Southern District of California

United States Attorney Laura E. Duffy announced today that a former U. S. Marine Captain admitted to submitting tens of thousands of dollars in false lodging receipts to the Marine Corps and the Department of Veterans Affairs from 2009 to 2011. At the time, Captain Shawn A. Joyce was stationed at Marine Corps Base Camp Pendleton.

As detailed in his plea agreement, Joyce had initially been discharged from active duty in October 2008, entered the Marine Corps reserves, and thereafter sought and obtained orders placing him back on active duty at Camp Pendleton. Under certain circumstances, reservists who are called to active duty become eligible for a housing reimbursement benefit during the term of their active duty, in addition to the basic allowance for housing that they receive. Joyce exploited this housing reimbursement benefit by falsely claiming reimbursement for rent that he never paid. Specifically, in 2009 and 2010, Joyce falsely claimed to be paying rent up to $4,030 per month for an address in Solana Beach. In 2011, Joyce falsely claimed to be paying rent of $3,700 per month for an address in Fountain Valley.

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

In his plea agreement, Joyce also admitted to devising a separate scheme to defraud the Department of Veterans Affairs of tens of thousands of dollars. Under federal law, a servicemember receiving VA disability benefits is not entitled to simultaneously receive active duty compensation. To avoid this type of “double payment,” service members (who receives VA disability benefits) are required to advice the VA when they receive orders placing them on active duty. Despite this regulation, Joyce failed to advise the VA and continued to receive VA disability benefits to which he was not entitled. Compounding the loss, Joyce contacted the VA from time to time trying to increase the amount of his improper disability payments.

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

United States Attorney Duffy stated, “With our nation’s military budget being strained to the breaking point, fraud that drains funds needed by the U. S. Marine Corps and our veterans, will not be tolerated.”

“The Office of Inspector General for the Department of Veterans Affairs aggressively investigates fraudulent receipt of VA benefits in order to preserve these benefits for those entitled to them,” said VA Deputy Assistant Inspector General for Investigations Quentin Aucoin.

The case has been assigned to U. S. District Judge John A. Houston. The next scheduled court appearance is November 18, 2013 for sentencing.asdf

DEFENDANT   Case Number: 13cr3063-JAH Shawn A. Joyce       SUMMARY OF CHARGES

Count 1: Wire fraud, in violation of Title 18, United States Code, Section 1343 - Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

Count 2: Wire fraud, in violation of Title 18, United States Code, Section 1343 - Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

  INVESTIGATING AGENCIES

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

San Diego – A local physician was arraigned this afternoon on eight counts of tax evasion. According to the indictment, from at least calendar years 2004 through 2011, William Richard Bailey, a physician of osteopathic medicine, provided physician services to the patients of several clinics operated by at least two other local doctors. Despite earning significant income, Bailey accomplished his tax evasion by concealing his income and by preparing and filing false federal income tax returns for the years 2004 through 2011 reporting $0 in taxable income and $0 in tax due and owing to the Internal Revenue Service (IRS).

As charged in the indictment, Bailey accomplished his tax evasion by using a purported “trust” and “unincorporated business trust organization” (UBO) during calendar years 2004 through 2011 to conceal income he earned as a physician from the IRS. To further his evasion, Bailey opened a bank account in the name of the UBO. Bailey received checks from at least two physicians who operated clinics in San Diego County where Bailey provided physician services in exchange for compensation. Bailey directed that the checks be made payable to the name of the UBO. According to the indictment, Bailey deposited these checks into the UBO bank account. Bailey then transferred funds from the “UBO” bank account to pay for his own personal expenses and benefit. During Bailey’s court appearance today, Assistant U.S. Attorney Joseph J.M. Orabona, who is prosecuting the case, stated that Bailey failed to report more than $1.1 million in income he earned during the calendars years 2004 through 2011, resulting in an alleged tax loss of approximately $300,000.

The arraignment took place today before U.S. Magistrate Judge Barbara L. Major. Bailey entered a plea of not guilty to the charges of tax evasion. The Court set a bond in the amount of $40,000. A motion hearing and trial setting is scheduled for September 27, 2013, before U.S. District Judge Cathy A. Bencivengo.

DEFENDANTS   Criminal Case No. 13CR3046-CAB William Richard Bailey       SUMMARY OF CHARGES

Title 26, United States Code, Section 7201 B Tax Evasion
Maximum Penalties: 5 years of imprisonment and $250,000 fine

  AGENCY

Internal Revenue Service-Criminal Investigations

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

DEFENDANT ADMITS HE PERSONALLY SOLICITED
OVER $2 MILLION WITH PHANTOM MINING ASSETS

San Diego, CA - United States Attorney Laura E. Duffy announced that Douglas Ellingson pleaded guilty today to participating in an investment fraud conspiracy that cheated victims from San Diego and elsewhere out of more than $2 million. Ellingson admitted that between April 2008 and September 2012, he conspired with co-defendant William Ison and others to fraudulently mislead investors about the nature and security of their investment, and induce victims into wiring money to one of several accounts under Ellingson’s control. Ellingson entered his plea to a wire fraud conspiracy before Magistrate Judge Bernard G. Skomal. He is scheduled to appear before U.S. District Court Judge Irma E. Gonzalez on October 28, 2013 for sentencing.

In entering his plea, Ellingson explained that he and Ison first conspired with James Pantazelos in early 2008 to fraudulently solicit investors by falsely promising that investments would be secured by valuable precious minerals obtained by Ison’s mining company, Olathe Mining Company (“OMC”). In fact, OMC had not begun mining operations, and its assets consisted of merely mining claims and extraction technology, not actual minerals. Pantazelos previously pleaded guilty in the Northern District of Illinois to one count of mail fraud arising from this scheme involving Ellingson and Ison. (United States v. Pantazelos, Case No. 11-cr-50078 (N.D. Ill.)). On February 15, 2013, Pantazelos was sentenced to 114 months in custody and ordered to pay over $3.3 million in restitution to victims

Ellingson further admitted that beginning in June 2008, he and Ison agreed to fraudulently solicit investments in OMC through Ellingson’s new business entity, Capital Advancement Systems (“CAS”). As with the Pantazelos scheme, Ellingson and Ison again fraudulently claimed that investments in CAS would be secured by OMC, although OMC had no liquid assets had not actually mined anything. Later, Ellingson and Ison expanded their falsehoods by fraudulently claiming to investors that funds would be backed by “guarantees” from Ison’s new company, Blue Diamond Excavation, Inc. (“BDE”). As Ellingson knew, however, BDE’s only assets were OMC’s non-liquid assets.

Later, Ellingson and Ison expanded their lies to potential investors by promising (1) that funds sent to CAS would never produce a loss, (2) that funds would be maintained in a bank account under Ellingson’s control, and (3) that funds would be used to secure loans for business deals, such that investor funds would never actually be placed at risk. In fact, Ellingson wired almost all of the funds directly to Ison, and was informed that Ison was sending 100% of the victim funds to an investment partner to be used in various business deals.

In order to promote Ison’s appearance of wealth to potential investors, Ellingson and Ison falsely claimed Ison was the head of a large non-profit foundation that gave over a “trillion dollars” to various humanitarian causes. They encouraged investors to hand over funds by promising that the profits would be used to support charitable causes.

Ultimately, the victims did not receive promised profits or a return of their original investments. In total, Ellingson personally obtained over $2 million from victims, almost all of which he wired directly to Ison.

United States Attorney Duffy stated that the prosecution of the wide-ranging conspiracy would continue. She thanked the Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation, which jointly investigated the matter. United States Attorney Duffy reminded the public to be wary of investment fraud scams that make promises that seem “too good to be true.” More information to help you avoid becoming the victim of an investment fraud scheme is located at www.stopfraud.gov/protect-securities.html.

DEFENDANT   Case Number: 12CR4030-IEG Douglas Ellingson Age: 44     SUMMARY OF CHARGES

Count 1: Title 18, United States Code, Section 371 (Conspiracy)
Maximum penalties: 5 years of custody; $250,000 Fine, or twice the gross gain/gross loss resulting from the offense

  AGENCIES

Federal Bureau of Investigation
Internal Revenue Service - Criminal Investigation

United States Attorney Laura E. Duffy announced that Irving J. Schwartz, M.D. was sentenced today to 5 months in prison, followed by 5 months in a half-way house, for his involvement in a scheme to defraud the Medicare trust fund by writing hundreds of false and fraudulent prescriptions for costly medical equipment that was not medically necessary. Dr. Schwartz was also ordered to pay restitution of $593,429.81 to the Medicare trust fund, and to forfeit $55,800 in kickbacks that he received for his role in the fraudulent scheme.

The Medicare program is a federally-funded health insurance program that provides health care services and equipment — including power wheelchairs to qualifying individuals who cannot walk without assistance. Prior to receiving this expensive equipment, however, a medical doctor must write a prescription certifying that the Medicare beneficiary has a medical need for the power wheelchair. In this case, Dr. Schwartz abused his position as a licensed physician by writing prescriptions for pricey medical equipment without any regard for the wants or needs of his patients.

The scheme focused on the sale of fraudulent power wheelchair prescriptions, with the end-goal being to obtain reimbursements from Medicare for power wheelchairs that patients did not need. Dr. Schwartz and a Co-conspirator named Gloria Hernandez would travel to El Centro, California in search of elderly Medicare patients. Schwartz would then write the patients prescriptions for power wheelchairs, even though the patients did not need the equipment and could walk without assistance. Schwartz collected a $300 cash kickback in exchange for each power wheelchair prescription. Hernandez would then sell the power wheelchair prescriptions to a medical supply owner named Jose Melendez (another Co-Conspirator), charging him $1,000 per fraudulent prescription.

Melendez, in turn, sold some of the power wheelchair prescriptions to other co-conspirators, charging an additional mark-up on each prescription. As the last step in the scheme, Melendez and the other co-conspirator owners of medical supply companies would submit the fraudulent prescriptions to Medicare for reimbursement, billing up to $5,865 for each power wheelchair.

In his plea agreement, Dr. Schwartz admitted that he wrote at least 186 fraudulent power wheelchair prescriptions for Medicare beneficiaries in exchange for more than $55,000 in bribes and kickbacks. Melendez, the owner and operator of Oceanside Medical Services, purchased these 186 fraudulent prescriptions and used them to submit over $830,000 in false claims to Medicare. In a related case, co-conspirators Aristeo and Laura Tavares admitted to submitting more than $250,000 in false claims, based on Dr. Schwartz’s fraudulent prescriptions. In total, the scheme resulted in more than $1 million in false claims to the Medicare trust fund.

During today’s hearing, prosecutors described Dr. Schwartz’s conduct as an egregious breach of trust and an abuse of his position as a medical doctor. In one case, Dr. Schwartz wrote two power wheelchair prescriptions for a husband and wife living in El Centro. Four years after Medicare paid for the expensive equipment, the power wheelchairs were still wrapped in the original plastic covering and sat unused in the couple’s home – except during Christmas when one wheelchair was used as a Christmas tree stand. The husband and wife were both able to walk without difficulty, and they told federal agents that they never asked for the costly equipment, never needed it, and never used it. United States District Court Judge Marilyn L. Huff chastised Dr. Schwartz in open court, remarking that “he should have known better,” and reminding Dr. Schwartz that these types of schemes take valuable government resources away from elderly patients who actually need expensive medical equipment.

United States Attorney Duffy said, “As a physician, Dr. Schwartz was licensed to operate in a system dependent on trust and honesty. He knew it was illegal to write false and fraudulent prescriptions, yet he purposefully engaged in criminal activity in order to line his own pockets at the expense of the Medicare program and the American taxpayer.”

DEFENDANTS   CRIMINAL CASE NO. 12cr2599-H Irving Schwartz       SUMMARY OF CHARGES

Count 1: Conspiracy to Pay and Receive Health Care Kickbacks and Defraud -Title 18, United States Code, Section 371; Maximum Penalties: Five years in custody; $250,000 fine; 3 year of supervised release; and mandatory restitution

  INVESTIGATING AGENCIES

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

Los Angeles resident Carl Wayne Adrian, Sr., and his company, California Uniforms, Inc. were fined $250,000 and ordered to forfeit $135,000 worth of seized Postal uniform items. Adrian Sr. was also sentenced to 12 months of home detention by U.S. District Judge William Q. Hayes.

As revealed during their guilty plea, the defendants participated in a scheme to defraud the Postal Service by providing unlicensed vendors with access to the Postal Service uniform sales reimbursement system in return for a 10% kickback.

Postal Service contracts with vendors wishing to sell licensed Postal uniform items require the vendor to accept payment only at the point of sale from Postal employees with proper identification. Payment for Postal uniforms can only be accepted in the form of uniform allowance cards, which are funded by the Postal Service. Vendors under contract with the Postal Service are given an authorization code which allows them to receive payments.

The vendor licensing agreements allow the Postal Service to insure that its uniforms are sold only by responsible vendors. This control over the sales of Postal uniforms has an important public safety aspect, in that most Americans will willingly open the door to their home to anyone wearing a Postal letter carrier uniform. For this reason, it is a misdemeanor for anyone who is not a letter carrier to wear such a uniform (18 USC 1730).

In December of 2009, Carl Adrian, Sr. received a proposal from Ace Uniforms in San Diego (which had recently lost its license to sell Postal uniforms) that he and his company, California Uniforms (which at that time possessed a valid license to sell Postal uniforms) process the uniform allowance card purchases made at Ace Uniforms, Inc. stores in San Diego and Phoenix, falsely representing the purchases to be the sales of California Uniforms, in return for a kickback of 10% of the amount paid by the Postal Service. Adrian admitted that he agreed to this proposal and during the period from December 9, 2009, through August 31, 2010, he and his firm improperly processed payments totaling approximately $105,000 for Postal uniform items sold at Ace Uniforms.

On August 31, 2010, the Postal Service canceled the contract with California Uniforms, Inc. that allowed the firm to sell Postal uniforms. Thereafter, the company contacted Monica Lauer of Merchandise Center, Inc. (who possessed a valid license to sell Postal uniforms), and proposed that Merchandise Center process the uniform allowance card purchases made at California Uniforms, Inc. stores in San Diego and Los Angeles, falsely representing the purchases to be the sales of Merchandise Center, in return for a kickback of 10% of the amount paid by the Postal Service. During the period from August 31, 2010, through October 13, 2011, Merchandise Center improperly processed payments totaling $410,000 for Postal uniform sold at California Uniforms.

This is one of a series of cases involving this scheme to defraud. On February 2, 2012, defendant Ace Uniforms, Inc. and its owner, Marc Stein, pled guilty to Conspiracy to Provide Kickbacks for their part in the scheme. Both Ace Uniforms and California Uniforms agreed to forfeit to the government all Postal uniforms found at their locations during the execution of search warrants at their business locations. Ace 3 Uniforms and Stein are scheduled to be sentenced before Judge Hayes on September 23, 2013, at 9:00 a.m.

On August 21, 2012, Monica Lauer and Merchandise Center, Inc. also pled guilty to Conspiracy to Accept Kickbacks for their role in the scheme. Lauer and Merchandise Center are also scheduled to be sentenced before Judge Hayes on September 23, 2013, at 9:00 a.m.

On August 22, 2013, Carl Wayne Adrian, Jr., the manager of the San Diego store for California Uniforms, pled guilty to Criminal Infringement of a Copyright. Postal uniforms bear the Sonic Eagle logo, which is copyrighted and trademarked by the Postal Service. Adrian Jr. admitted that he directed his employees to continue selling the Postal uniform items in inventory, including those bearing the Sonic Eagle logo, after California Uniform's license to distribute Postal uniforms had been revoked, thereby infringing upon the Sonic Eagle copyright held by the Postal Service. On October 9, 2012, Adrian Jr. was sentenced to one year probation and a fine of $500.

Pacific Area Field Office Special Agent in Charge Scott Pierce said: “The Postal Service manages over 30,000 contract actions each fiscal year. About $11 billion were spent on postal contracts in FY 2012. Due to the sheer volume of contracts and the huge dollar amounts involved, the Postal Service can be susceptible to losses in the hundreds of millions to fraud every year. Special Agents of the United States Postal Service Office of Inspector General actively investigate allegations of fraud, waste, and misconduct by contractors and postal employees who handle contracts. This case is an excellent example of the successful partnership between the Office of Inspector General and the U.S. Attorney’s office to aggressively pursue and prosecute cases where contract improprieties are uncovered.”

Criminal Case No. 12cr3650-WQH DEFENDANTS     California Uniforms, Inc.
Los Angeles, California
Carl Wayne Adrian, Sr.
Los Angeles, California

Date of Incorporation: 8-15-67

    SUMMARY OF CHARGES

Count 1 - Adrian Sr.

Wire Fraud, in Violation of Title 18, United States Code, Section 1343
Maximum Penalties: 20 years in custody and/or $250,000 fine, $100 special assessment.

Count 6 - California Uniforms, Inc.

Wire Fraud, in Violation of Title 18, United States Code, Section 1343
Maximum Penalties: 5 years probation, $500,000 fine, $400 special assessment.

  Criminal Case No. 12cr3136-WQH DEFENDANTS    

Merchandise Center, Inc.
North Hollywood, California

Monica Lauer
Los Angeles, California

Date of Incorporation: 12-17-86

    SUMMARY OF CHARGES

Conspiracy to Accept Kickbacks, in Violation of Title 18, United States Code, Section 371, and Title 41, United States Code, Sections 8702 and 8707

Maximum Penalties: 5 years in custody and/or $250,000 fine, $100 special assessment for the individual, and 5 years probation, a $500,000 fine and a $400 special assessment for the corporation.

  Criminal Case No. 12cr0235-WQH DEFENDANTS    

Ace Uniforms, Inc.
San Diego, California

Marc Stein
San Diego, California

Date of Incorporation: 1-12-95

    SUMMARY OF CHARGES

Conspiracy to Provide Kickbacks, in Violation of Title 18, United States Code, Section 371, and Title 41, United States Code, Sections 52 and 53

Maximum Penalties: 5 years in custody and/or $250,000 fine, $100 special assessment for the individual, and 5 years probation, a $500,000 fine and an $400 special assessment for the corporation

    Criminal Case No. 12cr3452-JMA DEFENDANTS    

Carl Adrian, Jr.
San Diego, California

    SUMMARY OF CHARGES

Criminal Infringement of a Copyright, in Violation of Title 18, United States Code, Sections 2319 and 2 Maximum Penalties: 1 year in custody and/or $100,000 fine, $25 special assessment

        AGENCY

United States Postal Service, Office of Inspector General

United States Attorney Laura E. Duffy announced that Julian resident John David Bittner was sentenced today following his plea of guilty to the unlawful taking of a Golden Eagle, in violation of the Bald and Golden Eagle Protection Act.

At the sentencing hearing today, Magistrate Judge David H. Bartick observed that although Bittner had devoted his life to wildlife, he had apparently placed his own financial interests ahead of the need to comply with federal permitting requirements. Bittner was paid by power companies, developers and others to track the birds for environmental impact studies.

Judge Bartick cited the fact that Bittner captured and banded birds without federal and state permits, placed unpermitted devices on birds, conducted aerial surveys after authorization was denied, used wild birds in educational programs without a permit, failed to immediately send eagle carcasses to the National Eagle Repository (where there is a lengthy waiting list for Native Americans to obtain plumage for religious ceremonies) and failed to provide to the government the data he had obtained about this wildlife. After considering the scientific concerns associated with placing multiple tracking devices on a single bird, and the failure to send eagle carcasses to the National Eagle Repository, Judge Bartick concluded that "it cannot be said that there was no harm in this case."

Judge Bartick sentenced Bittner to three years’ probation, a $7,500 fine, and ordered Bittner to provide the government with the raw data compiled from tracking birds from 2007-2012. Bittner had previously withheld this data, but now it can be used by government biologists to evaluate the effect of proposed projects on the bird population.

According to court documents and admissions in his guilty plea, Bittner is the founder of a non-profit organization and makes his living by “banding” birds and gathering data on the movement of those birds. Bittner performs these services to assist companies with environmental impact statements needed for the construction and maintenance of power lines and wind power generators. In order to “band” a bird, the creature must be trapped, captured or taken out of its nest. Such activity is considered a "take" of the bird and requires a permit under both the Migratory Bird Act and the Bald and Golden Eagle Protection Act. These permits are issued by the federal Bird Banding Lab (“BBL”) in Laurel, Maryland, under the auspices of the U.S. Geological Survey. There are 2000 federal Master Bander permits issued throughout the entire United States, and only 181 Master Banders are authorized to band Golden Eagles.

Bittner first obtained a federal bird banding permit while living in Ohio on July 15, 1964. On August 13, 1980, the BBL sent a letter to Bittner, advising him that his permit was revoked due to "various discrepancies in your bird banding operation." This action was taken after the State of Ohio had revoked Bittner's 1979 state banding permit, and requested that the federal government remove Ohio from the list of states in which Bittner was permitted to band birds. The BBL subsequently agreed to keep Bittner’s permit status as inactive, rather than revoked.

Bittner had no active federal permit to band birds from 1980 until April 30, 1997, when Bittner obtained authorization to band all non-endangered species of migratory birds, and later, to band California Condors and Golden Eagles. Like all such permits, his permit limited the permitted activities to specific states and stated that the federal permit was not valid "unless accompanied by any required State permits or licenses."

In California, a state permit is required to band Golden Eagles, as well as other migratory birds. Since 2000, Bittner has not possessed a valid permit from the State of California, due in large part to his failure to provide the required data in reference to past activities. The lack of a permit from the State of California invalidated the federal permit held by Bittner with respect to collecting and banding of 936 birds in California during the period from 2000-2011.

Bittner's federal banding permit expired on January 31, 2010. On February 13, 2010, Bittner emailed the BBL, stating: "My permit expired on January 31, 2010 but was just renewed on July 14, 2009 only five months before. Permits are supposed to be valid for two years. What's up?" A BBL biologist responded, noting that Bittner’s permit was not automatically renewed in July 2009, and reminding Bittner that he owed BBL data on 300-400 bands he had already conducted. Eventually, on August 12, 2010, the federal permit was renewed.

Despite not having a valid federal or California bird banding permit, during the period from January 31, 2010 through August 12, 2010, Bittner illegally trapped and marked 164 birds (including 37 eagles); 144 of those birds were trapped in San Diego or Imperial County. Of the 144 birds trapped in San Diego and Imperial Counties, 29 were Golden Eagles, and the banding cards filled out at the time the birds were marked indicated that Bittner – the only person in the organization who previously held a permit – was personally present on at least 18 of those occasions. As Judge Bartick noted in sentencing Bittner, during the time when no permits were in effect, the defendant's non-profit organization was paid over $500,000 by various clients for its services.

