Southern District of California

SAN DIEGO - Three corporate officers of Chula Vista-based Ohr, Inc., as well as the corporation itself, pleaded guilty yesterday to charges related to their international trafficking in counterfeit cell phones.

In pleading guilty, Michael Deitz, Sidney Schwarz, and Leora Schwarz admitted that they were officers of Ohr, Inc., from August 29, 2009, through May 31, 2013. The company was engaged in importing cellular phones and accessories from Taiwan to Chula Vista, which were later sold in retail stores in Mexico.

Deitz admitted that he was responsible for ordering the products sold by Ohr, Inc., while Sidney Schwarz acknowledged he was responsible for paying the suppliers. Deitz and Sidney Schwarz admitted that many of the cellular phones and accessories imported from China for Ohr, Inc., were counterfeit, in that they bore unauthorized copies of trademark owned by Apple, Samsung, Motorola, Nokia, Sony Ericsson and Blackberry, among others. They further admitted that they received at least nine notices from U.S. Customs, advising that the products they had imported were counterfeit and had been seized during the relevant period.

After learning that the source was supplying them with counterfeit goods, Deitz and Sidney Schwarz continued to do business with the supplier. Deitz also acknowledged that he received emails from his suppliers in China, discussing “illegal logos” and “copy logos” in relation to the cellular phone products he was purchasing, which he forwarded to Schwarz for payment of the attached invoices.

Deitz admitted in his plea agreement that he was aware that the items identified in the invoices as “copy,” “copy logo,” and “AAA” were counterfeit, and that all the cell phone housings and batteries that he purchased from China bearing trademarks were counterfeit. Both men and the company admitted that on August 9, 2011, Customs seized a box of goods ordered by Deitz on behalf of Ohr, Inc., and addressed to Schwarz’s residence which contained hundreds of counterfeit Nokia and Blackberry cell phone housings and hundreds of counterfeit Motorola, Sony Ericsson, Blackberry and Samsung cell phone batteries (shipped from the supplier who had previously shipped counterfeit goods that had been seized). The men acknowledged that the value of the counterfeit goods they imported from China was between $120,000 and $320,000, and agreed to forfeit $150,000, the proceeds of the offense.

Leora Schwarz admitted that on January 14, 2010, she received a notice from U.S. Customs, advising her that all importers of electronics and cellular phone products whose commercial value exceeded $2,500 had the duty to present formal entry documents to Customs for such entries. Leora Schwarz was aware that shipments of cellular phone products whose value exceeded $2,500 were being sent to Ohr, Inc. from China, and she took no action to have formal entry documents prepared, intended that the merchandise enter through the mail without formal inspection.

Deitz, Sidney Schwarz and Ohr, Inc, are set to be sentenced on July 24, 2015, at 8:30 a.m. before U.S. District Judge Gonzalo Curiel. Leora Schwarz was sentenced to one year of probation and a $1,000 fine.

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DEFENDANTS   Case Number: 14-CR-1075-GPC Ohr, Inc. Incorporated: 2007 Chula Vista, California Michael Deitz Age: 39 Chula Vista, California Sidney Schwarz Age: 60 Chula Vista, California Leora Schwarz Age: 32 Chula Vista, California   CHARGES

Defendants Ohr, Inc., Michael Deitz and Sidney Schwarz

Count 18: Importation Contrary to Law, in violation of Title 18, United States Code, Sections 545 and 2
Maximum penalties: Twenty years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture and $100 special assessment.

Criminal Forfeiture, in violation of Title 18, United States Code, Section 981(A)(1)(C) and 982(a)(1)(A) and (B); Title 31, United States Code, Section 5317(c)(1) and Title 28, United States Code, Section 2461(d)

Defendant Leora Schwarz

Failure to Present Entry Documents, a misdemeanor, in violation of Title 19, United States Code, Sections 1433 and 1436(c) and Title 18, United States Code, Section 2
Maximum penalty: One year in prison, a $100,000 fine, a term of supervised release of one year, restitution, and a $25 penalty assessment

  INVESTIGATING AGENCIES

Homeland Security Investigations
U.S. Postal Inspection Service

Christopher Dwan Underwood, a retired Air Force senior master sergeant, was sentenced today to two years in prison for stealing government credit cards and personal identifying information from more than 30 fellow service members in the San Diego area.

According to documents filed in federal court, Underwood used his Air Force privileges to gain access to gymnasiums on San Diego-area military installations. At these facilities, Underwood would steal credit cards and personal identifying information from his fellow service members’ unattended personal effects (e.g., gym bags, clothing, lockers, etc.).

After obtaining the credit cards and personal information, Underwood would pose as the service members and use this information—including their addresses, birthdates, and Social Security numbers—to activate his victims’ government Citibank charge cards. Once activated, Underwood used the stolen credit cards to make hundreds of unauthorized purchases amounting to tens of thousands of dollars stolen. In his buying sprees, Underwood obtained numerous cash advances and purchased items such as airline tickets and meals at upscale San Diego eateries (i.e., Donovan’s Prime Seafood and Tartine).

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DEFENDANT   Case Number: 14cr1859-GPC Christopher Dwan Underwood Age: 42 San Diego, California   CHARGES

18 U.S.C. § 1343 – Wire Fraud (30 years maximum sentence)
18 U.S.C. § 1028A – Aggravated Identity Theft (mandatory-minimum two-year sentence)

  INVESTIGATING AGENCIES

Naval Criminal Investigative Service
Marine Corps Criminal Investigation Division
Navy Criminal Investigation Division

Brian Karl Brimager, 37, prior boyfriend of murdered Los Angeles woman Yvonne Baldelli, was indicted by a federal grand jury in San Diego, California, today on first degree murder charges.  Brimager was arraigned in court on the superseding indictment and pleaded not guilty.

Brimager has been in U.S. custody since June 2013 on charges of obstruction of justice, giving false statements to a federal officer and falsifying records all related to the same murder investigation. 

According to the indictment in September 2011, Brimager and Baldelli moved together from Los Angeles, California, to the archipelago of Bocas del Toro, Panama.  They rented a room in a small five-unit hostel on Isla Carenero, a small island near Bocas reachable only by boat.  Almost immediately upon arrival Brimager began emailing another girlfriend, the mother of his young daughter.  In these emails, Brimager discussed plans to move back to California to live with this other girlfriend and help raise their daughter.  The emails did not mention Baldelli.

As revealed in the charging document, at the same time he was emailing the other girlfriend, Brimager began physically abusing Baldelli.  Among other damage, these beatings caused bruises around Baldelli’s eyes and on her arms.  The indictment alleges that around Nov. 26, 2011, Brimager murdered Baldelli, dismembered her body and disposed of her body parts in a remote jungle area on Isla Carenero.  Following her murder, Brimager engaged in an elaborate scheme to cover up the crime.  This scheme included destroying evidence, giving false information to law enforcement and sending a series of emails purportedly from Baldelli in order to make it appear to her friends and family that she was still alive.

According to the indictment, Brimager created a cover story to explain Baldelli’s whereabouts and, in the days and months that followed, engaged in a series of obstructive acts designed to back up his story.  For example, Brimager, using Baldelli’s laptop, sent emails to Baldelli’s family and friends from her personal email account, in which he purported to be Baldelli.  These emails, among other things, falsely claimed that Baldelli was alive and living in Costa Rica with another man.  To corroborate this story, Brimager, after murdering Baldelli, withdrew money from her bank accounts at an ATM to make it appear that she was on her way to Costa Rica.  He further attempted to substantiate his cover story by making another withdrawal from Baldelli’s bank accounts when he travelled through Costa Rica on his way back to the U.S.

The indictment also alleges that Brimager attempted to conceal his crime by disposing of a bloody mattress involved in Badelli’s murder in the ocean.  According to the indictment, within a few hours of murdering Baldelli and prior to dumping the mattress in the ocean, Brimager conducted two internet searches on Baldelli’s computer, one for “washing mattress” and a second for “washing mattress blood stain.”

The indictment also charges Brimager with making materially false statements to the FBI during an interview on March 21, 2012.  The indictment alleges that Brimager falsely stated that Baldelli took her white Sony VAIO laptop with her when she left Panama, when in fact, the laptop was found in Brimager’s possession on March 21, 2012, months after Baldelli’s murder.

Baldelli’s skeletal remains were not found in the jungle until almost two years after her murder.  

The case was prosecuted by Assistant U.S. Attorneys W. Mark Conover and Shane P. Harrigan.

Brian Karl Brimager, prior boyfriend of murdered Los Angeles woman Yvonne Baldelli, was indicted by a federal grand jury in San Diego today on first degree murder charges. Brimager was arraigned in court on the superseding indictment and pleaded not guilty.

Brimager has been in U.S. custody since June 2013 on charges of obstruction of justice, giving false statements to a federal officer and falsifying records all related to the same murder investigation.

According to the indictment, in September 2011, Brimager and Baldelli moved together from Los Angeles to the archipelago of Bocas del Toro, Panama. They rented a room in a small five-unit hostel on Isla Carenero, a small island near Bocas reachable only by boat. Almost immediately upon arrival Brimager began emailing another girlfriend, the mother of his young daughter. In these emails, Brimager discussed plans to move back to California to live with this other girlfriend and help raise their daughter. The emails did not mention Baldelli.

As revealed in the charging document, at the same time he was emailing the other girlfriend, Brimager began physically abusing Baldelli, causing injuries that included bruising around her eyes and on her arms. The indictment alleges that around November 26, 2011, Brimager murdered Baldelli, dismembered her body, and disposed of her body parts in a remote jungle area on Isla Carenero. Following her murder, Brimager allegedly engaged in a scheme to cover up the crime, including destroying evidence, giving false information to law enforcement and sending a series of emails purportedly from Baldelli in order to make it appear to her friends and family that she was still alive.

According to the indictment, Brimager created a cover story to explain Baldelli’s whereabouts and, in the days and months that followed, engaged in a series of obstructive acts designed to back up his story. For example, Brimager (using Baldelli’s laptop) allegedly sent emails to Baldelli’s family and friends from her personal email account, in which he purported to be Baldelli. These emails, among other things, falsely claimed that Baldelli was alive and living in Costa Rica with another man. To corroborate this story, Brimager (after murdering Baldelli) withdrew money from her bank accounts at an ATM to make it appear that she was on her way to Costa Rica, according to the indictment. He further attempted to substantiate his cover story by making another withdrawal from Baldelli’s bank accounts when he travelled through Costa Rica on his way back to the United States.

The indictment also alleges that Brimager attempted to conceal his crime by disposing of a bloody mattress involved in Badelli’s murder in the ocean. According to the indictment, within a few hours of murdering Baldelli and prior to dumping the mattress in the ocean, Brimager conducted two internet searches on Baldelli’s computer – one for “washing mattress” and a second for “washing mattress blood stain.”

The indictment also charges Brimager with making materially false statements to the FBI during an interview on March 21, 2012. The indictment alleges that Brimager falsely stated that Baldelli took her white Sony VAIO laptop with her when she left Panama, when in fact, the laptop was found in Brimager’s possession on March 21, 2012 – months after Baldelli’s murder.

Baldelli’s skeletal remains were not found in the jungle until almost two years after her murder.

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DEFENDANT   Case Number: 13CR2381-JM Brian Karl Brimager Age: 37     CHARGES

Foreign Murder of a United States National, Title 18, United States Code, Section 1119
Maximum Penalties: Death or life imprisonment,  $250,000 fine, restitution

Obstruction of Justice - Title 18, United States Code, Section 1512(c)(2)
Maximum Penalties: 20 years imprisonment, a $250,000 fine, 3 years supervised release

False Statement to a Federal Officer - Title 18, United States Code, Section 1001
Maximum Penalties:  5 years imprisonment, a $250,000 fine, 3 years supervised release

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

*An indictment 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.

Former U.S. Navy sailor Leonard Damon Washington was arraigned today on charges that he prepared and filed false tax returns that resulted in inflated refunds for fellow service members and big fees for him.

Leonard Damon Washington, who was assigned to the USS Higgins in 2010 when the alleged crimes began, was arrested on Tax Day, April 15, 2015, in Springdale, Arkansas. He was arraigned in federal court in the Western District of Arkansas before U.S. Magistrate Judge Erin Setser on charges of tax evasion and aiding and assisting in the preparation of false tax returns. The judge set bond at $50,000.

According to the indictment, which was unsealed today, Washington marketed himself to Navy service members as someone who could assist in preparing and filing income tax returns in exchange for a fee. During 2010, Washington convinced fellow Navy service members to let him prepare their income tax returns, but concealed his role as a paid tax preparer from the Internal Revenue Service (IRS). Among the false and misleading representations he made to his fellow Navy service members, Washington stated that he could obtain special tax deductions that other tax preparation services could not obtain or were unaware. The indictment also alleges that Washington created false and fraudulent income tax returns and tax forms for his clients and generated substantial false tax refunds. These false refunds allowed Washington to charge tax preparation fees in excess of $100,000. Washington directed these fees into multiple bank accounts (both in his name and in the name of nominees) in order to frustrate and impede the IRS’s efforts at determining his true income.

“Navy service members place a substantial amount of trust in their colleagues, especially while they are protecting our freedoms. It is intolerable when one of their own defrauds both his fellow Navy service members and the IRS,” said U.S. Attorney Laura E. Duffy. She reminded the public to always review a copy of any tax return prepared and filed on their behalf.

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented, “The IRS wants everyone who files a tax return to take advantage of the deductions and credits to which they are entitled by law; however, no one is entitled to defraud the government or other American taxpayers. As the traditional tax filing season concludes, the IRS reminds you to always review your return before signing it, and question any items you do not understand.” The government is seeking the removal of Washington to face charges in the Southern District of California.

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DEFENDANT   Case Number: 15CR0951-JM Leonard D. Washington Age: 42     CHARGES

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

Counts 2-7: 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

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

Timothy Francis Cashman, a Building Manager for the General Services Administration (“GSA”), admitted today to an almost decade-long conspiracy to accept bribes and steal property owned by the United States. In doing so, Cashman acknowledged using 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.”

As revealed in Court, Cashman admitted that in return for providing favorable treatment relating to the awarding of GSA contracts, he corruptly demanded that government contractor Hugo Alonso Inc. (“HAI”) give him $10,000 in cash and perform thousands of dollars’ worth of construction and renovation services on Cashman’s personal residence. 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 admitted demanding 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 also detailed in Court how he 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. For example, 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 said, “This defendant abused his position of trust for many years and the taxpayers paid the price. Combatting public corruption will remain one of my 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.

“Mr. Cashman admittedly undermined the process of fair and open competition when he conspired to accept bribes in exchange for awarding lucrative government contracts,” said IRS Criminal Investigation’s Los Angeles Field Office Special Agent in Charge Erick Martinez. “The IRS is committed to aggressively investigating those individuals who engage in corruption, fraud and deceit designed to satisfy their greed.”

“When a public servant like Mr. Cashman abuses his position and fails to conduct the public’s business in an honest and ethical manner, it undermines the public’s trust in government,” said FBI Special Agent in Charge, Eric S. Birnbaum. “When that happens, the FBI and our law enforcement partners will work together to restore the public’s trust by aggressively investigating and holding accountable those individuals who would abuse this trust for their own personal gain.”

“GSA employees who take bribes and steal from the U.S. government will be investigated and prosecuted to the full extent of the law,” said GSA Acting Inspector General Robert C. Erickson.

The FBI encourages the public to report allegations of public corruption to our hotline at (877) NO-BRIBE (662-7423).

HAI, and its principal, Hugo Alonso, have previously pled guilty and been sentenced. Cashman is scheduled to be sentenced before U.S. District Judge Gonzalo P. Curiel on August 7, 2015 at 8:30 a.m.

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DEFENDANT   Case Number: 14CR3621-GPC Timothy Francis Cashman Age: 54 Lakeside, California   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

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service – Criminal Investigations
General Services Administration – Office of Inspector General
CBP Office of Field Operations
Defense Criminal Investigative Service
Naval Criminal Investigative Service
Small Business Administration – Office of Inspector General

SAN DIEGO – U.S. Navy Lieutenant Commander Todd Dale Malaki pleaded guilty to bribery charges in federal court today, admitting that he accepted cash, hotel expenses and the services of a prostitute in return for providing classified U.S. Navy ship schedules and other internal Navy information to an executive of a defense contracting firm.

Malaki, 44, of San Diego, pleaded guilty before U.S. Magistrate Judge Mitchell D. Dembin of the Southern District of California to one count of conspiracy to commit bribery. A sentencing hearing is scheduled for July 6, 2015.

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. 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, Malaki admitted that Francis provided him with 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 was approximately $15,000.

“The receipt of envelopes of cash and lavish hotel stays by our public officials at whatever level erodes the public’s trust in our institutions and our government,” said U.S. Attorney Laura Duffy. “Today’s guilty plea reflects the next step in our ongoing effort to regain that public trust.”“Another Navy officer has now pleaded guilty and admitted to taking bribes to reveal classified military information to a major supplier,” said Assistant Attorney General Leslie R. Caldwell. “It is both troubling and disappointing how many Navy officers we have exposed as willingly falling prey to GDMA’s corruption, and our investigation remains active and ongoing. Those who serve in our nation’s military must uphold the public’s trust or pay the consequences for their crimes.”

Malaki is the eighth individual to plead guilty in this expanding probe into corruption and fraud in the U.S. Navy. GDMA pleaded guilty in January. Two other individuals, Paul Simpkins, formerly a Department of Defense (DOD) contracting officer, and Michael Misiewicz, a Captain-select in the U.S. Navy, have been charged and entered pleas of not guilty.

The ongoing investigation is being conducted by Defense Criminal Investigative Service and Naval Criminal Investigative Service, with substantial assistance from the Defense Contract Audit Agency. The case is being prosecuted by Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California and Senior Trial Attorney Brian R. Young 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.

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DEFENDANT   Case Number: 15CR967-WQH Todd Dale Malaki Age: 44 San Diego, California   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

U.S. Attorney for the Southern District of California Laura E. Duffy announced that Arman Eritsian was sentenced in federal court yesterday to a 30-month prison term for his role in a conspiracy to defraud the Internal Revenue Service out of hundreds of thousands of dollars by filing false tax returns in the names of stolen identities. Eritsian is one of 20 defendants who have been sentenced in a series of tax and bank fraud prosecutions targeting organized groups that victimized individuals, financial institutions and the U.S. Treasury.

Eritsian, the lead defendant in one indictment, had earlier admitted that between 2010 and 2012, he conspired with others to steal the identifying information of unwitting victims in order to file false tax returns in their names. The conspirators would direct the IRS to pay bogus refund claims to addresses or bank accounts under their control, and then withdraw the fraud proceeds so they could be spent by the conspirators. For his part, Eritsian admitted that he obtained stolen identities that were later used to file fraudulent returns; utilized multiple addresses and bank accounts to receive tax refund checks; used email accounts to communicate details of the conspiracy with coconspirators; and employed debit cards to monitor accounts opened and maintained to receive fraudulent tax refunds.

Chief District Judge Barry Ted Moskowitz explained that the sentence was warranted in part because Eritisan had sought to defraud the very nation that had welcomed him as a persecuted immigrant just a few years earlier. Eritsian emigrated from Azerbaijan to the United States as an asylum seeker, but soon thereafter began to participate in tax and insurance fraud schemes using stolen identities. Within a matter of months of being released from state custody for one of these scams, Eritsian joined others in the tax fraud scheme that led to his federal conviction and the sentence imposed yesterday.

Eritsian’s sentencing is the latest flowing from the September 2013 arrests of dozens of people in “Operation Trillions Trouble.” The four related cases charged over 50 defendants with multiple tax fraud conspiracies and several schemes to defraud American financial institutions. United States Attorney Laura E. Duffy praised the hard work of agents from the FBI and IRS-CI, along with their state and local counterparts, to disrupt and dismantle these fraud schemes and protect American taxpayers.

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented, “Identity theft and tax refund fraud were the lifeblood that Arman Eritsian and his co-conspirators used to further their massive fraud scheme. Yesterday’s sentencing of Eritsian, for his lead role in this crime ring, demonstrates IRS Criminal Investigation’s commitment to holding accountable those who victimize the public through brazen attempts at identity theft and tax refund fraud.”

FBI Special Agent in Charge, Eric S. Birnbaum commented, “The FBI will work tirelessly, using all investigative resources and intelligence capabilities, to dismantle sophisticated criminal enterprises that victimize the American public."

Eritsian was also ordered to pay $58,323 in restitution, most of which had already been collected by the IRS.

