Central District of California
Press releases recorded for this federal judicial district.
Los Angeles Art Dealer Sentenced to Federal Prison for Smuggling Stolen Antiquities and Overseeing Charitable Deduction Tax ScamRead the Press Release
LOS ANGELES – A Los Angeles art dealer has been sentenced to 18 months in federal prison for conspiring to smuggle looted archeological resources into the United States, and then using those antiquities as the basis of a charitable donation tax fraud scheme involving local museums.
Jonathan M. Markell, 70, a resident of the Westchester district of Los Angeles and who is the owner of Silk Roads Design Gallery (which previously was located on North La Brea Avenue and now operates in the Jefferson Park district of Los Angeles), was sentenced Monday afternoon by United States District Judge Dean D. Pregerson, who called Markell’s crimes “significant.”
In issuing the prison sentence, Judge Pregerson said it was “important to send a message” to art collectors, gallery owners and museums that they should avoid collecting and trading looted antiquities.
Markell previously pleaded guilty to conspiring to smuggle stolen antiquities into the United States by making false declarations to U.S. Customs authorities. In a second case, Markell pleaded guilty to conspiring to commit tax fraud. Markell admitted smuggling antiquities from Burma, Thailand, Cambodia and China into the United States for sale in his art gallery. Markell knew that many of the antiquities had been looted from the site of an ancient civilization located in Ban Chiang, Thailand – which the United Nations Educational, Scientific and Cultural Organization (UNESCO) has designated this site as a “World Heritage” site. An expert on Southeast Asian archaeology testified in court on Monday that the looting of the Ban Chiang sites – which are thousands of years old – to supply galleries like Markell’s was “devastating to the archeology of Thailand.”
“Mr. Markell’s greed placed his art gallery’s profits above the culture and heritage of the people of Thailand,” said United States Attorney Eileen M. Decker. “Not only did he play a significant role in the international trade of looted artifacts, Markell also participated in a scheme designed to illegally provide tax deductions to art collectors.”
Once in possession of the looted antiquities in the United States, Markell engaged in a tax fraud scheme by promoting and participating in a false charitable deduction scheme. After obtaining the Thai antiquities, most of which were from the Ban Chiang culture, Markell bundled the antiquities into “charitable donation packages” that were donated to charitable institutions such as museums and universities. Markell prepared fraudulent appraisals in order to falsely inflate the value of the antiquities, which he provided to co-conspirators, who used the fraudulent documents to claim inflated charitable donation tax deductions.
Markell’s wife, 68-year old Carolyn Markell, was also sentenced Monday afternoon for her role in the tax fraud conspiracy. In addition to being ordered to pay restitution to the Internal Revenue Service for fraudulent tax deductions, she and her husband were also ordered to repatriate 337 antiquities seized from their residence and gallery to Thailand, Burma, Cambodia and China.
“It is individuals such as Jonathan Markell – the importers, the buyers and the gallery owners who purchase and acquire such archeological resources or wildlife products for profitable resale who are primarily to blame for the underlying devastation, for these are the individuals who create the markets that create the monetary incentives that drive the poachers and looters into the field,” prosecutors wrote in a sentencing memorandum filed with the court.
This case was investigated by the National Park Service, U.S. Immigration and Customs Enforcement – Homeland Security Investigation, and IRS Criminal Investigation.
FBI Arrests O.C. Man who Allegedly Took over $1.2 Million from Distressed Homeowners in Bogus Loan Modification SchemeRead the Press Release
SANTA ANA, California – An Orange County man who allegedly bilked distressed homeowners with false promises that he could help them avoid foreclosure by obtaining modifications to their mortgages – or even completely eliminating their loans – was arrested this morning on federal fraud charges by Special Agents with the FBI.
Antonio Marquette, 56, was arrested without incident at his residence in the community of Midway City. Marquette is expected to be arraigned on a 12-count indictment this afternoon in United States District Court in Los Angeles.
According to the 12-count indictment, which was returned on Wednesday by a federal grand jury in Santa Ana and was unsealed upon this morning’s arrest, Marquette operated Bolsa Marketing Group in Garden Grove in 2010 and 2011 and allegedly charged homeowners up to $70,000 in cash for services that simply were not rendered.
Through Bolsa Marketing, Marquette allegedly ran a scheme that targeted distressed homeowners and induced them to pay up-front fees to obtain mortgage relief services. The indictment alleges that Marquette operated the scheme by “falsely promising homeowners mortgage loan modifications that would substantially reduce their mortgage payments, avoid foreclosure, or eliminate their mortgage loans entirely.”
As part of the scheme, Marquette allegedly made various promises to homeowners, including making guarantees that he could reduce their outstanding debt to 25 percent of the loan balance in only four months. Marquette also sent fraudulent checks to “pay off” mortgages and filed bogus documents county recorders offices, according to the indictment.
“Mr. Marquette is charged with preying on vulnerable homeowners who seemingly would do anything to avoid foreclosure,” said United States Attorney Eileen M. Decker. “While Marquette took steps to make it appear he working on behalf of homeowners, he in fact did nothing to help them, and many victims lost their homes.”
The indictment alleges that Marquette took in more than $1.2 million from victim-homeowners, most of whom were members of Vietnamese communities in Southern California, the Bay Area and Houston. However, investigators believe there may be additional victims who have not yet been identified. Members of the public who have information about Marquette’s scheme or believe they may be a victim of the scheme are encouraged to call the FBI’s Los Angeles Field office at (310) 477-6565.
The indictment charges Marquette with 10 counts of mail fraud, one count of wire fraud and one count of money laundering. These charges each carry a statutory maximum penalty of 20 years in federal prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The case against Marquette is the product of an ongoing investigation by the Federal Bureau of Investigation.
Sixteen Named in Racketeering Indictment Alleging Money Laundering Schemes Orchestrated by Former President of Orange County BankRead the Press Release
Two Other Money Laundering Indictments Unsealed as Part of Operation “Phantom Bank”
Federal authorities today arrested 11 defendants named in a sweeping racketeering indictment alleging a series of money laundering schemes that revolved around the former head of Saigon National Bank, based in Westminster, California, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Eileen M. Decker of the Central District of California. Four other defendants, who are named in separate indictments, were also arrested today.
The majority of the defendants arrested today are named in a racketeering indictment that was returned on Dec. 1 by a federal grand jury and unsealed today along with two other indictments returned by the grand jury over the past year. The three indictments charge a total of 20 defendants.
Six of the defendants named in the main indictment are charged with violating the federal Racketeer Influenced and Corrupt Organizations Act (RICO) by playing key roles in a series of schemes to launder drug proceeds. At the center of the schemes is Tu Chau “Bill” Lu, 71, of Fullerton, California, who from 2009 through January 2015, was president and CEO of Saigon National Bank.
The indictment alleges that Lu and the other five defendants were members of a criminal organization that was involved in narcotics trafficking and international money laundering in countries that included the United States, China, Cambodia, Liechtenstein, Mexico and Switzerland. Lu allegedly used his insider knowledge, position as an official at Saigon National Bank and network of connections to promote and facilitate money laundering transactions involving members and associates of the enterprise. Several members of the organization established or engaged in separate money laundering schemes, but all of the defendants allegedly worked with Lu, through him or at his direction.
In one scheme, an undercover informant delivered cash represented to be drug proceeds to defendants, who allegedly arranged for the cash to be converted into cashier’s checks made out to a company the informant claimed to own. Other conspiracies alleged in the indictment also involved the delivery of cash from the informant and the defendants’ alleged conversion of that money into cashier’s checks.
As part of the racketeering enterprise, Lu and others named in the RICO count allegedly floated a plan in which the informant and his boss (who was an actually an undercover law enforcement officer) would purchase a controlling interest in Saigon National Bank so they could have a financial institution that could easily facilitate money laundering operations.
In another aspect of the racketeering conspiracy, Lu and others allegedly proposed setting up a foundation in Liechtenstein that would be used to move money around the world. The informant and an undercover law enforcement officer posing as an associate told those proposing the creation of the foundation that they would be laundering the proceeds of drug sales in Europe and that the drugs had been bartered for weapons in Nigeria.
In yet another aspect of the conspiracy, Lu allegedly played a critical role in introducing the informant and other defendants to operatives from the Sinaloa drug cartel who wanted to launder millions of dollars every month. According to the indictment, Lu had also discussed purchasing Saigon National Bank with the Sinaloa operatives, and one of the operatives said the cartel had already invested $1 million in the bank.
The five other individuals charged in the RICO count are:
- Tsung Wen “Peter” Hung, 61, of Monterey Park, California;
- Edward Kim, 56, of Beverly Hills, California;
- John Edmundson, 55, a British citizen who resides in Hong Kong, who is still being sought by authorities;
- Pablo Hernandez, 75, of Tijuana, Mexico, who is still being sought by authorities; and
- Emilio Herrera, 53, a Mexican citizen who resides in Spring Valley, California, who is still being sought by authorities.
The RICO count is one of 28 counts in the indictment. The various money laundering schemes detailed in the RICO count are the subject of other charges, specifically conspiracy, money laundering and structuring transactions to avoid federal reporting requirements. Kim is additionally charged with evidence tampering for allegedly encouraging one of the undercover agents to destroy evidence.
The indictment alleges that members of the racketeering conspiracy discussed laundering hundreds of millions of dollars. The indictment details actual money transactions involving a total of $3.75 million.
The other defendants named in the indictment are:
- Mina Chau, 32, of La Mesa, California;
- Ben Ho, 41, of Santa Ana, California;
- Tom Huynh, also known as The Fat Guy, 57, of Westminster;
- Renaldo Negele, 51, of Liechtenstein, who is still being sought by authorities;
- Jack Nguyen, 38, of Manhattan Beach, California;
- Luis Krueger, 58, of Malibu, California;
- Li Jessica Wei, who is also known under various permutations of her name, including Wei Jessica Li, 58, of Arcadia, California;
- Du Truong “Andrew” Nguyen, 34, of Westminster, who is still being sought by authorities;
- Richard Cheung, also known as Richard Cheang, 58, of El Monte, California; and
- Lien Tran, 41, of Santa Ana.
The second indictment unsealed today charges Hung; Wei; Jian Sheng “Raymond” Tan, 48, of Temple City, California; and Derrick Cheung, also known as Chang Zhang Ying and Zhang Ying Chang, 39, of Rowland Heights, California, with conspiring to launder money that they believed to be the proceeds of narcotics trafficking and bank fraud. The defendants allegedly accepted money from an undercover operative and converted it to cashier’s checks and money orders, in exchange for a fee.
The third indictment unsealed today charges Tan; Ruimin Zhao, 45, of Temple City; and Vivian Tat, of Hacienda Heights, California, with conspiring to launder money that they believed to be the proceeds of narcotics trafficking. An undercover operative allegedly delivered the money to the defendants, who converted into cashier’s checks.
The 15 defendants taken into custody today will be arraigned this afternoon in U.S. District Court in Los Angeles.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The FBI, the Office of the Special Inspector General for the Troubled Asset Relief Program and Internal Revenue Service-Criminal Investigation are conducting the investigation in Operation Phantom Bank. Trial Attorney Andrew Creighton of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Kim Meyer of the Central District of California are prosecuting these cases.
16 Named in Racketeering Indictment Alleging Money Laundering Schemes Orchestrated by Former President of Orange County BankRead the Press Release
LOS ANGELES – Federal authorities today arrested 11 defendants named in a sweeping racketeering indictment that alleges a series of money laundering schemes that revolved around the former head Westminster-based Saigon National Bank. Four other defendants who are named in two separate money laundering indictments were also arrested today.
The majority of the defendants arrested today in relation to Operation “Phantom Bank” are named in a 109-page racketeering indictment that was returned by a federal grand jury on December 1 and unsealed late this afternoon. Two other indictments returned by the grand jury over the past year were also unsealed today. The three indictments charge a total of 20 defendants, three of whom are named in two indictments.
In the 16-defendant racketeering indictment, six of the defendants are charged with violating the federal Racketeer-Influenced and Corrupt Organizations Act (RICO) by playing key roles in a series of schemes to launder drug proceeds. At the center of the schemes is the lead defendant in the indictment – Tu Chau “Bill” Lu, 71, of Fullerton, who was president and chief executive officer of Saigon National Bank from 2009 through January 2015.
The RICO count alleges that Lu and the other five defendants were members of a criminal organization that was involved in narcotics trafficking and international money laundering in countries that included the United States, China, Cambodia, Liechtenstein, Mexico and Switzerland. The indictment alleges that Lu used “his insider knowledge, position as an official at Saigon National Bank, and network of connections to promote and facilitate money laundering transactions involving members and associates of the enterprise.” Several members of the organization established or engaged in separate money laundering schemes, according to the indictment, but “all working with, through, or at the instigation of defendant Lu.”
In one scheme, an undercover informant delivered cash represented to be drug proceeds to defendants, who arranged for the cash to be converted into cashier’s checks made out to a company the informant allegedly owned. Other conspiracies discussed in the RICO count also involved the delivery of cash from the informant, and that money was allegedly converted into cashier’s checks.
As part of the racketeering enterprise, Lu and others named in the RICO count allegedly floated a plan in which the informant and his boss (who was an actually an undercover law enforcement officer) would purchase a controlling interest in Saigon National Bank so they could have a financial institution which could easily facilitate money laundering operations.
In another aspect of the RICO conspiracy, Lu and others allegedly proposed setting up a foundation in Liechtenstein that would be used to move money around the globe. The informant and another associate who was also an undercover law enforcement officer told those proposing the creation of the foundation that they would be laundering money that came from drug sales in Europe and that the narcotics had been bartered for weapons in Nigeria.
In yet another aspect of the RICO conspiracy, Lu allegedly played a critical role in introducing to the informant and other RICO defendants operatives from the Sinaloa drug cartel who wanted to launder millions of dollars every month. According to the indictment, Lu also had conversations with the Sinaloa cartel operatives about purchasing Saigon National Bank, and one of the operatives said the cartel had already invested $1 million in the bank.
In addition to Lu, the five people charged in the RICO count are:
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Tsung Wen “Peter” Hung, 61, of Monterey Park;
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Edward Kim, 56, of Beverly Hills;
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John Edmundson, 55, a British citizen who resides in Hong Kong, who is still being sought by authorities;
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Pablo Hernandez, 75, of Tijuana, Mexico, who is still being sought by authorities; and
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Emilio Herrera, 53, a Mexican citizen who resides in Spring Valley, California, who is still being sought by authorities.
The RICO count is one of 28 counts in the indictment. The various money laundering schemes detailed in the RICO count are the subject of other conspiracy and substantive money laundering charges in tampering and structuring transactions to avoid federal reporting requirements. Additionally, Kim is charged with evidence tampering for allegedly encouraging one of the undercover agents to destroy evidence.
The indictment alleges that members of the racketeering conspiracy discussed laundering hundreds of millions of dollars. The indictment details actual money laundering transactions involving a total of $3.75 million.
“Our fight against international narcotics trafficking focuses on both drug interdiction and stopping the flow of money generated by illegal narcotics sales,” said United States Attorney Eileen M. Decker. “The indictments unsealed today demonstrate that we are facing sophisticated operatives who will use novel methods to launder drug proceeds. These cases also demonstrate that we are committed to using all investigative tactics to uncover these illegal operations and to prosecute those willing to help drug traffickers.”
The other defendants named in the indictment are:
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Mina Chau, 32, of La Mesa, California;
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Ben Ho, 41, of Santa Ana;
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Tom Huynh, also known as “The Fat Guy,” 57, of Westminster;
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Renaldo Negele, 51, of Liechtenstein, who is still being sought by authorities;
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Jack Nguyen, 38, of Manhattan Beach;
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Luis Krueger, 58, of Malibu;
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Li Jessica Wei (who is also known under various permutations of her name, including Wei Jessica Li), 58, of Arcadia;
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Du Truong “Andrew” Nguyen, 34, of Westminster, who is still being sought by authorities;
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Richard Cheung, also known as Richard Cheang, 58, of El Monte; and
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Lien Tran, 41, of Santa Ana.
“Investigations of financial institutions and individuals who willingly violate U.S. laws and regulations are vitally important to the integrity of our banking system,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation's Los Angeles Field Office. “Those affiliated with financial institutions who abuse their positions to launder the proceeds of drug trafficking, illegal weapon sales and bribery will be held accountable.”
The second indictment unsealed today charges Hung, Wei and two other defendants – Jian Sheng “Raymond” Tan, 48, of Temple City; and Derrick Cheung, also known as Chang Zhang Ying and Zhang Ying Chang, 39, of Rowland Heights – with accepting money from an undercover operative and, in exchange for a fee, converting the money to cashier’s checks and money orders. The three-count indictment alleges that the defendants accepted money they believed to be the proceeds of bank fraud and narcotics trafficking.
The third indictment stemming from this investigation and unsealed today charges Tan; Ruimin Zhao, 45, also of Temple City; and Vivian Tat, 51, of Hacienda Heights, with laundering money they thought came from narcotics trafficking. The money given to the defendants in this case was delivered by an undercover operative and was converted into cashier’s checks.
“The taxpayers put their faith in TARP recipient Saigon National Bank by funding the bank after the financial crisis, ”said Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). “As part of an expansive criminal enterprise, the former president and CEO of Saigon Bank, Tu Chau ‘Bill’ Lu and his co-conspirators have now been indicted for financial crimes relating to drug trafficking, money laundering and the use of the bank and Lu’s financial connections to facilitate the crimes. We commend U.S. Attorney Eileen M. Decker, the Department of Justice’s Criminal Division and our law enforcement partners for their work investigating this TARP case.”
During arraignments late today in United States District Court, 13 of the defendants entered not guilty pleas and were ordered to stand trial in February. The 13 who were arraigned today were all released on bond. Defendants Cheung and Hung are expected to be arraigned on Friday afternoon.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The RICO charge, the money laundering counts and the evidence tampering charge each a statutory maximum penalty of 20 years in federal prison. The charge of structuring financial transactions to avoid federal reporting requirements carries a maximum sentence of five years.
The investigation in Operation Phantom Bank was conducted by the Federal Bureau of Investigation, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and IRS Criminal Investigation.
This case is being prosecuted by Assistant United States Attorney Kim Meyer and Trial Attorney Andrew Creighton of the DOJ Criminal Division, Organized Crime and Gang Section.
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Two Members of Dockworkers Union Charged in Scheme that Bilked Health Care Plan by Fraudulently Billing for Chiropractic ServicesRead the Press Release
LOS ANGELES – Two members of the International Longshore and Warehouse Union (ILWU), Local 13, have been arrested on federal fraud charges that allege they caused two medical clinics to bill the union’s health care plan for chiropractic services that either were not provided or were not medically necessary.
Sergio Amador, 49, of Downey, and David Gomez, 52, of San Pedro, were arrested yesterday without incident by federal authorities.
At arraignments yesterday afternoon, Amador and Gomez pleaded not guilty to mail fraud charges contained in an indictment that was returned by a federal grand jury on November 18. Both men were freed on bond and were ordered to stand trial on February 2, 2016.
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 International Longshoremen’s and Warehousemen’s Union – Pacific Maritime Association Welfare Plan.
In 2009, Amador and Gomez opened a clinic in Long Beach operating under the name Port Medical that purported to provide general medical and chiropractic care. The next year, they opened a second clinic operating under the same name in San Pedro.
According to the indictment, Amador and Gomez also created medical management companies that they used to receive funds generated by the medical clinics, which were then used to pay themselves and to pay incentives to Welfare Plan members to use the Port Medical clinics and to encourage other Welfare Plan members to use them. The incentives allegedly included cash payments and sponsorships of sports teams.