According to Paul Schmidt, the Fish and Wildlife Service's Assistant Director for Migratory Birds in 2009, "The Bald Eagle population has rebounded in the past decades, and its recovery poses the challenge of managing a healthy population still protected under the Bald and Golden Eagle Protection Act. But unlike the Bald Eagle, the Golden Eagle population is not expanding, and may be in decline." The Bald and Golden Eagle Protection Act continues to protect these birds by prohibiting anyone without a permit from "taking" Bald or Golden eagles, including their parts, nests and eggs. “Taking” such birds includes pursuing, shooting, shooting at, poisoning, wounding, killing, capturing, trapping, collecting, molesting or disturbing.

United States Attorney Laura E. Duffy observed, "It is a sacred trust to preserve our natural heritage for future generations. This trust mandates that we observe both the spirit and letter of our law designed to protect the environment."

DEFENDANT   Criminal Case No. 13cr1391-W John David Bittner       SUMMARY OF CHARGES

Unlawful Taking of a Golden Eagle, in Violation of Title 16, United States Code, Section 668(a).
Maximum Penalties: 1 year in custody and/or $100,000 fine, $25 special assessment.

  AGENCY

U.S. Fish and Wildlife Service

Mario Escamilla, a high-ranking lieutenant of the Fernando Sanchez-Arellano drug trafficking organization, was sentenced today to 35 years in prison for his role as leader of the cartel’s U.S. operations, which included kidnappings and murders.

Escamilla is the 39th of 43 defendants charged in the case in July of 2010 to plead guilty. The original complaint charged that defendants participated in a federal racketeering (RICO) conspiracy involving murder, kidnaping, robbery, drug trafficking and money laundering offenses. As set forth in the complaint, the defendants are members and associates of the Fernando Sanchez Organization (FSO), an offshoot of the Arellano-Felix cartel.

Escamilla pleaded guilty in January of 2012 to the RICO conspiracy and narcotics distribution conspiracy charges. In his plea agreement, he admitted to involvement in three murder conspiracies – all of which were prevented by law enforcement.

In the sentencing memorandum, Assistant U.S. Attorney Todd Robinson wrote that Escamilla targeted people for assassination for frivolous reasons – like stealing a relatively small quantity of marijuana, or for “disrespecting” the cartel leadership.

“Escamilla confirmed through his conduct in this case that he has no qualms about committing murder, no matter how trivial the justification is for doing so,” prosecutors wrote. Because of court-authorized electronic surveillance in this case and the diligence of the law enforcement officers handling this investigation, defendant Escamilla failed in his attempts at killing the above-noted individuals.

In handing down the sentence, U.S. District Judge William Q. Hayes noted that “the conduct of Mr. Escamilla can only be described as aggravated . . . he conspired to murder three people in cold blood and he participated in the trafficking of a significant amount of methamphetamine, one of the most addictive and destructive controlled substances our society must deal with.”

Of the remaining four defendants, two are fugitives, one is believed to be dead, and the lead defendant in the case, Armando Villareal-Heredia, was extradited to the United States on May 23, 2012; his trial is scheduled to begin on October 22, 2013.

Also charged in this case was Jesus Quiñones Marques, the Director of International Liaison for the Baja California Attorney General’s Office. According to court documents, Quinones was aware of the FSO’s illegal activities and used his position to obtain confidential law enforcement information for the use of the FSO. According to his plea agreement, he was involved in making arrangements to have various rivals of the FSO arrested and detained by Mexican law enforcement officials. He was sentenced to 97 months in prison in September of 2012.

This case was the result of a long-term investigation conducted by the multi-agency San Diego Cross Border Violence Task Force (CBVTF). The CBVTF was formulated to target those individuals involved in organized crime-related violent activities affecting both the United States and Mexico. Law enforcement personnel assigned to the CBVTF made extensive use of courtauthorized wiretaps and other sophisticated investigative techniques to develop the significant evidence which led to the charges in this case.

United States Attorney Duffy praised the Organized Crime Drug Enforcement Task Force (OCDETF) for the coordinated team effort in the culmination of this investigation, “Operation Luz Verde.”

Agents and officers from the Federal Bureau of Investigation, San Diego Police Department, Drug Enforcement Administration, San Diego Sheriff’s Office, Chula Vista Police Department, U.S. Marshals Service, Bureau of Alcohol, Tobacco and Firearms, San Diego District Attorney’s Office, and California Department of Justice participated in this OCDETF investigation. The OCDETF program was created to consolidate and utilize all law enforcement resources in this country’s battle against organized crime and major drug trafficking organizations.

DEFENDANT   Case Number 10CR3044-WQH Mario Escamilla       SUMMARY OF CHARGES

Title 18, United States Code, Section 1962(d) - Conspiracy to Conduct Enterprise Affairs
Through a Pattern of Racketeering Activity (RICO conspiracy)
Maximum penalties: Life in prison, $250,000 fine

Title 21, United States Code, Sections 846 and 841(a)(1) - Conspiracy to Distribute Controlled Substances
Maximum penalties: Life in prison, $10,000,000 fine

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Chula Vista Police Department
San Diego Police Department
Drug Enforcement Administration
San Diego Sheriff’s Office
U.S. Marshals Service
Bureau of Alcohol Tobacco and Firearms
California Department of Justice

SAN DIEGO - Donald V. Totten, an unlicensed mortgage broker who operated a mortgage brokerage business from Rancho Santa Fe, was indicted today by a federal grand jury on charges that he obtained $2.2 million in mortgage loans using false information and then siphoned off hundreds of thousands of dollars from the sale of the properties.

Totten was arrested on July 24, 2013, and made his initial appearance in the Northern District of California. He is currently in federal custody and will be transported to the Southern District of California for the proceedings.

According to the indictment, Totten arranged a series of real estate transactions with a Chula Vista property owner who was struggling to make his mortgage payments. In a complicated set of transactions, Totten first entered into a partnership with an investor from Carlsbad, promising to share the costs of maintenance of the properties and then split the proceeds from an eventual re-sale.

To purchase the properties, Totten employed a straw buyer (his investor’s girlfriend) who never intended to live in the properties despite certifications to the contrary on her loan applications. In addition to providing significant down payments from his own funds, Totten falsified the straw buyer’s loan applications and, among other things, inflated her income and assets in order to induce the financial institutions to grant the mortgages.

According to the indictment, Totten and his loan processor, Shellie Lockard, who worked for his brokerage business Money World, then sent fabricated supporting documents to the mortgage lenders to bolster the bogus claims in the loan applications. The indictment charges Totten with purchasing four homes for the same straw buyer simultaneously – by intentionally failing to disclose to each lender that the borrower was in the process of buying multiple properties.

Last week, Lockard admitted falsifying applications for dozens of Money World mortgage loans. Lockard pled guilty on July 30, 2013. According to court documents, in addition to the four Chula Vista properties, Lockard processed dozens more fraudulent loan applications for Totten involving the purchase and re-finance of properties around the country. In each case, Lockard admitted that the loan paperwork she provided to mortgage lenders contained false information about the borrowers’ income, assets, debts, intent to occupy the properties, and other lies.

According to the indictment, Totten earned substantial commissions on the four Chula Vista sales, and at the same time he secretly arranged for almost $192,000 in sale proceeds to be sent directly to his own bank accounts as kickbacks. He concealed his receipt of these payments from the lenders by directing them to Island Financial, a company which he controlled. According to the indictment, after the sales closed, Totten had the straw buyer sign over the deeds to the properties to a trust that he controlled, effectively obtaining ownership. Eventually, however, each of the four mortgages defaulted and the properties were foreclosed. The lenders and secondary mortgage purchasers, including Fannie Mae and Freddie Mac, suffered losses as a result of the foreclosures.

“Prosecuting people who have contributed to the mortgage meltdown is one of my top priorities because they have played such a significant role in our nation’s financial turmoil, and because the economic damage to taxpayers is immense,” said U.S. Attorney Laura Duffy.

FBI Special Agent in Charge Daphne Hearn commented, “Mortgage fraud costs taxpayers billions of dollars every year and is a threat to our nation's economy. The FBI will continue to lend our agent and analyst resources to investigate these important cases.”

“Totten allegedly participated in a fraudulent scheme involving over $2 million in mortgage loans that ultimately defaulted, to the detriment of Fannie Mae, Freddie Mac and American taxpayers,” said Federal Housing Finance Agency Inspector General Steve A. Linick . “We are proud to support our law enforcement partners in investigating and prosecuting this case.”

“Mortgage fraud causes tremendous financial damage to everyone, including financial institutions, borrowers and the American taxpayer,” said Jose A. Gonzalez, Special Agent in Charge for IRS Criminal Investigation’s (IRS CI) Los Angeles Field Office. “IRS CI is firmly committed to supporting our law enforcement partners and the U.S. Attorney’s Office in the investigation and prosecution of fraudsters committing mortgage fraud crimes.”

These charges are the result of an active, ongoing criminal investigation. Anyone with information relating to these charges should contact the San Diego branch of the Federal Bureau of Investigation at (858) 565-1255, or the Federal Housing Finance Agency - Office of Inspector General hotline at (800) 793-7724.

The public is reminded that an indictment is not evidence that the defendant committed the crime charged. The defendant is presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.

DEFENDANT   Criminal Case No. 13MJ2783 Donald V. Totten       SUMMARY OF CHARGES

Title 18, U.S.C., Section 1349 -- Conspiracy to Commit Wire Fraud. Maximum Penalty: 30 years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss caused by the offense, five years supervised release, and $100 special assessment.

Title 18, U.S.C., Section 1343 -- Wire Fraud Affecting a Financial Institution. Maximum
Penalty: 30 years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss caused by the offense, five years supervised release, and $100 special assessment.

  DEFENDANT   Criminal Case No. 13MJ2783 Shellie Lockard Age: 43 Westlake Village, CA   SUMMARY OF CHARGES

Title 18, U.S.C., Section 1349 -- Conspiracy to Commit Bank Fraud and Wire Fraud. Maximum
Penalty: 30 years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss caused by the offense, five years supervised release, and $100 special assessment.

    INVESTIGATING AGENCIES

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

United States Attorney Laura E. Duffy announced that today a federal grand jury returned a superseding indictment charging Norman Felts, a convicted sex offender, with engaging in illegal sexual conduct with a minor while traveling in foreign commerce and for committing this offense while under a legal obligation to register as a sex offender. The defendant was previously charged with a complaint and has been in custody since his arrest on June 11, 2013.

The charging document alleges that, between December 2008 and January 11, 2013, Felts, a citizen of the United States, traveled to Mexico and engaged in illicit sexual conduct with a person under the age of 18, in violation of Title 18, United States Code, Section 2423(c). During that time period, Felts was required by federal and California state law to register as a sex offender. The superseding indictment also alleges that, on May 28, 2013, Felts possessed a hard drive that contained visual depictions of minors engaged in sexually explicit conduct, in violation of Title 18 U.S.C. 2522(a)(4)(B), and transported images of minors engaged in sexually explicit conduct, in violation of Title 18 U.S.C. 2522(a)(1).

As to these charges, the superseding indictment alleges that Felts was previously convicted of oral copulation under Cal. Penal Code 288A in 1972, child molestation under Georgia law in 1977, and procurement of a child under the age of 16 for lewd or lascivious acts under Cal. Penal Code 266j.

The defendant is next scheduled to be in court on August 8, 2013, before Judge Cathy Ann Bencivengo. The public is reminded that an indictment itself is not evidence that the defendant committed the crimes charged. The defendant is presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.

This case stems from an investigation by the Department of Homeland Security, Immigration and Customs Enforcement's Homeland Security Investigations.

This case was brought as part of the Department of Justice's Project Safe Childhood and ICE's Operation Predator. Both are nationwide initiatives to combat the growing epidemic of child sexual exploitation and abuse, to locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources." For more information about on Operation Predator, please visit www.ice.gov.

Anyone with information relating to the charges against this defendant is urged to call (619) 744-4623 and leave a confidential message, which will be returned by special agents investigating this case.

DEFENDANT Case Number: 13CR2296-CAB   Norman Felts In Custody     SUMMARY OF CHARGES  

Count 1 18 U.S.C. 2423(c) Engaging in Illicit Sexual Conduct in a Foreign Place
Maximum penalties: 30 years’ imprisonment

Count 2 18 U.S.C. 2260A Penalties for Registered Sex Offenders
Maximum penalties: 10 years’ imprisonment

Count 3 18 U.S.C. 2522(a)(1) and (b)(1) Transportation of Images of Minors Engaged in Sexually Explicit Conduct
Maximum penalties: 15 years imprisonment minimum, 40 year maximum

Count 4 18 U.S.C. 2522(a)(2)(b) and (b)(2) Possession of Matters Containing Images of Minors Engaged in Sexually Explicit Conduct
Maximum penalties: 10 years’ imprisonment minimum, 30 year maximum

Count 5 18 U.S.C. 1001 False Statement to a Federal Officer
Maximum penalties: 8 years’ imprisonment

  INVESTIGATING AGENCIES

Immigration and Customs Enforcement's Homeland Security Investigations
Customs and Border Protection

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

San Diego, CA - United States Attorney Laura E. Duffy announced today that David Hedley, a former Executive Director of the Indian Human Resource Center (“IHRC”), admitted embezzling over $140,000 from the San Diego-based non-profit.

According to his plea agreement, Hedley served as IHRC’s Executive Director between September 10 and December 11, 2012. Taking advantage of his position as a signer on IHRC’s credit union account, he obtained a debit card allowing him virtually unrestricted access to the funds in one of the credit union accounts. Once he obtained this access, Hedley stole approximately $141,260 in federal funds from IHRC.

According to the plea agreement, at the same time Hedley was stealing funds from IHRC’s credit union account, he was spending comparable sums gambling at a local Indian casino. For example, on October 9, 2012, Hedley withdrew $15,000 in cash from the IHRC credit union account at the North Island Credit Union (“NICU”) located in La Mesa, California. On that same day, Hedley gambled $15,000 at Viejas Casino. Similarly, on October 12, 2012, Hedley improperly withdrew $20,000 in cash from IHRC’s credit union account at the NICU branch in Imperial Beach, California and gambled with that sum at Pala Casino. Hedley also admitted to using over $800 in embezzled funds to buy Southwest Airlines tickets to Las Vegas, Nevada, where he spent thousands of dollars in stolen funds at the Hard Rock Hotel and Casino.

The IHRC was established to train and assist Native Americans with finding employment outside the tribal setting and was awarded over a half million dollars in federal funding from the U.S. Department of Labor over the past two years as part of the Workforce Investment Act (“WIA”). The Workforce Investment Act of 1998 (“WIA”) established a national workforce preparation and employment system to meet the needs of persons seeking employment, including new entrants to the workforce, in order to increase the employment, job retention, earnings and occupational skills of participants, improve the quality of the workforce, reduce welfare dependency, and improve the productivity and competitiveness of the United States.

As a result of his guilty plea, Hedley is facing up to 10 years in prison, and has agreed to pay mandatory restitution of $141,260.44, and to forfeit any property derived from or traceable to the proceeds he obtained from the offense.

Sentencing is scheduled for October 21 at 9 a.m. before U.S. District Judge William Q. Hayes.

DEFENDANT   Criminal Case No. 13CR1129-WQH David M. Hedley       SUMMARY OF CHARGES

Counts 1-8: Title 18, United States Code, Section 666(a)(1)(A) – Theft from Program Receiving
Federal Funds

Forfeiture: Title 18, United States Code, Sections 981(a)(1)(C) and Title 28, United States Code, Section 2461(c)

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
California Department of Justice, Bureau of Gambling Control

San Diego, CA - United States Attorney Laura E. Duffy announced today that John G. Rizzo, the CEO of iTrackr Systems, has admitted defrauding investors in connection with millions of shares of his Florida-based company.

As set forth in his Plea Agreement, in early 2006, Rizzo agreed to raise money for a Florida software company called iTracker, which developed software to track the inventories and availability of electronics, e.g., X-Boxes. In approximately late 2008, Rizzo and his coconspirators used the services of offshore “boiler rooms” to solicit investments for the company’s “penny stock.” Unknown to investors, the boiler rooms failed to disclose that only 20% of each investment would go to iTracker, with the remainder being paid to the boiler rooms as commission.

As part of that scheme, Rizzo utilized his shell company in the British Virgin Islands (“BVI”) and the company’s bank account in Belize. Rizzo sold millions of shares of iTrackr stock through his BVI company in order to avoid U.S. securities registration requirements and disguise the fact that almost all the investor funds were being diverted to the boiler rooms. In addition, Rizzo used a complex array of different entities to conceal the fact that he was selling the shares, not independent third party investors. During 2009 alone, approximately 120 different individuals in the United Kingdom invested a total of $2.5 million in iTrackr through this scheme.

United States Attorney Laura Duffy once again cautioned the public that they need to be vigilant against all forms of illegal stock manipulation, especially in the penny stock markets. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and the Internal Revenue Service for their efforts, and the continuing support of the Securities and Exchange Commission for their expertise and guidance.

FBI Special Agent in Charge, Daphne Hearn, commented, " This investigation highlights the need for investors to do their own homework before investing their money in schemes such as the one perpetrated by Mr. Rizzo. If something seems too good to be true, it almost always is. The FBI will continue to lend our expertise and resources to these types of cases and work with our partners, so that others do not fall prey to such fraudulent investment schemes."

Rizzo is scheduled to be sentenced on October 28, 2013 at 9:30 a.m. before U.S. District Court Judge Larry A. Burns.

DEFENDANT   Case Number: 13cr2716-JAH JOHN G. RIZZO       SUMMARY OF CHARGE

Title 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud. Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

  PARTICIPATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service

Richard Mendoza, the former Chief Executive Officer (“CEO”) of Pioneers Memorial Healthcare District (“PMHD”) in Brawley, California, pled guilty today to embezzling more than $90,000 from the Imperial Valley Hospital.

According to court documents, Mendoza served as CEO of PMHD from October 2001, until his termination in November 2011. Mendoza’s embezzlement activity was initially discovered by the Imperial Valley hospital in the fall of 2011, during an annual audit of expenses and disbursements. The FBI subsequently initiated an investigation that uncovered the extent of Mendoza’s embezzlement activity. According to court documents, while CEO, Mendoza submitted more than 30 fraudulent reimbursement requests for trainings, seminars and conferences that he never attended. As set forth in his plea agreement, Mendoza filled out registration forms indicating that he had paid for this training with his personal credit card, when in fact he had not. To conceal the fact that he had not actually paid for the conferences, Mendoza took advantage of his position as the hospital’s top executive and directed employees in PMHD’s Accounts Payable Department to reimburse his personal credit card account based only on these fraudulent registration forms (and without any additional proof of payment).

At the time he submitted each false reimbursement request, Mendoza knew that he had not registered for the medical conferences, was not planning to attend the medical conferences, and had not used his personal credit card to pay for the attendant registration costs. To the contrary, Mendoza would often be seen around the hospital on the dates he was supposedly attending these out-of-town conferences. For example, on one occasion Mendoza submitted a fraudulent reimbursement request for a medical conference in New York City, but instead attended a PMHD Board of Directors meeting in Brawley on the date of the conference. As part of his plea agreement, Mendoza agreed to pay more than $90,000 in restitution to the hospital.

United States Attorney Laura E. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and emphasized her support for financial crime prosecutions: “Mr. Mendoza violated the trust of his employer and the people he served in the community. Today’s guilty plea is yet another example of our commitment to investigate and prosecute those who illegally use their position of trust to unlawfully enrich themselves.”

FBI Special Agent in Charge, Daphne Hearn, commented, “Today’s plea agreement is a direct result of the commitment and teamwork between the FBI and the U.S. Attorney’s Office to hold those accountable who use their position of trust to unjustly line their own pockets.”

Mendoza is scheduled to be sentenced on October 25, 2013, at 8:30 a.m. before U.S. District Judge John A. Houston.

DEFENDANT   Case Number: 13cr2716-JAH Richard Mendoza       SUMMARY OF CHARGES

Mail fraud, in violation of Title 18, United States Code, Section 1341 - Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.

  INVESTIGATING AGENCY

Federal Bureau of Investigation

United States Attorney Laura E. Duffy announced that veteran Leray Shurn was sentenced yesterday to serve two years in federal prison by United States District Court Judge Thomas J. Whelan for running a landscaping business while claiming worker’s compensation and unemployment benefits from the Department of the Navy (Navy) and Department of Veterans Affairs (VA) to which he was not entitled. Judge Whelan also ordered Shurn to pay $357,977 in restitution and a $5,000 fine. Shurn’s fraud spanned more than five years and cheated two U.S. government agencies out of over $350,000.

According to evidence presented during trial, Shurn falsely represented to the Navy and VA that back and later knee injuries prevented him from working as a Navy civilian employee, and that he was not engaged in any employment where he received payment of any kind, was not self-employed, was not involved in any business enterprises, and did not have an ownership interest in any business enterprises. He also falsely claimed that his disability prevented him from being able to obtain employment.

In January 2013, a jury returned guilty verdicts on all 16 counts of fraud (5 counts of mail fraud, 4 counts of wire fraud, 5 counts of fraud to obtain federal employee’s compensation, and 2 counts of false statements to the VA). During the trial, the jury heard and saw evidence, including video recordings, that Shurn operated a landscaping business in which he personally performed landscaping work for numerous customers, provided customers with his business card for “Leray’s Landscaping” as well as monthly invoices, and represented to landscaping suppliers that he was in the landscaping business. The jury also received evidence that while Shurn was concealing his landscaping business from the Navy and VA, he completed a survey in which he indicated that he was a business owner.

United States Attorney Duffy added, “During these difficult budgetary times, submission of fraudulent claims harms our community and government agencies by diverting financial resources away from those with legitimate claims who are most in need of benefits payments and prevents agencies from funding other priorities.”

DEFENDANT   Case Number: 12CR1053-W Leray Shurn       SUMMARY OF CHARGES

16 Counts
Title 18, United States Code, Section 1341 - Mail Fraud
Title 18, United States Code, Section 1343 - Wire Fraud
Title 18, United States Code, Section 1920 - False Statement or
Fraud to Obtain Federal Employee’s Compensation
Title 18, United States Code, Section 1001 - False Statement to a Government Agency

  INVESTIGATING AGENCIES

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

United States Attorney Laura E. Duffy announced that Jose Ruiz of San Diego was sentenced today to 57 months of custody by District Court Judge William Q. Hayes for crimes arising from a mortgage loan-modification scheme that cheated 289 families out of over $1.1 million, and resulted in the loss of many victims’ homes to foreclosure. Ruiz was also ordered to pay full restitution to all of his victims.

Between approximately March 2009 and October 2011, Ruiz falsely told victims facing foreclosure that he could lower their mortgage loan payments. Ruiz made these false claims through his business entities based in San Diego and Chula Vista, California, including: “Equity Choice,” “Casa Nuestra,” and “UHUD National Reserve.” Ruiz pleaded guilty on August 2, 2012 to one count of mail fraud (18 U.S.C. § 1341), and one count of money laundering (18 U.S.C. § 1357).

In order to carry out his fraud, Ruiz sent hundreds of solicitation letters in which he falsely represented that his businesses were affiliated with the U.S. Department of Housing and Urban Development (“HUD”), and its Home Affordable Modification Program (“HAMP”). The letters directed the recipients to contact one of Ruiz’s business entities by telephone, or obtain information from one of the websites he had created to advertise his services. Ruiz specifically targeted low-income persons with Hispanic surnames by obtaining marketing leads with these specific criteria.

