Central District of California
Press releases recorded for this federal judicial district.
One of ICE’s Most Wanted Aliens Indicted for Illegally Re-Entering the United States Following DeportationRead the Press Release
LOS ANGELES – A Belizean national on the list of U.S. Immigration and Custom Enforcement’s most wanted deportable aliens has been charged with illegal re-entry into the United States following his deportation, a felony.
Santos Moreira, 46, an immigrant from Belize who currently is in the United States illegally, was found in Los Angeles County on November 2, 2015, according to an indictment returned against him on January 25 by a federal grand jury. Moreira previously was deported from the United States on three separate occasions – in December 1995, September 1999 and October 2010, the indictment states. Moreira is charged with re-entering and remaining in the United States knowingly and voluntarily without having obtained permission from the United States Attorney General or the Secretary of Homeland Security to reapply for admission into the United States following deportation.
Moreira’s criminal history includes a conviction in Los Angeles County Superior Court for possession for sale of cocaine base in 1991, for which he was sentenced to three years in prison, according to the indictment. In 1992, Moreira was convicted in Los Angeles Superior Court of second-degree robbery with an enhancement for personally using a firearm. He was sentenced to five years in state prison for that offense, the indictment states. Moreira is incarcerated at a Texas state prison for a 2018 drug-related conviction. He is expected to be brought to United States District Court in the Central District of California to face the federal illegal re-entry charge in the coming months.
If convicted, Moreira faces a statutory maximum sentence of 20 years in federal prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case was investigated by U.S. Immigration and Customs Enforcement.
This matter is being prosecuted by Special Assistant United States Attorney Kyle J. Ryan of the General Crimes section.
Los Angeles Woman Sentenced to 15 Years in Prison for Federal Sex Trafficking OffenseRead the Press Release
LOS ANGELES – A South Los Angeles woman who described herself on social media as “The Most Hated Hoe in L.A.” and who admitted using the Internet to solicit minors to engage in commercial sex acts has been sentenced to 15 years in federal prison.
Melanie Denae Williams, 23, was sentenced Thursday by United States District Judge George H. Wu, who also ordered her to pay restitution to her victims.
In November 2018, Williams, who used the moniker “Pretty Hoe” on social media platforms, pleaded guilty to one count of sex trafficking by force, fraud or coercion – an offense that carries a mandatory minimum sentence of 15 years’ imprisonment.
According to her plea agreement, Williams admitted to abusing a woman she recruited via social media to work as a prostitute. Williams ordered the victim to strip off her clothes, then Williams threw bleach on her and used a broomstick to beat her, according to court documents. Williams continually threatened to kill the victim if she left Williams, court papers state. Williams also forced the victim to get Williams’s name tattooed on her face, and confiscated the victim’s belongings and identity documents, according to an affidavit filed in the case.
Williams also admitted to using the Internet to recruit two minors to engage in commercial sex acts and then retaining the proceeds from the minors’ sex acts for her own use and benefit.
Williams also posted social media videos of her physically abusing and using firearms to threaten young women, according to the affidavit.
The investigation was conducted by the Los Angeles Regional Human Trafficking Task Force, which included agents with the Federal Bureau of Investigation and deputies with the Los Angeles County Sheriff’s Department. The Los Angeles Police Department and the Los Angeles District Attorney’s Office provided substantial assistance in the investigation and prosecution.
This case is being prosecuted by Assistant United States Attorneys Lana Morton-Owens and Joseph Axelrad of the Violent and Organized Crime Section.
Federal Prosecutors Unseal Indictments Naming 19 People Linked to Chinese ‘Birth Tourism’ Schemes that Helped Thousands of Aliens Give Birth in U.S. to Secure Birthright Citizenship for Their ChildrenRead the Press Release
SANTA ANA, California – Following the arrests this morning of three defendants who allegedly operated “birth tourism” outfits that catered to Chinese clients, federal authorities today unsealed indictments that charge a total of 19 people linked to three schemes that operated across Southern California and charged clients tens of thousands of dollars to help them give birth in the United States.
The indictments charge operators and clients of three “maternity house” or “birthing house” schemes that were dismantled in March 2015 when federal agents executed 35 search warrants, which resulted from international undercover operations.
The 17 cases unsealed today contain the first-ever federal criminal charges brought against operators and customers of birth tourism businesses. The birth tourism operations not only committed widespread immigration fraud and engaged in international money laundering, they also defrauded property owners when leasing the apartments and houses used in their birth tourism schemes, according to the indictments.
The indictments describe birth tourism schemes in which foreign nationals, mostly from China, applied for visitor visas to come to the United States and lied about the length of their trips, where they would stay, and the purposes of their trips – which were to come to the U.S. for three months to give birth so their children would receive U.S. birthright citizenship.
According to the indictments that charge the operators of the schemes, they coached their Chinese customers how to pass the U.S. Consulate interview in China by falsely stating that they were going to stay in the U.S. for only two weeks. Their clients were also coached to trick U.S. Customs at ports of entry by wearing loose clothing that would conceal their pregnancies. The indictments also allege that the customers were directed to fly to Hawaii from China – instead of directly to Los Angeles – because it was easier to get through U.S. Customs in Hawaii. The indictments allege that many of the Chinese birth tourism customers failed to pay all of the medical costs associated with their hospital births, and the debts were referred to collection.
“These cases allege a wide array of criminal schemes that sought to defeat our immigration laws – laws that welcome foreign visitors so long as they are truthful about their intentions when entering the country,” said United States Attorney Nick Hanna. “Statements by the operators of these birthing houses show contempt for the United States, while they were luring clients with the power and prestige of U.S. citizenship for their children. Some of the wealthy clients of these businesses also showed blatant contempt for the U.S. by ignoring court orders directing them to stay in the country to assist with the investigation and by skipping out on their unpaid hospital bills.”
“America’s way of life is not for sale,” said Joseph Macias, Special Agent in Charge of Homeland Security Investigations Los Angeles. “HSI will aggressively target those who would make a mockery of our laws and our values to benefit and enrich themselves. No one needs to be reminded about the national security and public safety implications of visa fraud and the crimes associated with it. Anyone who would exploit our nation’s generosity and our legal immigration system should be on notice – they may end up being the ones to pay a very steep price.”
“Receiving a tourist visa from the United States Government is a privilege, not a right,” stated IRS Criminal Investigation Acting Special Agent in Charge Bryant Jackson. “The indictments announced today confirm IRS Criminal Investigation’s commitment to following the money – from China to the United States – to help identify the promoters of this alleged illegal international birth tourism scheme. Using cash, fabricated financial documents, and nominee names for the transfer of money from China to the U.S., the promoters attempted to further their lucrative birth tourism enterprise.”
Three indictments returned Wednesday by a federal grand jury charge the operators of large birth tourism operations based in Orange, Los Angeles and San Bernardino counties. Pursuant to this week’s indictments, federal authorities this morning arrested three defendants: Dongyuan Li (李冬媛), 41, of Irvine; Michael Wei Yueh Liu (刘维岳), 53, of Rancho Cucamonga; and Jing Dong (董晶), 42, of Fontana. All three are charged with conspiracy to commit immigration fraud, international money laundering and identity theft. Liu is also charged with filing three false tax returns.
According to the indictments charging the operators, all three businesses touted the benefits of giving birth in the U.S., rather than in China, with claims of the U.S. having “the most attractive nationality”; “better air” and less pollution; “priority for jobs in U.S. government”; superior educational resources, including “free education from junior high school to public high school”; a more stable political situation; and the potential to “receive your senior supplement benefits when you are living overseas.”
The indictment naming Li alleges that she operated an Orange County-based business named You Win USA that advertised its “100-person team” in China and the U.S. had served more than 500 Chinese birth tourism customers. Li allegedly used 20 apartments in Irvine, charged each customer $40,000 to $80,000, and received $3 million in international wire transfers from China in just two years. The indictment details communications in which Li referred to U.S. immigration authorities as “the foreigners” and also discussed whether to refund a downpayment because, once the customer found out “the baby is a girl, her husband arranged abortion for her.”
(The investigation into Li’s operation led to another investigation, which resulted in criminal charges against the 20th person to be charged in this matter. Attorney Ken Zhiyi Liang was sentenced to 21 months in federal prison for helping material witnesses flee to China in violation of court orders.)
Another indictment filed this week charges Wen Rui Deng (邓文瑞), 65, a former Irvine resident who is believed to now be in China, with operating Star Baby Care, a Los Angeles County-based operation that is believed to have been the largest birth tourism scheme in the U.S. On its websites, Star Baby Care boasted that it was founded in 1999 as the “number one designated maternity service to the pregnant mother from China, Hong Kong, and Taiwan,” and had “provided services to 8,000 pregnant women (4,000 from China) since we established.” The indictment alleges that Deng’s scheme used 30 apartments in Rowland Heights and 10 properties in Irvine, including some houses. Deng’s scheme served many customers alleged to be Chinese officials, including some associated with Chinese Central Television, China Telecom, Bank of China, and two local taxation bureaus.
In the third indictment filed this week, Liu and Dong are accused of operating USA Happy Baby Inc., a San Bernardino County-based company that charged “VIP” customers as much as $100,000. Using apartments in Rancho Cucamonga and Irvine, USA Happy Baby allegedly also served Chinese officials, including people associated with the Henan People’s Radio Station in Zhengzhou, the Public Security Bureau in the Beijing Municipal Government, and the Harbin Medical University in Heilongjiang Province. Liu and USA Happy Baby are also charged with filing false tax returns that failed to report more than $1.9 million received over three years. The indictment also alleges that Liu and Dong used 14 different bank accounts to receive more than $3.4 million in international wire transfers from China during 2013 and 2014 alone.
There are 16 fugitive defendants whose indictments were unsealed today. They are:
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Qiang Yan (闫强), 42, who is Dongyuan Li’s husband, was indicted in December 2018 on three counts of visa fraud for filing an application for an “O” visa premised upon being an “alien of extraordinary ability,” which falsely claimed that he had co-authored two books and attached fake copies of those books. The indictment naming his wife notes that when Yan was interviewed during a search of Li’s multi-million-dollar residence in Irvine, he told the federal agents that his birth tourism business investment was “chump change,” because he had more than $10 million in his bank accounts in China.
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Xiao Yan Liu (刘小燕), 39, who was indicted in November 2018 for two counts of visa fraud and one count of lying to federal law enforcement. According to her visa application, she was the “Chief Physician” at the Henan Shangqiu Power Supply Company Staff Hospital.
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Jun Xiao (肖俊), 30, and LongJing Yi (易珑静), 30, who were indicted in February 2018 on charges of conspiracy, visa fraud, obstruction of justice, and criminal contempt. According to their indictment, Xiao and Yi made false statements on their visa applications, namely that they would be staying in the United States for only 15 days. According to court documents in their case, Xiao and Yi paid only $4,600 of the $32,291 in hospital charges related to the birth of their baby. The indictments detail communications from Xiao after he had fled to China, where he continued to denigrate the Court’s Order requiring him to stay in the U.S.: “Anyway, I’m already home. U.S. can’t do anything to me.”
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Dongjiang He (贺东江), 46, was indicted in February 2018 for fleeing with his wife to China, in violation of a federal court order. On his visa application, He listed his occupation as “Government” and his position as “Project Manager and Secretary General” for the China Nonferrous Metals Techno Economic Research Institute, which is located in the Haidian District in Beijing. His wife, Zhichan Yu (余芝婵), 40, also was indicted in February 2018 on charges of visa fraud, obstruction of justice, and contempt of court after fleeing to China in violation of a federal court order.
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Jia Luo (罗佳), 30, was indicted in February 2018 for fleeing to China in violation of a federal court order. According to court documents, Luo lied on her visa application and lied to U.S. Customs officers in Hawaii when asked her if she was planning on having a baby in the United States.
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Renlong Chen (陈人龙), 34, and his wife Wei Wang (王伟), 33, were indicted in February 2018 for fleeing to China, in violation of federal court orders. Chen and Wang are accused of making false statements on their visa applications by stating they would be visiting the United States for only eight days, when they actually made arrangements to stay at a maternity house in Rancho Cucamonga for three months so that Wang could give birth in the United States.
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Jie He (何洁), 29, was indicted in February 2018 for fleeing to China in violation of federal court order. She allegedly made false statements on her visa application, including that she planned to stay in the United States for only 20 days, when she actually entered into a contract to pay approximately $50,000 to obtain a visa and stay in the United States for several months to give birth. According to court documents, Jie He told investigators that she flew into Las Vegas, rather than Los Angeles, because the Chinese maternity operator had advised her that it was easier to enter through Las Vegas.
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Eryun Zhang (张尔芸), 25; her husband, Liang Ni (倪梁), 25; and her mother, Ji Xu (徐激), 50, were indicted in February 2018 for fleeing to China in violation of federal court orders. According to court documents, Ni admitted that, during an interview conducted at the U.S. Consulate in China, he falsely stated that the purpose of their trip was for their honeymoon, rather than the true reason for Zhang to give birth in the United States.
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Chao Chen (陈超), 34, a partner in the You Win USA scheme, was indicted in December 2018 with one count of contempt of court for fleeing the U.S. while he was pending sentencing. Chen previously pleaded guilty to visa fraud, marriage fraud and tax fraud.
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Ji Zhu (朱洁), 31, who was indicted in March 2018 for one count of marriage fraud, for allegedly marrying a U.S. citizen to obtain U.S. citizenship, even though she really was married to Chao Chen. Zhu fled to China with Chao Chen, where they remain fugitives from justice.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The three defendants arrested this morning are expected to be arraigned on the indictments this afternoon in United States District Court in Santa Ana.
The federal investigation into Dongyuan Li’s You Win USA scheme has resulted in seizure and/or forfeiture proceedings against three real properties with millions of dollars in equity, including her $2.1 million residence in Irvine; six vehicles, including four Mercedes Benz vehicles; more than $1 million from bank accounts; and many gold bars and coins.
These cases were investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and IRS Criminal Investigation. The Federal Bureau of Investigation participated in the investigation of USA Happy Baby and the material witnesses related to that scheme who fled to China. Local law enforcement authorities, including the Irvine Police Department and the San Bernardino County Sheriff’s Department, provided substantial assistance during execution of search warrants in 2015.
These cases are being prosecuted by Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office.
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Camarillo Man Sentenced to 14 Years in Federal Prison for Scheming to Obtain Unemployment Benefits Through Sham CompaniesRead the Press Release
LOS ANGELES – A Ventura County man has been sentenced to 168 months in federal prison for participating in a massive fraud scheme that used dozens of nonexistent companies to collect nearly $5 million in unemployment benefits for phony employees who never performed any work at the fake entities.
Jack Benjamin Hessiani, a.k.a. “Jack Herrera,” 40, of Camarillo, was sentenced today by United States District Judge John A. Kronstadt. Hessiani pleaded guilty in August 2018 to one count of mail fraud.
According to court documents, Hessiani created numerous fictitious businesses for the sole purpose of defrauding the Employment Development Department (EDD), the state agency that administers the federal unemployment insurance program in California. After he and his co-schemers filed documents with EDD that showed made-up earnings for the fictitious workers, Hessiani and the co-schemers submitted claims for unemployment insurance benefits for laid-off “employees.” In fact, many of the “employees” were people who had agreed to provide their personal identifying information in exchange for a portion of the unemployment insurance benefits. Some of the benefit portions would go to drug users who likely used the funds to enable future drug purchases, while others were poor students who later faced criminal exposure as a result of the actions of Hessiani and his co-schemers, court papers state.
The unemployment benefits were sent in the form of checks and debit cards to “mail drops” that Hessiani and the co-schemers established in the names of other individuals, according to court documents. After EDD began issuing unemployment benefits, Hessiani ensured that documents were filed that falsely stated that the laid-off “workers” were still unemployed, and he later sought “extended benefits” to obtain unemployment insurance benefits for the sham workers beyond the normal six-month period. These extended benefits were ultimately funded by the United States Treasury.
According to court documents, Hessiani and his co-schemers submitted approximately 725 unemployment insurance claims – including 521 original claims and 204 claims for extended benefits – in the names of 384 “employees.” The investigation identified 43 fictitious companies based in Ventura County that were used to further the scheme, which caused EDD to suffer actual losses of $3.96 million and the United States Treasury to suffer actual losses of approximately $900,000. Hessiani enlarged his scheme by inducing the people whose names were already being used to obtain fraudulent benefits to “recruit” others who would be identified as additional false employees at the fictitious companies, and he paid referral fees for each new fake worker brought into the scheme.
Three other defendants in the case have pleaded guilty to criminal charges and are pending sentencing. They are Hessiani’s brother, James Manuel Herrera, 30, of Camarillo; Eduardo Josue Garcia, 27, of Camarillo; and Daniel Ayala-Mora, 29, formerly of Camarillo.
The investigation in this case was conducted by the United States Department of Labor, Office of Inspector General; the United States Secret Service; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and the California Employment Development Department.
Assistant United States Attorneys Ranee Katzenstein and Julian André of the Major Frauds Section are prosecuting this case.
Justice Department Announces Court-Authorized Efforts to Map and Disrupt Botnet Used by North Korean HackersRead the Press Release
The Justice Department today announced an extensive effort to map and further disrupt, through victim notifications, the Joanap botnet – a global network of numerous infected computers under the control of North Korean hackers that was used to facilitate other malicious cyber activities. This effort targeting the Joanap botnet follows charges unsealed last year in which the United States charged a North Korean citizen, Park Jin Hyok, a member of a conspiracy backed by the North Korean government that carried out numerous computer intrusions. Those charges alleged that the conspiracy utilized a strain of malware, “Brambul,” which was also used to propagate the Joanap botnet.
Assistant Attorney General for National Security John Demers, United States Attorney Nicola T. Hanna, Assistant Director in Charge (ADIC) Paul Delacourt of the FBI’s Los Angeles Field Office and the U.S. Air Force Office of Special Investigations made the announcement.
“Computers around the world remain infected by a botnet associated with the North Korean Regime,” said Assistant Attorney General Demers. “Through this operation, we are working to eradicate the threat that North Korea state hackers pose to the confidentiality, integrity, and availability of data. This operation is another example of the Justice Department’s efforts to use every tool at our disposal to disrupt national security threat actors, including, but by no means limited to, prosecution.”
“Our efforts have disrupted state-sponsored cybercriminals who used malware to establish a computer network that gave them the ability to hack into other computer systems,” said U.S. Attorney Hanna. “While the Joanap botnet was identified years ago and can be defeated with antivirus software, we identified numerous unprotected computers that hosted the malware underlying the botnet. The search warrants and court orders announced today as part of our efforts to eradicate this botnet are just one of the many tools we will use to prevent cybercriminals from using botnets to stage damaging computer intrusions.”
“Through technical means and legal process, the FBI continually seeks to disrupt the malicious cyber activities of North Korean cybercriminals, as in this case, and all cyber actors who pose a threat to the United States and our international partners,” said ADIC Delacourt. “We urge computer users to take precautions, such as updating their software and utilizing antivirus, in order to avoid being victimized by this type of malware.”
Joanap malware targeted computers running the Microsoft Windows operating system and is used to gain access to and maintain infrastructure from which the hackers can carry out other malicious cyber activities. Joanap is a “second stage” malware, one that is often “dropped” by the automated Brambul “worm” that crawls from computer to computer, probing whether it can gain access using certain vulnerabilities. Once installed on an infected computer, Joanap would allow the North Korean hackers to remotely access infected computers, gain root level (or near-total) access to infected computers, and load additional malware onto infected computers.
Computers infected with Joanap — known as “peers” or “bots” — became part of a network of compromised computers known as a botnet. Like other botnets, Joanap was designed to operate automatically and undetected on victims’ computers. Joanap uses a decentralized peer-to-peer communication system, rather than a centralized mechanism to communicate with and control the peers, such as a command-and-control domain.
In order to address that distinct feature, a court order and search warrant was obtained pursuant to recent amendments to Rule 41 of the Federal Rules of Criminal Procedure. The search warrant allowed the FBI and AFOSI to operate servers that mimicked peers in the botnet. By pretending to be infected peers, the computers operated by the FBI and AFOSI under the authority of the search warrant and order collected limited identifying and technical information about other peers infected with Joanap (i.e., IP addresses, port numbers, and connection timestamps). This allowed the FBI and AFOSI to build a map of the current Joanap botnet of infected computers. Copies of the search warrants and orders and applications are available below.
Using the information obtained from the warrant, the government is notifying victims in the United States of the presence of Joanap on an infected computer. The FBI is both notifying victims through their Internet Service Providers and providing personal notification to victims whose computers are not behind a router or a firewall. The U.S. government will coordinate the notification of foreign victims by contacting the host country’s government, including by utilizing the FBI’s Legal Attachés.
The second-stage Joanap botnet and the first-stage Brambul worm have endured since 2009, even though they have been identified in the past and a number of antivirus products defend against them. Many private cyber security research companies have also published analytical reports about Brambul and Joanap. The FBI and the Department of Homeland Security have published reports analyzing Joanap and Brambul as well, including as recently as May 31, 2018. (https://www.us-cert.gov/ncas/alerts/TA18-149A.) Moreover, a complaint was filed on June 8, 2018, charging Park Jin Hyok with a conspiracy to carry out numerous computer intrusions backed by the North Korean government. That complaint alleged how co-conspirators used Brambul to gain unauthorized access to computers, and then used those computers to carry out the charged malicious cyber activities. The Brambul worm itself was recovered from the computer networks of some victims of the conspiracy.
