Southern District of California

The alleged leader of an Armenian alien smuggling ring was arraigned on an indictment unsealed today in federal court. Grigor Chatlayan, 44, is charged with coordinating and directing an international alien smuggling organization that brought undocumented Armenian nationals illegally into the United States in exchange for thousands of dollars. Chatalyan, of North Hollywood, California, was arrested on Saturday as he applied for entry into the United States from Mexico at the San Ysidro, California Port of Entry. He was arraigned in federal court this morning before U.S. Magistrate Judge David H. Bartick.

The indictment makes it clear that Chatalyan led 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. Chatalyan’s smuggling group arranged for the Armenian nationals to fly into Moscow, Russia, where they were given fraudulent Russian passport to travel to Cancun, Mexico. Once in Mexico, the smuggling organization would transport the Armenian nationals to Tijuana, Mexico. Chatalyan and his co-conspirators would then procure valid U.S. legal permanent resident or passport cards from within the United States and attempt to use those documents to pass imposter Armenian nationals through the San Ysidro, California Port of Entry.

According to the indictment, Chatalyan coordinated these activities with several co-conspirators, including two others charged in the indictment with Chatalyan: Varduhi Avagyan, 42, and Meri Avetsiyan, 40, both of Glendale, California. Avagyan and Avetisyan were arrested on November, 1, 2013 attempting to smuggle two Armenian nationals into the country.

All three are charged with conspiracy and bringing in illegal aliens for financial gain. In addition, Chatalyan is charged with aiding and abetting aggravated identity theft. Chatalyan and his co-conspirators face a maximum penalty of up to 15 years’ imprisonment and a $250,000 fine. If convicted on all charges, Chatalyan could be sentenced to a mandatory minimum of seven years in custody.

DEFENDANT     Grigor Chatalyan Age: 44 North Hollywood, California Varduhi Avagyan Age: 42 Glendale, California Meri Avetsiyan Age: 40 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

U.S. Department of Homeland Security - 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.     

United States Attorney Laura E. Duffy announced today that Ara Keshishyan pleaded guilty to leading and organizing a 14-defendant conspiracy to steal more than $1 million from Citibank using cash advance kiosks in a dozen casinos from Southern California to Las Vegas.

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 part of his guilty plea today, Keshishyan admitted that, using these methods, he and his co-conspirators stole more than $1 million from Citibank between June 2009 and January 2010. Keshishyan further admitted that, as the organizer of the conspiracy, he 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.”

Keshishyan is the 13th defendant to plead guilty in the case. The lone remaining charged defendant is a fugitive. Several of Keshishyan’s codefendants have already been sentenced to prison time and have been ordered to pay restitution for their roles in the scheme. Keshishyan is scheduled to be sentenced by Judge Janis L. Sammartino on September 12, 2014 at 9:00 a.m. His guilty plea is subject to acceptance by Judge Sammartino.

DEFENDANT   Case Number: Ara Keshishyan Age 31 Filmore, CA - Sentencing hearing set for September 12, 2014, before Judge Sammartino.   Ara Harutyunyan Age 32 Glendale, CA

- Sentence: imprisonment for 12 months and one day; supervised release for three years; restitution of $307,161

  Artur Harutyunyan Age 26 Glendale, CA

- Sentence: imprisonment for 12 months and one day; supervised release for three years; restitution of $307,161

  Vahe Asatrian Age 31 North Hollywood, CA

- Sentence: imprisonment for 12 months; supervised release for three years; restitution of $307,161

  Sarkis Mooshidian Age 39 Burbank, CA

- Sentence:  probation for five years; restitution of $66,500

  Levon Karamyan Age 60 FUGITIVE

The charges and allegations contained in the Indictment are merely accusations, and this defendant is considered innocent unless and until proven guilty.

  Migran Yamalyan Age 32 Winnetka, CA

- Sentencing hearing set for June 20, 2014, before Judge Sammartino

  Seryozha Harutyunyan Age 61 Glendale, CA

- Sentence:  imprisonment for six months; supervised release for three years; restitution of $106,370

  Lianna Avetisyan Age 26 North Hollywood, CA

- Sentencing hearing set for August 22, 2014, before Judge Sammartino

  Ashot Oganisyan Age 32 Mission Hills, CA

- Sentencing hearing set for June 27, 2014, before Judge Sammartino.

  Ovsep Sarafyan Age 35 North Hollywood, CA

- Sentence:  imprisonment for one month; home detention for seven months; supervised release for three years; restitution of $85,924

  Daniel J. Thomas Age 58 Huntington Beach, CA

- Sentence:  probation for five years; restitution of $65,260

  Hilda Hakverdyan Age 55 Glendale, CA

- Sentence:  probation for five years; restitution of $105,960

  Asatur Asatryan Age 35 Pasadena, CA

- Sentencing hearing set for August 15, 2014, before Judge Sammartino

  CHARGES

Conspiracy to Commit Bank Fraud – Title 18, U.S.C., Section 371 (all defendants)
Maximum penalty:  five 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.     

A Spring Valley college student was sentenced by U.S. District Judge Marilyn Huff today to 10 years in prison in connection with child pornography charges.

Anthony Michael Gonzales, 23, pleaded guilty in December 2013 to a single count of Receipt of Images of Minors Engaged in Sexually Explicit Conduct. He was also sentenced to five years of supervised release and ordered to pay $5,000 in restitution to a victim and register as a sex offender upon release from prison.

According to a complaint, from October 2011 through March of 2012, agents with Homeland Security Investigations identified an Internet Protocol address on a peer-to-peer file sharing program that was trading in files suspected of containing child pornography. The agents tracked the Internet Protocol address to Gonzales’ residence, which was located in Spring Valley, California.

In May 2012, the agents executed a search warrant on the residence and seized Gonzales’ laptop computer, which had the user name “Metatron.” A forensic examination uncovered approximately 170 videos and 22,300 images suspected of containing child pornography. On review of a sampling of at least 883 of the thousands of images, agents determined six of those images included bondage of children.

There also were images involving children who appeared to be under two years old. One DVD had approximately 100 images of child pornography. At the time of his subsequent arrest, Gonzales was a 23-year-old student who possessed a thumb drive that also contain additional images of child pornography.

DEFENDANT   Case Number: 13CR3108-H Anthony Michael Gonzales   Spring Valley, CA   CHARGES

Count 4 – Title 18, United States Code, Section 2252(a)(2) Receipt of Images of Minors Engaged in Sexually Explicit Conduct. Maximum penalties: Five year mandatory minimum, 20 year maximum, restitution, $250,000 fine

  INVESTIGATING AGENCY

U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI)

*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 bank manager Mark Masiglat pleaded guilty in federal court today, admitting that he secretly siphoned $36,000 from J.P. Morgan Chase’s general ledger through dozens of unauthorized cash withdrawals.

In entering his plea, Masiglat acknowledged that he embezzled the funds between January 2011 and August 2012, while employed as the Assistant Branch Manager at a J.P. Morgan Chase branch in Point Loma.  The bank’s deposits are insured by the Federal Deposit Insurance Corporation.

“Corrupt bankers cannot be allowed to treat federally-insured accounts as their own personal piggy bank,” said U.S. Attorney Laura Duffy. “My office will not tolerate abuse of the public’s trust in our financial institutions.  I want to thank the FBI for its commitment to ensuring the integrity of our local banks.”

Masiglat is scheduled to be sentenced by Judge Battaglia on August 22, 2014 at 9:00 a.m. 

DEFENDANT     Mark Masiglat       CHARGES

Embezzlement by a Bank Employee – Title 18, U.S.C., Section 656
Maximum penalty:  30 years’ imprisonment and $1 million 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.     

United States Attorney Laura E. Duffy announced today that Michael Loo was sentenced to 3 years of probation and a fine of $1,000, following his plea of guilty to selling the endangered Asian arowana fish (Scleropages formosus). Loo admitted that after posting an ad on Craigslist, he illegally offered an endangered Asian arowana for sale to an undercover agent for $2,800. This is the second sentencing for the illegal sale of Asian arowanas in this district in the last two weeks. In a related case, Kiem Tran, the owner of the Fish Warehouse in Westminster, California, was sentenced on May 16, 2014, to a term of two years of probation and a $1,000 fine, following his plea of guilty to Transportation of Merchandise Imported Contrary to Law. In pleading guilty, Tran admitted that he engaged in transactions with Loo involving Asian arowana, knowing that the arowana would be transported between Westminster and San Diego. Tran acknowledged that he was aware that the arowanas involved in the transactions were an endangered species and that they had been brought into the United States illegally.

During the investigation of Loo and Tran, 13 Asian arowana fish were seized by agents of U.S. Fish and Wildlife. The endangered fish were forfeited to the government, and have been kept at SeaWorld and the San Diego Zoo during the pendency of the cases.

The Asian arowana fish is found in the rivers of Southeast Asia. Due to loss of habitat and over-fishing for aquarium collections, the Asian arowana was listed among the most restrictive species in the Convention on International Trade in Endangered Species (CITES) in 1975. The fish, also known as the “bonytongue” or “dragon fish,” can grow to three feet in length and are identified by large metallic scales, double barbels on the jaw, and large pectoral fins which make it look like a dragon in flight. The fish are symbols of prosperity and luck in the Asian culture and are believed to preserve its owner from death by dying itself. The fish is commonly green but the more rare red or golden arowanas are highly prized by collectors, selling for thousands of dollars.

DEFENDANT   Case Number: 12CR2245-JM Michael Loo       CHARGES

Unlawful Sale of Fish, a felony, in violation of Title 16, United States Code, Sections 3372 and 3373
Maximum Penalty: 20 years in custody, a $250,000 fine and a $100 penalty assessment

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DEFENDANT   Case Number: 14CR396-JM Kiem Tran       CHARGES

Transportation of Merchandise Imported Contrary to Law, a felony, in violation of Title 18, United States Code, Section 545
Maximum Penalty: 5 years in custody, a $20,000 fine and a $100 penalty assessment

INVESTIGATING AGENCY

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.     

A San Diego tank cleaning firm was sentenced yesterday by U.S. District Judge Marilyn L. Huff to pay a $50,000 fine for failing to report an acid spill that occurred at its facility.

Pacific Tank Cleaning (PTC), a family-owned business that employs 85 people on three shifts, is engaged in the business of cleaning industrial tanks and piping, primarily aboard ships. On Monday, March 28, 2011, in the former PTC yard on National Avenue in San Diego, the valve on a 275-gallon plastic container (tote) failed, spilling the contents of the tote onto the ground at the facility. The liquid pooled on the concrete at the facility, and flowed out a hole at the base of the wall. The fluid ran down an alley at the rear of the facility (etching the concrete) and pooled along the curb in front of a nearby elementary school.

Two days later a nearby business reported the spill. The San Diego Fire Department Hazardous Incident Response Team (HIRT) and the San Diego County Department of Environmental Health Service, Hazardous Materials Management Division (DEH) responded to the scene, and closed the affected streets and alley. The responders traced the spill from the school, down the alley to the PTC facility. Samples of the liquid pooled in the street and samples of the soil just outside the PTC facility were found to be extremely acidic, with a pH of less than 1. Measured pH values are typically between 14 (most basic) to 0 (most acidic). Pure water has a pH of about 7.

One of the HIRT responders contacted a PTC vice president at the site. The vice president falsely advised that there were no acids at PTC, only contaminated water. The HIRT responder asked to inspect the facility and observed multiple large totes containing a product called Dynamic Descaler which contains hydrochloric acid. There was no evidence of any spill on the grounds of the PTC facility. Although PTC denied that they were the source of the spill, PTC contacted a clean-up company that afternoon. The clean up company washed and vacuumed the remaining liquid from the street and alley and properly disposed of the vacuumed material, at a cost of $17,000 (which was reimbursed to PTC by their insurance carrier).

Subsequently, the criminal investigation revealed that an employee on the first shift at PTC had been directed by Production Manager Jorge Luquin to use the contents of a 275 gallon tote to clean piping that was in the PTC yard that had come from a Navy ship. On March 28, 2011, the first shift employee discovered that the valve on the tote of used acid had failed, spilling the contents. The first shift employee reported the spill to Luquin, and advised Luquin that he had seen liquid in the alley.

Luquin ordered the PTC employees to clean up the spill on the site. PTC employees rinsed the area and vacuumed the liquid from the yard, placing it in another tote at the facility labeled “oily water” that was later sampled by DEH (and relabeled by health officials as “corrosive”). Although PTC had a Health and Safety Manager, that individual was not aware of the spill until the HIRT response two days later. The acid spill involved well over the reportable quantity of a hazardous substance (100 pounds of a corrosive liquid), but upon discovery of the release, PTC did not report it to the National Response Center, or any other governmental agency, as required by law.

PTC pled guilty in February. In addition to the criminal fine, PTC was placed on probation for three years, assessed a $400 penalty, and also ordered to reimburse DEH $11,238.60 for the costs of responding to the spill.

Pacific Tank Cleaning Production Manager Jorge Luquin pled guilty to the Unlawful Discharge of Pollutants in February of 2014. In pleading guilty, Luquin admitted that although he was aware the tank had leaked, he made no effort to contain the spill outside the facility, which allowed the acid to enter the storm drain system and ultimately the waters of the United States. Luquin is scheduled to be sentenced on June 24, 2014, at 1:30 p.m. before the Honorable Mitchell D. Dembin.

DEFENDANT   Case Number: 14CR395-H Pacific Tank Cleaning, Inc Incorporated: 1996 San Diego, CA   CHARGES

Failure to Report a Release, a felony, in violation of Title 42, United States Code, Sections 9602 and 9603

Maximum Penalty for a corporation: 5 years of probation, a $500,000 fine, $400 special assessment

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DEFENDANT   Criminal Case No. 14CR394-MDD Jorge Luquin       CHARGES

Unlawful Discharge of Pollutants, a misdemeanor, in violation of Title 33, United States Code, Sections 1311, 1342 and 1319(c)(1)(A)
Maximum Penalty: 1 year in custody, a fine of at least $2500 but not more than $25,000 per day of violation, $25 special assessment

INVESTIGATING AGENCY

U.S. Environmental Protection Agency, Criminal Investigation Division
Federal Bureau of Investigation
San Diego County Department of Environmental Health Services, Hazardous Materials Management 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.     

Arman Eritsian pled guilty today to conspiracy to commit wire fraud as part of his conspiracy to defraud the Internal Revenue Service of over $250,000 – by filing false tax returns in the names of stolen identities.

As set forth in his plea agreement, Eritsian admitted stealing personal identity information from innocent victims in order to file false tax returns in their names. These false returns generated hundreds of thousands of dollars in fraudulent tax refunds that should never have been taken from the U.S. Treasury. As part of this scheme, Eritsian and his fellow conspirators directed the IRS to send the ill-gotten refunds to postal addresses and/or bank accounts under their control.

For his part, Eritsian admitted that he stole the identities of people to use on the fraudulent tax returns. Eritsian also informed the Court that he attempted to conceal and disguise his illegal activity by using multiple email addresses to communicate with conspirators, and using debit cards to access the proceeds of the fraudulent refunds. In all, Eritsian admitted filing false tax returns in the names of more than a score of victims. In addition to jail time, Eritsian is required by the terms of his plea to make full restitution to the IRS for the losses caused by his criminal conduct.

Eritsian’s plea is the latest in a series of 22 guilty pleas following the September arrests of over 30 people in “Operation Trillions Trouble” a multi-agency investigation – led by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division -- into multiple tax fraud conspiracies, as well as several schemes to defraud various banks. These disparate criminal plans resulted in the bringing of four related indictments charging 58 defendants, 28 of whom are 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. AToday's guilty plea is yet another example of our office's commitment to investigate and prosecute those who illegally take advantage of others for their own personal gain and at the expense of the American taxpayer.

FBI Special Agent in Charge Daphne Hearn commented, “The FBI will continue to work with our law enforcement partners and provide leadership and expertise when it comes to investigating sophisticated and complex criminal conspiracies. The FBI will aggressively pursue these cases to prevent criminals from lining their own pockets with precious taxpayer's dollars.”

Erick Martinez, Special Agent in Charge of IRS Criminal Investigation, stated, “Our agents investigated and worked together with our law enforcement partners in bringing to light a massive tax fraud scheme. Arman Eritsian’s guilty plea represents another major step forward in bringing this sophisticated network of scammers to justice.”

DEFENDANT   Case Number: Arman Eritsian Age: 35 San Diego, CA   CHARGES

Count 1: Title 18, United States Code, Section 371 B Conspiracy
Maximum penalties: 5 years custody; $250,000 fine; 3 years supervised release; mandatory restitution.

  PROGRESS OF CASES CHARGED AS PART OF
OPERATION TRILLIONS TROUBLE
Summary: As of May 22, 2014,
22 of 30 (non-fugitive) defendants have been convicted.  

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

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

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

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

INVESTIGATING AGENCY

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.    

United States Attorney Laura E. Duffy announced today that Jesus Manuel Rivera-Villareal, aka “Chuy,” was sentenced to 15 years in prison for his role as a leader in a family-run drug-trafficking organization (DTO) that recruited young women to smuggle controlled substances into the United States.

Rivera-Villareal, who was sentenced by U.S. District Judge M. James Lorenz, pled guilty to conspiracy to import methamphetamine, cocaine, and heroin.

In August 2011, agents with the Department of Homeland Security, Homeland Security Investigations (HSI) in San Diego, California, began investigating the Rivera-Villareal DTO for its involvement in importing large quantities of narcotics into the United States. Using four recruiters, Rivera-Villareal and an associate hired, at least, five young women from the Riverside area to smuggle 27.38 kilograms of cocaine, 6.16 kilograms of pure methamphetamine, and 2.99 kilograms of heroin into the United States. After hiring the women, Rivera-Villareal arranged for another associate to load up the narcotics into secret compartments of various cars during brief trips to Mexicali, Mexico. Once the cars were loaded with narcotics, Rivera-Villareal returned the cars to the women who would then drive them into the United States in exchange for money.

United States Attorney Duffy complimented the efforts of HSI and stated, “This investigation demonstrates the commitment of the U.S. Department of Justice to keep dangerous drugs off the streets of our community by aggressively prosecuting high-level leaders of drug trafficking organizations.”

DEFENDANT   Case Number: 13-cr-3920-L Jesus Manuel Rivera-Villareal Age: 32 Corona, CA   CHARGES

Title 21 U.S.C. §§ 952, 960, 963 Conspiracy to Import Controlled Substances

Maximum penalties: Mandatory Minimum of 10 years in prison; Maximum of Life in prison; Maximum $10 Million fine; 5 years of supervise release. 

  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.     

San Diego, CA – Two former Qualcomm sales directors have been charged with four counts of insider trading in an indictment unsealed today.

According to the indictment, Derek Montague Cohen and Robert William Herman were both directors of Qualcomm’s North America Sales Department. In addition to their day jobs, they were also part of an informal stock trading group, sharing tips and opinions about the stock market. According to the indictment, while still employed by Qualcomm, Cohen and Herman learned that Qualcomm (QCOM) was about to acquire Atheros Communications, Inc. (ATHR), then a publicly traded technology company headquartered in California. Based on this inside information—and just one day before Qualcomm officially announced the acquisition—Cohen and Herman placed more than $500,000 in trades on various Atheros securities, including stocks purchases and option contracts. At the same time, Cohen allegedly covered a short position that he maintained, in violation of company policy, on Qualcomm stock.

Shortly after Cohen and Herman placed their trades, the New York Times’ DealBook blog leaked news of the impending acquisition, causing shares of Atheros to dramatically increase in value. Cohen and Herman then sold their securities, realizing a total profit of nearly $230,000. The indictment alleges that Cohen and Herman later falsely claimed to in-house Qualcomm lawyers and staff that they had only traded after reading a leaked news item—even though trading records, combined with records of the New York Times Company, show that this was impossible.

United States Attorney Laura E. Duffy said: “Insider trading is a threat to public companies and investors alike. This indictment should send a message throughout Southern California and beyond: the Department of Justice will not tolerate the manipulation of the securities markets for cynical and selfish personal gain.”