When the victims responded to the solicitation letters, Ruiz or one of his employees promised to provide relief under the HAMP program, despite having no connection with this government program. Ruiz and his employees then falsely represented that they would negotiate a modified mortgage payment on behalf of the victims with the victims’ respective lenders. In exchange, the victims were instructed to send mortgage payments directly to one of Ruiz’s business entities instead of their lenders.

Although Ruiz and his employees promised the victims that their payments would be held untouched in an impound account, and ultimately sent to the victims’ lenders at the end of negotiations, none of the money was forwarded. Many of his victims lost their homes to foreclosure as a result of the lenders’ failure to receive mortgage payments.

Rather than maintaining the victims’ funds, Ruiz spent the proceeds on a variety of luxury furnishings and personal items, including a diamond ring, computers, and a large-screen television. All of these items were seized by the United States and forfeited as part of Ruiz’s sentence. The items will be sold at auction, with proceeds going to the victims. Additionally, Ruiz was ordered to pay $1,122,031 in restitution to the victims.

Ruiz’s scheme was discovered after Special Agents from the United States Postal Inspection Service of the Downtown San Diego Station received over 750 undeliverable solicitation letters in April 2011 sent by Ruiz and his associates. The solicitation letters appeared to offer loan modification services and a free consultation regarding HAMP, or another HUD home-loan restructure program. Because the letters bore non-existent or incorrect return addresses, Postal Inspection agents began investigating the legitimacy of the offered services. In conjunction with the HUD Office of the Inspector General, agents interviewed hundreds of victims, conducted various searches, and seized property purchased with proceeds obtained pursuant to Ruiz’s fraudulent scheme.

On May 20, 2013, Judge Hayes sentenced Christian Hidalgo (Case Number: 12CR1658-WQH), a former associate of Ruiz, to 57 months of custody and ordered he pay restitution of over $687,000, for perpetrating the identical scam on over 120 additional victims. Judge Hayes also ordered Hidalgo forfeit various items he purchased from fraud proceeds, including a BMW, diamond rings, a large-screen television, and firearms.

United States Attorney Duffy added, “Although we are pleased with the successful investigation by the U.S. Postal Inspection Service and HUD-OIG, the swift prosecution, and the fruitful seizure of many valuable items purchased with the fraud proceeds, we are dismayed by the continued suffering of many innocent victims who have suffered the loss of their home and significant funds as a result of this repugnant scam. The victims suffered financially and emotionally from the defendant’s exploitation of their belief they were obtaining necessary relief from a government agency. They were targeted both because of their financial predicament and their Hispanic surnames. We will continue to seek redress for all victims of home-loan modification scams and hope that the defendant’s punishment serves as a strong deterrent to others who are committing, or plan to commit, similar crimes.”

DEFENDANT   Case Number: 12CR1657-WQH Jose Ruiz       SUMMARY OF CHARGES

Count 5 Title 18, United States Code, Section 1341, 2 (mail fraud, aiding and abetting)
Maximum penalty: 20 years of custody; $1,000,000 Fine

Counts 10 Title 18, United States Code, Section 1957 (money laundering)
Maximum penalty: 10 years of custody; $250,000 Fine

  AGENCIES

United States Postal Inspection Service (“USPIS”)
United States Department of Housing and Urban Development, Office of the Inspector General (“HUDOIG”)

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.

United States Attorney Laura E. Duffy announced today that Kirk Borja pled guilty in federal court in San Diego before United States Magistrate Judge Jan M. Adler to conspiring to distribute methamphetamine and possessing heroin with the intent to distribute it.

Borja was originally indicted on the methamphetamine trafficking charge following his arrest in January 2012, as part of “Operation Carnalismo,” an investigation into the Mexican Mafia gang and affiliated associates conducted by the Violent Crime Task Force - Gang Group (VCTF-GG), a group of federal, state, and local law enforcement agents led by the Federal Bureau of Investigation.

Since his arrest, Borja has been incarcerated at the Metropolitan Correctional Center (MCC), a federal detention facility in downtown San Diego. Borja admitted in his plea to possessing the heroin inside the MCC with the intent to distribute it to other inmates. According to his plea, Borja concealed the heroin inside his body before being discovered by the Bureau of Prison’s Special Investigative Supervisor unit.

United States Attorney Laura E. Duffy praised the VCTF-GG for marshaling the evidence of Borja’s methamphetamine trafficking that led to his arrest, as well as the work of the investigators at the MCC and the FBI’s Violent Crime squad who assisted with the investigation inside the detention facility. “This prosecution illustrates our commitment, and that of our law enforcement partners, to protect not only our streets, but our jails as well,” Duffy said. “Dangerous, addictive drugs like methamphetamine and heroin hurt any community that suffers their presence, whether it be a local neighborhood or one of our detention facilities.”

Borja’s plea is subject to final acceptance by United States District Judge Anthony J. Battaglia. Sentencing for Borja was set for Sept 27 at 9 a.m. before Judge Battaglia.

DEFENDANT’S INFORMATION     Case Number: 12CR0291-AJB     Kirk Borja   SUMMARY OF CHARGES

Title 21, United States Code, Sections 841/846 – Conspiracy to distribute methamphetamine
Maximum penalty: 40 years in prison

Title 21, United States Code, Sections 841 – Possession of heroin with the intent to distribute
Maximum penalty: 20 years in prison

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Chula Vista Police Department
San Diego County Sheriff's Department
National City Police Department
San Diego Police Department
San Diego County District Attorney's Office
U.S. Bureau of Prisons
California Department of Corrections and Rehabilitation
San Diego County Probation
Department, Immigration and Customs Enforcement's Homeland Security Investigations
Internal Revenue Service-Criminal Investigations

A federal jury convicted former U. S. Marine Sergeant Luis Gilbert Menchaca of conspiracy and false claims in connection with a fraud and bribery scheme at Marine Corps Air Station (MCAS) Miramar in San Diego, California. As part of the scheme, Menchaca – while serving as a watch commander for the military police at Miramar – paid thousands of dollars of bribes to another Marine in order to obtain tens of thousands of dollars in fraudulent lodging reimbursements.

Last year, Menchaca was charged in an indictment with one count of conspiracy and three counts of false claims. The case was tried before a jury beginning on Monday, July 15, 2013. This afternoon, after less than 30 minutes of deliberations, the jury returned a verdict of guilty on all counts.

The evidence presented at trial showed that Menchaca first joined the Marine Corps in 1998, and after an initial four-year term, was discharged and entered the Marine Corps Reserve. From time to time thereafter, Menchaca, who had attained the rank of Sergeant, 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.

The evidence at trial showed that 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 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 an address on Mission Village Drive in San Diego. In fact, the address listed on the fake receipt did not exist.

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 Ramos’s part in the conspiracy, Menchaca made cash payments to Ramos of up to $1,000 per month. On occasion, Menchaca also paid bribes to Ramos of up to $1,500 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 strained to the breaking point, we cannot afford to allow public corruption to drain much-needed U. S. Marine Corps resources.”

Menchaca’s case is set for sentencing on October 4, 2013, before U. S. District Judge Dana M. Sabraw.

Menchaca’s co-conspirator, Manuel Ramos-Padilla, pled guilty on April 9, 2013 to conspiring to commit bribery and make false claims. Ramos’s case is set for sentencing on August 9, 2013, also before Judge Sabraw.

DEFENDANTS
  Case Number: 12cr5099-DMS Manuel Ramos-Padilla
Luis Gilbert Menchaca       SUMMARY OF CHARGES

Conspiracy to commit bribery and make false claims, in violation of Title 18, United States Code, Section 371 (Menchaca and Ramos) - 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 (Menchaca) - 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

Former Cal State San Marcos student Matthew Weaver of Huntington Beach was sentenced today to one year in prison for stealing the identities and passwords of more than 700 fellow students so he could rig campus elections and win the presidency.

Weaver pleaded guilty in March to wire fraud, unauthorized access of a computer and identity theft. He admitted that he used small electronic devices known as keyloggers that record a computer user's keystrokes to steal 745 student passwords. He then used many of those stolen identities to snoop in email and Facebook accounts, and to cast about 630 votes for himself and for friends who also were on the ballot.

During the hearing, U.S. District Judge Larry A. Burns said he was troubled most by the fact that Weaver – even after his arrest - attempted to frame other CSU-SM students for the election irregularities and even solicited news media coverage, contending he’d been framed.

Falsely blaming others when Weaver knew he was responsible for the crime is “the phenomenal misjudgment I just can’t get around,” the judge told Weaver. “That’s what bothers me more than the original rigging” of the election.

Judge Burns noted that the original crime might have been perceived as less egregious – even a youthful prank - except for the cover up. “He’s on fire for this crime and then he pours gasoline on it” with similar bad behavior, the judge said.

“Weaver ran roughshod over the privacy rights of hundreds of people so that he could indulge his vanity,” said U.S. Attorney Laura Duffy. “If privacy is to mean anything in a digital age, it has to be protected. A 12-month sentence adequately warns men and women like Weaver that they cannot hide from the consequences of their actions behind youth or privilege. Everyone’s rights matter – not just theirs.”

Weaver cast many of the votes from a computer located on campus. According to court records, Weaver was exposed during the final hour of the student body election, when network administrators noticed unusual voting activity associated with a computer in Academic Hall 204. The administrators were able to determine that the user, later identified as Weaver, was cutting and pasting student usernames and passwords from an Excel spreadsheet into the VOTE system and then cast those students’ votes.

Shortly after the election closed at 5 p.m., CSU-SM network administrators asked CSU-SM police officer Brian McCauley to go to the suspicious computer in Academic Hall 204. There, Officer McCauley found Weaver sitting at the computer and noted that Weaver was using the only computer in the lab whose screen was not visible to the rest of the room.

Weaver, after seeing McCauley, who was in uniform, began shutting down the campus computer. McCauley and Weaver then had a short conversation, during which Weaver said he was working on a school project, but refused to provide details. McCauley then arrested Weaver and seized his bag, which contained six keyloggers as well as other evidence of the crimes.

Weaver’s supporters have described his crime as a prank.

But in a sentencing memorandum, prosecutors dismissed that characterization, saying Weaver was fully aware of the serious ramifications of his crime and was motivated by ego and greed. In fact, a search of Weaver’s laptop showed queries like “jail time for keylogger” and “how to rig an election.”

“He wanted power through the $300,000 budget and respect through his status as CSU-SM’s student body president. But he did not want to earn it, he wanted to steal it,” prosecutor Sabrina Feve wrote in a sentencing memorandum.

“Weaver determinedly and repeatedly spied on his classmates, stole their passwords, read their secrets, and usurped their votes – and he did it with his eyes wide open,” the memorandum said. “Weaver actually researched the legality of his scheme beforehand…and then, when he knew it was completely illegal, he researched how to blame someone else.”

In fact, Weaver should have had a special appreciation for the rights of fellow students to express themselves through voting. Weaver was one of the leaders of a publication called Koala San Marcos and, when CSU-SM students protested in October 2011 against some of its content, he got the ACLU to represent the group against CSU-SM.

“Ironically, at or around the time the ACLU was defending Weaver’s freedom of thought and expression, he was actively planning to defraud other students of their ability to vote and, a just a few months later, chilling their freedom of thought and expression by logging their keystrokes and snooping through their email and Facebook accounts,” Feve wrote in the sentencing memorandum.

DEFENDANTS   Criminal Case No. 13CR0821-LAB Matthew Weaver       SUMMARY OF CHARGES

Wire Fraud, in violation of 18 U.S.C. § 1343 (Count 1); Maximum penalties: 20 years imprisonment and $250,000 fine

Unauthorized Access of a Computer, in violation of 18 U.S.C. § 1030(a)(2) and
(c)(3)(B)(ii) (Count 2)
Maximum penalties: 5 years imprisonment and $250,000 fine

Identity Theft, in violation of 18 U.S.C. § 1028(a)(7) (Count 3)
Maximum penalties: 5 years imprisonment and $250,000 fine

  PARTICIPATING AGENCIES

Federal Bureau of Investigation
Cal State University San Marcos Police Department

Former Customs and Border Protection Officer Oscar Osbaldo Ortiz-Martinez was sentenced today by Chief United States District Judge Barry Ted Moskowitz to serve 144 months in federal prison for conspiring to allow drugs to be smuggled into the United States through his inspection lanes in exchange for tens of thousands of dollars in bribes. Judge Moskowitz also ordered the defendant to serve 5 years of supervised release following his prison term and imposed a $22,000 fine.

Ortiz, a two-year veteran who was assigned to the Calexico Ports of Entry, was convicted by a federal jury in September 2012, of conspiracy to import controlled substances and bribery. After a trial that lasted more than a week, the jury deliberated for just three hours before returning the verdicts.

According to court records and evidence presented at trial, Ortiz and his accomplice, Victor Manuel Silva, Jr., believed they were working for individuals with ties to a drug trafficking organization when, in fact, they were doing business with undercover agents and federal law enforcement cooperators posing as narcotics traffickers. Ortiz accepted $22,000 in bribes and was arrested on September 23, 2010, when he showed up to collect another $30,000 bribe from the informant. Silva was arrested later that day.

At trial, the government presented audio recordings of Ortiz discussing the smuggling of narcotics through his inspection lane with co-defendant Silva and a confidential informant. In two of those conversations, Ortiz made plans to allow the informant to cross 5 - 12 kg of cocaine through his lane in exchange for $20,000 and 15 kg of methamphetamine for $30,000.

Also during those recorded conversations, Ortiz established code words for the informant to use if the computer randomly required Ortiz to send the informant to secondary inspection, and they agreed these code words would prompt the informant to abandon the vehicle and run back to Mexico. Ortiz also at one point suggested the informant use motorcycles to smuggle narcotics, because they could then cross drugs “every day.”

The verbal exchanges between Ortiz and the informant when two bribes were paid, for $2,000 and $20,000, were also audio recorded. And for the latter transaction, agents video recorded Ortiz leaving the informant’s truck with the bag of money in his hand.

Silva, the accomplice who pleaded guilty in February 2011 to conspiracy to import at least 5 kilograms of cocaine, testified at trial against Ortiz, admitting that he and Ortiz had conspired to use the informant to smuggle narcotics through Ortiz’s lane. Silva also testified that he and Ortiz wanted to make as much money as possible.

“While the overwhelming majority of border officers are doing their jobs with vigilance and integrity, we have found that some are not, and we are going to bring to justice every one of these corrupt officials who violate the public’s trust and put our borders at risk,” said U.S. Attorney Laura Duffy.

“Acts of corruption within the Department of Homeland Security represent a threat to our nation and undermine the honest and hardworking employees who strive to maintain the integrity of the Department,” said Dennis M. McGunagle, Special Agent-in-Charge for the Department of Homeland Security, Office of Inspector General. “Corruption will not be tolerated and those who choose to break the law will be pursued aggressively. We appreciate the efforts of the U.S. Attorney’s Office for bringing these individuals to justice.”

“I commend the outstanding work by the law enforcement team of investigators and prosecutors in this important case,” said Joe Jeronimo, special agent in charge for ICE Office of Professional Responsibility. “ICE takes all allegations of criminal misconduct by DHS employees seriously, and will continue to aggressively investigate such allegations to ensure that the perpetrators are prosecuted to the fullest extent of the law.”

“Corrupt acts are a disgrace and the exact opposite of the values that form the basis of who we are,” said Pete Flores, Director of Field Operations for U.S. Customs and Border Protection (CBP) in San Diego. “CBP is a world-class law enforcement agency and enjoys a special position of national trust as the sole border enforcement agency. The vast majority of our officers are highly skilled, hard-working professionals dedicated to our mission to protect the American public. We will actively ferret out and work to prosecute to the fullest extent of the law any employees who commit unethical or unlawful acts that violate that special trust. This case will send a strong message to the community at large that we will not tolerate corruption in our workforce.”

DEFENDANTS
  Criminal Case No. 10cr3986-BTM Oscar Osbaldo Ortiz-Martinez
Victor Manuel Silva, Jr.       SUMMARY OF CHARGES

Conspiracy to Import Controlled Substances, in violation of Title 21, United States Code, Sections 952, 960, and 963

Bribery, in violation of Title 18, United States Code, Section 201

  INVESTIGATING AGENCIES

United States Department of Homeland Security, Office of Inspector General
United States Department of Homeland Security, Immigration and Customs Enforcement, Office of Professional Responsibility

United States Attorney Laura E. Duffy announced that a San Diego businessman and his corporation were sentenced today for their roles in a long-running conspiracy to evade customs duties.

United States District Judge Michael M. Anello sentenced Gerardo Chavez to serve 37 months in prison and his corporation, International Trade Consultants, LLC, to serve 5 years of probation. In addition, Judge Anello ordered that Chavez forfeit real property in Tecate, California, where Chavez maintained his corporate offices. Judge Anello also ordered Chavez to appear for a future restitution hearing, at which Chavez could be ordered to pay millions of dollars in compensation to state and federal taxing authorities.

According to court filings, Chavez was the President of the San Diego Customs Brokers Association, a trade group for licensed professionals in the import-export field. Between 2007 and his arrest in 2012, Chavez and his companies supervised numerous shipments of commercial goods while coordinating one-half billion dollars in trade between merchants in the United States and other countries. Ultimately, Chavez was apprehended after a four month-long wiretap investigation led by special agents with Immigration and Customs Enforcement’s Homeland Security Investigations and assisted by specialized international trade experts and officers from United States Customs and Border Protection. Prior to sentencing, Chavez cancelled his individual, local and national Customs licenses, effectively ending his career as a customs broker.

According to court documents, Chavez’s scheme focused on purchasing large, commercial quantities of foreign-made goods and importing them without paying import taxes, also known as Customs duties. Wholesalers in the United States would procure commercial shipments of, among other things, Chinese-made apparel and Indian-made cigarettes, and arrange for them to be shipped by ocean container to the Port of Long Beach, California. Before the goods entered the United States, conspirators acting at Chavez=s direction would prepare paperwork and database entries indicating that the goods were not intended to enter the commerce of the United States, but instead would be “transshipped” “in-bond” to another country, such as Mexico. By claiming that the goods would not enter the commerce of the United States but instead were just passing through to another country, Chavez and his conspirators tricked Customs officials into believing that no customs duties were owed on the merchandise.

Then, instead of completing the in-bond transshipment, Chavez and his conspirators would hire truck drivers to haul the shipments to warehouses throughout Southern California. Chavez and his conspirators then generated fraudulent paperwork to cover up the scheme. As the conspirators had now effectively imported the goods tax-free, they could in turn sell more merchandise at cheaper pricesCand reap greater profitsCthan their law-abiding competitors, including domestic American manufacturers of the same goods.

According to court filings, Chavez played a crucial role in the scheme, allowing others to use his lucrative customs license as the authority under which commercial shipments fraudulently entered the United States. While delegating much of the day-to-day operations to employees and contractors, Chavez provided crucial support to the conspiracy, advising on how to best deceive federal officers—and even volunteering to erase evidence from conspirators’ computers. Over the course of his scheme, Chavez helped his clients evade at least $18 million in import taxes on more than $100 million in fraudulently imported foreign goods. In addition, Chavez’s coconspirators—using Chavez’s license, expertise and logistical support—succeeded in importing adulterated Mexican food products, as well as produce infected with Salmonella Agona, a disease-causing and potentially life-threatening bacteria.

Chavez’s 37-month sentence also marks the latest in a string of Customs-related prosecutions pursued by the U.S. Attorney’s Office. Chavez’s sentencing came a little more than three weeks after a federal jury returned guilty verdicts on all counts pursued against one of Chavez’s conspirators, Sunil Mirwani and his Los Angeles-based company, M Trade, Inc. Mirwani owned approximately $30 million in Chinese-made textiles that Chavez helped fraudulently import into the United States. During that trial, some of Chavez’s former coconspirators testified under oath about Chavez’s fraudulent methods, noting that one of his contractors had access to equipment capable of forging certain official marks used by United States Customs and Border Protection.

United States Attorney Duffy said: "Our system of international trade relies on the honesty and integrity of all participants; and perhaps most of all, of customs brokers, to ensure that applicable taxes are paid, and that hazardous materials do not cross our country’s borders. Gerardo Chavez abused the trust this country instilled in him, endangering public health and stealing from the United States treasury at a time when we could ill afford it—all for his personal, fraudulent, gain.”

“Today’s sentencing illustrates the importance of DHS components working seamlessly to prevent criminals from exploiting the commercial trade corridor in the San Diego-Tijuana region,” said Derek Benner, special agent in charge for HSI in San Diego. “HSI will continue to prioritize investigations involving suspected Customs fraud in an effort to maintain the highest degree of integrity in cross border trade.”

“CBP is charged with protecting the revenue of the United States. This case demonstrates our commitment to that mission and the importance of working with our federal partners,” said Pete Flores, CBP director of field operations for San Diego. “Joint efforts such as this are crucial to maintaining our nation’s economic security and competitiveness.”

Lisa Malinowski, Special Agent in Charge, U.S. Food and Drug Administration's Office of Criminal Investigations, Los Angeles Field Office, said: “Today’s sentencing demonstrates OCI’s commitment to investigating and holding accountable those who conspire to import adulterated and potentially life-threatening products to the unsuspecting public. OCI will continue to join with our law enforcement counterparts to pursue those who place consumer’s health at risk for financial gain.”

DEFENDANTS   Case Number: 12CR3137-MMA Gerard Chavez
International Trade Consultants, LLC       SUMMARY OF CHARGES

Chavez: Count 1: Conspiracy to Defraud the United States and to Commit Offenses against the
United States, in violation of Title 18, United States Code, Section 371.

Counts 2-3: Bringing in Goods by Means of False Statements, in violation of Title 18, United
States Code, Section 542.

Count 57: Laundering of Monetary Instruments, in violation of Title 18, United States Code, Section 1956(a)(2)(A) and (h).

International Trade Consultants, LLC
Count 1: Conspiracy to Defraud the United States and to Commit Offenses against

  INVESTIGATING AGENCIES

Immigration and Customs Enforcement’s Homeland Security Investigations
United States Customs and Border Protection
Internal Revenue Service – Criminal Investigations
Food and Drug Administration
Alcohol and Tobacco Tax and Trade Bureau

A man who stole hundreds of identities – many by skimming debit card numbers from gasoline pumps around San Diego - was sentenced today to more than three years in prison and ordered to pay $521,800 in restitution to victims.

Akop Taymizyan, 37, pleaded guilty in January, 2013, to conspiracy to commit access device fraud and bank fraud and aggravated identity theft. A co-conspirator, Georgi Rushanyan, pleaded guilty to the same charges and was sentenced to 48 months in custody on April 27, 2012.

During today’s hearing, U.S. District Judge Dana M. Sabraw called the thefts a “highly sophisticated conspiracy” and “a drain on society’s resources.”

