Central District of California
Press releases recorded for this federal judicial district.
Long Beach Woman and Son Plead Guilty to Sex Trafficking of Teenagers Who Worked as ProstitutesRead the Press Release
LOS ANGELES – A Long Beach woman pleaded guilty this afternoon to federal charges of working with her son to prostitute a local runaway beginning when the girl was 15 and another young woman beginning when she was 18.
Sharilyn Kae Anderson, 46, pleaded guilty to conspiring with her son to engage in sex trafficking, an offense that carries a potential penalty of life in federal prison.
In a plea agreement filed in United States District court, Anderson admitted that she and her son used force, threats of force or coercion against the adult victim.
Anderson’s guilty plea comes nine days after her son, Joshua Jerome Davis, 23, pleaded guilty to the sex trafficking conspiracy, as well as two substantive counts of sex trafficking of a minor and an adult by force, threats of force or coercion. The charge of sex trafficking of a child by force carries a maximum sentence of life in prison and a mandatory minimum penalty of 10 years. The sex trafficking of an adult by force, threats of force, or coercion, or any combination of these means, carries a maximum sentence of life in prison and a mandatory minimum penalty of 15 years.
Anderson was arrested in August 2013 outside a residence he leased in North Las Vegas. At the time of his arrest, investigators located and rescued the minor victim who was with Anderson.
The Long Beach Police Department initially opened the investigation after the minor victim’s father reported her missing. The ensuing investigation uncovered evidence that Davis, assisted by his mother, had prostituted the victim at several hotels in Southern California and transported her across state lines to Nevada to engage in commercial sex in Las Vegas.
According to court documents, Davis first communicated with the minor victim on Facebook in 2010, when she was 14, leading to an initial meeting in early 2012. Several months later, the minor victim created an account on a website commonly used to promote prostitution and escort services. Anderson helped facilitate the prostitution scheme by booking hotel rooms and transporting both victims to hotels to engage in prostitution when her son was unavailable. Anderson also threatened the adult victim to intimidate her to continue making money for her son by prostituting.
Anderson and Davis each pleaded guilty before United States District Judge Christina A. Snyder, who is scheduled to sentence Anderson on May 18 and Davis on May 4.
This case is the product of an investigation by the Long Beach Police Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
Release No. 15-013
Nevada Man Sentenced to Nearly 10 Years in Prison in Fraud Scheme Targeting Chiropractors Who Developed Pain-Relieving Back BraceRead the Press Release
SANTA ANA, California – A Nevada man who was already serving seven years in federal prison for running an investment scheme has received a second sentence of nearly 10 years for defrauding the inventors of a back brace device called the “Gorillaback.”
Jonathan Glen Turner, 40, of Las Vegas, was sentenced to 115 months in federal prison late yesterday by United States District Judge James V. Selna. In addition to the prison term of almost 10 years – which will run consecutive to an 84-month sentence Turner received in May 2014 – Judge Selna ordered the defendant to pay $229,500 in restitution.
Following a three-week trial in August 2013 in which he represented himself, Turner was found guilty of three counts of wire fraud and one count of committing a felony while on pre-trial release. The evidence at trial showed that Turner, while free on bond in the earlier investment fraud case, befriended a Las Vegas chiropractor who had invented the Gorillaback device. Turner advised the inventor that he had been in the sales business and could sell the Gorillaback product. Turner, the chiropractor, and the chiropractor’s wife then formed a company – Products International – to manufacture and sell the back brace.
However, Turner made no effort to sell the device. He instead created fraudulent purchase orders to create the false impression that more than 10,000 Gorillabacks had been ordered and sold. Turner concealed the fact that he did not have the means to manufacture the device and there were no actual buyers.
Turner persuaded the victims to obtain investment money from their family and friends to have the “pre-sold” devices manufactured. Between March 2011 and January 2012, four additional victims in Orange County invested to have the devices manufactured, for a total loss to all victims of approximately $229,500.
Instead of using the money to manufacture Gorillabacks, Turner deposited the funds into bank accounts under his control and used the money for his personal use. Turner was arrested in this case in April 2012 and has been held without bond since that time.
While conducting the fraud involving the Gorillaback device, Turner was pending trial in another fraud that cost victims $2.6 million. Turner went to trial in that case in October 2012 and was convicted by a jury of two counts of mail fraud and two counts of wire fraud. He was sentenced in May 2014 (see: http://www.fbi.gov/losangeles/press-releases/2014/las-vegas-man-sentenced-to-more-than-seven-years-in-fraud-scheme-that-caused-orange-county-victims-to-lose-more-than-1-million).
Both cases against Turner were the product of investigations by the Federal Bureau of Investigation.
Release No. 15-012
Two Men Who Orchestrated $21 Million Movie Investment Scheme Sentenced to Federal Prison for Defrauding Hundreds of InvestorsRead the Press Release
LOS ANGELES – Two men who were leaders of a scheme involving a company called Gigapix that defrauded hundreds of victims by promising large returns on movie investments and a production company’s imminent public offering were sentenced today, receiving sentences of up to eight years in federal prison.
The two defendants sentenced this morning – Christopher Blauvelt, 59, a former Woodland Hills resident who was transient when he was arrested last year, and David Pritchard, 67, of Hollywood (formerly of Malibu) – were convicted at trial last year on a series of federal charges, including mail fraud, wire fraud and offering for sale unregistered securities.
United States District Judge Manuel Real sentenced Blauvelt to eight years in prison, and Pritchard was sentenced to five years.
Judge Real scheduled a restitution hearing for April 20.
The case centers on a company called Gigapix that was founded by Blauvelt in 2002 and took on Pritchard as a partner in 2006. During the subsequent seven years, Blauvelt, who was the chief executive officer of Gigaix, and Pritchard., who was the president of the company, hired telemarketers to solicit potential investors. These who were solicited to invest were told that Gigpix was an animation company similar to Pixar Animation Studios, and that Gigapix was developing projects expected to generate large profits when the company went public.
As part of the scheme, telemarketers – known as “fronters” – used lead lists purchased by the defendants to find potential investors and then used scripts touting the supposed merits of Gigapix. When investors expressed an interest, materials about the investment were mailed to them. At that time, the potential investors were turned over to “closers,” who collected their money.
Two Gigapix telemarketers who acted as closers – Gregory Pusateri, 50, of Woodland Hills, and Cheri Brown, 65, of Studio City – were also convicted at a trial, and they are scheduled to be sentenced by Judge Real on February 23.
In addition to raising money for Gigpix, the defendants also raised funds to produce a movie titled “OZ3D.” While soliciting money for Gigapix and “OZ3D,” the defendants made numerous misrepresentations to potential investors and withheld material facts. For example, according to court documents, investors were told that Gigapix was a financially successful company, they would receive high returns on their investments in less than 18 months, the investments carried little or no risk, and investors would see returns within a year or 18 months of investing. Investors were also told there was an urgency to invest in Gigapix and “OZ3D” because the window of opportunity to invest and the number of shares available were limited.
Investors were told that a minimum of 65 percent of the money invested in “OZ3D” would be used to produce and distribute the movie, and that only a small percentage of investor money would be used to pay commissions and finder’s fees. However, less than 5 percent of the investors’ money was used to finance the film. Of the millions raised for the Gigapix investment, less than 20 percent of those funds were spent on the production of movies or television shows. The majority of the money raised from investors was spent on salaries, commissions and overhead.
Approximately 730 victims lost virtually all of the money – approximately $21 million – that they invested in Gigapix and “OZ3D.”
“This case involves an egregious fraud of massive proportions that targeted non-wealthy victims who the defendants heartlessly misled,” prosecutors wrote in sentencing documents. “The effects of this crime on the victims are truly devastating in every way,” and compounded issues affecting elderly victims, low-income victims, victims who suffered from illnesses such as cancer and the effects of polio, and victims who
were supporting children with Down syndrome and spina bifida.This investigation was conducted by the Federal Bureau of Investigation.
elease No. 15-011
Bay Area Woman Who Ran $24 Million Investment Scam Sentenced to over 12 Years in Federal PrisonRead the Press Release
SANTA ANA, California – A San Jose woman who was convicted running a Ponzi scheme that bilked over 200 victims out of more than $24 million was sentenced today to serve 151 months in federal prison.
Bich Quyen Nguyen, 60, received the sentence from United States District Judge Josephine L. Staton, who said the crime caused physical, emotional and psychological harm to victims who, in some case, lost their entire life savings.
In addition to the prison term of more than 12½ years, Judge Staton ordered Nguyen to pay $24,517,482 in restitution.
Nguyen was found guilty conspiring to commit wire fraud in December 2013 by a jury that heard about Nguyen’s investment scheme, which offered purported certificates of deposit issued by a Swedish financial institution that she supposedly ran. The evidence presented during a six-day trial showed that Nguyen told victims that she was the chief executive officer Sun Investment Savings and Loan, which guaranteed annual returns of more than 30 percent on one-year certificates of deposit involving at least $1 million. Nguyen told victims that she used “trading platforms” and made trades at a high frequency and velocity to achieve the high rates of return. Nguyen told victims that their investments were safe because the victims’ money would be in “blocked” accounts. Nguyen further told victims that she had prepared for the 2008 financial crisis so their returns were still protected and guaranteed.
While claims about the investment were bogus, Nguyen’s “false promises did persuade the victims to give up their life-savings,” according to court documents filed by prosecutors. “Because of [Nguyen’s] fraud, the victims were forced to put off their retirements and stretch their remaining resources to simply make ends meet.”
To get the rates that Nguyen fraudulently promised, victims from southern California and Nevada organized private investment clubs to pool the required $1 million. Several of the victim investment clubs were located in Anaheim and Rialto.
During the second half of 2008, Nguyen and co-conspirators made presentations to victims across the region, with some of the presentations taking place at churches.
In the Spring of 2009, the Securities and Exchange Commission obtained orders from United States District Judge David O. Carter that prevented Nguyen and her co-conspirators from continuing to offer these investments. Following the issuance of the injunctions, a receiver and forensic accountant reviewed records and determined that the victims’ money was never “safe,” in part because it was commingled with other victims’ money; some of the victims’ money was used to make Ponzi payments to other investors; and the promised investments were never made. Despite Judge Carter’s orders, Nguyen in May and July 2009 continued to offer investments in Las Vegas and overseas.
In sentencing papers that described Nguyen as being “relentless in the execution of her fraud,” prosecutors cited numerous false promises to victims, lies she told during her trial (including blaming a dead man for the scheme) and a complete lack of remorse. Nguyen has “failed to take any responsibility for the over [$24] million that victims lost due to her fraud,” according to one sentencing memo. “Defendant’s ‘pass-the-buck’ attitude cannot be ignored when there are over 200 victims due to her fraud.”
Nguyen has been in custody for over year after being remanded into custody by Judge Staton when the trial concluded.
Previously in this case, another member of the conspiracy – Johnny Edward Johnson, 70, pleaded guilty to conspiracy to commit wire fraud. Johnson, who faces a statutory maximum sentence of 20 years in federal prison, is scheduled to be sentenced by Judge Staton on February 27.
The investigation of Nguyen and Johnson was conducted by the Federal Bureau of Investigation. The SEC provided substantial assistance.
elease No. 15-010
Georgia Man Pleads Guilty in Wire Fraud Scheme That Bilked Airlines by Obtaining Free ‘Non-Rev’ Tickets for Non-EmployeesRead the Press Release
LOS ANGELES – A Georgia man who fraudulently booked airline reservations by pretending to be a flight crew member pleaded guilty today to a federal wire fraud offense.
Gilbert Myers Jr., 38, of Atlanta, pleaded guilty this afternoon to conspiracy to commit wire fraud, a charge that carries a statutory maximum penalty of 20 years in federal prison.
Myers admitted orchestrating a conspiracy to defraud air carriers in which travelers would illegally board aircrafts while pretending to be employees of other airlines. In exchange for arranging their travel as “non-rev” employee travelers, Myers typically charged approximately $2,000 for one year of unlimited free flights.
Myers fraudulently booked hundreds of flights on victim airlines that include AirTran Airways, JetBlue Airways, Spirit Airlines, Sun Country Airlines and United Airlines.
The fraudulent travelers utilized Myers’ services to fly in and out of Los Angeles County airports by pretending to be in-flight crew members employed by other airlines. To obtain boarding passes and stand-by tickets (for which airline employees pay little or nothing, hence non-revenue), Myers called the victim airline’s reservation call center and gave the victim airline’s representative the name of a traveler, the airline he supposedly worked for, a bogus employee identification number, and a date of hire. Myers typically lied to the victim airline and said he worked on a flight crew for another airline, according to court documents.
Myers advised the fraudulent travelers to avoid detection by dressing appropriately and how to respond to questions about their employment at another airline. With the fraudulently obtained boarding pass and their real photo identification, the fraudulent travelers went through Transportation Security Administration security screening. The fraudulent travelers boarded planes listed as employees of other airlines. All of the travelers were subject to full security screenings by the Transportation Security Administration.
In the plea agreement, Myers admitted to several specific, fraudulent booking calls. As part of the conspiracy, Myers acknowledges that he “fraudulently booked these and hundreds of other flights with victim airlines.”
Myers pleaded guilty before United States District Judge Dean D. Pregerson, who scheduled a sentencing hearing for April 30.
In his plea agreement, Myers agrees that Judge Pregerson may order him to pay restitution to the victims. The fair market value of the fraudulently obtained plane tickets was more than $277,000, and attorneys in the case agree that the applicable amount of restitution is approximately $91,660.
All of the victim airlines fully cooperated in the investigation.
The case against Myers is the result of an investigation by the FBI’s Joint Terrorism Task Force.
Four Members of Loma Linda Family Arrested on Federal Charges Related to Embezzlement from Labor UnionRead the Press Release
RIVERSIDE, California – Four former and current officials of an independent labor union in Colton were arrested this morning on federal charges related to a scheme to embezzle funds from the union’s health plan.The four defendants, who were named in a 40-count indictment returned by a federal grand jury on January 21, are charged with conspiring to embezzle from the health plan for the United Industrial and Service Workers of America Local 101 (UISWA), which serves members in the Inland Empire.
Over the course of eight years, the defendants allegedly misappropriated a total of approximately $900,000 in union funds.
Those arrested this morning, all residents of Loma Linda, are:
John S. Romero, 68, the former president of USIWA;
Evelyn Romero, 66, John S. Romero’s wife, who succeeded her husband as president of USIWA and served in that position until June 2014;
John J. Romero, 50, who is the son of John S. and Evelyn Romero and who is the former secretary/treasurer of USIWA; and
Danae Romero, 37, who is the daughter of John S. and Evelyn Romero and who served as an officer in the union.
All four defendants are expected to be arraigned on the indictment this afternoon in United States District Court.
The indictment charges the defendants with conspiring to embezzle assets from the UISWA Health Plan, which was a program intended to provide healthcare benefits to union members.
The indictment also includes charges of knowingly filing false annual reports with the U.S. Department of Labor that failed to disclose more than $100,000 in UISWA revenues and disbursements, willfully misusing the assets from both the UISWA and UISWA Health Plan, and knowingly and willfully permitting another Romero-family member who had previously been convicted of a felony narcotics violation to serve as an officer and employee of the UISWA.
The indictment alleges that some of the Health Plan's bank accounts were held in the name of a construction company associated with the Health Plan's third party administrator, through which the Romero family received payments without the knowledge of consent of the Health Plan's second trustee. It is further alleged that the Romero family controlled the Health Plan's reserve fund accounts and used those assets for their personal benefit.
The defendants family allegedly used union funds to pay personal and union-related legal fees and judgments levied against them, systematically making payments of Health Plan assets to a separate business entity they operated under false pretenses, fund a payroll account that had been established using the name and employer identification number of a previous labor union they had been in control of that had since terminated operations, pay off a car loan for a vehicle belonging to another Romero family member, and recirculating assets from the Health Plan's reserve fund to its operating account to cover the insurance expenses for their own healthcare benefits that were billed to the union.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
If they are convicted of the charges in the indictment, all four defendants would face decades in federal prison.
The indictment is the result of a joint investigation conducted by the U.S. Department of Labor - Office of Inspector General, the U.S. Department of Labor - Employee Benefits Security Administration, and the U.S. Department of Labor - Office of Labor Management Standards.
Two Woodland Hills Men Who Operated $100+ Million Ponzi Scheme Involving ATMs Plead Guilty to Federal Fraud ChargesRead the Press Release
LOS ANGELES – The president of a Calabasas firm that was used to run a Ponzi scheme that caused investors to loss more than $100 million pleaded guilty this morning to federal fraud charges.