In a parallel action, the Securities and Exchange Commission today announced civil insider trading charges against Cohen and Herman.

Michele Wein Layne, director of SEC’s Los Angeles Regional Office, said: “As alleged in our complaint, Qualcomm placed trust in these sales managers who proceeded to exploit the confidential information shared with them and conduct insider trading for their personal gain.”

Cohen was arrested Saturday at Los Angeles International Airport at the request of the Federal Bureau of Investigation after he returned from an overseas visit to the Philippines. Herman remains at large.

Cohen was arraigned on the indictment in federal court in Los Angeles this afternoon; he entered a not-guilty plea, and was to be released on a $100,000 bond. He is scheduled to appear before U.S. Magistrate Judge Ruben B. Brooks in San Diego on May 14, 2014 at 10:30 a.m., for a status hearing.

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

Robert William Herman

Age: 52 San Diego, CA   CHARGES

Counts 1-4:  Securities Fraud – 15 U.S.C. §§ 78j(b) and 78ff.  Maximum penalties: 20 years in prison, 3 years of supervised release, $3 million fine and a $100 special assessment for each count.

  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 commercial real estate developer and mortgage broker pleaded guilty today for his role in a $50 million securities fraud scheme.

Bradley Holcom, 55, entered his plea before U.S. District Judge Cathy Ann Bencivengo, admitting that he committed wire fraud in connection with the sale of approximately $50 million worth of promissory notes which he sold to investors located throughout the United States.

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 first-position lien on a specific piece of property he was developing.

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 investors to directly foreclose on the property to protect their investment. In addition, he 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 investors 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 part of his plea, Holcom admitted that his conduct caused approximately $50 million in losses to over 50 victims. Holcom faces a maximum prison sentence of 20 years. Holcom is scheduled to be sentenced on July 25, 2014.

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.

DEFENDANT Case Number: 13-CR-01723-CAB Bradley Holcom Age: 55 Escondido, CA   CHARGES

Title 18, United States Code, Section 1343 -- Wire Fraud
Maximum penalties: 20 years’ imprisonment, $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss (whichever is greatest), $100 special assessment, 3 years of supervised release, restitution, and forfeiture.

  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 former U. S. Marine Gunnery Sergeant admitted to submitting false lodging reimbursement requests to the Marine Corps from 2009 to 2011, totaling nearly $100,000. At the time, the defendant, Gunnery Sergeant Devin Pierre Alario was stationed at Marine Corps Base Camp Pendleton.

As detailed in his plea agreement, 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. Alario exploited this housing reimbursement benefit by falsely claiming reimbursement for rent that he never paid. Specifically, on 27 occasions from June 2009 through October 2011, Alario submitted false rental receipts that inflated the amount he was paying for rent, included a fictitious landlord, or contained a false address. To substantiate his lodging claims and conceal the fraud, Alario also submitted fake leases that he prepared. Typically, Alario’s false claims sought rental reimbursement for up to $3,800 per month. All told, he made $95,013.10 from his fraud.

Alario pleaded guilty to one felony count of making false claims against the United States.

In his plea agreement, Alario agreed to pay restitution to the U.S. Marine Corps in the full amount of the losses.

United States Attorney Duffy stated, “We will aggressively prosecute anyone who siphons much-needed taxpayer funds from our nation’s armed forces, including those who exploit their positions within the military to do so.”

Acting Special Agent in Charge Kevin F. Boyne of the Defense Criminal Investigative Service (DCIS) Western Field Office commented, “DCIS is committed to working with the Naval Criminal Investigative Service and other partner agencies to aggressively pursue those individuals who undermine the public trust and the efforts of the Department of Defense to support the warfighter and their families. Schemes motivated by greed betray the values of the Marine Corps and cannot be tolerated.”

The case has been assigned to U. S. District Judge Cathy Ann Bencivengo. The next scheduled court appearance is July 25, 2014 at 9:00 a.m. for sentencing.

DEFENDANT   Case Number: Devin Pierre Alario Age: 40 Temecula, CA   CHARGES

False claims, in violation of Title 18, United States Code, Section 287 - Maximum penalties: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.

  INVESTIGATING AGENCY

Defense Criminal Investigative Service
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.     

United States Attorney Laura E. Duffy announced today that former San Diego resident Laura Ortuondo pleaded guilty before Magistrate Judge William V. Gallo to one count of making false statements to federal agents concerning her role in a nearly five-year cover-up of a scheme to defraud La Jolla Bank in connection with a $1.8 million Small Business Administration (“SBA”) loan that her former boss sought from the bank.

According to court records, in 2008, Ortuondo worked for a local small business owner named Annand Sliuman (who previously pleaded guilty in a separate case). In her role as Sliuman’s assistant, Ortuondo, among other things, helped Sliuman manage loans and loan applications with La Jolla Bank. In May 2008, Ortuondo assisted Sliuman in fraudulently obtaining a $1.8 million loan from La Jolla Bank by knowingly submitting two fraudulent tax forms to the bank on Sliuman’s behalf, which falsely stated that Sliuman had satisfied certain tax liabilities. Sliuman and Ortuondo submitted the fraudulent records to the bank in order to make it appear that he was eligible for the SBA loan from the bank. La Jolla Bank was a San Diego County-based bank and a member of the Federal Home Loan Bank of San Francisco (“FHLB”). La Jolla Bank failed in 2010 and was taken over by the Federal Deposit Insurance Corporation (“FDIC”) after the bank ran up a debt of approximately $1 billion, including approximately $700 million in outstanding advances from the FHLB.

According to court records, after assisting Sliuman in defrauding La Jolla Bank, Ortuondo then undertook a nearly five-year long effort to thwart federal agents’ investigation of the fraud. The cover-up began in October 2008, when Ortuondo lied to investigators and claimed that she was unaware that she had submitted false documents to the bank. Then, shortly after lying about her knowledge of the fraud, Ortuondo assisted Sliuman in destroying Ortuondo’s personal laptop, knowing that it contained incriminating evidence of their fraud against the bank. To make matters worse, Ortuondo also convinced her husband at the time to lie to federal agents and a federal grand jury on her behalf, claiming – falsely – that he had destroyed her laptop.

In November 2011, federal agents interviewed Ortuondo again regarding her role in the fraudulent procurement of Sliuman’s loan from La Jolla Bank. Again, Ortuondo lied about her role in the fraud and the cover-up, falsely denying that she knowingly submitted fraudulent tax forms to the bank and falsely claiming that her ex-husband destroyed her laptop. In today’s guilty plea, Ortuondo admitted to making these false statements to federal agents with the intent to obstruct the federal investigation of the La Jolla Bank fraud.

“My office will not tolerate lies and deceit intended to obstruct our system of justice,” said U.S. Attorney Laura Duffy. “As this case illustrates, no matter how long it takes, we will not rest until the truth sees the light of day. I want to thank our agency partners for their dogged commitment to seeing this investigation through.”

“Lies and deceit will not earn you entry into SBA’s small business lending program,” said SBA Inspector General Peggy E. Gustafson. “Together with our law enforcement partners, the OIG will continue to ensure those who commit fraud are brought to justice. We would like to thank the U.S. Attorney’s Office for its dedicated leadership and professionalism throughout this investigation.”

Treasury Inspector General for Tax Administration Special Agent in Charge Rod Ammari stated, “Individuals that use fraudulently created IRS documents to further their schemes and then actively obstruct the Government’s investigation will be investigated to the fullest extent. This investigation is a great example of collaboration by all agencies involved to hold the perpetrators of this scheme responsible for their actions.”

Daphne Hearn, FBI Special Agent in Charge, San Diego Field Office, commented, “Fraudulent schemes like this undermine our country's economy and ultimately leave American taxpayers on the hook. The FBI will continue to work with our law enforcement partners to protect our precious tax dollars from waste, fraud and abuse.”

Michael P. Stephens, Acting Inspector General of the Federal Housing Finance Agency, said: “All individuals who engage in fraudulent behavior, whether they are the ring leader or an assistant, will be held accountable for their actions. We are proud to have worked with our law enforcement partners on this case and are again pleased to see justice served.”

Matthew Alessandrino, FDIC Assistant Inspector General for Investigations, stated, “The FDIC Office of Inspector General is pleased to have joined the Department of Justice and our law enforcement colleagues in conducting this investigation. We are firmly committed to joint efforts such as this one in the interest of ensuring integrity in the banking system and helping to prevent losses to the Deposit Insurance Fund.”

Ortuondo is scheduled to be sentenced by Judge Anthony J. Battaglia on July 25, 2014 at 9 a.m. Her guilty plea is pending final acceptance by Judge Battaglia. Sliuman previously pleaded guilty in a separate case to bribing an officer of La Jolla Bank in exchange for the officer approving loans on his behalf, and admitted his role in the fraud and obstruction of justice conspiracy with Ortuondo. Sliuman is scheduled to be sentenced by Judge Battaglia in his case on September 26, 2014.

DEFENDANT   Case Number: 13CR3879-AJB Laura Ortuondo Age: 33 Cupertino, CA    CHARGES

False Statement to a Federal Agent, in violation of Title 18, United States Code, Section 1001
Maximum penalties: 5 years’ imprisonment, $250,000 fine.

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DEFENDANT   Case Number: 13CR3879-AJB Annand Sliuman Age: 33 Spring Valley, CA    CHARGES

Bank bribery, in violation of Title 18, United States Code, Section 215(a)(1)
Maximum penalties: 30 years’ imprisonment, $1,000,000 fine

  INVESTIGATING AGENCY

Small Business Administration – Office of the Inspector General
Department of Treasury – Inspector General for Tax Administration
Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Federal Deposit Insurance Corporation – 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.     

Howard Willie Carter, II, a San Diego resident, was sentenced yesterday by U.S. District Judge Barry Ted Moskowitz to 168 months in federal prison, followed by 10 years of supervised release, based on Carter’s conviction for receipt of child pornography.

Carter, who has been in custody since his arrest by the Federal Bureau of Investigation on October 17, 2012, pled guilty on November 14, 2013.

According to court documents, in August 2012, Carter was receiving and viewing images of minors engaged in sexually explicit conduct. After a forensic review of his computer, it was discovered that he possessed well over 600 illegal images and videos, with the majority of the images involving minors under the age of 12. The forensics examination of the computer conducted by the San Diego Regional Computer Forensic laboratory (RCFL) revealed that Carter attempted to upload one of those videos to YouTube to be viewed by others.

At sentencing yesterday, Judge Moskowitz stated that given Carter’s past criminal history and his conduct in the current case, Carter appeared to be a danger to the community and a significant sentence was warranted.

“Unfortunately, child exploitation is an epidemic in this nation,” said U.S. Attorney Laura Duffy. “Howard Carter’s actions highlight the dangerousness of this type of activity in our community. I hope this long sentence will prevent him and others from exploiting a victim in the future.”

FBI Special Agent in Charge Daphne Hearn, commented, “Each image Mr. Carter possessed represented the victimization of a child. We hope today's sentencing sends a clear message to anyone involved in the online sexual exploitation of a child, that the FBI will not tolerate the victimization and destruction of our children's future. We will remain vigilant and committed to removing sexual predators from our children's lives.”

This case stems from an investigation by the Federal Bureau of Investigation.

DEFENDANT   Case Number: 12CR4191-BTM Howard Willie Carter Age: 37 San Diego, California   CHARGES

Title 18, United States Code, Section 2252(a)(2) – Receipt of Child Pornography

  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 Angel Garcia Hernandez pled guilty to smuggling labels, tags and buttons for counterfeit Levi jeans Tuesday before U.S. Magistrate Judge Karen S. Crawford. In pleading guilty, the defendant admitted that on December 28, 2012, he smuggled counterfeit Levi Strauss & Co. labels, buttons and tags, enough to make $192,000 worth of counterfeit jeans.

Within an hour of Garcia’s border crossing, another defendant, Amadeo Calderon Valdivinos, also attempted to smuggle counterfeit Levi Strauss & Co. labels, buttons and tags into the United States through the San Ysidro Port of Entry. Calderon had enough labels to manufacture $128,000 worth of counterfeit jeans. Examination of the labels smuggled by both Garcia and Calderon by representatives of Levi Strauss & Co. revealed the same defects in the labels, suggesting that they came from the same source. According to court filings, although Garcia and Calderon both denied knowing each other at the time they crossed the border with the counterfeit labels, their cell phone records showed numerous calls between them. Calderon pled guilty to smuggling and was sentenced to time served (four months).

Sentencing for Garcia Hernandez is set for August 1, 2014, at 10:00 a.m. before the Honorable Barry Ted Moskowitz.

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

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

  INVESTIGATING AGENCY

Department of 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.     

SAN DIEGO – Former San Diego Community Bible Church Pastor Barry Minkow, a prolific fraudster whose crimes and claimed rehabilitation landed him on 60 Minutes and the cover of Fortune Magazine, was sentenced today to five years in prison for embezzling more than $3 million from his own parishioners and then concealing the funds from the Internal Revenue Service.

Minkow, who pleaded guilty in January, has admitted that he tricked a widower into making a $75,000 donation for a hospital in the Sudan to honor his wife after she died of cancer. Only there was no hospital, and Minkow pocketed the money. He also admitted, among others things, that he stole $300,000 from a widowed grandmother who is trying to raise her teenage granddaughter.

“It doesn’t get much worse than that in the world of non-violent crime,” said U.S. District Judge Michael Anello in handing down the maximum sentence. The judge ordered that term to be served after Minkow completes the time he has left on his current prison term for another financial crime.

During the sentencing hearing today, the widower, Brett Wright, was one of eight victims who addressed the court, describing their suffering over Minkow’s betrayal. Wright recalled Minkow’s duplicity in comforting his family through his wife’s illness while plotting to steal the honorarium upon her death. “He was so adept at showing care and concern for our situation,” Wright told the court. “But it was all a lie.”

Minkow even sent Wright and his daughter bogus thank you emails, purportedly from the charity. The message described the gift as worthy of “applause from heaven.” He signed the email, “Love in Christ, Barry.” An email forwarded by Minkow to Wright’s daughter said, “I believe we are honoring your mom’s heart directly helping the sick and needy in Darfur through this hospital construction.”

Minkow pleaded guilty in January to fraud charges, admitting to a litany of improper conduct spanning a decade, including opening unauthorized bank accounts on behalf of the church, forging signatures on the SDCBC checks, using funds drawn on legitimate church accounts for his personal benefit, and charging unauthorized personal expenses on church credit cards. Minkow also confessed to diverting SDCBC member donations for his own benefit and embezzling money intended as church donations.

“Barry Minkow is among the worst kind of predators,” said U.S. Attorney Laura Duffy. “He gained the affection and trust of his victims from the pulpit and then stole not only their money, but their faith in humanity, the clergy, the church, and themselves. This sentence will keep him from exploiting another victim for a while.”

FBI Special Agent in Charge Daphne Hearn commented, “Mr. Minkow violated the faith and trust of his congregation to unjustly enrich himself. The FBI is committed to pursuing those individuals who hide behind a facade of honesty and integrity, only to use their position to unlawfully enrich themselves.”

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented: “Barry Minkow skillfully operated as a predator, using his trusted position as pastor at San Diego Community Bible Church and Fraud Discovery Institute to fraudulently obtain over $3 million for his own benefit. His concealment of his diversion from the IRS, in an attempt to reduce his tax obligations, further displays his uncanny ability to deceitfully use every mechanism to line his own pockets. Today's sentencing reinforces IRS Criminal Investigation's commitment to investigate those who will stop at nothing to perpetuate financial and tax crimes.”

Bilking money from SDCBC is just the latest fraud scheme perpetrated by Minkow. In December 1988, Minkow was convicted of running an elaborate Ponzi scheme related to his ZZZZ Best carpet cleaning enterprise, a NASDAQ-traded entity. In that case, Minkow bilked banks and investors of millions of dollars, for which he was sentenced to 25 years in prison. While incarcerated, Minkow became involved in the Christian ministry, and upon his release in 1995 after having served approximately seven and a half years, he went to work at the Church at Rocky Peak in Chatsworth, California.

In 1997, SDCBC gave the defendant a second chance, a “do-over” of sorts. Soon thereafter founded the Fraud Discovery Institute (“FDI), a for-profit entity, which allegedly was aimed at the detection and prevention of fraudulent business practices. Through the work of FDI, Minkow soon garnered national media attention as a fraud detection expert, and his turn-around story was profiled on 60 Minutes in August 2006.

Yet even as he touted his redemption to gain the trust of parishioners, he began to steal money from the church and congregation. He used the money to found FDI and to fund what he hoped would be a Hollywood blockbuster movie about his life. He insisted that he star in the movie alongside Hollywood actors James Caan and Ving Rhames.

And, even while working through FDI to detect fraud, Minkow was engaged in manipulating the stock prices of the companies he was investigating. Most prominently in 2009, Minkow released a report accusing major homebuilder Lennar of massive accounting irregularities and fraud. In the wake of this report, Lennar’s share price was sliced in half – from 11.57 a share to $6.55 a share. According to court records, unbeknownst to the public, Minkow shorted Lennar stock in advance of the issuance of his report. Based on these transactions, Minkow was charged with conspiracy to commit securities fraud, and on March 30, 2009, he pled guilty in Miami to conspiring to manipulate Lennar’s share price, for which he was sentenced to serve five years in prison and to pay $583.5 million in restitution to Lennar. Minkow is currently serving that sentence. The facts of the current case “show a professional con man expertly plying his craft in an effort to line his pockets with millions of dollars in order to fund his own Hollywood movie,” prosecutor Mark Pletcher wrote in a sentencing memo.

“The facts show a predator from the pulpit ravaging those widowers and elderly, among others, that he convinced to trust him most intimately. This crime went far beyond money and greed, ultimately consuming the congregants of SDCBC physically and emotionally.

“In pursuit of the personification of Barry Minkow, nothing was sacrosanct,” Pletcher wrote. “From counseling a grieving family and then stealing the $75,000 honorarium donated in the deceased’s memory, to preying on a single, elderly woman raising her granddaughter, defendant used every deceit imaginable to slowly bleed SDCBS as an institution and its congregants personally of every last dollar.”

A restitution hearing was set for May 19 at 11:30 a.m.

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DEFENDANT   Case Number: 14-CR00153 Barry Minkow Age: 48 formerly of Poway, CA   CHARGES

Conspiracy To Commit Mail Fraud, Wire Fraud, Bank Fraud and To Defraud the United States, in violation of Title 18, United States Code, Section 371
Maximum penalties:  Five years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.

  INVESTIGATING AGENCY

Federal Bureau of Investigation
IRS 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, CA – Thirty-five people, many of whom are alleged members and associates of the West Coast Crips criminal street gang, are charged in complaints unsealed today with participating in three drug- and gun-related conspiracies, including one that alleges a racketeering enterprise with execution-style murders, a takeover-style robbery, high-speed chases, witness intimidation and other acts of violence.

At the same time, the District Attorney’s office will be filing charges against 22 defendants in a parallel investigation involving crimes such as robbery, drug sales, and illegal firearm possession and sales.

This morning before dawn, a contingent of more than 500 local, state and federal law enforcement officials hit dozens of locations around the county looking for defendants, guns and drugs. Thirty federal defendants and 19 state defendants are in custody as of 3 p.m. today, and during searches yesterday and over the course of the yearlong investigation, authorities have seized more than 16 firearms, including sawed-off shotguns, pistols and revolvers, many rounds of ammunition plus 4.5 pounds of methamphetamine, 4,400 pounds of marijuana and $300,000 in counterfeit bills.

Five federal defendants are still at large, including Randy Alton Graves, the lead defendant in the racketeering case. Graves is considered armed and dangerous and believed to be driving a baby blue Mercedes with paper license plates. Anyone with information is asked to contact the FBI at 858-320-1800.

