Central District of California

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

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

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

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

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

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

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

SANTA ANA, California – An Irvine man has been sentenced to serve 15 months in federal prison for selling stolen hospital supplies over the Internet, including on eBay and Alibaba.com.

Bahram Khandan, 50, was sentenced today by United States District Judge Cormac J. Carney, who also ordered the defendant to spend nine months on home detention following the completion of the prison term.

Additionally, Judge Carney scheduled a hearing for November 10 to determine how much Khandan shall pay in restitution to victim hospitals.

Khandan pleaded guilty on February 20 to misbranding of a drug with intent to defraud and interstate transportation of stolen property.

Khandan ran a company in Irvine variously known as United Capital Group, Inc.; UCGI Health; and UCGIMedicx (UCGI). Khandan received prescription drugs, biological products and medical supplies from his sister, who stole products from hospitals where she worked, including the UC Irvine Medical Center in Irvine, Kaiser Permanente’s Riverside Medical Center, and the Arrowhead Regional Medical Center in Colton.

Khandan sold the stolen prescription drugs, biological products and medical supplies on eBay and Alibaba.com. On March 18, 2011, search warrants were executed an Irvine house owned by Khandan, where the UCGI business was based, and authorities seized stolen medical products and $141,516 in cash.

Khandan realized profits of $1,883,390 by selling the stolen products over the Internet to customers across the United States and in foreign countries.

Khandan’s sister, Goli Alai-Khandan, was prosecuted by the Riverside County District Attorney’s office on charges related to thefts from the Kaiser Permanente facility. Alai-Khandan was sentenced to one year in state prison. Khandan was also charged in that case in relation to the thefts from Kaiser’s Riverside hospital. He received a sentence of six months in that state court case, a sentence that was taken into account by authorities in the federal case.

The federal case against Khandan was investigated by the U.S. Food and Drug Administration – Office of Criminal Investigation, which is responsible for enforcing the provisions of the Food, Drug and Cosmetics Act, a federal statute designed to ensure that drugs sold for use by humans are safe, effective and accurately labeled.

“Protecting the legitimate supply chain of regulated prescription drugs is an FDA priority,” said Lisa Malinowski, Special Agent in Charge of the FDA’s Office of Criminal Investigations. “Once these products are removed from the closed system that FDA oversees, there can be no guarantee that the products are safe, effective or even that they are what they purport to be. These illegal products could threaten the health of patients who rely on the drugs.

Release No. 14-123

SANTA ANA, California – A former Newport Beach resident who fled the country 15 years ago after federal agents executed search warrants relating to his fraudulent Internet company pleaded guilty this afternoon to federal fraud charges, admitting his role in a scheme that raised nearly $13 million from investors around the country in the late 1990s.

James Eberhart, 73, pleaded guilty to two counts of mail fraud before United States District Judge Cormac J. Carney. Eberhart has been in custody since he was arrested in Malaysia in 2012 after living as a fugitive abroad for more than 12 years.

Eberhart and his co-schemer, Eugene M. Carriere, operated a fraudulent Newport Beach company that used dozens of “boiler room” telemarketing firms and an unwitting celebrity spokesman, the late Tom Bosley, to raise investor funds. YES Entertainment Network, Inc. raised nearly $13 million from victims who were falsely told that the company was creating an 18-channel, multimedia, family-oriented entertainment website and that YES would generate profits through the sale of advertising on the website. Eberhart and Carriere 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.

Eberhart and Carriere used only 1 percent of the investors’ fund to build the YES website, and that was little more than a façade to reassure investors. Approximately 45 percent of the funds was 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 in the names of offshore corporations, all of which Eberhart had formed with the help of an attorney.

In November 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.

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. Malaysia deported Eberhart to the United States because his U.S. passport had expired. At the time of his arrest, Eberhart was living on a custom-built, 58-foot yacht.

Eberhart faces up to 10 years in custody when he is sentenced by Judge Carney on December 8.

