonus payment checks were paid to Hill directly and not processed through the payroll account.  Because the extra bonus payments were not processed through the payroll account, they were not reported on IRS Forms W-2 and therefore not reported to the IRS. 

In addition, Hill’s spouse received payments from John Compagno, MD, Inc. for repairs, maintenance, and construction work he did for the company for the period of 2004 through 2011.  John Compagno, MD, Inc. did not issue Forms 1099 for those services.  For the period of 2003 through 2011, Hill omitted income from additional bonuses and payments to her spouse in the amount of $122,391.  This resulted in additional tax due of $35,566.   

On March 1, 2017, Hill was charged with tax evasion, in violation of 26 U.S.C. § 7201.  Pursuant to the plea agreement, Hill pleaded guilty to the charge in the one-count information.  Judge Seeborg scheduled a hearing for sentencing on June 20, 2017.  The maximum sentence for a violation of 26 U.S.C. § 7201 is five years in prison and a fine of $250,000.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

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

A grand jury in the Northern District of California has indicted four defendants, including two officers of the Russian Federal Security Service (FSB), for computer hacking, economic espionage and other criminal offenses in connection with a conspiracy, beginning in January 2014, to access Yahoo’s network and the contents of webmail accounts. The defendants are Dmitry Aleksandrovich Dokuchaev, 33, a Russian national and resident; Igor Anatolyevich Sushchin, 43, a Russian national and resident; Alexsey Alexseyevich Belan, aka “Magg,” 29, a Russian national and resident; and Karim Baratov, aka “Kay,” “Karim Taloverov” and “Karim Akehmet Tokbergenov,” 22, a Canadian national and a resident of Canada.

The defendants used unauthorized access to Yahoo’s systems to steal information from about at least 500 million Yahoo accounts and then used some of that stolen information to obtain unauthorized access to the contents of accounts at Yahoo, Google and other webmail providers, including accounts of Russian journalists, U.S. and Russian government officials and private-sector employees of financial, transportation and other companies. One of the defendants also exploited his access to Yahoo’s network for his personal financial gain, by searching Yahoo user communications for credit card and gift card account numbers, redirecting a subset of Yahoo search engine web traffic so he could make commissions and enabling the theft of the contacts of at least 30 million Yahoo accounts to facilitate a spam campaign.

The charges were announced by Attorney General Jeff Sessions of the U.S. Department of Justice, Director James Comey of the FBI, Acting Assistant Attorney General for National Security Mary McCord, U.S. Attorney Brian Stretch for the Northern District of California and Executive Assistant Director Paul Abbate of the FBI’s Criminal, Cyber, Response and Services Branch.

“Cyber crime poses a significant threat to our nation’s security and prosperity, and this is one of the largest data breaches in history,” said Attorney General Sessions. “But thanks to the tireless efforts of U.S. prosecutors and investigators, as well as our Canadian partners, today we have identified four individuals, including two Russian FSB officers, responsible for unauthorized access to millions of users’ accounts. The United States will vigorously investigate and prosecute the people behind such attacks to the fullest extent of the law.”

“Today we continue to pierce the veil of anonymity surrounding cyber crimes,” said Director Comey. “We are shrinking the world to ensure that cyber criminals think twice before targeting U.S. persons and interests.”

“ The criminal conduct at issue, carried out and otherwise facilitated by officers from an FSB unit that serves as the FBI’s point of contact in Moscow on cybercrime matters, is beyond the pale,” said Acting Assistant Attorney General McCord. “Once again, the Department and the FBI have demonstrated that hackers around the world can and will be exposed and held accountable. State actors may be using common criminals to access the data they want, but the indictment shows that our companies do not have to stand alone against this threat. We commend Yahoo and Google for their sustained and invaluable cooperation in the investigation aimed at obtaining justice for, and protecting the privacy of their users.”

 “This is a highly complicated investigation of a very complex threat. It underscores the value of early, proactive engagement and cooperation between the private sector and the government,” said Executive Assistant Director Abbate. “The FBI will continue to work relentlessly with our private sector and international partners to identify those who conduct cyber-attacks against our citizens and our nation, expose them and hold them accountable under the law, no matter where they attempt to hide.”

 “Silicon Valley’s computer infrastructure provides the means by which people around the world communicate with each other in their business and personal lives. The privacy and security of those communications must be governed by the rule of law, not by the whim of criminal hackers and those who employ them. People rightly expect that their communications through Silicon Valley internet providers will remain private, unless lawful authority provides otherwise. We will not tolerate unauthorized and illegal intrusions into the Silicon Valley computer infrastructure upon which both private citizens and the global economy rely,” said U.S. Attorney Stretch. “Working closely with Yahoo and Google, Department of Justice lawyers and the FBI were able to identify and expose the hackers responsible for the conduct described today, without unduly intruding into the privacy of the accounts that were stolen. We commend Yahoo and Google for providing exemplary cooperation while zealously protecting their users’ privacy.”

Summary of Allegations

According to the allegations of the Indictment:

The FSB officer defendants, Dmitry Dokuchaev and Igor Sushchin, protected, directed, facilitated and paid criminal hackers to collect information through computer intrusions in the U.S. and elsewhere. In the present case, they worked with co-defendants Alexsey Belan and Karim Baratov to obtain access to the email accounts of thousands of individuals.

Belan had been publicly indicted in September 2012 and June 2013 and was named one of FBI’s Cyber Most Wanted criminals in November 2013. An Interpol Red Notice seeking his immediate detention has been lodged (including with Russia) since July 26, 2013. Belan was arrested in a European country on a request from the U.S. in June 2013, but he was able to escape to Russia before he could be extradited.

Instead of acting on the U.S. government’s Red Notice and detaining Belan after his return, Dokuchaev and Sushchin subsequently used him to gain unauthorized access to Yahoo’s network. In or around November and December 2014, Belan stole a copy of at least a portion of Yahoo’s User Database (UDB), a Yahoo trade secret that contained, among other data, subscriber information including users’ names, recovery email accounts, phone numbers and certain information required to manually create, or “mint,” account authentication web browser “cookies” for more than 500 million Yahoo accounts.

Belan also obtained unauthorized access on behalf of the FSB conspirators to Yahoo’s Account Management Tool (AMT), which was a proprietary means by which Yahoo made and logged changes to user accounts. Belan, Dokuchaev and Sushchin then used the stolen UDB copy and AMT access to locate Yahoo email accounts of interest and to mint cookies for those accounts, enabling the co-conspirators to access at least 6,500 such accounts without authorization.

Some victim accounts were of predictable interest to the FSB, a foreign intelligence and law enforcement service, such as personal accounts belonging to Russian journalists; Russian and U.S. government officials; employees of a prominent Russian cybersecurity company; and numerous employees of other providers whose networks the conspirators sought to exploit. However, other personal accounts belonged to employees of commercial entities, such as a Russian investment banking firm, a French transportation company, U.S. financial services and private equity firms, a Swiss bitcoin wallet and banking firm and a U.S. airline.

During the conspiracy, the FSB officers facilitated Belan’s other criminal activities, by providing him with sensitive FSB law enforcement and intelligence information that would have helped him avoid detection by U.S. and other law enforcement agencies outside Russia, including information regarding FSB investigations of computer hacking and FSB techniques for identifying criminal hackers. Additionally, while working with his FSB conspirators to compromise Yahoo’s network and its users, Belan used his access to steal financial information such as gift card and credit card numbers from webmail accounts; to gain access to more than 30 million accounts whose contacts were then stolen to facilitate a spam campaign; and to earn commissions from fraudulently redirecting a subset of Yahoo’s search engine traffic.

When Dokuchaev and Sushchin learned that a target of interest had accounts at webmail providers other than Yahoo, including through information obtained as part of the Yahoo intrusion, they tasked their co-conspirator, Baratov, a resident of Canada, with obtaining unauthorized access to more than 80 accounts in exchange for commissions. On March 7, the Department of Justice submitted a provisional arrest warrant to Canadian law enforcement authorities, requesting Baratov’s arrest. On March 14, Baratov was arrested in Canada and the matter is now pending with the Canadian authorities.

An indictment is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.

The FBI, led by the San Francisco Field Office, conducted the investigation that resulted in the charges announced today. The case is being prosecuted by the U.S. Department of Justice National Security Division’s Counterintelligence and Export Control Section and the U.S. Attorney’s Office for the Northern District of California, with support from the Justice Department’s Office of International Affairs.

Defendants: At all times relevant to the charges, the Indictment alleges as follows:

• • Dmitry Aleksandrovich Dokuchaev, 33, was an officer in the FSB Center for Information Security, aka “Center 18.” Dokuchaev was a Russian national and resident.

• • Igor Anatolyevich Sushchin, 43, was an FSB officer, a superior to Dokuchaev within the FSB, and a Russian national and resident. Sushchin was embedded as a purported employee and Head of Information Security at a Russian investment bank.

• • Alexsey Alexseyevich Belan, aka “Magg,” 29, was born in Latvia and is a Russian national and resident. U.S. Federal grand juries have indicted Belan twice before, in 2012 and 2013, for computer fraud and abuse, access device fraud and aggravated identity theft involving three U.S.-based e-commerce companies and the FBI placed Belan on its “Cyber Most Wanted” list.  Belan is currently the subject of a pending “Red Notice” requesting that Interpol member nations (including Russia) arrest him pending extradition. Belan was also one of two criminal hackers named by President Barack Obama on Dec. 29, 2016, pursuant to Executive Order 13694, as a Specially Designated National subject to sanctions.

• • Karim Baratov, aka “Kay,” “Karim Taloverov” and “Karim Akehmet Tokbergenov,” 22. He is a Canadian national and a resident of Canada.

Victims: Yahoo; more than 500 million Yahoo accounts for which account information about was stolen by the defendants; more than 30 million Yahoo accounts for which account contents were accessed without authorization to facilitate a spam campaign; and at least 18 additional users at other webmail providers whose accounts were accessed without authorization.

Time Period: As alleged in the Indictment, the conspiracy began at least as early as 2014 and, even though the conspirators lost their access to Yahoo’s networks in September 2016, they continued to utilize information stolen from the intrusion up to and including at least December 2016.

Crimes:

Count(s)

Defendant(s)

Charge

Statute                 18 U.S.C.

Conduct

Maximum Penalty

1

All

Conspiring to commit computer fraud and abuse

§ 1030(b)

Defendants conspired to hack into the computers of Yahoo and accounts maintained by Yahoo, Google and other providers to steal information from them.