According to the racketeering complaint, Graves was overheard on court-authorized wiretaps discussing his connections to past killings and his status as a “G,” or senior member. “I got multiples on my jacket…I don’t think it’s too many (expletives) as highly decorated the way I am. I know I got 5, 6 bodies…I got 35 years in and ain’t been around here flexing my muscle cause I’m a G and everybody respects me.”

In another call quoted in the complaint, Graves expressed fear that a female gang associate was going to talk to police about a murder committed by West Coast Crip members. “You run your mouth, you die, period. You run and hide, we get the next closest thing to you, period, no ifs ands or buts.”

The federal racketeering statute known as “RICO” historically has been used to prosecute mobsters and organized crime, but federal prosecutors have been using the statute on street gangs in recent years because they are increasingly acting as organized, sophisticated criminal enterprises.

The federal RICO complaint charges 17 alleged members and associates of the West Coast Crips and describes a criminal enterprise that has committed five murders, numerous attempted murders, armed robberies, high speed chases and other violent crimes, as well as prostitution, money laundering and importation and distribution of methamphetamine, cocaine and marijuana.

Two other complaints charge 12 and 6 people, respectively, with Methamphetamine trafficking conspiracies and firearms offenses. The 12-defendant complaint alleges that for at least a period of time last fall, a methamphetamine source-of-supply was using El Cajon Valley High School students to smuggle methamphetamine into the United States from Mexico. The six-defendant complaint alleges that both WCC and 5/9 Brim gang members worked together to conduct their methamphetamine and other trafficking activities.

The five murders alleged in the RICO conspiracy equate to about ONE-THIRD of all gang-related murders in the city of San Diego in 2013 – and about 13 percent of the overall murder tally in the entire city.

“Today’s RICO charges can be viewed as nothing less than a virtual wrecking ball crashing into the ruthless, ultra-violent West Coast Crips, a gang that has been a scourge on San Diego communities for far too long,” said U.S. Attorney Laura Duffy. “This violent gang culture has spilled over into our communities with public acts of violence, high-speed chases and the recruitment of kids to be drug couriers. With these charges, we are restoring some peace to our residents.”

“Working cooperatively with our law enforcement partners, we shut down a significant arm of this violent street gang today, pulling dozens of its members off the streets in one coordinated sweep,” District Attorney Bonnie Dumanis said. “The DA’s Gangs Division is proud to participate in targeted operations like this one. It’s an approach that’s working and is disrupting some of San Diego's most violent gangs.”

San Diego FBI Special Agent in Charge, Daphne Hearn, commented, “Today's arrests and charges are the result of two long term multi-agency investigations conducted by two FBI Safe Streets Task Forces, specifically the Violent Crimes Task Force - Gang Group and the East County Regional Gang Task Force. Dedicated personnel from federal, state and local law enforcement agencies worked in unison to go after violent street gang members and associates who pose a serious threat to the safety and security of our communities. The FBI will continue to work with our law enforcement partners to restore safety and security to our neighborhoods."

“This is a true collaborative effort by all involved and I am extremely proud of the investigators who made this happen. Many of the offenders arrested today have gang ties to the City of San Diego. This operation combined with continued enforcement will have a positive impact on all of our neighborhoods.”

“This case perfectly demonstrates how agencies share information and work together to increase the reach and depth of their individual investigations. The number of defendants indicted, the variety of the charges filed, the quantities of the drugs and number of firearms seized, and the stiff prison sentences many defendants will face if convicted are the result of committed teamwork,” said Carlos A. Canino, Special Agent in Charge, Bureau of Alcohol, Tobacco Firearms and Explosives, Los Angeles Field Division.

The West Coast Crips gang has been around for more than 30 years and claims several hundred members. The gang claims territory with borders roughly defined by Interstate 94 to the north, National Avenue to the South, Interstate 5 on the West and Interstate 15 on the east.

Membership can be gained through family connections. Or, some are inducted through acts of violence. All are expected to put in “work,” which in gang jargon means committing criminal acts when asked to.

The West Coast Crips is a hierarchical organization with seniority based on a member’s age. The oldest are referred to as Original Gangsters, or OGs, mostly in their 40s and 50s. They call the shots. They supply younger gang members with guns and drugs and let the youngsters to their dirty work.

The “homies” are in their 30s and early 40s. They’ve already put in the “work” for the gang and have earned the trust of fellow gang members.

The so-called “babies” are the youngest members, in their 20s and 30s. Many create cliques within the larger gang, and maintain a distinct identity. “3-Babiez” is one of the cliques of 20-somethings. The younger generation typically receives drugs from more senior gang members and deals to street users and distributors. This generation also manages prostitutes and enforces discipline on gang members and associates.

The following are key acts of violence alleged in the RICO complaint:

• Three members of the “3-Babiez” clique - Marcus Anthony Foreman, Wilbert Ross and Terry Carry Hollins – were involved in the fatal shooting of a random Hispanic gang member as revenge for the October 31, 2012 carjacking of West Coast Crip with a .40-caliber handgun.
  According to the complaint, a Crip approached the victim, Andres Caldera, and asked for a cigarette. When Caldera asked where the man was from, he yelled, “I am from West Coast,” pulled out a .40-caliber handgun and fired a single shot at Caldera’s face.


• A few days after that murder on December 2, 2012, the same trio of defendants robbed a Logan Heights business in takeover style, forcing employees onto the floor and holding guns to their heads, the complaint said. During a police chase, the trio ditched their getaway car and the gun, but officers arrested all three and recovered the gun - which happened to be the same gun used in the Oct. 31 murder.


• The complaint says that on April 6, 2013, West Coast Crip member Meashal Fairley was murdered in front of a San Diego nightclub during an argument over Fairley’s suspected cooperation with law enforcement.


• The third killing described in the complaint occurred in the parking lot of a fast food restaurant on October 25, 2013. Defendant Ross had a dispute with a person identified in the complaint as A.H. They set up a meeting at the restaurant, supposedly to resolve the dispute, which was over a rental car. But upon arrival, A.H. was attacked by a group of West Coast Crips led by Ross. In self-defense, A.H. fatally stabbed one of his attackers, Jeffrey “JJ” Rees, the complaint said.


• Chyrene Borgen, a West Coast Crip associate, was gunned down at a Halloween party early on November 1, 2013, after she had criticized the “3-Babiez” for what she believed was their involvement in Meashal Fairley’s murder, the complaint said. Following this murder, several defendants posted “selfies” on Facebook from the murder scene. One of the defendants is wearing a T-shirt that said: “3 BABIEZ, YELLOW TAPE GANG, ANYBODY KILLA.” About the same time, Cook appeared on a cell phone video along with other members of the 3-Babiez clique in which, as a group, they boasted about how they are willing to kill anybody, including women.


• A pregnant woman and West Coast Crips member, who is identified in the complaint by the initials K.S., was shot by a 3-Babiez member because she, too, dared to criticize the gang for the murders of her friends Meashal Fairley and Chyrene Borgen, the complaint said. K.S.and her baby survived the shooting, but gang members were still looking to kill her in the hospital.


• According to the complaint, West Coast Crips member Paris Hill was murdered by fellow Crips for giving a statement to police about the Rees gang-related murder. Within days of Hill’s murder, the gang was already putting hits out on witnesses, the complaint said.

This case is the latest in a series of large-scale, multiagency crackdowns on street gang activity in San Diego County neighborhoods. Including today’s indictments and complaints, more than 350 people, many of them documented gang members and associates, have been charged in a number of major federal gang prosecutions since January of 2012, with scores of guilty pleas entered.

This kind of law enforcement action would not have been possible without our partners from the FBI’s East County Regional Gang Task Force and the Violent Crimes Gang Task Force. Participating agencies include the FBI, the San Diego Police Department’s gang unit; the ATF; the El Cajon Police Department; the La Mesa Police Department; San Diego County Probation; the IRS; U.S. Postal Inspectors; the San Diego County Sheriff’s Department; and the California Highway Patrol.

This investigation was coordinated by an Organized Crime Drug Enforcement Task Force (OCDETF). The OCDETF program was created to consolidate and coordinate all law enforcement resources in this country's battle against major drug trafficking rings, drug kingpins, and money launderers.

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DEFENDANT   Case Number: 14MJ1494 Randy Alton Graves  Age: 50 El Cajon, CA Darnell James Graves-Butler  Age: 27 El Cajon, CA Dameon Deshawn Shelton Age: 40 National City, CA Leon Franklin Age: 39 San Diego, CA Brandon Lamar Whittle Age: 29 San Diego, CA Andre Lamar Harrison Age: 44 San Diego, CA Cleotha Young   Age: 36 San Diego, CA Sharod Levale Jackson  Age: 45 San Diego, CA Terry Carry Hollins Age: 32 San Diego, CA Jermain Gerald Cook   Age: 29 San Diego, CA Donald Eugene Bandy   Age: 25 San Diego, CA Marcus Anthony Foreman Age: 26  San Diego, CA Wilbert Ross   Age: 31 Chula Vista, CA Brenda Rodriguez Age: 23 San Diego, CA Gaquayla Aunicia Lagrone Age: 31 San Diego, CA Solcamire Castro-Hernandez Age: 28 San Diego, CA Luis Salgado-Viscarra    Age: 26  Spring Valley, CA       SUMMARY OF CHARGES

Conspiracy to Conduct Enterprise Affairs Through a Pattern of Racketeering Activity, in violation of Title 18, U.S.C. Section 1962 (d)

Maximum Penalty, based on the underlying racketeering crimes: Up to life in prison.

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DEFENDANT   Case Number: 14MJ1492 David William Centrone   Age: 31  El Cajon, CA Alexis Rubeiry Beltran-Rodriguez Age: 18 Unknown Terry Gerald Woods Age: 53 El Cajon, CA Reuben Carlton Morales Age: 27 El Cajon, CA Rene Faburrieta  Age: 33  Long Beach, CA Steven Luis Figueroa Age: 25 Long Beach, CA Anthony Gilbert Garcia Age: 31 El Cajon, CA Blake Austin Tenney  Age: 21 El Cajon, CA Tima Jeanmarie Gates Age: 40 Spring Valley, CA Jorge Aguilar-Valdez Age: 19  El Cajon, CA Dean Fredrick Malzahn Age: 51 El Cajon, CA Mark Manuel Espinosa    Unknown SUMMARY OF CHARGES

Conspiracy to Distribute Methamphetamine, in violation of Title 21, U.S.C. Sections 841 (a)(1) and 846
Maximum Penalties, based on alleged drug amounts: Up to life in prison; 10 year mandatory minimum.

Carrying a Firearm During and in Relation to Drug Trafficking Crime, in violation of Title 18, U.S.C. Section 924 (c)(1)
Maximum Penalties: Five year mandatory minimum penalty, which must be run consecutive to any other penalty imposed in the case (for the first 924(c) conviction); 25 year mandatory minimum penalty, which must be run consecutive to any other penalty imposed in the case (for each subsequent 924(c) conviction).

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DEFENDANT   Case Number: 14MJ1491 William Eugene Wash Age: 27 Lemon Grove, CA Jessie Smith  Age: 30 San Diego, CA David Rojas Age: 21 San Diego, CA Terrence Mack Carter  Age: 29 El Cajon, CA Terrell Davon Guss Age: 22 Spring Valley, CA Kevin Darryl Adell  Age: 33 San Diego, CA   SUMMARY OF CHARGES

Conspiracy to Distribute Methamphetamine, in violation of Title 21, U.S.C. Sections 841 (a)(1) and 846
Maximum Penalties, based on alleged drug amounts: Wash, Smith and Rojas: Up to life in prison; Carter, up to 40 years in prison.

Possession of Marijuana with Intent to Distribute, in violation of Title 21, U.S.C. Section 841 (a)(1)
Maximum Penalties, based on alleged drug amounts:  Up to 5 years in prison.

Carrying a Firearm During and in Relation to Drug Trafficking Crime, in violation of Title 18, U.S.C. Section 924 (c)(1)
Maximum Penalties: 5 year mandatory minimum penalty, which must be run consecutive to any other penalty imposed in the case.

Felon in Possession of a Firearm, in violation of Title 18, U.S.C., Sections 922(g)(1) and 924(a)(2)
Maximum Penalties:  10 years in prison.

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INVESTIGATING AGENCY

East County Regional Gang Task Force
Violent Crimes Gang Task Force
Task Force agencies include: FBI
San Diego Police Department’s gang unit
ATF
El Cajon Police Department
La Mesa Police Department
San Diego County Probation
IRS
U.S. Postal Inspectors
San Diego County Sheriff’s Department
California Highway Patrol.

*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.     

SEE OFFICIAL FBI NEWS RELEASE

The East County Regional Gang Task Force is seeking the public’s assistance in locating Randy Graves, age 51, of El Cajon, California. Graves is wanted on federal racketeering charges and considered to be armed and dangerous. Graves is approximately 6’0” feet tall, 205 pounds, black hair, and brown eyes.

Graves is known to drive a 2007 Mercedes Benz, SL 600 light blue in color with paper license plates.

Anyone with information concerning the whereabouts of Graves is asked to contact the FBI at telephone number (858) 320-1800. Graves should be considered armed and dangerous.

*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 – Marc Alan Chase, the proprietor of a La Jolla-based luxury car dealership, pleaded guilty today to eight misdemeanor counts of campaign finance crimes, including conspiracy, aiding and abetting contributions by a foreign national and making a conduit or “straw” contribution in connection with a federal campaign. He faces up to eight years in prison and $800,000 in fines for his conduct.

At the same hearing, two of Chase’s corporations – South Beach Acquisitions, Inc., and West Coast Acquisitions, Inc. – consented to the filing of felony charges of conspiracy, and entered into deferred prosecution agreements with the government.

As part of his plea agreement, Chase admitted that he conspired with Jose Susumo Azano Matsura, Ravneet Singh, Ernesto Encinas and Marco Polo Cortes (all of whom were indicted on February 18, 2014) to make several illegal campaign contributions in connection with various campaigns for elective office during the 2012 primary and general election cycles. Chase confessed to helping make a series of donations by Azano, a foreign national who by law cannot provide financing to American political campaigns. In addition, Chase admitted to facilitating a conduit contribution in connection with a federal campaign—which is illegal even if the source is a citizen.

In acknowledging his participation in the conspiracy, Chase admitted that he acted to cover up the illegal activity, ensuring that Azano’s name did not appear in any public record or filing.

In addition, Chase detailed one of the earliest incarnations of the illegal campaign finance scheme, admitting that, in 2011, Azano told him to recruit friends and relatives so that each would make the maximum possible donation to “Candidate 1,” a candidate for the office of mayor of San Diego during the 2012 primary election cycle. After giving Chase this instruction, Azano “caused one of his employees” to hand Chase approximately $10,000 in cash. Chase admitted that, just as Azano had instructed him, he distributed the cash among employees, contractors and acquaintances, asking them to make the maximum allowable donation to Candidate 1. Chase told many of them that he was reimbursing them with Azano’s money.

Also as part of the plea, Chase admitted to making three large contributions totaling $180,000 in September and October 2012. According to the plea agreement, Azano told Chase to make the contributions and promised to provide financing for them. In particular, on October 2, 2012, Azano wrote a $380,000 check to “Symbolic,” which Chase deposited into one of his corporations’ bank accounts. Chase admitted that, as agreed with Azano, $180,000 of this money would be used to make campaign contributions in connection with the campaigns of “Candidate 2,” a candidate for federal office, and “Candidate 3,” who was running for mayor. The remaining $200,000 was used to pay for one Andy Warhol serigraph, depicting dollar signs, which Chase had previously sold to Azano.

Incorporated into Chase’s plea agreement was a chart detailing the transactions in September and October 2012, which is reproduced in an appendix to this news release.

Chase’s sentencing hearing has been set for November 13, 2014 at 1:30 p.m. before U.S. Magistrate Judge David H. Bartick.

Plea Agreement (click HERE)

Information 14CR0926 (click HERE)

 

DEFENDANT   Case Number:

Marc Alan Chase

Age: 52 Solana Beach, CA   CHARGES

Count 1:  Conspiracy to Commit Offenses against the United States – 18 U.S.C. § 371.
 
Count 2-5 and 7-8:  Contribution by a Foreign National – 2 U.S.C. §§ 437g(d)(1)(A)(ii) and 441e(a)(1)

Count 6:  Conduit Contribution – 2 U.S.C. §§ 437g(d)(1)(A)(ii) and 441f
Maximum penalties for all counts, total: 8 years in prison (one year per count), 1 year of supervised release, and $800,000 in fines ($100,000 per count)

  INVESTIGATING AGENCIES

Federal Bureau of Investigation

Internal Revenue Service, Criminal Investigation

San Diego Police Department

*Charging documents, including indictments and informations, 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 - Sven Erik Ulsteen, a former executive and shareholder of a Channel Islands company named Anturion Limited, pled guilty today to fraudulently using counterfeit and forged securities to take over $2 million from investors.

Ulsteen also admitted that he attempted to conceal this income from the Internal Revenue Service, and in so doing defrauded the United States out of more than $200,000 in taxes. The defendant tendered his guilty plea before U.S. Magistrate Judge Mitchell Dembin, who had previously ordered Ulsteen held on $1 million bond because of the substantial risk that Ulsteen would flee to his native Norway during the pendency of this case.

Ulsteen has been in custody since December 16, 2013, when he left his San Diego home and attempted to leave the country for Norway. Agents from the Federal Bureau of Investigation intercepted Ulsteen at the airport and arrested him on a criminal complaint filed by the FBI’s San Francisco Field Office that alleged Ulsteen had used counterfeit and forged Anturion securities on at least six instances to defraud investors.

At today’s hearing the defendant admitted that between November 2012 and December 2013, he solicited investors from the United States to purportedly purchase shares of stock from, or lend money to, Anturion. At the same time, Ulsteen also created counterfeit and forged “subscription agreements” and “loan” documents that purported to be authentic securities of Anturion. The defendant presented these counterfeit securities to investors in order to convince them to part with money, and with the intent to deceive investors into believing that the securities were legitimate and that their funds were going to Anturion.

Ulsteen’s scam defrauded investors throughout California out of more than $2 million, which he then directed to accounts in the name of Anturion and another company that Ulsteen controlled. The defendant admitted that instead of transferring these investments and loans to Anturion, he took the monies for himself and used them to pay for personal expenses and to wire funds to bank accounts overseas.

Multiple investors who attempted to buy Anturion shares from Ulsteen never received them. The only Anturion shares victims received from the defendant came from his own personal holdings, and not from the company as they had been promised. Investors only received these shares long after they had paid Ulsteen for their supposed purchases, and after a lawyer representing multiple investors sent a letter to Ulsteen accusing him of fraud. Individual investors who believed they were loaning funds to Anturion either never received their repayment as promised, or never received the Anturion shares to which their loan repayments were supposedly convertible.

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 from the sale of his Anturion stock. And several times the IRS notified Ulsteen that he needed to file a federal income tax return and that he owed taxes, penalties and interest. Despite these notifications Ulsteen refused to file a federal income tax return for any of these years, and took several steps to prevent the IRS from learning how much income he had earned. These included depositing investor funds into the nominee company accounts he controlled, payment of his personal expenses out of these company accounts, and providing incomplete and inaccurate information to a tax return preparer in order to create false federal income tax returns.

Ulsteen remains in custody and is scheduled to be sentenced June 30, 2014, at 2 p.m. before U.S. District Judge M. James Lorenz.

The charges were announced by United States Attorney for the Southern District of California Laura E. Duffy, and by United States Attorney for the Eastern District of California Benjamin B. Wagner, whose office is handling the prosecution in San Francisco. The timely arrest of Ulsteen by the FBI before he could leave for Norway – a country which will not extradite its own nationals to the United States – and the prompt resolution of these fraud and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation.

DEFENDANT   Case Number: 14cr923-L and 14cr924-L Sven 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
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.     

Today United States Attorney Laura E. Duffy announced the arraignment and guilty plea of Eric S. Levine 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 of nearly $2 million. Importantly, he also had access to, and control over, Beth El’s bank accounts, credit card accounts, and bookkeeping records. Levine admitted today that starting in 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. In total, Levine admitted misappropriating $394,872.99 from the synagogue over those five years.

