Southern District of California

SAN DIEGO – A federal jury yesterday convicted San Ysidro resident Sofia Martinez, 27, of alien smuggling charges after a two week trial before the Honorable William Q. Hayes.

According to evidence presented in court, Martinez conspired with others to use jet skis and panga boats to deliver numerous undocumented aliens to the United States from Mexico. Martinez hired three Mexican citizens, whom she trained and used as jet ski drivers. She partnered with co-conspirators to purchase jet skis in the United States and bring them to Mexico for use in the conspiracy.

Martinez, who lived in Tijuana at the time, coordinated with others in the United States to pick up the illegal aliens once they were dropped off at beaches in San Diego County, and deliver them to their final destinations in the United States. Martinez and her co-conspirators charged $7,000 to $10,000 per illegal alien.

Prosecutors presented evidence of numerous smuggling events at trial, including a delivery by panga boat on May 9 and 10, 2013. The boat traveled from Rosarito, Mexico and landed south of the Children’s Pool in La Jolla, California in the early morning hours of May 10. Agents, alerted by a 911 call from a security guard and phone calls intercepted under court-ordered wiretaps, found 15 illegal aliens hiding in various locations around La Jolla.

Martinez was first indicted in September 2013 for conspiring to bring illegal aliens to the United States for financial gain. Her arrest resulted from an investigation conducted by Homeland Security Investigation’s (HSI) San Ysidro Border Enforcement Security Task Force, which is comprised of HSI special agents and Border Patrol agents.

“In addition to undermining this nation’s border security, smuggling by ocean is extremely hazardous for undocumented aliens,” said United States Attorney Laura Duffy. “Martinez’s arrest and the dismantling of this alien smuggling group is the product of countless hours of work and close coordination by numerous dedicated investigators.”

“Homeland Security Investigations invested a significant amount of resources into this investigation to reach the organizers and coordinators of the maritime smuggling events plaguing our coast,” said HSI San Diego Interim Special Agent in Charge Jose Garcia. “It was only through the hard work of the entire law enforcement team, processing numerous smuggling events and analyzing countless amounts of evidence, that they were able to develop a strong case against Sofia Martinez and her co-conspirators for a successful prosecution.”

Chief Patrol Agent Paul A. Beeson of the U.S. Border Patrol’s San Diego Sector said, “Sofia Martinez was finally caught due to the dedicated work of several law enforcement agencies who diligently worked together watching our shores. Border Patrol remains dedicated to protecting the borders of the United States, including the maritime border.”

After trial, Judge Hayes revoked Martinez’s bond and immediately remanded her into custody. Sentencing is set for February 23, 2015 at 9 a.m.

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DEFENDANTS   Case Number: 13CR3560-WQH Sofia Martinez Age: 27 San Ysidro, California   CHARGES

Count 1: Title 18, United States Code, Section 371: Conspiracy to bring in illegal aliens for                         financial gain. Maximum Penalty five years in prison and $250,000 fine

Counts 2-4: Title 8, United States Code, Section 1324(a)(2)(B)(ii): Bringing in illegal aliens for financial gain. Maximum Penalty: Fifteen years in prison and mandatory minimum of five years.

  INVESTIGATING AGENCIES

Homeland Security Investigations
Border Patrol

SAN DIEGO – San Diego realtor Michael E. Lustig was sentenced today to 10 years in federal prison for prostitution-related crimes, including his admissions that he paid for sex with a 13-year-old girl on several occasions.

Lustig, 71, was indicted by a federal grand jury in October of 2013 and pleaded guilty in July. He was sentenced by U.S. District Judge Roger T. Benitez.

According to court records, Lustig was first contacted in June of 2012 by San Diego Sheriff's deputies during an operation targeting customers of prostitution in the Encinitas area. At the time that Lustig was arrested, deputies seized two cellular telephones which led to information that he had been in contact with two minor females.

Interviews with the minors conducted by FBI Agents and San Diego Sheriff’s Deputies during a joint investigation revealed that Lustig had contacted them separately to engage in commercial sex activity. One of the minors was 11 years old at the time that sexual activity began with Lustig, and the other was 13 years of age. According to court records, surveillance video from a motel in El Cajon, California, showed Lustig entering a motel room with one of the minors and emerging 43 minutes later.

According to court records, Lustig had contacted the minors multiple times over a span of multiple months. Interviews with the minors confirmed that Lustig, known to them as “George,” had paid them for sexual activity and that at least one of the minors had identified herself as a minor.

In the plea agreement, Lustig admitted that he used a cellular telephone to contact the 13-year-old minor on multiple occasions between at least October 2011 and June 2012, seeking to engage in commercial sex activity. Lustig admitted that he thereafter engaged in commercial sex activity with the minor, paying the minor in return for sexual activity.

For example, according to the plea agreement, Lustig admitted that on October 15, 2011, he wrote the minor, asking, “Hey, is the bookstore open? I'm in desperate need of books rite now.” Lustig admitted in court that he was using code for commercial sex activity. On November 11, 2011, Lustig wrote the same minor, “U free sometime in the next 2 hours?” and “Any chance for library in 35 min, @ 7:15?”

Similarly, on June 8, 2012, Lustig wrote the minor simply “Bookstore?” meaning that he wanted to establish a date for commercial sex activity.

“Michael Lustig victimized the most vulnerable population in our community – children – and today he was brought to justice,” said U.S. Attorney Laura Duffy. “We will do everything in our power to protect children from predators.”

“This investigation serves as another example of how seamless law enforcement is in San Diego County when it comes to those who prey on the vulnerable," commented San Diego Sheriff Bill Gore. “We will offer any resources available to protect our children.”

“Michael Lustig, a sexual predator, is off the streets today because of the dedicated work of the San Diego law enforcement community,” said FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI remains dedicated to protecting our children from sexual predators and will continue to work with our law enforcement partners to make our cities a safer place for all of our children to live and succeed.”

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DEFENDANT   Case Number: 13CR3921-BEN Michael Lustig Age: 71 Rancho Santa Fe, California   CHARGES

Three counts of Interstate Travel in Aid of Racketeering Enterprises, in violation of 18 U.S.C. §1952(a) Maximum Penalty: Five years per count, 15 years total; 3 years supervised release.

  INVESTIGATING AGENCY

San Diego County Sheriff’s Department
Federal Bureau of Investigation

SAN DIEGO - Lloyd Irving Taylor, formerly a licensed California tax attorney and certified public accountant, was sentenced today by U.S. District Court Judge Michael Anello to 57 months in prison and ordered to pay over $2.2 million in restitution to the Internal Revenue Service (“IRS”).

A jury previously convicted Taylor of 19 felony charges, including aggravated identity theft, false statements to a financial institution, tax evasion, corrupt interference with the IRS, and making false statements on United States passport applications. Taylor has been in custody since his arrest in San Diego in April 2013.

According to evidence presented at trial, Taylor stole the identities of deceased children and used them as aliases to obtain fraudulent passports and other identification documents. He then used the passports (which he obtained from U.S. Embassies throughout Europe) and other fraudulent documents to open and maintain multiple financial accounts so that he could hide his income and assets from the IRS. Taylor also misused the stolen identities to transfer funds between his nominee accounts, and to purchase various assets, such as gold coins, which he used to evade taxes.

Similarly, Taylor fabricated over a dozen fraudulent religious institutions, and opened 31 related bank and investment accounts in the names of these fake churches. Defendant then misused the tax-exempt status of these fake religious institutions to fraudulently claim that his income was not subject to federal taxes. Following a week-long trial in June 2014, the jury deliberated for just 30 minutes before finding the defendant guilty on all counts.

Among the witnesses who testified at trial was the brother of one of the deceased victims whose identity was stolen, as well as a blind elderly woman whose social security number was stolen and misused by the defendant. The jury also saw the $1.6 million worth of gold coins that the defendant had hidden in a storage locker prior to the execution of a search warrant.

Evidence introduced at trial proved that despite working and earning money for over 40 years, Taylor filed federal tax return just seven times. All told, Taylor failed to report approximately $5 million in income, on which he owed the IRS approximately $1.6 million.

U.S. Attorney Laura E. Duffy commented: “Identity theft is a dangerous crime that not only traumatizes the unsuspecting victims and their family members, but also facilitates the commission of further criminal activity. For years, Lloyd Taylor stole the identities of deceased children and travelled internationally to obtain fraudulent identification documents. Far from living up to his obligation to be an officer of the court and trusted financial advisor, Mr. Taylor took advantage of his victims to line his pockets and avoid paying his taxes.”

U.S. Attorney Duffy praised the efforts of the San Diego Regional Fraud Task Force, working cooperatively with the IRS and Department of State, to uncover the defendant’s criminal activities and bring him to justice.

“Mr. Taylor, a tax professional, tried in every conceivable way to avoid paying his taxes—from using the identities of dead children and fake churches to converting income to gold coins,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “Today’s sentence reinforces our commitment to every American taxpayer to investigate and prosecute those who use the identities of others to evade their tax obligations.”

“The sentencing of Lloyd Taylor brings to a conclusion the multi-agency investigation in which the U.S. Department of State’s Bureau of Diplomatic Security (DS) brought passport fraud investigative experience and a global reach, to bear. DS is committed to protecting the integrity of the most highly sought after travel document in the world – the United States Passport,” said Michael Rohlfs, DS Resident Agent-in-Charge for San Diego.”

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DEFENDANT   Case Number: 13CR1390-MMA Lloyd Taylor Age: 71 San Diego, California   CHARGES

Counts 1-3:    Title 18, United States Code, Section 1542 – Making a False Statement on a United States Passport Application
Maximum penalties: 10 years custody; $250,000 fine; $100 Special Assessment; 3 year supervised release.

Count 4:         Title 26, United States Code, Section 7212 – Corrupt Endeavor to Impede and Impair the Due Administration of the Internal Revenue Laws
Maximum penalties: 3 years in prison, a fine up to $250,000, and term of supervised release of not more than 1 year.

Counts 5-6:    Title 26, United States Code, Section 7201 – Tax Evasion
Maximum penalties: 5 years in prison, a fine of $250,000, and a term of supervised release of not more than 3 years.

Counts 7-13:  Title 18, United States Code, Section1014 – False Statements to a Federally Insured Financial Institution
Maximum penalties: 30 years in prison, a fine of $1,000,000, and a term of supervised release of 5 years.

Counts 14-19: Title 18, United States Code, Section 1028A – Aggravated Identity Theft
Maximum penalties: 2 years consecutive to the sentence imposed for the underlying offense.

  INVESTIGATING AGENCY

San Diego Regional Fraud Task Force (multi-agency task force comprised of members of the United States Secret Service, the San Diego Police Department, and the San Diego District Attorney’s Office)
Internal Revenue Service – Criminal Investigation
United States Department of State, Office of Diplomatic Security

SAN DIEGO – Commercial real estate developer and mortgage broker Bradley Holcom was sentenced to 10 years in prison today for his role in a $50 million securities fraud scheme.

Holcom, 57, pleaded guilty in July before U.S. District Judge Cathy Ann Bencivengo to committing wire fraud in connection with the sale of approximately $50 million worth of promissory notes which he sold to more than 150 investors located throughout the United States.

At the sentencing hearing today, elderly investors who had lost millions of dollars asked the judge to impose the maximum sentence. The investors – some tearful, some angry, all financially and emotionally debilitated – told the court of the devastating impact of losing their life’s savings at retirement age with no ability to recover.

“My retirement funds for my golden years are gone,” one of the victims said during the hearing. “He could’ve pointed a gun to my head or held a knife to my chest, and he couldn’t have hurt me more.”

According to court documents, Holcom solicited investors to provide funds for the development of raw land for commercial and residential purposes through an investment program he operated called the Trust Deed Investment Program. Holcom admitted that he falsely told investors who purchased notes through the Trust Deed Investment Program that they would receive a lien on a specific piece of property he was developing and that the lien would be in first position.

However, as Holcom further admitted, he never provided investors with a lien in the property he was purportedly developing and instead conveyed to investors a lesser interest that did not allow them to directly foreclose on the property to protect their investment. In addition, Holcom admitted that while he promised investors that their purported lien would be in first position, he subsequently solicited investments for properties that he knew were already encumbered by first position liens.

According to court documents, Holcom also sold properties that were supposedly serving as the security for investors without informing them that the property they had financed for development was gone. Holcom admitted that in 2008 and 2009, even though his financial condition had seriously deteriorated, he continued to solicit investors for new funds by making misrepresentations about his true financial condition and the manner in which he was using investor money. As a result of the scheme, Holcom admitted that his conduct caused approximately $50 million in losses.

Holcom was also sentenced to three years of supervised release and ordered to pay restitution to his victims, with the final amount of restitution to be determined at a hearing on January 9, 2015. Holcom was ordered to begin serving his sentence on January 12, 2015.

This case was investigated by the FBI’s Phoenix Division – Yuma Resident Agency. The case is being prosecuted by Trial Attorney Henry P. Van Dyck and Deputy Chief Daniel Braun of the Criminal Division’s Fraud Section, and by Assistant United States Attorney Mark Pletcher of the United States Attorney’s Office for the Southern District of California. The Department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.

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DEFENDANT   Case Number: 13-cr-1723 Bradley Holcom Age: 57 Canby, Oregon   CHARGES

Wire fraud, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 20 years in prison, $250,000 fine or twice the gain or loss from the offense.

INVESTIGATING AGENCY

Federal Bureau of Investigation

EL CENTRO – Thirty alleged members of a large-scale methamphetamine and heroin drug trafficking organization in Imperial County are charged in federal grand jury indictments unsealed today with conspiring to import and distribute the illicit drugs.

Early this morning, a contingent of federal, state, and local law enforcement officials arrested 43 people – including those under federal indictment plus others who will be charged by the state - and seized drugs, cash, vehicles and 14 firearms in connection with the year-long investigation. During the predawn raids, agents also served 38 search warrants in Calipatria, El Centro and Brawley. The firearms ranged from handguns to assault rifles.

The arrests were based on two grand jury indictments. The charges include conspiracy to import and distribute methamphetamine and heroin and possession of methamphetamine and heroin with intent to distribute. So far, authorities have seized more than 30 pounds of methamphetamine with an estimated street value of 1 million dollars.

“With these arrests and charges, we have taken the first step in wiping out a major connection to methamphetamine in the valley,” said U.S. Attorney Laura Duffy. “This type of investigation and prosecution has a significant impact on public safety and quality of life in this community.”

“Today the Imperial Valley law enforcement community has taken down a widespread narcotics distribution ring that supplied the vast majority of the meth and heroin on the streets in El Centro, Brawley and Calipatria,” said Joe Garcia, interim special agent in charge for ICE HSI in San Diego. “While the impact on public safety in these communities will be far-reaching for the law abiding residents, our united force sends a bold message that criminals involved in smuggling drugs and weapons and gang activity should fear.”

The investigation involved federal wiretaps and extensive surveillance. Numerous defendants are documented members or associates of gangs, including individuals with ties to the North Side Centro, East Side Centro, and West Side Centro street gangs in El Centro, California; the Broleno street gang operating in Brawley, California; and the Calipas street gang operating in Calipatria, California.

The indictments and search warrants describe a conspiracy among a number of family members – parents, siblings, cousins, married couples - who formed the Lozano-Gonzalez drug trafficking organization. The organization allegedly imported methamphetamine and heroin from Mexicali and smuggled it through the Calexico ports of entry via pedestrian couriers and cars, into Imperial County.

Imperial Valley street gang members and those associated with the street gangs acted as a distribution network for the methamphetamine and heroin supply. Several documented gang members and associates are charged in the indictments.

Methamphetamine is a scourge in just about every community in this country, and Imperial County is no exception.

The U.S. Attorney’s office in the Southern District of California has seen a startling increase in the number of methamphetamine cases in the last five years in Imperial County – from 88 in FY 2010 to 134 cases in FY 2014. That’s 52 PERCENT more meth cases.

Today, methamphetamine-related prosecutions make up 70 percent of all federal drug prosecutions in the Imperial Valley. Just a few years ago, in 2010, methamphetamine was just 18 percent of our drug cases.

According to the Imperial County Coroner, the number of deaths due to methamphetamine has remained steady over the last several years in the county, averaging about 8 a year, except for a big spike last year, when there were 18 deaths attributed to methamphetamine use.

“We’ve really got a tremendous public health crisis on our hands,” U.S. Attorney Duffy said. “Meth destroys lives, families and communities. We are absolutely committed to making our neighborhoods safe from violent gang activity, drug trafficking and the devastating impact of methamphetamine and other dangerous drugs.”

Duffy said her office is engaged in ongoing communications with Mexican counterparts, both here and in Mexico City, on jointly attacking this issue. “We are evaluating the problem and working to come up with strategies.”

U.S. Attorney Duffy praised the law enforcement agencies of the Immigration and Customs Enforcement, Homeland Security Investigations; the Imperial County District Attorney’s Office; the El Centro Police Department; and more than a dozen other agencies that assisted with this huge takedown, believed to be the largest in Imperial County to date.

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

United States Attorney, Laura Duffy appearing at the press conference.

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DEFENDANTS   Case Number: 14-CR-3007 Francisco Lozano-Moreno, Jr.     Daniel Becerra-Jimenez              Ismael Lucio     Guadalupe Avila-Parra     Jose Alberto        Jose Aquiles Gomez-Zayas     Jesus Gonzalez-Lozano     Rodrigo Gonzalez-Lozano     Mike Angel Saiza, Jr.                  Armando Mayorga                      Ramon Munoz                Joe Angel Franco            Abel Hernandez Ambriz     Raul Rodriguez     Julissa Janeth Leal-Hernandez     Alexis Pinedo Ambriz                 Juan Carlos Lozano     Carolina Orozco-Vasquez           Isabel Sanchez                            Breanne Nicole Williams            Cindy Marie Mendivel     Gerald Anthony Phillips             Jason Jerry Gonzalez         CHARGES

Conspiracy to Import Methamphetamine in violation of Title 21, U.S.C. Secs. 952, 960 and 963; Conspiracy to Distribute Methamphetamine in violation of Title 21, U.S.C., Secs. 841(a)(1) and 846; Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); (Not all counts apply to all defendants)
Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a $10 million dollar fine.

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DEFENDANTS   Case Number: 14-CR-3008 Raphael Villasenor          Cesar Adrian Gomez      Eriberto Gonzalez-Ruiz     Luis Fernando Calderon Nava     Orlando Quintero            Monique Vania Camargo            Shandra Decoye Camargo     *Fugitives     CHARGES

Conspiracy to Distribute Heroin in violation of Title 21, U.S.C. Secs. 841(a)(1) and 846; Conspiracy to Distribute Methamphetamine in violation of Title 21, U.S.C., Secs. 841(a)(1) and 846; Possession of Heroin with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); (Not all counts apply to all defendants)
Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.

  INVESTIGATING AGENCY

El Centro Police Department
Immigration and Customs Enforcement, Homeland Security Investigations
Imperial County District Attorney’s Office
Imperial County Sheriff’s Office
U.S. Customs and Border Protection, Field Operations
U.S. Border Patrol
Brawley Police Department
Calipatria Police Department
Calexico Police Department
Imperial County Narcotics Task Force
Drug Enforcement Agency
Bureau of Alcohol, Tobacco, Firearms and Explosives
Bureau of Land Management
California Highway Patrol
U.S. Marshals Service

*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 – San Diego-based business attorney Richard Medina Jr. and alleged co-conspirator Omar Trevino Caro Del Castillo appeared in federal court today to face allegations that they laundered almost $12 million via international financial transactions in an attempt to promote their unlicensed money transmitting business.

According to an indictment unsealed this afternoon, the defendants are charged with operating as a commercial enterprise, willing and able to transfer cash on behalf of third parties without registering with the Secretary of the Treasury, as required by Title 31, United States Code, Section 5330. In turn, the defendants’ customers availed themselves of the defendants’ ability to collect cash anywhere throughout the United States, and transmit it anywhere in the world. According to the indictment, the defendants obtained commissions for their services, extracting a fee from the millions of dollars transmitted abroad.

The indictment alleges that in an effort to mask the transmission of currency, Medina opened several “Interest on Lawyers Trust Accounts,” known as IOLTA accounts, at national financial institutions. Other co-conspirators picked up cash at various locations throughout the United States and deposited the cash into one of Medina’s IOLTA Accounts.

By depositing the money into the IOLTA Accounts, the defendants, along with their clients abroad, intended to avoid financial institutions from filing accurate Department of Treasury FinCEN Form 104, Currency Transaction Reports. Financial Institutions must file Currency Transactions Reports for all currency transactions exceeding $10,000 during any one banking day. The defendants sent their clients’ funds internationally through an informal and unlicensed transfer network, in furtherance of the conspiracy to promote the operation of the unlicensed money transmitting business.

The criminal case is assigned to U.S. District Court Judge Roger T. Benitez.