First, Belan gained access to Yahoo’s servers and stole information that allowed him, Dokuchaev, and Sushchin to gain unauthorized access to individual Yahoo user accounts. 

Then, Dokuchaev and Sushchin tasked Baratov with gaining access to individual user accounts at Google and other Providers (but not Yahoo) and paid Baratov for providing them with the account passwords. In some instances, Dokuchaev and Sushchin tasked Baratov with targeting accounts that they learned of through access to Yahoo’s UDB and AMT (e.g., Gmail accounts that served as a Yahoo user’s secondary account).

10 years

2

Dokuchaev

Sushchin

Belan

Conspiring to engage in economic espionage

§ 1831(a)(5)

Starting on Nov. 4, 2014, Belan stole, and the defendants thereafter transferred, received and possessed the following Yahoo trade secrets:

• the Yahoo UDB, which was proprietary and confidential Yahoo technology and information, including subscriber names, secondary accounts, phone numbers, challenge questions and answers;
• the AMT, Yahoo’s interface to the UDB; and
• Yahoo’s cookie “minting” source code, which enabled the defendants to manufacture account cookies to then gain access to individual Yahoo user accounts.

15 years

3

Dokuchaev

Sushchin

Belan

Conspiring to engage in theft of trade secrets

§ 1832(a)(5)

See Count 2

10 years

4-6

Dokuchaev

Sushchin

Belan

Economic espionage

§§ 1831(a)(1), (a)(4), and 2

See Count 2

15 years (each count)

7-9

Dokuchaev

Sushchin

Belan

Theft of trade secrets

§§ 1832(a)(1), and 2

See Count 2

10 years (each count)

10

Dokuchaev

Sushchin

Belan

Conspiring to commit wire fraud

§ 1349

The defendants fraudulently schemed to gain unauthorized access to Yahoo’s network through compromised Yahoo employee accounts and then used the Yahoo trade secrets to gain unauthorized access to valuable non-public information in individual Yahoo user accounts.

20 years

11-13

Dokuchaev

Sushchin

Belan

Accessing (or attempting to access) a computer without authorization to obtain information for the purpose of commercial advantage and private financial gain.

§§ 1030(a)(2)(C), 1030(c)(2)(B)(i)-(iii), and 2

The defendants gained unauthorized access to Yahoo’s corporate network and obtained information regarding Yahoo’s network architecture and the UDB.

5 years

(each count)

14-17

Dokuchaev

Sushchin

Belan

Transmitting code with the intent to cause damage to computers.

§§ 1030(a)(5)(A), 1030(c)(4)(B), and 2

During the course of their unauthorized access to Yahoo’s network, the defendants transmitted code on Yahoo’s network in order to maintain a persistent presence, to redirect Yahoo search engine users and to mint cookies for individual Yahoo accounts.

10 years (each count)

18-24

Dokuchaev

Sushchin

Belan

Accessing (or attempting to access) a computer without authorization to obtain information for the purpose of commercial advantage and private financial gain.

§§ 1030(a)(2)(C), 1030(c)(2)(B)(i)-(iii), and 2

Defendants obtained unauthorized access to individual Yahoo user accounts.

5 years

(each count)

25-36

Dokuchaev

Sushchin

Belan

Counterfeit access device fraud

§§ 1029(a)(1), 1029(b)(1), and 2

Defendants used minted cookies to gain unauthorized access to individual Yahoo user accounts.

10 years (each count)

37

Dokuchaev

Sushchin

Belan

Counterfeit access device making equipment

§§ 1029(a)(4)

Defendants used software to mint cookies for unauthorized access to individual Yahoo user accounts.

15 years

38

Dokuchaev

Sushchin

Baratov

Conspiring to commit access device fraud

§§ 1029(b)(2)

Defendants Dokuchaev and Sushchin tasked Baratov with gaining unauthorized access to individual user accounts at Google and other Providers and then paid Baratov for providing them with the account passwords. In some instances, Dokuchaev and Sushchin tasked Baratov with targeting accounts that they learned of through access to Yahoo’s UDB and AMT (e.g., Gmail accounts that served as a Yahoo user’s secondary account).

7 ½ years.

39

Dokuchaev

Sushchin

Baratov

Conspiring to commit wire fraud

§ 1349

See Count 38

20 years

40-47

Dokuchaev

Baratov

Aggravated identity theft

§ 1028A(a)(1)

See Count 38

2 years

The language of this release was updated to reflect the current citizenship of Karim Baratov.

Watch the press conference

SAN FRANCISCO – A grand jury in the Northern District of California has indicted four defendants, including two officers of the Russian Federal Security Service (FSB), for computer hacking, economic espionage and other criminal offenses in connection with a conspiracy, beginning in January 2014, to access Yahoo’s network and the contents of webmail accounts. The defendants are Dmitry Aleksandrovich Dokuchaev, 33, a Russian national and resident; Igor Anatolyevich Sushchin, 43, a Russian national and resident; Alexsey Alexseyevich Belan, aka “Magg,” 29, a Russian national and resident; and Karim Baratov, aka “Kay,” “Karim Taloverov” and “Karim Akehmet Tokbergenov,” 22, a Canadian and Kazakh national and a resident of Canada.

The defendants used unauthorized access to Yahoo’s systems to steal information from about at least 500 million Yahoo accounts and then used some of that stolen information to obtain unauthorized access to the contents of accounts at Yahoo, Google and other webmail providers, including accounts of Russian journalists, U.S. and Russian government officials and private-sector employees of financial, transportation and other companies. One of the defendants also exploited his access to Yahoo’s network for his personal financial gain, by searching Yahoo user communications for credit card and gift card account numbers, redirecting a subset of Yahoo search engine web traffic so he could make commissions and enabling the theft of the contacts of at least 30 million Yahoo accounts to facilitate a spam campaign.

The charges were announced by U.S. Attorney Brian J. Stretch, Attorney General Jeff Sessions, Director James Comey of the FBI, Acting Assistant Attorney General Mary McCord of the National Security Division, and Executive Assistant Director Paul Abbate of the FBI’s Criminal, Cyber, Response and Services Branch.

“Silicon Valley’s computer infrastructure provides the means by which people around the world communicate with each other in their business and personal lives. The privacy and security of those communications must be governed by the rule of law, not by the whim of criminal hackers and those who employ them. People rightly expect that their communications through Silicon Valley internet providers will remain private, unless lawful authority provides otherwise. We will not tolerate unauthorized and illegal intrusions into the Silicon Valley computer infrastructure upon which both private citizens and the global economy rely,” said U.S. Attorney Stretch. “Working closely with Yahoo and Google, Department of Justice lawyers and the FBI were able to identify and expose the hackers responsible for the conduct described today, without unduly intruding into the privacy of the accounts that were stolen. We commend Yahoo and Google for providing exemplary cooperation while zealously protecting their users’ privacy.”

“Cyber crime poses a significant threat to our nation’s security and prosperity, and this is one of the largest data breaches in history,” said Attorney General Sessions. “But thanks to the tireless efforts of U.S. prosecutors and investigators, as well as our Canadian partners, today we have identified four individuals, including two Russian FSB officers, responsible for unauthorized access to millions of users’ accounts. The United States will vigorously investigate and prosecute the people behind such attacks to the fullest extent of the law.”

“Today we continue to pierce the veil of anonymity surrounding cyber crimes,” said Director Comey. “We are shrinking the world to ensure that cyber criminals think twice before targeting U.S. persons and interests.”

“The criminal conduct at issue, carried out and otherwise facilitated by officers from an FSB unit that serves as the FBI’s point of contact in Moscow on cybercrime matters, is beyond the pale,” said Acting Assistant Attorney General McCord. “Once again, the Department and the FBI have demonstrated that hackers around the world can and will be exposed and held accountable. State actors may be using common criminals to access the data they want, but the indictment shows that our companies do not have to stand alone against this threat. We commend Yahoo and Google for their sustained and invaluable cooperation in the investigation aimed at obtaining justice for, and protecting the privacy of their users.”

“This is a highly complicated investigation of a very complex threat. It underscores the value of early, proactive engagement and cooperation between the private sector and the government,” said Executive Assistant Director Abbate. “The FBI will continue to work relentlessly with our private sector and international partners to identify those who conduct cyber-attacks against our citizens and our nation, expose them and hold them accountable under the law, no matter where they attempt to hide.”

Summary of Allegations

According to the allegations of the Indictment:

The FSB officer defendants, Dmitry Dokuchaev and Igor Sushchin, protected, directed, facilitated and paid criminal hackers to collect information through computer intrusions in the U.S. and elsewhere. In the present case, they worked with co-defendants Alexsey Belan and Karim Baratov to obtain access to the email accounts of thousands of individuals.

Belan had been publicly indicted in September 2012 and June 2013 and was named one of FBI’s Cyber Most Wanted criminals in November 2013. An Interpol Red Notice seeking his immediate detention has been lodged (including with Russia) since July 26, 2013. Belan was arrested in a European country on a request from the U.S. in June 2013, but he was able to escape to Russia before he could be extradited.

Instead of acting on the U.S. government’s Red Notice and detaining Belan after his return, Dokuchaev and Sushchin subsequently used him to gain unauthorized access to Yahoo’s network. In or around November and December 2014, Belan stole a copy of at least a portion of Yahoo’s User Database (UDB), a Yahoo trade secret that contained, among other data, subscriber information including users’ names, recovery email accounts, phone numbers and certain information required to manually create, or “mint,” account authentication web browser “cookies” for more than 500 million Yahoo accounts.

Belan also obtained unauthorized access on behalf of the FSB conspirators to Yahoo’s Account Management Tool (AMT), which was a proprietary means by which Yahoo made and logged changes to user accounts. Belan, Dokuchaev and Sushchin then used the stolen UDB copy and AMT access to locate Yahoo email accounts of interest and to mint cookies for those accounts, enabling the co-conspirators to access at least 6,500 such accounts without authorization. 

Some victim accounts were of predictable interest to the FSB, a foreign intelligence and law enforcement service, such as personal accounts belonging to Russian journalists; Russian and U.S. government officials; employees of a prominent Russian cybersecurity company; and numerous employees of other providers whose networks the conspirators sought to exploit. However, other personal accounts belonged to employees of commercial entities, such as a Russian investment banking firm, a French transportation company, U.S. financial services and private equity firms, a Swiss bitcoin wallet and banking firm and a U.S. airline.