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DEFENDANT   Case Number: 13CR3480-BTM

Arman Eritsian         

Age: 36 Woodland Hills, California   CHARGES

Conspiracy to Commit Mail and Wire Fraud – Title 18, U.S.C., Section 371
Maximum penalty:            5 years’ imprisonment, $250,000 fine, $100 special assessment, restitution

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service, Criminal Investigation

Southern California Plating Company (“SoCal Plating”), a local metal finishing company located in Logan Heights, and its owner, Paul Hummell, admitted illegally storing hazardous waste and unlawfully discharging the waste into the sewer system. In pleading guilty, SoCal Plating acknowledged that it illegally discharged industrial wastewaters in excess of its permit limits into the City of San Diego sewer system.

As detailed in Court, the firm’s permit required compliance with Federal pretreatment standards for metal finishers, which limits the daily maximum concentration of nickel to 3.98 mg/L and the daily maximum concentration of zinc to 2.61 mg/L. However, SoCal Plating admitted that on July 8, 2013 and October 8, 2013, its employees discharged industrial wastewater to the sewer system which contained zinc and nickel in excess of these limits.

Company owner Paul Hummell admitted that the firm’s metal finishing operations generated a number of wastewater streams, including spent corrosive cleaning and process baths, and rinse waters which were corrosive and contaminated with toxic heavy metals.

On January 28, 2014, an inspection by the San Diego Department of Environmental Health Services (“DEH”) at SoCal Plating revealed drums of wastewater which had been stored at the site for over 90 days. The drums were sampled and found to contain chromium in toxic concentrations rendering it federally regulated hazardous waste. Hummell admitted that he knew that the industrial wastewater stored at the facility was hazardous waste and that no permit existed to store hazardous waste at the SoCal Plating site.

In pleading guilty, SoCal Plating agreed to pay restitution of $8,266 to DEH and $28,130 to the City of San Diego Industrial Waste Control Program for costs associated with monitoring the firm’s discharge and disposal of its wastewaters. Wastewater containing heavy metals such as those generated by metal finishers is required to be treated prior to discharge to the sewer system in order to avoid compromising the treatment works and/or pass through to the receiving waters. Heavy metals in high concentrations can damage the digesters at the sewage treatment plants, causing them to operate less efficiently.

"EPA is committed to achieve environmental justice for American communities overburdened from the illegal discharge of industrial materials," said Jay M. Green, Special Agent in Charge for EPA’s criminal enforcement program in California. The defendants’ manner of doing business is not only dangerous, it is criminal. By refusing to comply with the law, the defendants put the unsuspecting public at serious risk"

San Diego FBI Special Agent In Charge Eric S. Birnbaum commented “The metal plating industry requires strict adherence to environmental laws due to the toxic chemicals it uses and the danger these chemicals present to our community. Today's conviction holds the defendant accountable for his actions, and is a step in the right direction to address, a public health threat to the citizens of San Diego, and of Logan Heights in particular. The FBI will continue to work with our public and private sector partners in our ongoing efforts to safeguard the health of our citizens and prevent the ongoing degradation of our natural resources through criminal prosecution."

Sentencing for SoCal Plating and Hummell is set for August 3, 2015, at 9:00 a.m. before the Honorable Marilyn L. Huff, United States District Judge.

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DEFENDANT   Case Number: 15cr0947-H Paul Charles Hummell, Jr. Age: 71 San Diego, California   CHARGES

Count 1: Illegal Storage of Hazardous Waste, in violation of 42 U.S.C. § 6928(d)(2)(A)

Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution

  DEFENDANT   Case Number: 15cr0946-H Southern California Plating Company              Incorporated: 1983 San Diego, California   CHARGES

Count 1: Illegal Discharge of Pollutants, in violation of 33 U.S.C. § 1317(d) and 1319©(2)(A)

Maximum Penalties: 5 years’ probation, $500,000 fine or twice the pecuniary gain or loss resulting from the offense and a minimum fine of $5,000 per day of violation, $400 special assessment, restitution   INVESTIGATING AGENCIES

U.S. Environmental Protection Agency, Criminal Investigations Division

Federal Bureau of Investigation

SAN DIEGO – San Diego attorney Todd Macaluso, whose practice included representing plaintiffs in personal injury lawsuits, pleaded guilty today to defrauding his clients and investors by entering into funding agreements that put his clients’ personal injury cases up as collateral without their knowledge or consent. As part of his guilty plea, Macaluso admitted 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 “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.

United States Attorney Laura E. Duffy commented, “Individuals who have suffered a personal injury should not have to worry about being victimized by their own advocate. The defendant’s conviction should be a stark reminder that attorneys and other fiduciaries will be prosecuted if they fraudulently misuse the privileges society has given them.”

FBI Special Agent in Charge Eric S. Birnbaum commented, “Mr. Macaluso betrayed his clients’ trust by putting his clients’ personal injury recoveries on the hook without their knowledge or consent. The FBI is committed to maintaining the integrity of our justice system by aggressively investigating those individuals that violate their fiduciary responsibilities through fraudulent schemes that victimize the American public.”

Macaluso is scheduled to be sentenced on July 13, 2015, at 9:00 a.m. before U.S. District Court Judge Roger T. Benitez, at which time he will be ordered to pay restitution to all of his victims.

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DEFENDANT   Case Number: 15cr0948-BEN Todd E. Macaluso Age: 52 Rancho Santa Fe, California   CHARGES

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.

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

SAN DIEGO – Christopher Andrew Gibson, dubbed the “Bearded Bandit,” pleaded guilty today to robbing three San Diego banks of more than $7,600 in late 2014.

Gibson entered his plea before U.S. Magistrate Judge Karen S. Crawford to three counts of bank robbery, and was ordered to appear in front of U.S. District Judge Marilyn L. Huff for sentencing on July 20, 2015.

In the course of the investigation, the Federal Bureau of Investigation learned that Gibson committed the first bank robbery within hours of being released from the George Bailey Detention Facility, where he was held on unrelated charges. Gibson was dubbed the “Bearded Bandit” because of the shaggy facial hair he had in the first two robberies.

According to his plea agreement, Gibson entered Wells Fargo Bank, located at 685 Saturn Boulevard, San Diego, on October 7, 2014, and presented a bank employee with a note that was paraphrased as follows: “I know your training. No dye packs. No GPS devices. I want $4,567. Hurry cause I'm not waiting all day.” Gibson then took approximately $1,419.00 from the employee and fled the bank.

Gibson admitted in his plea agreement that he followed up with a robbery a week later in Vista at a Chase Bank, located at 1641 South Melrose Drive, on October 15, 2014. During the robbery, Gibson presented a bank employee with a note, which in effect said, “I know your training. I want $4,788 in 15 seconds. No dye packs or GPS devices.” Gibson took approximately $2,240.00 from the employee and fled the bank.

Gibson’s final robbery occurred at a second Chase Bank, located at 985 Vista Way in Vista, on November 6, 2014, his plea agreement said. During the robbery, Gibson presented a bank employee with a note, reading to the effect, “Don't be stupid and press any buttons. I know your training so just cooperate. I want $4,000 and no GPS devices or dye packs. No fake bills. I'm counting to 30.” Gibson took approximately $4,000.00 from the employee and fled the bank. The demand notes were not recovered.

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DEFENDANTS   Case Number: Christopher Andrew Gibson Age: 26 Vista, California   CHARGES

Counts 1-3: Bank Robbery – Title 18, U.S.C., Section 2113(a)
Maximum penalty:  20 years’ imprisonment and $250,000 fine

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

SAN DIEGO – Daniel Vazcones, aka “D-Boy”, a longtime member of the violent Logan Heights criminal street gang was sentenced today in federal court to 20 years in prison for distributing methamphetamine while in possession of a firearm.

Vazcones pled guilty in September to drug- and weapons-related charges. At sentencing, and in court records, he admitted to distributing methamphetamine while in possession of a .40-caliber Glock semi-automatic handgun.

During the hearing, Assistant U.S. Attorney Mark Conover argued for a significant sentence, noting that Vazcones was a “dangerous violent gang member” who since his arrest had made multiple threats to kill police officers and others involved in his prosecution.

This case highlights an emphasis on the federal prosecution of cases involving violent gang members in the Southern District of California. This case was the result of a long-term investigation conducted by the Violent Crime Task Force - Gang Group, a group of federal, state, and local law enforcement agents led by the Federal Bureau of Investigation.

“We are absolutely committed to making our neighborhoods safe from violent gang activity and drug trafficking,” said U.S. Attorney Laura Duffy. “We will not allow our neighborhoods to become headquarters for drug-pushing, gun-toting gangsters.”

FBI Special Agent in Charge Eric Birnbaum stated, “Today's sentencing should send a message to all gang members that the FBI and our law enforcement partners will aggressively pursue gang activity and hold gang members accountable for their criminal activities.”

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DEFENDANTS   Case Number: Daniel Vazcones Age: 31 El Cajon, California   CHARGES

Count 1:       Distribution of Methamphetamine-21 U.S.C. § 841(a)(1)
Maximum Penalties: Up to life in prison; 10 year mandatory minimum.

Count 2:       Possession of Firearm in Furtherance of Drug Trafficking Crime-18 U.S.C. § 924(c)
Mandatory 5 years’ imprisonment consecutive to drug trafficking sentence

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

SAN DIEGO – A Mexican national who stole the identity of a California-born farmworker and impersonated him for almost three decades – even claiming to be the father of some of his victim’s children - was sentenced in federal court today to 184 months in prison in what is believed to be the longest sentence of its kind.

Ramiro Plascencia-Orozco was charged in 2011 with two counts of aggravated identity theft and two counts of illegal reentry after deportation for acts that occurred in 2008 and 2011. He was convicted by a federal jury in August 2014 of all four counts after less than four hours of deliberation.

According to court records, Plascencia has used at least 35 different aliases over the course of four decades, but none more prolifically than that of Alberto Jose Del Muro-Guerrero, a man he met once through a mutual friend in the 1980s. Plascencia also has been removed from the United States more than 20 times and has been prosecuted 10 times for alien smuggling, illegal reentry, identity theft, false claim to U.S. Citizenship, drug trafficking and other crimes by the U.S. Attorney’s Office. At sentencing today, Plascencia still continued to assert that he is Del Muro.

U.S. District Judge John Houston said the long sentence was warranted in part because of Plascencia’s extensive criminal history, the decades-long impact of the crime on the victim and his family, and the defendant’s lack of remorse.

“The court finds the seriousness of identity theft is extraordinary in this case,” Judge Houston.

Later in the hearing, Judge Houston scolded Plascencia, speaking of the impact of his crimes on the real Del Muro. “Throughout the last 30 years he (Del Muro) has not had the opportunity to advance his life for himself and his family. He could not get a good job because of the criminal record that you imposed upon him. Because he couldn’t get a good job, it’s only reasonable to infer that his kids could not get a better education, that he could not have a better lifestyle for he and his family, because he was limited and handcuffed by you, because you stripped him of his identity throughout his entire adult life, to the benefit of yourself, and to his detriment - his extreme detriment.”

The judge criticized Plascencia for his legal maneuverings, including numerous instances in which he fired or pressed for the removal of almost all of his defense attorneys over the course of his criminal career in an attempt to delay proceedings.

“Unfortunately what a transcript in this case cannot reveal is your cavalier demeanor in court proceedings, demonstrating and telegraphing to this court that you understand what’s going on here and that you understand that you’re manipulating this entire system of justice, holding this very system hostage to your whim…for your own reasons,” Judge Houston said.

“I am extremely gratified by this sentence, which could not be more appropriate for a man who not only stole a name but hijacked a life for three decades,” said U.S. Attorney Laura Duffy. “We hope that with this sentence, Mr. Del Muro’s nightmare will be over and he will never again be forced to share his name with an audacious, calculating thief with no regard for anyone but himself.”

While arguing for a significant sentence, Assistant U.S. Attorney Marietta Geckos told the court: “We know that prison time cannot replace the years Mr. Del Muro has lost, the anxiety he has suffered, and the inconvenience he and his family endured. But today, for everyone here, we can say that there is one Mr. Del Muro, and he is not here today. Plascencia-Orozco is a serial violator of our immigration laws and is an unremorseful imposter. No U.S. citizen should have to fight this hard to save his own name. This must end.”

According to a statement read to the court by Assistant U.S. Attorney David Finn on behalf of Del Muro: “I want this to end, and for him (the defendant) to leave me alone, and I want him to get enough time in jail so that he doesn't come out and reuse my name. He only gets 3-4 years each time and as soon as he is released he uses my identity. Please do me a favor of putting an end to this. Have him stop bothering me and my family. It happens too often. Please give the maximum punishment you can since he deserves whatever you decide.”

According to court documents, Plascencia was arrested August 2, 2011 at the San Ysidro Port of Entry when he attempted to enter the United States through the pedestrian lane. He presented a U.S. birth certificate bearing the name Alberto Jose Del Muro, but a fingerprint inspection indicated that he was a Mexican citizen with no legal right to enter the U.S.

This attempted reentry occurred about one month after he had been deported by an immigration judge for entering the U.S. illegally yet again. The trial also included Plascensia’s 2008 illegal entry, and his illicit use of Del Muro’s documents at that time.

During trial, the real Alberto Jose Del Muro-Guerrero testified that he met Plascencia at a bar through a friend. The next day, Del Muro said, he ran into Plascencia in the street. Plascencia complained that their mutual friend had left him stranded, so Del Muro took Plascencia to his house and allowed him to sleep one night in his car.

Del Muro said Plascencia had asked for the car keys so he could listen to the radio. The next day, Del Muro found his car and Plascencia missing, along with his wallet, driver’s license, birth certificate and social security card, which he kept in the glove compartment on work days.

During his testimony, Del Muro explained that he worked in the fields and could be stopped by immigration authorities at any time, so he kept his identification documents at the ready, in the glove compartment of his car. He said he could not keep them in his pocket because they would get wet while working in the fields. Del Muro immediately reported his car stolen to police. His 1969 Ford Montego was later found in Oregon, but he would later realize he’d suffered a loss that proved far worse.

According to court transcripts, Del Muro testified that he started getting tickets after that, and his license was suspended. “I would go the Department of Motor Vehicles, and then the first thing that would show up would be his picture.” Even now, Del Muro has been unable to get a California Driver’s license.

Plascencia took the stand in his own defense. In addition to the wholesale adoption of the true Del Muro’s relatives - including names of parents, grandparents, children, spouse, date of birth, and city of birth - the defendant claimed that the true Mr. Del Muro – the victim in this case - had actually stolen the defendant’s wife/woman, and that some or all of the Del Muro children were fathered by the defendant.

According to the government’s sentencing memorandum, “The suffering caused by defendant Plascencia on the Del Muro family is palpable as they have been dragged through litigation for almost three decades because of defendant Plascencia’s identity theft.”

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DEFENDANTS   Case Number: Ramiro Plascencia-Orozco Age: 60 Guadalajara, Jalisco, Mexico   CHARGES

Two counts (2 & 4) Aggravated Identity Theft, in violation of Title 18 U.S.C. Sec. 1028A – required penalty two years per count consecutive to any other term of imprisonment.

Two counts (1 & 3) Illegal Entry after Deportation, in violation of Title 8, U.S.C., Sec. 1326 (a)(b)–, Maximum penalties 20 years in prison, $250,000 fine.

  INVESTIGATING AGENCIES

U.S. Customs and Border Protection

SAN DIEGO – Daniel Deaibes pleaded guilty today to participating in a scheme to steal title to Southern California homes, and then to “sell” the properties to unsuspecting buyers – who later learned they had actually purchased nothing.

According to his plea agreement, between September 2012 and November 2014, when Deaibes and two alleged co-conspirators were indicted and arrested, the trio fraudulently sold or attempted to sell at least 10 homes for more than $2.3 million.

As Deaibes admitted during his guilty plea, he participated in the scheme at the direction of a co-conspirator, the owner of several real estate investment outfits. According to Deaibes’ admissions, the co-conspirator and others would record fraudulent grant deeds at county recorder’s offices, so that it would appear that the true owners of homes had deeded their properties to shell companies controlled by the co-conspirator.

Once the fraudulent documents were recorded in the chain of title, the co-schemers would pose as the new owners and immediately try to sell the properties. Deaibes said his coconspirator used aliases and a host of sham businesses to pose as the owner of properties they listed for sale, and along with Deaibes, set up bank accounts for the sham companies so that fraud proceeds could be funneled out of the scheme. In this way, the conspirators would take all the proceeds of the sale, and the true owners of the properties would get nothing.

As Deaibes admitted during his guilty plea, the schemers even took steps to thwart efforts by the true owners to regain title to the properties. In one instance, true owner Fannie Mae discovered that a fraudulent grant deed had been recorded on a 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 notify prospective buyers of the fraudulent deed.

According to Deabes’ plea agreement, he and his co-schemers created a fake “Withdrawal of Lis Pendens” in an effort to proceed with the fraudulent sale. When Fannie Mae won a judgment in its favor and obtained a court finding that the deed was fraudulent, the co-schemers created a fake “Satisfaction of Judgment” and recorded that fraudulent document as well.

Deaibes also admitted that he used the alias “John Moran” to pose as the seller’s representative in several of the fraudulent sales. He introduced himself as “Moran” and presented a fake driver’s license to two different notaries in 2014. Deaibes admitted that he signed fraudulent documents using this alias in an effort to sell or encumber properties that belonged to unsuspecting owners.

Deaibes admitted that he and the co-schemers generated more than $1.5 million in profits from the scheme. In each case, the unwitting third-party buyer paid for a house believing that Alzoubi and his co-schemers had valid title. In fact, most of these properties were actually owned by Fannie Mae and Freddie Mac -- government sponsored enterprises with a mission to provide liquidity, stability, and affordability to the United States housing and mortgage markets. As part of their 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.

U.S. Attorney Laura E. Duffy commented, “Although the Great Recession ended some time ago, some of the lingering problems in the housing market are caused by schemes, such as this one, that undermine the public’s confidence in the security of their most important investment, their homes. The Department of Justice, working closely with our law enforcement partners, is committed to aggressively prosecuting those who misuse the real estate process to commit fraud.”

FBI Special Agent in Charge, Eric S. Birnbaum, commented, “Today’s conviction is a step in the right direction in holding Mr. Deaibes accountable for his illegal activities. The FBI is committed to working with our law enforcement partners in identifying and dismantling fraudulent schemes that undermine our economy and leave taxpayers to pay the bill. The FBI will aggressively pursue these cases so that our precious tax dollars will be used where they are needed most.”

Sentencing is set for June 8 at 9:00 am before U.S. District Judge Cynthia Bashant.

Deaibes and two other defendants, Mazen Alzoubi real estate investor Mohamed Daoud, were indicted in November 2014. Deaibes and Alzoubi, who were both arrested by FBI agents on November 19, 2014, were charged with mail fraud. Daoud was arrested at Los Angeles International Airport as he prepared to depart for his home country of Norway. He was charged in a related case with conspiracy to commit mail fraud and wire fraud.

The investigation into this fraud scheme is continuing. Anyone with information relating to these charges or similar scams is encouraged 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.

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DEFENDANT   Case Number: 14CR3325-BAS Daniel Deaibes Age: 36 Rancho Cucamonga, CA   CHARGES

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.

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DEFENDANTS PREVIOUSLY CHARGED   Daniel Deaibes, 14CR3325-BAS Age: 31 Rancho Cucamonga, CA Mail fraud, 18 U.S.C. § 1341   Mohamed Daoud, 14CR3326-BAS Age: 50 Norway Conspiracy to commit mail fraud and wire fraud, 18 U.S.C. § 1349   INVESTIGATING AGENCIES

Federal Housing Finance Agency – Office of Inspector General
Federal Bureau of Investigation

As to defendants Mazen Alzoubi and Mohamed Daoud, the public is reminded that the charges are not evidence that the defendants committed the crime charged. The defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.

SAN DIEGO – The three owner/operators of Equity Based Services (EBS), Howard Kaplan and his two sons, Stephen and Eric Kaplan, pled guilty today to conspiring to commit wire fraud. According to the charging documents, the three principals admitted stealing over a half million dollars from investors while operating the business.

EBS (operating as American Mini Storage) was formed, in 1995, as a San Diego-based private real estate company specializing in the acquisition and management of self-storage properties. According to the plea agreements filed in court, beginning in or about 2001 and continuing to sometime in 2010, the company and its affiliates offered individuals the opportunity to invest in syndicates comprised of approximately 77 self-storage projects in a dozen different states. In doing so, they failed to disclose material information about the source of periodic return payments and the actual past performance of the self-storage projects.

