Central District of California
Press releases recorded for this federal judicial district.
Guilty Plea in Case Involving Illegal Importation of Chinese CigarettesRead the Press Release
LOS ANGELES – A Los Angeles man has pleaded guilty to illegally engaging in the business of importing tobacco products.
Zhi Xiong Chen, 56, of Chinatown, pleaded guilty yesterday to the felony offense and admitted that for nearly five years, despite not holding a permit to import tobacco products, he used several addresses to receive 15,128 cartons of Chinese-brand cigarettes. During this time, U.S. Customs and Border Protection officers also stopped approximately 9,824 cartons of Chinese-brand cigarettes at international mail facilities in California and New York.
As part of the scheme, Chen admitted that he attempted to evade paying more than $467,000 in federal and state excise taxes on the cigarettes that he illegally imported.
“From early 2011 until mid-2016, this defendant illegally imported thousands of cartons of Chinese-made cigarettes without the necessary permits and without paying excise taxes,” said United States Attorney Eileen M. Decker. “The defendant’s crime not only cheated taxpayers, but also caused unregulated, potentially dangerous products to be sold to an unsuspecting public.”
“While Zhi Xiong Chen was illegally importing tens of thousands of cartons of cigarettes into the United States, he was also evading hundreds of thousands of dollars in taxes due on those cigarettes,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Importers who obtain the required permits and pay their fair share of taxes deserve to compete on a level playing field. Those who try to cut corners and skirt these legal obligations should know that they will be investigated and prosecuted.”
Chen pleaded guilty before United States District Judge George H. Wu, who is scheduled to sentence the defendant on April 17, at which time he will face a statutory maximum penalty of five years in federal prison.
This case is being investigated by the Alcohol and Tobacco Tax and Trade Bureau, the U.S. Food and Drug Administration’s Criminal Investigations, and IRS Criminal Investigation.
The case is being prosecuted by Assistant United States Attorney Valerie L. Makarewicz of the Tax Division and Trial Attorney Christopher S. Strauss of the Justice Department’s Tax Division.
California Man Pleads Guilty to Illegally Importing Chinese CigarettesRead the Press Release
A Los Angeles, California man pleaded guilty yesterday to illegally engaging in the business of importing tobacco products, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Eileen M. Decker for the Central District of California.
Zhi Xiong Chen, 56, of Chinatown, admitted that for nearly five years, despite not holding a permit to import tobacco products, he used several addresses to receive 15,128 cartons of Chinese-brand cigarettes. During this time, U.S. Customs and Border Protection officers also stopped approximately 9,824 cartons of Chinese-brand cigarettes at international mail facilities in California and New York.
As part of the scheme, Chen admitted that he attempted to evade paying more than $467,000 in federal and state excise taxes on the cigarettes that he illegally imported.
“While Zhi Xiong Chen was illegally importing tens of thousands of cartons of cigarettes into the United States, he was also evading hundreds of thousands of dollars in taxes due on those cigarettes,” said Acting Deputy Assistant Attorney General Goldberg. “Importers who obtain the required permits and pay their fair share of taxes deserve to compete on a level playing field. Those who try to cut corners and skirt these legal obligations should know that they will be investigated and prosecuted.”
“From early 2011 until mid-2016, this defendant illegally imported thousands of cartons of Chinese-made cigarettes without the necessary permits and without paying excise taxes,” said U.S. Attorney Decker. “The defendant’s crime not only cheated taxpayers, but also caused unregulated, potentially dangerous products to be sold to an unsuspecting public.”
Sentencing is scheduled for April 17. Chen faces a statutory maximum penalty of five years in prison, a period of supervised release, restitution and monetary penalties.
Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Decker thanked special agents of IRS–Criminal Investigation, the Alcohol and Tobacco Tax and Trade Bureau, and the U.S. Food and Drug Administration’s Criminal Investigations, who conducted the investigation, and Assistant U.S. Attorney Valerie L. Makarewicz and Trial Attorney Christopher S. Strauss of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Jamaican National Indicted in Federal Drug Case for Allegedly Supplying Flight Attendant with nearly 60 Pounds of CocaineRead the Press Release
LOS ANGELES – A federal grand jury has named a Jamaican man in an indictment that accuses him of supplying a Jet Blue flight attendant with nearly 60 pounds of cocaine that she attempted to smuggle on to a plane at Los Angeles International Airport.
Gaston Brown, 39, of Jamaica, was charged yesterday with one count of conspiracy to possess with intent to distribute cocaine, and one count of possession with intent to distribute cocaine.
Brown is currently serving a one-year-and-one-day federal prison sentence after being convicted in the Southern District of Florida of illegal re-entry after deportation. A federal judge yesterday issued a writ directing that Brown be brought to Los Angeles for an arraignment, which will likely be in mid-February.
Brown allegedly supplied the narcotics to Marsha Gay Reynolds, a former JetBlue flight attendant, who pleaded guilty last month to federal drug charges and admitted she attempted to bring the narcotics through a security checkpoint at LAX by using her “known crewmember” credentials.
“This case demonstrates law enforcement’s commitment to disrupting dangerous drug trafficking networks,” said United States Attorney Eileen M. Decker. “After making the large seizure of narcotics at LAX, investigators continued to look into this matter, which resulted in the indictment of a defendant who was trafficking a significant amount of cocaine.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If Brown is convicted of the drug trafficking charges, he would face a mandatory minimum sentence of 10 years in federal prison and a maximum possible sentence of life.
This investigation is being conducted by the Los Angeles International Airport Criminal Enterprise Task Force (LAACETF), an inter-agency task force based at LAX. The Task Force, which includes representatives of the FBI, the DEA, United States Customs and Border Protection, the Transportation Security Administration, the Los Angeles International Airport Police Department, the Los Angeles Police Department, and the Los Angeles Sheriff’s Department. The LAACETF provides a coordinated law enforcement effort to target airport/airline internal criminal enterprises that use the aviation system to transport large amounts of illicit drugs throughout the United States and various international destinations.
This matter is being prosecuted by Assistant United States Attorney Reema M. El-Amamy of the Organized Crime Drug Enforcement Task Force.
‘Wife’ of Man Facing Charges of Conspiring with Shooter in San Bernardino Attack Pleads Guilty to Entering into Sham MarriageRead the Press Release
RIVERSIDE, California – Mariyah Chernykh today pleaded guilty to federal immigration fraud charges and admitted entering into a sham marriage with Enrique Marquez Jr., who is facing charges of conspiring with the male shooter in the December 2, 2015 attack in San Bernardino.
Chernykh, 26, of Ontario, pleaded guilty this afternoon before United States District Judge Jesus Bernal to charges of conspiracy, perjury, and false statements.
As a result of her guilty pleas, Chernykh faces a statutory maximum sentence of 20 years in federal prison and a fine of up to $1 million. Judge Bernal is scheduled to sentence the defendant on November 20, 2017.
Chernykh is the second person to plead guilty in the immigration fraud scheme. On January 10, Syed Raheel Farook, the brother of deceased San Bernardino attacker Syed Rizwan Farook, pleaded guilty to being part of the conspiracy.
The third defendant in the case – Tatiana Farook, the wife of Syed Raheel Farook – still faces charges contained in a grand jury indictment and is scheduled to go on trial on March 28.
The indictment alleges that, beginning in late 2014 and continuing through February 2016, the three defendants conspired with Marquez to obtain immigration benefits for Chernykh by arranging and carrying out a fraudulent marriage between Chernykh, a Russian citizen, and Marquez, a United States citizen. In court today, Chernykh admitted that she made false statements in immigration documents, that she paid Marquez for his participation in the scheme, and that she made additional material false statements during interviews with FBI special agents.
Marquez was charged in a separate federal indictment with participating in the marriage fraud scheme, as well as plotting with San Bernardino attacker Syed Rizwan Farook in 2011 and 2012 to carry out attacks in the Inland Empire. Marquez is also charged with supplying two firearms that Syed Rizwan Farook and his wife, Tashfin Malik, later used in the San Bernardino attack and during the shootout with law enforcement that ended in the couple’s death. Marquez is scheduled to go on trial before Judge Bernal on September 26.
“Two of the four defendants charged as a result of the investigation into the December 2 San Bernardino terrorist attack have now been convicted,” said United States Attorney Eileen M. Decker. “These convictions signify important progress in the ongoing investigation and prosecution of all those connected to the attack. Today’s guilty pleas are further proof that law enforcement has doggedly investigated all leads stemming from the tragic attack in San Bernardino as we continue our efforts to bring justice to the community.”
“The criminal activity by the defendants who entered into phony marriages was uncovered following the deadly terror attack that occurred in December 2015 in San Bernardino,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Mariyah Chernykh ultimately admitted to lying to FBI Agents who were urgently seeking answers immediately following the attack to ensure that there were no additional threats to public safety. The defendant’s admission to violating U.S. immigration laws and defrauding the United States government is a welcome step as we continue our investigation of the attack which left 14 dead and several others seriously wounded.”
“Today’s guilty plea and the broader circumstances of this case are a powerful reminder about the serious consequences that can result when people lie or use false information to obtain an immigration benefit,” said Joseph Macias, special agent in charge for HSI Los Angeles. “Not only do such actions corrupt the integrity of our nation’s legal immigration system, but they can directly or indirectly put the safety of the American people at risk.”
The investigation in this case was conducted by the Joint Terrorism Task Force in Riverside, which includes the Federal Bureau of Investigation; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the San Bernardino Police Department; the San Bernardino County Sheriff’s Department; and the United States Attorney’s Office.
These cases are being prosecuted by Assistant United States Attorneys Jay H. Robinson, Melanie Sartoris and Deirdre Z. Eliot of the Terrorism and Export Crimes Section with substantial assistance from Trial Attorney C. Alexandria Bogle of the Justice Department’s Counterterrorism Section.
United States Attorney’s Office to Host Celebration Marking 50 Years of Service to the Central District of CaliforniaRead the Press Release
LOS ANGELES – The United States Attorney’s Office is hosting a reception on Friday, January 27 to commemorate the establishment 50 years ago of the United States Attorney’s Office for the Central District of California.
United States Attorney Eileen M. Decker will be joined by former United States Attorneys who have served as the chief federal law enforcement officer for the largest federal district in the nation, which is now made up of approximately 20 million residents.
KNBC news anchor Colleen Williams with be the master of ceremony at the celebration, which will be held tomorrow from 4:00 until 6:00 p.m. The event will be held in the atrium lobby of the new United States Courthouse at 350 West First Street in downtown Los Angeles.
The Central District of California was established in 1966 when the United States Congress divided what was then the Southern District into two separate districts. Shortly thereafter, the Department of Justice created the U.S. Attorney’s Office for the Central District of California.
The newly created Central District of California was based in Los Angeles, the new Southern District was based in San Diego. The Central District covers the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.
Since its creation, the U.S. Attorney’s Office in Los Angeles has filed landmark cases and presented groundbreaking legal arguments aimed at protecting the public from criminal schemes and defending the United States when sued.
Thirteen of the former United States Attorneys who have overseen the office over the past decades are expected to attend the event. Many current Assistant United States Attorneys and many former federal prosecutors will also be in attendance.
“As we celebrate 50 years since the establishment of the United States Attorney’s Office for the Central District of California, we applaud the commitment to service made by every Assistant United States Attorney and staff member who has ever worked in our office,” said United States Attorney Eileen M. Decker. “Every member of this office has quietly and tirelessly worked to see that justice was served in our communities. In line with our long tradition and legacy, we will continue to work tirelessly to uphold the core principles of justice that we all hold dear as Americans.”
Illinois Man Who Illegally Accessed Email Belonging to More Than 300 People, including Many Celebrities, Sentenced to Federal PrisonRead the Press Release
LOS ANGELES – An Illinois man who admitted responsibility for a phishing scheme that gave him illegal access to over 300 Apple iCloud and Gmail accounts, including those belonging to members of the entertainment industry in Los Angeles, has been sentenced to nine months in federal prison.
Edward Majerczyk, 29, of Chicago, was sentenced yesterday in Chicago by United States District Judge Charles P. Kocoras, who said the defendant’s crime was “abhorrent.”
Majerczyk pleaded guilty in September to a felony violation of the Computer Fraud and Abuse Act, specifically, one count of unauthorized access to a protected computer to obtain information. Majerczyk was charged by federal prosecutors in Los Angeles, but the case was transferred to the Northern District of Illinois, where the defendant pleaded guilty and was sentenced.
“This defendant engaged in a computer hacking scheme that not only gave him access to his victims’ computers, it also gave him access to the most personal details of their lives,” said United States Attorney Eileen M. Decker. “This was a deep intrusion into the victims’ privacy and a violation of federal law.”
According to a plea agreement filed in this case, from November 23, 2013 through August 2014, Majerczyk engaged in a phishing scheme to obtain usernames and passwords for his victims. He sent e-mails to victims that appeared to be from security accounts of internet service providers that directed the victims to a website that would collect the victims’ usernames and passwords. After victims responded by entering information at that website, Majerczyk had access to victims’ usernames and passwords. After illegally accessing the iCloud and Gmail accounts, Majerczyk obtained personal information including sensitive and private photographs and videos.
“Mr. Majerczyk manipulated hundreds of victims by tricking them into providing access to their accounts, including high-profile victims whose information was specifically targeted,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The lasting harm this type of intrusion can cause to celebrities and non-celebrities alike cannot be overstated, and this case should serve as a necessary reminder to all of us that it is dangerous to respond to unsolicited e-mails in which our personal information is requested.”
Many of Majerczyk’s victims were members of the entertainment industry in Los Angeles. By illegally accessing the e-mail accounts, Majerczyk accessed at least 300 accounts, and at least 30 accounts belonging to celebrities.
The charge against Majerczyk stems from the investigation into the leaks of photographs of numerous female celebrities in September 2014 known as “Celebgate.” However, investigators have not uncovered any evidence indicating that Majerczyk was responsible for any of the postings of celebrity photographs.
In addition to the prison term, Judge Kocoras ordered Majerczyk to pay $5,700 in restitution to one victim whose photos were published on the Internet. Majerczyk was ordered to begin serving his sentence by February 27.
The case against Majerczyk is the product of an ongoing investigation by the Federal Bureau of Investigation. The case was filed by Assistant United States Attorneys Ryan White and Vicki Chou of the Cyber and Intellectual Property Crimes Section. The sentencing hearing was handled by Chicago-based Assistant United States Attorney Raj Laud.
Mission Viejo Man Sentenced to 6½ Years in Federal Prison for Orchestrating $2.3 Million Real Estate Investment Fraud SchemeRead the Press Release
LOS ANGELES – A Mission Viejo man who admitted taking more than $2.3 million from investors in a fraudulent real estate investment scheme has been sentenced to 78 months in federal prison.
Francisco “Frank” Hobson, 40, who admitted to engaging in a fraudulent scheme in which he used real estate investor funds to pay for personal expenses and to make Ponzi-style payments to other investors, was sentenced yesterday by United States District Judge Percy Anderson. In addition to the 6½-year prison sentence, Judge Anderson ordered Hobson to pay approximately $1.61 million in restitution to 26 victims.
Hobson pleaded guilty in October to one count of wire fraud, admitting that he solicited money from investors with false promises to purchases properties, including a residence in Lakewood that was not actually for sale and a non-existent home in Downey.
Calling the defendant’s crimes “cold-hearted,” Judge Anderson said that Hobson was motivated by a desire for “a bigger house and bigger car,” and that Hobson’s actions demonstrated that he was “totally absorbed in his self and family at the expense of victims.”
At the time of the scheme, from late 2010 through July 2016, Hobson was a licensed real estate agent who lured victims with false promises that their investments would be used to purchase properties. However, the properties that Hobson promised to purchase for his victims were not for sale or simply did not exist, and the purchase agreements he sent to the victims were bogus. Additionally, Hobson continued to engage in the scheme for months after being interviewed in November 2015 by special agents with the Federal Bureau of Investigation, which had received complaints from two of his victims.
“The audacity of this defendant to continue his scheme after being interviewed by the FBI is shocking, and no doubt contributed to the significant sentence imposed by the court,” said United States Attorney Eileen M. Decker. “After that FBI interview in November 2015, the defendant went on to steal more than a half-million dollars from another family, money that was used to fund a lavish lifestyle and make payments to other victims.”
According to court documents, Hobson told investors to transfer money to “escrow accounts,” which were actually his own bank accounts. After the investors deposited their money, Hobson used the funds for personal expenses that included rent, travel, laser hair removal and plastic surgery.
“Mr. Hobson was motivated by greed that was not satisfied even after he knew his scheme was uncovered,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “This lengthy sentence should send a message to those using positions of trust to target certain groups through affinity schemes and should serve as a reminder to potential victims that extensive research is necessary before savings are turned over to individuals who promise large returns on investments and claim to be trustworthy.”
Out of the more than $2.3 million he collected as part of the scheme, Hobson paid out approximately $750,000 to his victims as Ponzi-style payments designed to conceal and extend the length of the scheme.
The case against Hobson was investigated by the Federal Bureau of Investigation. The case was prosecuted by Assistant United States Attorney Anil J. Antony of the Cyber and Intellectual Property Crimes Section.
Lake Forest Woman Pleads Guilty in $3.5 Million Real Estate Investment Scheme that Targeted Orange County InvestorsRead the Press Release
SANTA ANA, California – A Lake Forest woman who participated in a real estate investment scheme in which Southern California investors collectively suffered nearly $3.5 million in losses has pleaded guilty to federal charges.
Angel Bronsgeest, 55, pleaded guilty yesterday to one count of wire fraud before United States District Judge Cormac J. Carney.
In court yesterday, Bronsgeest admitted that she participated in a scheme in which victims were offered investments in a company known as The Equity Growth Group (TEGG). From through 2014, Bronsgeest and the man allegedly behind the scheme solicited victims during seminars in Orange County hotels offered by Investor Workshops, Inc.
The man who allegedly orchestrated the scheme – Shawn Patrick Watkins, 46, of Layton, Utah – was arraigned on September 1, 2016, after he surrendered to FBI agents in Orange County. Watkins is charged with nine counts of mail fraud, wire fraud and money laundering in an indictment that alleges he masterminded the scheme that defrauded at least 50 victims. Watkins allegedly presented himself as an expert in the field of real estate investment and attempted to gain trust by telling investors that he previously had worked in law enforcement.
As part of the solicitations, Bronsgeest admitted that she made false promises to investors. For example, investors were falsely advised that TEGG controlled hundreds of properties that generated rental income and TEGG would continue its growth by acquiring new properties. Investors were led to believe that they would receive substantial interest payments and that their money would be secured by collateral through the filing of deeds of trust on properties.
In reality, over the course of several years leading up to the collapse of TEGG, the company was not acquiring new properties and had a negative cash flow. Investor money was not used to acquire new properties, nor was it secured by collateral, and many victims did not receive interest payments. In fact, money that was paid to some victims as purported interest or a return on their investment came from investments made by other victims.
“This investment scheme was built on lies that began with false promises made during seminars to potential investors,” said United States Attorney Eileen M. Decker. “The falsehoods supported a Ponzi scheme that took money from unsuspecting victims for years and caused millions of dollars in losses. Investors must be wary of investment schemes that promise high rewards and no risk.”
“Defendant Bronsgeest knowingly took money from investors while knowing her offer was fraudulent,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Bronsgeest participated in this scheme in which her co-defendant, Shawn Watkins, used and overstated his brief history as a reserve deputy with law enforcement in order to gain the trust of investors, an exaggeration which ultimately got the attention of law enforcement officials and led to his undoing."
Bronsgeest is scheduled to be sentenced by Judge Carney on December 4. The charge of wire fraud carries a statutory maximum penalty of 20 years in federal prison.
Watkins is currently scheduled to go to trial on August 1 before Judge Carney.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
If convicted of the nine charges in the indictment – four counts of mail fraud, two counts of wire fraud and two counts of money laundering, Watkins would face a statutory maximum penalty of 180 years in federal prison.
The investigation in this case is being conducted by the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney Gregory W. Staples of the Santa Ana Branch Office.
Owners of West L.A. Pharmacy Found Guilty in Sweeping Scheme to Illegally Distribute Prescription NarcoticsRead the Press Release
LOS ANGELES – Two brothers who owned a West Los Angeles pharmacy were found guilty by a federal jury today of operating a years-long narcotic drug trafficking, money laundering and tax fraud conspiracy that illegally sold prescription narcotics to black market customers across the United States.
Brentwood residents Berry Kabov, 46, and his brother Dalibor “Dabo” Kabov, 33, who operated Global Compounding Pharmacy, were convicted of being at the center of a scheme that illegally sold oxycodone (best known by the brand name OxyContin, but also the main ingredient in Percocet and Percodan), hydromorphone (also known as Dilaudid), and hydrocodone (commonly known as Vicodin or Norco).
The Kabovs were found guilty of conspiracy to distribute narcotics, distribution of oxycodone, conspiracy to import narcotics, importation of anabolic steroids, money laundering and subscribing to false tax returns. As a result of the guilty verdicts, Berry Kabov faces a statutory maximum penalty of 309 years in federal prison, and Dalibor Kabov faces up to 315 years.
The brothers are scheduled to be sentenced on March 29 by United States District Judge Dolly M. Gee.