The indictment alleges that when some Welfare Plan members went to the Port Medical clinics to receive chiropractic treatment, they were asked to sign their names on multiple sign-in stickers, while on other occasions Welfare Plan members’ signatures on sign-in stickers were forged. According to the indictment, Amador and Gomez then caused the sign-in stickers to be used to create chart entries that falsely indicated the Welfare Plan members had received chiropractic services on dates when no such services had been provided.
The indictment also alleges that Amador and Gomez encouraged Welfare Plan members to go to the Port Medical clinics to receive massages, heat and ice treatments and other services that were not medically necessary – while the patients’ medical charts falsely showed “that the services provided were medically necessary, addressed specific conditions of patients that had been properly diagnosed, and were used to support and facilitate chiropractic care.” Those services – and others never provided – then allegedly were billed to the Welfare Plan. Those bills also concealed that patients had been recruited through the use of cash payments or other incentives.
As a result of the fraudulent scheme, the indictment alleges that Port Medical received at least $225,000 from the Welfare Plan.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The indictment charges both defendants with 20 counts of mail fraud. If they are convicted, each would face a statutory maximum sentence of 20 years in federal prison for each count of mail fraud.
The indictment is the product of an investigation 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.
Los Angeles-Based U.S. Attorney’s Office Collected over $42 Million in Civil and Criminal Actions during 2015 Fiscal YearRead the Press Release
LOS ANGELES – The United States Attorney’s Office for the Central District of California collected $42,370,356 as a result of criminal prosecutions and civil lawsuits during the 2015 fiscal year, United States Attorney Eileen M. Decker announced today.
The amount collected for U.S. taxpayers during FY2015 is the result of nearly $19 million collected in criminal actions, and approximately $23.4 million collected in civil actions.
Additionally, the U.S. Attorney’s Office worked with other offices and Justice Department components to collect an additional $10.54 billion, most of which was related to massive settlements with Bank of America and Standard & Poor’s Financial Service in cases in which proceeds were collected in FY 2015, which ended on September 30.
The U.S. Attorney’s Office also collected $33,353,717 in criminal and civil asset forfeiture proceedings. 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.
“Year after year, my office is involved in the collection of hundreds of millions of dollars – much of which goes the U.S. Treasury to fund government operations and to victims of crime,” said United States Attorney Eileen M. Decker. “Assistant U.S. Attorneys in this office continually demonstrate their deep commitment to being fiscally responsible and 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 230 Assistant United States Attorneys serve more than 19 million residents of the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.
The U.S. Attorney’s Office and the other litigating divisions in the Justice Department’s are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The 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.
Attorney General Loretta E. Lynch announced last week that the Justice Department collected $23.1 billion in civil and criminal actions in FY 2015 (see: http://go.usa.gov/cBpWY).
The largest came from financial institutions whose risky practices led up to the 2008 financial crisis and collapse of the U.S. housing market, including $8.2 billion of the settlement in August 2014 with Bank of America Corporation, which included $5 billion in penalties for claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever - and $687 million from the February 2015 settlement with McGraw Hill Financial Inc. and Standard & Poor’s Financial Services LLC.
Southern California Ambulance Company Owner, Operator and Managers Sentenced to Prison for Medicare Fraud SchemeRead the Press Release
The former owner, operator and managers of a Southern California ambulance company were sentenced to prison for their role in a fraud scheme that resulted in more than $1.5 million in fraudulent claims to Medicare.
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, Special Agent in Charge Christian J. Schrank of the U.S. Department of Health and Human Services-Office of the Inspector General’s (HHS-OIG) Los Angeles Region and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.
Today, U.S. District Judge S. James Otero of the Central District of California sentenced Yaroslav Proshak, aka Steven Proshak, 47, of Valley Village, California to serve 108 months in prison. On Dec. 2, 2015, Judge Otero of the Central District of California sentenced Emilia Zverev, 58, of Van Nuys, California; and Sharetta Michelle Wallace, 37, of Inglewood, California, to serve 36 months and 24 months in prison, respectively. In addition to their prison terms, Judge Otero ordered Zverev and Wallace to pay restitution jointly and severally with Proshak in the amount of $804,755. On Aug. 18, 2015, following a 10-day trial, a federal jury in Los Angeles convicted Proshak, Zverev and Wallace of one count of conspiracy to commit health care fraud and five counts of health care fraud.
Zverev and Wallace worked for ProMed Medical Transportation, an ambulance transportation company owned and operated by Proshak in the greater Los Angeles area that provided non-emergency services to Medicare beneficiaries, many of whom were dialysis patients. Zverev was the billing manager and Wallace supervised the ProMed EMTs. The evidence at trial showed that between May 2008 and October 2010, the defendants conspired to bill Medicare for ambulance transportation services for individuals that did not need such services. The defendants also instructed ProMed EMTs to conceal the patients’ true medical conditions by altering paperwork and creating fraudulent documents to justify the services. During the course of the conspiracy, ProMed submitted at least $1.5 million in false and fraudulent claims to Medicare for medically unnecessary transportation services; Medicare paid at least $804,755 on those claims.
The FBI and HHS-OIG investigated the case. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California. Trial Attorneys Blanca Quintero, Fred Medick and Ritesh Srivastava of the Criminal Division’s Fraud Section prosecuted the case.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.
Santa Barbara Doctor Sentenced to over 27 Years in Federal Prison for Writing Prescriptions for Huge Quantities of Dangerous NarcoticsRead the Press Release
SANTA ANA, California – A Santa Barbara-area physician who wrote numerous prescriptions for powerful painkillers for “patients” – many of whom were drug addicts, and some of whom died from drug overdoses – was sentenced today to 327 months in federal prison.
Julio Gabriel Diaz, 67, a Goleta resident who operated the Family Medical Clinic in Santa Barbara and was known to some “patients” as the “Candyman,” was sentenced by United States District Judge Cormac J. Carney.
Diaz was sentenced today after being found guilty in August by a federal jury. During the 2½-week trial, prosecutors showed that Diaz was a prolific writer of prescriptions for highly addictive and dangerous drugs and that he distributed the drugs outside of the usual course of professional practice and without a legitimate medical purpose.
In 2011, for example, Diaz wrote prescriptions for more than 1.7 million doses of painkillers. His “patients” typically paid cash and received prescriptions for powerful drugs that included opioids, anti-anxiety medications and muscle relaxants. Several doctors and pharmacists who testified during the trial said that they had never seen any doctor prescribe the combination and quantity of drugs prescribed by Diaz.
“Driven by financial gain, this doctor wrote a staggering number of prescriptions for people, many of whom were clearly abusing the drugs,” said United States Attorney Eileen M. Decker. “Diaz ignored family members who begged him to stop prescribing prescription pain medications to loved ones, and he ignored warnings from doctors and pharmacists that his ‘patients’ were abusing the drugs and suffering overdoses – in some cases fatally overdosing. Doctors who abuse their position of trust and violate their oath pose a significant threat to public health, and we will continue to target them when they commit acts that are not driven by a medical necessity.”
Diaz was found guilty of 79 counts of distribution of a controlled substance. Twenty-six of the charges relate to oxycodone (a drug often sold under the brand name OxyContin), 10 of the charges relate to methadone, seven of the counts relate to hydromorphone (a drug commonly sold under the brand name Dilaudid), 10 of the charges relate to fentanyl, 11 of the charges relate to hydrocodone (a drug often sold under the brand names Vicodin and Norco), 10 of the charges relate to alprazolam (a drug often sold under brand name Xanax), and five of the charges related to the distribution of various controlled substances to a minor.
According to the evidence presented at trial, doctors, nurses and other personnel with Santa Barbara Cottage Hospital wrote to the Medical Board of California and gave statements to investigators to complain about Diaz. Cottage Hospital doctors believed that Diaz posed such a threat that they prepared a spreadsheet documenting emergency room visits by patients who had been prescribed narcotics by Diaz.
“A medical doctor trusted by society, defendant [Diaz] stopped treating patients and became a drug dealer,” prosecutors wrote in a sentencing memorandum. “He turned young people into addicts and/or fueled the addictions of drug abusers.”
Diaz was arrested in this case in January 2012. After being free on bond for a time, he was taken into custody and has remained in custody since January 2014. After his arrest, the state of California revoked his license after finding that he provided incompetent and grossly negligent care.
The investigation into Diaz was conducted by the Drug Enforcement Administration and the Santa Barbara Police Department, which received the assistance of the California Medical Board.
Operator of Inland Empire Loan Modification Scam that Targeted Distressed Homeowners Sentenced to 18 Years in Federal PrisonRead the Press Release
RIVERSIDE, California – The founder and co-owner of a Rancho Cucamonga business was sentenced today to 18 years in federal prison for orchestrating a scheme that offered bogus loan modification programs to thousands of financially distressed homeowners who lost more than $7 million when they paid for services that were never provided.
Andrea Ramirez, 47, of Rancho Cucamonga, was sentenced today by United States District Judge Virginia A. Phillips, who also ordered the defendant to pay $6,764,743 in restitution.
Ramirez was the organizer of a telemarketing operation known under a series of names – including 21st Century Legal Services, Inc. – that bilked more than 4,000 homeowners across the nation, many of whom lost their homes to foreclosure. Ramirez was sentenced today after pleading guilty to one count of conspiracy to commit mail fraud and wire fraud.
“This fraudulent company purposely targeted homeowners who were extremely vulnerable because they were facing foreclosure,” said United States Attorney Eileen M. Decker. “Ramirez and her co-defendants made false promises to desperate homeowners, often took the last of their money and then abandoned them. Her contempt for her victims will put her in federal prison for nearly two decades.”
Previously in this case, the other co-owner of 21st Century – Christopher Paul George, 45, of Rancho Cucamonga, was sentenced by Judge Phillips to 20 years in federal prison.
A total of 11 defendants linked to 21st Century have been convicted of federal fraud charges as a result of an investigation conducted by the Federal Bureau of Investigation; IRS - Criminal Investigation; the United States Postal Inspection Service; the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and the Federal Housing Finance Agency, Office of Inspector General.
“As the ringleader in a scheme to dupe thousands of distressed homeowners out of their last dollar at the height of the financial crisis, Andrea Ramirez earned the next 18 years in federal prison, which she should use to reflect on her victims,” said Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
During a 15-month period that began in the middle of 2008, Ramirez operated 21st Century, which defrauded financially distressed homeowners by making false promises and guarantees regarding 21st Century’s ability to negotiate loan modifications for homeowners. Employees of 21st Century made numerous misrepresentations to victims during the course of the scheme, including falsely telling victims that 21st Century was operating a loan modification program sponsored by the United States government. Victims were generally instructed to stop communicating with their mortgage lenders and to cease making their mortgage payments.
21st Century employees contacted distressed homeowners through cold calls, newspaper ads and mailings. The company also controlled websites that advertised loan modification services. Once they contacted the distressed homeowners, 21st Century employees often falsely told clients that the company was operating through a federal government program, that they would be able to obtain new mortgages with specific interest rates and reduced payments, and that attorneys would negotiate loan modifications with their lenders. 21st Century employees regularly instructed financially distressed homeowners to cease making mortgage payments to their lenders and to cut off all contact with their lenders because they were being represented by 21st Century. On some occasions, 21st Century employees told homeowners that 21st Century was using the fees paid by the homeowner to make mortgage payments, when Ramirez, George and their co-defendants simply were pocketing the homeowners’ money.
After federal authorities executed a search warrant at 21st Century, Ramirez relocated 21st Century’s offices, renamed the company and made it appear it was operating out of Las Vegas, Nevada.
“Fraudulent mortgage fraud schemes affect consumers at the most basic level, jeopardizing their ability to retain ownership of their homes,” said Robert Wemyss, Inspector in Charge of the U.S. Postal Inspection Service – Los Angeles Division. “The U.S. Postal Inspection Service will continue to investigate these crimes to protect consumers and our nation's mail system from being used for illegal or dangerous purposes.”
Special Agent in Charge Erick Martinez of IRS-Criminal Investigation of the Los Angeles Field Office stated: “Ms. Ramirez took advantage of unsuspecting homeowners hoping to keep a roof over their heads. Hopefully she will now understand that her irresponsible actions have real consequences.”
In addition to Ramirez and George, nine other defendants have been convicted for their roles in the 21st Century scam. They are:
• Crystal Taiwana Buck, 40, of Long Beach, who persuaded numerous victims to pay fees to 21st Century, was sentenced to five years in prison;
• Albert DiRoberto, 62, of Fullerton, who handled both sales and marketing – which included making a commercial for 21st Century – was sentenced to five years in prison;
• Yadira Garcia Padilla, 38, of Rancho Cucamonga – who, among other things, posted bogus positive reviews about 21st Century on the Internet – was sentenced to four years in prison;
• Michael Bruce Bates, of Moreno Valley, was sentenced to one year and one day in prison;
• Michael Lewis Parker, of Pomona, was sentenced to six years in prison;
• Catalina Deleon, of Glendora, is scheduled to be sentenced on December 14;
• Hamid Reza Shalviri, of Montebello, is scheduled to be sentenced on Thursday, December 10;
• Mindy Sue Holt, of San Bernardino, was sentenced to 18 months in prison; and
• Iris Melissa Pelayo, of Upland, was sentenced to four years in prison.
O.C. Firefighter Sentenced to over 11 Years in Federal Prison for Sending Money Abroad to Produce Sexually Explicit Photos of GirlsRead the Press Release
SANTA ANA, California – A commercial firefighter who resides in Huntington Beach has been sentenced to 135 months in federal prison for attempting to produce child pornography by sending money to the Philippines to purchase a camera to take sexually explicit photos of a 13-year-old girl and her friend.
John McArthur, 57, was sentenced Friday afternoon by United States District Judge Josephine L. Staton.
McArthur pleaded guilty in May to one count of attempted production of child pornography.
“This defendant’s deviant crime sought to prey on the most vulnerable victims in society – children,” said United States Attorney Eileen M. Decker. “As demonstrated by the sentence that will send Mr. McArthur to prison for well over a decade, there are lengthy prison sentences associated with child pornography crimes like this defendant’s, and these penalties are designed to punish offenders and serve as a warning to others who might consider producing, trafficking or possessing child pornography.”
McArthur had online conversations with a person he believed was a 13-year-old girl in the Philippines in January 2012. During those online conversations, McArthur agreed to send money for the purchase of a camera that would be used to take sexually explicit photographs of the girl and an 11-year-old friend. McArthur later went to a Western Union agent in Wilmington to transfer the money to the 13-year-old girl.
At the time, McArthur was not aware that the person posing as the 13-year-old girl was Robert Oliver Clark, 75, another United States citizen who was residing in the Philippines. Clark was arrested in September 2014 in a related case, and he has been sentenced to 97 months in federal prison for possession of child pornography. In his case, Clark admitted that he “possessed, in his computer hard drive and in his email accounts, 5,443 images and 53 videos of child pornography, including 43 images and 1 video portraying sadistic or masochistic conduct and 16 images portraying toddlers.”
During the investigation, law enforcement authorities discovered that McArthur received hundreds of images and several videos of child pornography through his email accounts.
The investigation into McArthur and Clark was conducted by the United States Postal Inspection Service, which received substantial assistance from the U.S. Department of State, Diplomatic Security Service; U.S. Immigration and Customs Enforcement's Homeland Security Investigations; and the Los Angeles Joint Regional Intelligence Center.
“Protecting children from crimes of sexual abuse and exploitation is a priority for the U.S. Postal Inspection Service,” stated Robert Wemyss, Inspector in Charge for the Los Angeles Division. “I’m proud of the work of the Postal Inspection Service and our investigative partners to bring child predators to justice. U.S. Postal Inspectors have investigated these crimes for more than a century. While the predators’ use of technology has evolved, the core harm has not changed: a child’s lost innocence. We will not lose sight of this, and remain steadfast in our efforts to investigate, apprehend, and assist in the prosecution of those who seek to exploit children via the U.S. Mail, wherever in the world they may be.”
Former Deputy U.S. Marshal Sentenced to Federal Prison for Obstructing Justice by Lying to Investigators after Fatal ShootingRead the Press Release
LOS ANGELES – A former deputy U.S. marshal was sentenced today to 15 months in federal prison after being convicted of obstruction of justice – a charge stemming from lies he told to police after he fatally shot a man.
Matthew Itkowitz, 47, who now lives in Suffern, New York, was sentenced by United States District Judge Philip S. Gutierrez.
Itkowitz was found guilty of obstruction of justice by a federal jury in July. The conviction was based on false statements Itkowitz made to Los Angeles Police Department homicide detectives following his fatal shooting of a man in West Hollywood in March of 2008. Itkowitz falsely characterized an altercation that led to the shooting, and his version of events was contradicted by a video made by a security camera in the alley where the shooting took place.
In addition to obstruction of justice, Itkowitz was charged with violating the victim's constitutional rights to be free from the use of unreasonable force by a law enforcement officer. During the trial, Judge Gutierrez granted a defense motion for judgment of acquittal on that charge and a related gun charge. The jury that convicted Itkowitz also acquitted him of an obstruction of justice charge related to statements he made to a supervisor at the U.S. Marshals Service.
“Law enforcement officers are not above the law,” said United States Attorney Eileen M. Decker. “The actions of this defendant tarnished the outstanding work of law enforcement throughout the district and the nation and have earned him a significant federal prison sentence.”
The investigation into Itkowitz was conducted by the Federal Bureau of Investigation
Corona Woman Who Ran High-End Denim Jean Company Sentenced to nearly Seven Years in Prison in $15 Million Bank Fraud SchemeRead the Press Release
LOS ANGELES – A Corona woman who was the chief executive officer of a high-end jean company that outfitted Hollywood celebrities was sentenced today to 79 months in federal prison for running what prosecutors called “two fraud schemes of epic proportions.”
Carolyn Marie Jones, 52, was sentenced this afternoon by United States District Judge Michael W. Fitzgerald, who also ordered the defendant to pay $15,124,100 in restitution to individual investors and Union Bank of California.
At today’s sentencing hearing, Judge Fitzgerald said the defendant was “truly a greedy, awful person.”
Jones pleaded guilty in February to one count of bank fraud and one count of concealing assets in a bankruptcy proceeding.
Jones “executed not one, but two, fraud schemes of epic proportions resulting in a loss to Union Bank and numerous investors of $15,124,100,” prosecutors wrote in a sentencing memorandum that outlined one scheme involving bank loans and bankruptcy fraud and a second one targeting individual investors that Jones perpetrated while free on bond after being indicted in the bank fraud case.
According to court documents, Jones defrauded Union Bank of California in a scheme related to her company, DDI (sometimes known as Diamond Decisions, Inc.), which sold jeans under the labels Privacywear and PRVCY Premium. Union Bank issued an $8.5 million line of credit – which was later increased to $15 million – to Jones in late 2008, but Jones had filed a fraudulent loan application that used another person’s social security number, bogus tax returns that had never been filed with the Internal Revenue Service and false financial statements for DDI that grossly overstated the company’s profits.
“For years, defendant [Jones] knowingly submitted false and fabricated tax returns, income statements, accounts receivable reports, and other financial documents to Union Bank,” according to the sentencing memo. “She lied to numerous bank employees about her company’s success and sales, among other things. She fabricated fake customers and retail stores purportedly buying her products.”
Jones also admitted in court that the accounting firm she claimed had audited her financial statements was a sham company. Jones confessed she lied to Union Bank employees, including the loan officer.
Jones soon defaulted on the $15 million loan, and Union Bank filed a civil lawsuit against DDI in state court. When the court issued an order authorizing Union Bank to seize the company’s assets, Jones filed a Chapter 11 bankruptcy petition in February 2010 that listed the bank as the sole creditor. In the following months, Jones lied to the bankruptcy trustee, concealed DDI assets, specifically about $120,000 that she had received from DDI customers, and spent some of the money on herself.