Carriere was a fugitive for six years before being arrested in Thailand in April 2005. Carriere pleaded guilty in 2007 to two counts of mail fraud and was sentenced to three years in federal prison and ordered to pay $12,838,045 in restitution.

“Today's announcement delivers justice to many victims who waited years while Mr. Eberhart remained a fugitive, living life abroad after stealing their money,” said Bill Lewis, the Assistant Director in Charge of the FBI's Los Angeles Field Office. “This case, which culminated in Mr. Eberhart's arrest overseas more than a decade after he was charged, is a perfect example of the global and persistent arm of the law.”

In addition to Eberhart and 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.

This case is the result of an investigation by the Federal Bureau of Investigation and the U.S Postal Inspection Service. The U.S. Securities and Exchange Commission provided substantial assistance on the case.

Release No. 14-126

LOS ANGELES – The former owner of a Long Beach medical supply company was sentenced today to 30 federal months in prison and ordered to pay nearly $1.5 million in restitution for his role in a scheme to provide unnecessary power wheelchairs to Medicare patients.

Akinola Afolabi, 55, of Long Beach, received the sentenced from United States District Judge Philip S. Gutierrez.

Afolabi was the owner and president of Emmanuel Medical Supply, which sold durable medical equipment. Afolabi provided medically unnecessary power wheelchairs and other medical equipment to Medicare beneficiaries, and submitted fraudulent claims to Medicare for this equipment. Afolabi admitted that he paid “marketers” to obtain Medicare beneficiary information that he used on the false claims. Afolabi admitted that prescriptions for the equipment and related medical documents were fraudulent, and that some of the beneficiaries did not even receive the wheelchairs or other medical supplies that were the subject of bills submitted to Medicare.

From June 2006 through September 2009, Afolabi submitted approximately $2,668,384 in fraudulent claims to Medicare for power wheelchairs and related services, and Medicare paid approximately $1,490,532 on those claims.

This case was investigated by the Federal Bureau of Investigation and was brought as part of the Medicare Fraud Strike Force, which is supervised by the United States Attorney’s office and the Fraud Section of the Justice Department’s Criminal Division.

Release No. 14-124

LOS ANGELES – A former screener with the Transportation Security Administration who conspired to smuggle narcotics through screening checkpoints at Los Angeles International Airport was sentenced today to 80 months in prison.

Naral Richardson, 32, of South Los Angeles, who was the facilitator of the scheme that involved three TSA screeners at LAX, was sentenced by United States District Judge Margaret M. Morrow. Richardson is the last of seven defendants in this case to be sentenced to federal prison.

Richardson made arrangements so that 45 kilograms of cocaine, 4 kilograms of methamphetamine and 22 kilograms of marijuana were allowed to pass through security screening checkpoints at LAX.

Richardson pleaded guilty in March to a drug-trafficking conspiracy count, admitting that he used his contacts at LAX to facilitate and profit from five “pass-throughs” of drugs at LAX. During these pass-throughs, Richardson arranged for corrupt TSA screeners to look the other way as couriers carried suitcases containing cocaine, methamphetamine and marijuana through the airport for distribution around the country. As part of the scheme, Richardson arranged for the couriers and corrupt screeners to meet beforehand so they would recognize each other and the courier would get into the correct screening lane.

Richardson worked as a screener until he was terminated by the TSA in February 2011, and while employed at LAX he “routinely allowed high-volume drug traffickers to pass drugs through his security screening lane for as much as $1,000 per pass-through,” prosecutors wrote in a sentencing memorandum filed with the court.

The co-defendants previously sentenced in this scheme are:

John Brandon Whitfield, 25, of Los Angeles, a former TSA screener, who received a sentence of 70 months imprisonment;

Joy Lenisha White, 29, of Compton, a former TSA screener, who was sentenced to 70 months in prison;

Capeline Sheri McKinney, 27, of Los Angeles, a former TSA screener, who received a sentence of 50 months imprisonment;

Duane Lewis Eleby, 30, of Downey, a drug courier, who was sentenced to 90 months in prison;

Terry Dean Cunningham, 30, of Los Angeles, a drug courier, who received a sentence of 18 months imprisonment; and

Stephen Anthony Bayliss, 30, of Los Angeles, a drug courier, who was sentenced to 41 months in prison.