“These defendants used their pharmacy as a front for drug dealing, and they used multiple bank accounts to conceal their illicit proceeds,” said United States Attorney Eileen M. Decker. “Prescription drug abuse is an epidemic in this country that causes immense harm, and the use of the pharmacy allowed the defendants to increase greatly the volume of their business and distribute narcotics around the nation. In addition to operating as de facto drug dealers, these defendants cheated the U.S. tax system by failing to report approximately $1.5 million in income while living a life of luxury.”
According to court documents and evidence introduced during a three-week trial in United States District Court, the Kabov brothers used Global Compounding to sell bulk quantities of prescription drugs to customers across the country. During the investigation, authorities seized shipments that contained thousands of hidden oxycodone pills that the Kabov brothers had shipped to customers in and around Columbus, Ohio. These customers in turn made cash deposits into Kabov-controlled bank accounts or simply shipped bulk cash to the brothers in Southern California.
To conceal those black market drug sales, the Kabovs used their pharmacy to generate records that falsely indicated that prescriptions had been filled in the names of identity theft victims.
From June 2012 through December 2014, the pharmacy ordered nearly 100,000 oxycodone pills, yet it reported only half of those pills to state authorities who track prescription drug sale. There was a 15-month period with no reporting at all, and there were shortfalls in the tens of thousands of pills when the pharmacy did file reports.
“These individuals engaged in one of the most egregious, fraudulent acts we’ve seen on the part of a DEA registrant. They completely exploited the system to acquire dangerous and addictive prescription drugs by legal means with the primary intent of selling them on the black market,” said DEA Special Agent in Charge Steve Comer. “This conviction should serve as a warning to others so inclined to abuse the system. In the midst of a nation-wide opioid epidemic that is taking 90 lives a day, we’re leveraging all of our resources to bring illicit prescription drug traffickers like these to justice.”
In addition to the charges related to oxycodone, the brothers were found guilty of illegally importing anabolic steroids purchased from a wholesale drug distributor located in Hubei, China. The indictment details how the brothers used the pharmacy to illegally order bulk quantities of testosterone, oxandrolone and nandrolone.
On federal tax returns, the Kabovs understated their income by approximately $1.5 million. They falsely claimed to have suffered net losses in 2011 and 2012, while they were flying in private jets, staying in penthouse suites, and purchasing new luxury cars, such as a $100,000 Corvette.
“After amassing large quantities of cash from the black market sale of prescription drugs, the Kabov brothers attempted to legitimize these ill-gotten profits through the use of their pharmacy and financial institutions,” said Aimee Schabilion, Acting Special Agent in Charge of the IRS Criminal Investigation. “IRS Criminal Investigation remains committed to the investigation and prosecution of those who launder and profit from the proceeds of illegal pharmaceuticals.”
The investigation into the Kabov brothers and Global Compounding is being conducted by the Drug Enforcement Administration, IRS Criminal Investigation, the United States Postal Inspection Service, the Los Angeles Police Department, and the California Board of Pharmacy.
The case is being prosecuted by Assistant United States Attorneys Benjamin Barron and Ryan Weinstein of the Organized Crime Drug Enforcement Task Force, and Assistant United States Attorney Matthew O’Brien of the General Crimes Section.
Western Union Admits Anti-Money Laundering and Consumer Fraud Violations, Will Forfeit $586 Million in Settlement with Justice and FTCRead the Press Release
LOS ANGELES – The Western Union Company, a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Justice Department, the Federal Trade Commission, and several United States Attorney’s Offices, including the Central District of California.
In its agreement with the Justice Department, Western Union admits to criminal violations, including willfully failing to maintain an effective anti-money laundering (AML) program and aiding and abetting wire fraud.
According to admissions contained in a deferred prosecution agreement (DPA) and an accompanying statement of facts filed today, between 2004 and 2012, Western Union violated U.S. laws – the Bank Secrecy Act (BSA) and anti-fraud statutes – by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.
As part of the scheme, fraudsters contacted victims in the United States and falsely posed as family members in need or promised prizes or job opportunities. The fraudsters directed the victims to send money through Western Union to help their relative or claim their prize. Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds.
Western Union knew of, but failed to take corrective action against, Western Union agents involved in or facilitating fraud-related transactions. Beginning in at least 2004, Western Union recorded customer complaints about fraudulently induced payments in what are known as consumer fraud reports (CFRs). In 2004, Western Union’s Corporate Security Department proposed global guidelines for discipline and suspension of Western Union agents that processed a materially elevated number of fraud transactions. In these guidelines, the Corporate Security Department effectively recommended automatically suspending any agent that paid 15 CFRs within 120 days. Had Western Union implemented these proposed guidelines, it would have prevented significant fraud losses to victims and would have resulted in corrective action against more than 2,000 agents worldwide between 2004 and 2012.
Court documents also show Western Union’s BSA failures spanned eight years and involved, among other things, the acquisition of a significant agent that Western Union knew prior to the acquisition had an ineffective AML program and had contracted with other agents that were facilitating significant levels of consumer fraud. Despite this knowledge, Western Union moved forward with the acquisition and did not remedy the AML failures or terminate the high-fraud agents.
Similarly, Western Union failed to terminate or discipline agents who repeatedly violated the BSA and Western Union policy through their structuring activity in the Central District of California, the Eastern District of Pennsylvania, New York City and elsewhere. The BSA requires financial institutions, including money services businesses such as Western Union, to file currency transaction reports (CTRs) for transactions in currency greater than $10,000 in a single day. To evade the filing of a CTR and identification requirements, criminals will often structure their currency transactions so that no single transaction exceeds the $10,000 threshold. Financial institutions are required to report suspected structuring where the aggregate number of transactions by or on behalf of any person exceeds more than $10,000 during one business day. Western Union knew that certain of its U.S. Agents were allowing or aiding and abetting structuring by their customers. Rather than taking corrective action to eliminate structuring at and by its agents, Western Union, among other things, allowed agents to continue sending transactions through Western Union’s system and paid agents bonuses. Despite repeated compliance reviews identifying suspicious or illegal behavior by its agents, Western Union almost never identified those agents as the subjects of required reports to law enforcement
In the Central District of California, an investigation by the FBI’s Los Angeles Field Office, IRS Criminal Investigation and local partners into Western Union’s largest West Coast agent found that U.S. Shen Zhou International in Monterey Park sent more than $310 million in Western Union transactions to China – approximately 50 percent of which were structured. The owner of Shen Zhou – Zhihe “Frank” Wang, 60, of Monterey Park – pleaded guilty late 2013 to one count of structuring international transactions to evade reporting requirement in Santa Ana federal court. Wang admitted making numerous transmission to China in $2,500 amounts, which is just below the $3,000 amount that triggers various BSA reporting and record-keeping requirements for money transmitters, as well as the $10,000 amount that triggers CTR filings. Despite finding repeated violations of Western Union policies, Western Union took no disciplinary action against Shen Zhou beyond one 90-day probation in January 2006 during which Shen Zhou continued to process transactions.
Wang is currently scheduled to be sentenced by United States District Judge Andrew J. Guilford on June 5, at which time he will face a statutory maximum sentence of five years in federal prison.
Based on information uncovered in the Shen Zhou investigation, further investigation by the FBI into Western Union and its “China Corridor” agents found widespread structuring violations. Despite the fact that these high-volume agents failed multiple compliance reviews and continued to aid their customers in illegal activity, Western Union took little to no discipline against the agents, continued to allow the agents to process money transfers and actively encouraged the China Corridor agents to expand their businesses. Between 2003 and 2012, the top five China Corridor agents in the United States structured hundreds of millions of dollars in Western Union transactions.
“Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers,” said U.S. Attorney Decker. “In the case being prosecuted by my office, a Western Union agent has pleaded guilty to federal charges of structuring transactions – illegal conduct the company knew about for at least five years. Western Union documents indicate that its employees fought to keep this agent – as well as several other high-volume independent agents in New York City – working for Western Union because of the high volume of their activity. This action today will ensure that Western Union effectively controls its agents and prevents the use of its money transfer system for illegal purposes.”
“Los Angeles defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Rather than ensuring their high volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place. This settlement should go a long way in thwarting the proceeds of illicit transactions being sent to China to fund human smuggling or drug trafficking, as well as to interrupt the ease with which scam artists flout U.S. banking regulations in schemes devised to defraud vulnerable Americans.”
“In taking responsibility for their actions, Western Union has agreed to cooperate and forfeit more than $500 million for their role in circumventing Bank Secrecy Act reporting requirements,” stated Anthony J. Orlando, the Acting Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “Today's outcome is a testament to law enforcement efforts to stem the exploitation of the American financial system and ensure if you conduct business in our country you must abide by our laws.”
Western Union entered into a DPA in connection with a two-count felony criminal information filed today in the Middle District of Pennsylvania that charges Western Union with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. Pursuant to the DPA, Western Union has agreed to forfeit $586 million and also agreed to enhanced compliance obligations to prevent a repeat of the charged conduct, including creating policies and procedures:
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for corrective action against agents that pose an unacceptable risk of money laundering or have demonstrated systemic, willful or repeated lapses in compliance;
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that ensure that its agents around the world will adhere to U.S. regulatory and AML standards; and
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that ensure that the company will report suspicious or illegal activity by its agents or related to consumer fraud reports.
“As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division. “Western Union is now paying the price for placing profits ahead of its own customers. Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.”
In a related case, Western Union agreed to settle charges by the FTC in a complaint filed today in the U.S. District Court for the Middle District of Pennsylvania, alleging that the company’s conduct violated the FTC Act. The complaint charges that for many years, fraudsters around the world have used Western Union’s money transfer system even though the company has long been aware of the problem, and that some Western Union agents have been complicit in fraud. The FTC’s complaint alleges that Western Union declined to put in place effective anti-fraud policies and procedures and has failed to act promptly against problem agents. Western Union has identified many of the problem agents but has profited from their actions by not promptly suspending and terminating them.
“Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said FTC Chairwoman Edith Ramirez. “The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”
In resolving the FTC charges, Western Union agreed to a monetary judgment of $586 million and to implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.
The FTC order prohibits Western Union from transmitting a money transfer that it knows or reasonably should know is fraud-induced, and requires it to:
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block money transfers sent to any person who is the subject of a fraud report;
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provide clear and conspicuous consumer fraud warnings on its paper and electronic money transfer forms;
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increase the availability of websites and telephone numbers that enable consumers to file fraud complaints; and
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refund a fraudulently induced money transfer if the company failed to comply with its anti-fraud procedures in connection with that transaction.
In addition, consistent with the telemarketing sales rule, Western Union must not process a money transfer that it knows or should know is payment for a telemarketing transaction. The company’s compliance with the order will be monitored for three years by an independent compliance auditor.
Since 2001, the Justice Department has charged and convicted 29 owners or employees of Western Union agents for their roles in fraudulent and structured transactions.
The investigation into Western Union was conducted by the FBI’s Los Angeles Field Office and its local partners; the United States Postal Inspection Service’s Philadelphia Division’s Harrisburg, Pennsylvania, Office; IRS Criminal Investigation; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Philadelphia; the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau; the United States Department of Treasury, Office of Inspector General; the Broward County (Florida) Sheriff’s Office; and the United States Department of Labor.
The case is being prosecuted by Assistant U.S. Attorney Gregory W. Staples of the Santa Ana Branch Office, along with Trial Attorney Margaret A. Moeser of the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit and Assistant U.S. Attorneys in the Middle District of Pennsylvania, the Eastern District of Pennsylvania and the Southern District of Florida. Assistant United States Attorney Frank Kortum of the Asset Forfeiture Section, along with asset forfeiture attorneys in the other U.S. Attorney’s Offices and the Money Laundering and Asset Recovery Section, provided significant assistance in this matter. The Justice Department appreciates the significant cooperation and assistance provided by the FTC in this matter.
Persons who believe they were victims of the fraud scheme should visit the Department of Justice’s victim website at https://www.justice.gov/criminal-afmls/remission for instructions on how to request compensation through the Victim Asset Recovery Program.
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Western Union Admits Anti-Money Laundering and Consumer Fraud Violations, Forfeits $586 Million in Settlement with Justice Department and Federal Trade CommissionRead the Press Release
The Western Union Company (Western Union), a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Justice Department, the Federal Trade Commission (FTC), and the U.S. Attorney’s Offices for the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania and the Southern District of Florida. In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering (AML) program and aiding and abetting wire fraud.
Acting Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division; FTC Chairwoman Edith Ramirez; U.S. Attorney Bruce D. Brandler of the Middle District of Pennsylvania; U.S. Attorney Eileen M. Decker of the Central District of California; Acting U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Inspector in Charge David W. Bosch of the U.S. Postal Inspection Service (USPIS) Philadelphia Division; Assistant Director in Charge Deirdre Fike of the FBI’s Los Angeles Field Office; Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI); Special Agent in Charge Marlon V. Miller of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Philadelphia; and Special Agent in Charge Stephen Carroll of the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (FRB-CFPB OIG) Eastern Region made the announcement.
“As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General Bitkower. “Western Union is now paying the price for placing profits ahead of its own customers. Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.”
“Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said Chairwoman Ramirez. “The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”
“The U.S. Attorney’s Office for the Middle District of Pennsylvania has a long history of prosecuting corrupt Western Union Agents,” said U.S. Attorney Brandler. “Since 2001, our office, in conjunction with the U.S. Postal Inspection Service, has charged and convicted 26 Western Union Agents in the United States and Canada who conspired with international fraudsters to defraud tens of thousands of U.S. residents via various forms of mass marketing schemes. I am gratified that the deferred prosecution agreement reached today with Western Union ensures that $586 million will be available to compensate the many victims of these frauds.”
“Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers,” said U.S. Attorney Decker. “In a case being prosecuted by my office, a Western Union agent has pleaded guilty to federal charges of structuring transactions – illegal conduct the company knew about for at least five years. Western Union documents indicate that its employees fought to keep this agent – as well as several other high-volume independent agents in New York City – working for Western Union because of the high volume of their activity. This action today will ensure that Western Union effectively controls its agents and prevents the use of its money transfer system for illegal purposes.”
“Western Union’s failure to comply with anti-money laundering laws provided fraudsters and other criminals with a means to transfer criminal proceeds and victimize innocent people,” said Acting U.S. Attorney Lappen. “Western Union has agreed to forfeit $586 million, the largest forfeiture ever imposed on a money services business, and has agreed to take specific steps to ensure that it complies with the law in the future. This office will continue to vigorously enforce the anti-money laundering laws and regulations, which are necessary to prevent those engaged in fraud, terrorism, human trafficking, drug dealing and other crimes from using companies like Western Union to further their illegal activity.”
“Western Union, the largest money service business in the world, has admitted to a flawed corporate culture that failed to provide a checks and balances approach to combat criminal practices,” said U.S. Attorney Ferrer. “Western Union’s failure to implement proper controls and discipline agents that violated compliances policies enabled the proliferation of illegal gambling, money laundering and fraud-related schemes. Western Union’s conduct resulted in the processing of hundreds of millions of dollars in prohibited transactions. Today’s historic agreement, involving the largest financial forfeiture by a money service business, makes it clear that all corporations and their agents will be held accountable for conduct that circumvents compliance programs designed to prevent criminal conduct.”
“The U.S. Postal Inspection Service has been at the forefront of protecting consumers from fraud schemes for many years,” said Inspector in Charge Bosch. “When private businesses participate in the actions that Western Union was involved in, it makes it easier for criminals to victimize innocent citizens. Our commitment to bringing these criminals to justice will not waiver, and we look forward to facilitating compensation to victims.”
“Los Angeles-defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” said Assistant Director in Charge Fike. “Rather than ensuring their high volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place. This settlement should go a long way in thwarting the proceeds of illicit transactions being sent to China to fund human smuggling or drug trafficking, as well as to interrupt the ease with which scam artists flout U.S. banking regulations in schemes devised to defraud vulnerable Americans.”
"As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other U.S. laws,” said Chief Weber. “Western Union’s blatant disregard of their anti-money laundering compliance responsibilities was criminal and significant. IRS-CI special agents – working with their investigative agency partners – uncovered the massive AML compliance failures and is proud to be part of this historic criminal resolution.”
“Today’s announcement of this significant settlement highlights the positive result of HSI’s collaboration with our partner agencies to hold Western Union accountable for their failure to comply with bank secrecy laws that preserve the integrity of the financial system of the United States,” said Special Agent in Charge Miller. “As a result of this settlement, Western Union now answers for these violations. I thank the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau for their partnership in this investigation.”
According to admissions contained in the deferred prosecution agreement (DPA) and the accompanying statement of facts, between 2004 and 2012, Western Union violated U.S. laws—the Bank Secrecy Act (BSA) and anti-fraud statutes—by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.
As part of the scheme, fraudsters contacted victims in the U.S. and falsely posed as family members in need or promised prizes or job opportunities. The fraudsters directed the victims to send money through Western Union to help their relative or claim their prize. Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds.
Western Union knew of but failed to take corrective action against Western Union agents involved in or facilitating fraud-related transactions. Beginning in at least 2004, Western Union recorded customer complaints about fraudulently induced payments in what are known as consumer fraud reports (CFRs). In 2004, Western Union’s Corporate Security Department proposed global guidelines for discipline and suspension of Western Union agents that processed a materially elevated number of fraud transactions. In these guidelines, the Corporate Security Department effectively recommended automatically suspending any agent that paid 15 CFRs within 120 days. Had Western Union implemented these proposed guidelines, it could have prevented significant fraud losses to victims and would have resulted in corrective action against more than 2,000 agents worldwide between 2004 and 2012.
Court documents also show Western Union’s BSA failures spanned eight years and involved, among other things, the acquisition of a significant agent that Western Union knew prior to the acquisition had an ineffective AML program and had contracted with other agents that were facilitating significant levels of consumer fraud. Despite this knowledge, Western Union moved forward with the acquisition and did not remedy the AML failures or terminate the high-fraud agents.
Similarly, Western Union failed to terminate or discipline agents who repeatedly violated the BSA and Western Union policy through their structuring activity in the Central District of California and the Eastern District of Pennsylvania. The BSA requires financial institutions, including money services businesses such as Western Union, to file currency transaction reports (CTRs) for transactions in currency greater than $10,000 in a single day. To evade the filing of a CTR and identification requirements, criminals will often structure their currency transactions so that no single transaction exceeds the $10,000 threshold. Financial institutions are required to report suspected structuring where the aggregate number of transactions by or on behalf of any person exceeds more than $10,000 during one business day. Western Union knew that certain of its U.S. Agents were allowing or aiding and abetting structuring by their customers. Rather than taking corrective action to eliminate structuring at and by its agents, Western Union, among other things, allowed agents to continue sending transactions through Western Union’s system and paid agents bonuses. Despite repeated compliance review identifying suspicious or illegal behavior by its agents, Western Union almost never identified the suspicious activity those agents engaged in in its required reports to law enforcement
Finally, Western Union has been on notice since at least December 1997, that individuals use its money transfer system to send illegal gambling transactions from Florida to offshore sportsbooks. Western Union knew that gambling transactions presented a heightened risk of money laundering and that through at least 2012, certain procedures it implemented were not effective at limiting transactions with characteristics indicative of illegal gaming from the United States to other countries.
Western Union entered into a DPA in connection with a two-count felony criminal information filed today in the Middle District of Pennsylvania charging Western Union with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. Pursuant to the DPA, Western Union has agreed to forfeit $586 million and also agreed to enhanced compliance obligations to prevent a repeat of the charged conduct, including creating policies and procedures:
- for corrective action against agents that pose an unacceptable risk of money laundering or have demonstrated systemic, willful or repeated lapses in compliance;
- that ensure that its agents around the world will adhere to U.S. regulatory and AML standards; and
- that ensure that the company will report suspicious or illegal activity by its agents or related to consumer fraud reports.
In a related case, Western Union agreed to settle charges by the FTC in a complaint filed today in the U.S. District Court for the Middle District of Pennsylvania, alleging that the company’s conduct violated the FTC Act. The complaint charges that for many years, fraudsters around the world have used Western Union’s money transfer system even though the company has long been aware of the problem, and that some Western Union agents have been complicit in fraud. The FTC’s complaint alleges that Western Union declined to put in place effective anti-fraud policies and procedures and has failed to act promptly against problem agents. Western Union has identified many of the problem agents but has profited from their actions by not promptly suspending and terminating them.
In resolving the FTC charges, Western Union agreed to a monetary judgment of $586 million and to implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.
The FTC order prohibits Western Union from transmitting a money transfer that it knows or reasonably should know is fraud-induced, and requires it to:
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block money transfers sent to any person who is the subject of a fraud report;
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provide clear and conspicuous consumer fraud warnings on its paper and electronic money transfer forms;
-
increase the availability of websites and telephone numbers that enable consumers to file fraud complaints; and
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refund a fraudulently induced money transfer if the company failed to comply with its anti-fraud procedures in connection with that transaction.
In addition, consistent with the telemarketing sales rule, Western Union must not process a money transfer that it knows or should know is payment for a telemarketing transaction. The company’s compliance with the order will be monitored for three years by an independent compliance auditor.
Since 2001, the department has charged and convicted 29 owners or employees of Western Union agents for their roles in fraudulent and structured transactions. The U.S. Attorney’s Office of the Middle District of Pennsylvania has charged and convicted 26 Western Union agent owners and employees for fraud-related violations; the U.S. Attorney’s Office of the Central District of California has secured a guilty plea from one Western Union agent for BSA violations, and the U.S. Attorney’s Office for the Eastern District of Pennsylvania has secured guilty pleas for BSA violations of two other individuals associated with Western Union agents for BSA violations.