Joanap targets Microsoft Windows operating systems, but running Windows Defender Antivirus and using Windows Update will remediate and prevent infections by Joanap. A number of free and paid antivirus programs are also already capable of detecting and removing Joanap and Brambul, including the Microsoft Safety Scanner, a free product.
This effort to map and disrupt the botnet was led by Assistant United States Attorneys Anthony J. Lewis and Anil J. Antony of the United States Attorney’s Office for the Central District of California, and DOJ Trial Attorneys David Aaron and Scott Claffee of the National Security Division’s Counterintelligence and Export Control Section. The Criminal Division’s Computer Crime and Intellectual Property Section provided valuable assistance.
The details contained in the application for the search warrant and order and related pleadings are not charges and are merely accusations.
Justice Department Announces Court-Authorized Efforts to Map and Disrupt Botnet Used by North Korean HackersRead the Press Release
LOS ANGELES – The Justice Department today announced an extensive effort to map and further disrupt, through victim notifications, the Joanap botnet – a global network of numerous infected computers under the control of North Korean hackers that was used to facilitate other malicious cyber activities. This effort targeting the Joanap botnet follows charges unsealed last year in which the United States charged a North Korean citizen, Park Jin Hyok, a member of a conspiracy backed by the North Korean government that carried out numerous computer intrusions. Those charges alleged that the conspiracy utilized a strain of malware, “Brambul,” which was also used to propagate the Joanap botnet.
United States Attorney Nicola T. Hanna, Assistant Attorney General for National Security John Demers, Assistant Director in Charge (ADIC) Paul Delacourt of the FBI’s Los Angeles Field Office, and the U.S. Air Force Office of Special Investigations (AFOSI) made the announcement.
“Our efforts have disrupted state-sponsored cybercriminals who used malware to establish a computer network that gave them the ability to hack into other computer systems,” said United States Attorney Nick Hanna. “While the Joanap botnet was identified years ago and can be defeated with antivirus software, we identified numerous unprotected computers that hosted the malware underlying the botnet. The search warrants and court orders announced today as part of our efforts to eradicate this botnet are just one of the many tools we will use to prevent cybercriminals from using botnets to stage damaging computer intrusions.”
“Computers around the world remain infected by a botnet associated with the North Korean Regime,” said Assistant Attorney General John Demers. “Through this operation, we are working to eradicate the threat that North Korea state hackers pose to the confidentiality, integrity, and availability of data. This operation is another example of the Justice Department’s efforts to use every tool at our disposal to disrupt national security threat actors, including, but by no means limited to, prosecution.”
“Through technical means and legal process, the FBI continually seeks to disrupt the malicious cyber activities of North Korean cybercriminals, as in this case, and all cyber actors who pose a threat to the United States and our international partners,” said ADIC Paul Delacourt. “We urge computer users to take precautions, such as updating their software and utilizing antivirus, in order to avoid being victimized by this type of malware.”
Joanap malware targeted computers running the Microsoft Windows operating system and is used to gain access to and maintain infrastructure from which the hackers can carry out other malicious cyber activities. Joanap is a “second stage” malware, one that is often “dropped” by the automated Brambul “worm” that crawls from computer to computer, probing whether it can gain access using certain vulnerabilities. Once installed on an infected computer, Joanap would allow the North Korean hackers to remotely access infected computers, gain root level (or near-total) access to infected computers, and load additional malware onto infected computers.
Computers infected with Joanap – known as “peers” or “bots” – became part of a network of compromised computers known as a botnet. Like other botnets, Joanap was designed to operate automatically and undetected on victims’ computers. Joanap uses a decentralized peer-to-peer communication system, rather than a centralized mechanism to communicate with and control the peers.
In order to address that distinct feature, court orders and search warrants were obtained pursuant to recent amendments to Rule 41 of the Federal Rules of Criminal Procedure. The search warrant allowed the FBI and AFOSI to operate servers that mimicked peers in the botnet. By pretending to be infected peers, the computers operated by the FBI and AFOSI under the authority of the search warrant and order collected limited identifying and technical information about other peers infected with Joanap (for example, IP addresses, port numbers, and connection timestamps). This allowed the FBI and AFOSI to build a map of the current Joanap botnet of infected computers.
Using the information obtained from the warrants, the government is notifying victims in the United States of the presence of Joanap on an infected computer. The FBI is both notifying victims through their Internet Service Providers and providing personal notification to victims whose computers are not behind a router or a firewall. The U.S. government will coordinate the notification of foreign victims by contacting the host country’s government, including by utilizing the FBI’s Legal Attachés.
The second-stage Joanap botnet and the first-stage Brambul worm have endured since 2009, even though they have been identified in the past and a number of antivirus products defend against them. Many private cyber security research companies have published analytical reports about Brambul and Joanap. The FBI and the Department of Homeland Security also have published reports analyzing Joanap and Brambul as well, including a Technical Alert last May.
A criminal complaint filed last year charges Park Jin Hyok with being a member of a conspiracy backed by the North Korean government that carried out numerous computer intrusions. That complaint alleged how co-conspirators used Brambul to gain unauthorized access to computers, and then used those computers to carry out their malicious cyber activities. The Brambul worm itself was recovered from the computer networks of some victims of the conspiracy.
Joanap targets Microsoft Windows operating systems, but running Windows Defender Antivirus and using Windows Update will remediate and prevent infections by Joanap. A number of free and paid antivirus programs are also already capable of detecting and removing Joanap and Brambul, including the Microsoft Safety Scanner, a free product.
This effort to map and disrupt the botnet was led by Assistant United States Attorneys Anthony J. Lewis and Anil J. Antony, and Justice Department Trial Attorneys David Aaron and Scott Claffee of the National Security Division’s Counterintelligence and Export Control Section. The Criminal Division’s Computer Crime and Intellectual Property Section provided valuable assistance.
The details contained in the application for the search warrant and order and related pleadings are not charges and are merely accusations.
Government's Ex Parte Application for Botnet Search Warrant Botnet Warrant & OrderHemet Man Sentenced to Five Years in Prison for Identity Theft Scheme that Claimed More than $800,000 in False Tax RefundsRead the Press Release
RIVERSIDE, California – An Inland Empire man has been sentenced to 60 months in federal prison for his role in scheme that stole victims’ identities and used them to claim more than $800,000 in fraudulent tax refunds.
Raymond Salazar, 55, of Hemet, was sentenced Monday by United States District Judge Jesus G. Bernal. Salazar was further ordered to pay restitution of $298,693. Salazar pleaded guilty in August 2018 to one count of wire fraud and one count of aggravated identity theft.
Three other defendants involved in the scheme have pleaded guilty to federal criminal charges and are awaiting sentencing in March. They are:
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Charlene Castrejon, 60, of Hemet;
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Rebecca Mona Sandoval, 35 of San Jacinto; and;
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Robert Manuel Gamboa, Jr., known as Paul Timothy Garcia, 31, of Highland.
As part of their scheme, which continued through April 2015, Salazar and his co-conspirators obtained the names, Social Security numbers and dates of birth of individuals without their knowledge or consent, according to Salazar’s plea agreement.
The conspirators then used their victims’ identities to prepare and file false and fraudulent federal income tax returns that contained false income, dependent, earned income credit, education credit and child tax credit information, court documents state.
For example, in January 2013, Salazar and his co-defendants used one victim’s identity to knowingly file a false income tax return for 2012 that falsely stated the victim’s income and that the victim had a dependent who purportedly was the victim’s disabled nephew, court papers state. The return falsely stated that the identity theft victim was entitled to an earned income tax credit and refund of $3,169, according to Salazar’s plea agreement.
The refund payments were mailed to addresses or deposited directly into taxpayer debit card accounts that Salazar and his co-defendants controlled. In total, Salazar and his co-conspirators succeeded in obtaining approximately $569,334.26 in federal tax refunds from the Internal Revenue Service, Salazar’s plea agreement states.
In addition, in May 2013 Salazar and his co-defendants knowingly possessed at his Hemet residence at least 15 credit and debit cards and Social Security numbers belonging to their victims and which were intended to be used to file false federal income tax returns, according to court documents.
This case was part of an ongoing investigation conducted by IRS Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. They received substantial assistance from the FBI Safe Streets San Bernardino Gang Impact Team.
The case was prosecuted by Assistant United States Attorney Joseph B. Widman, chief of the Riverside Branch Office.
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Correctional Officer at Federal Prison Facility in Victorville Sentenced to Two Years in Prison for Sexually Abusing Female InmatesRead the Press Release
RIVERSIDE, California – A former correctional officer at the Federal Correctional Complex in Victorville has been sentenced to 24 months in prison for sexually abusing several female inmates while on duty.
Apolonio Gamez, 41, of Lake Elsinore, was sentenced late Monday by United States District Judge Jesus G. Bernal. In addition to the prison term, Judge Bernal ordered that Gamez would be on supervised release for seven years after he is released from prison. Gamez was also ordered to pay a $5,000 special assessment and to register as a sex offender when he is released from prison.
Gamez pleaded guilty in October to three felony charges: two counts of sexual abuse of a ward and one count of attempted sexual abuse of a ward.
According to Gamez’s plea agreement, he engaged in sexual activity with the inmates between September 2016 and July 2017 while he was on duty as a correctional officer and employed by the United States Bureau of Prisons.
On two occasions in the autumn of 2016, Gamez engaged in sexual activity with one inmate while he was on duty.
In May 2017, Gamez caught another inmate stealing food, threatened to send her to the “hole” (a reference to the prison’s special housing unit), and then directed her to engage in sexual activity with him, his plea agreement states. Gamez’s victim did not resist because “she felt frozen and powerless with fear,” according to court documents.
Gamez also admitted to exposing himself to a third inmate and attempted to engage in sexual activity with her during the summer of 2017.
The case against Gamez was investigated by the Department of Justice, Office of the Inspector General and the Federal Bureau of Investigation.
This matter was prosecuted by Assistant United States Attorney Sean Peterson of the Riverside Branch Office.
Chinese National Who Stole Trade Secrets while Working for Medical Device Companies Sentenced to Federal PrisonRead the Press Release
SANTA ANA, California – An Irvine engineer who stole trade secrets belonging to two former employers, both of which develop and manufacture medical devices used to treat cardiac and vascular ailments, was sentenced late this afternoon to 27 months in federal prison.
Wenfeng Lu, 46, was sentenced today by United States District Judge Andrew J. Guilford.
Lu was sentenced after pleading guilty last May to six counts of unauthorized possession and attempted possession of trade secrets. Lu admitted that he stole confidential and proprietary trade secrets from two different medical device companies with research facilities in Irvine, where Lu worked from January 2009 until he was arrested in this case in 2012.
Lu first worked at ev3 (which later became part of Covidien, and then Medtronic), and later at Edwards Lifesciences Corporation. Notwithstanding signing employment agreements in which he acknowledged that proprietary technology developed at the companies was the sole property of the companies, Lu copied numerous documents belonging to both of his employers that contained technical information and trade secrets, took them home, and placed them on his personal laptop computer.
While he was working for the companies, Lu travelled to the People’s Republic of China (PRC) multiple times – sometimes soon after stealing the trade secrets from his employers. Lu had obtained financing and was preparing to open a company in the PRC that would manufacture devices used to treat vascular problems and would use technology he had stolen from his American employers, according to court documents.
“In furtherance of his business, defendant [Lu] applied to the PRC government for funding designed to attract technological talent from places such as the United States, and was selected to receive approximately $2 million RMB (about $328,000 USD) and free rent for a period of three years in a laboratory in a technology park located in Nanjing Province in the PRC,” prosecutors wrote in a sentencing memorandum filed with the court. “The money and laboratory space was part of a program sponsored by the PRC government to encourage scientists of Chinese descent to return to the PRC with intellectual property to develop biomedical technology in the PRC.”
Lu was arrested as he prepared to board a plane to the PRC in November 2012, which prevented him from implementing his business plan and causing significant harm to the victim companies in the United States.
The sentencing memo notes that Lu was not content with “a substantial salary, a comfortable life in Irvine, California, and the opportunity to develop meaningful products that save people’s lives,” so he took his employers’ protected information. In addition, he took the information to the PRC, putting those trade secrets “at great risk of being stolen by nefarious actors in the PRC.”
This case was investigated by the Federal Bureau of Investigation.
This matter was prosecuted by Assistant United States Attorney Mark Takla of the Terrorism and Export Crimes Section and Assistant United States Attorney Jennie L. Wang of the Cyber and Intellectual Property Crimes Section.
Three Men Charged in ‘Swatting’ Schemes in which Admitted Hoax-Maker Targeted Individuals, Schools and a Convention CenterRead the Press Release
LOS ANGELES – Three men allegedly conspired with admitted “swatter” Tyler Rai Barriss to make hoax reports of bombs and murders to police departments, high schools and a convention center across the United States, according to three indictments unsealed today.
The three new cases allege that the men agreed with Barriss to make false reports of explosives and armed individuals to generate a law enforcement response that was intended to harass and intimidate their targets and to evacuate public buildings.
Special agents with the FBI this morning arrested two of the defendants, and a third has agreed to surrender to federal authorities in Los Angeles.
Those charged in the indictments unsealed today are:
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Neal Patel, 23, of Des Plaines, Illinois, also known by his Twitter handles @internetlord and @defeat, who was arrested this morning;
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Tyler Stewart, 19, of Gulf Breeze, Florida, also known by his Twitter handle @tragic, who was arrested this morning; and
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Logan Patten, 19, of Greenwood, Missouri, also known by his Twitter handle @spared, who has agreed to surrender.
The three defendants are charged in separate indictments with conspiracy and conveying false information concerning the use of an explosive device.
“Swatting,” according to the indictments, is “the action or practice of harassing a victim by deceiving an emergency service into sending police and emergency service response teams, including special weapons and tactics (SWAT) teams, to the victim’s address, often by making a false report of a serious law enforcement emergency – such as a murder or hostage situation – at the victim’s address to trigger the deployment of the response team.”
Patel allegedly conspired with Barriss over several days in early December 2017 to make false police reports to law enforcement authorities in Milford, Connecticut. The pair also conspired to make a false bomb threat targeting a video game convention in Dallas, Texas, according to the indictment. Patel also faces bank fraud charges for allegedly using unauthorized credit card numbers to purchase items of clothing for Barriss.
Stewart is charged with conspiring with Barriss to cause the evacuation of a high school in Gurnee, Illinois by making two false bomb threats in early December 2017. In the second incident, Barriss allegedly called the Gurnee Police Department, claimed the explosives had been left in a high school classroom, and stated he was high on methamphetamine and was considering shooting teachers and students.
Patten is charged with hiring Barriss, also in December 2017, to swat individuals by making false reports to the Indianapolis (Indiana) Metropolitan Police Department and the Hamilton County (Ohio) Sheriff’s Department. Patten also allegedly schemed with Barriss to swat a high school in Lee’s Summit, Missouri, at the direction of an uncharged juvenile. In this case, Patten is also charged with making threats to injure in interstate commerce.
Patel and Stewart are expected to make initial court appearances where they were arrested today in the Northern District of Illinois and the Northern District of Florida.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Barriss pleaded guilty on November 13 to a total of 51 charges brought by federal prosecutors in Los Angeles, Kansas, and Washington, D.C. His sentencing in United States District Court in Wichita, Kansas, is scheduled for March 1. Pursuant to a plea agreement, Barriss has agreed to serve a sentence of 20 to 25 years in federal prison.
The charge of conspiracy carries a statutory maximum sentence of five years in federal prison and the charge of conveying false information concerning the use of explosive device carries a statutory maximum penalty of 10 years in prison.
The charge of making threats to injure in interstate commerce carries a statutory maximum penalty of five years in federal prison.
The two bank fraud charges alleged against Patel each carry up to 30 years in federal prison.
The investigation into the swatting incidents is being conducted by the Federal Bureau of Investigation.
The cases announced today are being prosecuted by Assistant United States Attorney George E. Pence of the Terrorism and Export Crimes Section.
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Los Angeles-Area Attorney Arrested on Federal Drug Trafficking Charges Alleging Opioid Sale after Posting Ads on CraigslistRead the Press Release
LOS ANGELES – Members of a federal task force have arrested an attorney on narcotics distribution charges that allege she illegally sold oxycodone pills after offering drugs for sale on Craigslist.
Jackie Ferrari, 36, a resident of Downey, who investigators believe recently started a new job at a Beverly Hills law firm, was arrested late Friday without incident by law enforcement officers affiliated with the High Intensity Drug Trafficking Area (HIDTA) Task Force, which operates under the direction of the Drug Enforcement Administration.
The criminal complaint filed on January 15 and unsealed today specifically charges Ferrari with one count of distributing a controlled substance. The affidavit in support of the complaint states that a law enforcement source with a long history of purchasing narcotics from Ferrari made a buy earlier this month in which Ferrari sold the informant 50 oxycodone pills for $1,200. Ferrari subsequently sent the informant and other likely customers a text message that she “recently obtained a new supply of oxycodone and [had] other drugs available for sale,” according to the affidavit.
The investigation into Ferrari began after a 22-year-old woman died in August of a fentanyl overdose, and text messages on the victim’s phone initially indicated she may have purchased the narcotics from Ferrari. While investigators currently do not believe that Ferrari sold the narcotics that led to the overdose death, they have continued to investigate her “based on evidence…that she is a large-scale trafficker in opiates via the website Craigslist,” according to the affidavit, which notes that two local police departments developed information about Ferrari’s alleged drug trafficking activities in late 2017.
The affidavit also notes that records obtained from Craigslist pursuant to a subpoena demonstrate Ferrari’s “long history of posting advertisements for…the sale of narcotics” using coded names such as “roxy dolls” (i.e., Roxicodone, a short-acting version of oxycodone), “Chinese **White** Rice” (i.e., “China white” or powdered heroin, which is often mixed with fentanyl) and “Black Rice” (i.e., black tar heroin).
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
Ferrari is expected to make her initial appearance in this case this afternoon in United States District Court.
If convicted of the charge in the criminal complaint, Ferrari would face a statutory maximum sentence of 20 years in federal prison.
The investigation into Ferrari is being conducted by the HIDTA Task Force and was led by agents and officers with the Drug Enforcement Administration and the Los Angeles County Sheriff’s Department. The task force also includes representatives of the Los Angeles Police Department; the United States Department of Veterans Affairs, Office of Inspector General; the California Department of Justice; and the Los Angeles County District Attorney’s Office, Office of Investigations.
The Costa Mesa Police Department and the Cypress Police Department provided substantial assistance in the investigation.
The case against Ferrari is being prosecuted by Assistant United States Attorneys Benjamin Barron and Carley A. Palmer of the Organized Crime Drug Enforcement Task Force.
Former L.A. Sheriff’s Deputy Found Guilty of Lying to FBI Agents as Part of Cover-Up of Attack of Visitor to Men’s Central JailRead the Press Release
LOS ANGELES – A former deputy with Los Angeles Sheriff’s Department was convicted today on federal charges of lying to the FBI about the beating of handcuffed man at the Men’s Central Jail in 2011.
Byron Dredd, 36, was found guilty of making false statements to the FBI, a federal felony offense that carries a statutory maximum penalty of five years in federal prison.
Dredd and five other deputies who were previously convicted and sentenced in relation to the beating were assigned to the Visiting Center at Men’s Central Jail. On February 26, 2011, the victim went to the jail to visit his brother, who was in custody in the jail. Deputies handcuffed the victim and brought him to an employee break room because they suspected he had a cell phone on him. Deputies then beat the victim, who remained defenseless with his arms handcuffed behind his back the entire time. Dredd witnessed the beating from an adjacent room through a metal window. As a result of false reports authored by Dredd and other deputies, the victim was charged with several crimes, including resisting an officer and battery.
Dredd was convicted today of lying to the FBI during an interview on July 17, 2012. Dredd falsely told the FBI that the victim was the aggressor, and that he saw the victim swing at a deputy, tried to push past a deputy in an attempt to escape, and that he saw the victim punch a deputy in the chest. Those statements were lies because the victim remained handcuffed during the entire beating.
“All law enforcement officers will be held accountable for abusing their positions – whether that includes the illegal use of force or lying to cover up a civil rights violation,” said United States Attorney Nick Hanna. “This former deputy actively tried to conceal the illegal actions of his fellow deputies, and today a jury held him accountable for his role in the cover-up of an unjustified beating.”
“The defendant deceived investigators who were investigating very serious crimes, including civil rights abuses and an attempted cover-up,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI will continue to hold accountable those who cover up crimes involving civil rights abuses and malfeasance by public officials inside and outside prison walls.”
Dredd is scheduled to be sentenced in this case on May 20 by United States District Judge Dale S. Fischer.
In a previous trial in 2016, a jury was unable to reach a unanimous verdict against Dredd on the false statements. At that trial, Dredd was also acquitted of conspiring to violate the victim’s civil rights and obstructing a federal investigation.
Previously in this investigation, five deputies who participated in the beating and cover-up were convicted and sentenced to prison, including former Sergeant Eric Gonzalez who is serving an eight-year prison term after being found guilty of violating the victim’s civil rights and falsifying reports.
This case is the result of an investigation by the FBI, and is the last in a series of cases resulting from an investigation into corruption and civil rights abuses at county jail facilities in downtown Los Angeles. As a result of the investigation, 22 members of the Los Angeles Sheriff’s Department have now been convicted of federal charges.