Joel Barry Gillis, 74, of Woodland Hills, pleaded guilty in relation to a 13-year-long scheme that collected hundreds of millions from investors who were told their money would be used to purchase profitable automated teller machines.
The second man charged in the scheme related to Nationwide Automated Systems, Inc. (NASI) – Edward Wishner, 76, also of Woodland Hills, who held various titles at NASI, including vice president – pleaded guilty on January 13 in the case that bilked approximately 2,000 investors.
Gillis and Wishner each pleaded guilty to conspiracy, two counts of mail fraud and one count of wire fraud. As a result of their guilty pleas, each defendant faces a statutory maximum sentence of 80 years in federal prison.
Both men are scheduled to be sentenced on March 30 by United States District Judge S. James Otero.
According to documents filed in United States District Court, Gillis and Wishner operated NASI, which purported to 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, each of which 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 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. 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.
The scheme unraveled this past summer. In August, “NASI bounced approximately $3 million in checks that had been sent by NASI as monthly returns to victim-investors,” according to the charging document in the case. “By the end of the month, NASI had drained its bank account, drawing it down to a balance of less than $200,000.”
But, even as the Ponzi was collapsing, Gillis and Wishner continued to raise another $4 million from victim-investors.
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 September, which resulted in a court order freezing the company’s assets and having a receiver appointed to oversee the assets (see: http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).
Release No. 15-006
Georgia Man Pleads Guilty in Wire Fraud Scheme That Bilked Airlines by Obtaining Free ‘Non-Rev’ Tickets for Non-EmployeesRead the Press Release
LOS ANGELES – A Georgia man who fraudulently booked airline reservations by pretending to be a flight crew member pleaded guilty today to a federal wire fraud offense.
Gilbert Myers Jr., 38, of Atlanta, pleaded guilty this afternoon to conspiracy to commit wire fraud, a charge that carries a statutory maximum penalty of 20 years in federal prison.
Myers admitted orchestrating a conspiracy to defraud air carriers in which travelers would illegally board aircrafts while pretending to be employees of other airlines. In exchange for arranging their travel as “non-rev” employee travelers, Myers typically charged approximately $2,000 for one year of unlimited free flights.
Myers fraudulently booked hundreds of flights on victim airlines that include AirTran Airways, JetBlue Airways, Spirit Airlines, Sun Country Airlines and United Airlines.
The fraudulent travelers utilized Myers’ services to fly in and out of Los Angeles County airports by pretending to be in-flight crew members employed by other airlines. To obtain boarding passes and stand-by tickets (for which airline employees pay little or nothing, hence non-revenue), Myers called the victim airline’s reservation call center and gave the victim airline’s representative the name of a traveler, the airline he supposedly worked for, a bogus employee identification number, and a date of hire. Myers typically lied to the victim airline and said he worked on a flight crew for another airline, according to court documents.
Myers advised the fraudulent travelers to avoid detection by dressing appropriately and how to respond to questions about their employment at another airline. With the fraudulently obtained boarding pass and their real photo identification, the fraudulent travelers went through Transportation Security Administration security screening. The fraudulent travelers boarded planes listed as employees of other airlines. All of the travelers were subject to full security screenings by the Transportation Security Administration.
In the plea agreement, Myers admitted to several specific, fraudulent booking calls. As part of the conspiracy, Myers acknowledges that he “fraudulently booked these and hundreds of other flights with victim airlines.”
Myers pleaded guilty before United States District Judge Dean D. Pregerson, who scheduled a sentencing hearing for April 30.
In his plea agreement, Myers agrees that Judge Pregerson may order him to pay restitution to the victims. The fair market value of the fraudulently obtained plane tickets was more than $277,000, and attorneys in the case agree that the applicable amount of restitution is approximately $91,660.
All of the victim airlines fully cooperated in the investigation.
The case against Myers is the result of an investigation by the FBI’s Joint Terrorism Task Force.
Release No. 15-007
Former UPS Driver Who Stole Guns, Jewelry and Phones Being Shipped Is Found Guilty of Federal Weapons ChargesRead the Press Release
RIVERSIDE, California – A former United Parcel Service driver was found guilty today of federal gun trafficking charges for stealing dozens of guns going through the shipping company’s Ontario hub and providing them to another man who sold the weapons on the street.
Curtis Ivory Hays II, 37, of Rancho Cucamonga, was convicted of firearms and other offenses following a six-day trial in United States District Court.
Hays, who was found guilty of 15 counts, faces a statutory maximum sentence of 115 years in federal prison when he is sentenced on March 30 by United States District Judge Virginia A. Phillips.
The associate who allegedly sold some of the firearms – Dennis Dell White Jr., 35, of Moreno Valley – previously pleaded guilty in the case and is scheduled to be sentenced by Judge Phillips on May 4.
The evidence at trial showed that Hays stole a series of packages containing guns that were supposed to be delivered to Turner’s Outdoorsman in Rancho Cucamonga. From May through October of 2012, Hays stole six shipments containing a total of 72 firearms.
Hays gave the stolen firearms to White, who illegally sold the weapons to other individuals, and some of the guns then were sold to others. The firearms included 12-gauge shotguns and .45-caliber handguns.
Hays also stole shipments containing jewelry and mobile phones that were supposed to be delivered to Costco in Rancho Cucamonga, and this merchandise also was given to White.
Hays was found guilty of conspiracy, six counts of theft of firearms, six counts of receipt and possession of stolen firearms, and two counts of theft of interstate shipments.
White pleaded guilty to one count of theft of firearms.
The investigation into the stolen firearms was conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives in conjunction with the Ontario Police Department and the Riverside County Sheriff’s Department. Substantial assistance was provided by the San Bernardino County District Attorney’s Office.
Release No. 15-005
Bay Area Man Who Defrauded Website Investors Sentenced to 10 Years in Federal Prison for Running $1.2 Million ScamRead the Press Release
LOS ANGELES – A Northern California man who defrauded 18 victims by selling website domains that he falsely claimed would generate substantial advertising revenue was sentenced today to 120 months in federal prison.
John Winston Boone, 51, of Novato, was sentenced by United States District Judge Otis D. Wright II, who called the defendant’s conduct “cruel and callous.”
In addition to the 10-year prison term, Judge Wright ordered Boone to pay $1,219,138 in restitution to the victims, who reside across the United States and in Canada.
During today’s hearing, Judge Wright said Boone “showed a lack of humanity that was so base and so depraved.”
Boone pleaded guilty in November 2013 to two counts of wire fraud, admitting that he engaged in a five-year-long fraud scheme that targeted victims who wanted to own online businesses that would allow them to work from home. Boone offered the websites for sale in advertisements he placed on popular business websites, such as Bizquest.com and BizBen.com. When prospective buyers responded to his ads, Boone sent them phony financial records that falsely showed the websites had generated advertising revenue in the past. As part of his scheme, Boone lied about his employment background and falsely promised to provide training and other assistance in setting up the websites. After the victims paid money, Boone failed to provide any training or other support he promised, and the websites, with one small exception, never generated any income. When victims discovered the scam, Boone ceased all contact with them and he never returned their money.
Boone is a “financial predator, a master manipulator and a pathological liar who will do or say anything to steal money from his victims,” prosecutors wrote in a sentencing memo filed with the court. Prosecutors also cited Boone's callous conduct, describing how he defrauded one victim knowing he was disabled, and defrauded another victim knowing he had large medical bills to pay.
Boone displayed predatory conduct, according to the government's sentencing papers. After a victim sued him for return of her $60,000 down payment, Boone counter-sued her for the full amount of the $100,000 bogus contract and won, and then harassed her for payment with the knowledge that she suffered from panic attacks.
“For 30 years, nothing has deterred him – not criminal investigation or prosecution, not civil judgments, and not distraught victims,” according to prosecutors, who described the defendant as “extraordinarily charismatic and manipulative, while lacking any conscience.”
The case against Boone was investigated by the Federal Bureau of Investigation.
Release No. 15-004
Authorities Arrest 5 Linked to ‘Pill Mill’ That Used L.A. Medical Clinic to Generate Illegal Prescriptions and Distribute the Narcotics in TexasRead the Press Release
LOS ANGELES – After a federal grand jury issued a 33-count indictment last week, federal authorities in Texas and Southern California this morning arrested five defendants linked to a narcotics trafficking ring that sold illegal prescriptions for cash and obtained drugs that were shipped to Texas for sale on the black market. Two other defendants named in the indictment are currently being sought by authorities.
Those arrested this morning include the operators of the now-closed Southfork Medical Clinic, who allegedly sold unnecessary prescriptions for drugs that included oxycodone (best known by the brand names OxyContin and Percocet), hydrocodone (commonly sold under the brand names Vicodin, Norco and Lortab), alprazolam (best known by the brand name Xanax), carisoprodol (a muscle relaxant sold under the brand name Soma) and promethazine with codeine (a cough syrup sold on the street as “purple drank” and “sizzurp”). A doctor at Southfork wrote prescriptions “while acting and intending to act outside the usual course of professional practice and without a legitimate medical purpose,” and Southfork employees forged another doctor’s handwriting and signature on illegal prescriptions, according to the indictment.
The doctor employed by Southfork during the charged conspiracy, Madhu Garg, issued more than 10,000 prescriptions – with nearly 80 percent of those for hydrocodone or alprazolam, most of which were at the maximum dosage – over a 15-month period, according to records maintained by the State of California.
The conspirators also used Los Angeles as a base of operations to acquire and deliver bulk shipments of prescription drugs to Texas, according to the indictment. The investigation resulted in the seizure of multiple drug loads, including a January 2013 seizure of nearly 10,000 pills from the residence of ringleader Jagehauel Gillespie, and a July 2010 seizure of 48 bottles of promethazine with codeine from a car being driven across Texas by Gillespie and another defendant.
“Los Angeles is a major source of the deadly and addictive prescription drugs that are diverted to street sales across the Western United States,” said Acting United States Attorney Stephanie Yonekura. “This case in the latest in a series of prosecutions clearly demonstrating that law enforcement is committed to stemming the tide of drugs being diverted to the black market, as well as putting an end to medical professionals who abuse their prescription pads and their ethical obligations.”
The indictment describes multiple undercover operations conducted during the investigation. During an October 2013 meeting at Southfork, Gillespie agreed that Garg would prescribe oxycodone and promethazine with codeine for an undercover cooperator in exchange for the person returning to the clinic with bottles of the prescribed cough syrup. Later that day, Garg gave the undercover witness prescriptions for those drugs, and Garg agreed to issue more prescriptions later that week under a different patient name. Six days later, during another meeting at Southfork, Gillespie gave the undercover witness forged prescriptions for oxycodone and promethazine with codeine using another doctor’s name and medical license number.
“These arrests demonstrate law enforcement’s continuing intolerance for those who are simply drug traffickers operating behind the thinly veiled guise of a medical practice,” said Anthony D. Williams, Special Agent in Charge of the DEA’s Los Angeles Field Division. “Dr. Garg and her employees brazenly wrote and distributed thousands of illicit prescriptions with no legitimate necessity, allowing a countless number of highly addictive prescription opioids to hit the streets of Los Angeles and Texas. The DEA will persist its longstanding efforts to investigate and dismantle pill mills like Southfork Medical.”
All seven defendants are charged with conspiring to distribute narcotics, a charge that carries a statutory maximum penalty of 20 years in federal prison. Additionally, each of the defendants is charged in at least one substantive counts of distributing a controlled substance, charges that could increase a prison term if they are convicted.
The five arrested this morning are:
Jagehauel Gillespie, 39, of Houston, the operator of Southfork who allegedly charged flat fees of up to $500 for prescriptions and who will face a statutory maximum sentence of 149 years in federal prison if he is convicted;
Dr. Madhu Garg, 63, of Glendora, California, the medical doctor who wrote prescriptions at Southfork, allegedly without any medical necessity, before the Medical Board of California revoked her license in late 2013;
Diane Nunez, 24, of Long Beach, California, who oversaw day-to-day operations at Southfork;
Daniel Clay, 45, of Houston, who allegedly shipped controlled substances from Southern California to Texas; and
Ray Steven Benton, 56, of Baldwin Hills, California, a “capper” who recruited patients to obtain prescriptions at Southfork.
These defendants will be making initial court appearances this afternoon in the district in which they were arrested, meaning that Garg, Nunez and Benton will be arraigned in United States District Court in Los Angeles (and Gillespie and Clay will be appearing in federal court in Houston).
The two fugitives currently being sought are:
Jessica Poe, 32, of Inglewood, California, Gillespie’s girlfriend, who allegedly forged a doctor’s signature on prescriptions; and
Joseph Tyree Boyance, 35, whose whereabouts are presently unknown, a “capper” who recruited patients to obtain prescriptions at Southfork; and
The drug ring allegedly was based at the Southfork Medical Clinic, which until last February operated at 1818 South Western Avenue in the Harvard Heights district of Los Angeles.
In addition to the drug counts, Garg is charged with money laundering for allegedly wiring money obtained from the drug conspiracy to an account in Kuala Lumpur.
“IRS Criminal Investigation contributes our financial expertise in an effort to halt the illegal sale and distribution of prescription drugs,” stated IRS-Criminal Investigation Special Agent in Charge Erick Martinez. “Our goal is to stop criminal enterprises that profit from the illegal trade of dangerous narcotics and take away any financial benefit they receive from their criminal activity.”
Benton is also charged with firearms offenses, and both Gillespie and Benton are charged with using fake identities and fraudulent driver’s licenses to fill prescriptions at Los Angeles-area pharmacies.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
The case related to Southfork is the product of an investigation by the Drug Enforcement Administration’s Los Angeles and Houston field divisions, Internal Revenue Service-Criminal Investigation, the Los Angeles Police Department, the California Department of Justice, and the Texas Department of Public Safety.
Release No. 15-003
Orange County Man Who Bilked Physicians and Dentists Out of More Than $2 Million Sentenced to 57 Months in Federal PrisonRead the Press Release
SANTA ANA, California – An Orange County man who admitted targeting dozens of doctors and others in schemes that promised large returns on investments in the medical and dental fields and caused victims to lose more than $2 million was sentenced today to 57 months in federal prison.
David Rose, 58, of Coto de Caza, was sentenced this morning by United States District Judge James V. Selna.
Rose pleaded guilty in July to one count of wire fraud and one count of mail fraud.
According to court documents, over a six-year period that ran through May 2011, Rose solicited physicians to invest in an Irvine company he called M.D. Venture Partners (MDVP) and falsely promised lucrative returns on investments in emerging medical technologies.
In a subsequent scheme, Rose used Technology Innovation Partners (TIP) and Millenium Marketing Partners, both of Irvine, to solicit dentists and orthodontists to invest, claiming funds would be pooled and invested in a company developing ablation technology that would be used to remove wisdom teeth in children without surgery.
Throughout both schemes, investor funds were misused, with Rose using victims’ money for personal expenses. According to a plea agreement filed in court, Rose used investor funds to pay $7,500 monthly rent for a house in Coto de Caza, college tuition, an $80,000 Sea Ray boat and shares in the Green Bay Packers.
The investigation revealed that no money was invested by either MDVP or TIP.
In the MDVP scheme, Rose caused approximately 32 victims to lose more than $900,000, according to court documents. In the TIP scheme, 45 victims lost more than $1.4 million. As part of today’s sentencing, Judge Selna ordered Rose to pay a total of $2,315,394 in restitution.
Rose was arrested in May 2013 and has remained in custody since that time.
“The theft of more than $2 million by fraud is a serious offense, an offense in this case that took place over many years,” prosecutors wrote in a sentencing brief.
The case against Rose is the product of an investigation by the Federal Bureau of Investigation.
Release No. 15-002
SoCal Doctor Who Distributed Addictive Painkiller Hydrocodone and Laundered More Than $1 Million in Illegal Proceeds Sentenced to over 5 Years in Federal PrisonRead the Press Release
LOS ANGELES – A Los Angeles-area doctor who was convicted last summer of narcotics trafficking for illegally distributing the powerful painkiller best known by the brand names Vicodin and Norco was sentenced today to 63 months in federal prison.
Dr. Andrew Sun, 79, of La Mirada, was sentenced this afternoon by United States District Judge Manual Real.
A federal jury in August found Sun guilty of 14 counts of narcotics distribution after determining that he illegally issued prescriptions for hydrocodone and alprazolam – the drug best known as Xanax – in exchange for cash payments from “patients.” According to a sentencing memo filed by federal prosecutors, “When prescribed together, these drugs form an especially potent and deadly cocktail for which there is no legitimate medical purpose.”