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, which included the following: Trips to Mexico, Las Vegas, and Canada; stays at the Mandalay Bay and Bally’s in Las Vegas, the Hilton Waikiki, the Grand Mayan Los Cabos and La Costa Resort Spa; monthly membership and regular $1,400 charges for a personal trainer at 24 Hour Fitness; and tickets from StubHub. Levine was able 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.

As part of his plea, Levine will be required to pay Congregation Beth El back the funds he stole. He will next appear in court on June 27, 2014, at 9 a.m. before U.S. District Judge Dana M. Sabraw for sentencing as well as a hearing to determine the amount of restitution.

DEFENDANT   Case Number: 14CR0879-DMS Eric S. Levine Age: 36     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

*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 – A second defendant was charged today in connection with a sophisticated cross-border tunnel discovered by the San Diego Tunnel Task force last week.

Gilberto Quezada-Madrid made his first appearance in federal court this morning on tunnel-related charges, including Use of Cross-Border Tunnel and Conspiracy to Maintain a Drug Involved Premises. The government moved for detention based on risk of flight, and U.S. Magistrate Judge David Bartick set a detention hearing for Thursday, April 10, at 9:30 AM.

According to the complaint, agents with Homeland Security Investigations, who are part of the task force, connected Quezada-Madrid with suspected tunnel locations in San Diego and Tijuana, including numerous sightings during surveillance dating back to 2013.

Most recently, on March 31, 2014, agents observed as the defendant arrived at the San Diego location - a warehouse at 10145 Via de la Amistad. The next day, on April 1, agents found a concealed cross-border narcotics tunnel inside the Via de la Amistad warehouse and learned that the entry point was inside a mini-storage facility named Mini Bodegas de la Frontera in Tijuana, about 800 feet south of the international border.

Two days later, members of the Tunnel Task Force, in collaboration with enforcement counterparts in Mexico, uncovered a second sophisticated smuggling tunnel connecting a commercial building in San Diego's Otay Mesa industrial park with a warehouse in Tijuana.

The first tunnel, approximately 600 yards in length, was discovered Tuesday evening based on evidence developed during a five-month probe by the task force. The passageway – equipped with lighting, a crude rail system and wooden trusses – exited inside the Via de la Amistad warehouse. The entrance was accessed down a 70-foot shaft secured by a cement cover. The builders had installed a pulley system at the tunnel's U.S. entrance to hoist contraband up into the warehouse. The warehouse itself was filled with a variety of children's toys, including plastic three-wheelers, and boxes of televisions, similar to the merchandise found in the warehouse linked to the smuggling tunnel uncovered locally in October 2013.

Task force investigators arrested a 73-year-old Chula Vista woman for allegedly overseeing the logistics at the Via de la Amistad warehouse. She is charged in a criminal complaint with conspiring with others to maintain a drug involved premises.

The second tunnel was detected Thursday morning as investigators from Mexico, in close coordination with special agents from U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), tracked leads related to the passageway uncovered Tuesday. The second passageway, which originated inside a warehouse located at 10005 Marconi Drive, was the more sophisticated of the two. Stretching for more than 700 yards, it was equipped with a multi-tiered electric rail system and an array of ventilation equipment.

The two tunnels are the sixth and seventh cross-border passageways discovered in the San Diego area in less than four years. If laid end-to-end, the seven tunnels would extend a distance of nearly two miles.

The ongoing investigations into the two tunnels are being conducted by the agencies that make up the San Diego Tunnel Task Force, including HSI; U.S. Customs and Border Protection (CBP) - Border Patrol; the DEA; and the U.S. Attorney's Office. Additional support for this investigation has been provided by CBP's Office of Field Operations.

DEFENDANT   Case Number: 14mj1274 Gilberto Quezada-Madrid Age: 26 City: Tijuana   CHARGES

Use of a Cross Border Tunnel in violation of 21 U.S.C. Sections 555 and 2 Maximum Penalties: 20 years in prison.

Conspiracy to Maintain A Drug Involved Premises in violation of 21 U.S.C. Sections 856 (a)(1) and 846 Maximum Penalties: 20 years in prison.

  INVESTIGATING AGENCY

San Diego Tunnel Task Force

*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 - April 6-12, 2014 is National Crime Victims’ Rights Week – a time for law enforcement, prosecutorial agencies, victim advocates and community members to come together and support victims of crime.

Enforcing victim’s rights protects victims, enhances public safety and fosters public confidence in our criminal justice system. Agencies that partake in this Tribute and those who attend will acknowledge and honor crime victims nationwide.

The Victim Assistance Coordinating Council (VACC) and the United States Attorney’s Office in San Diego, CA invite you to attend the 25th annual Candlelight Tribute for Crime Survivors on Monday, April 7, 2014 at 5:30 p.m.

The Tribute will be held at the San Diego Police Officers’ Association Hall, 8388 Vickers St., San Diego, CA 92111. The keynote speaker will be San Diego County District Attorney Bonnie M. Dumanis.

The Tribute is a time to memorialize victims and to hear inspirational words from local law enforcement agencies, victim advocates and personal stories from the victims themselves.

The Tribute is sponsored by the Victim Assistance Coordinating Council (VACC). VACC is comprised of the following agencies: Alliance for Community Empowerment, the Crime and Trauma Recovery Program, the District Attorney’s Victim Assistance Program, the Drug Enforcement Administration (DEA) Victim Witness Program, the Federal Bureau of Investigation (FBI) Victim Assistance Program, First Avenue Counseling Centre, the Jenna Druck Center, Mothers Against Drunk Driving (MADD), San Diego Police Department Crisis Intervention, San Diego County Sherriff’s Department, the San Diego Police Officers Association, San Diego Slide Shows, Therapy Changes, the United States Attorney’s Office Victim/ Witness Program, the U.S. Postal Inspection Service, and other victim advocates.

By providing a single, uniform message from these agencies and service providers, we can help increase awareness and improve the assistance provided to all crime victims.

To receive further information about National Crime Victims’ Rights Week, and ideas on how to serve victims in your community please visit www.ovc.gov or www.sdvacc.com or the U.S. Attorney's Office Southern District of California webpage.

Veteran U.S. Customs and Border Protection Officer Lorne “Hammer” Jones was sentenced today by U.S. District Judge Marilyn Huff to 7½ years in custody for his role in a decade-long crime spree in which he sold his badge to alien-smuggling groups and ultimately to marijuana transportation cells working for Mexican drug cartels. In court, the defendant acknowledged he has waived his right to appeal.

At today’s sentencing and during the December 2013 trial, federal prosecutors Andrew Schopler and W. Mark Conover described the scheme Jones employed to allow over 30,000 kilograms of drug cartel marijuana and multiple illegal aliens into the United States. Jones’ corruption began by first waving cars and vanloads of aliens and drugs through his lane at the San Ysidro port of entry, and later escalated to smuggling tractor-trailers jammed with marijuana through the commercial port at Otay Mesa.

Jones, an inspector since 1994, worked at both the San Ysidro and Otay Mesa border crossings and had been a canine officer since the 1990s. He was indicted by a federal grand jury and arrested at work in 2010, charged with conspiracy to commit bribery and to smuggle drugs and aliens.

A dozen witnesses testified that Jones was on the take, including Michael Taylor, a former colleague and friend who was also being paid by smugglers to corruptly allow contraband into the United States; Jones’ ex-wife, who recruited him to be a smuggler; a friend and financial adviser who testified that the two had discussed ways to hide ill-gotten gains, and who had personally used Jones to smuggle his girlfriend across the border twice; and several of Jones’ co-conspirators.

Prosecutors also presented evidence from a database that tracks information about people crossing the border – such as license plate numbers, names of those who were inspected and when, and by whom. During trial, prosecutors said the data proved that Jones allowed known load vehicles and drivers for drug trafficking organizations to pass though his lanes for years, without being inspected.

According to testimony, Jones volunteered to work overtime shifts as a primary inspector so he could wave through vans jammed with aliens and drugs, and trucks full of marijuana. Jones also employed a beeper code system to notify smugglers which one of the 24 inspection lanes he was working when their loads approached the border crossing. But the system failed in 2002 when Jones was randomly and unexpectedly reassigned to another position, and a load driver was forced to abandon his van full of drugs in the inspection line. In a second failure months later, a van stuffed with four nearly three tons of marijuana was intercepted in the lane assigned to Jones just a few just car lengths away from him. While Jones’ furiously tried to “waved on” the cars in front of the load vehicle, the driver and passenger of the load vehicle jumped out of the van and attempted to escape from several inspectors who hurried over to apprehend them. Notably, Jones did not try to apprehend the smugglers; rather, as federal prosecutor W. Mark Conover said during closing argument, Jones was frozen “[s]itting in his booth, paralyzed with fear. His load was caught.” This marijuana seizure remains the largest ever at the San Ysidro Port of Entry.

“Lorne Jones allowed greed to destroy everything his badge represents,” said U.S. Attorney Laura Duffy. “We hope this outcome serves as a reminder that we will not allow rogue officers to compromise national security and the public trust.”

Pete Flores, CBP Director of Field Operations in San Diego, said: “The actions that Lorne Jones has been convicted of tarnish the badge he wore, and I’m appreciative of the work done to bring him to justice. My CBP officers are hard-working professionals who are vigilant in their protection of the U.S. border and service of the traveling public. CBP does not tolerate corruption within our workforce and we will seek out and work to prosecute to the fullest extent of the law any employees who commit unethical or unlawful acts that tarnish our badge.”

FBI Special Agent in Charge (SAC) Daphne Hearn commented, “When a law enforcement officer violates his oath to protect and serve the citizens of this nation, it undermines the public's trust. When that happens, the FBI and our law enforcement partners at the Border Corruption Task Force are determined to restore the public's confidence and trust by rooting out corruption at all levels of government.” The public can report alleged instances of corruption by calling the FBI hotline at 1-877-NO-BRIBE.

“I am pleased by today's sentence,” said Dennis M. McGunagle, Special Agent in Charge of Department of Homeland Security, Office of Inspector General. “The DHS OIG is committed to working with our law enforcement partners to identify and aggressively investigate allegations of corruption to protect our borders and the integrity of DHS personnel, programs, and operations.”

DEFENDANT   Case No. 10cr4141-H Lorne Leslie Jones, aka “Hammer” Age: 50 Chula Vista, CA   CHARGES

Conspiracy to Commit Offenses Against the United States, in violation of
18 U.S.C. § 371

Attempted Importation of Marijuana, in violation of 21 U.S.C. § 841   INVESTIGATING AGENCY

Federal Bureau of Investigation, Border Corruption Task Force
Department of Homeland Security, Office of Inspector General
Customs and Border Protection, Office of Field Operations

*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 – Roberto Ochoa of Tijuana pleaded guilty in federal court today, admitting that he slashed the throats of two fellow drug traffickers whom he believed had stolen methamphetamine and cocaine proceeds from their organization.

Ochoa entered a guilty plea to two counts of an Intentional Killing during the course of a Drug Trafficking Conspiracy before U.S. District Judge Dana M. Sabraw.

Ochoa was indicted in November 2011 along with a dozen others who were accused of drug trafficking and money laundering offenses. To date, eight have pleaded guilty, including Ochoa. Seven have been sentenced. Two are fugitives; the other cases are pending.

According to court records, in December 2011, Drug Enforcement Administration (DEA) agents initiated an investigation into a San Diego-based narcotics distribution cell. During the course of the investigation, agents identified a number of people that worked for this cell, including the defendant Roberto Ochoa.

On October 19, 2012, the defendant and others interrogated Hector Gonzalez and Rodolfo Robles at a home located on Multnomah Ct., in San Jacinto, California, about the theft of narcotics proceeds.

At this time, the defendant and another individual used knives to cut the throats of Gonzalez and Robles. Gonzalez and Robles died as a result of their wounds. On November 9, 2012, Riverside County Sheriff’s Officers responded to this address in order to conduct a welfare check and discovered the two bodies.

Sentencing was set for June 6, 2014, at 9 a.m. before Judge Sabraw.

DEFENDANT   Case No. 12CR4711-DMS Roberto Ochoa Age: 35 Tijuana, Mexico   CHARGES

Count 1: Title 21, United States Code, , Section 848(e)(1)(A) Intentional Killing during the course of a Drug Trafficking Conspiracy, in violation of Title 21, United States Code.
Maximum penalties include:  Life imprisonment or death and a mandatory minimum
20- year sentence; maximum $2 million fine; mandatory special assessment of $100 per count and a term of supervised release of at least 5 years and up to life.

Count 2: Title 21, United States Code, , Section 848(e)(1)(A) Intentional Killing during the course of a Drug Trafficking Conspiracy, in violation of Title 21, United States Code.
Maximum penalties include:  Life imprisonment or death and a mandatory minimum
20- year sentence; maximum $2 million fine; mandatory special assessment of $100 per count and a term of supervised release of at least 5 years and up to life.

  INVESTIGATING AGENCY

Riverside County Sheriff’s Office
Drug Enforcement Administration
Federal Bureau of Investigation
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.     

SAN DIEGO – Emilio Samyn Gonzales-Arenazas was sentenced today to 40 years in prison for his participation in the July 2009 robbery and murder of United States Border Patrol Agent Robert Rosas, Jr.

Gonzales, a 25-year-old Mexican national, pleaded guilty on July 25, 2011, admitting he was one of five armed individuals who conspired to rob a Border Patrol agent of his night vision device, which resulted in Agent Rosas being fatally shot during a struggle. He pleaded guilty to murder of a federal officer committed in perpetration of a robbery and unlawful confinement.

Court filings indicate that in July 2009, Gonzales and four others plotted to rob a Border Patrol agent of his night vision device. On July 23, 2009, the group, bearing firearms, traveled by car and foot to the international border near Campo, California. Gonzales entered into the United States at night and waited for a Border Patrol agent to arrive in the area while two co-conspirators stood watch on the Mexican side of the border. After Agent Rosas arrived in the area and exited his vehicle, he was detained at gunpoint. Agent Rosas resisted and, during the ensuing struggle, Gonzales and his co-conspirators shot Agent Rosas multiple times, killing him. Gonzales and his co-conspirators then stole the agent’s firearm, night vision device, and other equipment and fled back to Mexico.

In August 2010, Mexican officials arrested Gonzales at the request of the United States. Gonzales was extradited to the United States in March 2011.

Gonzales is the fourth defendant to be sentenced for Agent Rosas’s murder. In April 2010, United States District Judge M. James Lorenz sentenced Christian Daniel Castro-Alvarez to 40 years of imprisonment. On November 14, 2013, he sentenced Marcos Rodriguez-Perez to 56 years to run consecutive to a two-year sentence Rodriguez is currently serving for violating his supervised release from a prior alien smuggling conviction. On December 19, 2013, Jose Luis Ramirez-Dorantes was sentenced to 55 years in custody. The last defendant, Jose Juan Chacon-Morales, remains a fugitive, and there is a reward of up to $100,000 for information leading to his arrest or location.

After Gonzales’ sentencing, United States Attorney Laura E. Duffy expressed her condolences to Agent Rosas’s family and colleagues at the Border Patrol: “For over four and a half years, the Rosas family and Border Patrol have waited for justice to be completed against the individuals who brutally ended the life of a dedicated husband, father, son, brother, colleague, and friend. While I know there is nothing that can be done to bring Agent Rosas home again, I hope the sentences in this case provide some comfort and demonstrate that Agent Rosas and his sacrifice for his country will never be forgotten.”

Chief Patrol Agent Paul Beeson, of the U.S. Border Patrol’s San Diego Sector, said: “Border Patrol Agent Robert Rosas was a sincere professional dedicated to securing and defending our nation’s borders. He lost his life in defense of all he held dear: His country, his family and his friends. On behalf of the men and women of the U.S. Border Patrol I want to express our sincere gratitude to everyone who contributed countless hours to the investigation and prosecution of this case. Thanks to the cooperation of law enforcement agencies on both sides of the border and to the U.S. Attorney’s Office, those responsible for Robert’s murder have been brought to justice.”

FBI Special Agent in Charge Daphne Hearn commented, “Today’s sentencing demonstrates the FBI's continued commitment to hold those responsible for the death of U.S. Border Patrol Agent Robert Rosas. Agent Rosas served his country with dedication, honor, and courage. The FBI recognizes that no punishment will lessen Agent Rosas' death, but we hope today’s sentencing will help bring some closure to the family.”

At the sentencing, Judge Lorenz praised all federal law enforcement involved in the case for their thorough and professional investigation. Duffy also expressed her gratitude to the Federal Bureau of Investigation and Homeland Security Investigations for their tenacity and dedication. “The investigating agents from FBI and HSI worked tirelessly for many years to solve this crime and bring those responsible to justice. It was their incredible investigative efforts that made these convictions and sentences possible. They are owed much gratitude for their unwavering devotion and dedication to this investigation.”

DEFENDANT   Criminal Case No. 10CR3487 Emilio Samyn Gonzales-Arenazas Age: 25 Mexico   CHARGES

Count 4:          Title 18, United States Code, Sections 1114 and 2: Murder of a federal officer committed in perpetration of a robbery and unlawful confinement, aiding and abetting

  INVESTIGATING AGENCY

Federal Bureau of Investigation
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.     

SAN DIEGO - Alex Wisidagama, a former executive with Glenn Defense Marine Asia (GDMA), pleaded guilty today to participating in a scheme to defraud the United States, admitting that he and others duped the U.S. Navy into overpaying by at least $20 million for supplies and services to American ships in Asian ports.

Wisidagama’s plea is the second in an extensive international fraud and bribery scandal that has ensnared GDMA employees and several U.S. Navy officials. The government has alleged that Wisidagama’s cousin and owner of GDMA, Leonard Glenn Francis, bribed Navy officials with luxury travel and prostitutes in exchange for confidential information and other assistance in winning and retaining hundreds of millions of dollars in Navy contracts.

In his plea agreement, Wisidagama, 40, of Singapore, admitted that he and others used numerous methods to trick the Navy into overpaying for things like fuel and port fees. According to his plea agreement, Wisidagama and others submitted fraudulent or inflated invoices to the Navy; offered up phony competitive bids from non-existent companies so GDMA could win every time; and created fictitious port authorities with significantly inflated port tariff rates.

For example, the plea agreement describes details of the USS Mustin’s visit to Laem Chabang, Thailand, in the fall of 2011. GDMA billed the Navy $2.3 million for fuel that really cost $900,000 and $133,232 for “port dues” that really cost $6,849. The overcharges totaled $1.5 million.

“Wisidagama and others were creative, deceitful and audacious in their efforts to manipulate the Navy and steal millions of dollars from U.S. taxpayers,” said U.S. Attorney Laura Duffy. “This plea is an important development in our ongoing case, and we will continue to pursue all avenues.”

“Today's guilty plea of former Glenn Defense Marine Asia Vice President Alex Wisidagama is part of a far reaching corruption investigation by the Defense Criminal Investigative Service, the Naval Criminal Investigative Service and the Defense Contract Audit Agency,” said James B. Burch, Deputy Inspector General for Investigations, Office of the Inspector General, Department of Defense. “Corrupt contracting practices damage the public trust and ultimately undermine the efforts of the Department of Defense to support our men and women in uniform. Along with our law enforcement partners, we make the investigation of such offenses a top priority. Cases such as these are not motivated by need or other difficult personal circumstances; they are the product of simple greed.”

NCIS Director Andrew L. Traver said: “Special Agents from the Naval Criminal Investigative Service and the Defense Criminal Investigative Service have worked diligently with support from the Defense Criminal Audit Agency, our foreign law enforcement partners, and the Department of Justice to uncover the fraud committed by Alex Wisidagama and his co-conspirators. Today’s guilty plea highlights the strength of the evidence, and our investigative team continues to aggressively pursue all leads related to GDMA.”

The plea was accepted by U.S. Magistrate Judge Jan M. Adler and is subject to acceptance by U.S. District Judge Janis L. Sammartino. Sentencing was set for June 13, 2014 at 9 a.m. before Judge Sammartino.