“Jones operated a sophisticated and devious scheme that spanned many years and caused significant financial and personal harm,” said United States Attorney Eileen M. Decker. “Jones actions were driven by greed, caused losses to both a financial institution and individuals, and has now resulted in a significant prison sentence.”
As part of a plea agreement in this case, Jones apologized to the identity theft victim in the bank fraud case, and she agreed to pay $15 million in restitution to Union Bank and $124,100 in restitution to victims whom she admitted defrauding in the second scheme.
Jones pleaded guilty in relation to two cases that were the result of an investigation conducted by the United States Secret Service and IRS - Criminal Investigation. The United States Trustee’s Office provided valuable assistance during the investigation.
Former Beverly Hills Broker Now Charged with Fugitive Investment Advisor Florian Homm in $200 Million Stock Manipulation SchemeRead the Press Release
Superseding Grand Jury Indictment Adds New Fraud and Money Laundering Charges against Fugitive Hedge Fund Manager, Beverly Hills Broker, and 2 Homm Employees
LOS ANGELES – A former Beverly Hills stockbroker has been indicted – along with fugitive hedge fund manager Florian Homm and two others – in an alleged stock manipulation scheme designed to pump up the reported profits of the Homm-managed hedge funds in a fraud that caused investors to lose approximately $200 million.
A federal grand jury yesterday afternoon returned a superseding indictment that charges three others who alleged participated in a scheme orchestrated by Homm. The new defendants are: Todd Ficeto, 49, of Marion, Ohio, who formerly resided in Malibu; Colin Heatherington, 41, of Port Alberni, British Columbia, Canada; and Craig Heatherington, 38, of Queensland, Australia.
Ficeto today surrendered to federal authorities and is scheduled to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.
Florian Wilhelm Jürgen Homm, 53, was first indicted in March 2013 on charges of securities fraud and wire fraud after he was arrested in Italy (see: http://go.usa.gov/cBCcV). The superseding indictment returned yesterday adds the three new defendants and charges Homm in new counts with investment adviser fraud, money laundering and unlawful monetary transactions.
Homm was the founder and chief investment officer of Absolute Capital Management Holdings (ACMH), a Cayman Islands-based investment advisor that operated from Palma de Majorca in Spain and managed eight hedge funds (the Absolute Funds). Ficeto was the president of a Beverly Hills-based broker-dealer, Hunter World Markets, that he co-owned with Homm. Colin Heatherington was a stock trader at ACMH.
The superseding indictment charges Homm, Ficeto and Colin Heatherington in a conspiracy to commit securities fraud and eight counts of securities fraud. The indictment charges that, between September 2004 and September 2007, Homm directed the Absolute Funds to buy billions of shares of thinly traded, United States-based “penny stocks” through Hunter World Markets. Ficeto allegedly arranged the stock purchases and caused millions of shares of the same penny stocks to be given to Homm, Hunter World Markets, and CIC Global Capital, which was co-owned by the Heatheringtons
After the hedge funds invested hundreds of millions of dollars in the illiquid penny stocks, Homm and Colin Heatherington caused the hedge funds to trade the stocks among themselves in “cross-trades” made with the assistance of Ficeto at Hunter World Markets, according to the indictment. The cross-trades served to increase the trading prices of the previously illiquid stocks and, in turn, to boost the net asset values and apparent performance of the Absolute Funds, in a practice called “portfolio pumping.” This apparent performance improvement at the hedge funds generated additional fees for Homm and Absolute Capital. It also boosted Absolute Capital’s stock price on the London Stock Exchange, Alternative Investment Market, from which Homm profited by selling shares.
According to the indictment, while manipulating the trading of the penny stocks to falsely and artificially increase the profitability of the Absolute Funds, Homm, Colin Heatherington (through CIC Global Capital), and Ficeto also sold their own personal holdings of the same U.S. penny stocks to the Absolute Funds at the inflated prices, which the indictment alleges was simply embezzling money from the funds.
The indictment further charges two money laundering conspiracies. In the first scheme, Homm, Ficeto and other unnamed conspirators allegedly worked together in an elaborate conspiracy to launder Homm’s illicit proceeds throughout the world.
In the second scheme, Ficeto allegedly conspired with the Heatheringtons to launder the proceeds received from CIC Global Capital through Canada and Switzerland.
The indictment also charges various unlawful monetary transactions associated with the money laundering conspiracies.
The indictment further alleges that Ficeto engaged in unlawful monetary transactions by sending nearly $10 million of illicit proceeds to an account the Cook Islands, and then lied to the Securities and Exchange Commission about the Cook Islands account. Ficeto additionally is charged with Investment Adviser Fraud in connection with a hedge fund called the Hunter Fund, in which the Absolute Funds invested and also was used to conceal investments by the Absolute Funds in the penny stocks and to manipulate the stock market.
The indictment alleges that as the scheme unraveled, Homm dumped tens of millions of dollars of his own shares in Absolute Capital and resigned from the firm in the middle of the night on September 18, 2007.
In March 2013, Homm was taken into custody in Italy after being arrested at the Uffizi Gallery in Florence. Homm was arrested pursuant to a provisional arrest warrant sought by federal prosecutors in Los Angeles after they filed a criminal complaint containing charges related to the alleged fraud scheme. The United States sought Homm’s extradition to the United States and he was ordered extradited by the Italian Ministry of Justice, but Homm ultimately was released and is believed to have fled to Germany, where he remains a fugitive.
Colin Heatherington is believed to be in Canada, and Craig Heatherington is believed to be in Australia.
The indictment also contains a forfeiture allegation that would cause the defendants, if convicted of any of the securities or money laundering counts in the indictment, to forfeit to the United States “any and all property, real and personal, which constitutes or is derived from proceeds traceable to” any of those crimes.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
Each charge of conspiracy to commit securities fraud and securities fraud carry a statutory maximum penalty of 25 years in federal prison. The money laundering charges each carry a maximum penalty of 10 years in federal prison. Each charge of investment adviser fraud, obstruction of justice, and false statements carry a maximum statutory penalty of five years in federal prison.
The case against Homm is the product of an ongoing investigation by the Federal Bureau of Investigation. The United States Securities and Exchange Commission and Financial and Regulatory Authority provided assistance to the FBI’s investigation.
The United States Attorney’s Office wishes to thank the Swiss Office of the Prosecutor General of the Confederation for its support and assistance.
Operator of ‘Revenge Porn’ Website Sentenced to 2½ Years in Federal Prison in Email Hacking Scheme to Obtain Nude PhotosRead the Press Release
LOS ANGELES – A Northern California man who operated the Internet’s best-known “revenge porn” website was sentenced late this afternoon to 30 months in federal prison for hiring another man to hack into e-mail accounts to steal nude photos that were later posted on his website.
Hunter Moore, 29, of Woodland, California, who operated the now-defunct isanyoneup.com, was sentenced by United States District Judge Dolly M. Gee.
In addition to the prison term, which Moore was ordered to begin serving by January 22, Judge Gee ordered the defendant to pay a $2,000 fine.
In sentencing Moore, Judge Gee called the conduct “particularly reprehensible.”
Moore pleaded guilty in February to one count of unauthorized access to a protected computer to obtain information for purposes of private financial gain and one count of aggravated identity theft.
The alleged hacker – Charles Evens, 26, of Studio City, California – was sentenced last month to 25 months in federal prison after he pleaded guilty to the same two felony counts.
Moore operated the website http://isanyoneup.com, where he posted, among other things, nude or sexually explicit photos of victims. The pictures were submitted by individuals, without the victim’s permission, for purposes of revenge, Moore admitted in court.
However, to obtain more photos for the website, Moore instructed Evens to gain unauthorized access to – in other words, to hack into – Google e-mail accounts, according to Moore’s plea agreement. Moore sent payments to Evens in exchange for nude photos unlawfully obtained from the victims’ accounts. Moore then posted the illegally obtained photos on his website, without the victims’ consent, he admitted in the plea agreement.
The plea agreement discusses one specific incident in late 2011 when Moore sent an email to Evens that stated Moore would like as many nude pictures from hacked emails accounts as possible. In response, Evens accessed a victim’s e-mail account without authorization and obtained pictures, Evens provided the pictures to Moore, and Moore paid $145.70 to defendant Evens using Paypal. One of the nude photos was posted on isnayoneup.com on December 29, 2011, according to the plea agreement.
Evens admitted that he hacked into email accounts belonging to hundreds of victims.
The investigation in this case was conducted by the Federal Bureau of Investigation.
Two L.A. Deputy Sheriffs Sentenced to Federal Prison in Civil Rights Case Stemming from Beating of Visitor at Downtown Los Angeles JailRead the Press Release
LOS ANGELES – Two former Los Angeles Sheriff’s deputies who violated the civil rights of a visitor to the Men’s Central Jail by beating him while he was restrained with handcuffs were sentenced today, each being ordered to serve at least six years in federal prison.
Fernando Luviano, 37, was sentenced to 84 months in prison, and Sussie Ayala, 30, was sentenced to 72 months in prison.
The two defendants, who were each found guilty by a federal jury in June of violating the civil rights of the beating victim and falsifying records about the incident, were sentenced today by United States District Judge George H. King.
Following the imposition of the sentences, Judge King remanded both Luviano and Ayala into custody.
Another deputy sheriff who also was found guilty at trial – former Sergeant Eric Gonzalez – was sentenced earlier this month to eight years in federal prison and also was immediately taken into custody.
The jury that convicted Luviano, Ayala and Gonzalez found that they violated the civil rights of the victim in 2011 when they beat the man and caused serious bodily injury. Ayala and Gonzalez were additionally convicted of conspiring to violate the victim’s civil rights by using unreasonable force.
“As Judge King said today, the lengthy prison sentences imposed in this case send a clear message that no law enforcement officer is above the law,” said United States Attorney Eileen M. Decker. “These two former deputy sheriffs failed to uphold their oaths and abused their positions of power when they beat and pepper sprayed a handcuffed victim. Such conduct undermines the public’s trust in law enforcement and all the good work that peace officers do every day to protect our communities.”
Two other defendants involved in the incident – Pantamitr Zunggeemoge and Noel Womack – previously pleaded guilty and are scheduled to be sentenced by Judge King on January 25.
Last month, a federal grand jury indicted a sixth deputy in relation to the incident at the Visiting Center. Former Deputy Byron Dredd has pleaded not guilty.
The evidence presented at the trial of the three deputies showed that the victim and his girlfriend went to the jail to visit the woman’s incarcerated brother on February 26, 2011. Both visitors were in the possession of cell phones, which is prohibited under jail rules. When the phones were discovered, the victim was handcuffed and brought into an employee break room, where he was beaten and sprayed with pepper spray. The victim was later transferred to the hospital by paramedics.
In court documents that argued Luviano had a reputation of being “heavy-handed” with the violent prisoners he guarded at the jail, prosecutors said that Luviano “initiated the excessive force and used the most force against” the victim. Prosecutors wrote in a brief that his “violent crime and cover-up are serious offenses that harm the specific victim and tarnish the public trust in law enforcement.” Judge King agreed, finding there was “evidence of prior violent behavior toward inmates” by Luviano at Men’s Central Jail.
In papers related to Ayala’s sentencing, prosecutors wrote that “[s]he, like the other defendants in this case, abused her power by participating in a beating of a handcuffed man, lying to cover up her and her partners’ misdeeds, jailing the victim of their abuse, and putting that victim at risk of prosecution and a significant sentence for crimes he did not commit.”
In court today, Judge King said that Ayala’s actions “demonstrates that this really was a practice” of using excessive force against people inside the jail.
This case is the result of an investigation by the FBI, and is one in a series of cases resulting from investigation into corruption and civil rights abuses at county jails in downtown Los Angeles. Fifteen current or former members of the Los Angeles Sheriff’s Department have now been convicted of federal charges.
O.C. Man who Ran Two-Pronged Ponzi Scheme that Caused over $15 Million in Losses Sentenced to Nearly Five Years in Federal PrisonRead the Press Release
LOS ANGELES – An Orange County man who operated a Ponzi scheme that bilked victims out of more than $15 million with false promises of large returns from investments in debt obligations and distressed real estate was sentenced today to 57 months in federal prison.
William Donnelly Yotty, 69, who lived in Lodi when he was operating the scheme, and was living in Monarch Beach when he was arrested in this case in May 2014, was sentenced this afternoon by United States District Judge Margaret M. Morrow.
“It is important that people who engage in business frauds face substantial sentences,” Judge Morrow said, noting that Yotty’s victims included the elderly, teachers and law enforcement officers, many of whom earned modest salaries or had lost their retirement savings.
The daughter of an elderly couple told the judge this afternoon that her parents lost $250,000 in the fraud, they were forced to move out of their home, and her 71-year-old father could not afford to retire.
Yotty, who has been held without bond since his arrest, pleaded guilty in August to mail fraud and wire fraud charges.
“Yotty raised over $17 million from more than 240 victim-investors based on false representations about – among other things – the safety of the investors’ principal and the guaranteed rate of return on promissory notes and other financial instruments, and the surefire success of investments in a real estate venture,” prosecutors wrote in a sentencing brief filed with the court.
When he pleaded guilty, Yotty admitted that he ran several Lodi-based companies that offered bogus investments in corporate debt obligations and in distressed real estate that he and his salespeople said could be “flipped” for substantial profit.
In the first scheme, Yotty solicited nearly $11 million from investors by offering purportedly safe and lucrative investments in convertible debentures, promissory notes and other financial instruments. Using companies he operated under names such as The Money People, Inc., Yotty solicited money from victims by guaranteeing annual interest rates as high as 25 percent and promising that victims would also recoup their entire initial investments. These claims were false. Yotty started using new investor money to make required payments to prior investors in the spring of 2007 – less than a year after he started offering the investments. Yotty stopped making any payments to investors in the summer of 2009.
In the second investment scheme, which started in the summer of 2007 and was run through at least two programs – one of which he called Fortuno Millionaire Club – Yotty offered victims the opportunity to purchase foreclosed real estate at below-market prices, which would allow them to resell, or “flip,” the properties at two or three times their purchase price. At presentations, according to the sentencing memo, prospective investors were told “Our club member receives the down payment, the monthly payments from the new buyer, and all the proceeds from the sale of the Note! It’s a win…win…win!”
In fact, Yotty himself was flipping properties he purchased – many of which were in Flint, Michigan – to investors at substantial profits for himself. Because Yotty had already extracted any profit to be made from the properties, the investors were left with dilapidated real estate that they could not sell at all, let alone at the substantial profit that Yotty had promised.
As part of the scheme, Yotty concealed from the investors that the price they were paying for the properties was double or triple what Fortuno had paid, and that this inflated price would prevent the victims from realizing any profit of their own. As a further inducement to invest in Fortuno, Yotty and his salespeople also falsely promised victims that the properties were in livable condition and that Fortuno would manage the properties until the promised resale.
According to prosecutors, one victim, who was 79 when she invested in the Fortuno program, received a letter from the City of Flint that one of her two properties was condemned and going to be demolished, and the second property was in such bad shape that it could never be rented out or sold.
“This defendant stole not only his victims’ money, he stole their futures and their security,” said United States Attorney Eileen M. Decker. “This defendant’s fraud scheme has earned him a significant federal prison sentence which should stand as a warning to others that fraud does not pay.”
In addition to the prison term of nearly five years, Judge Morrow ordered Yotty to pay $15,018,822 in restitution to approximately 240 victims.
The investigation into Yotty’s Ponzi scheme was conducted by the Federal Bureau of Investigation, which received assistance from the California Department of Business Oversight, Enforcement Division.
Former Rosemead Resident Sentenced to nearly Five Years in Federal Prison for Trafficking in Counterfeit Marlboro CigarettesRead the Press Release
LOS ANGELES – A former resident of the San Gabriel Valley who was a major distributor of counterfeit cigarettes in the Los Angeles area has been sentenced to nearly five years in federal prison for trafficking in counterfeit goods.
Su Qin Yang, who also used the names “Lily” and “Anita Chang,” was sentenced yesterday to 57 months in prison by United States District Judge Margaret M. Morrow.
Yang, 45, who resided in Rosemead prior to fleeing to China in 2012, pleaded guilty in May to one count of trafficking in counterfeit goods and admitted in her plea agreement that she trafficked in almost 4 million counterfeit Marlboro cigarettes and almost 4,000 counterfeit Viagra pills. The counterfeit products were seized during searches of Yang’s residence and storage locations in the summer of 2012.
Yang “sold an extremely large quantity of counterfeit cigarettes to great profit, and showed no signs of slowing down,” prosecutors wrote in a brief that sought the 57-month sentence. “Indeed, the government is advised that after defendant’s arrest, the illegal sale of counterfeit cigarettes in the Los Angeles area decreased dramatically.”
Yang was named in an indictment returned by a federal grand jury in August 2013. Also charged in the 16-count indictment was Yang’s husband, Antonio Limbeek, who remains a fugitive and is believed to be in Indonesia.
“The black market for counterfeit products poses serious dangers to the community,” said United States Attorney Eileen M. Decker. “Counterfeit products endanger public health because they are not manufactured to the same standards as legitimate products. There is a significant possibility of contaminants in counterfeit items, and the black market makes these products more available to minors.”
After authorities executed the search warrants, but prior to the indictment in the case, Yang and her husband fled the United States. Yang returned to the United States in January.
The investigation into Yang and her husband was conducted by the Los Angeles Sheriff’s Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI).
“In addition to the health risks, trafficking in counterfeit cigarettes, as well as other trademarked goods, is a multi-billion dollar global industry that robs governments of vital revenues and undermines our economy,” said Joseph Macias, special agent in charge of HSI Los Angeles. “Even more disturbing, the huge profits generated by this illicit industry often go to fund other kinds of criminal enterprise.”
The investigation in this case started after Phillip Morris USA brought information related to the trafficking of counterfeit Marlboro cigarettes to federal authorities. When searches were conducted, authorities seized approximately 27,500 cartons of counterfeit cigarettes and approximately $440,000 in cash, “demonstrating the huge profits that defendant was obtaining through this crime,” prosecutors said in court papers.
While engaged in discussions with prosecutors in 2012 about potentially pleading guilty, Yang and Limbeek “fled the country, leaving their minor children behind,” according to the government’s sentencing memo. “Thereafter, [Yang] arranged for her minor children to be transported to Washington state and then flown to China, attempting to smuggle over $300,000 in additional cash with them.”
In addition to the prison term, Judge Morrow ordered Yang to pay $308,894 in restitution to Phillip Morris USA, which holds the trademark for Marlboro cigarettes.
Phillip Morris has designated The National Law Enforcement Officers Memorial Fund to receive all of the restitution.
L.A. Man Pleads Guilty in $2.6 Million Federal Tax Refund SchemeRead the Press Release
LOS ANGELES – A Los Angeles man pleaded guilty late yesterday afternoon to conspiring to use stolen identities to file fraudulent tax returns with the Internal Revenue Service that sought more than $2.6 million in false tax refunds.
Heber Cotton, 39, of Los Angeles, pleaded guilty to one count of conspiracy to defraud the United States by obtaining the payment of false claims, namely tax refunds.
According to a plea agreement filed in the case, beginning in December 2008 and continuing through March 2010, Heber Cotton and his co-defendant caused at least 275 fraudulent income tax returns to be filed with the IRS, which sought income tax refunds of over $2.6 million.
The co-defendant – Adel Cotton, 63, a Hacienda Heights resident who is currently in federal prison after pleading guilty in another case involving fraudulent tax refunds – is pending trial.
In relation to the tax fraud scheme, the indictment in the case alleges that Adel Cotton obtained the names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton and others not named in the indictment allegedly prepared false Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, Adel Cotton and others allegedly prepared fraudulent individual income tax returns claiming false tax refunds that were filed without the knowledge or consent of the identity theft victims.