Investors in the various syndicates were convinced to invest with the Kaplans, in part, by the representation that they would be entitled to a “Preferred Return,” usually in the amount of 8% per annum. This Preferred Return would generally be paid on a monthly, quarterly or other periodic basis; and, if not paid, would accrue until the property was sold. Investors were also promised that the defendants would not share in or be paid their fee (consisting of 25% of the profits) unless and until all other investors had received their 8% return. From approximately 2002 through August 2010, EBS regularly distributed the 8% periodic return to investors. Based, in part, on these regular 8% Preferred Returns, many earlier investors invested in one or more subsequent projects. These regular payments also attracted new investors.

Unknown to investors, some of the regular 8% Preferred Returns were made possible only because defendant Howard Kaplan was diverting funds from better-performing properties or using fees paid to EBS generated by new project syndications. As admitted in court proceedings, defendant Howard Kaplan failed to disclose to investors that their investment project was not generating enough operational profit to justify the 8% return. Similarly, he concealed from investors that certain individual syndications were, in fact, not generating sufficient funds to even cover their operational costs and debt service. In addition, Howard Kaplan also failed to disclose to investors that he was commingling their funds and using them to pay other projects’ debt service.

In entering his plea, Howard Kaplan admitted he breached his fiduciary responsibility and duty to investors by pre-funding the return payments through a process of raising excess funds for individual projects. Also, he induced investors to invest additional funds in projects without informing these investors as to the true financial condition of the properties, and created new and sometimes undisclosed fees called “capital assignment considerations” and “equity consulting fees”.

Defendants Stephen and Eric Kaplan admitted they were aware of the above misconduct by their father no later than January 2010. Despite this knowledge, they continued to seek and accept investments while failing to disclose the true financial status of the properties and misuse of funds to both new and old investors.

This case is being co-prosecuted with the California Attorney General’s Office, with assistance from the California Department of Business Oversight.

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DEFENDANTS   Case Number: Howard Kaplan Age: 71 El Cajon, California Stephen Kaplan Age: 51 La Jolla, California Eric Kaplan     Age: 43 San Diego, California   CHARGES

Title 18, U.S.C., Sec. 371 – Conspiracy to commit wire fraud.  Maximum penalties under the statute include 5 years in prison, $250,000 fine, three years of supervised release.

  INVESTIGATING AGENCIES

California Department of Business Oversight
Federal Bureau of Investigation

SAN DIEGO – The Department of Justice has filed a lawsuit to recover damages from a storage company that allegedly violated the Servicemembers Civil Relief Act when it sold service members’ personal property without obtaining the necessary court orders. The defendants in this lawsuit are Daniel E. Homan and Horoy Inc., doing business as Across Town Movers—a San Diego, California, storage company. Homan is the President and sole owner of Horoy Inc.

The Servicemembers Civil Relief Act, known as SCRA, protects the rights of service members while on active duty by suspending or modifying certain civil obligations. The law states that a storage lien may not be enforced against service members during, or 90 days subsequent to, their period of military service without a court order. The Department of Justice’s complaint alleges that, since 2011, Across Town Movers sold the personal property of 11 service members without obtaining a required court order.

The complaint further alleges that after illegally selling one of the service member’s personal property, Across Town Movers continued to receive regular payments from the United States for storage of the sold property. That service member is U.S. Navy Master Chief Petty Officer Thomas E. Ward.

In 2006, Master Chief Ward, a 30-year veteran, was deployed overseas. He placed his valuable car parts and many household items into storage, and entrusted Across Town Movers to keep his personal property safe until he returned. Just before he returned home, he learned that Across Town Movers had auctioned all of his stored personal property, including vintage original car parts.

“Service members, especially when deployed overseas, should be able to focus on protecting our county and shouldn’t have to worry about losing their personal property,” said U.S. Attorney Laura E. Duffy of the Southern District of California. “Congress enacted the SCRA for this purpose, and we will pursue all appropriate remedies to ensure that our service members’ rights are protected. Whether large or small, businesses will be held accountable for violating those rights.”

“Federal law does not allow storage companies to sell the contents of a servicemember’s storage lot without a court order,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Storage companies should check the Defense Department’s military database and other resources before conducting any auction to see if the customer is protected by the Servicemembers Civil Relief Act. The Department of Justice is committed to protecting the rights of the men and women who serve in our Armed Forces and we will continue to devote time and resources to make sure that they are given the legal protections they deserve.”

In addition to seeking damages for the value of the auctioned goods, the SCRA provides for civil monetary penalties of up to $55,000 for the first offense and $110,000 for each subsequent offense. The Department of Justice will also seek injunctive relief.

This lawsuit was filed today in the Southern District of California. This matter resulted from a referral to the Justice Department by the U.S. Navy.

Service members and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php. Additional information on the Justice Department’s enforcement of the SCRA and other laws protecting service members is available at www.servicemembers.gov.

This matter is being handled by Assistant U.S. Attorneys Dylan M. Aste and Leslie M. Gardner of the Southern District of California.

SAN DIEGO – A former Marine is charged in an indictment unsealed today with sexually assaulting an active-duty Marine in November 2014 on Camp Pendleton.

Pedro Javier Orellana, 23, was indicted by a federal grand jury and surrendered himself for arrest in Laurel, Maryland on Wednesday. He made his first federal court appearance today in Greenbelt, Maryland. A detention hearing will be held on Thursday to determine if Orellana should be detained pending transfer back to San Diego.

According to the indictment, Orellana sexually assaulted his victim on the Marine base while she was “incapable of appraising the nature of the conduct or was physically incapable of declining participation in the sex act.”

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DEFENDANT   Case Number: 15CR0597 Pedro Javier Orellana  Age: 23 Laurel, Maryland   CHARGES

18 U.S.C. § 2242(2) – Sexual Abuse- Incapacitated Victim (Maximum Life Sentence)

  INVESTIGATING AGENCIES

Naval Criminal Investigative Service
Marine Corps Criminal Investigation Division

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

SAN DIEGO – Four men appeared in federal court today and yesterday to face charges that they participated in a scheme to manufacture and traffic in firearms illegally, in some instances by assembling untraceable assault-style weapons in a defendant’s home and then selling the guns for thousands of dollars.

Federal, state and local law enforcement officials served multiple search warrants and made the arrests Friday at locations in Bonsall and Escondido and Temecula. During the searches and throughout the investigation, agents seized more than 50 firearms, including silencers, a short-barreled shotgun, unfinished lower receivers and AR-15-style homemade assault rifles. Some of the firearms were stolen, or had obliterated serial numbers, or both. Agents also found thousands of rounds of ammunition.

Christian Romero, Clay Bautista-Marquez, Ruben Tovar-Ordonez and Matthew Nutt were taken into custody separately on Friday. Romero and Nutt are charged via complaint with engaging in the business of manufacturing and dealing in firearms without a license; Bautista and Tovar are charged via indictment with unlawful dealing in firearms.

A fifth man, Michael Martin, was also arrested and charged via complaint with possession of a firearm – specifically two silencers - not registered to him in the National Firearms Registration and Transfer Record.

All but Martin were held without bond, pending upcoming detention hearings. Martin was to be released on a $20,000 bond.

During the searches Friday, agents also found numerous unfinished lower receivers commonly known as ULRs. ULRs can be lawfully purchased and sold by individuals who do not possess a Federal Firearms License because they are not considered firearms. Manufacturers are not required to mark ULRs with make, model and serial number. They can be manufactured into completed receivers, which are classified as firearms under federal law. An individual engaged in the business of manufacturing completed receivers or dealing in completed receivers is required to have a Federal Firearms License. Otherwise, doing so is a violation of federal law.

“Firearms traffickers who fly under the radar of law enforcement, assembling dangerous and untraceable assault-style weapons in the privacy of their homes, are a significant challenge and a major concern to me,” said U.S. Attorney Laura Duffy. “Because of this investigation, scores of these guns have been removed from the underground market and our communities are safer as a result.”

Many of the assault rifles seized by agents were manufactured from unfinished lower receivers. ATF Special Agent in Charge Carlos A. Canino stated, “These weapons are particularly dangerous because they bear no manufacturer markings or serial numbers making them virtually impossible to trace.” Canino added, “When law enforcement officials join forces in this type of investigation, the result is a significant disruption in violent crime.”

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DEFENDANT   Case Number: 15MJ0740 Matthew Nutt Age: 29 Escondido, California   CHARGES

Engaging in the Business of Dealing in Firearms without a License, in violation of 18 USC 922(a)(1)(A)

Maximum Penalties: Five years imprisonment, a fine of not more than $250,000, and a term of supervised release of not more than 3 years.

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DEFENDANT   Case Number: 15MJ0721 Christian Romero Age: 21 Bonsall, California   CHARGES

Engaging in the Business of Dealing in Firearms without a License, in violation of 18 USC 922(a)(1)(A)

Maximum Penalties: Five years imprisonment, a fine of not more than $250,000, and a term of supervised release of not more than 3 years.

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DEFENDANTS   Case Number: 14CR3360 Clay Bautista-Marquez Age: 30 Bonsall, California Ruben Tovar-Ordonez Age: 45 Temecula, California   CHARGES

Unlawful Dealing in Firearms, in violation of18 USC 922(a)(1)(A). Maximum Penalties Five years imprisonment, a fine of not more than $250,000, and a term of supervised release of not more than 3 years.

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DEFENDANT   Case Number: 15mj0741 Michael Martin Age: 38 Bonsall, California   CHARGES

Possession of a Firearm not Registered to him in the National Firearms Registration and Transfer Record, 26 U.S.C. § 5861(d). Maximum Penalties: Ten years in prison, $10,000 fine.

  INVESTIGATING AGENCIES

Drug Enforcement Administration
Bureau of Alcohol, Tobacco, Firearms and Explosives
Internal Revenue Service
Bureau of Land Management
San Diego Police Department
Immigration and Customs Enforcement –Enforcement and Removal Operations
United States Marshal’s Service
San Diego Sheriff’s Department

*A 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.

SAN DIEGO – John Frank Mussari Jr, owner of Mussari Motors Inc., a luxury car dealership in San Diego, was sentenced in federal court today to 24 months in prison for conspiring with a drug trafficker to evade laws requiring disclosure of cash transactions exceeding $10,000.

According to his plea agreement, Mussari admitted that he failed to report receiving $719,000 in cash from the drug trafficker, who purchased several high-end vehicles including a Ferrari and Porsche during a four-month period.

Under federal law, each person engaged in an automobile dealership, who in the course of that business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file “Report of Cash Payments Over $10,000 in Trade or Business” with the Financial Crimes Enforcement Network (FINCEN) within 15 days. Mussari admitted that he and the trafficker, who was identified in the plea agreement only as J.B., intentionally and willfully conspired with each other to avoid filing any of the required forms.

During his guilty plea in September 2014, Mussari admitted that he received $132,000 in cash for a Ferrari, $115,000 in cash for a Lamborghini, $147,000 in cash for a Porsche, and $205,000 for another Lamborghini. Mussari also admitted that he received $80,000, $60,000, and $31,000 in cash from the drug trafficker.

According to court documents, Mussari was initially detained attempting to leave in a Lamborghini at the time federal and state agents searched the residence of the drug trafficker’s home in Fallbrook, California. Agents found about $205,000 cash in Mussari’s Lamborghini. The money was forfeited to the United States.

U.S. District Judge Gonzalo P. Curiel ordered Mussari to report to prison on June 5, 2015. Mussari has been free on bond.

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DEFENDANT   Case Number: John Frank Mussari, Jr. Age: 48 San Diego, California   CHARGES

Conspiracy to Evade Reporting Requirements Received in Business, in violation of Title 18, U.S.C., Section 371. Maximum penalty: Five years in prison and $250,000 fine.

  INVESTIGATING AGENCIES

Internal Revenue Service
Drug Enforcement Administration

SAN DIEGO - Mark Lopez, former Chief Executive Officer of San Diego-based Unico, Inc., pleaded guilty in federal court today, admitting he defrauded shareholders in a sophisticated stock fraud scheme. Lopez entered his plea before District Court Judge Gonzalo P. Curiel to conspiring to commit securities fraud, and was ordered to return for sentencing on May 15, 2015.

According to court documents, from 2004 through June 2012, Lopez was the CEO of Unico, Inc., a San Diego-based holding company with mining interests in Utah. Because Unico’s stock was publicly traded, it was prohibited from issuing and transferring new shares of stock without having them registered with the U.S. Securities and Exchange Commission (“SEC”).

There are some narrow exemptions to this registration requirement, however, including “Section 3(a)(10)” of the Securities Act of 1933. Under Section 3(a)(10), a company such as Unico can issue and transfer exempt shares of its unregistered stock if: (a) the purpose is to settle a “bona fide debt;” and (b) the issuance is approved at a “fairness hearing” held by a court or other governmental authority.

Lopez admitted that beginning in or about December 2006, he agreed with co-conspirators to execute a scheme to defraud shareholders by deceptively using the Section 3(a)(10) exemption in order to issue and sell millions of unregistered shares of Unico stock, and then split the proceeds from the resulting sale. The scheme involved a $500,000 loan (or “convertible debenture”) made to Unico by a company called Outboard Investments. The terms of the debenture agreement (the “Outboard Debenture”) gave Outboard the right to seek repayment either in cash or in the form of Unico stock.

According to court documents, on December 1, 2006, Outboard assigned the debt to a company headquartered in the Turks & Caicos called Sequoia International, Inc. (“Sequoia”). After Unico’s default, as part of the conspiracy, on December 7, 2006, the conspirators caused Sequoia and Outboard to file a complaint against Unico in state court in Sarasota, Florida (a jurisdiction to which neither party had any connection).

The lawsuit was designed to give the appearance that Unico was contesting its liability under the Outboard Debenture, when in truth Defendant had already agreed to use the lawsuit as a way to issue unregistered shares. On the day of the filing, Lopez signed a settlement agreement on behalf of Unico that asked the court to permit the issuance of 350 million shares of Unico common stock to Sequoia. Lopez and the conspirators knowingly concealed from the state court the material fact that by so doing, Lopez had agreed to settle the $500,000 Outboard Debenture with Unico stock worth over $2.6 million. Based on these misrepresentations and omissions, the Florida court unwittingly approved the settlement agreement and allowed Unico to issue the shares to Sequoia. Defendant then secretly arranged for Sequoia to return over $1,067,000 in proceeds from the sale of this stock.

To continue the deception of shareholders and the public, Lopez signed and submitted to the SEC a Form 10-QSB (a publicly available quarterly report) as Unico’s CEO, according to court records. In that filing, Lopez falsely characterized Unico’s receipt of stock sale proceeds from Sequoia in order to deceive shareholders into believing that the Florida case was a bona fide lawsuit that was settled after a “fairness” determination.

U.S. Attorney Laura Duffy thanked the Securities and Exchange Commission for its assistance in the investigation and prosecution of Lopez’s complex securities fraud.

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DEFENDANTS   Case Number: 12CR5236-GPC Mark Lopez Age: 50 San Diego, California   CHARGES

Count 1: Conspiracy to Commit Securities Fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 25 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

SAN DIEGO – William Michael Howard was sentenced today to 40 years in prison for creating sexually explicit videos of three girls - ages 3, 5 and 7 - who attended a San Diego daycare operated by his girlfriend’s family.

Howard, 24, pleaded guilty in September 2014 to three counts of sexual exploitation of a minor. In his plea agreement, he admitted videotaping each girl’s private parts in three separate instances in 2013 and early 2014. One video was recorded when the 7-year-old was in his care. In the videos, Howard’s voice can be heard or one of his hands is seen removing a child’s clothing and posing her for the camera.

U.S. District Judge William Q. Hayes also ordered a lifetime of supervision following his release.

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DEFENDANTS   Case Number: 14CR1430 William Michael Howard Age: 24 San Diego, California   CHARGES

Counts 1-3: Title 18, United States Code, Section 2251(a) – Sexual Exploitation of a Minor; Maximum Penalty 30 years in prison per count, and mandatory minimum 15 years per count; Maximum $250,000 fine.

  INVESTIGATING AGENCIES

San Diego Police Department
Internet Crimes Against Children Task Force

SAN DIEGO – Two alien smugglers who left a pregnant woman to die in the rugged Otay Mountain wilderness during an ill-fated border-crossing attempt were sentenced in federal court today for actions that ultimately resulted in her death.

With the woman’s widower and three children in the courtroom, U.S. District Judge Cathy A. Bencivengo sentenced Carlos Hernandez-Palma to 84 months in prison, and Fernando Armenta-Romero to 57 months. Hernandez and Armenta pleaded guilty in October 2014 to Bringing in an Illegal Alien Resulting in Death and Bringing in an Illegal Alien for Financial Gain.

According to court records, the woman’s husband, Baltazar Razo-Barreto, repeatedly pleaded with the smugglers to use their cellular phone to call for assistance when his wife became gravely ill in the craggy, remote terrain. The smugglers refused. Ultimately the husband was forced to leave his wife, Jaqueline Capistran-Ochoa, to seek help, and the smugglers eventually abandoned her.

“These smugglers showed a profound lack of humanity when they refused to call for help and left a dying woman alone in the middle of nowhere,” said U.S. Attorney Laura Duffy. “This tragic case serves as a brutal reminder that attempting to cross into the United States illegally – and putting your faith, hope and future in the hands of mercenaries - is a very dangerous proposition and not worth the gamble. My office will aggressively prosecute those who smuggle illegal aliens into the United States for financial gain, place vulnerable people in grave danger, and needlessly cause deaths.”

On or about December 29, 2013, at approximately 7:10 PM, the Border Patrol Search Trauma and Rescue unit responded to a report of a 32-year-old undocumented alien female abandoned in the Otay Mountain Wilderness near the U.S.-Mexico border in southeastern San Diego County. This is a rugged and isolated area, with limited access to roads and no development.

Border Patrol agents contacted the reporting party, later identified as Razo, who identified himself as the husband of the missing woman. He told the agents that Ms. Capistran had been in medical distress when he left her in the care of others while he sought help.

After an extensive search of the mountainous area over a period of two days, the husband eventually led Border Patrol agents to an area where they discovered Ms. Capistran’s body. According to the medical examiner, Ms. Capistran’s death was attributed to hyperglycemia and ketoacidosis due to diabetes mellitus and hypothermia from environmental exposure. The medical examiner reported that Ms. Capistran was pregnant and estimated the gestational age of the fetus at approximately 11 to 12 weeks.

As indicated in court documents, Mr. Razo and his wife made arrangements with the smugglers in Mexico to be brought illegally into the United States in December 2013. The smugglers identified themselves to Mr. Razo as “CARLOS” (Hernandez) and “ARMENTA.” The smugglers told Mr. Razo that they would smuggle him and Ms. Capistran into the United States in exchange for a total smuggling fee of $12,000.

During their discussion, the smugglers explained that the journey from Mexico into the United States would take 1.5 to 2 days, including frequent breaks. The smugglers added that it was not particularly arduous as the terrain was mostly flat. The smugglers told Mr. Razo that the hardest part was climbing the U.S.-Mexico border fence. Mr. Razo relayed this information to Ms. Capistran. She had developed diabetes after the birth of their second child and was on diabetes medication. They also suspected that she might be pregnant.

Before leaving Tijuana, Mexico, for their journey into the United States, the smugglers took Ms. Capistran for walks around the park to determine whether she was fit to make the trip, especially since she appeared overweight and tired. Ms. Capistran walked with the smugglers through the park, but often grew tired and repeatedly required rest stops. The smugglers argued amongst themselves as to whether she could make the smuggling trek and even tried to recruit others to replace Mr. Razo and Ms. Capistran. Despite their misgivings and given their inability to recruit anyone else willing to pay them $12,000, they decided to take a chance on Mr. Razo and Ms. Capistran. On or about December 26, 2013, Hernandez and Armenta smuggled Mr. Razo and Ms. Capistran into the United States by climbing over the U.S./Mexico boundary fence in Tijuana, Mexico.

Notwithstanding the smugglers’ description of the terrain as mostly flat, the hike was mountainous, covered with large boulders and difficult to traverse. After approximately two days, Ms. Capistran began to slow down and required more frequent rest stops. Ms. Capistran told Mr. Razo that she felt like there was water in her lungs, and she was having a hard time breathing. Soon she was unable to walk at all.

Mr. Razo repeatedly pleaded with the smugglers to seek help and to use their cellular phone. The smugglers refused. They claimed the phone did not work and that it had been destroyed. After the third day, on December 29, 2013, Ms. Capistran was unresponsive. Since the smugglers refused to seek help, Mr. Razo left his wife in the smugglers’ care and hiked into the wilderness on his own. Mr. Razo eventually was able to contact his brother. The brother picked up Mr. Razo and called 911, and dispatchers connected them to the Border Patrol for assistance.