The investigation into this case was conducted by the Drug Enforcement Administration and IRS-Criminal Investigation, under the auspices of the Los Angeles High Intensity Drug Trafficking Area (HIDTA).

Substantial assistance was provided by the Transportation Security Administration, the Office of the Inspector General for the Department of Homeland Security, the Los Angeles Police Department, the Los Angeles Sheriff's Department, the Los Angeles International Airport Narcotics Task Force, and the Los Angeles Airport Police.

Release No. 14-125

LOS ANGELES – A Hawthorne woman who was responsible for more than $7 million in fraudulent Medicare billing for durable medical equipment – mostly power wheelchairs – was found guilty today of 16 federal charges stemming from the health care fraud scheme.

Adeline Ekwebelem, 51, was found guilty following a seven-day trial before United States District Judge Michael W. Fitzgerald.

Ekwebelem was convicted of conspiracy to commit health care fraud, 12 counts of health care fraud and three counts of paying illegal kickbacks for health care referrals. As a result of the 16 guilty verdicts, Ekwebelem will face a statutory maximum sentence of 145 years when she is sentenced by Judge Fitzgerald on December 15.

Ekwebelem becomes the fifth person convicted in relation to the scheme run out of her Gardena-based durable medical equipment (DME) supply company, Adelco Medical Distributors, Inc.

The evidence presented during the federal court trial showed that Adelco billed Medicare for medically unnecessary DME, primarily power wheelchairs, for beneficiaries who were often recruited off the street. Ekwebelem paid illegal kickbacks to individuals known as marketers to recruit those beneficiaries. Ekwebelem also paid kickbacks to a handful of complicit doctors in exchange for fraudulent prescriptions for DME.  Those doctors included Dr. Charles Okoye, who pleaded guilty last month (see:  http://www.justice.gov/usao/cac/Pressroom/2014/110.html), and Dr. Uche Chukwudi, who fled after being indicted and is currently a fugitive.

Three of Adelco’s marketers – Romie Tucker, Cindy Santana and Maritza Hernandez – have also pleaded guilty to receiving kickbacks from Ekwebelem.

As a part of this scheme, Ekwebelem submitted more than $7 million in fraudulent claims to Medicare and received nearly $3.5 million for those claims.  

The investigation into Ekwebelem and the others involved with Adelco’s 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. 14-122

LOS ANGELES – Four men were taken into custody this morning on federal charges related to alleged schemes involving the use of “skimming devices” to steal credit card data and using that data to manufacture and sell fraudulent credit cards.

The four were arrested pursuant to federal indictments returned late last month by a federal grand jury in Los Angeles. The two schemes involve stolen information from more than 10,000 accounts and more than $2 million in losses. Two federal indictments charge a total of five defendants.

Among those arrested this morning are three named in a 13-count indictment:

Armen Bislamian, 32, of Van Nuys;

Khachatur Bislamyan, 31, of Pasadena; and

Sisak Saribekyan, 28, of West Covina.

The second indictment, which alleges four counts, names:

Karlen Khatchatryan, 30, of Sherman Oaks, who self-surrendered this morning; and

Hartunyun Grigoryan, 34, of North Hollywood, who has agreed to surrender to authorities tomorrow.
Both indictments allege conspiracies to commit bank fraud, possession of counterfeit and unauthorized access devices, illegal possession of device-making equipment, and aggravated identity theft.