In his plea agreement, Heber Cotton admitted that he and Adel Cotton directed the Internal Revenue Service to mail the fraudulent refunds to addresses that he and Adel Cotton controlled. Heber Cotton also admitted that he gave personal information associated with identity theft victims to a co-conspirator who managed a bank, which the co-conspirator used to open bank accounts and cash the fraudulent refunds. Heber Cotton further admitted that, toward the end of the conspiracy, he paid the co-conspirator bank manager approximately 20 percent of each tax refund check that he bank manager cashed.
Heber Cotton pleaded guilty before United States District Court Judge Michael W. Fitzgerald, who is scheduled to sentence the defendant on March 7, 2016. At that time, Heber Cotton will face a statutory maximum sentence of 10 years in federal prison and a fine of $250,000.
Adel Cotton was indicted along with Heber Cotton in September 2015 and is charged with one count of conspiracy to defraud the United States with respect to claims. Adel Cotton is scheduled to go on trial before Judge Fitzgerald on March 8, 2016.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The investigation into Heber Cotton and Adel Cotton was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.
Five People, including Two Doctors, Charged in Kickback Schemes Involving nearly $600 Million in Fraudulent Claims by SoCal HospitalsRead the Press Release
Santa Ana, California – In a series of related cases announced today, the former CFO of a Long Beach hospital, two orthopedic surgeons and two others have been charged in long-running health care fraud schemes that illegally referred thousands of patients for spinal surgeries and generated nearly $600 million in fraudulent billings over an eight-year period.
Two of the defendants have previously pleaded guilty, and three others have agreed to plead guilty in the coming weeks. All five have agreed to cooperate in the government’s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries.
The schemes involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others. As a result of the illegal payments, thousands of patients were referred to Pacific Hospital in Long Beach, where they underwent spinal surgeries that led to more than $580 million in bills being fraudulently submitted during the last eight years of the scheme alone. Many of the fraudulent claims were paid by the California worker’s compensation system and the federal government.
In a second, similar scheme – also involving spinal surgeries – doctors received illegal kickbacks for referrals to a Hawaiian Gardens hospital.
Today, federal prosecutors today filed two cases related to the scheme, and yesterday three other cases were unsealed by a federal judge. Those named in the cases are:
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James L. Canedo, 63, of San Pedro, the former chief financial officer of Pacific Hospital of Long Beach, who pleaded guilty on September 4 to a criminal information charging him with participating in a conspiracy that engaged in mail fraud, honest services fraud, money laundering, paying or receiving kickbacks in connection with a federal health care program, and violating the Travel Act (specifically, interstate travel in aid of a racketeering enterprise). The case against Canedo was unsealed yesterday by United States District Judge Josephine L. Staton, who is scheduled to sentence the defendant on June 17, 2016.
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Philip Sobol, 61, of Studio City, an orthopedic surgeon, who has agreed to plead guilty to conspiracy (to commit mail fraud, honest services fraud, and violations of the Travel Act) as well as a separate, substantive Travel Act violation. The information against Sobol and a related plea agreement were filed today in United States District Court, where the defendant is expected to be arraigned next month.
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Alan Ivar, 55, of Las Vegas, a chiropractor who formerly resided in San Juan Capistrano and owned several businesses based in Costa Mesa, was charged today in a criminal information that alleges one count of conspiracy (to commit mail fraud, honest services fraud, money laundering, and violations of the Travel Act). In a plea agreement also filed today, Ivar admitted that for well over a decade, he had an agreement with the owner of Pacific Hospital to refer patients in exchange for a monthly retainer. Ivar, who also has agreed to plead guilty, is expected to be arraigned next month.
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Paul Richard Randall, 56, of Orange, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, who pleaded guilty on April 16, 2012 before Judge Staton to conspiracy to commit mail fraud. Randall, who admitted recruiting chiropractors and doctors to refer patients to Tri-City in exchange for kickbacks, is scheduled to be sentenced on April 8, 2016.
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Mitchell Cohen, 55, of Irvine, an orthopedic surgeon, was charged last week with filing a false tax return. Cohen, who in a plea agreement also filed on November 16 admits the he failed to report income received from kickback payments, is expected to be arraigned next month.
All five defendants have agreed to cooperate with the government’s ongoing investigation – dubbed “Operation Spinal Cap” – into the kickback schemes, which involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other medical professionals.
Under the terms of their plea agreements, Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall could be sentenced to as much as five years; and Cohen faces up to three years in prison on the tax charge. All defendants will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.
The former CEO and owner of Pacific Hospital of Long Beach, Michael D. Drobot, pleaded guilty in April 2014 to participating in the scheme (see: http://go.usa.gov/cjqtF). Drobot is also cooperating with the investigation.
As described in court documents, Drobot, who was the owner and/or CEO of Pacific Hospital of Long Beach until late 2013, ran a 15-year-long scheme in which he and others billed workers’ compensation insurers and the U.S. Department of Labor hundreds of millions of dollars for spinal surgeries and other procedures performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.
As part of the scheme, the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. Some of the patients lived hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities. The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital. From 2005 through 2013 (which is only part of the overall scheme), Pacific Hospital billed insurers more than $580 million for spinal surgeries on over 4,400 patients. Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.
“Health care fraud and kickback schemes burden our healthcare system, drive up insurance costs for everyone, and corrupt both the doctor-patient relationship and the medical profession itself,” said United States Attorney Eileen M. Decker. “The members of this scheme treated injured workers and their spines as commodities, to be traded away to the highest bidder. This investigation should send a message to the entire industry: patients are not for sale.”
The conspirators in the Pacific Hospital scheme concealed the kickback payments by entering into bogus contracts to provide a “cover story” for the doctors, chiropractors and others who received illegal payments. For example, a number of doctors entered into agreements with a Drobot-owned company, Pacific Specialty Physician Management (PSPM), under which the doctors received as much as $100,000 per month from PSPM in return for the right to purchase their medical practices – an option that was never exercised. PSPM paid some doctors inflated prices for the right to operate their practices and collect on their insurance claims. In still other cases, Pacific Hospital entered into contracts with doctors under which the doctors were to help the hospital collect on its surgery bills to insurance companies, but the hospital’s own collection staff, rather than the doctors, actually performed the collections work. Several doctors entered into lease agreements under which PSPM or Pacific Hospital paid rent for the use of office space, but rarely used the space. And other doctors had agreements to provide consulting services to Drobot’s companies, but did not actually provide the services. Still others, including marketers who introduced doctors to Pacific Hospital, had additional agreements with Drobot’s companies.
Canedo, as Pacific Hospital’s CFO from 1999 through October 2013, was responsible for tracking payments made directly to doctors by the hospital, as well as the number of patients each doctor referred to the hospital and the amounts the hospital collected for those patients’ procedures. Canedo also communicated directly with a number of the doctors regarding the payments and surgeries, and sometimes mediated disputes between different doctors who claimed credit for the same referrals.
Sobol, Ivar and Cohen each received, respectively, $5.2 million, $1.24 million, and $1.64 million in kickbacks. Together they referred more than 200 patients to Pacific Hospital.
“The defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded health care systems,” said David Bowdich, the Assistant Director in Charge of the FBI's Los Angeles Field Office. “The effort by investigators and prosecutors in this case cannot be overstated and, as it continues, will play a part in restoring confidence in the medical marketplace.”
Two other Drobot companies, California Pharmacy Management (CPM) and its successor, Industrial Pharmacy Management (IPM), were also important players in the scheme. Both companies set up and managed what were essentially mini-pharmacies within doctors’ offices. CPM and IPM bought and dispensed medication that the doctors prescribed to their patients, and these businesses received a portion of the money reimbursed by insurance companies for the medications. Drobot, along with others at CPM and IPM, often agreed to increase the doctors’ shares of the insurance claims in return for those doctors’ referral of patients to Pacific Hospital. In many cases, for doctors who made such referrals, the conspirators “advanced” payments from CPM and IPM before the companies had collected any money for the medications or even prescribed them, and often simply “wrote off” payments as losses when collections fell short.
“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,” said California Insurance Commissioner Dave Jones. “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs. Detectives from the Department of Insurance worked closely with federal law enforcement agencies to investigate and expose this illegal conspiracy, which is one of the largest workers compensation insurance fraud cases we have ever seen.”
Randall, who also facilitated the Pacific Hospital scheme by introducing doctors to Drobot and coordinating kickback arrangements, pleaded guilty to participating in a separate, similar scheme involving Tri-City Regional Medical Center. According to his plea agreement, Randall acted as a “marketer” for Tri-City and conspired with hospital executives to pay kickbacks to doctors and chiropractors to refer workers’ compensation patients Tri-City for spinal surgeries. As in the Pacific Hospital scheme, the surgeries at Tri-City involved use of spinal surgery hardware that Randall distributed to Tri-City at inflated prices through his company Summit Medical Group, knowing that the cost would be passed on to insurers. Using proceeds from the sale of the hardware, Randall paid a 5 percent kickback to Tri-City and kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred the patients. In addition, though a separate company, Platinum Medical, Randall paid kickbacks to doctors in return for referrals of patients for toxicology tests. The scheme resulted in several million dollars in losses to insurers.
“Medical referrals should be based on what’s best for the patient – not what’s best for the doctor’s bank account,” said IRS-Criminal Investigation Special Agent in Charge Erick Martinez. “In paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers’ compensation insurance carriers and to deprive the patients of their right to honest services.”
Tom Frost, Special Agent in Charge with the Postal Service Office of Inspector General, stated: “We are committed to preserving Postal Service resources by vigorously investigating allegations of fraud and corruption. We are grateful for the efforts of the U.S. Attorney’s Office and our State and Federal partners in this investigation.”
The ongoing investigation into abuses involving the spinal pass-through law and kickbacks paid for spinal surgery patients is being conducted by the Federal Bureau of Investigation; the United States Postal Service, Office of Inspector General; IRS Criminal Investigation; and the California Department of Insurance.
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Man Ordered Held without Bond after Being Arrested on Charges of Retaliating Against IRS Employee by Filing $10 Million LienRead the Press Release
RIVERSIDE, California – A man facing federal charges related to a $10 million lien filed against an Internal Revenue Service employee has been ordered held without bond pending trial after being arrested last week by federal agents.
James R. Vanderveldt was arrested Thursday morning and arraigned on Thursday afternoon in United States District Court. The Court entered a not guilty plea on his behalf under the name of “John Doe” after he refused to enter a plea to the charges.
A federal grand jury on Wednesday returned a two-count indictment that charges Vanderveldt with retaliation against a federal law enforcement officer by filing a false lien and obstructing the administration of the internal revenue laws. The indictment alleges that the crimes took place in San Bernardino County.
At Vanderveldt’s court appearance on Thursday, a trial was scheduled for January 12, 2016 before United States District Judge Jesus G. Bernal. If he is convicted of the two counts, Vanderveldt would face a statutory maximum sentence of 13 years in federal prison.
“The filing of fraudulent liens against government officials is more than harassment – it is a crime,” said United States Attorney Eileen M. Decker. “Use of this tactic to intimidate or deter a public official from doing his or her duty will fail.”
According to the indictment, Vanderveldt filed a false lien against the real and personal property of IRS employee “D.H.” that claimed the employee and D.H.’s spouse owed Vanderveldt $10 million. The false lien was allegedly filed in 2010 “on account of D.H.’s performance of his official duties.”
Vanderveldt is also charged in the indictment with “sending a false bill and other materials to D.H. that referenced a $10,000,000 debt that D.H. and D.H.’s spouse purportedly owed to Vanderveldt. In truth and in fact, as defendant Vanderveldt then well knew, neither D.H. nor D.H.’s spouse were indebted to defendant Vanderveldt.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The case against Vanderveldt was investigated by the Treasury Inspector General for Tax Administration (TIGTA).
United States Returns nearly $12 Million to Victims of Illegal Money-Transmitting Business called e-BullionRead the Press Release
LOS ANGELES – The United States has returned approximately $11.7 million in civilly forfeited fraud proceeds to more than 1,000 victims who invested or deposited money with e-Bullion.com, a website that operated for years as an illegal money-transmitting business.
The funds were disbursed to e-Bullion victims last week after federal prosecutors successfully obtained a civil forfeiture order against money and precious metals seized from the illegal money-transmitting business and its operator. The $11.7 million included bank funds and liquidated reserves of gold, silver and platinum seized from James Fayed and his companies – e-Bullion.com, Goldfinger Coin and Bullion (GCB) and Goldfinger Bullion Reserve Corp.
The recent disbursement of funds follows another distribution of funds in December 2014, when $1.8 million in civilly forfeited funds was returned to over 300 victims who invested in an illegal scheme operated under “Kum Ventures” that was run through e-Bullion.
e-Bullion purported to provide opportunities to invest in precious metals. Through the e-Bullion.com website, individuals opened accounts with real money, which they used to purchase virtual “e-currency” purportedly backed by precious metal reserves maintained by Fayed’s companies in the United States and Australia. e-Bullion accountholders could then trade their e-currency with others on the website. While there were no fees associated with establishing or funding an account on the e-Bullion website, there were fees associated with changing e-currency back into real money.
In practice, e-Bullion allowed individuals engaging in fraud to move money around the world while remaining virtually anonymous and avoiding many international banking reporting requirements. An investigation into e-Bullion and GCB by the Federal Bureau of Investigation and IRS Criminal Investigation revealed that operators of fraudulent “high-yield investment programs” and other illegal investment schemes used e-Bullion to collect millions of dollars of e-currency from victims, much of which was wire transferred by GCB to overseas accounts. The asset forfeiture case prosecuted by the United States Attorney’s office alleged that Fayed and his companies not only allowed these illegal schemes to use e-Bullion to operate – collecting substantial fees when the fraudsters cashed out – but also profited by retaining monies abandoned by fraudsters who believed they were under investigation by law enforcement or were about to be caught.
“e-Currency is not beyond the reach of the law,” said United States Attorney Eileen M. Decker. “The Department of Justice has recouped and will continue to recoup criminal proceeds for crime victims in the digital age.”
During the course of the criminal investigation into e-Bullion, James Fayed hired hitmen to murder his wife and business partner, Pamela Fayed. James Fayed subsequently was prosecuted by the Los Angeles County District Attorney’s Office and sentenced to death following the separate investigation by the Los Angeles Police Department.
The United States obtained information from e-Bullion’s and GCB’s encrypted computer servers in Switzerland, and that information was used to identify e-Bullion accountholders and the value of their individual accounts. Last week, Analytics Consulting LLC, the claims administration company retained by the United States Department of Justice, distributed the forfeited funds to the innocent accountholders through a process known as “remission,” which allows the government to use forfeited monies to compensate domestic and international victims of crime. The e-Bullion victims resided in several countries, including the United States, Australia and Canada.
The United States Attorney’s Office, the Federal Bureau of Investigation and IRS Criminal Investigation, with the assistance and cooperation of the Australian Federal Police and Australian prosecutors, also secured the forfeiture of approximately $12 million in precious metals held by Fayed and his companies in Perth, Australia. Efforts to repatriate the Australian proceeds for distribution to the e-Bullion victims are ongoing.
L.A. Man Pleads Guilty in $17 Million Scheme to Defraud Verizon by Reselling over 30,000 iPhones Obtained at Deeply Discounted PriceRead the Press Release
SAN DIEGO – The owner of a Glendale-based ride-sharing business pleaded guilty this afternoon to federal wire fraud charges, admitting that he illegally generated over $13 million in profits by selling more than 30,000 Apple iPhones fraudulently obtained from Verizon Wireless at substantially discounted prices.
Karen “Kevin” Galstian, 37, of Chatsworth, pleaded guilty today in United States District Court in San Diego to one count of wire fraud, and he admitted committing the offense while on pre-trial release in another case filed by prosecutors in San Diego.
Galstian pleaded guilty today in San Diego, where federal prosecutors in the United States Attorney’s office previously obtained a guilty plea in a bank fraud case. Pursuant to a plea agreement in the iPhone case, Galstian will be sentenced in both cases by United States District Judge Barry Ted Moskowitz. Today, Judge Moskowitz scheduled a sentencing hearing for January 11, 2016.
The plea agreement calls for a 100-month sentence on the combined cases.
As part of the scheme involving the iPhones, Galstian admitted that he used his company, Toro Ride, Inc., to induce Verizon Wireless to provide the business with more than 30,000 iPhones at a substantial discount. He purchased most of the mobile phones that usually sell for more than $500 for only 99 cents each – in connection with a two-year contract. Galstian claimed that the phones would be used by drivers for Toro Ride’s ride-sharing service (a service similar to Uber and Lyft) and that Toro Ride, which had only been operating in the Los Angeles area, was poised to expand nationwide. Galstian falsely told Verizon that Toro Ride had received $20 million from investors. When he brokered the deal with Verizon last year, Galstian failed to disclose the he was awaiting sentencing in the bank fraud case and thus would be incarcerated and unavailable to lead the company in the expansion.
As Verizon provided the iPhones that supposedly would be used by Toro Ride’s drivers, Galstian sold the vast majority of the devices to companies engaged in the international re-sale of consumer electronics. Thousands of the iPhones that Verizon shipped to Toro Ride were never used on its network and instead were activated in countries such as Vietnam, Iraq, China and Saudi Arabia.
Galstian fraudulently convinced Verizon to provide him with iPhones worth more than $19.4 million. In less than six months, Galstian generated illegal proceeds of more than $13 million by re-selling the iPhones. Toro Ride used some of the illicit proceeds derived from iPhone sales to make required monthly payments to Verizon, which enabled Galstian to continue to order thousands of additional iPhones. The plea agreement calls for the defendant to pay $17 million in restitution to Verizon.
Galstian used approximately $2.5 million of the fraud proceeds to purchase several properties, including a penthouse condominium in the Palms Casino in Las Vegas, and a Mercedes S550. In conjunction with today’s guilty plea, Galstian agreed to forfeit assets related to and obtained through the fraud scheme, including real properties in Northridge, Sherman Oaks, Tujunga and Las Vegas, as well as more than $200,000 seized from bank accounts and a number of vehicles.
The investigation into Galstian’s wire scheme was conducted by the Federal Bureau of Investigation.
Operators of Ponzi involving Non-Existent ATMs that Cost Victims over $135 Million in Losses Sentenced to up to Decade in PrisonRead the Press Release
LOS ANGELES – Concluding one of the largest Ponzi schemes ever seen in Southern California, two men who operated a Calabasas firm at the center of a scam that cost victims approximately $135 million were sentenced today, with one man being ordered to serve nine years, and the other a decade, in federal prison.
Joel Barry Gillis, 75, of Woodland Hills, was sentenced to 120 months in federal prison, and Edward Wishner, 77, also of Woodland Hills, was sentenced to 108 months in prison in relation to a 13-year-long scheme they operated through their company, Nationwide Automated Systems, Inc. (NASI).
Gillis and Wishner used NASI to collect hundreds of millions from thousands of investors who were falsely told their money would be used to purchase profitable automated teller machines that would generate annual profits of at least 20 percent. More than 1,300 investors lost money when the scheme collapsed last year.
United States District Judge S. James Otero sentenced the two defendants, citing the “staggering losses suffered by the victims.” Taking into account the “major magnitude” of the scheme, Judge Otero said he issued sentences less that those called for under the United States Sentencing Guidelines after considering the defendants’ ages, their early guilty pleas in the case and their attempts to help a court-appointed receiver identify remaining assets that could be used to repay victims.
Judge Otero scheduled a restitution hearing for February 1, 2016 and ordered the defendants to begin serving their sentences on December 28.
Gillis and Wishner each pleaded guilty in January to conspiracy, two counts of mail fraud and one count of wire fraud.
“This scheme had a devastating effect on hundreds of victims who lost their hard-earned money to the two defendants,” said United States Attorney Eileen M. Decker. “The lies and deception used by these defendants have earned them long prison sentences. Today’s significant sentences should be a warning to those who make false promises to rob victims of their livelihood and retirement funds.”
