Southern District of California

Assistant U.S. Attorneys Emily W. Allen (619) 546-9738 and Aaron Arnzen (619) 546-8384

NEWS RELEASE SUMMARY – February 11, 2016

SAN DIEGO – Oceanside businessman Greg Ruehle today admitted swindling more than 160 people out of investments totaling nearly $2 million.

As part of his plea to securities fraud charges, Ruehle admitted being hired by local medical research firm ICB International, Inc., to identify investors who could fund their research.  Instead, Ruehle collected millions of dollars from investors and used the money for his own gambling and other personal expenses.  Ruehle disguised and concealed his fraud by issuing the investors fake stock certificates and failing to report the purported “investment” to the company.

In a parallel action, the Securities and Exchange Commission today announced civil charges against Ruehle.  For further information, please see http://www.sec.gov/news/pressrelease/2016-28.html.

Ruehle, who lives in Oceanside, targeted investors both locally and from his hometown in Minnesota.  In 2015, some of the investors asked for proof that their money was being used at ICBI.  In response, Ruehle sent them a letter on what appeared to be company letterhead, and purportedly signed by the company’s CEO.  In fact, the letter was a forgery, which was borne out by the fact that Ruehle misspelled the CEO’s name.  ICBI remained unaware of these “investors,” and never received a penny of their $1.9 million investments.

San Diego-based ICBI’s mission is to develop technologies to transport therapeutic treatments through the blood-brain barrier to treat neuro-degenerative diseases like Parkinson’s and Alzheimer’s disease.  According to ICBI’s website, the company develops techniques for early diagnosis, monitoring of disease progression, and increased therapeutic efficacy of drugs for neuro-degenerative diseases and various cancers that currently cannot be reached by drugs.

Ruehle’s plea agreement requires that he forfeit the $1.9 million in proceeds and pay restitution to the victim investors. 

In addition to the securities fraud charges, Ruehle pleaded guilty to possession of a stolen firearm.  In his plea, Ruehle admitted that he owned three stolen firearms, including two semi-automatic pistols and a revolver.  He has agreed to forfeit these weapons and another revolver to federal law enforcement.

“Business professionals who use their knowledge of industries and securities to prey on unsuspecting lay investors undermine the public’s confidence and ability to participate in the markets,” said U.S. Attorney Laura E. Duffy.  “As this case demonstrates, they also jeopardize innovation and the success of small businesses.  This type of egregious securities fraud is simply unacceptable.”

“Mr. Ruehle engaged in a pattern of lies and deceitful acts while violating the trust of family, friends, and associates,” said FBI Special Agent in Charge, Eric S. Birnbaum.  “The FBI is committed to investigating and seeking the prosecution of those who steal money through fraudulent investment schemes.”

 “Firearms must be obtained through proper procedures by eligible recipients.” said ATF Special Agent in Charge Eric D. Harden. “This investigation is a reminder that the illegal use of firearms permeates all spectrums of crime.”

Ruehle’s sentencing is set for May 2, 2016 at 9:30 before U.S. District Judge Michael M. Anello.

This investigation was started with a call to the FBI. The FBI encourages the public to report fraudulent investment schemes to the FBI at telephone number 1-800-CALL FBI (1-800-225-5324).

DEFENDANT                      Case Number 16cr0231-MMA

Greg Ruehle                           Age: 64                       Oceanside, CA

CHARGES

Securities Fraud, in violation of 15 U.S.C. §§ 78j, 78ff

Maximum Penalties: 20 years’ imprisonment, $5,000,000 fine, $100 special assessment, restitution.

Possession of stolen firearms, in violation of 18 U.S.C. § 922(j)

Maximum Penalties: 10 years’ imprisonment, $250,000 fine, $100 special assessment.

AGENCIES

Federal Bureau of Investigation

Bureau of Alcohol, Tobacco, Firearms, and Explosives

Assistant U.S. Attorneys Emily W. Allen (619) 546-9738 and Valerie Chu (619) 546-6750

NEWS RELEASE SUMMARY – February 8, 2016

SAN DIEGO – San Diego businessman Michael Nazarinia was sentenced today to 9 months in custody for his role in a fraudulent mortgage loan modification business that duped hundreds of struggling homeowners.

The business, known as “Haffar & Associates,” owned by figurehead attorney Mohamed Haffar, recruited new customers using telemarketers who lied to clients in order to induce more than 1,000 people to sign up to pay more than $3.5 million in total.

Haffar & Associates Scheme

Nazarinia’s co-conspirator Charles Rose managed a call center staffed with as many as 30 telemarketers, whose job was to recruit new clients.  Rose trained the telemarketers, wrote telemarketing scripts for use on calls with potential clients, wrote form letters for the salespeople to send to potential clients, and recorded his own sales calls for telemarketers to emulate.  Rose pleaded guilty in July, admitting that he and his business partners, including Nazarinia, trained telemarketers to make statements to potential clients that were false, such as the following:

1. “Haffar & Associates has a 98% success rate.”
2. “Haffar & Associates has never lost a home to foreclosure.”
3. “We have had no complaints with the California state bar.”
4.  “When you sign up with Haffar & Associates you will be represented by a law firm, and an attorney will negotiate on your behalf.”
5. “Once you sign up, you will be protected by the power of the law firm and the bank cannot foreclose on your home.” 
6. “You definitely qualify for a loan modification.”
7. “Our team has settled countless loans with just about every lender, and we have built up connections with the banks and deal directly with many bank’s legal departments.”
8. “We have direct phone numbers at banks to help you get your loan modification.  We can go through the ‘back door’ at the bank to get your loan modified.”
9. “We have had great success with your mortgage lender.”
10. “Your lender will not deal with you because you don’t know how to deal with them.”
11. “We conduct a forensic audit of the original loan documents in order to discover whether the lender . . . violated one of many predatory lending laws . . . . [Then] our lawyers can use these violations to either sue or threaten to sue the banks, therefore leveraging the lender into providing our client with a work out solution.”
12.  “We have a 100% money back guarantee.”
13.  “You will be paid a refund of your fee if Haffar & Associates is unsuccessful at obtaining a loan modification on your behalf, but no one has ever asked for a refund.” 

In reality, Haffar & Associates did not have anything close to a 98% success rate in obtaining loan modifications for their clients.  Similarly, Haffar & Associates did not have any special connections with banks or the legal departments of banks.  The business also did not have sufficient numbers of staff or staff experienced enough to successfully complete loan modifications.  And many dissatisfied customers never received refunds they requested.  Although existing clients were not getting loan modifications, the telemarketers were encouraged to keep selling.

For his part, Nazarinia generated a fraudulent lease agreement, which was used to fraudulently delay eviction after Haffar & Associates failed to negotiate a modification for a client.  Nazarinia also admitted to filing a false 2010 income tax return, omitting almost $100,000 in illegal income from Haffar & Associates.  Among other things, Nazarinia supervised Haffar & Associates “case managers,” who submitted loan modification applications and negotiated with the banks on behalf of clients.  Despite the representations made to clients, attorney Haffar did not directly supervise Nazarinia’s case managers, and instead, Nazarinia and the case managers provided legal services to clients without Haffar’s input or direction.  Haffar rarely reviewed the clients’ files and almost never provided direction to the case managers.  According to Rose’s plea agreement, Haffar, Nazarinia, and Rose all understood that Haffar’s fees were his compensation for the risk he took in allowing Nazarinia and Rose to use his name, bar license, and law firm, and not for any actual work Haffar did on loan modification cases.

After Haffar & Associates stopped doing new business, Rose and Nazarinia started a new company, called “REST Report Matters,” selling a product they claimed would facilitate mortgage lenders’ review of homeowners applications for loan modifications.  Rose admitted as part of his guilty plea that he made false representations to potential clients in order to induce them to sign up and pay their fees.  They told homeowners that the product was the only available tool that could definitely tell homeowners the modification terms their lenders would provide.

Federal Law Enforcement Condemns Loan Modification Schemers

United States Attorney Laura E. Duffy reiterated her belief that, “The real tragedy of this case is that the defendants chose to profit from the suffering of others.  In difficult economic times, they exploited a particularly vulnerable segment of our population, homeowners who were desperately trying to make ends meet and stay in their homes.”  

 “Fraudulent mortgage fraud schemes affect consumers at the most basic level, jeopardizing their ability to retain ownership of their homes,” said Robert Wemyss, Inspector in Charge of the U.S. Postal Inspection Service – Los Angeles Division.  "The U.S. Postal Inspection Service will continue to investigate these crimes to protect consumers and our nation's mail system from being used for illegal or dangerous purposes.”

“Using the guise of a law office and a legal team, the defendants preyed upon financially desperate homeowners struggling to keep a roof over their head,” stated Erick Martinez, Special Agent in Charge of IRS Criminal.  “As today’s sentencing shows, those who find ways to profit by taking advantage of distressed homeowners and fail to report the income will be brought to justice.”

“Michael Nazarinia preyed on others’ misfortune to line his own pockets,” said Federal Housing Finance Agency – Office of Inspector General Special Agent in Charge Leslie DeMarco.  “The sentence he received today provides justice and will hopefully act as a deterrent to anyone else who might be tempted to engage in similar conduct.”

Rose is scheduled to be sentenced on April 11, 2016, also by Judge Houston.  Attorney Haffar has also pleaded guilty to tax charges relating to the venture, and admitted that he had no existing knowledge or experience in loan modifications when he started the business in 2008.  Haffar stipulated to his disbarment in November 2011 for his conduct.  He was formally disbarred in June 2012, and obligated to pay over $192,000 to reimburse former Haffar & Associates clients.  Haffar pleaded guilty to the federal criminal charge in August 2014, and was sentenced to three months in prison in January 2015. 

Another participant who worked for Rose’s telemarketing company, Stacy Tuers, pled guilty on tax charges in May 2015.  As part of Tuers’s guilty plea, he admitted that he knew the telemarketers were making false statements to potential clients, but continued to sell Haffar & Associates loan modification services.  Tuers is scheduled to be sentenced on the tax offense on March 10, 2016.

DEFENDANT

Michael Nazarinia, 15CR2718-JAH               Age: 41           San Diego, CA

CHARGES

Mail fraud, in violation of 18 U.S.C. § 1341

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary loss or gain, $100 special assessment, restitution.

Subscribing to a false tax return, in violation of 26 U.S.C. § 7206(1)

Maximum Penalties: 3 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.

DEFENDANTS PREVIOUSLY CHARGED:

Charles Rose, 15CR1786-JAH                       Age: 32           San Diego, CA

Mohamed Haffar, 14CR2251-JAH                Age: 36           San Diego, CA           

Stacy Tuers, 15CR1342-JAH                         Age: 54           San Diego, CA

AGENCIES

United States Postal Inspection Service

Internal Revenue Service – Criminal Investigation

Federal Housing Finance Agency – Office of Inspector General

For Further Information, Contact: Assistant U.S. Attorney Mark W. Pletcher (619) 546-9714

NEWS RELEASE SUMMARY – January 29, 2016

SAN DIEGO – U.S. Navy Lieutenant Commander Todd Dale Malaki was sentenced in federal court today to 40 months in prison for accepting cash, hotel expenses and the services of a prostitute in return for providing classified U.S. Navy ship and submarine schedules and other internal Navy information to a foreign defense contractor.

Malaki, 44, of Oxnard, California, pleaded guilty in April to one count of conspiracy to commit bribery. As part of his guilty plea, Malaki admitted that in 2006, while he was working as a supply officer for the U.S. Navy’s Seventh Fleet, he began a corrupt relationship with Leonard Glenn Francis, the former president and chief executive officer of Glenn Defense Marine Asia (GDMA), a company that provided services to the U.S. Navy.

During today’s sentencing hearing, U.S. District Judge Janis L. Sammartino noted that a more significant sentence was warranted in this case in part because Malaki’s conduct was not a momentary lapse in judgment but long-term corruption that spanned more than seven years. She described Malaki’s case as “one of the most serious offenses the court has seen in its tenure in the Southern District of California.”

In addition to his prison sentence, Judge Sammartino ordered Malaki to pay a $15,000 fine and $15,000 in restitution to the Navy. He was ordered to report to the U.S. Bureau of Prisons on May 2, 2016.

As part of the scheme, Malaki provided Francis with classified U.S. Navy ship and submarine schedules and proprietary invoicing information about GDMA’s competitors. In exchange, Malaki admitted, Francis provided him with luxury hotel nights on at least a dozen occasions in Singapore, Hong Kong and the island of Tonga, as well as envelopes of cash, entertainment expenses and the services of a prostitute.

Malaki is the second defendant to be sentenced in the investigation of corruption and fraud in the U.S. Navy. Last week, U.S. Navy Petty Officer First Class Daniel Layug was sentenced to 27 months in prison for conspiracy to commit bribery

To date, 10 individuals have been charged in connection with this scheme; of those, nine have pleaded guilty, including Malaki, Commander Michael Vannak Khem Misiewicz, Captain Daniel Dusek, NCIS Special Agent John Beliveau, Commander Jose Luis Sanchez and Layug as well as GDMA executives Francis, Alex Wisidagama and Edmond Aruffo.  Former Department of Defense civilian employee Paul Simpkins awaits trial. GDMA the corporate entity has also pleaded guilty.

“Malaki sold out the U.S. Navy which had provided him escape from his impoverished upbringing,” said U.S. Attorney Laura Duffy. “He put fellow sailors and warships at risk of exploitation, attack, or worse, and tarnished the reputations of those who had selected him from among the enlisted ranks and sponsored him to become a commissioned officer. Those who fail to uphold the public’s trust will pay the consequences for their crimes.”

“Today's sentencing of Lt. Commander Malaki is part of an ongoing joint effort by the Defense Criminal Investigative Service, the Naval Criminal Investigative Service and the Department of Justice to identify, investigate and bring to justice those seeking to enrich themselves at the expense of U.S. taxpayers,” said James B. Burch, Director, DCIS. “While the conduct of the vast majority of those in the U.S. Navy is beyond reproach, we will vigorously pursue those individuals who put the safety and security of U.S. Navy personnel at risk. The conduct of Lt. Commander Malaki is reprehensible and today's sentencing demonstrates the Defense Criminal Investigative Service and its law enforcement partners will continue to pursue allegations of fraud and corruption that puts the Warfighter at risk.”

“Lieutenant Commander Malaki betrayed his oath of office, failed to uphold the standards of selfless service, and threatened the security of Sailors when he sold U.S. Navy ship schedules for cash, hotel expenses, and the services of a prostitute," said NCIS Director Andrew Traver. “NCIS, in collaboration with Defense Criminal Investigative Service and the Department of Justice, will continue to aggressively pursue this investigation."

The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency.  The case is being prosecuted by Assistant U.S. Attorney Mark W. Pletcher of the Southern District of California and Trial Attorneys Brian R. Young and Lawrence Atkinson of the Criminal Division’s Fraud Section.

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

DEFENDANT                                  Case Number: 15cr967                    

Todd Dale Malaki                               Age: 44           Oxnard, California

SUMMARY OF CHARGES

Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371. Maximum penalty five years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater;

INVESTIGATING AGENCIES

Defense Criminal Investigative Service

Naval Criminal Investigative Service

Defense Contract Audit Agency

 

 

 

A U.S. Navy Lieutenant Commander was sentenced today to 40 months in prison for accepting cash, hotel expenses and the services of a prostitute from foreign defense contractor Glenn Defense Marine Asia (GDMA) in exchange for classified U.S. Navy ship and submarine schedules and other internal Navy information.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura Duffy of the Southern District of California, Deputy Inspector General for Investigations James B. Burch of the Defense Criminal Investigative Service (DCIS) and Director Andrew Traver of the Naval Criminal Investigative Service (NCIS) made the announcement.

In April 2015, Todd Dale Malaki, 44, pleaded guilty to one count of conspiracy to commit bribery and admitted that in 2006, while he was working as a supply officer for the U.S. Navy’s Seventh Fleet, he began a corrupt relationship with Leonard Glenn Francis, the former president and CEO of GDMA, a company that provided port services to U.S. Navy ships and submarines throughout the Pacific.  In addition to his prison sentence, U.S. District Judge Janis L. Sammartino of the Southern District of California ordered Malaki to pay a $15,000 fine and $15,000 in restitution to the Navy.

As part of the scheme, Malaki provided Francis with classified U.S. Navy ship schedules and proprietary invoicing information about GDMA’s competitors in exchange for luxury hotel stays in Singapore, Hong Kong and the island of Tonga, as well as envelopes of cash, entertainment expenses and the services of a prostitute.  Malaki admitted that the total value of the benefits he received from Francis was approximately $15,000. 

To date, 10 individuals have been charged in connection with this scheme; of those, nine have pleaded guilty, including Malaki, Commander Michael Vannak Khem Misiewicz, Captain Daniel Dusek, NCIS Special Agent John Beliveau, Commander Jose Luis Sanchez and U.S. Navy Petty Officer First Class Dan Layug.  Former Department of Defense (DoD) civilian employee Paul Simpkins awaits trial.  On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine; the others await sentencing. 

The NCIS, the DCIS and the Defense Contract Audit Agency are conducting the ongoing investigation.  Assistant Chief Brian Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California are prosecuting the case.

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DoD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

A U.S. Navy Commander pleaded guilty today to bribery charges, admitting that he accepted cash, gifts, travel expenses, entertainment and the services of prostitutes from foreign defense contractor Glenn Defense Marine Asia (GDMA) in exchange for classified U.S. Navy information, including ship schedules that contained information related to the U.S. Navy’s ballistic missile defense operations in the Pacific.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura Duffy of the Southern District of California, Deputy Inspector General for Investigations James B. Burch of the Defense Criminal Investigative Service (DCIS) and Director Andrew Traver of the Naval Criminal Investigative Service (NCIS) made the announcement.

Michael Vannak Khem Misiewicz, 48, of San Diego, pleaded guilty before U.S. Magistrate Judge Jan Adler of the Southern District of California to one count of conspiracy and one count of bribery.  Sentencing is scheduled for April 29, 2016, before U.S. District Judge Janis L. Sammartino of the Southern District of California.

“In exchange for luxury vacations, gifts and other expenses, Commander Misiewicz betrayed his oath, the men and women of the U.S. Navy, and American taxpayers by directing lucrative government contracts to his financial patron,” said Assistant Attorney General Caldwell.  “Working with our law enforcement partners, the Department of Justice’s Criminal Division is committed to prosecuting corrupt officials who abuse positions of public trust.”

“Commander Misiewicz provided information to a foreign contractor that, in the wrong hands, could’ve had a devastating impact on national security,” said U.S. Attorney Duffy.  “By giving in to greed, he put his Navy shipmates and fellow Americans in harm’s way.  This guilty plea is an important step in ensuring that all those who violated their duty of trust to the United States in this affair are held accountable.” 

“Today's guilty plea of Commander Misiewicz is yet another example of a U.S. Navy officer who sought to enrich himself at the expense of U.S. taxpayers,” said Director Burch.  “This type of reprehensible behavior will not be tolerated.  Those who serve in the U.S. Navy have an obligation to uphold the public's trust or suffer the consequences.  DCIS, the Naval Criminal Investigative Service and the Department of Justice will vigorously pursue this investigation wherever it may lead us.”

“Commander Misiewicz chose personal gain and gratification over sacrifice and service to our country," said Director Traver.  “His actions are antithetical to the Navy’s core values of honor, courage and commitment.  Along with DCIS, we will continue vigorously pursuing all aspects of the investigation.”

According to admissions in his plea agreement, from January 2011 until September 2013, Misiewicz provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to the defense contractor Leonard Glenn Francis, CEO and owner of Singapore-based GDMA.  GDMA provided port services to U.S. Navy ships and submarines when they arrived at ports throughout the Pacific.

Misiewicz admitted that when he was stationed in Japan, on the USS Mustin and in Colorado Springs, Colorado, he used his position and influence within the U.S. Navy to advance the interests of GDMA, including by providing Francis with classified ship schedules and other proprietary U.S. Navy information.  In return, Misiewicz admitted that Francis gave him cash, paid for luxury travel on at least eight occasions for Misiewicz and his family, provided his wife with a designer handbag and provided Misiewicz with the services of prostitutes on multiple occasions.  Throughout the conspiracy, Misiewicz admitted that he and his conspirators took steps to avoid detection by law enforcement by, among other means, using clandestine email accounts, which they periodically deleted.  

To date, nine individuals have been charged in connection with this scheme; of those, eight have pleaded guilty, including Misiewicz, Captain Daniel Dusek, Commander Jose Luis Sanchez, NCIS Special Agent John Beliveau and U.S. Navy Petty Officer First Class Daniel Layug.  Former Department of Defense (DoD) civilian employee Paul Simpkins awaits trial.  On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine; the others await sentencing.

The NCIS, the DCIS and the Defense Contract Audit Agency are conducting the ongoing investigation.  Assistant Chief Brian R. Young and Trial Attorney Lawrence Atkinson of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark W. Pletcher of the Southern District of California are prosecuting the case. 

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DoD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

For Further Information, Contact: Assistant U.S. Attorney Mark W. Pletcher (619) 546-9714

NEWS RELEASE SUMMARY – January 28, 2016

SAN DIEGO, CA – U.S. Navy Commander Michael Vannak Khem Misiewicz pleaded guilty to bribery charges in federal court today, admitting that he gave classified ship schedules - including those that contained information related to the U.S. Navy’s ballistic missile defense operations in the Pacific - to a foreign defense contractor in exchange for cash, gifts, travel expenses, entertainment and the services of prostitutes.

Misiewicz, 48, who was indicted last January by a federal grand jury in the Southern District of California, pleaded guilty before U.S. Magistrate Judge Jan Adler to one count of conspiracy and one count of bribery. A sentencing hearing is scheduled for April 29, 2016 at 9 a.m. before U.S. District Judge Janis L. Sammartino.

According to admissions in his plea agreement, from January 2011 until September 2013, Misiewicz provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to the defense contractor, Leonard Glenn Francis, CEO and owner of Singapore-based Glenn Defense Marine Asia. GDMA provided husbanding services such as tugboats, fuel, and trash removal services for U.S. Navy ships and submarines when they arrived at ports throughout the Pacific.

In his plea agreement, Misiewicz admitted that he used his position and influence within the U.S. Navy to advance the interests GDMA, including by providing Francis with classified ship schedules and other proprietary U.S. Navy information, and that in return, Francis gave him cash, paid for luxury travel on at least eight occasions for Misiewicz, his mother, brother and children to the Philippines, Japan, Kuala Lumpur, Cambodia, Singapore and the United States, provided his wife with a designer handbag, and plied Misiewicz with the services of prostitutes on multiple occasions. Throughout the conspiracy, Misiewicz admitted, he and his conspirators took steps to avoid detection by law enforcement by, among other means, using clandestine email accounts, which they periodically deleted.

“Commander Misiewicz provided information to a foreign contractor that, in the wrong hands, could’ve had a devastating impact on national security,” said U.S. Attorney Laura Duffy. “By giving in to greed, he put his Navy shipmates and fellow Americans in harm’s way. This guilty plea is an important step in ensuring that all those who violated their duty of trust to the United States in this affair are held accountable.”

“In exchange for luxury vacations, gifts and other expenses, Commander Misiewicz betrayed his oath, the men and women of the U.S. Navy, and American taxpayers by directing lucrative government contracts to his financial patron,” said Assistant Attorney General Leslie R. Caldwell.  “Working with our law enforcement partners, the Department of Justice’s Criminal Division is committed to prosecuting corrupt officials who abuse positions of public trust.”

“Today's guilty plea of Commander Misiewicz is yet another example of a U.S. Navy officer who sought to enrich himself at the expense of U.S. taxpayers,” said DCIS Director James B. Burch, Director. “This type of reprehensible behavior will not be tolerated. Those who serve in the U.S. Navy have an obligation to uphold the public's trust or suffer the consequences. DCIS, the Naval Criminal Investigative Service, and the Department of Justice will vigorously pursue this investigation wherever it may lead us.”

“Commander Misiewicz chose personal gain and gratification over sacrifice and service to our country.  His actions are antithetical to the Navy's core values of honor, courage and commitment," said NCIS Director Andrew Traver. “Along with DCIS, we will continue vigorously pursuing all aspects of the investigation.”

So far, nine people have been charged; of those, eight have pleaded guilty, including Misiewicz, Captain Daniel Dusek, Commander Jose Sanchez, NCIS Special Agent John Beliveau and U.S. Navy Petty Officer First Class Daniel Layug; as well as GDMA’s Francis and GDMA employee Alex Wisidigama. Former Department of Defense civilian employee Paul Simpkins awaits trial.  Layug was sentenced last week to 27 months in prison and a $15,000 fine; the others await sentencing.

The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency.  The case is being prosecuted by Assistant U.S. Attorney Mark W. Pletcher of the Southern District of California and Trial Attorneys Brian R. Young and Lawrence Atkinson of the Criminal Division’s Fraud Section. 

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

DEFENDANT                                              Case Number: 13-CR-4287                                     

Michael Vannak Khem Misiewicz                  48                    San Diego, CA

SUMMARY OF CHARGES

Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371

Maximum Penalty: 5 years in prison, a $250,000 fine,

Bribery, in violation of 18 U.S.C. § 201

Maximum Penalty:  15 years in prison, a $250,000 fine

INVESTIGATING AGENCIES

Defense Criminal Investigative Service

Naval Criminal Investigative Service

Defense Contract Audit Agency

 

For Further Information, Contact: Assistant U.S. Attorneys Joseph J.M. Orabona (619)546-7951 and Melanie Pierson (619) 546-7976

NEWS RELEASE SUMMARY – January 28, 2016

SAN DIEGO – A federal jury today convicted Dr. William Bailey, a local physician of osteopathic medicine, on eight counts of tax evasion.

According to evidence presented at trial, between 2004 and 2011 Bailey earned over $1.1 million in compensation for his services as a physician at two different local clinics and paid no taxes. Bailey concealed his income by having his paychecks directed to an account in the name of a trust.

In his own testimony at trial, Bailey admitted that he cut and pasted other documents to create the trust himself and signed the name of another person as the creator of the trust. As the grantor, sole trustee and also the beneficiary of the so-called trust, the income was attributed to Bailey as an individual.