The first indictment outlines how Bislamian, Bislamyan and Saribekyan allegedly conspired to steal account information from unsuspecting customers and created fake credit cards with the stolen account information. According to the indictment, Bislamian manufactured and obtained “skimming devices” designed to intercept data from credit and debit cards that were swiped by unsuspecting customers at point-of-sale terminals. Law enforcement authorities found the skimming devices installed at gas pumps in Irvine, Encinitas and San Diego. The indictment further alleges that Bislamian and Bislamyan stored stolen account information at their homes and at a facility dedicated to manufacturing fraudulent credit cards. The bogus cards were made through a process called “re-encoding” – in which stolen account information is placed on the magnetic strip on the back of a plastic card. As alleged in the indictment, Bislamyan and Saribekyan sold and used fraudulent cards re-encoded with stolen account information.

The second indictment alleges that Khatchatryan and Grigoryan operated a re-encoding facility in Los Angeles where they used stolen account information to make fraudulent credit cards. Law enforcement found this re-encoding facility at a liquor distributor in Los Angeles.

Bislamian, Bislamyan and Saribekyan are expected to be arraigned on the indictment this afternoon at 2:00 in United States District Court in downtown Los Angeles.

Khatchatryan and Grigoryan are expected to be arraigned tomorrow afternoon.

The conspiracy charges alleged in the indictments each carry a statutory maximum penalty of 30 years in federal prison. The charge of aggravated identity theft carries a mandatory consecutive two-year prison term.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

This case is the result of an investigation by the United States Postal Inspection Service, the Glendale Police Department, San Diego County District Attorney’s Office Investigators, the San Diego Police Department, the San Diego Sheriff’s Department, the Irvine Police Department, the Westminster Police Department, the United States Secret Service, the United States Postal Service – Office of Inspector General; the General Services Administration, the United States Marshals Service, the Los Angeles Joint Regional Intelligence Center, U.S. Immigration and Customs Enforcement’s Homeland Security Investigation, and the Los Angeles Police Department.

Release No. 14-121

LOS ANGELES – A deputy in the Los Angeles Sheriff’s Department was found guilty this afternoon of obstruction of justice for interfering with a grand jury investigation into misconduct at the Men’s Central Jail.

James Sexton becomes the seventh sworn officer to be found guilty 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.

“This case involves a select group of Sheriff’s Deputies who were tasked with ensuring safety and security within the jails, but they violated the law by trying to protect their department from federal scrutiny,” said Acting United States Attorney Stephanie Yonekura. “This case, which has now resulted the conviction of all seven charged, proves those who tarnish their badge and their oath will be brought to justice.”

Bill Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Division, said: “Today’s verdict is another reminder that law enforcement must work together to protect the civil rights of all we serve. As we move toward ending a period of corruption and restoring trust at the Men’s Central Jail, we should also be reminded to respect the employees of the Los Angeles County Sheriff's Department who have continued to serve with distinction throughout the duration of this investigation.”

Sexton was found guilty of conspiring to obstruct justice and obstruction of justice. As a result of today’s convictions, Sexton faces a statutory maximum penalty of 15 years in federal prison when he is sentenced on December 1 by United States District Judge Percy Anderson.

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, changed the name of the informant in the jail computer system and changed his booking number, which allowed members of the conspiracy to hide the informant from the FBI.

Six co-conspirators who were tried separated were found guilty of obstruction of justice and other charges earlier this summer (see:  http://www.justice.gov/usao/cac/Pressroom/2014/082.html). Those defendants are scheduled to be sentenced by Judge Anderson on Monday, September 22.

Release No. 14-120

LOS ANGELES – Capping the second phase of Operation “Supernova” – which was a multiagency investigation into Ventura County’s largest street gang – the leader of the Oxnard-based Colonia Chiques street gang has been found guilty of a host of criminal charges, including operating a continuing criminal enterprise.

In a verdict that was issued by a federal jury after 9:00 on Friday night, Luis Manuel Tapia, the leader of the Colonia Chiques and a validated associate of the Mexican Mafia prison gang, was found guilty of each of the 26 federal charges filed against him.

As a result of the convictions, Tapia, 37, of Ojai, faces four mandatory life sentences – plus an additional, consecutive 55 years – when he is sentenced by United States District Judge Otis D. Wright II on December 15.