During the conspiracy, the FSB officers facilitated Belan’s other criminal activities, by providing him with sensitive FSB law enforcement and intelligence information that would have helped him avoid detection by U.S. and other law enforcement agencies outside Russia, including information regarding FSB investigations of computer hacking and FSB techniques for identifying criminal hackers. Additionally, while working with his FSB conspirators to compromise Yahoo’s network and its users, Belan used his access to steal financial information such as gift card and credit card numbers from webmail accounts; to gain access to more than 30 million accounts whose contacts were then stolen to facilitate a spam campaign; and to earn commissions from fraudulently redirecting a subset of Yahoo’s search engine traffic.

When Dokuchaev and Sushchin learned that a target of interest had accounts at webmail providers other than Yahoo, including through information obtained as part of the Yahoo intrusion, they tasked their co-conspirator, Baratov, a resident of Canada, with obtaining unauthorized access to more than 80 accounts in exchange for commissions. On March 7, the Department of Justice submitted a provisional arrest warrant to Canadian law enforcement authorities, requesting Baratov’s arrest. On March 14, Baratov was arrested in Canada and the matter is now pending with the Canadian authorities.

An indictment is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.

The FBI, led by the San Francisco Field Office, conducted the investigation that resulted in the charges announced today. The case is being prosecuted by the U.S. Department of Justice National Security Division’s Counterintelligence and Export Control Section and the U.S. Attorney’s Office for the Northern District of California, with support from the Justice Department’s Office of International Affairs.

Defendants: At all times relevant to the charges, the Indictment alleges as follows:

• Dmitry Aleksandrovich Dokuchaev, 33, was an officer in the FSB Center for Information Security, aka “Center 18.” Dokuchaev was a Russian national and resident.
• Igor Anatolyevich Sushchin, 43, was an FSB officer, a superior to Dokuchaev within the FSB, and a Russian national and resident. Sushchin was embedded as a purported employee and Head of Information Security at a Russian investment bank.
• Alexsey Alexseyevich Belan, aka “Magg,” 29, was born in Latvia and is a Russian national and resident. U.S. Federal grand juries have indicted Belan twice before, in 2012 and 2013, for computer fraud and abuse, access device fraud and aggravated identity theft involving three U.S.-based e-commerce companies and the FBI placed Belan on its “Cyber Most Wanted” list.  Belan is currently the subject of a pending “Red Notice” requesting that Interpol member nations (including Russia) arrest him pending extradition. Belan was also one of two criminal hackers named by President Barack Obama on Dec. 29, 2016, pursuant to Executive Order 13694, as a Specially Designated National subject to sanctions.
• Karim Baratov, aka “Kay,” “Karim Taloverov” and “Karim Akehmet Tokbergenov,” 22. He is a Canadian and Kazakh national and a resident of Canada.

Victims: Yahoo; more than 500 million Yahoo accounts for which account information about was stolen by the defendants; more than 30 million Yahoo accounts for which account contents were accessed without authorization to facilitate a spam campaign; and at least 18 additional users at other webmail providers whose accounts were accessed without authorization.

Time Period: As alleged in the Indictment, the conspiracy began at least as early as 2014 and, even though the conspirators lost their access to Yahoo’s networks in September 2016, they continued to utilize information stolen from the intrusion up to and including at least December 2016.

Crimes:

Count(s)

Defendant(s)

Charge

Statute 18 U.S.C.

Conduct

Maximum Penalty

1

All

Conspiring to commit computer fraud and abuse

§ 1030(b)

Defendants conspired to hack into the computers of Yahoo and accounts maintained by Yahoo, Google and other providers to steal information from them.

First, Belan gained access to Yahoo’s servers and stole information that allowed him, Dokuchaev, and Sushchin to gain unauthorized access to individual Yahoo user accounts.

Then, Dokuchaev and Sushchin tasked Baratov with gaining access to individual user accounts at Google and other Providers (but not Yahoo) and paid Baratov for providing them with the account passwords. In some instances, Dokuchaev and Sushchin tasked Baratov with targeting accounts that they learned of through access to Yahoo’s UDB and AMT (e.g., Gmail accounts that served as a Yahoo user’s secondary account).

10 years

2

Dokuchaev

Sushchin

Belan

Conspiring to engage in economic espionage

§ 1831(a)(5)

Starting on Nov. 4, 2014, Belan stole, and the defendants thereafter transferred, received and possessed the following Yahoo trade secrets:

- the Yahoo UDB, which was proprietary and confidential Yahoo technology and information, including subscriber names, secondary accounts, phone numbers, challenge questions and answers;

- the AMT, Yahoo’s interface to the UDB; and

- Yahoo’s cookie “minting” source code, which enabled the defendants to manufacture account cookies to then gain access to individual Yahoo user accounts.

15 years

3

Dokuchaev

Sushchin

Belan

Conspiring to engage in theft of trade secrets

§ 1832(a)(5)

See Count 2

10 years

4-6

Dokuchaev

Sushchin

Belan

Economic espionage

§§ 1831(a)(1), (a)(4), and 2

See Count 2

15 years (each count)

7-9

Dokuchaev

Sushchin

Belan

Theft of trade secrets

§§ 1832(a)(1), and 2

See Count 2

10 years (each count)

10

Dokuchaev

Sushchin

Belan

Conspiring to commit wire fraud

§ 1349

The defendants fraudulently schemed to gain unauthorized access to Yahoo’s network through compromised Yahoo employee accounts and then used the Yahoo trade secrets to gain unauthorized access to valuable non-public information in individual Yahoo user accounts.

20 years

11-13

Dokuchaev

Sushchin

Belan

Accessing (or attempting to access) a computer without authorization to obtain information for the purpose of commercial advantage and private financial gain.

§§ 1030(a)(2)(C), 1030(c)(2)(B)(i)-(iii), and 2

The defendants gained unauthorized access to Yahoo’s corporate network and obtained information regarding Yahoo’s network architecture and the UDB.

5 years

(each count)

14-17

Dokuchaev

Sushchin

Belan

Transmitting code with the intent to cause damage to computers.

§§ 1030(a)(5)(A), 1030(c)(4)(B), and 2

During the course of their unauthorized access to Yahoo’s network, the defendants transmitted code on Yahoo’s network in order to maintain a persistent presence, to redirect Yahoo search engine users and to mint cookies for individual Yahoo accounts.

10 years (each count)

18-24

Dokuchaev

Sushchin

Belan

Accessing (or attempting to access) a computer without authorization to obtain information for the purpose of commercial advantage and private financial gain.

§§ 1030(a)(2)(C), 1030(c)(2)(B)(i)-(iii), and 2

Defendants obtained unauthorized access to individual Yahoo user accounts.

5 years

(each count)

25-36

Dokuchaev

Sushchin

Belan

Counterfeit access device fraud

§§ 1029(a)(1), 1029(b)(1), and 2

Defendants used minted cookies to gain unauthorized access to individual Yahoo user accounts.

10 years (each count)

37

Dokuchaev

Sushchin

Belan

Counterfeit access device making equipment

§§ 1029(a)(4)

Defendants used software to mint cookies for unauthorized access to individual Yahoo user accounts.

15 years

38

Dokuchaev

Sushchin

Baratov

Conspiring to commit access device fraud

§§ 1029(b)(2)

Defendants Dokuchaev and Sushchin tasked Baratov with gaining unauthorized access to individual user accounts at Google and other Providers and then paid Baratov for providing them with the account passwords. In some instances, Dokuchaev and Sushchin tasked Baratov with targeting accounts that they learned of through access to Yahoo’s UDB and AMT (e.g., Gmail accounts that served as a Yahoo user’s secondary account).

7 ½ years.

39

Dokuchaev

Sushchin

Baratov

Conspiring to commit wire fraud

§ 1349

See Count 38

20 years

40-47

Dokuchaev

Baratov

Aggravated identity theft

§ 1028A(a)(1)

See Count 38

2 years

SAN FRANCISCO – Behnam Halali, Ernesto Magat, and Karen Gagarin were found guilty on March 13, 2017, by a federal jury for their respective roles in a scheme to commit wire fraud and identity theft involving fraudulent life insurance policies, announced U.S. 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.  The verdict follows a four-week trial before the Honorable Susan Illston, United States District Judge in San Francisco.

According to the evidence produced at trial, Halali, 32, of San Jose, Magat, 35, of Hayward, and Gagarin, 32, of San Jose, were former agents of the American Income Life Insurance Company (AIL).  While working at AIL, the defendants participated in a conspiracy involving the submission of applications for life insurance policies on behalf of people at least some of whom did not know that a policy was applied for or issued in their name and/or did not want a life insurance policy. The defendants then shared the commissions and bonuses issued by AIL in connection with the fraudulent policies.  The defendants paid recruiters to find people willing to take medical exams in exchange for approximately $100, and then took the personal information associated with those people and submitted applications for life insurance in their names, in many cases without the individuals’ knowledge. The defendants and their co-conspirators also paid people to participate in a fictitious survey of a medical exam company, and took the personal information associated with those people and submitted applications for life insurance, in many cases without the individuals’ knowledge.  The evidence also demonstrated that the defendants and their co-conspirators created phony driver’s licenses so that their co-conspirators could take medical exams purporting to be the applicants. The defendants opened hundreds of bank accounts to fund the premiums on the fraudulent policies, and typically paid one to four months of premiums before letting the policies lapse.  The defendants and their co-conspirators returned verification calls to AIL purporting to be the applicants on the fraudulent applications from telephones set up exclusively for the fraudulent scheme.

All three defendants were charged with conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, wire fraud, in violation of 18 U.S.C. § 1343, and aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1). Pursuant to today’s verdict, the defendants were found guilty of all these counts. Halali and Magat were also charged with money laundering, in violation of 18 U.S.C. § 1957; these charges were dropped before trial.

Judge Illston scheduled hearings to sentence all three defendants on July 28, 2017.  The maximum statutory penalties for conspiracy to commit wire fraud and for wire fraud charges in violation of 18 U.S.C. §§ 1349 and 1343 are a prison term of 20 years, and a fine of $250,000 or twice the gross gain or loss from the offense, plus restitution. The maximum statutory penalty for aggravated identity theft in violation of 18 U.S.C. § 1028A is a mandatory prison sentence of 2 years. Additional fines, restitutions and a term of supervised release may also 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.