Bailey spent the $1.1 million he deposited in the trust account to pay his personal expenses, including the purchase of a home, two cars, a time share and approximately $400,000 in credit card bills. Despite earning a significant income, Bailey reported no taxable income on the tax returns he filed. Evidence presented at trial showed that Bailey owed a total of $315,000 in unpaid taxes for the period from 2004-2011.

“As today’s verdict shows, the law is clear on the issue of taxable income and who is required to file and pay taxes—there is no gray area on the subject,” said Special Agent in Charge Erick Martinez for IRS Criminal Investigation. “With filing season upon us, let this conviction serve as a warning to those who are considering similar conduct.”

Bailey is scheduled to be sentenced on April 20, 2016, at 9:00 a.m., before U.S. District Judge Cathy A. Bencivengo.

DEFENDANT                                  Criminal Case No. 13CR3046-CAB

William Richard Bailey                       Age: 57                       San Diego, California

SUMMARY OF CHARGES

Title 26, United States Code, Section 7201 B Tax Evasion

Maximum Penalties: 5 years of imprisonment and $250,000 fine per count

AGENCY

Internal Revenue Service-Criminal Investigations

Assistant U. S. Attorneys Andrew Young (619) 546-7981, Mark W. Pletcher (619) 546-9714 or Benjamin Katz (619) 546-9604

NEWS RELEASE SUMMARY – January 27, 2015

SAN DIEGO – A federal grand jury sitting in the Southern District of California has charged 22 people with participating in an international narcotics trafficking and illegal gambling ring led by former University of Southern California athlete Owen Hanson.

Early today, authorities arrested 19 people at locations around San Diego, Orange and Los Angeles counties, as well as in Sacramento, Phoenix, Louisiana, and Virginia. Owen Hanson and Giovanni “Tank” Brandolino were previously arrested; Kenny Hilinski remains a fugitive.

According to court documents, Hanson and his associates conspired to operate “ODOG,” an enterprise engaged in international and domestic drug trafficking, illegal sports gambling and international money laundering. The organization used threats and violence against its gambling and drug customers to force compliance.  For example, the organization sent a DVD of a beheading and a photo of an individual’s family gravestone in an effort to collect an alleged $2 million debt.

“Transnational criminal organizations pose a significant threat to our country and our allies throughout the world,” said U.S. Attorney Laura Duffy. “Such criminal organizations are unhindered by national boundaries, and unrestricted in the types of crimes they will commit in the pursuit of illegal profits.  Here, we allege that the ODOG enterprise employed illegal gambling, drug trafficking and money laundering to expand its tentacles throughout the world, and its operators regularly used complicated financial transactions and encrypted communications to conceal their criminal activities. Those who mistakenly underestimate the dangers of illegal gambling should take note of the extreme threats of violence employed by the ODOG enterprise to extort payment from their ‘customers.’”

“Today's indictment will begin the process of dismantling a sophisticated international criminal enterprise that used violence and intimidation to advance their criminal objectives," commented FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI is appreciative of the assistance from our domestic and international law enforcement partners in this investigation especially the Australian Crime Commission, the New South Wales Police Force and the New South Wales Crime Commission.”

“Utilizing the professional services of a Certified Public Account, the ODOG Enterprise laundered illicit funds through shell companies, phony bank accounts and structured bank deposits in an attempt to avoid detection by law enforcement,” said Erick Martinez, Special Agent in Charge for IRS Criminal Investigation. “This joint investigation continues to demonstrate our efforts to ensure that financial institutions will not be abused by narcotics traffickers and illegal gambling businesses attempting to conceal their ill-gotten gains.”

Here’s how the enterprise operated, according to the indictment:

Gambling Network

ODOG’s network of bookies and runners extended nationally from Virginia to California where various bookies accepted wagers on professional and collegiate football and baseball games. Hanson, who allegedly oversaw the organization, delegated a portion of the responsibility to operate the gambling network to Kenny Hilinksi, an expatriate living in Peru. From Peru, Hilinski maintained various websites used by gamblers to place bets, coordinated the collection of payments from various bookies and gamblers, and directed the organization’s runners to distribute the proceeds through shell companies and cash deliveries.

As indicated above, the ODOG gambling network employed violence and threats of violence to ensure that delinquent bettors paid their gambling debts. Daniel Portley-Hanks, a Los Angeles private investigator also charged in the indictment, allegedly assisted with the collection of debts from gamblers by obtaining personal identification information, locating the individuals, and coordinating the attacks.

Drug Distribution

The ODOG Enterprise distributed narcotics – including cocaine, methamphetamine, heroin, and ecstasy – both domestically and internationally in wholesale and retail quantities. Hanson, who oversaw the organization, shared domestic operations with Giovanni “Tank” Brandolino.  Brandolino was arrested in October 2015 by DEA agents in Brooklyn, New York in a separate narcotics trafficking case. Derek Loville, a former professional football player, also distributed drugs for the ODOG Enterprise in Arizona.

Money Laundering

The ODOG Enterprise used sophisticated techniques and employed financial professionals to launder the proceeds of both the gambling and drug trafficking networks. Luke Fairfield, a Certified Public Accountant based in San Diego, set up shell corporations and advised members of the organization on methods to structure bank transactions to avoid detection by bank security and law enforcement.  The ODOG Enterprise also used “runners” who collected and distributed the Enterprise’s illegal proceeds in a manner designed to evade detection by law enforcement.

The case stems from of a prior international sports gambling case against the Macho Sports Enterprise (13CR2196-JLS).  In Macho Sports, a June 2013 federal grand jury charged 19 defendants with various crimes, including a racketeering conspiracy and running an illegal gambling business. Following the international criminal web identified in the Macho Sports case, the FBI began working with Australia’s New South Wales Police Force (in conjunction with the New South Wales Crime Commission) to uncover this second international sports betting—and drug—conspiracy. 

Hanson was initially indicted and arrested on September 9, 2015 after arranging the delivery of five kilograms of cocaine and five kilograms of methamphetamine. This indictment adds additional charges relating to Hanson’s organization.  Hanson and co-defendants Luke Fairfield, Kenny Hilinski, Giovanni Brandolino, Daniel Portley-Hanks, Jack Rissell, and Derek Loville are charged with a racketeering conspiracy related to illegal gambling and narcotics trafficking. 

The indictment also charges Hanson, Fairfield, Hilinski, Brandolino, Portley-Hanks, Rissell, and fifteen others with operating an illegal gambling business. Of these additional fifteen defendants, thirteen (Charlie D’agostino, Marlyn Villareal, Dylan Anderson, Jim Muse, Jeff Bellandi, Curtis Chen, James Duley, Dee Foxx, Khalid Petras, Rahul Bhagat, David Kipper, Todd Oldham, and Daniel Ortega) were bookies working for Hanson, and two, Marlyn Villareal and Tim Bryan, were runners responsible for transporting gambling and drug trafficking proceeds funds on Hanson’s behalf. 

Finally, Hanson, Fairfield, Hilinski, Brandolino, D’Agostino, Villareal, Anderson, Bryan, and Bellandi are charged with laundering the proceeds of the organizations drug and gambling businesses. This money laundering was done by depositing funds into bank accounts opened in the names of fictitious companies but controlled by Hanson and Hilinski.  Villareal alone was responsible for the laundering of hundreds of thousands of dollars in drug and gambling proceeds.

In a related matter, Rufus Leon Rhone was also indicted and pled guilty on January 19, 2016 to charges of conspiring to distribute methamphetamine and cocaine.  His sentencing is set for  April 11, 2016.

DEFENDANT                                  Case Number: 15CR2310-WQH

Owen Hanson                                     Age:    33

Luke Fairfield                                     Age:    39

*Kenny Hilinski                                  Age:    38

Giovanni Brandolino                          Age:    41

Daniel Portley-Hanks                          Age:    69

Jack Rissell                                          Age:    49

Derek Loville                                      Age:    47

Chalie D’Agostino                              Age:    51

Marlyn Villareal                                  Age:    31

Dylan Anderson                                  Age:    33

Tim Bryan                                           Age:    47

Jim Muse                                             Age:    52

Jeff Bellandi aka “Jazzy”                    Age:    49

Curtis Chen                                         Age:    32

James Duley                                        Age:    40

Dee Foxx                                            Age:    34

Khalid Petras                                      Age:    54

Rahul Bhagat                                      Age:    30

David Kipper                                      Age:    34

Todd Oldham                                     Age:    31

Daniel Ortega                                      Age:    41

*Fugitives

SUMMARY OF CHARGES                                                    

Racketeering Conspiracy to Conduct Enterprise Affairs, 18 U.S.C. § 1962(d)

Maximum penalty: Life

Illegal Gambling Business, 18 U.S.C. § 1955

Maximum penalty: Five years

Money Laundering Conspiracy, 18 U.S.C. § 1956(h)

Maximum penalty: Twenty years

Conspiracy to Distribute Narcotics, 21 U.S.C. § 841(a)(1) and 846

Maximum penalty: Life

AGENCY

Federal Bureau of Investigation – San Diego Field Office

Internal Revenue Service – San Diego

Australian Crime Commission

New South Wales Police Force

New South Wales Crime Commission

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

 

 

Assistant U.S. Attorney Daniel C. Silva at (619) 546-9713

NEWS RELEASE SUMMARY – January 22, 2016

SAN DIEGO – San Diego-based money transmitter Baltazar Fitch pleaded guilty today in federal court to failing to maintain an adequate anti-money laundering program at his various money transmitting businesses (“MTBs”). Fitch was the manager, supervisor, and owner of the MTBs.

As defined in the Bank Secrecy Act (the “BSA”), a money transmitting business is an entity that provides various financial services, including but not limited to accepting currency and transmitting the currency by any means. As part of Fitch’s duties as manager, supervisor, and owner of the MTBs, he coordinated the receipt, transmission, and delivery of currency for the MTBs’ customers. He was aware that the BSA, at Title 31, United States Code, Section, 5318(g), required the MTBs to “report any suspicious transaction relevant to a possible violation of law or regulation” (a “5318(g) Report”) with the Department of Treasury.

As detailed in the Plea Agreement entered today in front of U.S. Magistrate Judge Mitchell D. Dembin, the MTBs repeatedly accepted large quantities of cash from Mexican-based currency exchange houses, knowing that the cash transactions were relevant to a possible violation of law or regulation without filing any 5318(g) Reports. Fitch, acting through the MTBs, provided currency exchange and transmission services to clients in Mexico and the U.S. In order to be able to deposit currency into U.S. bank accounts and wire transfer those funds to locations abroad, Fitch partnered with businesses located within the Southern District of California that maintained active bank accounts at various U.S. financial institutions. By utilizing these bank accounts, Fitch knew that the banks falsely believed the cash deposits were revenues/expenses generated from the sale of goods, when, in reality, they were funds transferred on behalf of the MTBs.

Fitch was also aware that the BSA, specifically Title 31, Code of Federal Regulations, Section 1022.210, required each MTB to develop, implement, and maintain an effective anti-money laundering program that: (i) was reasonably designed to prevent the MTBs from being used to facilitate money laundering; (ii) maintained written policies, procedures, and controls governing the verification of customer identification, the filing of reports such as 5318(g) Reports, the creation and retention of records, response to law enforcement requests, and other compliance with BSA requirements; and (iii) the MTBs designated a compliance officer, who was responsible for assuring that the business complied with all BSA requirements. Fitch failed to comply with any of these regulations.

The criminal case is assigned to U.S. District Court Judge Cynthia Bashant (16cr123-BAS). U.S. Magistrate Judge Mitchell D. Dembin allowed Fitch to remain on pretrial release, pursuant to the terms of a bond posted by Fitch.

“When criminal networks attempt to evade U.S. banking regulations by concealing unlawful  money transfers with legitimate business transactions, they can expect to quickly find law enforcement on the money trail,”  said Dave Shaw, special agent in charge for ICE Homeland Security Investigations in San Diego. “I commend the investigators for their work that not only unraveled a significant financial scheme with cross border ties, but underscores HSI’s commitment to combating financial crime.”

DEFENDANT                                  Case No. 16cr123-BAS                                

Baltazar Fitch                                      Chula Vista, CA

SUMMARY OF CHARGES

Willful Failure to Maintain Adequate AML Program – Title 31, U.S.C., Section 5322

Maximum penalty: Five years’ imprisonment, $250,000 fine or twice the gross gain resulting from offense, whichever is greatest

AGENCY

Homeland Security Investigations

Drug Enforcement Administration

 

A U.S. Navy Petty Officer First Class was sentenced today to 27 months in prison for accepting cash, consumer electronics and travel expenses from foreign defense contractor Glenn Defense Marine Asia (GDMA) in exchange for classified U.S. Navy information.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura Duffy of the Southern District of California, Special Agent in Charge Chris D. Hendrickson of the Defense Criminal Investigative Service’s (DCIS) Western Field Office and Director Andrew Traver of the Naval Criminal Investigative Service (NCIS) made the announcement.

In May 2014, Dan Layug, 27, pleaded guilty to one count of conspiracy to commit bribery and is the first defendant to be sentenced in the bribery scheme involving Singapore-based GDMA, which provided port services to U.S. Navy ships in the Asia Pacific region and used bribery to obtain information to win and maintain contracts.

According to court documents, GDMA owner and CEO Leonard Francis and other GDMA employees enlisted the clandestine assistance of Layug and other U.S. Navy personnel to provide classified ship schedules and other sensitive Navy information.  GDMA allegedly overcharged the Navy under its contracts and submitted bogus invoices for tens of millions of dollars in port services.

In his plea agreement, Layug admitted that he accepted a $1,000 per month allowance from GDMA, plus luxury hotel stays for himself and others in Malaysia, Singapore, Indonesia, Hong Kong and Thailand.  Layug also admitted that he sought consumer electronics from GDMA, including an iPad 3.  According to the plea agreement, Layug used his position as a logistics specialist at a U.S. Navy facility in Yokosuka, Japan, to gain access to classified U.S. Navy ship schedules, then provided this information to GDMA’s vice president of global operations.  Layug admitted that he also provided pricing information from one of GDMA’s competitors.

So far, nine individuals have been charged in connection with this scheme; of those, seven have pleaded guilty.  Captain Daniel Dusek and Commander Jose Luis Sanchez were charged with bribery conspiracies involving GDMA and have pleaded guilty.  Commander Michael Vannak Khem Misiewicz and former Department of Defense (DoD) civilian employee Paul Simpkins currently await trial.  On Dec. 17, 2013, NCIS Special Agent John Beliveau pleaded guilty to conspiracy and bribery charges for regularly alerting Francis to the status of the government’s investigation into GDMA.

The NCIS, the DCIS and the Defense Contract Audit Agency are conducting the ongoing investigation.  Trial Attorneys Brian Young and Lawrence Atkinson of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark W. Pletcher of the Southern District of California are prosecuting the case.

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DoD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

Assistant U. S. Attorney Mark W. Pletcher (619) 546-9714

NEWS RELEASE SUMMARY – January 21, 2016

SAN DIEGO – U.S. Navy Petty Officer First Class Daniel Layug was sentenced today to 27 months in prison for accepting cash, consumer electronics and travel expenses from foreign defense contractor Glenn Defense Marine Asia in exchange for classified U.S. Navy information.

Layug, who pleaded guilty in May 2014 to a single count of conspiracy to commit bribery, is the first defendant to be sentenced in the alleged bribery scheme involving Singapore-based Glenn Defense Marine Asia (GDMA), which provided port services to U.S. Navy ships in the Asia Pacific region and used information obtained through bribery to win and maintain contracts.

During today’s sentencing hearing, U.S. District Judge Janis Sammartino told the defendant that he had repeatedly betrayed the trust his country placed in him. “You put the Navy at risk. You put your colleagues at risk. And you put our country at risk…I think our security and safety were all at risk.”

Rear Admiral Jonathan A. Yuen, chief of Navy Supply Corps and Commander of Naval Supply Systems Command, testified during today’s hearing about the impact of Layug’s crime on the Navy. “I am very disappointed to learn that he admitted to receiving cash payments and electronic equipment in exchange for information concerning the movements of our ships. I do not have the words to express the depth of the betrayal such an exchange represents in contrast to the service and sacrifice that supply officers and sailors around the world perform every day. Every one of us in uniform owes the nation we serve our unswerving loyalty. Whatever the dollar value of the money and things Layug illicitly received, no amount of money is worth betraying our nation, our Navy or our shipmates.”

“In return for a monthly cash allowance, the latest gadgets and luxury accommodations for himself and his friends, the defendant betrayed the country that had given him every opportunity,” said U.S. Attorney Laura Duffy. “Layug essentially sold his honor for an iPad 3, and in doing so he put the U.S. Navy at risk of embarrassment, exploitation, attack or worse. Today’s sentence is the first of many that we hope will remind others to resist temptation.”

“Today's sentencing of Chief Petty Officer Daniel Layug is yet another example of the continued dedication by the Defense Criminal Investigative Service and its law enforcement partners to identify and prosecute those individuals who would abuse their positions of trust within the Department of Defense,” said Chris D. Hendrickson, Special Agent In Charge, Defense Criminal Investigative Service, Western Field Office.  “The conduct of Chief Petty Officer Layug is reprehensible and deeply troubling. The Defense Criminal Investigative Service will continue to investigate and seek to prosecute any individual, regardless of position, who would put our mission of Protecting America's Warfighters at risk.”

“Petty Officer Layug intentionally traded the safety and security of Sailors and Marines aboard ships for cash and expensive gifts, betraying the longstanding trust among those who serve the Navy and the nation, said NCIS Director Andrew Traver.  NCIS initially discovered this criminal activity and we will continue to work with the Defense Criminal Investigative Service and the U.S. Attorney's Office in vigorously investigating and prosecuting these crimes of corruption and fraud.”

So far, nine people have been charged; of those seven have pleaded guilty. Two are awaiting trial, including Commander Michael Michael Vannak Khem Misiewicz and former Department of Defense civilian employee Paul Simpkins. Layug was ordered to surrender to the U.S. Bureau of Prisons on April 1.

According to court documents, GDMA owner and CEO Leonard Francis and other GDMA employees enlisted the clandestine assistance of Layug and other U.S. Navy personnel - including Captain Daniel Dusek, Commander Misiewicz, Commander Jose Luis Sanchez and Naval Criminal Investigative Service Special Agent John Beliveau - to provide classified ship schedules and other sensitive Navy information. In total, GDMA allegedly overcharged the Navy under its contracts and submitted bogus invoices for tens of millions of dollars in port services.

In his plea agreement, Layug, 27, admitted that he accepted a $1,000 a month allowance from GDMA, plus luxury hotel stays for himself and others in Malaysia, Singapore, Indonesia, Hong Kong and Thailand. He also admitted asking GDMA for numerous electronics gadgets, including an iPad 3, a Nikon digital camera, a Blackberry, a VAIO computer, a PSP gaming unit and a Wii gaming unit.

According to the plea agreement, Layug worked secretly on behalf of GDMA, using his position as a logistics specialist at a U.S. Navy facility in Yokosuka, Japan, to gain access to classified U.S. Navy ship schedules and then provided this information to GDMA’s vice president of global operations. Layug admitted he also provided pricing information from one of GDMA’s competitors.    

In return, GDMA gave Layug envelopes of cash on a regular basis, the plea agreement said. On May 21, 2012, GDMA’s vice president of global operations instructed a GDMA accountant that “at the end of each month, we will be providing an allowance to Mr. Dan Layug. Total of US $1,000. You may pay him the equivalent in Yen. He will come by the office at the end of each month to see you.”   

According to the plea agreement, Layug sought consumer electronics from GDMA. In an email on March 9, 2012, Layug asked the vice president of global operations, “What are the chances of getting the new iPad 3? Please let me know.” In the plea agreement, Layug admitted that GDMA then provided him with an iPad 3.

In another email exchange on May 28, 2013, Layug asked the vice president of global operations for a “bucket list” of items including a high end camera, an iPhone5 cellular phone, a Samsung S4 cellular phone, and an Ipad Mini. Shortly after sending his “bucket list” to the vice president of global operations, Layug stated in an email that “the camera is awesome bro! Thanks a lot! Been a while since I had a new gadget!”

Francis was previously charged with conspiring to bribe U.S. Navy officials.

Three other senior Navy officials – Dusek, Misiewicz and Sanchez – have been charged separately with bribery conspiracies involving GDMA. Dusek and Sanchez have pleaded guilty. On December 17, 2013, Special Agent Beliveau II, has also pleaded guilty to conspiracy and bribery charges for regularly tipping off Francis to the status of the government’s investigation into GDMA.

The ongoing investigation is being conducted by NCIS, the Defense Criminal Investigative Service and the Defense Contract Audit Agency.  

The case is being prosecuted by Assistant U.S. Attorney Mark W. Pletcher of the Southern District of California and Trial Attorneys Brian Young and Lawrence Atkinson of the Criminal Division’s Fraud Section.

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

DEFENDANT                                              Case Number: 14mj1402     

Dan Layug                                                      Yokosuka, Japan

SUMMARY OF CHARGES

Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371

Maximum of 5 years in prison; a maximum $250,000 fine, or twice the gross gain or loss from the offense, whichever is greater

INVESTIGATING AGENCIES

Defense Criminal Investigative Service

Naval Criminal Investigative Service

Defense Contract Audit Agency

 

For Further Information, Contact: Assistant U.S. Attorney Andrew Haden (619) 546-6961

NEWS RELEASE SUMMARY – January 14, 2016

SAN DIEGO, CA – Two National Guard soldiers pleaded guilty to firearms charges in federal court today, admitting that they illegally sold numerous guns - including military-style assault rifles and ammunition – believing that they were destined for Mexico.

Andrew Reyes and Jaime Casillas, who worked in the Army National Guard Armory in La Mesa, both pleaded guilty before U.S. Magistrate Judge Mitchell Dembin to one count of dealing firearms without a license. Reyes also pleaded guilty to three counts of unlicensed transportation of firearms, admitting that he travelled to Texas on at least three occasions to purchase assault weapons which he then illegally transported to California and sold to an undercover agent from the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The defendants are scheduled to be sentenced on April 15, 2016 at 9 a.m. before U.S. District Judge M. James Lorenz.

According to his plea agreement, Reyes sold an AK-47 rifle on Sept 2, 2014; two AR-15 rifles and four high-capacity .223-caliber rifles magazines on December 3, 2014; and another AR-15 rifle on March 16, 2015 - all to the undercover ATF agent. In all cases, Reyes admitted that he believed the guns were destined for Mexico.

According to his plea agreement, Casillas sold a .40-caliber pistol to the undercover agent on August 14, 2014; an AR-15 rifle on October 17, 2014; and was present when Reyes sold the AR-15 rifle on March 16, 2015. Casillas also admitted that he believed the weapons were also destined for Mexico.  

The complaint alleges that some of the items were military-issued, while some were purchased by the defendants in Texas and re-sold to the undercover agent.

According to the complaint, the undercover agent made clear to the defendants on multiple occasions that the purchased guns were destined for Mexico; the defendants also noted that some of the guns acquired in Texas had obliterated serial numbers or were “hot,” meaning they’d been used in a crime or were stolen. The undercover agent told the defendants he was a member of a Mexican drug cartel, according to the complaint. During one transaction, the defendants showed up in U.S. Army uniforms.

“These National Guard soldiers have admitted to selling assault rifles and other firearms to a man they believed to be a Mexican cartel member,” said U.S. Attorney Laura Duffy. “Sadly, our nation has been frequently reminded that assault weapons possessed by the wrong people are a huge threat to public safety. This prosecution and conviction highlights the commitment of ATF and the U.S. Attorney’s Office to seek out, and then eliminate, the source of illegal firearms, wherever we find it in our community.”

“Casillas and Reyes’ conduct surpassed mere exploitation of military resources, and advanced to providing armaments usually reserved for law enforcement and combat personnel to individuals they believed were members of organized crime operating in the United States and Mexico,” said ATF Special Agent in Charge Eric D. Harden. “U.S. Service personnel make up a large percentage of the San Diego community. The community as a whole has an interest in combatting conduct that stains the public trust.”

DEFENDANTS                                            Case Number: 15mj1179                             

Jaime Casillas                                                 Age: 22                                   El Cajon, CA

Andrew Reyes                                                            Age: 34                                   La Mesa, CA

SUMMARY OF CHARGES

Dealing Firearms without a License, in violation of United States Code 922(a)(1)(A) (Both defendants)

Maximum Penalty: Five years in prison

Unlicensed Transportation of Firearms, in violation of United States Code 922(a)(3) (Reyes only)

Maximum Penalties: Five years in prison

INVESTIGATING AGENCIES

Bureau of Alcohol Tobacco Firearms and Explosives

 

 

 

 

 

 

Assistant U.S. Attorneys Joseph S. Green (619) 546-6955 and Lara W. Worm (619) 546-9697

NEWS RELEASE SUMMARY – January 7, 2016

SAN DIEGO – Hugo Adalberto Adrian Ramirez pleaded guilty this afternoon to conspiracy to distribute methamphetamine, cocaine, heroin and fentanyl in connection with a family drug trafficking ring that Ramirez directed.

Ramirez entered his guilty plea before U.S. Magistrate Judge Karen S. Crawford and remains in custody pending a sentencing hearing on March 7, 2016 at 9 a.m. before U.S. District Judge William Q. Hayes.

According to admissions in court and in his plea agreement, Ramirez conspired with family members, including his wife, sister, two adult children, and nephew, to distribute controlled substances within Southern California and to various locations throughout the United States, including the New York/New Jersey area and North Carolina.

According to his plea agreement, the government will recommend a sentence of no more than 35 years.

Ramirez directed and participated in all aspects of the conspiracy, including acquiring and negotiating the sale of controlled substances, conducting and directing counter-surveillance of law enforcement, and collecting drug proceeds.  As a part of the conspiracy, Ramirez frequently changed his cellular telephone in a failed attempt to thwart law enforcement.

Ramirez also used his minor children to promote the conspiracy, including directing minor children to run errands, pass messages, and conduct counter-surveillance of law enforcement officers investigating Ramirez’s activities.

Ramirez admitted to organizing numerous shipments of methamphetamine, cocaine and heroin to sub-distributors in North Carolina, including approximately 6.6 kilograms of methamphetamine and 57.4 grams of heroin seized by law enforcement agents on August 22, 2014.  Ramirez also admitted to the distribution of multi-kilogram quantities of cocaine and fentanyl to sub-distributors in New Jersey, including approximately 3 kilograms of cocaine and 1 kilogram of fentanyl seized by law enforcement agents on May 23, 2014.