The evidence at trial showed that Sun issued more than 24,000 prescriptions over a three-year period and generated more than $1.1 million in cash through what prosecutors called “a cash-and-carry narcotics store.”
Sun was also found guilty of three counts of money laundering.
“The jury convicted defendant of using his pedigree as a doctor to endanger his patients’ lives and to profit from their addiction,” prosecutors said in court papers. “Consistent with the guilty verdicts, defendant acted with no legitimate medical purpose and defendant sought to cover his tracks through systematic fraud and deception, including his attempt to conceal the hundreds of thousands of dollars of illegal proceeds.”
Sun, who operated medical clinics in San Gabriel and East Los Angeles, issued prescriptions to a dozen “patients” – in reality, undercover law enforcement officers – who made cash payments. Two medical experts retained by the government to review Sun’s interaction with the undercover operatives (UCs) concluded that “that there was no medical legitimacy to defendant’s meetings with the UCs, and that his conduct was an extreme departure from the accepted standard of care.”
Sun’s conviction last year in United States District Court was the second time he was found culpable for illegally writing prescriptions. In 2007, the Medical Board of California placed Sun on probation for four years and required him to complete special training and to generate special reports on his activities. But in 2010, the Medical Board found that he submitted false statements to the regulatory agency and extended his probation for another four years, which included a ban on prescribing certain medications, including the highly addictive drug best known under the brand name OxyContin.
The investigation into Sun was conducted by the Drug Enforcement Administration, IRS - Criminal Investigation, the Medical Board of California, the California Department of Health Care Services and the Monterey Park Police Department.
Release No. 15-001
Organizer of $9 Million Health Care Scam Set for Arraignment TodayRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 165Covina Hospice Sought Millions for ‘Treating’ Patients who were not Terminally Ill
LOS ANGELES – A Placentia woman already serving a prison sentence for defrauding Medi-Cal is expected to be arraigned this afternoon on new federal charges related to her operation of a hospice that submitted millions of dollars in fraudulent bills to Medicare and Medi-Cal for purportedly providing end-of-life care to patients who were, in fact, not dying.
Priscilla Villabroza, 68, has been transferred from a federal prison in Victorville and is expected to be arraigned on a 25-count indictment this afternoon in United States District Court in Los Angeles.
Villabroza is one of six defendants charged in relation to the scheme allegedly run out of the Covina-based California Hospice Care, which Villabroza purchased in late 2007 while under investigation in the earlier case that later sent her to prison for 4½ years.
Between March 2009 and June 2013, California Hospice submitted nearly $9 million in fraudulent bills to Medicare and Medi-Cal for hospice-related services, and the public health programs paid nearly $7.5 million.
According to the indictment, the fraud at California Hospice involved Villabroza and her daughter paying patient recruiters known as “marketers” or “cappers” to bring in Medicare and Medi-Cal beneficiaries. As part of the scheme, registered nurses at the facility performed “assessments” to determine whether the beneficiary was terminally ill and, regardless of the outcome, two doctors at the hospice certified that the beneficiary was terminally ill – even though the vast majority of them were not dying. Personnel at California Hospice allegedly altered medical records in response to Medicare audits to make the beneficiaries appear sicker. In the end, Medicare and Medi-Cal paid millions of dollars for medically unnecessary hospice-related services.
On December 17, the other five defendants were taken into custody and were arraigned on the indictment. They are:
Villabroza’s daughter, Sharon Patrow, 43, of Placentia, who appeared to own California Hospice and who operated the facility with her mother;
Dr. Sri Wijegoonaratna, 60, of Anaheim Hills, a physician who worked at the hospice and allegedly recruited patients;
Dr. Boyoa Huang, 41, of Pasadena, another doctor at California Hospice;
Nancy Briones, 74, of Mira Loma, a registered nurse who also allegedly recruited patients to be “treated” at California Hospice; and
Roseilyn Montana, 52, of San Bernardino, who recruited patients.
All five of the defendants arraigned last week pleaded not guilty, were released on bond and were ordered to stand trial before United States District Judge S. James Otero on February 10.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
All six defendants are charged in 13 counts of health care fraud, an offense that carries a statutory maximum sentence of 10 years in prison for each count.
Villabroza and Patrow are each charged with 12 counts of money laundering, each one of which carries a potential sentence of 20 years in prison.
Villabroza is currently in federal prison serving a 54-month term after being convicted of running a health care fraud scheme involving unlicensed nurses (see:
http://www.justice.gov/usao/cac/Pressroom/pr2009/082.html).The investigation into California Hospice was conducted by the United States Department of Health and Human Services, Office of Inspector General, the Federal Bureau of Investigation, the California Bureau of Medi-Cal Fraud & Elder Abuse, and IRS – Criminal Investigation.
Release No. 14-165
Attorney Who Helped Owner of Marijuana Stores Launder Illegal Proceeds Pleads Guilty in Federal Money Laundering CaseRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 164SANTA ANA, California – An attorney who engaged in a conspiracy that allowed the owner of a chain of marijuana stores to hide some of his income has pleaded guilty to federal financial offenses.
Guilty pleas by Richard C. Brizendine, 59, of Long Beach, were entered Monday by United States District Judge James V. Selna. Monday’s action concludes proceedings in which Brizendine pleaded guilty to two counts: money laundering and conspiracy to structure cash deposits to avoid federal reporting requirements.
Brizendine was an attorney for John Melvin Walker, who operated marijuana stores across Los Angeles and Orange counties and generated approximately $25 million in income over a six-year period. Brizendine conspired with Walker and others to accept cash from the marijuana operation and invest the funds into several corporations. According to court documents, Brizendine agreed to accept more than $10,000 in cash and then make smaller deposits into different bank accounts so as to not trigger federal requirements that financial institutions report currency transactions of more than $10,000 (this process is called structuring cash transactions). By pleading guilty, Brizendine specifically admitted that he structured approximately $389,700 for Walker.
The case against Brizendine was announced today after Judge Selna unsealed documents associated with the case.
Last year, Walker was sentenced to nearly 22 years in federal prison for operating a chain of marijuana and failing to reporter millions of dollars in revenues was on his taxes (see: http://www.justice.gov/usao/cac/Pressroom/2013/096.html).
Judge Selna is scheduled to sentence Brizendine on May 4, 2015. At that time, Brizendine will face a statutory maximum sentence of 10 years in federal prison. Until that time, he will remain free on a $500,000 bond.
The investigation of Brizendine and the marijuana operation was conducted by the Orange County Sheriff’s Department; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; IRS-Criminal Investigation; the California Board of Equalization; the Orange County District Attorney’s Office; and the Federal Bureau of Investigation.
Release No. 14-164
Two Woodland Hills Men Charged with Running Ponzi Scheme Involving ATMs That Caused Investors to Lose Well over $100 MillionRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 163LOS ANGELES – Two San Fernando Valley men were charged today in a federal fraud case that alleges they ran a 15-year-long Ponzi scheme that collected hundreds of millions from investors who were told their money would be used to purchase profitable automated teller machines.
Joel Barry Gillis, 74, of Woodland Hills, and Edward Wishner, 76, also of Woodland Hills, were charged today with mail fraud and wire fraud in a case that caused well over $100 million in losses to nearly 2,000 investors.
According to the criminal information filed today in United States District Court, Gillis and Wishner operated the Calabasas-based Nationwide Automated Systems, Inc. (NASI), which purported to place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated over 30,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
The information further alleges that 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 20 percent on each ATM. In addition to these high-yields, NASI and its salespeople urged some investors to use their retirement savings “by claiming that investments in NASI’s sale/leaseback program would outperform most traditional retirement investment accounts,” according to the information.
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 hidden under the veil of a Ponzi scheme. 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 performance of the investors’ ATMs. In reality, the purpose of these reports was to conceal that the true source of the payments sent to investors were monies received from other investors. 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.
The scheme unraveled this past summer. In August, “NASI bounced approximately $3 million in checks that had been sent by NASI as monthly returns to victim-investors,” according to the criminal information. “By the end of the month, NASI had drained its bank account, drawing it down to a balance of less than $200,000.”
In response to hundreds of calls from victim-investors, Gillis and Wishner “falsely sought to reassure the victim-investors that NASI was only suffering from accounting problems and technical delays relating to system upgrades, and that timely payment of investor returns would likely resume by the beginning of October 2014.” Even as the Ponzi was collapsing, Gillis and Wishner allegedly continued to raise another $4 million from victim-investors.
The information filed today charged Gillis and Wishner with conspiracy, two counts of mail fraud and one count of wire fraud. If they are convicted, Gillis and Wishner each would face a statutory maximum sentence of 20 years in federal prison for each of the four charges.
Gillis and Wishner are expected to make their initial court appearances tomorrow afternoon in United States District Court.
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 September, which resulted in a court order freezing the company’s assets and having a receiver appointed to oversee the assets (see: http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).
Release No. 14-163
Seventh Los Angeles Sheriff’s Deputy Guilty of Obstructing Justice for Interfering with Civil Rights Investigation Sentenced to PrisonRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 161LOS ANGELES – The seventh and final deputy in the Los Angeles Sheriff’s Department convicted of obstruction of justice for interfering with a grand jury investigation into misconduct at the Men’s Central Jail was sentenced this morning to 18 months in federal prison.
James Sexton, 30, was sentenced by United States District Judge Percy Anderson, who said the defendant “lost the courage to stand up when he knew things were wrong.”
After his case was severed from the other six defendants in the case, Sexton was found guilty in September of attempting to quash an investigation by the FBI into civil rights abuses at jail facilities operated by the Sheriff’s Department. The jury determined that Sexton was part of a broad conspiracy to obstruct justice – a plot in which conspirators, including two lieutenants, attempted to influence witnesses, threatened an FBI agent with arrest and concealed an FBI informant who should have been turned over to federal authorities. Sexton was found guilty of conspiring to obstruct justice and obstruction of justice.
The conspiracy to obstruct justice began in the summer of 2011 after sheriff’s deputies assigned to the Men’s Central Jail learned that a jail inmate was an FBI informant and was acting as a cooperator in a federal investigation into corruption and civil rights violations at the jail. The evidence showed that the defendants learned that the inmate received a cellular phone from a deputy sheriff who took a bribe and that the inmate was part of a federal civil rights investigation. Those involved in the obstruction scheme took affirmative steps to hide the cooperator from the FBI and the United States Marshals Service, which was attempting to bring the inmate into federal custody pursuant to an order issued by a federal judge. As part of the conspiracy, records were altered to make it appear as if the cooperator had been released, but he was re-booked under different names.
The jury heard evidence that Sexton, who was part of a gang intelligence unit called Operation Safe Jails (OSJ), changed the name of the informant and his booking number in the jail computer system, which allowed members of the conspiracy to hide the informant from the FBI.
Sexton’s lieutenant “called him into the OSJ office and asked defendant Sexton to use his expertise in navigating the archaic LASD computer system to help [hide the informant] from the federal authorities,” prosecutors wrote in a sentencing document filed with the court. “Defendant knew he was being asked to become an essential part of a criminal plan. Defendant knew that he would be taking part in wrongdoing, and, as the conspiracy progressed, he knew time after time that the actions he took and those taken by his co-conspirators were wrong and illegal.”
Following the 1½-year prison term, which Judge Anderson ordered to begin on February 16, 2015, Sexton will be on supervised release for one year.
Six co-conspirators who were tried separated were found guilty of obstruction of justice and other charges earlier. They were sentenced in September to federal terms of up to 41 months (see: http://www.justice.gov/usao/cac/Pressroom/2014/127.html).
Release No. 14-161
Multi-Agency Investigation into East L.A. Street Gang Results in Federal RICO Indictment That Charges 38 GangstersRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 160LOS ANGELES – A task force investigation into the street gang that has terrorized the Ramona Gardens housing complex in Boyle Heights for decades has resulted in a federal racketeering indictment and the arrest this morning of 25 members and associates of the criminal enterprise.
During a law enforcement operation this morning, approximately 800 agents and officers targeted Big Hazard, a multi-generational street gang that has brought murder, extortion, robbery and other crimes to Boyle Heights for the past 70 years.
The federal indictment charges a total of 38 defendants. In addition to the 25 people arrested this morning, seven defendants were already in custody, authorities are searching for five fugitives, and one defendant was killed this past weekend.
(As a result of this investigation, another five people were indicted on narcotics charges, four of whom defendants were arrested this morning, bringing the total number of federal arrests today to 29).
A 110-page indictment unsealed this morning outlines criminal activity going back to 2007, including dozens of drug deals, acts of intimidation and violence against people believed to have cooperated with law enforcement, illegal weapons sales and threats made against African-American residents of Ramona Gardens, which includes tagging with phrases such as “no blacks.”
The Hazard gang takes its name from a park near Ramona Gardens and is currently believed to have approximately 350 members. Much of the conduct is alleged in a racketeering charge that outlines a conspiracy to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, which federal authorities in Los Angeles have successfully used for two decades to battle prison gangs and street gangs.
“All of the gang’s operations were done under the umbrella of intimidation – making threats and then committing acts of violence against rival gangsters, law-abiding members of the community and Hazard gang members who might be cooperating with authorities,” said Acting United States Attorney Stephanie Yonekura. “The intimidation and threats extended to African-American residents of Ramona Gardens. In stark and simple messages delivered in person and through graffiti, the Hazard gang made it clear that black residents were not welcome in the neighborhood that it claimed to control.”
The gang’s main business is drug trafficking, according to the indictment, which details more than three dozen narcotics transactions involving as much as nearly one-half pound of methamphetamine. To conceal this business and expand its territory, Hazard members take steps to prevent law enforcement from infiltrating its activities, steps that include CCTV surveillance at drug houses, making bogus complaints about police officers in an attempt to have them moved to patrol other areas of Los Angeles, and threatening and assaulting local residents who cooperate with law enforcement.
The Hazard gang is closely aligned with the Mexican Mafia, and many members of the prison gang have come from Hazard. The lead defendant in the 45-count indictment is Manuel Larry Jackson, also known as “Cricket,” a Mexican Mafia member who oversees the activities of the Hazard gang. The indictment alleges that under Jackson’s control, the gang commits a wide variety of crimes, most significantly drug trafficking, which generates revenues through the sale of narcotics and the “taxing” of drug dealers who operate in Hazard territory. Some of the revenues generated through “taxes” or “rent” are funneled back to Jackson and other members of the Mexican Mafia.
“Calling yourself a ‘taxing’ authority gets the attention of the Internal Revenue Service,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “The role of IRS Criminal Investigation in narcotics investigations is to follow the money so we can financially disrupt and dismantle major drug trafficking organizations. Undermining the financial infrastructure of narcotics trafficking organizations has proven to be one of the most effective means to disrupt the market for illegal drugs.”
The federal indictment that led to this morning’s takedown charges a total of 38 defendants (although one of those defendants was killed this past weekend). Including Jackson, 29 of the defendants are charged in a racketeering conspiracy count that outlines activities of the gang, its allegiance to the Mexican Mafia and the various tactics it employs to impose fear in the community. The indictment also alleges several violent acts in aid of racketeering, about three dozen narcotics offenses and several crimes related to the illegal possession of firearms.
“Because of defendant Jackson’s power as a Mexican Mafia member and his connection to Hazard, Hazard members and associates have unique authority to engage in criminal activities, such as the sales of drugs and firearms outside of Hazard territory without the risk of violent reprisal that Latino gang members ordinarily would suffer for engaging in such criminal activities in territories controlled by other Latino gangs,” according to the indictment, which alleges that the gang “is continually engaged in the distribution of methamphetamine, phencyclidine (PCP), cocaine, cocaine base in the form of crack cocaine, heroin, and other controlled substances.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
Nearly all of the defendants are charged in the RICO count and/or a drug trafficking conspiracy, each of which carries a mandatory minimum penalty of 10 years in federal prison. The maximum statutory penalty for those convicted of those counts would be life without parole.
The investigation into the Hazard gang was conducted by the Federal Bureau of Investigation; the Los Angeles Police Department; the Bureau of Alcohol, Tobacco, Firearms and Explosives; and IRS – Criminal Investigation, which worked in conjunction with the Los Angeles County Sheriff’s Department and the Alhambra Police Department.
Release No. 14-160
Leader of Fraudulent Internet Firm and Longtime International Fugitive Sentenced to 10 Years in Federal PrisonRead the Press Release
SANTA ANA, California – A former Newport Beach resident who was a fugitive for well over a decade was sentenced today to 120 months in federal prison for running a fraudulent Internet company that bilked hundreds of victims out of approximately $13 million.