Assistant United States Attorneys Robert Leach and Matthew McCarthy are prosecuting the case with the assistance of Daniel Charlier-Smith, Denise Oki, and Bridget Kilkenny.  This prosecution is the result of an investigation by the FBI; the IRS, Criminal Investigation; and the Commissioner of the California Department of Insurance.

OAKLAND – Ricky Keith Barnette was sentenced today to one hundred months in prison for possession with intent to distribute methamphetamine, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.

Barnette, 34, of Antioch, pleaded guilty on November 10, 2016, to one count of possession with intent to distribute methamphetamine, in violation of Title 21, United States Code, Section 841(a)(1).  According to his plea agreement, Barnette admitted that on January 8, 2016, he was driving a stolen BMW in Antioch, Calif., while in possession of more than 167 grams of methamphetamine for sale and a stolen 9mm Ruger LC9 pistol loaded with eight rounds of ammunition.  Officers from the Antioch Police Department attempted to pull Barnette over but he drove onto the off-ramp of Highway 4 and sped westbound in the eastbound lanes of the highway.  While driving the wrong direction on the highway, Barnette collided head-on with another vehicle and caused great bodily injury to the other driver. 

Barnette was charged in an information with one count of possession with intent to distribute methamphetamine.  Pursuant to his plea agreement, Barnette pleaded guilty to the charge.

The sentence was handed down by the Honorable Jon S. Tigar, U.S. District Judge.  In addition to the prison term, Judge Tigar also ordered Barnette to serve a five-year period of supervised release and ordered him to forfeit the firearm and $1,760, that Barnette admitted was the proceeds of his drug trafficking.  Barnette is in custody and will begin serving the sentence immediately.

Assistant U.S. Attorney Garth Hire is prosecuting the case with the assistance of Vanessa Quant.  The prosecution is the result of an investigation by the Federal Bureau of Investigation, the Antioch Police Department, and the Contra Costa County Safe Streets Task Force.

OAKLAND– Dumaka Hammond pleaded guilty today to possession of child pornography, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The guilty plea follows a federal grand jury indictment issued on March 10, 2016.

Hammond, 40, is a resident of Richmond, Calif.  According to his plea agreement, Hammond admitted using an internet tool known as Tor to access and download child pornography.  Hammond acknowledged that some of the images he downloaded depicted sadistic or masochistic content and some images and videos involved prepubescent children.  Additionally, Hammond acknowledged that law enforcement found and removed from his home a laptop computer that contained more than 300 child pornographic images.   

Hammond was charged with one count of possession of child pornography and access with intent to view child pornography, in violation of 18 U.S.C. §§ 2252(a) and (b).  Pursuant to the plea agreement, Hammond pleaded guilty to the single count in the indictment.

The plea colloquy was conducted by the Honorable James Donato, U.S. District Judge.  Judge Donato has scheduled a sentencing hearing for May 24, 2017, at 10:30 a.m., in San Francisco.  The maximum statutory sentence for violating 18 U.S.C. § 2252 is a 20-year prison term.  Additional fines, victim restitution, and a term of supervised release also may be imposed by Judge Donato.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorney Thomas Green is prosecuting the case with the assistance of Trina Khadoo.  The prosecution is the result of an investigation by the FBI. 

If members of the public have any information relevant to this investigation or to suspected child predators or suspicious activity, they should contact Homeland Security Investigations through the toll-free Tip Line at 1-866-DHS-2-ICE or complete the 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.

OAKLAND– D’mar Dwain Jennings Conway pleaded guilty today to 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 guilty plea follows the filing of a complaint and indictment in the spring of 2016.

According to his plea agreement, Conway, 29, of Oakland, admitted that on at least one occasion between 2007 and 2010, he induced a victim, for whom he was a caregiver, to engage in a sex act.  Conway further admitted that the victim was under12 years old and that he induced the child to engage in sex acts so that Conway could produce visual depictions of the conduct.  Also in the plea agreement, Conway acknowledged that law enforcement found and removed from his home a digital memory card containing numerous images depicting Conway engaging in different sexual acts with a child who was approximately three to six years old.  Conway admitted that the images of the sexual abuse of the child were taken inside his residence. 

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 Honorable Jeffrey S. White, U.S. District Judge, accepted Conway’s guilty plea and scheduled a sentencing hearing for June 6, 2017, at 1:00 pm.  The maximum statutory sentence for violating 18 U.S.C. § 2251 is a 30-year prison term, and the minimum mandatory sentence for that crime is a 15-year prison term.  Additional fines, victim restitution, and a term of supervised release also may be imposed by Judge White.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Christina McCall and Erin Cornell are prosecuting the case with the assistance of Vanessa Quant and Noble Hughes.  The prosecution is the result of an investigation by HSI. 

If members of the public have any information relevant to this investigation or to suspected child predators or suspicious activity, they should contact HSI through the toll-free Tip Line at 1-866-DHS-2-ICE or by completing the 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 – Kiet Ly was sentenced today to 120 months in prison for possessing more than 1.5 kilograms of methamphetamine, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin.  The sentence follows a guilty plea entered September 21, 2016, in which Ly admitted he possessed with the intent to distribute 500 grams or more of methamphetamine.

Ly, 37, of San Francisco, was indicted on July 5, 2016, by a federal grand jury and charged with one count of possession with intent to distribute 500 grams or more of methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A).  Ly pleaded guilty to the charge.

The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge.  In addition to the prison term, Judge Breyer sentenced Ly to a 5-year period of supervised release.  The defendant is in federal custody and will begin serving his sentence immediately.

Assistant U.S. Attorney Andrew F. Dawson is prosecuting the case with the assistance of Marina Ponomarchuk.  The prosecution is the result of an investigation by the DEA and the San Francisco Police Department. 

SAN FRANCISCO – Andre Mitchell Brown and Javier Raymond Jenkins were charged with conspiracy and armed bank robbery announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  Brown also was charged with being a felon in possession of a firearm and with use of a firearm during and in relation to a crime of violence.

The defendants both made an initial appearance today before the Hon. Maria-Elena James, U.S. Magistrate Judge, on an indictment issued by a federal grand jury on February 28, 2017.  According to the indictment, San Francisco residents Brown and Jenkins surveilled five separate locations in an effort to find a bank or credit union to rob.  The indictment further alleges that on August 12, 2016, the defendants traveled to a Richmond District bank on Geary Street where Brown, carrying a .38 caliber pistol in his jacket, approached the bank wearing a wig, fake beard and mustache, sunglasses, jacket, and a glove on his left hand.  According to the indictment, the men attempted to rob the bank.  The defendants were charged with conspiracy to commit bank robbery, in violation of 18 U.S.C. § 371, and attempted armed bank robbery and aiding and abetting attempted armed bank robbery, in violation of 18 U.S.C. §§ 2113 and 18 U.S.C. § 2.  In addition, Brown was charged with being a felon in possession of firearms, in violation of 18 U.S.C. § 922(g)(1), and using, carrying, and possessing a firearm in relation to a crime of violence, in violation of 18 U.S.C. § 924(c).

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 each defendant faces upon conviction for the conspiracy charge is five years’ imprisonment and the maximum penalty each defendant faces upon conviction for the attempted bank robbery charge is 25 years’ imprisonment.  Further, upon conviction, the maximum penalty Brown faces for being a felon in possession of a firearm is 10 years’ imprisonment and the maximum penalty Brown faces upon conviction for using, carrying or possessing a firearm in relation to a crime of violence is life imprisonment, with a minimum mandatory sentence of 25 years’ imprisonment.  Additionally, periods of supervised release, fines, forfeitures, and special assessments also could be imposed.  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. 

Magistrate Judge Maria-Elena James ordered defendant Brown to appear on March 8, 2017, for a detention hearing, and ordered defendant Jenkin to appear on March 13, 2017, for a detention hearing.

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

SAN JOSE – Jesus Alberto Bueno-Meza was sentenced today to 120 months in prison for conspiracy to possess with intent to distribute and to distribute cocaine, announced United States Attorney Brian Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin.

Bueno-Meza, 48, a citizen of Mexico who was living in the San Jose area at the time of the offense, pleaded guilty on November 28, 2016, to 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).  According to the plea agreement, Bueno-Meza admitted he conspired with other individuals to distribute five kilograms or more of cocaine between July 2013 and September 2015.  He also admitted that, in furtherance of the conspiracy, he distributed cocaine and possessed with the intent to distribute cocaine on numerous occasions over his approximately two years of participation in the conspiracy.

Bueno-Meza was indicted by a federal grand jury on October 8, 2015.  He was charged with one count of conspiracy to possess with the intent to distribute and to distribute cocaine and methamphetamine, one count of distribution and possession with intent to distribute cocaine, three counts of use of a communication facility (telephone) to commit a felony drug offense, and one count of illegal re-entry after deportation. 

The sentence was handed down by the Honorable Edward J. Davila, U.S. District Judge.  In addition to the prison term, Judge Davila also sentenced Bueno-Meza to a five-year period of supervised release.  The defendant currently is released on bond and has been ordered to begin serving his sentence on June 22, 2017.

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 –Alan Weissman pleaded guilty today to committing 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 guilty plea follows charges filed by a federal grand jury in February of 2016, including that the defendant stole assets from ERISA plans for which he was supposed to be acting as a trustee.

According to the plea agreement, Weissman, 71, of Rancho Palos Verdes, Calif., served as a professional trustee and fiduciary of pension plans.  Weissman admitted that he embezzled money from bank accounts belonging to 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 over $750,000 of 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 today’s plea agreement, Weissman pleaded guilty to one count of bank fraud, the two embezzlement counts, and the false statements and concealment count.

The guilty plea was accepted by the Honorable Charles R. Breyer, U.S. District Judge.  Weissman is scheduled to appear for sentencing on June 7, 2017, at 10:00 a.m.  The maximum statutory penalty for bank fraud is 30 years’ imprisonment and a fine of $1,000,000 or twice the gross gain or loss resulting from the offense.  The maximum statutory penalty for each count in violation of 18 U.S.C. § 664 and 18 U.S.C. § 1027 is 5 years’ imprisonment and a fine of $250,000 or twice the gross gain or loss resulting from the offense.  Additional periods of supervised release and restitution also apply.  However, any sentence following conviction 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 Benjamin Kingsley is prosecuting the case with assistance from Bridget Kilkenny.  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 FRANCISCO – Ulices Cazarez was sentenced today to 87 months in prison for seeking to hire someone to murder his accuser in a sexual harassment case, announced United States Attorney Brian J. Stretch and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jill Snyder.