USPIS’s Philadelphia Division’s Harrisburg, Pennsylvania, Office; the FBI’s Los Angeles Field Office; IRS-CI; HSI; FRB-CFPB OIG; Department of Treasury OIG; the Broward County, Florida Sheriff’s Offices; and Department of Labor investigated the case. Trial Attorney Margaret A. Moeser of the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit, Assistant U.S. Attorney Kim Douglas Daniel of the Middle District of Pennsylvania, Assistant U.S. Attorney Gregory W. Staples of the Central District of California, Assistant U.S. Attorneys Judy Smith and Floyd Miller of the Eastern District of Pennsylvania and Assistant U.S. Attorney Randy Katz of the Southern District of Florida are prosecuting the case. Asset forfeiture attorneys in each U.S. Attorney’s Office and the Money Laundering and Asset Recovery Section provided significant assistance in this matter. The department appreciates the significant cooperation and assistance provided by the FTC in this matter.
Persons who believe they were victims of the fraud scheme should visit the Department of Justice’s victim website at https://www.justice.gov/criminal-afmls/remission for instructions on how to request compensation through the Victim Asset Recovery Program.
The Victim Compensation Program, operated by the Money Laundering and Asset Recovery Section, is composed of a team of experienced professionals, including attorneys, accountants, auditors and claims analysts. In hundreds of cases, the Victim Compensation Program has successfully used its specialized expertise to efficiently convert forfeited assets to victim recoveries.
U.S. Files Consent Decree Against O.C. Dietary Supplement Company to Stop Distribution of Adulterated and Misbranded ProductsRead the Press Release
SANTA ANA, California – The Department of Justice yesterday filed a consent decree in United States District Court that seeks a permanent injunction against the Irvine-based VivaCeuticals Inc. (doing business as Regeneca Worldwide) and its chief executive officer, Matthew A. Nicosia, to prevent violations of the Federal Food, Drug and Cosmetic Act (FDCA). As part of the settlement with the Justice Department, the defendants have agreed to cease all operations.
According to a civil complaint filed in late 2015, the defendants violated the FDCA by failing to manufacture dietary supplements in accordance with the FDA’s current good manufacturing practice (CGMP) regulations. The complaint also alleged that the defendants violated the FDCA by manufacturing and distributing a product called RegeneSlim Appetite Control, which contained the unsafe food additive 1, 3 dimethylamylamine (DMAA), and failing to disclose the presence of DMAA in RegeneSlim’s labeling. The complaint further alleges that the defendants violated the FDCA by marketing RegeneSlim to be used in the cure, mitigation, treatment or prevention of disease, thereby causing RegeneSlim to be an unapproved new drug and a misbranded drug.
The defendants agreed to settle the litigation through a consent decree that would permanently prohibit them from committing violations of the FDCA. The consent decree requires the defendants to cease all operations, and requires that if the defendants wish to resume manufacturing dietary supplements or drugs in the future, the FDA first must determine that the defendants’ manufacturing practices have come into compliance with the law. The proposed decree is currently awaiting approval by United States District Judge Josephine L. Staton.
The government’s enforcement action resulted from a series of inspections by the United States Food and Drug Administration of the defendants’ manufacturing facility that found recurring FDCA violations of the same nature as those alleged in the complaint. The defendants failed to correct these violations, despite FDA warnings.
“When dietary supplement manufacturers place unsafe and undisclosed ingredients in their products and disregard CGMP regulations, they put the public health at risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work closely with the FDA to prevent dietary supplement manufacturers from jeopardizing public health.”
“This case involves unsafe supplements, some of which contained DMAA, which can cause serious health problems, including the possibility of a heart attack,” said United States Attorney Eileen M. Decker. “This company has a lengthy history of distributing drugs and dietary supplements in violation of the FDCA, but this settlement will ensure that this practice comes to an end.”
This matter was handled by Trial Attorneys Clint Narver and Monica Groat of the Civil Division’s Consumer Protection Branch, with assistance from Claudia Zuckerman of the FDA’s Office of the Chief Counsel.
Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy ControlsRead the Press Release
LOS ANGELES – Costco Wholesale will pay $11.75 million to settle allegations that its pharmacies violated the Controlled Substances Act when they improperly filled prescriptions for controlled substances.
The settlement announced today resolves allegations that Costco pharmacies filled prescriptions that were incomplete, lacked valid DEA numbers or were for substances beyond various doctors’ scope of practice. Additionally, the settlement resolves allegations that Costco failed to keep and maintain accurate records for controlled substances at its pharmacies and centralized fill locations.
The settlement was announced today by United States Attorney Eileen M. Decker, along with U.S. Attorneys Annette L. Hayes for the Western District of Washington, Michael C. Ormsby for the Eastern District of Washington, Barbara L. McQuade for the Eastern District of Michigan, and Phillip A. Talbert for the Eastern District of California.
“These are not just administrative or paperwork violations – Costco’s failure to have proper controls in place in its pharmacies likely played a role in prescription drugs reaching the black market,” said United States Attorney Eileen M. Decker. “Costco pharmacies in Southern California filled numerous prescriptions for drugs that should not have been sold to consumers because of its flawed system for validating DEA registration numbers.”
Under the settlement that was finalized yesterday, Costco acknowledged that, from the beginning of 2012 through the end of 2015, certain Costco Pharmacies dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act (CSA) and its implementing regulations. The violations included filling prescriptions from practitioners who did not have a valid DEA number, incorrectly recording the practitioner’s DEA number, filling prescriptions outside the scope of a practitioner’s DEA registration, filling prescriptions that did not contain all the required information, failing to maintain accurate dispensing records, and failing to maintain records for their central fill locations in Sacramento and Everett, Washington.
As part of an investigation in 2012 into the diversion of controlled substances by local physicians, the DEA’s Los Angeles Field Division discovered that Los Angeles-area Costco pharmacies had filled numerous prescriptions issued by individual practitioners who lacked a valid DEA registration number. The resulting DEA investigation into the practices, policies and procedures for validating DEA registration numbers at local Costco pharmacies revealed that, between January 2012 and August 2013, area Costco pharmacies filled dozens of prescriptions issued by individual practitioners who lacked a valid DEA registration number, and filled nearly 200 prescriptions issued by individual practitioners with a valid DEA registration number but used an invalid DEA registration number when recording and reporting the prescription. Costco filled these prescriptions because its system for validating DEA registration numbers was deficient and flawed.
“Last year, over 50,000 Americans died as a result of drug overdoses, many of which were related to the misuse of prescription drugs. This settlement demonstrates the accountability and responsibility that go along with handling controlled prescription drugs,” said DEA Assistant Administrator Louis Milione. “DEA works every day to reinforce good corporate practices through outreach and education efforts and, when appropriate, with administrative and criminal action.”
“Pharmacies across this country are on the leading edge of the battle against our prescription drug abuse crisis,” said United States Attorney Annette L. Hayes of the Western District of Washington. “A company such as Costco that distributes a significant volume of controlled substances has a responsibility to ensure it complies with regulations that help prevent opioids and other dangerous drugs from being misused or otherwise added to the illegal marketplace. I commend the Drug Enforcement Administration investigators for uncovering the violations at issue in this case, and working with Costco to ensure that systems are put in place to prevent controlled substances from ending up in the wrong hands.”
To address issues uncovered in this investigation, Costco made improvements in its pharmacies. The company purchased a new pharmacy management system at a total budgeted five year cost of approximately $127 million. Additionally, Costco implemented a three tier audit program of its pharmacy locations: Tier 1 done by pharmacy managers and regional pharmacy supervisors; Tier 2 completed by an Internal Audit group consisting of three auditors and an audit supervisor; and Tier 3 an External Audit of 40 annual audits.
Under the terms of the settlement, over the next three years, DEA is allowed to conduct unannounced and unrestricted inspections of all DEA registered Costco Pharmacy locations without Administrative Inspection Warrants. The Drug Enforcement Administration monitors pharmacy prescribing practices to ensure compliance with federal law. Pharmacies found in violation face escalating penalties up to the revocation of their DEA Registration number – the authorization that allows them to write prescriptions for controlled substances.
Michael C. Ormsby, United States Attorney for the Eastern District of Washington, said “Opioid misuse has reached epidemic levels in the United States. This important matter is yet another example of the tenacious dedication of Drug Enforcement Administration investigators in uncovering and addressing corporate regulatory noncompliance. The DEA must be commended for its superb efforts in combating the opioid problem at so many different levels, including regulatory compliance.”
“In light of the prescription pill and opioid overdose epidemic we are seeing across the country, compliance with regulations governing pharmacies is more important than ever,” said United States Attorney Barbara L. McQuade of the Eastern District of Michigan. “We applaud Costco for working with DEA and taking steps to tighten up its compliance to ensure that prescription pills do not end up on the street market.”
“Pharmacies are the gatekeepers responsible for ensuring the lawful use of powerful drugs that have a legitimate medical purpose but are easily abused. The CSA provides the statutory oversight to ensure that pharmacies keep meticulous records,” said United States Attorney Phillip A. Talbert of the Eastern District of California. “The successful resolution of this matter demonstrates the Department of Justice’s commitment to enforcing the CSA.”
This case was investigated by DEA Diversion Groups in Seattle, Los Angeles, Sacramento and Detroit. While this settlement is national in scope, the settlement was negotiated by the United States Attorney’s Offices in the Western and Eastern Districts of Washington, the Central and Eastern Districts of California, and the Eastern District of Michigan.
Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy ControlsRead the Press Release
Costco Pharmacies Filled Prescriptions that Were Improper or Incomplete
Costco Wholesale will pay $11.75 million to settle allegations that its pharmacies violated the Controlled Substances Act when they improperly filled prescriptions for controlled substances. The settlement resolves allegations that Costco pharmacies filled prescriptions that were incomplete, lacked valid Drug Enforcement Administration (DEA) numbers or were for substances beyond various doctors’ scope of practice. Additionally, the settlement resolves allegations that Costco failed to keep and maintain accurate records for controlled substances at its pharmacies and centralized fill locations.
The settlement was announced today by U.S. Attorneys Annette L. Hayes of the Western District of Washington, Michael C. Ormsby of the Eastern District of Washington, Eileen M. Decker of the Central District of California, Barbara L. McQuade of the Eastern District of Michigan and Phillip A. Talbert of the Eastern District of California.
“Pharmacies across this country are on the leading edge of the battle against our prescription drug abuse crisis,” said U.S. Attorney Hayes. “A company such as Costco that distributes a significant volume of controlled substances has a responsibility to ensure it complies with regulations that help prevent opioids and other dangerous drugs from being misused or otherwise added to the illegal marketplace. I commend the DEA investigators for uncovering the violations at issue in this case, and working with Costco to ensure that systems are put in place to prevent controlled substances from ending up in the wrong hands.”
“Last year, over 50,000 Americans died as a result of drug overdoses, many of which were related to the misuse of prescription drugs. This settlement demonstrates the accountability and responsibility that go along with handling controlled prescription drugs,” said DEA Assistant Administrator Louis Milione. “DEA works every day to reinforce good corporate practices through outreach and education efforts and, when appropriate, with administrative and criminal action.”
Under the settlement reached Jan. 18, 2017, Costco acknowledges that between Jan. 1, 2012 and Dec. 31, 2015, certain Costco Pharmacies dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act (CSA) and its implementing regulations. The violations include: filling prescriptions from practitioners who did not have a valid DEA number; incorrectly recording the practitioner’s DEA number; filling prescriptions outside the scope of a practitioner’s DEA registration; filling prescriptions that did not contain all the required information; failing to maintain accurate dispensing records; and failing to maintain records for their central fill locations in Sacramento, California, and Everett, Washington.
“In light of the prescription pill and opioid overdose epidemic we are seeing across the country, compliance with regulations governing pharmacies is more important than ever,” said U.S. Attorney McQuade. “We applaud Costco for working with DEA and taking steps to tighten up its compliance to ensure that prescription pills do not end up on the street market.”
“These are not just administrative or paperwork violations – Costco’s failure to have proper controls in place in its pharmacies played a role in prescription drugs reaching the black market,” said U.S. Attorney Decker. “Costco pharmacies in Southern California filled numerous prescriptions for drugs that should not have been sold to consumers because of its flawed system for validating DEA registration numbers.”
“Opioid misuse has reached epidemic levels in the United States. This important matter is yet another example of the tenacious dedication of Drug Enforcement Administration investigators in uncovering and addressing corporate regulatory noncompliance,” said U.S. Attorney Ormsby. “The DEA must be commended for its superb efforts in combating the opioid problem at so many different levels, including regulatory compliance.”
“Pharmacies are the gatekeepers responsible for ensuring the lawful use of powerful drugs that have a legitimate medical purpose but are easily abused. The CSA provides the statutory oversight to ensure that pharmacies keep meticulous records,” said U.S. Attorney Talbert. “The successful resolution of this matter demonstrates the Department of Justice’s commitment to enforcing the CSA.”
To address issues uncovered in this investigation, Costco made improvements in its pharmacies. The company purchased a new pharmacy management system at a total budgeted five year cost of approximately $127 million. Additionally, Costco implemented a three tier audit program of its pharmacy locations: Tier 1 done by pharmacy managers and regional pharmacy supervisors; Tier 2 completed by an Internal Audit group consisting of three auditors and an audit supervisor; and Tier 3 an External Audit of 40 annual audits.
Under the terms of the settlement, over the next three years, DEA is allowed to conduct unannounced and unrestricted inspections of all DEA registered Costco Pharmacy locations without Administrative Inspection Warrants. The DEA monitors pharmacy prescribing practices to ensure compliance with federal law. Pharmacies found in violation face escalating penalties up to the revocation of their DEA Registration number – the authorization that allows them to write prescriptions for controlled substances.This case was investigated by DEA Diversion Groups in Seattle, Los Angeles, Sacramento and Detroit. While this settlement is national in scope, the settlement was negotiated by the United States Attorney’s Offices in the Western and Eastern Districts of Washington, Central and Eastern Districts of California and Eastern District of Michigan.
U.K. Man Who Came to U.S. to Have Sex with Boys Sentenced to 13 Years in Federal Prison for Transporting Child PornographyRead the Press Release
LOS ANGELES – A British man who traveled to the Coachella Valley to have sex with pre-teen boys and later pleaded guilty to transportation of child pornography was sentenced today to 13 years in federal prison.
Paul Charles Wilkins, 70, of Littleport in East Cambridgeshire, England, a dual United States-United Kingdom citizen, was sentenced this morning by United States District Judge Dolly M. Gee.
In addition to the prison term, Judge Gee ordered Wilkins to pay a $25,000 criminal fine and a $5,000 special assessment under the Justice for Victims of Trafficking Act of 2015. Following the completion of his prison term, Wilkins be on supervised release for the rest of his life.
Wilkins pleaded guilty in September to one count of transportation of child pornography. When he pleaded guilty, Wilkins admitted that he traveled to the United States from the United Kingdom in January 2016 for the purpose of having sex with two brothers who were 10 and 12 at the time. When that plan fell apart, Wilkins made arrangements with an undercover law enforcement officer to have sex with a 9-year-old boy in exchange for $250 at an apartment he had rented. Additionally, Wilkins admitted he possessed child pornography on his computer and brought child pornography from the United Kingdom into the United States, including graphic sexual images of boys between the ages of 5 and 8.
“This defendant persistently engaged in the sexual exploitation of children,” said United States Attorney Eileen M. Decker. “He was the administrator of an online group used by men to discuss their sexual interest in children, he traveled to the United States to have sex with two young boys, and he made arrangements with undercover agents to have sex with another young boy. Today’s sentence ensures that children will be protected from his abhorrent conduct for many years.”
The investigation into Wilkins was conducted by special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI).
“Given his age, this prison term virtually assures the defendant will not be a sexual threat to young people again,” said Joseph Macias, special agent in charge for HSI Los Angeles. “This sentence should also serve as a sobering reminder to pedophiles who wrongly believe they can outrun the law and indulge their perverse desires by buying an airline ticket and boarding a plane. HSI will continue to work closely with its law enforcement partners in the U.S. and around the world to hold these dangerous sexual predators accountable for their actions.”
The case was prosecuted by Assistant United States Attorney Christina T. Shay of the Violent and Organized Crime Section.
Owner of Palmdale Tax Service Arrested on Tax Fraud ChargesRead the Press Release
LOS ANGELES – The owner/operator of a Palmdale tax preparation business has been arrested on federal charges that he prepared and filed fraudulent federal income tax returns on behalf of his clients.
Oscar D. Alcerro, Jr., 31, the owner of Juniors Tax Service, Inc., was arrested yesterday by special agents with IRS Criminal Investigation pursuant to an indictment returned last month by a federal grand jury.
The 31-count indictment charges Alcerro with aiding and assisting in the preparation of fraudulent income tax returns.
The indictment alleges that over the course of several years – for the 2010 through 2013 tax years – Alcerro prepared and filed tax returns that claimed false itemized deductions on behalf of 11 clients. The taxpayers for whom the tax returns were prepared were not entitled to claim the deductions on the tax returns, which were filed without them knowing about the fraudulent deductions. The fraudulent tax returns included false deductions for personal property taxes, mortgage interest expense, gifts to charity and unreimbursed employee expenses. In one instance, the false deductions taken on the tax return totaled more than $57,500.
“Tax return preparers who are involved in the filing of false tax returns victimize their clients and the United States Treasury,” said United States Attorney Eileen M. Decker. “With the start of the 2017 filing season upon us, taxpayers should know that the Justice Department will hold these return preparers accountable for their conduct.”
“As we approach the tax filing season, those who might consider preparing false tax returns should be aware of the extremely negative consequences of doing so,” stated Acting Special Agent in Charge for IRS Criminal Investigation, Anthony J. Orlando. “Yesterday’s arrest of Mr. Alcerro emphasizes that the Internal Revenue Service and U.S. Attorney’s Office will continue our aggressive pursuit of those who attempt to defraud America’s tax system.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
Alcerro was arraigned on the indictment yesterday afternoon in United States District Court. A United States Magistrate Judge scheduled a trial on March 7 and ordered the defendant released on a $25,000 bond. As a condition of his release, Alcerro was ordered to not prepare tax returns.
Each count in the indictment carries a statutory maximum penalty of three years in federal prison, and a fine of up to $250,000 or twice the gross gain or loss resulting from the offense.
This case is the product of an investigation by IRS Criminal Investigation.
Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams. The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers. Additional information about and enforcement efforts by the United States Department of Justice may be found on the Tax Division’s website.
The case against Alcerro is being prosecuted by Assistant United States Attorneys James C. Hughes and Robert F. Conte of the Tax Division.
Orange County Men Plead Guilty to Hiding Millions of Dollars in Secret Foreign Bank AccountsRead the Press Release
SANTA ANA, California – Three Orange County residents pleaded guilty today to willfully failing to report their foreign bank accounts in Switzerland and Israel, the Justice Department announced.
Dan Farhad Kalili, 55, of Irvine, California; his brother, David Ramin Kalili, 52, of Newport Coast; and his brother-in-law, David Shahrokh Azarian, 67, also of Newport Coast, admitted that they willfully failed to file Reports of Foreign Bank and Financial Accounts (FBARs) with the Internal Revenue Service (IRS) regarding secret bank accounts in Switzerland and in Israel that each respectively maintained and controlled, many for well over a decade. These secret accounts held assets that reached into the millions of dollars.
“The days of being able to safely hide income and assets offshore and evade U.S. tax have come to an end,” said Principal Deputy Assistant Attorney General Ciraolo. “The United States and foreign jurisdictions are sharing information and working together to ensure that citizens around the world are paying their fair share. The guilty pleas entered today are yet another example of what awaits U.S. taxpayers who continue to flout the law.”
“Foreign bank accounts are not a haven for hiding money from the Internal Revenue Service,” said United States Attorney Eileen M. Decker. “These defendants took affirmative steps to hide income from federal authorities, but their efforts will now cost each of them hundreds of thousands of dollars in penalties for violating U.S. laws.”
“David and Dan Kalili and David Azarian disregarded their legal responsibility to file the required report of foreign bank accounts and report all their income and interest,” said Chief Richard Weber of IRS Criminal Investigation. “Regardless of where the money is hidden around the world, IRS-CI will follow the sophisticated financial transactions and ensure everyone is held accountable for the taxes they are required to pay.”
According to the documents filed with the court, and statements made in connection with the defendants’ guilty pleas:
Beginning in May 1996, and continuing through at least 2009, Dan Kalili opened and maintained several undeclared offshore bank accounts at Credit Suisse Group in Switzerland. He also opened and maintained several undeclared offshore bank accounts from at least 1998 through 2008 at UBS AG (UBS) in Switzerland. Similarly, David Kalili opened and maintained several undeclared accounts at Credit Suisse in Switzerland, from February 1999 through at least 2009, and at UBS in Switzerland, from October 1993 through at least 2008. Dan and David Kalili also maintained joint undeclared Swiss bank accounts at both UBS and Credit Suisse beginning in 2003 and 2004, respectively. Meanwhile, Azarian opened and maintained several of his own undeclared accounts at Credit Suisse in Switzerland from May 1994 through at least 2009, and at UBS in Switzerland from April 1997 through at least 2008.