During today’s hearing, the government asked that Caro Del Castillo be held without bond based on risk of flight, and U.S. Magistrate Judge Bernard G. Skomal agreed; Medina was ordered released on $200,000 bond.

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DEFENDANT   Case Number: 14cr2936 Richard Medina, Jr. Age: 38   Omar Trevino Caro Del Castillo Age: 37     CHARGES

Money Laundering Conspiracy – Title 18, U.S.C., Section 1956(h)
Maximum penalty:      20 years’ imprisonment, $500,000 fine, and forfeiture

Operating an Unlicensed Money Transmitting Business – Title 18 U.S.C., Section 1960
Maximum penalty:      5 years’ imprisonment, $250,000 fine, and forfeiture

Conspiracy – Title 18, U.S.C., Section 371
Maximum penalty:      5 years’ imprisonment

Money Laundering – Title 18, U.S.C., Section 1956(a)(2)(A)
Maximum penalty:      20 years’ imprisonment, $500,000 fine, and forfeiture

Cause or Attempt to Cause Financial Institution to File CTR that Contains Material Omission or Misstatement of Fact – Title 31, U.S.C., Section 5324(a)(2)
Maximum penalty:      10 years’ imprisonment, $500,000 fine, and forfeiture

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Drug Enforcement Administration
Internal Revenue Service

*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, CA - United States Attorney Laura E. Duffy announced that Brian Lee of San Diego County was sentenced today to 21 months in prison for embezzling over $1 million from trust accounts he had opened and managed on behalf of an elderly couple.

U.S. District Judge Barry Ted Moskowitz also ordered Lee to pay over $750,000 in remaining restitution, and commented Lee’s behavior was like “Dr. Jekyll and Mr. Hyde” as he was “little by little bleeding money away from persons who trusted him and were trying to do charitable things.”

Lee pleaded guilty to wire fraud on February 19, 2014. According to court documents and his admissions, an elderly San Diego couple hired Lee in approximately June 2004 to create trusts and corporations on their behalf in order to manage their assets. The couple also hired and paid Lee to maintain the bank accounts he opened for the couple’s entities.

Soon after opening these accounts, however, Lee began making unauthorized transfers of the couple’s funds and depositing the money into other bank accounts over which he had exclusive control. Lee continued to embezzle funds for almost a decade by systematically withdrawing funds from the couple’s accounts, including one account he opened as a trust account for the couple’s grandchildren. In total, Lee embezzled over $1 million from the couple, much of which he used to pay his own personal expenses.

United States Attorney Duffy said, “It is gratifying to achieve justice on behalf of these senior citizens, who unfortunately placed their trust in Mr. Lee. We hope that this case serves as a deterrent to other fiduciaries and trust administrators who might seek to take advantage of vulnerable victims.”

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DEFENDANT   Case Number: 14CR0385-BTM Brian P. Lee Age: 44     CHARGES

Title 18, United States Code, Section 1343 (Wire Fraud)    
Maximum penalty: 20 years of custody; $250,000 Fine

  INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO – Lynda Sanabria, a J.P. Morgan Chase banker, admitted in federal court today to receiving more than $200,000 in bribe payments related to Chase’s sale of mortgages on the secondary market. As detailed in her guilty plea, Sanabria used her position and influence at Chase to ensure that her preferred customers won their bids to purchase mortgage notes. Sanabria received these bribe payments from San Diego businessman Israel Hechter, who pleaded guilty in September and admitted paying a total of $1 million in bribes to Sanabria and others.

As detailed in Court documents, Sanabria began accepting bribes from Hechter and his associates as early as 2004, when Hechter offered to pay her on the side in return for providing inside information on loans that Chase was putting up for sale. Around 2004, he arranged to make a $70,000 payment to Sanabria, which Sanabria used to purchase property near Lake Havasu, Arizona. In addition, Hechter would provide the former Chase banker with a fixed payment (up to around $300) for each loan on which he bid. Pursuant to this arrangement, Sanabria provided Hechter with details about his competitors’ bids, which helped to ensure that Hechter was the winning bidder.

By 2008, Hechter stopped reporting the illegal payments to the Internal Revenue Service, and Sanabria stopped paying taxes on the illegal income. As noted in Sanabria’s guilty plea, Hechter later referred to the payments as birthday gifts or consulting fees, in order to disguise the fact that he was paying for influence over her decisions at Chase.

Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted as part of his guilty plea that he paid a million dollars in bribes to Sanabria and other bankers at GMAC and National City Bank. In order to make sure that Hechter’s bids were successful, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding process by supplying Hechter with confidential information about prices and competing bids.

Robert Moreno, of GMAC, was one of the other bankers to receive bribes from Israel Hechter. Last week, Moreno pleaded guilty, and admitted that he accepted more than $1 million in bribes from Hechter and from other GMAC customers.

After purchasing the mortgages from the various financial institutions, Hechter pooled the loans and sold shares of the pools to investors, usually friends and family members including his father, Zeev Hechter, his brother, Amir Hechter, and his employee, Jack Prober, each of whom also invested in the pools. After purchasing the loans, Ocean 18, LLC would service them and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.

“When bankers accept bribes, the real losers here are businesses who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes,” said U.S. Attorney Laura Duffy. “We will continue to prosecute insiders who exploit their positions for personal gain.”

FBI Special Agent in Charge Eric S. Birnbaum commented, “By pleading guilty, Ms. Sanabria admitted corrupting the process and denying other businesses the opportunity to obtain valuable contracts. The FBI and our law enforcement partners are committed to pursuing anyone who illegally lines his or her own pockets at the expense of the public good."

Sanabria entered her guilty plea today before U.S. Magistrate Judge Bernard G. Skomal. Sanabria is scheduled to be sentenced by U.S. District Judge Roger T. Benitez on January 19, 2015, at 9 a.m.

Israel Hechter, Zeev Hechter, Amir Hechter, and Prober each pleaded guilty in September to participating in the conspiracy and making hidden payments to Sanabria, Moreno, or others. They are all scheduled to be sentenced on January 5, 2014, at 9:00 am. Moreno pleaded guilty to the same offense, and is scheduled to be sentenced on January 19, 2014, at 9:00 am. Each of these defendants will also be sentenced by Judge Benitez.

The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.

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DEFENDANT PLEADING GUILTY Case Number: 14CR-2980-BEN Lynda Sanabria Age: 51 Rockwall, TX       DEFENDANTS PREVIOUSLY CHARGED Israel Hechter,     14CR2703-BEN Age: 47 San Diego, CA Amir Hechter,     14CR2701-BEN Age: 42 San Diego, CA Jack Prober,     14CR2704-BEN Age: 56 La Jolla, CA Zeev Hechter,     14CR2702-BEN Age: 68 Aventura, FL Robert Moreno,     14CR2277-BEN Age: 42 Tempe, AZ   CHARGES

Conspiracy to commit bank bribery and tax evasion, 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.

  INVESTIGATING AGENCY

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

San Diego, CA - United States Attorney Laura E. Duffy announced that Deborah and Douglas Tumlinson of Valley Center were arraigned today before U.S. Magistrate Judge Bernard G. Skomal on a ten-count indictment for various fraud charges they allegedly orchestrated after losing their home in the 2007 Witch Creek fire.

In October 2007, the Tumlinsons’ home in Ramona was destroyed by wildfire. The Tumlinsons originally joined a class-action lawsuit against San Diego Gas & Electric (“SDG&E”) to recoup losses from the fire. The indictment alleges that although the Tumlinsons did not enter a settlement with SDG&E, they obtained a loan from U.S. Claims, a funding company, by falsely claiming they had reached a settlement and promising to use the settlement funds as collateral. They were later sued by U.S. Claims for not making any payments on the loan.

The indictment also charges that the Tumlinsons took the proceeds from the U.S. Claims loan and laundered over $500,000 to purchase a new house in Valley Center. Next, the Tumlinsons allegedly made material misrepresentations on a loan application to Seaside Funding, Inc., a Carlsbad mortgage broker company, to obtain a $250,000 home equity loan on their new Valley Center home. They also failed to repay the Seaside Funding loan.

Finally, the Tumlinsons filed for bankruptcy three times, but are accused of intentionally failing to list the outstanding loan debt to U.S. Claims on their bankruptcy petitions.

The Tumlinsons are scheduled to appear before U.S. District Court Judge Janis L. Sammartino for a motion hearing on November 14, 2014.

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DEFENDANT   Case Number: 14CR2978-JLS Deborah Tumlinson Age: 43 (Counts 1-9)    Douglas Tumlinson Age: 40 (Counts 1, 3-8, 10) CHARGES

Count 1:          Title 18, United States Code, Sections 371 (Conspiracy)
Maximum penalty: 5 years of custody; $250,000 Fine

Count 2:          Title 18, United States Code, Sections 1343 (Wire Fraud)   
Maximum penalty: 20 years of custody; $250,000 Fine

Counts 3-4:     Title 18, United States Code, Sections 1341 (Mail Fraud)   
Maximum penalty: 20 years of custody; $250,000 Fine

Count 5:          Title 18, United States Code, Sections 1344 (Bank Fraud)  
Maximum penalty: 30 years of custody; $150,000 Fine

Count 6:          Title 18, United States Code, Sections 1014 (False Statement on Loan Application)          
Maximum penalty: 30 years of custody; $1,000,000 Fine

Count 7:          Title 18, United States Code, Sections 1957 (Money Laundering)  
Maximum penalty: 10 years of custody; $250,000 Fine

Counts 8-10:   Title 18, United States Code, Sections 152(3) (Bankruptcy Fraud) 
Maximum penalty: 5 years of custody; $250,000 Fine   INVESTIGATING AGENCY

Federal Bureau of 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, CA - James Yiu Lee pled guilty earlier today to obstructing justice in relation to a fraud scheme that resulted in investor’s losing more than $10 million. In his guilty plea, Lee also admitted hiding stolen funds in shell corporation accounts and using a series of elaborate transactions to avoid having to pay restitution he owed the United States from a previous felony conviction.

In December 1997, Lee (who was a part-time resident of La Jolla) was convicted of defrauding investors and embezzling from their pension funds. In November 1998, he was sentenced to 30 months in custody and ordered to pay $2,880,000 in restitution. To date, Lee has paid less than $30,000 of the owed restitution. According to documents filed in court, Lee began a new scheme in 2007, which he intentionally designed to obstruct the United States from collecting his income to pay the outstanding restitution.

As noted in his plea agreement, by 2009, Lee was soliciting new investors and falsely promising to share 50% of all realized gains and losses incurred from his online trading activity. In addition, he attracted clients by falsely informing them that he was a CPA, with Ph.D., J.D., and M.B.A. degrees. Lee also failed to disclose his 1997 felony fraud conviction.

In entering his plea, Lee admitted instructing clients to send management fees and profits from trades to bank accounts he opened in the name of shell corporations, including San Diego-based ELX Int., Inc. (“ELX”), which failed to list Lee as a corporate officer or on its bank account. Lee obtained use of his client’s funds by directing them to send payments to the ELX bank account. Once the assets were under his control, Lee would then transfer them to other shell accounts under his control. He would then use the hundreds of thousands of dollars of these stolen funds for personal expenses.

By January 2011, Lee admitted that his trading activity created significant realized losses to client accounts. Rather than pay clients for 50% of the losses, as promised, Lee restructured billing invoices to disguise the losses. He then proceeded to falsely bill his clients for non-existent gains. In total, Lee’s trading activity led to over $10 million in losses for over 14 clients.

Lee entered his guilty plea before Magistrate Judge Barbara L. Major. U.S. District Court Judge Roger T. Benitez will sentence Lee on January 19, 2015.

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DEFENDANT   Case Number: 14CR2937-BEN James Yiu Lee       CHARGES

Title 18, United States Code, Section 1503 (Obstruction of Justice)           

Maximum penalty: 10 years of custody; $250,000 Fine SUMMARY OF PREVIOUS CHARGE Case Number: 95CROO41-MMC-1 (NDCA)

Wire Fraud (18 U.S.C. § 1343) & Pension Embezzlement (18 U.S.C. § 664)

INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO - Grant McCollough, a real estate investor and owner of Tycoon Investments, and his wife, Marisa McCollough, pleaded guilty today to participating in a conspiracy to defraud mortgage lenders and impede the Internal Revenue Service.

As part of their conspiracy, the McColloughs recruited investors to act as “straw” buyers and arranged for false information to be submitted to mortgage lenders in support of the 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 also admitted hiding their skimmed profits from the IRS.

Over a dozen of the fraudulent mortgages were arranged by coconspirator Donald Totten, a mortgage loan officer and broker operating from Rancho Santa Fe. Totten pleaded guilty in February 2014 to mortgage fraud, 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 principal balance, so that the monthly payments were low but the outstanding balance of the loan increased over time. As part of his plea agreement, Totten admitted that defaults in the mortgages he brokered caused losses of between $2.5 million and $20 million. Totten, who is in custody, will be sentenced on October 20, 2014, by U.S. District Judge Michael M. Anello.

McCollough’s business partner at Tycoon Investments, 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 U.S. District Judge Leslie E. Kobayashi.

As admitted as part of the guilty pleas, the McColloughs arranged for loan applications to include made-up employment (including false employment at Tycoon Investments) and represented that borrowers earned substantial salaries from the company when, in reality, Tycoon Investments had no employees. In addition, with Totten’s help, the McColloughs and Kent would falsely represent that they jointly owned a bank account at Wells Fargo Bank, to support false claims by Marisa McCollough and Kent that they held significant assets. In reality, the funds were Totten’s. During the conspiracy, Marisa McCollough worked at Wells Fargo Bank, a position she used to help falsify records about the loan applicants’ account balances.

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.

The McColloughs’ guilty pleas were taken before U.S. Magistrate Judge Ruben B. Brooks. They are scheduled to be sentenced by Judge Anello on January 5, 2015 at 9 a.m.

In addition to these defendants, Totten’s employee and loan processor, Shellie Lockard, also pleaded guilty to participating in a conspiracy to defraud mortgage lenders. According to her plea agreement, Lockard processed fraudulent loans for Totten, and earned commissions of approximately $1,000 per loan. She was sentenced on September 15, 2014, by Judge Anello, and ordered to serve six months in home detention.

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.

“This kind of fraud has a ripple effect through our nation’s economy,” said U.S. Attorney Laura Duffy. “We will continue to investigate and prosecute those who defraud the mortgage market.”

FBI Acting Special Agent in Charge, Robert Howe, commented, “FBI investigations such as this expose the vulnerabilities in the mortgage industry and how criminals motivated by greed will stop at nothing to support their lavish lifestyles. This kind of dishonesty is profitable only in the short run, and ultimately leads to arrest and prosecution.”

IRS Criminal Investigation’s Special Agent in Charge Erick Martinez stated: “Today Grant McCollough and Marisa McCollough are being held accountable for their role in defrauding mortgage lenders and impeding the IRS. IRS Criminal Investigation is working hard to detect income from illegal sources intentionally hidden from the IRS and ensure that all forms of income are taxed.”

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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: Five years in prison, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, 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, CA - Kathryn Sylvester of San Diego was sentenced today to 41 months in custody for operating a large-scale mortgage fraud scheme that caused over $6 million in losses on various properties in San Diego and Orange Counties.

A restitution order is pending. The government has asked the court to order Sylvester to pay $6.6 million to several financial institutions and individuals who were victimized by her scheme.

During today’s sentencing hearing, U.S. District Court Judge Cathy Ann Bencivengo said Sylvester orchestrated a “sophisticated operation” involving “repeated acts of criminal behavior.” Judge Bencivengo acknowledged Sylvester’s managerial role in the conspiracy and noted that she must be held responsible for the “serious offense.”

According to court records and Sylvester’s admissions, between June 2005 and May 2008, Sylvester recruited “straw buyers” to submit falsified mortgage loan applications in order to buy properties and obtain home equity loans. Sylvester also provided false documents to support the straw buyers’ misrepresentations regarding their income and employment, and added straw buyers to unrelated bank accounts so they could inflate the value of their assets on loan applications. Sylvester also helped convince lenders to fund loans for which Sylvester and the straw buyers would not otherwise qualify.

Although Sylvester promised some straw buyers that she would “flip” a number of the properties for a quick profit, she systematically drained equity from the properties for her own benefit. As a result of Sylvester’s criminal acts, the conspirators were able to fraudulently obtain over 80 loans resulting in over $24 million in funded loans -- loans that eventually went into default and resulted in the foreclosure of approximately 28 properties.

U.S. Attorney Laura Duffy commented: “It is our sincere hope that we have closed a chapter on the destructive wave of mortgage frauds that heavily contributed to this nation’s financial crisis. Due to the determined efforts of the FBI to ensure that financial crimes do not go unpunished, Kathryn Sylvester and her conspirators have been held accountable for the serious damage they caused.”

FBI Acting Special Agent in Charge Robert Howe commented, “This FBI investigation unraveled a sophisticated mortgage fraud scheme that involved straw buyers and people in trusted positions who had a role in protecting the integrity of the mortgage lending process. Because of her lies and deception, motivated by greed, Ms. Sylvester will now be spending close to four years in federal prison to think about whether it was all worth it. Today's sentencing sends a message that the FBI will continue to aggressively investigate those individuals that engage in fraudulent financial schemes that cause harm to our banking industry.”

The straw buyers involved in Sylvester’s conspiracy included Claudia Montes, Tad Lent, Timothy Shannahan, and Roderick Michener. Montes, a former notary public, notarized the signatures of other straw buyers on the false loan applications. On April 12, 2013, Montes pleaded guilty and admitted that she conspired with Sylvester to submit false loan applications to lenders. Montes was sentenced to 20 months in custody by U.S. District Judge Janis L. Sammartino on February 14, 2014 (13CR1313-JLS).

Lent pleaded guilty to conspiring with Sylvester to submit falsified loan applications to mortgage lenders by misrepresenting the amount of his assets (12CR3744-L). U.S. District Judge M. James Lorenz sentenced Lent to one year of custody on March 3, 2014.

On April 14, 2014, Judge Lorenz also sentenced Shannahan to one year in custody for his role as one of Sylvester’s straw buyers (13CR1650-L). Michener pleaded guilty to conspiring with Sylvester to commit bank fraud (13CR1130-CAB). Michener admitted that he permitted co-conspirators to claim an ownership interest in his bank account in order to include the account as an asset on their respective mortgage loan applications. He also admitted transferring fraud proceeds to Sylvester. On March 14, 2014, Judge Bencivengo sentenced Michener to time-served and ordered him to repay over $2 million in restitution.

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DEFENDANT   Case Number: 13CR1355-CAB Kathryn Sylvester Age: 44     CHARGES

Count 1: Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud and bank fraud)
Maximum penalty: 30 years of custody; $1,000,000 fine

Count 5: Title 18, United States Code, Section 1343 (wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

  INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO - Israel Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted in federal court today that he paid $1 million in bribes to bank insiders at J.P. Morgan Chase Bank, GMAC Mortgage, LLC, and National City Bank.

According to his plea agreement, in exchange for the bribes, the bankers arranged for Hechter to win bids to purchase mortgage loans issued by the banks and sold on the secondary market. In order to make sure that Hechter’s bids won, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding by supplying Hechter with confidential information about prices and competing bids.

Assistant U.S. Attorney Phillip L.B. Halpern noted in court today that it was essential that the Department of Justice police the $10 trillion secondary mortgage market to ensure that there was a level playing field for all investors. “Individuals and corrupt bank employees who attempt to tilt this playing field for their own advantage cannot be tolerated,” he told the court.

Hechter’s brother, Amir Hechter, and his business associate, Jack Prober, pleaded guilty on Wednesday to participating in the conspiracy. Both Prober and Amir Hechter admitted writing personal checks to the bankers in order to assist the bankers in evading taxes on the illegal income. Israel and Amir’s father, Zeev Hechter, also admitted participating in the conspiracy. In entering his guilty plea on Tuesday, Zeev Hechter admitted hand-delivering approximately $330,000 in cash to GMAC banker Robert Moreno. In addition to meeting Zeev Hechter on New York City street corners, Moreno met him at Hechter’s car wash where the conspirators “laundered” the bribes. Each time they met, Zeev Hechter handed Moreno a bag containing tens of thousands of dollars in cash.

Moreno was arrested on July 15, 2014, for his alleged role in the conspiracy. As alleged in his charging documents, Moreno accepted hundreds of thousands of dollars in bribes in return for steering GMAC mortgages to Hechter’s company. After this relationship developed, Moreno allegedly used his position at the bank to help Hechter win bids to purchase mortgages – which Hechter previously had trouble winning. Moreno’s case is pending before U.S. District Judge Roger T. Benitez. A trial date has not been set.