Fentanyl is a synthetic opiate considered 50 to 100 times more powerful than morphine. It is typically administered to people in chronic pain, including end-stage cancer patients, and is also used as an anesthetic during surgery. Just a small amount – even a few grains - can be fatal.  Authorities across the country have noted an increase in fatal overdoses of heroin that is spiked with fentanyl.

“This family operated a cross-country drug network that supplied users with dangerous and potentially deadly drugs like fentanyl,” said U.S. Attorney Laura Duffy. “With this final plea out of 12 arrested defendants, we have interrupted the supply and hopefully kept users from making a tragic mistake.”

“It is important that the residents of San Diego are aware of the danger of this powerful and potentially lethal drug,” says DEA San Diego Special Agent in Charge William R. Sherman. “DEA will continue to investigate and arrest distributors and manufacturers of this poison.  It is marketed as a better high than heroin, but this clandestinely manufactured fentanyl is hundreds of times more potent than heroin.”

Kynan Barrios, Special Agent-In-Charge with the Bureau of Land Management in California stated, “Collaboration among law enforcement is vital to combating complex transnational criminal organizations that use America's public lands to smuggle dangerous drugs across international borders. These actions cause environmental degradation and threats to public safety throughout California as well as other states. The BLM is committed to ensuring these lands are safe to visit and remain healthy for the use and enjoyment of present and future generations.”

Ramirez’s guilty plea marks the 12th guilty plea in this case.  Ramirez’s family members who participated in the conspiracy have received sentences ranging from 14 months to 10 years.  Ramirez’s wife, Maria Ayala, received a sentence of 70 months following her guilty plea to laundering money in furtherance of the family’s drug trafficking operation. His son, Hugo Norberto-Adrian, Jr., received a sentence of 10 years in prison for conspiracy to distribute controlled substances.

Co-defendant Sonja Shenelle Holder, a New York rapper known as “Sonja Blade,” who pled guilty to money laundering charges in connection with this case on October 27, 2015, is scheduled to be sentenced on Monday, January 11, 2016.  In her plea agreement, Holder admitted to laundering approximately $326,545 in cash to promote the acquisition of narcotics.

This investigation was conducted under the federal Organized Crime Drug Enforcement Task Force (OCDETF) program. The OCDETF program was created to consolidate and utilize all law enforcement resources in this country’s battle against major drug trafficking.

DEFENDANTS                                            Criminal Case No: 14-CR-3057                   Sentence

Hugo Adalberto Adrian Ramirez                   42                    Corona, CA                             Pending          

Hugo Norberto-Adrian Jr.                              21                    Corona, CA                             120 months

*Paul Dwight Doyley                                     49                    Ashbury Park, NJ                    Fugitive

Sonja Shenelle Holder                                                37                    Brooklyn, NY                         Pending

*Victor Jesus Gastelum                                  44                    Unknown                                Fugitive

Sandra Bustos Juarez                                      32                    Charlotte, NC                         87 months

Alberto Mina                                                   38                    Charlotte, NC                         87 months

Noe Mina                                                        26                    Charlotte, NC                         87 months

Ricardo Mendoza                                           36                    Ontario, CA                            Pending

Crystal Adrian                                                            19                    Corona, CA                             15 months

Ghazi Catalan                                                 22                    Unknown                                Pending

Marvin Ventura Soto                                      25                    Huntington Park, CA              120 months

Maria Ayala                                                    44                    Corona, CA                             70 months

Sara Gricelda Adrian                                      41                    Corona, CA                             14 months

*Fugitives

SUMMARY OF CHARGES

Conspiracy to Distribute Controlled Substances in violation of Title 21, U.S.C. 841(a)(1) and 846; Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a $10 million dollar fine.

AGENCIES

Drug Enforcement Administration

Bureau of Land Management

Internal Revenue Service

Bureau of Alcohol, Tobacco, Firearms and Explosives

San Diego Police Department

Immigration and Customs Enforcement, Homeland Security Investigations

Fontana Police Department

Riverside County Sheriff’s Department

ICE Enforcement and Removal Operations

San Diego County Sheriff’s Department

*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt. 

 

 

 

 

Assistant U.S. Attorneys Rebecca S. Kanter (619-546-7304) and Christopher M. Alexander (619-546-6665)

NEWS RELEASE SUMMARY – January 7, 2016

SAN DIEGO - Dr. Homayoun Karimabadi, a former research professor at the University of California, San Diego (“UCSD”) and the Chief Executive Officer for SciberQuest, Inc., was charged in federal court today with fraudulently obtaining millions of dollars in government grants and contracts.

Dr. Karimabadi and SciberQuest, Inc., the corporation run by Dr. Karimabadi, both waived indictment and were arraigned on an information charging them with felony wire fraud and criminal forfeiture.  SciberQuest entered a guilty plea before U.S. Magistrate Judge Karen S. Crawford; Dr. Karimabadi is scheduled to enter into a deferred prosecution agreement on January 15, 2016 at 8:30 a.m. before Judge Gonzalo P. Curiel. Additionally, Dr. Karimabadi and SciberQuest jointly agreed to forfeit $180,000 as money that was improperly received as a result of the fraud, in addition to a fine that will be imposed on the corporation at sentencing. 

According to court records, during the fraud Dr. Karimabadi was the Chief Executive Officer and Chief Technology Officer at SciberQuest and at the same time was employed as a research professor at UCSD where, among other things, he served as the group leader of the space physics plasma simulation group.

According to the corporation’s plea agreement, from January 2005 to June 2013, Dr. Karimabadi, who has a Ph.D. in Plasma Astrophysics, applied for and received grants or contracts from the National Science Foundation (“NSF”), United States Air Force (“USAF”) and National Aeronautics and Space Administration (“NASA”) both through SciberQuest and UCSD.  SciberQuest was awarded around $6.4 million under 22 separate grants or contracts.  Of those, eight were Small Business Innovation Research (“SBIR”) grants with a value of about $1,760,000.  The SBIR Program was enacted by Congress to strengthen the role of innovative small business concerns in federal-funded research and development in order to stimulate technological innovation, foster and encourage participation by socially and economically disadvantaged small business concerns, and increase private sector commercialization of innovations derived from federal research and development, thereby increasing competition, productivity and economic growth.

To obtain the SciberQuest grants or contracts, Dr. Karimabadi made false statements to government officials.  Specifically, in award proposals, Dr. Karimabadi failed to disclose all of his and SciberQuest’s current and pending grants or contracts, thereby overstating the time he and SciberQuest could devote to the projects he was applying to receive.  In one example, Dr. Karimabadi only disclosed to NSF four current and eleven pending grants, and knowingly failed to disclose an additional ten current and five pending grants.  In all, Dr. Karimabadi disclosed to NSF only about three months per year of work that he was committed to, when in fact, he had already committed to various agencies over nineteen months per year of work. 

Dr. Karimabadi also falsely certified in SBIR award proposals submitted to NASA and USAF that he was primarily employed by SciberQuest.  In truth, he was employed full-time at UCSD both at the time of the award submission and during the performance of the grant.  Dr. Karimabadi and SciberQuest made these false statements to be awarded grants or contracts that they likely would not have received but for the deception.  As a result, from 2005 to 2013, Dr. Karimabadi received over $1.9 million in salary from SciberQuest due, in part, to the fraudulently obtained grants or contracts. 

“Dr. Karimabadi took advantage of his trusted positions at SciberQuest and UCSD to deceive government agencies into awarding federal grants or contracts,” said U.S. Attorney Laura E. Duffy. “Federal research funding is an important stimulus to local economies, especially in San Diego, which has a large research university presence. Fraud in the award process threatens to undermine confidence in the continued federal funding of research and innovation. With the continued diligence of our agency partners, we will continue to deter the dishonest practices used in this case by prosecuting those responsible and taking away any ill-gotten gains.”

Chris Hendrickson, Special Agent in Charge of the Defense Criminal Investigative Service Western Field Office, said “As this matter demonstrates, we are committed to investigate not only those who make false claims in supplying goods and services for the national defense, but also those who misrepresent research and submit  deceitful intellectual representations. Any such abuses of the public trust for personal gain simply will not be tolerated.”

Allison Lerner, NSF Inspector General said, “Dr. Karimabadi violated the public trust to enrich himself when he fraudulently represented his work on NSF awards.  My office will continue to vigorously pursue those who attempt to illegally obtain scarce federal dollars intended for scientific research, and I commend the U.S. Attorney’s office for its sustained efforts in reaching this settlement agreement.”

“Individuals who fraudulently obtain federal research funds earmarked for small businesses deprive others of an opportunity to pursue meaningful technological discoveries,” said Paul Martin, NASA Inspector General.  I commend the outstanding efforts of our agents and the other law enforcement agencies that are committed to ensuring the integrity of this program and prosecuting to the fullest extent of the law those who abuse research programs for the sake of personal enrichment.”SciberQuest will be sentenced on March 18, 2016 at 8:30 a.m. before U.S. District Judge Gonzalo P. Curiel. Dr. Karmabadi was placed on bond and ordered to return to court on January 15, 2016, for further proceedings to enter a Deferred Prosecution Agreement for his role in the matter.  

A deferred prosecution agreement is an agreement between a criminal defendant and the United States Attorney’s Office wherein the defendant admits to the facts constituting a criminal offense, but the United States agrees to suspend the entry of judgment for a period of time and agrees to dismiss the charges if, during that period, the defendant complies with certain conditions set forth in the agreement.

The investigation was conducted by the Department of Defense, NSF, and NASA.  The case is being prosecuted by Assistant U.S. Attorneys Rebecca S. Kanter and Christopher M. Alexander of the Southern District of California. 

Those with information relating to fraud, corruption, or waste in government contracting should contact the DOD Hotline at www.dodig.mil/hotline or call (800) 424-9098. 

DEFENDANTS                                           

SciberQuest, Inc.                                                                    Del Mar, California

Homayoun Karimabadi                       Age: 56                       Del Mar, California

Criminal Case No. 16CR026-GPC

SUMMARY OF CHARGE

Wire fraud, a felony, in violation of Title 18, United States Code, Section 1343.

SciberQuest’s Maximum Penalty:       5 years of probation, and a minimum of 1 year of probation; a fine of $500,000, or twice the gross gain or loss derived from the offense; a mandatory special assessment of $400 per count; an order of restitution; and an order of forfeiture. 

Karimabadi’s Maximum Penalty:       20 years in custody; a fine of $250,000, or twice the gross gain or loss derived from the offense; a mandatory special assessment of $100 per count; an order of restitution; and an order of forfeiture. 

INVESTIGATING AGENCIES

Department of Defense, Office of Inspector General

National Science Foundation, Office of Inspector General

National Aeronautics and Space Administration, Office of Inspector General

 

Assistant U.S. Attorneys Charlotte Kaiser (619) 546-7282 and David Leshner (619) 546-7921

NEWS RELEASE SUMMARY – January 7, 2015

SAN DIEGO – Tony McLeod of Tampa, Florida, was sentenced in federal court today to 324 months in custody and a lifetime of supervised release for multiple sexual crimes against two Escondido children.

Following an eight-day trial and less than two hours of deliberation, McLeod was convicted by a federal jury in June of 2015 of seven counts of sexual exploitation of a child, one count of attempted sexual exploitation of a child, one count of travel with intent to engage in illicit sexual conduct, and one count of transportation of a minor with intent to engage in criminal sexual activity as to a 14-year-old victim, and one count of attempted sexual exploitation of a child as to a 15-year-old victim.  McLeod has been in custody since his arrest in Tampa, Florida in June 2013.

According to evidence presented to the jury, in spring 2013, McLeod struck up a friendship with the minor victims through on-line gaming. These friendships spilled over into phone calls, texts, and video chats between McLeod and the minors in which they discussed their personal lives and McLeod learned they were in middle school. Around May of 2013, McLeod’s relationships with these minors turned sexual in nature, which involved the exchange of sexually explicit photographs and videos. After one of the minor’s family members discovered the illicit relationship, McLeod traveled from his home in Tampa, Florida to Los Angeles, California, picked up that minor from his middle school in Escondido, and then transported that minor (under an alias) on a flight from California to Florida. On arrival of the flight, McLeod was arrested and taken into custody. 

During the sentencing hearing before U.S. District Judge Janis L. Sammartino, the victims and their parents testified about the impact of McLeod’s actions. One of the minors, who was 14 years old when he travelled on the plane with McLeod, told Judge Sammartino, “I lost my childhood and lost my innocence.” The other victim, who had just turned 15 years old at the time of the offense, told the judge that McLeod’s actions and the aftermath “almost completely destroyed my family.” The mother of the 14-year-old victim testified that “we as a family have lost our sense of security.” 

In handing down the sentence, Judge Sammartino described McLeod’s conduct as “horrendous” and imposed a lifetime of supervised release. As part of the conditions of release, McLeod will be subject to search at any time by any law enforcement or probation officer with reasonable suspicion concerning a violation, he cannot use or possess any electronic devices that would allow him to communicate with others, and he cannot be in the presence of a child under age 18 unless he receives prior approval from his probation officer and only in the presence of a supervising adult who knows of his convictions. A restitution hearing is scheduled for February 26.

“McLeod was a master manipulator who ingrained himself in these kids’ lives despite being thousands of miles away.  He then exploited them for his own illicit sexual desire,” said U.S. Attorney Laura Duffy.  “We will work tirelessly to bring to justice those who prey on our children and rob them of their innocence.”

“Protecting our children from sexual predators is a priority to the FBI,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI will continue to work with our law enforcement partners to protect our nation’s children from those who would seek to exploit their innocence.” 

McLeod’s arrest and prosecution was the result of coordination between multiple federal and state agencies in both San Diego, California and Tampa, Florida.

DEFENDANT                                              Case Number: 13CR2297-JLS

Tony Lee McLeod                                          Age: 38                       Tampa, Florida

SUMMARY OF CHARGES

Title 18, United States Code, Section 2221(a) and (e) – Sexual Exploitation of a Child (Counts 2-9)

Title 18, United States Code, Section 2251(a) and (e) – Attempted Sexual Exploitation of a Child (Count 13)

Title 18, United States Code, Section 2423(b) – Travel with Intent to Engage in Illicit Sexual Conduct (Count 10)

Title 18, United States Code, Section 2423(a) – Transportation of a Minor with the Purpose of Engaging in Criminal Sexual Activity (Count 11)

LEAD INVESTIGATIVE AGENCY

San Diego FBI

INVESTIGATIVE AGENCIES

Escondido Police Department

Tampa Police Department

San Diego Regional Computer Forensics Laboratory

San Diego District Attorney’s Office

San Diego Internet Crimes Against Children Task Force

San Diego Sheriff’s Department

Tampa FBI

United States Marshal’s Service Task Force (Tampa)

Tampa International Airport Police

Florida State’s Attorney’s Office

U.S. Attorney’s Office for the Middle District of Florida

 

 

 

 

 

 

 

 

 

Assistant U.S. Attorneys Emily W. Allen (619) 546-9738 and Andrew Galvin (619) 546-9721

NEWS RELEASE SUMMARY – January 5, 2016

SAN DIEGO – Mazen Alzoubi, a real estate investor, admitted today that he orchestrated a scheme to steal title to Southern California homes and then sell the properties to unsuspecting buyers before the true owners could put a stop to the sale.

Alzoubi admitted that from May 2012 through August 2014, he and several co-conspirators fraudulently sold or attempted to sell at least 15 homes worth more than $3.6 million. On at least ten occasions, Alzoubi admitted, he was successful—earning illicit proceeds of nearly $2.2 million, which he then laundered and diverted to overseas bank accounts to ensure that the fraudulently-obtained proceeds could never be recovered.

Alzoubi and his co-conspirators, including Daniel Deaibes and Mohamed Daoud, would generate forged trust deeds, making it appear that the true owner had sold the home to a business Alzoubi controlled, when, in reality, the true owners were entirely unaware of Alzoubi’s actions. They would then record the fraudulent grant deeds at county recorder’s offices, so the deeds appeared legitimate.  Once the fraudulent documents were recorded in the chain of title, Alzoubi would pose as the owner and immediately try to sell the properties. Alzoubi used a web of aliases (including “John Moran,” “Enrique Lopez,” “Dan Cox,” and “Zubu Wawa”) and a host of sham businesses (with names like “Land Investments 01”) to pose as the owner of properties he listed for sale. Alzoubi and his co-conspirators set up bank accounts for the sham companies, so that the proceeds could be diverted directly to them.  In this way, Alzoubi collected all the sale proceeds, and the true owners were left with nothing. 

In some cases, the real owners discovered the fraud, and made efforts to re-gain control of their property.  In one instance, true owner Fannie Mae discovered that a fraudulent grant deed had been recorded relating to property it owned in Rowland Heights, California. Shortly after discovering the fraudulent deed, Fannie Mae filed a lawsuit to recover control over the property and recorded a lis pendens, notifying prospective buyers that Fannie Mae was challenging the fraudulent deed. Undeterred, Alzoubi and his co‑schemers created a fake “Withdrawal of Lis Pendens” in an effort to proceed with their fraudulent sale. When Fannie Mae won a judgment in its favor and obtained a court finding that the deed was fraudulent, Alzoubi and his co-schemers created a fake “Satisfaction of Judgment” and recorded that fraudulent document as well. 

Alzoubi and his co-conspirators assumed the identities of others in order to keep the scheme going, and used the forged signatures and notary stamps of notaries to make fake documents look legitimate, and of lawyers to prepare and file fraudulent court documents. As a result, Alzoubi was charged with, and pleaded guilty to, aggravated identity theft, which carries a mandatory sentence of two years in prison in addition to his sentence for the fraud and money laundering.

Alzoubi’s co-conspirator Daniel Deaibes pleaded guilty in March 2015. As part of his plea, Deaibes admitted that he participated in the scheme according to Alzoubi’s directions. He used the alias “John Moran” to pose as the seller’s representative in several of the fraudulent sales. Deaibes went so far as to introduce himself as “Moran” and present a fake driver’s license to two notaries public in 2014. He admitted that he signed fraudulent documents using this alias in an effort to sell or encumber properties that belonged to unsuspecting owners. 

Mohamed Daoud also pleaded guilty, in July 2015, admitting that he helped Alzoubi launder the proceeds of the scheme.  Alzoubi used Daoud’s company, “Norway LLC,” to pretend to acquire title to some of the properties, by forging fake deeds and then recording the forgeries at county recorder’s offices. Daoud admitted that during his participation in the money laundering conspiracy, Alzoubi induced at least six different buyers to purchase properties he did not own, leaving them with worthless claims to title and generating at least $1.4 million in proceeds from the fraud. Daoud received approximately $270,000 of the proceeds.

Alzoubi, and his co-conspirators generated nearly $2.2 million in profits from the scheme. In each case, the unwitting third party buyer paid for homes Alzoubi and his co-schemers pretended to lawfully own.  Most of these properties were post-foreclosure properties owned by banks or institutions such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored enterprises with a mission to provide liquidity, stability, and affordability to the United States housing and mortgage markets.  As part of this mission, Fannie Mae and Freddie Mac purchase residential mortgages in the secondary market, enabling lenders to replenish their funds to finance additional single family loans.  Fannie Mae and Freddie Mac can become the property owners if they own the mortgage loan at the time a home is foreclosed.

“We are committed to protecting the recovering housing market and the public’s confidence in the security of their most important investment, their homes,” said U.S. Attorney Laura Duffy.  “Prosecuting people who continue to prey on and profit from the devastating mortgage meltdown is a top priority because they play such a significant role in our nation’s financial turmoil, and because the economic damage to taxpayers is immense.”

Federal Housing Finance Agency – Office of Inspector General Special Agent in Charge Leslie DeMarco said, “We will not let individuals such as Mazen Alzoubi chip away at the housing market nor the taxpayers who ultimately bear the burden of such ludicrous schemes. The actions of Alzoubi and his co-conspirators were brazen and we are committed to finding justice for all who were harmed.”

“As admitted in court today, Mr. Alzoubi and his co-conspirators sold fraudulently obtained homes to unsuspecting buyers for their own personal gain while attempting to hide the profits in offshore bank accounts,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “Our agency is committed to unraveling complex identity theft and money laundering schemes where individuals attempt to conceal the true source of their illicit funds.”

“Sophisticated financial fraud schemes cost American taxpayers millions of dollars each year,” commented FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI is resolute in using our intelligence and investigative expertise to mitigate complex financial fraud schemes that threaten our financial system.”

Alzoubi’s guilty plea was taken before U.S. Magistrate Judge Jan M. Adler.  Alzoubi is scheduled to be sentenced by U.S. District Judge Cynthia Bashant on March 21, 2016 at 9 a.m.  Daoud’s sentencing is scheduled for the same date and time, and Deaibes’s sentencing is slated for May 23, 2016 at 9:00 am, both also before Judge Bashant.

U.S. Attorney Duffy explained that the American public is the very real victim of this type of destructive fraud that is impeding the country’s ability to recover from the economic collapse of 2008.  She emphasized that her office would aggressively prosecute such crimes and urged anyone in the community who has information relating to these charges to contact the San Diego branch of the Federal Bureau of Investigation at (858) 320-1800 or the Federal Housing Finance Agency—Office of Inspector General hotline at (800) 793-7724.

The swift resolution of this case was the result of coordinated investigations by the FBI, FHFA-OIG, and the Internal Revenue Service, Criminal Investigation Division.

DEFENDANT PLEADING GUILTY:

Mazen Alzoubi, 14CR3325-BAS                   Age: 32           Rancho Cucamonga, CA       

CHARGES

COUNT ONE: Conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. § 1349.

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution, and forfeiture.

COUNT TWO: Mail fraud, in violation of 18 U.S.C. § 1341.

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

COUNTS THREE AND FOUR: Aggravated identity theft, in violation of 18 U.S.C. § 1028A.

Maximum Penalties: mandatory 2 years’ imprisonment, consecutive to any other term of imprisonment, $250,000 fine, $100 special assessment, restitution.

COUNT FIVE: Conspiracy to launder money, in violation of 18 U.S.C. § 1956(h).

Maximum Penalties: 20 years’ imprisonment, $500,000 fine or twice the value of the property involved in the transaction, $100 special assessment, restitution, and forfeiture.

DEFENDANTS PREVIOUSLY CHARGED:

Daniel Deaibes, 14CR3325-BAS                   Age: 37           Rancho Cucamonga, CA       

Mail fraud, 18 U.S.C. § 1341

Mohamed Daoud, 14CR3326-BAS               Age: 50           Norway

Conspiracy to launder money, 18 U.S.C. § 1956(h)

AGENCIES

Federal Housing Finance Agency—Office of Inspector General

Federal Bureau of Investigation

Internal Revenue Service, Criminal Investigation

Assistant U. S. Attorney Orlando B. Gutierrez (619) 546-6958    

NEWS RELEASE SUMMARY – December 16, 2015

SAN DIEGO – Dr. Matthew Cole and his wife, Shireen Cole, pleaded guilty yesterday to prescription drug-related charges, admitting that they conspired to obtain scheduled pharmaceutical drugs commonly known as Percocet, Xanax and Ambien by submitting fraudulent prescriptions to pharmacies as if they were valid.

Dr. Cole, a dermatologist at Insight Dermatology with offices in San Diego and National City, used his own prescription pad with his assigned DEA registration number to write prescriptions in the names of friends with whom he had no doctor-patient relationship, and who had no knowledge of the prescriptions written in their names. He also wrote prescriptions for his wife using her maiden name.

For example, Dr. Cole admitted in his plea agreement that he wrote a prescription for 60 10-milligram tablets of Oxycodone in the name of a female college friend and on December 27, 2014, his wife took it to be filled at a CVS Pharmacy. While still in the CVS Pharmacy, Shireen Cole, a licensed Marriage and Family Therapist intern, handed the oxycodone tablets over to Dr. Cole.

Although the college friend was never a patient of Dr. Cole, on February 16, 2015, at his medical office, he created a false medical file for that friend, using his status as a licensed medical doctor to create the false appearance of a valid doctor/patient relationship.

In all, the defendants’ plea agreements listed 39 instances where fraudulent medical prescriptions were used to acquire Scheduled pharmaceutical drugs from commercial pharmacies. These 39 separate instances resulted in the acquisition of 1,820 tablets of scheduled pharmaceutical drugs, 1,280 of which were oxycodone – commonly known as Percocet.  The other drugs were zolpidem tartrate, commonly known as Ambien, and alprazolam, known as Xanax.

According to statements made in court yesterday, the defendants are both in drug treatment programs.

DEFENDANT                                  Case Number: 15CR3074-H

Matthew Cole, M.D.                                       Age: 37

Shireen Cole                                                    Age: 37                      

SUMMARY OF CHARGE                                                                 

Title 21 U.S.C. Sections 843(a)(3), 843(d)(1), and 846 – Conspiracy to Acquire Controlled Substances by Fraud, Deception, and Subterfuge

Maximum penalty: 4 years

AGENCY

Drug Enforcement Administration

Department of Health Care Services

 

 

 

 

Assistant U.S. Attorneys Patrick J. Bumatay (619) 546-8450 and Michael Wheat (619) 546-8437

NEWS RELEASE SUMMARY – December 16, 2015

SAN DIEGO – Suspected alien smuggler Eduard Cornejo-Saavedra, a fugitive being sought in connection with the deaths of two unauthorized immigrants who perished in the trunk of a car last year, was arrested in Miami today.

Saavedra, a 43-year-old citizen of Peru, was taken into custody by Homeland Security Investigations agents at the Miami International Airport on alien smuggling charges related to the August 2014 deaths of Tarcisio Casas-Blanco and Jose Aurelio Quiroz-Casas, both Mexican citizens.

Saavedra was arrested in Tijuana approximately six weeks ago at the request of the United States in connection with this case. Mexican officials sought his deportation and he was ultimately ordered deported to his native Peru. He was en route to Peru from Mexico City today when he was intercepted by U.S. law enforcement.

Saavedra was charged in October of 2014 with alien smuggling. That indictment was unsealed today. The United States is seeking his transfer from Miami to face charges in San Diego.