James Eberhart, 73, was sentenced this morning by United States District Judge Cormac J. Carney. In addition to the prison term, Judge Carney ordered Eberhart to pay $12,838,045 in restitution to more than 800 victims across the United States.
Eberhart pleaded guilty in September to two counts of mail fraud. His prosecution in United States District Court follows Eberhart's arrest in Malaysia in 2012 after he was a fugitive for more than 12 years.
In the late 1990s, Eberhart and co-defendant Eugene M. Carriere operated a fraudulent Newport Beach company called YES Entertainment Network, Inc. According to court documents, they used dozens of “boiler room” telemarketing firms and a Hollywood celebrity spokesman to raise millions of dollars by telling investors that YES was creating an 18-channel, multimedia, family-oriented website that would carry various forms of entertainment programs.
Investors were told that YES would generate profits through the sale of advertising on the website, and that their investment funds would be used to build and market the website. Eberhart and Carriere also told investors that the company planned an initial public offering of its stock for the fall of 1999, which would potentially make early investments worth millions of dollars.
These claims were false. Only 1 percent of investor funds were used to build the YES website, which was little more than a façade used to reassure investors. No money was used for advertising, but approximately 45 percent of the funds were used to pay sales commissions to the telemarketers. Most of the rest of the money was wired to bank accounts in Hong Kong and Singapore that Eberhart had formed with the help of an attorney.
In late 1999, while Eberhart was under investigation by the U.S. Securities and Exchange Commission for an earlier investment fraud scheme, and shortly after FBI agents had executed search warrants at the offices of telemarketing companies affiliated with YES, Eberhart, Carriere, and another employee destroyed company documents and fled the country. Carriere was a fugitive for six years before being arrested in Thailand in April 2005. In 2007, Carriere pleaded guilty to two counts of mail fraud and was sentenced to three years in federal prison and ordered to pay $12,838,045 in restitution.
In addition to Carriere, five other defendants – including the owners of telemarketing operations used by YES – were indicted, pleaded guilty, and were sentenced to as much as 142 months in federal prison.
Eberhart remained a fugitive until May 2012, when the FBI Legal Attaché in Kuala Lumpur, acting on a tip that Eberhart was residing in Malaysia, coordinated with Malysian authorities to arrest him. At the time of his arrest, Eberhart was living on a custom-built, 58-foot yacht, which he has entered into sailboat races. Prosecutors said that after Eberhart fled, he asked a Costa Rican family to legally adopt him – at age 58 – so that he could become a Costa Rican citizen, which would prevent the Costa Rican government from extraditing him to the United States.
The criminal case against Eberhart and the other defendants is the result of an investigation by the Federal Bureau of Investigation and the U.S Postal Inspection Service. The SEC provided substantial assistance on the case.
Release No. 14-158
Doctor Sentenced to 2 Years in Prison in Medicare Fraud SchemeRead the Press Release
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USDOJ: US Attorney's Office - CENTRAL DISTRICT OF CALIFORNIA - 159LOS ANGELES – A Los Angeles-area physician whose referrals led to more than $1.7 million in fraudulent Medicare billings was sentenced this afternoon to 24 months in federal prison for his role in a conspiracy to defraud Medicare related to medically unnecessary power wheelchairs and other durable medical equipment.
Charles Okoye, a 52-year-old Carson resident who formerly operated a medical clinic in South Los Angeles, was sentenced by United States District Court Judge Michael W. Fitzgerald, who also ordered the defendant to pay $931,118 in restitution.
Okoye pleaded guilty in August and admitted that he referred Medicare beneficiaries to a Gardena durable medical equipment supply company for power wheelchairs and other durable medical equipment (DME). These beneficiaries had been recruited by employees of Adelco Medical Distributors, Inc. and taken to see Okoye for a single, cursory examination, after which Okoye made the referrals to Adelco.
Adelco’s owner, Adeline Ekwebelem, paid Okoye an illegal kickback for every referral, and then billed Medicare more than $1.7 million for providing the DME, which the beneficiaries did not need or want and often never used. Medicare paid Adelco more than $820,000 on those claims. Ekwebelem was found guilty in September of conspiracy to commit health care fraud, health care fraud, and the payment of illegal kickbacks (see: http://www.justice.gov/usao/cac/Pressroom/2014/122.html). Judge Fitzgerald is scheduled to sentence Ekwebelem on January 15.
Okoye admitted that he engaged in a similar unlawful arrangement with another DME company, Esteem Medical Supply.
As a result of his guilty plea and conviction, Okoye’s medical license will likely be suspended for at least three years, and he will likely lose his ability to bill Medicare and Medi-Cal for patient services in the future.
The investigation into Okoye, Ekwebelem, and others involved with Adelco’s fraudulent scheme to defraud Medicare was conducted by the U.S. Department of Health and Human Services, Office of the Inspector General, and the Federal Bureau of Investigation.
Release No. 14-159
San Gabriel Man Sentenced to Federal Prison in Scheme in Smuggling Protected Turtles from U.S. to Hong KongRead the Press Release
LOS ANGELES – A San Gabriel man who attempted to smuggle nearly four dozen turtles from Southern California to Hong Kong has been sentenced to federal prison.
Kwong Wa Cheung, 36, was sentenced Tuesday to two months in federal prison. Following the completion of the prison term, Cheung will be on supervised release for two years, during which time he will serve two months in a residential re-entry center (a “halfway house”) and perform 500 hours of community service at an animal shelter.
Cheung was sentenced by United States District Judge John F. Walter, who also ordered the defendant to pay a $12,000 fine.
When Cheung attempted to smuggle the 46 turtles and tortoises to Hong Kong, he brought three boxes containing the animals to a United States Postal Service facility in San Gabriel. Cheung used a fake name and address on the packages, and declared that the content of the packages were “Toys (Acces Model).” The fake name that Cheung used aroused suspicion, and the Postal Service refused to ship the packages.
Because he used a fake name, the Postal Service could not locate Cheung and it began processing the undelivered packages for shipment to a “dead mail” facility in Georgia. But, after several days, at least one of the packages began to emit a strong odor because one of the now-dead turtles was already decomposing. When a Postal Inspector opened one of the packages, he found the reptiles packaged in athletic socks. Subsequent investigation allowed authorities to link Cheung to the mislabeled packages.
The turtles being smuggled were 26 Eastern Box turtles and 20 African Spurred tortoises. Both species are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
Cheung pleaded guilty in August to one count one of mislabeling wildlife intended for foreign commerce.
Judge Walter ordered Cheung to begin serving his sentence on or before February 15, 2015.
The case was investigated by the U.S. Fish and Wildlife Service and the United States Postal Inspection Service. The Los Angeles Zoo and Botanical Gardens provided assistance in identifying the species.
Release No. 14-156
Ex-Employee at Federal Prison in San Pedro Pleads Guilty to Accepting Bribe to Smuggle Mobile Phone into FacilityRead the Press Release
LOS ANGELES – A Lake Elsinore man who was employed as a correctional officer at the Federal Correctional Institution, Terminal Island has pleaded guilty to a federal bribery charge for taking $1,000 in cash to smuggle a cell phone into the prison facility.
Luis Borjon, 52, pleaded guilty on Tuesday to the felony charge and admitted that he took the payment while employed as a correctional officer by the United States Bureau of Prisons.
Borjon pleaded guilty before United States District Judge R. Gary Klausner, who is scheduled to sentence the defendant on February 23, 2015. At sentencing, Borjon will face a statutory maximum sentence of 15 years in federal prison.
According to court documents, Borjon approached an inmate under his supervision at the Terminal Island prison in November 2012 and solicited a “loan.” The inmate put Borjon in contact with the inmate’s brother, who was not in custody, and Borjon called the inmate’s brother to provide him with the number for Borjon’s “burner cell phone” (a disposable phone).
The inmate’s brother met Borjon in January 2013 at a gas station in Lake Elsinore, where Borjon accepted approximately $1,000 in cash and a cell phone to smuggle into the prison. Borjon subsequently smuggled the cell phone into the Terminal Island facility and delivered it to the inmate. Soon after, other correctional officers found and seized the smuggled cell phone.
After being indicted by a federal grand jury in June, Borjon was arrested on September 16. He was subsequently freed on bond.
The Borjon investigation was conducted by the United States Department of Justice Office of the Inspector General and the Federal Bureau of Investigation. The Drug Enforcement Administration provided assistance during the investigation.
Release No. 14-157
Rite Aid Corporation Pays $2.99 Million for Alleged Use of Gift Cards to Induce Medicare and Medicaid Patients to Transfer PrescriptionsRead the Press Release
LOS ANGELES – Rite Aid Corporation has paid the United States $2.99 million to resolve allegations that it violated the False Claims Act by inappropriately using gift cards as inducements, the Department of Justice announced today.
The settlement resolves allegations that Rite Aid offered illegal inducements to Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies. The government alleged that, from 2008 to 2010, Rite Aid knowingly and improperly influenced the decisions of Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies by offering them gift cards in exchange for their business.
“This settlement holds Rite Aid accountable for exerting undue influence on individuals when they make important healthcare decisions about where and when to fill prescriptions,” said Acting U.S. Attorney Stephanie Yonekura. “Corporate profit should never steer an individual away from making the right healthcare decision.”
Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division stated: “This case demonstrates the government's ongoing commitment to enforcing accountability, transparency and fairness in the retail pharmacy industry. The government will continue to advocate for the best interests of Medicare and Medicaid patients, and prevent pharmacies from improperly manipulating their healthcare choices.”
The settlement, which was announced today after a federal judge last week unsealed part of the case, resolves allegations filed by a Florida pharmacist under the qui tam, or whistleblower provisions of the False Claims Act, which authorizes private parties to sue for fraud on behalf of the United States and share in the recovery.
“Pharmacies are not allowed to improperly influence the decision-making of Medicare and Medicaid patients about where to fill prescriptions,” said Special Agent in Charge Glenn R. Ferry for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Pharmacy chains that manipulate patient choices in this way will be held accountable.”
Rite Aid is a Delaware corporation and national retail drugstore chain with its principal place of business in Camp Hill, Pennsylvania,
This case was investigated jointly by the United States Attorney’s Office, the Commercial Litigation Branch of the Justice Department’s Civil Division, the National Association of Medicaid Fraud Control Units and HHS-OIG.
The claims settled by today’s agreement are allegations only and there has been no determination of liability.
Release No. 14-155
L.A.-Area Medical Professional Sentenced to 3 Years in Federal Prison for Role in Scheme to Bilk Medicare Out of $7 MillionRead the Press Release
LOS ANGELES – A Los Angeles physician’s assistant was sentenced today to three years in federal prison for defrauding Medicare out of millions of dollars by signing fraudulent prescriptions and other medical documents for durable medical equipment (DME) while working at two separate medical clinics in the Los Angeles area.
Erasmus Kotey, 78, of Montebello, was sentenced this afternoon by United States District Judge Margaret M. Morrow. In addition to the 36-month prison term, Judge Morrow ordered Kotey to pay approximately $3.5 million in restitution to the Medicare program.
Kotey pleaded guilty in March to one count of health care fraud and one count of conspiracy to commit health care fraud in two separate cases. In a plea agreement filed earlier this year in United States District Court, Kotey admitted that he engaged in a scheme to commit health care fraud while working as a physician’s assistant at a clinic located at 866 North Vermont Avenue in Los Angeles. (A co-conspirator in this scheme was Susanna Artsruni, a North Hollywood woman who was sentenced to over 6 years in prison for causing $25 million in fraudulent claims to be submitted to Medicare, see: http://www.justice.gov/usao/cac/Pressroom/2014/043.html).
In addition to his role in the scheme at the clinic on North Vermont, Kotey admitted that he engaged in a conspiracy to commit health care fraud through his work as a physician’s assistant at a clinic at 943 South Atlantic Boulevard in Monterey Park.
At both clinics, Kotey signed prescriptions and other medical documents for medically unnecessary power wheelchairs and other DME. Using these fraudulent prescriptions, DME supply companies submitted fraudulent claims to Medicare.
Kotey also ordered medically unnecessary diagnostic testing at the North Vermont clinic.
In the two cases combined, Kotey’s fraudulent prescriptions resulted in approximately $7 million in false and fraudulent claims to Medicare. Medicare paid approximately $3.5 million on those claims.
Kotey remains free on bond and has been ordered to self-surrender in August 2015 after completing a course of medical treatment.
The cases against Kotey are the product of investigations by the Federal Bureau of Investigation; the U.S. Department of Health and Human Services, Office of Inspector General; and IRS – Criminal Investigation.
The cases were brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.
Release No. 14-154
San Fernando Valley Doctor Resolves Lawsuit That Alleged Fraudulent and Improper Pain Management Billing PracticesRead the Press Release
SANTA ANA, California – A doctor who operates a pain management clinic in Valencia has agreed to pay $1.2 million to resolve allegations that he submitted fraudulent bills and received improper payments from federal and state health insurance programs.
In a case partially unsealed today, Dr. Narinder S. Grewal, of Chatsworth, and his pain clinic, the Santa Clarita Surgery Center for Advanced Pain Management agreed to pay $1,087,176 to the United States and $112,823 to the State of California.
The settlement concludes a federal “whistleblower” lawsuit filed by a billing agent, who used to provide billing and collection services to the Grewal’s clinic.
The lawsuit alleged that Grewal and his clinic obtained improper reimbursements from government-run health insurance programs, including Medicare, Medi-Cal and Tricare, a federal health insurance program for military and related military personnel. The lawsuit alleged that Grewal and his clinic submitted fraudulent claims by “upcoding” medical services, which means that he allegedly submitted bills that were not justified by the services that were actually provided.
The settlement was announced today after United States District Judge Andrew J. Guilford unsealed the lawsuit. The parties have asked the court to dismiss the suit, which was filed pursuant to federal and state False Claims Acts.
The whistleblower provisions of the False Claims Acts permit a private person to sue on behalf of the United States and California, and to share in the proceeds of the suit. As a result of the settlement announced today, the billing agent will receive a total of $204,000.
The case was handled by the United States Attorney’s Office and the California Attorney General’s Office, in conjunction with the Department of Health and Human Services, Office of Inspector General, and the Department of Defense, Defense Criminal Investigative Service.
Two Inland Empire Men Plead Guilty in String of ATM RobberiesRead the Press Release
RIVERSIDE, California – Two men responsible for a series of ATM robberies in which they used power tools and a truck to forcibly open safes inside drive-up ATMs at facilities operated by JP Morgan Chase Bank have pleaded guilty to participating in a conspiracy that stole nearly a half million dollars.
David Joseph Silva Jr., 25, of Fontana, pleaded guilty today to conspiracy to commit bank larceny, a charge that carries a statutory maximum penalty of five years in federal prison.
Silva pleaded guilty before United States District Judge Jesus G. Bernal, who scheduled a sentencing hearing for February 23.
Last Monday, James William Costilow, 38, of Riverside, pleaded guilty to the same conspiracy charge. Judge Bernal scheduled Costilow's sentencing hearing for February 9.
During their guilty pleas, Silva and Costilow admitted that they attempted to break into Chase Bank ATMs in three counties 15 times over a six-month period. The pair successfully got into the safes inside ATMs on four occasions and conspired to steal approximately $462,093 in cash. In some of the thefts, the pair stole the entire ATM device, while in later attempts they used power saws or a “jaws of life” device to gain access to the safe inside the ATMs.
Silva and Costilow were arrested on September 22 after an unsuccessful ATM robbery in Murrieta, in which they first attempted to cut the hinges on the safe doors and then tried to pull the doors off with a truck. The attempt failed when the bumper came off the truck.
This case is the product of an investigation by the FBI and the Murrieta Police Department.
Release No. 14-152
San Diego Man Who Ran Scam That Offered Investments in ‘Reverse Life Insurance’ Policies Convicted of Federal Fraud ChargesRead the Press Release
SANTA ANA, California – The founder and chief executive officer of a firm that solicited more than $5 million from victims who thought they were investing in “reverse life insurance” policies has been found guilty of federal fraud charges.
Daniel Christian Stanley Powell, 33, of San Diego, was convicted Monday afternoon of five counts of mail fraud and five counts of wire fraud, as well as three counts of obstruction of justice. The verdicts followed a three-week trial and prompted United States District Judge Josephine L. Staton to remand Powell into custody pending sentencing.
According to the evidence presented at trial, Powell told investors in Christian Stanley that he would use their money to purchase life insurance policies from insured individuals, at which point the company would pay the monthly premiums and become the beneficiaries to the policies. Powell claimed that Christian Stanley would profit by collecting the death benefits when the insureds died or by selling the policies on the life settlement market. Powell, who started the Los Angeles-based Christian Stanley, Inc., trademarked the term “reverse life insurance” and sought to take his company public by filing documents with the Securities and Exchange Commission.