According to his plea agreement, Israel Hechter and his coconspirators attempted to cover up the bribes by pretending that they were legitimate “commissions” unrelated to the bankers’ positions with the banks, using a phony “Consulting Agreement,” a sham business and a corresponding bank account to disguise the bribes.

Many of the mortgages at issue were non-performing or distressed second mortgages. Israel Hechter pooled the loans and sold share of the pools to investors, usually friends and family members including Zeev Hechter, Amir Hechter, and Jack Prober, each of whom invested in the pools. After purchase, Ocean 18, LLC would service the loans and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.

The mortgages at issue were purchased on the secondary market, after the banks had issued funds to homeowner borrowers. Secondary purchasers of mortgages provide primary lenders with additional capital and reduced credit risk, and in turn provide borrowers with greater access to mortgage loans. The secondary mortgage market in the United States exceeds $10 trillion.

Each of the four guilty pleas were taken before U.S Magistrate Judge Mitchell D. Dembin. The defendants are scheduled to be sentenced by Judge Benitez on January 5, 2015, at 9 a.m.

“People who think they can manipulate and bribe their way into the winner’s circle should take note: The integrity of our financial system is not for sale,” said U.S. Attorney Laura Duffy. “This behavior is criminal, and there are consequences.”

“The defendants in this case knowingly engaged in a pattern of corruption by paying hundreds of thousands of dollars in bribes to those responsible for ensuring the integrity of financial transactions,” said FBI Acting Special Agent in Charge, Robert Howe. “Today's conviction sends a clear message that the FBI will not allow greed and corruption to undermine our financial markets. The FBI will continue to pursue these cases to ensure confidence and trust in our financial markets.”

“Professionals, including bankers who line their pockets with the payment of illicit bribes, should know they will not go undetected and will be held accountable,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “IRS Criminal Investigation is working hard to ensure that all forms of income are taxed, including income from illegal sources.”

The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.

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DEFENDANTS PLEADING GUILTY Israel Hechter  Age: 47 San Diego, CA Amir Hechter Age: 42 San Diego, CA Jack Prober Age: 56 La Jolla, CA Zeev Hechter  Age: 68 Aventura, FL   CHARGES

Conspiracy to commit bank bribery and tax evasion, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years in prison, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

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DEFENDANT FACING CHARGES Robert Moreno Age: 42 Tempe, AZ   CHARGES

Bank bribery, in violation of 18 U.S.C. § 215
Maximum Penalties: 30 years in prison, $1,000,0000 fine or three times the value of the bribe, $100 special assessment, restitution

INVESTIGATING AGENCIES

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

*As to defendant Robert Moreno, the public is reminded that the charges are not evidence that the defendant committed the crime charged.  The defendant is presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.

United States District Judge Dana M. Sabraw today sentenced Eric S. Levine to 18 months in prison for stealing hundreds of thousands of dollars from La Jolla’s Congregation Beth El synagogue.

Levine served as Beth El’s Executive Director from July 2007 to December 2013, overseeing the synagogue’s annual budget. Importantly, he also had access to, and control over, Beth El’s bank accounts, credit card accounts, and bookkeeping records. Starting in at least February 2008, he began embezzling money from the synagogue for his own use. He continued his thefts until he left the position in December 2013. As part of his guilty plea, Levine admitted misappropriating $394,872.99 from the synagogue over those five years. Based on additional accounting analysis and review of financial records, the congregation identified its ultimate losses from Levine’s conduct as over $540,000.

Levine was able to carry out his embezzlement by virtue of his control over Beth El’s bank account and credit card. On most occasions, he simply used money located in the congregation’s bank account to pay his own bills directly. On other occasions, he transferred balances from his personal credit card to the congregation’s credit card account, and then paid his balances with the congregation’s funds.

In order to fool the congregation, its bookkeepers, and its executive staff, Levine falsified Beth El’s books and records to cover up his ongoing theft. He hid thousands of dollars in payments to himself by creating entries for legitimate expenses of the synagogue, in categories such as “Ritual Fund,” “Rabbi Emeritus,” “High Holidays,” “Purim Baskets,” “janitorial expense,” “utilities,” “landscaping expense,” and “repair / replace reserve fund.” His mischaracterization of payments made it appear that more of Beth El’s funds were spent on legitimate synagogue expenses than was actually spent. Levine also prepared false financial reports and annual budget proposals based on these inflated figures.

Instead of these legitimate expenses, the funds were used to pay a variety of Levine’s credit card charges, including trips to Mexico, Hawaii, Las Vegas, and Canada; charges at La Costa Resort Spa; monthly membership and regular $1,400 charges for a personal trainer at 24 Hour Fitness; and expenditures at StubHub, Sleep Train, Discount Tire. Having his hand in Beth El’s till also allowed Levine to outfit his home with expensive leather furniture and BBQ equipment, buy fancy jewelry, send his children to private school, and purchase exclusive Disney vacations. After having pored over the congregation’s records from the time of Levine’s tenure, Beth El’s new Executive Director remarked in her letter to the Court: “From Eric’s first months at Beth El in 2007 until the day he left, every Beth El credit card statement is riddled with his personal expenses: restaurants, gas, iTunes, men’s clothing, travel for his family, home décor. Even after he gave notice of his departure to the Beth El board, Eric purchased expensive new smartphones for himself and his wife on Beth El’s Sprint account.”

The President of the synagogue described the impact of Levine’s thefts on the congregation: “Because of his crime, people lost their jobs, their livelihoods, and their lives were changed forever. "No money in the budget," he said, while taking our money to line his pockets.

Because of his crime, we could not install heat in the classrooms for our children. "No money in the budget," he said, while paying off his own credit cards. Because of him, we could not give complementary meals to families. “No money in the budget,” he said, while shopping for his own family, and himself. Our staff gets annual retirement employee contributions of about 2%. In 2009 he told the staff that due to the downturn in the economy, no contributions would be made that year…But there would have been sufficient funds if he had not been stealing…from his own employees, people who have dedicated their lives and souls to Beth El. He took our money, money we raised from our generous congregants, money to be used for the good of our community. He took it.”

Beth El’s rabbi explained the personal impact of Levine’s breach of trust in a letter to the Court. “Eric and I worked closely together. Most of our interactions involved the synagogue’s finances, which means he lied to me every day, every time our paths crossed,” he wrote. “Almost the entirety of our operating budget comes from voluntary dues and contributions. Simply put, people will not trust [Beth El] as much, if at all. . . . [Now], our diminished staff spends much more time on accounting than on our mission of creating a lively Jewish community in San Diego. It’s hard to know if we’ll ever be the same.” He also described employees who were laid off by Levine due to claimed budget constraints, including a single mother of two who has yet to find a new job.

One member of the congregation summed up the impact of Levine’s crime on this community:

Even more important [than the theft of funds] is the breach of trust and loss of a sense of reliance on one previously so highly ‘esteemed’ by so many of our Beth El community. Mr. Levine touched the lives of hundreds in our synagogue. We will certainly recover from the loss of funds. What he has done in terms of disappointment as a human being will affect our members and their ability to feel a sense of trust for years to come.

In imposing sentence, Judge Sabraw said the case involved “deeply troubling circumstances” because Levine’s scheme victimized both his employer and congregants who shared his life and faith.

“It’s a deception not only of the synagogue, but everyone who makes up the synagogue, so there are hundreds of victims…The sense of betrayal cannot be overstated.”

The Court ordered that Levine pay $543,000 in restitution for the monies he stole from Congregation Beth El. He was also sentenced to three years of supervised release upon completion of his prison term.

U.S. Attorney Laura Duffy said, “Mr. Levine embezzled hundreds of thousands of dollars to finance a life of luxury for himself while betraying the people who believed in him. This defendant was a one-man wrecking ball to this congregation, both financially and emotionally, and today the court imposed a fitting sentence for such abhorrent conduct.”

FBI Acting Special Agent in Charge Robert Howe commented, “Mr. Levine hid behind a facade of honesty and integrity while stealing money from his congregation to support his lavish lifestyle. In doing so, Mr. Levine betrayed the people who trusted him the most and today's sentencing sends a clear message that those who engage in similar criminal conduct will be held accountable for their actions.”

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DEFENDANT     Eric S. Levine Age: 37     CHARGES

Mail fraud, Title 18, United States Code, Section 1341
Maximum penalties: 20 years in custody; $250,000 fine; 3 years of supervised release; mandatory order of restitution to victims

  INVESTIGATING AGENCY

Federal Bureau of Investigation

SAN DIEGO – John Frank Mussari Jr, owner of Mussari Motors Inc., a luxury car dealership in San Diego, admitted in federal court today that he conspired 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.

Drug traffickers often use this method to launder drug proceeds.

During his guilty plea today, 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.

Mussari is scheduled to be sentenced on December 5, 2014 at 8:30 a.m. before U.S. District Judge Gonzalo P. Curiel.

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DEFENDANT   Case Number: 13cr4072 John Frank Mussari, Jr. Age: 48 San Diego, California   CHARGES

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

  INVESTIGATING AGENCY

Internal Revenue Service
Drug Enforcement Administration

*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 Edmund Seshie and Abdul Rezak Shaib pled guilty today to being part of a West African-based organized international car theft and identity theft ring.

In their guilty pleas, Shaib and Sheshie admitted purchasing stolen credit cards and corresponding counterfeit driver’s licenses in bulk from a Singapore-based “carder” website. So-called “carders” are people who buy, sell, and trade online the credit card data stolen from phishing sites or from large data breaches at retail stores. The stolen identities were then used to fraudulently purchase vehicles from U.S.-based car dealerships. In all, the defendants purchased scores of vehicles valued at almost a half a million dollars prior to the discovery of their scheme.

According to documents filed in court, co-defendant Henry Addo allegedly ran this international car theft ring from his home in Ghana. From various locations in Ghana, Addo placed international phone calls to car dealerships in the United States. During these call, he assumed the identity of the stolen credit card holders during the negotiation of each purchase, the indictment said. He then allegedly used a series of email accounts to transmit the counterfeit driver’s licenses and stolen credit card information to United States-based car dealerships.

According to the indictment, Addo motivated his United States-based co-conspirators to participate in the conspiracy by invoking “Sakawa,” which is a Ghanaian practice that combines modern internet-based fraud practices targeting foreigners with traditional African religious rituals.

Defendants paid for the cars using the stolen credit cards and (using the same stolen credit cards) paid automobile transportation companies to deliver the vehicles to various staging locations throughout the United States. Once multiple vehicles were accumulated at a particular staging location, a tractor trailer transported them in cargo containers to a New Jersey port for export to Africa, where the cars were then sold on the open market.

“This case is notable in terms of its level of sophistication, its audacious methods and the callous disregard for victims,” said U.S. Attorney Laura Duffy.” These guilty pleas are the first strike back on behalf of identity theft victims who now have to reclaim their good names – a frustrating task that can take years. We will continue to make these cases a priority.”

The FBI recommends that individuals take the following steps to minimize the chance of becoming a victim of identity theft:

• Don’t carry your Social Security card or any document containing your Social Security Number.
• Don’t give a business your Social Security Number just because they ask. Give it only when required.
• Protect your financial information.
• Check your credit report every 12 months.
• Secure personal information in your home.
• Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.
• Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

Shaib entered his guilty plea on September 16, 2014 and Sheshie entered his guilty plea today, both before United States Magistrate Judge Jan M. Adler. Judge Adler ordered both defendants to appear on December 5, 2014 at 9 a.m. for sentencing.

Co-defendant Addo remains a fugitive and is believed to be residing in Africa.

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DEFENDANT     Edmund Seshie, aka Eddie Blay Age: 42 Columbus, Ohio Abdul Rezak Shaib, aka Zak Age: 28 Bronx, New York   CHARGES

Conspiracy to Commit Mail and Wire Fraud – Title 18, U.S.C., Section 1349

Maximum penalty: 20 years’ imprisonment and $250,000 fine   INVESTIGATING AGENCY

Federal Bureau of 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 – James (“Jim”) Miller, a Manhattan Beach attorney and corporate executive, appeared in magistrate court in Los Angeles County yesterday to face allegations that he embezzled over a quarter-million dollars from his former employer, MWRC Internet Sales LLC (“MWRC”).

As alleged in a five-count Indictment, Miller – an attorney who worked for Body Glove, International and served as the President and Managing Partner of MWRC – devised a scheme to steal money from MWRC to pay for his personal, non-company related expenses.

The Defendant carried out his scheme by writing checks from MWRC’s bank account to pay himself unauthorized income and supplemented his legitimate salary to the tune of hundreds of thousands of dollars over approximately four years. The Indictment further alleges that the Defendant failed to disclose to other MWRC partners his on-going self-enrichment scheme and failed to disclose to the banks that the checks he wrote to himself were not authorized by MWRC.

The criminal case against Miller (14CR0471) is assigned to U.S. District Court Judge Andre Birotte, Jr. The trial is set for November 11, 2014 at 8:30 a.m. Magistrate Judge Patrick J. Walsh ordered the Defendant released on a $50,000 bond pending trial.

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DEFENDANT   Case Number: 14cr0471 James R. Miller Age: 65 Manhattan Beach, CA   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
Internal Revenue Service Criminal Investigations

*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 today that Ara Keshishyan was sentenced last Friday to 57 months’ imprisonment for leading and organizing a 14-defendant conspiracy to steal more than $1,000,000 from Citibank using cash advance kiosks in a dozen casinos from Southern California to Las Vegas. Judge Sammartino also ordered Keshishyan to pay back the $1,045,585 stolen from Citibank.

Keshishyan presided over a conspiracy to exploit a gap in Citibank’s electronic transaction security protocols in order to overdraw more than 20 Citibank accounts by tens of thousands of dollars each. The scheme worked as follows: Keshishyan recruited conspirators to open Citibank checking accounts that Keshishyan would fund with “seed” money that would form the basis for future fraudulent withdrawals. Keshishyan and his various conspirators then traveled to casinos in Southern California and Nevada, including the Morongo, Pechanga, San Manuel, Agua Caliente, Chukchansi, and Spa Resort casinos in California; the Tropicana, Wynn, Bicycle, and Whiskey Pete’s casinos in Las Vegas, Nevada; and Harrah’s in Laughlin, Nevada. Once inside the casino, Keshishyan instructed the conspirator how to conduct identical, fraudulent withdrawals at cash advance kiosks within a short time window in order to circumvent Citibank security protocols. Keshishyan’s technique exploited a glitch that allowed his conspirators to withdraw several times the amount of seed money deposited into the accounts. In one case, Keshishyan and one of the co-conspirators were able to withdraw 10 times the amount of money deposited into one of the accounts opened in furtherance of the fraud. The conspirators were careful to keep their deposits and withdrawals under $10,000 (typically between $9,000 and $10,000) in order to avoid federal transaction reporting requirements. As the organizer of the conspiracy, Keshishyan personally took a cut of every fraudulent withdrawal that he directed.

United States Attorney Duffy said, “This is an example of a class of cyber-fraud that burdens our financial system and results in a higher cost of doing business for American consumers. Along with our agency partners, my office is committed to detecting and prosecuting these schemes in whatever form they take.”

FBI Special Agent in Charge Daphne Hearn commented, “While advancements in technology have created a world of accessibility to users and a convenience for consumers, they have also left room for cyber criminals to exploit even the smallest of loopholes. The FBI will continue to use our investigative expertise in cyber and financial crimes to pursue those who illegally abuse our financial system for their own personal gain.”

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DEFENDANT   Case Number: Ara Keshishyan Age: 32 Fillmore, CA   CHARGES

Conspiracy to Commit Bank Fraud – Title 18, U.S.C., Section 371

  INVESTIGATING AGENCY

Federal Bureau of 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.     

Federal Authorities continue to focus on the growing problem of identity theft

SAN DIEGO – Arthur Grigorian admitted in federal court today that he defrauded the Internal Revenue Service of over $1.5 million by filing false tax returns in the names of stolen identities. Grigorian’s plea was the 27th conviction obtained by prosecutors since charges were filed in four related cases as part of a joint investigation by the FBI and IRS, dubbed “Operation Trillion Troubles,” in September, 2013.

Grigorian, the lead defendant in one indictment, admitted stealing personal identity information from unwitting victims in order to file false tax returns in their names. These false returns generated well over $1.5 million in fraudulent tax refunds that should never have been taken from the U.S. Treasury. According to the indictment, Grigorian and his conspirators falsely claimed refunds in the names of the victims in a number of ways, all of which involved some form of falsified income and withholdings. Most commonly, the conspirators claimed that the victims – many of whom were elderly and had not filed federal income tax returns in years – made tens of thousands of dollars in gambling winnings before losing nearly the identical amount.

The “losses” effectively canceled out the fabricated winnings, thus entitling the conspirators to a refund for the amount allegedly withheld on the initial winnings. As part of this scheme, Grigorian and his fellow conspirators directed the IRS to send the ill-gotten refunds to postal addresses and/or bank accounts under their control. The conspirators then would often circulate the money through several other accounts before withdrawing it and distributing the money amongst the group.

For his part, Grigorian admitted in court today that he stole the identities of people to use on the fraudulent tax returns, provided this personal information to conspirators, obtained fraudulent identification documents in the names of the stolen identity theft victims, facilitated the receipt of the ill-gotten funds, and enforced discipline on others related to the conspiracy. In all, Grigorian admitted to participating in filing false tax returns in the names of hundreds of victims. According to his plea agreement, Grigorian personally profited from his role in the organization’s activities.

Grigorian faces a maximum potential sentence of five years in prison. He is also required by the terms of his plea to make full restitution to the IRS for the losses caused by his criminal conduct, which totaled nearly $1.5 million.

Grigorian’s plea is the latest of 27 convictions following the September 2013 arrests of dozens of people in “Operation Trillion Troubles.” The four related cases charged the individuals with multiple tax fraud conspiracies and several schemes to defraud American banks. In all, over 58 defendants have been charged and 28 remain as international fugitives.

United States Attorney Laura E. Duffy praised the hard work of the agents from the FBI and IRS on their continued success in these related cases. "Today's guilty plea marks the culmination of the investigation and prosecution of a network of individuals whose scope of criminal actions was only exceeded by their brazen disregard for the sanctity of victims’ personal identity information. Our citizens’ identities are not commodities for criminals to trade and exploit for their own personal gain. Our office will continue to prosecute those who illegally take advantage of others at the expense of the American taxpayer."

FBI Acting Special In Charge Robert Howe commented, “Today's conviction is an example of the FBI's commitment to root out sophisticated fraudulent schemes by criminal enterprises. In this case, the defendant and his co-conspirators were involved in an elaborate scheme using Visa holders and stolen personal information to steal millions of dollars from American taxpayers. The FBI will continue to work with our law enforcement partners to protect American citizens from aggravated identity theft and protect our precious tax dollars from waste, fraud and abuse.”

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented: “Identity theft and tax refund fraud was the lifeblood that Arthur Grigorian and his conspirators used to further their multi-million dollar fraud scheme. Operation Trillion Troubles exhibits the efforts of the IRS Criminal Investigation and the U.S. Attorney’s Office to protect the integrity of the federal tax administration system. Today’s guilty plea by Arthur Grigorian, the leader of the crime ring, demonstrates IRS Criminal Investigation’s commitment to holding accountable those individuals who victimize others through identity theft and tax refund fraud.”

DEFENDANT   Case Number: Arthur Grigorian Age: 33 Glendale, CA   CHARGES

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

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PROGRESS OF CASES CHARGED AS PART OF
"OPERATION TRILLIONS TROUBLE"

Summary: As of September 11, 2014, 27 (non-fugitive) defendants have been convicted. 

13CR3479-BTM B Convictions (Conspiracy to commit wire fraud – All defendants)
Ernest Soloian
Harout Gevorgyan
Yvonne Mihailescu
Yermek Dossymbekov
Yelena Sklyarova
Vyacheslav Tsoy

13CR3480-BTM B Conviction
Arman Eritsian – Conspiracy to commit wire fraud

13CR3481-BTM B Convictions (Conspiracy to commit bank fraud – All defendants)
Karen Galstian
Vahag Stepanyan
George Karapetian
Christopher Buckely
Carlos Ferrufino
Akop Galstian
Farbob Golhassani
Paul Gonnelly
Tatyana Kabachinskya
David Megurian
Ashot Mnatsakanyan
Sedrak Movesyan
Robert Rodriguez
Christopher Ruiz

13CR3482-BTM B Convictions (Conspiracy to commit bank fraud – All defendants)
Hovakim Sogomonian
Harout Gevorgyan
Tigran Eritsyan
Konstantin Yugay
Mae Barbara Weissberger

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service
Los Angeles Police Department

 

*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 - Robert Moreno, a banker who sold mortgages on behalf of GMAC, admitted receiving more than one million dollars in bribe payments while working on behalf of GMAC. As detailed during his guilty plea, in return, Moreno used his position and influence to ensure that his customers won their bids to purchase mortgage notes. Moreno took the bulk of these bribe payments from San Diego businessman Israel Hechter, who pled guilty in September and admitted paying $1,000,000 in bribes to Moreno and others. Moreno also accepted hundreds of thousands of dollars from another customer based in Woodland Hills, California.