The smuggling incident in question occurred on August 12, 2014, when Nicholas George Zakov, 43, attempted to transport the two Mexican citizens, Casas-Blanco and Quiroz-Casas, into the United States by hiding them in the trunk of his 2012 Dodge Challenger.

Zakov pleaded guilty to the alien smuggling charges and received a sentence of seven years in prison on September 29, 2015. He has admitted that he drove the Challenger to the San Ysidro, California Port of Entry, where U.S. Customs and Border Protection officers discovered the two Mexican citizens unresponsive in Zakov’s trunk. Medical attention was immediately sought for the two, but they died a short while later of hyperthermia and mechanical asphyxiation.

Zakov also admitted that he continued to drive through the San Ysidro, California Port of Entry while ignoring the two Mexican citizens’ pleas to be let out of the trunk because of the extreme heat.

“This case is an important message to alien smugglers,” said U.S. Attorney Laura Duffy. “We will seek justice for all those that engage in this dangerous and harmful crime.”

“This apprehension demonstrates the importance of working together with our law enforcement partners on both sides of the border,” said Pete Flores, CBP director of field operations for San Diego. “Now this perpetrator may be brought to justice for his part in the death of two human beings.”

The investigation and arrest of Saavedra was the result of the collaboration of Homeland Security Investigations, U.S. Customs and Border Protection, San Diego Police Department, and the Baja California State Preventive Police Department.

Saavedra is charged with two counts of encouraging and inducing illegal aliens resulting in death and two counts of bringing illegal aliens into the United States for financial gain. Saavedra faces up to life imprisonment, a mandatory minimum sentence of three years in prison, and a $250,000 fine. 

DEFENDANT                                              Criminal Case No. 14CR3066-AJB

Eduard Cornejo-Saavedra                              Age: 43           Tijuana, Mexico

            a.k.a. Edward Saavedra

            a.k.a. Reenzo Saavedra-Cormeyo

SUMMARY OF CHARGES

Counts 1 and 2:           Encouraging and Inducing Illegal Aliens, Aiding and Abetting, Resulting in Death, 8 U.S.C. §1324(a)(1)(A)(iv), (v)(II), and (a)(1)(B)(iv)

Counts 3 and 4:           Bringing in Illegal Aliens for Financial Gain, Aiding and Abetting 8 U.S.C. §1324(a)(2)(B)(ii) and 18 U.S.C. § 2

INVESTIGATING AGENCIES

U.S. Customs and Border Protection

Homeland Security Investigations

San Diego Police Department

Baja California State Preventive Police Department

 

 

 

For Further Information, Contact: Assistant U.S. Attorney Alessandra Serano (619) 546-8104 and Lara Stingley (619) 546-8403

NEWS RELEASE SUMMARY – December 15, 2015

SAN DIEGO – U.S. Supervisory Border Patrol Agent Armando Gonzalez was sentenced in federal court today to 21 months in prison for placing a hidden camera in a floor drain of the women’s restroom at the Chula Vista Border Patrol station to capture images of female private parts.

In handing down the sentence, U.S. District Judge Roger T. Benitez said the “facts of this case were shocking,” and he described the conduct as “egregious” and “a violation of trust.” Gonzalez was permitted to remain free on bond until January 22, when he is required to report to the U.S. Bureau of Prisons.

During today’s hearing, Assistant U.S. Attorney Alessandra Serano told the court that the defendant’s crimes warranted a significant sentence, noting that the camera was in place for about 18 months and the defendant spent a lot of time editing, naming and saving the videos.

“When Armando Gonzalez put a video camera down the drain of a women’s restroom, he also put his career, his honor and his freedom down that drain,” said U.S. Attorney Laura Duffy. “This is a fitting sentence for a man who sullied his badge with such despicable behavior.”

Gonzalez pleaded guilty in May to one count of making a false statement to a federal officer and seven counts of video voyeurism. He admitted that he placed a hidden camera in a floor drain of the women’s restroom at the Chula Vista Border Patrol station to capture images of female private parts.

Gonzalez, a supervisor, also admitted that when Border Patrol superiors confronted him about the camera, he lied to cover up his crimes, saying that he’d placed the camera in the bathroom to conduct a drug investigation of one of his female employees.

According to the plea agreement, Gonzalez acknowledged that he captured video images of the unclothed private parts of seven women – all federal employees - who used the bathroom between July 24, 2013 and April 11, 2014. The videos were as short as 24 seconds and as long as nine minutes, 17 seconds.

The defendant saved the video images from those instances, and dozens of others, on an SD card he kept hidden at his workplace, the plea agreement said. Gonzalez admitted that after the hidden camera was discovered, he destroyed or discarded the hard drive from the Apple MacBook used to edit the videos before law enforcement had a chance to execute a search warrant at his home.

DEFENDANT                                  Case Number: 15cr0806-BEN                    

Armando Gonzalez                             Age 47                        El Cajon, CA

SUMMARY OF CHARGES

One Count, False Statements to a Federal Officer, in violation of 18 U.S.C. 1001

Maximum Penalty: Five years in prison, $250,000 fine

Seven Counts, Video Voyeurism, in violation of 18 U.S.C. 1801

Maximum Penalty: One year in prison, per count, and $100,000 fine per count

INVESTIGATING AGENCIES

Federal Bureau of Investigation

Department of Homeland Security

San Diego Police Department

Assistant U.S. Attorneys Todd Robinson (619) 546-7994 or David Leshner (619) 546-7921

NEWS RELEASE SUMMARY – December 9, 2015

TUCSON, Arizona - Ivan Soto-Barraza and Jesus Lionel Sanchez-Meza were sentenced to life terms today for the first-degree murder of U.S. Border Patrol Agent Brian Terry.

The defendants were also sentenced by U.S. District Judge David C. Bury to additional prison time for other crimes related to the murders. They received four 20-year terms each, which are to be served concurrently, and a 10-year term for discharging a firearm during a crime of violence, which will run consecutive to the life terms.

Soto-Barraza and Sanchez-Meza were convicted by a federal jury in October of first-degree murder, second degree murder, conspiracy to interfere with commerce by robbery, attempted interference with commerce by robbery, using and carrying a firearm during a crime of violence, and assault on Agent Terry and three additional federal officers – Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller.

According to evidence presented at trial, during the evening of December 14, 2010, Soto-Barraza, Sanchez-Meza and three other men were in the United States for the purpose of robbing drug traffickers of their contraband.  While Agent Terry and three other Border Patrol Agents were engaged in the performance of their official duties, members of the defendants’ group exchanged gun fire with the agents and one of the shots fired by a member of the defendants’ group killed Agent Terry.

U.S. Attorney Laura Duffy said, “The jury's verdict and life sentences imposed today reflect a just result for a crime which has had a profound effect not only on the family of Agent Brian Terry, but also the men and women who daily put their lives at risk to keep us all safe.”

Two other men, Manuel Osorio-Arellanes and Rosario Rafael Burboa-Alvarez, previously pleaded guilty to first-degree murder for their roles in Agent Terry’s death.  Yet another two men, Jesus Rosario Favela-Astorga and Heraclio Osorio-Arellanes, remain fugitives.

At trial, the United States was represented by attorneys from the Southern District of California, Special Attorneys Todd W. Robinson and David Leshner.  The U.S. Attorney’s Office for the District of Arizona is recused.  The case was investigated by the Federal Bureau of Investigation.

 

 

For Further Information, Contact: Assistant U.S. Attorney Joshua Mellor (619) 546-9733

NEWS RELEASE SUMMARY – December 9, 2015

SAN DIEGO – Twenty five people are charged in a federal grand jury indictment with participating in an illegal gambling operation that laundered an estimated $10 million in gambling proceeds through Chula Vista and San Diego card rooms in what is believed to be the biggest illegal gambling prosecution in San Diego county in recent memory.

More than 200 agents from the FBI, Homeland Security Investigations and the IRS plus San Diego County Sheriff’s deputies and investigators from the California Department of Justice Bureau of Gambling Control served five search warrants and 22 seizure warrants early today at locations in Chula Vista, San Diego and elsewhere.

The search and seizure locations included the Village Club Card Room, also known as Seven Mile Casino in Chula Vista, and the Palomar Card Room in San Diego. The card rooms are also charged in the indictment, which was unsealed in federal court this morning. Agents seized more than $600,000 during today’s searches of player accounts and bank accounts.

Authorities around the country arrested 21 people so far today at locations around San Diego, Orange and Los Angeles counties as well as San Jose, Las Vegas, New Jersey, Arizona, New Mexico, Pennsylvania and Iowa. Five indicted defendants remain fugitives and warrants have been issued for their arrests. 

These defendants, plus the two corporations, are charged in a federal grand jury indictment with various crimes, including running an Illegal Gambling Business, Conspiracy to Launder Monetary Instruments, Failure to Maintain an Anti-Money Laundering Program and Transportation for Prostitution.

Four defendants were arraigned on the indictment in federal court this afternoon before U.S. Magistrate Judge Barbara Major. Craig Kolk, Ricardo Castellanos-Velasquez, Duy Trang were granted bail;  Ali Lareybi was detained pending a hearing on Friday at 10 a.m. before Judge Major. The remaining San Diego are scheduled to be arraigned before Judge Major tomorrow. The United States is seeking the removal of out-of-state defendants to San Diego.

According to court documents, some of the defendants allegedly operated unlicensed casinos out of rented Rancho Santa Fe mansions. Up to three times a week, some defendants held intimate high-stakes poker and black jack games in extravagant settings that featured professional card dealers, prostitutes, chefs and waitresses.

Court documents allege that lead defendant David Stroj operated an illegal bookmaking business that extended throughout North America, including San Diego, Los Angeles, Albuquerque, Las Vegas, Chicago, Philadelphia, South Carolina and Florida, as well as locations in Mexico and Canada.

Millions of dollars in proceeds from the gambling events were laundered through the Palomar and Village Club card rooms, Las Vegas casinos, various bank accounts, shell companies, and a bail bonds business. The ring also operated illegal offshore online gaming websites.

“This indictment describes a massive operation that laundered millions of dollars in illicit proceeds,” said U.S. Attorney Laura Duffy. “We are committed to putting an end to any activity that enables criminals to hide illicit proceeds.”

“The defendants in this case allegedly acted as a criminal enterprise that allowed the proceeds from illegal gambling to be laundered through local card rooms thereby avoiding federal financial reporting requirements that help keep our communities safe,” said FBI Special Agent in Charge Eric S. Birnbaum. “Today's indictment is an example of the FBI's commitment to work with our law enforcement partners to identity, disrupt and dismantle complex criminal conspiracies.”

“HSI is committed to serving side-by-side with our partners in the San Diego law enforcement community,” said Dave Shaw, special agent in charge for HSI San Diego. “This investigation has dismantled an illicit gambling operation with ties to money laundering and a cross-border prostitution recruitment scheme.  Let it be clear, HSI will aggressively pursue any and all leads involving transnational criminal activity linked to the U.S.-Mexico border.”

“These defendants allegedly participated in an illegal sports gambling business, lining their pockets with profits from an illicit poker and blackjack business,” said Special Agent in Charge Erick Martinez of IRS Criminal Investigation. “Taking assets away from illegal operations is one of the government’s most effective tools against money laundering and organized crime.”

California’s Bureau of Gambling Control Chief Wayne Quint, Jr. issued Emergency Closure Orders on both the Palomar and Village Club card rooms effective immediately.

“These casinos allegedly engaged in money laundering and illegal gambling schemes that undermine the well-being of our communities,” said Attorney General Kamala D. Harris. “I thank our California Department of Justice Bureau of Gambling Control Special Agents, as well as our local and federal law enforcement partners, for holding the alleged perpetrators accountable for their financial crimes.”

The investigation, which began in 2013, involved hundreds of intercepted calls and text messages, border crossing records plus extensive surveillance and reviews of financial records.

Stroj, the lead defendant, is described as a large-scale international bookmaker based in the San Diego area. He is charged with conducting an illegal bookmaking business, conducting an illegal poker and blackjack business and conspiracy to launder money.

According to court records, Stroj and codefendants used offshore gambling websites, including betblackdiamond.com, LBTsports.com and diamondsb.ag, to manage his bookmaking business. Stroj used financiers, a business manager, sub agents, money runners, money couriers and debt collectors to conduct the bookmaking business and launder millions of dollars.

The bookmaking clients would make checks out to the casinos such as Palomar and the Village Club, or the Wynn and Bellagio casinos in Las Vegas, and the funds would be deposited into marker or player bank accounts, court records said.

During one intercepted call, Stroj discussed gambling income and how to launder it through a card club: “Palomar is the best way I can wash the money. I don’t have to report it. I just deposit it at the Palomar and there’s no problems for me.”

In another call, Stroj said: “Between you and me, the best way to launder money, you do it through these local casinos in San Diego…that’s how, if someone owes me a 100 ($100,000) and they want to wire it to me, I wire it to the Palomar and leave it in my player’s bank and they give me chips.”

Card rooms are legal in the state of California if they comply with strict regulations. For example, an owner of a gambling establishment must apply for and obtain a valid state gambling license from the Bureau and the California Gambling Control Commission (Commission). The Bureau's Licensing staff will conduct in-depth background investigations on applicants to determine whether they are suitable to hold a state gambling license. Suitability is determined by a number of factors including but not limited to the applicant's honesty, integrity, general character, reputation, habits, and financial and criminal history.

DEFENDANTS                                Case Number: 15cr2932-BAS                     

David Stroj                                                                

Matthew Greenwood                         

Jeffrey Broadt                                    

Jeffrey Stoff                                      

*Arturo Diaz-Ramirez                                   

Jaime Behar                                        

Robert Stroj                                       

Craig Kolk                                         

Jean Paul Rojo                                   

Joshua Jones                                       

Ricardo Castellanos-Velasquez         

*Alexandra Kane                               

Bryan Sibbach                                    

Joseph Palermo                                  

Thomas Mallozzi                                

Stephen Bednar                                 

Christopher Parsons                           

*Jeffrey Mohr                                    

*Kyle Allen                                        

Michael Hipple                                   

Duy Trang                                          

Alfredo Barba                                    

Ali Lareybi

Harvey Souza                                     

Naseem Salem

*Fugitives                                          

CORPORATIONS

Palomar Card Club

VC Cardroom, Inc., dba Seven Mile Casino and Village Card Club

SUMMARY OF CHARGES

Two counts, Conducting an Illegal Gambling Business, in violation of Title 18 U.S.C. Sec. 1955

Maximum Penalty Five Years in Custody, $250,000 fine, three years supervised release

(Count one is the first 20 defendants in the indictment)

(County two is David Stroj, Jeffrey Stoff, Arturo Diaz-Ramirez, Jaime Behar, Duy Trang and Alfredo Barba)

One count, Conspiracy to Launder Monetary Instruments, in violation of Title 18 U.S.C. Sec 1956 (h)

Maximum Penalty 20Years in Custody, $500,000 fine, three years supervised release

(David Stroj, Matthew Greenwood, Jeffrey Broadt, Jeffrey Stoff, Arturo Diaz-Ramirez, Jaime Behar, Robert Stroj, Craig Kolk, Jean Paul Rojo, Ricardo Castellanos-Velasquez, Alexandra Kane, Bryan Sibbach, Joseph Palermo, Christopher Parsons, Jeffrey Mohr, Duy Trang, Ali Lareybi, Naseem Salem and Palomar Card Club)

Two counts, Failure to Maintain Anti-Money Laundering Program , in violation of Title 31 U.S.C. Sec. 5318 (h) (1) and  5322 (a)

Maximum Penalty Five Years in Custody, $250,000 fine, three years supervised release

Once count for each corporation

Two counts, Transportation for Prostitution, in violation of Title 18 U.S.C. Sec. 2421

Maximum Penalty 10 Years in Custody, $250,000 fine, three years supervised release

(Defendants David Stroj and Jeffrey Broadt only)

AGENCIES

FBI

Homeland Security Investigations

Internal Revenue Service

California Department of Justice Bureau of Gambling Control

San Diego County Sheriff’s Department

Assistants U. S. Attorney Christopher P. Tenorio and Emily Keifer (619) 546-8413  

NEWS RELEASE SUMMARY – December 8, 2015

SAN DIEGO - Jack Zeljko Pasic pleaded guilty earlier today to defrauding the U.S. Postal Service out of postage due on over 9,000 packages shipped from San Diego to eBay customers throughout the United States between April 2009 and October 2010.

            From 2008 through 2010, Pasic ran a company, Diavega, which sold items to customers on eBay. In April 2009, Pasic purchased a postal meter to print postage labels that he would use to ship packages to his Diavega customers. Pasic altered the postage labels, however, to conceal that he had paid only $0.01 in postage when a larger amount of postage was actually owed.

According to his plea agreement, Pasic also labeled the packages to falsely indicate that they were being sent from, and mailed to, the same address in an effort to ensure that the items he shipped would reach their intended destination. In so doing, Pasic ensured the packages were delivered to the customers even when the USPS attempted to return the package to sender for underpayment of postage upon discovering that postage was due. In most cases, the customers were required to pay additional postage fees to the USPS even though they had sent earlier fees to Pasic. In total, Pasic defrauded the USPS out of over $18,000 in unpaid postage.

            “The vigilance of the U.S. Postal Service has ensured that the defendant will pay for services unjustly billed to the American public,” said United States Attorney Laura Duffy.

            Pasic entered his plea before U.S. Magistrate Judge Nita L. Stormes and is scheduled to be sentenced by U.S. District Judge Cathy Ann Bencivengo on January 8, 2016.

DEFENDANT                                  Case Number 15CR2381-CAB

Jack Zeljko Pasic                     Age: 51                      

SUMMARY OF CHARGE

Title 18, United States Code, Sections 1341 (Mail Fraud)   

Maximum penalty: 5 years of custody; $250,000 Fine

AGENCY

United States Postal Inspection Service

 

For Further Information, Contact: Executive Assistant U.S. Attorney Blair Perez (619) 546-7963

NEWS RELEASE SUMMARY – December 8, 2015

SAN DIEGO – The U.S. Attorney’s office in the Southern District of California collected over $37 million in civil and criminal actions, including forfeitures, in fiscal year 2015, which ended on Sept. 30, 2015. More than $7.7 million was collected in criminal and civil actions handled solely by the U.S. Attorney’s Office, including $4,311,334 million in criminal actions and $3,477,416 in civil actions.

Additionally, the Southern District of California worked with other U.S. Attorney’s Offices and components of the Department of Justice to collect an additional $3,041,041 in civil cases pursued jointly with these offices.

The U.S. Attorney’s office in the Southern District of California, working with partner agencies and divisions, also collected $26.3 million in asset forfeiture actions in FY 2015. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used for a variety of law enforcement purposes and to restore funds to crime victims.

“Restitution to victims and taxpayers is another way to ensure that justice is served,” said U.S. Attorney Laura Duffy. “The Southern District of California works hard to increase the amount collected each year through the recovery of ill-gotten gains from illegal activity.”

Major recoveries by the U.S. Attorney’s Office for the Southern District of California in civil cases this year included a case that resolved in May, when five ambulance companies entered into civil settlements with the Department of Justice requiring them to collectively pay more than $11.5 million in payments to the United States to resolve kickback allegations.

The settling defendants include three Orange-County based companies - Pacific Ambulance, Inc. and Bowers Companies, Inc., (both of which were subsequently acquired by Rural/Metro Corporation after the alleged misconduct occurred) and Care Ambulance Service, Inc.; and two San Diego-based companies - Balboa Ambulance Service, Inc., and E.R. Ambulance, Inc.

The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.

Attorney General Loretta E. Lynch announced last week that the Justice Department collected $23.1 billion in civil and criminal actions in the fiscal year (FY) ending Sept. 30, 2015.  Collections in FY 2015 represent more than seven and a half times the approximately $2.93 billion of the Justice Department’s combined appropriations for the 93 U.S. Attorneys’ offices and the main litigating divisions in that same period. 

“The Department of Justice is committed to upholding the rule of law, safeguarding taxpayer resources and protecting the American people from exploitation and abuse,” said Attorney General Lynch.  “The collections we are announcing today demonstrate not only the strength of that commitment, but also the significant return on public investment that our actions deliver.  I want to thank the prosecutors and trial attorneys who made this achievement possible, and to reiterate our dedication to this ongoing work.”

The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal financial, health, safety, civil rights and environmental laws.  In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.

 

 

 

 

 

Assistant U.S. Attorney Melanie K. Pierson (619) 546-7976

NEWS RELEASE SUMMARY – December 8, 2015

SAN DIEGO – Olga and Jose Jimenez of Hemet were arrested in connection with the smuggling of 911 sea turtle eggs into the United States from Mexico and charged in a four-count indictment.

            According to the indictment, on November 23, 2014, in Nayarit, Mexico, defendant Olga Jimenez boarded a bus destined for Tijuana with a large cooler containing approximately nine small plastic bags filled with a total of approximately 911 sea turtle eggs, while defendant Jose Luis Jimenez drove from Hemet, California, to the Mexican border and crossed into Mexico as a pedestrian with two small coolers. 

The indictment alleges that at the bus station in Tijuana, the defendants moved the sea turtle eggs from the large cooler to the two small coolers, concealing them under layers of ice, fish and shrimp. The defendants allegedly gave the coolers to the owner of a pickup truck to bring to the United States, telling the driver the coolers contained only fish and shrimp.  According to the indictment, the defendants then crossed back into the United States through the pedestrian lanes, after which Olga Jimenez placed a call to one of the occupants of the pickup truck in order to determine whether the sea turtle eggs had successfully entered the United States.  The indictment seeks criminal forfeiture of the eggs.

                                       

            The indictment alleges that the eggs belonged to endangered Olive ridley and Kemp’s ridley sea turtles.  Both Olive ridley and Kemp’s ridley sea turtles were initially identified as endangered under the U.S. Endangered Species Act in 1978 and 1973. In 1981, Olive ridley and Kemp’s ridley sea turtles were placed on Appendix I of the Convention on International Trade in Endangered Species (“CITES”).  Both Mexico and the United States are signatories to CITES.  It is a violation of law in both countries to trade in Olive ridley and Kemp’s ridley sea turtles or any part of those sea turtles, including their eggs, without permission from the respective governments.

            According to the National Oceanic and Atmospheric Administration, both Olive ridley and Kemp’s ridley sea turtles display one of the most unique synchronized nesting habits in the natural world.  Large groups of turtles gather off shore of nesting beaches and then come ashore all at once to nest in what is known as an arribada.  Females nest once or twice a year, laying clutches of approximately 100 eggs and burying them in the sand on the beach.  The indictment alleges that during the spectacle of the arribada, the nesting sites are vulnerable to poachers, who collect the eggs for sale for human consumption. The eggs are considered a delicacy in Asia, where they are reputed to have aphrodisiac effects.

            Olive ridley sea turtles (Lepidochelys olivacea) inhabit a broad range extending in the South Atlantic Ocean from West Africa to South America and in the eastern Pacific Ocean from Southern California to Northern Chile.  Adults weigh approximately 100 pounds and have olive/grayish-green heart-shaped shells measuring 22‑31 inches in diameter.                               

             

     Kemp’s ridley sea turtles (Lepidochelys kempii) are the smallest marine turtle in the world.  Their top shell is grayish green and nearly circular, with a pale yellowish bottom shell.  Adults weigh approximately 100 pounds and have shells measuring approximately 24-28 inches in diameter.  Kemp’s ridley sea turtles are found in the Gulf of Mexico and the Atlantic Ocean from the Yucatan peninsula in Mexico to New England.

                                   

            Jose Jimenez was ordered to appear before the Hon. Janis L. Sammartino on January 14, 2016 at 1:30 p.m. for a hearing on all motions in the case.  Olga Jimenez, who was arrested in the District of Arizona, was ordered to appear in federal court in San Diego on December 16, 2015, at 9:00 a.m. before the duty magistrate.

            “The U.S. Fish and Wildlife Service Office of Law Enforcement, along with our agency partners, is committed to investigating people who exploit endangered and protected species to line their own pockets,” said Jill Birchell, Special Agent in Charge of the agency’s California/Nevada office.

“Smuggling wildlife of any kind, especially endangered species, is something we take seriously,” said Eileen Sobeck, assistant administrator for NOAA Fisheries. “We will not tolerate violation of federal and international laws regarding the illegal trade of endangered species, and we will continue to take a hard stance in combating wildlife trafficking.”

*The charges and allegations contained in the Indictment are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Criminal Case No. 15cr2867-JLS

DEFENDANTS                               

Olga Jimenez                                                                           Age: 52                      

Hemet, California

Jose Jimenez                                                                            Age: 64

Hemet, California

SUMMARY OF CHARGES

Conspiracy – Title 18, U.S.C., Section 371

Maximum penalty: Five years in prison and $250,000 fine

Smuggling- Title 18, U.S.C., Section 545

Maximum penalty: Twenty years in prison and $250,000 fine

Importation Contrary to Law- Title 18, U.S.C., Section 545

Maximum penalty: Twenty years in prison and $250,000 fine

Unlawful Trafficking in Wildlife-Title 16, U.S.C. Sections 3372 and 3373

Maximum penalty: Five years in prison and $250,000 fine

Criminal Forfeiture- Title 16, U.S.C., Section 3374

AGENCIES

U.S. Fish and Wildlife Service, Office of Law Enforcement;

National Oceanic and Atmospheric Administration, Office of Law Enforcement

 

 

 

 

 

Assistant U.S. Attorney Alessandra Serano (619) 546-8104

NEWS RELEASE SUMMARY – December 7, 2015

SAN DIEGO, CA – Michael William Lutts, a 52-year-old foster parent and pediatric nurse, was sentenced in federal court today to the statutory maximum 80 years in prison for sexually exploiting a two-month-old premature boy and an 11-month-old girl who had been placed in his care in 2014.

During the sentencing hearing, U.S. District Judge John Houston called Lutts the “worst of the worst” and described his conduct as “horrific” and “worse than a mass murderer shooting 20 people” because the newborns he targeted “are the most fragile people to victimize.”

Before the sentence was handed down, Assistant U.S. Attorney Alessandra Serano urged Judge Houston to hand down a 65-year prison term –essentially life in prison considering the defendant’s age. “This defendant is a parent’s worst nightmare and a predator to society. He should never see the light of day. Rehabilitation would be futile.”