The case against Dredd is being prosecuted by Assistant United States Attorneys Veronica Dragalin and Agustin D. Orozco of the Public Corruption and Civil Rights Section.
Federal Jury Orders Mongols Motorcycle Gang to Forfeit LogosRead the Press Release
SANTA ANA, California – After finding the Mongols outlaw motorcycle gang guilty of racketeering offenses last month, a federal jury today determined that the criminal organization should forfeit the logos worn by members, finding that there was a direct connection between the gang’s crimes and the trademarked logos that prosecutors said formed the core of the motorcycle gang’s identity.
The forfeiture verdict culminates a decade-long prosecution of the Mongol Nation criminal enterprise and 77 members who were previously found guilty of racketeering offenses.
Today’s verdict – which will result in the forfeiture of the Mongol’s legal interests in the word “Mongols,” the gang’s center patch that depicts a goateed motorcycle rider, and combination of the two patches often seen on the Mongols’ leather vests – is the first of its kind in the nation. The verdict also ordered the forfeiture of scores of items bearing the Mongols name and logo that were seized during a lengthy investigation into the gang. During closing arguments earlier this week, prosecutors said members of the Mongols were “empowered by these symbols that they wear like armor.”
Pursuant to federal criminal forfeiture law, the verdict requires the entry of a “preliminary order of forfeiture” as part of the sentencing on the Mongols’ RICO convictions, according to documents filed by prosecutors. With further litigation expected on the forfeiture of the name and logo, prosecutors at this time have not asked the court for an order that would permit authorities to seize additional items bearing the name and logo from individual members of the gang.
“The Mongols are a notorious criminal organization whose members regularly engage in violent acts against law enforcement officers, rival gangs and members of the public,” said United States Attorney Nick Hanna. “The verdicts in this case brand the Mongols as a racketeering enterprise and direct the forfeiture of property used by the gang for decades to encourage and reward numerous acts of murder, assault and drug trafficking. The prosecution of an organization built around crime realizes one of the most important goals of the RICO Act – the eradication of organized crime by providing enhanced sanctions, including forfeiture, that attack the sources of a criminal enterprise’s economic power and influence.”
“ATF spent decades infiltrating and working to shut down this criminal organization which engages in heinous violent acts,” said Bill McMullan, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives, Los Angeles Field Division. “We are proud our work resulted in their unity symbol, the Mongol patch, being forfeited.”
At the conclusion of the guilt phase of the gang’s trial on December 13, the jury convicted the Mongol Nation of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act, as well as conspiring to violate the RICO Act. In rendering its verdict on the substantive RICO count, the jury specifically found that the Mongols constituted a criminal enterprise that was responsible for a murder, an attempted murder, a narcotics-trafficking conspiracy and two methamphetamine transactions. The RICO conspiracy charge included not only the five substantive racketeering acts, but five additional homicides, nine assaults and a series of narcotics transactions, one of which involved the seizure of more than 13 kilograms of cocaine.
In court last month, a federal prosecutor called the organization “a beehive of pernicious criminal activity.”
The case against the gang was filed in 2013, following a 2008 indictment of individual Mongols members – 77 of whom pleaded guilty to violating the RICO statute. The two criminal cases were before a total of four federal judges and were the subject of extensive litigation, including a separate civil lawsuit filed by an uncharged Mongols member.
The cases were the result of an investigation – Operation Black Rain – led by the Bureau of Alcohol, Tobacco, Firearms and Explosives in which four male ATF agents worked undercover and successfully infiltrated the Mongols to become full-patch members. Four female ATF agents also went undercover to pose as their girlfriends. The undercover agents developed and maintained biker personas, and they had to undergo rigorous scrutiny by the Mongols to be accepted as members. When one of the ATF agents received his patch, one of the gang’s members said: “Being a Mongol promises you one of two things – death or prison.”
United States District Judge David O. Carter, who oversaw the trial of the RICO case against the Mongols gang, will schedule a hearing to impose the sentence on the organization. In addition to the forfeiture, the Mongols may be subject to monetary fines.
Avanti Hospitals and Its Owners Agree to Pay $8.1 Million to Settle Allegations of Paying Illegal Kickbacks for Patient ReferralsRead the Press Release
LOS ANGELES – The Department of Justice announced today that Los Angeles-based Avanti Hospitals LLC and six of its owners will pay the federal government $8.1 million to settle allegations that they violated the False Claims Act by submitting – or causing Avanti’s subsidiary, Memorial Hospital of Gardena, to submit – false claims to the Medicare and Medicaid programs for medical services provided to patients who were referred by a physician who received kickbacks and other improper payments.
“Illegal kickbacks paid to doctors for referrals burden our healthcare system, drive up insurance costs for everyone, and corrupt the doctor-patient relationship,” said United States Attorney Nick Hanna. “Patients are not commodities who can be sold to the highest bidder, especially when the bills are ultimately being paid by American taxpayers.”
“Financial arrangements that improperly compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”
The government alleged that payments from Avanti, Gardena Hospital and at least two other Avanti affiliates to a high-referring physician violated the Anti-Kickback Statute, which prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs. They also allegedly violated the Physician Self-Referral Law, commonly known as the Stark Law, which prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper compensation arrangement. Both the Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not distorted by improper financial incentives and is instead based only on the best interests of the patient.
The settlement announced today resolved allegations that Avanti, Gardena Hospital and at least two other Avanti affiliates provided compensation to a physician they engaged as a medical director that both exceeded the fair market value of his services and was an attempt to incentivize him to refer patients to Gardena Hospital.
Avanti and Gardena Hospital have also entered into a corporate integrity agreement with the Department of Health and Human Services, Office of Inspector General.
“Patients and taxpayers rightly should expect that referrals be based on sound medical judgement, not driven by thinly veiled bribes, as alleged here,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Our compliance agreement with Avanti and Gardena Hospital contains strong monitoring and reporting provisions to help ensure that people in government health programs will be protected.”
The settlement announced today partially resolves allegations originally brought in a lawsuit filed by Dr. Joshua Luke, the former C.E.O. of Gardena Hospital, under the qui tam, or whistleblower, provisions of the False Claims Act. The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. Dr. Luke will receive approximately $1.6 million from the federal government.
The government’s intervention in this matter illustrates its emphasis on combating health care fraud. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).
This matter was handled by the United States Attorney’s Office for the Central District of California, the Civil Division’s Commercial Litigation Branch, and the Department of Health and Human Services, Office of Inspector General.
The case is U.S. ex rel. Luke, State of California ex rel. Luke v. Gardena Hospital, L.P. DBA Memorial Hospital of Gardena, Avanti Hospitals, LLC, et al., CV 15-8732-FMO. The claims resolved by the settlement are allegations only; there has been no determination of liability.
Immigration Lawyer Agrees to Plead Guilty to Visa FraudRead the Press Release
SANTA ANA, California – A Laguna Beach attorney has admitted in court documents that she submitted dozens of fraudulent visa petitions to federal immigration authorities and failed to report the money generated by her fraud to the Internal Revenue Service.
In a plea agreement filed on Wednesday, Mihae Park, 53, agreed to plead guilty to two felony offenses – one count of visa fraud and one count of filing a false tax return. Park is scheduled to make her initial appearance in United States District Court on January 14.
According to her plea agreement, Park submitted at least 25 immigrant and non-immigrant work visa petitions to U.S. Citizenship and Immigration Services that contained false information. Among other things in the fraudulent petitions filed between 2000 and 2017, Park listed an alias – Michelle Park – as the petitioner’s employer contact, stated petitioners had employees who were actually deceased or retired people, used bogus Social Security numbers for employees of petitioners, and submitted fake tax returns for work visa petitioners.
In 2013, Park submitted two fraudulent petitions on behalf of an Orange County educational company for two people she claimed would work there as a Chinese language teacher and as a music instructor, according to court documents. In reality, the company did not know or hire the two work visa beneficiaries, and the company did not offer classes in Chinese language or music, according to Park’s plea agreement.
Park also admitted filing false tax returns for the years 2009 through 2014 by failing to report receipts totaling $763,418 for this time period. As a result of her underreporting of her business income, Park had a deficiency in her federal income tax returns totaling $266,988 over this six-year period.
The government has seized $292,482 that Park received for the filing of fraudulent visa petitions, and also seized a 2012 Ferrari California and a 2015 Volkswagen GTI that Park purchased with the visa fraud proceeds, court papers state.
Once she pleads guilty to the two offenses, Park will face a statutory maximum sentence of 10 years in federal prison on the visa fraud charge and up to three years’ imprisonment on the tax charge.
This case was investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Citizenship and Immigration Services, and the IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorney Lawrence Kole of the Santa Ana Branch Office.
Engineering Firm Agrees to Pay over $5 Million to Settle False Claims Act Allegations Related to Small Business, Veterans Set-AsidesRead the Press Release
LOS ANGELES – IMEG Corp., an engineering and construction services firm, has agreed to pay $5.27 million to settle allegations that one of its predecessor entities defrauded the government by conspiring to submit fraudulent bills related to contracts designated for small businesses and small businesses owned by service-disabled veterans, the Justice Department announced today.
IMEG Corp., headquartered in Rock Island, Illinois, was formed in January 2017 through the merger of engineering firms TTG Corporate and KJWW Corp.
In August 2009, TTG, a large engineering services company, formed a company named TTG Schwab, Inc. – later known as Schwab Engineering, Inc. – with Jerome Schwab, a service-disabled veteran. The federal government, primarily the U.S. Department of Veterans Affairs, awarded Schwab Engineering over a dozen contracts that had been “set aside” for service-disabled, veteran-owned small business (SDVOSB) and small businesses.
On paper, Jerome Schwab was the majority owner, and later the sole owner, of Schwab Engineering. In reality, TTG provided nearly all the staffing and support, including financial and administrative services, for the federal set-aside contracts it was awarded – which violated the rules of the set-aside programs. TTG received up to 95 percent of the fees that Schwab Engineering earned from the SDVOSB and small business set aside contracts, according to the settlement.
Following the TTG-KJWW merger in 2017, IMEG discovered the wrongful conduct, informed the government, and has cooperated with federal authorities in this matter.
The settlement in this matter was finalized today. The claims resolved by the settlement are allegations only; there has been no determination of liability.
The settlement was the result of a coordinated effort by the U.S. Department of Veterans Affairs, Office of Inspector General; the U.S. Small Business Administration, Office of Inspector General; and the U.S. Department of Defense, Defense Criminal Investigative Service.
Assistant United States Attorney Donald Yoo of the Civil Fraud Section represented the government in this matter.
Charter School Founder and CEO Agrees to Plead Guilty in Scheme to Misappropriate Approximately $2.5 Million of Public Education FundsRead the Press Release
LOS ANGELES – The founder and former chief executive officer of Celerity Educational Group, a Koreatown-based non-profit company that owned and operated charter schools, has agreed to plead guilty to a federal conspiracy charge for misappropriating approximately $2.5 million in public-education funds awarded to several Celerity charter schools.
In a plea agreement filed today in United States District Court, Vielka Maritza McFarlane, 56, of Sylmar, agreed to plead guilty to one count of conspiracy to misappropriate and embezzle public funds.
McFarlane admitted in the plea agreement that she used the money to pay for personal expenses, including first-class air travel, fine dining and luxury goods. The bulk of the misappropriated funds were used to purchase a building for another charter school in Ohio.
McFarlane is scheduled to make her initial appearance in United States District Court on January 7.
McFarlane founded Celerity Educational Group in 2004 and served as its CEO until April 2015. Between April 2012 and April 2017, McFarlane also was CEO of Celerity Global Development, a non-profit California corporation, which provided various management services to the Celerity charter schools in exchange for a percentage of the schools’ revenues.
According to her plea agreement, from July 2009 to April 2017, McFarlane and her co-conspirators caused the Celerity charter schools and Celerity Educational Group to falsely certify to federal, state and local authorities that they were complying with all rules and regulations governing the use of public funds that they received.
McFarlane admitted in her plea agreement that she used public funds – money that should have been spent on educational purposes at Celerity charter schools in Los Angeles, Compton and Pasadena – for a variety of personal expenses and improper expenditures.
For example, between 2009 and 2013, McFarlane used credit cards issued to Celerity Educational Groups and Celerity Global Development to make personal purchases, including luxury items from shops in Beverly Hills and Tokyo, customized recumbent bicycles for her and her spouse, and more than $5,000 in leather-making equipment used by a for-profit company in which McFarlane and her family members were partners. McFarlane further admitted that she did not reimburse Celerity Education Group or Celerity Global Development for any of the payments described in the plea agreement prior to the government’s criminal investigation.
The plea agreement also states that from late 2012 to June 2014, McFarlane conspired to use approximately $2.3 million in public funds – a substantial portion of which came from the United States Department of Education – awarded to Celerity’s charter schools in Los Angeles to purchase and renovate an office building in Columbus, Ohio, where she oversaw the founding of a separate charter school.
Additionally, McFarlane admitted using public funds awarded to the Celerity charters schools in 2013 to pay $157,957 for the security deposit, monthly rent and renovations at a soundstage and recording studio in Canoga Park, which was rarely used by the Celerity charter schools. McFarlane pursued a proposal to allow a digital-production company to use the studio space in exchange for 200,000 shares in the digital-production company, which would have been issued to a separate for-profit media-production business called The Muse Collective.
McFarlane admitted in her plea agreement that the payments for her personal use, the Ohio property purchase, and the Canoga Village studio were improper; she lacked authorization to make those payments and expenditures; and the payments violated rules, regulations and laws governing the use of public funds that the Celerity charter schools received.
“When anyone repurposes public school funds for self-serving reasons, students suffer,” said First Assistant United States Attorney Tracy L. Wilkison. “This case involving the former CEO of Celerity demonstrates our ongoing efforts to protect and safeguard public funds, and to hold accountable those who improperly use those funds for their own gain.”
“Today’s court filings allege that defendant McFarlane ‘knowingly and willfully’ abused her position of trust to steal funds from the very ones she promised to serve – the children and families of the Celerity schools. That is unacceptable,” said Adam Shanedling, Special Agent in Charge of the U.S. Department of Education, Office of Inspector General, Western Regional Office. “Our Special Agents will continue to aggressively pursue those who seek to enrich themselves at the expense of our nation’s students. America’s students, their families, and taxpayers deserve nothing less.”
“Defendant McFarlane’s deception went on for years as she continually stole money intended for charter schools and the students who attended them,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI and our partners will continue to investigate crimes that threaten publicly funded entities and which result in losses suffered by victims for whom funds are intended, including children.”
“Through deception and manipulation, McFarlane devised a scheme to steal money that should have benefited children for her own financial gain,” said Nichole Cooper, Los Angeles Inspector in Charge, United States Postal Inspection Service. “The success of this investigation serves as an excellent example of the effective partnership between federal law enforcement agencies.”
“Vielka McFarlane committed a crime that systematically defrauded federal and state governments, the children of Celerity Educational Group, and the taxpaying public,” stated R. Damon Rowe, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “IRS Criminal Investigation will not stand still while criminals line their pockets with illicit proceeds while our community charter school programs go underfunded.”
Once McFarlane pleads guilty, she will face a statutory maximum penalty of five years in federal prison for the conspiracy charge.
In June 2017, the U.S. Attorney’s Office entered into a Non-Prosecution Agreement with Celerity Educational Group, now known as ISANA Academies, in which ISANA recognized and acknowledged the misconduct committed by McFarlane, agreed to cooperate fully with the government’s investigation, and agreed to implement certain reforms designed to ensure that similar conduct does not occur again.
By entering into the Non-Prosecution Agreement, the U.S. Attorney’s Office recognized that ISANA is responsible for educating thousands of students from underserved neighborhoods throughout Los Angeles County, and has demonstrated a strong commitment to its students and their academic achievement. The reforms now implemented by ISANA should allow it to continue serving its students and communities. The United States Attorney’s Office recognizes the cooperation of ISANA and its board of directors throughout its ongoing investigation.
This case was investigated by the United States Department of Education, Office of Inspector General; the Federal Bureau of Investigation, the United States Postal Inspection Service; IRS Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the United States Secret Service. The Los Angeles Unified School District’s Office of Inspector General was also part of the investigative team and has played an instrumental role in the ongoing investigation.
This case is being prosecuted by Assistant United States Attorneys Julian L. André and Valerie L. Makarewicz of the Major Frauds Section, and Assistant United States Attorney Saurish Appleby-Bhattacharjee of the Violent and Organized Crimes Section.
Walnut Man Sentenced to Nearly 4 Years in Federal Prison for Scheme to Smuggle Rifle Scopes and Tactical Equipment to SyriaRead the Press Release
SANTA ANA, California – An Inland Empire man was sentenced this morning to 46 months in federal prison for his role in a scheme to smuggle rifle scopes and other tactical gear to Syria in violation of the International Emergency Economic Powers Act and sanctions imposed on Syria by the United States.
Rasheed Al Jijakli, 57, a Syrian-born naturalized U.S. citizen who resides in Walnut, was sentenced by United States District Judge James V. Selna.
During today’s sentencing hearing, Judge Selna agreed with prosecutors that the goods Jijakli took to Syria were “instruments of death.”
Jijakli pleaded guilty to a felony conspiracy charge on August 13 and admitted he conspired with others to export tactical gear from the United States to Syria. That tactical gear included U.S.-origin laser boresighters, and day- and night-vision rifle scopes.
From June through July of 2012, Jijakli and a co-conspirator purchased the Tactical Gear. On July 17, 2012, Jijakli traveled with the tactical gear from Los Angeles to Istanbul with the intent that it would be provided to Syrian rebels training in Turkey and fighting in Syria.
Jijakli provided some of the tactical gear, specifically the laser boresighters, to a second co-conspirator, who Jijakli learned was a member of the militant group Ahrar Al-Sham. Jijakli also provided the goods to other armed Syrian insurgent groups in Syria and Turkey.
Jijakli and his co-conspirators knowingly provided at least 43 laser boresighters, 85 day rifle scopes, 30 night-vision rifle scopes, tactical flashlights, a digital monocular, five radios, and a bulletproof vest to Ahrar Al-Sham and other Syrian rebels in Syria, or with knowledge that the tactical gear was going to Syria.
Additionally, in August and September 2012, Jijakli directed co-conspirators to withdraw thousands of dollars from Palmyra Corporation, where Jijakli was the chief executive officer, to pay for tactical gear that would be provided to Syrian rebels. In his plea agreement, Jijakli specifically admitted directing that $17,000 from Palmyra be used to purchase tactical gear intended for Syrian rebels.
The case against Jijakli was the result of an investigation conducted by the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Department of Commerce’s Office of Export Enforcement, and IRS Criminal Investigation.
The case against Jijakli was prosecuted by Assistant United States Attorney Mark Takla of the Terrorism and Export Crimes Section in the United States Attorney’s Office and Trial Attorney Christian Ford of the Counterintelligence and Export Control Section of the Justice Department’s National Security Division.
Former Tax Lawyer Arrested on Tax Evasion ChargesRead the Press Release
LOS ANGELES – A Long Beach man who once worked as a tax and estate-planning lawyer has been charged by a federal grand jury with two felony counts of tax evasion for setting up shell companies to evade the payment of over $1.4 million he owed to the Internal Revenue Service.
James Roy McDaniel, 65, was arrested on Tuesday and today remains in federal custody without bond. At his arraignment on Tuesday, McDaniel entered a not guilty plea and was ordered to stand trial on February 12.
McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. The IRS subsequently assessed McDaniel more than $1.4 million in taxes, interest and penalties for the tax years 1997 through 2001, court papers state.
According to the tax evasion indictment returned by a federal grand jury earlier this month, McDaniel willfully attempted to evade paying his debt to the IRS by creating two shell companies – Davis Bell Consulting LLC and James Roy Consulting LLC – where he directed payments for tax and estate planning work he performed after being released from prison. During a scheme that allegedly ran from May 2008 until December 2012, McDaniel attempted to mislead federal tax authorities and conceal his income by directing other people to sign documents identifying themselves as the sole managing members of the shell companies. As part of the alleged scheme, McDaniel directed them to open bank accounts where he deposited checks for his tax and estate planning work, the indictment states.
McDaniel also allegedly applied for a Taxpayer Identification Number for James Roy Consulting in the name of another person without obtaining that person’s consent.
The indictment also alleges that McDaniel failed to file a federal income tax return for 2012 and failed to pay $45,725 in taxes due for that year.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
If he were to be convicted of the two tax evasion charges alleged in the indictment, McDaniel would face a statutory maximum sentence of 10 years in federal prison.
This case is being investigated by IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorney Ruth Pinkel of the Public Corruption and Civil Rights Section.
Criminal Charges Filed in Los Angeles and Alaska in Conjunction with Seizures of 15 Websites Offering DDoS-For-Hire ServicesRead the Press Release
LOS ANGELES – The Justice Department today announced the seizure of 15 internet domains associated with DDoS-for-hire services, as well as criminal charges against three defendants who facilitated the computer attack platforms.
The sites, which offered what are often called “booter” or “stresser” services, allowed paying users to launch powerful distributed denial-of-service, or DDoS, attacks that flood targeted computers with information and prevent them from being able to access the internet. Booter services such as those named in this action allegedly cause attacks on a wide array of victims in the United States and abroad, including financial institutions, universities, internet service providers, government systems, and various gaming platforms.
The action against the DDoS services comes the week before the Christmas holiday, a period historically plagued by prolific DDoS attacks in the gaming world.