Moreno initially accepted the bribes in cash and personal checks, so that he could conceal the payments from the IRS and avoid paying taxes on the illegal income. Several times in 2012, Hechter’s father, Zeev Hechter, met Moreno in New York City at the car wash he owned, where he delivered “laundered” cash payments totaling $330,000. Moreno travelled around the country, including Las Vegas, New York City, and Scottsdale, Arizona, arranging hand-to-hand cash deliveries of the bribes from Zeev Hechter and others. He also accepted personal checks from Israel’s brother Amir Hechter and their business associate Jack Prober.

Moreno and Israel Hechter later set up a sham “Consulting Agreement” and a phony consulting business, Phoenix Asset & Acquisition, Inc., to disguise the bribe payments and make them look like legitimate consulting fees unrelated to Moreno’s work with GMAC. Moreno then copied this sham contract and used it with other customers who paid him bribes, all to cover up the payments. Moreno took in over $500,000 in bribe payments under these bogus contracts.

Israel Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted as part of his guilty plea that he paid a million dollars in bribes to Moreno and other bank insiders at J.P. Morgan Chase Bank and National City Bank. In order to make sure that Israel Hechter’s bids were accepted, the bankers, including Moreno, corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding by supplying Israel Hechter with confidential information about prices and competing bids.

The mortgages Moreno sold on behalf of GMAC were mostly non-performing or distressed second mortgages. After purchase, Israel Hechter pooled the loans and sold shares of the pools to investors, usually friends and family members including Zeev Hechter, Amir Hechter, and Prober, each of whom invested in the pools. After purchase, Ocean 18, LLC would service the loans and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.

Moreno was arrested on July 15, 2014, for his role in the conspiracy. He entered his guilty plea today before United States Magistrate Judge Mitchell D. Dembin. Moreno is scheduled to be sentenced by United States District Judge Roger T. Benitez on January 19, 2015, at 9:00 a.m.

Israel Hechter, Zeev Hechter, Amir Hechter, and Prober each pled guilty in September to participating in the conspiracy and making hidden payments to Moreno. They are all scheduled to be sentenced by Judge Benitez on January 5, 2014, at 9:00 am.

The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.

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DEFENDANT PLEADING GUILTY Case Number: 14CR2277-BEN Robert Moreno    

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DEFENDANTS PREVIOUSLY CHARGED   Amir Hechter Case Number: 14CR2701-BEN Jack Prober Case Number: 14CR2704-BEN Zeev Hechter Case Number: 14CR2702-BEN   CHARGES

Conspiracy to commit bank bribery and tax evasion, 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.

  INVESTIGATING AGENCY

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

SAN DIEGO, CA – An alleged fourth member of an Armenian alien smuggling ring made her first appearance in federal court today before U.S. Magistrate Judge Nita L. Stormes.

Maria Yanakopulus, 57, is charged with participating in an international alien smuggling organization that brought undocumented Armenian nationals illegally into the United States in exchange for thousands of dollars.

A complaint unsealed today alleges that Yanakopulus was a member of an international smuggling enterprise whereby Armenian nationals were smuggled from Armenia to the United States by way of Moscow, Russia and Cancun, Mexico. In exchange, Armenian nationals were made to pay up to $18,000 each to be brought into the United States. Once in Mexico, the smuggling organization would transport the Armenian nationals to Tijuana, Mexico. The alien smuggling ring would then procure valid U.S. legal permanent resident or passport cards from within the United States and attempt to pass the Armenian nationals as imposters to those documents through the San Ysidro, California, Port of Entry.

In this case, on October 30, 2013, Yanakopulus allegedly drove her white Honda Civic with three undocumented Armenian nationals into the United States through the San Ysidro Port of Entry. Yanakopulus presented to a Customs and Border Protection officer valid I-551 cards (“green cards”) bearing the names and photographs of other individuals for the three Armenian nationals. The three Armenian nationals were then admitted into the United States as imposters to the green cards.

Yanakopulus is the fourth member of this alien smuggling organization arrested by federal agents. On November 1, 2013, Varduhi Avagyan, 42, and Meri Avetisyan, 40, both of Glendale, California were arrested for attempting to smuggle two Armenian nationals into the country. On June 12, 2014, Grigor Chatalyan, the alleged ring leader of the smuggling ring, was arrested as he crossed into the United States at the San Ysidro Port of Entry. Chatalyan is charged with coordinating and directing the international alien smuggling organization. Chatalyan, Avagyan, and Avestisyan are charged in case No. 14CR1646-MMA and a motion hearing/trial setting is scheduled for November 3, 2014 in that case.

Yanakopulus is charged with conspiracy and three counts of bringing in illegal aliens for financial gain. In addition, Yanakopulus is charged with aiding and abetting aggravated identity theft. She faces a maximum penalty of up to 15 years imprisonment and a $250,000 fine. If convicted on all charges, Yanakopulus could be sentenced to a mandatory minimum of five years in custody as well as an additional two year consecutive sentence for aggravated identity theft.

Judge Stormes held a bond hearing today and ordered conditions of release for Yanakopulus, which include the posting of a $30,000 cash or corporate surety bond. A preliminary hearing is scheduled for September 18, 2014, before Judge Stormes.

DEFENDANT   Case Number: 14MJ3067 Maria Yanakopulus Age: 57 Glendale, California   CHARGES

Conspiracy, 18 U.S.C. § 371

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

Aiding and Abetting Aggravated Identity Theft, 18 U.S.C. § 1028A and 18 U.S.C. § 2

  INVESTIGATING AGENCY

Homeland Security Investigations

*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.     

Jeffrey Bednarek, a former employee at the California Department of Motor Vehicles office in El Cajon, California, was sentenced today by U.S. District Court Judge Cathy A. Bencivengo to three years in prison for his leadership role in a conspiracy to commit bribery, identification document fraud and witness tampering. In addition to the prison sentence imposed, the court also ordered Bednarek to pay a fine of $25,000.

In handing down the sentence, Judge Bencivengo told the defendant that as a DMV employee and a former corrections officer, he should have known better. “You were in fact violating the public trust…You had to know it was wrong.”

In comments at today’s hearing, Assistant U.S. Attorney Joseph Orabona argued for a significant sentence and gave examples of Bednarek’s cavalier attitude about his crimes. “Bednarek’s greed overrode his integrity. His attempt to alter the testimony of a witness just prior to trial showed his determination to mask the truth about his criminal activities.”

Orabona told the judge that Bednarek processed a fraudulent license for an undercover agent, and after it was complete, he handed the agent the temporary license, made the sign of the cross, and said, “Be good. Be gone. And sin no more.”

The prosecutor also read text messages from Bednarek to co-conspirator Jim Bean, referring to the substantial amount of cash he was collecting through the bribery scheme. “Come drop the package chubby. Cha-ching.”

Bednarek pleaded guilty on January 28, 2014. According to court documents, Bednarek was a Licensing Registration Examiner at the El Cajon DMV who was responsible for conducting driving tests for driver’s license applicants. Beginning in at least April 2009, and continuing up to at least April 26, 2012, Bednarek conspired with his co-defendants to commit federal program bribery and identification document fraud. In his plea agreement, Bednarek admitted that he falsely entered “passing” scores for both written and behind-the-wheel tests for applicants who applied for regular (Class C) and commercial (Class A) driver’s licenses in exchange for bribes. Bednarek also acknowledged that he directed others to enter false “passing” test scores and that he created false driving test score sheets to create the appearance that the applicant had completed the test. Bednarek said in his plea agreement that during the conspiracy, he produced more than 100 fraudulent driver’s permits and licenses, and that applicants paid more than $50,000 in total bribes for permits and licenses that he fraudulently produced.

While awaiting an upcoming trial that was scheduled for December 2, 2013, Bednarek tampered with one of the Government’s witnesses, the plea agreement said. According to court documents, Bednarek was arrested on November 13, 2013 pursuant to a complaint for witness tampering. On November 22, 2013, Judge Bencivengo ordered that Bednarek be detained pending trial. Bednarek admitted in his plea agreement that between January 26, 2013 and November 4, 2013, he knowingly attempted to corruptly persuade a Government witness to alter his testimony, namely, to provide false testimony regarding cash bribes that Bednarek had received for his aggravating role in the conspiracy. Bednarek admitted that he intended to prevent and influence the Government witness’s testimony in the trial that was scheduled for December 2, 2013.

U.S. Attorney Laura Duffy said, “Public corruption is one of our highest priorities. Today’s sentence demonstrates that those who violate the public’s trust will be held accountable for their crimes. We thank our partners at the FBI and DMV for their commitment to this important investigation.”

“Our department takes any type of crime among our employees very seriously,” said DMV Director Jean Shiomoto. “Our own DMV Investigations Unit and other law enforcement agencies are always on the lookout for this type of illegal activity in any of our field offices.”

Of the 31 defendants charged in this widespread corruption scheme (related Criminal Case Nos. 12CR1852-CAB, 13CR0121-CAB, and 13CR0592-CAB), 30 of the 31 defendants, including Bednarek, have pleaded guilty to felony conduct, namely, conspiracy to commit bribery and identification document fraud. One defendant is a fugitive. All of the former DMV employees convicted in this case were sentenced to prison, and most of the recruiters and driver’s license applicants received probationary sentences. In total, the Court imposed approximately $119,000 in fines. The following table provides a summary of the crimes and sentences for almost all of the defendants in the widespread corruption scheme:

DEFENDANT CASE NO. CHARGE(S) SENTENCE Jim Lynn Bean 12CR1852-CAB Conspiracy
Bribery 597 days in prison,
3 years supervised release,
Fine of $25,000 Jeffrey Thomas Bednarek 12CR1852-CAB Conspiracy
Bribery
Identification
Document Fraud
Witness Tampering 36 months in prison,
3 years supervised release,
Fine of $25,000 Scott David Friedli 12CR1852-CAB Conspiracy 4 months in prison,
2 years supervised release,
Fine of $1,500 Marco Beltran 12CR1852-CAB Conspiracy 6 months in prison,
2 years supervised release,
Fine of $4,000 Gabriella Villanueva 12CR1852-CAB Conspiracy 5 years probation,
Fine of $200 Bashar Assad Azaria 12CR1852-CAB Conspiracy 5 years probation,
Fine of $2,000 Reenan Esa Kuza 12CR1852-CAB Conspiracy 2 years probation,
Fine of $3,000 Usman Aliyev 12CR1852-CAB Conspiracy 5 years probation,
Fine of $2,100 Abdulmajed Alhokair 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Ahmad Alarbeed 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Mohammed Alsuwaidi 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Khalid Abdulaziz Al-Sowaidi 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Talal Bass Almousharji 12CR1852-CAB Conspiracy 5 years probation,
Fine of $900 Virginia Pena 12CR1852-CAB Conspiracy 51 days in prison,
2 years supervised release,
Fine of $600 Gizem Yontar 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Douri Zafer 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Asiel Bahjat Tomika 12CR1852-CAB Conspiracy 5 years probation,
Fine of $4,600 Angel Salvador Astimibay 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Bekzad Mirhanov 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Jesus Leon 13CR0121-CAB Conspiracy 5 years probation,
Fine of $200 Jesse Mario Bryan 13CR0592-CAB Conspiracy
Bribery 6 months in prison,
3 years supervised release,
Fine of $25,000 Alexander Gonzalez 13CR0592-CAB Conspiracy 12 days in prison,
32 months supervised release,
Fine of $8,000 Frank Tom Attiq 13CR0592-CAB Conspiracy 5 years probation,
Fine of $200 Ali Al Nadawi 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,500 Saleh Almuzini 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000 Matthew Allan Elliott 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000 Mohamed Alali 13CR0592-CAB Conspiracy 5 years probation,
Fine of $800 James Lester Shaw 13CR0592-CAB Conspiracy 10 days in prison,
2 years supervised release,
Fine of $4,000 Hassan Hamad Althani 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000

These cases are the result of an active, ongoing criminal investigation. 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 626-851-0173.

DEFENDANT   Case Number: 12CR1852-CAB Jeffrey T. Bednarek Age: 54         SUMMARY OF CHARGES

Count 1 Title 18, United States Code, Section 371 -- Conspiracy to Commit Bribery and to Produce Unauthorized Identification Documents -- statutory maximum sentence of 5 years’ custody, a maximum fine of $250,000, special assessment of $100, and a maximum term of supervised release of 3 years. 

Count 2 Title 18, United States Code, Section 666(a)(1)(B) -- Bribery -- statutory maximum sentence of 10 years’ custody, special assessment of $100, and a maximum term of supervised release of 3 years.

Count 7: Title 18, United States Code, Section 1512(b)(1) -- Witness Tampering -- 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
Department of Motor Vehicles B Investigations Division

SAN DIEGO – Two suspected alien smugglers, Fernando Armenta-Romero and Carlos Hernandez-Palma, were arrested over the Labor Day weekend for allegedly leaving a woman to die in the Otay Mountains over the 2013 Christmas holidays. Yesterday, charges of bringing in an illegal alien resulting in death were filed against the alleged smugglers, who were arraigned today before U.S. Magistrate Judge Karen S. Crawford.

According to the amended complaint, on or about December 29, 2013, at approximately 7:10 PM, the Border Patrol Search Trauma and Rescue (“Border Patrol”) unit responded to a report of a 32-year-old undocumented alien female abandoned in the Otay Mountain Wilderness. The Otay Mountain Wilderness is located 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 Baltazar Razo-Barreto (“Razo”). Mr. Razo identified himself as the husband of the 32-year-old woman, who he identified as Jaqueline Capistran-Ochoa (“Capistran”). 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, Mr. Razo eventually led Border Patrol agents to an area where they discovered the body of a woman, who Mr. Razo identified at the scene as his wife, Ms. Capistran. When Ms. Capistran was found, she had no pulse and displayed signs of rigor mortis. According to the medical examiner, Ms. Capistran’s death was attributed to hyperglycemia and ketoacidosis due to diabetes mellitus and hypothermia from environmental exposure. As alleged in the complaint, the medical examiner reported that Ms. Capistran was pregnant and estimated the gestational age of the fetus at approximately 11 to 12 weeks.

According to court documents, Mr. Razo and his wife, Ms. Capistran, made arrangements with smugglers in Mexico to be brought illegally into the United States in December 2013. The smugglers identified themselves to Mr. Razo as “CARLOS” and “ARMENTA,” according to the complaint.

The following information is alleged in the complaint: The smugglers told Mr. Razo that they would smuggle him and Ms. Capistran into the United States for $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. They 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 enough 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 about whether she could make the smuggling trek. Despite their misgivings, they decided to take the chance given the promised payment. On or about December 26, 2013, CARLOS and ARMENTA smuggled Mr. Razo and Ms. Capistran into the United States by climbing over the U.S./Mexico boundary fence in Tijuana, Mexico.

Despite the smugglers’ description of the terrain as mostly flat, the hike was actually 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. However, 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 with CARLOS and ARMENTA, and hiked into the wilderness on his own. With the help of a Good Samaritan, Mr. Razo eventually contacted Border Patrol for assistance. Unfortunately, by the time Border Patrol agents and Mr. Razo found Ms. Capistran in the Otay Mountains, it was too late. Ms. Capistran had died and was left along a trail in the mountains. CARLOS and ARMENTA were gone. They had hiked out of the mountains two days before and called ARMENTA’s brother to pick them up.

CARLOS and ARMENTA made their initial appearance today before Judge Crawford for arraignment. The Government moved to detain both alleged smugglers based on risk of flight and danger to the community. A detention hearing is scheduled for September 9, 2014, at 9:30 a.m., before Judge Crawford.

DEFENDANT   Case Number: 14MJ2956-KSC Fernando Armenta-Romero Age: 43   Carlos Hernandez-Palma Age: 35     CHARGES

Count 1:  Title 18, United States Code, Section 1324 – Bringing in Illegal Aliens Resulting in Death – statutory maximum of 10 years in prison, a maximum fine of $250,000, a 3-year term of supervised release, and $100 special assessment. 
All defendants

  INVESTIGATING AGENCY

U.S. Border Patrol - Chula Vista Intelligence Division

*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 – Raul Antonio Gonzalez Lopez was sentenced to seven months in custody by United States District Court Judge Michael M. Anello, for illegally disposing of trash containing a potentially fatal brew of acids and potassium cyanide.

In pleading guilty, Gonzalez Lopez admitted that on March 12, 2011, he picked up trash at We Lend More, a business located in National City, California. As he was aware, this trash included containers of acid and potassium cyanide. The following day, Gonzalez Lopez dumped the chemicals (which included federally regulated hazardous wastes such as nitric acid and potassium cyanide) in the Miramar Landfill. Due to the dangerous nature of these chemicals, they are prohibited from being disposed at the Miramar Landfill.

According to Joe Lowry, Chief Scientist for the U.S. Environmental Protection Agency, when potassium cyanide and acids are combined they produce a deadly hydrogen cyanide gas. One breath of pure hydrogen cyanide gas would be enough to kill a person, and 50 ppm of hydrogen cyanide is the level that has been determined to be immediately dangerous to life or health. Lowry viewed the evidence from the case and prepared a dispersion model showing the threat area where the concentration of hydrogen cyanide is greater than or equal to 50 ppm, assuming a wind of 3 mph. This zone extends approximately 71 yards from the initial point of combination, and anyone within 30 yards when the chemicals combined would have been killed instantly.

Emphasizing the government’s commitment to enforcing environmental statutes, U.S. Attorney Laura Duffy stated that “we will continue to work with our federal law enforcement partners to take firm and decisive action when slipshod, cavalier practices pose a threat to human health.”

“Hazardous wastes pose a great risk to human health and the environment when intentionally mismanaged,” said Jay M. Green, Special Agent-in-Charge of EPA’s criminal enforcement program in California. “The defendant’s illegal disposal of dangerous acids and cyanides could have easily resulted in a serious injury or death had it not been for the vigilance of the Miramar Landfill operators. Today’s sentence demonstrates the government’s commitment to hold accountable those individuals who would attempt to profit by illegally dumping hazardous wastes.” San Diego FBI Acting Special Agent-In-Charge W Robert Howe added that this case “demonstrates the dedication of the FBI to the apprehension of those persons who jeopardize the health and lives of innocents through the deliberate mishandling and improper disposal of deadly chemicals.”

In February of 2011, We Lend More and its owner, Marc Vogel, were convicted by a jury of aiding and abetting the illegal transportation and disposal of hazardous waste. The trial evidence indicated that the acid (in a breakable glass bottle) and cyanide (in aged plastic containers) were disposed of together in the same cardboard box, which was dumped at the landfill. Because the landfill operators use heavy equipment on a regular basis to compact the face of the landfill, such activity would be expected to cause the containers to break and the chemicals (in the same box) to combine, causing instant death to the landfill operator and anyone else within 30 yards (such as other landfill personnel or customers).

Gonzalez Lopez was arrested on January 14, 2014, in Mexico and extradited to the United States to face these charges.

DEFENDANT   Case Number: 11cr3327-MMA Raul Antonio Gonzalez Lopez Age: 55 Tijuana, Mexico   CHARGES

Unlawful Disposal of Hazardous Waste– Title 42, U.S.C., Section 6928(d)
Maximum penalty:     5 years’ imprisonment and $250,000 fine

  INVESTIGATING AGENCY

Environmental Protection Agency, Federal Bureau of 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, CA - Holli Dawn Coulman, who served as an executive to a Hewlett Packard (“HP”) Senior Vice President from 2008 to May 2012, admitted defrauding the company of nearly $1 million through a series of fraudulent employee reimbursements. According to documents filed in federal court, Coulman fraudulently justified the payments of international trips, country club expenses, and high-end clothing purchases by falsely claiming them as legitimate business expenses.

Coulman began working at HP in San Diego in approximately June 2000, and served as an executive assistant. In this position, she received a number of American Express corporate credit cards, which were to be used solely for authorized and approved business expenses. Coulman, however, used the credit cards to support an extravagant and luxurious lifestyle, including spending: (1) in excess of $100,000 at the La Costa Resort Spa; (2) more than $43,000 at the Lodge at Pebble Beach and Casa Palmero at Pebble Beach; (3) thousands of dollars in airfare for trips to Hawaii and Europe; (4) thousands of dollars purchasing items at the Apple Store; (5) more than $33,000 in BTO Sports motocross gear; and (6) thousands of dollars in charges to Neiman Marcus and Nordstroms. In addition, Coulman admitted using the company credit cards to pay for more than $350,000 in expenses accrued by her brother’s custom painting business in Colorado.