Powell, who also told some victims that their money would be invested in gold mines, claimed that investments were safe because his company already owned $1.9 billion in reverse life insurance policies in a mutual fund. Contrary to his promises, however, the evidence demonstrated that Christian Stanley did not own any life insurance policies or any working mines and had earned only $31,250 in revenue since its inception.
In total, approximately 50 victims invested a total of approximately $5.2 million. The victims, who were located throughout the United States, invested directly through Powell, other representatives of Christian Stanley, or their own financial advisors. Victims lost approximately $4 million as a result of the scheme, which included funds that had been invested through individual retirement accounts.
Powell used victims’ money to make Ponzi-scheme payments to some investors, to pay commissions to representatives who recruited investors, and to create promotional materials, which gave the appearance that Christian Stanley was a legitimate and successful business. Powell also spent victims’ funds on a luxury apartment on the west side of Los Angeles, Ferrari and Porsche automobiles, and a $35,000 donation to Usher’s New Look foundation, which got him a photograph with former President Bill Clinton that was used as part of Christian Stanley’s promotional materials.
On September 2, 2011, the U.S. Securities and Exchange Commission filed a civil complaint against Powell and Christian Stanley (Securities and Exchange Commission v. Christian Stanley, Inc., et al., CV11-7147-GHK). The evidence at the criminal trial showed that Powell knowingly drafted false affidavits to use in his defense to the SEC case and that he lied to the victims about his assets and promised to return their money if they signed the false affidavits. This criminal conduct led to the convictions on the obstruction of justice charges.
Powell is scheduled to be sentenced by Judge Staton on March 13, 2015, at which time the defendant will face a statutory maximum sentence of 260 years in federal prison.
The case against Powell is the result of an investigation by the Federal Bureau of Investigation.
Release No. 14-150
Loomis Armored Transport Drivers Arrested in Plot to Steal More Than $1 Million Being Transported for Federally Insured BankRead the Press Release
LOS ANGELES – Two armored truck drivers for Loomis were arrested this morning on federal charges related to a scheme in which they stole more than $1 million in cash, part of a shipment that was being transported for Bank of America
Cesar Yanez, 37, of Fontana, and Aldo Esquivel Vega, 28, of Pomona, were arrested this morning without incident by special agents with the FBI and officers with the Los Angeles Police Department. In relation to search warrants executed this morning, agents found approximately $85,000 in cash at the home of Yanez.
A third person involved in the scheme, Jovita Medina Guzman, 39, of San Bernardino, was also arrested this morning for helping her co-defendants hide and disperse the stolen funds and for being an accessory after the fact.
All three defendants are expected to be arraigned on a four-count indictment this afternoon in United States District Court.
The indictment, which was returned by a federal grand jury on November 7 and unsealed this morning, alleges that Yanez and Vega, while employed by Loomis on June 27, were transporting a multi-million dollar shipment of cash for Bank of America when they stopped in a parking lot on West Adams Boulevard. Vega electronically opened the rear doors of the armored car, which allowed Yanez to access the cash storage area of the vehicle. Yanez removed $1,086,000 in cash from the armored car and placed it into a trash can that had been left in the parking by an as-yet-unidentified person, who later picked up the trash can and recovered the stolen money. Later, Guzman allegedly delivered some of the stolen money to Vega.
Yanez and Vega are each charged with conspiracy to commit bank larceny and bank larceny. Additionally, Yanez and Guzman are charged with Possession of Bank Larceny Proceeds, and Guzman is charged as an accessory after the fact to hinder and prevent her co-defendants’ apprehension, trial, and punishment.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
If they are convicted of the offenses alleged in the indictment, Yanez would face a statutory maximum sentence of 25 years in federal prison; Vega would face up to 15 years; and Guzman could be sentenced to as much as 15 years in custody. Additionally, each of the defendants could be ordered to pay fines of as much as two times the loss suffered by Bank of America.
The investigation into the theft of bank funds was conducted by the Federal Bureau of Investigation and the Los Angeles Police Department.
Release No. 14-151
San Fernando Valley Pastor Sentenced to over 10 Years in Prison for Running $7 Million Ponzi That Targeted Spanish-Speaking InvestorsRead the Press Release
LOS ANGELES – A Chatsworth man has been sentenced to 121 months in federal prison for running an investment scheme that lured more than 82 victims into investing approximately $7 million.
Luis Alonso Serna, 61, a pastor at Zion Living Word Christian Center (formerly Amistad Cristiana) in San Fernando who operated a foreign currency investment company called Architects of the Future Investments, was sentenced Monday by United States District Judge Beverly Reid O’Connell.
Serna, who pleaded guilty in August to a wire fraud charge, was also ordered to pay $4.6 million in restitution, which represents to amount of losses suffered by his victims.
“This case involves an egregious fraud that targeted the non-wealthy victims who believed in the defendant because he was a pastor,” prosecutors wrote in a sentencing memorandum filed with the court. “The effects of this crime on the victims are truly devastating in every way.”
According to court documents, Serna solicited loans from individuals by telling them that the money would be invested in foreign currency and that their investments would generate annual returns as high as 20 percent. Serna admitted in his plea agreement that he invested only a small portion of the loan proceeds in foreign currency or anything else that could possibly sustain the returns he promised his victims. Serna was in fact running a Ponzi scheme in which he used money from new investors to pay off and placate people who had previously given him money.
“In short, [Serna] has caused not only financial loss, but the loss of homes, the loss of ability to pay for education for children, the need to declare bankruptcy, psychological damage, physical affliction, and endless suffering,” according to the sentencing memo, which contained numerous statements from victims who suffered adverse effects when they lost their money.
This case was investigated by the United States Postal Inspection Service and the Federal Bureau of Investigation.
Release No. 14-149
Armenian Power Leader Sentenced to 32 Years in Federal Prison for Racketeering, Extortion and Sophisticated Fraud SchemesRead the Press Release
LOS ANGELES – A leader of the Armenian Power gang, who was convicted at trial of 57 counts for his role in a racketeering conspiracy that included extortion, bank fraud, and a sophisticated credit and debit card skimming scheme, was sentenced this afternoon to 32 years in prison.
Mher Darbinyan, 39, of Valencia, was sentenced by U.S. District Judge R. Gary Klausner, who described the defendant’s string of crimes as “heinous.”
Darbinyan – who was also known as “Hollywood Mike” and “Capone” – was a leader of Armenian Power, a gang responsible for extortion, firearms offenses, fraud and identity theft throughout the Los Angeles area. Among other offenses, Darbinyan operated a sophisticated bank fraud scheme that used middlemen and runners to deposit and cash hundreds of thousands of dollars in fraudulent checks drawn on the accounts of elderly bank customers and businesses.
Darbinyan also organized and operated a sophisticated debit card skimming operation targeting customers of 99 Cents Only Stores across Southern California. This expansive scheme involved the installation and use of skimmers to steal thousands of customers’ debit card numbers and PIN codes.
Evidence presented during a trial earlier this year also showed that Darbinyan conspired to extort money from a member of the Armenian community by threatening violence against the victim and his family members. Additionally, on two separate occasions, Darbinyan possessed firearms and ammunition after having previously been convicted of felony grand theft for his role in a 2004 debit card fraud scheme.
“No community is safe from defendant -- not the members of his own Armenian-American community and not the members of the multiple communities throughout Southern California that he has victimized through his widespread fraud schemes,” prosecutors wrote in a sentencing memorandum filed with the court that recommended the 32-year sentence.
Darbinyan was among 90 individuals charged in 2011 in two indictments targeting Armenian Power. To date, 87 individuals have been convicted (two defendants are fugitives, and prosecutors dismissed charges against one defendant). According to evidence presented during the Armenian Power trials, the street gang – which is believed to have more than 250 documented members and hundreds of associates – is responsible for violent criminal acts, including murders, attempted murders, kidnappings, robberies, extortions and witness intimidation.
The Armenian Power cases were investigated by the Eurasian Organized Crime Task Force, which is comprised of the FBI, the Glendale Police Department, the Los Angeles Police Department, the Burbank Police Department, the Los Angeles Sheriff’s Department, Internal Revenue Service – Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Secret Service. The Huntington Beach Police Department and Beverly Hills Police Department provided assistance.
The cases are being prosecuted by the United States Attorney’s Office and the Organized Crime and Gang Section in the Criminal Division at the Department of Justice.
Release No. 14-148
Operation ‘Cat Eyes’ Targets Illegal Sale of ‘Misbranded’ and Adulterated Cosmetic Contact Lenses That Pose Risk to EyesightRead the Press Release
LOS ANGELES – Federal prosecutors this week filed a series of criminal charges against Los Angeles-area retail outlets, as well as their owners and managers, that allegedly sold contact lenses without prescriptions – some of which were contaminated with dangerous pathogens.
Two criminal informations filed this morning, as well as four additional informations filed on Tuesday, charge a total of 12 defendants with the illegal sale of decorative and cosmetic contact lenses.
All six cases allege that the defendants sold “misbranded” contact lenses because they were sold without prescriptions.
Two of the cases also allege that the defendants sold adulterated contact lenses that were contaminated with bacteria known as Bacillus cereus. According to court documents, the Bacillus cereus bacterial strain can cause severe infections that, even with prompt treatment, can lead to blindness.
The cases filed this week are the result of Operation “Cat Eyes,” an investigation that 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.
Operation Cat Eyes targeted retail stores – some of which were opened specifically for Halloween – that sold cosmetic and decorative contact lenses without a prescription to unsuspecting consumers in Southern California.
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.
The six cases filed this week in United States District Court in Los Angeles charge these defendants:
• Halloween and Party Discounters, Inc. (which operated as a booth at the Los Angeles Fair in Pomona); Mike Honabach, 45, of Highland, the owner of Halloween and Party Discounters, Inc.; Intertrade Imports, Inc., a Jacksonville, Florida company; and Eunju Kang Savvidis, 53, of Jacksonville, the manager of Intertrade, were charged today with one count of introducing adulterated devices into interstate commerce for selling bacteria-adulterated lenses at the County Fair (Honabach and his company were charged in two additional counts with receipt of bacteria-adulterated contact lenses and with sale of misbranded contact lenses);
Aspirational International, Inc., a Hong Kong corporation that was charged today with offering misbranded contact lenses for sale at http://www.colorlens4less.com/;
Doris Owusu Ansah, 54, of West Covina, the owner of Sunset Beauty Salon in West Covina, who is charged with selling a misbranded pair of contact lens on October 16;
Jung Rae Jo, 60, of Cerritos, the owner of Fashion Young in Westminster, who allegedly sold four pairs of misbranded contact lenses to two undercover FDA investigators on October 14;
CKL Fashion, Inc. (a Corona-based company that operates T-Shirt Mart in Glendale) and its manager, Young Kim, 51, of La Crescenta, who allegedly sold two pairs of misbranded contact lenses to an undercover FDA investigator on October 14; and
HTS General, Inc. (doing business as the Halloween Superstore on North Glendale Avenue in Glendale; Zinaida Khrimyan, 25, of Glendale, the owner of HTS; and Patrick Abedi, 30, of Glendale, the store manager for HTS, who allegedly sold a pair of misbranded contact lenses on October 14.
All 12 defendants will be issued summonses directing them to appear for arraignments in federal court in Los Angeles on December 9.
All of the charges filed in Operation Cat Eyes 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 FDA has issued various warnings against the use of cosmetic contact lenses (for example: http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm402704.htm).
Release No. 14-147
Founder of Bankrupt O.C. Real Estate Investment Firm Pleads Guilty in Fraud Scheme That Resulted in $110+ Million BankruptcyRead the Press Release
SANTA ANA, California – One of the owners of a now-defunct Southern California real estate investment firm pleaded guilty today to perpetrating a fraudulent scheme that ended with the bankruptcy of the company, in which investors and banks collectively lost more than $110 million.
John Packard, 64, of Long Beach, pleaded guilty to one count of mail fraud before United States District Judge Cormac J. Carney.
During today’s hearing, Packard admitted bilking investors in Pacific Property Assets (PPA), which had offices in Long Beach and Irvine. Packard and his co-defendant, Phoenix resident Michael J. Stewart, created PPA in 1999 to purchase, renovate, operate and resell or refinance apartment complexes in Southern California and Arizona. Typically, PPA financed property acquisitions through mortgages, and it raised money from private investors to pay for renovations to the properties. After several years, PPA would usually refinance (or sometimes sell) each property.
Although PPA’s apartment rental operations were not profitable, it was able to raise cash through refinancing and selling properties. As real estate values were generally increasing until approximately 2007, the properties were refinanced at ever-higher values, which enabled PPA to use the extra refinancing proceeds to not only pay off the original mortgages, but also to make payments on other loans, make payments to investors, and to pay Stewart and Packard. In its 10 years of operations, PPA acquired more than 100 real estate properties and raised tens of millions of dollars from hundreds of investors.
By the end of 2007, when the real estate market began to decline and credit became scarce, PPA’s business model was no longer feasible. To keep PPA afloat, from late 2007 through April 2009, Stewart admitted today that he and Packard continued to raise tens of millions of dollars from new investors. The defendants used those new funds to pay earlier investors, mortgage lenders, other company expenses, and Stewart and Packard themselves. Packard admitted that by October 2008, he and Stewart knew that PPA was dependent on these investor loans to make its monthly debt payments and continue operating, and was unable to raise money through other means.
Packard also admitted that during the course of this continued fundraising effort, Stewart – with Packard’s knowledge and consent – misrepresented PPA’s financial condition, claiming that its business model was still working, and that PPA was still financially stable and able to raise money through refinancing. Stewart and Packard concealed from investors the fact that the business had effectively become a Ponzi scheme, using new investors’ funds to pay back earlier investors. Moreover, following PPA’s final investor offering in 2009, virtually none of the investors’ approximately $9.23 million in funds were used to invest in new property purchases, as had been promised to investors; instead, the money was used to pay earlier investors and banks, to pay Stewart and Packard, and to pay PPA’s bankruptcy attorney.
PPA and a group of related companies filed for bankruptcy in June 2009. When the bankruptcy was filed, PPA owed 647 private investors more than $91 million, and it owed banks approximately $100 million. In the bankruptcy proceedings, the private investors received nothing, while banks lost an estimated $24 million.
Packard faces a statutory maximum sentence of 20 years in federal prison when he is sentenced by Judge Carney on May 18, 2015.
Stewart is scheduled to go on trial on April 14, 2015.
The investigation in this case was conducted by the Federal Bureau of Investigation, which received assistance from the United States Trustee’s Office.
Release No. 14-146
Former Studio Money Man Sentenced to Federal Prison for EmbezzlementRead the Press Release
LOS ANGELES – A former finance manager of a television production studio was sentenced this morning to two years in federal prison for embezzling approximately $2.5 million from the Culver City company.
Nolan Mitchell Ransdell, 41, of Canyon Country, was sentenced by United States District Judge George Wu. In addition to the prison term, Judge Wu ordered Ransdell to pay $2,458,589 in restitution.
Ransdell previously pleaded guilty to bank fraud and admitted that he stole money from his employer, Studio Lambert USA, which is now known as All3Media America. Ransdell embezzled the money in several ways, including forging an executive’s signature on checks Ransdell had made out to himself. Ransdell also took checks that the executive had pre-signed for “emergency” use and made himself the payee. In addition, Ransdell made checks payable to a subordinate, and then instructed that employee to cash the checks and return the money to him. Ransdell also made unauthorized cash withdrawals from Studio Lambert’s bank accounts.
Studio Lambert USA, a subsidiary of a British studio, produced television shows for distribution in the United States, including Undercover Boss. Studio Lambert’s parent company noticed that the accounting for the production accounts was not consistent with the accounting for the corporate accounts. When asked to explain the differences, Ransdell made up excuses, for instance, saying that discrepancies were the result of payment delays in connection with prepaid debit cards. Once it realized it was the victim of embezzlement, Studio Lambert contacted the FBI and assisted in the investigation.
The case against Ransdell is the result of an investigation by the Federal Bureau of Investigation.
Release No. 14-145
Inglewood Gang Member Sentenced to Nearly 5 Years in Prison for Running Identity Theft Ring the Produced Counterfeit Credit CardsRead the Press Release
LOS ANGELES – An Inglewood gang member was sentenced this afternoon to 57 months in federal prison for running an identity theft ring that victimized scores of individuals and merchants in three states, resulting in an estimated $1 million in financial losses.