Judge Houston handed Lutts a sentence that was 15 years more than the prosecutor had asked for – saying he wanted to “send a message to others who conduct this activity under the cover of dark.” The judge said he would not recommend any psychological treatment for the defendant as the “taxpayers shouldn't waste their money on treatment.”

Lutts pleaded guilty in January, admitting to 15 instances in July and August of 2014 in which he photographed and videotaped the babies in sexually explicit situations at both his home and workplace. In one image, the defendant photographed his own exposed genitals beside the infant, who was still wearing his hospital bracelet. In some of the images and videos, the baby is crying as Lutts sexually abuses him. Lutts also admitted emailing sexually explicit images of children to others.

Lutts pleaded guilty to two counts of sexual exploitation of a minor and one count of distribution of child pornography. In addition to his custodial sentence, he was ordered to forfeit his College area home where most of the crimes occurred.

“This is one of most appalling, heart-wrenching cases I have seen in this district,” said U.S. Attorney Laura Duffy. “All child exploitation cases are heinous. But it’s a whole new level of depravity when the victims are babies in the care of a trusted nurse. One of these victims was a premature, two-month-old foster child who was alone in this world except for a foster parent who was supposed to provide a safe and loving environment. We will do everything in our power to protect our precious, defenseless children from sexual abuse and exploitation.”

“Lutts was trusted with the care of two infants who he sexually exploited and abused repeatedly. These infants suffered in silence, unable to speak for themselves, and unable tell others of the horror they were suffering,” said FBI Special Agent in Charge, Eric S. Birnbaum. “When this type of sexual exploitation takes place, the FBI and our law enforcement partners will aggressively pursue these sexual predators and bring them to justice. In doing so, we will give a voice to the most vulnerable members of our society.”

DEFENDANT                                              Criminal Case No. 14CR2542-JAH

Michael William Lutts                        Age: 52                       San Diego

SUMMARY OF CHARGES

Counts 1, 17:               Sexual Exploitation of a Minor, in violation of 18 U.S.C. §2251(a)

Maximum Penalties: Thirty years in prison, mandatory minimum 15 years per count

Counts 16:                   Distribution of Child Pornography, in violation of 18 U.S.C. §2252(a)(2)

                                    Maximum Penalties: Twenty years in prison, mandatory minimum 5 years              

INVESTIGATING AGENCIES

Federal Bureau of Investigation

 

 

Assistant U. S. Attorney Matthew Brehm (619) 546-8983    

NEWS RELEASE SUMMARY – December 7, 2015

SAN DIEGO – Tulio David Gasca was sentenced today by U.S. District Judge John Houston to 55 months in prison for robbing a North Island Credit Union branch and then leading sheriff’s deputies on a 40-minute foot chase.

In his plea agreement, Gasca, 24, admitted that on March 5, 2015, at approximately 12:41 p.m., he entered the branch in Imperial Beach wearing a mask and approached a teller and said, “Give me your money!” Gasca took $4,210 and ran from the credit union.

An off-duty correctional officer chased after Gasca, who ran into an apartment complex across the street from the credit union, through its courtyard, and then out a gate into an alley. The correctional officer continued to pursue Gasca but lost sight of him. A canine unit responded to the courtyard and began to track Gasca.

Before the canine unit found the defendant, a San Diego County Sheriff’s helicopter arrived and its crew spotted Gasca a few blocks away from the credit union and apartment complex. A responding sheriff’s deputy attempted to stop Gasca.  Gasca wrenched himself free from the deputy’s hold and ran from him. 

When the deputy caught up to Gasca and tried to stun him with a taser, Gasca physically resisted, injuring the deputy. Gasca then fled toward 13th Street. At approximately 1:25 p.m., deputies found Gasca hiding in the backyard of a 13th Street residence, where they arrested him. The stolen money was not recovered at that time.

On March 6, 2015, a resident on 13th Street notified law enforcement that she found a large amount of currency when cleaning shelves located in her backyard, where Gasca was found the day before. Deputies returned to her home and recovered $3,862 and an email addressed to Gasca from beneath a shelf in the backyard.

DEFENDANT                                  Case Number: 15CR0731-JAH

Tulio David Gasca                              Age: 24                      

SUMMARY OF CHARGE                                                                  

Bank Robbery, in violation of Title 18, United States Code, Section 2113(a)         

Maximum penalty: 20 years in prison

AGENCY

Federal Bureau of Investigation

San Diego County Sheriff’s Department

 

Assistant U.S. Attorneys Joseph J.M. Orabona (619) 546-7951 or Alexandra Foster (619) 546-6735

NEWS RELEASE SUMMARY – December 2, 2015

SAN DIEGO – The owner of a tax preparation business pleaded guilty today in federal court, admitting that she filed more than 4,000 false income tax returns with the Internal Revenue Service in order to obtain more than $7 million in bogus refunds.

Melissa Ann Vega, also known as Lisa Vega, was a local tax preparer and owner of L&T Works, a tax return preparation business on Miramar Road. She entered her plea to charges of conspiracy to file false, fictitious, and fraudulent claims for federal tax refunds, tax evasion and aggravated identity theft before U.S. Magistrate Judge Bernard G. Skomal.

According to her plea agreement, Vega, conspired with others from at least December 2009 through April 2015 to submit thousands of false income tax returns to the IRS in order to fraudulently obtain tax refunds to which Vega, her co-conspirators, and her clients were not entitled.  In carrying out her scheme, Vega falsified her clients’ tax returns without their knowledge or consent.  As part of the conspiracy, Vega claimed thousands of dollars in false education expenses and tax credits for which her clients were not qualified.

Vega told her co-conspirators and employees that they should maximize clients’ refunds by filing for a $4,000 education credit, even though the client did not attend school for that tax year. To conceal her role in the fraud, Vega intentionally omitted her name and tax return preparer identification number on the false tax returns she prepared for her clients. In total, Vega’s fraud caused the IRS to pay more than $7 million in artificially-inflated tax refunds based solely on the false education credits. Moreover, Vega admitted that she and her co-conspirators stole the identities of other persons, including minors, and used them on the false tax returns in order to further inflate the amount of the tax refund paid by the IRS.  

Vega did not shy away from personally profiting from her fraudulent scheme.  In addition to charging her clients between $150 and $200 per return, Vega also admitted that she stole more than $300,000 in false tax refunds from her clients by directing their refunds into bank accounts that she controlled.  Vega spent this money for her own personal benefit.  Vega also admitted that she evaded her own income taxes and filed false personal tax returns in which she fraudulently claimed withholding credits, education credits, and tax credits for minor dependents that she did not support and were not related to her. According to court documents, Vega evaded more than $156,000 in taxes due to the IRS for tax years 2009 through 2013. 

The plea agreement also sets forth a forfeiture provision whereby Vega, a previously convicted felon, agreed to the surrender of several firearms seized from her residence during the execution of a search warrant in April 2014, including a sawed-off shotgun, shotgun shells, a 9mm handgun, and 9mm ammunition. Vega’s husband, Jamie Lang, pleaded guilty to possessing the unregistered sawed-off shotgun and is scheduled to be sentenced in this case before U.S. District Judge Jeffrey T. Miller on December 18, 2015 at 9:00 a.m. In addition, Vega consented in her plea agreement to the forfeiture of approximately $18,600 in cash, also seized during the search warrant, which represented proceeds of her tax fraud. 

Furthermore, as part of her plea agreement, Vega agreed to be permanently enjoined from preparing or filing federal income tax returns for anyone other than herself. A civil complaint will be filed against Vega, and a permanent injunction will be entered to prevent Vega from acting as a tax preparer in the future.   

Vega was released on bond in this case on January 28, 2015. Although the court informed her not to commit another federal crime, Vega once again began filing false tax returns with the IRS within days of her release. Without the clients’ knowledge, Vega fraudulently inflated or created credits and deductions to maximize her clients’ false returns. The IRS uncovered her fraud, and Vega was arrested on February 25, 2015. In furtherance of her conspiracy, Vega agreed with Deanna Dave (charged in Criminal Case No. 15CR2715-JM) to misrepresent to the grand jury that Dave was the owner and paid-return preparer for the tax returns filed in February 2015. In truth, Vega continued as the owner of her tax preparation business and prepared the false tax returns which she filed for her clients. On November 17, 2015, Dave pleaded guilty to making a false declaration before the grand jury, and her sentencing is scheduled for February 5, 2016 before Judge Miller.

“Tax return preparers owe a duty to their clients to prepare tax returns that are accurate and comply with the law,” said U.S. Attorney Laura Duffy. “Tax return preparers who defraud the IRS out of millions of dollars, intentionally falsify tax returns, and steal the identities of minor dependents breach the public’s trust and undermine confidence in the tax system. This Office and our law enforcement partners will vigilantly pursue allegations of such misconduct in order to protect the community and the public.”

With a new tax return filing season right around the corner, U.S. Attorney Duffy reminded the public to always review a copy of any tax return prepared and filed on their behalf and to be skeptical of tax preparers that offer to obtain substantial tax refunds.

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented: “As we approach tax filing season, those who might consider committing refund fraud and identity theft should be aware of the extremely negative consequences of doing so,” said IRS Criminal Investigation's Special Agent in Charge Erick Martinez. “IRS Criminal Investigation will continue to vigorously pursue those who unjustly enrich themselves by preparing false income tax returns.”

“The Secret Service remains committed to vigorously investigating and seeking prosecution of those individuals who commit identity theft.  We are grateful for the efforts of the U.S. Attorney’s Office and our federal partners at the Internal Revenue Service in this investigation,” said David Murray, Special Agent in Charge, United States Secret Service, San Diego Field Office.

Separately, three other defendants have entered guilty pleas admitting their roles in the tax fraud conspiracy.  Earlier this year, co-conspirators Tammie Cowles, Stephen Elliott, and Justin Vega entered guilty pleas to conspiracy to file false claims for tax refunds. Co-conspirator Justin Vega is scheduled to be sentenced before U.S. District Judge Jeffrey T. Miller on January 22, 2016, and co-conspirators Tammie Cowles and Stephen Elliott are scheduled for sentencing before Judge Miller on March 4, 2016. 

Vega is scheduled to be sentenced for her crimes before U.S. District Judge Jeffrey T. Miller on March 4,  2016 at 9:00 a.m.

DEFENDANT                                  Criminal Case No. 14CR3658-JM

Melissa Ann Vega                   Age: 44           San Diego, CA           

SUMMARY OF CHARGES THAT DEFENDANT VEGA PLEADED GUILTY TO:

Count 1 – Title 18, United States Code, Section 286 B Conspiracy to File False Claims

Maximum penalties: 10 years in prison, $250,000 fine, 3 years of supervised release.

Count 2 – Title 26, United States Code, Section 7201 – Tax Evasion

Maximum penalties: 5 years in prison, $250,000 fine, 1 year of supervised release.

Count 3 – Title 18, United States Code, Section 1028A – Aggravated Identity Theft

Maximum penalties: 2 years in prison to be served consecutive to any other term of imprisonment, $250,000 fine, 3 years of supervised release

OTHER CO-CONSPIRATORS AND CHARGES:

Tammie Cowles                      Age: 41           San Diego, CA            Criminal Case No. 15CR1591-JM

  Pleaded Guilty to:          Title 18, United States Code, Section 286 – Conspiracy to File False Claims

Stephen Elliott                        Age: 28           San Diego, CA            Criminal Case No. 15CR1003-JM

  Pleaded Guilty to:          Title 18, United States Code, Section 286 – Conspiracy to File False Claims

Justin Vega                             Age: 26           San Diego, CA            Criminal Case No. 15CR2198-JM

  Pleaded Guilty to:          Title 18, United States Code, Section 286 – Conspiracy to File False Claims

Deanna Dave                          Age: 49           San Diego, CA            Criminal Case No. 15CR2715-JM

  Pleaded Guilty to:          Title 18, United States Code, Section 1623 – False Declaration before Grand Jury

Jamie Lang                              Age: 27           San Diego, CA            Criminal Case No. 14CR3658-JM

  Pleaded Guilty to:          Title 26, United States Code, Section 5861(d) – Possession of Saw-Off Shotgun

INVESTIGATING AGENCIES

Internal Revenue Service-Criminal Investigation

United States Secret Service

Bureau of Alcohol, Tobacco, and Firearms

 

 

Contact: Kelly Thornton, 619-546-9726

NEWS RELEASE SUMMARY – November 30, 2015

SAN DIEGO – Methamphetamine continues to be a wrecking ball in San Diego County, as Mexican Super Labs flood the market with the purest and cheapest product ever seen here, creating a perfect storm of health and public-safety consequences.

The latest Methamphetamine Strike Force Report Card, which tracks nine indicators of the meth problem in San Diego County annually, found that the meth epidemic is in full force here, as numbers of meth-related deaths, emergency room visits, arrests and border seizures remain at alarming levels.

According to the report, emergency-room visits throughout San Diego County have increased by thousands of patients – up 141 percent since 2010. Seizures of methamphetamine at the San Diego-Tijuana border have marked a dramatic 129 percent increase from 2010 to 2014. Forty-five percent of adults arrested in 2014 had meth in their systems, compared to 27 percent in 2010.

Adding to law enforcement angst is voter-approved Prop. 47, which last year made meth use and possession a misdemeanor. These offenses used to be felonies, and the courts could require drug treatment for many offenders. That has completely changed. Today, someone can get arrested, released and re-arrested many times for what are considered non-violent meth offenses.

Twenty-five years ago meth was cooked up in the U.S., in small-scale labs in motorhomes, trailers or apartments, and it was maybe 50 percent pure. Today’s meth is being manufactured in huge quantities in Mexican Super Labs supplied by Asian chemical distributors and staffed by university educated chemists and engineers.

The result: U.S. Markets are being flooded with the highest quality and lowest priced meth to date. What was once 50 percent pure is now 95 percent pure. What was $1,800 a kilogram in 2010 is now as low as $400.

“The trend lines are deeply troubling and show that we must continue to wage war against a drug that is tearing families apart,” said county Supervisor Dianne Jacob. “Make no mistake:  meth is death, meth breaks lives, and we need to continue to do all we can to stem the tide of this terrible drug into our communities.”

“Meth is a quadruple threat – it’s extremely pure, inexpensive, highly addictive and widely available,” said U.S. Attorney Laura Duffy. “We are tackling this monster problem by intensifying efforts to dismantle the cartels, and by offering prevention and education programs targeting young people and medical professionals.”

“This is a perfect storm for meth addicts and those just encountering the drug for the first time,” said Sheriff Bill Gore. “We can't incarcerate our way out of this problem – it will require education at all levels as to the severe consequences of this drug. This is the essence of public safety – to educate and inform.”

Dr. Danielle Douglass, an emergency physician at Sharp Grossmont Hospital, said that long term use of meth is related to many cardiovascular problems, including cardiomyopathy. “Meth use results in both chronic and acute heart disease,” Douglass said. “A good percentage of these meth-related deaths are people who die of natural disease, where their meth use contributed to an early death. Half of all meth-detected deaths are persons aged 40 to 60 years old.”

Some other trends:

--Meth use and crime are linked. Last year 45 percent of adults arrested and taken to county jails tested positive for methamphetamine. That number comes from both jail surveys and confirmed drug tests. This is a 66 percent increase over five years ago.

-Between fiscal years 2009 and 2014, Customs and Border Protection reported a 300 percent increase in the amount of meth seized at all of California’s ports of entry.

- While this year’s Methamphetamine Strike Force Report Card found meth-related deaths showed a slight 2-percent decrease from 2013 to 2014 –from 267 to 262 – the 2014 death toll is still two-thirds higher than five years ago.

-Meth, in its ever increasing role as “grim-reaper” doesn’t discriminate. In 2014, the youngest methamphetamine-related death reported by San Diego’s Medical Examiner was a 17-year-old female who committed suicide, and the oldest was a 70-year-old woman who died of heart disease with methamphetamine toxicity. This woman was not an anomaly. We have a “Silver Tsunami” of aging meth users whose bodies are less and less able to handle this powerful drug.

-Innovative traffickers will try anything and everything to smuggle their drugs across the border by land, sea or air – in Super Tunnels, on jet skis, superlight aircraft and even drones. They are using youth as mules to walk across the borders.

-Seven to 10 percent of methamphetamine now being smuggled into the U.S. from Mexico is in liquid form, meaning finished methamphetamine that has been dissolved or suspended in a liquid solvent. Once in the United States – the meth is taken to labs at which the liquid meth is converted into crystal meth.  This process requires chemicals that are highly flammable and explosive - which presents a whole host of other issues for the communities, generally in the Central Valley, in which such labs are located.

Nick Macchione, director of the county’s Health and Human Services Agency and a chair of the Meth Strike Force, emphasized that treatment works, and is available. The County contracts with residential and outpatient programs in every region in San Diego County. A 2002 California Administrative Office study estimated that every dollar spent on drug treatment avoids seven dollars in criminal justice expenses. 

Residents who need treatment referrals or who want to report anonymously suspicious meth-related crime are encouraged to call the Meth Hotline at 1-877-NO-2-METH or to give anonymous reports to www.no2meth.org

 

 

Former Hospital Executive, Doctors and Two Others Admit Roles; Agree to Cooperate

In a series of related cases announced today, the former chief financial officer (CFO) of a Long Beach, California, hospital, two orthopedic surgeons and two others have been charged in long-running health care fraud schemes that illegally referred thousands of patients for spinal surgeries and generated nearly $600 million in fraudulent billings over an eight-year period.

Two of the defendants have pleaded guilty and three others have agreed to plead guilty in the coming weeks. All five defendants have agreed to cooperate in the government’s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries.

The schemes involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others.  As a result of the illegal payments, thousands of patients were referred to Pacific Hospital in Long Beach, where they underwent spinal surgeries that led to more than $580 million in bills being fraudulently submitted during the last eight years of the scheme alone.  Many of the fraudulent claims were paid by the California worker’s compensation system and the federal government.

In a second, similar scheme that also involved spinal surgeries, doctors received illegal kickbacks for referrals to a Hawaiian Gardens hospital.

Today, federal prosecutors today filed two cases related to the scheme, and yesterday three other cases were unsealed by a federal judge.  Those named in the cases are:

• James L. Canedo, 63, of San Pedro, California, the former CFO of Pacific Hospital in Long Beach, who pleaded guilty on Sept. 4 to a criminal information charging him with participating in a conspiracy that engaged in mail fraud, honest services fraud, money laundering, paying or receiving kickbacks in connection with a federal health care program and violating the Travel Act, specifically, interstate travel in aid of a racketeering enterprise.  The case against Canedo was unsealed yesterday by U.S. District Judge Josephine L. Staton of the Central District of California, who is scheduled to sentence the defendant on June 17, 2016.
• Philip Sobol, 61, of Studio City, California, an orthopedic surgeon who has agreed to plead guilty to conspiracy to commit mail fraud, honest services fraud and violations of the Travel Act; as well as a separate, substantive Travel Act violation.  The information against Sobol and a related plea agreement were filed today in U.S. District Court, where the defendant is expected to be arraigned next month.
• Alan Ivar, 55, of Las Vegas, a chiropractor who formerly resided in San Juan Capistrano, California, and owned several businesses based in Costa Mesa, California, was charged today in a criminal information that alleges one count of conspiracy to commit mail fraud, honest services fraud, money laundering and violations of the Travel Act.  In a plea agreement also filed today, Ivar admitted that for well over a decade, he had an agreement with the owner of Pacific Hospital to refer patients in exchange for a monthly retainer.  Ivar, who also agreed to plead guilty, is expected to be arraigned next month.
• Paul Richard Randall, 56, of Orange, California, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, pleaded guilty on April 16, 2012, before Judge Staton to conspiracy to commit mail fraud.  Randall, who admitted recruiting chiropractors and doctors to refer patients to Tri-City in exchange for kickbacks, is scheduled to be sentenced on April 8, 2016.
• Mitchell Cohen, 55, of Irvine, California, an orthopedic surgeon, was charged last week with filing a false tax return.  Cohen admits in a plea agreement filed on Nov. 16 admits the he failed to report income received from kickback payments and is expected to be arraigned next month.

All five defendants have agreed to cooperate with the government’s ongoing investigation, dubbed “Operation Spinal Cap,” into the kickback schemes, which involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other medical professionals.

Under the terms of their plea agreements, Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall face up to five years in prison; and Cohen faces up to three years in prison on the tax charge.  All of the defendants will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.

In April 2014, Michael D. Drobot, the former CEO and owner of Pacific Hospital of Long Beach, pleaded guilty to participating in the scheme and is also cooperating with the investigation.

As described in court documents, Drobot, who was the owner and/or CEO of Pacific Hospital of Long Beach until late 2013, ran a 15-year-long scheme in which he and others billed workers’ compensation insurers and the U.S. Department of Labor hundreds of millions of dollars for spinal surgeries and other procedures performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.

As part of the scheme, the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery.  Some of the patients lived hundreds of miles away from Pacific Hospital and closer to other qualified medical facilities.  The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital.  From 2005 through 2013, only part of the overall scheme, Pacific Hospital billed insurers more than $580 million for spinal surgeries on more than 4,400 patients.  Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.

“Health care fraud and kickback schemes burden our healthcare system, drive up insurance costs for everyone, and corrupt both the doctor-patient relationship and the medical profession itself,” said U.S. Attorney Eileen M. Decker of the Central District of California.  “The members of this scheme treated injured workers and their spines as commodities, to be traded away to the highest bidder.  This investigation should send a message to the entire industry: patients are not for sale.”

The conspirators in the Pacific Hospital scheme concealed the kickback payments by entering into bogus contracts to provide a “cover story” for the doctors, chiropractors and others who received illegal payments.  For example, a number of doctors entered into agreements with a Pacific Specialty Physician Management (PSPM), a company owned by Drobot, under which the doctors received as much as $100,000 per month from PSPM in return for the right to purchase their medical practices – an option that was never exercised.  PSPM paid some doctors inflated prices for the right to operate their practices and collect on their insurance claims.  In still other cases, Pacific Hospital entered into contracts with doctors under which the doctors were to help the hospital collect on its surgery bills to insurance companies, but the hospital’s own collection staff, rather than the doctors, actually performed the collections work.  Several doctors entered into lease agreements under which PSPM or Pacific Hospital paid rent for the use of office space, but rarely used the space.  And other doctors had agreements to provide consulting services to Drobot’s companies, but did not actually provide the services.  Still others, including marketers who introduced doctors to Pacific Hospital, had additional agreements with Drobot’s companies.

Canedo, as Pacific Hospital’s CFO from 1999 through October 2013, was responsible for tracking payments made directly to doctors by the hospital, as well as the number of patients each doctor referred to the hospital and the amounts the hospital collected for those patients’ procedures.  Canedo also communicated directly with a number of the doctors regarding the payments and surgeries, and sometimes mediated disputes between different doctors who claimed credit for the same referrals.

Sobol, Ivar and Cohen each received, respectively, $5.2 million, $1.24 million and $1.64 million in kickbacks.  Together they referred more than 200 patients to Pacific Hospital.

“The defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded health care systems,” said Assistant Director in Charge David Bowdich of the FBI's Los Angeles Field Office.  “The effort by investigators and prosecutors in this case cannot be overstated and, as it continues, will play a part in restoring confidence in the medical marketplace.”

Two other Drobot companies, California Pharmacy Management (CPM) and its successor, Industrial Pharmacy Management (IPM), were also important players in the scheme.  Both companies set up and managed what were essentially mini-pharmacies within doctors’ offices.  CPM and IPM bought and dispensed medication that the doctors prescribed to their patients, and these businesses received a portion of the money reimbursed by insurance companies for the medications.  Drobot, along with others at CPM and IPM, often agreed to increase the doctors’ shares of the insurance claims in return for those doctors’ referral of patients to Pacific Hospital.  In many cases, for doctors who made such referrals, the conspirators “advanced” payments from CPM and IPM before the companies had collected any money for the medications or even prescribed them, and often simply “wrote off” payments as losses when collections fell short.

“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,” said California Insurance Commissioner Dave Jones.  “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs.  Detectives from the Department of Insurance worked closely with federal law enforcement agencies to investigate and expose this illegal conspiracy, which is one of the largest workers compensation insurance fraud cases we have ever seen.”

Randall, who also facilitated the Pacific Hospital scheme by introducing doctors to Drobot and coordinating kickback arrangements, pleaded guilty to participating in a separate, similar scheme involving Tri-City Regional Medical Center.  According to his plea agreement, Randall acted as a “marketer” for Tri-City and conspired with hospital executives to pay kickbacks to doctors and chiropractors to refer workers’ compensation patients Tri-City for spinal surgeries.  As in the Pacific Hospital scheme, the surgeries at Tri-City involved use of spinal surgery hardware that Randall distributed to Tri-City at inflated prices through his company Summit Medical Group, knowing that the cost would be passed on to insurers.  Using proceeds from the sale of the hardware, Randall paid a 5 percent kickback to Tri-City and kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred the patients.  In addition, Randall paid kickbacks to doctors in return for referrals of patients for toxicology tests though a separate company, Platinum Medical.  The scheme resulted in several million dollars in losses to insurers.

“Medical referrals should be based on what’s best for the patient – not what’s best for the doctor’s bank account,” said Special Agent in Charge Erick Martinez of IRS-Criminal Investigation (CI).  “In paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers’ compensation insurance carriers and to deprive the patients of their right to honest services.”

“We are committed to preserving Postal Service resources by vigorously investigating allegations of fraud and corruption,” said Special Agent in Charge Tom Frost of the U.S. Postal Service’s Office of Inspector General (USPS OIG).  “We are grateful for the efforts of the U.S. Attorney’s Office and our State and Federal partners in this investigation.”

The ongoing investigation into abuses involving the spinal pass-through law and kickbacks paid for spinal surgery patients is being conducted by the FBI, the USPS OIG, IRS-CI and the California Department of Insurance.

Assistant U.S. Attorneys Joseph Green (619) 546-6955 and Eric Beste (619) 546-6695

NEWS RELEASE SUMMARY – November 23, 2015

SAN DIEGO – A leader of a sophisticated bank fraud scheme that used dozens of bank accounts in the names of fictitious businesses was sentenced today to 33 months in prison for his role in causing $689,000 in losses to Bank of America.