Pursuant to seizure warrants issued by a federal judge in Los Angeles, the FBI on Wednesday seized the domains of 15 booter services, which represent some of the world’s leading DDoS-for-hire services. Among these sites were critical-boot.com, ragebooter.com, downthem.org, and quantumstress.net.
According to the affidavit in support of the warrant authorizing the seizure of the 15 websites, these services offered easy access to attack infrastructure, payment options that included Bitcoin, and were relatively low cost. Each of the services was tested by the FBI, which verified those DDoS attack services offered through each of the seized websites. While testing the various services, the FBI determined that these types of services can and have caused disruptions of networks at all levels.
In conjunction with the seizure warrants, federal prosecutors in Los Angeles on Wednesday filed a criminal complaint that charges Matthew Gatrel, 30, of St. Charles, Illinois, and Juan Martinez, 25, of Pasadena, California, with conspiring to violate the Computer Fraud and Abuse Act through the operation of services known as Downthem and Ampnode. According to affidavit in support of the criminal complaint, Downthem offered DDoS services directly to users who wished to attack other internet users, and Ampnode offered resources designed to facilitate the creation of standalone DDoS services by customers. Between October 2014 and November 2018, Downthem’s database showed over 2000 customer subscriptions, and had been used to conduct, or attempt to conduct, over 200,000 DDoS attacks.
“The attack-for-hire websites targeted in this investigation offered customers the ability to disrupt computer networks on a massive scale, undermining the internet infrastructure on which we all rely,” said United States Attorney Nick Hanna. “While this week’s crackdown will have a significant impact on this burgeoning criminal industry, there are other sites offering these services – and we will continue our efforts to rid the internet of these websites. We are committed to seeing the internet remain a forum for the free and unfettered exchange of information.”
In a case related to Ampnode, the United States Attorney’s Office for the District of Alaska last week charged David Bukoski, 23, of Hanover Township, Pennsylvania, with aiding and abetting computer intrusions. The charging documents allege that Bukoski operated Quantum Stresser, one of the longest-running DDoS services in operation. As of late last month, Quantum had over 80,000 customer subscriptions dating back to its launch in 2012. In 2018 alone, Quantum was used to launch over 50,000 actual or attempted DDoS attacks targeting victims worldwide, including victims in Alaska and California.
“DDoS for hire services such as these pose a significant national threat,” said Bryan Schroder, the United States Attorney for the District of Alaska. “Coordinated investigations and prosecutions such as these demonstrate the importance of cross-District collaboration and coordination with public sector partners.”
“DDoS attacks are serious crimes that can cause real harm, as shown by the wide range of sectors allegedly victimized in this case,” said Assistant Attorney General Bryan A. Benczkowski, of the Justice Department’s Criminal Division. “The operators and the customers of DDoS-for-hire services should be on notice that the Department of Justice will aggressively prosecute those who perpetrate malicious cyber attacks.”
“Whether you launch the DDoS attack or hire a DDoS service to do it for you, the FBI considers it criminal activity,” said FBI Assistant Director Matthew Gorham. “Working with our industry and law enforcement partners, the FBI will identify and potentially prosecute you for this activity. We will use every tool at our disposal to combat all forms of cybercrime including DDoS activity. We encourage all DDoS victims to contact your local FBI field office or file a complaint with the FBI’s Internet Crime Complaint Center at www.ic3.gov.”
Over the past five years, booter and stresser services have grown as an increasingly prevalent class of DDoS attack tools. These types of DDoS attacks are so named because they result in the “booting” or dropping of the victim-targeted website from the internet. Booter-based DDoS attack tools offer a low barrier to entry for users looking to engage in cyber criminal activity, representing an effective advance in internet attack technology.
The charges in the indictment and criminal complaint are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The criminal case against Gatrel and Martinez is being prosecuted by Assistant United States Attorney Cameron Schroeder of the Cyber and Intellectual Property Crimes Section in Los Angeles.
Assistant United States Attorney Jonathan Galatzan of the Asset Forfeiture Section is handling the seizure of the domains.
The case against Bukoski is being prosecuted by Assistant U.S. Attorney Adam Alexander of the District of Alaska and Trial Attorney C. Alden Pelker of the Computer Crime and Intellectual Property Section (CCIPS) of the Justice Department’s Criminal Division. CCIPS and the two Districts are also coordinating cryptocurrency seizures.
The cases announced today are being investigated by the FBI’s Anchorage Field Office and the FBI’s Cyber Initiative and Resource Fusion Unit (CIRFU). Additional assistance was provided by the FBI’s Chicago, Los Angeles, Memphis, and Philadelphia Field Offices and the Scranton, Pennsylvania Resident Agency; the Major Cyber Crimes Unit, Global Operations and Targeting Unit, and Money Laundering Intelligence Unit of FBI Headquarters; Defense Criminal Investigative Service; and the U.S. Attorney’s Offices for the Eastern District of Pennsylvania, Middle District of Pennsylvania, Western District of Tennessee, and the Northern District of Illinois. The United Kingdom’s National Crime Agency, the Dutch National Police – National High Tech Crime Unit, and the National Cyber-Forensics & Training Alliance made invaluable contributions. Akamai, Bell Aliant, Cloudflare, Entertainment Software Association, Flashpoint, Google, Oath, Inc., Oracle, Palo Alto Networks Unit 42, PayPal, Riot Games, ShadowDragon, SpyCloud, University of Cambridge, and other valued private sector partners provided additional assistance.
California Man Sentenced to Nearly 4 Years in Federal Prison for Scheme to Smuggle Rifle Scopes and Tactical Equipment to SyriaRead the Press Release
Rasheed Al Jijakli, 57, a Syrian-born naturalized U.S. citizen who resides in Walnut, California, was sentenced today to 46 months in prison for his role in a scheme to smuggle rifle scopes and other tactical gear to Syria in violation of the International Emergency Economic Powers Act and sanctions imposed on Syria by the United States.
The announcement was made by Assistant Attorney General for National Security John C. Demers and U.S. Attorney Nicola T. Hanna for the Central District of California. The sentence was issued by U.S. District Judge James V. Selna.
During today’s sentencing hearing, Judge Selna agreed with prosecutors that the goods Jijakli took to Syria were “instruments of death.”
Jijakli pleaded guilty to the felony offense on Aug. 13 and admitted he conspired with others to export tactical gear from the United States to Syria. That tactical gear included U.S.-origin laser boresighters, and day- and night-vision rifle scopes.
From June through July of 2012, Jijakli and a co-conspirator purchased the tactical gear. On July 17, 2012, Jijakli traveled with the tactical gear from Los Angeles to Istanbul with the intent that it would be provided to Syrian rebels training in Turkey and fighting in Syria.
Jijakli provided some of the tactical gear, specifically the laser boresighters, to a second co-conspirator, who Jijakli learned was a member of the militant group Ahrar Al-Sham. Jijakli also provided the goods to other armed Syrian insurgent groups in Syria and Turkey.
Jijakli and his co-conspirators knowingly provided at least 43 laser boresighters, 85 day rifle scopes, 30 night-vision rifle scopes, tactical flashlights, a digital monocular, five radios, and one bulletproof vest to Ahrar Al-Sham and other Syrian rebels in Syria, or with knowledge that the tactical gear was going to Syria.
Additionally, in August and September 2012, Jijakli directed co-conspirators to withdraw thousands of dollars from Palmyra Corporation, where Jijakli was the chief executive officer, to pay for tactical gear that would be provided to Syrian rebels. In his plea agreement, Jijakli specifically admitted directing that $17,000 from Palmyra be used to purchase tactical gear intended for Syrian rebels.
The case against Jijakli was the result of an investigation conducted by the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Department of Commerce’s Office of Export Enforcement, and IRS Criminal Investigation.
The case against Jijakli was prosecuted by Assistant U.S. Attorney Mark Takla of the Central District of California’s Terrorism and Export Crimes Section, and Trial Attorney Christian Ford of the National Security Division’s Counterintelligence and Export Control Section.
Two Men Linked to Santa Fe Springs Street Gang Convicted of Federal Racketeering and Drug ChargesRead the Press Release
LOS ANGELES – Two members of the Canta Ranas Organization, a Santa Fe Springs-based criminal enterprise linked to the Mexican Mafia, have been found guilty by a jury of multiple federal offenses, including racketeering, narcotics and firearms charges.
Henry Jerry Mendoza, 39, who is also know by a number of monikers including “Spanky,” of Bellflower, and Jaime Andrew Villalba, 38, a.k.a. “Puppet,” of Hemet, each was found guilty on December 14 of conspiracy to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act and being a felon in possession of a firearm and ammunition. Mendoza also was found guilty of a drug trafficking conspiracy, possession of methamphetamine and of carrying a firearm during and in relation to a crime of violence or drug trafficking crime.
Mendoza and Villalba were convicted in the third recent trial against members of Canta Ranas, a multi-generational street gang that primarily operates in Santa Fe Springs and Whittier. The criminal organization is involved in murder, burglary, extortion, money laundering and drug distribution, according to court documents.
The evidence presented to the jury at Mendoza and Villalba’s trial showed that Mendoza sold drugs and possessed firearms in furtherance of the criminal enterprise and, at the time of his arrest in December 2016, he possessed multiple bags of methamphetamine and a loaded 9-mm handgun. Villalba stored weapons and ammunition on behalf of the racketeering organization, brokered deals for gun magazines and ammunition for one of the leaders of the gang, and committed assaults on the gang’s behalf, according to trial evidence. In June 2013, Villalba assaulted someone he believed belonged to a rival street gang, hitting the unconscious man with a bottle, and, the following month, Villalba was found in possession of approximately 10 firearms, including assault rifles, shot guns, handguns and a large amount of ammunition for each firearm, the trial evidence showed.
United States District Judge Percy Anderson has scheduled March 11, 2019 sentencing hearings for both defendants, where each will face potential sentences of life imprisonment on the RICO count. Mendoza faces a mandatory minimum sentence of 25 years in federal prison on the drug trafficking conspiracy and firearms charges because he has a prior conviction for a felony drug offense.
Over the past few months, federal juries have convicted seven members of the Canta Ranas Organization. Following trials in August and September, five Canta Ranas-linked defendants were found guilty of racketeering conspiracy and other counts. All three trials this year arose from a federal grand jury indictment charging 51 defendants that was the result of “Operation Frog Legs.”
Operation Frog Legs is the result of an investigation by the Southern California Drug Task Force, which is led by the Drug Enforcement Administration as part of the High Intensity Drug Trafficking Area (HIDTA) initiative. The Task Force members that participated in Operation Frog Legs were U.S. Immigration and Customs Enforcement’s Homeland Security Investigation, the Whittier Police Department, the Los Angeles County Sheriff’s Department, IRS Criminal Investigation, and the California Department of Corrections and Rehabilitation, Office of Correctional Safety, Special Service Unit.
This trial was prosecuted by Assistant United States Attorneys Lindsay Bailey, Victoria Degtyareva and Chelsea Norell of the Organized Crime Drug Enforcement Task Force Section.
Two L.A. Fashion District Executives and Their Import-Export Company Sentenced in Scheme to Launder Money for Drug CartelsRead the Press Release
LOS ANGELES – Morad “Ben” Neman and Hersel Neman – the owners and top executives of Pacific Eurotex Corp., an import-export textile company based in the Los Angeles Fashion District – each received federal prison sentences today for their roles in a “Black Market Peso Exchange” scheme to launder money for international drug cartels.
Morad “Ben” Neman, 58 of Westwood, the chief executive officer of Pacific Eurotex, was sentenced to two years in federal prison, to be followed by six months of home confinement. In addition to the prison term, Neman is jointly liable with the company to forfeit $3,178,230 million to the government.
Morad Neman pleaded guilty to conspiring to structure monetary transactions with a domestic financial institution, conspiring to defraud the United States by obstructing the lawful functions of the Internal Revenue Service, subscribing to and filing a false 2013 tax return that understated income he received from Pacific Eurotex, and aiding and assisting in the filing of another false 2013 tax return. When he pleaded guilty in December 2017, Morad Neman admitted to structuring frequent deposits of the cash in amounts less than $10,000 to avoid a bank reporting requirement that would have triggered the attention of law enforcement.
Hersel Neman, 59 of Beverly Hills, the chief financial officer of Pacific Eurotex, was sentenced to 18 months in federal prison, to be followed by six months of home confinement. He pleaded guilty to conspiring to launder money, conspiring to defraud the United States by obstructing the lawful functions of the IRS, and subscribing to and filing a false tax return. Hersel Neman is liable to forfeit approximately $370,000.
Pacific Eurotex itself was sentenced to three years of probation and was ordered to pay a fine of $400,000 for its conviction on charges of conspiring to launder money and conspiring to structure monetary transactions with a domestic financial institution.
Hersel Neman and Pacific Eurotex pleaded guilty in December 2017 to using the company to launder large amounts of cash that they deliberately ignored were drug trafficking proceeds. Both defendants admitted in court papers that they did not report to federal officials the receipt of the bulk cash.
The Neman brothers and their company were sentenced by United States District Judge John A. Kronstadt, who will issue a final order related to criminal fines for the three defendants.
This case was the result of an investigation into Fashion District businesses using “Black Market Peso Exchange” schemes to launder narcotics proceeds for international drug cartels. The Nemans were arrested in September 2014 on the same day that approximately 1,000 law enforcement officials executed dozens of search warrants in the Fashion District and seized more than $100 million in laundered drug money.
The Black Market Peso Exchange is one of the largest mechanisms by which international drug cartels obtain the proceeds of illicit drug sales in the United States, according to court documents. This type of scheme allows drug traffickers who have their proceeds in U.S. currency to convert it to a different currency, such as Mexican pesos, via the sale of goods shipped across international borders.
In a typical Black Market Peso Exchange scheme, drug cartels sell their cash proceeds to a money broker who finds businesses in a foreign country that purchase goods from U.S. companies and who need dollars to pay for these goods. The money broker then arranges for delivery of the illegally-obtained dollars to U.S.-based vendors such as Pacific Eurotex. These dollars are then used to pay for the goods purchased by the foreign businesses. Once the goods are shipped to and sold by the foreign business, the money – now in the local, non-U.S. currency – is turned over to the money broker, who then pays the drug cartel in the foreign country’s local currency.
Pacific Eurotex received, laundered and structured approximately $370,000 in bulk cash delivered on four separate occasions over 2½ months in 2013 by an undercover agent posing as a money courier, according to court documents. The company laundered this money after being specifically advised by special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations that bulk cash payments were frequently derived from illegal activity and that it was required to report cash transactions involving more than $10,000 in currency.
The defendants admitted in court documents that they instructed other people to deposit the cash into the personal Wells Fargo bank account of Hersel Neman’s wife. In total, 384 deposits totaling nearly $3.18 million were divided into increments of less than $10,000 to prevent Wells Fargo from filing a currency transaction report with the U.S. Treasury Department, according to court documents.
In September 2018, Mehran Khalili, 50, of Beverly Hills, who is a brother-in-law of Hersel Neman, was found guilty by a federal judge of one count of conspiracy to structure financial transactions to avoid detection by law enforcement. He faces a statutory maximum sentence of 10 years in federal prison when he is sentenced by Judge Kronstadt on January 31.
Another defendant in the case, Alma Villalobos, 56, of Arleta, pleaded guilty in March 2018 to one felony count of conspiracy to cause Pacific Eurotex to fail to file reports of currency transactions over $10,000 in a non-financial trade or business. She also faces a statutory maximum sentence of 10 years in prison at her sentencing hearing, which is scheduled for January 24.
The investigation into Pacific Eurotex was conducted by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorneys Julie J. Shemitz, Jamie A. Lang and Puneet V. Kakkar of the Organized Crime Drug Enforcement Task Force.
O.C. Doctor Arrested on Federal Narcotics Charges that Allege Prescriptions to ‘Patients’ who Suffered Fatal OverdosesRead the Press Release
SANTA ANA, California – Special Agents with the Drug Enforcement Administration this morning arrested an Orange County doctor on federal charges that allege he illegally distributed opioid and other powerful narcotics by writing prescriptions for “patients” without medical examinations and to at least five individuals who suffered overdose deaths. One man who allegedly obtained prescriptions from the doctor was involved in a car accident last month that killed a bicyclist who was a captain with the Costa Mesa Fire & Rescue Department.
Dzung Ahn Pham, 57, of Tustin, who owns Irvine Village Urgent Care, was arrested pursuant to a criminal complaint that charges him with two counts of illegally distributing oxycodone. The complaint alleges that Pham issued prescriptions for the controlled substance outside the usual course of professional practice and without a legitimate medical purpose.
The affidavit in support of the criminal complaint alleges that Pham was selling prescriptions to “patients” who were drug addicts and/or who were selling the drugs on the black market. A review of a state-maintained database shows that Pham issued “an extremely high amount” of prescriptions over a three-year period, and the types of drugs prescribed to certain patients would lead to “higher risks for addiction, overdose and overdose death,” according to the affidavit. Investigators learned that a CVS pharmacy in Irvine stopped accepting prescriptions from Pham more than five years ago when the doctor could not justify the number of opioid pills he was prescribing to individual patients.
During two undercover operations this past summer that are discussed in the affidavit, a DEA agent quickly and easily obtained prescriptions for narcotics, including “a triple threat,” also referred to as a “Holy Trinity, [which] is the combined use of an opioid (such as hydrocodone), a benzodiazepine (such as Valium), and carisoprodol (a muscle relaxer like Soma).” Pham allegedly steered the undercover agent to an Irvine pharmacy that filled many of his prescriptions.
The affidavit contains text messages in which “patients” seek prescriptions, sometimes asking for specific quantities of particular narcotics in specific dosages. “[A]t least 84 of those patients had their prescriptions filled on the same day or within the next two days of their text messages,” according to the affidavit. “The drugs requested include, but are not limited to, adderall, oxycodone, tramadol, suboxone, norco, soma, alprazolam, and hydrocodone bitartrate-acetaminophen.”
From 2014 through 2017, at least five people who received and filled prescriptions from Pham died of drug overdoses. A Mission Viejo man, who is currently facing state murder charges in the November 3 death of Costa Mesa Fire & Rescue Captain Mike Kreza, was allegedly under the influence of Pham-prescribed drugs at the time of the incident. That man told investigators “that he was on medications prescribed by Pham,” and several prescription bottles with Pham’s name were found in the defendant’s vehicle after the incident, according to the affidavit.
The affidavit also details a text message sent by Pham, who expressed concern after receiving information that the individual who fatally shot 12 people last month at the Borderline Bar and Grill in Thousand Oaks had in his possession prescriptions for someone else, but which Pham had prescribed.
“This case clearly and tragically illustrates the dangers of drug dealers armed with prescription pads,” said United States Attorney Nick Hanna. “This doctor is accused of flooding Southern California with huge quantities of opioids and other dangerous narcotics by writing prescriptions for drugs he knew would be diverted to the street. Prosecutors in my office, working with their law enforcement partners, will tirelessly pursue everyone involved in the trafficking of opioids as part of our persistent and ongoing efforts to stop the trail of misery that follows these dangerous drugs.”
“Today’s arrest of Dr. Pham was accomplished through the tireless work of DEA agents and federal prosecutors,” said DEA Los Angeles Associate Special Agent in Charge William D. Bodner. “This arrest should serve as a warning to any physician who utilizes their position to traffic opioids. Dr. Pham’s arrest coincides with today’s press conference announcing DEA’s commitment to opioid and overdose prevention with its community and law enforcement partners.”
The specific narcotics charge in the complaint relates to oxycodone prescriptions Pham allegedly issued to a woman that Pham never saw as a patient. The affidavit, however, describes that Pham had regularly prescribed oxycodone to the woman’s husband, including within days of the prescriptions he allegedly wrote to the woman.
The criminal complaint alleges that Pham generated large amounts of cash from the operation of Irvine Village Urgent Care by charging between $100 and $150 per office visit. Between 2013 and September 2018, Pham deposited over $5 million, mostly in cash, into bank accounts held by Pham and his wife, according to the affidavit, which notes the he also deposited approximately $1.7 million, likely derived from insurance payments, into a business bank account.
Pham is expected to make his first court appearance this afternoon in United States District Court in Santa Ana.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
If he were to be convicted of the drug-trafficking charges alleged in the complaint, Pham would face a statutory maximum sentence of 40 years in federal prison.
The case against Pham is being investigated by the Drug Enforcement Administration’s Tactical Diversion Squad, the Irvine Police Department, and IRS Criminal Investigation.
This matter is being prosecuted by Assistant United States Attorney Brett Sagel of the Santa Ana Branch Office.
Credit Union Employee Found Guilty of Fraudulently Obtaining Lines of Credit Worth over $2.7 Million for Her Online BoyfriendRead the Press Release
LOS ANGELES – An Orange County woman who used her position at a Hawthorne-based credit union to secretly open more than 25 fraudulent lines of credit for her online boyfriend, extending more than $2.7 million in credit to him, has been found guilty of 15 federal charges, including fraud and conspiracy.
Indira Mohabir, 42, of La Palma, was found guilty on Monday after a three-day jury trial. The jury found Mohabir guilty on all 15 counts in a grand jury indictment, which charged her with one count of conspiracy to commit insider fraud and financial institution fraud, eight counts of insider fraud on a federally-insured financial institution and six counts of financial institution fraud.