Lancelot Joshua Wilburn, who used the moniker “El Dog,” 33, a member of the Queen Street Bloods street gang, was sentenced today by United States District Judge Dolly M. Gee. In addition to the prison term, Judge Gee ordered the defendant to pay just over $50,000 in restitution.
Wilburn pleaded guilty in June to four felony counts: possessing counterfeit or unauthorized access devices (credit cards), possessing device-making equipment, using counterfeit access devices and aggravated identity theft.From January 2011 to May 2012, Wilburn and his co-conspirators used stolen account numbers, counterfeit credit cards, and fake drivers’ licenses to rent cars and purchase luxury items in California, Nevada and Kansas. Wilburn and those acting at his direction converted merchandise into cash by repeatedly exchanging fraudulently purchased items for other luxury goods, gift cards and cash refunds.
The stolen personal identifying information came from stolen medical intake forms, Russian computer hackers and other sources. According to court records, authorities executed a search warrant on Wilburn’s apartment in May 2012. Inside the residence, agents found a counterfeit credit card manufacturing plant, hundreds of stolen medical profiles, counterfeit credit cards, counterfeit currency, counterfeit drivers licenses, stolen credit reports, 770 stolen credit card numbers and 166 counterfeit American Express Traveler’s Checks.
Wilburn continued his criminal activity even after being arrested in Kansas in 2012 in relation to the use of counterfeit credit cards. While in custody there, Willburn threatened to kill a cooperating witness, and he directed others to destroy evidence and remotely “wipe” his seized cell phones. While he was free on bond in the Kansad case, Wilburn directed associates to steal more medical profiles, and to raise additional money for his defense by using the counterfeit credit cards at Nordstroms, Saks Fifth Avenue and other retailers.
In a sentencing memo filed with the court, prosecutors wrote that Wilburn “has mocked the criminal justice system by threatening violence against cooperators, attempting to bribe witnesses, and destroying evidence.”The case against Wilburn was the result of an investigation by the United States Secret Service. The United States Department of Housing and Urban Development – Office of Inspector General; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Inglewood Police Department; the Los Angeles Police Department; the Los Angeles County Sheriff’s Department; and the California Highway Patrol provided assistance.
Release No. 14-143
Federal Prosecutor in Los Angeles to Serve as Election Officer for Much of Southern California During November 4 General ElectionRead the Press Release
LOS ANGELES – As part of the Justice Department’s nationwide Election Day Program for the upcoming general elections, Assistant United States Attorney Dennis Mitchell will again serve as the District Election Officer during the November 4 general election
Acting United States Attorney Stephanie Yonekura announced today that AUSA Mitchell will serve as District Election Officer for the Central District of California, which includes the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.
As District Election Officer, AUSA Mitchell is responsible for handling of complaints of election fraud and voting rights abuses, coordinating with the FBI Field Office in Los Angeles, and consulting with the Justice Department in Washington.
Since 2006, AUSA Mitchell has served as District Election Officer, overseeing citizen complaints concerning potential violations of the federal Voting Rights Act. As District Election Officer during next week’s balloting, AUSA Mitchell will ensure that complaints of election fraud and voting rights abuses made to federal authorities will be properly handled and, if appropriate, thoroughly investigated by Special Agents with the FBI.
“Every citizen is entitled to have his or her vote counted without interference or discrimination,” said Acting United States Attorney Stephanie Yonekura. “Citizens should not hesitate to report possible violations of voting rights laws. The Justice Department is committed to act promptly to protect the integrity of the election process.”
Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office, stated: “The ability to vote in America is a sacred right, and voters are entitled to cast their ballots in a fair and lawful environment. The FBI encourages anyone who encounters violations – including discrimination, fraud or other abuse – to report it to the FBI for investigation.”
The Department of Justice is committed to deterring election fraud and discrimination at the polls, and federal authorities will combat these violations whenever and wherever they occur. The Justice Department’s long-standing Election Day Program furthers these goals, in part by instilling public confidence in the integrity of the election process by providing local points of contact for the public to report possible election fraud and voting rights violations while the polls are open on Election Day.
Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.
Federal law also contains special protections for the rights of voters and provides that they can vote free of intimidation or harassment. For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them – or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting – may violate federal voting rights law. Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice. For further information, see: http://www.justice.gov/crt/about/vot/.
The FBI Field Office in Los Angeles will have Special Agents available to receive allegations of election fraud and other election abuses on Election Day. The phone number to report possible voting rights abuses at the FBI Field Office in Los Angeles is: (310) 996-3829.
Complaints about access to ballots or voting discrimination also may be made directly to the Voting Section at the Civil Rights Division at the Justice Department in Washington at (800) 253-3931 or (202) 307-2767. In addition, individuals may also report such complaints by fax to (202) 307-3961, by email to [email protected] and by using a form on the DOJ website: http://www.justice.gov/crt/complaint/votintake/index.php.
The effectiveness of the Justice Department’s Election Day Program depends in large part on the watchfulness and cooperation of the American electorate. Therefore, anyone with specific information about discrimination or election fraud should make that information available immediately to the District Election Officer, the FBI or the Civil Rights Division in Washington.
Release No. 14-144
Yucca Valley Man Who Worked at Local Schools Sentenced to 23 Years in Federal Prison in Federal Child Pornography CaseRead the Press Release
RIVERSIDE, California – A school custodian who sexually abused a child over a period of several years and uploaded visual images of the molestations to the Internet has been sentenced to 276 months in federal prison for his conviction on child pornography charges.
Matthew Frazer, 39, of Yucca Valley, was sentenced Friday by United States District Judge Virginia A. Phillips.
Frazer pleaded guilty in July to one count of distribution of child pornography and one count of possession of child pornography. In a plea agreement, Frazer admitted filming the molestation of the victim, who was between 4 and 8 at the time, and uploading the films onto the internet to share with others.
Prior to his arrest on January 31, Frazer was employed as a custodian with the Morongo Unified School District. The victim did not attend the schools where Frazer worked.
The investigation into Frazer was initiated last year after the National Center for Missing and Exploited Children provided to the FBI a series of pornographic images depicting a young girl being sexually abused. For several months, investigators attempted to identify the adult male in the images, and the FBI identified Frazier as the suspect earlier this year.
Frazer pleaded guilty to the two felony charges pursuant to a plea agreement, in which he admitted filming sexual explicit images of the young female victim from 2008 through 2012. He specific admitted making a video in October 2009, when the victim was 6 years old, and again in 2010 when she was 7.
According to court documents, the images have been found in the possession of more than 250 people who collect child pornography. “The magnitude of such
harm to [the victim] is difficult to appreciate and cannot be overstated,” prosecutors wrote in a sentencing memorandum filed with the court.This case is the result of an investigation by the FBI. The following agencies provided assistance during the investigation: the Riverside Police Department, the Riverside County Sheriff’s Department, the San Bernardino Police Department, the San Bernardino County Sheriff’s Department, and the San Bernardino County Probation Department.
Release No. 14-142
Former Orange County Teacher Named in Federal Sex Tourism CaseRead the Press Release
SANTA ANA, California – A former teacher with the Santa Ana School District has been charged with traveling to the Philippines to engage in sex with an underage girl and producing a video of the encounter.
Robert Ruben Ornelas, 63, of Santa Ana, was taken into federal custody Friday afternoon after being named in a criminal complaint filed in United States District Court.
The three-count complaint accuses the onetime school teacher and girl’s softball coach of engaging in sexual conduct in a foreign place, producing child pornography, and possessing child pornography.
Ornelas also faces state charges of lewd acts with a child, but the defendant was turned over to federal custody on Friday after the new complaint was filed.
The federal complaint details allegations that Ornelas traveled in March 2012 to the Philippines, where he engaged in sexual conduct with a girl who was approximately 14. According to the affidavit in the case, Ornelas took video of his encounter with the girl and brought the images with him when he returned the U.S. the following month. The third count in the complaint accuses the defendant of knowingly possessing the child pornography.
While Ornelas is charged with conduct related to one victim, the affidavit discusses evidence linking him to the sexual molestation of additional victims.
The federal case is based on information and images found on Orenelas’ computer and digital media seized by investigators when they executed a search warrant at his residence. On the seized media, investigators discovered communications between Ornelas and several underage girls in the Philippines dating back to 2007. Investigators also found numerous sexually explicit photos and videos of underage girls.
The Orange County District Attorney’s Office previously charged Ornelas with two counts of lewd conduct with a child for allegedly molesting a relative. While those charges remain pending at this time, Ornelas was transferred to the custody of the U.S. Marshals Service Friday afternoon to facilitate the federal prosecution.
At his initial court appearance Friday afternoon in federal court, Ornelas was ordered held without bond and was ordered to appear at an arraignment on November 10.
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 three charges in the criminal complaint carry a cumulative maximum sentence of 80 years in federal prison. The charge of producing child pornography carries a mandatory minimum sentence of 15 years.
The federal charges are the product of an ongoing probe by the Orange County Child Exploitation Task Force, which includes special agents from the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Newport Beach Police Department and the Orange County Sheriff’s Department.
Release No. 14-141
Ex-San Bernardino Police Officer Sentenced to 25 Years in Prison in Civil Rights Case Stemming from Sexual Assaults of ProstitutesRead the Press Release
RIVERSIDE, California – A former officer with the San Bernardino Police Department was sentenced today to 300 months in federal prison for violating the civil rights charges of two women he forced perform sex acts while he was in uniform.
Jose Jesus Perez, 47, of Menifee, received the sentence from United States District Judge Virginia A. Phillips.
Perez was found guilty by a federal jury in May of two felony counts and one misdemeanor count of deprivation of rights under color of law for sexually assaulting two victims in 2011. The jury determined that both felony offenses involved aggravated sexual abuse, and that one attack involved a kidnapping and bodily injury.
The evidence presented during a week-long trial showed that Perez groped a woman and coerced her to perform oral sex on him by using force against her on April 25, 2011.
The jury also found that Perez had unlawful sexual intercourse with another woman on two occasions in August 2011.
The testimony at trial indicated that the two victims, who worked as prostitutes in the City of San Bernardino, engaged in the sex acts demanded by Perez out of fear of arrest because he was a police officer. One victim testified that he forced her to perform oral sex on him in his patrol car, and the other victim testified that he forced her to have intercourse with him next to his patrol car in a vacant lot and again in motel rooms.
A third woman testified that Perez had aggressively solicited sex from her while he was in uniform when he found her stranded in San Bernardino. The three women each testified that they feared repercussions if they did not comply with Perez’s demands.
Perez “has a long and escalating history of inappropriate sexual behavior towards women,” prosecutors wrote in a sentencing brief that noted a lengthy history of misconduct toward women. “Although defendant is no longer a police officer and is no longer able to abuse a position of public authority to his own criminal ends, he remains the same person — someone who lacks basic respect for the humanity and autonomy of women. Unfortunately, sexual predators in this county do not lack for means of carrying out their crimes, and a badge is unnecessary for their purposes. Defendant poses a greater danger than most sexual predators; although he lacks a badge, he retains his police tactical training and knowledge of police investigative methods. Defendant remains a threat to the public regardless of his employment.”
Perez became a police officer in 1997, when he was hired by the Los Angeles Police Department. Perez worked for the LAPD until 2008, when he went to work for the San Bernardino Police Department. Perez was released from employment by SBPD in December 2012. Perez has been in custody since he was arrested in September 2013 in Texas.
The investigation into Perez was conducted by the San Bernardino Police Department and the Federal Bureau of Investigation.
Release No. 14-140
Doctor Charged with Illegally Writing Prescriptions for Addictive Narcotics and Laundering Proceeds of His Drug DealingRead the Press Release
LOS ANGELES – A San Gabriel Valley doctor has pleaded not guilty to federal drug trafficking charges that allege he illegally distributed drugs that include the powerful and addictive painkiller oxycodone.
Dr. Daniel Cham, 47, was arraigned on a 31-count indictment late Thursday afternoon, at which time a trial was scheduled for December 16. Cham was arrested Wednesday afternoon at his residence in Covina. At yesterday’s arraignment, bond was set at $140,000, and Cham was ordered to serve home detention while free on bond and was prohibited from practicing medicine.
The indictment, which was returned by a federal grand jury on October 7 and unsealed when the defendant was arrested, charges Cham with drug trafficking, money laundering, fraud and making false statements to federal authorities. The indictment focuses on prescriptions Cham wrote at various locations, including his medical offices in La Puente and Artesia. The drugs involved in the allegedly illegal prescriptions include oxycodone (a powerful narcotic painkiller best known under the brand name OxyContin), hydrocodone (a narcotic painkiller often sold under the brand names Vicodin and Norco), alprazolam (commonly known by the brand name Xanax), and carisoprodol (as muscle relaxer best known as Soma).
“The problem of pharmaceuticals being diverted to the black market continues to grow, which feeds drug addiction and leads to additional criminal acts by addicts,” said Acting United States Attorney Stephanie Yonekura. “Unscrupulous doctors who prescribe controlled substances without a legitimate medical purpose are simply fueling a black market of narcotics. These doctors are the same as street dealers who face lengthy sentences in federal prison.”
In May 2014, investigators executed federal search warrants at 13 locations, including Cham’s residence and medical offices. According to the affidavit in support of the search warrants, which was unsealed at Cham’s arraignment, the doctor often saw patients between 8 p.m. and 2 a.m. on Fridays, Saturdays and Sundays, and he post-dated prescriptions to make them appear to have been written on weekdays. In the year that ended in March 2014, Cham issued more than 5,500 prescriptions for controlled substances – primarily for oxycodone, hydrocodone, alprazolam and carisoprodol – and he issued more than 42,000 such prescriptions since July 2010, according to the affidavit.
The affidavit also discussed how an undercover officer made three visits to Cham’s La Puente office earlier this year, and how Cham wrote prescriptions for controlled substances in exchange for $200 or $300 in cash or money orders. As discussed in the affidavit, Cham issued a prescription for oxycodone even though the undercover operative said he “had been high and drunk while receiving controlled substance prescriptions” previously from Cham. On another occasion, Cham prescribed oxycodone even though the undercover law enforcement officer presented, in lieu of photo identification, a written notice that his license had been suspended for driving under the influence.
“Daniel Cham's arrest sends a clear message to doctors who violate their sworn public duty by selling prescriptions for highly addictive opioids – the DEA will shut down your operation and put you behind bars,” said Anthony D. Williams, Special Agent in Charge of the DEA’s Los Angeles Field Division. “Along with our law enforcement partners, we continue to aggressively target medical professionals who act as drug traffickers cloaked in a white lab coat.”
In addition to counts related to the undercover operation, the indictment charges Cham with fraudulently issuing prescriptions for controlled substances to Tracy Townsend, who used at least five false identities. Townsend, 51, of Studio City, is also charged in the indictment, but his whereabouts are currently unknown.
An investigation by IRS - Criminal Investigation and the Drug Enforcement Administration’s Financial Investigation Group showed that Cham used at least four bank accounts to launder the proceeds of his illegal prescriptions. The indictment charges Cham with concealing proceeds derived from the undercover visits by depositing them into an account held in the name of a separate business.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
If convicted of the 31 counts in the indictment, Cham would face a statutory maximum sentence of 339 years in federal prison.
The investigation into Cham was conducted by the Drug Enforcement Administration, IRS - Criminal Investigation, the Los Angeles County Sheriff’s Department’s Health Authority Law Enforcement Task Force, the Federal Bureau of Investigation, the California Medical Board and the Los Angeles Police Department.
Release No. 14-139
Former Immigration Officer Who Took Bribes from Immigrants Sentenced to 51 Months in Federal PrisonRead the Press Release
Ex-Federal Employee and His Wife Were Also Found Guilty of Witness Tampering
SANTA ANA, California – A former immigration officer who was found guilty of taking bribes from Cambodian immigrants in exchange for immigration benefits, including granting the immigrants temporary legal status, has been sentenced to more than four years in federal prison.
Billy Louis Nelms Sr., 54, of Los Angeles, was sentenced to 51 months in prison late Monday afternoon by United States District Judge Andrew J. Guildford.
During the federal court proceeding Monday, Judge Guilford called the corruption offenses a “disappointment,” noting that “we live in a cynical time where people are not believing in their government.” Judge Guilford also stated that Nelms’ corrupt actions sent a poor message to immigrants, essentially telling them: “Pay the man, get the result.”
Following a seven-day trial, a federal jury on August 1 found Nelms guilty of conspiracy to commit bribery and defraud the United States, bribery, conspiracy to witness tamper and witness tampering.