As revealed in court pleadings, Coulman went to great lengths to cover up her theft of company funds. Among other things, she intercepted emails sent from HP program administrators that questioned her various personal expenditures. After intercepting the incriminating emails, Coulman would often delete them before they could be reviewed by her boss, a senior vice president. Occasionally, she would fabricate responses indicating that the expenses had been authorized by her boss, even going so far as to submit fabricated supporting documentation, receipts, and invoices. In total, Coulman stole approximately $954,292.31 from HP through her scheme.

United States Attorney Duffy added, “This type of brazen corporate theft directly harms the shareholders of the company and the public at large due to increases in the cost of goods sold by companies. I commend the FBI for its work in uncovering this theft.”

Coulman entered her guilty plea before U.S. Magistrate Judge Jill L. Burkhardt, and is scheduled for sentencing on before U.S. District Judge Marilyn Huff on December 1, 2014.

DEFENDANT   Case Number: 14CR2424-H Holli Dawn Coulman Age: 43     CHARGES

Title 18, United States Code, Section 1343 (Wire Fraud)  
Maximum penalty: 20 years of custody; $250,000 Fine (or twice the gross loss from the offense)

 

INVESTIGATING AGENCY

Federal Bureau of 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, CA - United States Attorney Laura E. Duffy announced that William Ison pled guilty earlier today to defrauding investors, including San Diego residents, of nearly $7 million. According to documents filed in federal court, Ison obtained these funds between March 2008 and September 2012 by falsely claiming that the funds would be secured by his own mining company which was supposedly worth billions of dollars.

In his guilty plea, Ison admitted helping Douglas Ellingson (who previously pled guilty and is awaiting sentencing) solicit investors for “private placement programs” through Ellingson’s business entity, Destiny’s Partners Ventures. Among other things, Ison gave presentations to potential investors at seminars throughout the United States, in which he made fraudulent representations to induce individuals to invest with Ellingson. These false representations included the claim that investors’ funds would not be subject to risk as they were backed by Ison’s multi-billion dollar mining company.

In order to mislead investors, Ison claimed that his role as President of Blue Diamond Excavation, Inc. (“BDE”), a mining excavation company based in Newport Beach, allowed him to safely secure loans as its assets were worth $86 billion. In fact, BDE had yet to begin mining operations or produce any income from mining. Ison embellished his story by falsely telling investors that he had already used BDE’s assets to secure medium-term notes (“MTNs”) valued at $2-2.5 billion. Ison went so far as to claim that individuals had already committed to purchase one MTN worth $250 million as a “guaranteed exit sale” in the event capital was required to replace investor funds. In fact, Ison had not obtained any MTNs and no buyers had been secured.

Ison also misled potential investors by claiming that he had already been involved with incredibly successful investment programs in which he had personally made more than $100 million. He also lied to investors by telling them that he managed a consortium of large non-profit foundations that donated more than a trillion dollars annually to various humanitarian causes. During his plea, Ison admitted that he had not received such profits, did not personally manage active non-profit foundations, and that the claimed donations were fictitious.

Ellingson and Ison initially wire-transferred investor funds for placement in the Winsome Investment Trust, through James Pantazelos and Robert Andres. Both Pantazelos and Andres have already pled guilty for their roles in the fraud scheme. Pantazelos was sentenced in Chicago to 114 months in custody on February 15, 2013, and ordered to pay over $3.3 million in restitution (United States v. Pantazelos, No. 11CR50078 (N.D. Ill. 2011)). Andres is presently scheduled to be sentenced in Utah on September 1, 2014 (United States v. Andres, No. 11CR0985-RJS (D. Utah 2011).

Ison entered his guilty plea before U.S. District Court Judge Dana M. Sabraw, and he is scheduled for sentencing on January 30, 2015. Ellingson is presently scheduled to be sentenced by Judge Sabraw on October 24, 2014.

DEFENDANT   Case Number: 12CR4030-DMS William Ison Age: 54     CHARGES

Title 18, United States Code, Sections 371, 1343 (Wire Fraud Conspiracy)      
Maximum penalty: 5 years of custody; $250,000 Fine (or twice the gross loss of the offense)

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Internal Revenue Service

*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 today that Robert William Herman pled guilty to one count of insider trading. At the time of his illegal trade, Herman was a director in the North America Sales Department of Qualcomm, Inc. (QCOM).

According to Herman’s plea agreement, Herman and a co-defendant were part of an informal stock trading group, and occasionally shared tips and opinions about the stock market. By November 2010, Qualcomm was conducting a review of Atheros Communications, Inc., a technology company, to determine whether to acquire it.

Also according to Herman’s plea agreement, Herman and the co-defendant repeatedly heard from their immediate supervisor that Qualcomm was contemplating a major acquisition—emphasizing that the information was secret. As part of Herman’s plea, he admitted that, on January 4, 2013, he and his co-defendant learned that the acquisition target was Atheros, and they spoke to each other about it by telephone.

Shortly after the telephone call ended, Herman purchased 4,000 shares of Atheros at approximately $37.17 per share for a total price of more than $148,680. Later that day, after news of the acquisition became public, shares of Atheros increased in value. Herman then sold them all for a profit of $29,318.

FBI Special Agent in Charge, Daphne Hearn, said, “Today’s conviction sends a message, that insider trading results in only temporary gains that can lead to long-term losses, to include fines and prison time. The FBI will continue to aggressively pursue those cheaters who don't play by the same rules so the American public will have confidence in our economic system.”

United States Attorney Duffy commented: “Insider trading is a serious offense. This office will continue to work closely with the FBI and other law enforcement partners to protect our nation’s financial markets.”

Herman’s sentencing is currently set for November 21, 2014 at 9:00 a.m. before the Honorable Janis L. Sammartino.

DEFENDANT     Robert William Herman Age: 52 City: San Diego, CA   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.

  INVESTIGATING AGENCY

Federal Bureau of 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.     

Svein Erik Ulsteen, a former executive and shareholder of Anturion Limited, a company formed in the Channel Islands, was sentenced today to 46 months in custody for bilking investors of more than $2 million by selling them counterfeit and forged Anturion securities. Ulsteen used the investor funds to pay for his personal entertainment and living expenses—such as yacht and BMW payments—rather than to operate Anturion. Ulsteen was also sentenced in a separate case with corruptly preventing the Internal Revenue Service from determining his true tax liability, and attempting to cheat the IRS out of almost $400,000 in lawfully owed taxes. Ulsteen has been in custody since December 16, 2013, when he attempted to board a plane leaving for his home country of Norway. United States District Judge M. James Lorenz rejected Ulsteen’s request to be released from custody today, commenting that Ulsteen’s sole motivation to commit his crimes was to benefit himself, and “there are too many victims out there that have lost everything because of your greed. Now it’s time to make the defrauded public whole.” District Judge Lorenz also rejected Ulsteen’s attempt to characterize himself as a credible businessman, and instead commented, “You’re just a con man.”

According to court records and admissions by Ulsteen, between October 2011 and June 2013 Ulsteen solicited investors by pretending to either: (1) sell them shares of Anturion stock; or (2) borrow money on behalf of Anturion, which would be paid back with interest. In fact, however, Ulsteen was neither authorized to sell company stock nor borrow money on its behalf. To support his deceptive solicitations, Ulsteen created fake “subscription agreements” and phony “loan” documents that purported to be authentic securities of Anturion. Using these counterfeit securities, Ulsteen convinced investors throughout the United States to send more than $2 million to Ulsteen’s nominee accounts.

Personal Luxury Expenditures
Ulsteen admitted that instead of transferring these investments and loans to Anturion, he took the money for himself. For example, from a $300,000 loan one victim thought was going to Anturion, Ulsteen spent over $8,500 on his 82-foot yacht moored in Florida, over $42,000 paying personal credit card expenses, $5,000 in payments to his then-spouse, more than $4,600 in BMW car payments, over $66,650 in insurance premiums, as well as numerous other personal expenditures such as cell phone service, health care premiums and on-line dating services.

Investors Received Nothing, or Worthless Shares
Multiple investors who thought they were purchasing stock in Anturion received nothing. Other investors eventually received shares, but by that time the price of Anturion stock had dramatically declined. This stock came from Ulsteen’s own personal holdings (and not directly from the company as Ulsteen had promised) and could not be sold through any investment firm in the United States. Indeed, trading in Anturion is presently suspended on London’s ISDX Growth Market, so there is no way to reliably value any of the shares Ulsteen eventually provided to his victims. And those individual victims who thought they were loaning money to Anturion were never repaid as promised.

Tax Evasion
In addition to selling forged securities, Ulsteen admitted to corruptly obstructing the IRS’s attempts to assess his true tax liability. Between 2010 and 2012, Ulsteen earned over $1 million from various activities, including the sale of his Anturion stock. Although the IRS notified Ulsteen that he needed to file federal income tax returns as he owed taxes, penalties and interest, Ulsteen refused to file for any of these years, and took several steps to prevent the IRS from learning how much income he had earned. These steps included depositing investor funds into the nominee accounts he controlled and paying his personal expenses out of these company accounts.

Ulsteen was ordered to return to court on December 11, 2014, for a hearing to determine how much restitution he owes to his victims.

Today’s sentencing was announced by United States Attorney for the Southern District of California Laura E. Duffy, who commended and thanked her colleague Benjamin B. Wagner, the United States Attorney for the Eastern District of California, for his Office’s excellent work on the case before Ulsteen’s arrest in San Diego late last year. That arrest and the prompt conviction of these fraud and tax charges was the result of coordinated investigations by the San Francisco and San Diego Divisions of the Federal Bureau of Investigation, and the San Diego Division of the Internal Revenue Service, Criminal Investigation.

DEFENDANT   Case Numbers: 14CR0923-L (S.D. Cal.),
14CR0924-L (S.D. Cal.), and
3:14-CR-0067-WHA (N.D. Cal.) Svein Erik Ulsteen Age: 50 San Diego, CA   CHARGES

Counterfeit and Forged Securities, in violation of 18 U.S.C. § 513.
Maximum Penalties: 10 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

Obstruction of Internal Revenue Laws, in violation of 26 U.S.C. § 7212(a).
Maximum Penalties: 3 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.

  INVESTIGATING AGENCY

Federal Bureau of Investigation – San Francisco Division and San Diego Division
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 – Former superintendent of the San Ysidro School District Manuel Paul pled guilty today in federal court to deprivation of benefits for political contributions. Paul worked in the San Ysidro School District (“SYSD”) for 38 years as a teacher, principal, and superintendent, a post he held from 2007 until his resignation in 2013.

According to court documents, Paul had several duties as superintendent, including recommending contractors for consideration and approval by the SYSD Governing Board for SYSD construction projects.

Paul admitted in his plea agreement to requesting that a contractor (“Contractor A”) make $3,600 in campaign contributions to three political candidates for the 2010 Board election, identified in the plea agreement as Candidates A, B, and C. Paul admitted that he made clear that Contractor A’s inclusion on the list of potential contractors for future District building projects was contingent on Contractor A making the payment. According to the plea agreement, shortly thereafter – and only two months before the 2010 Board election – Paul accepted $2,500 in cash from Contractor A in the parking lot of a Chula Vista restaurant. Paul admitted that he then contributed a portion of the $2,500 to the political campaigns of Candidates A, B, and C by purchasing campaign signs from a print shop in Tijuana. According to court documents, Candidates A, B, and C won the three open seats.

Charging documents allege that almost two years later, in July 2012, Paul provided Candidates A, B, and C a receipt for the purchase of $1,401 in campaign signs for the 2010 election. The receipt lists a third party as the purchaser of the signs.

Simultaneous with his guilty plea, Paul also entered into a stipulation with California’s Fair Political Practices Commission, in which he admitted to receiving a gift in excess of the annual gift limit by accepting the $2,500 from Contractor A. As part of his settlement with the FPPC, Paul agreed to pay a $5,000 fine. The stipulation will be considered by the FPPC at its October hearing.

United States Attorney Laura E. Duffy stressed that her office will continue to pursue vigorously any criminal activity that seeks to introduce illegal money into campaigns. “Today’s guilty plea is a stark reminder that illegal money in our elections – regardless of the amount – is a threat to our democratic form of government and will be treated as such by our office. All citizens of our district have the right to elections free from dollars obtained through coercion.”

FBI Special Agent in Charge, Daphne Hearn, commented, "We demand the best from our public servants and expect them to deal honestly and fairly when conducting the public's business. Mr. Paul did not do that, and will now be held accountable for his actions." The FBI encourages the public to report allegations of public corruption to the FBI public corruption hotline at telephone number (877) NO - BRIBE (662-7423).

United States Magistrate Judge William V. Gallo ordered Paul to appear on November 18, 2014, for sentencing.

DEFENDANT   Case Number: 14CR2351-H Manuel Paul Age: 63 Bonita, CA   CHARGES

Deprivation of Benefit for Political Contribution – Title 18, U.S.C., Section 601
Maximum penalty:      1 year imprisonment and $100,000 fine

  INVESTIGATING AGENCY

Federal Bureau of 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 – A federal grand jury issued a new indictment this morning against Mexican businessman Jose Susumo Azano Matsura and alleged co-conspirators Ravneet Singh, his Washington, D.C.-based campaign-services company ElectionMall Inc. and San Diego lobbyist Marco Polo Cortes, detailing 26 counts of various campaign-finance, falsification of records, bribery, and gun charges.

Besides adding numerous charges, the superseding indictment also brings the defendants into a single case and alleges they were part of a broader conspiracy to illegally and surreptitiously funnel Azano’s money into various political campaigns and committees, including those of three San Diego mayoral candidates and a political party committee supporting federal candidates. The indictment details approximately $600,000 in such illegal donations. According to federal law, it is illegal for a foreign national to donate to political campaigns in the U.S.

The most-recent indictment lists 20 instances in which various defendants allegedly falsified campaign finance records with the San Diego City Clerk, the Federal Election Commission, or the California Secretary of State. Specifically, the indictment lists multiple occasions in which the defendants failed to identify Azano as the true source of campaign donations or concealed the donation altogether.

The new indictment also charges Singh, a social media consultant, and his corporation, ElectionMall Inc., with a single count of bribery. According to the indictment, Singh offered $1,000 to a federal official in exchange for confidential and classified information between December of 2013 and January of 2014. The superseding indictment also charges that Azano was an alien in possession of a firearm, namely, a black Sig Sauer P225 semi-automatic pistol. Federal law prohibits possession of firearms, ammunition or explosives by an alien who is unlawfully in the United States or who has been admitted to the United States under a nonimmigrant visa.

Among other things, the new indictment alleges that members of the conspiracy would survey candidates for various elective offices to determine which ones to support. Azano would seek a private meeting with a candidate and conspirators would then design secret methods of financing that candidate’s campaign. They would use various methods to inject the cash into campaigns – including straw donors and un-reported in-kind donations. Azano would also use companies and an independent expenditure committee of his own creation to support favored candidates, the indictment alleges.

Singh, his corporation, Cortes and retired San Diego Police Detective Ernesto Encinas were first charged in January of 2014 via complaint. Azano, Singh, ElectionMall and Cortes were first indicted in February of 2014.

Ernesto Encinas, a former San Diego police detective and owner of a private security firm, pleaded guilty in March to conspiracy to commit crimes against the United States and filing a false tax return.

Marc Allen Chase, a co-owner of a La Jolla luxury car dealership, pleaded guilty in March to eight misdemeanor counts of campaign finance crimes, including conspiracy, aiding and abetting contributions by a foreign national and making a “straw” contribution in connection with a federal campaign.

DEFENDANT   Case Number: 14CR388-MMA Jose Susumo Azano Matsura Age: 48 Coronado, CA Ravneet Singh Age: 41 Washington, D.C. ElectionMall Inc.   Washington, D.C. Marco Polo Cortes Age: 44 San Diego, CA   CHARGES

Count 1: Conspiracy to Commit Offenses Against the United States – Title 18, U.S.C., Sec. 371.
Maximum Penalties: Up to five years in prison and $250,000 fine
*All Defendants

Count 2: Conspiracy to Commit Offenses Against the United States – Title 18, U.S.C., Sec. 371.
Maximum Penalties: Up to five years in prison and $250,000 fine
*Azano and Cortes only

Count 3: Donation and Contribution by a Foreign National Aggregating $25,000 or more – Title 2, U.S.C., Secs. 437g (d) (1) (A) (i) and 441e (A) (1).
Maximum Penalties: Up to five years in prison and $250,000 fine
*All Defendants

Count 4: Contribution in the Name of Another Aggregating $25,000 or more – Title 2, U.S.C., Secs. 437g(d) (1) (A) (i) and 441f.
Maximum Penalties: Up to five years in prison and $250,000 fine
*Azano and Cortes only

Counts 5-24: Falsification of Records – Title 18, U.S.C., Sec. 1519.
Maximum Penalties: Up to 20 years in prison per count and $250,000 fine per count.
*All defendants charged with one or more counts

Count 25: Bribery – Title 18, U.S.C., Sec. 201(b).
Maximum Penalties: Up to 15 years in prison and $250,000 fine
*Singh and ElectionMall Inc. only

Count 26: Alien in Possession of a Firearm - Title 18, U.S.C., Sec. 922 (g) (5) (B).
Maximum Penalties: Up to 10 years in prison and $250,000 fine
*Azano only

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Internal Revenue Service
San Diego Police Department

*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 – Raul Antonio Gonzalez Lopez pleaded guilty today to the Illegal Disposal of Hazardous Waste before United States Magistrate Judge Mitchell D. Dembin. In pleading guilty, Gonzalez Lopez admitted that on March 12, 2011, he drove to We Lend More, a business located in National City, California, to pick up trash. As he was aware, the trash included containers of acid and potassium cyanide. Gonzalez Lopez further admitted that on March 13, 2011, he dumped the trash from We Lend More at the Miramar Landfill, including containers of nitric acid and potassium cyanide (federally regulated hazardous wastes). The Miramar Landfill does not possess a permit that would allow it to accept federally regulated hazardous waste for disposal.

According to court documents, Joe Lowry, Chief Scientist for the U.S. Environmental Protection Agency advised that when combined, potassium cyanide and acids produce a deadly hydrogen cyanide gas. One breath of pure hydrogen cyanide gas would be enough to kill a person, and 50 parts per million (ppm) of hydrogen cyanide is the level that has been determined to be immediately dangerous to life or health. Lowry viewed the evidence from the case and prepared a dispersion model showing the threat area where the concentration of hydrogen cyanide is greater than or equal to 50 ppm, assuming a wind of 3 mph. The zone extends approximately 71 yards from the initial point of combination, and anyone within 30 yards when the chemicals combined could have been killed instantly.

In February of 2011, We Lend More and its owner, Marc Vogel, were convicted of aiding and abetting the illegal transportation and disposal of hazardous waste, following a jury trial. The evidence adduced at trial indicated that the acid (in a breakable glass bottle) and cyanide (in aged plastic containers) were disposed of together in the same cardboard box, which was dumped at the landfill. Because the landfill operators use heavy equipment on a regular basis to compact the face of the landfill, such activity would be expected to cause the containers to break and the chemicals (in the same box) to combine, posing grave risk to the landfill operator and anyone else within 30 yards (such as other landfill personnel or customers).

Gonzalez Lopez was arrested on January 14, 2014, in Mexico and extradited to the United States to face these charges. On July 16, 2014, Gonzalez Lopez appeared in court in San Diego.

DEFENDANT   Case Number: Raul Antonio Gonzalez Lopez Age: 55 Tijuana, Mexico   CHARGES

Unlawful Disposal of Hazardous Waste– Title 42, U.S.C., Section 6928(d)
Maximum penalty: Five years in prison and $250,000 fine

  INVESTIGATING AGENCY

Environmental Protection Agency
Federal Bureau of 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.     

Today United States Attorney Laura E. Duffy announced the sentencing of Song Shen Zhen, for smuggling 241 swim bladders from endangered Totoaba fish from Mexico into the United States. The Honorable Marilyn L. Huff handed down a one year sentence to Zhen and ordered him to pay restitution in the amount of $120,500 to the “Procuraduria Federal de Proteccion al Ambiente,” Mexico’s environmental protection agency.

According to information presented during the sentencing, on April 10, 2013, at approximately 12:45 a.m., Zhen drove his 2010 Dodge Attitude into the United States at the Calexico West Port of Entry (“POE”). Zhen, the sole occupant of the vehicle, told the Customs and Border Protection Officer that he had nothing to declare.

The officer, however, observed a deformity in both floor mats located in the rear of the vehicle. Upon closer inspection, he discovered what appeared to be dried Totoaba swim bladders, which were contained in two plastic grocery bags hidden under the mats. In total, the inspector found 27 swim bladders weighing a total of approximately 1.85 kilograms (4.07 pounds). One bladder was seized for testing and Zhen was permitted to leave the POE.