In July 2006, Dan Kalili, with the assistance of Beda Singenberger, a Swiss citizen who owned and operated a financial advisory firm called Sinco Truehand AG, opened an undeclared account at UBS in the name of the Colsa Foundation, an entity established under the laws of Liechtenstein. Singenberger was indicted in the Southern District of New York in 2011 for conspiring to defraud the United States, evade U.S. income taxes, and file false U.S. tax returns. Singenberger remains a fugitive. As of May 2008, the Colsa Foundation account at UBS held approximately $4,927,500 in assets.
Each of the defendants took affirmative steps to prevent their assets in UBS and Credit Suisse from being discovered. Dan Kalili opened an undeclared account at Swiss Bank A in the name of the Colsa Foundation and in May 2008, transferred his assets from the UBS Colsa Foundation account to Swiss Bank A. He later made partial disclosure of the Swiss Bank A Colsa account on his individual income tax returns. In 2009, Dan Kalili opened undeclared accounts at Israeli Bank A and at Bank Leumi, both in Israel. In June 2009, he closed the joint undeclared account at Credit Suisse he held with David Kalili, as well as his own undeclared account, and transferred the funds. Shortly before its closure, the undeclared joint account of Dan and David Kalili at Credit Suisse held approximately $2,561,508 in assets. As of December 2009, Dan Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,569,973, and his undeclared account at Bank Leumi held assets valued at approximately $2,497,931.
Similarly, in August 2008, David Kalili opened an undeclared account at Israeli Bank A in Israel, into which he transferred funds from his UBS accounts. He later partially declared the Israeli Bank A account on his individual income tax returns. As of August 2009, David Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,369,489.
In August 2008, Azarian, also opened an undeclared account at Israeli Bank A in Israel, and in May 2009, he closed his undeclared account held at Credit Suisse and transferred the funds to Israeli Bank A. Azarian later partially declared this Israeli Bank A account on his individual income tax returns. At the time of its closure, Azarian’s undeclared account at Credit Suisse held assets valued at approximately $1,903,214.
For each year from 2006 through 2009, Dan Kalili, David Kalili, and Azarian, as U.S. citizens, were required, but willfully failed, to report their ownership and control over foreign bank accounts through the timely filing of FBARs with the IRS disclosing their signatory or other authority over the various undeclared accounts held at UBS, Credit Suisse, Israeli Bank A, and Bank Leumi, each having an aggregate value of more than $10,000 during each of these years.
United States District Judge Andrew J. Guilford scheduled sentencing for April 24. The three defendants each face a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties. In addition, each defendant agreed to pay a civil penalty for willfully failing to file FBARs. Dan Kalili agreed to pay a civil penalty of $2,674,329, David Kalili agreed to pay a civil penalty of $1,325,121 and Azarian agreed to pay a civil penalty of $951,607.
Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS-CI, who conducted the investigation, and Assistant Chief Jorge Almonte and Trial Attorney Jason M. Scheff of the Tax Division, who are prosecuting the case. Principal Deputy Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the Central District of California for its substantial assistance.
Business Manager Agrees to Plead Guilty after Admitting $7.2 Million Embezzlement from Alanis Morissette and Other CelebritiesRead the Press Release
LOS ANGELES – The business manager for Alanis Morissette and other entertainment and sports figures admitted in court papers filed today that he embezzled nearly $7.2 million from his clients.
Jonathan Todd Schwartz, 48, who now resides in Playa Vista, but was living in Agoura Hills at the time of the criminal conduct, was charged today with wire fraud and subscribing to a false tax return for failing to disclose the embezzled funds to the Internal Revenue Service.
In conjunction with the criminal information filed today, prosecutors also filed a plea agreement in which Schwartz agreed to plead guilty to the two felony offenses.
Schwartz was a member of GSO Business Management, LLC, a business management firm based in Sherman Oaks that provides financial guidance to clients, including managing bank accounts, providing accounts payable services, and preparing short- and long-term budgets.
In the plea agreement, Schwartz admitted that he took clients’ money for himself and falsified account records to conceal the embezzlement of client funds. Schwartz admitted that between May 2010 and January 2014, he withdrew approximately $4.8 million belonging to “Client Number 2” – Alanis Morissette – without her knowledge or authorization. Schwartz further admitted that he falsely labeled the unauthorized cash withdrawals as “sundry/personal expenses” on the accounting records GSO maintained for Morissette. When confronted about the missing funds, Schwartz stated that the money was an investment in illegal marijuana “grow” businesses, a statement that Schwartz has now admitted was false.
“Money managers have fiduciary and moral responsibilities to their clients that begin with preserving client assets and not using that money to line their own pockets,” said United States Attorney Eileen M. Decker. “This defendant violated this basic principle, and then engaged in further criminal conduct by attempting to hide his ill-gotten gains from the Internal Revenue Service. Despite those efforts, however, the defendant will now face serious consequences for victimizing his clients and American taxpayers.”
In the plea agreement, Schwartz also admits that he embezzled over $1 million from another client and concealed the embezzlement by falsely coding the unauthorized cash withdrawals as money used for the client’s home renovations. Schwartz further admitted that he embezzled $737,500 from yet another client and forged that client’s signature on at least two cash receipts.
“Mr. Schwartz was hired to protect his clients’ money by managing it professionally, but instead misappropriated millions to enrich himself,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “This case should serve as a warning that there are serious consequences for those who abuse their positions of trust to embezzle funds.”
While he has agreed to plead guilty to filing a false tax return for the year 2012, Schwartz admitted in the plea agreement that he did not report any of the approximately $7.2 million he obtained through his embezzlement scheme to the IRS. As a result of the entire scheme, Schwartz acknowledges that he owes the IRS more than $1.7 million in federal income taxes.
“Schwartz was caught with his hand in the proverbial cookie jar,” stated IRS Criminal Investigation Acting Special Agent in Charge Anthony J. Orlando. “No matter what the source of income, all income is taxable. The IRS works regularly with our law enforcement partners in cases like these to prevent other financial professionals from duping their clients.”
Schwartz is expected to make his initial appearance in United States District Court on February 1.
Once he pleads guilty to the charges that have been filed in this case, Schwartz will face a statutory maximum penalty of 23 years in federal prison. While the plea agreement contemplates a sentence of approximately four to six years, the actual sentence will be determined by the judge that hears the case.
This case was investigated by the Federal Bureau of Investigation and IRS Criminal Investigation. GSO Business Management, LLC fully cooperated during the investigation.
This case is being prosecuted by Assistant United States Attorney Ranee A. Katzenstein, Chief Assistant for Trials, Integrity and Professionalism.
McKesson Agrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical DrugsRead the Press Release
LOS ANGELES – McKesson Corporation, one of the nation’s largest distributors of pharmaceutical drugs, has agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), the Justice Department announced today.
The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years. The staged suspensions are among the most severe sanctions ever agreed to by a DEA-registered distributor. The settlement also imposes new and enhanced compliance obligations on McKesson’s distribution system.
McKesson operates a distribution center in Santa Fe Springs.
In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In the new case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” – orders that were unusual in their frequency, size or other patterns – for controlled substances distributed to its independent and small-chain pharmacy customers. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone, which are frequently misused products that are part of the current opioid epidemic.
The government’s investigation developed evidence that even after designing a compliance program after the 2008 settlement, McKesson did not fully implement or adhere to its own program. In Colorado, for example, McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, and all of those were connected to one instance related to a recently terminated customer.
In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. Among other things, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms. Critically, the settlement will require McKesson to engage an independent monitor to assess compliance – the first independent monitor of its kind in a CSA civil penalty settlement.
“The company’s practices resulted in dangerous drugs being diverted from legitimate uses into the black market and helped fuel the opioid epidemic that is causing so much damage across the nation,” said United States Attorney Eileen M. Decker. “This nationwide investigation will result in a landmark penalty, significant changes in the way that pharmaceutical drugs are distributed by the company, and the ability of the Department of Justice to monitor McKesson’s future conduct.”
This case against McKesson is the product of a multi-district investigation that involved the DEA Field Divisions in Boston, Chicago, Denver, Detroit, Miami, Newark, San Francisco, St. Louis and Washington.
The U.S. Attorney’s Office for the Central District of California participated in the case, along with U.S. Attorney’s Offices for the Eastern District of California, Colorado, the Middle District of Florida, the Eastern District of Kentucky, the Northern District of Illinois, Massachusetts, the Eastern District of Michigan, Nebraska, New Jersey, the Northern District of West Virginia, and the Western District of Wisconsin.
U.S. Attorneys’ Offices for the District of Colorado and the Northern District of West Virginia, along with DEA Office of Chief Counsel and Diversion Control Division, led the civil settlement negotiations. DEA’s Denver, Detroit and Miami Field Divisions, and its Washington Division Office led the administrative and civil investigation. The Criminal Division’s Narcotic and Dangerous Drug Section (NDDS) also coordinated and assisted in negotiating certain portions of the settlement. Assistant United States Attorneys Amanda Rocque (Colorado) and Alan McGonigal (NDWV) represented the United States in the civil penalty investigations and negotiations. Associate Chief Counsel Lee Reeves and Senior Attorneys Dedra Curteman, Dana Hill and Krista Tongring represented DEA in the investigations and negotiations. Trial Attorneys Harry Matz and Kirtland Marsh were involved for NDDS.
McKesson Agrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical DrugsRead the Press Release
McKesson Corporation (McKesson), one of the nation’s largest distributors of pharmaceutical drugs, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), the Justice Department announced today.
The nationwide settlement requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years. The staged suspensions are among the most severe sanctions ever agreed to by a Drug Enforcement Administration (DEA) registered distributor. The settlement also imposes new and enhanced compliance obligations on McKesson’s distribution system.
In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In this case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances distributed to its independent and small chain pharmacy customers – i.e., orders that are unusual in their frequency, size, or other patterns. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone pills, frequently misused products that are part of the current opioid epidemic.
The government’s investigation developed evidence that even after designing a compliance program after the 2008 settlement, McKesson did not fully implement or adhere to its own program. In Colorado, for example, McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, all connected to one instance related to a recently terminated customer.
In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. Among other things, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms. Critically, the settlement will require McKesson to engage an independent monitor to assess compliance – the first independent monitor of its kind in a CSA civil penalty settlement.
This was a multi-district investigation that involved the following DEA Field Divisions: Boston Field Division, Chicago Field Division, Denver Field Division, Detroit Field Division, Miami Field Division, Newark Field Division, San Francisco Field Division, St. Louis Field Division, and Washington District Office. The following U.S. Attorney’s Offices participated in the case: Central District of California, Eastern District of California, District of Colorado, Middle District of Florida, Eastern District of Kentucky, Northern District of Illinois, District of Massachusetts, Eastern District of Michigan, District of Nebraska, District of New Jersey, Northern District of West Virginia, and Western District of Wisconsin.
U.S. Attorneys’ Offices for the District of Colorado and the Northern District of West Virginia, along with DEA Office of Chief Counsel and Diversion Control Division, led the civil settlement negotiations. DEA’s Denver, Detroit and Miami Field Divisions, and its Washington Division Office, led the administrative and civil investigation. The Criminal Division’s Narcotic and Dangerous Drug Section (NDDS) also coordinated and assisted in negotiating certain portions of the settlement. Assistant United States Attorneys Amanda Rocque (Colorado) and Alan McGonigal (NDWV) represented the United States in the civil penalty investigations and negotiations. Associate Chief Counsel Lee Reeves and Senior Attorneys Dedra Curteman, Dana Hill and Krista Tongring represented DEA in the investigations and negotiations. Trial Attorneys Harry Matz and Kirtland Marsh were involved for NDDS.
Civil Penalty Settlement Agreement Memorandum of Agreement Compliance AddendumMember of Dockworkers Union Sentenced to 41 Months in Prison in Scheme Involving Fraudulently Billing for Chiropractic ServicesRead the Press Release
LOS ANGELES – A member of the International Longshore and Warehouse Union (ILWU), Local 13, has been sentenced to 41 months in federal prison for his role in a scheme in which two medical clinics submitted more than a quarter-million dollars in bills to the union’s health care plan for chiropractic services that were not provided or were not medically necessary.
David Gomez, 53, of San Pedro, was sentenced on Monday, January 9, by United States District Judge R. Gary Klausner. Gomez was convicted in October of 20 counts of mail fraud. Gomez has been in custody since a federal jury returned its guilty verdicts.
The ILWU represents dockworkers at the ports of Los Angeles and Long Beach. Members of the union receive benefits, including health care benefits, through the ILWU-Pacific Maritime Association Welfare Plan.
According to the evidence presented at trial, Gomez and his co-defendant, Sergio Amador, opened a clinic in Long Beach in 2009 that operated under the name Port Medical and provided medical and chiropractic care. The next year, they opened a second clinic operating under the same name in San Pedro.
Gomez and Amador also created medical management companies that they used to receive funds generated by the medical clinics, which they then used to pay themselves and to pay incentives to ILWU members. These incentives were often paid as “sponsorships” of basketball or softball teams, with the understanding that the ILWU member receiving the “sponsorship” would visit, and encourage other team members to visit, Port Medical.
According to the evidence presented at trial, Port Medical chart entries were falsified to indicate that ILWU members and their dependents, including children as young as 5, had received repeated chiropractic services, including multiple sessions of massage therapy, that they had not. To accomplish this, ILWU members were asked to sign their names on multiple sign-in stickers that were used to create the fabricated chart entries, or their signatures on stickers affixed to the chart entries were simply forged.
Other evidence at trial related to instructions provided to Port Medical massage therapists on how to craft chart entries to maximize billing and make services appear to be medically necessary, a requirement for them to be covered by the ILWU-PMA Welfare Plan. Included were instructions to massage therapists never to write that a patient had indicated “no complaints,” and to make sure not to copy or write chart entries “exactly the same each time, change things up a little!!!”
According to court documents, a conservative assessment determined that the total amount of fraudulent bills was $258,913, and the health plan paid out $228,440. At last Monday’s sentencing hearing, Judge Klausner ordered Gomez to pay $201,000 in restitution to the health plan.
“This defendant managed a fraudulent scheme that targeted a program designed to provide benefits to Gomez’s fellow union members,” said United States Attorney Eileen M. Decker. “He was driven by his personal greed, and his criminal conduct undermined the union’s intention to bring medical benefits to other union members and their families.”
Amador pleaded guilty last year to one count of mail fraud and is scheduled to be sentenced by United States District Judge John A. Kronstadt on April 6.
The case against Gomez and Amador was investigated by the U.S. Department of Labor – Office of Inspector General, Office of Investigations; the U.S. Department of Labor – Employee Benefits Security Administration; and the Federal Bureau of Investigation.
“By defrauding the health plan of his fellow union members, Gomez betrayed and abused the trust of the very people his clinics purported to serve. Though this case is a sobering reminder of the often shameless nature of fraud schemes, today’s sentence sends a stern warning to those who would line their pockets at the expense of health plan participants and sponsoring employers. The Office of Inspector General will continue to work with our law enforcement partners to investigate the theft of union benefit plan assets,” stated Abel Salinas, Special Agent-in-Charge of the Los Angeles Office, Office of Inspector General, U.S. Department of Labor.
“The Employee Benefits Security Administration is pleased with the outcome of this case and hopes it serves as a warning to other potential bad actors. We will continue to work with our investigative partners to bring justice to those who commit similar crimes against the ILWU-PMA Welfare Plan, or any other employee-benefit plan,” said Crisanta Johnson, Regional Director for the Department of Labor's Employee Benefits Security Administration.
“Defendant Gomez concocted an elaborate scheme to enrich himself at the expense of his colleagues, their families and the insurance plan that protected their health,” said Deirdre Fike, the Assistant Director in Charge of the FBI's Los Angeles Field Office. “This successful prosecution was the result of a long-term effort by agents and prosecutors dedicated to combating health care fraud.”
The case was prosecuted by Assistant United States Attorney George S. Cardona, Chief of the Major Frauds Section.
Ringleader of Bank Fraud Scheme that Used Information Stolen by Wells Fargo Employees Sentenced to over 7 Years in Federal PrisonRead the Press Release
LOS ANGELES – The organizer of a bank fraud scheme in which Wells Fargo Bank employees stole customer account data – information that was used to impersonate scores of customers and steal well over a half-million dollars from their accounts – was sentenced today to 89 months in federal prison.
Ronald Charles Reed, 70, of Inglewood, was sentenced this afternoon by United States District Judge Fernando M. Olguin. In addition to the prison term, Judge Olguin ordered Reed to pay $580,332 in restitution to Wells Fargo Bank.
Reed pleaded guilty in March 2016 to bank fraud and aggravated identity theft.
Reed, who is also known as “Disco Ronnie,” admitted that he worked with former Wells Fargo employees and “runners” in a scheme that caused Wells Fargo to suffer approximately $580,000 in losses.
Reed recruited four Wells Fargo employees in 2013 and 2014, asked them to access the bank’s computer records, and then purchased personal identifying information belonging to bank customers. The stolen information included dates of birth, account numbers, driver’s license numbers, and social security numbers.
Reed provided this stolen information to the runners. Using fake IDs, the runners impersonated bank customers and made substantial cash withdrawals from the customers’ accounts. In some cases, the runners also used the customer’s account to deposit worthless checks and receive cash back. The fraudulent transactions were made at Wells Fargo branches across Southern California and in other states, including Minnesota and Nevada.
Reed also admitted that in 2014 he purchased personal identifying information for accounts at U.S. Bank. Unbeknownst to Reed, the information he bought was for undercover accounts supplied by a confidential informant who was working with law enforcement.
Over a 13-month period that ended in mid-2014, Reed’s scheme caused runners to withdraw approximately $580,332 from 75 accounts belonging to Wells Fargo customers and $12,000 from two undercover accounts at U.S. Bank.
“This defendant has a lengthy criminal history, much of which involved fraudulent schemes and identity theft, including a counterfeit credit card case in this district that led to a sentence of nearly five years in federal prison,” said United States Attorney Eileen M. Decker. “In the process of committing these crimes, he stole the identities and bank account funds from innocent people, creating unnecessary havoc in their lives. Innocent victims of identity theft deserve the protection of the criminal justice system, and this sentence attempts to achieve that goal.”
“Fraud ringleaders should be deterred by the strong hand of justice delivered in today’s sentence. We are proud to collaborate with our FBI partners by aggressively pursuing criminals attempting to exploit our nation's financial infrastructure, " said Rob Savage, Special Agent in Charge, U.S. Secret Service, Los Angeles Field Office.
“Mr. Reed mercilessly exposed sensitive information, violating his victims personal and financial security and leaving them vulnerable to additional fraud while convincing others to use their official position at the bank to steal from their employer,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI will continue to work with our partners at the Secret Service and investigators at financial institutions to detect insider crimes and hold the perpetrators accountable.”
The former bank employees who worked with Reed have all pleaded guilty and are pending sentencing. The investigation into the runners – who remain unidentified – remains ongoing. Anyone with information on any of these individuals should contact FBI Special Agent Watkins at (310) 477-6565.
This matter was jointly investigated by the Federal Bureau of Investigation and the United States Secret Service. Wells Fargo Bank and U.S. Bank fully cooperated during the investigation.
The case is being prosecuted by Assistant United States Attorney Christina T. Shay of the Violent and Organized Crime Section.
Former Manager at HBO Sentenced to 30 Months in Federal PrisonRead the Press Release
LOS ANGELES – A San Fernando Valley woman who pleaded guilty to three felony charges stemming from a scheme in which she submitted fraudulent bills and illegally collected approximately $1 million from HBO was sentenced this morning to 30 months in federal prison.
Jennifer Choi, 39, of Valley Village, who formerly worked as manager in HBO’s Talent Relations Department, was sentenced by United States District Judge John A. Kronstadt.
Choi pleaded guilty last year to two counts of wire fraud and one count of tax evasion for failing to report the ill-gotten gains to the Internal Revenue Service.
In addition to the prison term, Judge Kronstadt today ordered Choi to pay $1,285,742 in restitution – just over $1 million to HBO and $283,706 to the IRS.
When she was terminated by HBO in September 2014, Choi had worked at the company for nearly 10 years. As part of her job, Choi was responsible for scheduling services – such as hairstyling, wardrobe and make-up – for actors associated with HBO. Choi set up a company called Shine Glossy, LLP, which she used to submit bogus invoices to HBO for style and make-up services supposedly provided to actors. To make the invoices appear real, Choi listed real actors and real stylists on the invoices.
The style services were never actually provided, and HBO funds instead went directly into a bank account Choi had established. Through Shine Glossy, Choi submitted nearly 300 fraudulent invoices that led HBO to pay approximately $940,000.
Choi also admitted in court that she used a car service for herself, her family and her friends and provided HBO’s account information, which led the car service to bill HBO for the unauthorized rides. In this part of the scheme, Choi fraudulently obtained approximately $63,000 in car services that were paid for by HBO.
“This defendant engaged in a sophisticated fraud scheme that resulted in the theft of approximately $1 million from the victim company and nearly $300,000 from American taxpayers,” said United States Attorney Eileen M. Decker. “The criminal conduct in this case continued for years, and the pace of the theft accelerated over time. This was a crime motivated by greed and a desire to fund an extravagant lifestyle.”