Wisidagama, who was arrested in San Diego, California, on September 16, 2013, served as the general manager of Global Government Contracts for GDMA. GDMA was a multi-national corporation with headquarters in Singapore and operating locations in other countries, including Japan, Singapore, Thailand, Malaysia, Korea, India, Hong Kong, Indonesia, Australia, Philippines, Sri Lanka and the United States. GDMA provided hundreds of millions of dollars in husbanding services to the U.S. Navy, such as the coordinating, scheduling and procurement of items and services required by ships and submarines when they arrive at port. These services included providing tugboats; paying port authority and customs fees; furnishing security and transportation; supplying provisions, fuel and water; removing trash and collecting liquid waste.

Wisidagama is the second defendant to plead guilty as part of this investigation. On December 17, 2013, former NCIS Supervisory Special Agent John Bertrand Beliveau Jr. pleaded guilty to conspiracy to commit bribery and bribery charges after admitting to providing Francis with sensitive law enforcement information in exchange for things of value such as cash, luxury travel accommodations, lavish dinners and prostitutes. In addition to Beliveau and Wisidagama, Francis and U.S. Navy Commanders Michael Vannak Khem Misiewicz and Jose Luis Sanchez have been charged as part of the bribery scheme.

The ongoing investigation is being conducted by the Naval Criminal Investigative Service, 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 and 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 No. 13cr4043-JLS Alex Wisidagama Age: 40 Singapore   CHARGES

Conspiracy to Defraud the United States in violation of 18 USC 286
Maximum of 10 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.     

San Diego, CA – Former San Diego police detective Ernesto Encinas pled guilty today to charges that he conspired to commit campaign finance crimes in connection with a series of elections at the local and federal level. At the same hearing, Encinas also pled guilty to charges that he made false statements to the Internal Revenue Service when filing tax returns on behalf of his private security business, Coastline Protection and Investigations, Inc.

As part of his plea agreement, Encinas admitted to a range of allegations first brought to light on January 21, 2014, when prosecutors unsealed a complaint against him. Speaking under oath before U.S. Magistrate Judge William V. Gallo, Encinas admitted that he and his coconspirators agreed to make illegal contributions on behalf of Jose Susumo Azano Matsura, a foreign national who was arrested by FBI agents on related campaign finance charges in February. Foreign nationals cannot lawfully contribute to any campaign at the federal, state or local level. Also as part of the plea, Encinas confirmed that he and others, including Azano, Ravneet Singh and Marco Polo Cortes, agreed to make conduit contributions in connection with a federal election, as well as falsify records with the intent to impede a federal investigation—both of which are felonies regardless of whether the source is a citizen or foreign national. (Azano, Singh and Cortes, who were charged earlier this year, have pleaded not guilty to the charges filed against them.)

Encinas’s plea agreement detailed other aspects of the scheme not previously disclosed in public filings. For example, Encinas admitted to FBI agents that Azano induced a series of individuals to donate directly to “Candidate 1,” described as a candidate for the office of mayor of San Diego during the 2012 primary election cycle. Encinas stated that Azano provided cash, which the straw donors each used to make the maximum possible donation to Candidate 1.

In addition, as part of his plea agreement, Encinas admitted that during tax years 2011 and 2012, Azano paid Encinas approximately $10,000 in cash “off the books.” Encinas failed to report approximately $147,300 of such cash payments in tax year 2011, and approximately $74,900 in cash payments in tax year 2012, for a total of approximately $222,200 in unreported cash income. This resulted in a tax loss of $69,394.36 over two years, which Encinas agreed to pay back as restitution.

First Assistant United States Attorney Cindy M. Cipriani said: “To secretly inject foreign money into our elections is an affront to the transparency and integrity of our electoral system. In obtaining this guilty plea, we demonstrate our continuing efforts to investigate and prosecute campaign finance crimes in San Diego and beyond.”

FBI Special Agent in Charge, Daphne Hearn said, “Illegal campaign contributions from foreign sources undermines our electoral process and ultimately our democracy. The FBI is committed to working with our law enforcement partners to identify and root out public corruption wherever it may be happening.”

Special Agent in Charge of Internal Revenue Service Criminal Investigation (IRS CI), Erick Martinez, commented: “Retired San Diego Police Detective Ernesto Encinas intentionally failed to report over $222,000 in cash received by keeping this money ‘off the books.’ Today’s guilty plea should serve as a reminder- all of us have an obligation to file an accurate and truthful tax return. Failure to do so could result in criminal prosecution.”

Encinas’s sentencing hearing has been set for June 9, 2014 at 9 a.m. before United States District Judge Michael M. Anello.

DEFENDANT   Case No. 14CR0344-MMA

Ernesto Encinas

Age: 57

San Diego, CA   CHARGES

Count 1:  Conspiracy to Commit Offenses against the United States – 18 U.S.C. § 371.  Maximum penalties: 5 years in prison, 3 years of supervised release, $250,000 fine and a $100 special assessment

Count 2:  False Tax Return – 26 U.S.C. § 7206(1): 3 years in prison, 1 year of supervised release, $250,000 fine and a $100 special assessment

  INVESTIGATING AGENCY

Federal Bureau of Investigation
Internal Revenue Service, Criminal Investigation
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 – Four baggage handlers at San Diego International Airport were indicted by a federal grand jury Friday on charges that they conspired to smuggle cocaine and methamphetamine onto aircraft by exploiting their ability to pass unchecked through security screening areas.

It’s believed to be the first federal drug prosecution of airport employees at San Diego’s largest airport.

The indictment alleges that Felix Samuel Garcia, Paulo Mendez Perez and Saul Bojorquez, all current or former employees of Delta Global Services, which provides ground services for several airlines, flashed badges numerous times and walked through checkpoints with drugs in their backpacks. Brian Alberto Gonzalez, also a DGS employee, allegedly worked as a courier.

According to the indictment, the drug-toting baggage handlers connected with drug couriers during clandestine meetings in airport restrooms in the secured area of Terminal 2, where they would wait for adjoining stalls to become available and once inside, would hand off the cocaine and methamphetamine under the stalls’ divider.

Also charged were seven alleged couriers, drug suppliers and middlemen. After the bathroom rendezvous, the couriers would board flights and proceed to destinations like New York City, Nashville, Detroit, Baltimore and Hawaii, where they were met by other members of the drug trafficking organization. While the street price of methamphetamine in San Diego is about $5,000 a pound, the value skyrockets to $25,000 a pound in Hawaii.

The alleged traffickers charged in the indictment include Sergio Mejia-Gamboa, Angel Ortega, David Camacho, Jesus Morales, Candelario Perez, Israel Acosta and Henry Garcia-Arambula. All were arrested last week during sweeps by federal agents. All defendants are in custody but Ortega.

The following defendants are scheduled to be arraigned tomorrow before U.S. Magistrate Judge Ruben B. Brooks: Garcia; Mejia-Gambo; Camacho; Morales; Acosta and Gonzalez.

According to a complaint, agents seized 8 kilograms (17 pounds) of cocaine with an estimated street value of $144,000; 18 pounds of methamphetamine with an estimated street value of $90,000 in San Diego and up to $450,000 in Hawaii; and $103,846 in cash during the yearlong investigation.

“This was a brazen scheme to smuggle drugs right under the noses of airport security officials,” said U.S. Attorney Laura Duffy. “We aren’t going to let dangerous drugs fly in unchecked bags in the overhead bins of commercial aircraft.”

“Throughout this investigation, DEA San Diego’s Narcotic Task Force worked closely with law enforcement counterparts nationwide, including airport authorities, to ensure the successful apprehension and dismantlement of this drug trafficking organization,” said DEA San Diego Assistant Special Agent in Charge Gary Hill. “All agencies involved understand how important the security protocols of our airports are, and will continue to work together to formulate plans to thwart other criminal elements from exploiting and circumventing airport security in the future.”

DEFENDANT   Case Number 14cr0657 Felix Samuel Garcia  Age: 29 Imperial Beach, CA Paulo Mendez Perez Age: 36 Chula Vista, CA Sergio Mejia-Gambo Age: 22 San Bernadino, CA     Angel Ortega  Age: 26 San Bernadino, CA     David Camacho  Age: 27 San Bernadino, CA     Jesus Morales Age: 21 San Bernadino, CA     Candelario Perez  Age: 24 Fresno, CA Israel Acosta Age: 48 San Bernadino, CA Brian Alberto Gonzalez Age: 30 San Diego, CA Saul Bojorquez Aviles Age: 26 Chula Vista, CA Henry Garcia-Arambula Age: 22 San Berndino, CA   CHARGES

Conspiracy to Possess Controlled Substances with Intent to Distribute – Title 21, U.S.C., Section 846 and 841 (a) (1); Maximum Penalties: 20 years in prison

Possession of Cocaine and Methamphetamine with Intent to Distribute – Title 21, U.S.C., Section 841 (a) (1); Maximum Penalties: 10 years to life in prison

INVESTIGATING AGENCY

Narcotic Task Force
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 yesterday Cheng Zhuo Liu, pled guilty to smuggling protected sea cucumbers. In pleading guilty, Liu admitted that he had smuggled 100 pounds of dried sea cucumber into the United States from Mexico on October 3, 2013, concealed in the spare tire area of his Hyundai. The smuggled sea cucumbers were members of the species Isostichopus fuscus, with a market value of between $5,000-$10,000.

According to scholarly articles, sea cucumbers are marine animals with a leathery skin and an elongated body. They are found on the sea floor worldwide with the greatest number of species being located in the Asian Pacific Ocean. Sea cucumbers serve a useful role in the marine ecosystem as they help recycle nutrients, breaking down detritus and other organic matter after which bacteria can continue the degradation process. Due to overfishing, many species of sea cucumber (including Isostichopus fuscus) are protected under Appendix III of the Convention on International Trade in Endangered Species (CITES) and require a CITES permit from the country of origin and a U.S. Fish and Wildlife Import/Export permit to import them into the United States. Liu admitted that he had neither permit.

Unfortunately, there is presently a thriving black market in sea cucumbers driven by demand in Asia where a pound might sell for $300. In China, the sea cucumber is used in Chinese cuisine (as Hoi Sam) as well as for medicinal purposes. Our Southwest border is not the only area where smuggling sea cucumber is a problem. India has been grappling with sea cucumbers being smuggled in large quantity to Indonesia, Japan and Sri Lanka due to its alleged medicinal properties. Similarly, in the Caribbean Sea off the shores of the Yucatàn Peninsula near fishing ports such as Dzilam de Bravo, illegal harvesting devastated the population of sea cucumbers and resulted in conflict in the community as rival gangs struggled to control the illegal harvest.

According to the American Cancer Society, although it has been used in traditional Asian folk medicine for a variety of ailments, "there is little reliable scientific evidence to support claims that sea cucumber is effective in treating cancer, arthritis, and other diseases."

Liu agreed to forfeit the sea cucumber seized as part of the case and is scheduled to be sentenced on June 9, 2014, at 9:00 a.m. before the Honorable Roger T. Benitez.

DEFENDANT   Criminal Case No. 13-CR-4347-BEN Cheng Zhuo Liu   Age: 50 Chula Vista, California   CHARGES

Smuggling, a felony, in violation of Title 18, United States Code, Section 545
Maximum Penalty: 5 years in custody, a $20,000 fine and a $100 penalty assessment

  INVESTIGATING AGENCY

National Oceanic and Atmospheric Administration (NOAA); U.S. Fish and Wildlife Service

United States Attorney Laura E. Duffy today announced the arraignment and guilty plea of Alfonso Fierro, Jr., for stealing millions of dollars from his employer, WSA Distributing, Inc., a wireless handset distributor headquartered in San Diego.

According to court documents, Alfonso Fierro, Jr. worked as WSA Distributing’s Corporate Controller from 2008 through 2012. In 2012, he was promoted to Chief Financial Officer (“CFO”) of the company. From September 2011 through December 2013, Fierro abused his position within the company to steal millions of dollars in company funds. Among other things, he forged the authorized signatures on WSA checks; made false statements on WSA letterhead about his income; falsified WSA’s corporate books and records to cover up his thefts, and concealed material information about his scheme from his employer. All told, Fierro admitted forging 110 WSA checks, totaling $2,480,967.11.

As revealed today in court, Fierro used the stolen funds to catapult him instantaneously into the lifestyles of the rich and famous. His biggest purchase was a $2.79 million home in Rancho Santa Fe. To purchase his dream home, Fierro first forged the authorized signatures on a WSA check for $83,700 made out to an escrow account at Heritage Escrow set up for the purchase of the home. He then forged the authorized signatures on a WSA check for $988,000 made out to himself as the payee. A few days later, he used these funds to make a second escrow deposit in the amount of $767,100.

Instead of stealing all of the purchase money outright, Fierro next turned to deception of a different sort to pay the remaining balance on the house. He created a letter on WSA letterhead purportedly signed by WSA’s Chief Executive Officer. The letter falsely claimed that Fierro earned a base salary of $450,899.52 from WSA and was guaranteed an annual bonus of $200,000. Instead of over $650,000 a year, Fierro’s actual annual salary was $125,000. Heedless of the outright falsity, Fierro forged WSA’s CEO’s signature on the letter and submitted it to Bank of America in connection with his applications for two mortgages (in the amounts of $1,500,000 and $450,000) to complete the purchase of the house.

Fierro concealed his crime by, among other things, lying to WSA’s CEO about his purchase of the home. Fierro claimed that he was able to buy the Rancho Santa Fe home using $1 million his father had received from selling property in Mexico. Fierro hid the fact that that he was actually using misappropriated funds from WSA to purchase the property.

Fierro also acquired for himself the accoutrements of his newly rich lifestyle, complete with membership at an exclusive San Diego Country Club ($54,904 paid in forged WSA checks), luxury vehicles ($90,000 worth paid in forged WSA checks), plenty of fine jewelry and watches ($185,382 paid in forged WSA checks), and exclusive travel and accommodations (e.g., $67,000 in private jet airfare and $24,000 hotel accommodations for a December 2013 trip to Hawaii).

As part of his plea, Fierro will be required to pay WSA Distributing back the $2,480,967.11 he stole. He will next appear in court on May 30, 2014, at 9 a.m., before U.S. District Judge Dana M. Sabraw.

DEFENDANT Case No. 14CR0573-DMS Alfonso Fierro, Jr., 41 Rancho Santa Fe, California   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 – Two men are charged in indictments unsealed this week with hacking into the computer servers of a major U.S. mortgage broker to steal personal information and use it to siphon funds from the brokerage accounts of thousands of victims.

Jason Ray Bailey and Victor Alejandro Fernandez were charged in a two-count indictment with conspiracy to commit wire fraud and computer hacking. Bailey was arraigned today before U.S. Magistrate Judge Jan Adler; Fernandez was arraigned on Wednesday.

According to charging documents, both men are part of a Tijuana-based conspiracy that hacked the computer servers of a U.S mortgage broker and obtained mortgage applications containing customers’ personal identification information such as names, dates of birth, social security numbers, addresses, assets, tax information and driver’s licenses.

Approximately 4,200 customers had their information stolen between December 2012 and June 2013 and the conspiracy dates back to July 2011, the charging documents say.

Members of the conspiracy used victims’ stolen information to impersonate the mortgage customers, open credit lines in their names, and steal their assets, according to the charging documents. For example, members of the conspiracy identified multiple victims’ brokerage accounts and fraudulently took control of the accounts by first calling the brokerage companies and providing the victims’ personal identification information, and then changing the victims’ passwords and contact information. Once the defendants gained control of the accounts, members of the conspiracy allegedly wired funds from the victims’ brokerage accounts to coconspirators’ U.S. bank accounts in the San Diego and Calexico areas. Several of these wires were over $20,000 and $30,000 each.

Bailey’s detention hearing was scheduled for March 4, 2014 at 3 p.m. and Fernandez’s detention hearing was scheduled for March 6, 2014 at 2:45 p.m. Both defendants are scheduled for a motion hearing and trial setting conference before U.S. District Judge Gonzalo P. Curial on April 11, 2014 at 10:30 a.m.

DEFENDANT   Case No. 14CR0277-GPC

Jason Ray Bailey

Age: 38 Chula Vista, CA Victor Alejandro Fernandez Age: 38 Mammoth Lakes, CA   CHARGES

Count 1: Conspiracy to Commit Wire Fraud – Title 18, U.S.C., Section 1349
Maximum Penalties: Up to 30 years in prison and $1,000,000 fine.

Count 2: Computer Hacking – Title 18, U.S.C., Sections 1030 (a) (4) and (c) (3) (A)
Maximum Penalties: Up to five years in prison 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.     

United States Attorney Laura E. Duffy today announced the sentencing of Eric Phillips for his role in a scheme to defraud clients of Georggin Law, formerly located in Carlsbad, California, who were seeking to repair their credit histories. District Judge Michael M. Anello imposed a sentence of 33 months in custody on Phillips, who victims at today’s hearing described as a “predator.”

Phillips helped create Georggin Law in 2010 – despite the fact that he is not an attorney and has never been licensed to practice law – and claimed that the firm could provide credit repair services to clients attempting to purchase real estate. Phillips falsely represented to potential clients that he had been at Georggin Law for 34 years, that he was an attorney, and that he had a California bar number. Phillips gave presentations at realtors’ offices, targeting individuals who hoped to buy homes but had poor credit scores due to a prior short sale or foreclosure. During these sales pitches, Phillips claimed that Georggin Law could file lawsuits in small claims courts and have prior short sales and foreclosures removed from clients’ credit reports. In addition to lying about his history and qualifications, Phillips also falsely claimed that Georggin had won over 600 victories in small claims courts, had a 100% success rate and had never lost a case. Phillips also promised a “money back guarantee,” despite the fact that Georggin Law maintained little or no money to actually refund unsatisfied clients.

Phillips admitted that Georggin defrauded over 250 clients using such false statements, and that he personally pocketed at least $150,000 from the scheme.

According to the State Bar of California, the attorney nominally affiliated with Georggin Law, Ernest George Georggin, has agreed to surrender his law license and pay restitution to certain clients of the firm.

Victims of Phillips’ scheme addressed the court at today’s sentencing hearing. One man, who has been a firefighter for 34 years, spoke about how devastating it was to have been victimized by Phillips. He said he had withdrawn money from his retirement savings to pay Georggin Law’s fees, but after paying over the money he could not get any calls back from the firm. Another victim described a similar experience, explaining that Phillips promptly called her back when she was ready to pay the fees, but then failed to return her calls thereafter. Both described Phillips as a “predator.”

Other victims sent written statements to the court, describing Phillips as a “habitual liar [who told] us that he was an attorney,” “smart, cunning, and very convincing,” and a “man selling snake oil.” One man from La Mesa wrote to the court, “I was abused by the credit report system, then further abused by Mr. Phillips who did nothing for two years after taking my money.” As a man from San Diego explained, “Eric Phillips pretended to be an attorney and guaranteed our money back … Buying a home here in San Diego is expensive enough … But add in a criminal like Eric Phillips … makes a tough situation even worse … He is a smooth talker with a smile that lures clients in and banks on your trust.”

Phillips will next appear before Judge Anello on April 14, 2014, for a determination of how much restitution he will be ordered to pay the victims of his scheme.

DEFENDANT     Eric Dean Phillips Age: 58 Riverside, California   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, North County Resident Agent

*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 biomedical device manufacturer Valor Medical, Inc. was fined $250,000 today by U.S. District Judge Dana M. Sabraw for intentionally withholding unfavorable test results from the Food and Drug Administration about products under development for the treatment of aneurysms.

Valor had been seeking FDA approval to proceed with clinical trials of the devices in question, including one intended for use in blood vessels in the brain, known as Neucrylate AN, and one intended for use in blood vessels near the heart, called Neucrylate AVM. But the actual preclinical test results would have cast doubt on the safety of Neucrylate, so the company concealed the results.