According to documents filed in United States District Court, Gillis and Wishner owned and operated NASI, which they claimed would place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated approximately 31,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
Victim-investors paid a flat amount – typically $12,000, but in some cases as much as $19,800 – to buy a specific ATM that was to be installed at a specific location. Gillis and Wishner told victim-investors that NASI would lease back the ATMs and pay investors 50 cents for each transaction performed at their particular ATM, guaranteeing annual returns of at least 20 percent on each ATM.
NASI did make monthly payments to investors, but that money came from other investors. While NASI did operate a small number of ATMs – no more than 250, which were owned by the company and not investors – the overall operation was a sham.
“These sentences should serve as a deterrent to other would-be white-collar criminals, yet it cannot rectify the damage done to the lives of over 1,300 victims,” said David Bowdich, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “I strongly urge investors to question and do their due diligence when the stated returns are seemingly too good to be true.”
Gillis and Wishner prevented investors from discovering the fraudulent nature of the business by providing bogus monthly reports to the investors that falsely detailed the supposed performance of the investors’ ATMs. Gillis and Wishner also included a “non-interference” provision in the lease agreements that prohibited victim-investors from visiting the locations where their ATMs were supposedly located.
But, even as the Ponzi was collapsing, Gillis and Wishner continued to raise another $15 million from victim-investors.
“When Gillis and Wishner’s Ponzi scheme collapsed, the victim-investors suffered irreparable financial harm, leaving them struggling to make ends meet, facing retirement bereft of assets, and unable to pay for necessary health care or provide for family members’ medical expenses, education, and other needs,” prosecutors wrote in a sentencing memorandum filed with the court. “These victims included individuals from whom Gillis and Wishner had solicited ‘investments’ even after the Securities and Exchange Commission had served NASI with a subpoena signaling NASI’s imminent shut-down.”
Several victims testified during today’s lengthy sentencing in United States District Court. “Because of their excessive greed, they elected to hurt many people,” one victim said to Judge Otero. Another victim broke down when describing how he and his family has lost their life savings and were forced to sell their home of 20 years, concluding: “We were stripped of our sense of community and dignity.”
This case was investigated by the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided substantial assistance in the matter.
The SEC filed a civil lawsuit in relation to the NASI scheme in October 2014 September (see: http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).
L.A. Man Who Hacked into Email Accounts and Obtained Nude Photos for ‘Revenge Porn’ Website Sentenced to Federal PrisonRead the Press Release
LOS ANGELES – A San Fernando Valley man who hacked into e-mail accounts to steal nude photos that were later posted on a well-known “revenge porn” website was sentenced today to 25 months in federal prison on computer crime and identity theft charges.
Charles Evens, 26, of Studio City, was sentenced today by United States District Judge Dolly M. Gee.
In addition to the prison term, which Evens will begin serving on January 29, Judge Gee ordered the defendant to pay a $2,000 fine, to perform 20 hours of community service and to pay $147.50 in restitution to one of the hacking victims.
Evens pleaded guilty in July to one count of unauthorized access to a protected computer to obtain information for purposes of private financial gain and one count of aggravated identity theft. In sentencing Evens today, Judge Gee imposed a one-month sentence for the computer hacking count and a mandatory two-year term for the identity theft count.
Evens obtained nude pictures that were posted on the revenge porn website, http://isanyoneup.com. The operator of that website – Hunter Moore, 29, of Woodland, California – pleaded guilty in February to the same two offenses that Evens admitted to. Judge Gee is scheduled to sentence Moore on November 30.
On his website, Moore posted nude and sexually explicit photos that had been submitted without the permission of victims. To obtain more photos for the website, Evens gained unauthorized access – in other words, hacked into – Google e-mail accounts. Moore sent payments to Evens in exchange for nude photos unlawfully obtained from the victims’ accounts. Moore then posted the illegally obtained photos on his website without the victims’ consent. Evens admitted that he hacked into email accounts belonging to hundreds of victims.
The investigation in this case was conducted by the Federal Bureau of Investigation.
Former Executive with Screen Actors Guild Pension Plan Pleads Guilty to Tax Charge Stemming for Failing to Report IncomeRead the Press Release
LOS ANGELES – The former chief information officer for the Screen Actors Guild’s Producers Pension and Health Plan (PPHP) has pleaded guilty to filing a false tax return in which he failed to report income he received from contractors hired to upgrade the PPHP computer system.
Nader Karimi, 51, of Los Angeles, pleaded guilty Thursday afternoon to one felony count of subscribing to a false tax return.
When he pleaded guilty before United States District Judge Fernando M. Olguin, Karimi admitted lying on his 2008 federal tax return that failed to report $454,666 in income. Over the course of the years 2005 through 2008, Karimi failed to report a total of approximately $711,000 in taxable income, according to his plea agreement.
Karimi was responsible for modernizing PPHP’s computer systems, and in that capacity he had the authority to enter into contracts on behalf of PPHP. Over a four-year period, Karimi entered into agreements with vendors that agreed to pay a portion of the money they received from PPHP to a company affiliated with Karimi, Enterprise Technology and Management Services. The payments to ETMS totaled $711,000, and Karimi used the sums for personal expenses while not declaring them as income on his tax returns.
“Individuals entrusted with the pension and health care funds of others must be held to the highest standard of conduct,” said United States Attorney Eileen M. Decker. “The Department of Justice will do everything within its power to bring to justice those who abuse a position of trust for personal gain.”
Judge Olguin is scheduled to sentence Karimi on March 11, 2016, at which time he faces a statutory maximum of three years in federal prison.
Karimi has agreed to file amended tax returns, pay back taxes, and make an additional restitution payment of at least $100,000 to PPHP.
This case is the result of an investigation by the United States Department of Labor – Office of Inspector General, the Labor Department’s Employee Benefits Security Administration, IRS Criminal Investigation, and the FBI.
Orange County Attorney Pleads Guilty to Wire Fraud and Tax Evasion Charges in $8 Million Scheme Related to Investments by ClientsRead the Press Release
LOS ANGELES – An attorney who prosecutors believe took at least $8 million in investment capital from clients and used the funds for personal expenses and luxury items pleaded guilty this morning to wire fraud and tax evasion charges.
Stephen Young Kang, 46, of Newport Beach, pleaded guilty before United States District Judge George Wu to two counts of wire fraud and one count of tax evasion.
According to a plea agreement filed last week in United States District Court,
Kang “admits that beginning as early as October 2012, and continuing through in or about at least September 2015, in Los Angeles and Orange Counties, and elsewhere, defendant knowingly and with intent to defraud, devised, participated in, and executed a scheme to defraud clients to whom defendant had agreed to provide legal or investment services.”
Kang admitted in court today that he defrauded a food distribution company, Ottogi America, Inc., that hired the attorney to help the company purchase properties near its distribution center in Gardena. Ottogi wire transferred funds to a trust account in Houston, Texas, to be used for the purchase of the properties. But Kang admitted that he did not use the money to invest in properties. Rather, Kang admitted that he caused the funds to be transferred to other accounts that he controlled. Prosecutors believe that Kang then used a substantial portion of Ottogi’s money to pay for personal expenses and business ventures, as well as to make partial payment to other victims.
Kang also admitted that he defrauded a Texas victim out of $500,000 in 2013 by falsely representing that he would invest the $500,000 in a company called Pegasus Capital Ltd., LLC. When the victim demanded repayment, Kang agreed in September 2015 – which was after he was initially indicted in this fraud case – to provide the victim with a “first priority security interest” in a term life insurance policy. Kang, however, failed to disclose to the victim that the life insurance was worth only $250,000, that Kang’s wife was the sole beneficiary of the policy, and that the policy was first applied for and approved on August 28, 2015. Prosecutors believe that Kang offered, and in some cases provided, the same life insurance policy to other victims.
“Attorneys owe their clients a special duty of loyalty and trust that is fundamental to our legal system,” said United States Attorney Eileen M. Decker. “The Department of Justice will defend this principle by holding responsible those who violate this duty of loyalty for their own personal gain.”
David L. Bowdich, the Assistant Director in Charge of the FBI's Los Angeles Field Office, stated: “Unfortunately, Mr. Kang put his personal financial interest above those of his clients who entrusted him to act on their behalf. By virtue of his profession and the trust afforded to him, his actions are all the more egregious.”
In relation to the tax evasion count, Kang admitted that he received at least $1,516,000 in income in 2013, but willfully attempted to evade the assessment of income tax by failing to file a federal income tax return for calendar year 2013 and using corporate accounts to conceal the income he received.
“Professionals, including attorneys, who create elaborate schemes that have no purpose other than to mislead others and defraud the IRS run the very high risk of prosecution,” said Special Agent in Charge Erick Martinez of IRS Criminal Investigation. “These individuals face severe consequences including imprisonment and substantial fines.”
As a result of today’s guilty pleas, Kang faces a statutory maximum sentence of 45 years in federal prison when he is sentenced by Judge Wu on February 11, 2016.
The case against Kang is the product of an ongoing investigation by the Federal Bureau of Investigation and IRS Criminal Investigation.
Based on the evidence in this case, investigators believe Kang may have victimized others in locations where he practiced law or resided, including California, Texas, and Seoul, Korea. Anyone who believes they may have been victimized by Kang should contact the FBI’s Los Angeles Field Office at (310) 477-6565.
O.C. Man Sentenced to Two Years in Federal Prison for Selling Non-Existent In-N-Out Burger Franchises in the Middle EastRead the Press Release
SANTA ANA, California – A Newport Beach man has been sentenced to 24 months in federal prison for running a multi-million dollar fraud scheme that bilked investors with false promises of In-N-Out Burger franchises in the Middle East.
Craig Stevens, 56, was sentenced Monday afternoon by United States District Judge Andrew J. Guilford.
Stevens pleaded guilty in June to one count of wire fraud, admitting that he fraudulently solicited more than $4.27 million from investors who were told that each franchise cost approximately $150,000, plus another $250,000 per year for royalties.
When Stevens pleaded guilty, he admitted sending an email to a victim in Lebanon that discussed a purported licensing agreement.
The scheme, which ran throughout 2014, fraudulently solicited investments when Stevens “claimed to have the exclusive rights to [In-N-Out] franchises in the Middle East,” according to court documents, which explained that the Irvine-based company is a private held corporation that “does not have any business partnerships or franchise agreements with third parties.”
The case against Stevens was investigated by the Federal Bureau of Investigation.
Justice Department Returns Forfeited Assets Derived from Public Corruption Scheme to Korean Minister of JusticeRead the Press Release
LOS ANGELES – The Department of Justice has returned $1,126,951.45 in forfeited assets to the government of the Republic of Korea.
The forfeited assets – which were returned yesterday – were the profits of a public corruption scheme orchestrated by former Korean President Chun Doo Hwan in the 1990s, and were laundered to the United States by Chun’s family members and associates. The assets were forfeited in two recent civil forfeiture actions filed in Los Angeles and Philadelphia as part of the Department of Justice’s Kleptocracy Asset Recovery Initiative.
"The return of these assets is a powerful vindication of the rule of law, and an important victory for the people of the Republic of Korea," said Attorney General Loretta E. Lynch.
"The Department of Justice is committed to ensuring that the proceeds of corruption have no safe haven in this country," said United States Attorney Eileen M. Decker. "We will vigilantly pursue such proceeds and return them to the victims of the corruption."
U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the Federal Bureau of Investigations investigated the cases leading to the U.S. forfeiture of the assets being returned to Korea and served as the seizing agencies.
In 1997, a criminal court in Korea convicted former President Chun of accepting more than $200 million in bribes from Korean corporations and ordered him to pay approximately $212 million in criminal penalties. In 2013, the Anti-Corruption Division of the Korean Supreme Prosecutor’s Office opened a money laundering investigation regarding the potential laundering of the bribery proceeds into the United States by Chun and his associates through the acquisition of U.S. real estate and opening of U.S. bank accounts.
In February 2014, FBI agents seized $726,951.45 in a California escrow account. Those funds represented the net proceeds from the sale of a Newport Beach house that
President Chun’s son, Chun Jae Yong, had purchased in 2005 with proceeds traced to his father’s corruption scheme. In April 2014, the U.S. Attorney’s Office in Los Angeles filed a civil forfeiture action against the $726,951.45.
In February 2015, a second civil forfeiture action was filed in the Eastern District of Pennsylvania against a secured investment worth approximately $500,000 in a Pennsylvania company, which also was traced to Chun’s corruption scheme.
In March 2015, the government reached a settlement agreement of the two civil forfeiture actions, resulting in the forfeiture of a total of $1,126,951.45, which was returned to the government of the Republic of Korea yesterday.
The case filed in Los Angeles was prosecuted by the United States Attorney’s Office and United States Department of Justice, Criminal Division, Asset Forfeiture and Money Laundering Section.
Former San Fernando Valley Man Pleads Guilty to Smuggling Protected South American Fish Species to CanadaRead the Press Release
LOS ANGELES – A man who was recently extradited from Mexico to face federal charges related to the illegal trafficking of the world’s largest freshwater fish pleaded guilty this afternoon to smuggling two Arapaima gigas to Canada.
Isaac Zimerman, 66, who formerly resided in West Hills, pleaded guilty today to the smuggling charge before United States District Judge Otis D. Wright II.
In a plea agreement filed yesterday in United States District Court, Zimerman admitted that he smuggled two Arapaima gigas to Canada. At the time, Zimerman knew that he was illegally exporting the fish because they are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and they could not be exported to another country without a CITES re-export permit, which he did not have.
Zimerman was initially charged in 2009, along with his company, River Wonders LLC, and his wife, Leonor Catalina Zimerman.
River Wonders also pleaded guilty this afternoon to attempted smuggling of 10 Arapaima gigas to a resort in the Bahamas.
While Leonor Zimerman pleaded guilty to a misdemeanor offense in 2010, Isaac Zimerman fled the United States that same year after prosecutors filed additional charges alleging that he continued to illegally export fish while on bond. Special agents with the United States Fish & Wildlife Service tracked Zimerman’s movements through Europe, to Israel and eventually to Mexico.
On March 3, 2015, concluding a four-year manhunt, Zimerman was arrested near Metepec, Mexico. During his flight to avoid prosecution, Zimerman changed his appearance and took other steps to avoid detection and arrest. Mexico extradited Zimerman in September.
As a result of today’s guilty plea, Zimerman faces a statutory maximum sentence of 10 years in federal prison when he is sentenced by Judge Wright on February 8.
Leonor Zimerman pleaded guilty in 2010 to a misdemeanor count of illegal fish trafficking. She was sentenced by United States District Judge Valerie Baker Fairbank in January 2011 to 21 months of probation and was ordered to pay a $1,500 fine.
The arrest of Isaac Zimerman concluded a four-year manhunt led by the United States Fish & Wildlife Service, which received assistance from the Mexico City attaché of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Customs and Border Protection, the FWS Intel Unit, Interpol, the U.S. Department of Justice’s Environment and Natural Resources Division, and the U.S. Department of Justice’s Office of International Affairs.
Former Pico Rivera Businessman Pleads Guilty to Federal Tax Fraud and Identity Theft Charges in Scheme that Netted nearly $550,000Read the Press Release
LOS ANGELES – A former Pico Rivera businessman pleaded guilty late this afternoon in relation to a stolen identity refund fraud scheme in which he conspired to use stolen identities to file fraudulent tax returns with the Internal Revenue Service that fraudulently generated approximately $550,000 in tax refunds.
Frank Ruben Candelaria, 53, of Los Angeles, pleaded guilty to one count of conspiracy to defraud the United States and two counts of making false claims against the United States by filing fraudulent tax returns in his own name.
According to the plea agreement filed in the case, beginning in December 2008 and continuing through September 2009, Candelaria and co-conspirator Edgar Rene Nunez, 61, caused at least 143 fraudulent income tax returns to be filed with the IRS. As a result of the fraudulent tax returns that sought well over $1 million in refunds, the IRS issued approximately $548,447 in fraudulent tax refund checks.
"Stolen identity refund fraud, known as SIRF, victimizes both the United States and the individuals who have had their identities stolen," said United States Attorney Eileen M. Decker. "The Department of Justice will continue to prosecute aggressively criminals seeking to profit from the identities of others."
In executing the scheme, Nunez and others obtained the names and Social Security numbers of individuals without their knowledge and consent. The co-conspirators created bogus Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, fraudulent individual income tax returns were prepared and filed claiming false tax refunds. The tax returns were filed without the knowledge or consent of the identity theft victims.
The fraudulent tax refunds were then either mailed to addresses that Candelaria and Nunez, as well as others, controlled or directly deposited to bank accounts that Nunez and others controlled.
"IRS Criminal Investigation has declared investigating refund fraud and identity theft a top priority," stated Special Agent in Charge Erick Martinez of the Los Angeles Field Office. "Filing fraudulent tax returns in the names of other individuals creates irreparable harm to those individuals whose identities were stolen, as well as a monetary loss against the U.S. Treasury."
In addition to the tax fraud scheme outlined above, Candelaria filed fraudulent tax returns in his own name for the 2006 and 2007 tax years claiming false refunds of $9,955 and $9,720, respectively.
When sentenced by U.S. District Court Judge Michael W. Fitzgerald on February 1, Candelaria faces a statutory maximum sentence of 20 years in federal prison and a fine of $750,000. Candelaria has agreed to pay full restitution to the IRS in the amount of $568,152.
Nunez pleaded guilty on March 31, 2015 to one count of conspiracy to submit false claims, nine counts of submitting false claims against the U.S. government, two counts of mail fraud, and one count of identity theft. When he is sentenced on February 22, Nunez faces a statutory maximum sentence of 97 years in federal prison and a fine of $3,250,000.
The investigation into Candelaria and Nunez was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.
Woman Who Used Checks Stolen from Elderly Victim while under Supervision in another Fraud Case Gets 58-Month Prison TermRead the Press Release
LOS ANGELES – A woman with a 40-year history of fraudulent conduct who used checks stolen from a woman in a West Hills nursing home to purchase hundreds of dollars in merchandise – a crime she committed while on supervised released in another federal fraud case – was sentenced today to 58 months in federal prison.
Carol Ejdowski, 66, a transient who had recently been residing in Beverly Hills, was sentenced by United States District Judge Dolly M Gee, who imposed a 37-month term for the current bank fraud case and a consecutive 21-month sentence because the offense was committed while Ejdowski was on supervised release.
When she defrauded the elderly victim, Ejdowski was serving a three-year period of supervised released after pleading guilty to passport fraud related to a credit card scam, serving a 63-month federal prison term and being released in late 2012.
In sentencing Ejdowski, Judge Gee said “the facts of this case are particularly despicable.” Pointing to the defendant’s multiple prior convictions for fraud, grand theft and perjury, Judge Gee called Ejdowski “a recidivist of the highest order” who had “shown her disrespect for the law repeatedly.”
Ejdowski pleaded guilty in September 2014 to one count of bank fraud, admitting that she stole checks from the victim that she used to purchase merchandise at Costco and Walmart. Ejdowski was originally scheduled to be sentenced on April 29, but she failed to appear for that hearing and was a fugitive until she was arrested and incarcerated in August.
While Ejdowski admitted in court that she used stolen checks, prosecutors argued that she also used the victim’s credit cards in a scheme that cause $1,925 in losses.
“This case demonstrates the Department of Justice’s commitment to prosecuting those who prey upon the most vulnerable in our community,” said United States Attorney Eileen M. Decker. “Standing alone, the monetary loss in this case did not adequately reflect the gravity of defendant’s crime, but today’s significant sentence should send a message to all those who would seek to victimize the vulnerable.”
Although the low loss amount was low, prosecutors wrote in a sentencing memo that Ejdowski’s “criminal conduct was particularly deplorable because it targeted a defenseless, 70-year-old, half-paralyzed woman who was living by herself in a nursing home/rehab facility.”