“Jennifer Choi took advantage of a coveted position of trust by failing to resist temptation in order to attain a glamourous lifestyle,” said Deirdre Fike, the Assistant Director in Charge of the FBI's Field Office. “Defendant Choi, in defrauding her employer of $1 million, subjected herself to a substantial sentence during which she will pay for her criminal activity.”
When she pleaded guilty, Choi admitted that she failed to file federal income tax returns for 2011, 2013 and 2014, even though she earned hundreds of thousands of dollars during those years. She also admitted significantly under-reporting her income when she did file tax returns for the years 2010 and 2012.
“Choi allowed greed to color her judgment and now she will be paying the price,” stated IRS Criminal Investigation’s Acting Special Agent in Charge Anthony J. Orlando. “Today’s sentencing reinforces our commitment to every American taxpayer to vigorously investigate individuals who line their pockets with fraudulently obtained funds and then file fraudulent tax returns.”
The investigation into Choi was conducted by the Federal Bureau of Investigation and IRS – Criminal Investigation.
This case was prosecuted by Assistant United States Attorney Jeffrey M. Chemerinsky of the Violent and Organized Crime Section.
Syed Raheel Farook Pleads Guilty in Immigration Fraud CaseRead the Press Release
RIVERSIDE, California – Syed Raheel Farook, the brother of deceased San Bernardino attacker Syed Rizwan Farook, pleaded guilty today in federal court in an immigration fraud case stemming from the investigation of the December 2, 2015 attack in San Bernardino in which 14 people died and 22 were wounded.
Syed Raheel Farook, 31, of Corona, California, pleaded guilty to one count of conspiracy to commit immigration fraud before United States District Judge Jesus Bernal.
As a result of today’s guilty plea, Syed Raheel Farook faces a statutory maximum sentence of five years in federal prison, a fine of up to $250,000 and up to three years of supervised release. Judge Bernal is scheduled to sentence the defendant on November 13.
Syed Raheel Farook; his wife, Tatiana Farook; and his sister-in-law, Mariyah Chernykh, were charged in an indictment returned by a federal grand jury in April 2016. All three were charged with conspiracy to knowingly make under oath a false statement with respect to a material fact in an application, affidavit, and other document required by the immigration laws and regulations of the United States, and to commit perjury.
The indictment alleges that, beginning in late 2014 and continuing through February 2016, the three defendants conspired with Enrique Marquez Jr. to obtain immigration benefits for Chernykh by arranging and carrying out a fraudulent marriage between Chernykh, a Russian citizen, and Marquez, a United States citizen. The conspirators allegedly made false statements in immigration documents submitted on Chernykh’s behalf.
In addition to the conspiracy count, Chernykh is charged in the indictment with two counts of making false statements under oath in immigration documents and one count of making false statements to federal agents about the scheme. A trial for Tatiana Farook and Chernykh is currently scheduled for March 28.
Marquez was charged in a separate federal indictment with participating in the marriage fraud scheme, as well as plotting with San Bernardino attacker Syed Rizwan Farook in 2011 and 2012 to carry out attacks in the Inland Empire. Marquez is also charged with supplying two firearms that Syed Rizwan Farook and his wife, Tashfin Malik, later used in the San Bernardino attack and during the shootout with law enforcement that ended in the couple’s death. Marquez is scheduled to go on trial before Judge Bernal on September 26.
“Today’s guilty plea is the result of the thorough investigation into the brutal attack in San Bernardino that took the lives of 14 innocent Americans and tragically affected many more shooting victims and family members,” said United States Attorney Eileen M. Decker. “Law enforcement and prosecutors in my office continue to seek justice for the victims and the entire community of San Bernardino by uncovering and prosecuting all of the criminal activity related to the terrible events of December 2. As I have said many times, we are committed to leaving no stone unturned in this investigation.”
“The false statements Mr. Farook admittedly made allowed others to cut the line to attain citizenship ahead of legitimate applicants,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “This guilty plea should serve as a message for anyone contemplating similar activity that flouting the immigration laws of the United States has serious consequences.”
“Let there be no doubt, immigration benefit fraud is a serious crime,” said Joseph Macias, special agent in charge for HSI Los Angeles. “When people use false or misleading information in order to obtain an immigration benefit for themselves or others, it creates a security vulnerability that could be exploited by criminals and other individuals who pose a serious danger to our community. As this case makes clear, HSI will aggressively target those who conspire to corrupt the integrity of America’s legal immigration system, putting our nation’s security at risk in the process.”
The investigation in this case was conducted by the Joint Terrorism Task Force in Riverside, which includes the Federal Bureau of Investigation; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the San Bernardino Police Department; the San Bernardino County Sheriff’s Department; and the United States Attorney’s Office.
These cases are being prosecuted by Assistant United States Attorneys Jay H. Robinson, Melanie Sartoris and Deirdre Z. Eliot of the Terrorism and Export Crimes Section with substantial assistance from Trial Attorney C. Alexandria Bogle of the Justice Department’s Counterterrorism Section.
Former Wife of Fugitive Chinese Official Pleads Guilty to Conspiring to Commit Immigration Fraud Related to EB-5 Investor VisaRead the Press Release
LOS ANGELES – The ex-wife of a former Chinese government official has pleaded guilty to charges that she conspired to fraudulently obtain visas to enter the United States through the immigrant investor program.
Shilan Zhao (趙世蘭), 53, of Newcastle, Washington, pleaded guilty yesterday to one count of conspiring with her ex-husband to commit immigration fraud by submitting false documents to federal authorities. As part of a plea agreement with prosecutors, Zhao agreed to cooperate with the government’s investigation into this matter.
Zhao and her ex-husband – Jianjun Qiao (喬建軍), also known as Feng Li, 53 – were charged in a federal grand jury indictment unsealed in March 2015. Qiao remains a fugitive who is being sought by federal authorities.
According to the indictment, Zhao and Qiao were divorced, but, in documents filed with U.S. immigration authorities, they falsely claimed to be married. The indictment also accused them of lying about the source of Zhao's investment in the U.S., an investment which was required under the EB-5 immigrant investor program to obtain U.S. immigrant visas.
Zhao pleaded guilty pursuant to a plea agreement in which she admitted that she submitted false documents, prepared or obtained by her ex-husband, to U.S. immigration authorities under penalty of perjury to support her immigration application. Those documents included a false marriage certificate and documents that purported to show the source of the money used for her investment.
“We will continue to fight fraud and abuse in our immigration system,” said United States Attorney Eileen M. Decker. “There is a lawful process that can be followed to obtain legal status in this nation. Those who attempt to undermine the system by fraud threaten our national security and compromise the attempts of other immigrants who follow the rules to lawfully gain entry to the United States.”
In her plea agreement, Zhao agrees that $25,000 used to pay her bond can be applied to any restitution or other monetary penalties ordered in this case. Additionally, she agreed to forfeit her interest in several parcels in Monterey Park; a house in Newcastle, Washington; and a condominium in Flushing, New York.
“Immigration benefit fraud is a serious crime,” said Joseph Macias, special agent in charge for HSI Los Angeles. “Not only do schemes like this potentially rob deserving immigrants of benefits they rightfully deserve, they also create a security vulnerability that could be exploited by criminals and others who pose a danger to our community. HSI will aggressively target those who conspire to corrupt the integrity of America’s legal immigration system and put our nation’s security at risk in the process.”
“The EB-5 investor visa program requires all immigrant investors to accurately document the source of their funds in their application,” stated IRS Criminal Investigation Acting Special Agent in Charge Anthony J. Orlando. “IRS Criminal Investigation will take whatever steps are necessary to ensure that ill-gotten gains received in foreign countries are not fraudulently laundered through the United States financial system.”
Zhao pleaded guilty yesterday before United States District Judge Stephen V. Wilson, who scheduled a sentencing hearing for November 6. At sentencing, Zhao will face a statutory maximum penalty of five years in federal prison.
This case is the product of a joint investigation conducted by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and IRS - Criminal Investigation, which received assistance from U.S. Citizenship and Immigration Services. The Supreme People's Procuratorate and Ministry of Public Security of the People's Republic of China also provided assistance.
This case is being prosecuted by Assistant United States Attorney Vicki Chou of the Cyber and Intellectual Property Crimes Section and Assistant United States Attorney John J. Kucera of the Asset Forfeiture Section.
Federal Grand Jury Indicts Man on Federal Drug Trafficking Charges for Attempting to Smuggle Heroin Wrapped in Christmas PaperRead the Press Release
Update:
LOS ANGELES – A Pico-Union resident was indicted today on federal drug trafficking charges for allegedly trying to smuggle at least one kilogram of heroin on a plane leaving Los Angeles International Airport. The heroin was wrapped in Christmas paper and concealed in checked luggage on a flight that was bound for Cincinnati, Ohio. A federal grand jury indicted James Mitchell on one count of possession with intent to distribute heroin.
While the indictment alleges more than one kilogram of heroin, authorities recovered approximately six kilograms of heroin from Mitchell’s luggage. The narcotics would have a street value of approximately $2.1 million in Ohio.
At the time of the narcotics seizure, Mitchell was an employee of Aero Port Services at LAX and had direct access to secure areas of the airport.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If he is convicted of the drug trafficking charge, Mitchell would face a mandatory minimum sentence of 10 years in federal prison and a statutory maximum sentence of life.
Mitchell is scheduled to be arraigned on the indictment in United States District Court on January 18.
Original Release (Dec. 22, 2016):
Los Angeles Man Arrested on Federal Charges of Attempting to Smuggle Heroin Wrapped in Christmas Paper through LAX
LOS ANGELES – A Los Angeles man facing federal drug trafficking charges for allegedly trying to smuggle at least a kilogram of heroin on a plane leaving Los Angeles International Airport is scheduled to make his first court appearance this afternoon.
James Mitchell, 25, who resides in Pico-Union, was arrested yesterday by special agents with the Drug Enforcement Administration after prosecutors on Tuesday filed a criminal complaint in United States District Court.
The complaint specifically alleges that Mitchell attempted to smuggle approximately 2.15 pounds of heroin through a security checkpoint at LAX on December 10. At that date, Mitchell had checked in for a Frontier Airlines flight to Cincinnati, Ohio, only two days after purchasing a one-way ticket. Mitchell checked one article of luggage that “alerted to an unknown dense material” during an “image scan” by the Transportation Security Administration. An inspection of the bag revealed “six packages of a suspicious gray brittle concrete-like substance,” one of which later tested positive for heroin. The packages were wrapped in Christmas-themed paper.
TSA officials noted a “vinegar odor” emanating from one of the packages, which prompted Los Angeles World Airport (LAWA) police officers to seek assistance from a Hazardous Materials Unit. A portion of Terminal 3 was closed while personnel worked to detect and alleviate any potential chemical threat.
LAWA Police responding to the scene worked with Frontier Airlines in an attempt to locate Mitchell. When he answered a phone call from Frontier personnel, Mitchell told the gate agent he was in the restroom and not feeling well. At about this same time, airport surveillance cameras captured Mitchell exiting the terminal while speaking on a cell phone. Once outside, Mitchell removed a beanie cap from his head and changed his sweater, disappearing on foot in the lower terminal arrival area.
Investigators ultimately tracked Mitchell down at his Pico-Union residence, obtained an arrest warrant, and took him into custody without incident yesterday morning. After his arrest, investigators confirmed Mitchell is an employee of Aero Port Services at LAX and has direct access to secure areas of the airport.
“At a time when airlines are carrying loved ones across the country and the world, this defendant jeopardized passenger safety by attempting to use the system to traffic in dangerous drugs,” said United States Attorney Eileen M. Decker. “Interdicting drug shipments is part of the mission to protect our critical infrastructure, and criminals seeking to abuse that infrastructure will be punished.”
At this point, Mitchell is charged in relation to only one of the six packages recovered from his luggage. Authorities are in the process of testing the other five packages to confirm the presence of heroin. The total weight of all six packages was approximately 6.5 kilograms, which is more than 14 pounds.
The complaint charges Mitchell with conspiracy to possess with the intent to distribute heroin, and possession with the intent to distribute heroin. If he were to be convicted of those two counts, he would face a mandatory minimum term of five years in federal prison, and a statutory maximum sentence of 40 years.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
The DEA Los Angeles International Airport Narcotics Task Force, an inter-agency task force based at LAX, is conducting this investigation. The Task Force is charged with providing a coordinated law enforcement effort to target airport/airline internal criminal enterprises that use the aviation system to transport large amounts of illicit drugs throughout the United States, and throughout the world.
“Criminal organizations recruiting individuals with special access to commercial aircraft pose a serious threat to commercial aviation,” said DEA Special Agent in Charge Steve Comer. “Accordingly, we’re working with our law enforcement partners to mitigate this threat and aggressively prosecute individuals that could potentially exploit such access.”
In addition to the Drug Enforcement Administration, the Task Force is made up 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.
The case against Mitchell is being prosecuted by Assistant United States Attorney Reema M. El-Amamy of the Organized Crime Drug Enforcement Task Force.
Brea Man Who Operated Physical Therapy Clinics Sentenced to over 10 Years in Federal Prison in $3 Million Medicare Fraud SchemeRead the Press Release
SANTA ANA, California – A Brea man who operated rehabilitation clinics in Walnut, Torrance and Los Angeles and defrauded Medicare out of approximately $3 million by billing for unneeded or unnecessary services has been sentenced to 121 months in federal prison.
Simon Hong (who is also known as Seong Wook Hong), 55, was sentenced yesterday afternoon by United States District Judge David O. Carter. At the conclusion of the sentencing hearing, Judge Carter ordered Hong remanded into custody.
Hong was found guilty in October of eight counts of healthcare fraud, nine counts of illegal kickbacks related to healthcare referrals and two counts of aggravated identity theft.
Hong owned physical therapy clinics operated by companies called Hong’s Medical Management, Inc., CMH Practice Solution, and HK Practice and Solution, Inc. As part of the scheme, Hong recruited Medicare beneficiaries and provided uncovered services like massage and acupuncture for them. Even though the beneficiaries did not receive actual physical therapy, Hong’s co-conspirators billed Medicare for physical therapy, and then funneled 56 percent of the reimbursement funds back to Hong.
Through this scheme Hong and his co-conspirators billed Medicare from the spring of 2009 until November 2013 and received approximately $2,929,775 in reimbursements, of which Hong received approximately $1,640,674. During today’s sentencing hearing, Judge Carter ordered Hong to pay $2,929,775 in restitution.
“This defendant stole nearly $3 million in federal money earmarked for those with serious medical needs,” said United States Attorney Eileen M. Decker. “This lengthy sentence accurately reflects the scope of the harm caused by the defendant to American taxpayers and legitimate Medicare beneficiaries. My office will continue to bring prosecutions against criminals causing harm to federal programs.”
Hong is one of 10 defendants who were charged in 2015 and early 2016 for healthcare fraud related to physical therapy. Eight others have pled guilty, and one, David Y. Kim, 54, of Los Angeles, remains a fugitive. Those previously convicted in the investigation are:
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Joseff Sales, 39, of Buena Park, a co-owner and operator of Rehab Dynamics, who pleaded guilty to one count of healthcare fraud and one count of illegal kickbacks, and was sentenced last year to 51 months in prison;
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Danniel Goyena, 39, of Buena Park, a co-owner and operator of Rehab Dynamics, who pleaded guilty to two counts of healthcare fraud and was sentenced last year to 51 months in prison;
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Marlon Sonco, 39, of Sylmar, who pleaded guilty in June 2015 to conspiracy and is scheduled to be sentenced on January 23;
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Eddieson Legaspi, 40, of Lomita, an employee of Rehab Dynamics, pleaded guilty to conspiracy to commit healthcare fraud and also was sentenced yesterday to 15 months;
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Ohun Kwon, 50, of Fullerton, the owner/operator of E.K. Medical Management, which referred patients to Rehab Dynamics, pleaded guilty to conspiracy to commit healthcare fraud and was sentenced last year to 27 months in federal prison;
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Leovigildo Sayat, 39, of Torrance, an employee of RSG Rehab, pleaded guilty to conspiracy to commit health care fraud and was sentenced last year to two years in prison;
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Byong Chun “David” Min, 68, of Irvine, co-owner/operator of Glory Rehab Team, which operated as Dream Hospital in Orange County, who pleaded guilty to healthcare fraud and illegal kickbacks, also was sentenced yesterday to 45 months in prison; and
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Jason S. Min, 35, of Irvine, David Min’s son, who was the other owner/operator of Glory Rehab, pleaded guilty last year to obstruction of justice and is scheduled to be sentenced on February 6.
“Mr. Hong and his co-defendants spent years defrauding the Medicare system at the expense of taxpayers and legitimate healthcare recipients,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Agents and prosecutors worked very diligently on this case to identify and charge multiple defendants in order to hold them responsible for their actions.”
“Medicare provides legitimate health care services for millions of older Americans,” said Christian J. Schrank, HHS OIG Special Agent in Charge of the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG). “Fraudulently billing the program for therapies never provided will cost Mr. Hong years in prison. As this sentencing shows, not just providers, but business owners who are partners in these schemes, will pay a price. Together with our law enforcement partners, we will pursue all those involved in stealing from the Medicare trust fund.”
In a separate case, Hong pleaded guilty last month to conspiracy to commit health care fraud in another scheme involving occupational and physical therapy services that were never provided to Medicare beneficiaries. Medicare suffered losses of approximately $2.4 million in relation to this scheme. Hong is scheduled to be sentenced in this case in Los Angeles federal court by United States District Judge George Wu on March 6.
“For almost six years since May 2009, [Hong] participated in or orchestrated schemes to defraud Medicare that led to at least $5.3 million in actual losses to Medicare and potentially over $20 million in intended losses to Medicare, a program that can hardly afford them,” prosecutors wrote in a sentencing memorandum filed in relation to today’s sentencing. “He directed numerous others in executing the schemes, perverting the legitimate physical therapy services process at every turn, from patient enrollment to billing to record keeping.”
The investigation in these cases was conducted by the FBI and HHS-OIG. The prosecutions are being handled by Assistant United States Attorneys Byron J. McLain and Sarah Heidel of the Major Frauds Section.
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Inland Empire Man Pleads Guilty in Wire Fraud Scheme Stemming from Use of Fraudulent Checks Made with Info Stolen from U.S. MailRead the Press Release
LOS ANGELES – A Hemet man pleaded guilty today to a federal conspiracy charge for participating in a scheme in which he and another man used information obtained from stolen mail to create fraudulent checks and identity documents which were used to purchase goods that were later returned to major retail outlets to obtain cash.
Jason William Leonard, 37, pleaded guilty today to conspiracy to commit wire fraud, admitting he participated in a scheme that caused more than $114,000 in losses.
Leonard pleaded guilty before United States District Judge Stephen V. Wilson, who is scheduled to sentence the defendant on March 20.
In a plea agreement filed in United States District Court two weeks ago, Leonard admitted that he conspired with another man – Michael Joseph Tomassacci, 39, of San Jacinto – to create checks that they used in a scheme to purchase merchandise at retail stores with the intent to later return the merchandise for cash. In his plea agreement, Leonard specifically admitted that he and his co-conspirator used personal identifying information from approximately 265 victims to create checks that were used to purchase goods at stores, including Walmarts in Redlands and Santee.
The total intended loss of the conspiracy was more than $250,000, and actual losses totaled $114,565.
“Mail theft is a crime that is much more than an inconvenience for postal customers,” said United States Attorney Eileen M. Decker. “This type of crime leads to identity theft and significant losses to financial institutions and other American businesses.”
Tomassacci is a fugitive being sought by authorities. If you have any information about this fugitive, please contact the: U.S. Postal Inspection Service at 1-877-876-2455 (select Option 2) and reference case number 2026956-MT.
When he is sentenced by Judge Wilson, Leonard will face a statutory maximum penalty of 20 years in federal prison.
This case is being investigated by the United States Postal Inspection Service.
Los Angeles Division Inspector in Charge Robert Wemyss of the U.S. Postal Inspection Service stated: “We are working closely with the U.S. Attorney's Office and our partners in law enforcement to bring to justice those responsible for mail theft. Prosecution alone, however, will not solve this problem. That's why Postal Inspectors across the region have teamed up with community leaders to help educate citizens on prevention measures to better secure their mail, helping protect them from financial damage and inconvenience. Concerned citizens who have information related to mail theft or have observed suspicious activity are encouraged to contact the Postal Inspection Service at 1-877-876-2455."
This case is being prosecuted by Assistant United States Attorney Victoria A. Degtyareva of the General Crimes Section.
Riverside Man Sentenced to 20 Years in Federal Prison for Possession of Child PornographyRead the Press Release
LOS ANGELES – A Riverside man was sentenced yesterday to 20 years in federal prison for possession of child pornography, the latest Inland Empire man to receive a substantial sentence for a child pornography offense.
Walter Klink, 42, was sentenced by United States District Judge Virginia A. Phillips to spend 240 months in prison. Following his release from custody, Klink will be on lifetime supervised release.
Klink had previously been convicted by the United States Attorney’s Office for possession of child pornography. In 2007 he was sentenced by Judge Phillips to eight years in prison. After commencing his supervised release, law enforcement received evidence that Klink once again possessed child pornography, including pornographic images of a minor relative.
“This defendant’s criminal conduct paused only while he was in federal prison,” said United States Attorney Eileen M. Decker. “Therefore, the sentence in this case will help protect the children of our community for the next two decades and will ensure the defendant is under court supervision for the rest of his life.”