U.S. Chief District Judge Barry Ted Moskowitz sentenced Vahag Stepanyan of Las Vegas, Nevada, to almost three years in custody based on the defendant’s “brazen” scheme to defraud a federally insured financial institution, as well as for his participation in a separate tax fraud scheme that resulted in millions of dollars in fraudulent claims for tax refunds.

As a part of the bank fraud scheme, Stepanyan guided other co-conspirators in the creation of fictitious business entities in Nevada that were used to set up accounts at Bank of America.  Stepanyan and other co-conspirators then engaged in a series of bank transactions that allowed co-conspirators to withdraw recently deposited funds from the bank accounts before Bank of America learned that the accounts did not have sufficient funds to cover the withdrawals. The scheme resulted in a loss of $689,000 to Bank of America.

In addition, as a part of a separate scheme to defraud the Internal Revenue Service, Stepanyan cashed checks drawn on accounts that had received fraudulent tax refunds. At the sentencing hearing, Judge Moskowitz remarked that Stepanyan’s participation in a scheme to defraud the United States “added insult to injury” because he sought to take advantage of the nation that had welcomed him from Armenia.

At the conclusion of today’s sentencing hearing, Judge Moskowitz remanded Stepanyan into custody to begin serving his 33-month sentence.

DEFENDANTS                               

Vahag Stepanyan                                            Age: 34                       Las Vegas, NV

SUMMARY OF CHARGES

Conspiracy to Commit Bank Fraud – Title 18, U.S.C., Section 1349

Maximum penalty: Thirty years in prison, $250,000 fine, restitution

AGENCY

Federal Bureau of Investigation

Internal Revenue Service – Criminal Investigation

 

Assistant U.S. Attorneys Phillip L.B. Halpern (619) 546-6964 and

Emily J. Keifer (619) 546-7319

NEWS RELEASE SUMMARY – November 23, 2015

SAN DIEGO – Todd Bosnich, fired policy director for the failed Carl DeMaio congressional campaign, was sentenced today to five years of probation for sending anonymous emails to himself - making it appear that DeMaio threatened him – and then lying to the FBI about it.

U.S. District Judge Larry Burns also ordered Bosnich to undergo psychiatric counseling, complete 240 hours of community service and a pay a $2,500 fine. In imposing the sentence, Judge Burns noted that DeMaio lost the election.

“There is no way of knowing how much [Bosnich’s conduct] affected voters’ minds,” he said, emphasizing that this was not a victimless crime. “The victim is Mr. DeMaio, DeMaio’s campaign, or the democratic process.”

Bosnich pleaded guilty in June, admitting that he instigated and impeded the FBI investigation. According to his plea agreement, after he was terminated from his job in May of 2014, a disgruntled Bosnich made sexual harassment accusations against DeMaio. Among other things, he claimed that DeMaio offered him $50,000 in hush money to keep quiet about the harassment.

Bosnich also told a radio reporter during an interview on June 2, 2014 that he had received threatening emails from an anonymous source that he was “positive” were from DeMaio or someone closely associated with DeMaio.

According to his plea agreement, Bosnich admitted that three days later, on June 5, 2014, Bosnich set up a dummy yahoo email account, elimanagment@yahoo.com, from his North County residence using bogus personal information including a false date of birth and gender. According to his admissions, he then sent a “particularly ugly and threatening message” to his own personal email account. The email suggested that the “anonymous” author of the email would ensure that Bosnich never again worked in politics if he didn’t stop making accusations against DeMaio.

During multiple interviews with the FBI, Bosnich – supposedly the victim of threatening emails - continued to claim that he did not know who sent the emails, but he believed DeMaio was behind the anonymous threats. Based on these false claims, a grand jury issued subpoenas attempting to identify the source of the emails. All the while, it was Bosnich himself who had sent the emails.

“The integrity of the American electoral process is the very bedrock of our democracy,” said U.S. Attorney Laura E. Duffy. “Bosnich’s criminal act had the very real possibility of improperly tipping the scale towards a particular candidate.  This was far from a harmless prank.”

“Mr. Bosnich engaged in a pattern of lies and deceitful acts in an effort to obstruct FBI Agents from getting to the truth in this case,” said FBI Special Agent in Charge Eric S. Birnbaum. “Today’s sentencing sends a clear message that the FBI will aggressively investigate and seek prosecution of those who attempt to obstruct justice by lying to the FBI.”

DEFENDANT:                                             Case Number 14CR1544-LAB                   

Todd Bosnich                                                 Age: 29                       Del Mar, CA

SUMMARY OF CHARGES

Obstruction of Justice – Title 18, U.S.C., Section 1512

Maximum penalty: 5 years’ imprisonment and $250,000 fine

AGENCY

Federal Bureau of Investigation

 

 

 

 

Special Assistant U. S. Attorney Stephanie G. Chau (619) 546-9174 and Assistant U.S. Attorney Michael G. Wheat (619) 546-8437

NEWS RELEASE SUMMARY – November 18, 2015

SAN DIEGO – Jermaine Harris of San Diego was convicted by a federal jury yesterday of manufacturing and passing counterfeit currency following a one-week trial before U.S. District Judge Cathy Ann Bencivengo.

A federal jury deliberated less than one day and found Harris guilty of one count of Counterfeiting and Forging Obligations of the United States, in violation of 18 U.S.C. Section 471 and one count of Passing Counterfeit Obligations, in violation of 18 U.S.C. Section 472.

At trial, the government presented evidence that Harris, along with co-defendants Alexander Eibeck, Sopeap Muk, Meghan Ripley, Nicole Cortes and Ashley Contreras, operated a counterfeit currency manufacturing plant from a hotel room in Mission Valley.

On November 15, 2014, the San Diego Police Department arrested one of the six individuals for passing counterfeit United States Federal Reserve Notes at the Fashion Valley Mall.  On November 16, 2014, the San Diego Police Department and the United States Secret Service, Regional Task Force, discovered the manufacturing plant.

According to the evidence presented at trial, the six defendants manufactured counterfeit U.S. currency by “bleaching” or “washing” the ink off of genuine small-denomination bills and then using a printer to print images of higher-denomination bills on the washed currency paper.  A search of the hotel room yielded a wide variety of physical evidence, including completed and partially completed counterfeit currency, printers, bleaching solution, and various tools used to replicate the security features of legitimate U.S. currency.  U.S. Secret Service agents discovered that the defendants had been using electronic devices to view and manipulate images of legitimate U.S. currency features to produce counterfeit $100 bills.

Subsequent investigation revealed that the group victimized numerous businesses in the San Diego area by passing the counterfeit $100 bills.  According to the plea agreement for Eibeck, the face value of the counterfeit bills manufactured and passed by the group exceeded $16,000.

Eibeck, Muk, Ripley, Cortes and Contreras were previously sentenced after pleading guilty.  Judge Bencivengo will sentence Harris on February 19, 2016.

This case was investigated by United States Secret Service.

“The United States Secret Service would like to thank the San Diego Police Department, as well as our other state and local law enforcement partners in the San Diego Regional Fraud Task Force for all their efforts and assistance with this investigation,” said Special Agent in Charge David Murray.

DEFENDANT                                  Case Number: 14CR3488-CAB

Jermaine Harris                                   Age: 34

Alexander Eibeck                               Age: 27

Sopeap Muk                                        Age: 28

Nicole Cortes                                      Age: 29

Meghan Ripley                                    Age: 35                      

Ashley Contreras                                Age: 22

SUMMARY OF CHARGES                                                                   

Counterfeiting and Forging Obligations, in violation of Title 18, United States Code, Section 471           

Maximum penalty: 20 years

Passing Counterfeit Obligations, in violation of Title 18, United States Code, Section 472

Maximum penalty: 20 years

AGENCIES

United States Secret Service, San Diego Regional Task Force

San Diego Police Department

 

Assistant U.S. Attorney Dylan M. Aste (619) 546-7621

NEWS RELEASE SUMMARY – November 17, 2015

SAN DIEGO – United States Attorney Laura E. Duffy announced today that a group of San Diego pharmacies and their owners have paid $750,000 to the federal government to resolve allegations that they mishandled significant amounts of highly addictive and frequently abused prescription narcotics, as well as ephedrine or pseudoephedrine products.  

The settlement is with Park Medical Pharmacy, Inc., and owners Joseph Grasela and John Grasela.  The Graselas and Park Medical Pharmacy, Inc. do business as Medical Center Pharmacy.  They operate a dozen storefront pharmacies under various names such as Galloway Medical Center Pharmacy, Community Medical Center Pharmacy, and Medical Center Pharmacy. 

The settlement arises from a U.S. Drug Enforcement Agency (“DEA”) investigation into suspected illegal activity at Medical Center Pharmacy. Based on DEA’s inventory audits, inspections, and other investigative activities, the United States asserts that Medical Center Pharmacy committed multiple violations of the Controlled Substances Act (“CSA”).   

The alleged violations include diversion of a significant amount of controlled substances, failure to control the pharmacies’ inventory of controlled substances, and failure to maintain required records of the pharmacies’ distribution of controlled substances.  The alleged violations also include failure to obtain the proper authorization required for the sale of ephedrine and pseudoephedrine products, which can be used to produce methamphetamine.

The United States asserts that Medical Center Pharmacy was unable to account for roughly 21,000 pills at four locations over a two-year span.  In some instances, two pharmacy technicians allegedly diverted thousands of pills.  In others, Medical Center Pharmacy allegedly delivered drugs to a residence that pill seekers used in conjunction with their sham identities.  The unaccounted-for pills were the powerful and highly addictive drugs oxycodone and hydrocodone, commonly known by their brand names OxyContin, Roxicodone, and Percocet. 

The United States contends that Medical Center Pharmacy violated the Combat Methamphetamine Epidemic Act (“CMEA”) portion of the CSA.  The CMEA was enacted to curtail the illicit production and use of methamphetamine by requiring pharmacies to certify that they have met CMEA requirements such as properly training their employees in the proper sale of ephedrine, pseudoephedrine, and other listed chemical products. The CMEA also requires pharmacies to keep a logbook of certain listed chemical products sold, and the logbook must contain the identity of the purchaser and the product that was purchased.  This requirement, along with a cap on the amount of listed chemical products an individual may purchase, helps prevent “meth smurfing” – the purchasing of legal amounts of ephedrine products but in many separate purchases.  The United States asserts that Medical Center Pharmacy unlawfully sold listed chemical products without DEA authorization, did not properly maintain logbooks, and did not train employees.

“Pharmacies that are given the commercial benefit of selling controlled substances must meet their legal burden of adhering to the strict requirements prescribed under the Controlled Substances Act.  We will aggressively pursue those who violate these requirements,” stated U.S. Attorney Duffy.  “Oxycodone and hydrocodone have similar chemical structures to heroin and are similarly dangerous.  The United States will not tolerate drug diversion or poor inventory control of highly abused and highly addictive prescription painkillers. This settlement conveys that message.”  

In addition to paying $750,000 in settlement to the government, Medical Center Pharmacy has committed to implementing new inventory control procedures to assure full accountability of all controlled substances.

“It is DEA’s responsibility to guarantee that pharmacies are held accountable for their role in ensuring powerful and potentially dangerous drugs are not diverted for illegal use,” said DEA San Diego Special Agent in Charge William R. Sherman. “DEA will continue to monitor and investigate pharmacies to ensure that they are following all federal regulations so that these potent drugs don’t end up on the streets of our communities.”

This matter was handled by Assistant U.S. Attorney Dylan M. Aste of the Affirmative Civil Enforcement Unit of the U.S. Attorney’s Office.

Assistant U.S. Attorneys Emily Allen (619) 546-9738 or Mark Conover (619) 546-6763

NEWS RELEASE SUMMARY – August 28, 2015

SAN DIEGO – Solomon Gordon Raymond, also known as Paul Anthony Raymond, was sentenced today to 57 months in custody by U.S. District Judge Roger T. Benitez for lying to banks on a series of business loan applications he used to take almost $500,000.

In addition to punishing Raymond for his fraudulent crimes, Judge Benitez increased Raymond’s sentence for the lies he told during testimony at his May 2015 trial. During the hearing, Judge Benitez described the defendant as “one of the worst conmen I have ever seen.” Raymond was taken into custody at today’s sentencing hearing to immediately begin serving his sentence.

Raymond was convicted by a jury of lying on several loan applications he submitted to Wells Fargo Bank, Bank of America, and the Bank of Escondido.  Each application contained numerous false statements and omissions regarding Raymond’s financial and business affairs, criminal history, and other aspects of his creditworthiness.  Evidence presented at trial established that Raymond was able to trick the banks into believing that he was a good candidate for the loans by strategically using a second social security number that was unmarred by his bad credit history and multiple prior bankruptcy filings.  Indeed, even though he had exited bankruptcy just a few months before his first loan application, Raymond falsely claimed to the lender that he had not undergone bankruptcy.  Raymond also lied about his criminal history, falsely claiming to the banks that he had never been arrested or convicted of a crime. 

Evidence at trial showed that Raymond told extraordinary falsehoods about his finances.  For example, he claimed that his income ranged from $308,841 to $543,933; in fact, his true income was only a fraction of these amounts.  To support his false claims he submitted fraudulent tax returns that appeared to have been filed with the IRS. At trial, the government proved that the file stamps on these tax returns were completely fabricated, and that the returns had never been submitted to the IRS.

Raymond also submitted forged bank and brokerage account statements to support his Bank of Escondido application, showing balances close to $400,000 in each account.  In fact, the balances in these accounts were substantially lower, with one account even having less than $100.

Just three days after Raymond collected the last payment of his nearly half million dollars from his fraudulent loans, he filed for bankruptcy, attempting to wipe away his obligation to repay these loans. Raymond has left the banks and the U.S. Small Business Administration (which guaranteed the loans) with hundreds of thousands of dollars in losses.

“Mr. Raymond’s string of lies and deceptions not only defrauded these banks – they also victimized the taxpayers whose funds are used to support business loans to deserving small businesses.  We are pleased that they jury saw through the additional lies he told at trial, and that he was appropriately punished for his misconduct,” said U.S. Attorney Laura Duffy.

U.S. District Judge Benitez also ordered Raymond to repay the victims $729,192 in restitution.

DEFENDANTS                               

Solomon Gordon Raymond (a.k.a. Paul Anthony Raymond )               Age: 54

Golden Valley, Minnesota

SUMMARY OF CHARGES

Four counts of False Statement in a Loan and Credit Application, in violation of 18 U.S.C. § 1014.

Maximum penalty: Thirty years in prison, $1,000,000 fine, restitution, and $100 special assessment, per count.

AGENCIES

Federal Bureau of Investigation

Small Business Administration Office of Inspector General

Social Security Administration Office of Inspector General

Treasury Inspector General for Tax Administration

 

Assistant U.S. Attorney Joseph J.M. Orabona (619) 546-7951

NEWS RELEASE SUMMARY – November 12, 2015

SAN DIEGO – On the day after Veteran’s Day 2015, former U.S. Navy sailor Leonard Damon Washington pleaded guilty to tax evasion and filing false tax returns for a scam that resulted in more than      $1 million in inflated tax refunds for fellow Navy service members, and over $140,000 in fraudulent tax preparation fees for Washington.  Washington entered his guilty plea before U.S. Magistrate Judge Barbara L. Major, and remains in custody pending a sentencing hearing on February 5, 2016.

According to admissions in court and in his plea agreement, Washington was an active-duty sailor aboard the USS Higgins in San Diego in 2010 when he marketed himself to more than 140 Navy service members as someone who could assist in preparing and filing income tax returns.  Washington convinced his fellow Navy service members to hire him as their tax preparer, and to pay him the exorbitant fee of $1,000 per return, by using a variety of false and misleading representations, including that he could obtain “special military tax” deductions and other special tax preparation services because of their military status.

Washington then prepared and filed false income tax returns on behalf of clients, including returns that claimed falsified gambling winnings and phantom tax withholdings, and thereby generated fraudulent tax refunds for his clients.  Although he received over $140,000 in preparation fees from clients, Washington concealed his role as their paid tax preparer from the Internal Revenue Service (IRS).  Washington directed his fraudulently-acquired fees into various bank accounts (including nominee accounts) in order to frustrate and impede the IRS’s efforts at determining his true income.  Ultimately, Washington spent a substantial portion of his fraud proceeds on hotels, flights, restaurants, luxury items, jewelry and other personal expenses, and evaded more than $49,000 in personal federal income taxes he owed for 2010.

“This service member used his position in the U.S. Navy to recruit clients and cheat the system,” said U.S. Attorney Laura Duffy. “On the day after Veteran’s Day, when we are reminded of the amazing character and sacrifice of our best and brightest, this defendant stands in sharp contrast.” She reminded the public to always review a copy of any tax return prepared and filed on their behalf.

“Leonard Washington perpetrated a scheme that systematically defrauded the government, his fellow service members, and the taxpaying public,” said IRS Criminal Investigation’s Special Agent in Charge Erik Martinez.  “IRS Criminal Investigation will continue to vigorously pursue those who unjustly enrich themselves by preparing false income tax returns.”   

DEFENDANT                                  Criminal Case No. 15CR0951-JM

Leonard D. Washington                     Age: 43                       Springdale, Arkansas

SUMMARY OF CHARGES AGAINST DEFENDANT:

Count 1: Title 26, United States Code, Section 7201 B Tax Evasion.  Maximum penalties: 5 years’ imprisonment, $250,000 fine, $100 special assessment, 3 years of supervised release

Count 2: Title 26, United States Code, Section 7206(2) – Aiding and Assisting Preparation of False Tax Returns.  Maximum penalties per count: 3 years’ imprisonment, $100,000 fine, $100 special assessment, 1 year of supervised release

INVESTIGATING AGENCIES

Internal Revenue Service-Criminal Investigation

 

 

For Further Information, Contact: Assistant U.S. Attorneys Fred Sheppard (619) 546-8237, Valerie Chu (619) 546-6750, and Caroline Han (619) 546-6968

NEWS RELEASE SUMMARY – November 10, 2015

SAN DIEGO – Eight medical professionals and associates are charged in federal grand jury indictments with buying and selling patients in a bribery scheme involving $25 million in improper claims for medical services and devices which were then billed to California Workers’ Compensation insurance companies.

FBI agents along with investigators from the California Department of Insurance and the San Diego County District Attorney’s Office served five search warrants and three seizure warrants today at locations in San Diego, Chula Vista, National City, Murietta and Los Angeles. Authorities arrested five people, including a radiologist, a chiropractor, a medical equipment provider, a medical clinic administrator and a so-called medical marketer. An attorney and a medical service provider were summoned to appear in federal court on Thursday.  One indicted defendant, Gonzalo Paredes, remains a fugitive and a warrant has been issued for his arrest.

These defendants, plus six corporations, are charged in three federal grand jury indictments unsealed today with conspiracy and honest services mail fraud. The indictments allege that these players either paid or received tens of thousands of dollars to buy or sell hundreds of patients, without the patients’ knowledge - therefore depriving those patients of their right to their doctors’ honest services.

“Today’s indictments are only the first wave of charges in what we believe is rampant corruption on the part of some physicians and chiropractors in their dealings with the health care system in general, and California’s Workers’ Compensation System in particular,” said U.S. Attorney Laura Duffy. “A patient puts his trust, and his very life, into the hands of his physician. A doctor’s decisions should never, under any circumstances, be influenced by anything other than the patient’s best interest.”

“Today's indictments show how the defendants in this case allowed greed and corruption to influence their patient care decisions and treated their patients as a commodity to be bought and sold,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI will continue to use our intelligence and investigative expertise to identify, disrupt and dismantle sophisticated criminal conspiracies that unlawfully enrich individuals at the expense of patient care. The FBI and our law enforcement partners are committed to rooting out corruption in our health care system.”

“This criminal network bought and sold patients like cattle,” said District Attorney Bonnie Dumanis. “They cashed in on people who trusted them with their health and they conspired to illegally game the system on a level that we’ve not seen before. But, the game is over.”

“Our detectives from the California Department of Insurance worked closely with the FBI, United States Attorney's Office and San Diego District Attorney's office to investigate and arrest these medical providers for insurance fraud, which adds crippling costs to California's workers compensation system,” said Department of Insurance Commissioner Dave Jones. “These are not victimless crimes. When medical providers defraud insurers, those costs are passed on to California businesses and consumers, who already are struggling to make ends meet.”

This is how the schemes worked:

Patients who said they were injured on the job filed a workers’ compensation claim with the state of California and sought treatment for their injury. In this round of indictments, the workers sought help from a chiropractor.

The chiropractors were the gateway to a wide-array of health care fraud. In these cases alone they prescribed medical equipment, referred the patients for MRIs and X-Rays, and ordered specialized treatments such as Shockwave therapy.

As alleged in one of the indictments, Los Angeles radiologist Ronald Grusd paid bribes to a San Diego chiropractor in exchange for patient referrals. The bribes were funneled to the chiropractor via Grusd’s corporation, Willows Consulting, a shell company. The checks were labeled “professional services,” but this was a sham.

In order to further hide the illegal kickbacks, checks were issued to intermediaries - defendants Alexander Martinez and his father, Ruben - through their front companies, “Line of Sight” and “Desert Blue Moon.” The Martinezes took their “cut” and then, in turn, paid off the chiropractor.

Grusd’s practice, California Imaging Network Medical Group, has clinics in San Diego, Los Angeles, Beverly Hills, Fresno, Rialto, Santa Ana, Studio City, Bakersfield, Calexico, East Los Angeles, Lancaster, Victorville and Visalia.

In another indictment, a second San Diego chiropractor, Dr. George Reese, with offices on El Cajon Boulevard, referred patients to a Los Angeles area medical service provider (controlled by attorney Lee Mathis and Fernando Valdes, president of Foremost Shockwave Solutions ) in return for bribes. The bribes were set by the conspirators at $100 per patient and paid through an intermediary. After taking a cut amounting to $25 per patient, the intermediary would pay the remaining $75 per patient to Reese.

Although disguised as “office rent” payments, the illegal bribes were paid in cash during clandestine exchanges in restaurants and parking lots. For example, $6,000 in cash was delivered to Reese in the parking lot of the Jolly Roger in Oceanside, hidden in a gift bag. Other times, it was passed in envelopes or stashed inside newspapers.

According to the indictment, Reese and his codefendants generated and submitted bills to insurers totaling in the tens of millions of dollars. Most of these treatments involved the providing of “Shockwave therapy,” which uses low energy sound waves to initiate tissue repair. Proceeds from the insurance claims generated through this scheme were paid to Mathis and Valdes.

In the final indictment, a San Diego chiropractor referred patients to a licensed provider of durable medical equipment, Julian Garcia. In return Garcia paid the chiropractor $50 for each patient – in cash, to disguise the kickbacks. Garcia then improperly billed Workers Comp insurers millions for hot and cold packs for patients who had been secured by bribes.

Anyone with information about healthcare fraud may call the FBI at 1-800-CALL-FBI, or 1-800-225-5324 or the California Department of Insurance’s toll-free fraud hotline, 800-927-4357.

An arrest itself is not evidence that the defendant committed crimes charged.  The defendant is presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

DEFENDANTS                                Case Number: 15cr2821-BAS                     

Ronald Grusd                                     Age 69                                    Los Angeles, CA    

**Gonzalo Ernesto Paredes               Age 59                                    LaVerne, CA

Alexander Martinez                            Age 37                                    Calexico, CA

Ruben Martinez                                  Age 59                                    Murietta, CA

California Imaging Network               Incorporated in 2007                Beverly Hills, CA

Willows Consulting Company            Incorporated in 2011                Beverly Hills, CA

Line of Sight, Inc.                               Incorporated in 2002                Calexico, CA

Desert Blue Moon                              Incorporated in 2001                Las Vegas, NV

DEFENDANTS                                Case Number: 15cr2822-CAB

George K. Reese                               Age 50                                       San Diego, CA

*Lee Mathis                                        Age 70                                       San Clemente, CA

*Fernando Valdes                              Age 50                                       Westminster, CA

George K. Reese Chiropractic Corp. Incorporated in 2001                  San Diego, CA

Foremost Shockwave Solutions         Incorporated in 2005                 Garden Grove, CA

DEFENDANT                                  Case Number: 15cr2820-BAS

Julian Garcia                                       Age 32                                       National City, CA

SUMMARY OF CHARGES

Conspiracy to Commit Honest Services Mail Fraud, in violation 18 U.S.C. 371

Maximum Penalty: Five years in custody; $250,000 fine and three years’ supervised release

Honest Services Mail Fraud, in violation of 18 U.S.C. Secs. 1341 and 1346

Maximum Penalty: Twenty years in custody; $250,000 fine or twice the pecuniary gain or loss, whichever is greater, and three years’ supervised release

Travel Act, in violation of U.S.C. 1952

Maximum Penalty: Five years in custody; $250,000 fine and three years’ supervised release

INVESTIGATING AGENCIES

Federal Bureau of Investigation

San Diego County District Attorney’s Office

California Department of Insurance

*Not arrested, but were summoned to appear before a judge on Thursday.

**Still at large

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assistant U. S. Attorney Christopher P. Tenorio (619) 546-8413

NEWS RELEASE SUMMARY – November 6, 2015

San Diego, CA - William Ison, who recruited investors by making bogus claims during presentations at financial seminars throughout the United States, was sentenced today to 27 months in custody for defrauding investors, including several from San Diego, of approximately $7 million. U.S. District Judge Dana M. Sabraw also ordered Ison to pay back victim losses as restitution.

Ison previously admitted making fraudulent presentations to potential investors to persuade them to invest in “private placement programs” with co-defendant Douglas Ellingson (who was previously sentenced to 18 months in custody for his role in the scheme).  Ison, who represented he was President of Blue Diamond Excavation, Inc. (“BDE”), a mining excavation company based in Newport Beach, claimed investors’ funds would be secured by the company’s assets worth $86 billion, which he had already used to secure medium-term notes (“MTNs”) valued at over $2 billion. In fact, BDE had not produced any income from mining and had not obtained any MTNs.

In addition to lying to seminar participants that he personally made more than $100 million through an investment program, Ison also falsely claimed he managed a consortium of large non-profit foundations that donated more than a trillion dollars annually to various humanitarian causes.  Many victims reported they were induced to participate in the scheme only because of Ison’s promises that a portion of profits would go to successful charities that eradicated poverty and developed a cure for AIDS.