Cazarez, 39, of East Palo Alto, pleaded guilty on December 6, 2016.  A civil sexual harassment lawsuit was filed against Cazarez in late May 2015.  According to his plea agreement, Cazarez admitted that in June 2015 he was willing to pay thousands of dollars to have his accuser murdered.  The plea agreement describes the process by which Cazarez discussed prices as high as $40,000 with certain individuals.  Ultimately, Cazarez met with an undercover agent (UC) with the ATF.  On June 12, 2015, the UC posed as a hitman and met with the defendant in the parking lot of the Stonestown Mall in San Francisco to discuss the killing.  The two negotiated a price for the murder and Cazarez told the UC that he would obtain the address for the intended victim within days.  Federal agents and task force officers arrested Cazarez on June 26, 2015.  On July 9, 2015, a federal grand jury indicted Cazarez for use of interstate commerce facilities in the commission of murder-for-hire, in violation of 18 U.S.C. § 1958.

The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge, in San Francisco. In addition to the prison term, Judge Breyer also sentenced the defendant to a three-year period of supervised release.  The defendant was immediately remanded into custody.

Assistant U.S. Attorneys Scott D. Joiner and William Frentzen prosecuted the case with the assistance of Christine Tian, Lance Libatique, and Yanira Osorio.  The prosecution is the result of an investigation by the ATF and the San Francisco Police Department.

SAN FRANCISCO – Yolanda Brown, AKA Yo-Yo, was sentenced today to 130 months in prison, and ordered to pay $19,285.00 in restitution, for five robberies of Bay Area banks and credit unions, the unlawful possession of a firearm, and distribution of methamphetamine, announced United States Attorney Brian J. Stretch, Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett, and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jill Snyder.

Brown, 48, of San Francisco, pleaded guilty to the charges on November 21, 2016.  According to the plea agreement, Brown admitted to robbing the following banks and credit unions:

Date

Bank / Credit Union

Location

January 11, 2016

Wells Fargo

2055 Chestnut Street, San Francisco, CA

January 13, 2016

Patelco Credit Union

1358 Fairmont Drive, San Leandro, CA

February 19, 2016

Patelco Credit Union

1358 Fairmont Drive, San Leandro, CA

June 9, 2016

Citibank

2400 19th Avenue, San Francisco, CA

June 16, 2016

Wells Fargo

3365 Deer Valley Road, Antioch, CA

In her plea agreement, Brown also admitted to being a convicted felon in possession of a firearm and possessing with intent to distribute and distributing more than fifty grams of methamphetamine.

On October 20, 2016, a federal grand jury indicted Brown for the robberies and unlawful possession of a firearm.  The indictment charged her with five counts of bank or credit union robbery, in violation of 18 U.S.C. § 2113(a), and one count of being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g)(1).  Further, on September 15, 2015, Brown was indicted for distribution of methamphetamine, in violation of 21 U.S.C. § 841(a)(1).   Under the plea agreement, Brown pleaded guilty to all charges in both indictments.

The sentence of 130 months’ imprisonment was handed down by the Honorable Thelton E. Henderson, U.S. District Judge, in San Francisco.  Judge Henderson also sentenced the defendant to a five-year period of supervised release.  The defendant was immediately remanded into custody.

Assistant U.S. Attorney Scott D. Joiner prosecuted the case with the assistance of Lance Libatique and Linda Love.  The prosecution is the result of an investigation by the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the San Francisco Police Department, the San Leandro Police Department, and the Antioch Police Department.

SAN FRANCISCO—  Former Acting Attorney General and Deputy Attorney General of the U.S. Department of Justice Mark Filip, now a Chicago-based partner with the law firm Kirkland & Ellis, has been jointly selected by the U.S. Attorney’s Office for the Northern District of California and Pacific Gas and Electric Company (PG&E) to serve as Compliance and Ethics Monitor of PG&E.  On January 26, 2017, the Honorable Thelton E. Henderson, Senior United States District Judge, ordered PG&E to submit to a five-year period of monitorship as a condition of the company’s probation following its five felony convictions for willful violations of the Natural Gas Pipeline Safety Act.  The jury also convicted PG&E of corruptly obstructing the federal investigation of the 2010 gas transmission line explosion in San Bruno.  Mr. Filip previously served as a federal judge in the U.S. District Court for the Northern District of Illinois, as well as an Assistant United States Attorney in the United States Attorney’s Office for the Northern District of Illinois. 
 

OAKLAND – A Union City man and the corporation he owns were charged with conspiracy to defraud the United States, smuggling, and multiple violations of the Toxic Substances Control Act and the Hazardous Materials Transportation Act, announced U.S. Attorney Brian J. Stretch; Environmental Protection Agency Criminal Investigation Division Special Agent in Charge Jay Green; U.S. Department of Transportation Office of the Inspector General Regional Special Agent in Charge William Swallow; and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin.  The indictment alleges that Peiwen Zhou and his company, AK Scientific, conspired to defraud the United States, smuggled materials into the United States, and illegally transported chemicals within the United States by mislabeling and improperly packaging hazardous chemicals.

According to the indictment, Zhou, 53, of Palo Alto, was the founder, owner, and chief executive officer of AK Scientific.  Zhou and AK Scientific were in the business of purchasing and then selling research and specialty chemicals to customers that included universities, research laboratories, and other entities.  AK Scientific purchased chemicals from chemical supply companies in, among other places, South Korea, Poland, India, and New Zealand. 

The indictment alleges the defendants defrauded the United States and smuggled hazardous chemicals into the United States by mislabeling the contents of containers.  Further, defendants allegedly transported chemicals in violation of the Toxic Substances Control Act (TSCA) by failing to complete required import certifications and by failing to properly label packages containing hazardous materials.  In addition, according to the indictment, the defendants also arranged to transport hazardous materials on several occasions without labeling the packages as required by the Hazardous Materials Transportation Act (HMTA). 

Defendants are charged with one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371; one count of smuggling, in violation of 18 U.S.C. § 545; two counts of violating the TSCA, in violation of 15 U.S.C. § 2611(b) and 40 C.F.R. §§ 721.20 and 721.4880; and seven counts of violating 49 C.F.R. § 172.400 of the HMTA, in violation of 49 U.S.C. § 5124(a) and 18 U.S.C. § 2.  For defendant Zhou, if convicted, the maximum statutory penalties are as follows:

Conspiracy- 5 years in prison term and a $250,000 fine

Smuggling- 20 years in prison and a $250,000 fine

Each count of violating the TSCA- 1 year in prison term and a $50,000 fine

Each count of violating the HMTA- 5 years in prison term and a $250,000 fine

For defendant AK Scientific, if convicted, the corporation faces the following maximum statutory penalties:

Conspiracy- 5 years of probation and a $500,000 fine 

Smuggling- 5 years of probation and a $500,000 fine 

Each count of violating the TSCA- 5 years of probation and a $200,000 fine

Each count of violating the HMTA- 5 years of probation and a $500,000 fine

Further, additional special assessments may be imposed on either defendant and Zhou may be subject to additional terms of supervised release.  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. 

Zhou and a representative for AK Scientific are scheduled to appear on Tuesday, February 21, 2017, at 9:30 am before United States Magistrate Judge Donna Ryu for an initial appearance.

The case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s office in San Francisco.  The prosecution is the result of an investigation by the U.S. Environmental Protection Agency’s Criminal Investigation Division, the U.S. Department of Transportation’s Office of Inspector General, and the U.S. Department of Homeland Security’s Homeland Security Investigations.

SAN JOSE – Nicholas Anthony Rodriguez was sentenced to 188 months (15.7 years) in prison for his role in a conspiracy to possess with intent to distribute methamphetamine, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The sentence follows a guilty plea entered July 25, 2016, in which Rodriguez admitted he conspired to and did in fact possess with the intent to distribute methamphetamine.

According to records filed in connection with his plea agreement, Rodriguez, 40, of San Jose, acknowledged that between April and June of 2014, he conspired with others to possess and did possess with intent to distribute 451 grams of actual methamphetamine.  In his plea agreement, Rodriguez admitted that, on June 25, 2014, he and another individual were found in possession of 42 grams of actual methamphetamine and $9,215 in cash, as well as a machete, while driving in the San Jose area.  Rodriguez further admitted that he and another individual also possessed an additional 409 grams of actual methamphetamine located at the other individual’s home that same day.  Rodriguez also acknowledged that, while out of custody on pretrial release on July 28, 2014, he was found in possession of an additional 145 grams of a mixture containing methamphetamine and 2 grams of cocaine. 

Rodriguez was indicted by a federal grand jury on July 2, 2014.  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 841(b)(1)(C), and one count of possession with intent to distribute methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C).  Pursuant to his plea agreement, Rodriguez pleaded guilty to both counts in the Indictment.

The sentence was handed down by the Honorable Edward J. Davila, U.S. District Judge.  In addition to the prison term, Judge Davila sentenced Rodriguez to a 3-year period of supervised release.  The defendant has been in federal custody since August 7, 2014, and will begin serving his sentence immediately.

Assistant U.S. Attorney Maia Perez is prosecuting the case.  The prosecution is the result of an investigation by the FBI and the Santa Clara County Sheriff’s Office. 

SAN JOSE – James Seltzer, a former attorney and resident of Marin County, was sentenced to 72 months’ imprisonment for securities fraud, announced United States Attorney Brian J. Stretch, FBI Special Agent in Charge John F. Bennett, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.  The sentence, issued today by U.S. District Judge Lucy H. Koh, follows a guilty plea entered September 14, 2016.

According to his plea agreement, beginning no later than October of 2007 through at least May of 2011, Seltzer, 69, formerly of Belvedere, defrauded and deceived multiple individuals in connection with the purchase and sale of securities.  Seltzer admitted he misrepresented to the investors that he would use their money to make certain investments for their exclusive benefit but instead diverted the funds to other uses.  Seltzer acknowledged that in many cases, he diverted all or virtually all of the monies he had obtained from his investors and spent the monies on his own personal and business expenses after depositing the funds into his own personal bank accounts.  The court found Seltzer defrauded 16 investors of more than $4.5 million and ordered Seltzer to pay restitution to his victims in the amount of $4,646,555.