This case against Klink was the result of a joint investigation by the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) and the Riverside County District Attorney’s Sexual Assault Felony Enforcement (SAFE) team. The case was prosecuted by Assistant United States Attorney Tritia Yuen of the Riverside branch office.
Klink is the latest man from the Inland Empire who has been convicted recently or currently face federal charges related to child pornography. In the other cases:
- Jeremy Matthew Meyerett, 41, of San Bernardino, was sentenced December 12 to 20 years in federal prison for producing child pornography, including a sexually explicit pictures of a 5-year-old girl.
- James Gregory O’Neill, 58, of Riverside, was sentenced on May 2 to 10 years in federal prison for his third conviction of possessing child pornography. When authorities discovered the pictures on O’Neill’s phone, he was on parole after being convicted in Riverside Superior Court of possessing matter depicting a minor in a sexual act, a crime that led to a two-year sentence. O’Neill had also been convicted in federal court in 2003 of distributing child pornography, a conviction that brought a 40-month prison sentence.
- Andrew Harrison Fowler, 26, of Perris, a convicted sex offender who was convicted of having sex with minors in San Diego Superior Court, pleaded guilty on April 18 to possession of child pornography, with some of the images depicting victims younger than 10. Fowler came to the attention of law enforcement after his employer discovered that he was distributing and possessing child pornography while using a computer at his job in Corona. Fowler was sentenced by Judge Phillips on June 27 to 12 years in federal prison and a lifetime of supervised release. Fowler was on parole in the San Diego case when he committed the offense in the federal case. This case was investigated by the Riverside County District Attorney’s Office Sexual Assault and Felony Enforcement/Internet Crimes Against Children Unit, which includes special agents with HSI.
- Anthony Michael Scotti, 22, of Murrieta, pleaded guilty on April 4 to possession of child pornography. Scotti, who was previously convicted in Riverside Superior court of distributing lewd material to a minor, admitted that he had images on an iPod that was seized by law enforcement last August, and that he used the Kik messaging app to distribute images of children engaged in sex acts with adults. In a plea agreement, Scotti also admitted that he used text messages to convince a 15-year-old girl in another state to take sexually explicit pictures and send them to him. United States District Judge Philip S. Gutierrez is scheduled to sentence Scotti on January 23, at which time the defendant faces a mandatory minimum sentence of 10 years in federal prison, and prosecutors have recommended a sentence of 14 years. This case was investigated by HSI.
- Angelo Harper Jr., 21, of Moreno Valley, was found guilty after a two-day bench trial on charges of advertising, distributing and possessing child pornography. Trial evidence included an explicit six-minute video depicting a man with a pre-pubescent boy, as well as evidence showing that Harper used the Messenger to access a chatroom for those interested in nepiophilia, which is a sexual interest in infants and toddlers. Harper “possessed 8,260 images and 520 videos of child pornography,” according to court documents. “This collection included violent depictions of the rape and assault of babies and toddlers.” Harper was sentenced in October by United States District Judge R. Gary Klausner to 235 months in federal prison. This case was investigated by HSI and the Riverside Sexual Assault Felony Enforcement Task Force.
- Nathan Charles Longino Barba, 21, of Rancho Cucamonga, pleaded guilty in August to possessing child pornography. Barba received images and videos depicting child pornography over the Internet. “Some of the images depicted children under two years old being used for sexual acts,” prosecutors said in court papers. “Other images of child pornography portrayed sadistic or masochistic sexual conduct involving the minor children.” Barba is scheduled to be sentenced by United States District Judge Virginia A. Phillips on January 30. Prosecutors have recommended a sentence of three years in federal prison. This case was investigated by FBI.
Los Angeles Man Arrested on Federal Charges of Attempting to Smuggle Heroin Wrapped in Christmas Paper through LAXRead the Press Release
LOS ANGELES – A Los Angeles man facing federal drug trafficking charges for allegedly trying to smuggle at least a kilogram of heroin on a plane leaving Los Angeles International Airport is scheduled to make his first court appearance this afternoon.
James Mitchell, 25, who resides in Pico-Union, was arrested yesterday by special agents with the Drug Enforcement Administration after prosecutors on Tuesday filed a criminal complaint in United States District Court.
The complaint specifically alleges that Mitchell attempted to smuggle approximately 2.15 pounds of heroin through a security checkpoint at LAX on December 10. At that date, Mitchell had checked in for a Frontier Airlines flight to Cincinnati, Ohio, only two days after purchasing a one-way ticket. Mitchell checked one article of luggage that “alerted to an unknown dense material” during an “image scan” by the Transportation Security Administration. An inspection of the bag revealed “six packages of a suspicious gray brittle concrete-like substance,” one of which later tested positive for heroin. The packages were wrapped in Christmas-themed paper.
TSA officials noted a “vinegar odor” emanating from one of the packages, which prompted Los Angeles World Airport (LAWA) police officers to seek assistance from a Hazardous Materials Unit. A portion of Terminal 3 was closed while personnel worked to detect and alleviate any potential chemical threat.
LAWA Police responding to the scene worked with Frontier Airlines in an attempt to locate Mitchell. When he answered a phone call from Frontier personnel, Mitchell told the gate agent he was in the restroom and not feeling well. At about this same time, airport surveillance cameras captured Mitchell exiting the terminal while speaking on a cell phone. Once outside, Mitchell removed a beanie cap from his head and changed his sweater, disappearing on foot in the lower terminal arrival area.
Investigators ultimately tracked Mitchell down at his Pico-Union residence, obtained an arrest warrant, and took him into custody without incident yesterday morning. After his arrest, investigators confirmed Mitchell is an employee of Aero Port Services at LAX and has direct access to secure areas of the airport.
“At a time when airlines are carrying loved ones across the country and the world, this defendant jeopardized passenger safety by attempting to use the system to traffic in dangerous drugs,” said United States Attorney Eileen M. Decker. “Interdicting drug shipments is part of the mission to protect our critical infrastructure, and criminals seeking to abuse that infrastructure will be punished.”
At this point, Mitchell is charged in relation to only one of the six packages recovered from his luggage. Authorities are in the process of testing the other five packages to confirm the presence of heroin. The total weight of all six packages was approximately 6.5 kilograms, which is more than 14 pounds.
The complaint charges Mitchell with conspiracy to possess with the intent to distribute heroin, and possession with the intent to distribute heroin. If he were to be convicted of those two counts, he would face a mandatory minimum term of five years in federal prison, and a statutory maximum sentence of 40 years.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
The DEA Los Angeles International Airport Narcotics Task Force, an inter-agency task force based at LAX, is conducting this investigation. The Task Force is charged with providing a coordinated law enforcement effort to target airport/airline internal criminal enterprises that use the aviation system to transport large amounts of illicit drugs throughout the United States, and throughout the world.
“Criminal organizations recruiting individuals with special access to commercial aircraft pose a serious threat to commercial aviation,” said DEA Special Agent in Charge Steve Comer. “Accordingly, we’re working with our law enforcement partners to mitigate this threat and aggressively prosecute individuals that could potentially exploit such access.”
In addition to the Drug Enforcement Administration, the Task Force is made up 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.
The case against Mitchell is being prosecuted by Assistant United States Attorney Reema M. El-Amamy of the Organized Crime Drug Enforcement Task Force.
Gang Member Who Executed Man for Violating Mexican Mafia Rules Related to Drug Sales Sentenced to 24 Years in Federal PrisonRead the Press Release
LOS ANGELES – An El Sereno man and former 18th Street gang member has been sentenced to 24 years in federal prison after pleading guilty to a federal drug trafficking offense and admitting he murdered a man who had failed to pay “taxes” to the Mexican Mafia.
Eddie “Criminal” Garcia, 39, was sentenced on Monday by United States District Judge Michael W. Fitzgerald. Following the completion of the 288-month prison term, Garcia will serve eight years of supervised release.
During Monday’s sentencing hearing, Judge Fitzgerald said it was “difficult to imagine a more egregious crime in federal court” and that the defendant had “stolen hope” from the victim’s family.
Garcia pleaded guilty last year to participating in a conspiracy to distribute methamphetamine in a case that targeted the San Gabriel Valley-based Puente-13 gang. In addition to participating in drug trafficking activities that included collecting “taxes” or “rent” on behalf of the Mexican Mafia member who controlled Puente-13, Garcia admitted that he murdered another gang member who failed to make those extortion payments.
“This defendant killed another human being in cold blood to further his own criminal credentials and to further his drug trafficking career,” said United States Attorney Eileen M. Decker. “While he may have believed he could get away with murder, the hard work and dedication of law enforcement and prosecutors in my office ensured that he was held accountable. This case is a stark reminder of the devastating impact of gang violence on our community and the severe consequences that will result from participating in those criminal enterprises."
In a plea agreement with prosecutors, Garcia admitted that in 2006 he and two members of Puente-13 lured another gang member to an apartment complex, where Garcia executed the victim with a bullet to the head. Garcia was acting at the behest of leaders of Puente-13, who targeted the victim, a Valinda man named David Dragna, because Dragna was suspected of taking drug money that was intended for the Mexican Mafia.
At Monday’s sentencing, Dragna’s sister lamented the loss of her “best friend and the person who taught her how to ride a bike, drive a car, and went on [her] first date as a chaperone.” She described the devastation the murder caused her family who, for the past decade, had been desperately waiting for the day that they would see justice be done.
The Dragna murder was unsolved prior to a federal racketeering indictment that was unsealed in June 2010.
Two members of Puente-13 pleaded guilty to participating in Dragna’s murder. Angel “Smiley” Torres was sentenced to 186 months in prison, and Steven “Flaco” Nunez is currently serving a 10-year prison term.
The Mexican Mafia member who controlled the Puente-13 gang and his brother were sentenced to life in federal prison after being convicted at trial for their roles in leading a wide-ranging Puente-13 drug and murder conspiracy.
The investigation into the Puente-13 criminal enterprise and the murder of Dragna was conducted by the Drug Enforcement Administration and the Los Angeles County Sheriff’s Department.
The case was prosecuted by Assistant United States Attorney Mack E. Jenkins of the Public Corruption and Civil Rights Section.
Long Beach Sex Offender Faces Indictment that Charges Him with Attempted Sex Trafficking and Using Internet to Entice MinorRead the Press Release
LOS ANGELES – A convicted sex offender from Long Beach has been indicted by a federal grand jury on charges of attempted sex trafficking of a child for allegedly responding to an online advertisement that offered sex with a 15-year-old girl in exchange for $200.
Victor James Sporman, 46, who previously resided in Bellflower, was named in a two-count indictment that was returned yesterday afternoon by a federal grand jury. The indictment charges Sporman with attempted sex trafficking of a child and using the Internet to induce a minor to engage in criminal sexual activity.
The case against Sporman is the result of an undercover operation by U.S. Immigration and Customs Enforcement’s Homeland Security Investigation (HSI). Authorities were conducting an anti-sex trafficking operation in Long Beach and posted an advertisement on the Craigslist website that was designed to attract individuals interested in engaging in commercial sex acts with minors.
“This defendant is charged with using the Internet to locate a child to rape in exchange for money,” said United States Attorney Eileen M. Decker. “This indictment reflects conduct that is abhorrent in a civilized society, and is the latest example of my office’s dedication to protecting vulnerable members of our society, especially children victimized by the sex trafficking industry.”
On October 26, Sporman responded to the advertisement via e-mail and subsequently engaged in a series of text messages with an undercover agent he thought was a 15-year-old girl, according to the indictment. Sporman agreed to pay $200 to engage in sex with the “girl.” Sporman repeatedly texted photographs of himself, money and his genitals. In preparation for the encounter on December 6, Sporman purchased condoms. When Sporman arrived at the hotel to have the sexual encounter with the girl, Sporman had approximately $200 in his possession, as well as two condoms.
Sporman was arrested at the hotel on December 6 and made his initial court appearance the next day, when he was released on a $40,000 bond.
Sporman is expected to be arraigned on the indictment on January 3 in United States District Court in downtown Los Angeles.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
Both of the charges in the indictment carry a mandatory minimum sentence of 10 years in federal prison and statutory maximum sentence of life.
“The predators who are brazenly stalking our children online need to know that HSI, together with its law enforcement partners, is working tirelessly to track you down and hold you accountable for your crimes,” said Joseph Macias, special agent in charge for HSI Los Angeles. “We need the public’s assistance in this effort. We urge anyone in the community who has information about this case, or any other incident involving possible child sex trafficking, to come forward so we can prosecute the perpetrators and provide assistance to their victims.”
Investigators believe there may be unidentified underage victims related to Sporman. Any member of the public who has information is requested to contact investigators by using HSI’s toll-free tip line at 1-866-DHS-2-ICE or by completing an online form.
The case against Sporman is the product on an investigation by HSI’s Los Angeles Human Smuggling and Trafficking Group, which received substantial assistance from the Long Beach Police Department. The case is being prosecuted by Assistant United States Attorney Lana Morton-Owens of the Violent and Organized Crime Section.
U.S. Attorney’s Office Based in Los Angeles Collected Nearly $72 Million in Civil and Criminal Actions for Taxpayers in Fiscal Year 2016Read the Press Release
LOS ANGELES – United States Attorney Eileen M. Decker announced today that her office collected $71,732,281 in criminal and civil actions in Fiscal Year 2016. Of this amount, just over $27 million was collected in criminal actions, and $44.6 million was collected in civil actions.
The United States Attorney’s Office for the Central District of California worked with other U.S. Attorney’s Offices and components of the Department of Justice to collect an additional $7.8 million in joint cases, mostly civil matters.
Additionally, the U.S. Attorney’s office, working with partner agencies and divisions, collected $29.9 million in asset forfeiture actions in the fiscal year that ended on September 30. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.
“Every year, my office helps collect millions of dollars that goes to help victims of crime and to the United States Treasury to fund government programs,” said United States Attorney Eileen M. Decker. “We are committed to recovering every dollar from defendants involved in criminal activity, as well as working on behalf of the victims of crime.”
The United States Attorney’s Office for the Central District of California is based in Los Angeles and has branch offices in Santa Ana and Riverside. Currently, approximately 270 Assistant United States Attorneys serve nearly 20 million residents of the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.
Attorney General Loretta E. Lynch has announced that the Justice Department collected more than $15.3 billion in civil and criminal actions in fiscal year 2016 – a figure that represents more than five times the approximately $3 billion appropriated budget for the 94 U.S. Attorneys’ offices and the main litigating divisions of the Justice Department.
The U.S. Attorneys’ Offices, along with the Justice Department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S., as well as criminal debts owed to federal crime victims. Federal law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.
Assistant United States Attorney Indira Cameron-Banks is the Chief of the Financial Litigation Section in the Civil Division. In that position, she is responsible for coordinating efforts to collect criminal and civil debts owed to victims of federal crimes and the United States, including restitution, fines, civil settlements, penalties and defaulted federal loans. These efforts include locating debtors’ assets and initiating enforcement actions to secure collection on the outstanding debts.
Former Malibu Businessman Sentenced to Five Years in Federal Prison for Securities Fraud and Tax OffenseRead the Press Release
Los Angeles – A former Malibu businessman has been sentenced to 60 months in federal prison for conspiring to sell unregistered securities which generated $1,663,190 in illegal profits and a related tax fraud charge.
Mervin Barclay Davis, 69, who has been in federal custody since 2013, was sentenced yesterday by United States District Judge John F. Walter. In addition to the five-year prison term, Judge Walter ordered Davis to pay restitution of $225,000 to investor victims and $466,500 to the Internal Revenue Service.
Davis pleaded guilty in 2014 to one count of conspiracy and one count of subscribing to a false tax return.
According to court documents, beginning in 2005 and continuing through 2007, Davis conspired with others to sell unregistered stock through his affiliation with Clearvision, Inc., which purported to be a public relations and media company that specialized in promotional videos for small to mid-sized companies. Clearvision often received unregistered stock as payment for its services from its corporate clients.
Davis and others at Clearvision identified small, private companies interested in raising capital, including Powerlock International (Powerlock) and International Telecommunications, Inc. (ITLS). Davis offered to take the companies public through mergers with publicly traded shell companies. Davis and others told these companies that Clearvision could help them obtain new investors and funding for their business. As part of this arrangement, Davis required that the companies provide him and Clearvision with shares of company stock.
In many instances, the total amount of shares that Davis and Clearvision received from the corporate client totaled more than 10 percent of the total outstanding shares of that company. To circumvent and evade reporting requirements that follow from owning or controlling more than 10 percent of a company’s outstanding shares, Davis arranged to have some of the shares that he received deposited into a nominee account that he controlled.
Davis directed the unregistered stock of these companies to be sold through the nominee account, generating illegal profits from those sales. Through the sales of the unregistered ITLS securities, Davis generated approximately $779,914 in illegal profits.
“This fraud scheme was extremely complicated in that it involved shell companies, nominee accounts and unregistered stock from multiple companies, all of which were used to conceal the defendant’s participation in the crime,” said United States Attorney Eileen M. Decker. “Despite the sophistication of this massive fraud scheme, law enforcement unraveled the intricate details in order to hold the defendant accountable. My office will continue to prosecute sophisticated criminal schemes to vindicate the rights of American taxpayers and investors.”
Davis also profited from artificially inflating the price and volume of certain penny stocks, including the stock of Powerlock. Through this scheme, Davis and his son generated approximately $883,276 in illegal profits from their sale of Powerlock stock.
Davis falsely reported that he had $92,000 in total income in 2006, which resulted in a tax loss to the IRS.
“Yesterday’s sentencing demonstrates how federal law enforcement will work together to help put an end to the criminal behavior of those who prey on investors for their personal financial gain,” stated IRS Criminal Investigation’s Acting Special Agent in Charge Anthony J. Orlando. “IRS CI’s criminal investigators will continue to use their financial expertise to identify and trace complex financial transactions and help put a stop to this and other types of stock manipulation schemes.”
The investigation of Davis was conducted by the Federal Bureau of Investigation and IRS Criminal Investigation. FINRA’s Criminal Prosecution Assistance Group provided assistance during the investigation.
The case was prosecuted by Assistant United States Attorney Sarah J. Heidel of the Major Frauds Section.
Justice Department Opens Investigations of Orange County, California, District Attorney’s Office and Sheriff’s DepartmentRead the Press Release
The Justice Department today opened a civil pattern-or-practice investigation into the Orange County District Attorney’s Office and the Orange County Sheriff’s Department, pursuant to the Violent Crime Control and Law Enforcement Act of 1994.
The investigation will focus on allegations that the district attorney’s office and the sheriff’s department systematically used jailhouse informants to elicit incriminating statements from specific inmates who had been charged and were represented by counsel, in violation of the Sixth Amendment. Additionally, the investigation will seek to determine whether the district attorney’s office committed systematic violations of defendants’ 14th Amendment due process rights under Brady v. Maryland, a 1963 Supreme Court case, by failing to disclose promises of leniency that would have substantially undermined the credibility of the informants’ trial testimony.
Orange County District Attorney Tony Rackauckas requested that the Justice Department review his office’s informant policies and practices and offered unfettered access to documents and personnel.
“A systematic failure to protect the right to counsel and to a fair trial makes criminal proceedings fundamentally unfair and diminishes the public’s faith in the integrity of the justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Our investigation will examine the facts and evidence to determine whether the district attorney’s office and sheriff’s department engaged in a pattern or practice of violating these rights. We are grateful to District Attorney Rackauckas for the unrestricted access he has offered to provide.”
“We appreciate the District Attorney's invitation to review his office's policies and practices, along with his assurance of unfettered access to documents and personnel in his office,” said U.S. Attorney Eileen Decker of the Central District of California. “We are confident that this investigation, and the cooperation being offered by the Orange County District Attorney's Office, will help restore public confidence in the integrity of the Orange County criminal justice system.”
Attorneys from the Civil Rights Division’s Special Litigation Section and the U.S. Attorney’s Office of the Central District of California are jointly conducting this investigation. For more information on the Civil Rights Division, please visit www.justice.gov/crt. For more information about the U.S. Attorney’s Office of the Central District of California, please visit https://www.justice.gov/usao/district/cdca.
Justice Department Opens Investigation of Orange County District Attorney’s Office and Sheriff’s DepartmentRead the Press Release
LOS ANGELES – The Justice Department today opened a civil pattern-or-practice investigation into the Orange County District Attorney’s Office and the Orange County Sheriff’s Department, pursuant to the Violent Crime Control and Law Enforcement Act of 1994.
The investigation will focus on allegations that the district attorney’s office and the sheriff’s department systematically used jailhouse informants to elicit incriminating statements from specific inmates who had been charged and were represented by counsel, in violation of the Sixth Amendment. Additionally, the investigation will seek to determine whether the district attorney’s office committed systematic violations of defendants’ 14th Amendment due process rights under Brady v. Maryland, a 1963 Supreme Court case, by failing to disclose promises of leniency that would have substantially undermined the credibility of the informants’ trial testimony.
Orange County District Attorney Tony Rackauckas requested that the Justice Department review his office’s informant policies and practices and offered unfettered access to documents and personnel.
“We appreciate the district attorney's invitation to review his office's policies and practices, along with his assurance of unfettered access to documents and personnel in his office,” said United States Attorney Eileen M. Decker. “We are confident that this investigation, and the cooperation being offered by the Orange County District Attorney's Office, will help restore public confidence in the integrity of the Orange County criminal justice system.”