No Americans were harmed because the FDA never permitted clinical trials to proceed in the United States. However, one death and two strokes occurred as part of clinical trials of the product in Europe, where the European authorities were also unaware of the undisclosed test reports.

Former Valor CEO and current member of the Board of Directors H. Clark Adams and Valor Regulatory and Clinical Affairs Manager Cathy Bacquet pleaded guilty to misdemeanors, and Valor founder Dr. Charles Kerber and Chief Scientist Peter Friedman entered into Deferred Prosecution Agreements, for their roles in the matter.

Because Neucrylate is considered be a Class III medical device under the Food, Drug and Cosmetic Act (“FDCA”), premarket approval from the FDA is required before it can be sold in the United States. In order to perform clinical trials on humans to obtain the data needed to support an application for premarket approval, Valor needed to obtain an investigational device exemption (“IDE”) from the FDA. The regulations relating to investigational device exemptions require the applicant to submit “reports of all prior clinical, animal and laboratory testing of the device.”

As the device is intended to be permanently implanted in the body, biocompatibility is very important. The FDA evaluates the biocompatibility of medical devices pursuant to international standards, which require a series of at least three tests. Two of the three tests typically performed to satisfy these requirements are the mouse lymphoma assay (MLA) and the chromosomal assay (CAA) tests.

According to sentencing documents filed with the court, Valor sent samples of Neucrylate to a laboratory to perform the CAA and MLA tests in early 2007. Shortly thereafter, the lab reported to Alan Donald, a consultant hired by Valor, that all the chromosomes in the CAA test had been destroyed by initial contact with the Neucrylate, indicating toxicity.

The lab asked if Valor wanted the lab to dilute the samples of Neucrylate and try the test again, which is the standard protocol. Donald requested that no further testing be performed. The final report, dated April 25, 2007, indicated that “no chromosomes were present to be scored.” While the destruction of all chromosomes indicated that the Neucrylate was cytotoxic, the official conclusion to the report stated that no conclusion could be drawn from the testing because the testing had not been completed pursuant to the testing protocol.1

At about the same time, the laboratory sent an email to Friedman, with the preliminary results of the MLA test attached, advising that “all testing has been completed and the test article is considered to be mutagenic.” Friedman forwarded the email, with the attached preliminary results, to Donald, Adams, and Kerber later that same day. Adams replied to all, saying “Let’s huddle and determine how we overcome this obstacle. I have confidence that we can find an answer.”

Neither the CAA test results nor the MLA test results were ever provided to the FDA by Valor, which filed two separate investigational device exemption applications and responded to several additional requests for information from the FDA (virtually all of which specifically requested that the CAA and/or MLA tests be performed).

The FDA rejected all of Valor’s IDEs for Neucrylate.

After a December 2010 inspection of Valor uncovered the CAA test, the FDA sent a warning letter to Adams at Valor. The letter referenced the failure to disclose the CAA testing as a violation of the regulations requiring an applicant to submit all preclinical testing to the FDA.

When responding to the FDA on behalf of Valor, Defendant Bacquet claimed that Valor “inadvertently” left out the CAA and MLA tests in the application for the IDE. Valor blamed this “unintentional violation” on Valor’s reliance on the work of consultant Alan Donald, who had separated from the company nearly a year before that IDE was filed. The letter falsely stated that “Prior to February 10, 2011, the existence of this report [the MLA] was not known to VM management or Quality/Regulatory staff.” This statement was contradicted by a series of emails between Friedman, Kerber, Adams, and Donald from the time period when the MLA results were received by Valor in 2007, as well as by presence of the MLA report on the computers of Friedman and Bacquet.

The American people depend on the FDA to determine that there is sufficient scientific basis to believe that a proffered medical device is safe and effective before permitting clinical trials on human beings. The FDA, in turn, depends on the full and truthful disclosure of all pre-clinical testing by device manufacturers to make an educated determination. When information is withheld from the FDA, as in the instant case, the decision-making process is corrupted.

____________________

1The lab’s internal Quality Event Details Form noted that the samples for the CAA test were “cytotoxic,” and the results were valid, but the sponsor was “choosing to cancel the study rather than perform dilutions” so a “full conclusion as to the genotoxicity of the sample will not be made.”

DEFENDANT   Criminal Case No. 14cr0196-DMS

Valor Medical, Inc. San Diego, California

  Date of Incorporation: 2007   SUMMARY OF CHARGES

Failure to Provide Required Information, a felony, in violation of Title 21, United States Code, Section 331(q)(1)(B) and 333(a)(2)
Maximum Penalty for a corporation: 5 years of probation, a $500,000 fine, $400 special assessment

  INVESTIGATING AGENCY

U.S Food and Drug Administration, Office of Criminal Investigations

United States Attorney Laura E. Duffy announced today that Alvarado Medical Plaza Pharmacy, Inc. was sentenced by United States District Court Judge Janis L. Sammartino to repay Medicare over $1 million, and to pay a $10,000 fine, following its conviction of federal Health Care Fraud for billing Medicare for unapproved oncology drugs.

The pharmacy had admitted that between May 2010 and June 2011, it ordered $752,688.00 of prescription oncology drugs from Quality Specialty Products (QSP) in Canada. The drugs ordered from QSP were unapproved versions of drugs sold in the United States as Avastin, Eloxatin, Gemzar, Neupogen, Rituxin, Taxotere, and Zometa, which were shipped from Canada to defendant in San Diego. The pharmacy further admitted that it was aware that the drugs were not intended for sale in the United States because (a) the packaging and shipping documents indicated that the drugs were shipped to the office from outside the United States; (b) many of the invoices identified the origin of the drugs and intended markets as countries other than the United States; (c) the labels did not bear the “RX Only” language required by the Food and Drug Administration (FDA); (d) the labels did not bear the National Drug Code (NDC) numbers found on the labels of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; and (g) the packing slips indicated that the drugs came from Canada.

The pharmacy further admitted that it supplied the prescription oncology drugs purchased from QSP to doctors, pre-mixed in infusion bags, without advising the doctors that the drugs came from abroad and were not approved for use in the United States. As known to the pharmacy, Medicare provides reimbursement only for drugs approved for use in the United States. Each drug approved by the FDA for use in the United States is assigned a specific code by Medicare for reimbursement claim purposes. The pharmacy admitted that it was aware that some of the drugs purchased from QSP would be administered to Medicare patients, and that doctors would bill Medicare for those drugs using the reimbursement code for U.S. approved drugs. The pharmacy admitted that by causing doctors to falsely claim that the drugs were approved by the FDA for use on patients in the United States, Medicare was fraudulently overbilled at least $1,004,284.04 between May 2010 and June 2011.

Also today Judge Sammartino sentenced William Burdine, a pharmacist licensed in the State of California and the owner of Alvarado Medical Plaza Pharmacy. Burdine was sentenced to 8 months’ home confinement, and ordered to complete 240 hours of community service over his five year period of probation. Burdine admitted that he ordered the prescription oncology drugs from QSP in Canada, knowing that it was unlawful for him to import those drugs into the United States under the Food, Drug and Cosmetic Act, and was convicted of Importation of Goods Contrary to Law. Burdine was also ordered to repay Medicare in the same amount as Alvarado Medical Plaza Pharmacy.

Criminal Case No. 13cr4295-JLS

DEFENDANTS    

Alvarado Medical Plaza Pharmacy, Inc.
William Burdine

Incorporated:1992
Age: 65 San Diego, California   SUMMARY OF CHARGES

Alvarado Medical Plaza Pharmacy Inc.

Health Care Fraud, in Violation of Title 18, United States Code, Section 1347.
Maximum Penalty for a corporation: 5 years probation, a $500,000 fine and $400 special assessment.

William Burdine
Importation Contrary to Law, in Violation of Title 18, United States Code, Section 545.
Maximum Penalty: 10 years in custody and/or $250,000 fine and a $100 special assessment

  AGENCY

U.S. Food and Drug Administration, Office of Criminal Investigations

San Diego – Mexican businessman Jose Susumo Azano Matsura was charged in an indictment unsealed today with making an illegal campaign contribution to a San Diego mayoral candidate.

Azano, 48, was arrested by FBI agents at his Coronado home Wednesday morning. He was arraigned in federal court this afternoon before U.S. Magistrate Judge Mitchell D. Dembin.

Today’s indictment makes it clear that Azano was the foreign national responsible for the $120,000 illegal campaign contribution to a San Diego mayoral candidate referred to in prior court records. According to federal law, it is illegal for a foreign national to donate to political campaigns in the U.S. Also charged in related cases are San Diego lobbyist Marco Polo Cortes, former San Diego Police detective Ernesto Encinas and Ravneet Singh, owner of the campaign services company known as ElectionMall Inc., which is also charged as a corporate entity.

According to court documents, Cortes, Singh and Encinas conspired to funnel more than $500,000 of illegal foreign money into San Diego municipal and federal campaigns, primarily in 2012 and 2013. The source of the illegal foreign money, the court records said, was a person referred to as “the Foreign National.”

The $120,000 sum in the Azano indictment is the same transaction described in a January 21, 2014 complaint that charges Cortes with conspiracy to finance political campaigns using money from an illegal foreign source. That complaint says: “Using money that the Foreign National had given him, the straw donor wrote a $120,000 check from one of his corporation’s bank accounts to an independent expenditure committee that favored Candidate 3.”

The “straw donor” is still identified in court records only as a La Jolla businessman who acted as a conduit for large campaign donations from the Foreign National.

According to a February 18 grand jury indictment charging Cortes, Singh and his company, ElectionMall Inc., “After directing the Straw Donor to write checks in favor of certain campaigns, the Foreign National would reimburse him.”

That indictment also describes a “war room” created by Singh, Cortes and another coconspirator within the campaign offices of an unidentified mayoral candidate, “for the purpose of making unreporterd inkind contributions financed by the Foreign National.”

The straw donor and candidates are not identified because they have not been charged as members of the conspiracy.

DEFENDANT   Case Number: 14cr388MMA

Jose Susumo Azano Matsura

Age: 48 Coronado, CA   SUMMARY OF CHARGES

Count 1: Campaign Contribution by a Foreign National – Title 2, U.S.C., Sections 437g (d) (1) (A) (i) and 441e (A) (1).
Maximum Penalties: Up to five years in prison and $250,000 fine

  INVESTIGATING AGENCIES

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, CA - United States Attorney Laura E. Duffy announced that Brian Lee of San Diego County pleaded guilty today to participating in a scheme he created to obtain over $1 million from accounts he had opened on behalf of any elderly couple. Lee entered his guilty plea to one count of wire fraud before Magistrate Judge Jan M. Adler, and is scheduled to appear before U.S. District Court Judge Barry Ted Moskowitz on May 16, 2014 for sentencing.

In approximately June 2004, a San Diego couple hired Lee to create trusts and corporations on their behalf, and to control bank accounts he opened in the name of the various entities. As Lee admitted in today’s hearing and in court documents, between 2004 and 2012, he made unauthorized transfers of the couple’s funds, through interstate transactions, into other bank accounts over which he had exclusive control. He systematically withdrew funds for his personal use from various accounts, including one opened as a trust for the couple’s grandchildren. In total, Lee siphoned over $1 million from the couple.

United States Attorney Duffy added, “In order to have confidence in the financial service professionals, all consumers – and especially our senior citizens – must be able to trust that their hardearned money is safe from those they hire to help administer their estates. With the continued diligence of our partners in the FBI, we will continue to investigate allegations of embezzlement in order to deter such unscrupulous practices.”

DEFENDANT   Case Number: 14cr0385BTM

Brian P. Lee

Age: 44     SUMMARY OF CHARGE

Count 1: Title 18, United States Code, Section 1343 (Wire Fraud) Maximum penalty: 20 years of custody; $250,000 Fine

  AGENCY

Federal Bureau of Investigation

San Diego, CA - United States Attorney Laura E. Duffy announced that Claudia Montes was sentenced today by U.S. District Court Judge Janis L. Sammartino to 20 months in custody for her role in a multi-million dollar mortgage fraud scheme between 2005 and 2008

. Montes and her co-conspirators obtained proceeds from approximately 80 mortgage loans by making false representations on the loan applications regarding their respective salaries and assets, among other things. The conspirators’ failure to pay back the loans resulted in defaults and the foreclosure of approximately 28 properties in San Diego and Orange Counties. At one time, the properties included approximately 25 residences in the Talmadge neighborhood of San Diego.

Montes also acknowledged that she and other straw buyers falsely claimed ownership of a co-conspirator’s bank account in order to falsely represent their assets and obtain loans for which they would not otherwise be eligible. Among the straw buyers was Montes’ sister, who she recruited to participate in the scheme. Montes admitted she also obtained home equity proceeds after securing the initial fraudulent loans, and sharing the funds among co-conspirators for personal expenses. Montes was sentenced to concurrent terms for wire fraud and conspiracy and ordered to pay over $1 million in restitution for the losses resulting from the fraudulent loans she allowed to default.

Montes worked closely with co-conspirator Kathryn Sylvester (Case No. 13CR1355-CAB), who pleaded guilty to one count of wire fraud and one count of conspiracy to commit wire fraud on January 16, 2014. Sylvester admitted she had recruited the “straw buyers” to submit the falsified mortgage loan applications for the purchase of local properties and home equity loans. She also admitted she provided false documents to support the straw buyers’ misrepresentations regarding their income and employment. Sylvester also acknowledged that she made similar misrepresentations to obtain loans from private individuals. Although Sylvester often promised she would “flip” a number of the properties for a profit, she systematically drained equity from the properties for her own benefit, resulting in over $5 million in losses to institutional and private lenders. Sylvester is scheduled to appear before U.S. District Court Judge Cathy Ann Bencivengo on April 1, 2014 for sentencing.

Other co-conspirators included Tad Lent, Roderick Michener, and Timothy Shannahan who are all residents of San Diego. Michener pleaded guilty on April 4, 2013, to conspiring with Sylvester to commit bank fraud (Case No. 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. Michener is scheduled to be sentenced before District Court Judge Cathy A. Bencivengo on March 14, 2014.

Lent pled guilty to conspiring with Sylvester to submit falsified loan applications to mortgage lenders by misrepresenting the amount of his assets (Case No. 12CR3744-L). Lent entered his guilty plea on January 28, 2013, and is scheduled to be sentenced before District Court Judge M. James Lorenz on March 3, 2014.

Shannahan admitted conspiring with Sylvester between January 2007 and May 9, 2008, to fraudulently induce lenders to fund mortgage loans (Case No. 13CR1650-L). Among other things, Shannahan falsely claimed on a mortgage loan application that he earned $50,000 per month in order to obtain mortgages for a residence in La Jolla. Shannahan entered his guilty plea on May 18, 2013 and is scheduled to be sentenced before Judge Lorenz on March 10, 2014.

United States Attorney Duffy said, “Crimes like this helped contribute to the housing crisis in 2008, from which we are only now beginning to recover. Sentences such as the one imposed today will hopefully deter others from playing games with the home loan industry and prevent further financial crises.”

DEFENDANT   Case No. 13CR1313-JLS

Claudia Montes

Age: 41     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 2: Title 18, United States Code, Section 1343 (wire fraud); Maximum penalty: 20 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.     

United States Attorney Laura E. Duffy announced that today Hector Manuel Carreon, a former nurse’s assistant in San Diego, was sentenced by United States District Judge John A. Houston to serve 50 years in federal prison based on Carreon’s convictions for sexual exploitation of a child, attempted sexual exploitation of a child, and receipt and possession of child pornography. Carreon was convicted after a trial by the Court in July 2013. Judge Houston also ordered a lifetime of supervised release and mandatory sex offender registration. Carreon has been in custody since his arrest by Special Agents with the Homeland Security Investigations in June 2012.

According to court documents, on June 26, 2012, Homeland Security Investigations executed a federal search warrant where they found Carreon in bed with his underwear pulled down to his ankles with a family member under the age of 10. Agents located multiple computers with child pornography – over 500 images and 900 videos of minors engaged in sexually explicit conduct - in the residence. Several videos contained minors under the age of 12. Agents also located three videos of Carreon sexually molesting two family members who appeared to be drugged in the videos. At sentencing today, Judge Houston stated that it was “apparent” that Carreon had drugged the minors before engaging in the video recording of the sexual molestation.

This case stems from an investigation by Homeland Security Investigations.

DEFENDANT   Case Number: 12CR3149-JAH

Hector Manuel Carreon

Age: 47 San Diego, California   SUMMARY OF CHARGES

Title 18, United States Code, Section 2251 (a) and (e) - Sexual Exploitation of a Child and Attempted Sexual Exploitation of a Child
Title 18, United States Code, Section 2252(a)(2) and (4) – Receipt and Possession of Child Pornography

  INVESTIGATING AGENCY

Homeland Security Investigations

SAN DIEGO, CA - Manuel Osorio-Arellanes, age 37, was sentenced to 30 years in prison today in United States District Court in Tucson, AZ, for the first degree murder of United States Border Patrol Agent Brian Terry, announced Laura E. Duffy, United States Attorney for the Southern District of California. Agent Terry was shot and killed on December 14, 2010, when the defendant and four others engaged in a firefight with Border Patrol agents.

According to the plea agreement entered in October 2012, Manuel Osorio-Arellanes admitted that during the evening of December 14, 2010, he and others were in the United States for the purpose of robbing drug traffickers of their contraband. While Agent Terry was engaged in the performance of his official duties, members of the defendant’s group exchanged gun fire with agents and one of the shots fired by a member of the defendant’s group killed Agent Terry.

U.S. Attorney for the Southern District of California Laura E. Duffy said, “Nothing can bring back Agent Terry, who gave his life protecting our country. Our hope is that, starting today with this significant sentence, justice will give some modicum of relief to grieving family members. We will continue our unrelenting pursuit of those responsible for the tragic attack against Agent Terry.”

FBI Special Agent in Charge Douglas G. Price, Phoenix Division, stated, “Today’s sentencing is another step forward in getting justice in the case involving the murder of U.S. Border Patrol Agent Brian Terry and his family. The FBI remains steadfast in our constant pursuit of those responsible for the death of Agent Terry and we will utilize all available resources to apprehend those responsible for this heinous murder”.

“The sentencing of another individual responsible for the murder of Border Patrol Agent Brian A. Terry is critically important to the men and women of our agency,” said Manuel Padilla Jr., Chief Patrol Agent, Tucson Sector, U.S. Border Patrol. “We are extremely grateful for the effort and tireless dedication to this case from the U.S. Attorney’s Office, the Federal Bureau of Investigation and the Government of Mexico.While we will continue to be relentless in our commitment to securing our Nation’s borders, we will forever remember all of the men and women who have made the ultimate sacrifice.”

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

Lionel Portillo-Meza and Ivan Soto-Barraza have been captured in Mexico. These defendants are charged with crimes including 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, assault on a federal officer and possession of a firearm by a prohibited person. In addition to the murder of Agent Terry, the indictment also alleges that the defendants assaulted Border Patrol Agents William Castano, Gabriel Fragoza, and Timothy Keller, who were with Agent Terry during the firefight.

A sixth defendant, Rito Osorio-Arellanes, pled guilty to conspiracy to interfere with commerce by robbery and was sentenced to eight years in prison in January 2013. Rito Osorio- Arellanes was not present at the incident that resulted in Agent Terry’s murder.

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 Federal Bureau of Investigation.

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 Hassan Rafiee and his son, Idin Rafiee, were arraigned today before United States Magistrate Judge Barbara L. Major in federal court in San Diego on an indictment charging them and a third man, Majid Nouri, with conspiracy to evade U.S. economic sanctions against Iran.

Under the International Emergency Economic Powers Act ("IEEPA"), and a series of Presidential Executive Orders, the United States has imposed economic sanctions against Iran. With limited exceptions, the sanctions generally prohibit U.S. persons from exporting, selling, and supplying goods, technology or services to Iran, or even facilitating such transactions.