According to papers filed by the government, Seltzer’s victims included several women with whom he conducted personal relationships in order to gain their trust as a precursor to stealing from them.  During today’s sentencing proceedings, after hearing from several of Seltzer’s victims, Judge Koh described Seltzer’s conduct as “callous.”  Furthermore, in addition to the victims in his criminal case, bankruptcy filings reveal Seltzer accumulated a debt of well over $20 million to numerous other individuals.  Seltzer fled the country in 2010 and remained overseas for 5 years. 

On June 18, 2015, a federal grand jury indicted Seltzer charging him with five counts of securities fraud, in violation of 15 U.S.C. § 78; one count of mail fraud, in violation of 18 U.S.C. § 1341; and three counts of money laundering, in violation of 18 U.S.C. § 1957.  He was apprehended in Hawaii in September 2015, and, pursuant to the plea agreement, pleaded guilty to one count of securities fraud.  The remaining counts were dismissed.   

In addition to the prison term and restitution, Judge Koh also sentenced Seltzer to serve a three-year period of supervised release.  Judge Koh ordered Seltzer to surrender no later than April 19, 2017, to begin serving his sentence.   

Assistant U.S. Attorneys Timothy Lucey and Arvon Perteet are prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation by the IRS-Criminal Investigation and the Federal Bureau of Investigation.

SAN FRANCISCO – Allen Fong was sentenced to 46 months in prison and was ordered to pay a $5,269,698 forfeiture money judgment for his role in operating an international prostitution racketeering enterprise, announced United States Attorney Brian J. Stretch and Homeland Security Investigations ("HSI") Special Agent in Charge Ryan Spradlin. 
 
Fong, 60, of San Mateo, pleaded guilty on July 5, 2016, to numerous crimes, including racketeering, in connection with a broad-ranging indictment filed in federal court on October 16, 2014.  In pleading guilty to all 32 counts in the indictment, Allen Fong admitted that from August 2006 through July 2014, he was involved in the day-to-day operations of an ongoing racketeering enterprise that recruited women from overseas to work in brothels in Bay Area cities, including Foster City, Cupertino, San Bruno, San Mateo, and Santa Clara.  Fong’s activities included renting apartments for use as brothels, paying the rent, telephone and utility services for operating the enterprise, arranging for telecommunications services for prostitution advertisements and appointments for sexual activity between prostitutes and their customers, and transferring proceeds in amounts of thousands of dollars from the United States to Singapore. Fong also admitted he met a co-conspirator at the San Francisco International Airport traveling from Singapore to the United States and drove her to an enterprise brothel where she was housed and worked as a prostitute.

Court papers described the operation of the enterprise, Fong’s role as the leader of that enterprise, and Fong’s activities such as providing logistical support for the brothels, determining how much the prostitutes could charge customers for sexual services, determining and collecting the enterprise's share of the prostitutes' earnings, and deciding additional policy matters.  Court papers also documented Fong’s own words in recorded conversations such as his comment that “tons” of “girls” from Asian countries such as Singapore, Taiwan, and Hong Kong would be arriving “next month.”
 
In all, Fong pleaded guilty to one count of conspiracy to conduct enterprise affairs through a pattern of racketeering activity, in violation of 18 U.S.C. § l962(d); one count of conspiracy to use interstate and foreign commerce to promote prostitution in aid of a racketeering enterprise, in violation of 18 U.S.C. §§ 371 and 1952(a)(3); eleven counts of use of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   interstate commerce to promote prostitution in aid of a racketeering enterprise, in violation of 18 U.S.C. §§ 1952(a)(3) and 2; one count of conspiracy to launder monetary instruments, in violation of 18 U.S.C. §§ 1956(h) and 1956(a)(1)(A)(i); nine counts of substantive money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 2; one count of conspiracy to transport funds from the United States to a foreign country to promote unlawful activity, in violation of 18 U.S.C. §§ 1956(h) & 1956(a)(2)(A); seven counts of transporting funds from the United States to a foreign country to promote unlawful activity, in violation of 18 U.S.C. §§ 1956(a)(2)(A) and 2; and one count of conspiracy to transport an individual in interstate and foreign commerce for prostitution and importation of alien for immoral purpose, in violation of 18 U.S.C. §§ 371 & 2421, and 8 U.S.C. § 1328.
 
Fong’s prison term includes sentencing enhancements for his leadership role in the Enterprise and the number of prostitute victims involved.  The forfeiture money judgment of $5,269,698 represents proceeds generated by the conspiracy.  Judge Seeborg also sentenced Fong to a $12,500 fine, $3,200 in special assessments, and a three-year period of supervised release with conditions that include the supervising officer’s access to Fong’s financial information.  Fong was ordered to self-surrender to the Bureau of Prisons to begin serving his prison term on April 18, 2017.
 
Assistant U.S. Attorney Deborah R. Douglas is prosecuting the case assisted by Christine Tian and Lance Libatique.  Assistant United States Attorney David Countryman assisted with forfeiture matters. The prosecution results from a joint investigation by the Department of Homeland Security, Homeland Security Investigations San Francisco Field Office, and the San Mateo Police Department.

OAKLAND – Arnold Fischman was sentenced to 70 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, entered yesterday by the Honorable Haywood Gilliam, U.S. District Judge, follows a guilty plea entered by the defendant.

Fischman, 69, of Oakland, pleaded guilty on September 12, 2016, to one count of possession of pornography depicting minors under the age of 12 engaging in sexually explicit conduct.  According to his guilty plea, Fischman acknowledged that he was in possession of more than 600 images of child pornography on January 8, 2015, when federal agents executed a search of his residence.  Papers filed by the government reveal that a search warrant executed by HSI agents at Fischman’s home found more than 10,000 images and videos of child pornography on his electronic devices, including images depicting the sexual abuse of children as young as three to five years old.  The government charged Fischman with possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B). 

The sentence was handed down by the Honorable Haywood Gilliam, U.S. District Judge.  Judge Gilliam ordered Fischman to self-surrender to begin serving his sentence no later than March 27, 2017.  Judge Gilliam also imposed a five year period of supervised release to follow Fischman’s prison term.

Assistant U.S. Attorney Thomas R. Green prosecuted the case with the assistance of Trina Khadoo.  The prosecution is the result of an investigation by the HSI.

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.

OAKLAND – An El Cerrito man pleaded guilty today to 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.

According to the plea agreement, Brandon Robinson, 35, conspired to steal names of deceased individuals and to use 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.

Sentencing is scheduled for May 23, 2017.  Robinson faces a statutory maximum sentence of five years in prison for the conspiracy count and a mandatory minimum sentence of two years in prison for the aggravated identity theft count.  Robinson also faces a period of supervised release, restitution, and monetary penalties.

U.S. Attorney Stretch and Deputy Assistant Attorney General Goldberg commended special agents of Internal Revenue Service–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.

An El Cerrito, California man pleaded guilty today to 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 the plea agreement, 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.

Sentencing is scheduled for May 23. Robinson faces a statutory maximum sentence of five years in prison for the conspiracy count and a mandatory minimum sentence of two years in prison for the aggravated identity theft count. Robinson also faces a period of supervised release, restitution and monetary penalties.

Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch commended special agents of Internal Revenue Service–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 JOSE- A federal grand jury indicted ten South Bay residents for conspiring to commit extortion by force and conspiring to engage in drug trafficking, announced United States Attorney Brian J. Stretch and Homeland Security Investigations (“HSI”) Special Agent in Charge Ryan Spradlin.  According to the indictment unsealed today, seven of the defendants conspired to extort drug dealers while the other three defendants conspired to engage in trafficking methamphetamine. 

According to the indictment, the following defendants conspired to engage in extortion:

• Velarmino Escobar-Ayala (aka Meduza)
• Tomas Rivera (aka Profugo, aka Caballo)
• Ismael Alvarenga-Rivera (aka Casper)
• Willfredo Edgardo-Ayala (aka Chino)
• Jose David Abrego-Galdamez (aka Largo)
• Melvin Lopez (aka Sharky)
• Alexander Martinez-Flores (aka Pocar)

In addition, the indictment alleges that these defendants conspired to obtain property from drug dealers in Santa Cruz by threatening violence against the dealers and other persons close to them.  Further, the indictment alleges the defendants had a plan and purpose to engage in the extortion and threatened force, violence, and fear to obtain money that was demanded.  The seven defendants have been charged with conspiracy to commit extortion by force in violation of 18 U.S.C. § 1951(a).

Also, the indictment alleges defendants Gerber Morales (aka Choco), Emilio Escobar-Albarnga (aka Diablo), and Josue Alcedis Escobar-Cerritos (aka Penguino) were engaged in a conspiracy engage in drug trafficking.  According to the indictment, from March of 2015 until the present, the three defendants conspired to possess with intent to distribute 50 grams of more of a mixture of substance containing a detectable amount of methamphetamine, in violation of 21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(B)(viii).

According to additional court papers filed by the government today, the current charges in this case stem from a multi-year investigation into the activities of a violent Santa Cruz street gang known as Santa Cruz Salvatrucha Locos 13 (SCSL13).  The government’s papers state that “SCSL13 is a subset of the larger Mara Salvatrucha 13 (MS-13) gang organization.”  According to the government, the defendants all are alleged to be either active members or recruits performing criminal tasks on behalf of SCSL13. 

The defendants were arrested this morning as part of a criminal enforcement operation that included more than 200 local and federal law enforcement personnel.  The coordinated arrests and searches took place in three cities – Santa Cruz, Watsonville, and Daly City.  Defendants made appearances before the Honorable Nathanael Cousins, U.S. Magistrate Judge. 

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 sentence for a conviction of conspiracy to commit extortion is 20 years in prison and a $250,000 fine.  A conviction for conspiracy to possess with intent to distribute 50 grams or more of methamphetamine carries a mandatory minimum sentence of five years in prison, a maximum prison term of 40 years, and a maximum fine of $5,000,000.  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. 

Assistant U.S. Attorneys Joseph Alioto and William Edelman are prosecuting the case.  The prosecution is the result of an investigation by the HSI. 

A San Francisco, California mother and son were convicted today following a six-day trial for conspiring to file fraudulent corporate income 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.

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

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 $400,000. provided false summaries to Didsee’s return preparers, which claimed business expenses that were never incurred and included Hsu’s personal expenses. Chang signed the fraudulent returns as Didsee’s President.

“Owners can’t use their businesses as piggybanks, paying personal expenses out of their corporate accounts and falsely claiming them as business expenses,” said Acting Deputy Assistant Attorney General Goldberg. “All employers are legally required to file accurate and complete returns and pay their fair share – just like their employees.”