“These corrupt actions challenged the integrity of an immigration system Mr. Nelms had sworn to uphold,” said Acting United States Attorney Stephanie Yonekura. “Mr. Nelms may have believed that he was above the law, but the prison sentence imposed today shows that everyone will be held accountable for their illegal actions.”
Nelms’ wife, Sokhon Nelms, 60, also of Los Angeles, also was found guilty of conspiracy to witness tamper and witness tampering for threatening two witnesses at the behest of her husband. Sokhon Nelms is scheduled to be sentenced by Judge Guilford on November 6.
“Maintaining the integrity of our nation’s immigration system remains one of the top priorities for the Department of Homeland Security (DHS), Office of Inspector
General (OIG),” said Roger T. Merchant, Special Agent in Charge of DHS OIG, Los Angeles Field Office. “There is no place within the Department for those who knowingly commit corrupt acts for their own personal gain. The DHS OIG will continue to aggressively pursue, investigate and prosecute those who break the law and violate the public trust.”
The evidence at the couple’s trial showed that, between 2005 and August 2008, Billy Nelms worked in the Santa Ana federal building as an immigration officer in the Fraud Detection and National Security unit, which is part of U.S. Citizenship and Immigration Services (USCIS). As part of his job, Nelms was involved in, among other things, investigating marriage fraud on applications for an immigration benefit.
The bribery scheme involved Cambodian immigrants who were present in the United States without legal status and promised permanent legal status by Nelms. The immigrants paid as much as $5,000 in cash, and, in exchange for this, Nelms stamped immigration documents that gave the immigrants temporary legal status in the United States – but not the permanent status they sought.
After Nelms was indicted on bribery charges in June 2013, Mr. and Mrs. Nelms tampered with two of the witnesses in the bribery case.
This case is the product of an investigation by the Department of Homeland Security’s Office of Inspector General (DHS-OIG).
USCIS’s Fraud Detection and National Security Directorate and Immigration Services and U.S. Immigration and Customs Enforcement’s Homeland Security
Release No. 14-137
Former Simi Valley Businessman Sentenced to over 7 Years in Prison for Selling Knock-Off Batteries to Navy for Use on WarshipsRead the Press Release
LOS ANGELES – The former owner of the Simi Valley-based battery distributor Powerline, Inc. was sentenced today to 87 months in prison for defrauding the government by selling more than $2.7 million in knock-off batteries to the U.S. Department of Defense.
Didier De Nier, 64, who lived in Simi Valley until he fled the U.S. over two years ago, was found guilty in April by a federal jury of five counts of wire fraud and one count of conspiracy to defraud the United States.
In addition to the prison term, United States District Judge Dolly M. Gee ordered De Nier to pay more than $2.7 million in restitution, mostly to the DoD.
“Military personnel aboard Navy vessels relied on these bogus batteries to supply back-up power in an emergency, but the fraudulent nature of the nearly 80,000 batteries sold by De Nier meant warships risked becoming dead in the water,” said Acting United States Attorney Stephanie Yonekura. “This defendant risked the safety of American military personnel, which warrants the substantial prison sentence he has received.”
The charges stem from a probe by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) and the Defense Criminal Investigative Service (DCIS). The Defense Logistics Agency and the Defense Contract Audit Agency also provided significant support to the investigation, which represents the first case prosecuted under the 2011 Defense Authorization Act.
“As this sentence makes clear, military procurement fraud is a serious crime, with repercussions that extend far beyond the financial losses to the Department of Defense and U.S. taxpayers,” said Claude Arnold, special agent in charge for HSI Los Angeles. “This defendant put the safety and readiness of our nation’s warfighters at risk merely to line his own pockets. HSI will continue to aggressively target those who willfully jeopardize our nation’s security and the welfare of those devoted to protecting it.”
Chris Hendrickson, Special Agent in Charge, DCIS, Western Field Office, stated: “America's Warfighters deserve the very best to perform their jobs, and the taxpayers expect nothing less. Fraud committed by defense contractors not only takes away precious resources necessary for the protection of our brave sailors, solders, airman and marines, it also undermines the confidence of the American public who demand
that tax dollars are used responsibly. This investigation should serve as a warning for those intent on defrauding the U.S. military and American public that the Defense Criminal Investigative Service and our law enforcement partners will pursue these crimes relentlessly.”From 2004 to 2011, Powerline, which also did business as Birdman Distribution Corp., sold more than 80,000 batteries and battery assemblies which the Navy used for emergency back-up power aboard nuclear aircraft carriers, minesweepers and ballistic submarines. The batteries were installed on numerous Naval vessels at a cost to the DOD of more than $2.6 million.
De Nier instructed his employees how to disguise the bogus nature of the batteries by affixing counterfeit labels falsely identifying them as originating from approved manufacturers – even drafting instructional guides on how to assemble the knock-offs. Powerline employees also used chemicals to remove “Made in China” markings from the counterfeit batteries and prepared doctored invoices, packing slips and other paperwork.
De Nier profited handsomely from his crimes – using proceeds to buy a yacht, pay his home mortgage, and to cover the cost of travel to the Caribbean and French Riviera.
De Nier’s ex-wife, Lisa De Nier, who served for decades as Powerline’s vice president of sales, previously pleaded guilty in this case to conspiracy to defraud the government. She faces up to 10 years in prison when she is sentenced later this year.
Shortly after federal agents searched Powerline’s offices in July 2012, De Nier fled the Los Angeles area to live aboard his yacht near the Caribbean island of St. Martin, a French territory. In October 2013, federal agents arrested De Nier, a dual French-U.S. citizen, after he had sailed his yacht to the U.S. Virgin Islands.
Those with information relating to fraud, corruption or waste in government contracting should contact the DoD Hotline at www.dodig.mil/hotline or should call (800) 424-9098.
Release No. 14-136
52 Members and Associates of San Bernardino Street Gang Targeted in Federal Drug Trafficking IndictmentRead the Press Release
RIVERSIDE, California – After a federal grand jury issued a 90-page indictment, federal and state authorities today arrested 21 of 52 defendants linked to San Bernardino's largest gang on narcotics-trafficking charges that allege numerous transactions involving methamphetamine and heroin.
The indictment, which was unsealed this morning, targets members and associates of the West Side Verdugo gang, who are charged with trafficking methamphetamine and heroin in San Bernardino and various California prisons, where members of the gang and gang affiliates linked to the Mexican Mafia are incarcerated. The indictment outlines how some of the proceeds generated by narcotic sales were funneled to members of the Mexican Mafia prison gang.
All 52 defendants named in the indictment are charged with conspiracy to distribute and to possess with intent to distribute methamphetamine and heroin. Seven of the defendants are also charged in drug distribution counts involving methamphetamine and heroin.
The conspiracy count in the indictment details hundreds of “overt acts” that begin in the summer of 2010 and continue into 2012. The overt acts describe numerous drug deals, the smuggling of drugs into state prison facilities and seizures of drugs by law enforcement that in one case was well over one-half pound of methamphetamine
In addition to the sale of narcotics, the indictment alleges that members of West Side Verdugo collected "taxes" from drug dealers who were allowed to operate in gang territory – for example, the 7th Street Park -- in exchange for sharing some of the drug proceeds with the gang.The 21 defendants taken into custody today are expected to be arraigned on the indictment this afternoon in United States District Court in Riverside.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until proven guilty in court.
The conspiracy count in the indictment, which charges all 52 defendants, carries a mandatory minimum sentence of 10 years and a statutory maximum penalty of life in federal prison.
In addition to the 21 people arrested today, 22 were already in custody on unrelated charges. Authorities are continuing to look for 8 people who are charged in the indictment and a summons will be issued for one defendant.
This case is the product of an investigation by the FBI, the San Bernardino Sheriff's Department, the San Bernardino Police Department and the California Department of Corrections and Rehabilitation. The San Bernardino County District Attorney's Office provided substantial assistance.
Personnel from a number of law enforcement agencies assisted during today's operation, including the San Bernardino Department of Probation; the Los Angeles Police Department; the Los Angeles County Sheriff's Department; the California Highway Patrol; the Drug Enforcement Administration; and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Release No. 14-135
Immigration Official Sentenced to 30 Months in Prison for Soliciting Bribes to Approve Applications for Citizenship and 'Green Card'Read the Press Release
SANTA ANA, California – An immigration service officer with U.S. Citizenship and Immigration Services (USCIS) who took thousands of dollars in bribes from immigrants who were seeking either citizenship or lawful permanent resident status in the United States was sentenced today to 30 months in federal prison.
Mai Nhu Nguyen, 48, of Irvine, was sentenced by United States District Judge Josephine L. Staton.
From 2011 through June 2013, Nguyen solicited and took bribes from Vietnamese immigrants. In one case, Nguyen took $1,000 from an immigrant seeking a “Green Card” and 200 egg rolls from an immigrant seeking citizenship.
Nguyen, who worked at USCIS’s Santa Ana office for approximately eight years and is now on leave, was an immigration service officer with the power to approve or deny applications for immigration benefits that are submitted by immigrants.
The case against Nguyen is the product of an investigation by the Federal Bureau of Investigation and the Department of Homeland Security’s Office of Inspector General.
Release No. 14-134
Owner of La Habra Manufacturing Firm Charged with Illegally Manufacturing and Selling Key Component for AR-15-Type RiflesRead the Press Release
LOS ANGELES – A federal grand jury today indicted the owner of an Orange County manufacturing business on a federal charge related to the illegal manufacture and sale of lower receivers for AR-15-type rifles, as well as completed firearms.
The one-count indictment charges Joseph Roh with engaging in the business of manufacturing and dealing in firearms without a license, a felony offense that carries a statutory maximum penalty of five years in federal prison and a $250,000 fine.
The indictment alleges that Roh, 46, of Fullerton, did not have the proper license, but he manufactured and sold hundreds of lower receivers for AR-15-type firearms. In addition to the lower receivers, the indictment alleges that Roh illegally sold complete rifles and pistols.
Through his business, ROHG Industries in La Habra, Roh allegedly started with unfinished lower receivers for AR-15-style firearms. A lower receiver is the frame of a completed firearm that holds the trigger and hammer. An unfinished lower receiver, when machined further, constitutes a firearm. Roh and his employees would finish the lower receivers by machining the devices with a computer-numerically-controlled – or CNC – machine and drill presses that Roh maintained at the La Habra warehouse.
Roh attempted to avoid the licensing requirement by requiring that each customer play a token role in the manufacturing process, which often meant merely pushing a button on a CNC machine, while company employees did the vast majority of the work.
While the sale of unfinished lower receivers is not regulated, the manufacture and sale of completed lower receivers – which are considered firearms under federal law – requires a proper license.
Additionally, Roh would, if the customer wanted, assemble the rest of the firearm by adding an upper receiver, a barrel, and other necessary parts to the lower receiver.
Roh has agreed to surrender tomorrow and be arraigned on the indictment tomorrow afternoon in United States District Court.Release No. 14-133
Geographic Targeting Order Issued by FinCEN Aims at Money Laundering for Drug Cartels in Los Angeles Fashion DistrictRead the Press Release
LOS ANGELES – Federal authorities today announced that the Financial Crimes Enforcement Network (FinCEN) has issued a Geographic Targeting Order (GTO) that imposes additional reporting and recordkeeping obligations on most of the businesses located in the Los Angeles Fashion District. The GTO will enhance law enforcement’s ongoing efforts to identify and pursue cases against persons and businesses engaged in money laundering that benefits international drug cartels.
The GTO, which will go into effect on October 9, was sought by the United States Attorney’s Office for the Central District of California as part of a sweeping investigation targeting the illicit movement of U.S. currency to Mexico and Colombia on behalf of prominent drug trafficking organizations. The Justice Department is working with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) and the Internal Revenue Service’s Criminal Investigation Division to fight money laundering schemes designed to allow international drug cartels in Central America and South America to reach drug proceeds generated in the United States.
A series of investigations have revealed evidence that money laundering activities and violations of the Bank Secrecy Act (BSA) are pervasive throughout the Los Angeles Fashion District, which includes more than 2,200 businesses. Much of the money laundering is conducted through Black Market Peso Exchange schemes – also known as trade-based money laundering – in which drug money in the United States is converted into goods that are shipped to countries such as Mexico, where the goods are sold and money in the form of local currency goes to the drug trafficking organizations.
There are approximately 2,300 businesses that are being served with notice of today’s order, including garment and textile stores, transportation companies, travel agencies, perfume stores, electronic stores (including those that only sell cell phones), shoe stores, lingerie stores, flower/silk flower stores, beauty supply stores, and stores bearing “import” or “export” in their name.
On September 10, more than 1,000 federal, state and local law enforcement officials were in the Fashion District, where they executed dozens of search warrants and arrest warrants linked to businesses suspected to be engaged in money laundering schemes (see: http://www.justice.gov/usao/cac/Pressroom/2014/117.html). Criminal investigations have uncovered evidence that many of these businesses are routinely accepting bulk cash Black Market Peso Exchange schemes on behalf of drug trafficking organizations based in Mexico and Colombia. During last month’s enforcement action, authorities seized more than $90 million in currency. The cash was found at various residences and businesses stored in file boxes, duffel bags, backpacks and even in the trunk of a Bentley. Another approximately $45 million was seized in the form of property and bank accounts.
“This order requires nearly every business in the Fashion District to report any instance in which they receive at least $3,000 in cash, and failure to comply with the order could lead to a criminal indictment,” said Acting United States Attorney Stephanie Yonekura. “My office sought the unprecedented order from FinCEN with the goal of shutting down the flow of dirty money to foreign drug cartels – a huge problem that has contaminated the Fashion District."
Claude Arnold, special agent in charge for HSI Los Angeles, commented: “Last month, in a matter of hours, HSI special agents seized tens of millions of dollars in cash from individuals with business interests in L.A.’s garment district. That’s a mindboggling amount of money and it makes it abundantly clear the scale of criminal activity we’re up against. International drug cartels generate billions of dollars a year in profits, but all that cash is virtually worthless unless traffickers can find a way to funnel it clandestinely back into the monetary system. Unscrupulous companies that help the cartels cover their financial tracks are contributing in a major way to the devastation wrought by the international drug trade and they will be held to answer for their actions.”
Richard Weber, Chief of IRS - Criminal Investigation, said: "Individuals who laundered money through the fashion industry will now be hard pressed to continue their criminal activities. The issuance of this Geographic Targeting Order will assist law enforcement agencies in ferreting out money launderers from this trade industry and will help to preserve a strong local economy."
FinCEN Director Jennifer Shasky Calvery stated: “This GTO illustrates that FinCEN will not shy away from using each and every one of its authorities to disrupt drug cartel activity. FinCEN’s expertise goes far beyond collecting the BSA data. Our own analysis of thousands of BSA filings played a critical role in the recent takedown, as well as ongoing law enforcement operations. And the additional information collected through FinCEN’s GTO will only increase our ability to track and dismantle these criminal organizations.”
The GTO will take effect on October 9, 2014 and will remain in effect for 180 days. Affected businesses in the Los Angeles Fashion District should review the Order to understand their reporting obligations. Covered businesses with questions about today’s order should contact the FinCEN Resource Center at 800-767-2825.
Release No. 14-132
Cyberstalking Case Involving Violent Threats Against Art Dealers and Their Children Leads to 5-Year Federal Prison TermRead the Press Release
LOS ANGELES – The owner of a Temecula art gallery who stalked, harassed and attempted to extort as much as $300,000 from art world professionals was sentenced today to 60 months in federal prison.
Jason White, 43, of Temecula, who pleaded guilty in March to two counts of federal stalking, was sentenced today by United States District Judge Stephen V. Wilson.
During today’s hearing, Judge Wilson called White’s crimes ”horrendous” and “very disturbing.”
White was arrested by the FBI on February 12 after engaging in a six-month stalking and extortion scheme that targeted art world professionals with whom he had had business relationships. When those business relationships ended, White posted derogatory information about his former associates on websites he had created, and then used threatening emails to demand hundreds of thousands of dollars in exchange for taking the websites down. White repeatedly made extortionate demands through harassing text messages and emails, and when his demands were not met, he threatened violence against the victim families, including their children.
“Given the ominous, angry and relentless nature of the messages, the victims had a reasonable fear that defendant planned to hunt down and kill their spouses and children,” prosecutors wrote in a sentencing memo filed with the court. “Indeed, this case is a parent’s worst nightmare that will likely haunt the victims for the rest of their lives because they will always be fearful that defendant may find their children and make good on his threats.”