Assistant U.S. Attorney Sabrina Feve, in urging the court to impose a lengthy sentence, noted that Taymizyan continued to steal even after his co-conspirator was taken into custody. “Even Rushanyan’s arrest and prosecution did not deter the conspiracy from continuing to steal and make unauthorized use of victims’ debit card numbers and PINs,” Feve wrote in court documents.

The charges against Taymizyan arose from his involvement in a scheme to steal and use victims’ debit card numbers and personal identification numbers (PINs). Beginning in or about December 2009, the conspiracy installed skimming devices inside gas pumps located in California, Arizona, and Nevada. These devices surreptitiously recorded victims’ debit card numbers and PINs.

The conspiracy then re-encoded the stolen debit card numbers onto dummy magnetized access cards and affixed the matching PIN via a sticker. Taymizyan, along with other co-conspirators, then traveled around California, Arizona, Nevada, Texas, and Georgia making unauthorized withdrawals from victims’ bank accounts. The withdrawals were for both cash and US Postal stamps.

The conspiracy stole debit card numbers and PINs for over 400 bank accounts belonging to at least six banks, and over 8,800 “Forever” stamps. To date, the conspiracy has made over $500,000 in unauthorized withdrawals.

Gas pumps in and around San Diego were targeted as part of this scheme and at least 30 bank accounts belonging to San Diego-area victims were compromised. Members of the conspiracy, including Taymizyan, also traveled to San Diego to make unauthorized withdrawals. In February 2010, Taymizyan made an unauthorized withdrawal from a La Jolla ATM.

“Identity theft is a pervasive and growing threat to consumers and financial institutions,” said U.S. Attorney Laura Duffy. “The U.S. Attorney’s Office recommends that individuals monitor their monthly bank, credit card, and brokerage account statements for unauthorized charges and immediately report any unauthorized charges or transfers to their financial institutions.”

DEFENDANT   Case Number: 12cr4134-DMS Akop Taymizyan       SUMMARY OF CHARGES

Conspiracy to Commit Access Device Fraud and Bank Fraud - Title 18, United States Code, 371
Maximum penalties: 5 years' imprisonment and $250,000 fine
Aggravated Identity Theft - Title 8, United States Code, Sections 1028A
Mandatory sentence: 2 years’ imprisonment

  AGENCIES

United States Secret Service, Las Vegas Metropolitan Police Department; Cobb County, Georgia District Attorney’s Office

The La Jolla oncology practice known as Joel I. Bernstein, M.D., Inc. was sentenced today to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing Medicare as if the drugs were legitimate.

The sentence was handed down by U.S. District Judge Cathy A. Bencivengo following the corporation’s guilty plea to health care fraud in January. The practice was also sentenced to a year of probation, which means it must allow Probation officers to scrutinize finances, submit to office searches and prepare a compliance program to avoid such problems in the future.

In pleading guilty, the practice admitted that it had purchased $3.4 million of foreign cancer drugs, knowing they had not been approved by the U.S. Food and Drug Administration for use in the United States. From 2007 to 2011, Bernstein’s office purchased these drugs for significantly less than market value in the U.S., and then submitted claims to Medicare at the full reimbursement price. To conceal the scheme, the office fraudulently used Medicare reimbursement codes for approved cancer drugs, as Medicare does not pay for unapproved drugs.

The drugs purchased by the corporation were meant for markets outside the United States and contained the same active ingredients as drugs sold in the U.S. under the brand names Abraxane®, Alimta®, Aloxi®, Boniva®, Eloxatin®, Gemzar®, Neulasta®, Rituxan®, Taxotere®, Venofer® and Zometa®).

The practice has admitted that it was aware that the drugs were intended for markets other than the United States and were not the drugs approved by the FDA for use in the United States because: (a) the packaging and shipping documents indicated that 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 for the drugs as countries other than the United States; (c) the labels did not bear the “Rx Only” language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions 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; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) the office had received a Notice from the FDA in October, 2008, that a shipment of drugs had been detained because the drugs were unapproved.

Medicare provides reimbursement only for drugs approved by the Food and Drug Administration (FDA) for use in the United States. The practice admitted that it knowingly submitted claims for payment to Medicare using the reimbursement codes for the U.S. approved drugs, falsely representing that the drugs were those approved by the FDA for use on patients in the United States.

The defendant acknowledged that between January of 2007, and May of 2011, the practice received $1.7 million in reimbursement from Medicare as a result of this fraudulent scheme. The practice was ordered to forfeit $1.2 million, which was the amount of gross proceeds received by the defendant solely related to the drugs.

In a related False Claims Act lawsuit filed by the United States, Dr. Bernstein and his medical practice paid in excess of $2.2 million to settle allegations that they submitted false claims to the Medicare program. The corporation was allowed to apply that sum toward the amount owed in the criminal restitution to Medicare.

Dr. Bernstein himself also pleaded guilty to a misdemeanor charge of Introducing Unapproved Drugs into Interstate Commerce. In pleading guilty, Dr. Bernstein admitted that on July 8, 2010, he purchased the prescription drug Mabthera (intended for market in Turkey and shipped from a source in Canada) and administered it to patients. Bernstein further acknowledged that the drug Mabthera is not approved by the Food and Drug Administration for use in the United States. Rituxin®, a product with the same active ingredient, is approved by the Food and Drug Administration for use in the United States.

Dr. Bernstein was released on a $10,000 personal surety bond and is scheduled to be sentenced on July 2, 2013 at 2:00 p.m.

DEFENDANT   Criminal Case No. 13cr0119-CAB Joel I. Bernstein, M.D., Inc. Date of Incorporation: 1998 La Jolla, California   SUMMARY OF CHARGES

Health Care Fraud, in violation of Title 18, United States Code, Sections 1347 and 2 Maximum Penalty for a Corporation: $500,000 fine, $400 special assessment.

  AGENCIES

Food and Drug Administration, Office of Criminal Investigations
Federal Bureau of Investigation

Brian Karl Brimager, former boyfriend of United States Citizen Yvonne Baldelli, was indicted by a federal grand jury in San Diego yesterday on charges that he obstructed justice and made false statements to law enforcement in connection with the investigation into Baldelli’s suspected murder in Panama in 2011. Agents with the Federal Bureau of Investigation arrested Brimager without incident this morning at his house in Vista.

The indictment, unsealed today, alleges that Brimager killed Baldelli in late November 2011 and then engaged in an elaborate scheme to cover up his crime. This scheme included destroying evidence, giving false information to law enforcement, and sending a series of emails purportedly from Baldelli making it appear to her friends and family that she was still alive and traveling with another man in Costa Rica.

According to the indictment, in September 2011 the couple moved together from Los Angeles to the archipelago of Bocas del Toro, Panama. They rented a room in a five-unit hostel on Isla Carenero, a small island near Bocas reachable only by boat. The indictment alleges that while in Panama, Baldelli suffered physical abuse at the hands of Brimager resulting in bruising around her eyes and on her arms.

Baldelli was last seen on the evening of November 26, 2011, when she left Carlos’ Steakhouse, a bar and restaurant in Bocas del Toro, with Brimager.

The indictment alleges that after Baldelli’s disappearance, Brimager created a cover story to explain her whereabouts and in the days and months that followed engaged in a series of obstructive acts designed to make that version appear credible. For example, using Baldelli’s laptop, Brimager sent emails to Baldelli’s friends and family from her personal email account, purporting to be from Baldelli, falsely stating that she was in Costa Rica with another man. To “corroborate” this story, Brimager traveled to Bocas Del Toro on November 27, 2011 and withdrew money from Badelli’s bank account at an ATM to make it appear that she was on her way to Costa Rica. Later, on his way back to the United States, Brimager took a two-day layover in Costa Rica. According to the indictment, while in Costa Rica, Brimager made another withdrawal from Baldelli’s bank account at an ATM in order to make it appear that Baldelli was alive and in San Jose.

“Brimager impersonated Baldelli over email in an attempt to trick her friends and family into believing she was still alive, thereby obstructing, influencing and impeding investigation into her disappearance and suspected death,” the indictment said.

In addition to sending fake emails from Baldelli, the indictment charges that Brimager obstructed justice by disposing of physical evidence, including a bloody mattress. The indictment alleges that prior to dumping the mattress in the ocean, Brimager conducted two internet searches on Baldelli’s computer – one for “washing mattress” and a second for “washing mattress blood stain.” The indictment also alleges that Brimager got rid of Baldelli’s personal belongings – including clothing, cosmetics and jewelry – by packing the items into approximately 10 large garbage bags and leaving them on the dock outside the hostel for disposal.

The indictment also charges Brimager with making materially false statements to the FBI during an interview on March 21, 2012. The indictment alleges that Brimager falsely stated to the FBI that Baldelli left Panama for Costa Rica on November 27, 2011. Brimager also claimed that Baldelli took her white Sony VAIO laptop with her when she left Panama, when in fact, the laptop was found in Brimager’s possession on March 21, 2012 – months after Baldelli’s disappearance. The indictment alleges that Brimager also made materially false statements to the FBI regarding the laptop ever being in Panama, Brimager’s plans to return to the United States, and his striking of Baldelli. Brimager also falsely stated, according to the indictment, that he had never accessed Baldelli’s personal email account or sent emails purporting to be from Baldelli.

DEFENDANT   Case Number: 13CR2381-JM Brian Karl Brimager       SUMMARY OF CHARGES

Obstruction of Justice, 10 counts - Title 18, United States Code, Section 1512(c)(2)
Maximum Penalties: 20 years imprisonment for each count, a $250,000 fine, 3 years supervised release

False Statement to a Federal Officer, 1 count - Title 18, United States Code, Section 1001
Maximum Penalties: 5 years imprisonment, a $250,000 fine, 3 years supervised release

  AGENCIES

Federal Bureau of Investigation

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

A man who attempted to smuggle more than two dozen roosters and hens into Mexico for the purposes of cockfighting was sentenced today by U.S. District Judge William Q. Hayes to time served, which amounted to 65 days in custody.

Marco Marquez-Avila, 41, of Tijuana, was returned to the United States on April 22, 2013, by Mexican authorities who discovered that he had 28 adult roosters and hens that were covered by floor mats in his Toyota Camry.

Each bird was individually encased in a nylon sock with the head covered and the feet bound with a velcro strap. Additionally, the birds had had their combs and wattles removed, a common mutilation for birds intended for cockfighting. All birds required euthanasia.

While cockfighting is legal in Mexico, it is not legal in the state of California. Federal law in the U.S. prohibits the transportation of animals that are to be used in an animal fighting venture. Additionally, federal regulations require that poultry exported to Mexico be eligible to be freely transported and marketed in the United States, which cockfighting birds are not.

This is the fifth case of cockfighting birds being smuggled southbound to Mexico this year, and the second time someone has been turned around by Mexican authorities and returned to Customs and Border Protection officers in as many months because adult poultry are not allowed to be exported to Mexico without prior inspection and certification.

DEFENDANT   Case Number: 13cr01845 MARCO MARQUEZ-AVILA       SUMMARY OF CHARGES

Unlawful transportation of animals used in animal fighting venture – Title 7, United States Code, 2156
Maximum penalties: 5 years imprisonment and $250,000 fine

  AGENCIES

U.S. Department of Agriculture, Office of Inspector General
U.S. Customs and Border Protection

United States Attorney Laura E. Duffy announced that Jose Melendez, the owner and operator of Oceanside Medical Services, was sentenced to 18 months in prison today for his involvement in a health care fraud conspiracy that resulted in over $1 million in false claims to the Medicare trust fund. Melendez was also ordered to pay $593,429.81 in restitution, and will be on supervised release for three years after completing his custodial sentence.

The scheme involved the sale of fraudulent power wheelchair prescriptions in order to fraudulently obtain Medicare reimbursement for power wheelchairs that patients did not need and, in some cases, did not want. Two of Melendez’s co-conspirators, Dr. Irving Schwartz and Gloria Hernandez, traveled to El Centro, California in search of elderly Medicare patients. Dr. Schwartz wrote fraudulent prescriptions for the patients to obtain power wheelchairs, even though the patients did not need the equipment and could walk without assistance, and collected a $300 cash kickback in exchange for each power wheelchair prescription. Hernandez then sold the fraudulent power wheelchair prescriptions to Melendez, charging him $1,000 per fraudulent prescription.

Melendez, in turn, sold some of the power wheelchair prescriptions to other co-conspirators, charging an additional mark-up on each prescription. As the last step in the scheme, Melendez and his co-conspirators submitted the fraudulent prescriptions to Medicare for reimbursement, billing up to $5,865 for each power wheelchair. All told, Dr. Schwartz wrote at least 186 fraudulent power wheelchair prescriptions for Medicare beneficiaries in exchange for more than $55,000 in bribes and kickbacks. Melendez, the owner and operator of Oceanside Medical Services, purchased these 186 fraudulent prescriptions and used them to submit over $830,000 in false claims to Medicare. Co-conspirators Aristeo and Laura Tavares, who were charged in a separate case, submitted more than $250,000 in false Medicare claims based on Dr. Schwartz’s fraudulent prescriptions.

United States Attorney Duffy reiterated that combating health care fraud is a top priority of the Department of Justice. “Anyone attempting to defraud Medicare – whether a doctor, medical equipment supplier, or patient recruiter – will be prosecuted to the fullest extent of the law, and should understand that the prognosis includes a substantial prison sentence, like the one imposed today.” United States Attorney Duffy thanked the Federal Bureau of Investigation and Department of Health and Human Services, Office of Inspector General, for their diligence and perseverance in breaking up this health care fraud conspiracy.

Dr. Schwartz is scheduled to be sentenced on August 19, 2013, before Judge Huff. On March 27, 2013, Aristeo and Laura Tavares were sentenced to time served (1 day in custody), and ordered to pay $182,860.77 in restitution to the Medicare trust fund. Hernandez was sentenced today to 6 months home confinement, and ordered to pay $160,000 in restitution to Medicare.

DEFENDANT   CRIMINAL CASE NO. 12cr2599-H Jose Melendez       SUMMARY OF CHARGES

Count 1: Conspiracy to Pay and Receive Health Care Kickbacks and Defraud -Title 18, United States Code, Section 371; Maximum Penalty: Five years in custody; $250,000 fine; 3 year of supervised release; and mandatory restitution.

  INVESTIGATING AGENCIES

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

Jaime Cuadra, the former chief financial officer of Oceanic Enterprises, Inc. pled guilty today to wire fraud and filing a false federal income tax return in connection with his embezzlement of $1,089,813.26 from Oceanic and its parent company, Umami Sustainable Seafood, Inc., a San Diego-based, publically traded company.

As set forth in his plea agreement, Cuadra admitted that he embezzled the money over a two-and-a-half-year period from 2010 until his termination from Oceanic in February 2013. Cuadra took advantage of his position as CFO to access Oceanic's accounts and withdraw money for his personal benefit. Cuadra primarily used the money to fund a fledgling professional football league of which Cuadra served as the president and chief executive officer during the period of his fraud.

According to court documents, Cuadra admitted that he used embezzled funds to develop the league and attract investors by paying league executives, as well as the league's marketing, consulting, and public relations fees. Cuadra resigned as the president and CEO of the professional football league in February 2013. Cuadra admitted he used embezzled funds for other purposes as well, such as to: 1) financially support other outside business ventures (including a T-shirt business); 2) lease a Porsche Cayenne; 3) pay for personal travel, hotels, and meals; 4) purchase a variety of miscellaneous items, including artwork, designer clothing, computers and entertainment systems, and tickets to sporting events; and 5) deposit funds into his personal accounts and obtain cash from automated teller machines. Cuadra admitted that he hid his embezzlement from Oceanic and Umami by falsifying Oceanic's financial records in part by coding his illicit transfers as legitimate business expenses.

Cuadra also filed false tax returns for the years in which he carried out his scheme to defraud Oceanic and Umami. Specifically, he admitted that he failed to report his embezzled income on his 2010-2012 tax returns and, in one instance, wrote off an expense he paid with embezzled funds as a "partnership loss," which further reduced his adjusted gross income. In all, Cuadra admitted that his false tax returns resulted in unpaid taxes of $387,347.58. As a condition of his plea, Cuadra must pay back the full amount of his unpaid taxes as well as the more than $1 million he stole from Umami.

United States Attorney Laura E. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and the Internal Revenue Service and reiterated her support of financial-crime prosecutions: "Today's guilty plea is yet another example of our office's commitment to investigate and prosecute those who illegally take advantage of positions of trust for their own personal gain."

FBI Special Agent in Charge, Daphne Hearn, commented: “At its most basic level, this case is about greed and the abuse of trust. I commend the efforts of the FBI Agents and Financial Analysts who worked tirelessly to uncover this sophisticated embezzlement scheme. I also want to thank the IRS and the U.S. Attorney's Office for their important roles in this investigation.”

“Jaime Cuadra used his position of trust as Chief Financial Officer to defraud over $1 million dollars from two San Diego based companies, Oceanic Enterprises and Umami Sustainable Seafood Inc.,” said Jose A. Gonzalez, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “Cuadra’s failure to pay federal income taxes of $387,347.58 on his embezzled funds further confirms that his methodical greed and criminal activity was for his personal benefit. Today’s guilty plea entered by Cuadra reaffirms IRS CI’s commitment to investigate and prosecute those who misuse their position of trust to conduct criminal activity.”

Cuadra is scheduled to be sentenced Sept. 23 at 9 a.m. before Judge Huff.

DEFENDANT   Criminal Case No. 13cr2298-H Jaime Cuadra       SUMMARY OF CHARGES

Count 1: Title 18, United States Code, Section 1343 B Wire Fraud
Maximum penalties: 20 years custody; $250,000 fine; 3 years supervised release.

Count 2: Title 26, United States Code, Section 7206(1) B Filing a False Federal Income Tax Return
Maximum penalties: 3 years custody; $250,000 fine; 1 year supervised release.

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service

SAN DIEGO, CA - Eduardo Arellano-Felix, who acted as the chief financial officer of the notorious Mexican drug cartel that bears his family name, was sentenced today in federal court to 15 years in prison for laundering tens of millions of dollars in illicit drug proceeds.

Arellano-Felix is the last of four brothers to be targeted by U.S. prosecutors for leading what was once among the world’s most violent and powerful multi-national drug trafficking organizations. He pleaded guilty in May to money laundering and conspiracy charges.

In handing down the sentence, U.S. District Judge Larry A. Burns told the defendant that even though he was less involved in the unsavory aspects of the drug business than his brothers, nevertheless he was “still an integral part” and “fully aware of the methods” of the cartel and “should be ashamed” of his actions, which have had “terrible and longlasting effects” on this community and the relationship between the U.S. and Mexico.

According to court documents, the AFO moved hundreds of tons of cocaine and marijuana from Mexico and Colombia into the U.S. and made hundreds of millions of dollars in the process. The cartel terrorized the Southwest border and beyond with executions, torture, beheadings, kidnappings and bribes to law enforcement, military personnel and government officials.

In a sentencing memorandum, prosecutors wrote that Arellano-Felix was a major force within the cartel leadership. “In his position, Defendant advised his brothers as they orchestrated the importation of hundreds of tons of cocaine and marijuana into the United States, ordered the kidnap and murder of numerous people, and directed the widespread corruption of law enforcement and military personnel in Mexico. Defendant also personally laundered at least tens of millions of dollars in illicit proceeds, and purchased large numbers of firearms for use by the AFO. Defendant’s actions resulted in destroyed lives and untold suffering on both sides of the border.”

U.S. Attorney Laura Duffy said: “The three living Arellano Felix brothers, who for decades lived as multi-millionaires while terrorizing the Southwest border, ordering assassinations and corrupting countless public officials - are now confined to maximumsecurity prison cells for a very long time. I urge others who aspire to take their place to take note.”

Duffy praised the dedicated team of prosecutors and federal agents from the DEA, FBI and IRS for overcoming the extreme challenges of building successful cases against the highest-ranking leaders of a major trafficking organization, who are typically insulated and difficult to prosecute. “It was an audacious goal to take this cartel down, and I’m extremely satisfied with the outcome.”

“The sentence that Eduardo Arellano-Felix received today marks the end of an era in cartel history. The AFO is finished, others have moved in and are attempting to take their place,” says Special Agent in Charge of the DEA San Diego William R. Sherman. “Our warning to those who emulate the members of that once powerful cartel, take a good look at your future. Our commitment to hunting down and arresting those people trafficking drugs across the US/Mexico border has not wavered but has only grown stronger. DEA and our law enforcement partners are already actively pursuing all those who dare attempt to fill the void left by the demise of the AFO.”

San Diego FBI Special Agent in Charge Daphne Hearn said, “Today's sentencing demonstrates the unwavering commitment of the FBI to continue working with our domestic and international law enforcement partners to disrupt and dismantle violent criminal enterprises such as the Arellano-Felix Organization that instill fear and threaten the safety of our citizens.”

Jose A. Gonzalez, Special Agent in Charge for IRS Criminal Investigation’s Los Angeles Field Office commented: “Today’s sentencing of Eduardo Arellano- Félix, the last brother and a former leader who ran Arellano- Félix Organization’s (AFO), is a significant contribution to the end of a brutally violent, multi-national drug cartel. Today is a triumph for prosecutors and federal agents who have worked for years to dismantle and bring key leaders to justice. Ill-gotten gains derived by the AFO were the essential backbone of this organization and IRS Criminal Investigation, working with our law enforcement partners, leveraged our financial expertise to assist in the dismantling of this dangerous and deadly drug cartel.”

It’s been a long road to get to this point.

Arellano-Felix was first indicted in 1998, along with his brothers, on drug conspiracy charges. Then in 2002, prosecutors added charges of racketeering, money laundering and conspiracy to distribute and import marijuana and cocaine in a subsequent indictment. He was arrested by Mexican authorities in Tijuana, Baja California, Mexico on October 25, 2008. A final order of extradition to the United States was granted in 2010.

After two years of unsuccessful appeals, Arellano-Felix was extradited by the government of Mexico to the United States on August 31, 2012, to face charges in the Southern District of California. He entered his guilty plea nine months later.

Two brothers and former leaders of the Arellano-Felix Organization (AFO) - Benjamin Arellano-Felix and Francisco Javier Arellano Felix - were captured in 2002 and 2006, respectively, and are currently serving sentences in the United States following their convictions for racketeering, drug trafficking, and money laundering charges. Benjamin was sentenced to 25 years in prison; Javier is serving a life term. Ramon Arellano-Felix, the cartel's enforcer, was killed in a shootout with police in 2002.

In his plea agreement, Arellano-Felix – a medical doctor nicknamed “El Doctor” - admitted he was a senior member of the AFO. He also admitted that he laundered hundreds of millions of dollars in drug trafficking proceeds and used some of the income to pay AFO members to commit crimes; to buy firearms, ammunition and vehicles; to travel on AFO-related business; to pay bribes; and to purchase drugs. He signed his plea agreement, “Dr. Eduardo Arellano Felix.”

In connection with his plea, Arellano-Felix will also forfeit $50 million. Before he was extradited, Arellano-Felix spent almost four years in custody in Mexico, from October 25, 2008 to August 31, 2012.