By the time Border Patrol agents and Mr. Razo found Ms. Capistran in the Otay Mountain wilderness, it was too late. Ms. Capistran had been left to die on a trail in the mountains. The smugglers were gone. They had hiked out of the mountains two days before and called Armenta’s brother to pick them up.

In addition to the prison sentences, Judge Bencivengo ordered that CARLOS and ARMENTA each serve a term of three years of supervised release.

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DEFENDANTS   Case Number: 14CR02766-CAB Fernando Armenta-Romero Age: 43   Carlos Hernandez-Palma Age: 35           CHARGES

Count 1:  Title 18, United States Code, Section 1324 – Bringing in Illegal Alien Resulting in Death – statutory maximum of death or life imprisonment, a maximum fine of $250,000, a 5-year term of supervised release, and $100 special assessment.

Count 2:  Title 18, United States Code, Section 1324 - Bringing in Illegal Alien for Financial Gain – statutory minimum of three years, statutory maximum of 10 years, a maximum fine of $250,000, a 3-year term of supervised release, and $100 special assessment.   INVESTIGATING AGENCIES

Border Patrol - Chula Vista Intelligence Division

SAN DIEGO, CA – Three Glendale, California women pleaded guilty today in federal court to smuggling Armenian nationals into the United States as part of an international smuggling organization.

Varduhi Avagyan, 42, Meri Avetsiyan, 40, and Maria Yanakopulus, 57, all admitted their roles in a transcontinental conspiracy to bring undocumented Armenian nationals illegally into the United States in exchange for thousands of dollars.

As part of their guilty pleas, the three admitted to conspiring to traffic Armenian nationals from Armenia to the United States by way of Moscow, Russia and Cancun, Mexico. The Armenian nationals were charged up to $18,000 each to be brought into the United States. The three would procure valid U.S. entry documents and attempt to bring the Armenian nationals into the United States as imposters to those documents.

Avagyan and Avetisyan were arrested on November, 1, 2013 attempting to smuggle two Armenian nationals into the country. Yanakopulus was arrested on September 5, 2014.

All three pleaded guilty to conspiracy to bring in illegal aliens for financial gain and encouraging and inducing illegal aliens. They are scheduled to be sentenced before U.S. District Judge Michael M. Anello on May 11, 2015.

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DEFENDANTS   Case Number: 14CR1646-MMA Varduhi Avagyan Age: 42 Glendale, California Meri Avetsiyan Age: 40 Glendale, California Maria Yanakopulus Age: 57 Glendale, California   CHARGES

Conspiracy, 18 U.S.C. § 371              Five year maximum sentence, $250,000 fine

  INVESTIGATING AGENCIES

Homeland Security Investigations

SAN DIEGO - Grant McCollough, a real estate investor and owner of Tycoon Investments, along with his wife Marisa McCollough, a former Wells Fargo Bank employee, were sentenced today by U.S. District Judge Michael M. Anello for participating in a mortgage fraud conspiracy involving dozens of properties in Colorado and Maui, Hawaii.

Grant McCollough was sentenced to 10 months in custody; Marisa McCollough was sentenced to four months. The court also ordered the couple to pay $25,746 in restitution to the IRS.

The McColloughs pleaded guilty on September 30, 2014, and admitted that as part of their conspiracy they recruited investors to act as “straw” buyers in real estate transactions. The defendants then arranged for false information to be submitted to mortgage lenders in support of the straw buyers’ loan applications. The McColloughs also fraudulently inflated the value of the homes and disguised the source of the down payments, in order to skim funds from the fraudulent transfer of property among their co-conspirators. They then hid their skimmed profits from the Internal Revenue Service.

Nearly all of the fraudulent mortgages were arranged by coconspirator Donald Totten, a mortgage loan officer and broker operating from Rancho Santa Fe. Totten was sentenced in October 2014 to 30 months in prison for his role in the scheme, which included mortgage fraud causing more than $20 million in losses to mortgage lenders, bankruptcy fraud, and filing a false tax return that failed to report more than $3 million in taxable income. Totten operated the businesses “Money World” and “Integrated Home Loans,” and specialized in brokering a particularly toxic stated-income, stated-asset “negative amortization” loan product, which allowed borrowers to make monthly payments less than the interest charged over the same period and without paying down the principle balance, so that the monthly payments were low but the outstanding balance of the loan increased over time.

Grant McCollough was not the only principal of Tycoon Investments involved in the conspiracy. McCollough’s business partner, Jason Kent, was also charged in the scheme. On July 21, 2014, Kent pleaded guilty to wire fraud, and admitted assisting Totten, Grant McCollough, Marisa McCollough, and others with carrying out this mortgage and “kickback” scheme. Kent’s case was transferred to the District of Hawaii and he is scheduled to be sentenced on February 26, 2015, before United States District Judge Leslie E. Kobayashi.

With Totten’s help, Marisa McCollough bought a $3.4 million oceanfront home in Lahaina, Hawaii. In order to qualify, she falsely claimed that she earned $90,000 per month, had close to $700,000 in savings, and made a down payment of $630,000. This was all false, and in fact Ms. McCollough did not contribute any of her own funds to the purchase. The McColloughs lived in the home for several years, but never made the mortgage payments they owed.

According to court documents, many of the fraudulently-obtained mortgage loans subsequently defaulted, causing mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, to suffer significant losses as a result of the conspiracy. Fannie Mae and Freddie Mac are government-sponsored enterprises with a mission to provide liquidity, stability, and affordability to the U.S. housing market. Both enterprises assist mortgage lenders by purchasing the loans they originate, enabling the lenders to replenish their funds to finance additional mortgage loans for American homebuyers. The statements borrowers make in loan applications are an important factor in Fannie Mae’s and Freddie Mac’s determination whether to purchase a mortgage loan.

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DEFENDANTS   Case Number: 14CR2787-MMA Grant McCollough Age: 38 Kearney, Nebraska Marisa McCollough Age: 36 Kearney, Nebraska   CHARGES Conspiracy to commit wire fraud and defraud the United States, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

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DEFENDANT   Case Number: 13CR2941-MMA Donald Totten Age: 58 Oakland, California   CHARGES Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
Filing 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.
Bankruptcy fraud, in violation of 18 U.S.C. § 152
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.

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DEFENDANT   Case Number: 14CR1667-MMA Jason Kent Age: 37 Lahaina, HI       CHARGES Wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.

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DEFENDANT   Case Number: 13CR2772-MMA Shellie Lockard Age: 44 Ventura, CA   CHARGES Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.   INVESTIGATING AGENCIES

Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal Investigation

SAN DIEGO – Paul Simpkins, a former senior federal contracting officer for the U.S. Navy, was arrested this morning and charged with conspiracy to commit bribery in connection with his alleged role in a scheme to steer contracts and benefits to Glenn Defense Marine Asia (GDMA), a defense contracting firm headquartered in Singapore.

Simpkins, 60, was arrested this morning in Haymarket, Virginia. He was arraigned in federal court in the Eastern District of Virginia and is scheduled for a detention hearing tomorrow at 2 p.m. Eastern time before U.S. Magistrate Judge Rawles Jones. The government is seeking Simpkins’ removal to face charges in the Southern District of California.

“With the arrest of Paul Simpkins, who was recently among the Defense Department’s high ranking civilians we have uncovered yet another tentacle of this pervasive bribery scheme,” said U.S. Attorney Duffy. “The more we learn about the extent of the greed and corruption, the more determined we are to eviscerate it.”

“Today’s arrest in this ongoing investigation demonstrates our continued resolve to root out all of the corrupt officials involved in this bribery scheme,” said Assistant Attorney General Leslie R. Caldwell. “As alleged, Paul Simpkins misused his position as a contracting officer at the U.S. Navy to obtain bribes of cash, air travel, hotel rooms, and prostitutes, and his actions tarnish the reputation earned by the vast majority of U.S. Navy officers and enlisted and civilian personnel.”

“As we've mentioned previously, the GDMA investigation is far from over,” said Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS). “NCIS will follow the evidence wherever it leads, to bring to justice those who were involved in perpetrating this massive fraud on the Department of the Navy and the American taxpayer. Active leads remain and NCIS will stay on the case until our work is done.”

“As the filing of today's Criminal Complaint and subsequent arrest of Paul Simpkins shows, the Defense Criminal Investigative Service and its law enforcement partners will continue to identify and investigate those individuals who seek to defraud the U.S. taxpayer,” said Deputy Inspector General of Investigations James B. Burch of the Department of Defense (DCIS). “Any individual, regardless of position, who allowed Glenn Defense Marine Asia Ltd. to prosper at the expense of the American taxpayer, will be brought to justice.”

Simpkins is the latest individual to be arrested in connection with a corruption probe involving the U.S. Navy, GDMA, and its owner, Leonard Glenn Francis. To date, seven individuals, including Francis, and GDMA have entered guilty pleas as part of the investigation.

According to a criminal complaint unsealed today, Simpkins held several manager-level contracting positions throughout the federal government, including Supervisory Contract Special at the U.S. Navy Regional Contracting Center in Singapore from April 2005 through June 2007, and manager in the Department of Defense’s Office of Small Business Programs from December 2007 to August 2012. The complaint alleges that between May 2006 and September 2012, Simpkins accepted several hundred thousand dollars in cash and wire transfers, travel and entertainment expenses, hotel rooms and the services of prostitutes. In return, Simpkins allegedly helped steer lucrative U.S. Navy contracts to Francis and GDMA, advocated for and advanced the interests of GDMA in contract disputes, and assisted in preventing GDMA’s competitors from receiving U.S. Navy business.

The complaint specifically alleges that, beginning in early 2006, Simpkins and Francis held a series of meetings at a hotel in Singapore in which Francis agreed to provide Simpkins with things of value in return for help in steering lucrative ship husbanding contracts to GDMA. Specifically, the complaint alleges that Francis paid Simpkins by hand-delivering over $150,000 in cash and by making several wire transfers to a bank account held in the name of Simpkins’s wife at the time. To conceal the true nature of the wire transfers, Simpkins allegedly used an email account belonging to his mistress to advise Francis of the routing and account information of the bank account belonging to his wife.

In return for the things of value, Simpkins allegedly used his influence within the U.S. Navy to benefit GDMA, including by helping GDMA to secure lucrative ship husbanding contracts to service U.S. Navy vessels in Thailand and the Philippines. In addition, Simpkins allegedly interceded on GDMA’s behalf in contract disputes with the U.S. Navy. The complaint specifically alleges that in 2006, Simpkins’s subordinate recommended that GDMA’s husbanding contract in Thailand not be extended due to “many exceedingly high cost” items. Simpkins allegedly overruled his subordinate and extended GDMA’s contract.

In another example, Simpkins allegedly instructed U.S. Navy officials in Hong Kong to discontinue the use of meters that monitored the volume of liquid waste that GDMA removed from U.S. Navy ships under its husbanding contracts. The use of these meters would have ensured proper accounting of the actual amount of waste removed to ensure that no overbilling occurred. Simpkins also allegedly instructed a U.S. Navy official not to review invoices that GDMA submitted in connection to a recent port call in Hong Kong after Francis complained that U.S. Navy personnel were asking questions.

The ongoing investigation is being conducted by NCIS and DCIS. The case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Senior Trial Attorney Brian R. 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.

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.

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DEFENDANT   Case Number: 15MJ0325 Paul Simpkins Age: 60         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

*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.      

SAN DIEGO – Alva Benavidez pleaded guilty today in federal court to conspiracy to accept bribes stemming from her employment at the California Driver Safety Office at the Department of Motor Vehicles.

Appearing before U.S. Magistrate Judge Karen S. Crawford, Benavidez admitted that she accepted more than $5,000 in cash and gifts from attorneys and their law firms in exchange for helping their clients obtain positive results in DMV hearings and unauthorized temporary licenses.

According to court records, Benavidez was an employee of the DMV since August 2000, where she worked as a Driver Safety Officer (“DSO”). As a DSO, Benavidez’s duties included presiding over hearings to determine whether a person charged with Driving Under the Influence (“DUI”) should have their license suspended. As an employee of the DSO, Benavidez had access to files, records and information of the DMV, including temporary licenses. In her plea agreement, Benavidez admitted that between 2005 and August 2014, she entered into an agreement with six different attorneys and six of their staff or representatives (collectively “co-conspirators”) to aid the attorneys in obtaining favorable treatment for clients who were charged with DUIs. In exchange for the favorable treatment for the clients of the co-conspirators, Benavidez accepted goods and services of value, including cash, meals, and luxury items such as designer purses, from the co-conspirators.

Some of the activity Benavidez admitted to in her plea agreement included stealing arrest packets from the DSO before the information about a DUI arrest could be entered into the DSO database, setting aside driver license suspensions, and providing unauthorized temporary driver licenses for people who had been arrested for DUIs. In exchange for her participation in the conspiracy, Defendant accepted gifts and bribes worth over $5,000 total, including cash, gift certificates, sunglasses, purses and other items of value.

Benavidez retired from the DMV in December 2014 after search warrants were executed at her home and office. She has been released on bond pending sentencing. The guilty plea is not final until it has been accepted by the district court. Benavidez is scheduled to be sentenced on April 20, 2015 at 9 a.m. before U.S. District Judge Cynthia A. Bashant.

Anyone with information about corruption at the DMV is asked to contact the Federal Bureau of Investigation at 1-877-NO-BRIBE (662-7423), or the DMV’s Investigations Branch-Office of Internal Affairs at (951) 653-5357.

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DEFENDANT   Case Number: 15CR0233-BAS Alva Garrido Benavidez Age: 51 San Diego, California       CHARGES

Conspiracy to Accept Bribes – Title 18, U.S.C., Section 371
Maximum penalty:      20 years’ imprisonment and $250,000 fine

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Department of Motor Vehicles, Investigations Division, Special Operations Command, Office of Internal Affairs

SAN DIEGO, CA – Michael William Lutts, a 50-year-old foster parent and pediatric nurse, pleaded guilty in federal court today to sexually exploiting a two-month-old premature boy and an 11-month-old girl who had been placed in his care last summer.

According to his plea agreement, Lutts admitted to 15 instances in July and August 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 before U.S. Magistrate Judge Jill L. Burkhardt. He faces up to 80 years in prison, and has agreed to forfeit his College area home where most of the crimes occurred.

“This is a deeply disturbing case,” said U.S. Attorney Laura Duffy. “We will do everything in our power to protect our precious, defenseless children from sexual abuse and exploitation, especially at the hands of caregivers who are supposed to keep them safe .”

FBI Special Agent in Charge Eric S. Birnbaum commented, “Though the FBI investigates many types of criminal investigations, it is particularly disturbing when the victims are sexually exploited children or infants. When this type of sexual exploitation takes place, the FBI and our law enforcement partners will aggressively pursue those who would exploit and abuse children, and bring them to justice."

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DEFENDANT   Case Number: 14CR2542-JAH Michael William Lutts Age: 50 San Diego, California   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

SAN DIEGO –Mark A. Hofmann of San Diego, California, was sentenced today to two years in prison for his role in an investment fraud scheme whereby Hofmann misappropriated more than $400,000 in investment funds of a Louisiana riverboat pilots association known as Bolivar Investors Group, LLC.

During a hearing before U.S. District Judge Dana M. Sabraw, Hofmann was also ordered to pay more than $400,000 in restitution to members of the riverboat pilots association – the victims of Hofmann’s white collar crime.

According to court documents, Hofmann solicited $3 million from Bolivar Investors Group, LLC, as part of a joint venture to allegedly develop office buildings next to a medical center in Covington, Louisiana. As part of their deal, Hofmann agreed to open a bank account in San Diego, California, in order to use the investment funds to pay project expenses. Hofmann promised the investors in Bolivar Investors Group, LLC that they would have access to the bank account and would be able to review the statements online. However, Hofmann, and his co-conspirator, Timothy Monahan, were the only signatories on the bank account, and were the only ones with access to the bank account details. To conceal his fraudulent scheme, Hofmann provided the riverboat pilots that invested through Bolivar Investors Group with falsified bank records and other fraudulent financial documents.

According to court documents and Hofmann’s admissions, rather than spend the money on project expenses, Hofmann misappropriated more than $400,000 of funds that belonged to Bolivar Investors Group, LLC, for his own personal use and expenses, which were unrelated to the land development deal. In addition, as mentioned during the sentencing hearing today, Hofmann also withdrew from the joint venture bank account more than $230,000 in cash and checks that he wrote to himself, which was also unrelated to the land deal.

During the sentencing hearing, two of the riverboat pilots from Louisiana told the Court that Hofmann’s fraud had destroyed personal relationships between generations of pilots dating back 100 years. The two pilots said the victims are constantly reminded each month of Hofmann’s fraud because they continue to pay monthly interest and principal on loans they had taken out to invest in the joint venture with Hofmann.

United States Attorney Laura E. Duffy said, “Today, justice was served on behalf of the riverboat pilots association in Louisiana, who placed their trust in Mr. Hofmann. We hope that this case serves as a deterrent to those raising capital for joint ventures who might seek to take advantage of their investors and misappropriate their funds.”

This case was investigated by the New Orleans Division of the Federal Bureau of Investigation and presented for prosecution to the U.S. Attorney’s Office in the Eastern District of Louisiana. The case was transferred to the Southern District of California for entry of the guilty plea and for sentencing.

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DEFENDANTS   Case Number: 13CR4073-DMS Mark A. Hofmann Age: 57     CHARGES

Count 1: Title 18, United States Code, Section 1343 – Wire Fraud -- statutory maximum sentence of 20 years’ custody, a maximum fine of $250,000, special assessment of $100, and a maximum term of supervised release of 3 years. 

  INVESTIGATING AGENCIES

Federal Bureau of Investigation – New Orleans Division
U.S. Attorney’s Office for the Eastern District of Louisiana
U.S. Attorney’s Office for the Southern District of California

SAN DIEGO, CA – Nicholas George Zakov pleaded guilty to immigration crimes in federal court today, admitting that he acted with “extreme disregard” for the lives of two Mexican citizens who perished while being smuggled across the U.S.-Mexico border in Zakov’s trunk.

Zakov, 43, a U.S. citizen, admitted that on August 12, 2014, he attempted to transport two Mexican citizens, Tarcisio Casas-Blanco and Jose Aurelio Quiroz-Casas, into the United by hiding them within the trunk of his 2012 Dodge Challenger. Zakov was going to be paid $3,500 for his actions.

Zakov further admitted that he continued to drive the vehicle 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. At the Port of Entry, U.S. Customs and Border Protection officers discovered the two Mexican citizens unresponsive in Zakov’s trunk. Casas-Blanco and Quiroz-Casas later died of hyperthermia and mechanical asphyxiation.

Zokov entered his plea before U.S. Magistrate Judge David H. Bartick. He pleaded guilty to 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. According to his plea agreement, Zakov admitted that Casas-Blanco and Quiroz-Casas died as a result of being concealed in his trunk.

Zakov faces up to life imprisonment, a mandatory minimum sentence of three years in prison, and a $250,000 fine. Sentencing is scheduled for April 10, 2015 before U.S. District Judge Anthony J. Battaglia.

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DEFENDANT   Case Number: 14CR2363-AJB Nicholas George Zakov Age: 43 Hawthorne, California   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 - Four members of an extortion ring were sentenced in federal court today for collectively duping 124 Latino families across the United States, in some cases falsely claiming a family member had been kidnapped and forcing them to pay almost $190,000 in ransom for kidnappings that never took place.

The defendants – Ruth Graciela Raygoza, Maria Del Carmen Pulido Contreras, Adrian Jovan Rocha and Jonathan Rocha – were sentenced by U.S. District Judge Jeffrey T. Miller to 40, 21, 21 and 14.5 months in prison, respectively. They pleaded guilty in July of 2014 to conspiracy to commit wire fraud and conspiracy to launder money.

According to the plea agreements and other court documents, the ring targeted victims from Mexico and Central America that spoke primarily Spanish and were not United States citizens. As part of the scheme, co-conspirators of the foursome called numerous families in the United States and falsely represented that they were holding a loved one captive, and demanded money for his or her safe release. The extortion victims were usually instructed to send thousands of dollars through either MoneyGram or Western Union. Defendants would then pick up the money in Southern California. After picking up the money, defendants re-wired or delivered the money to other conspirators in Mexico. The money was divided among defendants and co-conspirators in Mexico to fund and promote the scheme.