“A systematic failure to protect the right to counsel and to a fair trial makes criminal proceedings fundamentally unfair and diminishes the public’s faith in the integrity of the justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Our investigation will examine the facts and evidence to determine whether the District Attorney’s Office and Sheriff’s Department engaged in a pattern or practice of violating these rights. We are grateful to District Attorney Rackauckas for the unrestricted access he has offered to provide.”
Attorneys from the Civil Rights Division’s Special Litigation Section and the U.S. Attorney’s Office of the Central District of California are jointly conducting this investigation. For more information on the Civil Rights Division, please visit www.justice.gov/crt. For more information about the U.S. Attorney’s Office of the Central District of California, please visit https://www.justice.gov/usao/district/cdca.
San Bernardino Man Sentenced to 20 Years in Federal Prison for Producing Child Pornography involving 5-Year-OldRead the Press Release
LOS ANGELES – A San Bernardino man has been sentenced to 20 years in federal prison for production of child pornography, including sexually explicit pictures of a 5-year-old girl.
Jeremy Matthew Meyerett, 41, was sentenced yesterday by United States District Judge Virginia A. Phillips to spend the 240 months in prison. Following his release from custody, Meyerett will be on supervised release for 20 years.
Meyerett pleaded guilty in June to the production of child pornography in a case that arose from an undercover investigation by the Queensland (Australia) Police Service. According to court documents, Meyerett discussed sexually molesting a 5-year-old girl, and a subsequent search of an online account by federal law enforcement yielded child pornography depicting the young victim.
“Child exploitation offenses such as those prosecuted in these cases are a scourge on our community,” said United States Attorney Eileen M. Decker. “My office will continue to protect vulnerable child victims of these heinous crimes by seeking lengthy sentences, such as the one imposed this week, for these criminals.”
This case against Meyerett was the result of a joint investigation by the Riverside Police Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI).
The case was prosecuted by Special Assistant United States Attorney Teresa Beecham, a Riverside County deputy district attorney who is also a member of the Riverside County District Attorney’s Sexual Assault Felony Enforcement (SAFE) team. The Riverside County District Attorney’s Office dismissed a related state case against Meyerett in favor of federal prosecution.
Meyerett is one of a half-dozen men from the Inland Empire who recently have been in federal court on charges related to child pornography. Three other defendants received sentences of at least 10 years in prison.
“The lengthy sentences given to these defendants are a gratifying outcome for the HSI special agents who work tirelessly to identify child sexual predators and bring them to justice,” said Joseph Macias, special agent in charge for HSI Los Angeles. “The sexual exploitation of children is a despicable crime and, as these sentences make clear, there are serious consequences for those convicted. HSI remains committed to working with our federal, state, and local law enforcement partners to aggressively pursue those who victimize the most vulnerable members of our society, our children.”
In the other Inland Empire child exploitation cases:
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James Gregory O’Neill, 58, of Riverside, was sentenced on May 2 to 10 years in federal prison for his third conviction of possessing child pornography. When authorities discovered the pictures on O’Neill’s phone, he was on parole after being convicted in Riverside Superior Court of possessing matter depicting a minor in a sexual act, a crime that led to a two-year sentence. O’Neill had also been convicted in federal court in 2003 of distributing child pornography, a conviction that brought a 40-month prison sentence.
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Andrew Harrison Fowler, 26, of Perris, a convicted sex offender who was convicted of having sex with minors in San Diego Superior Court, pleaded guilty on April 18 to possession of child pornography, with some of the images depicting victims younger than 10. Fowler came to the attention of law enforcement after his employer discovered that he was distributing and possessing child pornography while using a computer at his job in Corona. Fowler was sentenced by Judge Phillips on June 27 to 12 years in federal prison and a lifetime of supervised release. Fowler was on parole in the San Diego case when he committed the offense in the federal case. This case was investigated by the Riverside County District Attorney’s Office Sexual Assault and Felony Enforcement/Internet Crimes Against Children Unit, which includes special agents with HSI.
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Anthony Michael Scotti, 22, of Murrieta, pleaded guilty on April 4 to possession of child pornography. Scotti, who was previously convicted in Riverside Superior court of distributing lewd material to a minor, admitted that he had images on an iPod that was seized by law enforcement last August, and that he used the Kik messaging app to distribute images of children engaged in sex acts with adults. In a plea agreement, Scotti also admitted that he used text messages to convince a 15-year-old girl in another state to take sexually explicit pictures and send them to him. United States District Judge Philip S. Gutierrez is scheduled to sentence Scotti on January 23, at which time the defendant faces a mandatory minimum sentence of 10 years in federal prison, and prosecutors have recommended a sentence of 14 years. This case was investigated by HSI.
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Angelo Harper Jr., 21, of Moreno Valley, was found guilty after a two-day bench trial on charges of advertising, distributing and possessing child pornography. Trial evidence included an explicit six-minute video depicting a man with a pre-pubescent boy, as well as evidence showing that Harper used the Messenger to access a chatroom for those interested in nepiophilia, which is a sexual interest in infants and toddlers. Harper “possessed 8,260 images and 520 videos of child pornography,” according to court documents. “This collection included violent depictions of the rape and assault of babies and toddlers.” Harper was sentenced in October by United States District Judge R. Gary Klausner to 235 months in federal prison. This case was investigated by HSI and the Riverside Sexual Assault Felony Enforcement Task Force.
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Nathan Charles Longino Barba, 21, of Rancho Cucamonga, pleaded guilty in August to possessing child pornography. Barba received images and videos depicting child pornography over the Internet. “Some of the images depicted children under two years old being used for sexual acts,” prosecutors said in court papers. “Other images of child pornography portrayed sadistic or masochistic sexual conduct involving the minor children.” Barba is scheduled to be sentenced by United States District Judge Virginia A. Phillips on January 30. Prosecutors have recommended a sentence of three years in federal prison. This case was investigated by FBI.
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O.C. Man Charged with Selling Pet Meds Without a Prescription, Some of Which Were Not Approved for Distribution in the United StatesRead the Press Release
LOS ANGELES – A Laguna Hills man was arrested this morning on charges that he used the internet to sell misbranded veterinary medications without a prescription.
Sean Gerson, 48, the owner of a business called Vaccination Services in Lake Forest, was taken into custody this morning by special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Food and Drug Administration’s Office of Criminal Investigations, and the Environmental Protection Agency. Gerson is scheduled to make his initial appearance this afternoon in United States District Court in Los Angeles.
Gerson was arrested pursuant to a two-count criminal complaint filed on December 6. The complaint alleges that Gerson delivered into interstate commerce two misbranded drugs: Comfortis, an anti-flea medication, and ciprofloxacin, a powerful antibiotic commonly called “Cipro” that can be used in dogs and cats to treat skin, respiratory and urinary tract infections. The complaint, which contains one felony count and one misdemeanor count, alleges that the drugs were knowingly dispensed without a prescription.
The affidavit in support of the complaint alleges that Gerson sold Comfortis that was designed for the South African market and was not approved for distribution in the United States.
“Uncontrolled distribution of antibiotics and medication pose a threat to public safety, including the fostering of antibiotic resistant strains of bacteria,” said United States Attorney Eileen M. Decker. “The drugs involved in this case allegedly were distributed without the supervision of a licensed professional, which greatly increases the risk of unintended consequences beyond the animals taking the medication.”
According the affidavit, Gerson allegedly used several websites – including www.fleastuff.com, www.mydoghasfleas.xyz and www.fleaandtickstuff.com – to market prescription animal products to buyers without valid prescriptions, rendering the medications misbranded. Additionally, federal law prohibits the importation and sale of veterinary medicines that have not been approved by the FDA and EPA for use in this country.
In conjunction with Gerson’s arrest, federal investigators executed a search warrant at a Laguna Hills storage unit linked to Gerson, where they seized a variety of veterinary prescription products.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
If he is convicted of two counts in the complaint, Gerson would face a statutory maximum sentence of four years in federal prison.
This week’s arrest marks the second time Gerson has been linked to the illegal sale of pet medications and products. He pleaded guilty in Harris County, Texas, in 2014 to state charges of delivery of a dangerous drug, specifically a prescription drug called Clenbuterol. According to the affidavit filed in connection with this week’s charges, following that conviction, Gerson agreed to work as a confidential informant for authorities, with the stipulation he could not sell animal prescription drug products.
The case against Gerson is being prosecuted by Assistant United States Attorney Joseph O. Johns, Chief of the Environmental and Community Safety Crimes Section.
Flight Attendant Who Tried to Bring nearly 60 Pounds of Cocaine through Security at LAX Pleads Guilty to Federal Drug ChargeRead the Press Release
LOS ANGELES – A former JetBlue flight attendant who tried to bring nearly 60 pounds of cocaine through a security checkpoint at Los Angeles International Airport by using her “known crewmember” credentials has pleaded guilty to conspiring to traffic narcotics.
Marsha Gay Reynolds, 32, of Jamaica, New York, pleaded guilty yesterday afternoon to one count of conspiracy to possess and to distribute cocaine.
Reynolds pleaded guilty before United States District Judge Virginia A. Phillips. Reynolds is scheduled to be sentenced by United States District Judge Christina A. Snyder on March 13. Because of the quantity of narcotics involved in this case, Reynolds faces a mandatory minimum sentence of 10 years in federal prison. The statutory maximum sentence is life.
On March 18, Reynolds had just under 27 kilograms of cocaine in her luggage as she attempted to board a JetBlue flight in Terminal 4 at LAX, according to court documents. After showing her official badge and identification to the Transport Security Administration officer on duty at the known crewmember checkpoint, Reynolds was randomly selected for additional screening. Reynolds was then escorted to a secondary screening area. Upon arriving at this checkpoint, Reynolds dropped her luggage, removed her shoes, and fled the area, running down an upward-traveling escalator and away from TSA officers.
Reynolds pleaded guilty to a conspiracy charge filed Friday in United States District Court. According to the “First Superseding Information,” Reynolds was working with an unindicted co-conspirator who supplied her with the narcotics seized at LAX. The co-conspirator supplied Reynolds with narcotics and the proceeds of drug sales so she could transport them between Los Angeles and New York. Reynolds admitted these allegations when she pleaded guilty.
“This defendant violated the trust placed in her when she received clearance to travel through our nation’s airports without the typical security checks,” said United States Attorney Eileen M. Decker. “This flight attendant played an important role in a significant narcotics-trafficking operation that posed a danger to the travelers and employees at major U.S. airports.”
Reynolds has been in custody since March 23, when she surrendered herself to the Drug Enforcement Administration at John F. Kennedy International Airport in New York.
This investigation is being conducted by the Los Angeles International Airport Criminal Enterprise Task Force (LAACETF), an inter-agency task force based at LAX. The Task Force, which includes representatives of the FBI, the DEA, United States Customs and Border Protection, the Transportation Security Administration, the Los Angeles International Airport Police Department, the Los Angeles Police Department, and the Los Angeles Sheriff’s Department. The LAACETF provides a coordinated law enforcement effort to target airport/airline internal criminal enterprises that use the aviation system to transport large amounts of illicit drugs throughout the United States and various international destinations. The LAACETF focuses on LAX and other Southland airports, including John Wayne International Airport, the Los Angeles/Ontario International Airport, the Long Beach Airport, Bob Hope Airport, the Van Nuys Airport, and the Santa Monica Airport.
This matter is being prosecuted by Assistant United States Attorney Reema M. El-Amamy of the Organized Crime Drug Enforcement Task Force.
California Man Pleads Guilty to Perpetrating Trademark Scam and Money LaunderingRead the Press Release
Associate Pleads Guilty to Helping Launder Proceeds of Scam
A Southern California man who masterminded a $1.66 million mass-mailing scam targeting trademark applicants pleaded guilty today to charges of mail fraud and money laundering and his associate pleaded guilty to helping launder the scam’s proceeds.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Inspector in Charge Robert Wemyss of the United States Postal Inspection Service (USPIS) Los Angeles Division and Acting Special Agent in Charge Anthony J. Orlando of the Internal Revenue Service Criminal Investigation (IRS-CI) Los Angeles Field Office made the announcement.
Artashes Darbinyan, 37, of Glendale, pleaded guilty to one count of mail fraud and one count of conspiracy to launder monetary instruments before U.S. District Judge Stephen V. Wilson of the Central District of California. Orbel Hakobyan, 42, also of Glendale, pleaded guilty to one count of conspiracy to launder monetary instruments before Judge Wilson. Sentencing for both has been set for June 19, 2017.
As part of his guilty plea, Darbinyan admitted that he ran a mass-mailing scam through companies called Trademark Compliance Center (TCC) and Trademark Compliance Office (TCO). The scam involved fraudulent offers of a service in which TCC and TCO promised to monitor an applicant’s trademark for infringing marks and to register the trademark with U.S. Customs and Border Protection (CBP), which offers a real service that screens imports for possibly infringing trademarks. The offers were made via mail solicitations to applicants for U.S. trademarks for $385. Darbinyan never registered, nor ever intended to register, any of the trademarks with CBP for the customers who paid the fee.
Darbinyan also admitted to concealing his control over the scam through elaborate measures in which he illegally used the identities of other people to open accounts at virtual office centers in the Washington, D.C., area, which received and then forwarded victims’ payments to other virtual office centers in the Los Angeles area. Using those same illicit identities, Darbinyan then opened bank accounts at Wells Fargo through which he laundered the proceeds of the scam. To further avoid detection, Darbinyan paid virtual office fees with money orders; used bogus email accounts, which he would only log into using prepaid wireless modems; and regularly changed cell phone numbers.
As part of his guilty plea, Hakobyan admitted to helping launder the proceeds of the trademark scam. Specifically, Hakobyan deposited victims’ checks into bank accounts at Wells Fargo that had been opened under false names. Hakobyan misrepresented his identity to withdraw funds from the accounts at Wells Fargo in the form of cash and cashier’s checks, which he then used to purchase gold. In total, he admitted to helping launder approximately $1.29 million of the scam’s proceeds.
In total, Darbinyan admitted, the trademark scam defrauded approximately 4,446 victims of $1.66 million.
Darbinyan and Hakobyan were charged along with Albert Yagubyan, 36, of Burbank, California, in a second superseding indictment unsealed on July 19, 2016. Yagubyan, the former branch manager of the Wells Fargo branch where the majority of the scam’s proceeds were laundered, is awaiting trial. An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
USPIS and IRS-CI investigated the case. Trial Attorneys William Johnston and Brian Kidd of the Criminal Division’s Fraud Section are prosecuting the case.
The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country. Today’s pleas are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
California Man Pleads Guilty to Perpetrating Trademark Scam and Money LaunderingRead the Press Release
LOS ANGELES – A Southern California man who masterminded a $1.66 million mass-mailing scam targeting trademark applicants pleaded guilty today to charges of mail fraud and money laundering, and his associate pleaded guilty to helping launder the scam’s proceeds.
Artashes Darbinyan, 37, of Glendale, pleaded guilty to one count of mail fraud and one count of conspiracy to launder monetary instruments before U.S. District Judge Stephen V. Wilson.
Orbel Hakobyan, 42, also of Glendale, pleaded guilty to one count of conspiracy to launder monetary instruments before Judge Wilson.
Judge Wilson is scheduled to sentencing both defendants on June 19.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker, Inspector in Charge Robert Wemyss of the United States Postal Inspection Service (USPIS) Los Angeles Division and Acting Special Agent in Charge Anthony J. Orlando of the Internal Revenue Service Criminal Investigation (IRS-CI) Los Angeles Field Office made the announcement.
As part of his guilty plea, Darbinyan admitted that he ran a mass-mailing scam through companies called Trademark Compliance Center (TCC) and Trademark Compliance Office (TCO). The scam involved fraudulent offers of a service in which TCC and TCO promised to monitor an applicant’s trademark for infringing marks and to register the trademark with U.S. Customs and Border Protection (CBP), which offers a real service that screens imports for possibly infringing trademarks. The offers were made via mail solicitations to applicants for U.S. trademarks for $385. Darbinyan never registered, nor ever intended to register, any of the trademarks with CBP for the customers who paid the fee.
Darbinyan also admitted to concealing his control over the scam through elaborate measures in which he illegally used the identities of other people to open accounts at virtual office centers in the Washington, D.C., area, which received and then forwarded victims’ payments to other virtual office centers in the Los Angeles area. Using those same illicit identities, Darbinyan then opened bank accounts at Wells Fargo through which he laundered the proceeds of the scam. To further avoid detection, Darbinyan paid virtual office fees with money orders; used bogus email accounts, which he would only log into using prepaid wireless modems; and regularly changed cell phone numbers.
“These defendants preyed upon American businesses interested in protecting their intellectual property,” said United States Attorney Eileen M. Decker. “In addition to the underlying fraud, this case involved identity theft and money laundering, but, despite these efforts to conceal their activity, these defendants now face federal prison time for their crimes.”
Robert Wemyss, Postal Inspector in Charge of the Los Angeles Division stated: “This investigation was an excellent example of a partnership between state and federal law enforcement agencies across the country, working together to bring down a nationwide fraud conspiracy. I fully commend the hard work and countless hours put forth by all of the law enforcement agencies involved, which resulted in bringing these individuals in this case to justice.”
As part of his guilty plea, Hakobyan admitted to helping launder the proceeds of the trademark scam. Specifically, Hakobyan deposited victims’ checks into bank accounts at Wells Fargo that had been opened under false names. Hakobyan misrepresented his identity to withdraw funds from the accounts at Wells Fargo in the form of cash and cashier’s checks, which he then used to purchase gold. In total, he admitted to helping launder approximately $1.29 million of the scam’s proceeds.
“As admitted today, Darbinyan and Hakobyan used false identities and virtual office centers to scam trademark holders. They turned their illicit proceeds to cash and gold,” said IRS Criminal Investigation Acting Special Agent in Charge Anthony J. Orlando. “IRS Criminal Investigation remains committed to unraveling complex financial transactions and money laundering schemes where individuals attempt to conceal the true source of their money.”
In total, Darbinyan admitted, the trademark scam defrauded approximately 4,446 victims of $1.66 million.
Darbinyan and Hakobyan were charged along with Albert Yagubyan, 36, of Burbank, California, in a second superseding indictment unsealed on July 19, 2016. Yagubyan, the former branch manager of the Wells Fargo branch where the majority of the scam’s proceeds were laundered, is awaiting trial. An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
USPIS and IRS-CI investigated the case. Trial Attorneys William Johnston and Brian Kidd of the Criminal Division’s Fraud Section are prosecuting the case.
The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country. Today’s pleas are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Southland Sex Offender Who Traveled to Cambodia to Sexually Abuse Young Boys Sentenced to 22 Years in Federal PrisonRead the Press Release
LOS ANGELES – A Los Angeles-area man who traveled to Cambodia to engage in sexual activity with at least five boys has been sentenced to 264 months in federal prison after the court heard from four of the victims.
Erik Leonardus Peeters, 48, of Norwalk, was sentenced yesterday afternoon by United States District Judge Christina A. Snyder. In addition to the prison term of nearly 22 years, Judge Snyder ordered Peeters to pay $15,000 in restitution to his victims. Upon completion of his prison term, Peeters will also be subject to supervised release for the rest of his life.
Peeters pleaded guilty in March 2012 to two counts of engaging in illicit sexual contact with a minor in a foreign place. According to court documents filed in the case, Peeters traveled to Cambodia in April 2008 and within two months began seeking out youths for sex, targeting victims who were destitute and often disabled.
During yesterday’s sentencing hearing, four of Peeters’ victims, who are now young adults, described their feelings of fear and shame stemming from their encounters with Peeters, as well as the shame and social stigma their families also suffered. “I’m fearful, and I’m still ashamed,” one man said.
“The seriousness of this offense and the devastating impact the sexual assaults had on the victims cannot be overstated,” said United States Attorney Eileen M. Decker. “This defendant is a sexual predator who repeatedly victimized young boys, several of whom have physical disabilities, and all of whom come from deeply impoverished communities in the developing world. This lengthy sentence sends a message to all pedophiles in the United States that they cannot escape prosecution by traveling to other countries to engage in illegal and horrific sexual acts against children.”
Peeters was arrested by the Cambodian National Police (CNP) in February 2009 for violating Cambodian laws that prohibit sexual contact with children. Peeters was subsequently charged by federal prosecutors in Los Angeles with engaging in illicit sexual conduct with minors in a foreign country. Peeters was returned to Los Angeles from Cambodia in August 2009.
Years before he traveled to Cambodia, Peeters was convicted in Los Angeles County of lewd and lascivious conduct with boys under the age of 14.
The charges against Peeters resulted from an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in Los Angeles and HSI Attaché Offices in Bangkok, Phnom Penh and Ho Chi Minh. The United States Embassy in Phnom Penh provided substantial assistance.
“This sentencing is a testament to the tenacity and tireless dedication of every law enforcement agency involved in this case, and further strengthens HSI’s resolve to investigate pedophiles who harm innocent children,” said Joseph Macias, special agent in charge of HSI Los Angeles. “Americans tempted to commit sex crimes overseas should understand that tough U.S. laws will ensure they pay a high price for their criminal actions. We owe it to the young victims, many of whom will bear the emotional scars for the rest of their lives.”
The case against Peeters was prosecuted by Assistant United States Attorney Lana Morton Owens of the Violent and Organized Crime Section and Special Litigation Counsel Patricia Donahue.