In addition to the brothers, this office has convicted a long line of top AFO lieutenants, including, in part, Arturo Paez-Martinez in 2002, Ismael and Gilberto Higuera-Guerrero in 2007 and Jesus Labra-Aviles in 2010.

This case (Case Number: 97cr2520-LAB) was investigated by agents from the Drug Enforcement Administration, the Federal Bureau of Investigation, and the Internal Revenue Service-Criminal Investigation and prosecuted in the Southern District of California by Assistant United States Attorneys Joseph S. Green, James P. Melendres, and Daniel E. Zipp.

The Criminal Division’s Office of International Affairs provided significant assistance in the extradition. The investigation of Eduardo Arellano-Felix 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.

SUMMARY OF CHARGES IN GUILTY PLEAS

Count 1

Count 2

 

Title 18, United States Code, Sections 371 (Conspiracy to launder monetary instruments) Maximum penalty: 5 years of custody.

Title 21, United States Code, Sections 854(a) and 846 (Conspiracy to use and invest illicit drug profits) Maximum penalty: 10 years of custody.

Former U.S. Border Patrol Agents Raul and Fidel Villarreal, brothers who smuggled at least 1,000 illegal immigrants into the United States in exchange for more than $1 million in bribes, were sentenced today to 35 and 30 years in prison, respectively.

The brothers were convicted by a federal jury on August 10, 2012, of conspiracy to bring in illegal aliens for financial gain, multiple counts of bringing in illegal aliens for financial gain, conspiracy to launder money and receiving bribes. The brothers smuggled their customers while on duty, in uniform and in their Border Patrol vehicles and were assisted by a Tijuana police chief.

In handing down the sentences and $250,000 fines for each, U.S. District Judge John A. Houston told the brothers he was “disgusted” by their actions. The judge also noted that ignoring their duty to protect the border “impacted national security,” and that he wanted the lengthy sentences to send a message that such a serious violation of the public’s trust would not be tolerated.

At the hearing, Assistant U.S. Attorney Tim Salel urged the judge to impose the harshest sentence, primarily because the brothers abused the sacred trust of the public and neglected to protect the border. But he also noted that as law enforcement closed in, the brothers planned to kill co-conspirators to prevent them from testifying. And he argued the brothers deserved a long sentence because they had no regard for the safety of the illegal border crossers who were recklessly jammed into Border Patrol vehicles and transported at high speeds over treacherous terrain, just to maximize profits.

“This is a case of unmitigated greed and betrayal by two senior Border Patrol agents who smuggled aliens while on duty instead of patrolling the border,” Salel told the court. “The defendants are experienced agents, 10-year veterans. This was not a case of misguided rookies who got involved with the wrong crowd. They knew they had pledged to defend the border. Yet these guys set up their own organization to line their pockets.”

U.S. Attorney Laura Duffy said she was very pleased with the outcome of the case.

“The audacious way these brothers so easily tossed aside their loyalty to their country and to fellow agents,who put their lives on the line every day protecting our borders, is appalling,” Duffy said. “This sentence provides justice for a public betrayed, and reflects that this was, by far, among the most egregious violations of the public’s trust we’ve seen by federal officials in many years.”

“Today’s sentencing sends a clear message: DHS will not tolerate any type of employee misconduct, especially criminal activity that undermines the core values of our organization and the thousands of DHS employees who uphold those values in their mission to protect the American public,” said Joe Jeronimo, special agent in charge for the Office of Professional Responsibility, Western Region. “I commend the integrity and perseverance of all the investigators and prosecutors who worked tirelessly to ensure that justice was fully served in a criminal case that unfortunately involved a very egregious breach of public trust.”

Dennis M. McGunagle, special agent in charge of the Office of Inspector General, Department of Homeland Security, said, “The DHS Office of Inspector General has no tolerance for acts of corruption committed by DHS employees. We commend the efforts of the U.S. Attorney’s office for bringing these individuals to justice.”

While working as agents, the brothers formed a smuggling organization with what seemed to be the perfect cover: Many of their customers were shuttled in squad cars by a Tijuana police chief to the border. The customers would be transported down rugged Otay Mountain trails or through remote areas near Imperial Beach by the Villarreals in Border Patrol vehicles on the way to remote drop-off locations. If anyone were to question them, they could claim the passengers were being arrested. It’s what they referred to as the “guaranteed method.”

“The Villarreals used their specialized training and knowledge of the border – particularly the vulnerable smuggling routes near Imperial Beach and Otay Mountain – to smuggle aliens,” Salel wrote in court documents. “By pretending to arrest the aliens and transporting them in their assigned Border Patrol vehicles, the Villarreals could ‘hide in plain sight’ and maintain plausible deniability if another law enforcement agent was watching them.”

Raul Villarreal, the younger brother who was hired by the Border Patrol in 1995 to work at the Imperial Beach station, eventually became a public information officer and once made a public service announcement warning the Mexican people about the dangers of alien smugglers who take advantage of illegal border crossers. Ironically, for the announcement Raul played the part of an unscrupulous smuggler who showed callous indifference to the welfare of crossers. Judge Houston said his sentence was longer because he was the organizer and ring leader.

Fidel Villarreal, who was hired in 1998, also rose through the ranks to become a mountain supervisor for the Brown Field Border Patrol station. He was the supervisor and manager of the smuggling operation.

The brothers operated the smuggling business for 14 months in 2005 and 2006, conspiring with partners in Tijuana – including Claudia Gonzalez, Armando Garcia and even a Tijuana police chief.

Gonzalez would leave envelopes containing cash – usually around $10,000 to $13,000 per smuggling trip, three or four times a week and sometimes multiple times a day - under the front seat of the Villarreals’ luxury vehicles, which were usually parked at a shopping mall in Tijuana. Fidel had a BMW and Raul had a Mercedes SUV.

During the investigation, agents used multiple confidential informants to infiltrate the criminal organization, and installed cameras on poles in areas where migrants were dropped off. They planted undercover recording devices, put tracking instruments on Border Patrol vehicles and even followed a smuggling load by airplane.

In June of 2006, the Villarreals were tipped off about the investigation, abruptly resigned and fled to Guadalajara along with other coconspirators. While living in Mexico, they kept tabs on the investigation and warned members of the organization not to cooperate with authorities. The brothers’ desperation piqued and they made plans to have coconspirators murdered in Mexico. The murders never took place.

In one instance, they held a gun to the head of a coconspirator, who supervised some of the drivers who the Villarreals suspected of cooperating with U.S. officials, but he was able to escape. Unbeknownst to the Villarreals, The coconspirator met with another coconspirator in a graveyard in Tijuana, warning her of the plot to kill her and urging her to go to San Diego.

In April of 2008, the brothers were indicted, along with Garcia and Gonzalez. They were arrested in Tijuana in October of 2008 and eventually extradited to the U.S. to face trial. Garcia was convicted along with the Villarreal brothers; Gonzalez pled guilty on December 10, 2009 to conspiracy to bring in illegal aliens for financial gain, bribery, and money laundering. Garcia is scheduled for sentencing on July 22. Gonzalez was sentenced in August 2012 to time served, which was three years, 10 months.

DEFENDANTS   Case Number: 08CR1332-JAH Raul Villarreal
Fidel Villarreal
Armando Garcia
Claudia Gonzalez       SUMMARY OF CHARGES

Conspiracy to Bring in Illegal Aliens for Financial Gain - Title 18, United States Code, 371
Maximum penalties: 5 years' imprisonment and $250,000 fine

Bringing in illegal aliens for financial gain - Title 8, United States Code, Sections 1324(a)(2)(B)(ii)
Maximum penalties: 10 years' imprisonment and $250,000 fine

Bribery - Title 18, United States Code, Sections 201(b)(2)(A) and (C)
Maximum penalties: 15 years' imprisonment and greater of $250,000 fine or three times the amount of the bribe

Conspiracy To Launder Money - Title 18, United States Code, Sections 1956(a)(2)(A) and (h)
Maximum penalties: 20 years' imprisonment and greater of $500,000 fine or twice the value of the funds

  AGENCIES

Immigration and Customs Enforcement’s Homeland Security Investigations
Department of Homeland Security, Office of Inspector General
ICE Office of Professional Responsibility
U.S. Border Patrol

United States Attorney Laura E. Duffy announced today that Jason Xie, a resident of Sacramento, California, tendered his guilty plea yesterday before United States Magistrate Judge William McCurine, Jr., to the charge of conspiring to smuggled endangered Totoaba fish swim bladders into the United States.

In his plea, Jason Xie admitted that he conspired with his codefendant, Anthony Bueno, and others to smuggle the Totoaba swim bladders into the United States from Mexico. Xie acknowledged that he intended to sell the swim bladders to the Asian market, both in the United States and abroad. Xie admitted that in February 2013 he received two coolers containing the swim bladders of 100 Totoaba smuggled into the United States, and again on March 30, 2013, he accepted delivery of three coolers containing the swim bladders of 170 endangered Totoaba (about 225 pounds), concealed under layers of fish and ice.

As part of his plea, Xie agreed to forfeit the 170 Totoaba swim bladders and also a $350,000 residence he purchased in Seattle, Washington, which he admitted he purchased with the proceeds of the sale of endangered Totoaba.

Xie further admitted that he paid $1500 per swim bladder in Mexico for the Totoaba. Xie acknowledged as part of his guilty plea that he knew it was unlawful to take, possess, transport and sell Totoaba in Mexico and the United States. The Totoaba smuggled by Xie and his co-conspirators in February and March was valued at over $400,000.

Totoaba macdonaldi, also known as Cynoscion macdonaldi, is the largest species within the scaienidae family. It can grow to more than 62 feet in length, weigh up to 220 pounds, and live up to 25 years. They are endemic only to the Gulf of California, the narrow inlet between Baja California and Mexico's mainland (also called the Sea of Cortez). This fish can be identified by its dusky silver color, elongated body, sharp snout, a projecting lower jaw, and a slightly convex tail.

During their winter migration, schools of adult Totoaba travel northward along the east coast of the Gulf of California to the Colorado River delta, where they remain for weeks before spawning in the spring. The Totoaba's spawning season runs from approximately March to May each year. During this time, Totoaba travel to the shallower waters at the mouth of the Colorado River, making them vulnerable to commercial and sport fishermen.

The Totoaba macdonaldi's large swim bladders are highly prized for use in Chinese soups. These bladders are removed from the fish, dried, and often exported from Mexico to other countries. In some instances, the fish are taken from the Colorado River, carved open so their swim bladders can be removed, and left to die on the shores. The U.S./Mexico ports of entry closest to the Sea of Cortez are in Calexico, California and San Luis, Texas.

While the Totoaba were once abundant in the Gulf of California, and even at one point constituted the second most important commercial fish for Mexico, their populations have declined drastically due to overfishing, pollution, and diversion of waters from the Colorado River.

The Totoaba was included in the most protected list of species covered by the Convention on International Trade in Endangered Species (CITES, Appendix I) in 1976, and was listed as endangered under the Endangered Species Act in 1979. Mexico included it on its list of species "In Danger of Extinction" in 1994. Both Mexico and the United States are signatories to CITES. It is a violation of law in both countries to trade in Totoaba or any part of a Totoaba.

Despite the protection, the species has shown minimal recovery. Unique biological traits, such as its limited geographic range and vulnerability during spawning, along with external pressures of habitat degradation and over-fishing, have pushed the species to the brink of extinction. The nearest Port of Entry in California to the Sea of Cortez is the Port of Entry at Calexico, California. During the period from February to May, 2013, border inspectors in Calexico seized approximately 700 pounds of Totoaba, representing the swim bladders of over 500 endangered fish.

Sentencing for Xie is scheduled for September 13, 2013, at 9:00 a.m. before the Honorable Cathy Ann Bencivengo, United States District Judge.

DEFENDANT   Criminal Case No. 13cr1311-CAB Jason Jin Shun Xie       SUMMARY OF CHARGES

Conspiracy, in Violation of Title 18, United States Code, Section 371.
Maximum Penalties: 5 years in custody and/or $250,000 fine, $100 special assessment.

  AGENCy

U.S. Fish and Wildlife Service
Department of Homeland Security, ICE's Homeland Security Investigations

United States Attorney Laura E. Duffy and Federal Bureau of Investigation Special Agent in Charge Daphne Hearn announced that 18 members of a violent gambling ring located principally in California and Peru were indicted for operating “Macho Sports”—an illegal Internet and telephone gambling business.

Participants in the scheme were charged with taking millions of dollars in illegal sports wagers over the last decade in the San Diego and Los Angeles areas. Earlier today, FBI agents arrested 15 of the defendants on a sealed indictment in coordinated actions in San Diego and Los Angeles, as well as Oslo, Norway, and Lima, Peru. FBI agents also executed seizure warrants seeking the forfeiture of more than $5 million in property associated with Macho Sports, including a La Jolla property obtained by conspirators with proceeds from the illegal gambling conspiracy. The FBI investigation, which started in 2011, employed wiretaps and undercover agents to infiltrate the organization and uncover the defendants’ illegal gambling activities and extortionate debt collection.

According to the indictment, Jan Harald Portocarrero and Erik Portocarrero ran Macho Sports from Lima, Peru, using the Internet and toll-free telephone lines to accept bets from customers in California. The organization ensured the prompt payment of gambling debts through the use of intimidation, threats, and violence, as well as fostering a violent reputation as to its treatment of delinquent customers. The co-conspirators avoided detection by laundering their illegal proceeds and maintaining a company headquarters and the physical platform for its Internet operations outside the United States. Although originally from California, the Portocarrero brothers set up Macho Sports in Peru after suffering previous gambling arrests or convictions in the United States.

The Portocarreros employed managers in Peru, such as defendant Young Hee Koh, to oversee the enterprise’s telephone and internet operations, resolve disputes, and adjust customers’ lines of credit. The organization also used teams of bookies—such as Amir Mokayef (operating primarily in the San Diego area) and Joseph Barrios (operating primarily in the Los Angeles area)—who were responsible for recruiting customers, paying off winning bets, and collecting on losing bets.

Macho Sports’ bookies often managed their own network of “sub-bookies,” who both recruited customers and delivered payments to the managing bookie. For example, San Diego- -area bookie Mokayef managed the sub-bookies Michael Christopher Iaco, Howard Alan Blum, Michael John Massey, Salvatore Giacomo Groppo, Nilesh Kumar Ambubhai Patel, and Benjamin John William Weber. Los Angeles-area bookie Barrios managed the sub-bookies Charles Edward Sullivan, Emed G. Sidaros, aka Action Ed, Isaac Pete Gharibeh, Dunzmy June Nguyen, and Todd Michael Heflin.

Macho Sports supplied their customers with an account number and password for accessing their gambling accounts on its websites. Bookies instructed their customers that they could place bets with their bookmaker, or by calling Macho Sports’ toll-free numbers, or through their online accounts on the Macho Sports websites. Typically, Macho Sports would extend credit to new customers, so they could begin sports betting without pre-funding their accounts. Macho Sports also provided further extensions of credit to existing customers, so that those customers could wager larger amounts of money than their prior extensions of credit allowed.

The enterprise also used “runners,” such as Randall Lee Irwin and Larry Neil Gold, who dealt directly with customers on behalf of its various bookies. These runners handled customer payments and collections. To ensure prompt payment, Macho Sports fostered a violent reputation about its treatment of delinquent customers. To this end, and because Macho Sports could not rely on the legal system for debt collection, the enterprise used intimidation, threats, and violence against its customers, especially when customers were late in paying their gambling debts.

United States Attorney Duffy observed that billions of dollars are being made outside the law now that technology has made illegal gambling more accessible: “Illegal gambling is a thriving illegal business hiding in plain sight. The Department is committed to combating this crime, which too often is characterized by organized criminals, shady bookies, serious violence and lives in shambles because of gambling addiction.”

Some defendants are expected to be arraigned on the indictment this afternoon before U.S. Magistrate Judge William McCurine, Jr.

DEFENDANTS   Case Number: 13CR2196-JLS Jan Harald Portocarrero
Erik Portocarrero
Amir Mokayef
Joseph Barrios
Young Hee Koh
Randall Lee Irwin
Larry Neil Gold
Charles Edward Sullivan
Michael Christopher Iaco
Emed G. Sidaros
Isaac Pete Gharibeh
Dunzmy June Nguyen
Todd Michael Heflin
Howard Alan Blum
Michael John Massey
Salvatore Giacomo Groppo
Nilesh Kumar Ambubhai Patel
Benjamin John William Weber       CORPORATE DEFENDANT Macho Sports International Corp.   Panama and Peru   SUMMARY OF CHARGES

Count 1: Racketeering Conspiracy to Conduct Enterprise Affairs (RICO Conspiracy), in violation of Title 18, United States Code, Sections 1962(c)&(d)

Maximum penalties: 20 years in prison, 3 years supervised release; and a $250,000 fine

Count 2: Illegal Gambling Business, in violation of Title 18, United States Code, Section 1955
Maximum penalties: 5 years in prison, 3 years supervised release; and a $250,000 fine

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service – Criminal Investigation

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

David Bahr, a self-employed Rancho Santa Fe consultant, pleaded guilty today to conspiracy to commit securities fraud in connection with the Florida-based penny stock company “iTrackr.”

As set forth in his Plea Agreement, Bahr admitted that he agreed with others to fraudulently manipulate and artificially inflate the price of iTrackr shares in order to make money for himself and his client-investors whom he advised. Bahr admitted that he had bought shares of iTrackr, and advised others to do so, in order to keep up the price of iTrackr stock, and had arranged for the dissemination of promotional material that overstated the likelihood of iTrackr’s success and future profits.

The guilty plea coincides with charges filed today by the Securities and Exchange Commission in connection with the same conduct.

In late November, Bahr spoke on the telephone with an undercover FBI agent posing as a businessman who could arrange for stockbrokers to secretly invest their clients’ money in iTrackr in return for a 30% kickback. The undercover officer told Bahr that the kickback would not be disclosed to the brokers’ clients, and that he could ensure that the shares would be held for approximately one year, thus keeping the shares off the market and avoiding any sales that would decrease the price.

Bahr agreed to the plan, and agreed to pay the kickback. Bahr told the undercover officer that in order to reach his desired share price, he wanted the brokers to buy 10 million shares of iTrackr at an average price of 25 cents per share, for a total investment of $2.5 million. Bahr agreed to pay a total kickback of $750,000.

Bahr and the undercover officer agreed to do a test run. On various days in December 2012, the undercover officer, using FBI funds, made an initial purchase of iTrackr stock, and Bahr purchased a total of 135,000 shares of iTrackr stock. Bahr was satisfied with the purchases, and wired a $3,000 kickback to the undercover officer’s bank account. Days later, federal agents searched his Rancho Santa Fe home and seized documents and electronic evidence.

United States Attorney Duffy reiterated her continuing support for the stiff enforcement of federal securities laws, and cautioned the public to be vigilant against stock manipulators, especially in the penny stock markets. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and the Internal Revenue Service for their efforts in this fraud investigation, and the continuing support of the Securities and Exchange Commission for their expertise and guidance.

Sentencing was set for September 3, 2013 before U.S. District Judge Larry A. Burns. Bahr was released on bond.

DEFENDANT   CASE NUMBER 13cr2198-LAB David Bahr       SUMMARY OF CHARGE

Title 18, United States Code, Section 1349 - Conspiracy to Commit Securities fraud. Maximum penalty: 25 years imprisonment and $250,000 fine.

  PARTICIPATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service

A federal jury today convicted Sunil Jiwat Mirwani and his corporation, M Trade, Inc., in connection with a scheme to evade customs duties on more than $30 million in Chinese-made jeans, skirts, shorts and other wearing apparel.

Both Mirwani and his corporation were charged with one count of conspiring to defraud the United States, two counts of importing goods by means of false statements, and one count of conspiring to launder money. The case was tried before a jury beginning on June 4, 2013. This afternoon, after less than a day of deliberations, the jury returned guilty verdicts on all four counts for both defendants.

The evidence presented at trial showed that as part of the conspiracy, Mirwani hired a group of San Diego-based businessmen and logistics professionals to initiate shipments of Mirwani’s merchandise from ports in China to the Port of Long Beach, California. When the goods arrived, Mirwani and his conspirators would ensure that the merchandise was classified as “in bond”—meaning it would not enter the commerce of the United States, but instead be transshipped through the territory of the United States to Mexico. Rather than complete the transshipment to Mexico, however, Mirwani and his conspirators would divert the merchandise to Mirwani’s El Monte, California-based warehouse, as well as to other warehouses in the Los Angeles-area. Having imported this merchandise effectively duty-free, Mirwani would then sell his jeans, shorts and skirts within the United States at an advantage over his law-abiding competitors—including domestic American manufacturers of similar goods and foreign manufacturers who had paid the applicable duties on their imports. As part of the scheme, Mirwani and his conspirators falsified customs documentation and database entries, even going so far as to forge special perforation marks found on particular customs filings.

The evidence showed that Mirwani also conspired to launder money, transmitting nearly $10 million from M Trade, Inc.’s bank account to the account of Mirvana International, a Hong Kong-based company that Mirwani shares with his twin brother. In addition, Mirwani transmitted similar sums to the Mirvana International account through other intermediary accounts in the United States and Mexico. Finally, Mirwani also transmitted money through M Trade Inc.’s account directly to mainland China. The international wire transfers served to conceal proceeds of the fraud as well as to help fund future fraudulent shipments.

U.S. Attorney Duffy said she was pleased with the verdict: “Not only does this type of fraud deplete our public treasury, but it also deprives domestic manufacturers and law-abiding importers of a level playing field. This prosecution and today’s convictions underscore our commitment to protecting the economic health of the United States and ensuring that no one exploits American and international markets for their personal gain.”

“Today’s verdict shows that the jury refused to believe that Mr. Mirwani was a confused dupe, but rather through his own crafty, deceitful means, wittingly conspired to pocket over $500,000 by evading the proper customs taxes and laundered the proceeds to avoid detection by the authorities,” said Jose A. Gonzalez, Special Agent in Charge for Internal Revenue Service Criminal Investigation (IRS CI). “Evasion of any type of tax, income tax or otherwise, is a crime and IRS CI will prosecute known perpetrators to the fullest extent of the law.”

A sentencing hearing is scheduled for September 9, 2013, at 9:00 a.m. before United States District Judge Michael M. Anello.

DEFENDANT   Case Number: 12CR3137-MMA Sunil Jiwat Mirwani
M Trade, Inc       SUMMARY OF CHARGES AND MAXIMUM PENALTIES

Count 1: Conspiracy to Defraud 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

Counts 2 and 4: Entry of Goods by Means of False Statements – 18 U.S.C. § 542. Maximum penalties: 2 years in prison, 1 year of supervised release, $250,000 fine and a $100 special assessment

Count 57: Conspiracy to Launder Monetary Instruments – 18 U.S.C. § 1956(a)(2)(A) and (h). Maximum penalties: 20 years in prison, 3 years of supervised release, $500,000 fine (or a fine worth twice the amount of the laundered money) and a $100 special assessment.