In a sentencing memorandum, prosecutors detailed Ejdowski’s history of fraud offenses, with convictions going back to the 1970s.
The latest fraud case against Ejdowski was the result of an investigation by the Federal Bureau of Investigation.
Downey Man Pleads Guilty to Falsely Certifying Beef as Free of E. coliRead the Press Release
LOS ANGELES – A Downey man who falsely certified that beef being sold by his employer was free of E. coli bacteria – which later proved to be false when one beef sample was found to be contaminated with the pathogen – has pleaded guilty to a federal offense of making and using a false writing and document.
Jim Johnson, 67, who worked as a consultant to the now-defunct Huntington Meat Packing Company, pleaded guilty to the felony offense Monday afternoon in United States District Court.
Huntington Meat was a Montebello-based meat processing and distribution company that sold raw ground beef that was used by other companies to make products such as beef patties and burrito mix. Under a food safety plan approved by the United States Department of Agriculture, Huntington Meat was required to test its meat for the Escherichia coli 0157:H7 bacterium
When he pleaded guilty earlier this week, Johnson admitted that in 2010 he knowingly and willfully provided the USDA’s Food Safety Inspection Service (FSIS) with a fake Certificate of Analysis which falsely stated that a beef sample from the company had tested negative for E. coli. Subsequent lab results showed that some of this meat was contaminated with E. coli. – which prompted the FSIS to issue recall 864,000 pounds of meat (see: http://go.usa.gov/crQ7H). There were no illnesses linked to the recalled beef.
“The defendant’s lie created a public health hazard, and such conduct will not be tolerated,” said United States Attorney Eileen M. Decker. “The public is entitled to have confidence in the food that makes it to its tables. The Department of Justice will continue to prosecute aggressively those whose conduct undermines that confidence.”
As a result of his guilty plea, Johnson faces a statutory maximum sentence of five years in federal prison when he is sentenced by United States District Judge Fernando M. Olguin on March 3.
The case against Johnson is the product of an investigation by the U.S. Department of Agriculture, Office of Inspector General, which received assistance from the U.S. Department of Agriculture’s Food Safety and Inspection Service.
SoCal Company Pays $4 Million and Enters into Agreement to Resolve Allegations it Overcharged U.S. Military for Fruit, VegetablesRead the Press Release
LOS ANGELES – A Los Angeles company has paid $4 million to resolve civil allegations that it fraudulently overcharged the U.S. military for fresh fruits and vegetables that it supplied to military dining facilities and Navy ships in Southern California. As part of a second agreement with criminal prosecutors, Coast Produce Company will implement various measures to ensure the company complies with its legal obligations.
Coast Produce Company’s settlement agreements with the government resolve a civil lawsuit and criminal investigation into allegations that the company violated the federal False Claims Act and obstructed an investigation related to two contracts the company had with the Department of Defense (DoD) to supply fresh produce to the military in the Los Angeles and San Diego regions.
The allegations against Coast Produce first surfaced in a “whistleblower” lawsuit filed in 2008 by an industry consultant. To resolve the allegations in the lawsuit, Coast paid a $4 million settlement on September 2, and United States District Judge David O. Carter unsealed and dismissed the civil lawsuit on September 17.
Under its contract with the DoD, Coast Produce allegedly was required to charge only the current prices charged to Coast by its own suppliers for the fruits and vegetables (the “delivered price”), plus an additional fixed $1.50-per-unit distribution fee that included Coast’s profit. The lawsuit alleged that Coast Produce knowingly overcharged the military on the delivered prices in three ways: 1) by instructing two suppliers to provide inflated quotes for produce, which the company then submitted to the DoD as pricing support, while simultaneously instructing the two suppliers to actually bill at their regular lower prices; 2) by charging the DoD more than it paid for bananas and pineapples under long-term fixed-price supply contracts; and 3) submitting artificially high quotes to the DoD – typically from vendors Coast Produce had no intention of buying from – in order to set a payment rate, but then actually purchasing the produce it supplied at lower prices, and keeping the difference.
The settlement arises from a qui tam, or whistleblower, lawsuit originally filed under seal in 2008 by Kevin Driscoll pursuant to the provisions of the federal False Claims Act. The United States Attorney’s Office investigated Mr. Driscoll’s allegations, elected to intervene in the lawsuit, and negotiated the settlement. Pursuant to the False Claims Act, Mr. Driscoll will receive $920,000.
In relation to the criminal investigation, the United States Attorney’s Office on September 2 filed a criminal information against Coast Produce, alleging that the company altered or falsified records. The information alleged that Coast Produce provided false invoices to the DoD when it requested evidence concerning the prices Coast was paying for produce it provided the military. The criminal information was filed pursuant to a Deferred Prosecution Agreement, in which the government agreed to defer any criminal case against Coast Produce for a two-year period in return for the company’s agreement to implement various compliance and remedial measures during that period, among other things. If Coast Produce does not violate the agreement during the 24-month period, the government will not proceed with a criminal case against Coast.
In an ordered signed on Friday, United States District Judge Percy Anderson dismissed the information filed by the government, which can be refiled in the event of a breach of the agreement by Coast.
“The agreements with Coast Produce demonstrate that this office will use all criminal and civil tools at its disposal to ensure that contractors who overcharge the United States military are held accountable,” said United States Attorney Eileen M. Decker. “Companies that supply Produces and services to our military members should know that our office will aggressively investigate those who seek to unlawfully profit from that relationship.”
Chris D. Hendrickson, Special Agent in Charge of the Department of Defense, Defense Criminal Investigative Service, stated: “The government’s settlement agreements with Coast show the continued dedication by the Defense Criminal Investigative Service and the Department of Justice to protect those funds entrusted to the U.S. military. Overcharging the Department of Defense is always reprehensible because it drains precious funds and resources necessary to protect America’s warfighters. The Defense Criminal Investigative Service will continue to investigate any individual or business who pursues personal enrichment at the expense of U.S. taxpayers.”
There is no allegation that the fruits and vegetables supplied by the company were unsatisfactory in quality. Coast Produce agreed to the civil settlement without admitting any wrongdoing. As to the criminal Deferred Prosecution Agreement, Coast admitted the facts attached to the DPA, but did not admit that it committed any crime.
The government’s investigation was conducted by the Defense Criminal Investigative Service, assisted by the U.S. Army Criminal Investigation Command and the U.S. Department of Agriculture’s Office of Inspector General.
Former Sergeant with Los Angeles Sheriff's Department Sentenced to Eight Years in Prison in Civil Rights Case Stemming from Beating of Jail VisitorRead the Press Release
A former sergeant with the Los Angeles Sheriff’s Department (LASD), who was previously found guilty of federal civil rights offenses related to the beating of a handcuffed visitor to the Men’s Central Jail, was sentenced today to 96 months in federal prison.
Eric Gonzalez, 46, received the eight-year sentence from U.S. District Judge George H. King of the Central District of California, who immediately remanded the defendant into custody.
Judge King said that Gonzalez “abused his authority and corrupted the very system he was sworn to uphold.”
Gonzalez, who was a 12-year veteran of LASD at the time of the offense, was one of three former deputies who were found guilty in June of civil rights charges.
At the trial, a jury determined Gonzalez, along with former LASD Deputies Fernando Luviano and Sussie Ayala, violated the civil rights of the victim in 2011 when they beat the man and caused bodily injury. The jury also determined that all three defendants had falsified records when they prepared reports claiming that the victim was not handcuffed during the incident. Gonzalez and Ayala were each additionally convicted of conspiring to violate the victim’s civil rights by using unreasonable force.
Two other defendants who were named in a federal grand jury indictment in late 2013, Pantamitr Zunggeemoge and Noel Womack, previously pleaded guilty.
“Today’s lengthy prison sentence demonstrates that individuals who abuse their positions of trust as law enforcement officers will be held accountable,” said U.S. Attorney Eileen M. Decker of the Central District of California. “The former deputy sheriffs who participated in the scheme to violate the civil rights of a handcuffed man who was beaten without cause cast a stain on the entire sheriff’s department, where virtually all of the deputies serve admirably.”
Gonzalez was the leader of the conspiracy to violate the victim’s civil rights, according to a sentencing memo filed by prosecutors: “While [the victim] may have suffered the bruises and cuts, the negative impact of defendant Gonzalez’s actions does not end with [the victim], nor is [he] the only victim. The actions undertaken by the defendants in this case have impacted the public trust and thus extend beyond [the victim] and his family.”
“Mr. Gonzalez's actions cast a pall on his department and dishonored the badge he wore for many years,” said Assistant Director in Charge David Bowdich of the FBI's Los Angeles Field Office. “We must be vigilant when it comes to abuse-of-power allegations, and prosecute them when warranted. However, we should also recognize and respect those who wear the badge with pride and serve Los Angeles County honorably.”
The evidence presented at trial showed that the victim and his girlfriend went to the jail to visit the woman’s incarcerated brother on Feb. 26, 2011. Both visitors were in the possession of cell phones, which are prohibited under jail rules. When the phones were discovered, the victim was handcuffed and brought into an employee break room, where prosecutors said he was subject to a “savage beating” and sprayed with a burning agent similar to pepper spray. The victim was later transferred to the hospital by paramedics.
Following the incident, Gonzalez instructed Zunggeemoge to write a report that falsely described how the victim swung his left elbow and struck Zunggeemoge, which prompted the use of force. Subsequent reports by other defendants also falsely described how the victim attempted to escape from the break room.
“Instead of using his position to educate and advance a new generation of law enforcement officers that would make the LASD proud, [Gonzalez] used this to frustrate the goals of true law enforcement,” according to the government’s sentencing memo. “As is clear from the pre-sentence report, to this day he has accepted no responsibility and seems to argue that he was ‘right.’”
During today’s sentencing hearing, Judge King said that when law enforcement officers “think they are above the law, the entire rule of law is threatened.”
Ayala and Luviano are scheduled to be sentenced by Judge King on Nov. 30. Ayala faces a face a statutory maximum sentence of 40 years in federal prison and Luviano faces up to 30 years.
Last month, a federal grand jury indicted a sixth deputy in relation to the incident at the visiting center. Former Deputy Byron Dredd pleaded not guilty on Friday, Oct. 30, to conspiracy to violate civil rights and two counts of making false reports, and he was ordered to stand trial on Dec. 22.
The case against Gonzalez and the other deputies is the result of an investigation by the FBI and is one in a series of cases resulting from an investigation into corruption and civil rights abuses at county jail facilities in downtown Los Angeles. As a result of the investigation, 15 current or former members of the LASD have now been convicted of federal charges.
Former Sergeant with L.A. Sheriff’s Dept. Sentenced to 8 Years in Prison in Civil Rights Case Stemming from Beating of Jail VisitorRead the Press Release
LOS ANGELES – A former sergeant with the Los Angeles Sheriff’s Department, who was found guilty this summer of federal civil rights offenses related to the beating of a handcuffed visitor to the Men’s Central Jail, was sentenced today to 96 months in federal prison.
Eric Gonzalez, 46, received the eight-year sentence from United States District Judge George H. King, who immediately remanded the defendant into custody.
Judge King said Gonzalez “abused his authority and corrupted the very system he was sworn to uphold.”
Gonzalez, who was a 12-year veteran of LASD at the time of the offense, was one of three former deputies who were found guilty in June of civil rights charges.
At the trial, a jury determined Gonzalez, along with former LASD Deputies Fernando Luviano and Sussie Ayala, violated the civil rights of the victim in 2011 when they beat the man and caused bodily injury. The jury also determined that all three defendants falsified records when they prepared reports claiming that the victim was not handcuffed during the incident. Gonzalez Ayala were additionally convicted of conspiring to violate the victim’s civil rights by using unreasonable force.
Two other defendants who were named in a federal grand jury indictment in late 2013 – Pantamitr Zunggeemoge and Noel Womack – previously pleaded guilty.
“Today’s lengthy prison sentence demonstrates that individuals who abuse their positions of trust as law enforcement officers will be held accountable,” said United States Attorney Eileen M. Decker. “The former deputy sheriffs who participated in the scheme to violate the civil rights of a handcuffed man who was beaten without cause cast a stain on the entire Sheriff’s Department, where virtually all of the deputies serve admirably.”
Gonzalez was the leader of the conspiracy to violate the victim’s civil rights, according to a sentencing memo filed by prosecutors. “While [the victim] may have suffered the bruises and cuts, the negative impact of defendant Gonzalez’s actions does not end with [the victim], nor is [he] the only victim. The actions undertaken by the defendants in this case have impacted the public trust and thus extend beyond [the victim] and his family,” prosecutors wrote.
“Mr. Gonzalez's actions cast a pall on his department and dishonored the badge he wore for many years,” said David Bowdich, the Assistant Director in Charge of the FBI's Los Angeles Field Office. “We must be vigilant when it comes to abuse-of-power allegations, and prosecute them when warranted. However, we should also recognize and respect those who wear the badge with pride and serve Los Angeles County honorably.”
The evidence presented at trial showed that the victim and his girlfriend went to the jail to visit the woman’s incarcerated brother on February 26, 2011. Both visitors were in the possession of cell phones, which are prohibited under jail rules. When the phones were discovered, the victim was handcuffed and brought into an employee break room, where prosecutors said he was subject to a “savage beating” and sprayed with a burning agent similar to pepper spray. The victim was later transferred to the hospital by paramedics.
Following the incident, Gonzalez instructed Zunggeemoge how to write a report that falsely described how the victim swung his left elbow and struck Zunggeemoge, which prompted the use of force. Subsequent reports by other defendants also falsely described how the victim attempted to escape from the break room.
“Instead of using his position to educate and advance a new generation of law enforcement officers that would make the LASD proud, [Gonzalez] used this to frustrate the goals of true law-enforcement,” according to the government’s sentencing memo. “As is clear from the pre-sentence report, to this day he has accepted no responsibility and seems to argue that he was ‘right.’”
During today’s sentencing hearing, Judge King said that when law enforcement officers “think they are above the law, the entire rule of law is threatened.”
Ayala and Luviano are scheduled to be sentenced by Judge King on November 30. Ayala faces a face a statutory maximum sentence of 40 years in federal prison, and Luviano faces up to 30 years.
Last month, a federal grand jury indicted a sixth deputy in relation to the incident at the Visiting Center. Former Deputy Byron Dredd pleaded not guilty on Friday to conspiracy to violate civil rights and two counts of making false reports, and he was ordered to stand trial on December 22.
The case against Gonzalez and the other deputies is the result of an investigation by the FBI, and is one in a series of cases resulting from an investigation into corruption and civil rights abuses at county jail facilities in downtown Los Angeles. As a result of the investigation, 15 current or former members of the Los Angeles Sheriff’s Department have now been convicted of federal charges.
South American Man who Illegally Trafficked in Protected Orchids on Layover at LAX Pleads Guilty to Federal Wildlife ChargeRead the Press Release
LOS ANGELES – A Peruvian national who possessed orchids in violation of an international wildlife treaty has pleaded guilty to a federal offense of illegal trade in a protected species.
Victor Manuel Arias Cucho, 46, of Lima, Peru, pleaded guilty to the offense Wednesday in United States District Court.
This case is the result of U.S. authorities discovering more than 200 protected orchids in Cucho’s luggage at Los Angeles International Airport. Cucho was flying from Australia to Peru on September 24, when he had a layover at LAX after attending an orchid trade show in Sydney.
The orchids are protected under the Convention on International Trade In Endangered Species of Wild Fauna and Flora (CITES), and Cucho was aware that he could not bring the CITES-protected orchids into the United States or Peru without having proper documentation. Knowing that he did not have the CITES-required documentation, Cucho concealed the orchids in various parts of his luggage in order avoid detection by customs authorities. Upon arriving at LAX, Cucho submitted a Customs declaration in which he denied that he was carrying any plants, and he was sent by customs authorities for a secondary agricultural inspection.
After pleading guilty on Wednesday, Cucho was sentenced by United States Magistrate Judge Karen L. Stevenson to two years of probation and was ordered to pay a $7,500 fine.
The case against Cucho is the product of an investigation by the U.S. Fish & Wildlife Service. U.S. Customs and Border Protection first discovered the orchids in Cucho’s luggage. The United States Department of Agriculture, Animal and Plant Health Inspection Service, Plant Protection and Quarantine Program provided assistance.
Inland Empire Man Convicted of Threatening to Kill Federal OfficerRead the Press Release
LOS ANGELES – A man who threatened to kill a United States Forest Service Law Enforcement Officer who came to the man’s home to ask about trash dumped in the San Bernardino National Forest has been convicted by a federal jury.
Richard Latka, 56, of Hemet, was convicted yesterday afternoon in United States District Court of threatening a federal officer.
According to the evidence presented at the trial, the Forest Service Officer went to a residence in Hemet in October 2014 to investigate trash that had recently been dumped in the nearby national forest. The officer encountered Latka in the front yard of the residence, and Latka reacted angrily when the officer said he wished to speak to “Mr. Morales” without telling Latka why. Latka then ran toward the officer with clenched fists. Believing that Latka intended to hit him, the officer drew his Taser gun. Latka stopped running but continued screaming at the officer. The officer tried to remove himself from the situation by getting into his car, but Latka continued to scream at the officer and pounded on the window of the marked law enforcement vehicle with his fist. The officer drove away, but Latka followed in his own car, yelling “next time you’re dead.” Witnesses reported that Latka later said that he would “get” the officer and that he was going to kill him.
“Threatening the lives of law enforcement officers will not be tolerated,” said United States Attorney Eileen M. Decker. “The officer in this case took many steps to de-escalate the situation and prevent it from getting worse. If not for the officer’s professionalism and calm, the defendant’s conduct could have become more violent and dangerous.”
United States District Judge Dale S. Fischer, who presided over the trial, set sentencing for January 25, 2016, at which time Latka will face a statutory maximum penalty of 10 years in federal prison, a three-year period of supervised release, and a fine of $250,000.
The case against Latka is the product of an investigation by the United States Forest Service.
Man Who Hired Teenage Girl for Sex is Sentenced in Human Trafficking CaseRead the Press Release
LOS ANGELES – A South Bay man who admitted lying to federal investigators about his conduct with a 16-year-old girl he met online and hired for commercial sex has been sentenced to 57 months in federal prison for obstructing a sex-trafficking probe being conducted by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Long Beach Police Department.
Charles Goswitz, 59, of Torrance, appeared Tuesday morning before U.S. District Judge Beverly Reid O’Connell. Goswitz, a court videographer who used the online moniker “Baldy Cruiser,” pleaded guilty to the obstruction charge June 22. The case marks the first federal prosecution in the Los Angeles area of a so-called “John” in a teen sex-trafficking investigation.
“Human trafficking inflicts tremendous harm on its victims, especially when those victims are children,” said United States Attorney Eileen M. Decker. “We have a duty to protect children from these predators, which includes prosecuting those who purchase children for sex. The significant sentence the defendant received in this case should serve as a warning to adults who engage in this type of criminal conduct. Although this is the first case of its kind in this district, it will not be the last.”
The probe into Goswitz’s activities began in February 2013 after HSI special agents received a lead from the Long Beach Police Department about a missing teen whose father suspected she was involved in commercial sex. During the ensuing investigation, authorities located sexually explicit images of the victim in an advertisement Goswitz posted on Backpage.com soliciting sex.
According to the case affidavit, in April 2013 HSI special agents met with Goswitz to advise the teen was missing and that she was a potential human trafficking victim. The affidavit states Goswitz denied ever meeting the minor victim, claiming he obtained the photographs of her online. Two months later, HSI special agents again questioned Goswitz, at which time he admitted engaging in commercial sex acts with the victim. Additionally, Goswitz acknowledged he had contacted the victim after his initial meeting with investigators. He further confirmed he had the minor victim and other females with whom he engaged in commercial sex acts pose for explicit photos wearing t-shirts saying “I love Baldy Cruiser.” He then posted those images on Internet sex forums as proof of his sexual exploits.