Unbeknownst to Zhen, CBP agents followed him to his home in Calexico and conducted surveillance. After Zhen left the house in mid-morning, the agents obtained a search warrant. Inside the house, they discovered that the residence was sparsely furnished, contained few personal effects, and appeared instead to be set-up as a Totoaba drying factory. An additional 214 Totoaba swim bladders were laid out in rows to dry, with fans positioned to blow air over them. There was a significant quantity of packaging materials and other evidence consistent with the shipment of Totoaba swim bladders overseas. Based on the estimated values set forth above, the 241 swim bladders possessed by Zhen (27 smuggled and another 214 in the house) were worth approximately $361,500 in Mexico, $1.265 million upon resale in the U.S, and $3.6 million in the overseas black market.

Background on Totoaba: Totoaba macdonaldi, also known as Cynoscion macdonaldi, is a species of marine fish. It can grow to more than 6½ feet in length, weigh up to 220 pounds, and live up to 25 years. This marine fish is the largest species within the scaienidae family. It is endemic only to the Gulf of California, the narrow inlet between Baja California and the Mexico’s mainland (also called the Sea of Cortez). During the Totoaba’s spawning season, which runs from approximately March to May each year, Totoaba fish travel to the shallower waters at the mouth of the Colorado River, making them vulnerable to commercial and sport fishermen.

Totoaba fish have internal air bladders that help them control their buoyancy in water. These air bladders, also called swim bladders, are highly prized in Asia for a variety of uses: as an ingredient in a specialty soup, for perceived therapeutic and medicinal purposes, and to improve the complexion. Swim bladders from the endangered Totoaba fish can be identified by distinctive tubes that are attached to the bladders.

Totoaba fish are protected as an endangered species under the Endangered Species Act (16 U.S.C. § 1531, et seq.) (“ESA”), the Lacey Act (16 U.S.C. § 3731, et seq.), and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). These laws generally prohibit the taking, possessing, transporting, importing, sale, and trade of Totoaba fish.

Based on information law enforcement officers have developed from conversations with researchers in Mexico and Totoaba fish smugglers, the value of Totoaba swim bladders in Mexico is approximately $1,500-$1,800 each. Once imported into the United States, the value increases to $5,000 each. They can be resold for $10,000 to $20,000 apiece in the overseas market.

As it is not legal to fish for Totoaba in Mexico, a poacher cannot risk being caught in possession of the easily-identified body of the endangered fish. It is much simpler to transport only the bladder, which is lighter, smaller, and much more valuable. As a result, PROFEPA (the Mexican federal agency tasked with the protection of endangered species) reports encountering Totoaba taken from the Colorado River, carved open so their swim bladders can be removed, and left to die on the shores.

---

DEFENDANT   Case Number: Song Shen Zhen Age: 75 Calexico, California   CHARGES

Smuggling, Title 18, United States Code, Section 545
Maximum penalties: 20 years in prison, $250,000 fine, 3 years of Supervised Release.

  INVESTIGATING AGENCY

Department of Homeland Security – Homeland Security Investigations
U.S. Fish and Wildlife Service

*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, CA – Rosario Rafael Burboa-Alvarez was indicted by a federal grand jury in Tucson yesterday, becoming the seventh man charged in connection with the murder of U.S. Border Patrol Agent Brian Terry.

Agent Terry was fatally shot on Dec. 14, 2010, when he and other Border Patrol agents encountered armed robbers in a rural area north of Nogales, Arizona. Of the defendants charged so far, two have pleaded guilty, three are awaiting trial and two are fugitives.

Burboa-Alvarez was already in custody in Tucson for immigration-related crimes. He is scheduled to be arraigned in federal court in Tucson at 1:45 p.m. today before U.S. Magistrate Judge Bernardo P. Velasco.

Burboa-Alvarez, 30, is described in the indictment as the recruiter who assembled the crew of armed robbers to travel from Mexico to the United States and forcibly take marijuana from smugglers through threats or actual violence.

The crew members were identified in the indictment as Manuel Osorio Arellanes, Jesus Rosario Favela-Astorga, Ivan Soto-Barraza, Heraclio Osorio-Arellanes, Lionel Portillo-Meza and Rito Osorio-Arellanes.

The indictment charges Burboa-Alvarez and others with first degree murder, second degree murder, conspiracy to interfere with commerce by robbery and attempted interference with commerce by robbery. Other crew members are also charged with use and carrying a firearm during a crime of violence and assault on a federal officer. In addition to the murder of Agent Terry, the indictment alleges that the defendants assaulted Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller, who were with Agent Terry during the firefight.

Portillo-Meza was captured in Mexico in September 2012 and extradited to the U.S. on June 17, 2014. Soto-Barraza was captured in Mexico in September 2013 and was extradited to the U.S. on July 31, 2014. Favela-Astorga and Osorio-Arellanes are fugitives.

Another defendant, Manuel Osorio-Arellanes, pleaded guilty to first degree murder and was sentenced to 30 years in prison in February 2014. Another defendant, Rito Osorio-Arellanes, who was in custody at the time of Agent Terry’s murder, pleaded guilty to conspiracy to interfere with commerce by robbery and was sentenced to eight years in prison in January 2013.

This case is being prosecuted in federal court in Tucson by attorneys from the Southern District of California. They are Special Assistant United States Attorneys Todd W. Robinson, David D. Leshner and Fred Sheppard. The U.S. Attorney’s Office for the District of Arizona is recused. This case is being investigated by the FBI. The Justice Department’s Office of International Affairs provided assistance with the extraditions.

The public is reminded that an indictment is a formal charging document and 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 Adam Lynch was sentenced to prison this morning in federal court in San Diego in connection with his conviction on seven counts of bank robbery. Lynch, dubbed the “Ho Hum Bandit” for his reportedly nonchalant manner in robbing banks, committed a string of bank robberies in San Diego beginning in February 2010. United States District Judge Roger T. Benitez sentenced Lynch to 70 months in prison, and ordered him to pay restitution to the victim banks.

As described in his plea agreement, Lynch committed his first bank robbery on February 27, 2010, robbing a US Bank in San Diego. He thereafter went on a spree of robberies in the area, committing his seventh on June 5, 2010. Typically, Lynch would commit the robbery by walking up to the counter, passing a note to the teller, identifying himself as being armed with a gun, and demanding cash. Lynch stole a combined total of $25,094. He did not physically injure any of the bank personnel.

Lynch’s robberies in San Diego were the start, but not the end, of his career. On May 6, 2013, in Denver, Lynch was convicted of four counts of bank robbery, based on robberies he committed in the Denver area in August 2010, December 2010, and March 2011; as well as a robbery he committed in Cheyenne, Wyoming, in November 2010. For those offenses, on April 19, 2013, Lynch was sentenced by a federal judge to 64 months in prison.

In imposing a 70-month sentence this morning, Judge Benitez ordered that 56 months of that sentence run consecutive to the 64-month sentence that Lynch had previously received, and that the remainder of today’s sentence run concurrent to the previous sentence. In other words, today’s sentence increases Defendant’s total custodial sentence to 120 months. Lynch has been in custody since his arrest on April 21, 2011, and he remains in custody.

DEFENDANT   Case Number: Adam Lynch Age: 37 Corte Madera, California   CHARGES

Bank robbery in violation of Title 18, United States Code, Section 2113(a) - Maximum penalties per count: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.

  INVESTIGATING AGENCY

Federal Bureau of 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.     

United States Attorney Laura E. Duffy announced today that a Washington State resident was sentenced by U.S. District Judge Barry Ted Moskowitz to serve six months in custody for smuggling counterfeit Levi Strauss tags, labels and buttons into the United States. Angel Garcia Hernandez admitted that on December 28, 2013, he entered the United States from Mexico with a duffel bag stuffed with counterfeit Levi Strauss buttons, tags and labels, which he intentionally failed to declare. Hernandez possessed enough counterfeit labels to manufacture 3,000 pairs of counterfeit Levis 501 jeans, which were valued at $192,000.

An hour and a half later the same day that Garcia Hernandez entered the United States, defendant Amadeo Calderon Valdivinos also entered the United States from Mexico at the same Port of Entry, with enough counterfeit Levi Strauss buttons, tags and labels to make $127,000 of counterfeit 501 jeans. Valdivinos pled guilty in Criminal Case 13cr4346-JAH, and was sentenced in April to four months in custody by U.S. District Judge John A. Houston.

“Intellectual property crimes, such as the counterfeit trademark offenses in these cases, strike at the heart of America’s modern economy,” said U.S. Attorney Laura Duffy. “Those who seek to steal and misuse intellectual property should know that the Department of Justice and our law enforcement partners will use the full range of enforcement tools available – including, where appropriate, criminal prosecution – to prevent these offenders from profiting at the expense of the reputation of United States companies and individuals.”

DEFENDANT   Case Number: 14cr1034-BTM Angel Garcia Hernandez Age: 55 Bridgeport, Washington   CHARGES

Smuggling, in Violation of Title 18, United States Code, Section 545.
Maximum Penalties: 20 years in custody and/or $250,000 fine, $100 special assessment.

---

DEFENDANT   Case Number: 13cr4346-JAH Amadeo Calderon Valdivinos Age: 55 Rialto, California   CHARGES

Smuggling, in Violation of Title 18, United States Code, Section 545.
Maximum Penalties: 20 years in custody and/or $250,000 fine, $100 special assessment.

  INVESTIGATING AGENCY

U.S. Department of Homeland Security, Office of Immigration and Customs Enforcement

*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 – San Diego realtor Michael E. Lustig pleaded guilty in federal court today to prostitution-related crimes, admitting that he paid for sex with a 13-year-old girl on several occasions.

Lustig, who was indicted by a federal grand jury in October of 2013, entered his plea before U.S. Magistrate Judge Mitchell D. Dembin. Sentencing was set for November 3, 2014, at 9 a.m. before U.S. District Judge Roger T. Benitez.

According to court records, Lustig, 70, was first contacted in June of 2012 by San Diego Sheriff's deputies during an operation targeting customers of prostitution in the Encinitas area. At the time that Lustig was arrested, deputies seized two cellular telephones which led to information that he had been in contact with two minor females.

Interviews with the minors revealed that Lustig had contacted them separately to engage in commercial sex activity. One of the minors was 11 years old at the time that sexual activity began with Lustig, and the other was 13 years of age. According to court records, surveillance video from a motel in El Cajon, California, showed Lustig entering a motel room with one of the minors and emerging 43 minutes later.

According to court records, Lustig had contacted the minors multiple times over a span of multiple months. Interviews with the minors confirmed that Lustig, known to them as “George,” had paid them for sexual activity and that at least one of the minors had identified herself as a minor.

In the plea agreement, Lustig admitted that he used a cellular telephone to contact the 13-year-old minor on multiple occasions between at least October 2011 and June 2012, seeking to engage in commercial sex activity. Lustig admitted that he thereafter engaged in commercial sex activity with the minor, paying the minor in return for sexual activity.

For example, according to the plea agreement, Lustig admitted that on October 15, 2011, he wrote the minor, asking, “Hey, is the bookstore open? I'm in desperate need of books rite now.” Lustig admitted in court that he was using code for commercial sex activity. On November 11, 2011, Lustig wrote the same minor, “U free sometime in the next 2 hours?” and “Any chance for library in 35 min, @ 7:15?”

Lustig again admitted that he used code to recruit the minor for commercial sex activity. On June 8, 2012, Lustig wrote the minor simply “Bookstore?” meaning that he wanted to establish a date for commercial sex activity.

“The United States will vigorously pursue any adult preying on children for sexual activity,” said U.S. Attorney Laura Duffy. “Defendants like Michael Lustig victimize the most vulnerable population in our community – children - and these predators will be brought to justice.”

“A predator is off our streets today and can't victimize the innocents," said Sheriff Bill Gore. “This investigation showcases the success of collaborative federal and local investigations working toward the common good.”

FBI Special Agent in Charge, Daphne Hearn, commented, “The average age of a child targeted for prostitution is between the ages of 12 to 14 for girls and 11 to 13 for boys. As a result, the FBI will remain vigilant and continue our efforts to protect our nation's children from sexual predators by working with our law enforcement partners and removing these individuals from society through the justice system.”

On October 23, 2013, a federal grand jury returned a two-count indictment charging Lustig with two counts of sex trafficking of a minor in violation of 18 U.S.C. § 1591, and criminal forfeiture.

DEFENDANT   Case Number: Michael Lustig Age: 70 San Diego, California   CHARGES

Three counts of Interstate Travel in Aid of Racketeering Enterprises, in violation of 18 USC 1952(a) Maximum Penalty: Five years per count, 15 years total; 3 years supervised release.

  INVESTIGATING AGENCY

San Diego County Sheriff’s Department
Federal Bureau of 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, CA – Ivan Soto-Barraza, who is charged with the first degree murder of United States Border Patrol Agent Brian Terry, was extradited to the United States from Mexico today, announced Attorney General Eric Holder and U.S. Attorney Laura E. Duffy of the Southern District of California.

Agent Terry was fatally shot on Dec. 14, 2010, when he and other Border Patrol agents encountered Soto-Barraza and others in a rural area north of Nogales, Arizona. Of six defendants charged so far, two have pleaded guilty and two are awaiting trial.

“This marks another step forward in our aggressive pursuit of those responsible for the murder of Agent Brian Terry, who made the ultimate sacrifice while serving his country,” said Attorney General Holder. “We will never stop seeking justice against those who do harm to our best and bravest.”

“This extradition is another major development in the pursuit of justice for Agent Terry and his family,” said U.S. Attorney Laura Duffy. “As we continue to make significant progress in this case, we are constantly motivated by the memory of Agent Terry and his sacrifice for our country.”

Soto-Barraza is scheduled to be arraigned in federal district court in Tucson, Arizona, on August 1, 2014. The indictment charges Soto-Barraza and others with first degree murder, second degree murder, conspiracy to interfere with commerce by robbery, attempted interference with commerce by robbery, use and carrying a firearm during a crime of violence and assault on a federal officer. In addition to the murder of Agent Terry, the indictment alleges that the defendants assaulted Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller, who were with Agent Terry during the firefight.

On July 20, 2012, in order to seek the public’s assistance, Department of Justice officials announced a reward of up to $1 million for information leading to the arrest of four fugitives: Jesus Rosario Favela-Astorga, Heraclio Osorio-Arellanes, Lionel Portillo-Meza and Soto-Barraza. Portillo-Meza was captured in Mexico in September 2012 and extradited to the U.S. on June 17, 2014. Soto-Barraza was captured in Mexico in September 2013. Favela-Astorga and Osorio-Arellanes are fugitives.

A fifth defendant, Manuel Osorio-Arellanes, pleaded guilty to first degree murder and was sentenced to 30 years in prison in February 2014. A sixth defendant, Rito Osorio-Arellanes, who was in custody at the time of Agent Terry’s murder, pleaded guilty to conspiracy to interfere with commerce by robbery and was sentenced to eight years in prison in January 2013.

This case is being prosecuted in federal court in Tucson by attorneys from the Southern District of California, Special Attorneys Todd W. Robinson, David D. Leshner, and Fred Sheppard. The U.S. Attorney’s Office for the District of Arizona is recused. This case is being investigated by the FBI. The Justice Department’s Office of International Affairs provided assistance with the extradition.

The public is reminded that an indictment is a formal charging document and defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

###

Dept. of Defense Supervisor Nate Cervantes Accepted
Over $100,000 in Bribes

A Department of Defense supervisor, the self-described “Godfather” of Camp Pendleton, was sentenced today to two years in prison for accepting over $100,000 in bribes from contractors who sought to win or retain government construction and service contracts at Camp Pendleton worth millions of dollars.

Natividad Lara “Nate” Cervantes pleaded guilty in January to bribery and conspiracy to commit bribery of a public official. At today’s hearing, U.S. District Judge Anthony J. Battaglia also ordered Cervantes, who is free on bond, to self-surrender by September 30, 2014, and to forfeit $106,964 in ill-gotten gains.

“Nate Cervantes used his considerable influence and popularity at Camp Pendleton to foster a culture of corruption among contractors at the military base,” said U.S. Attorney Laura Duffy. “This scandal has undermined public confidence in the fairness of the system. Hopefully, today’s sentence will restore some of that confidence. We will investigate and expose corruption wherever it occurs in the U. S. military.”

FBI Special Agent in Charge Daphne Hearn commented, “When a government official like Mr. Cervantes violates his oath to protect and serve the citizens of this nation, it undermines the public's trust. When that happens, the FBI will aggressively pursue people like Mr. Cervantes to root out corruption at all levels of government and restore that trust. This case like many of our investigations was initiated based upon a call from the public to the FBI and shows what can happen when the public joins with law enforcement to fight crime. The FBI encourages the public to report allegations of public corruption to our hotline at (877) NO-BRIBE.”

“Today’s sentencing is a reminder that individuals who scheme to defraud the U.S. Government and violate the public’s trust will be brought to justice,” said Small Business Administration Inspector General Peggy E. Gustafson. “The actions of Natividad Cervantes and his conspirators grossly undermine the honest work being done every day by Federal employees and government contractors. I want to thank the U.S. Attorney's Office for its dedicated leadership and professionalism in pursuit of justice served today.”

Special Agent in Charge Chris Hendrickson of the Defense Criminal Investigative Service (DCIS) Western Field Office commented, “Cases such are this are not motivated by need, or other difficult personal circumstances; they are products of simple greed. We are committed to aggressively pursuing those who abuse the public trust and ultimately undermine the efforts of the Department of Defense to support our warfighters.”

“Failure to play by the rules will land you in prison,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation. “Today’s sentencing supports IRS Criminal Investigation’s commitment to bring to justice to those individuals who seek to illegally enrich themselves through the improper awarding of government contracts.”

Bribery at Camp Pendleton

When he entered his guilty plea in January, Cervantes admitted using his position at Camp Pendleton to solicit bribes from construction companies seeking to do business on the base, including codefendant Hugo Hernandez Alonso’s company, Hugo Alonso, Inc. (HAI), and codefendant Bayani Yabut Abueg, Jr.’s company, MBR Associates, Inc. (MBRA). From about 2008 until March 2013, Cervantes served at Camp Pendleton as the Supervisor of the Construction and Service Contracts Inspection Branch, Facilities Support Contract Division. During that time Cervantes used his position supervising construction and service contracts to solicit Alonso and Abueg for bribes from their companies, HAI or MBRA. In return for helping to steer contracts to HAI and MBRA, Cervantes received cash payments from Alonso and Abueg and extensive free construction work on his personal condominium. Alonso, Abueg, and their respective companies were all sentenced last month.

As an example, Cervantes admitted that in about 2008 he agreed to accept a $25,000 bribe to assist Alonso and HAI in obtaining a $3.5 million government contract to install flooring at Camp Pendleton. In arranging for the bribe payment, Cervantes, through a third-party conduit, requested that Alonso “have the 25 package” (code for the $25,000 bribe) available on September 5, 2008. On that same day, Alonso provided the $25,000 to the third party conduit for delivery to Cervantes. Cervantes admitted that HAI paid Cervantes a total of at least $119,000 in bribes between 2008 and 2011.

The bribes to Cervantes were not limited to just HAI. Cervantes admitted to exchanging a bribe in 2011 related to the awarding of a $3 million contract at Camp Pendleton to Abueg’s company, MBRA. Further, Cervantes admitted that on March 26, 2013, he met with a cooperating witness, who agreed to pay Cervantes a $40,000 bribe in exchange for assistance in obtaining a new $4 million contract at Camp Pendleton. The bribe was to be structured over a number of payments. The first payment was scheduled for March 28, 2013, with the balance of the bribe to be paid after the contract was awarded.

On March 28, 2013, the cooperating witness met with Cervantes at a local business on Miramar Road in San Diego, California, to make the first payment that was discussed earlier in the week. During this meeting, Cervantes discussed, among other things, the payment schedule and the source of funds for the bribe payments. At the end of the meeting, the cooperating witness handed Cervantes an envelope containing $10,000 cash. At that point, FBI agents arrested Cervantes.

The public is encouraged to report possible public corruption criminal activity by calling the FBI’s public corruption/border corruption hotline at (877) NO-BRIBE or (877) 662-7423, or by calling the Department of Defense’s hotline at (800) 424-9098 or emailing hotline@dodig.mil.

DEFENDANT   Case Number: 13cr1345-AJB Natividad Lara Cervantes Age: 64 San Diego, California   CHARGES

Title 18, United States Code, Section 201(b)(2)—Bribery of public official
Maximum penalties: 15 years’ imprisonment, $250,000 fine, or three times the monetary equivalent of the bribe

Title 18, United States Code, Section 371 – Conspiracy to commit bribery of public official
Maximum penalties: 5 years’ imprisonment, $250,000 fine, or twice the gross amount of defendant’s pecuniary gain from the offense

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Naval Criminal Investigative Service
Internal Revenue Service, Criminal Investigation
Department of Defense Criminal Investigative Service
General Services Administration, Office of Inspector General
Small Business Administration, Office of Inspector General

*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 –Jose Rodrigo Arechiga-Gamboa, also known as “Chino Antrax,” was formally extradited to the United States by the Netherlands today.