“This has been by far the worse experience of my life,” one victim wrote in a statement to the court. “I could not sleep for days because I was waiting for their phone call to give instructions since they told me that they would kill my niece if I did not send the money requested. I got sick as a result of not sleeping, not eating well and the stress that I was subjected to and feeling so powerless.”

U.S. Attorney Laura Duffy said, “This was a cruel hoax that caused significant emotional and financial damage to a large number of people. These sentences are appropriate for defendants who preyed on a vulnerable population with no regard for their suffering.”

“Homeland Security Investigations is committed to dismantling criminal rings that seek to exploit vulnerable victims through their daunting scams,” said interim Special Agent in Charge Joe Garcia. “These unscrupulous criminal networks are motivated by extreme greed and will go to extreme measures to gain illicit proceeds.”

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DEFENDANTS   Case Number: 13CR3984-JM Ruth Graciela Raygoza Age: 64 Chula Vista, California Maria Del Carmen Pulido Contreras Age: 43 Los Angeles, California Adrian Jovan Rocha Age: 27 Tijuana, Mexico Jonathan Rocha Age: 24 Tijuana, Mexico   CHARGES

Title 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud
Title 18, United States Code, Section 1956 - Conspiracy to Launder Money (international promotion)

  INVESTIGATING AGENCIES

U.S. Immigration and Customs Enforcement’s Homeland Security Investigations

SAN DIEGO –Derek Montague Cohen, a former Sales Director at Qualcomm, Inc (NASD: QCOM) pled guilty today to insider trading and admitted netting almost $200,000 in fraudulent proceeds by trading ahead of Qualcomm’s 2011 acquisition of Atheros Communications. At the time of his illegal trade, Cohen was a director in Qualcomm’s North America Sales Department. Two of his former colleagues in the Sales Department -- Robert Herman and Michael Fleischli -- have already been charged and taken responsibility for their misconduct.

According to Cohen’s plea agreement, he and Herman were part of an informal stock trading group that occasionally shared tips and opinions with each other about the stock market. Beginning in December 2010, their immediate supervisor notified them that Qualcomm was contemplating a major acquisition of a public company, and emphasized that this information was secret. Because of his access to inside information at Qualcomm, Cohen knew there were a limited number of companies that could potentially be considered as acquisition targets by the company.

As detailed today in court, by the morning of January 4, 2011, Cohen had learned from his position at Qualcomm that the identity of the acquisition target was Atheros. Cohen then engaged in a series of stock and options trades to take advantage of this inside information at the expense of ordinary shareholders. Over the span of just a few hours, Cohen purchased 10,400 shares of Atheros stock, and 375 call options in Atheros, at a cost of over $430,000. Less than an hour after Cohen’s last illegal trade, the New York Times reported on the planned acquisition by Qualcomm, which caused Atheros’s stock price to rocket upward. Defendant sold his stock and stock options later that month for an illegal profit of just under $200,000 – an amount that he agreed to forfeit to the United States as part of his plea agreement.

Cohen was the fourth former Qualcomm executive charged with insider trading in connection with the company’s Atheros acquisition. Jing Wang, Qualcomm’s former Executive Vice President and President of Global Business Operations, pled guilty in July 2014 to insider trading and money laundering based on three separate instances in which he misused Qualcomm’s confidential information to trade in a secret brokerage account in the name of a British Virgin Islands entity. Wang – who reaped over $240,000 from his insider trading and then attempted to obstruct federal investigations into his misconduct – is to appear in federal court on February 20, 2015, at which time his sentencing hearing will be scheduled. Cohen’s co-defendant Robert Herman – who made just under $30,000 in proceeds and pled guilty in late 2014 – was sentenced earlier this month to three years of probation, fined $50,000, and ordered to complete 1,500 hours of community service. The fourth insider trading defendant, Michael Fleischli, was charged in May 2014 with making approximately $3,000 from insider trading on the Atheros acquisition, and is currently on a three-year period of supervision pursuant to a deferred prosecution agreement.

Wang’s stock broker, former Merrill Lynch vice president Gary Yin, has also been convicted of conspiring with Wang to launder the proceeds of Wang’s insider trading and obstruct the investigation into his misconduct. Yin is also scheduled to appear in federal court on February 20, when it is expected that his sentencing hearing will be set.

United States Attorney Laura E. Duffy complimented the Federal Bureau of Investigation for its exemplary work on this matter and expressed appreciation for the Los Angeles office of the U.S. Securities and Exchange Commission, Division of Enforcement (“SEC”), which worked collaboratively with prosecutors while conducting separate civil investigations of the same securities fraud offenses.

Cohen’s sentencing is set for May 22, 2015 at 9:00 a.m. before the Honorable Janis L. Sammartino.

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DEFENDANT   Case Number: 14CR1202-JLS Derek Montague Cohen Age: 52 San Diego, California   CHARGES

Title 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5 million fine and three years of supervised release.

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DEFENDANT   Case Number: 13CR3487-WQH Jing Wang Age: 52 Del Mar, California   CHARGES

Title 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5,000,000 fine, three years of supervised release, and restitution.

Title 18, U.S.C., Secs. 1956(a)(1)(B)(i) – Money Laundering. Maximum penalties include 20 years in prison, $500,000 fine, and three years of supervised release.

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DEFENDANT   Case Number: 13CR3488-WQH Gary Yin Age: 56 San Diego, California   CHARGES

Title 18, U.S.C., Sec. 371 – Conspiracy to obstruct proceedings and commit money laundering.  Maximum penalties include 5 years in prison, $250,000 fine, three years of supervised release, and restitution.

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

Distribution cells are dismantled in Chula Vista,
National City and Oceanside

CHARGING DOCUMENTS click HERE

SAN DIEGO – Sixty alleged members and associates of the Mexico-based Sinaloa Cartel - including the highest ranking leaders, lieutenants and operators of multiple distribution cells - are charged in 14 indictments unsealed today with trafficking huge quantities of methamphetamine, cocaine, heroin and marijuana to points around the United States.

The indictments mark the conclusion of the third phase of a three-year investigation that, in total, has resulted in charges against 117 people and has had a significant impact on the worldwide operations of the Sinaloa Cartel.

This investigation has also offered one of the most comprehensive views to date of the inner workings of one of the world’s most prolific, violent and powerful drug cartels. Cartel members and associates were targeted for three years in a massive probe involving multiple countries, scores of law enforcement agencies around the United States, a number of federal districts and over 200 court-authorized wiretaps in this district alone.

The primary indictment, unsealed in federal court in San Diego today, targets the alleged leader of the cartel, Ismael Zambada-Garcia, known as “El Mayo,” as well as two of his four sons - Ismael Zambada-Sicairos, known as “Mayito Flaco,” and Ismael Zambada-Imperial, known as “Mayito Gordo.” Zambada-Imperial was arrested by Mexican authorities in November 2014.

Also part of that indictment is Ivan Archivaldo Guzman-Salazar, known as “Chapito,” whose father Joaquín “El Chapo” Guzmàn Loera was the alleged leader of the Sinaloa Cartel along with Mayo and considered the world’s most powerful drug lord until his arrest in Mexico in February 2014.

This case began in late 2011 as an investigation of what was at first believed to be a small-scale drug distribution cell in National City and Chula Vista. The alleged leader of that cell – Jose Luis Iglesias, aka Jose Bautista Samano-Molina – and a number of his associates were indicted in 2012. Iglesias remains a fugitive, but most of his associates have been sentenced.

But it soon became evident that the drugs were being supplied by the Sinaloa Cartel, and the case morphed into a massive multi-national, multi-state probe that has resulted in scores of arrests and seizures from San Diego, Los Angeles, Riverside, San Bernardino and Imperial counties to the big cities of San Francisco, Chicago, New York City and Detroit; the states of Nevada, Texas, South Carolina, Delaware, Pennsylvania, Minnesota, Kentucky, Georgia; and the countries of Mexico, Canada, Colombia, Great Britain, the Philippines, Guatemala and China.

Law enforcement in San Diego has worked hand-in-hand with agents in Chicago to target the upper level leadership of the Sinaloa Cartel. This partnership resulted in the indictment of these leaders in San Diego as well as the indictment of numerous high-level Sinaloa Cartel leaders in Chicago, including Chapo and his son Jesus Alfredo Guzman-Salazar.

On the local front, one of the indictments unsealed today charges alleged members of an Oceanside distribution cell linked to the Sinaloa Cartel which is believed responsible for supplying about one-third of the methamphetamine to the streets of San Diego’s North County.

According to court records, the alleged leader of the cell, Miguel Iram Quiroz-Perez, was indicted along with 13 associates who were responsible for distribution to customers that included documented members of the Deep Valley Bloods and the Deep Valley Crips street gangs.

As part of this investigation, U.S. authorities previously arrested and prosecuted another son of Mayo - Serafin Zambada-Ortiz - who pleaded guilty in the Southern District of California in September 2014 to drug trafficking charges. Zambada Ortiz, a U.S. citizen born in San Diego, pleaded guilty to conspiring to buy more than 100 kilograms of cocaine and more than 1,000 kilograms of marijuana in Sinaloa, then import it into the United States. Zambada Ortiz faces 10 years to life in prison when sentenced on May 22, 2015.

José Rodrigo Aréchiga-Gamboa, commonly referred to by his alias "El Chino Ántrax,” was arrested in the Netherlands and extradited to the United States by Dutch authorities in July 2014. Arechiga-Gamboa is believed to have worked for the Sinaloa Cartel as the leader of a violent enforcement arm of the Sinaloa Cartel called “Los Antrax” and a key lieutenant of Mayo.

Two of the indictments unsealed today also target Alfonso Arzate-Garcia, aka “Aquiles,” the alleged Tijuana Plaza boss for the Sinaloa cartel, and his brother, Rene Arzate-Garcia, aka “La Rana,” alleged to be an enforcer for the cartel in Tijuana who is believed responsible for a significant amount of violence in the Tijuana plaza. Both men are fugitives.

Two alleged high-ranking cartel leaders - Alfonso Limon-Sanchez and Rafael Felix-Nunez - were arrested in separate incidents by Mexican authorities in November 2014.

Limon-Sanchez is alleged to be one of Mayo’s primary cocaine sources of supply. Felix-Nunez is alleged to have been one of Chino Antrax’s chief lieutenants in Los Antrax.

“This extraordinary case is this district’s most significant, comprehensive and large-scale cartel prosecution since the dismantling of the Arellano-Felix drug trafficking organization,” said U.S. Attorney Laura Duffy. “We are going after the Sinaloa Cartel with the same passion, knowing that the drugs and violence peddled by the cartel are destroying lives and tearing the fabric of our communities.”

“The culmination of this investigation is significant not only to the citizens of San Diego, but to citizens of our entire country,” said DEA San Diego Special Agent in Charge William R. Sherman. “DEA has long known that the reach of the Sinaloa Cartel extends beyond the US/Mexico border to locations throughout the world. This investigation targeted the highest ranking members of this powerful cartel, taking them out of commission, seriously impacting their operational structure. DEA and its law enforcement partners will continue to target and investigate this violent and dangerous cartel until its world-wide operations are completely dismantled.”

“San Diego is at the forefront of narco-dollar money laundering, with couriers using bulk cash smuggling, structured bank deposits, and high-end luxury vehicles and airplanes to move their illicit drug proceeds,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “Seizing the dirty cash and assets of these illegal organizations will hit the criminals where it hurts the most--it will deprive them of their profits."

In all, with the conclusion of this third phase, the government has seized more than 652 kilograms of methamphetamine, 1,343 kilograms of cocaine, 12.2 tons of marijuana, 53 kilograms of heroin, 5,500 oxycodone pills and $14.1 million in narcotics proceeds.

According to the main indictment, the alleged leaders of the cartel imported large quantities of cocaine, methamphetamine and other drugs, as well as the chemicals to manufacture methamphetamine, into Mexico from Asia and Central and South American countries including Colombia, Ecuador, Venezuela, Peru, Panama, Costa Rica, Honduras and Guatemala. The traffickers used various methods to move the drugs, including cargo aircraft, private aircraft, submarines and other submersible and semi-submersible vessels, container ships, supply vessels, go-fast boats, fishing vessels, buses, rail cars, tractor trailers, trucks, automobiles, and private and commercial interstate and foreign carriers, the indictment said.

The indictment alleges that the large quantities of drugs were then smuggled across the international border to San Diego via automobiles, tractor trailers, trucks, fishing vessels and tunnels and stored at various stash houses, safe houses and warehouses in San Diego County. The cocaine, methamphetamine and marijuana were transported and distributed from there to locations throughout the U.S.

According to the indictment, trafficking proceeds were laundered through bulk cash smuggling; structured bank deposits; wire transfers; currency exchange transfers; alternative credit-based systems used to transfer money without the use of wires or other traditional means; goods-based systems in which items, including high end luxury vehicles and airplanes, were purchased in one location and transferred to another location; and other methods by shared networks of money couriers and money launderers associated with the Sinaloa Cartel.

According to the indictment, the government is seeking criminal forfeiture of a number of possessions, including a 1982 Cessna Turbo 210 aircraft, a Lamborghini Murceilago luxury vehicle, and other vehicles and property.

In order to protect their drug distribution activities and evade law enforcement, the traffickers took a number of steps. They obtained guns and other weapons and used intimidation, violence and threats of violence against members of law enforcement, rival drug traffickers and members of their own drug trafficking organization, the indictment said.

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DEFENDANTS   Case Number: 14CR0658-DMS Ismael Zambada-Garcia, aka Mayo Age: 64

Culiacan, Mexico

Ismael Zambada-Imperial aka Mayito Gordo Age: 30

Culiacan, Mexico

Ismael Zambada-Sicairos, aka Mayito Flaco  Age: 32

Culiacan, Mexico

Ivan Archivaldo Guzman-Salazar Age: 31

Culiacan, Mexico

FULL LIST OF DEFENDANTS Click HERE

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CHARGES

Continuing Criminal Enterprise, in violation of Title 21 U.S.C. §§ 848(a) and (b)
Term of custody including a mandatory minimum 20 years and up to life imprisonment, $2 million fine and 5 years supervised release.

Ismael Zambada-Garcia is charged as the principal administrator, organizer or leader of the enterprise or is one of several such principal administrators, organizers, or leaders; and the violation involved 300 times the quantity of a substance described in subsection 841(b)(1)(B) (100 grams of heroin, 500 grams of cocaine, 100 kilograms of marijuana or 50 grams of Methamphetamine mixture), which is mandatory life imprisonment.

Conspiracy to Distribute Controlled Substances for Purpose of Unlawful Importation, in violation of Title 21 U.S.C. §§ 959, 960 and 963; Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.

Conspiracy to Import Controlled Substances, in violation of Title 21 U.S.C. §§ 952, 960 and 963. Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.

Conspiracy to Distribute Controlled Substances, in violation of Title 21 U.S.C. §§ 841 and 846
Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.

Conspiracy to Commit Money Laundering, in violation of Title 18 U.S.C. §§ 1956 (a)(2)(A) and (h)

Term of custody up to 20 years imprisonment, a fine of the greater of $500,000 or twice the value of the monetary instrument or funds involved and 5 years supervised release.   INVESTIGATING AGENCIES

Drug Enforcement Administration
Customs and Border Protection Office of Field Operations
Customs and Border Protection Office of Border Patrol
Internal Revenue Service
Federal Bureau of Investigation
Homeland Security Investigations
United States Attorney’s Office, Northern District of Illinois
Department of Treasury, Office of Foreign Asset Control
Oceanside Police Department
San Bernardino County Sheriff’s Department
National City Police Department
Chula Vista Police Department
San Diego Police Department
San Diego County District Attorney’s Office
San Diego Law Enforcement Coordination Center
Interpol

*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.      

SAN DIEGO - Leonard Glenn Francis, owner and chief executive of Glenn Defense Marine Asia, pleaded guilty to bribery and fraud charges in federal court today, admitting that he presided over a massive, decade-long conspiracy involving “scores” of U.S. Navy officials, tens of millions of dollars in fraud and millions of dollars in bribes and gifts – from cash, prostitutes and luxury travel to Cuban cigars, Kobe beef and Spanish suckling pigs.

Also today, U.S. Navy Capt. Daniel Dusek, 47, was charged via information and pleaded guilty to a single count of conspiracy to commit bribery before U.S. Magistrate Judge William V. Gallo. Dusek, the highest-ranking of five current or former Navy officials to plead guilty in the case so far, admitted that he used his influence as Deputy Director of Operations for the 7th Fleet, headquartered in Yokosuka, Japan, and later as executive officer of the USS Essex and the commanding officer of the USS Bonhomme Richard, to benefit Francis and GDMA, which for decades provided port services to U.S. Navy ships. Dusek admitted that in return, Francis plied him with meals, alcohol, entertainment, gifts, dozens of nights and incidentals at luxury hotels and the services of prostitutes.

Francis, a 50-year-old Malaysian national, and his corporate entity GDMA, both pleaded guilty to conspiracy to commit bribery, bribery and conspiracy to defraud the United States before U.S. Magistrate Judge Jan M. Adler. According to the plea agreement, Francis faces up to 25 years in prison.

Francis also admitted to defrauding the U.S. Navy of tens of millions of dollars by routinely overbilling for everything from fuel to tugboats to sewage disposal. The government and Francis have agreed that Francis and GDMA should forfeit $35 million of the ill-gotten proceeds and pay full restitution to the U.S. Navy, an amount to be determined by U.S. District Judge Janis L. Sammartino upon sentencing.

In his plea agreement, Francis conceded that over the course of the conspiracy, he and GDMA gave public officials millions of dollars in things of value, including over $500,000 in cash; hundreds of thousands of dollars in the services of prostitutes and associated expenses; hundreds of thousands of dollars in travel expenses, including airfare, often first or business class, luxurious hotel stays, incidentals and spa treatments; hundreds of thousands of dollars in lavish meals, top-shelf alcohol and wine and entertainment; and hundreds of thousands of dollars in luxury gifts, including designer handbags and leather goods, watches, fountain pens, fine wine, champagne, Scotch, designer furniture, consumer electronics, ornamental swords and hand-made ship models.

Francis identified seven Navy officials who accepted his bribes – including Dusek; Commanders Jose Luis Sanchez and Michael Vannak Khem Misiewicz; Naval Criminal Investigative Service Special Agent John Beliveau; Petty Officer First Class Dan Layug; and two unnamed, yet-to-be-charged individuals - a contract specialist and a lieutenant commander. All of the charged Navy officials have pleaded guilty except Misiewicz, whose case is pending. Misiewicz has pleaded not guilty.

“It is astounding that Leonard Francis was able to purchase the integrity of Navy officials by offering them meaningless material possessions and the satisfaction of selfish indulgences,” said U.S. Attorney Laura Duffy. “In sacrificing their honor, these officers helped Francis defraud their country out of tens of millions of dollars. Now they will be held to account.”

“Today’s guilty pleas of Leonard Francis, his company, and a Navy officer are vitally important steps in our active, ongoing investigation,” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division. “We will continue our efforts to root out those implicated in this long-running corruption scheme, both inside the Navy and out. The interests of justice and national security demand nothing less.”

“The greed of all those involved in this massive fraud and bribery case has cost American taxpayers tens of millions of dollars,” said Naval Criminal Investigative Service Director Andrew Traver. “NCIS and our law enforcement partners have pored through mountains of documents and emails, discovering and documenting the crimes so that those who participated can be held accountable. Although today's pleas are a significant milestone in the case, this investigation is far from over; there is much more work to be done.”

“The guilty pleas entered today send a clear message to those who, driven by greed, betray the faith and trust of the American taxpayers" said Deputy Inspector General for Investigations James B. Burch of the Department of Defense, Defense Criminal Investigative Service. “The DCIS, along with its law enforcement partners, will relentlessly pursue those who corrupt the procurement process for their own personal benefit.”

“I'm extremely gratified that the work of our investigative support team could make a significant contribution to the outcome in this egregious case of defrauding the government and, ultimately, the American taxpayer,” said Anita Bales, Director of Defense Contract Audit Agency.

According to Dusek’s plea agreement, he hand-delivered Navy ship schedules to the GDMA office in Japan or emailed them directly to Francis or a GDMA employee on dozens of occasions, each time taking steps to avoid detection by law enforcement or U.S. Navy personnel. Dusek was so helpful to GDMA that an employee identified him as “an official GDMA card holder.” And he was rewarded for his efforts. In one example cited in the plea agreement, GDMA paid for a hotel for Dusek and his family at the Marriott Waikiki in Hawaii on July 19, 2010. A few weeks later, on August 5, 2010, GDMA paid for a hotel room for Dusek at the Shangri-La in Makati, Philippines and while there, GDMA provided him with the services of a prostitute.