Mohabir is scheduled to be sentenced by United States District Judge André Birotte Jr. on April 5. Mohabir faces a statutory maximum penalty of five years in federal prison on the conspiracy count and a maximum of 30 years in prison for each of the fraud charges.
Criminal charges are still pending against Phillip Cook, 51, who currently resides in Las Vegas, and who was able to withdraw approximately $1 million of the illicitly obtained funds before the scheme was discovered.
Mohabir, who worked as a business loan processor at Western Federal Credit Union, now doing business as Unify Financial Credit Union, began a romantic online relationship with Cook in approximately November 2014, according to text messages and emails that were introduced at trial. Although the two did not meet in person during the relevant time period, they quickly began daily correspondence by text, email and phone, exchanging messages and talking multiple times a day.
Their romantic discussions were interwoven with discussions of how to open credit lines at the credit union, and Mohabir agreed to use her position to help Cook open these credit lines. According to testimony from Mohabir’s supervisors and a fraud investigator at the credit union, which was corroborated by bank records, Mohabir opened lines of credit outside of her authority and without the necessary approvals from the credit union, and she overrode and bypassed the credit union’s internal controls to get the credit lines opened.
In exchange for Mohabir’s agreement to open the lines of credit and her assistance in keeping the credit lines hidden, Cook promised to take Mohabir on exotic trips, and he sent her flowers and money, including a $50,000 check drawn on the credit lines that she opened for him – a check that was intercepted at the credit union, according to evidence introduced at trial and court documents.
The scheme started in late November 2014 and lasted about two months, but most of the credit lines were established – or were doubled – over a few days in January 2015.
This case is the result of an ongoing investigation being conducted by the FBI and the Federal Deposit Insurance Corporation, Office of Inspector General. The Hawthorne Police Department provided substantial assistance.
The case against Cook and Mohabir is being prosecuted by Assistant U.S. Attorneys Kerry L. Quinn and Scott Paetty of the Major Frauds Section.
Pasadena Man Who Trafficked Narcotics by Airplane Luggage from LAX to Detroit Sentenced to 13½ Years in Federal PrisonRead the Press Release
LOS ANGELES – A Pasadena man who organized and directed a conspiracy to ship multi-kilogram quantities of heroin and cocaine in airplane luggage from Los Angeles to Detroit was sentenced today to 162 months in federal prison.
Kevin Blair, a.k.a. “Wood,” 47, who pleaded guilty in September to one count of conspiracy to possess with intent to distribute cocaine and heroin, was sentenced by United States District Judge Christina A. Snyder.
Blair obtained heroin and cocaine from his supply source in Los Angeles, arranged to have drug couriers from Detroit fly to Los Angeles, and then had them return to Detroit with the narcotics concealed in their luggage, according to court documents. Blair also directed a co-conspirator to book airline tickets with his credit cards and directed another co-conspirator to arrange for the couriers’ ground transportation and lodging.
A co-defendant, Delano Leflore, 39, a.k.a. “Bop Bop,” of Detroit, was sentenced in October to 10 years in federal prison for his role in the drug trafficking conspiracy after he pleaded guilty to the same narcotics conspiracy.
Kennsha Mason, 30, of Detroit, one of Blair’s drug couriers, was sentenced in October to 27 months in federal prison after she too pleaded guilty to one count of conspiracy to possess with intent to distribute cocaine and heroin. According to court documents, Mason was hired to transport narcotics from Detroit to Los Angeles. During one trip to Los Angeles in early March 2017, Mason travelled to a townhouse on South Oakland Avenue in Pasadena, where Blair supplied the narcotics that were discovered by law enforcement in her suitcase.
Another defendant, Gabriela Maria de Leon, 29, of Woodland Hills, pleaded guilty to possession with intent to distribute heroin and served 16 months in custody.
The case against Blair and Leflore followed the seizure of approximately two kilograms of heroin and approximately one kilogram of cocaine at Los Angeles International Airport on March 7, 2017 after the narcotics were discovered in checked luggage. Mason was arrested at the scene.
The DEA Los Angeles International Airport Narcotics Task Force, an inter-agency task force based at LAX, is conducting this investigation. The Pasadena Police Department provided assistance.
The Task Force also is comprised of representatives from the Federal Bureau of Investigation, the Los Angeles Airport Police, the Los Angeles Police Department and the Los Angeles County Sheriff’s Department. The Task Force also works closely with the United States Customs and Border Protection and the Transportation Security Administration on this case.
The case against Blair was prosecuted by Assistant United States Attorney Alexander Wyman of the Major Frauds Section and Jehan Pernas of the General Crimes Section.
Glendale Attorney Pleads Guilty to Using Client Trust Accounts to Launder More than $500,000 Generated by Tax Fraud SchemeRead the Press Release
SANTA ANA, California – A Glendale lawyer pleaded guilty today to federal charges of using his client trust bank accounts to launder proceeds of a $14 million tax fraud and identity theft scheme that used false identities and bogus Republic of Armenia passports to obtain tax refunds from the Internal Revenue Service.
Arthur S. Charchian, 44, entered guilty pleas to two felony counts this morning before United States District Judge Andrew J. Guilford. Charchian pleaded guilty to one count of money laundering and one count of making a false statement to the Social Security Administration.
According to his plea agreement, Charchian participated in a scheme in which he used two client trust bank accounts – which are supposed to be used by attorneys to segregate client funds from the attorney’s money – to launder approximately $549,000 of proceeds generated in a massive “stolen identity refund fraud” (SIRF) scheme.
The underlying SIRF scheme involved schemers who used false identities and fake Republic of Armenia passports to open hundreds of bank accounts that were used to launder funds fraudulently received from the IRS. A total of 17 defendants, including Charchian, have been publicly charged in that scheme, which involved approximately 7,000 fraudulent tax returns that cumulatively sought about $38 million in refunds. The IRS issued about $14 million in refunds. The fraudulent tax returns were filed and the bank accounts were opened with personal identifying information that had been stolen from thousands of victims. With Charchian’s guilty plea today, the federal investigation into the SIRF scheme has resulted in 11 convictions, and the seizure of four residential properties and more than $700,000. Four defendants remain fugitives from justice, and two defendants are scheduled to go on trial next year.
Charchian admitted in court that from 2012 to 2015 he laundered checks that constituted the proceeds of bank fraud, tax fraud, and identity theft. Charchian became involved in the underlying tax fraud scheme when banks flagged accounts being used by co-conspirators to launder proceeds of the SIRF scheme. Charchian received checks from co-conspirators, deposited those checks into his client trust accounts, and then wrote outgoing checks. He admitted charging a 10 percent fee to launder the money.
For example, on May 9, 2014, Charchian deposited a $57,168 cashier’s check payable to a fraudulent identity into his client trust bank account. Later that month, Charchian wrote an outgoing check from the same client trust bank account for $51,468 – the laundered funds, minus the 10 percent.
In total, Charchian laundered more than 15 incoming checks with a cumulative value of $549,352 that constituted fraud proceeds, he admitted in court. He also admitted to cashing checks from the client trust accounts and dispensing cash to the co-conspirators.
Charchian also admitted that on June 4, 2015, he wrote and signed a letter to the U.S. Social Security Administration on his law firm’s letterhead that falsely asserted the $51,468 check represented the proceeds of a “settlement” for a client. Charchian admitted he wrote the fraudulent letter to help a third party continue to receive Social Security benefits, which Social Security officials had reduced when they learned the person had received some of the money from the “settlement” check.
Judge Guilford scheduled a September 9, 2019 hearing to sentence Charchian, who faces a statutory maximum sentence of 15 years in prison.
This case against Charchian and the defendants in the SIRF scheme is being investigated by IRS Criminal Investigation, the Federal Bureau of Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
This case is being prosecuted by Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office.
Federal Law Enforcement Officer and Ex-Wife Convicted in Large-Scale Drug Trafficking SchemeRead the Press Release
LOS ANGELES – A U.S. Customs and Border Protection (CBP) officer who once worked at Los Angeles International Airport and his ex-wife have been found guilty by a federal jury of multiple felonies for participating in a narcotics distribution ring that moved hundreds of kilograms of cocaine, heroin and marijuana from the Los Angeles area to Chicago.
Manuel Porras Salas, 52, of Fontana, a 25-year veteran of CBP who is on indefinite suspension from the agency, and Sayda Powery Orellana, 50, also of Fontana, were found guilty Thursday afternoon following a five-day trial in United States District Court. Following the verdicts, the defendants were remanded into federal custody.
The jury found Salas and Orellana guilty of one count of conspiracy to distribute controlled substances, one count of conspiracy to commit money laundering, and one count of making false statements to law enforcement. The jury also found Orellana guilty of four additional money laundering counts.
According to court documents and the evidence presented to the jury, Salas, who also worked as a CBP officer at John Wayne and Ontario International airports, and Orellana used a commercial truck driver to move hundreds of kilograms of illegal drugs from California to Illinois. For their participation, the defendants received hundreds of thousands of dollars in compensation that they then laundered through bank accounts held in the name of Orellana and others. Orellana also gambled hundreds of thousands of dollars in the narcotics proceeds at a Southern California casino.
The investigation began when a commercial truck driver was stopped in Gallup, New Mexico on March 11, 2012, with about 260 kilograms of narcotics – including cocaine, heroin and marijuana – valued at approximately $1.5 million dollars. In addition to the narcotics, investigators found bank account numbers belonging to Orellana and a co-conspirator. The commercial truck driver, who later pleaded guilty to possession with intent to distribute controlled substances, told law enforcement that he worked with Salas and Orellana transporting narcotics to Chicago and had done so on multiple occasions. When he drove a truck to Chicago, he would receive cash proceeds for the narcotics, and then Salas and Orellana would direct him to deposit the money into various bank accounts – including an account in Orellana’s name.
When interviewed by federal agents, Salas and Orellana made false statements about their relationship with the truck driver and the source of the money in the bank accounts.
Salas and Orellana are scheduled to be sentenced by United States District Judge Cormac J. Carney on April 15, at which time each will face a mandatory minimum sentence of 10 years’ imprisonment and a statutory maximum sentence of life in federal prison.
The case against Salas and Orellana is the product of an investigation by U.S. Customs and Border Protection, Office of Professional Responsibility; the Drug Enforcement Administration; and IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorneys Joseph T. McNally and Aron Ketchel of the Violent and Organized Crime Section.
The U.S. Attorney’s Office for the District of New Mexico provided assistance in this matter.
Members of International Movie Piracy Ring Indicted in Scheme to Steal and Sell Pre-Release Hollywood Films and TV ShowsRead the Press Release
LOS ANGELES – A federal grand jury today indicted five men in four countries on federal charges alleging they distributed or offered for sale stolen digital versions of hundreds of motion pictures and television shows – including “Fifty Shades of Grey,” “The Expendables 3” and “The Walking Dead” – prior to their official release.
According to the indictment filed this afternoon in United States District Court, members of the hacking conspiracy broke into computer systems used by Hollywood film production companies and stole digital files, including feature films, trailers, television series episodes and audio tracks. The ring allegedly put the stolen files on a server in France, which contained more than 25,000 motion picture-related files, including the feature films “Godzilla,” “How to Train Your Dragon 2” and “Horrible Bosses 2.”
The defendants also illicitly acquired copies of films by other means, including recording cinema screenings and obtaining copies of motion pictures distributed to movie industry professionals, according to the indictment, which outlines criminal conduct beginning in early 2013 and continuing into the spring of 2015.
Once they obtained the movies and other content, the defendants allegedly altered the properties of the computer files to make them easier to distribute online. According to the indictment, they offered the stolen motion picture files for sale via private electronic communications, but they also uploaded stolen movies onto pirate movie websites. The defendants used a shared PayPal account to receive and distribute money from the sale of the pirated motion pictures, the indictment states.
In February 2015, one of the defendants allegedly told a prospective buyer that the ring would be offering copies of the films “Kingsman: The Secret Service” and “Fifty Shades of Grey” for sale on the same day as their U.S. theatrical release.
The defendants charged in the indictment are:
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Malik Luqman Farooq, 30, a resident of the United Kingdom, who allegedly sold more than a dozen stolen pre-release or contemporaneous-release films over a period of two years. Farooq was previously arrested by the City of London Police on related charges and is awaiting trial in the United Kingdom.
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Aditya Raj, believed to reside in India, who allegedly released pirated movies on the internet and helped arrange for the camcording of various films in India.
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Sam Nhance, believed to reside in Dubai, United Arab Emirates, who allegedly procured and maintained the computer server on which the co-conspirators stored and manipulated digital files for further distribution.
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Ghobhirajah Selvarajah, believed to reside in Malaysia, who was the registered owner of a PayPal account that the co-conspirators allegedly used to receive payment for sales of films and to pay for the storage server for the group.
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Jitesh Jadhav, also believed to reside in India, is alleged to have camcorded films in India that were sold by other members of the conspiracy, including screenings of “The Amazing Spider-Man 2,” “X-Men: Days of Future Past,” and “Dawn of the Planet of the Apes.”
The co-conspirators are also alleged to have previously operated a website used to distribute pirated “Bollywood” films, known as “BollyTNT.”
The defendants, who are not in U.S. custody, are named in a seven-count indictment that charges them with conspiracy to commit computer fraud, unauthorized access to a computer, aggravated identity theft, and copyright infringement.
The conspiracy, computer hacking, and copyright violation charges each carry a statutory maximum sentence of five years in federal prison. The charges of aggravated identity theft carry a mandatory two-year sentence to run consecutive to any other sentence imposed in the case.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
This case is being investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which received substantial assistance from the Police Intellectual Property Crime Unit of the City of London Police. U.S. authorities received cooperation from French and Canadian authorities in obtaining evidence stored abroad.
This case is being prosecuted by Assistant United States Attorney Cameron Schroeder of the Cyber & Intellectual Property Crimes Section.
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Investigation by Orange County Violent Gang Task Force Leads to Federal Narcotics and Firearms Charges Against 20 DefendantsRead the Press Release
SANTA ANA, California – Authorities with the Orange County Violent Gang Task Force this morning arrested nine defendants on federal narcotics and firearms charges stemming from an investigation into gang activity in Santa Ana and surrounding communities.
The arrests are the result of 10 federal indictments issued by a federal grand jury that charge a total of 20 defendants. The indictments allege a series of methamphetamine and heroin transactions, as well as firearms offenses. Seven of the defendants are believed to members of Alley Boys street gang, and four others are believed to be members of other Orange County gangs.
One of the indictments details an illicit narcotics-trafficking operation based in a budget hotel in Santa Ana where the drugs were sold and distributed. A second indictment alleges a transaction at an Anaheim hotel where two defendants allegedly sold a half-pound of methamphetamine to a prospective buyer for $3,500 in cash.
In addition to those arrested this morning, nine defendants are currently in custody on other charges, including two who were taken into custody yesterday on state charges. Two defendants are currently being sought by federal authorities.
“As part of our violent crime initiative, we are taking the fight to local street gangs such as the Alley Boys who destroy our communities with drugs and guns,” said United States Attorney Nick Hanna. “The federal criminal cases being announced today are the latest in a long string of investigations in which federal and state agencies have partnered to target the gang activity that takes a devastating toll on neighborhoods. Jurisdictional boundaries don’t matter to street gangs and drug traffickers, which is why my prosecutors and federal agents will continue to work with local authorities to improve public safety.”
“Street gangs and their members with extensive criminal histories continue to remain a menace to neighborhoods here in Orange County and throughout California,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “We will continue to work with our local and federal partners on the Orange County Violent Crimes Task Force to target the most notorious gangs who continue to wreak havoc on our communities.”
“Today’s announcement of ‘Operation King Midas’ is an example of our collective success in protecting our communities,” said Santa Ana Police Chief David Valentin. “The outcomes displayed here today are a direct reflection of the successful collaboration between the Santa Ana Police Department, the Federal Bureau of Investigation, and all our task force partners working toward a common goal – safety of all the good people of our communities. The residents of Santa Ana and Orange County have confidence in law enforcement and the results of this case provide evidence of why their trust and confidence exists. As the host agency of the FBI-sponsored Orange County Violent Gang Task Force, we are proud of this impactful collaboration.”
The 20 defendants named in the indictments unsealed this morning are:
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Sergio Soria, aka “Red,” 41, of Tustin, an alleged leader of the Highland gang, who is currently a fugitive;
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David Oscar Perez, aka “Jap,” 42, of Santa Ana;
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Hector Aburto Lopez, 27, of Santa Ana;
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Sammy Walter Gray, Junior, aka “Junior,” 35, of Santa Ana;
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Sylvia Gray, aka “Shiva,” 43, of Santa Ana;
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Deanna Lorraine Kirk, aka “Dee,” 48, of Bakersfield, who was already in custody;
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George Ramirez, aka “Lil’ One,” 39, of Santa Ana;
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Danny Castillo, aka “Taz,” 39, of Santa Ana;
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Melissa Ramirez, 35, of Santa Ana;
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Esteban Cervantes, aka “Hitman,” 43, of Santa Ana, who was already in custody and now faces federal firearms offenses that include selling a .45-caliber handgun to a person he thought was a convicted felon;
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Oscar Peralta Jimenez, aka “Toker,” 35, of Santa Ana, who was already in custody;
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Daniel Zaragoza, aka “Dough Boy,” 39, of Santa Ana, who was already in custody;
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Jennie Martinez, 27, of Santa Ana;
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Michael Herrera, aka “Oso,” 41, of Santa Ana, an Alley Boys “shotcaller” who is believed to be in Mexico at this time;
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Jaime Rojas, aka “Sneaky,” 41, of Garden Grove, who was already in custody;
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Cesar Reyes, aka “Spy,” 43, of Santa Ana, who was already in custody;
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Rene Cruz, aka “Grumpy,” 42, of Santa Ana, who was already in custody;
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Berenice Macias, aka “Bere,” 27, of Anaheim;
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Gregory Michael O’Brien, 50, of Santa Ana; and
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Frank Perez, 47, of Santa Ana, California.
(One additional defendant named in one of the indictments recently died and will be dismissed as a defendant in that case.)
The 11 defendants taken into custody this morning are expected to be arraigned on the indictments this afternoon in United States District Court in Santa Ana.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
These cases were investigated by the Orange County Violent Gang Task Force, which is made up of agents and officers with the Anaheim Police Department; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the California Department of Corrections – Parole; the Correctional Intelligence Task Force; the Drug Enforcement Administration; the Federal Bureau of Investigation; the Fullerton Police Department; IRS Criminal Investigation; the Orange County Probation Department; and the Santa Ana Police Department.
These cases are being prosecuted by Assistant United States Attorneys Greg Scally, Ann Luotto Wolf and Jake Nare of the Santa Ana Branch Office.
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United Nations Musical Director Arrested on Federal Wire Fraud Charge Alleging $750,000 Embezzlement from a Charity ConcertRead the Press Release
LOS ANGELES – A professional drummer who has served as a musical director for the United Nations and the Arsenio Hall television show has been arrested on a felony wire fraud charge for allegedly embezzling $750,000 from a charity concert for homeless children and using the pilfered money to buy his ex-wife a house in Calabasas.
Robin DiMaggio, 47, of Woodland Hills, was arrested Friday afternoon. He is scheduled to make his initial court appearance this afternoon in United States District Court.
According to the criminal complaint that led to his arrest, DiMaggio said he would assist the Peace for You Peace for Me Foundation, a Bulgaria-based non-profit organization, with organizing a charity concert in the Bulgarian capital of Sofia that was designed to raise money for and raise awareness of homeless and displaced children from conflict zones throughout the world. DiMaggio allegedly told the Foundation in a series of communications that he would be able to secure several celebrities to perform at the charity concert.
On August 5, 2016, the foundation’s financial sponsor allegedly wired $750,000 to a DiMaggio-controlled account as a guarantee for future payments related to artists performing at the charity concert. Prior to the money transfer, DiMaggio allegedly represented that he would not spend the money, which he would place in an escrow account and only later use to pay artists who would perform at the concert.
DiMaggio never set up the escrow account, the complaint alleges. Instead, several days later, he deposited the $750,000 into his personal bank account and used the money to make payments on cars, credit card debt and his living expenses. Within weeks of the wire transfer, DiMaggio allegedly used $251,370 of the funds to purchase a Calabasas home for his ex-wife. He also wired $150,000 of the funds to a bank account in the name of his company, DiMagic Entertainment, Inc. None of the transfers was sent to artists or their management in connection with the charity concert in Bulgaria, according to the complaint.
On August 10, 2016 – the day after he allegedly put the $750,000 into his personal bank account – DiMaggio emailed the foundation’s financial sponsor, stating that “an entire group of managers” believed the charity concert in Bulgaria should be postponed from October 1, 2016 to December 1, 2016, during the Bulgarian winter. When the foundation’s financial sponsor demanded the $750,000 back, DiMaggio wrote back that he had sent the deposit to the artists as agreed and that he would return the funds when the deposits were returned.
The financial sponsor sued DiMaggio in Los Angeles County Superior Court in December 2016 and during deposition DiMaggio testified that a third party had used DiMaggio’s email account to contact the foundation about the concert and had been responsible for the withdrawal of most of the funds, court papers state. However, DiMaggio also admitted at the deposition that he used $251,370 in funds to buy the Calabasas home for his ex-wife as a partial settlement of his spousal support.
Nine months later, DiMaggio filed a Chapter 7 bankruptcy petition. During DiMaggio’s bankruptcy court proceedings, the financial sponsor and his company, which also had filed claims against him in that court, were awarded $1.2 million.
A complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
If he were to be convicted of the wire fraud charge, DiMaggio would face a statutory maximum penalty of 20 years in federal prison.
This case has been investigated by the Federal Bureau of Investigation.
This case is being prosecuted by Assistant United States Attorney Poonam G. Kumar of the Major Frauds Section.
Fourth Defendant Arrested in Credit Card ‘Bust-Out’ Scheme that Spent $2 Million on Luxury Watches, Liquor, Cars and Cemetery PlotsRead the Press Release
LOS ANGELES – With the surrender this morning of the final defendant, federal authorities have taken into custody four people named in a grand jury indictment that alleges a “bust-out” scheme in which the defendants fraudulently charged nearly $2 million in less than a year to credit cards often opened with “synthetic identities.”
Gayane Hakobyan, 69, of Hollywood Hills, was taken into custody this morning and is expected to be arraigned on the indictment this afternoon in United States District Court.
Previously in this case, Mikayel Hovhannisyan, 36, of North Hollywood, surrendered on December 3. The other two defendants in the case – Mikayel Hmayakyan, 41, of Glendale; and Vahan Aloyan, 43, also of Glendale – were arrested on November 20. During their arraignments, all three of these defendants entered not guilty pleas and were freed on bond.
The defendants allegedly conspired to carry out a wide-ranging credit card fraud scheme, using the fraudulently obtained cards to purchase hundreds of thousands of dollars’ worth of liquor and luxury watches. The 22-count indictment alleges a bust-out scheme in which the defendants obtained credit cards – sometimes under their real names, but often with synthetic identities created with a combination of real and fictitious information – that were run up to the credit limit. Members of the scheme then allegedly “paid down” by submitting payments from accounts with insufficient funds or through fake accounts to restore the credit line, which allowed them to make additional purchases.
All four defendants allegedly used the fraudulently-obtained credit cards to purchase hundreds of thousands of dollars in alcoholic beverages on behalf of the now-closed Liquor Spot in Glendale, where Aloyan was a manager.
The indictment also charges Hmayakyan with bank fraud for using fraudulent credit cards in the names of various aliases – including “Liam Sarcozzy” – to purchase plots at Forest Lawn Cemetery in Glendale, which he then sold at a profit. Hmayakyan is also accused of conspiring with others to fraudulently apply for loans under an alias to obtain a Kia Optima and in a real person’s name for a 2016 Lexus GX460. The indictment alleges that Hmayakyan never intended to pay any credit card bills nor made any payments on the loans.
During the execution of a search warrant in 2016, law enforcement seized more than 37,000 bottles of alcoholic beverages, worth approximately $300,000, from the Liquor Spot. They also seized nearly $13,000 in U.S. currency from the store, as well as nearly $13,000 and 37 watches and other jewelry items from Aloyan’s residence.
All four defendants are charged with one count of conspiracy to commit bank fraud and 10 counts of bank fraud. Hmayakyan is charged separately with six additional counts of bank fraud. Hmayakyan and Aloyan also are charged with possessing “unauthorized access devices,” which included credit cards, debit cards, bank account information and Social Security numbers belonging to other people. Hmayakyan is also charged with two counts of aggravated identity theft.
Each count of bank fraud and conspiracy to commit bank fraud carries a statutory maximum penalty of 30 years in federal prison. The charge of possession of unauthorized access devices carries a statutory maximum penalty of 10 years. The aggravated identity theft charges carry a mandatory consecutive sentence of two years.
United States District Judge George H. Wu has scheduled a trial in this case for early January.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case was investigated by the United States Secret Service and the Glendale Police Department.
This case is being prosecuted by Assistant United States Attorney Poonam G. Kumar of the Major Fraud Section.
Hollywood-based Craigslist Drug Dealer Named in Federal Criminal Case Alleging Fentanyl Sale that Resulted in a Fatal OverdoseRead the Press Release
LOS ANGELES – A Hollywood man who allegedly sold fentanyl to buyers he met on Craigslist was indicted today on federal charges of selling the powerful synthetic opioid to a customer who suffered a fatal overdose.
Andrew Madi, 25, was charged by a federal grand jury with one count of distribution of a controlled substance resulting in death. If convicted, Madi faces a mandatory minimum sentence of 20 years in federal prison and a statutory maximum sentence of life imprisonment.
According to court documents filed in this case, Madi is an opioid dealer who used the Craigslist website to sell fentanyl to the victim on July 3, 2018. Fentanyl is a synthetic opioid that is 50 times more powerful than heroin.
Forensic review of the victim’s cellular telephone that his family provided to federal law enforcement showed that the victim contacted a narcotics dealer – who was later identified as Madi – after viewing a Craigslist post that Madi had created advertising the sale of “roofing tar,” which is code for black-tar heroin. The victim then communicated via text messages with Madi, court documents state, during which Madi allegedly said he was out of “roofing tar,” but had some “China white” that carried a money-back guarantee if the victim did not like the drugs.
Madi met with the victim at a shopping complex in West Hollywood, where he had .65 grams of “China white” ready for the victim, according to a criminal complaint filed last week.
Hours later, Madi allegedly contacted the victim via text message and asked how the victim was doing, to which the victim responded that the drug was “pretty powerful,” and noted that “this white does the job that’s for sure.” Madi allegedly gave the victim a tip on how to smoke the China white. The forensic review of the victim’s telephone showed that the victim did not purchase drugs from any other dealers prior to his death, court papers state.
On July 6, the victim’s father discovered the victim dead in his apartment. The Los Angeles County Coroner’s Office investigation concluded that the victim died of a fentanyl overdose. Coroner’s investigators also found in the victim’s bedroom a smoking instrument that bore fentanyl residue and a baggie that contained .32 grams of fentanyl.
Law enforcement officials investigating the case later discovered that the “roofing tar” Craigslist advertisement was linked to Madi, and identified other Craigslist posts dating to at least March 2018 in which Madi advertised the sale of fentanyl, heroin and Xanax, according to the complaint.
Madi was arrested pursuant to the criminal complaint on December 3. At his initial court appearance that day, he was ordered held without bond by a United States Magistrate Judge.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Madi’s arraignment is scheduled for December 21.
This matter is being investigated by the Drug Enforcement Administration.
This case is being prosecuted by Assistant United States Attorney Benjamin Barron of the Organized Crime Drug Enforcement Task Force.
Medical Device Maker ev3 to Plead Guilty and Pay $17.9 Million for Distributing Adulterated Device; Covidien Paid $13 Million to Resolve Civil Liability for Second DeviceRead the Press Release
WASHINGTON – Minnesota-based medical device manufacturer ev3 Inc. has agreed to plead guilty to charges related to its neurovascular medical device, Onyx Liquid Embolic System, and pay $17.9 million, the Department of Justice announced today. Covidien LP, whose parent acquired ev3, separately paid $13 million to resolve False Claims Act allegations resulting from its alleged payment of kickbacks in connection with another medical device, the Solitaire mechanical thrombectomy device.
“The Department of Justice will hold corporations accountable when they violate laws designed to protect consumers and protect public funds,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “This resolution demonstrates the Department’s continued commitment to protect taxpayer dollars and deter companies from putting profits before patient safety.”
Pursuant to a criminal information filed today in U.S. District Court for the District of Massachusetts, ev3 will plead guilty to a misdemeanor charge in connection with the company’s distribution of adulterated Onyx, in violation of the Food, Drug and Cosmetic Act. As part of the criminal resolution, ev3 will pay a criminal fine of $11.9 million and will forfeit $6 million.
According to the plea agreement, Onyx was approved by the U.S. Food and Drug Administration (FDA) as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain. The FDA has approved Onyx only for use inside the brain. Despite the FDA’s limited approval of Onyx, from 2005 to 2009, ev3 sales representatives encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain. The company’s sales force continued to tout unapproved and potentially dangerous uses of Onyx even after FDA officials told ev3 executives that they had specific safety concerns regarding uses of Onyx outside the brain at a 2008 meeting. FDA officials told ev3 executives that a study would be required to gain approval for uses of Onyx outside the brain and to ensure that the benefits of the device outweighed the risks.
Rather than conduct a study to ensure the safety and effectiveness of Onyx for uses outside the brain, ev3’s sales representatives sometimes attended surgical procedures and provided explicit instructions to surgeons regarding how to use Onyx for unapproved surgical procedures outside the brain, including in quantities far larger than what would be used in the brain. According to the criminal information, ev3’s management also set-up a system of sales quotas and bonuses that incentivized sales representatives to sell Onyx for unapproved uses and trained the sales force how to instruct physicians on unapproved uses of the device.
Covidien acquired ev3 in 2010, subsequent to the course of criminal conduct covered by the plea agreement. Covidien was acquired by Medtronic in 2015. Although Medtronic played no role in the criminal conduct, the company has agreed as part of the ev3 criminal resolution to implement new compensation structures to ensure the sales force responsible for marketing Onyx is not incentivized to sell the device for unapproved uses. Medtronic has also agreed to conduct compliance monitoring related to the Onyx sales and marketing components.
“ev3 disregarded laws designed to protect patient safety,” said United States Attorney Andrew E. Lelling for the District of Massachusetts. “The U.S. Attorney’s Office is committed to protecting patients and the integrity of federal health care programs, and we will continue to use our criminal authority to ensure that medical device manufacturers play by the rules that protect the public and ensure quality of care.”
“Unnecessarily putting patients at risk to increase profits, as the government alleged in this case, will not be tolerated,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue to work with our federal partners and hold accountable companies that use deceptive practices to increase their bottom line.”
“Consumers rely on the FDA to ensure that there’s a reasonable assurance of safety and effectiveness for the approved uses of medical devices. When manufacturers ignore the FDA’s regulatory authority, they undermine these crucial assurances and put lives at risk. Our Office of Criminal Investigations investigated a bad actor who marketed their device for unapproved uses, potentially harming patients,” said FDA Commissioner Scott Gottlieb, M.D. “The ev3 agreement to plead guilty announced by the U.S. Department of Justice today is an example of the FDA’s comprehensive commitment to ensuring the safety of medical devices and investigating companies that put patients at risk. A key part of our overall efforts to promote safe and effective innovation and protect patients is our enforcement work related to unsafe practices and bad actors. In addition to investigating such activities, we’re advancing other new policies to assure post-market device safety, as we recently outlined in our Medical Device Safety Action Plan. The FDA is also committed to fully implementing a new active surveillance system that will enable the agency to harness real-world evidence from medical records and patient registries to more swiftly identify device safety issues and enable more informed decision-making.”
Covidien separately has agreed to pay $13 million to resolve its civil liability for allegedly paying kickbacks to induce the use of its Solitaire mechanical thrombectomy device. The Solitaire device is intended to restore blood flow and retrieve a blood clot in certain stroke patients.
The United States alleged that Covidien caused false claims to be submitted to Medicare and Medicaid by paying kickbacks to hospitals and institutions to induce them to use Covidien’s Solitaire device. Specifically, the United States alleged that after receiving FDA clearance for the Solitaire device, Covidien launched a registry to pay hospitals and institutions to collect data about user experiences with the device. For about two years beginning in August 2014, Covidien paid a fee to hospitals and institutions that participated in a registry each time they used a new Solitaire device and reported certain clinical data about their practices for treating stroke patients to Covidien. Covidien solicited certain hospitals and institutions for the registry in order to convert their business from the competitor’s product and/or persuade them to continue using Covidien products, and knowingly and willfully used the registry as a means of increasing device sales.
The civil lawsuit was filed by Jeffrey Faatz, who worked for Covidien from 2012 to 2014, under the qui tam, or whistleblower, provisions of the False Claims Act. The Act allows private parties to sue on behalf of the government for false claims and to share in any recovery. As part of today’s resolution, Mr. Faatz will receive $2,015,000. The case is captioned United States ex rel. Doe v. Covidien PLC et al., Civil Action No. 8:15-cv-01796 AG (JCGx) (C.D. Cal.).
“Illegal kickbacks bring fraud and abuse into the Medicare system,” said U.S. Attorney Nicola T. Hanna for the Central District of California. “As part of an aggressive marketing campaign for its medical device, Covidien allegedly found a way to subsidize facilities that agreed to use its product – often convincing them not to use devices sold by another manufacturer. Patients deserve to know that their medical providers are offering the best possible treatments and are not making decisions based on increasing the bottom line for health care providers.”
The plea agreement was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Consumer Protection Branch, with assistance from the FDA’s Office of Chief Counsel. The criminal investigation was conducted by the FDA’s Office of Criminal Investigations, HHS’s Office of the Inspector General, the Department of Veteran’s Affairs, Office of the Inspector General, and the Federal Bureau of Investigations.
The civil settlement was the result of an investigation by the Justice Department’s Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Office for the Central District of California, and the Office of Inspector General at the U.S. Department of Health and Human Services. The False Claims Act claims resolved by the settlement are allegations only and there has been no determination of liability.
For more information about the Consumer Protection Branch, the Commercial Litigation Branch, Fraud Section, and their enforcement efforts, visit their websites at http://www.justice.gov/civil/consumer-protection-branch and https://www.justice.gov/civil/fraud-section.
Medical Device Maker ev3 to Plead Guilty and Pay $17.9 Million for Distributing Adulterated Device; Covidien Paid $13 Million to Resolve Civil Liability for Second DeviceRead the Press Release
Minnesota-based medical device manufacturer ev3 Inc. has agreed to plead guilty to charges related to its neurovascular medical device, Onyx Liquid Embolic System, and pay $17.9 million, the Department of Justice announced today. Covidien LP, whose parent acquired ev3, separately paid $13 million to resolve False Claims Act allegations resulting from its alleged payment of kickbacks in connection with another medical device, the Solitaire mechanical thrombectomy device.
“The Department of Justice will hold corporations accountable when they violate laws designed to protect consumers and protect public funds,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “This resolution demonstrates the Department’s continued commitment to protect taxpayer dollars and deter companies from putting profits before patient safety.”
Pursuant to a criminal information filed today in U.S. District Court for the District of Massachusetts, ev3 will plead guilty to a misdemeanor charge in connection with the company’s distribution of adulterated Onyx, in violation of the Food, Drug and Cosmetic Act. As part of the criminal resolution, ev3 will pay a criminal fine of $11.9 million and will forfeit $6 million.
According to the plea agreement, Onyx was approved by the U.S. Food and Drug Administration (FDA) as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain. The FDA has approved Onyx only for use inside the brain. Despite the FDA’s limited approval of Onyx, from 2005 to 2009, ev3 sales representatives encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain. The company’s sales force continued to tout unapproved and potentially dangerous uses of Onyx even after FDA officials told ev3 executives that they had specific safety concerns regarding uses of Onyx outside the brain at a 2008 meeting. FDA officials told ev3 executives that a study would be required to gain approval for uses of Onyx outside the brain and to ensure that the benefits of the device outweighed the risks.
Rather than conduct a study to ensure the safety and effectiveness of Onyx for uses outside the brain, ev3’s sales representatives sometimes attended surgical procedures and provided explicit instructions to surgeons regarding how to use Onyx for unapproved surgical procedures outside the brain, including in quantities far larger than what would be used in the brain. According to the criminal information, ev3’s management also set-up a system of sales quotas and bonuses that incentivized sales representatives to sell Onyx for unapproved uses and trained the sales force how to instruct physicians on unapproved uses of the device.
Covidien acquired ev3 in 2010, subsequent to the course of criminal conduct covered by the plea agreement. Covidien was acquired by Medtronic in 2015. Although Medtronic played no role in the criminal conduct, the company has agreed as part of the ev3 criminal resolution to implement new compensation structures to ensure the sales force responsible for marketing Onyx is not incentivized to sell the device for unapproved uses. Medtronic has also agreed to conduct compliance monitoring related to the Onyx sales and marketing components.
“ev3 disregarded laws designed to protect patient safety,” said United States Attorney Andrew E. Lelling for the District of Massachusetts. “The U.S. Attorney’s Office is committed to protecting patients and the integrity of federal health care programs, and we will continue to use our criminal authority to ensure that medical device manufacturers play by the rules that protect the public and ensure quality of care.”
“Unnecessarily putting patients at risk to increase profits, as the government alleged in this case, will not be tolerated,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue to work with our federal partners and hold accountable companies that use deceptive practices to increase their bottom line.”
“Consumers rely on the FDA to ensure that there’s a reasonable assurance of safety and effectiveness for the approved uses of medical devices. When manufacturers ignore the FDA’s regulatory authority, they undermine these crucial assurances and put lives at risk. Our Office of Criminal Investigations investigated a bad actor who marketed their device for unapproved uses, potentially harming patients,” said FDA Commissioner Scott Gottlieb, M.D. “The ev3 agreement to plead guilty announced by the U.S. Department of Justice today is an example of the FDA’s comprehensive commitment to ensuring the safety of medical devices and investigating companies that put patients at risk. A key part of our overall efforts to promote safe and effective innovation and protect patients is our enforcement work related to unsafe practices and bad actors. In addition to investigating such activities, we’re advancing other new policies to assure post-market device safety, as we recently outlined in our Medical Device Safety Action Plan. The FDA is also committed to fully implementing a new active surveillance system that will enable the agency to harness real-world evidence from medical records and patient registries to more swiftly identify device safety issues and enable more informed decision-making.”
Covidien separately has agreed to pay $13 million to resolve its civil liability for allegedly paying kickbacks to induce the use of its Solitaire mechanical thrombectomy device. The Solitaire device is intended to restore blood flow and retrieve a blood clot in certain stroke patients.
The United States alleged that Covidien caused false claims to be submitted to Medicare and Medicaid by paying kickbacks to hospitals and institutions to induce them to use Covidien’s Solitaire device. Specifically, the United States alleged that after receiving FDA clearance for the Solitaire device, Covidien launched a registry to pay hospitals and institutions to collect data about user experiences with the device. For about two years beginning in August 2014, Covidien paid a fee to hospitals and institutions that participated in a registry each time they used a new Solitaire device and reported certain clinical data about their practices for treating stroke patients to Covidien. Covidien solicited certain hospitals and institutions for the registry in order to convert their business from the competitor’s product and/or persuade them to continue using Covidien products, and knowingly and willfully used the registry as a means of increasing device sales.
The civil lawsuit was filed by Jeffrey Faatz, who worked for Covidien from 2012 to 2014, under the qui tam, or whistleblower, provisions of the False Claims Act. The Act allows private parties to sue on behalf of the government for false claims and to share in any recovery. As part of today’s resolution, Mr. Faatz will receive $2,015,000. The case is captioned United States ex rel. Doe v. Covidien PLC et al., Civil Action No. 8:15-cv-01796 AG (JCGx) (C.D. Cal.).
“Illegal kickbacks bring fraud and abuse into the Medicare system,” said U.S. Attorney Nicola T. Hanna for the Central District of California. “As part of an aggressive marketing campaign for its medical device, Covidien allegedly found a way to subsidize facilities that agreed to use its product – often convincing them not to use devices sold by another manufacturer. Patients deserve to know that their medical providers are offering the best possible treatments and are not making decisions based on increasing the bottom line for health care providers.”
The plea agreement was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Consumer Protection Branch, with assistance from the FDA’s Office of Chief Counsel. The criminal investigation was conducted by the FDA’s Office of Criminal Investigations, HHS’s Office of the Inspector General, the Department of Veteran’s Affairs, Office of the Inspector General, and the Federal Bureau of Investigations.
The civil settlement was the result of an investigation by the Justice Department’s Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Office for the Central District of California, and the Office of Inspector General at the U.S. Department of Health and Human Services. The False Claims Act claims resolved by the settlement are allegations only and there has been no determination of liability.
For more information about the Consumer Protection Branch, the Commercial Litigation Branch, Fraud Section, and their enforcement efforts, visit their websites at www.justice.gov/civil/consumer-protection-branch and www.justice.gov/civil/fraud-section.
Los Angeles-Area Clothing Outlets Owner Gets One-Year Prison Sentence for Failing to Report Nearly $4 Million in Income to IRSRead the Press Release
LOS ANGELES – A Downey man who operates second-hand clothing stores in Los Angeles County has been sentenced to one year and one day in federal prison for not reporting nearly $4 million in corporate income to the Internal Revenue Service.
Jose Martin Andrade Flores, 53, the owner and operator of American Superior Used Clothing, Inc., also was ordered by United States District Judge Christina A. Snyder on Monday to pay a $10,000 fine.
Flores pleaded guilty in September to one count of subscribing to a false corporation income tax return that he filed for American Superior for 2013. In that year, American Superior had income of approximately $3,440,769, but Flores instead reported only $2,505,183, omitting income of $935,586.
According to court documents, part of American Superior’s business model was to recycle used clothing, then resell it at retail stores located on Melrose Avenue, Hollywood, Echo Park and Pasadena. The company also engaged in bulk wholesale transactions with international buyers and sold merchandise at Rose Bowl swap meets and on East Los Angeles sidewalk locations.
From 2012 through 2016, Flores concealed from his corporate tax preparer cash sales and deposits into foreign bank accounts that were made on behalf of American Superior. As a result, the tax returns he filed for American Superior for those five years failed to report a total of $3,966,473 in income to the IRS.
In early 2017, Flores put American Superior up for sale, advertising the company’s sale on BizBuySell, a website where companies are bought and sold, according to the government’s sentencing memorandum. The advertisement listed a selling price of $3.5 million and estimated revenue of $4 million – twice the revenue the company reported to the IRS in its tax returns.