Arechiga-Gamboa arrived at San Diego International airport about 2 p.m. under heavy security. He was flown in by the United States Marshals Service and the Drug Enforcement Administration from Amsterdam to San Diego. He was booked into federal custody and is scheduled to be arraigned on Friday, July 11, 2014, at 2:00 p.m. before U.S. Magistrate Judge Mitchell D. Dembin.

A federal grand jury in San Diego returned an indictment on December 20, 2013, charging Arechiga-Gamboa with Conspiracy to Distribute Controlled Substances Intended for Importation and Conspiracy to Import Controlled Substances. That same day, the Clerk of the Court issued a sealed warrant for his arrest.

Arechiga-Gamboa was arrested on December 30, 2013, at the Schiphol Airport in Amsterdam, Netherlands at the request of the United States. Arechiga-Gamboa was taken into custody at the airport traveling under a fraudulent name, “Norberto Sicairos-Garcia,” as he deplaned a KLM flight from Mexico City, Mexico to Amsterdam. The United States made formal requests for assistance from foreign authorities via a provisional arrest warrant and an Interpol Red Notice. The indictment was unsealed in San Diego a few days later, on January 3, 2014.

According to formal documents filed in support of Arechiga-Gamboa’s extradition from the Netherlands, Arechiga-Gamboa is alleged to have worked for the Sinaloa Cartel as a bodyguard and the leader of an enforcement group called “Los Antrax.” In this position, he allegedly assisted the Sinaloa Cartel by providing security for narcotics shipments and conducting enforcement operations.

According to extradition documents, Arechiga-Gamboa later rose to become one of the highest-level leaders of the Sinaloa Cartel. Despite traveling under a fraudulent Mexican passport by assuming the identity of a deceased individual, undergoing significant plastic surgery and attempting to alter his fingerprints, U.S. law enforcement officials were able to confirm Arechiga-Gamboa’s identity through forensic techniques. A Dutch Court considered the extradition request and, on May 28, 2014, ordered that Arechiga-Gamboa be extradited to the United States to stand trial on the narcotics trafficking offenses.

The Justice Department’s Criminal Division Office of International Affairs provided substantial assistance in the extradition of the defendant.

DEFENDANT   Case Number: 13-CR-4517-DMS

Jose Rodrigo Arechiga-Gamboa, aka “Chino Antrax,” aka “Norberto Sicairos-Garcia”

  CHARGES

Count 1:  Title 21, United States Code, Sections 959, 960 and 963 – Conspiracy to Distribute Controlled Substances Intended for Importation

Count 2:  Title 21, United States Code, Sections 952, 960 and 963 – Conspiracy to Import Controlled Substances

  INVESTIGATING AGENCY

Drug Enforcement Administration
Customs and Border Protection Office of Field Operations
Customs and Border Protection Office of Border Patrol
San Diego Law Enforcement Coordination Center
Homeland Security Investigations
Internal Revenue Service
Interpol

*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 – A retired Navy official who started a second career orking for defense contractor Glenn Defense Marine Asia (GDMA) pleaded guilty in federal court today, admitting that he and others overcharged the Navy by up to $2.5 million for port services to American ships and then used some of the proceeds to treat Navy officials to lavish dinners, cocktails and entertainment.

Edmond A. Aruffo, who retired in 2007 at the rank of lieutenant commander after a military career spanning more than 20 years, is the seventh defendant charged – and the fourth to plead guilty - in the expanding corruption scandal involving GDMA’s illicit relationships with Navy officials. GDMA is a Singapore-based contractor that has serviced Navy ships and submarines in the Pacific for decades.

Aruffo, who became manager of GDMA’s Japan operations in 2009, entered his plea before U.S. Magistrate Judge Karen S. Crawford to a single count of conspiracy to defraud the United States. Aruffo’s bond was set at $40,000; however he indicated to the court he not post bond and immediately self-surrender. A sentencing hearing was scheduled for October 3, 2014 at 9 a.m. before U.S. District Judge Janis L. Sammartino.

“This corruption scandal continues to lead us in new directions, and we continue to marvel at the extent of it,” said U.S. Attorney Laura Duffy. “If there are others who, like Edmond Aruffo, have traded integrity and honesty for greed and profit, we will find them and prosecute them.”

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division said: “There is an old Navy saying: ‘Not self, but country.’ Edmond Aruffo instead put self before country when he stole from the U.S. Navy as part of a massive fraud and bribery scheme that cost the U.S. Navy more than $20 million.”

“Retired U.S. Navy Lieutenant Commander Edmond A. Aruffo who previously held a position of trust and responsibility conferred on him by the Navy betrayed his former Service for personal financial gain by rigging invoices and deserves to be held accountable for his criminal actions. NCIS will continue to work with the Defense Criminal Investigative Service and the US Attorney's Office in vigorously investigating and prosecuting these crimes of corruption and fraud.”

“The guilty plea of Edward Aruffo is part of an ongoing effort by the Defense Criminal Investigative Service and its law enforcement partners to bring to justice individuals who seek to illegally enrich themselves at the expense of U.S. taxpayers," said James R. Ives, Acting Deputy Inspector General for Investigations, U.S. Department of Defense. “While the vast majority of DoD contractors engage in lawful business practices, a few are driven by greed to break the law. Those who do will be caught and punished. American taxpayers will accept nothing less.”

According to court documents, GDMA owner and CEO Leonard Francis and his cousin, GDMA executive Alex Wisidigama, enlisted the clandestine assistance of Navy personnel - including Commander Michael Vannak Khem Misiewicz, Commander Jose Luis Sanchez, Naval Criminal Investigative Service Special Agent John Beliveau and Petty Officer First Class Daniel Layug - to provide classified ship schedules and other sensitive information about an ongoing criminal investigation of GDMA. In total, GDMA allegedly overcharged the Navy under its contracts and submitted bogus invoices for more than $20 million. Wisidagama, Beliveau and Layug have pleaded guilty; the others are awaiting trial.

According to his Arrufo’s plea agreement, Aruffo was hired by GDMA’s Francis, who is accused of bribing Navy personnel with cash, luxury travel, expensive meals, consumer electronics and prostitutes in exchange for classified and proprietary information to win contracts and favorable treatment for his company.

According to the plea agreement, Aruffo was serving as the operations officer of the USS Blue Ridge when he met Francis. GDMA was providing “husbanding” services, such as tug boats, harbor pilots, trash removal, line handlers and transportation, to that ship and numerous others, including.

The plea agreement said Aruffo and others defrauded the U.S. Navy in connection with charges for port services provided to nearly every Navy ship that came to port in Japan from July 2009 to September 2010.

As part of its contract with the Navy, GDMA was required to coordinate various vendors to provide port services for the Navy ships. Those vendors were to submit invoices directly to the Navy, rather than through GDMA.

The plea agreement said Aruffo and others obtained letterhead from the Japanese vendors and used it to prepare bogus invoices which inflated the cost for services by tens of thousands of dollars. Aruff admitted he arranged kickbacks to GDMA from the vendors, once they were paid by the Navy.

For example, according to the plea agreement, in February of 2010 the USS Lake Erie visited the port of Sukomo, Japan. Aruffo arranged for a Japanese vendor to provide tugboats, harbor pilots, trash removal, line handlers, transportation and other services. The vendor invoiced the Navy $145,229.77 – an amount inflated by about $50,000, which the vendor ultimately gave to GDMA as a kickback.

A few days later, Aruffo arranged for another Japanese vendor to provide such services to the USS Blue Ridge at the port of Otaru, Japan, the plea agreement said. The vendor billed the Navy in the amount of $432,476.14 and then kicked back $204,961.20 to GDMA.

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

The case is being prosecuted by Assistant U.S. Attorneys Mark Pletcher and Robert Huie of the Southern District of California, Director of Procurement Fraud Catherine Votaw and Trial Attorneys Brian Young and Wade Weems of the Criminal Division’s Fraud Section.

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

DEFENDANT   Case Number: 14cr1924 Edmond A. Aruffo Age: 45 San Diego, California   CHARGES

Conspiracy to Defraud the United States, in violation of 18 U.S.C. § 371
Maximum of 5 years in prison; a maximum $250,000 fine, or twice the gross gain or loss from the offense, whichever is greater.

  INVESTIGATING AGENCY

Defense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit 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.     

Lloyd Irving Taylor, a San Diego tax attorney and Certified Public Accountant, was convicted by a federal jury today in a complex tax-evasion scheme involving the creation of bank accounts in the names of deceased children and fake churches.

Following a week-long trial, a jury deliberated for 30 minutes before reaching a verdict that rendered Taylor, 71, guilty of all 19 counts charged, including aggravated identity theft, false statements to a financial institution, tax evasion, corruptly endeavoring to impair or impede the IRS and making false statements on United States passport applications. The defendant has been in custody since his arrest in April of 2013.

According to evidence presented at trial, Taylor stole the identities of deceased children, used them as aliases and obtained fraudulent passports and other identification documents. He then used the passports and other documents to open and maintain multiple financial accounts in order to hide his income from the IRS and to transfer funds from these accounts to purchase various assets, such as gold coins. The purchase of gold coins was done, in part, to evade taxes.

Likewise, Taylor formed over a dozen fraudulent tax-exempt religious institutions and opened 31 related bank accounts, including investment accounts in the names of the fake churches, so his income could grow tax free.

Among the witnesses who testified at trial were the brother of one of the deceased children as well as a blind elderly woman whose social security number was stolen and used by the defendant. Also during the trial, prosecutors showed the jury death certificates of four deceased children, who died in the 1950s, and displayed $1.6 million in gold coins the defendant had hidden in a storage locker.

According to trial witnesses, Taylor failed to report $5 million in income during the span of the fraud, and he owed the IRS $1.6 million. During his 42 years of working, Taylor had filed a tax return just seven times, according to trial testimony.

At Taylor’s bond hearing in April, 2013, a judge ordered him detained while pending trial based on a number of circumstances, including his international travel on his false passports, the millions of dollars he controlled through dozens of bank accounts, and his numerous false statements to banks in furtherance of his criminal activity.

“We are very pleased with the jury’s quick and decisive verdict,” said U.S. Attorney Laura Duffy. “Lloyd Taylor was able to hide his money for a while, but his days of exploiting dead children and the elderly to line his pockets are over.”

“Mr. Taylor tried in every conceivable way to hide his income from the IRS—from hiding income in the names of his stolen identities and non-existent churches to converting income to gold coins,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “This conviction sends a clear message that IRS Criminal Investigation is working hard to make sure that all taxpayers file and pay their fair share of taxes.”

“The U.S. Department of State’s Diplomatic Security Service is committed to the protection of the U.S. passport, and the investigation of those who would obtain and use it for illegal gain. DSS is pleased to have contributed the initial charges in this investigation, leading to the arrest, indictment and conviction of Taylor,” said DS Los Angeles Field Office Special Agent-in-Charge Robert Myers.

DEFENDANT Criminal Case No. 13CR1390-MMA

Lloyd Taylor

Age: 71 San Diego, CA       CHARGES

Counts 1-3:    Title 18, United States Code, Section 1542 – Making a False Statement on a United States Passport Application
Maximum penalties: 10 years custody; $250,000 fine; $100 Special Assessment; 3 year supervised release.

Count 4:         Title 26, United States Code, Section 7212 – Corrupt Endeavor to Impede and Impair the Due Administration of the Internal Revenue Laws
Maximum penalties: 3 years in prison, a fine up to $250,000, and term of supervised release of not more than 1 year.

Counts 5-6:    Title 26, United States Code, Section 7201 – Tax Evasion
Maximum penalties: 5 years in prison, a fine of $250,000, and a term of supervised release of not more than 3 years.

Counts 7-13:  Title 18, United States Code, Section1014 – False Statements to a Federally Insured Financial Institution
Maximum penalties: 30 years in prison, a fine of $1,000,000, and a term of supervised release of 5 years.

Counts 14-19: Title 18, United States Code, Section 1028A – Aggravated Identity Theft
Maximum penalties: 2 years consecutive to the sentence imposed for the underlying offense.

  INVESTIGATING AGENCIES

San Diego Regional Fraud Task Force (multi-agency task force comprised of members of the United States Secret Service, the San Diego Police Department, and the San Diego District Attorney’s Office)
Internal Revenue Service
United States Department of State, Office of Diplomatic Security

*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 – A retired Air Force senior master sergeant is charged in an indictment unsealed today with stealing credit cards from fellow service members on numerous San Diego area military installations, often while they exercised at base gymnasiums, and using the cards to make unauthorized purchases and obtain thousands of dollars in cash advances.

Christopher Dwan Underwood, 42, was indicted by a federal grand jury and arrested Friday. He made his first appearance in federal court this morning to face charges of wire fraud, bank fraud and aggravated identity theft. A bond hearing was set for July 3, 2014 at 10 a.m. before U.S. District Judge Gonzalo P. Curiel.

According to the indictment, Underwood had access to military installations because of his retiree status. He preyed on victims who left their personal belongings unattended during gym workouts on bases, and on more than 30 occasions he swiped military-issued credit and debit cards and victims’ personal information, such as dates of birth and social security numbers.

Government Travel Charge Cards, known as GTCCs, are authorized for use only when a cardholder is authorized to go on official military travel. Posing as the cardholders and using their personal information, Underwood called Citibank, the card issuer, to activate the cards. Once the cards were activated, he made over $20,000 in unauthorized purchases and cash advances, the indictment said.

DEFENDANT    

Christopher Dwan Underwood

Age: 42 San Diego, CA       CHARGES

18 U.S.C. § 1343 – Wire Fraud (30 years maximum sentence)
18 U.S.C. § 1344 – Bank 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

*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 – Tijuana-based methamphetamine trafficker Salvador Walker was sentenced today by U.S. District Judge Roger T. Benitez to more than 17 years in prison for his leadership role as a transportation coordinator in a large drug-trafficking conspiracy.

Walker, 56, was convicted by a federal jury in September of 2013 after a three-day trial. According to evidence presented at trial, Walker’s trafficking activity first came to the attention of authorities in 2011 after Customs and Border Protection officers arrested Jaime Garcia-Covarrubias, George Ramirez and Gerardo Ramos-Tabardillo as they attempted to drive separate vehicles loaded with methamphetamine through the San Ysidro, California Port of Entry. All three couriers were subsequently convicted of importation of methamphetamine.

According to court documents, an investigation conducted by the Department of Homeland Security identified Salvador Walker as the link among each of the methamphetamine loads. The investigation revealed that Walker was responsible for recruiting drivers to import narcotics into the United States, and that he directly oversaw efforts to load methamphetamine into compartments in vehicles to bring to the United States. Agents learned that the three couriers alone made dozens of trips to Tijuana to load their vehicles with methamphetamine and then successfully crossed the drugs into the United States and traveled to deliver the methamphetamine to Walker’s associates in the Los Angeles area.

During Walker’s trial, the United States presented evidence that Walker supervised these drug couriers as they transported methamphetamine to associates in Anaheim as well as narcotics proceeds back to Mexico. After the presentation of evidence, a jury convicted Walker of conspiring with others to import methamphetamine.

“Methamphetamine is a particularly dangerous drug with devastating effects on the user and the community,” said United States Attorney Laura E. Duffy. “The leaders and organizers of drug importation rings face significant consequences for their actions. Today’s sentence is a warning to all those leaders that they will be brought to justice and face significant custodial time for their aggravated crimes.”

DEFENDANT   Criminal Case No. 12-CR-0909-BEN

Salvador Walker

Age: 56 Tijuana, Baja California       CHARGES

Count 1: Title 21, United States Code, Sections 952, 960 and 963 - Conspiracy to Import Methamphetamine; Maximum penalty: Life Imprisonment

  INVESTIGATING AGENCIES

Homeland Security Investigations
Customs & Border Protection

*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.     

Former U.S. Marine Captain Shawn A. Joyce was sentenced in federal court today to four months in prison followed by a year of home confinement for submitting tens of thousands of dollars in false lodging receipts to the Marine Corps and the Department of Veterans Affairs from 2009 to 2011. At the time of the offenses Joyce was on active-duty and stationed at Marine Corps Base Camp Pendleton.

U.S. District Judge John A. Houston also ordered Joyce to pay over $90,000 in restitution.

Joyce pleaded guilty on August 21, 2013, to two counts of wire fraud. As detailed in his plea agreement, Joyce had initially been discharged from active duty in October 2008, entered the Marine Corps reserves, and thereafter sought and obtained orders placing him back on active duty at Camp Pendleton. Under certain circumstances, reservists who are called to active duty become eligible for a housing reimbursement benefit during the term of their active duty, in addition to the basic allowance for housing that they receive.

Joyce exploited this housing reimbursement benefit by falsely claiming reimbursement for rent that he never paid. Specifically, in 2009 and 2010, Joyce falsely claimed to be paying rent up to $4,030 per month for an address in Solana Beach. In 2011, Joyce falsely claimed to be paying rent of $3,700 per month for an address in Fountain Valley.

In order to conceal and disguise the fraud, Joyce submitted false rental receipts to the Marine Corps and created a fake email address in the name of his former landlord at the Solana Beach address. This email address was then used without his former landlord’s knowledge or consent to facilitate the fraud.

In his plea agreement, Joyce also admitted to devising a separate scheme to defraud the Department of Veterans Affairs of tens of thousands of dollars. Under federal law, a service member receiving VA disability benefits is not entitled to simultaneously receive active duty compensation. To avoid this type of “double payment,” service members who receive VA disability benefits are required to inform the VA when they are placed on active duty.

Despite this regulation, Joyce failed to advise the VA and continued to receive VA disability benefits to which he was not entitled. Compounding the loss, Joyce contacted the VA from time to time trying to increase the amount of his improper disability payments.

Joyce pled guilty to two counts of wire fraud and acknowledged defrauding the Defense Department of $48,740 (count one) and the VA of $41,862 (count two). In his plea agreement, Joyce also agreed to pay restitution in the full amount of the losses.

This morning, Judge Houston ordered Joyce to pay those amounts back to the Defense Department and the VA as part of the sentence.

U.S. Attorney Duffy stated, “We will vigorously investigate and prosecute those who try to defraud this country’s Armed Forces or to cheat the Department of Veterans Affairs.”

Special Agent in Charge Douglas J. Carver, VA Office of Inspector General Western Field Office in Los Angeles, said: “The Department of Veterans Affairs depends on the honesty of claims filed by our veterans. Cases like this are thoroughly investigated by the VA OIG to reclaim the VA’s limited resources to insure funds are properly paid to entitled veterans.”

DEFENDANT    

Shawn A. Joyce

Age: 34 Encinitas, California       INVESTIGATING AGENCIES

Department of Veterans Affairs, Office of Inspector General
Naval Criminal Investigative Service

*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.     

The presidents of two government contracting companies, as well as the companies themselves, were sentenced today for bribing the so-called “Godfather” of Camp Pendleton in exchange for millions of dollars in construction and service contracts at Camp Pendleton and other federal facilities.

At today’s hearing, U.S. District Judge Anthony J. Battaglia sentenced Hugo Hernandez Alonso, president of Hugo Alonso, Inc. (HAI), to one year in prison, three years of supervised release and a fine of almost $127,000. His company was sentenced to five years of probation and the same fine, which could be offset by payment of Alonso’s individual fine.

Bayani Yabut Abueg, Jr., president of MBR Associates, Inc. (MBRA), was sentenced to six months in prison, three years supervised release, $105,025 in restitution to the IRS and a fine of $366,140. His company was sentenced to five years of probation plus a $375,000 fine, which could be offset by payment of Abueg’s individual fine.

The judge ordered both men, who are free on bond, to self-surrender by January 2, 2015.

Alonso, Abueg, their respective companies, and Natividad Cervantes, who was known as the “Godfather” of Camp Pendleton, all pleaded guilty in January, each admitting their parts in the bribery-kickback scheme. Cervantes is scheduled to be sentenced by Judge Battaglia on July 24, 2014.

According to Alonso’s plea agreement, the bribes were made in connection with the awarding of at least six government construction and service contracts from 2008 to 2011.

In addition, Alonso, Abueg and their respective companies pleaded guilty to soliciting and accepting kickbacks from subcontractors in relation to government contracts awarded to Alonso and Abueg’s companies (some of which were steered to them by Cervantes).

The defendants admitted that they solicited and accepted the kickbacks from various subcontractors in exchange for favorable treatment in connection with future subcontracts. Abueg also admitted filing a false federal income tax return for 2010 that failed to report over $268,000 in illegal kickbacks.