Soon after, Francis asked Dusek to exercise his influence on GDMA’s behalf by steering the aircraft carrier USS Abraham Lincoln and its associated strike group to Port Klang, Malaysia – a port terminal owned by Francis. Dusek replied in a series of emails to GDMA in late August 2010 that he would make it happen. “Good discussion with N00 (Admiral) today and convince him that PKCC (Francis’ terminal) is the better choice,” Dusek wrote to Francis on August 21, 2010. Three days later, Dusek reported to Francis that he had “everyone in agreement that the next CSG (Carrier Strike Group) through the AOR (area of responsibility) will stop at PKCC. Dates will be 08-12 Oct.”

The USS Abraham Lincoln Carrier Strike Group did, in fact, make that visit to Francis’ port on October 8-12, 2010.

In an email to one of his employees, Francis wrote on October 3, 2010: “(Dusek) is a golden asset to drive the big decks (aircraft carriers) into our fat revenue GDMA ports.”

On September 17, 2013, when Dusek learned that Francis and Navy personnel had been arrested, he deleted the contents of his email accounts in an effort to avoid detection by law enforcement.

In the Francis plea agreement, Francis admitted that he required his Navy contacts to use their influence to benefit GDMA by steering contracts to GDMA; by scheduling and directing Navy ships to various ports favored by GDMA; and by advocating for and advancing GDMA’s interests with the Navy with respect to ship husbanding issues.

Francis also said Misciewicz provided classified and proprietary Navy information on dozens of occasions and in return, he gave cash and paid travel expenses for Misciewicz. The plea agreement lists eight examples.

Francis acknowledged that he recruited NCIS Special Agent Beliveau, who was the first to plead guilty in this case, to conduct regular searches of the NCIS database which housed information about ongoing NCIS investigations; to download NCIS reports involving investigations into the activities of GDMA and Francis and provide copies of these reports to Francis; and to give Francis advice and counsel on how to respond to, stall and thwart these investigations.

As part of his plea, Francis admitted that Beliveau gave him the identities of subjects of these investigations; the information provided by witnesses and documents, including identifying information about cooperating witnesses and their testimony; the aspects of GDMA’s billings that were of concern to the investigations; the fact that the investigations had obtained email accounts, and the identity of those accounts; the particulars about bank records and financial information sought by the investigations; the reports to prosecutors; and outlines of planned future investigative activities.

Besides Francis, two other GDMA executives - Alex Wisidagama and Edmond Aruffo – have pleaded guilty, acknowledging their roles in defrauding the United States. That brings the total of guilty pleas to seven of eight defendants.

Francis and Dusek are scheduled to be sentenced on April 3, 2015 at 9 a.m by Judge Sammartino.

The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California and Director of Procurement Fraud Catherine Votaw and Trial Attorney Brian R. Young 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.

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DEFENDANT   Case Number: 13-CR-3781, 3782 and 4287 Leonard Glenn Francis Age: 50 Singapore Glenn Defense Marine Asia Pte. Ltd.              Singapore   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;

Bribery, in violation of 18 U.S.C. § 201. Maximum 15 years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater. Mandatory restitution.

Conspiracy to Defraud the United States, in violation of in violation of 18 U.S.C. sec. 371. Maximum penalty five years in prison $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater. Mandatory restitution.

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DEFENDANT   Case Number: 15-CR-131-JLS Daniel Dusek  Age: 47 San Diego, CA   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

*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.      

SAN DIEGO – Judge Anthony J. Battaglia today sentenced Dr. James Francis Murphy to 48 months in custody for his years-long efforts to obstruct the IRS from assessing and collecting the hundreds of thousands of dollars of income taxes he owed from the operation of his medical practices in Encinitas, California, and Omaha, Nebraska. Dr. Murphy was also ordered to pay nearly half a million dollars in restitution to the Internal Revenue Service.

His wife, Denine Christine Murphy, a co-defendant in the case, was sentenced to 12 months of house arrest and ordered to pay restitution of $147,528.

Evidence presented at trial showed that despite earning as much as $1 million a year from their osteopathic medical practice, Dr. and Mrs. Murphy paid almost no federal income taxes for a decade. Instead of accurately declaring their income and paying taxes lawfully owed to the United States, and despite repeated warnings from the IRS, the Murphys filed false income tax returns for the medical practice using a bogus “trust,” and filed false personal income tax returns concealing their true income. In addition, in some years the Murphys simply refused to file required tax returns at all. Incredibly, for several years their fraudulent tax returns triggered the Earned Income Credit, and resulted in their receiving tax refunds from the IRS.

As presented at trial, when confronted by the IRS and notified that they owed substantial sums in taxes, the Murphys engaged in a variety of schemes to prevent the United States from correctly assessing and collecting these taxes. These schemes included: (1) falsely claiming that they were not citizens of the United States; (2) frivolously claiming that the federal tax laws did not apply to them; (3) fraudulently presenting fictitious documents such as “Private Offset Discharge and Indemnity Bonds” and “Bonded Promissory Notes,” purportedly worth hundreds of millions of dollars, as payment on their tax obligations; and (4) fraudulently claiming that the hundreds of thousands of dollars they paid to credit card companies, utilities, and other vendors were actually withholdings of federal income taxes, thereby entitling them to over a million dollars in refunds from the IRS. The defendants even claimed that the then-Secretary of the Treasury, Henry Paulson, was their “fiduciary,” who was responsible for paying their taxes.

The defendants were found guilty by a jury on June 20, 2014 after a two-week jury trial held before Judge Battaglia. At today’s sentencing, Judge Battaglia described Dr. Murphy’s conduct as “a calculated, deliberate, and orchestrated series of efforts…to avoid tax liability.” The court noted that Dr. Murphy’s crimes represented “a pretty offensive set of circumstances.” Judge Battaglia decried the “nature of the arrogance, [in] how these mechanisms were utilized” to carry out what the court characterized as an “all out scheme to defraud the government.”

U.S. Attorney Laura E. Duffy commented, “The Murphys went to outrageous lengths to deprive the U.S. taxpayers of their fair share of the tax burden. It is especially egregious that they exploited the Earned Income Tax Credit, a credit intended to benefit low-income working families, to collect refunds they were not entitled to receive. Taxpayers should be aware that schemes to avoid paying taxes will result in serious consequences – including significant jail time – in addition to having to pay back taxes with interest.”

“As we approach tax filing season, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation. “No matter what the source of income, all income is taxable. The prosecution of individuals who intentionally conceal income and evade taxes is a vital element of the IRS’ enforcement strategy.”

Rod Ammari, Special Agent in Charge of the Treasury Inspector General for Tax Administration stated, “James and Christine Murphy’s attempts to corruptly impede tax administration by submitting fraudulent documents to the IRS will not be tolerated. These schemes that are used to avoid paying their fair share affects all hard working taxpayers, and Treasury Inspector General for Tax Administration is committed to investigating these criminal schemes.”

Dr. Murphy is required to surrender to begin his custodial term by February 24, 2015.

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DEFENDANT   Case Number: 12CR2497-AJB Dr. James Francis Murphy Age: 53

Encinitas, California

Denine Christine Murphy Age: 52

Encinitas, California

CHARGES

Count 1: Corrupt interference with the administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a).  Both defendants.  Maximum penalties – 3 years’ custody, $250,000 fine.

Counts 2-5: Presenting fictitious financial obligations, in violation of 18 U.S.C. § 514.  Defendant Dr. James Francis Murphy.  Maximum penalties – 10 years’ custody and $250,000 fine (per count).

Counts 6-8: False claims to the United States, in violation of 18 U.S.C. § 287.  Both defendants.  Maximum penalties – 5 years’ custody and $250,000 fine (per count).   INVESTIGATING AGENCIES

Internal Revenue Service, Criminal Investigation
Treasury Inspector General for Tax Administration

A Los Angeles-based furniture business, Kaven Company, Inc. (“Kaven”) and its owner, Kam Wing Chan, were arraigned yesterday on charges related to the smuggling of millions of dollars in endangered abalone, sea cucumber, and Totoaba into San Diego from Mexico.

The indictment alleges that Chan used Kaven, which was ostensibly an importer of Asian furniture, to purchase endangered fish in Mexico, import them into the United States, and then export them to Asia. For example, as noted in the charging documents, on various occasions, Chan smuggled: (1) 37 pounds of dried abalone (including the endangered white and black abalone) and 58 Totoaba swim bladders into the United States on October 9, 2013; (2) 20,006 pounds of sea cucumber on March 23, 2012; and (3) 1,014 pounds of abalone on January 15, 2013. The seafood was allegedly purchased in violation of Mexican law because the invoices presented did not properly demonstrate the origin of the fish.

In total, Chan and Kaven are charged with illegally exporting (from September 1, 2009 through May 30, 2013) more than $3 million in seafood to China. These exports were destined primarily to companies owned by one of Chan’s relatives.

All three smuggled fish are prized in Asia where they are considered "culinary delicacies," and often adorn the buffets of festival meals and are served at formal dinners. For example, dried-out versions of the 377 known tropical species of Sea Cucumber retail between $10 and $600 per kilogram in Hong Kong and on mainland China. One species has been reported to sell on the black market for $3000 per kilo.

According to scientists, Sea Cucumbers provide an important service for reef ecosystems. Among other things, they help to keep the sand in reef lagoons and sea grass beds fresh by turning them over, and by feeding on the dead organic matter that's mixed in with the sand, the nutrients they excrete can re-enter the biological web by algae and coral. Without the sea cucumbers, that sort of nutrient recycling could not occur. It's also thought that sea cucumbers help to protect reefs from damage due to ocean acidification. Feeding on reef sand appears to increase the alkalinity of the surrounding seawater.

Totoaba macdonaldi, also known as Cynoscion macdonaldi, is the largest species within the scaienidae family of fish. It can grow to more than 6-1/2 feet in length, weigh up to 220 pounds, and can live up to 30 years. These fish are found only in the Gulf of California, the narrow inlet between Baja California and the Mexico's mainland (also called the Sea of Cortez). The fish can be identified by its dusky silver color, elongated body, sharp snout, projecting lower jaw, and a slightly convex tail. According to the indictment, a single Totoaba swim bladder, highly prized for use in soups, can sell for $1400-$4000 in Mexico and up to ten time that amount in Asia.

Totoaba macdonaldi was included in the most protected list (Appendix 1) of species covered by the Convention on International Trade in Endangered Species (“CITES”) in 1976, and was listed as endangered under the U.S. Endangered Species Act in 1979. Both Mexico and the United States are signatories to CITES. It is a violation of law in both countries to trade in Totoaba or any part of a Totoaba.

Black abalone (Haliotis cracherodii) and white abalone (Haliotis sorenseni) are also species listed as endangered pursuant to the Endangered Species Act. Black abalone was listed as endangered on January 14, 2009, and white abalone was listed as endangered on May 29, 2001.

Mexican fisheries law (the General Law on Sustainable Fishing and Aquaculture) requires that the lawful origin of fisheries products be demonstrated by means of an arrival, harvest, production, or collection notice, an import permit, or a fisheries waybill (for transport). The failure to demonstrate such lawful origin is a violation of law.

“In collaboration with our international, federal and state law enforcement partners, NOAA will do everything in its power to make sure marine resources are protected and wildlife trafficking is shut down and those who attempt to profit from the exploitation of vulnerable and threatened species are brought to justice,” said Eileen Sobeck, Assistant Administrator for NOAA Fisheries.

Kaven Company and Kam Wing Chan are scheduled to appear before United States District Court Judge Anthony J. Battaglia on February 6, 2015, at 1:30 p.m. for a hearing on all motions.

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DEFENDANTS   Case Number: 14CR3662-AJB Kaven Company   Los Angeles, CA Kam Wing Chan Age: 61 Monterey Park, CA       CHARGES

Count 1
Conspiracy, in violation of Title 18, United States Code, Section 371; Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment

Counts 2, 4, 5, and 7
Unlawful Importation of Wildlife, in violation of Title 16, United States Code, Sections 3372(a)(2)(A) and 3373(a)(1)(A); Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment

Counts 3 and 6
Smuggling/Importation Contrary to Law, in violation of Title 18, United States Code, Section 545; Maximum Penalty: 20 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment

Count 8
Unlawful Trafficking in Wildlife, in violation of Title 16, United States Code, Sections 3372(a)(1)(A) and 3373(d)(1)(B); Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment

Forfeiture
In violation of Title 16, United States Code, Section 3374 and Title 18, United States Code, Section 981.

  INVESTIGATING AGENCIES

National Oceanic and Atmospheric Administration, Office of Criminal Enforcement; U.S. Fish and Wildlife Service, Office of Criminal Enforcement

*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.      

United States Attorney Laura E. Duffy announced that today Norman Paul Felts, a United States citizen who had been living in Mexico, was convicted after a bench trial before U.S. District Judge Cathy Ann Bencivengo of possession of child pornography with a prior sex offense. Felts has been in custody since his arrest by Special Agents with Homeland Security Investigations in June 2013.

According to the evidence presented to the Court, between January 2010 and May 28, 2013, Felts possessed a loose hard drive that contained several images of child pornography. On May 28, 2013, Felts entered the United States and was found in possession of a loose hard drive which was later found to have contained several images of minors engaged in sexually explicit conduct concealed in a folder called “One Million Recipes.”

Felts’ arrest was a result of an investigation stemming from a Cybertip to the National Center for Missing and Exploited Children (NCMEC). NCMEC referred the tip to the HSI Representative for the Office of the Assistant Attaché in Tijuana, Mexico for further investigation. Authorities located a male minor who worked on Felt’s boat in Mexioc, and Felt stipulated at trial that he took sexually-explicit pictures of the boy, knowing the boy was underage. When Felts was contacted at the Tecate Port of Entry on May 28, 2013, Special Agents from the Cyber Crimes and Computer Forensics Group assigned to the Office of the Special Agent in Charge in San Diego, California became involved with the investigation. Felts has three prior sex offense convictions as far back as 1972, when he was convicted of oral copulation. Felts was also convicted for child molestation in Georgia in 1977. Felts’ most recent sex offense conviction was in 1999 for procurement of a minor under 16 for a lewd act.

“The U.S. Attorney’s Office commends the CBP officers and HSI Special Agents who work diligently to prevent purveyors of child pornography from continuing to exploit these children both here in the United States and abroad,” said United States Attorney Laura E. Duffy.

Felts faces a mandatory minimum sentence of 10 years and up to 20 years in prison, a lifetime of supervised release and a $250,000 fine. Sentencing is scheduled for March 27, 2015.

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DEFENDANTS   Case Number: 13CR2296-CAB Norman Paul Felts Age: 70 Ensenada, Mexico CHARGES

Title 18, United States Code, Section 2252(a)(4) and (b) – Possession of Matters Containing Images of Minors Engaged in Sexually Explicit Conduct

  INVESTIGATING AGENCIES

Homeland Security Investigations

*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.      

Local Biotech Company Doctored Timesheets on NIH Contracts

United States Attorney for the Southern District of California Laura E. Duffy announced that a local biopharmaceutical company, Ansun Biopharma, Inc., entered into criminal and civil settlements with the Department of Justice that will require it to make approximately $2 million in payments to the United States. These settlements resolve a criminal and related civil investigation against Ansun for submitting false and fraudulent claims on grants and a contract with the National Institutes of Health (“NIH”).

Ansun Biopharma, Inc., formerly known as NexBio, Inc., is a biotechnology company headquartered in San Diego, California, that, from 2004 through 2011, had received several research grants and a contract from the NIH. Among these were a grant award for “Broad-Spectrum Therapeutics for Influenza,” a grant award for “Development of Fludase as an Anti-Influenza Agent,” and, in September 2006, a $50 million contract to develop a drug to combat influenza (the “Fludase Contract”). Fludase was an experimental antiviral drug for the treatment of influenza.

According to the settlements, Ansun’s former Chief Executive Officer, Mang Yu, directed its then-Vice President of Finance and Administration (who was responsible for the accounting department) Dongmei Wang, to fabricate timesheets for company employees to maximize billing on the NIH grants and the Fludase Contract.

The company admitted that in 2009, it created a time-keeping policy that required employees to accurately record the number of hours devoted to certain projects, including projects covered under the Fludase Contract and other NIH-funded grants. The policy also required employees to accurately record the number of hours attributed to overheard, General &Administrative, and other labor categories. Despite these time-keeping requirements instituted by NexBio, Yu directed accounting personnel to maximize reimbursements from NIH, regardless of the actual number of employee hours spent on the Fludase Contract or the other NIH-funded grants. In particular, Yu directed Wang to bill employee hours to the Fludase Contract, even if the project the employee was working on did not fall within the scope of the Fludase Contract.

The company also acknowledged that Yu informed Wang that NexBio should use the money authorized by the Fludase Contract whenever possible, in case NIH terminated the Fludase Contract before NexBio had used all the allotted funds. In addition, Yu told Wang to extend the funding available on the NIH grants for as long as possible because he needed access to the money from the grants to manage cash flow problems at the company.

To comply with Yu’s orders, Wang corrupted the integrity of the employee time-keeping system by fabricating timesheets for certain employees, altering the number of hours entered on certain timesheets and moving employee hours from one labor category to another, and from non-government projects to either the Fludase Contract or one of the NIH grants. The purpose and effect of these alterations was to obtain money from NIH, even if the work was not covered under the terms of the Fludase Contract or NIH grants.

For this conduct, occurring from the 2004 to 2011, a criminal information was filed today charging Ansun with a violation of Title 18, United States Code, Section 1031, executing a scheme to defraud the United States in a contract valued more than $1 million. As part of its settlement, Ansun has agreed to pay the NIH $1,654,600.00.

Separately, Ansun entered into a settlement agreement with the United States to resolve civil allegations that it violated the False Claims Act by submitting invoices that falsely stated the number and category of hours worked by employees in connection with several research grants and a contract funded by NIH. The fabricated invoices resulted in the submission of false claims from September 1, 2006, through June 30, 2011. Ansun agreed to settle the civil matter with a payment of $495,000 to the United States. The False Claims Act is the government’s primary civil remedy to redress false claims for government funds under government contracts and research grants.

Wang was previously charged and pled guilty to executing a scheme to defraud the United States in a contract valued more than $1 million, in violation of Title 18, United States Code, Section 1031. After Wang complied with the terms of a deferral agreement, that charge was dismissed in December 2014.

Yu was previously charged and pled guilty to interfering with officers of the Department of Health and Human Services, in violation of Title 42, Section 262(c), (e), and (f), and was sentenced to one year of probation in August 2014.

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DEFENDANTS   Case Number: 15CR0024-DMS ANSUN BIOPHARMA, INC.   San Diego, CA           Case Number: 14CR2352-AJB MANG YU Age 58 Rancho Santa Fe, CA           Case Number: 13CR2056-MMA DONG MEI WANG Age 49 San Diego, CA             CHARGES

Executing a Scheme to Defraud the United States, in violation of 18 U.S.C. § 1031.
Maximum Penalties for a corporation: 5 years’ probation, $5,000,000 fine or twice the gross gain or gross loss resulting from the offense, $400 special assessment, restitution.

Interference with Officers of United States Department of Health and Human Services, in violation of 42 U.S.C. § 262
Maximum Penalties: 1 year imprisonment, $100,000 fine, $25 special assessment, 5 years’ probation.

  INVESTIGATING AGENCIES

Department of Health and Human Services, Office of the Inspector General
Federal Bureau of Investigation

U.S. Navy Commander Admits Providing Contractor with Classified Ship Schedules; Becomes Fifth of Seven Defendants to Plead Guilty

SAN DIEGO, CA – U.S. Navy Commander Jose Luis Sanchez pleaded guilty to bribery charges in federal court today, admitting that he provided a government contractor with classified ship schedules and other internal U.S. Navy information in exchange for cash, travel and entertainment expenses and the services of prostitutes.

Sanchez, 42, an active duty U.S. Navy Officer stationed in San Diego, is one of seven defendants charged – and the fifth to plead guilty – in the corruption probe involving Glenn Defense Marine Asia (GDMA), a defense contractor based in Singapore that serviced U.S. Navy ships and submarines throughout the Pacific.

Sanchez, the highest-ranking Naval official to plead guilty in the case so far, admitted to bribery and bribery conspiracy before U.S. Magistrate Judge David H. Bartick. A sentencing hearing was scheduled for March 27, 2015, at 9 a.m., before U.S. District Judge Janis L. Sammartino.