In one part of the scheme, White targeted his former employer, an art publisher, as well as White’s supervisor at the art publisher’s company. After creating derogatory websites in the art publisher’s name, White allegedly sent threatening text messages to the art publisher, the publisher’s son, and his former supervisor. In a text message to his former supervisor, he threatened to find her family and make her pay with “fear, anguish and pain.” On several occasions, White obtained pictures of her child and sent pictures of the child to the victim with comments such as “it will be very unfortunate if something was to happen to him.”
White’s “conduct also demonstrates a disturbing and escalating pattern of stalking conduct, particularly since he committed these crimes less than one year after a
restraining order was filed against him by another former employer for identical cyber stalking and extortion conduct,” according to the government’s sentencing position papers. “As defendant intended, his stalking crimes traumatized his victims.”During today’s sentencing hearing, two of the victims spoke, telling Judge Wilson how they felt terrorized by the barrage of threatening emails and texts that White sent them.
The case against White was investigated by the Federal Bureau of Investigation, Art Crime Team.
Release No. 14-131
Two Inland Empire Men Ordered Held Without Bond After Being Charged in Federal Case Alleging Series of ATM RobberiesRead the Press Release
RIVERSIDE, California – Two men were charged today with participating in a string of ATM robberies in which they used power tools and a truck to forcibly open safes inside drive-up ATMs and steal nearly a half million dollars.
James William Costilow, 38, of Riverside, and David Joseph Silva Jr., 25, of Fontana, were charged today in a criminal complaint filed in United States District Court with attempted theft from a bank.
The charge relates to an unsuccessful ATM robbery early Tuesday morning in Murrieta, but the affidavit in support of the complaint alleges that the two men “have been successful in approximately four incidents and have stolen approximately $462,093 in cash.”
The attempted theft charge in the complaint stems from an incident in which Costilow and Silva allegedly went to a Chase Bank branch in Murrieta, used a pass code to trigger an audit of the ATM cash supply, and, once money was delivered to the machine, attempted to break into the safe to steal the money. After attempting to cut the hinges on the safe doors, they tried to pull the doors off with a truck, but the attempt failed when the bumper came off the truck, according to the affidavit.
Murrieta Police officers responded to the incident and took Costilow and Silva into custody after a short chase. They were held in local custody until yesterday, when they were turned over to federal authorities.
The affidavit describes how Costilow and Silva allegedly broke into ATM safes: “A type of power saw or a ‘jaws of life’ device is used to cut into the safe doors. Once the safe doors are weakened, a nylon towrope is tied to the safe door and to the truck. The truck attempts to pull the safe door off, enabling access to the money.”
There have been 15 thefts and attempted thefts from drive-up ATMs at Chase Bank branches in Los Angeles, Riverside and San Bernardino Counties over the past six months. The affidavit states that investigators believe Costilow and Silva were involved in all 15 incidents.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
Costilow and Silva made their initial court appearances earlier this afternoon in United States District Court, where a magistrate judge ordered them held without bond and scheduled an arraignment for October 15.
The charge of attempted bank theft carries a statutory maximum sentence of 10 years in federal prison.
This case is the product of an ongoing investigation by the Federal Bureau of Investigation and the Murrieta Police Department.
Release No. 14-130
Two Men Convicted of Providing Material Support to Terrorists and Plotting to Kill American Targets in AfghanistanRead the Press Release
RIVERSIDE, California – Two men were found guilty today of federal charges related to plots to provide material support to terrorists and to kill American personnel.
Following a 6½-week trial, a federal jury returned guilty verdicts against the two defendants, one a United States citizen and one who was residing in California on a “Green Card.”
The two men convicted today are Sohiel Omar Kabir, 36, a naturalized United States citizen who was born in Afghanistan and who until late 2011 resided in Pomona; and Ralph Deleon, 25, of Ontario, a lawful permanent resident and citizen of the Philippines.
The jury found that Kabir and Deleon together were guilty in relation to two specific plots: conspiring to provide material support to terrorists and conspiring to kill officers and employees of the United States Government.
As a result of these convictions, Kabir and Deleon each face life without parole when they are sentenced on February 23 by United States District Judge Virginia A. Phillips.
Additionally, the jury found Kabir guilty of participating in two additional schemes: conspiring to provide material support and resources to Al-Qa’ida, a designated foreign terrorist organization; and conspiring to receive military-type training from Al-Qa’ida.
Deleon was additionally found guilty of conspiring to commit murder, kidnapping, or maiming overseas, for which he also faces a possible life sentence.
“This case shows that the appeal of extremist ideologies can reach from Afghanistan to America, demonstrating the clear need for continued vigilance in rooting out homegrown violent extremists who plot terrorist acts both here and abroad,” said United States Attorney Stephanie Yonekura. “The fine work of the FBI agents, other members of the Joint Terrorism Task Force and the prosecutors on this case shows how we can identify, infiltrate and dismantle terrorist cells bent on striking America and the American military.”
“The threat posed to America’s security by individuals within the United States who support terrorists is very real,” said Bill Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “This case demonstrates the process by which individuals living in the United States were groomed and radicalized toward an extremist ideology and, ultimately, planned the murder of American and coalition forces. The FBI and our partners on the Joint Terrorism Task Force are committed to identifying and thwarting support for terrorism before irreversible damage is inflicted on the innocent.”
Two other defendants who were indicted in the case in 2012 – Miguel Alejandro Santana Vidriales and Arifeen David Gojali – previously pleaded guilty and are pending sentencing.
The evidence presented during the trial showed Kabir introduced Deleon and Santana to radical Islamic ideology in 2010. Kabir left the United States in the final days of 2011, arriving in Afghanistan in July 2012. While in Afghanistan, Kabir continued to communicate with Santana and Deleon, encouraging them to join him in Afghanistan. Kabir told Santana and Deleon that he had made contacts with terrorist organizations, and, when they arrived, all three would join “the students” – the Taliban – and “the professors” – Al-Qa’ida.
In February 2012, an FBI source met Deleon and Santana. They discussed radical Islamic views, and in the spring of 20112 Deleon revealed the plan to travel overseas to engage in “violent jihad,” which would include attacking American military personnel and bases. Deleon told the source he wanted to be on the front lines or use explosives, and Santana said he wanted to be a sniper.
In September 2012, Deleon and Santana recruited Gojali to join them and to travel overseas to commit violent jihad. Deleon, Santana and Gojali made plans to join Kabir in Afghanistan to engage in violent training. As part of their planning, Santana, Deleon and Gojali conducted preliminary training in southern California at firearms and paintball facilities to prepare for terrorist training overseas.
Deleon, Santana and Gojali were arrested by the FBI on November 16, 2012 after leaving a Chino apartment. The three were planning to drive to Mexico, from where they would fly to Afghanistan. Kabir was taken into custody by American military personnel in Afghanistan.
In addition to the guilty verdicts, the jury acquitted Kabir of conspiring to commit murder, kidnapping, or maiming overseas (the count which Deleon alone was guilty of). The jury was unable to reach a unanimous verdict on two charges against Deleon – conspiring to provide material support and resources to Al-Qa’ida, a designated foreign terrorist organization; and conspiring to receive military-type training from Al-Qa’ida (the two charges which Kabir alone was found guilty of).
The investigation into this terrorism scheme was conducted by the Joint Terrorism Task Force (JTTF) in Riverside, California. The Riverside JTTF is comprised of members from the following agencies: Riverside County Sheriff’s Office; Riverside Police Department; San Bernardino Sheriff’s Department; Beaumont Police Department; Ontario Police Department; U.S. Immigration and Customs Enforcement – Homeland Security Investigations (ICE-HSI); the United States Attorney’s Office and the Federal Bureau of Investigation.
Release No. 14-129
Former CEO of Orange County Medical Device Firm Indicted for Providing Inside Information to Former Professional Baseball PlayerRead the Press Release
SANTA ANA, California – A federal grand jury today indicted the former chief executive officer of an Orange County medical device and eye care company on insider trading charges.
James V. Mazzo, who was the CEO of the Santa Ana-based Advanced Medical Optics, Inc., which was traded on the New York Stock Exchange under the symbol EYE, was added to an indictment that had previously named former professional baseball player Douglas DeCinces and two of his associates.
The case, which was initially filed in 2012, alleges that Mazzo was the source of non-public information that DeCinces and his associates used to trade EYE stock in the midst of a takeover bid by Abbot Laboratories.
The 41-count superseding indictment filed this afternoon in United States District Court charges Mazzo with providing DeCinces with confidential information in advance of Abbott’s 2009 acquisition of Advanced Medical Optics. DeCinces and his associates allegedly used the non-public information to purchase shares of EYE, which increased from approximately $8 to $22 as a result of the acquisition.
The indictment further alleges that Mazzo previously provided DeCinces with inside information in relation to Advanced Medical Optics’ 2007 acquisition of an Irvine medical device company, IntraLase Corp. (NASDAQ: ILSE). DeCinces allegedly used this inside information to purchase IntraLase stock, and to tip a friend to purchase shares, ahead of the announcement that Advanced Medical Optics was purchasing the company. IntraLase stock rose approximately 10 percent after the announcement of the deal.
The superseding indictment names:
James V. Mazzo, 57, of Laguna Beach, who was the CEO of Advanced Medical Optics from 2002 to 2009;
Douglas V. DeCinces, 60, of Laguna Beach, who currently is the president and CEO of a real estate development firm in Irvine;
David Parker, 60, of Provo, Utah, who was a friend and business partner of DeCinces; and
Fred Scott Jackson, 65, of Newport Beach, a real estate attorney who was friends with DeCinces.
The superseding indictment alleges that, during a series of meetings in the fall and early winter of 2008, Mazzo obtained inside information about Abbott’s planned tender offer, specifically that Abbott was prepared to pay $21 to $23 per share of EYE stock, which at the time was trading around $8 per share. Mazzo – who the indictment describes as a close personal friend of DeCinces’ – allegedly disclosed inside information regarding the tender offer during a series of meetings and telephone calls with DeCinces in the weeks leading up to the public announcement of the tender offer. During this same time, the indictment alleges, DeCinces began buying up EYE shares. According to the indictment, in December 2008, DeCinces liquidated his diverse stock portfolio of investments at Merrill Lynch – suffering approximately $80,000 in losses – to obtain approximately $160,000 that he used to purchase EYE stock. The superseding indictment alleges that DeCinces ultimately purchased a total of 90,700 shares of EYE stock, which he sold soon after Abbott’s tender offer for the company was publicly announced, and realized approximately $1.3 million in profits.
The indictment also alleges that DeCinces provided inside information about the Abbott tender offer to five other individuals who also purchased EYE stock. DeCinces allegedly gave the tip to Parker and Jackson, in part, to make up for prior investment recommendations that had gone bad. After purchasing EYE shares and selling them following the acquisition, Parker allegedly realized illegal profits of $347,920 and Jackson allegedly obtained illegal profits totaling $140,259.
An indictment contains allegations that a defendant has committed crimes. Every defendant is presumed innocent until and unless proven guilty.
The four defendants indicted in this case will be summoned to appear for arraignments in United States District Court in Santa Ana.
The indictment charges Mazzo with 13 counts of insider trading, 13 counts of tender offer fraud and one count of securities fraud.
DeCinces is charged with 19 counts of insider trading, 19 counts of tender offer fraud, one count of securities fraud and one count of money laundering.
Parker and Jackson are each charged with three counts of insider trading, three counts of tender offer fraud, and one count of securities fraud. Parker additionally faces one count of money laundering and criminal forfeiture.
The securities fraud count carries a maximum statutory sentence of 25 years in federal prison. Each of the insider trading and tender offer fraud counts in the indictment carry a maximum statutory sentence of 20 years. The money laundering counts each carry a maximum penalty of 10 years.
This investigation in this case was conducted by the Federal Bureau of Investigation and IRS Criminal Investigation. The Securities and Exchange Commission provided assistance during the investigation.
The SEC has a pending civil lawsuit in relation to the EYE insider trading scheme (see: http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171483872). DeCinces settled the case without admitting or denying the allegations, agreeing to pay $2.5 million in fines and not contest the IRS’ seizure of what were alleged to be insider trading profits. Jackson, without admitting or denying the allegations in the lawsuit also settled with the SEC, returning his profits and paying a penalty. A trial for Mazzo and Parker is scheduled for August 2015 in United States District Court in Santa Ana.
Release No. 14-128
Six Current and Former Los Angeles Sheriff’s Deputies Sentenced to Federal Prison for Obstructing Federal Civil Rights InvestigationRead the Press Release
LOS ANGELES – Six sworn deputies who were working in the Los Angeles Sheriff’s Department each were sentenced today to federal prison terms for
interfering with a federal civil rights investigation into misconduct at the Men’s Central Jail.The six defendants received prison terms of up to 41 months from a federal judge who said they all lacked “courage to do what is right” and then failed to show “even the slightest remorse.”
United States District Judge Percy Anderson issued the sentences after a federal jury determined that the defendants, including two lieutenants, attempted to influence witnesses, threatened an FBI agent with arrest and concealed an FBI informant who should have been turned over to federal authorities.
All six of the defendants were convicted of participating in a broad conspiracy to obstruct justice, a plot that began in the summer of 2011 after they learned that a jail inmate was an FBI informant and was acting as a cooperator in a federal investigation into corruption and civil rights violations at the jail.
“Blind obedience to a corrupt culture has serious consequences,” Judge Anderson told the defendants before ordering each of them to begin prison sentences in the coming months.
Acting United States Attorney Stephanie Yonekura stated: “In their corrupt attempt to shield the Sheriff’s Department from scrutiny, these deputies brought scandal and shame to themselves and their department. These deputies decided to impede a federal investigation, and in doing so they threw away their careers and their freedom. These law enforcement officers have now been held accountable for their unlawful actions.”
The defendants who were sentenced today are:
Gregory Thompson, 54, a now-retired lieutenant who oversaw LASD’s Operation Safe Jails Program, who was ordered to serve 37 months in prison and to pay a $7,500 fine;
Lieutenant Stephen Leavins, 52, who was assigned to the LASD’s Internal Criminal Investigations Bureau, who received a 41-month prison sentence;
Gerard Smith, 42, a deputy who was assigned to the Operation Safe Jails Program, who was ordered to serve 21 months in prison;
Mickey Manzo, 34, a deputy who was assigned to the Operation Safe Jails Program, who received a 24-month sentence;
Scott Craig, 50, a sergeant who was assigned to the Internal Criminal Investigations Bureau, who was sentenced to 33 months; and
Maricela Long, 46, a sergeant who assigned to the Internal Criminal Investigations Bureau, who received a sentence of two years in federal prison.
Following the completion of their prison sentences, each defendant will serve one year on supervised release.
“Interference with a federal investigation cannot be tolerated,” said Bill Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The sentences imposed today allow us to move forward toward an environment of mutual trust and the common goal of delivering justice to victims of crime. I look forward to continued collaboration with our trusted partners at the Los Angeles County Sheriff’s Department.”
All six were found guilty on July 1 after a jury heard evidence about how the defendants learned that an inmate received a cellular phone from a deputy sheriff who took a bribe and that the inmate was part of a federal civil rights and corruption investigation. The deputies took affirmative steps to hide the cooperator from the FBI and the United States Marshals Service, which were attempting to bring the inmate into federal custody pursuant to an order issued by a federal judge. As part of the conspiracy, records were altered to make it appear as if the cooperator had been released, but he was re-booked under different names.
The deputies also engaged in witness tampering by attempting to influence witnesses to not cooperate with the federal grand jury investigation, including the informant and the sheriff’s deputy who had taken a bribe to smuggle the cell phone into the jail.
Over the course of several weeks, the defendants sought an order from a Los Angeles Superior Court judge that would have compelled the FBI to turn over information about its investigation to LASD. After the judge refused to issue such an order, based on a lack of jurisdiction, Craig and Long confronted an FBI special agent at her residence in an attempt to intimidate her into providing details about the investigation and to try to deter the FBI from conducting the federal investigation. The sergeants falsely told the special agent, and later her supervisor, that they were obtaining a warrant for her arrest.
Speaking of the confrontation at the special agent’s home, Judge Anderson said it was one of the most striking incidents related to the obstruction conspiracy, particularly because it was videotaped. “They did this to scare and intimidate the FBI…and they intended to obstruct justice,” the judge said.
In addition to the conspiracy count, all six deputies were convicted of obstruction of justice offenses. Craig and Long were also found guilty of making false statements to the FBI agent and to her supervisor about seeking a warrant for her arrest.
Thompson, Craig and Leavins are no longer with the Sheriff’s Department. Smith is on approved leave. Manzo and Long, according to the Sheriff’s Department, were relieved of duty without pay in December 2013.
Release No. 14-127