Bribery at Camp Pendleton

When he entered his guilty plea, Cervantes admitted using his position at Camp Pendleton to solicit bribes from Alonso and Abueg’s construction companies seeking to do business on the base. Cervantes made it clear that since at least as early as September 2008, he used his position supervising construction and service contracts to seek bribes from Alonso and Abueg, on behalf of either HAI or MBRA.

In return for awarding HAI and MBRA contracts, Cervantes received cash payments from Alonso and Abueg and extensive free construction work on his personal condominium.

As part of his plea agreement, Cervantes admitted that in approximately 2008, he agreed to accept a bribe of $25,000 to assist Alonso and HAI in obtaining a $3.5 million government contract to install flooring at Camp Pendleton.

In arranging for a bribe payment, Cervantes, through a third-party conduit, requested that Alonso “have the 25 package” (code for the $25,000 bribe) available on September 5, 2008. On that same day, Alonso provided the $25,000 to the third party conduit for delivery to Cervantes. Cervantes and Alonso admitted that Alonso paid Cervantes a total of at least $119,000 in bribes between 2008 and 2011. Abueg admitted delivering $20,000 of these bribes to Cervantes, at the direction of Alonso. Alonso’s company, HAI, also entered a guilty plea regarding the paying of bribes to Cervantes.

The bribes to Cervantes were not limited to just HAI. Both Cervantes and Abueg admitted to exchanging a bribe in 2011 related to the awarding of a $3 million contract at Camp Pendleton to Abueg’s company, MBRA. Further, Cervantes admitted that on March 26, 2013, he met with a cooperating witness, who agreed to pay Cervantes a $40,000 bribe in exchange for assistance in obtaining a new $4 million contract at Camp Pendleton. The bribe was to be structured over a number of payments. The first payment was scheduled for March 28, 2013, with the balance of the bribe to be paid after the contract was awarded.

On March 28, 2013, the cooperating witness met with Cervantes at a local business on Miramar Road in San Diego, California, to make the first payment that was discussed earlier in the week. During this meeting, Cervantes discussed, among other things, the payment schedule and the source of funds for the bribe payments. At the end of the meeting, the cooperating witness handed Cervantes an envelope containing $10,000 cash. At that point, FBI agents arrested Cervantes.

Kickbacks Related to Government Contracts and Subcontracts

In addition to the bribery scheme, Alonso and Abueg engaged in a vast scheme to solicit kickbacks from subcontractors in exchange for favorable treatment in the awarding of subcontracts on various government contracts awarded to HAI and MBRA. Some of these government contracts were the same contracts at Camp Pendleton improperly awarded to HAI and MBRA with Cervantes’ help in exchange for bribes.

Abueg, as a representative of HAI and then MBRA, admitted that between 2008 and 2011, he solicited, received, and accepted over $539,000 kickbacks from various subcontractors. The kickbacks typically consisted of cash given to Abueg or to Abueg’s son, and checks issued to Abueg, his son, or his daughter, all in an attempt to conceal the nature of the kickbacks. Other kickbacks to Abueg consisted of subcontractors performing discounted work at the personal residences of Abueg’s wife, relatives, and associates, including Cervantes. For some of the kickbacks, Abueg requested that the subcontractors inflate their original estimate for certain work associated with the government contract. The inflated amount used for the kickback was then improperly included in corporate books and records as a legitimate business expense.

Separately, Alonso, as representative of HAI, admitted that in 2009, he accepted a kickback in the form of discounted remodeling of his Chula Vista residence by a subcontractor. Abueg’s and Alonso’s companies, MBRA and HAI, respectively, also entered guilty pleas regarding the solicitation and acceptance of kickbacks.

“We are not going to allow criminals to turn the contracting system into their own little fiefdoms,” said U.S. Attorney Laura Duffy. “The extreme home makeover party is over for these defendants, who will no longer be ordering up new kitchens and baths for relatives at taxpayer expense.”

FBI Special Agent in Charge Daphne Hearn commented, “Members of our community expect government employees to act ethically and honestly. When even one person dishonors that trust, it rips away the professional dignity that others government servants have spent a lifetime building. At a time when our nation’s military must do more with fewer resources, the actions of the defendants undermine our country’s best interests for their own financial gains.”

“It’s all about playing by the rules—you earn an honest dollar and you report it on your tax return. Failure to do so will land you in prison,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation. “IRS Criminal Investigation is proud to work with our law enforcement partners by lending its financial expertise in any investigation involving the improper awarding of government contracts.”

“The Defense Criminal Investigative Service works closely with its law enforcement partners to bring to justice those individuals who seek to illegally enrich themselves at the expense of U.S. taxpayers,” said Chris Hendrickson, Special Agent in Charge of the Western Field Office. “While the vast majority of DoD contractors exercise lawful business practices and engage in fair competition, a few are driven by greed to break the law. Those who do will be caught and punished. The American taxpayer will accept nothing less.”

According to David A. House, Special Agent in Charge, Pacific Rim Regional Office of Investigations General Services Administration, Office of Inspector General: “This investigation demonstrates GSA OIG’s commitment to ensuring the integrity of the procurement process, especially when dealing with public buildings. Bribes and kickbacks are an affront to every taxpayer; we are dedicated to investigating these allegations thoroughly.”

“Hugo Alonso and Bayani Abueg instigated a bribery and kickback scheme that defrauded our government and American taxpayers for personal gain,” said Inspector General Peggy E. Gustafson. “Today’s sentencing demonstrates the SBA OIG’s resolve to bring those who commit fraud in SBA’s set-aside contracting programs and erode the public’s trust in government to justice. I want to thank the U.S. Attorney’s Office for its dedicated leadership and professionalism in pursuit of justice served today.”

The public is encouraged to report possible public corruption criminal activity by calling the FBI’s public corruption/border corruption hotline at (877) NO-BRIBE or (877) 662-7423, or by calling the Department of Defense’s hotline at (800) 424-9098 or emailing hotline@dodig.mil.

DEFENDANT   Case Number: 14cr0120-AJB

Hugo Hernandez Alonso

Age: 50 City: Chula Vista, CA           Case Number: 14cr0144-AJB

Bayani Yabut Abueg, Jr.

Age: 51 San Diego, CA  

CORPORATE DEFENDANTS

Case Number: 14cr0120-AJB

Hugo Alonso, Inc.

 

Chula Vista, CA

      Case Number: 14cr0144-AJB

MBR Associates, Inc.

 

National City, CA

  CHARGES

Title 18, United States Code, Section 371 – Conspiracy to commit bribery of public official
Maximum penalties for individual defendants: 5 years’ imprisonment, $250,000 fine, or twice the gross amount of defendant’s pecuniary gain from the offense
(Defendants Alonso and Hugo Alonso, Inc.)

Title 41, United States Code, Sections 8701, 8702, and 8707 – Anti-Kickback Act Violation
Maximum penalties for individual defendants: 10 years’ imprisonment, $250,000 fine, or twice the gross amount of defendant’s pecuniary gain from the offense
(Defendants Alonso, Hugo Alonso, Inc., Abueg, and MBR Associates, Inc.)

Title 26 United States Code, Section 7206(1) – Filing a False Tax Return
Maximum penalties: 3 years imprisonment, $250,000 fine, or twice the gross amount of the tax loss from the offense
(Defendant Abueg only)

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Naval Criminal Investigative Service
Internal Revenue Service, Criminal Investigation
Department of Defense Criminal Investigative Service
General Services Administration, Office of Inspector General
Small Business Administration, Office of Inspector General

*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 Glamis Dunes Storage Inc. and its owner, Michael Mamelli, Sr. were arraigned today on charges that they injected and disposed of potentially millions of gallons of sewage underground at the Glamis Dunes Storage site, in violation of the Safe Drinking Water Act.

According to the indictment, 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 sewage and grey water) at the facility. At that time, 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, and estimated that at full occupancy, they would dispose of approximately 1.25 million gallons of RV sewage and grey water at a wastewater treatment plant per year.

The indictment alleges that on December 16, 2009, a Cease and Desist Order was issued to Michael Mamelli of Glamis Dunes Storage by the Imperial County Department of Environmental Health Services, after it was discovered that Glamis Dunes Storage and Mamelli were illegally disposing of sewage from the RV holding tank by pumping out the sewage and discharging it into an underground septic tank on the site. The Cease and Desist Order required them to immediately cease the discharge of sewage to the underground septic tank, remove the underground septic tank and to retain the services of a registered hauler to pump out the RV holding tank and provide evidence of disposal at a wastewater treatment plant.

The indictment further alleges that between February 16, 2010, and March 12, 2010, the defendants had a contractor build a leach field in the rear of the property, place a pump in the RV holding tank, and connect a pipe directly from the RV holding tank out to the leach field, concealing the power connection for the pump under gravel near the RV holding tank. Thereafter, it is alleged that defendant Mamelli and other employees of Glamis Dunes Storage illegally disposed of the sewage in the RV holding tank by activating the pump and discharging the sewage through the underground leach field.

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

The Safe Drinking Water Act, Section 300h-2(b) of Title 42 of the United States Code, prohibits the willful violation of any requirement of an applicable underground injection program. The underground injection program applicable to Class V injection wells in the State of California is the national underground injection control program, which is administered by the Environmental Protection Agency.

Under the federal regulations, injection wells are regulated according to the classification that the well is given. Class V injection wells include septic system wells used to inject the waste or effluent from a multiple dwelling, business establishment, community or regional business establishment septic tank. The regulations prohibit any underground injection of fluids, except into a well permitted or otherwise authorized under this program. The construction of any well required to have a permit is prohibited until the permit has been issued.

The indictment also seeks criminal forfeiture of the sum of $125,000, alleged to be the proceeds of the offense.

Michael Mamelli and Glamis Durnes Storage, Inc. are scheduled to appear before U.S. District Court Judge William Q. Hayes on August 8, 2014, at 2:00 p.m. for a hearing on all motions.

DEFENDANT   Case No.: 14-CR-1766-WQH Glamis Dunes Storgage, Inc.        Incorporated: 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: Three years in custody, the greater of a $10,000 fine or twice the illegal gain or loss and a $100 penalty assessment

  INVESTIGATING AGENCY

Environmental Protection Agency, Criminal Investigations Division
Bureau of Land Management

*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.     

Jeffrey R. Spanier, former owner of Amerifund Capital Finance, LLC located in Boca Raton, Florida, was sentenced today by U.S. District Judge Roger T. Benitez to serve 10 years in federal prison and pay almost $20.7 million in restitution for his role in a $100 million stock loan fraud scheme that bilked victims all over the world.

Spanier was also ordered to forfeit several million dollars in assets that were the proceeds of the fraud, including cash and securities held in brokerage accounts, and a luxury home in Florida. The case was investigated by the FBI.

Spanier was indicted on April 13, 2012, along with Douglas McClain Jr. and James Miceli. All were charged with multiple counts of conspiracy, mail fraud, wire fraud, securities fraud, and money laundering. On May 31, 2013, a federal jury returned guilty verdicts on all counts in the indictment against McClain. Miceli committed suicide shortly before that trial. On December 20, 2013, a separate jury found Spanier guilty on multiple counts of conspiracy, mail fraud, wire fraud, and securities fraud.

According to trial testimony, Spanier, through his entity Amerifund Capital Finance, partnered with McClain, Miceli, and Argyll Equities, and together with his partners fraudulently induced corporate executives to pledge millions of dollars’ worth of stock the executives held in publicly traded companies as collateral for loans by falsely representing that the borrowers' stock would not be sold unless there was a default on the loan.

The evidence presented at trial showed that Argyll, the purported lender, had no cash to lend and instead survived for years by immediately selling borrowers stock on the day after the stock was pledged as collateral. The proceeds from the sale of the stock were used to fund the loans creating the appearance that Argyll had plenty of cash to lend.

The evidence also showed that Spanier, McClain, and others fraudulently induced the borrowers to make monthly interest payments on their loans by falsely representing that their collateral was safe and would be returned as long as they did not default. At the end of the loan terms, the borrowers paid off their loans. Instead of returning the stock to the borrowers, Spanier and McClain kept the money and provided false excuses about why they could not return their stock.

The evidence further showed that the unauthorized sales of stock held by insiders of publicly traded companies caused the stock price to plummet which defrauded purchasers of these publicly traded securities who purchased stock through public stock exchanges.

During the trial, the government offered testimony from several executives, many of whom had faithfully paid off their loans over a period of years, completely unaware that their stocks had been sold. All testified about the frustration, emotional stress and grief they experienced when they unsuccessfully attempted to recover their stock once the loan balance was paid, and ultimately realized they were the victims of a massive fraud. Victims were located in the United States, Canada, Mexico, Panama, China, England, and Belgium.

The jury rejected defense claims that Spanier was merely a broker who was unaware of the fraud scheme.

U.S. Attorney Laura Duffy praised the efforts of the FBI for its investigation of the case and described today’s sentence as a fitting end to a brazen deception. “Jeffrey Spanier not only stole tens of millions of dollars from his own clients, but he victimized the public market when his actions caused stock prices to plummet. This significant sentence means Spanier’s days driving a Bentley and living in a gated country club community at the expense of others will soon be a distant memory.”

FBI Special Agent in Charge, Daphne Hearn, commented, “Today's sentencing ensures that Mr. Spanier is being held accountable for his illegal and unscrupulous actions. The FBI is committed to pursuing those who illegally line their pockets at the expense of the public.”

DEFENDANT   Case Number: 12CR0918BEN Jeffrey R. Spanier Age: 49 City: Delray Beach, Florida   CHARGES

Count 1:          Conspiracy (Title 18, United States Code, Section 371):  Counts 2-7      Mail Fraud (Title 18, United States Code, Section 1341
Counts 8-18    Wire Fraud (Title 18, United States Code, Section 1343)
Count 19         Securities Fraud (Title 15, United States Code, Sections 78j(b) and 78ff)

  INVESTIGATING AGENCY

Federal Bureau of 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 a federal jury returned guilty verdicts on all counts against Dr. James Francis Murphy and his wife, Denine Christine Murphy, based on their years-long efforts at preventing the IRS from assessing and collecting the hundreds of thousands of dollars of income taxes they owed from the operation of their medical practice in Encinitas, California, and Omaha, Nebraska.

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,” filed false personal income tax returns that concealed their true income, and in certain years simply refused to file required tax returns at all.

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 thwart the United States’ attempts to correctly assess and collect 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 then-Secretary of the Treasury Henry Paulson was their “fiduciary” and was responsible for paying their taxes.

The defendants were found guilty by a jury after a two-week trial held before U.S. District Judge Anthony J. Battaglia, and were ordered to appear again for sentencing on September 12, 2014.

U.S. Attorney Duffy said she is pleased with the jury’s verdict. “The Murphys have found out that the old adage is true: Nothing is certain but death, taxes and prosecution if you don’t pay your taxes.”

Erick Martinez, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office commented, “James and Christine Murphy’s use of a sham trust served no other purpose than to hide the income they earned from the medical practice. Their filing of false tax returns and false claims of payment to the IRS were tax elimination tactics, used to further promote their criminal activities. Today’s jury verdict emphasizes that those who use these elaborate tax schemes run the risk of criminal prosecution.”

DEFENDANT     Dr. James Francis Murphy Age: 53 Encinitas, California Denine Christine Murphy Age: 51 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 AGENCY

Internal Revenue Service, Criminal Investigation

TIGTA (Treasury Inspector General for Tax Administration)

*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 – Four defendants from unrelated cases were sentenced in federal court today for crimes involving the sex trafficking and sexual exploitation of children, underscoring a continuing trend as prosecutions in this category continue to rise.

The number of defendants prosecuted for sex crimes that victimize and exploit children in the Southern District of California has increased 85 percent in the last five years, from 61 in 2009 to 113 in 2013. The increase is even more dramatic compared to 10 years ago, when only a few cases were logged.

The number of prosecutions involving sex crimes that victimize and exploit children in the Southern District of California has increased 65 percent in the last five years, from 49 in 2009 to 81 in 2013. And those numbers do not reflect that several recent sex trafficking cases have dozens of defendants each.

“The statistics show that one of our highest priorities is protecting children from predators who commit these heinous crimes against our community’s most vulnerable members,” said U.S. Attorney Laura Duffy.

The prosecutions are part of Project Safe Childhood, a nationwide initiative launched by the U.S. Department of Justice in 2006 to combat the growing epidemic of child sexual exploitation and abuse via the internet. The program’s primary goal is to locate, apprehend and prosecute individuals who exploit children through pornography and sex trafficking as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

DEFENDANT     Tyson Lee Channell Age: 29 Case Number: 13cr1372-AJB Sentenced by U.S. District Judge Anthony J. Battaglia to 10 years in prison, followed by 10 years of supervised release, for acting as a pimp to a 14-year-old girl, at one point taking her to Las Vegas to work as a prostitute. Channel pleaded guilty in April of 2013 to transportation of a minor to engage in prostitution.       Jamal Leland Landrum Age: 26 Case Number: 13cr1227-AJB Sentenced to 10 years in prison by U.S. District Judge Anthony J. Battaglia for sex trafficking of a 15-year-old girl in El Cajon. Landrum pleaded guilty in June of 2013 to sex trafficking of a minor.       James Michael DiSalvo Age: 55 Case Number: 13cr4165-GPC Sentenced to nine years by U.S. District Judge Gonzalo P. Curiel. DiSalvo pleaded guilty in February 2014 to distribution of child pornography.   Christopher Wissmath Age: 36 Case Number: 13cr3159-JM Sentenced by U.S. District Judge Jeffrey T. Miller to 30 months in prison and seven years of supervised release. Wissmath pleaded guilty in October of 2013 to transmitting information about a minor with intent to entice the minor.   A fifth sentencing, that of Martell Davis, was scheduled to take place today but was postponed. Davis, who was wearing a T-shirt that said, “I Make Pimpin’ Look Easy” when he was arrested, pleaded guilty in September of 2013 to transportation of a minor to engage in prostitution, admitting he drove a 17-year-old girl to Yuma, Arizona, to engage in commercial sex acts. Case No. 13cr3149-JLS.   INVESTIGATING AGENCY

U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI)
Federal Bureau of Investigation
San Diego Police Department
El Cajon Police Department

*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, CA – Lionel Portillo-Meza, who is charged with the first degree murder of United States Border Patrol Agent Brian Terry, was extradited to the United States from Mexico on June 17, 2014, announced Attorney General Eric Holder and U.S. Attorney Laura E. Duffy of the Southern District of California.

Agent Terry was fatally shot on Dec. 14, 2010, when he and other Border Patrol agents encountered Portillo-Meza and four others in a rural area north of Nogales, Arizona.

“This marks a major step forward in our aggressive pursuit of those responsible for the murder of Agent Brian Terry, who made the ultimate service while serving his country,” said Attorney General Eric Holder. “By securing the extradition of this suspect, the Department of Justice has ensured that he will stand trial and face justice here in the United States. And we will never waver in our commitment to ensure that those who commit acts of violence against our best and bravest can be caught and held accountable – to the fullest extent of the law.”

“This development brings us one step closer to achieving justice for a beloved agent who paid the highest price in protecting this country,” U.S. Attorney Duffy said. “While there is nothing that can be done to bring Agent Terry home again, we hope this news will bring some level of comfort to the family knowing that our team of prosecutors and investigators within the Department of Justice will not stop until the case is resolved.”

Portillo-Meza was arraigned in federal district court in Tucson, Arizona, on June 18, 2014. He entered a not-guilty plea and was detained without bond. The indictment charges Portillo-Meza and others with first degree murder, second degree murder, conspiracy to interfere with commerce by robbery, attempted interference with commerce by robbery, use and carrying a firearm during a crime of violence and assault on a federal officer. In addition to the murder of Agent Terry, the indictment alleges that the defendants assaulted Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller, who were with Agent Terry during the firefight.

On July 20, 2012, in order to seek the public’s assistance, Department of Justice officials announced a reward of up to $1 million for information leading to the arrest of four fugitives: Jesus Rosario Favela-Astorga, Ivan Soto-Barraza, Heraclio Osorio-Arellanes, and Portillo-Meza. Portillo-Meza was captured in Mexico in September 2012. Soto-Barraza was captured in Mexico in September 2013.

A fifth defendant, Manuel Osorio-Arellanes, pleaded guilty to first degree murder and was sentenced to 30 years in prison in February 2014. A sixth defendant, Rito Osorio-Arellanes, who was in custody at the time of Agent Terry’s murder, pleaded guilty to conspiracy to interfere with commerce by robbery and was sentenced to eight years in prison in January 2013.

This case is being prosecuted in federal court in Tucson by attorneys from the Southern District of California, Special Attorneys Todd W. Robinson, David D. Leshner, and Fred Sheppard. The U.S. Attorney’s Office for the District of Arizona is recused. This case is being investigated by the FBI. The Justice Department’s Office of International Affairs provided assistance with the extradition.

The public is reminded that an indictment is a formal charging document and defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.