“Commander Sanchez lost sight of the Navy’s core values and embraced a lifestyle of greed,” said U.S. Attorney Laura Duffy. “We continue to unearth the full scope of this pernicious fraud and bribery scheme, and we will pursue the evidence, wherever it leads us.”

“Commander Sanchez sold out his command and country for cash bribes, luxury hotel rooms, and the services of prostitutes,” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division. “After today’s guilty plea, instead of free stays at the Shangri-La hotel, Sanchez is facing many nights in federal prison. The Department of Justice’s Criminal Division is committed to prosecuting those who abuse positions of public trust for personal enrichment at the expense of national security and the American taxpayers.”

“During the course of the investigation into the criminal enterprise, investigators have compiled voluminous evidence identifying multiple persons of interest, generating numerous leads, and establishing and corroborating connections,” said Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS). “NCIS and our law enforcement partners are committed to seeing this massive fraud and bribery investigation through to its conclusion, so that those responsible are held accountable.”

“This outcome again sends the message that corruption will be vigorously investigated and prosecuted,” said Deputy Inspector General of Investigations James B. Burch of the Department of Defense, Defense Criminal Investigative Service. “This is an unfortunate example of dishonorable Naval officers who recklessly risked the safety of our troops by trading classified information for cash, extravagant gifts and prostitutes. Cases such as these are not motivated by need or other difficult personal circumstances; they are the product of simple greed. This investigation should serve as a warning that those who compromise the integrity of the United States will face their day of reckoning. DCIS and our law enforcement partners will pursue these crimes relentlessly.”

According to his plea agreement, from April 2008 to April 2013, Sanchez held various logistical positions with the U.S. Navy’s Seventh Fleet in Asia. Sanchez admitted that, beginning in September 2009, he entered into a bribery scheme with Leonard Glenn Francis, the CEO of GDMA, in which Sanchez provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to benefit GDMA. In return, Francis gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes. Sanchez admitted that this bribery scheme continued until September 2013.

In his plea agreement, Sanchez admitted to seven specific instances in which he provided Francis with classified U.S. Navy ship and submarine schedules. He also admitted using his position and influence with the U.S. Navy to benefit GDMA and Francis on various occasions. Further, Sanchez admitted that he tipped Francis off about investigations into GDMA overbillings and briefed Francis on internal U.S. Navy deliberations.

Sanchez further admitted that, in exchange for this information, Francis provided him with cash, entertainment and stays at high-end hotels. For example, in May 2012, Francis paid for Sanchez to stay five nights at the Shangri-La, a luxury hotel in Singapore, and, two months later, Francis paid for Sanchez’s travel from Asia to the United States, at a cost of over $7,500. According to the plea agreement, Francis arranged and paid for the services of prostitutes for Sanchez while Sanchez was in Singapore and elsewhere in Asia.

In addition to Sanchez, two other U.S. Navy officials – former NCIS Special Agent John Beliveau and Petty Officer First Class Dan Layug – have pleaded guilty in this case, as well as former GDMA executives Alex Wisidagama and Edmond Aruffo.

Also today, U.S. Navy Captain-Select (Commander) Michael Vannak Khem Misiewicz, 47, who was previously charged via information, was indicted by a federal grand jury in the Southern District of California on seven additional bribery counts.

According to allegations in the indictment, from at least as early as July 2011 until September 2013, Misiewicz provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to advance the interests GDMA. In return Francis allegedly gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes.

The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California and Director of Procurement Fraud Catherine Votaw and Trial Attorney Brian R. Young 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.

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DEFENDANT   Case Number: 13-CR-4287 Jose Luis Sanchez Age: 42 San Diego, CA CHARGES

Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371
Bribery, in violation of 18 U.S.C. § 201

DEFENDANT   Case Number: NYA Michael Vannak Khem Misiewicz Age: 47 San Diego, CA CHARGES

Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371
Bribery, in violation of 18 U.S.C. § 201

  INVESTIGATING AGENCIES

Defense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit Agency

*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.      

Read the indictment - Click HERE Presentation slides - Click HERE

SAN DIEGO – Twenty-two alleged gang members and associates are charged in a federal grand jury indictment with participating in a racketeering conspiracy involving the cross-country sex trafficking of underage girls, including many who were recruited from East County middle and high schools.

Early this morning detectives and agents from the San Diego County Sheriff’s Department, Homeland Security Investigations and the FBI, with assistance from other agencies, made 15 arrests and served 11 search warrants here and in Hemet, California; Tucson, Arizona, and Austin, Texas. Just one defendant remained at large at midday; seven were already in state custody. Some of the local defendants are scheduled to make their first court appearances tomorrow at 10:30 a.m. before U.S. Magistrate Judge Ruben Brooks.

The indictment, unsealed today, alleges that the defendants are associated with a relatively new gang formed in 2008 called “Tycoons,” which, until this morning, operated a nationwide prostitution enterprise primarily from its base in Lemon Grove and Spring Valley.

According to the indictment and other court documents, the enterprise was also involved in other crimes such as attempted murder, assaults, drug trafficking, robberies, residential and commercial burglaries, and beatings, intimidation and threats of violence against female victims, witnesses in criminal cases and members of the community.

Over the course of the two-year investigation, law enforcement identified approximately 100 girls and young women - as young as 12 years old, up to the mid-twenties - who were manipulated with promises of a lavish lifestyle or were forced through threats or actual violence to work as prostitutes for the enterprise, according to a search warrant.

Many of them were recruited on school campuses in East County by pimps and experienced, high-ranking prostitutes, the warrant said. During the course of the conspiracy, the girls and women were transported from San Diego County to customers in California and beyond – to Texas, Arizona, Kansas, Michigan, Nevada and elsewhere, the indictment said.

The defendants allegedly used a number of methods to manipulate the recruits, including false promises of a luxurious lifestyle, intimidation, and actual or threatened violence. Court records indicate that the alleged pimps regularly furnished drugs and alcohol to lower the recruited prostitute’s inhibitions and increase her productivity.

“Victims of sex trafficking are young, just getting started in life,” said U.S. Attorney Laura Duffy. “They have hopes and dreams of being loved and having beautiful lives ahead of them. Gang members are exploiting these dreams and stealing the souls of children. They are crushing them with false promises that lead to physical and emotional abuse and sexual slavery.”

The ranks of “Tycoons” are mostly made up of documented gang members from gangs all over the county, including the West Coast Crips, Neighborhood Crips, Lincoln Park, Skyline Piru (Eastside Piru), O’Farrell Park, 5/9 Brims, Emerald Hills and Linda Vista Crips. These gang members have a sort of dual membership in Tycoons. Within Tycoons, there are cliques known as PGF, for Playgirl Fantasy; Tycoon/Additup; and BYB, or Break Your Bitch.

According to court documents, members of Tycoons are akin to a crime family, where all members work together committing various crimes for the purpose of making money. The indictment alleges that the defendants took on different responsibilities within the criminal enterprise. Some managed prostitutes and transported them all over the country. Some forcefully coerced the girls and young women into prostitution and maintained their obedience and loyalty through acts of violence. Some handled the money. Some placed advertisements to generate business or booked motel rooms in which acts of prostitution took place; and others distributed drugs and committed other crimes.

For that reason, the defendants are charged with racketeering conspiracy—the statute traditionally used for organized-crime syndicates and mobsters. But as criminal street gangs such as these join forces and become more sophisticated and prolific in their illicit business pursuits, this statute is an effective tool to address all aspects of the criminal conduct.

This is the third time the U.S. attorney’s office here has used the racketeering statute to charge large numbers of gang members with operating a criminal enterprise that included drugs, human trafficking, and violence. In the first case, 39 Oceanside gang members and associates were charged with racketeering, and, to date, 35 have pleaded guilty. The second involved gangs in North Park; that case is pending, with three guilty pleas so far.

The investigation began as a result of information provided by members of the East County community who saw troubling signs and reported them. Duffy said she is encouraged that community members came together to address this problem.

“They did not look the other way,” Duffy said. “They saw signs of trouble, and they reported it. As a result, girls and young women exploited in this case have been extended a path from misery to safety, and we have started on a path to end this criminal enterprise.”

“This investigation was initiated through the vigilance of parents and school resource officers," commented Sheriff Bill Gore. “Local, state, and federal law enforcement will always collaborate and bring to bear all resources available, when the safety of our youth is at stake. I'm very proud of the work done today, and during the entire course of this matter.”

“This investigation pulls back the curtain on a growing threat involving sexual exploitation occurring in plain sight,” said Joe Garcia, interim special agent in charge for HSI in San Diego. “As part of the Department of Homeland Security’s Blue Campaign, HSI agents are committed to combating human trafficking in collaboration with our law enforcement partners. In doing so, we need the public’s assistance in reporting suspicious activity, which is even more critical when the targets involve our local area teenagers.”

“Exploiting and harming America's children through sex trafficking is a serious crime with detrimental effects to the victims and our communities,” said FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI will continue to collaborate with our law enforcement partners in cases like this and our Operation Cross Country initiative where we have rescued over 3,600 children from the grips of sex traffickers and hold them accountable.”

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DEFENDANTS   Case Number: 14cr33537-BAS James Terelle King Age: 23   Michael Dean Richardson Age: 21   Andrew Damon Richardson Age: 22   Brian Keith Scott Age: 22   Alondre Shamil Dickerson Age: 20   Anthony Robert Dennison Age: 22   Keyon Renta Gill Age: 30   Donavyn Keith Dove Age: 21   Ryan Mcintoch Izumi Age: 22   William Henry Mitchell Age: 23   Jordan Renee Mitchell Age: 21   David Michael Stokes Age: 21   Christian Darwin Wilcox Age: 21   Marquis Dominique Davis Age: 21   Cortes Tizzaro Prater Age: 23   Emmanuel Gumataotao Farol Age: 20   Donald Mickey Stokes Age: 21   *Wiley Junius Greeno Age: 23   Deija Renee Lamb Age: 19   Joseph Benjamin Taylor Age: 21   Frank Gibson III Age: 20   Christal Marie Torres Age: 24       *fugitive CHARGES

Conspiracy to Commit RICO in violation of Title 18, U.S.C. 1962(d); Maximum Penalties: Life in prison, $250,000 fine, up to life of supervised release.

  INVESTIGATING AGENCIES

San Diego County Sheriff’s Department
Immigration and Customs Enforcement, Homeland Security Investigations
Federal Bureau of Investigation

*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.      

SAN DIEGO, CA – Today a federal jury convicted Potrero, California, resident Kala D. Rains, 47, of seven counts of conspiracy and alien smuggling after a trial before the Honorable Anthony J. Battaglia. The jury also found that the ranch used by Rains to facilitate the conspiracy should be forfeited to the United States Government.

According to evidence presented in court, Rains acted in concert with other co-conspirators to use her ranch to facilitate the bringing in and harboring of illegal aliens in order to transport them further into the interior of the United States. Evidence showed that she was part of a conspiracy that orchestrated the smuggling of several loads of illegal aliens from Mexico into the United States in and around the Tecate, California- area.

Her arrest resulted from an investigation conducted by Homeland Security Investigations’ (HSI) Border Enforcement Security Task Force, which is comprised of HSI special agents and U.S. Border Patrol agents. Prosecutors presented evidence of video-recorded undercover meetings, audio recordings, and telephonic evidence to build the case of the conspiracy. Jurors also heard from aliens smuggled into the United States by the organization who testified that they were to pay between $6,500 and $7,500 to members of the conspiracy as a smuggling fee.

“The U.S. Attorney’s Office commends the HSI Special Agents and U.S. Border Patrol Agents who worked tirelessly over the two-year investigation to infiltrate, disrupt, and dismantle this transnational criminal organization,” said United States Attorney Laura E. Duffy.

Previously, co-defendants Caroline Haro Espindola, Jose Maria Partida-Esquivel, and Alexander Flores pleaded guilty for their roles in the alien smuggling conspiracy.

Rains faces a mandatory minimum sentence of three years and a maximum sentence of 10 years in prison and a $250,000 fine. Sentencing is scheduled for February 27, 2015.

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DEFENDANT     Kala Rains Age: 47 Potrero, California   CHARGES

Count 1:    Conspiracy, 18 U.S.C. § 371

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

Counts 4-5:    Harboring Illegal Aliens, 8 U.S.C. §1324(a)(1)(A)(iii) and (v)(II)

Counts 6-7:    Transporting Illegal Aliens, 8 U.S.C. §1324(a)(1)(A)(ii) and (v)(II)

  INVESTIGATING AGENCY

Homeland Security Investigations

U.S. Border Patrol

SAN DIEGO – Del Mar physician William Joseph Watson today became the first doctor in the Southern District of California in recent memory to be sentenced to federal prison for prescribing thousands of Oxycodone pills and other highly addictive painkillers without any legitimate medical purpose.

U.S. District Judge James M. Lorenz sentenced Watson to almost five years in custody at a hearing this morning in federal court. Watson pleaded guilty in August - the morning his trial was set to begin - to one count of conspiracy to distribute and dispense oxycodone, known by the brand name of OxyContin, without a legitimate medical purpose.

Watson admitted that he sold the prescriptions to addicts, who then used them recreationally or sold them on the street. According to court records, Watson accepted thousands of dollars in cash or luxury goods, such as designer handbags, jewelry and fine wines, in exchange for the Oxycodone prescriptions.

“This is a sentence that sends a very strong message to doctors,” said U.S. Attorney Laura Duffy. “If you disregard your sacred duty as a physician to do no harm, and you use your prescription pad to fuel the painkiller epidemic gripping this country, you do so at your own peril, with the very real prospect of going to prison.”

“The sentencing of former doctor Joseph Watson today demonstrates the seriousness of the crimes involving prescription drugs,” said San Diego DEA Special Agent in Charge William R. Sherman. “Mr. Watson went from being a physician to a drug dealer for the simple reason that any criminal resorts to drug trafficking: Greed. The diversion of prescription drugs from their intended use continues to be a serious issue and DEA is committed to investigating and arresting anyone who diverts prescription drugs for illegal use.”

At today’s sentencing hearing, Assistant U.S. Attorney Fred Sheppard urged the court to impose a significant sentence as a warning to other doctors. Sheppard noted that Watson’s actions contributed to the overdose death of one of his young patients.

“Let it ring from this court room: If you take that oath to do no harm and sell it for a couple hundred dollars, you're going to prison,” Sheppard said.

Watson was ordered to surrender on January 8, 2015, to begin serving his sentence. He was also sentenced to three years of supervised release.

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DEFENDANTS   Case Number: 13cr2988 William Joseph Watson Age: 59 Del Mar, California   CHARGES

Title 21, United States Code, Sections 841(a)(1)

  INVESTIGATING AGENCY

U.S. Drug Enforcement Administration

SAN DIEGO - Rancho Santa Fe Businessman Christopher John Cozzie pleaded guilty to fraud charges in federal court today, admitting that he sold imaging and diagnostic systems for breast examinations that he either did not deliver or partially delivered.

According to court documents, Cozzie operated two companies, Advance Functional Imaging, and Green Screen Labs, which purported to sell equipment that included infrared cameras, laptops or touchscreen computers and imaging software plus training and interpretation services for less invasive breast examinations.

He admitted that between 2007 and 2009, he marketed the equipment to holistic healthcare providers via the internet and at health and wellness conventions in Las Vegas and various locations in California. He charged up to $35,000 per system to customers from California to Australia.

Cozzie admitted in his plea agreement that by 2008, he had no capital to run his business and was unable to provide the entire package of equipment to customers – particularly the cameras needed to do the imaging. He was selling used cameras, as well as selling the same camera to more than one customer.

According to the plea agreement, in February of 2009, when Cozzie had already failed to deliver his systems to other customers, a doctor in Texas contracted with Cozzie for an imaging system, including a new camera, computer and training. According to his plea, on April 6, 2009, the doctor wired Cozzie $32,000 for the system, but never received the camera, despite repeated contacts with Cozzie.

According to the plea agreement, some customers received partial systems; some received nothing. Yet Cozzie continued to market and sell the systems. The approximate loss suffered by Cozzie’s customers exceeds $200,000.

According to the indictment, Cozzie even removed a camera from the offices of one of his clients and delivered it to another client in another part of California.

Sentencing was set for March 3, 2015, before U.S. District Judge William Q. Hayes.

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DEFENDANTS   Case Number: 14cr0900WQH Christopher John Cozzie Age: 57

Rancho Santa Fe, California

  CHARGES

Wire Fraud, 18 U.S.C. 1343
Maximum Sentence:  20 years, $250,000 fine, $100 penalty assessment, restitution

  INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO – Ho Sung Lim, owner of three Cricket Wireless outlets in San Diego County, pleaded guilty in federal court today to a tax evasion charge, admitting that he used a number of methods to avoid paying income and employment taxes to the Internal Revenue Service.

According to his plea agreement, Lim acknowledged that he failed to report income from his business; he paid employees in cash and underreported their wages to avoid payroll taxes; and he paid personal expenses from a corporate account – all of which lowered his tax bill by more than $160,000 over four years.

Lim’s plea was accepted by U.S. Magistrate Judge Mitchell D. Dembin and is subject to final approval by U.S. District Court Judge Larry A. Burns. He was charged via information today.

“We all have to pay our fair share of taxes,” said U.S. Attorney Laura Duffy. “Anyone who deliberately shirks this obligation takes a big risk, as Mr. Lim has learned.”

Erick Martinez, IRS Criminal Investigation’s Special Agent in Charge said, “Business owners have a responsibility to pay their fair share of taxes—both income and employment—and remit those taxes to the Internal Revenue Service. The failure to do so is a very serious offense. Those Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t.”

According to his plea agreement, Lim admitted that on several occasions between 2009 and 2012 he skipped his duty to file Employer’s quarterly Federal Tax Return, Form 941 (“Payroll Taxes”), on behalf of his business Telecell, Inc. Lim admitted that he attempted to evade or defeat the payment of Payroll Taxes by various means, including, but not limited to paying employees from his business, Telecell, Inc., in cash, and without reporting to the IRS the full amount of income he paid to those employees.

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DEFENDANTS   Case Number: 14cr3484-LAB Ho Sung Lim Age: 47 San Diego, California   CHARGES

Tax Evasion – Title 26 U.S.C., Section 7201
Maximum Penalty: 5 years’ imprisonment; $100,000 fine; costs of prosecution.

  INVESTIGATING AGENCY

Internal Revenue Service Criminal Investigation

*Indictments and complaints are not evidence that the defendant committed the crime charged.  All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.     

SAN DIEGO - United States Attorney Laura E. Duffy announced that Lachelle Rene Thrower pled guilty today to falsifying federal asbestos training certificates, admitting that over a four-year period she falsely certified over a hundred workers as being trained and qualified to safely remove asbestos.

According to court documents, Thrower was employed by an approved provider of asbestos removal training. Any student seeking to be accredited to remove asbestos was required to complete four, eight-hour days of training, and to pass a written examination. Thrower admitted that between May 14, 2010, and August 5, 2014, she falsely certified 100-150 training certificates for asbestos workers who did not actually attend the training courses or take the necessary exam. Thrower kept the money paid by the non-attending trainees, and falsified the certificates by using an electronic signature of the authorized trainer. Her false certifications caused her employer to falsely report to the EPA-delegated agency (Cal/OSHA) that certain individuals had attended the asbestos training and passed the exam. Thrower also admitted that when trainees did actually attend classes and paid in cash, defendant would keep this cash herself instead of providing it to her employer. All told, Thrower caused a financial loss to her employer of between $10,000 and $30,000.

Training for asbestos abatement professionals is required under the Asbestos Hazard Emergency Response Act of 1986 (AHERA), as well as the Toxic Substances Control Act (TSCA). Section 206(a) of TSCA prohibits any person from removing asbestos from schools and commercial buildings unless that person has been trained under an EPA-approved program, or a State program accredited by the EPA that has been found to be at least as stringent as the model program developed by the EPA. The EPA has accredited the asbestos training program of the State of California, administered by the Occupational Safety and Health Administration of the State (Cal/OSHA).

“Unsafe disposal of asbestos endangers human health. To ensure compliance with environmental laws and regulations, government agencies need accurate and truthful information,” said Jay M. Green, Special Agent in Charge of EPA's criminal enforcement program in California. “Workers and the public are at risk when proper asbestos remediation training is not conducted, while people like the defendant fraudulently and cynically line their pockets. Fortunately, Thrower’s employer has cooperated with investigators and has identified the falsified certificates for Cal/OSHA. Today’s guilty plea demonstrates, however, that those who try to make money by breaking the law will be prosecuted.”