According to the indictment, the Rafiees and Majid Nouri are U.S. citizens originally from Iran. The indictment alleges that the Rafiees – with Nouri’s assistance – operated two companies, Pasha International aka Surnyx, based in San Diego, and Pasha Tak, based in Iran. The defendants used these companies to carry out a multi-year conspiracy to evade the trade sanctions against Iran. Specifically, the indictment alleges that the defendants unlawfully procured more than $8 million in goods – primarily cooling equipment – for customers in Iran, without obtaining any approval from the United States Department of Treasury, Office of Foreign Assets Control.

In January 2014, Department of Homeland Security, Homeland Security Investigation (HSI) agents arrested Hassan and Idin Rafiee in San Diego and arrested Majid Nouri in Katy, Texas. The Rafiees have each been released on a $100,000 bond secured by property, home detention and GPS monitoring, and are scheduled to make their next appearance on March 7, 2014 before the Hon. Janis L. Sammartino for a motion hearing. Nouri is expected to make his initial appearance in federal court in San Diego on February 11, 2014.

DEFENDANT   Case Number: 14CR0240-JLS

Hassan Rafiee
Majid Nouri
Idin Rafiee

San Diego, California
Katy, Texas
San Diego, California
Age 58
Age 41
Age 24   SUMMARY OF CHARGES

Title 50, U.S.C., Sections 1702 and 1705, and Title 31, C.F.R., Part 560 – Conspiracy to Export to Embargoed Country
Maximum penalties: 20 years in prison and a $1,000,000 fine.

  INVESTIGATING AGENCY

Department of Homeland Security, Homeland Security Investigations

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

San Diego – Forty-five people with links to six criminal street gangs have been charged with gun and methamphetamine-trafficking crimes in indictments unsealed this week.

Following a yearlong investigation and a three-day gang sweep that concluded this morning, 40 defendants were in custody and 52 weapons were taken off the streets. A coalition of local, state and federal agents also conducted searches at eight locations – including sites in Linda Vista, Midtown, City Heights, Mid City, Clairemont Mesa and Oak Park.

Many of these locations are homes where drugs and guns were stored or sold – including an apartment across the street from Hoover High School. Agents and detectives seized $47,600 in cash at a house in Oak Park this morning, bringing the total of cash seized to almost $60,000.

Among the guns found during the investigation, dubbed Crystal Palace II: Numerous assault rifles; AR-15 magazine-fed, semi-automatic rifles; high-powered rifles, an SWD M11 9mm (Tec 9) with high capacity magazine and a couple Norinco Mak 90 7.62mm (AK-47) with high capacity magazines.

The 10 indictments describe five different conspiracies with overlapping players, including individuals with ties to the Oriental Killer Boys, the Oriental Mob Crips, the Viet Boys, the Tiny Oriental Crips, the Logan Heights Calle Treinta (KIE-yay TRAIN-tuh) and Linda Vista Crips.

According to indictments and search warrant affidavits, most defendants were drug traffickers selling methamphetamine. Some were felons in possession of firearms.

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

“HSI and our law enforcement partners have struck a serious blow to violent gang organizations in San Diego,” said Derek Benner, special agent in charge for HSI in San Diego. “The focus of Crystal Palace Part ll was on disrupting criminal gang activity in Southern California based on previously gathered intelligence. Today’s arrests, which included a number of high-level gang members who were taken off the streets, will immediately improve community safety.”

“This is exactly the type of criminal activity that DEA and its law enforcement partners want to ensure is not afflicting the streets of San Diego,” said Special Agent in Charge William R. Sherman of the San Diego Drug Enforcement Administration.

"Combating violent crime to make our communities safer is our first goal,” said John D'Angelo, Acting Special Agent in Charge of the ATF Los Angeles Field Division. “We best achieve that through effective partnerships and innovative enforcement. In this investigation, our agencies worked together, but uniquely applied our respective resources and enforcement jurisdictions to the overall effort. As a result, we made a far greater impact together than any of us could have alone.”

According to court documents, some of the defendants were distributing methamphetamine far beyond the borders of California – from Hawaii to Guam, and from central California to Minnesota.

This case is the latest in a series of federally-charged, large-scale multi-agency crackdowns on street gang activity in San Diego County neighborhoods. Including today’s indictments, almost 300 people have been charged in a number of major federal gang prosecutions since January 2012, with scores of guilty pleas entered.

What most of these cases have in common is methamphetamine. It’s the perfect commodity for gangs because there is no shortage of customers. It’s cheap, pure and so addictive you can get hooked after just one use. It’s prevalent among the young and old, rich and poor.

Federal prosecutions of methamphetamine drug crimes in the Southern District of California, which includes San Diego and Imperial counties, have increased more than 500 percent in the last five years, from 144 cases in FY 2008 to 910 cases in FY 2013.

While San Diego County was once known for its proliferation of meth labs, the supply of meth has shifted to “superlabs” operated by drug cartels in Mexico. As a result, meth seizures at U.S. ports of entry along the California-Mexico border have almost doubled. In fiscal 2013, nearly 12,000 pounds of meth were seized at the ports, compared to almost 6,700 pounds two years earlier, according to U.S. Customs and Border Protection stats.

“Meth abuse and trafficking are tremendous problems in our country and our county – and they urgently require more resources and attention,” U.S. Attorney Duffy said. “For all of these reasons, in 2014-2015, my office will be taking a harder look at our role in attacking these problems.”

Many of the defendants are scheduled to make their initial appearances in federal court at 2 p.m. today before U.S. Magistrate Judge Karen S. Crawford.

DEFENDANTS   Criminal Case No: 14-CR-0216-MMA

Name

Age Hometown

Chien Van Nguyen, aka “Chino”

32 San Diego, CA

Israel Soto, aka “Izzy/EZ”

30 El Cajon, CA

Christian Lomeli, aka “Chente”

23 Chula Vista, CA

Lori Ann Rodriguez

43 San Diego, CA

Eric Allan Guffin, aka “White Boy”

50 San Diego, CA

Ha Thi Ngoc Nguyen, aka “Holly”

38 San Diego, CA

Lorenzo Orozco, aka “Tony Baloney”

33 San Diego, CA

Anthony Adam Cruz, aka “Tony”

37 San Diego, CA

Eric Hanesana, aka “Slim/Sleepy”

30 San Diego, CA

John Van Trinh, aka “Ngo / Little John”

23 San Diego, CA

Somxay Souphalak, aka “Hay”

38 San Diego, CA

Thalina Perry,

32 San Diego, CA

Thomas Ai Sommay, aka “T-Black”

33 San Diego, CA

Leo Paschal,

32 El Cajon, CA

Theng Sonepaseuth Theimthath, aka “Theng / Baby Blue

36 San Diego, CA   SUMMARY OF CHARGES

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); Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.

  DEFENDANTS   Criminal Case No: 14-CR-0224-MMA

Name

Age Hometown Israel Soto, aka “Izzy/EZ” 30 El Cajon, CA *Aziel Viveros-Navarro, aka “Pariente” 56 Tijuana, Mexico Jessica Quezada, 23 El Cajon, CA *Nathan Derek Gardner, aka “Nick” 34 Chula Vista, CA Gale Mason, 42 San Diego, CA   SUMMARY OF CHARGES

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); Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2)

Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.

  DEFENDANTS   Criminal Case No: 14-CR-0219-MMA

Name

Age Hometown

Mario Alberto Miranda-Verdugo

32 San Diego, CA

Israel Soto, aka “Izzy/EZ”

30 El Cajon, CA

*Chad Namoc

29 Pahoa, HI   SUMMARY OF CHARGES

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

  DEFENDANTS   Criminal Case No: 14-CR-0225-MMA

Name

Age Hometown Tam Minh Ta, aka “Tom” 30 San Diego, CA Trinh Bang Le, aka “Tyson” 42 San Diego, CA Jesus Efren Guzman, 33 San Diego, CA Giang Van Doan, aka “Shorty” 37 San Diego, CA *Christopher Sutphin Ibanez, 49 San Diego, CA Bounpheng Soryadvongsa, aka “Bulldog” 41 San Diego, CA Rick Minh Ta, aka “Ricky” 27 San Diego, CA Billy Minh Ta, 29 San Diego, CA Vong Vongdara, aka “Thigh” 33 San Diego, CA Jasmine Marie Cross, aka “Kitty” 19 San Diego, CA   SUMMARY OF CHARGES

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); Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.

  DEFENDANTS   Criminal Case No: 14-CR-0221-MMA

Name

Age Hometown Dung Van NGUYEN aka “Du” 36 San Diego, CA Israel Soto, aka “Izzy/EZ” 30 El Cajon, CA Javier Chavez 48 Riverside, CA Veovanh Insixengmay aka “Baby” 32 San Diego, CA Eric Allan Guffin, aka “White Boy” 50 San Diego, CA Dien Phong Vo 36 San Diego, CA Louie James Roberts 26 San Diego, CA Thuy Thu Tu 45 San Diego, CA *Sengnguen Koulavongsa aka “Nguen” 40 San Diego, CA Erin Lindsay Connelly 32 El Cajon, CA *Suzana Vera 39 San Diego, CA   SUMMARY OF CHARGES

Conspiracy to Distribute Methamphetamine in violation of Title 21, U.S.C., Secs. 841(a)(1) and 846; Conspiracy to Import Methamphetamine in violation of Title 21, U.S.C. Secs. 952, 960 and 963; Importation of Methamphetamine in violation of Title 21, U.S.C., Secs. 952 and 960; Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2)

Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.

  DEFENDANT   Criminal Case No: 14-CR-0223-MMA

Name

Age Hometown Vincent Rubio 36 San Diego, CA   SUMMARY OF CHARGES

Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); Maximum Penalties: 40 years in prison with a mandatory minimum sentence of 5 years and a 5 million dollar fine.

  DEFENDANT   Criminal Case No: 14-CR-0220-MMA

Name

Age Hometown Dat Minh To aka “Tony” 33 San Diego, CA   SUMMARY OF CHARGES

Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1); Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: 40 years in prison with a mandatory minimum sentence of 5 years and a 5 million dollar fine.

  DEFENDANT   Criminal Case No: 14-CR-0218-MMA

Name

Age Hometown Vinh Van Phan aka “Crack Baby” 33 San Diego, CA   SUMMARY OF CHARGES

Felon in Possession of a Firearm in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: 10 years in prison and a $ 250,000 dollar fine.

  DEFENDANT   Criminal Case No: 14-CR-0217-MMA

Name

Age Hometown Khamsouk Inthavong aka “Speedy”” 35 San Diego, CA   SUMMARY OF CHARGES

Felon in Possession of Ammunition in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: 10 years in prison and a $ 250,000 dollar fine.

  DEFENDANT   Criminal Case No: 14-CR-0222-MMA

Name

Age Hometown Cu Van Huynh aka “Ku Van Huynh/ Van Cu Huynh” 31 San Diego, CA   SUMMARY OF CHARGES

Felon in Possession of Ammunition in in violation of Title 18, U.S.C., Secs. 922(g)(1) and 924(a)(2) Maximum Penalties: 10 years in prison and a $ 250,000 dollar fine.

*Fugitives

  AGENCIES

Immigration and Customs Enforcement, Homeland Security Investigations
San Diego Police Department
San Diego County Sheriff’s Department
Drug Enforcement Agency
Bureau of Alcohol, Tobacco, Firearms and Explosives

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

SAN DIEGO – United States Attorney Laura E. Duffy announced that Philip Kubeck, Roselia Kubeck, and Earl Allen pleaded guilty Friday morning in federal court in San Diego to conspiracy to bring in illegal aliens for financial gain, harbor illegal aliens, and transport illegal aliens. All three entered their guilty pleas before U.S. Magistrate Judge David H. Bartick.

As described in their plea agreements, Philip Kubeck, Roselia Kubeck, and Earl Allen were involved in a smuggling scheme in which illegal aliens were smuggled into the United States through a hole in the International boundary fence, were harbored at a house located on North 8th Street, in El Centro, California, and then transported further into the United States via private airplane in order to bypass Border Patrol checkpoints.

According to his plea agreement, Earl Allen operated the alien stash house located on North 8th Street, where the aliens were taken after illegally entering the United States through the hole in the fence. Earl Allen also drove the aliens to the Imperial County airport.

Philip Kubeck admitted that he served as the pilot, and flew the aliens from El Centro, California, past all of the Border Patrol checkpoints, to the Los Angeles area. According to her plea agreement, Roselia Kubeck served as the communications link between Philip Kubeck and Earl Allen coordinating flight times for the illegal aliens staying at the stash house, and drop off times for those aliens at the airport. Illegal aliens involved in this scheme paid as much as $10,000 to be brought into the United States and transported in this way.

All three are set for sentencing on April 21, 2014 before U.S. District Judge Larry Alan Burns.

DEFENDANTS   Criminal Case No. 13CR4226-LAB

Philip Kubeck
Roselia Kubeck
Earl Allen

      SUMMARY OF CHARGES

Conspiracy in violation of of Title 18, United States Code, Section 371- Maximum penalties per count: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.

  INVESTIGATING AGENCIES

United States Border Patrol

SAN DIEGO – Ahmed Nasir Taalil Mohamud, a cabdriver from Anaheim, was sentenced today to six years in prison for his part in a San Diego-based conspiracy to provide material support to the terrorist group al-Shabaab.

Nasir is the last of four defendants to be sentenced by U.S. District Judge Jeffrey T. Miller. The others were sentenced in November 2013, including San Diego cabdriver Basaaly Saeed Moalin to 18 years in prison; Mohamed Mohamed Mohamud, the imam at a popular mosque frequented by the city’s immigrant Somali community, to 13 years in prison; and Issa Doreh, who worked at a money transmitting business that was the conduit for moving the illicit funds, to 10 years in prison.

Nasir and his co-conspirators were found guilty during a three-week trial in February. The United States presented evidence that Nasir, Moalin, Mohamud and Doreh conspired to provide money to al-Shabaab, a violent and brutal militia group that engages in suicide bombings, targets civilians for assassination, and uses improvised explosive devices. In February, 2008, the U.S. Department of State formally designated al-Shabaab as a foreign terrorist organization.

During the trial, the government contended that Nasir conspired to collect money from donors in Orange County as part of the conspiracy to support al-Shabaab.

During today’s sentencing hearing, Judge Miller acknowledged that Nasir was the least culpable member of the conspiracy and he noted the defendant’s background as a refugee from war-torn Somalia. Still, the judge said, “These offenses were very serious.”

This case was prosecuted in federal court in San Diego by Assistant U.S. Attorneys William Cole and Caroline Han and Department of Justice Trial Attorney Steven Ward. This case was investigated by the San Diego Joint Terrorism Task Force; the Federal Bureau of Investigation; the Department of Homeland Security, Immigration and Customs Enforcement; and the Department of Homeland Security, Customs and Border Protection.

DEFENDANTS   Criminal Case No. 10CR4246-JM

Ahmed Nasir Taalil Mohamud Basaaly Saeed Moalin Mohamed Mohamed Mohamud Issa Doreh

      SUMMARY OF CHARGES

Count 1 (all defendants) : Title 18, United States Code, Section 2339A(a)(1) - Conspiracy to provide material support to terrorists; Maximum penalties: 15 years in prison

Count 2 (all defendants): Title 18, United States Code, Section 2339B(a)(1) – Conspiracy to provide material support to foreign terrorist organization; terrorists; Maximum penalties: 15 years in prison

Count 3 (all defendants): Title 18, United States Code, Section 1956(h) – Conspiracy to launder monetary instruments; Maximum penalties: 15 years in prison

Count 4 (Basaaly Moalin) Title 18, United States Code, Section 2339A(a) – Providing material support to terrorists; Maximum penalties: 15 years in prison

Count 5 (defendants Basaaly Moalin, Mohamed Mohamed Mohamud and Issa Doreh) Title 18, United States Code, Section 2339B(a)(1) – Providing material support to foreign terrorist organization; Maximum penalties 15 years in prison

  INVESTIGATING AGENCIES

San Diego Joint Terrorism Task Force
Federal Bureau of Investigation
Homeland Security Investigations, Immigration and Customs Enforcement
Homeland Security Investigations, Customs and Border Protection

Six former government contractors and a former Defense Department employee who called himself the “Godfather of Camp Pendleton” have entered guilty pleas in federal court in connection with a scheme involving bribery and kickbacks at federal facilities.

The guilty pleas, which also include two corporations, took place over a span of 10 days, culminating with the admissions today of subcontractors Paul Dana Kay of PK Excavation and Manuel Ramirez of MRN Construction, Inc., before U.S. Magistrate Judge David H. Bartick to Anti-Kickback Act violations.

Likewise, on Tuesday of this week, subcontractors Gerardo Mercado and Raul Mercado of Blue Ocean Construction, Inc., entered guilty pleas before Judge Bartick. Last week, former U.S. Department of Defense employee Natividad “Nate” Lara Cervantes, the self-described “Godfather,” as well as government prime contractors Hugo Hernandez Alonso and Bayani Yabut Abueg, Jr., and their companies, Hugo Alonso, Inc. (“HAI”) and MBR Associates, Inc. (“MBRA”) admitted crimes as well.

According to court records, Cervantes used his position at Camp Pendleton to solicit bribes from construction companies HAI and MBRA seeking to do business on the base, and referred to himself as the “Godfather of Camp Pendleton.” At least as early as September 2008, Cervantes admitted using his position supervising construction and service contracts to seek bribes from Alonso and Abueg, on behalf of either HAI or MBRA, to do business at Camp Pendleton. In return for these contracts, Cervantes received cash payments from Alonso and Abueg and remodeling work on a condominium that was paid for by HAI.

As part of his plea agreement, Cervantes admitted that as early as 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 at least $74,000 in bribes between 2008 and 2011. Cervantes and Abueg, acting on behalf of HAI, also admitted exchanging an additional $20,000 in bribes during this time, all of which was approved by 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 Abueg, who agreed to pay Cervantes a $40,000 bribe in exchange for assistance in obtaining a new $4 million contract at Camp Pendleton for MBRA. 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, Abueg 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, Abueg handed Cervantes an envelope containing $10,000 cash. At that point, federal agents intervened.

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 employee. Abueg’s and Alonso’s companies, MBRA and HAI, respectively, also entered guilty pleas regarding the solicitation and acceptance of kickbacks.

The four subcontractors who pleaded guilty this week admitted paying tens of thousands of dollars in kickbacks for favorable treatment in their subcontracts with HAI or MBRA. For example, Kay admitted to paying Abueg at least $50,000 in kickbacks, and the Mercados admitted to paying Abueg over $44,000 in kickbacks.

“The public confidence of citizens in their government is seriously undermined when federal employees and contractors engage in deceitful, corrupt practices for personal gain,” said U.S. Attorney Laura Duffy. “Corruption exacts a price, and those costs are ultimately born by honest taxpayers and forthright vendors. This office will continue to vigorously prosecute and hold accountable all those who seek personal enrichment at the public’s expense.”

FBI Special Agent in Charge Daphne Hearn commented, “The FBI is committed to working with our law enforcement partners in rooting out fraudulent schemes that defraud the Department of Defense and ultimately American taxpayers. Today’s guilty pleas are an example of that continued commitment to the American public to protect our precious tax dollars from waste, fraud, and abuse.”

Acting Special Agent in Charge of Internal Revenue Service (IRS) Criminal Investigation for the Los Angeles Field Office, Joel P. Garland stated, “Today’s court action reaffirms IRS Criminal Investigation’s role in combating tax and other financial crimes stemming from bribery of public officials.”

Small Business Administration Inspector General Peggy E. Gustafson said: “There is zero tolerance for corruption in SBA’s set-aside contracting programs. We will aggressively pursue allegations of fraud and corruption in these programs and seek justice on behalf of taxpayers. I want to thank the U.S Attorney’s Office and our law enforcement partners for their dedication and hard work throughout this investigation.”

“The special agents in my office work hard to fight fraud and protect taxpayer dollars,” said Inspector General Brian D. Miller of the General Services Administration. “We will continue to actively investigate GSA contractors whose ‘business as usual’ involves bribes and kickbacks.”