The evidence presented during a two-week trial in federal court in Los Angeles showed that Tapia was deeply involved in the business of running the Colonia Chiques and was personally involved in the sale of firearms and narcotics. During a series of secretly recorded meetings with Tapia, he described himself as the “CEO” of his enterprise, comparing it to Walmart because he supplied a wide array of contraband and always guaranteed his product’s quality. Indeed, one $200,000 drug transaction in October 2011 involved approximately 10 pounds of nearly pure methamphetamine.

During the investigation, authorities conducted an undercover operation in Las Vegas in which an undercover FBI agent posed as a senior member of the Italian mob and negotiated to have Tapia supply the Las Vegas syndicate of the Italian mob with up to 20 pounds of highly pure methamphetamine every month.

The jury also heard Tapia, in a video recording, bragging that his heroin was so strong that it had “killed six people” – and that this was a “good advertisement” for his drug operation. Tapia also explained how his high-quality methamphetamine – which lab results confirmed was often 100 percent pure – was obtained from Mexican drug cartels. In another video recording, Tapia was heard directing a large assembly of younger Colonia Chiques gang members to monopolize their drug selling territory, to seek out and violently expel or attack informants, and to heed the directives of the Mexican Mafia.

At another stage of the investigation, authorities seized 2.5 pounds of heroin, over 9 ounces of cocaine, 9.6 ounces of methamphetamine, cash and two loaded firearms inside a hidden trap in a car owned by Tapia.

Tapia was specifically found guilty of leading a continuing criminal enterprise that distributed at least 1,000 grams of methamphetamine, conspiracy to distribute controlled substances, conspiracy to engage in the business of dealing in firearms without a license, 10 substantive counts of drug distribution (involving heroin, methamphetamine, and cocaine), three counts of possession of a firearm in furtherance of a drug trafficking crime, seven counts of being a felon in possession of a firearm, and the illegal transfer of a fully-automatic machinegun. Counting the machinegun, investigators seized 19 firearms from Tapia, including an AR-15 assault rifle, a custom built AK-47 with a bayonet, and a pistol grip sawed-off shotgun.

Four of Tapia’s co-defendants – Diana Zamora, Edgar Aguilar, Roger Armendariz and Jaime Cardenas – have pleaded guilty to conspiring traffic narcotics and/or firearms and have received sentences of up to 10 years in federal prison. An unknown male, known only as “Pancho,” who allegedly supplied narcotics to Tapia, is a fugitive believed to be in Mexico.

In the first part of Operation Supernova (see: http://www.justice.gov/archive/usao/cac/Pressroom/2011/018.html) federal prosecutors convicted 11 defendants who have received sentences of up to 25 years in prison.

The Supernova investigation was conducted by the Ventura County Federal Violent Crimes Task Force, which is comprised of agents with the Federal Bureau of Investigation and officers with the Oxnard Police Department.

Release No. 14-118

Santa Ana, California – An Orange County auctioneer who defrauded banks by accepting bribes to lower the amount of winning bids in trustee auctions was sentenced today to 24 months in federal prison, announced Acting United States Attorney Stephanie Yonekura and Bill L. Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. 

Reyna Peinado, 48, of Huntington Beach was sentenced this afternoon by United States District Judge Andrew J. Guilford.

According to a plea agreement filed in this case, Peinado conspired with a confederate – identified in court papers by the initials “S.F.” – in a scheme to defraud banks. During the scheme, which started in February 2012 and lasted for about three months, Peinado conducted real estate auctions on the steps of the Orange County Courthouse on behalf of a trustee known as Reliable Posting and Publishing (RPP), which represented banks which held title of the foreclosed properties. Peinado began the auctions with an opening bid for a property located in Orange County, and attendees would then call out bids, all of which the defendant would tally before declaring a winning bidder. Once the trustee sales were conducted, Peinado called in the sale price and used an overnight courier to send a receipt of funds and cashiers’ checks from the winning bidder to RPP, which posted the sale price on the website for the property.