“This case should put commercial sex patrons on notice,” said Claude Arnold, Special Agent in Charge for HSI Los Angeles. “Those who pay for sex with minors are contributing in no small way to the current epidemic of teen and child sex-trafficking. The clients in these cases are, for all intents and purposes, as culpable as the actual traffickers and we intend to hold them accountable for their actions.”
Judge O’Connell ordered Goswitz to surrender in 60 days to begin serving his sentence. Upon completion of his prison term, Goswitz will be subject to five years’ supervised release and will be required to register as a sex offender for life.
Operation ‘Fright Night’ Targets Cosmetic Contact Lenses that are Illegally Sold without a Prescription and Pose Risk to EyesightRead the Press Release
LOS ANGELES – The owners and operators of 10 Southern California businesses were charged today in federal court with illegally selling cosmetic contact lenses without prescriptions. Some of the products that were purchased in connection with this investigation were contaminated with dangerous pathogens that can cause eye injury, blindness and loss of the eye.
The 10 criminal informations filed late this afternoon charge the store operators with selling “misbranded” contact lenses because they were sold without prescriptions. The products that were allegedly illegally sold were marketed as Halloween and beauty accessories under names such as Wonder Look, Red Rose, Black & White, Beauty World and Crazy Eagle.
“Contact lenses that fit the eye poorly could cause eye damage, including scratches on the cornea, corneal infection, conjunctivitis, decreased vision and blindness,” according to the charging documents. “Under California law, a California resident retailer could only sell and/or dispense contact lenses if the retailer was a licensed physician or surgeon, licensed optometrist, registered dispensing optician, or a pharmacist.”
“These products pose a serious danger to unsuspecting Halloween shoppers, and those who have already purchased these products should not use them,” said United States Attorney Eileen M. Decker. “As required by the law, contact lenses should be used only when they are prescribed by a knowledgeable medical professional.”
The cases filed this week are the result of Operation “Fright Night,” which targeted retail stores – some of which were selling Halloween costumes and accessories – that sold cosmetic and decorative contact lenses without a prescription to unsuspecting consumers in Southern California.
The investigation was conducted by the United States Food and Drug Administration’s (FDA’s) Import Operations Branch of the Los Angeles District Office; the FDA’s Office of Criminal Investigations; the California Department of Public Health; and the California Department of Consumer Affairs’ Division of Investigation, Health Quality Investigation Unit.
“Consumers rely on FDA oversight to ensure the safety of their contact lenses. Buying decorative or ‘fashion’ contact lenses without a valid prescription puts consumers’ health – and their vision – at risk,” said George M. Karavetsos, director, FDA Office of Criminal Investigations. “The FDA is committed to working with our law enforcement partners to keep such products out of the U.S. marketplace.”
Contact lenses – whether corrective, cosmetic or decorative – are considered to be prescription medical devices subject to FDA regulations. Due to the risk of injury, blindness and possible eye infection, all contact lenses require prescriptions from medical professionals who can provide guidance on the proper care and maintenance of the contact lenses.
“This joint operation is important because wearing these decorative lenses is dangerous and can cause serious injury, which potentially can result in blindness or the loss of an eye if they are not properly prescribed by a licensed eye care professional,” said Dr. Karen Smith, the director of the California Department of Public Health and the state public health officer. “Those who sell these lenses without obtaining a prescription put people at risk. Operation Fright Night is a great example of our joint commitment to protect public health from the risk of eye-related illness and injury from these prescription medical devices.”
Cassandra Hockenson, the spokesperson for the Medical Board of California, stated: “The Medical Board of California’s primary mission is consumer protection, and it is imperative to get the word out to the public on the dangers of selling contact lenses without a proper prescription from a licensed medical professional.”
The 10 cases filed this week in United States District Court in Los Angeles charge these defendants:
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Arianna Beauty, Inc., which is located on Santee Street in downtown Los Angeles, and its owner, Farshid Ben Cohen, 53, of Los Angeles;
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Alex Mario Collantes Marxelly, 40, of San Bernardino, the owner of Zebra Accessories in San Bernardino;
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Kathy Hwang, 51, of Chino Hills, doing business as Fashion 20 in La Puente;
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Hollywood Toys & Costumes, Inc. in Hollywood, and the store’s owner, Rezvan Moazzez, also known as Ron Moazzez, 69, of Encino;
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Sin Young Yi, 59, of Chino Hills, the owner of Yi’s Accessories in the Central Mercado Mini Mall in La Puente;
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Susie Shin, 52, of La Mirada, the owner of My Treasure in Buena Park;
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J2 Trading, Inc., doing business as Hairitage Beauty Supply in San Bernardino and J2’s owner, Dong Ki Min, 51, of Chino Hills;
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Fashion 4-U, Inc., doing business as Fashion Dream in Garden Grove, and the store’s owner, Jeong J. Park, also known as Sarah Park, 55, of La Mirada;
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La Moda XVII, Inc., doing business as Fashion Q in Baldwin Park; and
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NXT.G Corporation, doing business as Zzotta Shoes in the Pacific View Mall in Ventura, and the store’s owner, Kyung Sook Jung, also known as Grace Lee.
All of the defendants named in the criminal informations will be issued summonses directing them to appear for arraignments in federal court in the coming weeks.
A criminal information contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
All of the charges filed in Operation Fright Night are misdemeanor offenses that carry a statutory maximum penalty of one year in federal prison and fines of up to $100,000 for an individual and up to $200,000 for a corporation.
The California Department of Public Health today warned consumers against using decorative contact lenses without first consulting with an eye care professional (see: http://www.cdph.ca.gov/Pages/NR15-078.aspx).
The FDA has issued various warnings against the use of cosmetic contact lenses (for example: http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm402704.htm).
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Nevada Man Sentenced to over 12 Years in Federal Prison for Running Ponzi Scheme involving E-mini S&P FuturesRead the Press Release
LOS ANGELES – The architect of a fraudulent investment scheme that caused scores of victims to suffer losses of nearly $10 million was sentenced today to 151 months in federal prison for running a Ponzi scheme and lying to the Securities and Exchange Commission.
Gordon Driver, 58, of Henderson, Nevada, was sentenced today by United States District Judge John A. Kronstadt.
In addition to the prison term, Judge Kronstadt ordered Driver to pay $9,681,289 in restitution to victims of his scheme.
Driver pleaded guilty in April to two felony counts – wire fraud and making a false statement to SEC, which was investigating his fraudulent operation.
In his plea agreement filed earlier this year, Driver admitted that he falsely told victims that he was producing profits of 1 percent to 5 percent a week through a commodity futures trading program involving E-mini S&P 500 futures contracts. Driver also told victims that he had never sustained a monthly net loss as a result of his trading.
In reality, Driver’s trading activity over the course of his three-year scheme was overwhelmingly unprofitable, causing him to lose nearly almost all the money that he used to trade commodities.
Investigators have calculated that Driver took in nearly $17.4 million from approximately 150 victims, including several in Ventura, Orange and Los Angeles counties. Prosecutors successfully argued in court today that 88 victims collectively lost nearly $10 million as a result of the scheme. Some of the investors were made whole or actually made “profits” during the course of the Ponzi scheme when Driver used money from other investors – and not from profits – to pay off some people. For example, in court papers, prosecutors wrote that “for 8 solid months between June 2008 and mid-March 2009, Driver engaged in no futures trading whatsoever, yet took in $4.5 million over 55 separate deposits from his investors, and paid out $4.4 million in fictitious profits.”
During the course of the scheme, Driver “was the largest ‘winner’ by far: he spent $2.1 million on himself and his family, including buying three brand new cars and taking out $471,000 in cash,” according to a sentencing memo filed with the court.
“Investment fraud schemes like this one rob individuals and families of their livelihood and their retirements, and the significant sentence imposed today accounts for the harm caused by the defendant’s scheme,” said United States Attorney Eileen M. Decker. “This case is a reminder that investors should be wary of lofty promises from investments.”
Driver solicited investments through Nevada-based companies with names like Axcess Automation LLC, which was under investigation by the Securities and Exchange Commission in 2009 when Driver testified under oath. During this testimony, which was given under penalty of perjury, Driver said that he did not have a monthly negative return during the second half of 2007 – a statement which was false and which forms the basis of the second charge to which he pleaded guilty.
In the sentencing memo, prosecutors called Driver “a liar and a continuing economic danger to the community, who must be incarcerated for a lengthy period of time to keep him away from the investing public.”
Investigators said in court documents that Driver is currently “deceptively” marketing a $25,000 commodities trading software package for E-mini S&P 500 futures contracts through a company called Avenge LLC that uses a website (www.avengesoftware.com), radio podcasts and social media. According to investigators, the website and other internet marketing materials for the current venture do not disclose that Driver runs the company.
Furthermore, prosecutors said Driver failed to disclose to Avenge customers that he was facing a lengthy prison term and, by his own admission in court papers, that his “business will cease to exist if he is sentenced to a custodial sentence.”
The criminal case against Driver is the result of a joint investigation by the Federal Bureau of Investigation and the United States Postal Inspection Service, both of which received assistance from the Commodities Futures Trading Commission, the SEC, the Attorney General of Ontario (Canada), and the Ontario Securities Commission.
Five Assistant U.S. Attorneys from Los Angeles Receive Attorney General Awards for Work on Two Massive Fraud CasesRead the Press Release
LOS ANGELES – Five assistant United States attorneys have received Attorney General Awards for their extraordinary work on cases involving historic settlements with a credit ratings agency and one of the nation’s largest banks.
The five prosecutors were honored yesterday at a ceremony in Washington, D.C. attended by the honorees, their families and United States Attorney Eileen M. Decker.
Assistant U. S. Attorney George S. Cardona and former Assistant U.S. Attorney Anoiel Khorshid were among 11 attorneys and investigators who received the Attorney General’s Award for Distinguished Service for their work on the investigation into Standard & Poor’s Ratings Services, which earlier this year paid a $1.375 billion settlement, the largest penalty of its type ever paid by a credit rating agency.
AUSAs Cardona and Khorshid played key roles in the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) investigation and litigation against S&P for its issuance of fraudulently inflated ratings of Residential Mortgage Backed Securities (RMBS) and Collateralized Debt Obligations in the run-up to the 2007 through 2008 financial crisis (see: http://go.usa.gov/3SJCJ).
As part of the federal investigation and litigation with S&P, which was coordinated with related civil actions by 19 states and the District of Columbia, S&P admitted it ignored senior analysts within the company who complained it had given top ratings to financial products that were failing to perform as expected and it had declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business. While this strategy helped S&P avoid disappointing its clients, it did major harm to investors, including federally insured financial institutions that suffered losses exceeding $20 billion and to the larger economy, contributing to the worst financial crisis since the Great Depression.
Assistant U.S. Attorneys Evan J. Davis, Leon W. Weidman and Brent A. Whittlesey received the Attorney General’s Award for Distinguished Service for being part of the team that obtained an historic $16.65 billion settlement with Bank of America for fraud in the origination and securitization of residential mortgages.
AUSAs Davis, Weidman and Whittlesey were among 13 attorneys and auditors recognized for their important roles on one team that investigated the entire platform of RMBS offered for sale in 2006 through 2008 by Merrill Lynch, Bank of America and Countrywide. The teams pursued extensive and detailed fact investigations, developed and adapted innovative legal theories under FIRREA and prepared comprehensive civil complaints seeking billions of dollars in penalties.
The exhaustive efforts and perseverance of these teams advanced the core mission of the department by holding Bank of America accountable for its fraudulent conduct that contributed to the financial crisis, as well as providing substantial compensation for entities supported by American taxpayers and critical assistance to homeowners and neighborhoods impacted by the mortgage meltdown (see: http://go.usa.gov/3SJyj).
“These outstanding prosecutors represent the very best qualities of our office –ethics, integrity and professionalism – and they displayed incredible dedication in tackling two of the most complicated and largest cases ever handled by the Department of Justice,” said United States Attorney Eileen M. Decker. “I am extremely proud of the work done by these attorneys, who are a testament to fine work done by everyone in the Department.”
Attorney General Loretta Lynch recognized 279 Justice Department employees and 33 individuals with Attorney General Awards at a ceremony in Washington. These annual awards recognize department employees and other individuals for their dedication to carrying out the Department of Justice’s mission.
“The individuals being honored today stand out within a department that holds all of its employees and partners to an extremely high standard of excellence,” said Attorney General Lynch. “They have put in long hours, made immense sacrifices, and, in some cases, placed themselves in harm’s way. They have taken on issues that once seemed intractable, and made progress on problems that once seemed impossible. And their outstanding work is an inspiration to public servants everywhere.”
Federal Grand Jury Adds Wire Fraud and Tax Evasion Charges, as well as New Victims, to Fraud Case against Orange County AttorneyRead the Press Release
LOS ANGELES – An attorney who was indicted in September for allegedly stealing several million dollars from clients was named yesterday in a new indictment that adds additional wire fraud counts, as well as tax evasion and identity theft charges, to the case.
Stephen Young Kang, 46, of Newport Beach, is now charged in a 30-count superseding indictment that was returned yesterday afternoon by a federal grand jury.
The indictment filed in United States District Court in Los Angeles charges Kang with 22 counts of wire fraud, three counts of money laundering, two counts of aggravated identity theft and three counts of tax evasion. The indictment also contains forfeiture allegations that would require Kang to surrender ill-gotten gains if he is convicted of criminal charges.
The new indictment re-alleges wire fraud and money laundering charges contained in the original indictment, which was filed on September 1 and alleged that Kang defrauded a corporation and a couple seeking to make investments related to applications for EB-5 visas (see: http://go.usa.gov/3SdpJ).
The new fraud allegations concern three additional victims – including one who came forward in response to the FBI’s call for additional victims when Kang was initially indicted – who collectively suffered losses of more than $1 million. The three additional victims gave money to Kang for investment purposes, but the attorney allegedly used the money for his own personal and business expenses.
The superseding indictment further alleges that Kang committed identity theft when he used the names and forged signatures of two individuals without legal authority during and in relation to the alleged fraud scheme.
Kang is now also charged with receiving substantial taxable income and willfully attempting to evade paying his taxes in the years 2012 through 2014.
Kang was arrested on August 10 by special agents with the FBI and IRS - Criminal Investigation at Los Angeles International Airport as he attempted to board a flight to Seoul, Korea. He is currently free on a $750,000 bond.
Kang will be summoned to appear in United States District Court to be arraigned on the superseding indictment in the near future. At present, he is scheduled to go to trial in this case on November 3.
If convicted of the charges in the indictment, Kang faces a statutory maximum penalty of 20 years in federal prison for each of the wire fraud charges, up to 10 years in prison for each of the money laundering offenses, five years in prison for the each of the tax evasion charges, and a mandatory two-year consecutive term of imprisonment for the identity theft charges.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
Based on the evidence in this case, investigators believe Kang may have victimized others in locations where he practiced law or resided, including California, Texas, and Seoul, Korea. Anyone who believes they may have been victimized by Kang should contact the FBI’s Los Angeles Field Office at (310) 477-6565.
The case against Kang is the product of an ongoing investigation by the Federal Bureau of Investigation and IRS - Criminal Investigation.
DMV worker, 5 others Charged in Identity Theft Scheme that used Puerto Rican Birth Certificates to Create Bogus Identity DocumentsRead the Press Release
SANTA ANA, California – A clerk at the California Department of Motor Vehicles office in El Monte and five others have been indicted on federal identity theft charges for allegedly using legitimate birth certificates and Social Security numbers obtained from Puerto Rico to create new identities that were sold to people willing to pay thousands of dollars for fraudulent identity documents.
DMV clerk Tracey Lynette Jones, 33, of Long Beach, surrendered to federal authorities on Monday and was arraigned Monday afternoon in United States District Court. Jones entered a not guilty plea, was released on a $25,000 bond and was ordered to stand trial on November 24 before United States District Judge Cormac J. Carney.
Jones and the other five defendants were named in a four-count indictment returned on September 30 by a federal grand jury. The indictment charges all six defendants with conspiring to produce identification documents. Several of the defendants, including Jones, are charged with various identity theft offenses.
“Identity theft is a serious crime that undermines the economic fabric of our society and causes considerable harm to the individual victims,” said United States Attorney Eileen M. Decker. “This identity theft scheme was particularly insidious because it both victimized the individuals whose identities were stolen and required the active participation of a government official. The fact that a DMV official abused her position of authority in committing this crime is egregious since such conduct can undermine the public’s confidence in a government institution entrusted with our personal information.”
Four of the remaining defendants were arrested last month by special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and investigators with the DMV’s Investigations division. They are:
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Wilfredo Montero, 36, of Los Angeles;
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Adolfo Maria Cruz, 47, of Corona;
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Roberto Ruiz, 35, of Tustin; and
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Jose Cruz, 49, of Corona.
Out of the four defendants arrested in September, three have been freed on bond and Cruz remains in custody.
The sixth defendant charged in the case, Jorge “Diablo” Perez, aka Pedro Josue Figueroa-Marquez, 33, originally from Mexico, remains at large and is being sought by authorities.
According to the indictment, the conspiracy was allegedly spearheaded by Montero and catered to individuals willing to pay as much as $5,000 for new identities obtained with genuine birth certificates and Social Security numbers obtained from Puerto Rico residents. Investigators are working to identify the source of the documents obtained from Puerto Rico.
The case, which is the result of a three-year undercover investigation, revealed many of the ring’s customers were previously deported felons. Federal prosecutors have filed charges against three people believed to be customers of the identity theft ring, and authorities are seeking to take those individuals into custody.
“If anyone had any doubt about why identity theft is a serious public safety threat, this investigation should be a wake-up call,” said Claude Arnold, special agent in charge for HSI Los Angeles. “Based on our evidence, this ring’s clients had good reason to want to obscure their pasts. And for a price, the defendants were allegedly willing to oblige. Our probe is ongoing and we’re aggressively pursuing all those involved.”
An affidavit in support of criminal complaints that were previously filed in the case describes a July 2012 meeting between Montero and an HSI undercover special agent posing as prospective client. After the undercover investigator indicated he wanted to purchase identity documents, Montero led him to his garage where he pulled out a Puerto Rican birth certificate and matching Social Security card which were concealed inside a boxing glove.
After obtaining identity documents for buyers, the defendants, for an additional fee, allegedly helped their clients use the documents to apply for California driver’s licenses or California identification cards under the assumed identities. The indictment alleges defendant Jones altered records in the DMV’s electronic databases to make it appear the applicants had passed required exams to obtain a driver’s license when, in fact, they had not.
“DMV does not tolerate any type of illegal conduct among employees who tarnish the image of the thousands of other DMV employees who work hard to ensure every applicant meets all licensing requirements,” said Jean Shiomoto, Director of the California Department of Motor Vehicles.
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 convicted in the identity theft conspiracy, the six defendants named in the indictment would face a statutory maximum penalty of 15 years in federal prison.
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8 Charged in Federal Court in Relation to Skimmers Installed in Gas Pumps to Collect Credit Card and Debit Card InformationRead the Press Release
LOS ANGELES – Authorities this morning arrested four defendants charged with federal fraud and identity theft charges for allegedly participating in a scheme that installed credit card “skimmers” inside gas pumps at gas stations across Southern California and Southern Nevada.
A criminal complaint charges eight defendants – three of whom are fugitives at this time – with participating in a conspiracy that secretly installed electronic devices known as skimmers inside of gas pumps that were equipped with point of sale terminals. When gas station customers swiped their credit or debit cards through the device that reads the magnetic strips on the back of their cards, the information was stored on the skimmers that were hidden inside the gas pumps. According to the affidavit in support of the complaint, members of the conspiracy were able to later retrieve the account information without going back inside the gas pumps by using Bluetooth-equipped devices, such as cellular phones or tablets.