Peeters is the third and final defendant sentenced as part of Operation Twisted Traveler, a joint initiative by HSI and the Department of Justice to identify and prosecute American men who traveled to Cambodia and engaged in sexual conduct with children there. The defendants were charged under the PROTECT Act, which took effect in 2003 and substantially strengthened the federal laws related to predatory crimes involving children outside the U.S. by adding new crimes and increasing prison sentences.
The other two defendants prosecuted as part of Operation Twisted Traveler, Ronald Gerard Boyajian and Jack Louis Sporich, who received prison sentences of 70 years and 10 years, respectively.
Los Angeles Man Who Ran Burger Restaurant Sentenced to 15 years in Federal Prison for Distributing Crack CocaineRead the Press Release
LOS ANGELES – A South Los Angeles man was sentenced this morning to 15 years in federal prison for distributing crack cocaine on two occasions, including one transaction that took place at his hamburger stand.
Brian Sawyers, 57, was sentenced by United States District Judge Ronald S.W. Lew for his conviction on two counts of distribution of cocaine base in the form of crack cocaine for selling the drug to a confidential informant working with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). The sentence was based in part on Sawyers’ three prior felony drug convictions, two of which were federal convictions, which meant he faced a mandatory minimum sentence of 10 years in prison.
“Crack cocaine remains a highly addictive drug that poses a danger to its users, and the trafficking of crack poses dangers to the community at large,” said United States Attorney Eileen M. Decker. “Removing this defendant from the street for the next 15 years increases the safety of the law-abiding residents of South Los Angeles.”
“The defendant’s criminal history documents several violations of drug trafficking laws,” said ATF Special Agent in Charge Eric D. Harden. “The lengthy sentence handed down ensures Mr. Sawyer does not remain on the streets to sell drugs at the peril of his own community.”
According to court documents, Sawyers sold over an ounce of crack cocaine and, later, approximately 2½ ounces of crack cocaine to an ATF confidential informant. The first transaction took place on February 8, 2012 in the parking lot of B.D. Burgers, the restaurant that Sawyers owned in South Los Angeles. On March 1, 2012, there was a second operation in which the informant met Sawyers at the burger stand, and they went to Sawyers’ home, where they completed the transaction.
The investigation into Sawyers was conducted by the ATF’s Los Angeles Field Division, the Los Angeles Police Department, and the Drug Enforcement Administration. The case was prosecuted by Assistant United States Attorneys Anil J. Antony and Ann C. Kim.
Former Teacher’s Assistant Sentenced to 8 Years in Federal Prison for Distribution of Child PornographyRead the Press Release
LOS ANGELES – A West Los Angeles man who previously worked as a teacher’s assistant was sentenced today to 96 months in federal prison for distributing child pornography via a peer-to-peer file-sharing system on his computer. The images involved in this case depicted children under the age of 15, including child images deemed to be “sadistic” under the federal sentencing rules.
Steven Petlak, 53, was sentenced by United States District Judge Michael W. Fitzgerald. Following the completion of his prison term, Petlak will be on supervised released for the rest of his life.
Petlak pleaded guilty in July to one count of distribution of child pornography. In a plea agreement filed with the court, Petlak admitted that, on multiple dates, he used peer-to-peer software on his computer hard drive to share graphic images of child molestation.
“Predators who seek out child pornography online threaten the safety and well-being of the most vulnerable in our real-world community,” said United States Attorney Eileen M. Decker. “This defendant’s conduct exemplifies a horrific and dark part of our society, and the sentence today reflects the harm caused by defendants who trade in these heinous materials.”
In court filings, Petlak admitted that he made an effort to seek out the worst types of child pornography he could find – in Petlak’s words, “the really dark stuff.” While on pretrial release in this matter, Petlak was caught by law enforcement looking at what appeared to be graphic images of a juvenile female.
Following his release from prison, Petlak will be required to register as a sex offender and to avoid places where children are present.
This investigation was conducted by the Federal Bureau of Investigation. The case was prosecuted by Assistant United States Attorney Reema M. El-Amamy of the Organized Crime Drug Enforcement Task Force Section.
Canadian Couple Sentenced to Federal Prison in ‘Secret Shopper’ Mass Marketing Scam that Bilked Victims Across United StatesRead the Press Release
LOS ANGELES – A Toronto couple who were extradited earlier this year to the United States have been sentenced for their roles in a mass marketing scheme that targeted hundreds of victims across the United States with counterfeit checks that accompanied bogus claims they had been selected to become “secret shoppers” at MoneyGram counters inside Walmart stores.
Idris Nuradin 35, was sentenced yesterday afternoon to 27 months in federal prison by United States District Judge Philip S. Gutierrez. In addition to the prison term, Judge Gutierrez ordered Nuradin to pay $110,109 in restitution to 33 victims.
Nuradin’s wife, 34-year-old Habone Gayad, 34, yesterday received a “time served” sentence, which is approximately eight months in custody.
The couple and others mailed out hundreds of letters from Toronto to people across the United States that falsely stated they had been selected to act as secret shoppers at Walmart and MoneyGram, according to court documents. The letters included bogus checks that the victims were instructed to deposit to their own bank accounts. The victims were told to immediately wire most of the proceeds of the checks at MoneyGram counters located inside Walmart stores. The balance of the checks would serve as the payment for the secret shoppers.
However, the solicitations and the checks sent out by Nuradin and his wife were bogus. Since the checks were counterfeit – including checks supposedly issued by Warner Brothers and AEG Live – banks held victims responsible for funds that victims withdrew and wired to the scammers in Canada. In his plea agreement, Nuradin, who pleaded guilty to one count of mail fraud, admitted that he targeted more than 500 victims and intended to cause losses of approximately $1.9 million. The actual losses suffered by identified victims totaled $110,109.
“This case demonstrates that criminals cannot hide in foreign countries and take advantage of Americans without repercussions,” said United States Attorney Eileen M. Decker. “This cruel scheme had a devastating financial impact on many victims who never intended to participate in a crime.”
“The defendants in this case were among an endless amount of criminals operating worldwide who target Americans with fraud schemes disguised as money-making opportunities,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI collaborates with domestic and international law enforcement partners to investigate criminals who exploit the vulnerabilities – and empty the bank accounts – of U.S. victims with convincing schemes."
Robert Wemyss, Inspector in Charge, U.S. Postal Inspection Service - Los Angeles Division, stated: “The U.S. Postal Inspection Service will continue to work with our partners in law enforcement to ensure that the U.S. Postal Service isn’t used as a conduit to defrauding the American consumer. The protection of our citizens is at the cornerstone of our mission.”
This case was investigated by the Federal Bureau of Investigation, the United States Postal Inspection Service, Toronto Police Service in Canada and the Federal Trade Commission.
Nuradin and Gayad were indicted in 2010 and were extradited by Canada in April at the request of the United States Department of Justice.
This case was prosecuted by Assistant United States Attorney Monica E. Tait of the Major Frauds Section.
The FBI has compiled a list of some of the most common scams, as well as tips to help prevent you from being victimized, which is available here: https://www.fbi.gov/scams-and-safety/common-fraud-schemes
Customs Officer Convicted by Federal Jury of Stealing Checks and Money Orders from International Mail Facility in TorranceRead the Press Release
LOS ANGELES – A longtime U.S. Customs and Border Protection (CBP) officer has been convicted of federal charges for theft of mail from the International Mail Facility (IMF) in Torrance and arranging to have an accomplice deposit checks obtained from the stolen mail.
Carlos Canjura, 54, of Van Nuys, was convicted in federal court on Wednesday afternoon of all nine counts alleged in the superseding indictment, including conspiracy to commit bank fraud, bank fraud and possession of stolen mail.
According to court records, Canjura was a CBP Officer assigned to the IMF, where his duties included examining mail and parcels coming into the United States for contraband, counterfeit goods, and possible fraudulent financial checks or credit cards. The IMF is operated by the United States Postal Service and serves as a location where international mail is processed by CBP officers and other personnel to ensure compliance with federal law before delivery to addresses in the United States.
During the three-day trial, federal prosecutors proved that the defendant stole personal checks, traveler's checks and money orders from international mail. Canjura then informed his co-conspirator about the stolen checks using messages with coded language like “centurions,” “troops,” “projects” and “cases” to refer to the checks. Canjura gave the stolen checks to his co-conspirator, who fraudulently endorsed the checks or altered them before depositing the checks at ATMs or through mobile phone applications. Canjura stole well over 100 checks with a cumulative value of at least $65,000.
“The public is entitled to use the mail system without fear that officials charged with safeguarding the mail are abusing it for their own benefit,” said United States Attorney Eileen M. Decker. “This defendant not only abused his position as a federal officer by stealing international mail, he also used the stolen mail in an elaborate scheme to defraud banks. In so doing, he violated the public trust he swore to serve.”
Canjura is scheduled to be sentenced on March 6 by United States District Judge Beverly Reid O’Connell. At sentencing, Canjura will face a statutory maximum sentence of 145 years.
The investigation of this case was conducted by the Federal Bureau of Investigation, which received assistance from U.S. Immigration and Customs Enforcement’s Office of Professional Responsibility and CBP’s Office of Professional Responsibility.
The case was prosecuted by Assistant United States Attorney Bryant Yang and Special Assistant United States Attorney Ashwin Janakiram of the General Crimes Section.
South Bay Man Sentenced to over 7 Years in Federal Prison for Receiving Child Pornography and Compiling Large CollectionRead the Press Release
LOS ANGELES – A Torrance man has been sentenced to 87 months in federal prison for amassing a collection of more than 20,000 images and videos of child pornography that he made available to others via the BitTorrent peer-to-peer file-sharing system.
Jace Jeanes, 39, was sentenced on Monday by United States District Judge Michael W. Fitzgerald. Following the completion of his prison term, Jeanes will be on supervised released for the rest of his life.
Jeanes pleaded guilty in July to one count of receiving child pornography. In a plea agreement filed with the court, Jeanes admitted possessing approximately 19,885 images and approximately 243 videos of child pornography.
In relation to the charge of receiving child pornography, Jeanes admitted receiving child pornography on his laptop computer in March 2014, specifically two videos depicting graphic images of child molestation. Days after receiving the child pornography, an undercover law enforcement officer used BitTorrent to download more than 2,800 images and videos of child pornography from Jeanes’ computer and two hard drives.
“Every act of child molestation is a heinous offense, and the victimization of the child continues when the act is recorded and the recording is shared or possessed,” said United States Attorney Eileen M. Decker. “These images and videos are a permanent record of the initial crime, and my office is committed to prosecuting participants of the underground market of visual depictions of that crime.”
Following his release from prison, Jeanes will be required to register as a sex offender and to avoid places where children are present.
The investigation into Jeanes was conducted by the Federal Bureau of Investigation. The case was prosecuted by Assistant United States Attorney Christina T. Shay of the Violent and Organized Crime Section.
Carlsbad Man Sentenced to Federal Prison for Role in Scheme to Launder Money for Drug Rings, Including the Sinaloa CartelRead the Press Release
LOS ANGELES – A Carlsbad man has been sentenced to five years and three months in federal prison for his part in an international money laundering organization that conspired to move more than $15 million dollars in drug money for organizations that included the Sinaloa Cartel.
Bradley John Martin, 55, received the 63-month sentence on Monday from United States District Judge Christina A. Snyder.
Martin pleaded guilty in May to conspiracy to launder money and operating an unlicensed money remitting business. The illegal scheme spanned the world and involved operatives in Canada, India, the United States and Mexico who laundered drug trafficking proceeds generated the sale of narcotics in Canada and the United States for and on behalf of the Sinaloa Cartel and their affiliated drug trafficking organizations. The laundered money was to have either been transported to the Sinaloa Cartel as profits or reinvested in additional narcotics to be sold and distributed in the United States and Canada.
In his plea agreement, Martin admitted that he was a repeat money courier in an international “hawala” ring that transferred narcotics proceeds for the Sinaloa drug cartel and other drug trafficking organizations. Specifically, Martin admitted to personally transporting over $1.8 million in cash that he knew to be the proceed of drug trafficking.
“Law enforcement will continue to use every available tool to cripple the operations of major drug trafficking operations like the Sinaloa Cartel,” said United States Attorney Eileen M. Decker. “This case shows that membership in the cartel is not a prerequisite to prosecution; criminals outside of the cartel that enable drug trafficking will also face substantial prison sentences.”
According to the indictment, a “hawala” is an alternative form or method of money remittance which operates outside of traditional banking or financial systems. Through hawala transactions, only the value of the money is transferred, not the money itself. The hawala system transfers money via a network of brokers known as “hawaladars.” In its most basic form, a hawala needs at least two brokers who are typically located in separate countries (but can be located in different cities within one country). The transfer of monetary value occurs between the brokers based solely upon the trust that exists between the brokers. Thus, there are no promissory instruments or any legally binding features of the hawala system. The necessary trust and long-established connections between brokers are typically based on familial, ethnic, religious, regional and/or cultural grounds. Often, a given hawala network consists of many brokers operating in multiple countries around the world in which all brokers are in contact with each other and money movements can occur in a variety of directions from one country to another.
The indictment specifically alleges that the hawala network transferred more than $4.5 million in narcotics proceeds and was involved in the trafficking of 29 kilograms of cocaine and approximately 90 pounds of methamphetamine. However, during the course of a four-year federal wiretap investigation by the Drug Enforcement Administration’s LA Strike Force and IRS Criminal Investigation, authorities seized a total of $15,467,293 in bulk United States currency, 321 kilograms of cocaine, 98 pounds of methamphetamine, 11 kilograms of MDMA (“ecstasy”) and nine kilograms of heroin.
“Individuals lending assistance to drug traffickers in the form of laundering drug proceeds are arguably no better than the traffickers themselves,” said Drug Enforcement Administration Special Agent in Charge John S. Comer. “Martin’s sentence is a warning to others that might be tempted to collude with drug trafficking organizations.”
“Martin – a frequent money courier for the Sinaloa Drug cartel – used Bud Light and Diet Coke cardboard drink boxes to move illicit drug proceeds through Southern California. IRS Criminal Investigation will continue our vigilant pursuit of unlicensed money transmitters who attempt to circumvent the financial system of the United States,” stated Anthony J. Orlando, Acting Special Agent in Charge of IRS Criminal Investigation.
Martin is one of 15 defendants who have been arrested in this case. Of the 15 who have been arraigned, 11 have pleaded guilty, and four of them have been sentenced. Three defendants are scheduled for trial in April, 2017. One defendant – Breidi Alberto Espinoza, 28, of Corona – was arrested this summer, subsequently freed on bond, and is now a fugitive who is believed to have fled to Mexico.
The indictment charges seven defendants who are currently fugitives. They are:
- Sanjeev Bhola, of India;
- Balwat Bhola, of India;
- Bakshish Sidhu, of India;
- Jason Robert Carey, 37, a resident of the province of Ontario;
- Jesus Manuel Perez Rios, 33, of Coachella, who authorities believe fled to Mexico;
- Tina Pham, 25, of Montreal; and
- a Canadian man known only as “Buddy.”
The investigation in this case is being 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 Attorneys Carol Alexis Chen and Ellen E. Lansden of the Organized Crime Drug Enforcement Task Force.
Alleged Pimp Arrested on Federal Sex Trafficking Charges Related to 16-Year-Old Victim Who Worked as Prostitute in Inland EmpireRead the Press Release
RIVERSIDE, California – Law enforcement authorities have arrested an alleged pimp who is charged with trafficking a 16-year-old girl and advertising her services as a prostitute in an online publication.
Lawrence Gunn Jr., 32, was arrested without incident Tuesday afternoon at a Woodland Hills apartment complex where he appears to have been residing. Gunn was arrested pursuant to a criminal complaint filed last week in United States District Court that that charges him with sex trafficking of a child by force, fraud or coercion.
The arrest of Gunn was announced today when the criminal complaint was unsealed. Gunn made his initial appearance in the case this afternoon in federal court in Riverside and remains in custody.
Gunn, who is also known as “Classified,” allegedly branded his prostitutes with tattoos of his moniker to mark his “stable” of sex workers.
The investigation into Gunn began in February when the 16-year-old victim was traced to a Moreno Valley motel, where authorities discovered five victims who were working for Gunn – three of whom were minors. Several of the victims had tattoos that read “Classified,” including the 16-year-old victim, who had the tattoo over her right eye.
The investigation showed that the victims had placed advertisements for commercial sex acts on Backpage.com and that Gunn had about a dozen women and girls working for him. One of the victims had posted hundreds of ads for sex services in states as far away as Alaska and Minnesota, according to the affidavit in support of the criminal complaint. Several victims told authorities that Gunn took all of the money they collected from customers, with one victim using a wire transfer service to send more than $17,000 to Gunn over the course of three months.
“Every day, human trafficking victimizes large numbers of women and children, causing victims physical harm and long-lasting emotional trauma,” said United States Attorney Eileen M. Decker. “This case demonstrates that law enforcement has adopted a new approach that views the women and children as crime victims, but we will continue to aggressively prosecute their traffickers.”
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
The charge of child sex trafficking carries a mandatory minimum sentence of 10 years in federal prison and statutory maximum sentence of life.
This case was investigated by the Riverside County Anti-Human Trafficking Task Force, which include representatives from the Riverside County Sheriff’s Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI). The Moreno Valley Police Department, the San Bernardino County Sherriff’s Office, the Los Angeles County Sheriff’s Department and the Los Angeles Police Department assisted in the investigation.
“Forcing anyone, much less a child, to prostitute themselves under the constant threat of physical harm is not only criminal – it is morally reprehensible,” said Joseph Macias, special agent in charge for HSI Los Angeles. “That what amounts to modern slavery occurs here in our communities in the 21st century is inconceivable. HSI is committed to working with our law enforcement partners to ensure that those involved are held accountable for their crimes.”
This case is being prosecuted by Assistant United States Attorney Tritia L. Yuen of the Riverside Branch Office.
U.S. Attorney’s Office and FBI to Host Eighth Annual Cyber Crime Prevention SymposiumRead the Press Release
LOS ANGELES – The United States Attorney’s Office, the FBI, and a coalition of law enforcement agencies and community groups will host the 8th Annual Cyber Crime Prevention Symposium tomorrow. The day-long seminar for more than 400 educators, parents, and middle and high school students is being held at the California Endowment in Los Angeles.
The Symposium will address a wide range of Internet-related security and safety issues with speakers conducting discussions on topics that include child exploitation, cyber bullying, the implications of digital communication on health, digital reputation, navigating peer pressure, social media, cyber abuse, Internet dangers and sextortion, among other topics. This year features a youth presentation on Snapchat and special celebrity guests from Disney television programs will make a special surprise appearance during the lunch break.
“Internet and social media use has become a fundamental element of our daily lives. Whether it is for educational or recreational use, it is essential that everyone – especially young people – have skills to stay safe in cyberspace,” said United States Attorney Eileen M. Decker. “This Symposium will assist the most vulnerable among us, and those who care for them, in designing and implementing strategies that will help protect them from online dangers.”
“Education is key to empowering children to take control of their cyber citizenship and do their part to protect themselves and their peers from those who would do them harm via the internet,” said Deirdre L. Fike, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “This Symposium affords the FBI and our law enforcement partners direct access to students, parents, and educators to discuss the dangers of sextortionists, cyberbullies, and fraudsters our children face online. We are all partners in the fight to keep kids safe in cyberspace.”
Student teams from each of the schools attending this year’s Symposium will also be invited to participate in the 6th Annual Cyber Safety Challenge. This contest asks attending students to develop a cyber safety program at their respective schools in order to educate the entire student body on the various risks associated with cyber crime. The contest promotes good cyber etiquette by challenging students to engage in creating the cyber safety programs. Students participating in this challenge will have their contest entries judged by a panel of experts, and the winning school will be publicized in May 2017.
“With just a touch of a screen or a click of a mouse, our children can be the targets of bullies and predators," said Los Angeles City Attorney Mike Feuer. "My Office is proud to partner with law enforcement, educators, parents and students to keep our children safe by addressing the very serious threats posed by online predators and cyber bullies."
Organized under the aegis of the Inter-Agency Council on Child Abuse and Neglect (ICAN), law enforcement agencies participating in tomorrow’s conference include the United States Attorney’s Office, the Federal Bureau of Investigation, the Los Angeles City Attorney’s Office, the Los Angeles County Sheriff’s Department, and the Los Angeles Police Department Internet Crimes Against Children Task Force (ICAC).
“Children who are growing up in this high tech age are being targeted by online predators at an alarmingly high rate,” said Deanne Tilton Durfee, Executive Director for the ICAN. “Each year, this Symposium will provide participants with resources and tools to help children learn how to protect themselves and be safe in the cyber world, while enjoying all of the benefits of the fast-growing technologies.”
The Cyber Crime Prevention Symposium is hosted this year by the Archdiocese of Los Angeles, and the planning committee also includes participation by the Los Angeles County Office of Education, Santa Monica-UCLA Medical Center, the Anti-Defamation League, Fox Entertainment Group, the Walt Disney Company, and Warner Bros. Entertainment.
“I’m a firm believer that knowledge is power,” said Dr. Heather Banis, victim’s assistance coordinator for the Archdiocese of Los Angeles. “The Cyber Crime Prevention Symposium helps our students be ‘in the know,’ empowering them to stay safe online.”