At the conclusion of some of the trustee sales, Peinado contacted the winning bidder to solicit a bribe in order to reduce the purchase price of the property. In return for approximately $5,000 per property, Peinado reduced the sale price from between $15,000 to $57,000 less than the winning bid purchase price. By reducing the purchase price on seven properties, Peinado caused approximately $261,500 in losses to the banks.

This investigation was conducted by the Federal Bureau of Investigation.

Release No. 14-119

Fashion District Store Using ‘Black Market Peso Exchange’ Scheme Allegedly Took Ransom Money for Hostage Being Held and Tortured by Sinaloa Drug Cartel

LOS ANGELES – Approximately 1,000 law enforcement officials this morning fanned out across the Fashion District in downtown Los Angeles to execute dozens of search warrants and arrest warrants linked to businesses suspected of using “Black Market Peso Exchange” schemes to launder narcotics proceeds for international drug cartels.

Authorities today arrested nine defendants and seized what is estimated to be at least $65 million in cash and from bank accounts around the world in relation to asset forfeiture actions filed as part of the ongoing investigations.

One case unsealed today alleges that the Sinaloa Drug Cartel used a Fashion District business to accept and launder ransom payments to secure the release of a United States citizen who was kidnapped by that narcotics organization, held hostage, and tortured at a ranch in Mexico.

Two other indictments also unsealed today involve alleged money laundering by other Fashion District stores using the Black Market Peso Exchange (BMPE) scheme.

In a BMPE scheme, a peso broker works with an individual engaged in illegal activity, such as a drug trafficker, who has currency in the United States that he needs to bring to a foreign country, such as Mexico, and convert into pesos. The peso broker finds business owners in the foreign country who buy goods from vendors in the United States and who need dollars to pay for those goods. The peso broker arranges for the illegally obtained dollars to be delivered to the United States-based vendors, such as the stores in the Fashion District, and these illegally obtained dollars are used to pay for the goods purchased by the foreign customers. Once the goods are shipped to the foreign country and sold by the foreign-based business owner in exchange for pesos, the pesos are turned over to the peso broker, who then pays the drug trafficker in the local currency of the foreign country, thus completing the laundering of the illegally obtained dollars.

This BMPE scheme – which is also known as Trade-Based Money Laundering – is often used by Mexico-based drug trafficking organizations to collect money from their drug sales in the United States without having to take the risk of smuggling bulk amounts of U.S. currency across the Mexican border and without having to convert and wire the U.S. currency through established financial institutions, which not only carries transaction fees, but also a threat their illegal activity will be detected.

“We have targeted money laundering activities in the Fashion District based on a wealth of information that numerous businesses there are engaged in Black Market Peso Exchange schemes,” said Robert E. Dugdale, the Assistant United States Attorney who oversees the Criminal Division in the Central District of California. “Los Angeles has become the epicenter of narco-dollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses.  Because Los Angeles is at the forefront of this money laundering activity, law enforcement in Los Angeles is now at the forefront of combatting this issue.”

In the criminal case related to the laundering of ransom money to the Sinaloa Cartel, three people were arrested today for their roles in a BMPE scheme based at a Fashion District wholesaler named QT Fashion, Inc., (which did business under the names QT Maternity and Andres Fashion). The indictment in this case also alleges that a Sinaloa, Mexico-based business, Maria Ferre S.A. de C.V., was involved in the scheme to launder ransom money. Following the kidnapping of a United States Citizen by the Sinaloa Drug Cartel, QT Fashion allegedly accepted bulk cash and funneled the money through 17 other Fashion District businesses at the direction of Maria Ferre.

The indictment alleges that the Sinaloa Drug Cartel ordered the kidnapping of the victim after authorities in the United States seized more than 100 kilograms of cocaine that he was responsible for distributing. The victim was held at a ranch in Culiacan, Sinaloa, where he was beaten, shot, electrocuted and waterboarded. The hostage was released after relatives paid $140,000 in ransom, and he is currently in the United States.