Prospective buyers then met in person with Flores on three occasions, and engaged in multiple telephone calls with him. During a May 2017 meeting with the prospective buyers, Flores said American Superior generated $800,000 to $1 million in cash each year, but reported only enough money on its tax returns to give the appearance it was breaking even. Flores also told them that he made between $300,000 and $400,000 each year from American Superior.
According to court documents, Flores also told the prospective buyers, “There is no better business than this business. When you report, you can always break even. It’s a recycling business. They won’t touch you.”
Two months later, the IRS executed a search warrant and seized the company’s true cash receipts that Flores had described and shown to the prospective buyers. The agents also seized cash and text messages sent to Flores from employees reporting the daily sales at one of his retail stores.
As part of this case, Flores agreed to pay all back taxes, interest and penalties associated with his willful failure to accurately report American Superior’s income. Flores has paid the IRS $1,189,331, which includes $439,632 in penalties.
This matter was investigated by IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorney Ranee Katzenstein, Chief of the Major Frauds Section.
Tax Lawyer Indicted for Obstructing IRS Investigation into Tax Returns that Sought More than $100 Million in RefundsRead the Press Release
SANTA ANA, California – A federal grand jury has charged a tax lawyer in a three-count indictment that alleges she attempted to obstruct a federal investigation into millions of dollars in refunds claimed in tax returns prepared by her accounting firm.
Margaret Quick, 63, a former resident of Newport Coast who currently lives in Paradise Valley, Arizona, was charged Wednesday with two counts of attempting to interfere with the administration of federal tax laws and one count of making false statements to the Internal Revenue Service. Quick is a Pennsylvania-licensed tax attorney and former partner at the Irvine-based Quick Rios & Associates, According to public records, Quick has a juris doctorate and obtained a masters of law degree with an emphasis in taxation.
According to the indictment, Quick tried to obstruct the IRS investigation into the Quick Rios-prepared tax returns that sought more than $100 million in total refunds via the IRS’s Telephone Excise Tax Refund (TETR) program. TETR was designed to compensate individuals and businesses that paid excess telephone excise taxes from 2003 to 2006.
The indictment alleges that Quick directed others to alter telephone invoices and other TETR-related documents, then providing those fraudulent documents to the IRS to support the TETR-based tax returns that her accounting firm had prepared and filed. The indictment also alleges that Quick lied to the IRS via email and in-person, when she made false statements to IRS agents during in-person meetings in 2011 and 2012. Quick also is charged with attempting to influence a witness’s testimony, both by email and telephone, in July 2018.
The other Quick Rios partner, certified public accountant Antonia Rios, pleaded guilty in October 2017 to obstructing the IRS investigation. During her change-of-plea hearing, Rios admitted that Quick Rios prepared federal tax returns for approximately 200 clients – including a number of Fortune 500 companies. Rios admitted that under Quick Rios’ fee arrangements with its clients, she and Quick stood to make millions of dollars in fees if the IRS ultimately paid out the TETR-based refunds. The IRS negotiated settlements with many of the firm’s clients. Rios is scheduled to be sentenced by United States District Judge Andrew J. Guilford on February 25.
Quick will be summonsed to appear in United States District Court in Santa Ana for an arraignment, which will likely be scheduled for early 2019.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
If convicted of all three charges in the Indictment, Quick would face a statutory maximum sentence of 11 years in federal prison and up to $750,000 in fines.
This case is being investigated by IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office.
Koreatown Consultant and Ex-California Dept. of Alcoholic Beverage Control Official Plead Guilty in Long-Running Bribery SchemeRead the Press Release
LOS ANGELES – A former official with the California Department of Alcoholic Beverage Control (ABC) and a Koreatown business consultant each pleaded guilty to federal criminal charges today in connection with a long-running scheme where the consultant paid tens of thousands of dollars in bribes to the ABC official in order to gain an unfair financial advantage for his consultancy company.
The two men who pleaded guilty before United States District Judge John A. Kronstadt were:
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Wilbur M. Salao, 46 of Bellflower, a 21-year ABC employee who was a district administrator in the Los Angeles Metro ABC office from 2010 until he left the agency in May 2017; and
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Scott Seo, also known as “Seung Hye Seo” and “Scott Hoon Seo,” 49 of San Pedro, who was employed by the ABC for 15 years before starting his consulting company, Alcoholic Beverage Control LLC (ABC LLC) in 2006.
Salao pleaded guilty to one count of conspiracy, and Seo pleaded guilty to one count of bribery.
According to court documents, Seo admitted paying Salao more than $28,000 in bribes and kickbacks from December 2011 through May 2016. As a long-time ABC official, Salao had the power to award businesses liquor licenses, direct investigations and punish bar owners in the Koreatown neighborhood of the city of Los Angeles.
In return for the bribes – which were usually paid in amounts ranging from $2,000 to $5,000 – Salao directed ABC enforcement operations and disciplinary actions against targeted businesses that Seo selected and expedited the liquor licensing process for Seo’s clients. For example, in December 2011, after the ABC raided a Koreatown establishment, Seo charged the business $60,000 in cash, some of which was used to pay Salao, who issued a temporary license that allowed the establishment to continue operating. Seo also admitted that, between 2014 and 2016, he sent Salao lists of businesses for the ABC to target and included suggested violations, such as operating after hours.
Salao also followed Seo’s direction by altering official documents and delaying the liquor licensing process for Seo’s competitors, according to court documents.
Salao also learned of impending enforcement actions in Koreatown by the ABC and the Los Angeles Police Department and provided information to Seo – including a photograph of an undercover LAPD officer. That information allowed Seo to warn his client, which was able to conceal its own separate illegal activity from police.
Salao’s assistance enriched Seo’s consultancy business by at least $60,000, according to Seo’s plea agreement.
Judge Kronstadt is scheduled to sentence Salao on March 28 and Seo on April 4.
At sentencing, Seo will face a statutory maximum sentence of 10 years in federal prison, and Salao will face a sentence of up to five years.
This case is part of an ongoing FBI investigation. Any member of the public who has knowledge about this case – or who would like to report similar allegations of corruption by public officials – is encourage to contact their local FBI Field Office. In Los Angeles, the FBI can be reached 24 hours a day at (310) 477-6565. Foreign language speakers can be made available.
This case is being prosecuted by Assistant United States Attorney Veronica Dragalin of the Public Corruption and Civil Rights Section.
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Dietary Supplement Ingredient Importers Arrested in Connection with Large-Scale Smuggling and Money Laundering SchemeRead the Press Release
LOS ANGELES – Two Southern California residents were arrested Wednesday in connection with a long-running scheme to smuggle purported dietary supplement ingredients into the United States from China, the Department of Justice announced today.
Lynn Chau, 43, of Rosemead, and Bao Luu, 42, of Mira Loma, were charged in a seven-count indictment that was returned by a Los Angeles federal grand jury on November 7, and unsealed today. The indictment also charged Pure Assay Ingredients Inc., Chau’s import company located in City of Industry, and two Chinese citizens, Alex Wang and Ivy He, who worked for Pure Assay in Chengdu, China.
According to the indictment, the defendants conspired to deceive the Food and Drug Administration (FDA) and U.S. Customs and Border Protection (CPB) inspectors by mislabeling certain stimulants and other questionable ingredients as non-controversial substances to evade government scrutiny during import. The indictment alleges that the defendants sold the smuggled substances to dietary supplement manufacturers in the United States for use in consumer products. In one instance, the indictment contends that Chau and Luu assembled a false shipment to fool FDA into believing that Pure Assay destroyed substances the agency blocked from distribution. In reality, Pure Assay already had shipped out the real products and presented mislabeled substitutes for destruction.
“The public deserves honesty and integrity from companies importing ingredients for the products people purchase and consume,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “We will continue to pursue and prosecute those who import dangerous and illegal ingredients for fraudulent purposes.”
“This case alleges a scheme designed to generate profits at the expense of the public’s health and safety,” said United States Attorney Nick Hanna. “Members of the conspiracy are charged with smuggling prohibited substances, such as steroid precursors, and attempting to prevent U.S. officials from learning the true nature of the shipments that made their way into so-called dietary supplements. We will continue to investigate and prosecute people involved in deceptive practices that endanger consumers.”
According to the indictment, Pure Assay, Chau, Wang and He prepared fraudulent documents, including false certificates of analysis and false labels, and submitted them to FDA when they believed that an ingredient would be denied entry or invite inquiries from FDA and CPB. The false documents typically declared the substances to be sucralose, melatonin, or other legal ingredients. The indictment alleges that the defendants used this method to smuggle into the United States designer steroids and stimulants for use in dietary supplements while disregarding the risk that their operation posed to consumers.
“American consumers are put at risk when the true nature of ingredients for dietary supplements is hidden from regulatory authorities,” said Charles L. Grinstead, Special Agent in Charge, FDA Office of Criminal Investigations’ Kansas City Field Office. “We will continue to pursue and bring to justice those who jeopardize the public health.”
The indictment against Pure Assay and its principals follows a separate, recent prosecution against several Chinese citizens charged with conspiring to mislabel synthetic dietary supplement ingredients or otherwise helping to hide the true nature of a purported new dietary supplement from American retailers. Three Chinese nationals arrested in Las Vegas last fall while attending a dietary supplement trade show later pleaded guilty in connection with that prosecution.
The case was investigated by FDA’s Office of Criminal Investigations. The case is being prosecuted by Trial Attorneys Patrick Runkle, Raquel Toledo, and David Sullivan of the Department of Justice’s Consumer Protection Branch, and Erik Silber, Assistant United States Attorney for the Central District of California.
An indictment merely alleges that crimes have been committed. All defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch.
Dietary Supplement Ingredient Importers Arrested in Connection with Large-Scale Smuggling and Money Laundering SchemeRead the Press Release
Two southern California residents were arrested on Nov. 28, 2018, in connection with a long-running scheme to smuggle purported dietary supplement ingredients into the United States from China, the Department of Justice announced.
Lynn Chau, 43, of Rosemead, California, and Bao Luu, 42, of Mira Loma, California, were charged in a seven-count indictment that was returned by a Los Angeles federal grand jury on November 7, 2018, and unsealed today. The indictment also charged Pure Assay Ingredients Inc., Chau’s import company located in City of Industry, California, and two Chinese citizens, Alex Wang and Ivy He, who worked for Pure Assay in Chengdu, China.
According to the indictment, the defendants conspired to deceive the Food and Drug Administration (FDA) and U.S. Customs and Border Protection (CPB) inspectors by mislabeling certain stimulants and other questionable ingredients as non-controversial substances to evade government scrutiny during import. The indictment alleges that the defendants sold the smuggled substances to dietary supplement manufacturers in the United States for use in consumer products. In one instance, the indictment contends that Chau and Luu assembled a false shipment to fool FDA into believing that Pure Assay destroyed substances the agency blocked from distribution. In reality, Pure Assay already had shipped out the real products and presented mislabeled substitutes for destruction.
“The public deserves honesty and integrity from companies importing ingredients for the products people purchase and consume,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “We will continue to pursue and prosecute those who import dangerous and illegal ingredients for fraudulent purposes.”
“This case alleges a scheme designed to generate profits at the expense of the public’s health and safety,” said United States Attorney Nick Hanna. “Members of the conspiracy are charged with smuggling prohibited substances, such as steroid precursors, and attempting to prevent U.S. officials from learning the true nature of the shipments that made their way into so-called dietary supplements. We will continue to investigate and prosecute people involved in deceptive practices that endanger consumers.”
According to the indictment, Pure Assay, Chau, Wang, and He prepared fraudulent documents, including false certificates of analysis and false labels, and submitted them to FDA when they believed that an ingredient would be denied entry or invite inquiries from FDA and CPB. The false documents typically declared the substances to be sucralose, melatonin, or other legal ingredients. The indictment alleges that the defendants used this method to smuggle into the United States designer steroids and stimulants for use in dietary supplements while disregarding the risk that their operation posed to consumers.
“American consumers are put at risk when the true nature of ingredients for dietary supplements is hidden from regulatory authorities,” said Charles L. Grinstead, Special Agent in Charge, FDA Office of Criminal Investigations’ Kansas City Field Office. “We will continue to pursue and bring to justice those who jeopardize the public health.”
The indictment against Pure Assay and its principals follows a separate, recent prosecution against several Chinese citizens charged with conspiring to mislabel synthetic dietary supplement ingredients or otherwise helping to hide the true nature of a purported new dietary supplement from American retailers. Three Chinese nationals arrested in Las Vegas last fall while attending a dietary supplement trade show later pleaded guilty in connection with that prosecution.
The case was investigated by FDA’s Office of Criminal Investigations. The case is being prosecuted by Trial Attorneys Patrick Runkle, Raquel Toledo, and David Sullivan of the Department of Justice’s Consumer Protection Branch, and Erik Silber, Assistant United States Attorney for the Central District of California.
An indictment merely alleges that crimes have been committed. All defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Central District of California, visit its website at www.justice.gov/usao-cdca.
Alleged Conman Posing as Beverage Entrepreneur Faces Wire Fraud Charges in Ponzi Scheme that Duped Investors Out of $5 MillionRead the Press Release
LOS ANGELES – A former resident of the Ritz-Carlton Residences at LA Live in downtown Los Angeles has been arrested on federal wire fraud charges that allege he defrauded investors out of more than $5 million in a Ponzi scheme, deceiving one investor by falsely telling him that NBA stars such as Stephen Curry would be endorsing one of his beverage products.
Khemraj Dave Hardat, 50, a Canadian national who has been living in the Los Angeles area on an expired tourist visa, was arrested Tuesday afternoon by special agents with the FBI. Hardat made his initial appearance Wednesday afternoon in United States District Court, and he is due back in court tomorrow for a hearing to determine if he will be freed on bond.
According to the criminal complaint filed in this case, over the course of approximately 3½ years, Hardat duped at least seven victims into wiring him a total of more than $5 million. Rather than invest these funds in the businesses Hardat claimed to run, he allegedly used the money for personal expenses, or, in the style of a Ponzi scheme, made partial repayments to previous victims.
According to the affidavit in support of the complaint, Hardat falsely portrayed himself as a man of significant educational and economic achievement, misrepresenting that he had a Ph.D. from Yale University and that he had generated hundreds of millions of dollars via deals with PepsiCo and Dr. Pepper. Hardat bolstered this false impression by displaying a luxurious lifestyle, which included the rented residence at the Ritz-Carlton, Lamborghini and Maserati sports cars, a luxury box at Staples Center and his children’s placement at prestigious private schools.
Hardat allegedly convinced one victim – a financial professional – to loan him $4 million by telling him of Hardat’s purported friendships with NBA players and the CEO of PepsiCo, and by showing the victim a doctored bank statement reflecting a balance of $498 million. In October 2014, according to the affidavit, Hardat allegedly called the victim and requested a $4 million loan because an investor was dropping out of a deal set to close in a week. The victim agreed to wire the money to Hardat’s company, O4 Worldwide Holdings, with an agreement that Hardat would repay the $4 million, plus $200,000 in interest, within one week. Besides a late payment of $205,000 in November 2014, Hardat never repaid the victim, instead using $3.8 million of the victim’s money to pay personal expenses and earlier victims, including one court judgment against him.
After the victim confronted Hardat about the debt in December 2014, Hardat allegedly told him of a new business opportunity and represented that the $4 million owed would turn into $12 million. Hardat then wrote the victim a check for $8 million, which later was returned for insufficient funds.
Another victim, who met Hardat through their children’s school events, allegedly wired Hardat a total of $393,854 in loans for his business after Hardat falsely represented that Basketball Hall of Famer Shaquille O’Neal was one of his business partners and that Stephen Curry would be endorsing one of his company’s products. Instead, Hardat allegedly used the money to make payments on his Maserati and Lamborghini sports cars. Although the victim has been repaid about $235,000, law enforcement analysis indicates that at least $215,000 of that amount came from subsequent loans or investments that Hardat fraudulently obtained from subsequent victims, court documents state.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The criminal complaint charges Hardat with one count of wire fraud, which carries a statutory maximum penalty of 20 years in federal prison.
At Wednesday’s court appearance, a United States Magistrate Judge scheduled tomorrow’s detention hearing, as well as a preliminary hearing on December 12 and an arraignment on December 18.
The FBI is conducting the investigation into this case.
This case is being prosecuted by Assistant United States Attorney Adam P. Schleifer of the Major Frauds Section.
O.C. Income Tax Return Preparer Pleads Guilty to Defrauding the IRS by Filing New Returns for Clients and Failing to Report His IncomeRead the Press Release
SANTA ANA, California – A City of Orange tax return preparer has pleaded guilty in a scheme to defraud the Internal Revenue Service out of hundreds of thousands of dollars through the submission of fraudulent federal income tax returns for both himself and his clients.
Gilberto C. Gonzalez, 55, who operated under the name Gil Income Tax, pleaded guilty Monday before United States District Judge Andrew J. Guilford to one count of tax evasion, two counts of passing forged United States Treasury checks, and one count of unlawful procurement of naturalization.
According to a plea agreement filed in this case, during the years 2010 through 2012, Gonzalez prepared and filed with the IRS income tax returns for clients. But, after the returns were filed and without his clients’ knowledge, Gonzalez prepared and filed amended income tax returns that claimed a tax refund. In those amended returns, Gonzalez used his own home or business address, which caused the United States Treasury to mail the refund checks directly to Gonzalez. After waiting for some period of time, Gonzalez fraudulently endorsed the refund checks and deposited them into one of 11 bank accounts that he controlled.
Over a five-year period that began in January 2010, approximately 1,258 federal and state tax refund checks – worth more than $2.3 million and payable to individuals other than Gonzalez – were deposited into Gonzalez-controlled accounts.
Most of Gonzalez’s clients were Spanish speakers who had grown up in Mexico, according to the plea agreement, in which Gonzalez admitted that most of his clients could not read their income tax returns and had trusted him to properly prepare their tax returns.
In addition to defrauding the IRS by filing the amended tax returns, Gonzalez failed to report this income on his individual tax returns. For the tax years 2010 through 2012, Gonzalez failed to report more than $1.3 million in income, which caused the IRS to suffer tax losses of approximately $457,207, according to the plea agreement.
During the course of his tax fraud scheme, Gonzalez attempted to unlawfully procure United States citizenship by making false statements to U.S. Citizenship and Immigration Services. When he pleaded guilty, Gonzalez specifically admitted that he failed to disclose he had committed a crime by perpetrating his tax fraud scheme.
Gonzalez is scheduled to be sentenced by Judge Guilford on March 11, 2019, at which time he will face a statutory maximum penalty of 35 years in federal prison.
As part of his plea agreement, Gonzalez also agreed that he owes the IRS restitution totaling $975,183. Additionally, Gonzalez has agreed to forfeit to the government his interest in his residence, which was purchased with $652,324 that was primarily money fraudulently obtained from the IRS.
This case is the product of an investigation by IRS Criminal Investigation.
The case is being prosecuted by Assistant United States Attorney Daniel H. Ahn of the Santa Ana Branch Office.
Monrovia Man Sentenced to Nearly 6 Years in Prison for ‘Hawala’ Scheme to Move Money for Sinaloa Cartel and other Drug TraffickersRead the Press Release
LOS ANGELES – A Monrovia man who was part of an international drug money laundering organization has been sentenced to 70 months in federal prison for conspiring to move millions of dollars in proceeds for the Sinaloa cartel and other narcotics traffickers.
Harinder Singh, a.k.a. “Sonu,” 34, was sentenced late Monday by United States District Judge Christina A. Snyder, who imposed the sentence after noting Singh’s “escalating” involvement in the money laundering conspiracy.
Singh was sentenced after being found guilty by a jury last January of conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business and operating an unlicensed money transmitted business.
Singh was the 17th defendant convicted as a result of a 2015 grand jury indictment that was the first major United States criminal case involving “hawala” transfers of drug money.
According to court documents, hawala is an international underground money remittance system based on trust between the participants. The hawala system originated on the Indian subcontinent and relies on long-established connections between brokers, who usually are located in different countries, but sometimes are in different cities in one nation. The trust and long-established connection between brokers typically are based on familial, ethnic, religious, regional and/or cultural grounds. Since traditional banking and financial systems are not involved in hawala, it operates without leaving a paper trail. Under the hawala system, only the value of the money is transferred, not the money itself.
In this case, drug traffickers used a traditional hawala network of brokers in the United States, Canada and India to secretly transfer millions of dollars of drug proceeds to the United States, where brokers such as Singh delivered the money to couriers acting on behalf of Canadian drug traffickers and Mexican drug cartels. Prosecutors said the conspiracy was responsible for transferring at least $4 million in drug proceeds.
The evidence presented at his two-week trial in United States District Court showed that Singh participated in a hawala conspiracy that moved money generated from drug sales in Canada to the United States. The money was used to pay for multi-kilogram drug purchases in Los Angeles, which was then routed to Canada for distribution.
California Highway Patrol officers discovered $274,980 in U.S. currency wrapped in black plastic when Singh was stopped in October 2012. During that traffic stop, Drug Enforcement Administration special agents conducted surveillance and observed Singh’s wife exiting the couple’s apartment complex carrying a bag, which was later found to contain $388,100 in U.S. currency. That cash also was rubber-banded in stacks and similarly wrapped in black plastic.