FBI Special Agent in Charge, Eric S. Birnbaum, commented, “Because Ms. Thrower's employer expeditiously reported her criminal conduct to the FBI and the Cal OSHA, law enforcement was able to swiftly identify and prevent improperly credentialed asbestos workers from any asbestos removal employment. The FBI and our law enforcement partners will aggressively pursue those who jeopardize the public's health while satisfying their own greed.”

Thrower is scheduled to appear before United States District Court Judge Marilyn L. Huff on February 17, 2015, at 8:30 a.m. for sentencing.

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DEFENDANTS   Case Number: 14-CR-3485-H Lachele Rene Thrower Age: 44 San Diego, California   CHARGES

False Statements: Title 18, United States Code, Section 1001.

Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss, and a $100 penalty assessment.

  INVESTIGATING AGENCY

Environmental Protection Agency, Criminal Investigations Division
Federal Bureau of Investigation

SAN DIEGO – United States Attorney Laura E. Duffy announced that Walter Andrew Mills, 45, of San Diego County was sentenced today to 30 months in prison for investment fraud and embezzlement.

U.S. District Court Judge Roger T. Benitez also ordered Mills to pay $844,800 in restitution.

Mills pleaded guilty to wire fraud on June 6, 2014. According to court documents and his admissions, Mills fraudulently convinced a victim to invest $419,800 in Mills’ company, Cabrillo Investment Group, LLC, by concealing the fact that the victim’s previous investments in HessGen, Inc. had been misappropriated. Upon receiving the investment, Mills diverted a significant portion of the money to his own personal use.

As part of a larger scheme, between November 5, 2010, and March 26, 2012, Mills convinced additional victims to invest $425,000 in HessGen and another company, Smart Gaming Software, knowing that a significant portion of the money would not be used for the purposes represented. Mills similarly diverted a significant portion of those funds to his own personal use.

“The defendant cheated investors out of hundreds of thousands of dollars and now he is being held to account,” said U.S. Attorney Laura Duffy. “The victims placed their faith and financial futures in the hands of a man who thought only of himself.”

FBI Special Agent in Charge Eric S. Birnbaum commented, “Mr. Mills violated the trust of the people who had faith in him and the ones he was supposed to serve. The FBI is committed to holding those accountable who abuse their position of trust for the sole purpose of unlawfully enriching themselves.”

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DEFENDANTS   Case Number: 14-cr-01576-BEN Walter Andrew Mills Age: 45 San Diego, California   CHARGES

Wire Fraud – Title 18, U.S.C., Section 1343
Maximum penalty:  20 years’ imprisonment and $250,000 fine

  INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO – San Diego resident Steve Elar Mora is charged in a federal grand jury indictment unsealed today with various drug and weapons charges, including endangering human life while illegally manufacturing hashish oil, after an explosion at the marijuana dispensary that he operated alerted authorities to the location.

According to court records, the explosion allegedly occurred due to an illicit Butane Honey Oil lab operating at the marijuana dispensary. Butane Honey Oil is an extremely potent form of tetrahydrocannabinol, or THC, the chemical responsible for most of marijuana's psychological effects.

The product, known as “butane hash oil” or “honey oil,” is made by dissolving marijuana using dangerous substances such as butane – or lighter fluid - and selling the resulting residue to users at over twice the price of other high quality marijuana products.

Efforts to extract hash oil are on the rise. According to the DEA, in 2014 alone there have been eight fires or explosions related to the illegal production of Butane Honey Oil. Since October 2011, there have been approximately 20 BHO fires/explosions in San Diego County.

The explosion connected to the indictment of Mora occurred on July 21, 2014, at the Greenworks Dispensary in the Clairemont area of San Diego. While executing a search warrant after the explosion, law enforcement also found a handgun and ammunition at the dispensary. According to the indictment, Mora has been convicted of two state felonies and is not allowed to possess a firearm under federal law.

Law enforcement also searched Mora’s residence, located near Mission Bay High School, in the Pacific Beach area. At his residence, DEA agents found an AR-15 assault rifle among his possessions.

The process of extracting THC from marijuana is known as “blasting.”

Marijuana is tightly packed into an extraction device such as a glass, plastic, or metal tube. A butane canister is then sprayed into the top of the extraction device. The butane strips the plant matter of its cannabinoid-containing oils, which drip from the bottom of the extraction device, often through a filter and into a holding container. The resulting honey-like mixture of psychotropic plant oil and chemicals is then purified to improve the quality of the product. The end product is highly-profitable and can be ingested as an oil, consumed in edibles or solidified to make concentrated forms of cannabis known as “wax.” In an act called “dabbing,” dabs of wax are vaporized and inhaled with the use of electronic cigarettes and other vaporizing devices.

During the different purification methods, butane, a flammable gas that is odorless, colorless, and heavier than air, can evaporate out of the substance and collect on the floor, accumulating to explosive levels without proper ventilation. Thus, while chemists are in the process of manufacturing BHO, they may simultaneously create an invisible risk of explosion.

Given the popularity of BHO in the marijuana market, the inexpensive equipment needed to manufacture BHO, and the countless how-to-blast videos posted on YouTube, hash oil labs are multiplying, as are explosions.

Mora made his first appearance in court today before U.S. Magistrate Judge Jan M. Adler, who set a detention hearing for Monday at 2 p.m. He also scheduled a motions hearing before U.S. District Judge Barry Ted Moskowitz for Dec. 19.

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DEFENDANTS     Steve Elar Mora Age: 34 San Diego, California   CHARGES

Count 1:          Manufacturing of Marijuana and Hashish Oil-21 U.S.C. § 841(a)(1)
                        Maximum penalty: 20 years’ imprisonment and $1,000,000 fine
           
Count 2:          Conspiracy to Manufacture/Distribute Hashish Oil -21 U.S.C. §§ 841(a)(1) and 846
                        Maximum penalty: 5 years’ imprisonment and $250,000 fine

Count 3:          Maintaining Drug-Involved Premises -21 U.S.C. § 856(a)(1)
Maximum penalty: 20 years’ imprisonment and $500,000 fine

Count 4:          Endangering Human Life While Illegally Manufacturing Hashish Oil -21 U.S.C. § 858
Maximum penalty: 10 years’ imprisonment and $250,000 fine

Count 5,6:       Felon in Possession of Firearm and Ammunition-18 U.S.C. § 922(g)(1)
Maximum penalty: 10 years’ imprisonment and $500,000 fine

Count 7:          Possession of Firearm in Furtherance of Drug Trafficking Crime-18 U.S.C. § 924(c)
Mandatory 5 years’ imprisonment consecutive to drug trafficking sentence

  INVESTIGATING AGENCY

Drug Enforcement Agency

*Indictments and complaints are not evidence that the defendant committed the crime charged.  All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.     

SAN DIEGO - Gevorg Kupelian, owner of the El Centro Clinic located at 485 Broadway Street in El Centro, California, pleaded guilty today to participating in a conspiracy that targeted the Medicare program and its beneficiaries.

Kupelian admitted to defrauding Medicare by billing for unnecessary procedures, pretending that patients were being seen by medical professionals, and billing for tests and services that were never actually provided.

At today’s hearing, Kupelian admitted that after he leased the premises used by the El Centro Clinic, he found a doctor, hired employees, and recruited “cappers” to bring Medicare beneficiaries to the clinic. While Kupelian and his co-conspirators operated the clinic to give the impression to beneficiaries and outside observers that patients were being seen by qualified medical professionals, in fact, patients would rarely see a doctor or other qualified medical professionals during visits to the clinic.

Kupelian and his co-conspirators caused tests to be performed on the recruited patients without regard to medical necessity, including allergy tests, breathing tests, bladder tests, EKGs, and ultrasounds – all for the purpose of generating bills to Medicare. Kupelian instructed employees that all patients were to undergo all of the tests offered by the clinic, without regard to the patients’ actual diagnoses. Kupelian also created “sample” lab sheets and billing forms with certain tests and diagnoses already requested, and directed employees to simply fill in patients’ names and Medicare beneficiary information. Some tests were never performed at all, and Kupelian inserted phony test results into patient files to make it appear that the tests had been done and results had been appropriately generated.

Kupelian admitted that through the El Centro Clinic, the conspirators fraudulently billed Medicare over $2.7 million and received over $1.285 million in payments. Of that amount, Kupelian’s management company received over $964,000.

Kupelian is next scheduled to appear before the Honorable Larry A. Burns on February 9, 2015 for sentencing.

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DEFENDANTS   Case Number: 14CR3419-LAB GEVORG KUPELIAN Age: 41     CHARGES

Count 1: Conspiracy to commit health care fraud, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Health and Human Services, Office of the Inspector General

SAN DIEGO – United States Attorney Laura Duffy, together with law enforcement partners and transgender leaders, will offer a groundbreaking training session today to promote respect and trust between officers and a transgender community that has faced discrimination, abuse and ridicule.

About 100 local police officers and Sheriff’s deputies as well as state and federal prosecutors, public defenders, federal agents and court staff are scheduled to take part in the first-of-its-kind event. The hour-long session is part of a Department of Justice training initiative launched in March that is designed to educate the nation’s law enforcement officers about problems and needs of transgender people and how to better serve them.

The training session is scheduled on this day to commemorate “International Transgender Day of Remembrance,” an annual event to memorialize those who have been killed as a result of fear or hatred of transgender people. The Day of Remembrance, which began as a tribute to murdered transgender activist Rita Hester, has become an empowering time to renounce the history of violence and discrimination perpetrated against the transgender community.

Every day, law enforcement personnel across the country encounter transgender individuals, including those who are victims of - or witnesses to - discrimination, abuse, hate crimes, intolerance and injustice. Yet many crimes involving transgender people often go unreported due to fear of marginalization, misunderstandings, harassment, and even assault. Because transgender individuals often feel re-victimized by the criminal justice system, they are reluctant to complain when hate crimes occur.

“Today’s training will help lay a stronger foundation of trust between the transgender community and those who are charged with the tremendous responsibility of protecting and serving,” said U.S. Attorney Laura Duffy. “Sometimes creating trust is as simple as using a person's preferred name, or gender pronoun, or asking for identification in a safe and respectful way. With better education, we can open minds. And with open minds, tensions and misperceptions start to fall away.”

This program is designed to teach officers the relevant terminology, pierce through stereotypes, improve interviewing skills, and reject the misconceptions that often drive the response to hate crimes.

According to recent studies, 78% of transgender individuals have been harassed at school, 41% have attempted suicide, and 26% have lost a job due to bias. Last year in Minnesota, a transgender woman lost her home and service dog due to alleged arson. In the 18 month period from January 2011- May 2012, approximately 18 transgender individuals were murdered in Puerto Rico. In Colorado a few years ago, the murder of a transgender woman became the first-ever transgender incident to result in a hate crimes conviction. And this year alone, violence against the transgender community has claimed the lives of 16 individuals nationally.

The Justice Department’s Community Relations Service unit, known as CRS, is in charge of the training program. CRS was created as part of the 1964 Civil Rights Act as a way to dial down desegregation tensions in the South. The Civil Rights Division protects gender identity and expression by investigating and prosecuting gender-identity motivated violence under the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act. CRS has responded to several incidents of hate violence in recent years, including in Puerto Rico, where 18 LGBT people were murdered between 2010 and 2012.

Today’s training program expands upon the work already accomplished in our proactive law enforcement community. To their credit, the San Diego Police Department and the San Diego County Sheriff have already developed “best practices” protocols.

*For an interview with U.S. Attorney Laura Duffy, please contact Media Relations Director Kelly Thornton at 619-546-9726.

SAN DIEGO - United States Attorney Laura E. Duffy announced the convictions today of two defendants for their roles in defrauding 3,261 homeowners from across the nation through 1st American Law Center, a sham law firm in Oceanside, California. After a three week trial and a day of deliberation, the jury returned guilty verdicts against Dean Gregory Chandler, the former president, chief Executive officer and attorney for the company; and Michael Eccles, a manager in the telemarketing call center. Chandler was convicted of eight felony counts: Three counts of mail fraud, three counts of wire fraud, and one count each of conspiracy and money laundering. Eccles was convicted of five counts: Conspiracy and two counts each of mail fraud and wire fraud.

According to evidence presented at trial, Chandler created 1st American Law Center in 2009 in partnership with convicted drug trafficker Gary Bobel (who has been separately convicted and sentenced for his role in the scheme). Chandler arranged to have Bobel oversee the call center and its teams of telemarketers, who pitched loan modification services on behalf of the law center. Those telemarketers, including Michael Eccles, promised potential clients that a panel of attorneys would pre-screen applicants’ financial information to ensure that only the most qualified applicants would be approved as clients of the law firm; that a team of attorneys would negotiate with clients’ mortgage lenders; that those attorneys would draft all documents to be submitted to the mortgage lenders; that the “attorney retainer fee” averaging $3,495 would be preserved in an attorney client trust account until the client was satisfied, and that clients were protected by a money back guarantee.

As presented at trial, Michael Eccles was promoted to manager of the call center in December 2009, and he took advantage of the new position to script additional lies for the telemarketers to use with clients, including that the law firm had been in business since 1992; that they had been successfully modifying loans for over 20 years; that they had helped over a hundred thousand homeowners, and that it took attorneys on average 200 hours to complete a successful loan modification – all to suggest that the clients could take hope and comfort in the expertise and established success of the “law firm” they had hired. The telemarketers even persuaded homeowners to pay the company=s fees instead of using their limited funds to stay current on their mortgage payments.

Witness testimony and documentary evidence at trial proved that Chandler had almost no role in the loan modification process, and that nearly all of the statements made by telemarketers to the clients were lies. Chandler, the attorney, did not pre-screen all of the applications or negotiate with lenders. Rather than successfully modifying 98% of their client’s mortgages, the firm failed to modify 3 out of every 4 loans. Instead of keeping clients’ payments in an attorney trust account, they were funneled into various other accounts to pay co-schemers, sales commissions, and company expenses. Instead of having funds available to deliver on its money-back-guarantee, the firm failed to provide refunds to untold numbers of clients who requested them.

For his part, Chandler served as the face of the law firm, and the firm’s commercial, website, and brochure featured Chandler’s name, image, and state bar license number. Chandler reviewed telemarketer call scripts submitted to him for approval, and also listened in real time and on recordings to telemarketer calls to clients.

According to evidence at trial, however, Chandler’s chief role was to mislead regulatory and enforcement agencies which threatened the law firm’s profitable operations. In that capacity, in October 2009 Chandler lied under oath in a sworn declaration to an Assistant Attorney General at the California Department of Justice. Multiple witnesses testified that the statements in Chandler’s declaration were false. And when the customer complaints threatened the company’s bottom line, Chandler also lied repeatedly to the Better Business Bureau in efforts to try to inflate the law center’s sagging ratings. For his role in the scheme, Chandler earned over $275,000 in about a 14-month period. In July 2010, after the Federal Bureau of Investigation and Internal Revenue Service executed a search warrant at his law firm, Chandler also drained one of the firm’s bank accounts of $16,500 and used it for his own benefit, instead of to pay employees or refund victims. This transaction was the basis of the money laundering charge.

During the trial, multiple victims of the defendants’ fraudulent scheme came from across the country to testify about their experiences. For example, a couple from Evansville, Indiana, both in their 70s, related how they contacted 1st American Law Center to avoid losing the home where they had spent 27 years raising a family, which was specially modified to accommodate their paraplegic son’s wheelchair. Due to medical problems which forced the husband to retire as an auto mechanic, the couple fell behind on their payments. The couple put their faith in the promise that an attorney would negotiate with their lender. They also counted on the money back guarantee if the firm was unsuccessful. The couple ultimately lost their home, and their money.

The defendants will next appear before United States District Judge Roger T. Benitez on February 23, 2015 for sentencing. A restitution hearing for the victims of 1st American Law Center is set for April 21, 2015.

Today’s jury verdicts bring to a total of 13 the convictions that have resulted from the fraudulent operation of 1st American Law Center. Gary Bobel received a sentence of 92 months in custody. Telemarketer Shelveen Singh, who operated out of Riverside, was sentenced to 110 months in custody. Other convicted telemarketers include Travis Iverson, Scott Spencer, Johnny Hearn, Anthony Calandriello, Mark Spencer, and Roger Jones. Information Technology Director Steven Gersztyn was convicted and sentenced for lying to federal agents during the investigation of the case, and Amy Hintz and Sarah Grimm were each convicted of theft of government property for stealing documents while making copies of evidence in the custody of the FBI.

United States Attorney Laura E. Duffy commented, AThe 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 B homeowners who were desperately trying to make ends meet and stay in their homes.

“Mr. Chandler and Mr. Eccles misused and abused their positions of trust to prey upon those who were financially vulnerable and desperate to save their homes,” said FBI Special Agent in Charge Eric S. Birnbaum. “Today's convictions reaffirm our commitment to hold accountable the guilty who profit by taking advantage of vulnerable people.”

“The defendants used a slew of lies to sell their loan modification services and obtain money from distressed homeowners throughout the United States,” said IRS Criminal Investigation's Special Agent in Charge Erick Martinez. “Loan modification scams thrived for a time, but that time is gone, and as this verdict shows, it's time for those responsible to face judgment.”

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DEFENDANTS   Case Number: 12CR4031-BEN Dean Gregory Chandler Age: 57 Fallbrook, California Michael Eccles Age: 35 Vista, California   CHARGES

Defendant Chandler was convicted of Counts 1-8.

Defendant Eccles was convicted of Counts 1, 3-4, 6 and 7.

Count 1: Conspiracy to commit mail fraud or 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.

Counts 2-4: 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 5-7: 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, $100 special assessment, restitution.

Count 8: Money Laundering, in violation of 18 U.S.C. § 1957.
Maximum Penalties: 10 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

Internal Revenue Service, Criminal Investigation

SAN DIEGO - Glamis Dunes Storage Inc. and its owner, Michael Mamelli, Sr., pleaded guilty today to the illegal underground disposal of potentially millions of gallons of untreated human waste and sewage at the Glamis Dunes Storage site for more than four years, in violation of the Safe Drinking Water Act. The Glamis Dunes site is located off of Highway 78 in Imperial County, and advertises storage services near the Imperial Sand Dunes Recreation Area.

The defendants admitted at today’s hearing that in August of 2007, Glamis Dunes Storage obtained a conditional use permit from Imperial County to install and operate a 20,000 gallon holding tank for RV waste (including human waste and grey water) at the facility. When acquiring the permit, Glamis Dunes Storage represented that the wastewater would be pumped out by a licensed septage hauler and disposed of at the Holtville wastewater treatment plant. According to Glamis Dunes Storage, the holding tank could be expected to dispose of approximately 1,250,000 gallons of RV sewage and grey water per year. The permit specifically prohibited any underground leach system attached to the holding tank.

As the defendants admitted, however, between February 16, 2010, and March 12, 2010, the defendants arranged for a contractor to build a leach field in the rear of the property, install a pump in the RV holding tank, and connect a pipe directly from the RV holding tank out to the leach field. The defendants also arranged for the power connection for the pump to be concealed under gravel near the RV holding tank. Thereafter, they admitted that they repeatedly disposed of the human waste and sewage from the RV holding tank by activating the pump and discharging the sewage through the underground leach field.

The defendants acknowledged that between August and October of 2012, they had a contractor add a new pump and two 2,500 gallon tanks in series to the pipe connecting the RV holding tank to the leach field. The defendants continued to illegally dispose of the sewage in the RV holding tank by discharging it through the underground tanks and leach field without a permit or other authorization from the EPA.

The defendants agreed to forfeiture of the sum of $50,000, as the proceeds of the offense, and to make restitution to the Bureau of Land Management and the Imperial County Department of Environmental Health and to fund the restoration of the site to the satisfaction of the Imperial County Department of Environmental Health.

Michael Mamelli and Glamis Dunes Storage, Inc. are scheduled to appear before U.S. District Court Judge William Q. Hayes on February 17, 2015, at 9:00 a.m. for sentencing.

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DEFENDANTS   Case Number: 14-CR-1766-WQH Glamis Dunes Storgage, Inc. Inc., 2006 Glamis, California Michael J. Mamelli, Sr. Age: 63 Newport Beach, California   CHARGES

Unlawful Injection of Pollutants, a felony, in violation of Title 42, United States Code, Section 300h-2(b)(2)

Maximum Penalty for Individual: Three years in prison; up to $250,000 fine or twice the illegal gain or loss, whichever is greater.

Maximum Penalty for corporation: Fine of up to $500,000.

  INVESTIGATING AGENCY

Environmental Protection Agency, Criminal Investigations Division
Bureau of Land Management