“Today’s arrests and searches should send a message to international drug cartels that the FBI and our partners won’t tolerate the exploitation of American businesses for the purposes of illicit financial transactions that fund hostage-taking and the distribution of narcotics,” said Bill L. Lewis, the Assistant Director in Charge of the FBI's Los Angeles Division. “In addition, today’s actions should send a warning to American businesses who turn a blind eye to the crime they facilitate, while avoiding reporting requirements, transaction fees and law enforcement scrutiny.”

Three defendants related to QT Fashion were arrested this morning – Andrew Jong Hack Park (aka Andres Park), 56, of La Canada-Flintridge; Sang Jun Park, 36, of La Crescenta; and Jose Isabel Gomez Arreoloa (aka Chabelo), 49, of downtown Los Angeles.

Three defendants linked to Maria Ferre are wanted by authorities. They are Luis Ignacio Orozco Munoz (aka Nacho), 50, of Culiacan, Sinaloa; Armando Arturo Chavez Gamboa, 43, of Culiacan, Sinaloa; and Daisy Corrales Estrada, 30, of Culiacan, Sinaloa.

The six individual defendants were charged in a three-count indictment returned under seal by a federal grand jury on June 19. The indictment, which was unsealed this morning, accuses the defendants of conspiracy to launder money, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business. If they are convicted of the charges in the indictment, each defendant would face a statutory maximum penalty of 30 years in federal prison.

The investigation into the money laundering scheme related to the kidnapping was conducted by the FBI, IRS – Criminal Investigation and the Drug Enforcement Administration. The case is being prosecuted by Assistant United States Attorney Angela Scott (213-894-6683).

“Today’s Fashion District takedown sends a clear message that law enforcement will not tolerate the actions of those who use the cover of legitimate business to conceal bulk cash obtained directly from drug trafficking and associated acts of violence,” said DEA Associate Special Agent in Charge Stephen G. Azzam. “These indictments and arrests deal a massive blow to complex trade-based money laundering schemes in general, and will therefore severely impair the ability of drug cartels to realize profits and further entrench themselves in our nation’s socioeconomic fabric.”

In the second case announced today, three members of a Temple City family – Xilin Chen, 55; Chuang Feng Chen (aka “Tom”), 24, who is Xilin Chen’s son; and Aixia Chen, 28, who is Xilin Chen’s daughter – have been charged with conspiring to launder monetary instruments, money laundering, and various immigration offenses for their roles in running various businesses in the Fashion District that were used in BMPE schemes. During this morning’s operation, Xilin Chen and Chuang Chen were arrested. Aixia Chen is a fugitive currently being sought by authorities.

The indictment related to the Chens’ businesses – Yili Underwear and Gayima Underwear – alleges that they received bulk cash from a narcotics trafficker in Los Angeles and from an undercover agent posing as a drug trafficker. The Chens allegedly laundered the money to drug trafficking organizations outside of the United States through use of the BMPE scheme, and “structured” the deposits of the bulk cash they received at their businesses to avoid currency reporting requirements that would have alerted law enforcement to their criminal conduct.

IRS - Criminal Investigation’s Special Agent in Charge Erick Martinez said, “Through our collective efforts, we are gaining access to more and more information on the abusive practices of individuals and businesses involved in the laundering and structuring of drug proceeds through the Los Angeles Fashion District, and you can expect us to use all of our enforcement tools to stop this abuse. IRS - Criminal Investigation is working hard to ensure criminals do not use the United States financial system to legitimize their illegal profits.”

If they are convicted, Xilin Chen would face a statutory maximum sentence of 100 years in federal prison, Chuang Chen would face up to 40 years, and Aixia Chen could be sentenced to as much as 80 years.

The case naming the Chens was investigated by the Drug Enforcement Administration and IRS – Criminal Investigation under the auspices of the Southwest Border Initiative. The case is being prosecuted by Assistant United States Attorney John Kucera (213-894-3391) and Assistant United States Attorney Vicki Chou (213-894-8692).