  INVESTIGATING AGENCIES

Immigration and Customs Enforcement – Homeland Security Investigations
Internal Revenue Service – Criminal Investigations
United States Food and Drug Administration

In December, 2010, U.S. Attorney Laura Duffy took the highly unusual step of appearing at a community meeting to field questions from Somali immigrants who were troubled by the arrests of four men suspected of sending money to the terrorist group al-Shabaab. One of the four was a popular leader of a local mosque.

While the meeting felt tense at times, that dialogue paved the way for Duffy and counterparts at the FBI to create a more formal partnership with community activists, social service providers and spiritual leaders to improve communication, break down misunderstandings and build trust between law enforcement and the San Diego Somali community.

The group of about 24 people calls itself the San Diego Somali Community-Law Enforcement Roundtable. And while community outreach is a cornerstone of President Obama’s counterterrorism strategy, the San Diego partnership has focused first and foremost on building relationships and creating good will.

Law enforcement officials are trying to show members of the community – who are typically leery of authorities in part because of traumatic experiences in their war-torn homeland – that they can be trusted to protect civil rights, vigorously respond to hate crimes and offer support should community members suffer backlash or threats in the wake of events like the Boston Marathon bombings.

“We are trying to create strong, positive relationships between the community and law enforcement so that victims are more likely to report crimes and community members are more likely to come forward when they observe signs of gang-involvement, radicalization or other behaviors that threaten the safety of the community,” Duffy said.

“We also hope this partnership will help us prevent vulnerable youth – many of whom are new residents that experience culture shock and language barriers and difficulty assimilating - from being bullied, recruited by gangs or even drafted into extremism,” Duffy said.

The group holds bi-monthly meetings to discuss issues facing the Somali community and to plan community engagement projects. The U.S. Attorney’s office is also working with local mosques to provide presentations about a variety of public safety topics, such as constitutional rights, what to expect when interacting with law enforcement, an overview of the criminal justice system, Transportation Security Administration screenings at airports, and resources for people reentering the community after incarceration.

The Roundtable has three standing subcommittees. The Law Enforcement Cultural Programs Subcommittee is developing training materials on Somali customs, practices and culture for members of law enforcement. The Youth Subcommittee focuses on health and safety issues for youth. The Young Adult/Re-entry Subcommittee is looking at eliminating some of the barriers impeding the successful transition of Somali youth and young adults who are returning to the community after incarceration.

“We want all sectors in our district to understand that while we are certainly concerned with investigating and prosecuting crimes, we are equally concerned with protecting constitutional rights,” Duffy said. “This is another example of how we are trying to expand the definition of traditional law enforcement by engaging in non-traditional activities such as outreach, which is linked to prevention.”

The partners will hold a Youth Athletic and Resource Fair on Saturday June 8, 2013, from 10 a.m. to 2 p.m. at Colina Del Sol Park and Recreation Center, 5319 Orange Avenue, in City Heights. The Youth Athletic Event will include a soccer clinic for girls and a basketball tournament for boys, and will also offer a variety of safety-themed resource booths and activities. The FBI and FBI Citizens Academy Alumni Association will host a booth to distribute Child ID Kits and online safety information for children.

“We are very excited to host an event which will bring families out to share in athletic competition, promote public safety education, and encourage the youth in our community to get involved in positive activities such as organized athletics,” Duffy said.

In recent years, Somali youth in the U.S. have been especially vulnerable to recruitment efforts by the Somalia-based terrorist group al-Shabab. The U.S. government has designated al-Shabaab a foreign terrorist organization for its links to al-Qaeda and its tactics that include suicide bombings, beheadings and assassinations.

More than 20 young men have left Minnesota – home to the nation’s largest concentration of Somali immigrants – for Somalia since 2007 in what has been described as one of the largest recruiting efforts of U.S. fighters by a foreign terrorist organization.

In San Diego, the four Somali immigrants whose arrests inspired the initial meeting between law enforcement and the community were convicted by a federal jury of conspiring to provide material support to al-Shabaab. They are scheduled to be sentenced June 27.

The Roundtable, meanwhile, continues to meet, expand, and pursue its mission.

For further information about the Roundtable, please contact the U.S. Attorney’s Office or Erin McKinnon at the FBI at (858) 499-7464.

Kelly Thornton
Public Affairs Coordinator
Office of the United States Attorney
Southern District of California
619.546.9726
Kelly.Thornton@usdoj.gov

SAN DIEGO – Physician William Joseph Watson was arrested and charged today with selling prescriptions for thousands of Oxycodone pills and other highly addictive painkillers without any legitimate medical purpose. Watson allegedly sold the prescriptions to addicts, who then used them recreationally, sold them on the street, or traded them for heroin.

According to a complaint filed in federal court today, Watson accepted thousands of dollars in cash or luxury goods, such as designer handbags, jewelry and fine wines, in exchange for the Oxycodone prescriptions.

“Prescription drug abuse and overdoses have reached alarming levels,” said U.S. Attorney Laura Duffy. “We are going after those who traffick pharmaceuticals with the same passion we have shown for dismantling the ruthless cartels that deal in cocaine, heroin and methamphetamine.”

“Knowing that prescription drug abuse is a national epidemic, DEA takes the illegal diversion of prescription drugs very seriously,” says DEA San Diego Special Agent in Charge William Sherman.

Oxycodone has become one of the preferred opioid drugs of choice by pharmaceutical drug addicts, the tablets can be crushed, snorted, injected or smoked for a quick, intense high. To prevent abuse, one manufacturer reformulated the 80 milligram pill in 2010, creating a version that could no longer be or smoked. Other versions of the pill, however—including the 30 milligram pill—can still be abused by addicts.

According to the complaint, Watson’s prescription-writing habits raised the suspicions of Drug Enforcement Administration agents, who monitor the type and quantity of medications prescribed through a state tracking system. The complaint alleges that Watson wrote a high volume of prescriptions for Oxycodone, Hydrocodone and Xanax, three of the most highly-abused medications on the market. Most of his patients were young and less likely to need large quantities of these medications. And, Watson routinely prescribed 80 milligram tablets of Oxycodone until they were reformulated. Then he switched to the 30 milligram version.

The complaint alleges that during medical appointments with confidential informants and an undercover DEA agent, Watson demonstrated that he would write a prescription for Oxycodone even though there was no legitimate medical purpose for doing so.

During one medical visit on June 25, 2012 that is described in the complaint, a confidential informant introduced an undercover DEA agent as his girlfriend, saying she was “hurting” and needed some treatment. Watson introduced himself to the so-called girlfriend and said he heard that she needed to come in for some treatment, winking at her while he said the word “treatment,” according to the complaint. During the appointment, Watson never asked to review the DEA agent’s medical records, nor did he inquire about any tests, x-rays or other diagnoses. To the contrary, Watson simply wrote her a prescription for 120 Oxycodone pills.

Under Title 21, United States Code, Section 841, and Title 21, United States Code of Federal Regulations, Section 1306.04(a), a medical doctor may not prescribe a controlled substance unless there is a legitimate medical purpose.

DEFENDANT   CRIMINAL CASE NO. 13mj2172 William Joseph Watson Age: 58 Del Mar, CA   SUMMARY OF CHARGES

Counts 1-21 Title 21, United States Code, Sections 841(a)(1) and (b)(1)(C) – Dispensing
Controlled Substances Without a Legitimate Medical Purpose. Maximum penalties: 20 years of custody, $1 million fine, life-term of supervised release.

  AGENCIES

U.S. Drug Enforcement Administration

Steve Edward Ruby, the serial bank robber known as the “Insistent Bandit,” pleaded guilty today before U.S. District Court Judge William Q. Hayes to six counts of bank robbery and one count of attempted bank robbery.

In one of the robberies, Ruby was seen riding a woman’s red mountain bike and wearing a long-sleeve T-shirt with the logo, “Bite Me.” He was known for approaching tellers with a loud and demanding tone, often lifting his shirt to reveal a gun tucked inside his waistband and insisting, “I am armed. I have a gun. Give me all your money.”

In his plea agreement, Ruby admitted he robbed the same bank - Pacific Western Bank located at 9955 Mission Gorge Road in Santee – two times in January, taking a total of $3,103. When he attempted to rob the same bank a third time on February 14, 2012, tellers recognized him and refused to let him in.

In the first robbery, Ruby admitted he told the teller: “This is a robbery. I am not kidding. I have a gun. I’ll shoot (use) it. Give me all your loose money.” When he returned the second time, the plea agreement said, he terrorized the same teller, saying in a loud voice: “We’re going to do this again! Give me all your loose bills starting with your third drawer and no bait!”

Ruby also admitted to robbing four additional banks in February, including the Home Bank of California located at 875 Garnet Avenue in San Diego, taking a total of $607; US Bank at 9643 Mission Gorge Road in San Diego, taking a total of $1,211; a different branch of the Pacific Western Bank located at 368 Broadway in El Cajon, taking a total of $1,432; and the Wells Fargo bank located at 6670 Montezuma Road, in San Diego, taking a total of $9,903. The grand total was $16,246.

Ruby is scheduled to appear for sentencing before Judge Hayes on September 3, 2013 at 9:00 a.m.

Ruby had an accomplice, Spiros Romensas, who acted as Ruby’s getaway driver during two of the February bank robberies. Romensas was convicted of two counts of aiding and abetting bank robbery on April 18, 2013, after a jury trial. Romensas is scheduled to appear for sentencing before Judge Hayes on July 15, 2013 at 9:00 a.m.

Ruby was caught after FBI agents issued an alert for a maroon truck seen leaving the banks after a number of the robberies. A sheriff’s deputy conducting other business at the A-American Storage facility on Greenfield Drive in El Cajon saw what he believed to be the maroon truck parked at the storage facility and contacted the managers of the business to determine the truck’s owner.

The managers identified Romensas as the owner of the truck and identified Romensas’ friend, Steve Ruby, as a frequent passenger in the truck.

The driver’s license photo of Ruby matched the bank surveillance photos of the robber. Surveillance footage taken on February 21, 2012 from A-American Storage depicts Ruby loading a red bicycle into the back of Romensas’ truck while wearing a white shirt with the words “Bite Me” on it in big red lettering. Ten minutes later, Ruby is captured on surveillance footage from the Pacific Western Bank riding a red bike up to the bank, wearing the “Bite Me” shirt.

DEFENDANTS   Case Number: 12CR01073-WQH Steve Ruby
Spiros Romensas Age: 54
Age: 53 El Cajon, CA
La Mesa, CA   SUMMARY OF CHARGES

Counts 1-7 – Title 18, United States Code, Section 2113(a) – Bank Robbery and Attempted Bank Robbery; Maximum Penalties - 20 years imprisonment and $250,000 fine

  INVESTIGATING AGENCIES

Federal Bureau of Investigation Violent Crimes Task Force

United States Attorney Laura E. Duffy announced that Roberto J. Velasquez, a San Diego area clinical psychologist, was sentenced today for perpetrating a multi-year fraud scheme to falsify medical certifications to the federal government. In today’s court hearing, Chief District Judge Barry Ted Moskowitz sentenced Velasquez to serve 21 months in federal prison, followed by two years of supervised release and ordered Velasquez to pay more than $1.5 million in restitution to the Social Security Administration.

According to court documents, Velasquez masterminded a scheme whereby he falsely certified that dozens of patients were disabled, when in fact they were not. To further the fraud, Velasquez made up patient histories, fabricated test results, suggested symptoms and complaints that did not exist, intentionally underestimated patient scores on standardized tests, and lied about the length of time he had been seeing the patients. In exchange for each false report, Velasquez charged his patients a $200 kickback.

In his plea agreement, Velasquez admitted that he falsified two different types of disability reports. First, Velasquez falsified Medical Certification for Disability Exception Forms (Forms N-648), which are used by the Department of Homeland Security during the naturalization process. Velasquez’s false certifications allowed certain immigrants to avoid taking the English language and Civics portions of the U.S. citizenship exam. Based on the fraudulent N-648 forms, the Department of Homeland Security granted disability exemptions to approximately 50 immigrants who were not actually disabled.

Velasquez also admitted that he submitted fraudulent medical reports to the Social Security Administration, falsely certifying that certain patients were eligible for disability benefits when he knew they were not. Beginning in 2006, and continuing up to the date of Velasquez’s arrest in April 2012, the Social Security Administration paid out at least $1.5 million in unwarranted disability benefits based on Velasquez’s false certifications. Velasquez also admitted that approximately 33% of his patient files contained fabrications, false statements, and false certifications of disability.

The fraud was uncovered through an undercover operation conducted jointly by the Department of Homeland Security, Immigration and Customs Enforcement/Homeland Security Investigations, and the Office of Inspector General, Social Security Administration. The investigation revealed Velasquez’s disregard for federal disability requirements. He coached his patients who were attempting to skirt the citizenship requirements, instructing them to use poor English during their interviews and not mention that they had a college education. Velasquez also lied about the length of time he had been treating his patients, in order to create a “track record” that would satisfy reviewers at the Social Security Administration, where he had previously worked as a consultant.

This prosecution is a part of the United States Attorney’s Health Care Fraud initiative. United States Attorney Duffy noted, “Combating health care fraud is a top priority of the Department of Justice. Rather than exercising his professional medical judgment to help his patients, this Defendant corrupted the integrity of the system in order to line his own pockets.”

“This investigation uncovered a multi-year fraudulent scheme that exploited the naturalization process for an illicit gain,” said Derek Benner, special agent in charge for HSI San Diego. “HSI is committed to working closely with our counterparts at USCIS to aggressively pursue those who seek their own enrichment by perpetuating immigration benefit fraud that undermines the integrity of America’s legal immigration system.”

Social Security Administration, Office of Inspector General Special Agent in Charge David F. Butler added, “The egregious nature of this crime, facilitated by a trained, qualified clinical practitioner who was entrusted to certify his patients’ disabilities to the federal government for purposes of determining their eligibility for Social Security benefits, cannot and will not be tolerated by the Social Security Administration’s Office of the Inspector General. When brought to our attention, we will aggressively investigate all individuals who are paid and trusted by the government to provide material information concerning an individual’s benefit eligibility.”

DEFENDANT   CRIMINAL CASE NO. 12cr1750-BTM Roberto J. Velasquez       SUMMARY OF CHARGES

Count One - Title 18, United States Code, Section 1546 – False Statements in Immigration
Documents
Count Two - Title 42, United States Code, Section 1383a(a)(2) - False Statements in Applications for SSI Disability Benefits

  INVESTIGATING AGENCIES

United States Immigration and Customs Enforcement’s Homeland Security Investigations
Office of Inspector General, Social Security Administration

United States Attorney Laura E. Duffy announced that Mexican Mafia member Salvador Nicola Colabella was sentenced today by United States District Judge Anthony J. Battaglia to serve 262 months in federal prison based on his August 9, 2012 plea to RICO conspiracy charges, in violation of Title 18, United States Code, Section 1962(d). Colabella has been in custody since his arrest on January 25, 2012.

According to court documents, Colabella’s role in the RICO conspiracy related to his participation in the Mexican Mafia, a violent, prison-based gang that controls the criminal conduct of thousands of Hispanic, street-gang members in Southern California. As revealed in his plea, Colabella controlled a significant portion of the criminal activity of Hispanic street-gang members in the San Diego area. Court records noted that while the Mexican Mafia has thousands of associates, membership is rare; in fact, law enforcement estimates that there are only about 150-200 Mexican Mafia members in the United States.

In his guilty plea, Colabella admitted to personally engaging in drug trafficking and extortion, as well as profiting from the criminal activity of those gang members who worked under his command. The extortion payments, or “taxes” in Mexican Mafia parlance, are collected by associates at the behest of members through violence and/or the threat of violence. In exchange for such “taxes,” Mexican Mafia members essentially grant gang members and other associates the right to conduct criminal activity within their respective areas of influence. In fact, Colabella admitted in his plea agreement that he had authority over several Mexican Mafia associates who collected taxes on his behalf. Drug dealers who paid Colabella taxes were responsible for distributing hundreds of pounds of methamphetamine and other drugs worth millions of dollars on the streets of San Diego. In all, Colabella collected tens of thousands of dollars in “taxes,” through the extortion of cash, cars, and other items of value. Colabella admitted in his plea agreement that his associates resorted to violence in the course of extorting others. For example, one of Colabella’s top associates stabbed a drug dealer over a dispute related to the drug dealer’s payment of taxes. According to court records, while Colabella did not directly order the assault, the associate was only able to carry out the stabbing because of the authority granted to him by Colabella.

This case was the result of “Operation Carnalismo,” a long-term investigation conducted by the Violent Crime Task Force - Gang Group (VCTF-GG), a group of federal, state, and local law enforcement agents led by the Federal Bureau of Investigation. In total, Operation Carnalismo resulted in charges against 36 individuals across five indictments. The indictments charged RICO conspiracy, violent crime in aid of racketeering, conspiracy to distribute drugs, and the distribution of drugs.

United States Attorney Duffy praised the work of the VCTF-GG in marshaling the evidence related to Colabella’s activities. Duffy added, “Today’s sentencing marks another significant step toward our office’s effort to combat the dangerous criminal activity of gangs and, in particular, the Mexican Mafia. Gang members should take note: their organized criminal activity will not be tolerated, and we will continue to use the full resources of our office and our law enforcement partners to investigate and prosecute organized gang crime.”

FBI Special Agent in Charge, Daphne Hearn stated, “Today's sentencing should send a message to all gang members that the FBI and our law enforcement partners will aggressively pursue you and hold you accountable for your criminal activities. San Diego is safer today because of the cooperative efforts between the public and law enforcement.”

Chula Vista Police Chief David Bejarano said, “The Chula Vista Police Department appreciates the collective efforts made by our detective and members of the Violent Crimes Task Force to remove this dangerous individual from our community. The success of this investigation underscores the strength and benefits of the partnership that exists among Federal, State and local law enforcement agencies throughout the San Diego region.”

National City Police Chief Manuel Rodriguez stated, “This operation spotlights the collaborative efforts of local, state, and federal agencies to combat violence in our community.”

DEFENDANT   Case Number: 12CR0290AJB Salvadore Nicola Colabella       SUMMARY OF CHARGES AGAINST COLABELLA

Title 18, United States Code, Section 1962(d) – Conspiracy to conduct enterprise affairs through a pattern of racketeering activity

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
Chula Vista Police Department
San Diego Police Department
National City Police Department
San Diego County Sheriff's Department
San Diego County District Attorney's Office
U.S. Bureau of Prisons
California Department of Corrections and Rehabilitation
San Diego County Probation
Immigration and Customs Enforcement's Homeland Security Investigations
Internal Revenue Service-Criminal Investigations

PROGRESS OF CASES CHARGED AS PART OF OPERATION CARNALISMO –
CONVICTIONS AND SENTENCES

12CR290-AJB
Salvadore Colabella – RICO conspiracy – 262 Months
Jose Luis Mercado – RICO conspiracy - Sentencing June 28, 2013
Robert Mercado – Violent Crime in Aid of Racketeering - 168 Months
Maria De Jesus Claudia Ochoa– RICO conspiracy - Sentencing July 26, 2013
Silvano Hernandez – RICO conspiracy - 210 Months
Jose Briseno-Contreras – RICO conspiracy - 46 Months

12CR291-AJB
Ramon Agredano – Conspiracy to distribute methamphetamine - 84 Months
Richard Cornejo – Conspiracy to distribute methamphetamine - 135 Months
David York – Conspiracy to distribute methamphetamine - 120 Months
Guillermo Chaidez – Conspiracy to distribute methamphetamine - 120 Months
David Garcia – Conspiracy to distribute methamphetamine - 120 Months
Adrian Dominguez – Conspiracy to distribute methamphetamine - 108 Months
Charles Smith – Conspiracy to distribute methamphetamine - 120 Months
Anna Sheneman – Conspiracy to distribute methamphetamine - 93 Months
Esteban Rodriguez – Conspiracy to distribute methamphetamine - 60 Months

12CR292-AJB
Juan Guerrero – Conspiracy to distribute methamphetamine - 135 Months
Jorge Moreno – Conspiracy to distribute methamphetamine - Sentencing June 28, 2013
Edward Moreno – Conspiracy to distribute methamphetamine - 120 Months
Allen Mundell – Conspiracy to distribute methamphetamine - 120 Months
Brett Youkel – Conspiracy to distribute methamphetamine - 120 Months
Lacy McElroy – Conspiracy to distribute methamphetamine - 100 Months

12CR293-AJB
Alfredo Bazurto – Conspiracy to distribute methamphetamine - Sentencing June 7, 2012
Charles Monroe – Conspiracy to distribute methamphetamine - 120 Months
Jose Pedro Covarrubias – Conspiracy to distribute methamphetamine - 120 Months
George Chavez – Conspiracy to distribute methamphetamine - 120 Months
Jose Esparza – Conspiracy to distribute methamphetamine - 130 Months
John Atkinson – Conspiracy to distribute methamphetamine - 120 Months
Annabel Vasquez – Conspiracy to distribute methamphetamine - 72 Months
Fantajamarie Cajmere Deleal – Conspiracy to distribute methamphetamine - 77 Months

United States Attorney Laura E. Duffy announced that Rudy Espudo pled guilty today before United States District Judge Irma E. Gonzalez to three counts of a superseding indictment including:  conspiracy to conduct enterprise affairs through a pattern of racketeering activity (commonly known as RICO conspiracy);  conspiracy to distribute methamphetamine; and
 knowingly and intentionally brandishing a firearm during and in relation to a crime of violence and a drug-trafficking crime.

According to the superseding indictment handed up on August 2, 2012, Espudo is a validated member of the Mexican Mafia who oversaw their activities throughout much of northern San Diego County.

In his guilty plea, Espudo admitted to engaging in drug trafficking and extortion, as well as profiting from the criminal activity of those gang members who worked under his so-called protection. Espudo pledged to “protect” these criminals as long as they paid their “taxes” to the Mexican Mafia. Such taxes are essentially extortion payments made by gang members and drug dealers to a Mexican Mafia member for the right to conduct their illegal activity free from interference from the Mexican Mafia. In one example of a drug dealer who refused to make tax payments, Espudo admitted that he ordered the robbery of that person, which was committed with the use of a shotgun. Espudo also admitted that he had authority over several Mexican Mafia associates who assisted by collecting taxes on his behalf. Drug dealers who paid him taxes in this manner were responsible for distributing methamphetamine, cocaine, heroin and other drugs on the streets of San Diego County.

This case is part of "Operation Notorious County," an investigation led by the North County Regional Gang Task Force, a group of federal, state, and local law enforcement agents led by the San Diego County Sheriff’s Department and the Federal Bureau of Investigation. Operation Notorious County resulted in eight indictments in January 2012, charging fifty-one individuals with participating in a federal racketeering influenced and corrupt organization (RICO) conspiracy. United States Attorney Duffy praised the North County Regional Gang Task Force for the coordinated team effort in this investigation.