Ison and Ellingson, who together were responsible for over $10 million in victims’ losses, initially participated in a scheme involving the Winsome Investment Trust, with James Pantazelos and Robert Andres. Both Pantazelos and Andres were prosecuted for their roles in related fraud schemes. Pantazelos was sentenced in Chicago to 114 months in custody and ordered to pay over $3.3 million in restitution on February 15, 2013 (United States v. Pantazelos, No. 11CR50078 (N.D. Ill. 2011)).  Andres was sentenced in Utah to 56 months in custody and ordered to pay over $3.2 million in restitution (United States v. Andres, No. 11CR0985-RJS (D. Utah 2011).

Judge Sabraw noted that the victims were injured in “immeasurable ways” as a result of Ison’s intentional misrepresentations that he knew would cause smart people to part with a lot of money, including from withdrawals of college and retirement savings.

U.S. Attorney Laura Duffy said, “Although we are comforted that these defendants can no longer target citizens in fraudulent get-rich-quick schemes under the guise of humanitarian charity, we understand there is no shortage of con men who seek to separate people from their savings. Thankfully, the FBI and IRS will maintain their vigilance for such scams.”

“Today’s sentencing marks the successful end of an investigation that uncovered an investment fraud scheme laced with a web of financial lies that generated millions of dollars through false promises and deceit,” said Special Agent in Charge Erick Martinez of IRS-Criminal Investigation. “Ison took advantage of unsuspecting investors for purported humanitarian causes. Hopefully he will now understand that his irresponsible actions have real consequences.”

DEFENDANT                                  Case Number:           12CR4030-DMS

William Ison                                        Age: 55                    

SUMMARY OF CHARGE                                                                 

Title 18, United States Code, Sections 371, 1343 (Wire Fraud Conspiracy)

Maximum penalty: 5 years of custody; $250,000 Fine (or twice the gross loss of the offense

AGENCIES

Federal Bureau of Investigation

Internal Revenue Service

Assistant U.S. Attorney W. Mark Conover (619) 546-6763

NEWS RELEASE SUMMARY – November 2, 2015

SAN DIEGO – San Diego attorney Todd Macaluso, whose practice included representing plaintiffs in personal injury lawsuits, was sentenced today to five months in prison and ordered to pay $150,000 in restitution and a $100,000 fine for engaging in a scheme to defraud clients and investors.

Macaluso, who pleaded guilty in March, has admitted that he entered into funding agreements with investors that put his clients’ personal injury cases up as collateral without their knowledge or consent, and that he forged the signatures of his clients and used forged notary stamps and signatures in order to convince potential investors to advance him millions of dollars.

According to court records, Macaluso funded his personal injury law practice by entering into these funding agreements with various investors.  Under these agreements, investors advanced Macaluso money in exchange for the right to collect a portion of his clients’ recoveries in the future.  Although clients had to consent to the collateralization of their lawsuits in order for these transfers to be valid, Macaluso concealed these arrangements from many of his clients and forged their signatures on the financing documents.  To conceal his scheme, Macaluso also forged the signatures and stamps of notary publics who purportedly witnessed the executions of these legal documents, but who (like his client) had no knowledge of the arrangements.

Because these funding agreements provided for extremely high rates of return, and the repayment schedules adjusted upward every six months, some agreements eventually required Macaluso to repay investors 200% of the original investment.  These extreme rates of return gave Macaluso a strong incentive to settle his clients’ personal injury cases quickly.  But Macaluso concealed from several clients this added pressure on him to secure a settlement before the next rate adjustment.

“Macaluso’s clients were stabbed in the back by the lawyer who was supposed to have their back,” said U.S. Attorney Laura Duffy. “Today there is a modicum of justice for them.”

FBI Special Agent in Charge Eric S. Birnbaum said, “Today's sentencing holds Mr. Macaluso accountable for violating his fiduciary responsibilities and betraying his clients' trust. The FBI is committed to maintaining the integrity of our justice system  and will aggressively pursue  those who act unethically and unlawfully at the expense of the American public.”

Macaluso was sentenced by U.S. District Court Judge Roger T. Benitez.

DEFENDANT                                  Case Number:  15cr0948-BEN

TODD E. MACALUSO                    Age: 53           Rancho Santa Fe, California

SUMMARY OF CHARGE

Title 18, United States Code, Section 1343 - Wire Fraud.  Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

AGENCY

Federal Bureau of Investigation

Assistant U.S. Attorneys Phillip L.B. Halpern (619) 546-6964 and Andrew G. Schopler (619) 546-8068

NEWS RELEASE SUMMARY – October 23, 2015

Timothy Francis Cashman, a Building Manager for the General Services Administration (“GSA”), was sentenced to 16 months in custody today for accepting bribes and stealing property owned by the United States.

At a sentencing hearing today, Judge Gonzalo P. Curiel noted that Cashman was a religious man who performed many good deeds and selfless acts throughout his life. Nevertheless, he told the packed courtroom of friends, family, and supporters who requested leniency for Cashman that it was vital the general public understood that “quid pro quo is not the status quo; quid pro quo is not acceptable.”

During the sentencing, the government demonstrated how Cashman used his position with GSA (overseeing operations and maintenance at the Otay Mesa, San Ysidro, and Tecate Ports of Entry) for his personal enrichment; rather than to fulfill GSA’s core mission of delivering “the best value in real estate, acquisition, and technology services to government and the American people.”

Over a number of years, Cashman provided favorable treatment relating to the awarding of GSA contracts.  For example, he demanded $10,000 in cash and thousands of dollars’ worth of construction and renovation services on Cashman’s personal residence from government contractor Hugo Alonso Inc. (“HAI”).  These services included having HAI paint Cashman’s Lakeside home and replace his roof and windows free of charge.

The former GSA building manager also demanded that HAI pay another government contractor (Company “A”) $120,000 in exchange for HAI being awarded a GSA construction contract at the Otay Mesa POE. Subsequently, Cashman accepted six checks from Company “A” totaling $42,000, which he deposited into his personal account.  All of the income he received from HAI was concealed from the IRS when submitting his federal income tax returns.

In addition to accepting bribes from HAI, Cashman improperly obtained thousands of dollars in valuable United States Government building materials for his own benefit by causing GSA contractors and others to remove and transport such materials away from GSA facilities where he could sell or use them without the knowledge of GSA.  Among other things, Cashman instructed government contractors: (1) in March 2011, to load approximately 25 stainless steel panels located at the San Ysidro POE into his personal Ford truck; (2) in January 2012, to load 35 heavy brass letters (spelling out “United States Border Inspection Station” and weighing approximately 2,000 pounds) into his personal truck; (3) in December 2012, to collect approximately 3,000 feet of underground copper cable belonging to the United States and to deliver it to, among other places, his personal residence; and (4) in November 2013, to set aside for his personal sale a large quantity of underground copper cable and approximately 5 aluminum panels located at the Otay Mesa POE.

United States Attorney Laura E. Duffy remarked that the Cashman case demonstrates that combatting public corruption in all its forms will remain one of her office’s highest priorities. She also thanked the Special Agents with the FBI, IRS-CI and GSA-OIG whose tireless work both uncovered this corruption and resulted in removing the corrupt official from the government fisc.

In addition to his custodial sentence, Cashman was also sentenced to three years of supervised release and ordered to pay $50,057.32 in restitution. HAI, and its principal, Hugo Alonso, previously pleaded guilty and were sentenced.  In total, 11 individuals have been apprehended and pleaded guilty in related corruption investigations.

DEFENDANT                                  Criminal Case No.  14CR3621-GPC                                              

Timothy Francis Cashman                  Age: 54                       Lakeside, CA

SUMMARY OF CHARGES

Count 1:          18 U.S.C. § 371 - Conspiracy to commit bribery and theft of government property

Maximum Penalty: 5 years’ imprisonment and a $250,000 fine

Count 2:          26 U.S.C. § 7206(1) - Filing False Tax Return

                        Maximum Penalty:  3 years’ imprisonment and a $250,000 fine

AGENCIES

Federal Bureau of Investigation

Internal Revenue Service – Criminal Investigations

General Services Administration – Office of Inspector General

 

Assistant U. S. Attorney David Finn (619) 546-7342  

NEWS RELEASE SUMMARY – October 22, 2015

SAN DIEGO – Federal officials seized control of a sophisticated cross-border super tunnel last night following a six-month undercover investigation that resulted in the arrests of 22 people in San Diego and Tijuana and the confiscation of 12 tons of marijuana.

The tunnel, approximately eight football fields in length, stretches from a warehouse in Tijuana to the Otay Center Warehouse, located at 2587 Otay Center Drive in San Diego. The passageway is believed to be equipped with lighting, electricity and a rail system and is one of the largest tunnels uncovered along the southern border in recent years.

Isaias Enriquez-Acosta and Isidro Silva-Acosta were arrested and charged in federal complaints this morning with unlawful conspiracy to import a controlled substance and conspiracy to use border tunnels and passages. They are scheduled to make their first court appearances at 2 p.m. today before U.S. Magistrate Judge David Bartick.

Mexican officials reported 16 arrests and the seizure of 10 tons of marijuana at the Tijuana tunnel entrance; San Diego County Sheriff’s officials arrested four people in connection with tunnel activity. Federal authorities here have seized almost 2 tons of marijuana and counting - they were still bringing bundles out of the tunnel today.

The newly-completed tunnel was discovered as a result of a six-month investigation by the Tunnel Task Force, which includes agents from Homeland Security Investigations, the Drug Enforcement Administration and U.S. Border Patrol. The Task Force began the investigation in May of 2015 with the introduction of  an undercover agent to Enriquez-Acosta, according to the complaint. The agent offered to help transport and store drugs for the defendants, the complaint said. The undercover agent also helped transport buckets filled with dirt away from the tunnel warehouse, the complaint said.

The enforcement action that led to the shuttering of the tunnel last night was triggered by a meeting at a San Diego restaurant between the undercover agent and the defendants yesterday. At that meeting, the defendants and the undercover agent discussed the logistics for moving loads of marijuana from the tunnel warehouse to another warehouse, the complaint said. This was an indication that a load was about to be moved through the tunnel from Mexico to the U.S. Officials believe this was the first time the tunnel was used to move a significant quantity of drugs.

Silva was taken into custody Wednesday about 5:30 p.m. as about 30 agents from Homeland Security Investigations’ Special Response Team moved to take down the tunnel; Enriquez was arrested at a nearby hotel. In the front room of the Otay Center Warehouse, agents found a hole in the floor about 3-feet in diameter which led to a shaft descending approximately 32 feet down into the ground. The shaft connected to an underground tunnel leading towards the U.S.-Mexico border. Agents saw plastic-wrapped marijuana bundles stacked inside the tunnel.

“We see a super tunnel open for business once every year or so,” said U.S. Attorney Laura Duffy. “Just when traffickers think they’re ready to move, we put them out of business. We continue to make good on our promise to relentlessly pursue and shut down any tunnel as soon as it opens.”

"Federal agents on the San Diego Tunnel Task Force have once again taken down a sophisticated cross border drug smuggling tunnel that was fully operational under the San Diego-Tijuana border,” said Dave Shaw, special agent in charge for ICE Homeland Security Investigations in San Diego. “The success of this investigation is yet another example of our commitment to secure the border while combating the increasingly dangerous underground smuggling activity.”

The marijuana seized in connection with the tunnel has an estimated street value of nearly $6 million. The tunnel dismantled Wednesday is the 10th large-scale drug smuggling tunnel discovered in the San Diego area since 2006. In the last five years, federal authorities have detected more than 75 cross-border smuggling tunnels, most of them in California and Arizona.

DEFENDANT                                  Case Number: 15MJ3133

Isaias Enriquez-Acosta                       Age: 53           Tijuana, Mexico

Isidro Silva-Acosta                             Age: 27           Tijuana, Mexico                   

SUMMARY OF CHARGES                                                                

Conspiracy – Unlawful Importation of a Controlled Substance, in violation of Title 21, United States Code, Sections 952, 960 and 963

Maximum penalty: Life in prison

Conspiracy – Border Tunnels and Passages, in violation of 18 United States Code, Section 555(d)

Maximum Penalty: Life in prison

AGENCIES

Tunnel Task Force, including agents from Homeland Security Investigations, Drug Enforcement Administration and U.S. Border Patrol

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Assistant U. S. Attorney Benjamin Holley (619) 546-7952

NEWS RELEASE SUMMARY – October 13, 2015

SAN DIEGO – Susan Polmar of Carlsbad was sentenced in federal court today to 41 months in custody for stealing more than $4.6 million in a wire fraud scheme spanning six years.

As detailed in court filings, Polmar, a small-business owner, created a kiting scheme in which she submitted false customer information to a payment processing company, received advanced payment, and then covered the resulting debit by creating yet more fraudulent customer data. She then took money from the falsely inflated business accounts to fund numerous luxuries, including spending over $33,000 on trips to Disneyland and over $130,000 in construction on her Carlsbad home. Her fraud continued from 2007 through 2013, when it was discovered by an internal audit conducted by the owners of the payment processing company Polmar used.

The federal investigation, led by agents and detectives of the United States Secret Service’s San Diego Regional Fraud Task Force, revealed that the scheme required near-daily action by Polmar to maintain and that, over the course of her fraud, Polmar’s non-sufficient fund payments (from which she skimmed money for her personal and business use) totaled approximately $865 million.

During the sentencing hearing, Polmar also admitted that, after the investigation into her fraudulent conduct began but before she pleaded guilty, she defrauded the Pacific Rim PTA (of which she was then-President) by submitting false invoices for reimbursement totaling $3,700. After that fraud was discovered, Polmar repaid the money to the PTA.

At the sentencing hearing, United States District Court Judge Larry Alan Burns noted that Polmar had many positive qualities, including a supportive family and no criminal record. But, the judge said, the fact that Polmar stole millions of dollars for her personal expenses, especially when combined with her continued financial fraud after knowing of the federal investigation, justified a severe sanction. He accordingly imposed a 41-month prison sentence, to be followed by three years of supervised release. The judge also ordered Polmar to repay $4,655,464.34. At the conclusion of the hearing, Polmar was remanded into custody to begin serving her sentence.

DEFENDANT                                  Case Number: 15CR1075-LAB

Susan Polmar                                      Age: 47                                 

SUMMARY OF CHARGE                                                                    

Wire Fraud, in violation of Title 18, United States Code, Section 1343     

Maximum penalty: 20 years

AGENCY

United States Secret Service

Assistant U. S. Attorney Alessandra Serano (619) 546-8104

NEWS RELEASE SUMMARY – October 9, 2015

SAN DIEGO – U.S. Border Patrol Supervisory Agent Martin Rene Duran was arrested yesterday and charged with using his official position to create bogus alerts in a border-security law enforcement database so that a lawful U.S. resident and frequent border crosser would be repeatedly detained by Customs and Border Protection officers, sometimes at gunpoint.

According to a complaint unsealed in federal court today, Duran’s target was a man who had instigated a criminal investigation in Mexico of Duran’s brother-in-law, Raymundo Estrada Figueroa, who is accused of raping and abusing the man’s 11-year-old son for two years. Estrada was a boyfriend of the child’s mother at the time; the abuse is alleged to have taken place between 2010 and 2013 in Tijuana.

Estrada is charged in the same complaint as Duran with two counts of traveling from the United States to Mexico to engage in illicit sexual conduct. One count relates to the border crosser’s son; the other is in connection to that boy’s half-brother.

Duran, a supervisor at the Imperial Beach Border Patrol Station, was taken into custody at the Otay Mesa Port of Entry; Estrada was arrested at his Chula Vista home. Both appeared in federal court today; both will remain in custody until a detention hearing on Wednesday, October 14, 2015 at 2 p.m. before U.S. Magistrate Judge William V. Gallo.

The border crosser who reported the sexual abuse of his son is identified in court documents only by his initials, “R.C.” to protect his son’s identity. According to the complaint, R.C. - a Mexican national and legal U.S. resident with no criminal background - was sent to secondary and detained on five occasions at the San Ysidro border crossing in 2013 based on the false alerts entered by Duran into the system known as TECS, which is the principal database used by officers at the border to assist with screening and determinations regarding admissibility of arriving persons.

Duran’s alerts indicated, among other things, that R.C. was “known to carry firearms,” and that he was “associated with recent threats to CBP personnel.” Every time he was detained, no weapons or contraband were found and R.C. was released. On one occasion, R.C. and his wife were removed from their vehicle, handcuffed, separated from their minor children, escorted to the security office and put in a holding cell for almost two hours before they were released, the complaint said.

R.C. believed Duran was trying to pressure him into dropping the charges against Estrada in Mexico, the complaint said.

Duran is charged with five counts of unlawfully causing the detentions while acting under color of law, thereby willfully depriving R.C. of his Constitutional rights to liberty and freedom from unreasonable seizures, and three counts of falsification of records and obstruction.

In a separate complaint also unsealed yesterday, Duran was charged with firearms violations related to the purchase of guns in Arizona. The complaint alleges that Duran falsely claimed under penalty of perjury that he was a resident of Arizona when, in fact, he lived in Chula Vista.

“This type of corruption is in a category all by itself,” said U.S. Attorney Laura Duffy. “When an officer turns on those he is supposed to protect, and uses his significant power against law-abiding people who had faith in him, it’s a special kind of betrayal.”

"This investigation was a collaborative effort among a number of federal law enforcement agencies and demonstrates our commitment to address allegations of criminal misconduct by CBP employees,” said Kathryn Butterfield, Special Agent in Charge of Internal Affairs for U.S. Customs and Border Protection in San Diego. “Every CBP employee shares responsibility for promoting integrity and for meeting mission demands while sustaining the trust and confidence of the public we serve. An overwhelming majority of CBP personnel perform their duties with honor and distinction on a daily basis. However, CBP does not tolerate those who tarnish the badge and the agency’s reputation.”

“This investigation was conducted by agents from the U.S. Immigration and Customs Enforcement’s (ICE) Office of Professional Responsibility, Homeland Security Investigations, Custom and Border Protection Office of Internal Affairs, and the Department of Homeland Security Office of Inspector General. “We will move aggressively to investigate and bring to justice those who have allegedly betrayed the public’s trust. Guarding against illegal or unethical behavior is not an option; it’s an obligation we have to the people we serve.”

DEFENDANT                                

Martin Rene Duran                             Age: 46                       Chula Vista   

SUMMARY OF CHARGES                                                                   

Case Number: 15mj3002

Falsification of Records/Obstruction, in violation of Title 18, U.S.C., Sec. 15

Deprivation of Rights Under Color of Law, in violation of Title 18, U.S.C., Sec. 242

Case Number: 15mj2957

Illegal Transportation of Firearms, in violation of Title 18, U.S.C., Sec. 922(a)(3) and

924(a)(l)(D) Maximum Penalty:

DEFENDANT                                

Raymundo Estrada Figueroa              Age: 48                       Chula Vista               

SUMMARY OF CHARGES

Case Number: 15mj3002                                                  

Two counts, Travel in Foreign Commerce to engage in illicit sexual conduct, in violation of 18 U.S.C. 2423(c)

AGENCIES

Homeland Security Investigations

Immigration and Customs Enforcement – Office of Professional Responsibility

Bureau of Alcohol, Tobacco Firearms and Explosives

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

  

Today, a federal jury in Tucson, Arizona, found Ivan Soto-Barraza, 37, and Jesus Leonel Sanchez-Meza, 27, guilty of first-degree murder and other offenses for the murder of United States Border Patrol Agent Brian Terry, announced U.S. Attorney Laura E. Duffy for the Southern District of California. 

According to evidence presented at trial, during the evening of Dec. 14, 2010, Soto-Barraza, Sanchez-Meza and three other men were in the United States for the purpose of robbing drug traffickers of their contraband.  While Agent Terry and three other Border Patrol Agents were engaged in the performance of their official duties, members of the defendants’ group exchanged gun fire with the agents and one of the shots fired by a member of the defendants’ group killed Agent Terry.

The jury found both Soto-Barraza and Sanchez-Meza guilty of first-degree murder, second degree murder, conspiracy to interfere with commerce by robbery, attempted interference with commerce by robbery, using and carrying a firearm during a crime of violence and assault on Agent Terry and three additional federal officers – Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller.  The court scheduled the defendants’ sentencing hearing for Dec. 9, 2015.  Both defendants face a mandatory sentence of life on the first degree murder charge (count 1).

“With these convictions, we have taken another important step towards securing justice for Agent Brian Terry,” said Attorney General Loretta E. Lynch.  “Today’s verdict is the result of years of tireless effort from dozens of dedicated law enforcement officers, prosecutors, and investigators committed to ensuring that the murder of their friend and colleague does not go unpunished.  The Department of Justice will continue to relentlessly pursue the remaining individuals responsible for Agent Terry’s loss, and to uphold the values of courage, duty, and honor that he embodied with his life and service.”

“Agent Terry gave his life protecting our country.  Today’s verdict cannot undo that tragedy and loss, but brings another measure of justice to Agent Terry’s family and the United States,” said U.S. Attorney Duffy.  “I commend the prosecution team, the Federal Bureau of Investigation, the United States Border Patrol and all other law enforcement partners who have assisted in the investigation and prosecution.”

Two other men, Manuel Osorio-Arellanes and Rosario Rafael Burboa-Alvarez, previously pleaded guilty to first-degree murder for their roles in Agent Terry’s death.  Yet another two men, Jesus Rosario Favela-Astorga and Heraclio Osorio-Arellanes, remain fugitives.

At trial, the United States was represented by attorneys from the Southern District of California, Special Attorneys Todd W. Robinson and David Leshner.  The U.S. Attorney’s Office for the District of Arizona is recused.  The case was investigated by the Federal Bureau of Investigation.

Special Assistant U. S. Attorney Emily Reuter (619) 546-9706

NEWS RELEASE SUMMARY – September 28, 2015

SAN DIEGO – The last of four defendants was sentenced in federal court today to 37 months in custody for smuggling more than 11,600 pounds of marijuana on two panga boats traveling together in international waters approximately 115 nautical miles southwest of Ensenada, Mexico.

This is the largest marijuana interdiction by the U.S. Coast Guard off the California coast since 2011.

Armando Rodriguez-Ramirez was sentenced by U.S. District Judge Marilyn L. Huff. The defendant pleaded guilty on January 15, 2015 to Conspiracy to Import Marijuana Intended for Importation. Defendants Reyes Rodriguez-Gomez, Jose Transito Rangel-Luna and Francisco Antonio Castro-Aviles previously entered guilty pleas to the same crime and were sentenced to 78, 30 and 21 months, respectively.

“We aren’t going to let our oceans become a freeway for drug traffickers,” said U.S. Attorney Laura Duffy. “Smugglers might think the vast Pacific is a good place to be invisible, but these defendants know otherwise.”

According to the complaint, the four defendants were arrested on July 29, 2014, after their two drug smuggling vessels were spotted by a Coast Guard aircrew from Air Station Sacramento, California. The Coast Guard Cutter Stratton from Alameda, California, and Cutter Petrel from San Diego, were patrolling in the area and launched pursuit boats to intercept the vessels. The defendants abandoned an approximately 55-foot vessel laden with marijuana and fled in a 35-foot panga.

The Coast Guardsmen chased the defendants for approximately two hours before they stopped the fleeing vessel by shouldering it, thus allowing a Coast Guard boarding team to take the defendants into custody. The drug-laden panga as well as floating bales of marijuana were also recovered by the Coast Guard. The Coast Guard Cutter Haddock from San Diego also participated in the interdiction.

The crew of the Cutter Petrel turned the four defendants over to agents from Homeland Security Investigations who investigated the crime, according to the complaint.

“The success of prosecutors, investigators and Coast Guardsmen in this case highlights our whole-of-government campaign to combat the threats posed by violent transnational organized crime networks, which erode stability, security and prosperity in the Western Hemisphere,” said Vice Adm. Charles Ray, commander, Coast Guard Pacific Area. “Together we stand ready to target, attack and disrupt criminal networks using all of the authorities, capabilities, competencies and partnerships our Nation has to offer, both at home and abroad.”

“Homeland Security Investigations is committed to combating the threat of transnational criminal organizations and their illicit smuggling activity whether it be by land, air or sea,” said Mike Carney, deputy special agent in charge for ICE Homeland Security Investigations in San Diego. “In this smuggling event the San Diego Maritime Task Force, comprised of investigators from HSI, U.S. Border Patrol, San Diego Sheriff’s Department, San Diego Harbor Police and the Coast Guard Investigative Service, put together a strong case building upon the great work of the crew of the U.S. Coast Guard Cutter Stratton.”

In his plea agreement, Rodriguez-Ramirez admitted that the larger of the two pangas was loaded with about 5,305 kilograms of marijuana and that he and fellow crew members were helping transport it to the U.S. for distribution.

The Coast Guard and its interagency partners have seized more than 30,000 pounds of marijuana off the California coast in Fiscal Year 2015, which runs from Oct. 1, 2014, to Sept. 30, 2015. In Fiscal Year 2014, Coast Guardsmen seized more than 121,000 pounds of marijuana worth over $110 million. Coast Guard officials attribute the increased law enforcement presence in the California Coastal Region, through interagency operations, with the drop in maritime smuggling efforts.

Armando Rodriguez-Ramirez was sentenced by U.S. District Judge Marilyn L. Huff.

 

DEFENDANT                                              Case Number: 14CR2415-H

Armando Rodriguez-Ramirez                     Age 24             Mazatlán, Mexico 

Other Defendants:

Reyes Rodriguez-Gomez                           Age 46             Mazatlán, Mexico

Jose Transito Rangel-Luna                        Age 49             Mazatlán, Mexico

Francisco Antonio Castro-Aviles                Age 25             San Quintin, Mexico

 

SUMMARY OF CHARGE                                                       

Conspiracy to Import Marijuana Intended for Importation, in violation of Title 21, United States Code, Sections 959, 960, and 963 

Maximum penalty: Life in prison, $10 million fine, $100 special assessment, and a term of supervised release of at least 5 years.