“This case was not about a mistake or a misunderstanding, it was about greed,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI). “Tracy Chang agreed to help her son, Howard Hsu and his business cheat the IRS. Hsu fabricated millions of dollars in expenses and Chang knew the expenses were false. She maintained the books and signed the tax returns while Hsu gave the CPA the “cooked books”. In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe.”

A sentencing date has not been scheduled. Hsu and Chang face a statutory maximum sentence of five years in prison for the conspiracy count and three years in prison for the false return counts. Hsu and Chang also face a period of supervised release, restitution and monetary penalties.

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 Colin Sampson and Trial Attorney Matthew Kluge 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 FRANCSICO – San Francisco residents Howard Hsu and his mother, Tracy Chang, were convicted today following a one-week trial for conspiring to file fraudulent corporate income 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.

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

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 $400,000.    Hsu provided false summaries to Didsee’s return preparers, which claimed business expenses that were never incurred and included Hsu’s personal expenses.  Chang signed the fraudulent returns as Didsee’s President.   

“Owners can’t use their businesses as piggybanks, paying personal expenses out of their corporate accounts and falsely claiming them as business expenses,” said Acting Deputy Assistant Attorney General Goldberg.  “All employers are legally required to file accurate and complete returns and pay their fair share – just like their employees.”

“This case was not about a mistake or a misunderstanding, it was about greed ,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI).  “Tracy Chang agreed to help her son, Howard Hsu and his business cheat the IRS.  Hsu fabricated millions of dollars in expenses and Chang knew the expenses were false.  She maintained the books and signed the tax returns while Hsu gave the CPA the “cooked books”.  In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe.”

A date for sentencing has not yet been scheduled.  Hsu and Chang face a statutory maximum sentence of five years in prison for the conspiracy count and three years in prison for the false return counts.  Hsu and Chang also face a period of supervised release, restitution and monetary penalties.

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 Colin Sampson and Trial Attorney Matthew Kluge of the Tax Division, who are prosecuting the case.

OAKLAND – Kenneth Michael Ellis was sentenced today to 45 months in prison for bank robberies covering much of Northern California, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.

Ellis, 31, from Stockton, pleaded guilty on November 16, 2016, to eight separate counts of unarmed bank robbery and agreed to pay more than $28,000 in restitution.  According to the plea agreement, Ellis admitted to using force or intimidation to rob banks in Fremont, Gilroy, Concord, Dublin, Pleasanton, and Lafayette.  Ellis typically entered the banks wearing dark glasses and a hat, approached the victim tellers to ask to cash a check, and presented a note that demanded money and told the tellers not to take certain actions.

Ellis admitted the following robberies:

• $3,000 from a Chase Bank branch in Fremont, California, on February 12, 2016
• $4,400 from a Wells Fargo Bank branch in Gilroy, California, on March 4, 2016
• $3,180 from a Wells Fargo Bank branch in Concord, California, on March 11, 2016
• $1,700 from a US Bank branch in Dublin, California, on March 15, 2016
• $1,083 from a US Bank branch in Gilroy, California, on March 16, 2016
• $1,434 from a US Bank branch in Fremont, California, on March 17, 2016
• $5,145 from a Wells Fargo Bank branch in Pleasanton, California, on March 17, 2016
• $4,600 from a Chase Bank branch in Lafayette, California, on March 21, 2016

As part of his plea agreement, Ellis also agreed to pay restitution to the following banks as a result of robberies he committed in the Eastern District of California:

• $1,000 to Chase Bank located at 5010 Elk Grove Boulevard, Elk Grove, California (for a robbery on March 1, 2016)
• $1,400 to Wells Fargo Bank located at 3518 Marconi Avenue, Sacramento, California (for a robbery on March 1, 2016)
• $1,500 to Bank of Stockton located at 230 Main Street, Rio Vista, California (for a robbery on March 21, 2016).

Media reports of the robberies described Ellis as the “Bearded Bandit,” recounting the description provided of the suspect and the car he used during this multi-agency investigation in a number of law enforcement bulletins.  Ellis was arrested on March 23, 2016, by the Brentwood Police Department after they received a call from a citizen who reported seeing someone who fit the description of the robbery suspect.  

The sentence was handed down by the Honorable Yvonne Gonzalez Rogers, U.S. District Judge.  Judge Gonzalez Rogers also sentenced the defendant to a three-year period of supervised release.  Ellis, who has been in custody since his March 2016 arrest, will begin serving his sentence immediately. 

Assistant U.S. Attorney Christina McCall is prosecuting the case with the assistance of Vanessa Quant, Melissa Dorton, and Noble Hughes.  The prosecution is the result of an investigation by the Federal Bureau of Investigation, the United States Attorney’s Offices of the Eastern and Northern Districts of California, the Contra Costa County District Attorney’s Office, the Alameda County District Attorney’s Office, the Santa Clara District Attorney’s Office, the Brentwood Police Department, the Concord Police Department, the Gilroy Police Department, the Alameda County Sheriff’s Office, the Fremont Police Department, the Pleasanton Police Department, the Contra Costa County Sheriff’s Office, the Sacramento Sheriff’s Department, the Elk Grove Police Department, the Rio Vista Police Department, and the Dixon Police Department.

SAN FRANCISCO – David Beckford was sentenced to more than 10 years in prison for his role in a conspiracy to manufacture counterfeit Xanax pills, for engaging in international money laundering, and for his use and possession of a firearm in furtherance of drug trafficking and in violation of the felon-in-possession statute, announced United States Attorney Brian J. Stretch; Drug Enforcement Administration Special Agent in Charge John J. Martin; Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf; and U.S. Food and Drug Administration Office of Criminal Investigations Special Agent in Charge Lisa L. Malinowski.  The sentence was issued by the Honorable Jeffrey S. White, U.S. District Judge, following a guilty plea entered in November of 2016.

According to the guilty plea, Beckford, 28, of Oakland, Calif., admitted that from January 17, 2014, through December 12, 2015, he engaged in a scheme to import controlled substances from China and other foreign sources, obtain manufacturing equipment, including a press to make pills, and press fake Xanax pills at locations in the Northern District of California.  Beckford acknowledged the pills he manufactured were designed to appear as close as possible to brand-name Xanax pills.  Beckford further admitted to wiring money to China and other foreign countries to pay for the materials that he used to operate his illegal Xanax manufacturing business.  In total, Beckford was found to be responsible for 161,474 counterfeit Xanax pills.  Beckford further admitted to possessing firearms and ammunition. 

This investigation is one example of law enforcement efforts to combat prescription pill abuse and counterfeit pill manufacturing.  On May 12, 2016, a federal grand jury returned a thirty-three count superseding indictment charging Beckford and four co-defendants with various crimes related to the scheme.  For his role, Beckford was charged with conspiracy to manufacture, distribute, and possess with intent to distribute a controlled substance, in violation of 21 U.S.C. § 846; three counts of substantive manufacture, distribution, and possession with intent to distribute a controlled substance, in violation of 21 U.S.C. § 841(a); being a felon in possession of a firearm and ammunition, in violation of 18 U.S.C. § 922(g)(1); possession of a firearm in furtherance of a drug trafficking crime, in violation of 18 U.S.C. § 924(c); sale of counterfeit drugs, in violation of 21 U.S.C. § 331(i)(3); conspiracy to engage in international money laundering, in violation of 18 U.S.C. § 1956(h); twenty-three counts of substantive international money laundering, in violation of 18 U.S.C. § 1956(a)(2)(A); and trafficking in a counterfeit drug, in violation of 18 U.S.C. § 2320(a)(4).  Pursuant to his plea agreement, Beckford pleaded guilty to all but the substantive counts of money laundering and manufacture, distribution, and possession with intent to distribute a controlled substance.

“Prescription drug abuse threatens the very fabric of our society,” said U.S. Attorney Stretch.  “David Beckford intentionally and illegally manufactured and distributed counterfeit prescription drugs.  His plan to put more than 150,000 counterfeit pills into circulation presented a serious risk to public safety.  This office is proud of the work done by our federal law enforcement partners to put an end to his scheme.”  

“Mr. Beckford’s sentence reflects the seriousness of this crime,” said Michael T. Batdorf, Special Agent in Charge, IRS-Criminal Investigation.  “The defendant was the mastermind of this elaborate scheme.  He found international suppliers through the internet and solicited others, including his girlfriend, to handle the wire transfer payments of funds to the overseas suppliers.  IRS CI is committed to following the money to the other side of the world and back so we can financially disrupt and dismantle narcotics trafficking organizations.”

“The FDA’s regulation of the production and distribution of prescription drugs is designed to ensure that they are safe and effective.  Criminals who manufacture and sell drugs outside of FDA’s oversight put the health of U.S consumers at risk,” said Lisa L. Malinowski, Special Agent in Charge, FDA Office of Criminal Investigations, Los Angeles Field Office.  “Our office will continue to pursue and bring to justice those who endanger the public’s health by distributing counterfeit, unapproved, and adulterated prescription medications.”

“Prescription drug misuse is a national epidemic affecting all segments of society.  Sadly, individuals like David Beckford who produced counterfeit pills for personal gain, feed this problem,” stated Drug Enforcement Administration Special Agent in Charge John J. Martin.  “As DEA continues an unprecedented dialogue with foreign counterparts to address the availability of pharmaceuticals and manufacturing equipment, we will simultaneously investigate traffickers operating in our own backyard.”

In addition to the 123-month prison term, Judge White also sentenced the defendant to a three-year period of supervised release and forfeiture of currency, firearms, ammunition, and custom jewelry.  The defendant currently is in custody and will begin serving the sentence immediately.  Also sentenced as part of the conspiracy were co-defendants Stephan Florida and Isaiah Clayton, whose sentences were for 14 months’ imprisonment and 36 months’ probation, respectively, for their roles in the scheme.  In addition, co-defendant Beau Sankene has pleaded guilty to crimes related to her roles in the conspiracy and has not yet been sentenced. 

Assistant U.S. Attorneys Sheila Armbrust and Marc Wolf prosecuted the case with the assistance of Ana Guerra and Yanira Osorio.  The prosecution is the result of an investigation by the Drug Enforcement Administration, Internal Revenue Service, Criminal Investigation, and U.S. Food and Drug Administration Office of Criminal Investigations.