Espudo has been in custody since his arrest in January 2012. Judge Gonzalez set a sentencing hearing for Espudo for October 7, 2013.

DEFENDANT   Case Number: 12CR0236IEG Rudy Espudo, aka Crazy       SUMMARY OF CHARGES

Title 18, United States Code, Section 1962(d) – Conspiracy to conduct enterprise affairs through a pattern of racketeering activity; Title 21, United States Code, Section 841 -Conspiracy to distribute methamphetamine; and Title 18, United States Code, Section 924(c) -Brandishing of a firearm in the commission of a crime of violence and a drug trafficking offense. Maximum penalties: Life in prison

  INVESTIGATING AGENCIES

San Diego County Sheriff's Department
Federal Bureau of Investigation
Chula Vista Police Department
National City Police Department
San Diego Police Department
San Diego County District Attorney's Office
U.S. Bureau of Prisons
California Department of Corrections and Rehabilitation
San Diego County Probation
Department, Immigration and Customs Enforcement's Homeland Security Investigations Internal Revenue Service-Criminal Investigations

Tax Preparer Neil Thomsen was sentenced by U.S. District Judge Roger T. Benitez today to 15 years in prison for a massive fraud that involved stealing hundreds of identities and filing false claims with the IRS for more than half a million dollars in bogus tax refunds.

Thomsen was convicted by a federal jury in December 2011 of 32 counts of mail fraud, Social Security fraud, passport card fraud and aggravated identity theft.

According to evidence presented at trial, Thomsen used 292 stolen identities in a two-year crime spree and defrauded the IRS out of more than $515,000 in tax refunds that he was not entitled to receive. The judge ordered Thomsen to pay that amount in restitution.

“Mr. Thomsen thought he could outsmart the IRS at every turn, but he got caught,” Assistant U.S. Attorney Joseph Orabona told the court during today’s hearing. “This is astronomical – 292 people were victimized.”

In arguing for a lengthy sentence, Orabona told the court that Thomsen had shown no remorse, and given the opportunity would likely continue to be an economic danger to the community.

Judge Benitez noted that identity theft is a very serious crime that “can take years - if not a lifetime - to undo” and results in “incredible pain and suffering” for victims. He said he was increasing the sentence in part because Thomsen offered “patently false” testimony in his own defense that amounted to obstruction of justice.

“Tax fraud results in an increasing burden on honest taxpayers and negatively impacts honest citizens’ confidence in our tax system,” said U.S. Attorney Laura Duffy. “Identity theft not only has a long-lasting financial impact on the victims, but also has an emotional impact affecting the stability of victims and their families. Today’s 15-year sentence for Mr. Thomsen sends a message to tax preparers and others who engage in refund schemes and identity theft that the government will prosecute you to the fullest extent of the law and that the punishment will be severe.”

“Neil A. Thomsen is a tax preparer, turned identity and tax thief, who attempted to steal over $515,000 in false tax refunds from the Internal Revenue Service (IRS) ,” said Jose A. Gonzalez, Special Agent in Charge for IRS Criminal Investigation (CI) Los Angeles Field Office. “As evidenced by victim testimony at trial, Thomsen’s identity theft and tax crimes significantly altered people’s financial lives. The investigation, prosecution and today’s sentencing of Neil Thomsen is a model of IRS CI’s strategy to combat criminals stealing identities to file false claims for tax refunds with the Internal Revenue Service (IRS).”

“As a tax preparer, Neil A. Thomsen violated his legal duty to protect the integrity of tax administration and his clients from the heinous crime of identity theft,” said Special Agent in Charge, Julie Parodi, Treasury Inspector General for Tax Administration. “Our agency will continue to work vigilantly to protect taxpayers from unscrupulous tax preparers who are engaged in identity theft.”

According to evidence presented by the government during trial, Thomsen is a tax preparer who turned into an identity thief by electronically filing false and fraudulent 2008 individual tax returns between January and March 2009 using the stolen identities of his former clients, clients of his former employers, and his former co-workers. He received more than $425,000 in false tax refunds from the IRS and earned thousands of dollars in false tax preparation fees to which he was not entitled.

In June 2009, Thomsen fled the United States and moved to Mexico to avoid capture. Instead of staying in Mexico, Thomsen hatched another plan to defraud taxpayers and the IRS in 2010. According to court records and trial evidence, Thomsen, Sean McNaughton, Louie Torres Arias, and Keith Smith conspired to commit fraud by assuming the identities of other persons and filing false tax returns in California, Texas, Nevada, and Arizona.

Court records indicate that Thomsen and his co-conspirators – all of whom have pleaded guilty - submitted false tax returns seeking tax refunds totaling more than $500,000. Thomsen believed he had a fool-proof plan to defraud the taxpayers and the IRS, until, he was arrested on June 17, 2010, ending his crime spree.

The evidence showed that in order to execute his scheme to defraud, Mr. Thomsen used his IRS electronic filing number to set up accounts with two banks in order to facilitate the receipt of tax preparation fees and tax refunds. The banks then mailed refund checks and debit cards to Mr. Thomsen, which facilitated his access to the proceeds of the false tax returns. The evidence showed that Mr. Thomsen deposited refund checks into his bank accounts and cashed debit cards at multiple ATM machines throughout Southern California.

The evidence further showed that Mr. Thomsen used several identities to lease office space, establish mail accounts, obtain telephone numbers, obtain a wireless card, purchase a car, and purchase computer equipment, including a laptop computer, external hard drive, and cell phone. The evidence also showed that Mr. Thomsen had several false identification documents in his possession in the names of other persons on June 17, 2010, which was the day he was arrested attempting to enter the United States from Mexico at the San Ysidro Port of Entry.

This case was investigated by Special Agents with the Treasury Inspector General for Tax Administration, and the Internal Revenue Service, Criminal Investigation.

DEFENDANT   Criminal Case No. 10CR2810-BEN Neil A. Thomsen       SUMMARY OF CHARGES

Counts 1 through 4: Title 18, United States Code, Section 1341 – Mail Fraud
Maximum Penalties: 20 years of imprisonment and $250,000 fine per count

Counts 7 through 16: Title 18, United States Code, Section 287 – False, Fictitious, and Fraudulent Claims
Maximum Penalties: 5 years of imprisonment and $250,000 fine per count

Counts 17 through 24: Title 42, United States Code, Section 408(a)(8) – Social Security Fraud
Maximum Penalties: 5 years of imprisonment and $250,000 fine per count

Counts 25 through 32: Title 18, United States Code, Section 1028A – Aggravated Identity Theft
Maximum Penalties: At least one term of imprisonment of 2 years consecutive to any other sentence

Count 33: Title 18, United States Code, Section 1546(a) – Passport Card Fraud
Maximum Penalties: 25 years of imprisonment and $250,000 fine

Count 34: Title 18, United States Code, Section 1028A – Aggravated Identity Theft
Maximum Penalties: At least one term of imprisonment of 2 years consecutive to any other sentence

  PARTICIPATING AGENCIES

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

United States Attorney Laura E. Duffy announced that Antonio Zermeno Garcia entered a guilty plea in federal court in San Diego today to count one of an indictment charging him and co-defendants Luis Miguel Salas Rodriguez and Carlos Alberto Andrade-De La Cruz with conspiracy to commit kidnapping, in violation of Title 18, United States Code, Section 1201(c). Co-defendants Luis Miguel Salas Rodriguez and Carlos Alberto Andrade-De La Cruz previously entered guilty pleas to the same charge on April 26, 2013.

In connection with the entry of their guilty pleas, the defendants admitted that, in March 2012, they devised a plan to kidnap three individuals who owed them money for narcotics trafficking. They further admitted they planned to kidnap the individuals in San Diego, California and transport them to Tijuana, Mexico. Defendant Andrade-De La Cruz further admitted that he was an organizer and leader of this kidnapping conspiracy and that he illegally crossed into the United States on March 14, 2012 in 2 order to locate the first victim with the assistance of Defendants Salas Rodriguez and Zermeno Garcia.

Defendants Luis Miguel Salas Rodriguez and Carlos Alberto Andrade-De La Cruz are scheduled to appear before United States District Judge William Q. Hayes for sentencing on July 29, 2013, at 9:00 a.m.

Defendant Antonio Zermeno Garcia’s plea is subject to final acceptance by Judge Hayes at or before sentencing on August 12, 2013, at 9:00 a.m.

DEFENDANTS   Criminal Case No. 12CR1244WQH Antonio Zermeno Garcia
Luis Miguel Salas Rodriguez
Carlos Alberto Andrade-De La Cruz       SUMMARY OF CHARGES

Conspiracy to Commit Kidnapping, in violation of Title 18 United States Code, Section 1201(c) Maximum penalties: Life in Prison, $250,000 fine, $100 Special Assessment, 5 years of Supervised Release

  INVESTIGATING AGENCY

Federal Bureau of Investigation – Cross Border Violence Task Force

United States Attorney Laura E. Duffy announced that Christian Hidalgo of Chula Vista was sentenced today to 57 months of custody by District Court Judge William Q. Hayes for a mortgage loan-modification scheme that cheated over 120 people out of over $670,000, and resulted in the loss of many homes to foreclosure. Hidalgo was also ordered to pay full restitution to all of his victims.

Between approximately March 2009 and October 2011, Hidalgo falsely told victims facing foreclosure that he could lower their mortgage payments. Hildalgo made these false claims through a variety of business entities based in San Diego and Chula Vista, California, including: "Expo Enterprises," "United Housing," "Community Housing Agency," "National Resource Services," "Retro Management," "My Community Outreach," and "Nuestra Communidad Services."

In order to carry out his fraud, Hidalgo sent hundreds of solicitation letters in which he falsely represented that these businesses were affiliated with the U.S. Department of Housing and Urban Development ("HUD"), and its Home Affordable Modification Program ("HAMP"). The letters would direct the recipients to contact one of Hidalgo's business entities by telephone, or obtain information from one of the websites he had created to advertise his services. Hidalgo targeted low-income persons in Southern California with Hispanic surnames by obtaining marketing leads with this specific criteria.

When the victims responded to the solicitation letters, Hidalgo or one of his employees would promise to provide relief under the HAMP program, despite having no connection with this government program. Hidalgo and his employees would then falsely represent that they would negotiate a modified mortgage payment on behalf of the victims with the victims' respective lenders. In exchange, the victims were instructed to send mortgage payments directly to one of Hidalgo's business entities instead of their lenders.

Although Hidalgo and his employees promised the victims that their payments would be held untouched in an impound account, and ultimately sent to the victims' lenders at the end of negotiations, none of the money was forwarded. Sadly, this often resulted in the foreclosure of the victims' homes as a result of the lenders' failure to receive mortgage payments. For his part, Hidalgo spent the victim funds in a variety of ways, including purchasing a BMW, diamond rings, a large-screen television, and firearms. All of these items, were seized by the United States and forfeited as part of Hidalgo's sentence. The items will be sold at auction, with proceeds going to the victims.

Hidalgo's scheme was discovered after Special Agents from the United States Postal Inspection Service of the Downtown San Diego Station received over 750 undeliverable solicitation letters in April 2011 sent by Hidalgo and associates. The solicitation letters appeared to offer loan modification services and a free consultation regarding HAMP, or another HUD home-loan restructure program. Because the letters bore non-existent or incorrect return addresses, Postal Inspection agents began investigating the legitimacy of the offered services. In conjunction with the HUD Office of the Inspector General, agents interviewed hundreds of victims, conducted various searches, and seized property purchased with proceeds obtained pursuant to Hidalgo's fraudulent scheme.

United States Attorney Duffy added, "We are grateful for he vigilant efforts of the U.S. Postal Inspection Service and HUD-OIG in discovering this dreadful practice of targeting vulnerable victims in the Latino community who merely sought assistance to maintain their homes. Although many have suffered economically in the last few years, those in dire straits should not be targeted in their time of need. We hope that the sentence imposed in this case, and the restitution ordered, can bring some relief to the victims and serve as a strong deterrent to others conducting fraudulent home-loan modification scams that the consequences of your illegal conduct will be severe."

DEFENDANT   Case Number: 12CR1658-WQH Christian Hidalgo       SUMMARY OF CHARGES

Count 2

Counts 7

 

Title 18, United States Code, Section 1341, 2 (mail fraud, aiding and abetting) Maximum penalty: 20 years of custody; $1,000,000
Fine

Title 18, United States Code, Section 1957 (money laundering)
Maximum penalty: 10 years of custody; $250,000 Fine

  AGENCIES

United States Postal Inspection Service ("USPIS")
United States Department of Housing and Urban Development, Office of the Inspector
General ("HUD-OIG")

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.

United States Attorney Laura E. Duffy announced today that two individuals and a corporation were sentenced by U. S. District Judge Larry Alan Burns in federal court in San Diego, in connection with their participation in a fraud and corruption scheme at Naval Air Station (NAS) North Island, in Coronado, California. The three defendants were Robert Ehnow, the owner and President of Poway defense contractor L&N Industrial Tool & Supply Inc. (“L&N”); Joanne Loehr, the owner and President of Poway defense contractor Centerline Industrial Inc. (“Centerline”); and Centerline itself, a California corporation.

According to court records, during the course of the conspiracy, the Department of Defense paid Ehnow’s company, L&N, over $3 million. Centerline obtained over $1.8 million in payments from the Defense Department during the conspiracy. A third defense contractor, X&D Supply, Inc. (“X&D”), located in Carlsbad, California, was paid over $2 million during the conspiracy.

For his role in the corruption scheme, Ehnow was sentenced to serve 36 months in federal prison and was ordered to pay $759,937 in restitution to the United States Department of the Navy. Loehr was sentenced to serve 36 months in federal prison and was ordered to pay $300,000 in restitution to the Navy. Centerline was sentenced to a term of five years of probation and was ordered to forfeit $1,809,257 as proceeds of the scheme. Ehnow and Loehr were also sentenced to serve, upon their release from prison, three years of supervised release.

The three defendants were charged in an indictment with one count of engaging in a conspiracy to commit wire fraud, bribery, and money laundering, and with additional counts of bribery. The case was tried before a San Diego jury beginning on February 20, 2013. On March 4, 2013, after two days of deliberations, the jury returned guilty verdicts for each defendant as to the conspiracy count, and as to one or more bribery counts. The jury also acquitted each defendant on one or more bribery counts.

The evidence presented at trial showed that as part of the conspiracy, defense contractors provided Navy officials with a wide range of personal benefits, including cash, checks, retail gift cards, flat screen television sets, luxury massage chairs, bicycles costing thousands of dollars, model airplanes, and other items. In return, the Navy officials placed millions of dollars in government orders with the defense contractors.

Additionally, the defense contractors prepared and submitted fraudulent invoices to the Department of Defense, making it appear that they were billing the Department for goods and services within the scope of legitimate government contracts. In fact, the Defense Department was unknowingly paying for, among other things, the cost of bribes provided to the Navy officials. Compounding the cost of the fraud, the defense contractors also routinely charged a markup on the fraudulent invoices.

The defendants also engaged in money laundering by using L&N’s government contract to fraudulently bill the Navy for items that were never supplied. Then, at the request of Navy co-conspirators, Ehnow wrote checks passing along the criminal proceeds to Centerline and Loehr, keeping a portion for itself as compensation for serving as a conduit for the criminal proceeds.

L&N, also known as Mardoc Corporation, filed for Chapter 7 bankruptcy in June 2011. Centerline remains in business.

Today’s sentences bring to eleven the total number of defendants sentenced in connection with this scheme. Of the eight individuals previously convicted, five were Navy officials: Donald Vangundy, Kiet Luc, David Lindsay, Brian Delaney - all four of whom worked in the Navy's "E2/C2" aircraft program, which is dedicated to maintaining the tactical readiness of the Navy’s E-2 and C-2 aircrafts – and Kenneth Ramos, who worked in North Island’s Industrial Business Operations Department. These five former Navy officials admitted to receiving a total of more than $1 million in cash, goods, and services for their personal use, all fraudulently charged to and paid for by the Department of Defense in connection with this fraud and bribery scheme.

The other four defendants previously convicted were owners or sales managers of San Diego-area defense contracting firms: John Newman was the sales manager of L&N, Paul Grubiss was the sales manager of Centerline, Michael Graven was the owner and operator of X&D, and Jesse Denome was the owner and operator of JD Machine Tech Inc.

According to United States Attorney Duffy, the investigation into possible corruption at Naval Air Station North Island was initiated on the basis of citizen complaints. These complaints followed the July 2009 indictment of six individuals on fraud and corruption charges centered at the Space and Naval Warfare Systems Command (SPAWAR). As part of the SPAWAR corruption case, the government publicized a hotline dedicated to the reporting of possible waste, fraud, and abuse related to government and military contracts. U.S. Attorney Duffy noted that the investigation is ongoing and anyone with information relating to waste, fraud, and abuse in government contracting is urged to contact the Procurement Fraud Working Group hotline at: sandiego.procurementfraud@usdoj.gov or call 1-877-NOBRIBE.

U.S. Attorney Duffy stated, “These defense contractors told lies, and gave bribes, to get millions of dollars in business from the United States Navy. The sentences handed down today send a message that this corruption will not be tolerated.”

Chris D. Hendrickson, Special Agent in Charge for the Defense Criminal Investigative Service, Western Field Office added, “DCIS and our law enforcement partners will continue to aggressively pursue corruption investigations involving the operations of the DoD. Abusing the public trust has serious consequences and severe punishment is appropriate for stealing resources from our soldiers, sailors, airmen, marines and the American taxpayer.”

Jose A. Gonzalez, Special Agent in Charge of IRS Criminal Investigation’s (CI) Los Angeles Field Office commented, “Robert Ehnow’s and Joanne Loehr’s bribery of trusted naval officials of more than $1 Million in cash and other gifts, had the potential to erode the public’s basic trust in our economic system. Instead, the initial citizen complaint which led to the investigation and Ehnow’s and Loehr’s subsequent conviction, confirm the public’s refusal to tolerate criminal corruption by our public officials. Today’s sentencing brings Robert Ehnow and Joanne Loehr to justice and confirms IRS CI’s assurance to investigate fraud, corruption and money laundering crime by public officials.”

David House, Special Agent in Charge, Pacific Rim Region Office of Investigations for the General Services Administration Office of Inspector General, said, “The General Services Administration is the gateway for Federal procurement and is committed to promoting fair and honest competition among contractors. The GSAIG is committed to preserving the integrity of the Federal procurement process; bribery and kickbacks corrupt that process and will not be tolerated.”

DEFENDANTS   Case Number: 12cr3320H Robert Ehnow
Joanne Loehr
Centerline Industrial Inc., a California corporation       SUMMARY OF CHARGES IN CASE NO. 12CR3320-LAB

Count 1: Conspiracy to commit bribery, in violation of Title 18, United States Code, Section 371 (all defendants) - Maximum penalties: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment. (All defendants found guilty on Count One.)

Counts 2 to 7: Bribery, in violation of Title 18, United States Code, Section 201 (defendant Ehnow) - Maximum penalties (per count): 15 years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment. (Defendant Ehnow found guilty on Count Seven, not guilty on Counts Two through Six)

Counts 8 to 12: Bribery, in violation of Title 18, United States Code, Section 201 (defendants Loehr and Centerline) - Maximum penalties (per count): 15 years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment. (Defendants Loehr and Centerline found guilty on Counts Ninth through Twelve, not guilty on Count Eight)

  Case Number: 12-CR-4071-LAB Sentenced on March 4, 2012 Kenneth Paul Ramos   Case Number: 12-CR-1055-LAB Sentenced on September 10, 2012 Donald Vangundy
Kiet Luc
Brian Delaney
David Lindsay
John Newman
Michael Graven
Paul Grubiss   Case Number: 10-CR-3737-LAB Sentenced on October 12, 2011 Jesse Denome   INVESTIGATING AGENCIES

Federal Bureau of Investigation
Defense Criminal Investigative Service
Internal Revenue Service - Criminal Investigation
General Services Administration - Office of Inspector General
Naval Criminal Investigative Service

United States Attorney Laura E. Duffy announced that a Camp Pendleton defense contractor was sentenced today for his role in a scheme involving the theft of costly medical equipment that the military had planned to ship overseas to treat injured Marines.

In today’s court hearing, U.S. District Judge Cathy Ann Bencivengo sentenced Michael Tuisee to serve 6 months in prison, followed by 6 months of house arrest with GPS monitoring, and 3 years of supervised release. Judge Bencivengo also ordered Tuisee to forfeit $8,250 in illegal proceeds and pay $179,698.50 in restitution to the U.S. Marine Corps.

According to court records, Tuisee and his two co-conspirators worked in warehouses run by 1st Medical Logistics Company (“1st MEDLOG”) aboard Camp Pendleton. 1st MEDLOG is the unit responsible for maintaining medical equipment and shipping necessary medical items to combat forces throughout the world. By virtue of his employment as a civilian defense contractor, Tuisee had unfettered access to sophisticated medical equipment stored at 1st MEDLOG warehouses. Prior to sentencing, Tuisee admitted that he conspired to steal expensive medical equipment from 1st MEDLOG, including ventilators, autoclaves, defibrillators, headlights, and laryngoscopes. Tuisee repeatedly stole these costly medical items, loaded them into his personal vehicle, and surreptitiously sold them to medical equipment resellers – often meeting with buyers during nighttime rendezvous in secluded parking lots.

During today’s sentencing, Judge Bencivengo told Tuisee he abused his position and breached the Government’s trust when he stole military medical equipment and sold it for personal profit. U.S. Attorney Duffy echoed those sentiments, noting that she will continue to “vigorously investigate and prosecute those who seek profit at the expense our men and women in uniform.” Duffy reminded the public that these charges were the result of ongoing efforts to root out corruption among our area defense contractors. She encouraged the public to contact the Naval Criminal Investigative Service (NCIS) at 1- 800-264-6485 or www.ncis.navy.mil if they have any information relevant to the ongoing investigation into theft of medical equipment at Camp Pendleton.

DEFENDANT   Case Number: 13cr0338-CAB Michael Tuisee       SUMMARY OF CHARGES

Count 1: Conspiracy to Engage in Theft of Government Property, Title 18, United States Code, Section 371 (all defendants)

  INVESTIGATING AGENCY

Naval Criminal Investigative Service

United States Attorney Laura E. Duffy announced today that Timothy James Hensley, a local middle school teacher at Bell Middle School, pled guilty today in federal court in San Diego to a five count indictment charging him with receipt and possession of child pornography. Hensley entered his guilty plea before United States Magistrate Judge Bernard G. Skomal, subject to final acceptance of the plea by United States District Court Judge Irma E. Gonzalez, at or before the time of sentencing.

As part of his guilty plea, Hensley admitted to receiving images of a minor female approximately 10 years of age engaged in sexually explicit conduct as well as to possessing an IMac computer and computer disks containing images depicting minors engaged in sexually explicit conduct, in violation of Title 18, United States Code, Section 2252(a)(2) and (4)(B). According to court records, several of these images depicted prepubescent minors engaged in sexually explicit conduct. The defendant was arrested by special agents with Homeland Security Investigations on January 15, 2013, following the execution of a federal search warrant at Hensley’s residence.