Special Agent in Charge Chris Hendrickson of the Defense Criminal Investigative Service (DCIS) Western Field Office commented, “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.” Special Agent in Charge Susan M. Simon of the Naval Criminal Investigative Service (NCIS) Southwest Field Office observed, “This investigation once again highlights the excellent cooperation between multiple investigative agencies working together in the pursuit of justice. Combating procurement fraud perpetrated by U.S. Navy and U.S. Marine Corps contract companies and government contracting personnel remains a top priority for the Naval Criminal Investigative Service. It has been a pleasure for NCIS to have worked so closely with our federal partners, including the United States Attorney's Office, in the successful resolution of this case. We look forward to building on the excellent relationships forged throughout the course of this investigation.”

Cervantes, Alonso and Abueg are scheduled to next appear in court for sentencing before U.S. District Judge Anthony J. Battaglia on April 18, 2014. Kay, Ramirez, Gerardo Mercado, and Raul Mercado are all scheduled to appear for sentencing before Judge Battaglia on April 25, 2014.

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 contacting the Department of Defense Hotline at (800) 424-9098 or email: hotline@dodig.mil.

DEFENDANT   Case Number: 13cr1345AJB

Lara Cervantes Natividad

      DEFENDANT   Case Number: 14cr0120-AJB

Hugo Hernandez Alonso

      DEFENDANT   Case Number: 14cr0144-AJB

Bayani Yabut Abueg, Jr.

      DEFENDANT   Criminal Case No. 14cr0180-AJB

Gerardo Ricardo Mercado

      DEFENDANT   Criminal Case No. 14cr0181-AJB

Raul Mercado

      DEFENDANT   Criminal Case No. 14cr0187-AJB

Paul Dana Kay

      DEFENDANTS   Criminal Case No. 14cr0213-AJB

Manuel Ramirez

      CORPORATE DEFENDANT   Case Number: 14cr0120-AJB

Hugo Alonso, Inc.

      CORPORATE DEFENDANT   Case Number: 14cr0144-AJB

MBR Associates, Inc.

    SUMMARY OF 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 (Defendant Cervantes only)

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 Cervantes, 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, MBR Associates, Inc., Gerardo Mercado, Raul Mercado, Kay, Ramirez)

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 AGENCIES

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

This morning in federal court in San Diego, former Marine watch commander Luis Gilbert Menchaca was sentenced to prison for his role in a fraud and bribery scheme at Marine Corp Air Station (MCAS) Miramar. As part of the scheme, Menchaca – while serving as a watch commander for the military police at Miramar – paid thousands of dollars in bribes to another Marine in order to obtain tens of thousands of dollars in fraudulent lodging reimbursements. U.S. District Judge Dana M. Sabraw sentenced Menchaca to two years in prison followed by three years of supervised release, and ordered him to pay restitution to the Marine Corps in the amount of $37,632.

On July 16, 2013, Menchaca was found guilty by a federal jury of one count of conspiracy to commit bribery and three counts of making false claims. The trial evidence demonstrated that Menchaca first joined the Marine Corps in 1998, and after an initial four-year term in which he attained the rank of Sergeant, was discharged and entered the Marine Corps Reserve. From time to time thereafter, Menchaca received orders placing him on active duty. In connection with his mobilization orders, Menchaca became eligible to receive certain travel payments, including lodging reimbursement and a per diem allowance, for the entire duration of his active duty service. These travel payments were in addition to the compensation and basic housing allowance (“BAH”) that he, like other Marines, received.

In May 2007, after being placed on active duty at Miramar, Menchaca entered into a conspiracy with another Miramar Marine, Manuel Ramos-Padilla. Ramos worked in an administrative office at Miramar that processed travel claims for reservists like Menchaca. In connection with the scheme, Menchaca and Ramos agreed to submit falsely completed forms – called “travel vouchers” – that claimed reimbursement for thousands of dollars in lodging expenses that Menchaca had not incurred or paid. In addition to submitting these false travel vouchers, the conspirators submitted a fake rental receipt, for a nonexistent address on Mission Village Drive in San Diego.

Menchaca and Ramos repeated the scheme month after month, for a period of ten months. In total, Menchaca submitted approximately $38,000 in false lodging claims. The proceeds of the scheme were deposited directly into Menchaca’s bank account every month. In exchange for his role processing the false travel vouchers, Menchaca paid Ramos up to $1,000 per month in cash. On occasion, Menchaca also paid bribes to Ramos in the form of personal checks.

While on active duty with the Marine Corps, Menchaca spent over four years in the military police. During the time period of the fraud, Menchaca served as a watch commander within the military police. In that role, he supervised patrol supervisors, who in turn supervised lower-ranking military police officers. Menchaca had responsibilities for overseeing the enforcement of federal laws, including the Uniform Code of Military Justice; as well as for enforcing the California Vehicle Code and Miramar regulations.

United States Attorney Duffy stated, “Investigating and prosecuting bribery is one of our top priorities. With our nation’s military budget already strained, public corruption draining needed U. S. Marine Corps resources will not be tolerated.”

Menchaca’s co-defendant, Manuel Ramos-Padilla, previously pled guilty to conspiring to commit bribery and make false claims. On November 8, 2013, Ramos was sentenced by Judge Sabraw to 24 months in prison.

"The Special Agent in Charge of the NCIS Field Office at Camp Pendleton, Charles Warmuth, says "Misusing trust for personal gain is not a "victimless" crime; it siphons money that could otherwise be used to maintain the readiness of the nation's war fighters and NCIS is committed to bringing to justice those who commit such fraud."

DEFENDANT   Case Number: 12cr5099-DMS

Luis Gilbert Menchaca

    CO-DEFENDANT Manuel Ramos-Padilla   SUMMARY OF CHARGES

Conspiracy to commit bribery and false claims, in violation of Title 18, United States Code, Section 371 - Maximum penalties: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

Three counts of false claims, in violation of Title 18, United States Code, Section 287 - Maximum penalties (per count): Five years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.

  INVESTIGATING AGENCY

Naval Criminal Investigative Service

UPDATE
On March 20, 2014, the charges against Alan Donald were dismissed without prejudice on the motion of the government.
 

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San Diego biomedical device manufacturer Valor Medical, Inc, (“Valor”) and four of its employees admitted today that they failed to provide the Food and Drug Administration (“FDA”) with required information that would have cast doubt on the safety of Neucrylate, a product intended to treat aneurysms.

According to court documents, in 2007, Valor commissioned two preclinical tests on Neucrylate, a mouse lymphoma assay (MLA) and a chromosomal assay (CAA), both of which contained unfavorable results. Although Valor acknowledged receiving the reports, the company failed to include the results of the MLA and CAA testing when it submitted an application to the FDA for an investigational device exemption in September 2010. This failure represents a violation of the federal criminal statutes as all defendants admitted that the report was required to have been included with Valor’s application under the Food, Drug and Cosmetic ACT (“FDCA”).

According to court records, Valor created two separate products, one intended for use in blood vessels in the brain (Neucrylate AN) and one intended for use in blood vessels near the heart (Neucrylate AVM). 2 Because both products are considered to be Class III medical devices under the FDCA, premarket approval from the FDA is required before they can be sold in the United States. In order to perform clinical trials on humans to obtain the data needed to support an application for premarket approval, Valor needed to first obtain an investigational device exemption (“IDE”) from the FDA. The regulations relating to such exemptions require applicants to submit “reports of all prior clinical, animal and laboratory testing of the device.”

As the Valor devices are intended to be permanently implanted in the body, biocompatibility is very important. The FDA evaluates the biocompatibility of medical devices pursuant to ISO-10993, an international standard, which requires a series of at least three tests. Two of the three tests typically performed to satisfy these requirements are the MLA and CAA tests.

According to sentencing documents, after Valor sent the samples of Neucrylate to be tested, the lab reported to Alan Donald, a consultant hired by Valor, that all the chromosomes in the CAA test had been destroyed by initial contact with the Neucrylate. The lab asked if Valor wanted the lab to follow the standard protocol, which called for diluting the samples of Neucrylate and retesting. Rather than follow the standard protocol, Donald told the lab that no further testing should be performed. The lab’s final report indicated that “no chromosomes were present to be scored” – indicating that the Neucrylate was cytotoxic (i.e., toxic to cells). The official conclusion to the report indicated that the testing had not been completed pursuant to the testing protocol.1

At about the same time, the laboratory sent an email to Valor’s Chief Scientist, Peter Friedman, attaching the preliminary results of the MLA test, which advised Valor that “all testing has been completed and the test article is considered to be mutagenic” (i.e., an agent that changes the genetic material of a cell, usually DNA, thereby increasing the frequency of mutations). Friedman forwarded the email later that same day, with the attached preliminary results, to Valor’s then-CEO Charles Kerber, Board Member H. Clark Adams, and Alan Donald. Adams replied to all, saying, “Let’s huddle and determine how we overcome this obstacle. I have confidence that we can find an answer.”

Following this huddle, the company provided neither the CAA test results nor the MLA test results to the FDA, even though they filed two separate IDE applications and responded to several additional requests for information (virtually all of which specifically requested that the CAA and/or MLA tests be performed).

At the time that defendant Cathy Bacquet, Clinical Affairs Manager, compiled and submitted the IDE application to the FDA, the CAA test report was filed as Test Report #27 in the Valor Medical Technical Report Log. According to a Valor employee, Adams, Kerber, and Bacquet made the decision not to provide the CAA test to the FDA.

The MLA report was not in the Technical Report Log at the time Valor’s IDE was submitted in 2010 because Adams specifically prohibited its inclusion. However, a copy of the MLA test report was found on both Friedman’s and Bacquet’s computers during the execution of a search warrant. The file, created in 2007 on Friedman’s computer and in 2009 on Bacquet’s computer, was identified as “mouse lymphoma-failed.” In an email two months after the submission of the IDE, Bacquet wrote, “We have already done Mouse Lymphoma and do not want to repeat it.” Fortunately, the FDA rejected all of Valor’s IDEs for Neucrylate despite not having the failed test results.

After a December 2010 inspection of Valor uncovered the CAA test, the FDA sent a Warning Letter to Adams at Valor. The letter referenced Valor’s failure to disclose as a violation of the regulations requiring an applicant to submit all preclinical testing to the FDA. Bacquet, responding on behalf of Valor, claimed that Valor “inadvertently” left out the CAA and MLA tests in the application for the IDE. Valor blamed this “unintentional violation” on Alan Donald, who had separated from the company nearly a year before that IDE was filed. Bacquet falsely wrote in the letter, “Prior to February 10, 2011, the existence of this report [the MLA] was not known to VM management or Quality/Regulatory staff,” which is clearly contradicted by the series of emails between Friedman, Kerber, Adams, and Donald when the MLA results were received by Valor in 2007, and the presence of copies of the MLA report on the computers of Friedman and Bacquet.

The American people depend on the FDA to determine that there is sufficient scientific basis to believe that a proffered medical device is safe and effective before permitting clinical trials on human beings. The FDA, in turn, depends on the full and truthful disclosure of all pre-clinical testing by device manufacturers to make an educated determination. When information is withheld from the FDA, the decision-making process is corrupted. Here, the FDA did not approve the proffered medical device for clinical trials on humans, so no Americans were endangered by the defendants’ failure to provide the testing data to the FDA.

“Our nation’s system of evaluating medical device safety and effectiveness depends upon the submission of truthful data to the FDA,” said U.S. Attorney Laura Duffy. “When manufacturers like these defendants place their profits above their duty to honestly report the results of product testing, they place the American public’s health and safety in jeopardy. This office will continue to vigorously enforce laws designed to protect the health and safety of our citizens through cases like this.”

The company pled guilty to Failure to Provide Required Information in violation of Title 21, United States Code, Section 331(q)(1)(B) and 333(a)(1) (a felony). Former Valor CEO and current member of the Board of Directors H. Clark Adams, and Valor Regulatory and Clinical Affairs Manager Cathy Bacquet also pled guilty to the same crime but as misdemeanor. Valor founder Dr. Charles Kerber and Chief Scientist Peter Friedman entered into Deferred Prosecution Agreements in which they admitted that they knew the required information was omitted in the FDA Application. Finally, former Valor consultant, Alan Donald, pled guilty in a related criminal case for his role in failing to submit the CAA and MLA test results to the FDA with the 2008 IDE application. At the time, Donald was a member of the Board of Directors of Valor Medical, and was paid as a regulatory consultant.

"The FDA's regulatory decisions must be based on sound and truthful scientific evidence," said Lisa Malinowski, Special Agent in Charge, Office of Criminal Investigations, Los Angeles Field Office. "We will continue to protect the Agency's public health mission against this type of deliberate deception and aggressively pursue the prosecution of those who may endanger the public’s health. We commend the U.S. Attorney’s Office for their diligence in pursuing this investigation.”

United States Magistrate Judge David H. Bartick sentenced former Valor CEO H. Clark Adams to one year of probation, and a $5,000 fine, and sentenced Regulatory and Clinical Manager Cathy Bacquet to one year of probation and a $2500 fine. The sentencing for Valor Medical, Inc. is scheduled for February 19, 2014, at 9:30 a.m. before U.S. District Judge Dana Sabraw. A status hearing has been set for February 3, 2015, at 1:30 p.m. with respect to defendants Kerber and Friedman.

_________________________

1The lab’s internal Quality Event Details Form noted that the samples for the CAA test were “cytotoxic,” and the results were valid, but the sponsor was “choosing to cancel the study rather than perform dilutions” so a “full conclusion as to the genotoxicity of the sample will not be made.”

DEFENDANT   Criminal Case No. 14cr0196-DMS

Valor Medical, Inc. San Diego, California

H. Clark Adams
San Diego, California

Cathy Bacquet
San Diego, California

Charles Kerber
San Diego, California

Peter Friedman
San Diego, California

Date of Incorporation: 2007

Age: 77

Age: 49

    SUMMARY OF CHARGES

Count 1 (Defendant Valor Medical)

Failure to Provide Required Information, a felony, in violation of Title 21, United States Code, Section 331(q)(1)(B) and 333(a)(2)
Maximum Penalty for a corporation: 5 years probation, a $500,000 fine, $400 special assessment

Count 2 (remaining defendants)

Failure to Provide Required Information, a misdemeanor, in violation of Title 21, United States Code, Section 331(q)(1)(B) and 333(a)(1)
Maximum Penalty: 1 year in custody and/or $100,000 fine, $25 special assessment.

  AGENCY

U.S Food and Drug Administration, Office of Criminal Investigations

United States Attorney Laura E. Duffy announced that Kevin Kelso pled guilty today in federal court before Magistrate Judge William V. Gallo to charges of wire fraud stemming from his employment as a senior finance executive at the Westin San Diego, from which he stole more than a half a million dollars.

According to court records, Kelso was an employee of Interstate Hotels & Resorts and worked as Westin San Diego’s Director of Finance between December 2010 and September 2012. Kelso utilized this position to embezzle funds from the Westin to pay for his own personal expenses. He admitted stealing the money using a variety of means, including abusing the hotel’s change order process (the process by which a hotel exchanges large denomination bills for smaller bills to keep in the hotel safe), obtaining an unauthorized corporate American Express card (which he paid using Westin San Diego’s bank account), and writing checks from Westin San Diego’s bank account to pay himself and third parties for personal expenses. In his plea, Kelso also admitted to concealing the fact that he was taking cash from the hotel’s safe and not making a corresponding deposit during the change order process and making false entries in Westin San Diego’s general ledger.

Kelso further admitted to defrauding his prior employer, the Ann Arbor Marriot Ypsilanti in Michigan, using similar machinations. The total amount of embezzled funds from the two hotels was over $800,000.

The defendant has been released on bond pending sentencing. The guilty plea is not final until it has been accepted by the district court. Kelso is scheduled to be sentenced April 18, 2014 at 9 a.m. before U.S. District Judge Dana Sabraw.

DEFENDANT   Case Number: 13CR3017-DMS

Kevin Kelso

      SUMMARY OF CHARGES

Counts 1-6: Title 18, United States Code, Section 1343 – Wire Fraud

Forfeiture: Title 18, United States Code, Sections 981(a)(1)(C) and Title 28, United States Code, Section 246

  INVESTIGATING AGENCIES

United States Secret Service

United States Attorney Laura E. Duffy announced that Jeffrey Bednarek, a former employee at the California Department of Motor Vehicles (“DMV”) in El Cajon, California, pleaded guilty late yesterday to his aggravated role in a conspiracy to commit bribery and identification document fraud, bribery, and witness tampering. Bednarek entered his guilty plea before U.S. Magistrate Judge William V. Gallo.

According to the plea agreement, Bednarek was a Licensing Registration Examiner at the El Cajon DMV who was responsible for conducting driving tests for driver’s license applicants. Bednarek admitted that, beginning in at least April 2009, and continuing up to at least April 26, 2012, he conspired with his co-defendants to commit federal program bribery and identification document fraud.

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 a complaint for witness tampering. On November 22, 2013, U.S. District Judge Cathy A. 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.

Of the 30 defendants charged in this widespread corruption scheme (related Criminal Case Nos. 12CR1852-CAB and 13CR0592-CAB), all 30 of the defendants, including Bednarek, have pleaded guilty to felony conduct, namely, conspiracy to commit bribery and identification document fraud. Many of these defendants have been sentenced, and several others are currently awaiting sentencing. Bednarek is next scheduled to be in court before United States District Judge Cathy A. Bencivengo for sentencing on April 25, 2014, at 9:00 a.m.

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   Criminal Case No. 12CR1852-CAB

Jeffrey T. Bednarek

      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

United States Attorney Laura E. Duffy announced that Adam Lynch pled guilty this afternoon in federal court in San Diego to 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. Lynch entered his guilty plea before U.S. Magistrate Judge David H. Bartick.

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. He robbed the same bank branch twice within the space of a week. Typically, Lynch would commit the robbery by walking up to the counter, passing a note to the teller, identifying himself as being armed, and demanding cash. 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.

Lynch has been in custody since his arrest on April 21, 2011, and is set for sentencing on April 28, 2014 before U.S. District Judge Roger T. Benitez.

DEFENDANT   Case Number: 14-CR-0182-BEN

Adam Lynch

      SUMMARY OF 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

San Diego, CA – United States Attorney Laura E. Duffy announced today that insurance broker Jeffrey B. Keller appeared in federal court before United States Magistrate Judge William V. Gallo and admitted deceiving life insurance companies so that they would issue more than $80 million worth of policies to unqualified applicants who had no intention of paying the policy premium. In return, Keller obtained over $3 million in commissions.

As set forth in the Plea Agreement, Keller employed multiple means to deceive the life insurance companies. Initially, he recruited elderly individuals to apply for “free” life insurance policies with death benefits ranging from $2 million to $10 million. Keller then submitted fraudulent applications to the insurance companies by intentionally omitting or falsifying the applicant’s net worth, income, or source of premium payments. Further, Keller concealed that, in some cases, he secretly rebated to some applicants funds representing part of the commission payments fraudulently obtained from the life insurance carriers.

In addition to deceiving the life insurance companies, Keller inflated business expenses paid to his coconspirators in order to reduce his income and thus evade the payment of taxes that were lawfully due and owing. For example, Keller would issue checks in inflated amounts payable to a variety of companies controlled by individuals who assisted Keller in committing tax evasion. These coconspirators were paid for work related to the life insurance fraud (e.g., setting up life insurance trusts) and then kicked-back the inflated amount to Keller. In order to settle his tax liability, Keller agreed to pay $1 million to the IRS in connection with the inflated invoices.

Keller is scheduled to be sentenced on April 11, 2014, at 9:00 a.m. before U.S. District Court Judge Janis L. Sammartino.

DEFENDANT    

JEFFREY B. KELLER

      SUMMARY OF CHARGES

Title 18, United States Code, Section 371 – Conspiracy to Commit Mail Fraud and Wire Fraud and to Defraud the United States by Impairing and Impeding the Lawful Functioning of the Internal Revenue Service. Maximum penalties: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

  AGENCIES

Internal Revenue Service – Criminal Investigation
Federal Bureau of Investigation