SAN FRANCISCO – Leshawn Lawson was sentenced to 214 months in prison for possession with intent to distribute cocaine, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin.  The sentenced was handed down yesterday by the Honorable Phyllis J. Hamilton, United States District Judge, who found Lawson guilty of the drug charge after a bench trial in July of last year.  

According to court papers, Lawson, 41, of Hayward, Calif., acknowledged he was driving a white Bentley in Livermore, Calif., when he was pulled over by a Livermore police officer.  The officer seized more than $10,000 in cash from Lawson and found packaging in the trunk of the car for ten kilograms of cocaine.  Lawson admitted that at the time he was pulled over, he knew a controlled substance was in the trunk.  Testing revealed that there were actually 9,957 grams of 87.6% pure cocaine in the trunk of the Bentley.  A federal grand jury indicted Lawson on February 19, 2015, charging him with one count of possession with intent to distribute cocaine, in violation of 21 U.S.C. § 841(a)(1).  Judge Hamilton found Lawson guilty of the charge after a bench trial on July 6, 2016.  

In addition to the prison term, Judge Hamilton sentenced Lawson to a five-year period of supervised release.  Lawson has been in custody since his arrest and will begin serving his sentence immediately.  

Assistant U.S. Attorneys Sheila Armbrust and Aaron Wegner are prosecuting the case with the assistance of Michelle Alter and Yanira Osorio.  The prosecution is the result of an investigation by the DEA and the Livermore Police Department.

OAKLAND– Hugh Robinson was sentenced to 144 months in prison for his role in a conspiracy to commit theft of government property, announced United States Attorney Brian J. Stretch, Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

Robinson, 46, of San Pablo, Calif., was charged along with ten codefendants on November 5, 2015, in a 71-count indictment with conspiracy to commit theft of public money, theft of public money, wire fraud, and aggravated identity theft. On October 31, 2016, a jury convicted Robinson of all charges against him in the indictment. The sentence was handed down yesterday by the Honorable Jeffrey S. White, U.S. District Judge.

According to the indictment and evidence presented at trial, from at least August 21, 2013, through April 27, 2015, the defendants conspired with one another to commit the offenses against the United States charged in the indictment, which included theft of government money. The scheme involved obtaining the names of deceased individuals, filing false tax returns in the names of those individuals, obtaining false identifications, and illegally cashing U.S. Treasury checks.

Robinson, with the assistance of others, obtained names of deceased individuals for use in filing false tax returns. To obtain identities for use in the scheme, the defendants searched California death records and obtained the names and personal identifying information of deceased individuals. The defendants then used the identities obtained from the death records to electronically file false federal income tax returns and caused the returns to be filed in the name of the deceased individuals with the IRS. The returns falsely represented that the individuals earned wages or other income and that the individuals listed on the tax returns were entitled to tax refunds. Robinson and other individuals working with them also listed on the tax returns certain physical addresses to which the defendants had access, enabling the defendants to retrieve the refund checks.

Also described in the indictment and at trial is the process by which the defendants cashed the fraudulently obtained U.S. Treasury checks. The evidence established that a co-conspirator provided false and fraudulent California identification documents which was used to negotiate the U.S. Treasury checks. The false identifications contained the pictures of designated co-conspirators who would cash the checks. In addition, Robinson and others brought some of the checks to a Walmart store in Richmond, Calif., where other co-conspirators cashed the checks. According to the indictment, two of the coconspirators were Walmart employees who knew the checks belonged to others and the U.S. Treasury. Further, Robinson and his coconspirators obtained false identification documents that matched other names on the U.S. Treasury checks and negotiated those illegally-obtained checks at various other Walmart stores. According to the criminal complaint filed in the case, a search of the location where Robinson resided yielded $237,394 worth of uncashed U.S. Treasury checks.

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

Hugh Robinson, a San Pablo, California resident, was sentenced yesterday to serve ­­144 months in prison for filing tax returns using the identities of deceased individuals and stealing social security and refund checks destined for other individuals, 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 October 2016, Robinson, 46, was convicted of conspiring to steal public money, stealing public money, and aggravated identity theft. According to the evidence presented at his trial, from at least August 2013 through April 2015, Robinson and his co-conspirators took names and personal identification information of deceased individuals from California death records and used them to file income tax returns seeking refunds. Robinson and his co-conspirators directed the refunds to addresses and bank accounts that they controlled. Robinson also bought and cashed legitimate refund and social security benefits checks that he knew had been stolen. Robinson and his co-conspirators obtained fraudulent California IDs and used them to cash the refund and social security checks at various stores, including in the Richmond-area. total, Robinson intended to cause a loss of more than $1.5 million.

In addition to the term of prison imposed, Robinson was ordered to serve three years of supervised release and to pay restitution in the amount of $900,402 to the Internal Revenue Service (IRS).

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 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, Calif. – Kamran Azizi pleaded guilty today to conspiring to defraud the United States, announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. 

According to the plea agreement, during 2005 through 2008, Azizi, 59, of Danville, was responsible for compiling donations made to Maktab Tarighe Oveyssi Shahmaghsoudi (MTO), a Sufi Islamic organization with several centers in the Northern District of California.  Azizi acknowledged that during that period, with the assistance of his co-conspirator, Hedyeh Shoar, aka Hedyeh Azizi (to whom he was married until 2007), he kept more than $250,000 of members’ donations to MTO for his own benefit.  Azizi and Shoar then worked together to hide this income from the United States by, among other things, concealing it from the individual who prepared their federal income tax returns, and signing and filing tax returns which omitted this income.

A federal grand jury indicted Azizi with one count of conspiracy, in violation of 18 U.S.C. § 371, and two counts of filing a false tax return, in violation of 26 U.S.C. § 7206(1).  Pursuant to today’s agreement, Azizi pleaded guilty to the conspiracy count.  Azizi is scheduled to appear on June 23, 2017, before the Honorable Vince Chhabria, U.S. District Judge, for sentencing. 

The maximum statutory penalty for the conspiracy violation is five years in prison and a $250,000 fine.  In addition, a term of supervised release 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.

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

SAN FRANCISCO – Agents of the Federal Bureau of Investigation and investigators from the San Francisco Public Corruption Task Force arrested San Francisco Sheriff’s Deputy April Myres and a former San Francisco Jail inmate, Antoine Fowler, on gun and fraud charges, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. 

A criminal complaint was filed in federal court against Fowler, 32, yesterday afternoon.  An amended complaint was filed against Myres, 52, earlier today. 

According to the complaints, Myres gave her Sheriff’s Department-issued firearm, a Glock 17 9mm pistol, to Fowler and later claimed that it had been stolen in a burglary of her home.  The gun was located yesterday by FBI agents under the front driver-side console of Fowler’s car after Fowler was pulled over in Oakland by FBI SWAT agents.

According to the criminal complaints, Myres made a claim to her insurance company that numerous items, including her Sheriff’s Department-issued firearm, body armor, and handcuffs (as well as a mink jacket and a number of Louis Vuitton, Chanel, and Versace handbags, and Manolo Blahnik, Gucci, and Christian Louboutin shoes) were stolen from her home in San Francisco on March 25, 2016.  The FBI conducted a search of Myres’ residence on February 2, 2017, and found a number of the items Myres claimed had been stolen.  The amended criminal complaint against Myres charges her with mail fraud, wire fraud, and conspiracy, in violation of 18 U.S.C. §§ 1341, 1343, and 1349, as well as disposing of a firearm by providing it to a convicted felon, in violation of 18 U.S.C. § 922(d).

Fowler, who was released from the San Francisco Jail on January 11, 2016, is alleged to have had a romantic relationship with Myres before his release.  According to the complaints, when Fowler was arrested on February 2, Myres’ service firearm, which she had reported stolen to the insurance company, was in his car.  The criminal complaint against Fowler charges him with being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g).

The charges and successful recovery of the firearm were the result of close cooperation and coordination by members of the San Francisco Public Corruption Task Force, including the FBI, the San Francisco Police Department Internal Affairs Unit, the San Francisco District Attorney’s Office, and the San Francisco Sheriff’s Department Investigative Services Unit.  The investigation began shortly after Myres claimed the firearm and other items were stolen from her house in March 2016.

Defendants Myres and Fowler were arrested on February 2, 2017, and made their initial appearances in San Francisco on February 3, 2017, before U.S. Magistrate Judge Laurel Beeler.  Fowler is being detained pending further hearings now scheduled for February 7, 2017, at 9:30 am before Magistrate Judge Beeler.  Myres was released on a $1 million secured bond and is scheduled to appear before Magistrate Judge Beeler on February 15, 2017. 

If convicted, the maximum statutory penalty Fowler faces for being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g), is 10 years in prison.  If convicted, the maximum statutory penalty Myres faces for each count of mail fraud, wire fraud, and conspiracy is 20 years in prison, and the maximum statutory penalty for a violation of 18 U.S.C. § 922(d), is 10 years.  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. 

A criminal complaint merely alleges there is probable cause to believe crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.

The case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s Office.

SAN FRANCISCO– Eric Lundin was sentenced today to 84 months in prison for use and possession of a firearm in furtherance of a crime of violence announced United States Attorney Brian J. Stretch and FBI Special Agent in Charge John F. Bennett.  The sentence follows a guilty plea entered November 10, 2016, in which Lundin admitting using the weapon to enhance or maintain his status with the racketeering enterprise of the Mongols Motorcycle Club.

According to his guilty plea, Lundin, 67, of Arcadia, Calif., admitted that on April 22, 2013, he used a Colt .38 caliber revolver and a semi-automatic handgun to instill fear in, intimidate, and detain a female kidnapping victim.  Lundin admitted that he targeted the victim at least in part because he believed his daughter and his home had been robbed by an associate of a relative of the victim.  Lundin believed it was important to maintain respect for the Mongols, and his status as a member, by responding to the robbery.  Lundin acknowledged that during the course of the kidnapping, his victim was trapped in the vehicle and he stated “Mongols don’t leave witnesses.”   

The sentence was handed down by the Honorable Jon S. Tigar, U.S. District Judge.  In addition to the prison term, Judge Tigar also imposed a term of three years of supervised release during which time he may not associate with any members of the Mongols.  The defendant currently is in custody and will begin serving the sentence immediately. 

Assistant United States Attorneys William Frentzen and Zinzi Bonilla are prosecuting the case with the assistance of Bridget Kilkenny. The prosecution is the result of an investigation by the Federal Bureau of Investigation, the Arcada Police Department, and the Humboldt County Sherriff’s Office.