Prior to the traffic stop and the seizure at Singh’s apartment complex in Monrovia, a federal wiretap intercepted Punjabi-language telephone calls indicating that Singh and co-conspirators communicated over multiple prepaid – or “burner” – telephones to arrange for the pick-up, transport and delivery of large amounts of U.S. currency – in amounts of up to $800,000 – across the Los Angeles area.
Soon after the October 2012 traffic stop, Singh met with law enforcement agents and admitted collecting large sums of bulk cash on a weekly basis and receiving approximately $300 for every $200,000 in shipments, according to court documents.
During the course of a four-year investigation by the DEA’s L.A. Strike Force and IRS Criminal Investigation, authorities seized nearly $15.5 million in bulk U.S. currency, 321 kilograms of cocaine, 98 pounds of methamphetamine, 11 kilograms of MDMA and nine kilograms of heroin.
Other individuals convicted in this case include Singh’s uncle, Sucha Singh, who received a 63-month sentence for his role as a hawala broker; Bradley John Martin, who similarly received a 63-month sentence for his role as a money courier; and Harmeet Singh, who received a 42-month sentence for his role as a hawala broker.
The investigation in this case was conducted by the Drug Enforcement Administration and IRS Criminal Investigation. These agencies received assistance and support from the Santa Ana Police Department, the Beverly Hills Police Department and the Pomona Police Department.
This case is being prosecuted by Assistant United States Attorney Carol Alexis Chen of the Organized Crime Drug Enforcement Task Force.
Former VA Employee Indicted for Allegedly Stealing Government Vehicles and Charging over $15,000 on Federal Gas CardsRead the Press Release
LOS ANGELES – A federal grand jury today named an Inglewood man in a three-count indictment that accuses him of stealing two government vehicles and illegally charging more than $15,000 on U.S. government gas cards for gas that he sold to friends at a discount.
Kyle Sidney Freedman Flournoy, 34, was charged in the indictment with conspiracy and two counts of retaining stolen government property.
Flournoy was arrested on November 6 by federal authorities pursuant to a criminal complaint filed in August.
At the time of the alleged criminal conduct in 2013, Flournoy was employed by the U.S. Department of Veterans Affairs. According to court documents, Flournoy stole a VA vehicle and rented it out to associates – including gang members – for $30. Flournoy is also charged with stealing a second VA vehicle in late 2013.
The indictment also charges Flournoy with unlawfully using more than 10 different federal government gas cards over the course of several weeks to charge more than $15,000 in gas. Flournoy allegedly gave the gas to others who paid him approximately 60 cents on the dollar.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
If convicted on all three charges in the indictment, Flournoy would face a statutory maximum sentence of 25 years in federal prison.
Flournoy is scheduled to be arraigned on the indictment on December 3.
This case is being investigated by the United States General Services Administration, Office of the Inspector General, and the United States Department of Veterans Affairs, Office of the Inspector General, Criminal Investigations Division.
This case is being prosecuted by Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office.
Grand Jury Indicts Hawthorne Man on 14 Federal Charges for Allegedly Collecting Life Insurance after Killing His Two ChildrenRead the Press Release
LOS ANGELES – A federal grand jury today named a Hawthorne man in a 14-count indictment that alleges he intentionally drove his family into the water at the Port of Los Angeles in a scheme to collect proceeds of life insurance policies he had purchased on their lives.
Ali F. Elmezayen, 44, was charged with four counts of mail fraud, four counts of wire fraud, one count of aggravated identity theft and five counts of money laundering. Elmezayen remains in federal custody after being arrested on November 7 by the FBI.
The indictment alleges that Elmezayen purchased several life and accidental death insurance policies providing coverage on himself, his domestic partner and their three children in 2012 and 2013. Elmezayen then drove a car with his partner and two youngest children off a wharf at the Port of Los Angeles on April 9, 2015. Elmezayen swam out the open driver’s side window of the car. Elmezayen’s partner, who did not know how to swim, escaped the vehicle and survived when a nearby fisherman threw her a flotation device. The two children, who were 8 and 13, drowned in the car.
Elmezayen then collected more than $260,000 in insurance proceeds from Mutual of Omaha Life Insurance and American General Life Insurance on the accidental death insurance policies he had taken out on the children’s lives, according to the indictment.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Elmezayen is scheduled to be arraigned on the indictment on November 29 in United States District Court.
If he were to be convicted of all the charges contained in the indictment, Elmezayen would face a statutory maximum sentence of 212 years in federal prison.
This case is being investigated by the Federal Bureau of Investigation and IRS Criminal Investigation. The federal investigators received substantial assistance from the Los Angeles Police Department, the Los Angeles Port Police and the Los Angeles City Attorney’s Office.
The case is being prosecuted by Assistant United States Attorneys Alex Wyman and David Ryan.
Los Angeles Woman Pleads Guilty to Federal Sex Trafficking ChargeRead the Press Release
LOS ANGELES – A South Los Angeles woman who called herself “The Most Hated Hoe in L.A.” on social media pleaded guilty today to a federal sex trafficking offense and admitted she used the Internet to solicit minors to engage in commercial sex acts.
Melanie Denae Williams, 23, who used the moniker “Pretty Hoe” on social media platforms, pleaded guilty to sex trafficking by force, fraud or coercion. She entered her plea before United States District Judge George H. Wu.
As a result of today’s guilty plea, Williams faces a mandatory minimum sentence of 15 years in federal prison and will be required to pay restitution to her victims.
According to her plea agreement, Williams abused a woman she had recruited through social media to work as a prostitute. In one incident detailed in court documents, Williams ordered the victim to strip off her clothes, then Williams threw bleach on her and beat her with her hands and a broomstick. Williams also forced the victim to get Williams’ name tattooed on her face, confiscated the victim’s belongings and identity documents, and continually threatened to kill the victim if she left Williams, according to an affidavit filed in this case.
Williams also posted social media videos of her physically beating and using firearms to threaten young women, the affidavit states.
Williams also admitted in the plea agreement to using the Internet to recruit two minors to engage in commercial sex acts. Williams would then retain the proceeds from the minors’ sex acts for her own benefit.
Judge Wu scheduled a sentencing hearing for January 28.
The investigation into Williams was conducted by the Los Angeles Regional Human Trafficking Task Force, which included agents with the Federal Bureau of Investigation and deputies with the Los Angeles County Sheriff’s Department. The Los Angeles Police Department and the Los Angeles District Attorney’s Office provided substantial assistance in the investigation and prosecution.
This case is being prosecuted by Assistant United States Attorneys Lana Morton-Owens and Joseph Axelrad of the Violent and Organized Crime Section.
Former L.A. County Deputy Sheriff Sentenced to 17½ Years in Prison for Scheming to Escort Large Amounts of Narcotics for $250,000Read the Press Release
LOS ANGELES – A former Los Angeles County Sheriff’s deputy was sentenced today to 210 months in federal prison for participating in an interstate drug trafficking conspiracy in which the deputy agreed to use his role as a law enforcement officer to ensure that narcotics were successfully transported.
Kenneth Collins, 51, of Chino, was sentenced by United States District Judge Otis D. Wright II, who also ordered the defendant to pay $38,000 in restitution.
In August, Collins pleaded guilty to conspiracy to distribute methamphetamine, cocaine and marijuana. Collins, who separated from the Los Angeles County Sheriff’s Department in late February, admitted to conspiring with at least two other individuals to accept cash payments in exchange for distributing large amounts of controlled substances. Collins also admitted to actively preventing the legitimate efforts of state and local law enforcement in exchange for cash payments up to $250,000.
“For years, former deputy Collins abused the trust of the people of Los Angeles County as a corrupt law enforcement officer motivated by greed,” said United States Attorney Nick Hanna. “In public, he was sworn to uphold the law, but in private he was a gun-for-hire willing to help drug smugglers in exchange for getting his cut of the dirty profits.”
“Today’s sentencing is a sober warning that those in a position of public trust will not be allowed to abuse their authority as a law enforcement officer,” said Assistant Director in Charge Paul Delacourt of the FBI’s Los Angeles Field Office. “Former deputy Collins betrayed the public’s trust by placing a higher priority on satisfying his personal greed rather than ensuring the safety of our communities he was sworn to protect.”
As part of an undercover operation, FBI special agents arrested Collins and his two co-defendants in January after they arrived in Pasadena to provide security to transport nearly 45 pounds of cocaine and more than 13 pounds of methamphetamine to Las Vegas. Previously, Collins had negotiated a cash payment of $250,000 for his escort services. What Collins didn’t know at the time was that he had entered into an agreement with an undercover FBI agent posing as the partner of a wealthy investor financing a drug trafficking operation.
Collins admitted that he and his co-defendants provided security in November 2017 for a Pasadena-to-Las Vegas shipment of what he believed was six kilograms methamphetamine, as well as marijuana and counterfeit cigarettes. Collins received $25,000 in cash for his team’s security services that day.
Collins justified the high fees for his services by telling the undercover agent “we’re cops” and “all of our transports make it through.” During one meeting with the undercover agent, Collins displayed his Sheriff’s Department badge and firearm as proof that he was a law enforcement officer, thereby rendering his services more valuable to drug traffickers.
The undercover agent bought two pounds of marijuana from Collins for $6,000 in October 2017 as a “test run.” If the “test run” sale went well, Collins offered to sell up to $4 million of marijuana every month to the undercover agent, claiming he had a “connection” through which he could secure up to one ton of marijuana every month, according to court documents.
In recorded negotiations with the undercover agent, Collins also offered to intimidate and physically assault people in exchange for cash, court documents said. “I fix problems,” Collins bragged. “I make a lot of things go away.” Collins even claimed to have recently set someone’s “$85,000 Cadillac truck on fire” for one of his other criminal “clients.”
When he pleaded guilty, Collins also admitted that, in an entirely separate encounter, where he again corruptly used his law enforcement position, he illegally seized approximately $160,000 in cash from a vehicle after conducting an unlawful traffic stop. Prior to the stop, Collins was aware there would be a large amount of cash in the vehicle and never reported the stop or the cash seizure to the LASD.
In his plea agreement, Collins further acknowledged that he used to be an instructor at the Emerging Leaders Academy, a life-skills class where LASD deputies were supposed to mentor adult ex-offenders to help them reintegrate into society. It was through the academy that Collins first met his co-defendant Grant Valencia, a student at the time.
Two co-defendants in this case – David Easter and Grant Valencia – each pleaded guilty to one count of conspiracy to distribute controlled substances. Valencia has been sentenced. Easter’s sentencing hearing is scheduled for January 8.
The case against Collins and his co-defendants was investigated by the FBI, with cooperation from the Los Angeles County Sheriff’s Department.
This case is being prosecuted by Assistant United States Attorney Lindsey Greer Dotson of the Public Corruption and Civil Rights Section.
California Resident Pleads Guilty to Filing False Tax Returns Which Failed to Report Secret German and Israeli AccountsRead the Press Release
A Beverly Hills, California, resident pleaded guilty today to filing false tax returns which did not report his offshore accounts in Germany and Israel and did not report the income earned on those accounts, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman and U.S. Attorney Nicola T. Hanna of the Central District of California.
According to the plea agreement and related court documents, Teymour Khoubian pleaded guilty to filing false tax returns for tax years 2009 and 2010 that failed to report foreign financial accounts in Germany and Israel, and failed to report income earned on those accounts. Between 2005 and 2012, Khoubian jointly owned multiple accounts at Bank Leumi in Israel with his mother that held between $15 million and $20 million. Additionally, since at least 2005, Khoubian also owned a foreign account at Commerzbank AG in Germany. Despite his ownership interest in these accounts and a legal requirement to declare all offshore accounts containing $10,000 or more, Khoubian prepared false tax returns for tax years 2005 through 2011 that did not fully disclose his foreign accounts, nor report all the interest income earned on those accounts. For instance, Khoubian’s Bank Leumi accounts generated interest income in excess of $4 million between 2005 and 2010, none of which was reported to the Internal Revenue Service (IRS). The total tax loss associated with the Bank Leumi accounts is approximately $ 1.2 million.
At least since 2009, Khoubian was aware of the IRS’s Offshore Voluntary Disclosure Program (the OVDP). The OVDP allowed U.S. taxpayers to voluntarily disclose their previously unreported foreign accounts and pay a reduced penalty to resolve their civil liability for not declaring foreign accounts to U.S. authorities. During 2011 and 2012, Bank Leumi requested that Khoubian sign a Form W-9 for U.S. tax reporting purposes. In an August 13, 2012, recorded telephone conversation with a banker at Bank Leumi, Khoubian stated that the reason he did not want to sign a Form W-9, was "because you have to pay half of it."
In 2012 and 2014, Khoubian knowingly made multiple false statements to IRS special agents investigating his foreign accounts, including falsely stating that the Bank Leumi accounts were not in his name, that he did not own a bank account in Germany from 2005 to 2010, that he closed his German bank account and moved all of that money to the United States, and that none of the money in his German bank account was moved to Israel.
As part of the plea agreement, Khoubian agreed to the entry of a civil judgment against him for an FBAR penalty in the amount of $7,686,004. Khoubian further agreed to pay an additional $612,310 in restitution to the IRS.
Khoubian faces a maximum of three years in prison for each of the tax counts to which he pleaded guilty, as well as monetary penalties and a period of supervised release.
This case is being prosecuted by Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Justice Department’s Tax Division, with the assistance of Assistant United States Attorney Robert Conte of the U.S. Attorney’s Office for the Central District of California, and was investigated by the Internal Revenue Service-Criminal Investigation.
Arms Trafficker Found Guilty of Conspiring to Supply and Use Anti-Aircraft Missiles after Pleading Guilty to other Arms OffensesRead the Press Release
LOS ANGELES – A federal jury has convicted a black-market arms dealer of conspiring to acquire, transfer and use missiles designed to shoot down aircraft.
Rami Najm Asad-Ghanem, 52, who was commonly known as Rami Ghanem, a naturalized United States citizen who was living in Egypt at the time of the offenses, was found guilty of the missile conspiracy charge late Thursday afternoon in United States District Court. The jury returned the verdict at the conclusion of a nine-day trial.
The evidence at trial showed that Ghanem conspired to transfer a wide array of different surface-to-air missile systems to customers around the world, including clients in Libya, the United Arab Emirates, Iraq and other countries. During the trial, prosecutors presented evidence – which included Ghanem’s electronic communications, his recorded statements, and the corroborating testimony of co-conspirators taken abroad – that demonstrated he conspired to use Russian-made Igla and Strela surface-to-air missile systems by brokering the services of mercenary missile operators to a militant faction in Libya in 2015. Among other actions, Ghanem negotiated the salaries and terms of service of the mercenary missile operators, coordinated their payment, facilitated their travel to Libya, and offered them a $50,000 bonus if they were successful in their mission of shooting down airplanes flown by the internationally recognized government of Libya.
“With the wide range of weapons being offered for sale, this case demonstrates the dangers of underground arms trafficking to the international community and to the security of U.S. forces operating abroad,” said United States Attorney Nick Hanna. “This complicated case was successfully prosecuted as a result of the diligent efforts of federal law enforcement authorities conducting international operations, obtaining evidence from foreign nations and piecing together illicit arms deals in several nations. The successful conclusion of this case is a clear message to arms dealers that there will be severe consequences for providing weapons of war through the black market.”
“Safeguarding our military equipment and technology is vital to our nation’s defense, the protection of our war fighters and a top enforcement priority for HSI,” said Joseph Macias, Special Agent in Charge for Homeland Security Investigations (HSI) Los Angeles. “The successful outcome of this case is a direct result of the steadfast efforts of our domestic and international law enforcement partners to keep dangerous weapons out of the hands of transnational criminal organizations and foreign enemies that would do us harm. HSI will continue to aggressively target individuals who seek to illegally procure and sell items aimed at causing serious harm to the security of our nation.”
On October 29, Ghanem pleaded guilty to six other federal crimes arising from a variety of arms-trafficking activities, including the unlicensed export of weapons and ammunition, smuggling, money laundering and unlicensed arms brokering.
The investigation into Ghanem started in mid-2014, when a Los Angeles-based supplier of military supplies alerted the U.S. government that it had been solicited to provide equipment to Ghanem. During an undercover operation, an HSI agent developed a relationship with Ghanem, who was seeking to procure a number of armaments – including sniper rifles and night-vision optics – but Ghanem affirmed that the transactions had to be “under the table.” During subsequent meetings with the undercover operative in Athens, Ghanem expressed an interest in purchasing helicopters and fighter jets on behalf of Iranian clients, and Ghanem said he had relationships with Hezbollah in Iraq.
Over the course of several months in 2015, Ghanem discussed his interest in purchasing numerous weapons, and in August 2015 placed an order for $220,000 worth of sniper rifles, pistols, silencers, laser sights, ammunition, night-vision goggles and other items that were to be shipped to Libya. After making two down payments, Ghanem was arrested on December 8, 2015, in Athens. He was extradited to the United States in April 2016 to face prosecution in this case and has remained in custody without bond since the time of his arrest.
After his arrests, authorities seized numerous digital devices that Ghanem had in his possession. Searches of those devices revealed evidence of other large-scale arms brokering activities, including millions of rounds of ammunition, anti-tank missiles, and the scheme to transfer and use anti-aircraft missiles.
“The guilty verdict in the trial of Ghanem demonstrates the Defense Criminal Investigative Service’s unwavering commitment to protect our country from those who seek to inflict harm on it,” said Chris Hendrickson, Special Agent in Charge, DCIS Western Field Office. “DCIS, along with our federal law enforcement partners, will relentlessly pursue those who put our military and our foreign military partners at risk by illegally obtaining and exporting protected U.S. military assets for use against our military and our foreign military partners.”
“This guilty verdict is the result of outstanding collaborative investigative work by the Office of Export Enforcement and its law enforcement partners to combat the illegal shipment of sophisticated technology. We will continue to aggressively pursue violators wherever they may be,” said Richard Weir, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Los Angeles Field Office.
United States District Judge S. James Otero, who presided over Ghanem’s trial, has scheduled a sentencing hearing for March 4, 2019.
As a result of Thursday’s guilty verdict on the missile-trafficking charge, Ghanem will face a mandatory minimum sentence of 25 years in federal prison and a statutory maximum sentence of life imprisonment.
Last month, Ghanem pleaded guilty to attempted exportation of defense articles without a license, smuggling, two counts of money laundering, conspiracy to illegally broker a wide range of weapons and illegal arms brokering. In relation to the charges to which he pleaded guilty, Ghanem faces a statutory maximum sentence of 20 years for each of the weapons exportation, arms brokering and money laundering counts. On the smuggling count, Ghanem faces a statutory maximum sentence of 10 years in prison. On the conspiracy count, he faces a statutory maximum sentence of 5 years in prison.
The investigation in this case was conducted by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Department of Defense’s Criminal Investigative Service; and the Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement. The Justice Department’s Office of International Affairs of the Department’s Criminal Division provided significant support in the investigation and securing the defendant’s extradition from Greece.
The case is being prosecuted by Assistant United States Attorneys Melissa Mills and George E. Pence IV of the United States Attorney’s Office’s Terrorism and Export Crimes Section, and by Trial Attorney Christian E. Ford of the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division.
Man Pleads Guilty to Filing False Tax ReturnRead the Press Release
Israel Birman pleaded guilty yesterday in U.S. District Court for the Central District of California to filing a false federal tax return on which he failed to report interest income he earned from bank accounts at Bank Leumi Le-Israel B.M., announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to court documents, between 2006 and 2014, Israel Birman held offshore bank accounts in Israel at Bank Leumi and Israel Discount Bank. The accounts had balances over $10,000 each year, which required the filing of Reports of Foreign Bank and Financial Accounts (FBARs) with the Department of the Treasury. In 2013, Israel Birman’s bank accounts at Israel Discount Bank had a total value of over $3.4 million. Israel Birman did not file FBARs for 2006-2014. Israel Birman instructed Bank Leumi to hold bank mail from delivery to the United States, and obtained access to his offshore funds through the use of “back-to-back” loans from Bank Leumi USA collateralized by his undeclared Bank Leumi offshore funds. In 2009 and 2010, Israel Birman earned taxable interest income on his Bank Leumi bank accounts totaling over $187,000. He failed to report that interest income on his 2009 and 2010 federal tax returns.
“The Department of Justice continues to vigorously investigate and prosecute offshore account holders who maintain undeclared accounts and willfully ignore their U.S. reporting and tax obligations,” said Principal Deputy Assistant Attorney General Zuckerman.
In December 2014, Bank Leumi entered into a deferred prosecution agreementafter the bank admitted to conspiring from at least 2000 until early 2011 to aid and assist U.S. taxpayers to prepare and present false tax returns by hiding income and assets in offshore bank accounts in Israel and other locations around the world. Under the terms of the deferred prosecution agreement, Bank Leumi paid the United States a total of $270 million and continues to cooperate with respect to civil and criminal tax investigations.
U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file an FBAR each year disclosing the account.
Sentencing is scheduled for January 28, 2019. Birman faces a maximum sentence of three years in prison, as well as a period of supervised release, restitution and monetary penalties. As part of the plea agreement, Israel Birman has agreed to pay a civil penalty of not less than $1,709,883, representing fifty percent of the balance in his Israel Discount Bank account in 2013.
Principal Deputy Assistant Attorney General Zuckerman commended special agents from IRS-Criminal Investigation, who are investigating the case, and Tax Division Trial Attorneys Leslie Goemaat and Melissa Schraibman Grinberg, who are prosecuting the case. The Tax Division thanks the U.S. Attorney’s Office of the Central District of California for its assistance. Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.