According to an affidavit by a special agent with the U.S. Secret Service, participants in the conspiracy manufactured skimmers with parts purchased at electronics stores. At the gas stations, they allegedly used large vans to conceal their activities as they forced open panels on the gas pumps and installed the skimming devices that were not visible to customers who used their credit cards at the pumps.
The affidavit outlines how the organization installed dozens of skimmers at gas stations operated by different companies in areas that include San Gabriel, Burbank, North Hollywood, Van Nuys, Eagle Rock, Beverly Hills, Santa Monica, Torrance, Long Beach, Anaheim, Santa Ana, Tustin, Fountain Valley, the Coachella Valley and Las Vegas, Nevada.
“Identity theft causes significant harm to individuals as well as imposing costs on society overall,” said United States Attorney Eileen M. Decker. “Members of the public are entitled to use their credit and debit cards at gas stations without fear that their identities could be stolen. The collective consequence of such criminal activity is that thousands of people have had their personal information compromised and now they must undertake substantial efforts to protect their identities.”
In conjunction with this morning’s arrests, investigators executed a series of search warrants. At one location, they found materials indicating that members of the conspiracy were actively involved in the manufacture of counterfeit credit cards.
The eight defendants named in the criminal complaint are:
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Nazar Daniyelyan, 47, of Sun Valley, who was arrested;
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Ruben Karapetyan, 39, of Porter Ranch, who was arrested;
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Armen Khalulyan, 30, of Los Angeles, who is a fugitive;
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Arutyan Oganyan, 41, of North Hollywood, who is a fugitive;
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Grigor Pambukyan, 26, of Van Nuys, who was arrested;
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Arsen Terzyan, 32, of Van Nuys, who was arrested;
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Anthony Tngryan, 26, of Van Nuys, who is a fugitive; and
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Oganes Tagaryan, 23, of North Hollywood, who is expected to surrender to authorities in the near future.
The four taken into custody this morning are expected to make their initial court appearances this afternoon in United States District Court in downtown Los Angeles.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The eight defendants are charged with conspiracy to possess 15 or more unauthorized access devices. If they are convicted of this charge, each would face a statutory maximum sentence of five years in federal prison.
If any member of the public has information concerning the three fugitives in this case, they are urged to contact the Secret Service at (213) 533-4400.
“This conspiracy case demonstrates the effectiveness of multijurisdictional partnerships in the dismantling of criminal enterprises targeting innocent American citizens, “ said L. Robert Savage, III, the Special Agent in Charge of the United States Secret Service’s Los Angeles Field Office. “This investigation and the resulting arrests should serve as a warning to criminals that law enforcement will not cease pursuing them.”
The investigation into the credit card skimming ring is ongoing. At this point, authorities have no estimate for the loss that may be associated with the stolen credit card information.
The case was investigated by the Los Angeles Fraud Task Force (LAFTF), which is an ongoing partnership between the U.S. Secret Service and the Los Angeles Police Department. The Los Angeles County Sheriff's Department, the Glendale Police Department, the U.S. Marshal's Fugitive Task Force and the Drug Enforcement Administration assisted in the investigation.
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Former President of Central Coast Investment Firm Sentenced to 7 Years in Prison for Defrauding Real Estate InvestorsRead the Press Release
LOS ANGELES – A Paso Robles man has been sentenced to 84 months in federal prison for misappropriating millions of dollars that victims invested in Central Coast real estate projects and for helping a real estate developer defraud a bank.
James Hurst Miller Jr., 67, the former president of the Atascadero-based Hurst Financial Corporation, was sentenced yesterday by United States District Judge Otis D. Wright II.
Miller’s case is related to that of Kelly Gearhart, a former Central Coast real estate developer, who was sentenced in July to 14 years in federal prison (see: http://go.usa.gov/3SQqR).
Miller operated Hurst Financial, which essentially acted a “middle man” between investors and real estate developers, including Gearhart. Miller solicited investments in Paso Robles real estate development projects known as Beacon Road and Vista Del Hombre (which involved Gearhart), as well as the Salinas River real estate development project in Templeton. After obtaining funds from investors, Miller used approximately $3.7 million of the money for other purposes, contrary to his promises about how the money would be used. Miller used money from investors to develop different real estate projects, make interest payments to investors, and pay-off loans related to different real estate projects.
Miller also admitted that he aided and abetted false statements made by Gearhart to Heritage Oaks Bank. Prosecutors argued that Miller helped Gearhart clear title to Vista Del Hombre lots that were securing victims’ investments, and Gearhart then used those lots to obtain bank loans from Heritage Oaks Bank and San Luis Trust Bank (which was later acquired by Pacific West Bank).
In asking for a prison term that was half that of Gearhart’s sentence, prosecutors noted Miller’s acceptance of responsibility and cooperation. Prosecutors also argued in court documents that, although Miller misspent money from victims, he did not steal the money for his personal use or to fund any lavish lifestyle. Unlike Gearhart, who defrauded victims for his own personal gain, Miller “was an established businessman who committed certain crimes when faced with economic difficulties,” according to a sentencing memo filed in court. Nevertheless, prosecutors sought a seven-year sentence based on the significant impact Miller’s crimes had on the community, as well as Miller personally profiting from commissions and fees on victims’ investments.
“Miller turned to fraud when faced with a choice between helping Gearhart and safeguarding victims’ investments,” said United States Attorney Eileen M. Decker. “This significant sentence emphasizes that he made the wrong choice.”
Miller pleaded guilty in 2011 to mail fraud, wire fraud, money laundering, and aiding and abetting a false statement to a bank.
In addition to the seven-year sentence issued to Miller, Judge Wright scheduled a restitution hearing for December 21.
Gearhart also appeared in court yesterday, at which time Judge Wright scheduled another restitution hearing for November 9.
The cases against Miller and Gearhart were the result of an investigation by the Federal Bureau of Investigation and IRS - Criminal Investigation.
Former Broker at San Fernando Valley Brokerage Firm Sentenced to 18 Months in Federal Prison for Defrauding InvestorsRead the Press Release
LOS ANGELES – A former registered representative at a now-defunct Sherman Oaks brokerage and investment firm was sentenced today to 18 months in federal prison on wire fraud charges associated with a real estate investment scam that resulted in about five dozen investors losing nearly $4 million.
Jonathan Greenfield, 50, of West Hills, who was a licensed securities representative at Morgan Peabody, Inc., was sentenced by United States District Judge Dale S. Fischer.
Greenfield pleaded in December 2013 to two wire fraud counts, admitting that he provided his clients at Morgan Peabody with materially false information related to a real estate investment fund called the Sherwood Secured Investment Fund, LLC. Greenfield also admitted the he omitted material information in connection with the fund.
The fund was created by former Morgan Peabody Chief Executive Officer David Williams, who pleaded guilty in May and is pending sentencing (see: http://go.usa.gov/3SQQw). The Sherwood Secured Investment Fund offered a 9 percent annual return on investments made in “direct and indirect investments in real estate and real estate companies” and other secured investments, but Williams admitted that he used the majority of investor money from the Sherwood Fund to pay for personal expenses. Greenfield was not charged with knowing that Williams would misappropriate the fund monies, but was charged with misrepresenting to his clients the risk and the purpose of the investment.
In addition to the prison term, Greenfield was ordered to pay restitution of $359,497 to victims of the fraud.
The investigation into Williams’ scheme was conducted by special agents with the Federal Bureau of Investigation and IRS - Criminal Investigation.
Seal Beach Man Pleads Guilty in Foreclosure Rescue SchemeRead the Press Release
Riverside, California – A Seal Beach man has pleaded guilty to federal fraud charges related to a mortgage rescue scheme in which he made false promises to the distressed homeowner, filed fraudulent bankruptcies to delay foreclosure and rented the property to third parties as the foreclosure proceedings were delayed.
Terry Meisinger, 74, appeared before United States District Judge Virginia A. Phillips on Tuesday morning and pleaded guilty to two counts of wire fraud.
Meisinger admitted he defrauded a distressed homeowner by inducing him to sign a quitclaim in exchange for promises that included negotiating a short-sale agreement with his lender that would free the homeowner from his mortgage on a property in North Las Vegas, Nevada. But, instead, Meisinger caused a deed of trust to be recorded on the property, which was followed by a fraudulent bankruptcy on behalf of the person who supposedly now held an interest in the home. Meanwhile, Meisinger rented out the home to another person while foreclosure proceedings were stayed as a result of the fraudulent bankruptcy.
Meisinger “repeated the process of causing the recording of deeds of trusts in the names of various beneficiaries whose identities he controlled and causing the filing of bankruptcies on behalf of those lenders to delay the foreclosure proceedings, while collecting rents” on property in North Las Vegas, according to the plea agreement filed in this case.
Meisinger admitted in court this week that he repeated this scheme with approximately 150 properties between 1999 and 2014 and gained more than $1.5 million from this scheme. Altogether, Meisinger admitted there were at least 50 victims of his scheme, which included homeowners, lenders and renters.
Meisinger also admitted that his illegal conduct violated Judge Phillips’ court order in a prior civil matter barring Meisinger from participating in the home finance or real estate industries for 10 years (see: http://go.usa.gov/3Sr23). Meisinger was also barred from filing bankruptcy petitions. In that civil action, Judge Phillips had imposed a $5 million civil fine on Meisinger.
As a result of the guilty pleas, Meisinger faces a statutory maximum sentence of 40 years in federal prison, as well as a $3 million fine. Judge Phillips is scheduled to sentence him on December 21.
The criminal case against Meisinger is the result of an investigation by the United States Department of Housing and Urban Development, Office of the Inspector General (HUD-OIG).
Former TSA Officer Indicted for Allegedly Allowing Marijuana-Laden Baggage to Pass through Security Screening at LAXRead the Press Release
LOS ANGELES – A former officer with the Transportation Security Administration was indicted today by a federal grand jury on narcotics and bribery charges for allegedly accepting payment to allow checked bags filled with marijuana to be cleared through screening checkpoints at Los Angeles International Airport.
Deondre Smith, 33, of South Los Angeles, was named in a two-count indictment that charges him with conspiracy to distribute marijuana and bribery of a public official.
The indictment alleges that Smith accepted payments of at least $500 to ensure that baggage containing marijuana would be allowed to pass through security checkpoints at LAX so that the bags would be loaded on to commercial aircraft. “Knowing that the luggage contained marijuana, defendant Smith would temporarily take possession of the luggage from other co-conspirators and either personally escort the luggage through LAX baggage screening checkpoints, or deliver the luggage to make sure the baggage containing marijuana passed security,” according to the indictment.
“I expect all federal employees to meet the highest standards of ethical behavior,” said United States Attorney Eileen M. Decker. “Any acceptance of bribes to influence official conduct will not be tolerated. It is particularly serious when the employee knowingly assisted the commission of a serious criminal offense.”
The bags containing marijuana were transported to Charlotte Douglas International Airport in North Carolina, where the drugs were distributed, according to the indictment, which alleges nine specific incidents in 2009 and 2010 where Smith allowed drug-filled bags to pass through security.
Other members of the conspiracy have been convicted of federal drug trafficking charges in North Carolina.
The indictment alleges that the conspiracy in which Smith participated moved at least 50 kilograms of marijuana.
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 convicted, Smith would face a statutory maximum penalty of five years for the drug trafficking conspiracy. The bribery count carries a statutory maximum penalty of 15 years in prison.
Smith will be summonsed to appear for an arraigned in United States District Court in the coming weeks.
This case is the result of an investigation by the Department of Homeland Security, Office of Inspector General and the Federal Bureau of Investigation.
Former L.A. Sheriff’s Deputy Indicted by Federal Grand Jury on Charges Related to Cover-Up of Attack of Visitor to Men’s Central JailRead the Press Release
LOS ANGELES – In a case stemming from the beating of a handcuffed man at Men’s Central Jail in downtown Los Angeles, a sixth member of the Los Angeles Sheriff’s Department was indicted today on federal charges for allegedly participating in the cover-up of the violent incident.
Byron Dredd, 33, who is no longer with the LASD, was named in a three-count indictment that charges him with conspiracy to violate the victim’s civil rights and two counts of making false reports.
Five other former deputies have been convicted in relation to the 2011 attack and are pending sentencing (see: http://go.usa.gov/3Jypx).
Dredd, along with the other defendants previously convicted, was assigned to the Visiting Center at Men’s Central Jail. On February 26, 2011, the victim and his girlfriend went to the jail to visit the victim’s incarcerated brother. Both visitors had cell phones in their possession, which is prohibited under jail rules. When the phones were discovered, the victim was handcuffed and brought into an employee break room, where he was beaten and sprayed with a burning agent similar to pepper spray. The victim was later transferred to the hospital by paramedics. As a result of false statements made by the previously convicted deputies and allegedly made by Dredd, the victim was charged with several crimes, including resisting an officer and battery.
The indictment against Dredd alleges that he wrote an incident report in which he falsely claimed that the victim attacked one of the deputies and then attempted to escape.
“The Department of Justice will continue to hold accountable individuals who abuse their positions as law enforcement officers by committing crimes or by trying to cover them up,” said United States Attorney Eileen M. Decker. “While this former deputy sheriff allegedly participated in a scheme to violate the civil rights of a man who had to be hospitalized after he was beaten by other deputies, his actions should not reflect on the good work performed by the overwhelming majority of Los Angeles deputy sheriffs.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
If convicted of the charges in the indictment, Dredd would face a statutory maximum penalty of 35 years in federal prison – up to 10 years for the civil rights conspiracy, up to 20 years for the falsification of records, and up to five years for making false statements to the FBI.
Dredd will be summonsed to appear for an arraigned in United States District Court in the coming weeks.
This case is the result of an investigation by the FBI, and is one in a series of cases resulting from an investigation into corruption and civil rights abuses at county jail facilities in downtown Los Angeles. As a result of the investigation, 15 current or former members of the Los Angeles Sheriff’s Department have now been convicted of federal charges.
Investigation into 3 Los Angeles-Area Synthetic Drug Rings Leads to Arrest of 12 Linked to Manufacture and Distribution of ‘Spice’Read the Press Release
LOS ANGELES – Investigations led by the Drug Enforcement Administration and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations in the Los Angeles area have resulted in the arrest of a dozen defendants allegedly involved in the large-scale manufacture and distribution of synthetic narcotics that are commonly called “spice.”
The arrests on Wednesday and this morning were part of a larger, nationwide crackdown on synthetic drug distribution that the DEA labeled “Project Synergy III” (see: 151 Arrested In DEA-Led Investigation Of Synthetic Drug Rings). The law enforcement operation in Los Angeles targeted three organizations that allegedly manufactured and distributed thousands of kilograms of synthetic cannabinoids, which are designed to mimic the effects of THC, the psychoactive agent in marijuana.
Over the past several years, DEA has identified more than 400 new designer drugs in the United States – most of which are manufactured in rogue labs in China and sold on the Internet or in retail outlets such as smoke shops, gas station convenience stores and bodegas. These substances are generally sold in brightly colored packaging, marketed to young people, and billed as “safe” alternatives to marijuana or dangerous party drugs such as MDMA (ecstasy). The synthetic drugs are commonly marked with the disclaimer “not for human consumption” or “DEA approved,” which is an attempt to shield distributors from prosecution. Abuse of these psychoactive substances has resulted in increasing numbers of overdose incidents, emergency room visits and even deaths.
In the three cases in Los Angeles announced today, a total of 16 defendants are charged with manufacturing and distributing synthetic cannabinoids. The chemicals are mixed with agents – often acetone – to create a mixture that is sprayed onto plant material – typically marshmallow leaf or damania leaf – to create synthetic marijuana, which is commonly referred to as “spice” or “herbal incense.” Such synthetic cannabinoids are smoked or orally ingested, and are referred to in three indictments as smokable synthetic cannabinoids (SSCs). The SSCs discussed in the indictment were sold under brand names that included “Sexy Monkey,” “Crazy Monkey,” “Scooby Snax,” “Bizarro” and “Mad Hatter.”
“This effort highlights DEA’s commitment to toppling the reign drug traffickers hold over too many of our children,” said Anthony D. Williams, the DEA Special Agent in Charge of the Los Angeles Field Division. “Synthetic drugs are extremely dangerous substances and pose a serious threat to the health and well-being of our youth. We will continue to target and dismantle any and all drug trafficking organizations victimizing our society.”
United States Attorney Eileen M. Decker said: “These are extremely dangerous drugs, despite being falsely marketed to youth as being a ‘safe’ alternative and having innocent names like ‘spice’ and ‘K2.’ The often unknown and constantly changing chemicals in these drugs can have unpredictable and devastating effects on users. The Department of Justice takes this threat to public health and safety seriously and will prosecute purveyors of synthetic drugs as the drug traffickers that they are.”
The first case, which was the result of an investigation by the DEA, focused on companies in the “Skid Row” district in downtown Los Angeles. The indictment in this case charges seven defendants:
• Faisal Iqbal, 34, of Glendale, who was arrested yesterday;
• Sana Faisal, 32, of Glendale, Faisal Iqbal’s wife and who was arrested yesterday;
• Mohammad Iqbal, 65, of Glendale, Faisal Iqbal’s father, who is a fugitive believed to be in Pakistan;
• Fidencio Garcia Jr, 25, of North Hollywood, who was arrested yesterday;
• Ahmad Abu Farie, 54, of Huntington Beach, who was arrested yesterday;
• Mohammad Abu Farie, 25, of Huntington Beach, Ahmad Abu Farie’s son, who surrendered to authorities this morning; and
• Ehab Abu Farie, 24, of Chandler, Arizona, another son of Ahmad Abu Farie, who was arrested yesterday.
The second case investigated by the DEA focused on two individuals who had ties to the other two organizations discussed in the other indictments. The two charged in this second indictment are:
• Samia Amaninawabi, 39, of Ontario, who has agreed to surrender to authorities tomorrow; and
• Aziz Maali, 51, of Clifton, New Jersey (formerly of Monterey Park), who was arrested yesterday.
The case investigated by HSI focused on Orange County-based businesses and led to an indictment charging seven defendants. Those charged in the third indictment are:
• Adnan Bahhur, 55, of Anaheim, who has not yet been taken into custody;
• Islam Bahhur, 29, of Anaheim, Adnan Bahhur’s son, who was arrested yesterday;
• Hakeem Bahhur, 24, of Anaheim, another son of Adnan Bahhur, who has not yet been taken into custody;
• Maesa Bahhur, 44, of Greenville, South Carolina, Adnan Bahhur’s daughter, who surrendered to authorities in Los Angeles this morning;
• Mohamad Hamade, 31, of Irvine, who was arrested yesterday;
• Oun Alrzouq, 49, of Anaheim, who was arrested yesterday; and
• Yasir Harb, 55, of Romoland, California, who was arrested yesterday.
Those arrested in Southern California yesterday were arraigned Wednesday afternoon in United States District Court. All of those defendants pleaded not guilty and were ordered to stand trial later this year. Mohammad Abu Farie and Maesa Bahhur are expected to be arraigned this afternoon in Los Angeles federal court.
“Many of the precursor chemicals used to manufacture these substances are shipped from overseas and HSI is committed to working with its law enforcement partners to stop the flow into the U.S.,” said Claude Arnold, special agent in charge for HSI Los Angeles. “But beyond targeting the manufacturers and importers, it’s also imperative we get the word out – especially to young people – about the dangers, and potentially deadly consequences, of using these substances.”
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.
Most of the defendants are charged with conspiracy to manufacture, possess with intent to distribute, and distribute controlled substance analogues, a charge that carries a sentence of up to 20 years in federal prison.
More information about synthetic designer drugs can be found on the Drug Fact Sheets at www.DEAdiversion.usdoj.gov.