Hensley is scheduled to appear for sentencing before Judge Gonzalez on August 12, 2013, at 9:00 a.m.

This case stems from an investigation by the Department of Homeland Security, Immigration and Customs Enforcement's Homeland Security Investigations.

This case was brought as part of the Department of Justice’s Project Safe Childhood, and ICE's Operation Predator, both are nationwide initiatives launched to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys' Offices and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources." For more information about on Operation Predator, please visit www.ice.gov

DEFENDANT   Criminal Case No. 13cr0393-IEG Timothy James Hensley       SUMMARY OF CHARGES

Three Counts: Title 18, United States Code, Section 2252(a)(2) (Receipt of Child Pornography) Maximum Penalties: Mandatory minimum 5 years’ incarceration to 20 years per count, mandatory minimum of 5 years’ incarceration, $250,000 fine, a minimum of 5 years and up to a lifetime of supervised release and registration as a sex offender

Two Counts: Title 18, United States Code, Section 2252(a)(4)(B) - Possession of Child Pornography Maximum penalties: 20 years in prison; a $250,000 fine; and a minimum of 5 years and up to a lifetime of supervised release and registration as a sex offender.

  INVESTIGATING AGENCY

Immigration and Customs Enforcement’s Homeland Security Investigations

United States Attorney Laura E. Duffy announced that two San Diego men were sentenced today for their roles in a long-running tax fraud that exploited both homeless and drug-addicted “customers” to defraud the United States out of hundreds of thousands of dollars.

In today’s court hearing, United States District Judge Anthony J. Battaglia sentenced Isaiah Konkus to serve 10 months in prison and his codefendant Justin Petersen to serve 10 months in prison. Judge Battaglia also ordered both defendants to pay $268,832 in restitution to the Internal Revenue Service.

According to court records, between 2008 and 2011, Konkus and Petersen masterminded a scheme to defraud the IRS by exploiting its “Earned Income Credit” program, also known as the “EIC.” The EIC is designed to help working families by offsetting social security taxes and by providing an incentive for individuals to find and keep work. As part of their fraud, Konkus and Petersen sought out low-income “customers,” including the homeless, single mothers and addicts by soliciting them at trolley stations, homeless shelters and other places in downtown San Diego.

Purporting to act on behalf of their business—variously named “Street Angels” or “SoCal Tax Consultants”—Konkus and Peterson approached potential “customers” and asked whether they wanted “free money from the government.” They then instructed eligible candidates who gave a positive response to sign a blank tax return. Konkus and Petersen then filled in largely false information about income, occupation and dependents on these signed returns in an attempt to qualify their “customers” for the highest possible EIC payment. They then filed these false returns with the IRS, seeking as much as $8,000 in fraudulent payments at a time.

Court filings further show that despite the fact that their work consisted entirely of faking and filing a simple (and false) tax return, Konkus and Petersen charged exorbitant rates to their mostly unsophisticated customers by skimming up to $2,500 of their tax credit. Konkus and Petersen filed more than 1,000 tax returns, spending their ill-gotten gains on luxuries including illegal drugs, a Humvee, a sport fishing trip and a stay in the most expensive suite at a luxury hotel in the Gaslamp District of San Diego on New Year’s Eve.

Konkus and Petersen were charged on October 11, 2012, and pled guilty the same day. As part of their plea agreements, Konkus and Petersen both admitted to violating one count of conspiracy to defraud the United States with respect to false claims and one count each of filing a false tax return. Also as part of their plea agreements, Konkus and Petersen admitted to falsifying their own tax returns, evading more than $35,000 each in internal revenue taxes.

United States Attorney Duffy noted that, “Not only did these defendants cheat the IRS out of hundreds of thousands of dollars, they also exploited some of our community’s most vulnerable— including the homeless and the working poor—for their illegal gain. The IRS’s tireless efforts in this case show that tax fraud is neither a victimless crime nor a crime that our office will tolerate.”

“Isaiah Konkus and Justin Peterson conspired to defraud the US Government by preying on the vulnerable in our society and utilizing their identities to file false tax returns and claiming an Earned Income Tax Credit,” said Jose A. Gonzalez, Special Agent in Charge for IRS Criminal Investigation (CI) Los Angeles Field Office. “The Earned Income Tax Credit Program was created to help the low income working citizens and those who fraudulently abuse the program will be investigated and prosecuted.”

DEFENDANTS   Case Number: 12CR4070-AJB Isaiah Konkus
Justin Petersen       SUMMARY OF CHARGES AND MAXIMUM PENALTIES

Count 1 (both defendants): Conspiracy to Defraud the United States with Respect to Claims – Title 18, United States Code, Section 286. Maximum penalties: 10 years in prison, 3 years of supervised release, $250,000 fine and a $100 special assessment

Count 2 (Konkus only): False Tax Return – Title 26, United States Code, Section 7206(1). Maximum penalties: 3 years in prison, 1 year of supervised release, $250,000 fine and a $100 special assessment.

Count 3 (Petersen only): False Tax Return – Title 26, United States Code, Section 7206(1). Maximum penalties: 3 years in prison, 1 year of supervised release, $250,000 fine and a $100 special assessment.

  INVESTIGATING AGENCY

Internal Revenue Service – Criminal Investigation

Vincent Carlos, a self-employed business owner who purchases discount food and other products at wholesale prices and sells them for a profit to discount stores, such as Big Lots, was sentenced today in U.S. District Court in San Diego by United States District Judge Anthony J. Battaglia to serve two concurrent sentences of 12 months' and one day in prison and a three-year term of supervised release, announced United States Attorney Laura E. Duffy. The sentence was based upon his December 6, 2012 guilty plea to two felony counts of wire fraud. In addition, Judge Battaglia ordered Mr. Carlos to pay restitution to the victims in the total amount of $335,106.80.

According to court records, Mr. Carlos, the owner and operator of L.J. Trading, LLC, obtained financing for the purchase of wholesale products from one victim in Illinois and another victim in California. In exchange for their financing, Mr. Carlos paid them a return on their investment. As part of the fraud, Mr. Carlos fabricated a series of deals, emailed and faxed the bogus contracts to the two victims, and promised a return on their investments. Mr. Carlos received more than $335,000 from the two victims in order to finance the fabricated deals. In reality, Mr. Carlos simply used the money to repay both victims for prior deals for which he owed them investment returns. Mr. Carlos used one victim's money to repay the other victim, and vice versa. Eventually, the scheme collapsed when Mr. Carlos was unable to pay the victims the returns he owed them. Before Mr. Carlos could defraud these victims out of more money, the U.S. Secret Service uncovered the fraud and swiftly put an end to it.

Judge Battaglia ordered Mr. Carlos to self-surrender to his designated penal institution not later than June 28, 2013, in order to begin serving his sentence of 12 months and one day.

DEFENDANT   Criminal Case No. 12CR3559-AJB Vincent Carlos       SUMMARY OF CHARGES

Title 18, United States Code, Section 1343 - Wire Fraud

  AGENCY

United States Secret Service

United States Attorney Laura E. Duffy announced today that Timothy E. Shannahan pled guilty to conspiring to commit mortgage fraud by acting as a "straw buyer" in a $5 million mortgage fraud scheme.

In pleading guilty before Magistrate Judge Nita L. Stormes, Shannahan became the fourth person to admit conspiring with Kathryn Sylvester, the former CEO of Sylvester Financial, Inc. According to court records, Sylvester was responsible for recruiting straw buyers – who she directed to submit false mortgage loan applications in order to purchase properties throughout Southern California between 2005 and 2008.

In entering his plea, Shannahan admitted conspiring with Sylvester between January 2007 and May 9, 2008, to fraudulently induce lenders to fund mortgage loans. Among other things, Shannahan falsely claimed on a mortgage loan application that he earned $50,000 per month as the Vice President and Director of Marketing for Real Realty Solutions, in order to obtain mortgages for a residence located on Nautilus Street in La Jolla. In total, Shannahan admitted that the loans obtained in his name resulted in losses of $400,000 to $1 million. For her part, Sylvester - according to her indictment - is alleged to have played a role in approximately 80 fraudulent loans on 28 foreclosed properties resulting in losses in excess of $5 million. Her case is pending.

Other straw buyers who have entered guilty pleas to date include Claudia Montes, Roderick Michener and Tad Lent. Montes, a former notary public, pled guilty on April 12, 2013, to a two-count information charging her with conspiring with Sylvester to submit false loan applications and transferring proceeds from the fraudulent loans to Sylvester.

Michener pled guilty on April 4, 2013, to conspiring with Sylvester to commit bank fraud. In doing so, Michener allowed his co-conspirators to claim an ownership interest in his bank account in order to falsely inflate their assets on fraudulent mortgage loan applications. Michener also admitted transferring fraud proceeds to Sylvester. He is scheduled to be sentenced before District Court Judge Cathy A. Bencivengo on June 28, 2013.

Lent pled guilty on January 28, 2013 to conspiring with Sylvester to submit falsified loan applications to mortgage lenders by misrepresenting the amount of his assets. He is scheduled to be sentenced on September 16, 2013 before District Court Judge M. James Lorenz.

United States Attorney Duffy added, "The tireless efforts of our partners in the FBI has continued to result in successful prosecutions of persons who have tried to game the system by manipulating the mortgage loan industry. We will continue our joint efforts to deter further mortgage fraud crimes by pursuing such prosecutions with all available resources."

Shannahan is scheduled to appear before District Judge Lorenz on July 29, 2013 for sentencing.

DEFENDANT   Case Number: 13CR1650-L Timothy E. Shannahan       SUMMARY OF CHARGE

Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

  DEFENDANT   Case Number: 13CR1355-JLS Kathryn Sylvester Age: 43     SUMMARY OF CHARGES

Count 1 Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud and bank fraud)
Maximum penalty: 20-30 years of custody; $150,000-$250,000 Fine

Counts 2-11 Title 18, United States Code, Section 1343 (wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

Counts 12-13 Title 18, United States Code, Section 1344 (bank fraud)
Maximum penalty: 30 years of custody; $150,000 Fine

  DEFENDANT   Case Number: 13CR1313-JLS Claudia Montes Age: 41     SUMMARY OF CHARGES

Count 1 Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

Count 2 Title 18, United States Code, Section 1343 (wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

  DEFENDANT   Case Number: 13CR1130-CAB Roderick Michener Age: 51     SUMMARY OF CHARGES

Count 1 Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

Count 2 Title 18, United States Code, Section 1343 (wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

  DEFENDANT   Case Number: 12CR3744-L Tad A. Lent Age: 46     SUMMARY OF CHARGE

Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud)
Maximum penalty: 20 years of custody; $250,000 Fine

  AGENCY

Federal Bureau of Investigation

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.

A retired United States Customs and Border Protection supervisor was sentenced today by U.S. District Judge Marilyn L. Huff to 10 years in prison, followed by five years of supervised release, for downloading child pornography.

Former Supervisory Special Agent Lawson Hardrick, Jr., who was the assistant director for the Calexico ports of entry, was found guilty by a federal jury in January of two counts of receipt of images of minors engaged in sexually explicit conduct, each a felony. The verdicts followed a two-day trial before Judge Huff.

According to the evidence presented at trial, agents with Immigration and Customs Enforcement’s Homeland Security Investigations conducted an investigation of persons using peer to peer file-sharing programs to make child pornography available to others. According to the forensic evidence introduced at trial, the defendant received videos of children as young as four and nine years old through a file-sharing program in 2008 through 2010. The indictment was handed up by a federal grand jury sitting in San Diego in July 2012.

Upon release, Hardrick will be required to register as a sex offender.

DEFENDANT   Case Number: 12cr3061-H Lawson Hardrick       SUMMARY OF CHARGES

Counts: 2

Receipt of Images of Minors Engaged in Sexually Explicit Conduct- Title 18, United States Code, 2252(a) (2)
Maximum Penalties: 20 years incarceration with a five year mandatory minimum sentence, $250,000 fine, a minimum of 5 years and up to a lifetime of supervised release and registration as a sex offender.

  INVESTIGATING AGENCY

Immigration and Customs Enforcement’s Homeland Security Investigations

San Diego, CA - United States Attorney Laura E. Duffy announced that David Hedley, a former Executive Director of the Indian Human Resource Center (“IHRC”), was arraigned yesterday on an indictment charging him with eight felony counts of theft from the San Diegobased non-profit that received federal funds. The defendant was arrested by Federal Bureau of Investigation (“FBI”) agents on April 25, 2013, in Riverside, California.

According to the indictment, Hedley served as the Executive Director of IHRC between approximately September 10 and December 11, 2012. During that time, Hedley is believed to have stolen approximately $140,000 from the non-profit.

According to information disclosed at Hedley’s arraignment, on numerous days when Hedley was improperly withdrawing money from IHRC’s bank account, he was spending comparable sums gambling at a local Indian casino. For example, on October 9, 2012, Hedley withdrew $15,000 in cash from the IHRC bank account at the North Island Credit Union (“NICU”) located in La Mesa, California. On that same day, Hedley purchased $15,000 worth of chips, tokens or gaming instruments at the Viejas Casino. Similarly, on the October 12, 2012, Hedley improperly withdrew $20,000 in cash from IHRC’s bank account at the NICU branch in Imperial Beach, California and purchased over $20,000 in chips, tokens or gaming instruments the same day from Pala Casino.

The IHRC was established to train and assist Native Americans with finding employment outside the tribal setting and was awarded over a half million dollars in federal funding from the U.S. Department of Labor over the past two years as part of the Workforce Investment Act (“WIA”). The Workforce Investment Act of 1998 (“WIA”) established a national workforce preparation and employment system to meet the needs of persons seeking employment, including new entrants to the workforce, in order to increase the employment, job retention, earnings and occupational skills of participants, improve the quality of the workforce, reduce welfare dependency, and improve the productivity and competitiveness of the United States.

United States Attorney Laura E. Duffy commented that, “The taxpayer resources provided to IHRC were intended to help create jobs by assisting the Native American community. I commend the FBI for its investigative work leading to these charges.”

FBI Special Agent in Charge Daphne Hearn commented, “At the most basic level this case is about one individual’s greed and the abuse of trust. The FBI will hold those accountable who line their own pockets at the expense of the American taxpayer.”

Hedley was arraigned on the indictment in the Central District of California before Magistrate Judge David Bristow; Hedley pleaded not guilty. Magistrate Judge Bristow set bail at $100,000 and ordered the defendant to appear in the Southern District of California on May 9, 2013.

The public is reminded that an indictment is not evidence that the defendant committed the crime charged. The defendant is presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.

DEFENDANT   Criminal Case No. 13CR1129-WQH David M. Hedley       SUMMARY OF CHARGES

Counts 1-8: Title 18, United States Code, Section 666(a)(1)(A) – Theft from Program Receiving Federal Funds

Forfeiture: Title 18, United States Code, Sections 981(a)(1)(C) and Title 28, United States Code, Section 2461(c)

  INVESTIGATING AGENCIES

Federal Bureau of Investigation
California Department of Justice, Bureau of Gambling Control

United States Attorney Laura E. Duffy and Federal Housing Finance Agency Inspector General Steve A. Linick announced today that Mary Armstrong, an unlicensed mortgage broker who operated a nationwide loan origination fraud and kickback scheme from San Diego, pled guilty today before United States District Judge John A. Houston to all five counts of an indictment charging her with wire fraud, money laundering, and conspiracy. Armstrong was indicted on May 10, 2012, and apprehended in Las Vegas, Nevada, in July 2012; she has been held in custody since her arrest.

As part of today's guilty plea, Armstrong admitted that she defrauded mortgage lenders by arranging for the sale of $100 million worth of real estate at inflated prices, and then siphoned the overpayments to bank accounts she controlled. She created false loan applications on behalf of straw buyers, then arranged for her co-conspirators to create fake documents in support of those applications, including W-2 forms, pay stubs, bank statements, and other records. According to Armstrong's accountant and tax preparer, Audrey Yeboah, who pled guilty in October 2012 to participating in the same scheme, Armstrong collected over $14.5 million in kickbacks from the fraudulently-obtained mortgage loans.

Armstrong joins defendants Teresa Rose, a Ramona real estate agent; Seattle businessman Justin Mensen; and Yeboah; each of whom has pled guilty to participating in the scheme. These defendants admitted that they carried out their scheme by recruiting "investors" through the Internet and advertisements in the LA Times, and offering them the opportunity to purchase homes located in Southern California, Washington state, and elsewhere. In reality, these so-called "investors" were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. The defendants were able to secure mortgages for the properties by falsifying loan applications for the straw buyers, falsely claiming exorbitant income from fake employers and using fake W-2s and pay stubs to support the claims. The defendants submitted these fraudulent loan applications to mortgage lenders to obtain 100% financing - and thus avoided having to make any down payment on the properties.

According to the defendants' plea agreements, they profited on these fraudulently-acquired mortgage loans by inflating the purchase price of the properties by $100,000 (or more), and having the straw borrowers kick-back to them the illicit proceeds. Although the conspirators claimed to lenders that the extra money would be used for construction improvements, in fact, the conspirators funneled the money to sham "construction" companies that they controlled, thereby concealing their kick-backs.

Armstrong admitted that after the conspirators collected the overpayments, the straw buyers defaulted on the mortgage loans, resulting in mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, suffering losses of up to $20 million.

Two additional defendants charged as part of the scheme, John Allen and William Fountain, are scheduled to begin trial on November 5, 2013. The public is reminded that an indictment is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.

United States Attorney Duffy commented, “Armstrong's fraudulent conspiracy endangered not only the particular lenders ensnared in her scheme, but every American who subsequently suffered from the destabilization of the housing and financial sectors. And the country's taxpayers were ultimately left 'holding the bag' when forced to bail out Fannie Mae and Freddie Mac. Today's guilty plea is another important step in this Office's aggressive prosecution of such financial frauds, and the vindication of all Americans who have suffered in the recent financial crisis.”

FBI Special Agent in Charge Daphne Hearn commented, “Mortgage fraud losses cost taxpayers billions of dollars every year and is a threat to our national economy. The FBI will continue to dedicate substantial amount of expert resources to investigate these crimes.”

United States Attorney Duffy reminded the community that anyone with information relating to these charges should contact the San Diego branch of the Federal Bureau of Investigation at (858) 565-1255, or the Federal Housing Finance Agency - Office of Inspector General hotline at (800) 793-7724.

A sentencing hearing is scheduled for Armstrong before Judge Houston on August 12, 2013, at 8:30 a.m.

DEFENDANTS   Criminal Case No. 12CR1848-JAH Mary Armstrong
Teresa Rose
William Fountain
John Allen       SUMMARY OF CHARGES

Count 1: Title 18, U.S.C., Section 371 -- Conspiracy to Commit Wire Fraud and to Launder
Money; Maximum Penalty: 5 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment. (All Defendants)

Count 2: Title 18, U.S.C., Section 1343 -- Wire Fraud; Maximum Penalty: 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment. (Mary Armstrong)

Counts 3-5: Title 18, U.S.C., Section 1956 (a)(1)(B)(I) -- Money Laundering; Maximum
Penalty: 15 years' custody, a maximum fine of $500,000 or twice the value of the property involved in the transaction, and $100 special assessment. (Mary Armstrong)

  DEFENDANT   Criminal Case No. 12CR1458-JAH Justin Mensen       SUMMARY OF CHARGES Title 18, U.S.C., Section 371 -- Conspiracy to Commit Wire Fraud and to Launder Money;
Maximum Penalty: 5 years custody, a maximum fine of $250,000 or twice the
gain derived from or loss caused by the offense, and $100 special assessment.   DEFENDANT   Criminal Case No. 12CR4322 -JAH Audrey Yeboah       SUMMARY OF CHARGES Title 18, U.S.C., Section 1343 -- Wire Fraud; Maximum Penalty: 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.   INVESTIGATING AGENCIES

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

United States Attorney Laura E. Duffy announced today that former Chula Vista Wells Fargo banker Ricardo Adolfo Benavente, III was charged with defrauding Wells Fargo and several of its customers by stealing and laundering approximately $750,000 from Wells Fargo customer accounts. According to an indictment unsealed in federal court today, Benavente used his access privileges at Wells Fargo to move hundreds of thousands of dollars from the accounts of Wells Fargo customers into accounts controlled by Benavente himself. The indictment further alleges that in many instances Benavente laundered the stolen funds in order to disguise the fact that he had stolen them.

According to the indictment, from April-October 2009, Benavente, a banker at a Wells Fargo branch office in Chula Vista, stole the funds from accounts belonging to four Wells Fargo customers. He then funneled the stolen funds through various Wells Fargo accounts that he created and controlled, and which he had opened in the name of fictitious customers expressly for the purpose of conducting his scheme to defraud. In one case, Benavente also funneled stolen funds through a PayPal account that he set up in the name of one of his victims, in order to disguise the fact that the money had been stolen. Benavente then used this PayPal account to direct the funds to his own bank and for his own benefit. The indictment alleges that in furtherance of his fraud scheme, Benavente stole and used the names and account numbers of his various victims in order to create the appearance that the transactions were being conducted by the customers themselves. He also created a trail of fraudulent bank instruments, such as withdrawal slips and cashier’s checks, which he used to steal money from his victims’ accounts and direct those funds to accounts that he controlled.

The indictment charges Benavente with counts of bank fraud, embezzlement, aggravated identity theft, and money laundering in connection with the scheme. In addition, he is charged with one count of filing a false tax return for his failure to disclose to the Internal Revenue Service that he had acquired hundreds of thousands of dollars of income from his scheme to defraud Wells Fargo and its customers.

United States Attorney Duffy thanked the agents from the United States Secret Service and Internal Revenue Service-Criminal Investigations for their work in uncovering the alleged crimes.

Benavente was arraigned on the indictment today and pleaded not guilty. A motion hearing is scheduled in the case for June 3, 2013 at 2:00 p.m., before United States District Court Judge Larry Alan Burns.

DEFENDANT   Case Number: 13CR1513-LAB Ricardo Adolfo Benavente, III Age: 27 Chula Vista, CA   SUMMARY OF CHARGES

Counts 1-28: Bank fraud in violation of Title 18, United States Code, Section 1344
Maximum penalties: 30 years’ imprisonment, $1,000,000 fine

Counts 29-56: Embezzlement in violation of Title 18, United States Code, Section 656
Maximum penalties: 30 years’ imprisonment, $1,000,000 fine

Counts 57-63: Aggravated Identity Theft, in violation of Title 18, United States Code, Section 1028A
Maximum penalties: Mandatory 2-year consecutive sentence

Counts 64-79: Money Laundering, in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i)
Maximum penalties: 20 years’ imprisonment, $500,000 fine

Count 80: Filing a False Tax Return, in violation of Title 26, United States Code, Section 7206(1)
Maximum penalties: 3 years’ imprisonment, $250,000 fine, costs of prosecution

  INVESTIGATING AGENCIES

United States Secret Service
Internal Revenue Service – Criminal Investigations

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