 

AGENCIES

U.S. Coast Guard

Homeland Security Investigations

 

Video from the Bust -

https://www.dvidshub.net/video/425675/coast-guardsmen-interdict-11000-pounds-marijuana

Photos from the offload -

https://www.dvidshub.net/image/1476095/coast-guard-cutter-stratton-offloads-seized-marijuana

Video from the Offload -

https://www.dvidshub.net/video/353064/coast-guard-cutter-stratton-offloads-12000-pounds-seized-marijuana

 

Assistant U.S. Attorney Emily W. Allen (619) 546-9738

NEWS RELEASE SUMMARY – September 25, 2015

SAN DIEGO – Amalia Martinez, the head of Small Business Administration (“SBA”) lending at the now- defunct La Jolla Bank, pleaded guilty today to conspiracy to misapply bank funds, admitting that she and other senior bank executives accepted cash bribes and kickbacks from borrowers in return for issuing hundreds of millions of dollars in loans to borrowers they knew were unqualified and unlikely to repay.  The mismanagement contributed to the bank’s collapse in February 2010, when the Federal Deposit Insurance Corporation (“FDIC”) took over and absorbed its outstanding debt of more than $1 billion.  That $1 billion tab was ultimately passed on to the taxpayers.

Beginning in 2004, Martinez and senior bank officers agreed to issue loans under favorable terms to high-volume borrowers they referred to as “Friends of the Bank,” or “FOBs.”  They accepted fraudulent loan applications from the FOBs, and overlooked negative information about the borrowers’ creditworthiness.  When the FOBs defaulted on their repayment obligations, the bank executives would issue more loans, so that the borrowers could use bank funds to make payments on their existing loans.  In this way, the executives covered up the bank’s true poor performance, and allowed the bad loans to inflate their performance measures—which, in turn, increased their compensation from the bank.

Several of the FOBs participated in the conspiracy by making large cash payments in return for loans.  In late 2007, one construction borrower handed $100,000 in cash to a senior bank official, who went on to share that money with Martinez and others.  Another borrower, who received $75 million in loans, met with the same bank official in Las Vegas in 2008, where he hand-delivered $250,000 in cash.  In 2006, a restaurant owner paid $50,000 in cash in return for loans; later, when the borrower struggled to repay his debts, Martinez arranged to issue another $150,000 loan, to be used to make payments on existing debts.

The conspirators also took efforts to cover up the scheme.  In 2009, as the bank was failing, regulators began to investigate La Jolla Bank’s poor performance.  In order to conceal the mismanagement and self-dealing from the regulators, senior bank officials directed Martinez and other co-conspirators to destroy fraudulent financial statements and “FOB” designations contained within the bank’s files, according to Martinez’s plea agreement.

Martinez admitted that she arranged to lend more than $55 million in SBA-backed loans as part of the conspiracy, and lost nearly $20 million in bank funds when those loans defaulted.  The bank’s conventional lending portfolio was much larger, resulting in hundreds of millions of dollars in loans issued as part of the conspiracy.

To date, three other defendants have been charged in this case.  SBA borrower Annand Sluman pled guilty and admitted paying cash bribes to Martinez in return for several SBA loans he was issued between 2006 and 2008.  By 2008, Sliuman was not qualified to borrow, and he submitted fraudulent documents as part of his loan application that made his businesses appear to be qualified. Sliuman’s assistant, Laura Ortuondo, assisted in creating the fraudulent loan documents.  She pled guilty to making false statements to investigators about her involvement in the case; as part of her plea, she also admitted that she destroyed evidence and instructed her then-husband to testify falsely on her behalf to help cover up the crime.

In August 2015, La Jolla Bank loan broker Jocelyn Brown was indicted for paying bribes to Martinez and others, in return for their help arranging loans for Brown’s borrowers. According to the indictment, Brown kicked back a portion of her broker commission to ensure that loans she referred to the bank were approved, regardless of the soundness of the loans and their benefit to the bank.  Brown was arrested on August 7, 2015, and her case is pending before United States District Judge Anthony J. Battaglia.  No trial date has yet been set.

“By accepting bribes in exchange for lending out the bank’s money, corrupt officials at La Jolla Bank exposed the bank to a substantial risk and, ultimately, ran the bank into the ground. Their greed cost the taxpayers, who had to step in and repay its depositors,” said U.S. Attorney Laura E. Duffy.  “Attacking corruption at financial institutions is one important tool we have to protect taxpayers and reduce the likelihood that our country will have to ‘bail out’ another bank.”  U.S. Attorney Duffy noted that the investigation of La Jolla Bank continues, and anyone with information is encouraged to call the Federal Bureau of Investigation at 858-320-1800.

“The Treasury Inspector General for Tax Administration is committed to investigating and prosecuting individuals to the fullest extent of the law when they choose to commit acts of bribery,” said Special Agent in Charge Rod Ammari. “Bribery will never be tolerated and TIGTA is committed to rooting out such illegal activity, especially when the millions of dollars that are lost from bribery are passed on to the hard working American taxpayer.”

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join our law enforcement colleagues in announcing today’s guilty plea,” said Wade V. Walters, Special Agent in Charge of the FDIC’s Office of Inspector General. “We are proud to have played a role in uncovering a complex conspiracy that contributed to substantial losses to the Deposit Insurance Fund. We are committed to continuing investigative efforts to protect the viability of the fund and ensure integrity in our nation’s banks.”

“Ms. Martinez abused her position of trust to unjustly enrich herself at the expense of American taxpayers," stated FBI Special Agent in Charge, Eric S. Birnbaum.  "The FBI is committed to using our investigative and intelligence capabilities to identify, disrupt and dismantle corrupt business practices within our financial industry.”

“When individuals defraud a bank they are in effect defrauding the community as well,” said Special Agent in Charge Leslie P. DeMarco of the Federal Housing Finance Agency’s Office of Inspector General. “It is particularly egregious when the individuals engaging in the fraud are the very individuals entrusted by the bank to serve the community. These individuals caused great harm to the bank, the community, and ultimately the taxpayers. We are committed to holding all bad actors accountable for their actions.”

Martinez’s guilty plea was taken before U.S. Magistrate Judge Bernard G. Skomal.  She is scheduled to be sentenced by Judge Battaglia on November 30, 2015 at 9:00 a.m. On September 12, 2014, Judge Battaglia sentenced Laura Ortuondo to three years’ probation including 12 months of home detention, and ordered her to pay a $3,000 fine. Annand Sliuman is scheduled to be sentenced by Judge Battaglia on December 14, 2015, at 9:00 am.

DEFENDANTS AND CHARGES:

Amalia Martinez, 15CR2471-AJB                 Age 51            San Diego, CA

Conspiracy to misapply bank funds, in violation of 18 U.S.C. § 371

Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary loss or gain, three years supervised release, $100 special assessment, restitution.

Jocelyn J. Brown, 15CR2049-AJB                 Age: 59           San Diego, CA

Conspiracy to commit bank bribery, in violation of 18 U.S.C. § 371

Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary loss or gain, three years supervised release, $100 special assessment, restitution.

Bank bribery, in violation of 18 U.S.C. § 215

Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or three times the value of the thing given, offered, or promised, five years’ supervised release, $100 special assessment, restitution.

Making a false statement to a federal agent, in violation of 18 U.S.C. § 1001

Maximum Penalties: 5 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.

Annand Sliuman, 13CR3673-AJB                 Age 34                        Spring Valley, CA

Bank bribery, in violation of 18 U.S.C. § 215

Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or three times the value of the thing given, offered, or promised, five years’ supervised release, $100 special assessment, restitution.

Laura Ortuondo, 13CR3879-AJB                  Age 34                        Cupertino, CA

Making a false statement to a federal agent, in violation of 18 U.S.C. § 1001

Maximum Penalties: 5 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.

AGENCIES

Federal Bureau of Investigation

U.S. Small Business Administration – Office of Inspector General

Treasury Inspector General for Tax Administration

Federal Deposit Insurance Corporation – Office of Inspector General

Department of the Treasury – Office of Inspector General

Federal Housing Finance Agency – Office of Inspector General

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Assistant U.S. Attorneys Nicholas Pilchak (619) 546-9709 and Mark Pletcher (619) 546-9714

NEWS RELEASE SUMMARY – September 24, 2015

SAN DIEGO – Imperial Valley businessman Octavio Cesar Sana, a Spanish national with legal U.S. residency, pleaded guilty today to running a years-long conspiracy to traffic in millions of dollars of counterfeit Chinese cell phone parts.

Sana pleaded guilty before U.S. Magistrate Judge William Gallo to conspiring to traffic in counterfeit goods and related money laundering charges. According to the plea agreement, Sana sold at least $3.2 million worth of counterfeit Chinese cell phone parts through businesses he has operated since 2007—including through a website called “Flexqueen.com.”

Sana was arrested February 3, 2015 at the Imperial Valley Airport, along with Chinese national Hongwei Du.  Du has also been charged with conspiracy to traffic in counterfeit goods.*

Sana admitted in his plea agreement that he and Du were attending meetings in the United States to set up further counterfeit trafficking ventures. The two were arrested in connection with a multi-year investigation spearheaded by Homeland Security Investigations (HSI) and the Internal Revenue Service, Criminal Investigations.  HSI executed a series of searches nationwide coordinated with the arrest of Sana and Du, including Tampa, Florida; Brownsville, Texas; Boston, Massachusetts; Atlanta, Georgia; Pittsburgh, Pennsylvania; Nashville, Tennessee; and Orange, San Diego and Imperial counties in California. These searches resulted in the seizure of more than 55,000 counterfeit items, and additional criminal charges in several jurisdictions.

According to the plea agreement, since 2007, Sana’s businesses have sold approximately $6.5 million of cell phone parts and accessories to businesses and consumers throughout the United States. Sana admitted, however, that roughly half of those parts were counterfeits, sourced almost exclusively from China.

Sana also admitted in his plea agreement that he and his co-conspirators used extensive methods to frustrate the ability of U.S. Customs and Border Protection to detect, inspect and intercept their imported counterfeit goods. An example of such deception included shipping merchandise with “protective stickers” strategically placed to obscure the products’ infringing trademarks. The plea agreement also explains that Sana and Du utilized a dedicated shipping channel for branded goods to avoid attention from Chinese customs officials.

In the United States, Sana admitted that he supervised at least four other individuals who worked at his businesses distributing counterfeit merchandise, including Angela Vela, who also pleaded guilty to separate charges in federal court in El Centro today before Judge Peter Lewis. Sana admitted wiring more than $3.1 million to a bank account in Hong Kong to pay for that merchandise and other items, and acknowledged that at least $3.2 million of merchandise sold by his business since 2007 was fake.

Sentencing for both defendants is scheduled for January 4, 2016 at 8:30 a.m.  before U.S. District Judge M. James Lorenz.

As part of his plea agreement, Sana has agreed to forfeit $3.2 million, along with 18 cell phones, 13 computers, and 2 hard drives seized the day of his arrest, and the two website domain names used by his businesses to sell the counterfeits.

“Trafficking in counterfeit goods threatens the integrity of the marketplace,” said U.S. Attorney, Laura E. Duffy. “Consumers who purchase sophisticated electronics equipment bearing a brand name trademark shouldn’t have to run the risk of being fleeced by a counterfeit.”  U.S. Attorney Duffy observed that trafficking in counterfeit goods is a profitable and growing criminal industry; U.S. Customs and Border Protection (CBP) reported that in 2014 alone, it intercepted an estimated $1.2 billion of counterfeit goods in more than 23,000 seizures.

Duffy commended the close coordination between the investigating agencies—the Department of Homeland Security, Homeland Security Investigations; the Internal Revenue Service, Criminal Investigations; and the U.S. Postal Inspection Service—during the lengthy investigation of this case.  The Department of Justice’s Office of International Affairs also provided invaluable assistance.

“The sale of counterfeit goods not only robs legitimate companies of billions in revenue every year, it also hurts the men and women who depend on those businesses for their livelihoods,” said David Shaw, Special Agent in Charge for HSI San Diego. “Beyond that, intellectual property theft poses a very real public safety threat, by generating proceeds for organized crime and introducing substandard, often dangerous goods into the commerce chain.”

“IRS Criminal Investigation will continue to focus on keeping illicit proceeds out of U.S. banks,” said Special Agent in Charge Erick Martinez. “Today's plea demonstrates the federal government is committed to maintaining the integrity of our financial system.”

Du, the remaining defendant, is next scheduled to appear in court on November 2, 2015.

DEFENDANT                                                                      Case No. 15-cr-2316-L                     

Octavio Cesar Sana                 42 years old                             El Centro, CA

CHARGES

Conspiracy to Traffic in Counterfeit Goods - 18 U.S.C. § 371

Maximum penalty: 5 years’ imprisonment and $250,000 fine

Money Laundering Conspiracy – 18 U.S.C. § 1956(h)

Maximum penalty: 20 years’ imprisonment and $500,000 fine     

RELATED DEFENDANTS                                                                     

Case No. 15-cr-526-L

Hongwei “Nick” Du               31 years old                             Shenzhen, China

Case No. 15-cr-612-L

Angela Rose Vela                   36 years old                             El Centro, CA

AGENCIES

Homeland Security Investigations

Internal Revenue Service – Criminal Investigations

U.S. Postal Inspection Service

*An indictment or complaint is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.

Assistant U.S. Attorneys Luella Caldito and Daniel C. Silva at (619) 546-9713

NEWS RELEASE SUMMARY – September 15, 2015

SAN DIEGO – Attorney Richard Medina, Jr. pleaded guilty today in federal court, admitting that he and others operated an unlicensed money transmitting business that illegally conducted almost $12 million worth of international financial transactions in violation of the Bank Secrecy Act.

Medina entered his plea before U.S. Magistrate Judge Bernard G. Skomal. In his plea agreement, Medina admitted that he and other defendants operated a commercial enterprise that collected cash from clients in the U.S. and transferred it to points around the world without registering the business with the Secretary of the Treasury, as required by law. Medina also pleaded guilty to a conspiracy charge.

Medina and his co-conspirators, Omar Trevino Caro Del Castillo and Francisco Cuevas, obtained commissions for their services, extracting a fee from the millions of dollars transmitted abroad. Caro Del Castillo and Cuevas have already pleaded guilty and are awaiting sentencing.

Medina, in his role in the conspiracy, illegally utilized his law firm’s “Interest on Lawyers’ Trust Accounts” (IOLTA) for receipt, transport, and transmission of cash to international destinations. Civil attorneys routinely receive client funds, known as “Trust money,” to be held in trust for future use – including IOLTA Accounts.

Medina acknowledged in his plea agreement that he “knew or had reason to know that the cash transactions described [therein] were proceeds of unlawful activity, or were intended to promote unlawful activity.”

Medina is scheduled to be sentenced on December 7, 2015 by U.S. District Court Judge Roger T. Benitez. U.S. Magistrate Judge Skomal allowed Medina to remain on pretrial release, pursuant to the terms of a bond posted by Medina.

DEFENDANT                                              Case No. 14cr2936                           

Richard Medina                                              Age: 39

SUMMARY OF CHARGES

Operating an Unlicensed Money Transmitting Business – Title 18, U.S.C., Section 1960

Maximum penalty: Five years in prison, $250,000 fine, and forfeiture

Conspiracy – Title 18, U.S.C., Section 371

Maximum penalty: Five years in prison

AGENCY

Federal Bureau of Investigation

Drug Enforcement Administration

Internal Revenue Service

 

Assistant U.S. Attorney Melanie K. Pierson (619) 546-7976

NEWS RELEASE SUMMARY – September 15, 2015

SAN DIEGO – David and Sandra Perez pleaded guilty in federal court today to charges relating to the sale of “Energy Wave” medical devices via the Internet – devices they marketed as an effective treatment for cancer and AIDS, yet had not received necessary approval from the U.S. Food and Drug Administration.

According to their plea agreements, the couple marketed the Energy Wave device over the Internet from their home in Carlsbad. They have since moved to Oregon. David Perez admitted scheming with the manufacturer of the devices, David Arthur, who marketed the “Energy Wave” device over the internet using the website www.myenergywave.com. Arthur previously pleaded guilty and is awaiting sentencing.

As detailed in court, the Energy Wave device consists of a micro-current frequency generator with a digital readout, two stainless steel cylinders and two personal application plates with connectors and lead wire for the cylinders and plates.  Users were provided with an operating manual and a list of Auto Codes that set forth hundreds of digital settings for the device, directed to specific conditions from abdominal pain, AIDS and diabetes to stroke, ulcer and worms. The Auto Codes and Manual advised users to connect the cylinders or plates to the machine and touch them to the body for a recommended run time to treat each condition.

David Perez admitted selling each device for approximately $1,200 to $1,500, and receiving gross proceeds of approximately $271,000.  He also acknowledged that he intended to defraud and mislead the FDA by attempting to evade the agency’s oversight of medical claims made regarding the Energy Wave device by maintaining a separate website (rifecodes.com) to which he referred customers who needed to obtain the auto codes that allegedly were effective in treating the various medical conditions.

Sandra Perez admitted assisting her husband by shipping the “Energy Wave” devices and depositing the funds necessary to pay coconspirator David Arthur for the devices. The couple admitted that they knew or should have known a number of their customers were vulnerable because they had purchased the device in an attempt to cure cancer, and that they were marketing the device without the proper FDA approvals.

“Those who are sick and desperate for relief are particularly vulnerable to scams, and we are doing our best to protect them from people who exploit the weak for their own financial gain,” said U.S. Attorney Laura Duffy.

“The FDA oversees approvals for medical devices to ensure that the public is protected from devices that are unsafe or ineffective,” said Lisa L. Malinowski, Special Agent in Charge, FDA Office of Criminal Investigations’ Los Angeles Field Office. “We will continue to commit our efforts to remove potentially dangerous medical devices from the U.S. marketplace.”

David Perez is scheduled to be sentenced January 11, 2016 before U.S. District Judge Roger T. Benitez.  His wife was sentenced by U.S. Magistrate Judge William Gallo to one year of probation, and ordered to perform 100 hours of community service and pay restitution of $1,495 to a purchaser of the device.

During today’s hearing, Judge Gallo stated:  “I believe you had to know at some level that this was junk science.”

DEFENDANT                                              Criminal Case No. 15cr0360-BEN                         

David Perez                                                    Age: 60

Medford, Oregon

Sandra Perez                                                   Age: 55

Medford, Oregon

SUMMARY OF CHARGES

David Perez:

Conspiracy– Title 18, U.S.C., Section 371

Maximum penalty: Three years in prison and $250,000 fine

Sandra Perez:

Sale of Unapproved Medical Devices-Title 21, U.S.C., Sections 331(a) and 333(a)(2), a misdemeanor

Maximum penalty: One year in prison and $100,000 fine

AGENCIES

Food and Drug Administration, Office of Criminal Investigations

Homeland Security Investigations

Postal Inspection Service

 

 

 

 

 

Assistant U.S. Attorneys Shane Harrigan (619) 546-6981 and Caroline Han (619) 546-6968

NEWS RELEASE SUMMARY – September 14, 2015

SAN DIEGO - Marchello Dsaun McCain was arraigned in federal court today on new charges that he made false statements to the FBI in connection with an international terrorism investigation of his brother, Douglas McCain, an American believed killed while fighting with the Islamic State of Iraq and the Levant (ISIL) in Syria.

According to the indictment, Marchello McCain made false statements to Federal Bureau of Investigation Joint Terrorism Task Force (FBI-JTTF) agents about his knowledge of his brother’s travel to Syria and the use of a credit card to purchase Douglas McCain’s airline tickets from the United States to Turkey, a transit point for individuals travelling to Syria. On August 26, 2014, several U.S. media outlets reported that Douglas McCain had been killed in Syria fighting for ISIL in a battle against the Free Syrian Army.

In January 2015, FBI-JTTF agents arrested Marchello McCain in connection with an indictment charging him with three counts of possession of firearms and ammunition by a felon.  A superseding indictment charging him with two additional counts of possession of firearms and ammunition by a felon and one count of possession of body armor by a violent felon was filed against him in March 2015.  The second superseding indictment was unsealed today during a hearing before U.S. District Judge Thomas Whelan. McCain is currently being held in custody without bond.

U.S. Attorney Laura E. Duffy praised the work of the FBI-JTTF in furthering our joint mission of safeguarding our national security by working countless hours on this investigation. The FBI-JTTF’s investigation of Douglas McCain’s travel to Syria is particularly important because it involves ISIL, a foreign terrorist organization which threatens to induce our youth into committing violence against foreigners and U.S. citizens alike.

Marchello McCain’s next court date is a motion hearing scheduled before District Judge Whelan on October 19, 2015.

This case is being prosecuted in federal court in San Diego by Assistant U.S. Attorneys Shane Harrigan and Caroline Han.  This case was investigated by the San Diego Joint Terrorism Task Force; the Federal Bureau of Investigation; the Federal Air Marshal Service; the Department of Homeland Security, Homeland Security Investigations; and the Department of Homeland Security, U.S. Border Patrol.

DEFENDANT                                              Criminal Case No. 15CR0174-W

Marchello Dsaun McCain                               San Diego, California             Age 33

SUMMARY OF CHARGES

Counts 1-4, and 6:

Title 18, U.S.C., Sections 922(g)(1) – Felon in Possession of Firearms and Ammunition

Maximum penalties: Ten years in prison and a $250,000 fine.

Count 5:

Title 18, U.S.C., Sections 931 – Felon in Possession of Body Armor by a Violent Felon

Maximum penalties: Three years in prison and a $250,000 fine.

Count 7:

Title 18, U.S.C., Sections 1001(a)(2) – False Statements Involving International Terrorism

Maximum penalties: Eight years in prison and a $250,000 fine.

INVESTIGATING AGENCIES

San Diego Joint Terrorism Task Force

Federal Bureau of Investigation

Federal Air Marshal Service

Department of Homeland Security, Homeland Security Investigations

Department of Homeland Security, U.S. Border Patrol

*An indictment itself is not evidence that the defendants committed the crimes charged.  The defendant is presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.

 

 

 

 

 

 

 

Assistant U.S. Attorney Phillip L.B. Halpern (619) 546-6964

NEWS RELEASE SUMMARY – September 14, 2015

SAN DIEGO – Stock broker Sunil Sharma of Carlsbad was sentenced in federal court today to 33 months in custody for stealing more than $6 million from local investors by falsely claiming their funds were safely placed in conservative investments when, in reality, he was pursuing a risky day trading strategy that ultimately turned into a massive Ponzi scheme.

“You have not only destroyed the lives of the people who appeared in court today, but the lives of hundreds of others who make up their extended family,” said U.S. District Court Judge John A. Houston during the sentencing hearing.

As detailed in court papers, Sharma covered up his massive trading losses by continuing to falsely tell investors that their investments were doing well. Among other things, he would send investors monthly or quarterly statements that falsely reflected that their investments were generating the promised returns. Sharma admitted that even while reassuring investors, he diverted approximately $2.5 million in investor funds for his own personal use, including: (1) approximately $700,000 towards the down payment of a $2 million home off Artesian Road in San Diego; (2) approximately $12,000 for a cruise in the Mediterranean; and (3) for leasing a Mercedes SL and a BMW.

As revealed in court documents, Sharma was a Series 7 licensed broker, who had worked for Merrill Lynch, AG Edwards, and as an independent broker for Raymond James. In 2000, Sharma moved to San Diego where he continued to practice as an independent broker. Due to the market crash that followed September 11, 2001, Sharma and his clients lost a substantial amount of money. As a result, Sharma voluntarily gave up his license to act as a securities broker.

After relinquishing his broker’s license, Sharma began to work in the insurance industry. In 2002, Sharma sold insurance from his business in Rancho Bernardo. He also began teaching seminars highlighting various types of insurance and annuities which could be purchased by his clients.

In 2007, Sharma set up Gold Coast Holding, LLC (“Gold Coast”) as a vehicle to trade options and initially funded the company with approximately $50,000 of his own money. After experiencing a bit of  “beginners luck” he began telling his insurance clients that they could make better returns if he could “day trade” their money.  Recognizing that his customers would not give him money for risky options trading, he lied to them and falsely stated that Gold Coast was an extremely safe way to earn a monthly retirement income because their money was to be: (1) part of a diversified portfolio; (2) pooled with many other investors; (3) used to buy bonds from emerging markets in Brazil, Russia, India, and China (“BRIC”); and (4) managed by Goldman Sachs.  Sharma guaranteed investors a rate of return (typically between 6%-7%) for two to three years and urged his clients to liquidate their retirement accounts and annuities based upon the safety of his investment scheme.

From the outset, Gold Coast (and later a second company he established, Safe Harbor Tax Lien Acquisitions) exclusively used the money for day trading options.  Between January 2008 and November 2014, Sharma raised $8.36 million from 32 different clients using these two companies. In order to attract new investors, Sharma paid $2.12 million in “returns” to old clients from funds generally derived from the contribution of later investors.

For example, of the approximately $3.5 million he raised from investors in the first two years of day trading, Sharma was left with only about $250,000 by the end of 2009.  As a result, Sharma turned Gold Coast into a classic “Ponzi scheme” by paying earlier investors their guaranteed rates of return with approximately $5 million in new funds solicited from later investors.

Prior to the investment scheme collapsing completely, Sharma stopped trading option spreads and switched over to purchasing straight “call” and “put” options. It was Sharma’s hope that adopting this new strategy would allow him to recoup all of his investment losses. Once again, however, Sharma’s strategy proved disastrous. Although he was able to make his December 2014 monthly payout to investors, he ran out of funds in January 2015.

United States Attorney Laura E. Duffy acknowledged that this Ponzi scheme was a bit harder to detect than usual as Sharma did not promise his investors outlandish returns. Nevertheless, she warned all investors to ensure that individuals soliciting money have appropriate licenses and audited financial statements. “All investors – especially when they are dealing with their retirement savings – must exercise due caution before turning over money even to long-time friends or else what appears to be a safe harbor might turn into a ship wreck.”

“Mr. Sharma engaged in an elaborate Ponzi scheme to steal millions of dollars from people who trusted him with their life savings,” said FBI Special Agent in Charge, Eric S. Birnbaum. “Today’s sentencing makes it clear that the FBI and U.S. Attorney’s Office will work together to identify, disrupt and hold accountable those individuals that are involved in sophisticated financial fraud schemes that steal money from the American public.”

DEFENDANT:                                 Case Number 15cr1396

Sunil Sharma                                       Age: 68                       Carlsbad, CA                              

CHARGE

Wire Fraud, in violation of 18 U.S.C. § 1343.

Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, restitution.

AGENCY

Federal Bureau of Investigation