In the third case announced today, a business in the Fashion District named Pacific Eurotex, Corp. and four individuals connected to that business have been charged with conspiracy to launder money, conspiring to illegally structure currency transactions to avoid a currency transaction reporting requirement, structuring currency transactions to avoid currency transaction reporting requirements, and failing to file reports of currency transactions over $10,000.  This Indictment alleges that the defendants utilized Pacific Eurotex as a repository to receive bulk cash that they knew or believed consisted of drug money, that they later laundered those drug proceeds to foreign countries through a trade-based money laundering scheme; that they failed to report the receipt of this bulk cash, as required; and that they structured deposits of this bulk cash into bank accounts by making frequent deposits of the cash in amounts less than $10,000 to avoid a bank reporting requirement that would have drawn the scrutiny of law enforcement to their actions.

“These arrests and seizures should serve as a sobering warning to companies that seek to bolster their bottom line by doing business with drug traffickers – you will pay a high price for your complicity,” said Claude Arnold, special agent in charge for Homeland Security Investigations in Los Angeles. “Unscrupulous companies that help cartels cover their financial tracks by laundering their illicit funds are contributing to the devastation wrought by the international drug trade.”

The four individual defendants named in the Pacific Eurotex indictment were arrested this morning. Those taken into custody are: Hersel Neman, 55 of Beverly Hills, the chief financial officer of Pacific Eurotex; Morad Neman, 54, of the Westwood District of Los Angeles, the chief executive officer of Pacific Eurotex and brother of Hersel Neman; Mehran Khalili, 45, of Beverly Hills, who is a brother in law of the Nemans; and Alma Villalobos, 52, of Arleta.

This indictment alleges that Pacific Eurotex received, laundered and structured approximately $370,000 in bulk cash delivered on four separate occasions by an undercover agent posing as a money courier. The indictment alleges that defendants laundered the money after being specifically advised by Homeland Security Investigations agents that bulk cash payments were frequently derived from illegal activity and that they were required to report cash transactions involving more than $10,000 in currency. According to the indictment, the defendants laundered money, despite the fact that, on one occasion, some of the bulk currency appeared to be spattered with blood.

California Attorney General Kamala D. Harris stated: “Transnational gangs are the number one threat to California's public safety. These predatory criminal organizations destabilize our communities with drugs, guns and human trafficking. Today marks a major victory in our ongoing fight to keep California safe from these predators.”

The investigation into Pacific Eurotex was conducted by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and IRS - Criminal Investigation. Substantial assistance was provided by the Los Angeles Interagency Metropolitan Police Apprehension Task Force (LA IMPACT); the Los Angeles, Long Beach, Gardena, Torrance, El Segundo, and Monterey Park police departments; along with the Westside High Tech Task Force. This case is being prosecuted by Assistant United States Attorney Julie Shemitz (213-894-5735).

The defendants arrested today are scheduled to be arraigned this afternoon in United States District Court.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

 Release No. 14-117

LOS ANGELES – A Marina del Rey man was sentenced today to more than three years in prison for providing sensitive information about a network used to control and communicate with military satellites to an individual he believed was a foreign intelligence officer working for the People’s Republic of China (PRC). 

Brian Scott Orr, 42, was sentenced to 37 months in federal prison by United States District Judge Beverly Reid O’Connell. In addition to the prison term, Judge O’Connell ordered Orr to pay a fine of $10,000, and to serve a three-year term of supervised release after he completes the prison term.

After being arrested by the FBI and charged last November, Orr pleaded guilty on March 17 to retention of stolen government property.

Orr is a former civilian employee who worked for the United States Air Force Research Laboratory (AFRL) in Rome, New York, from 2009 through 2011. While employed there, Orr maintained a Top Secret security clearance and was assigned to work on sensitive and classified matters related to the Air Force Satellite Control Network (AFSCN), a computer network used to control military satellites. Some of Orr’s responsibilities included the identification and evaluation of vulnerabilities in the network.

While working in this capacity, Orr obtained various materials used to train personnel on how to operate the computer network. Orr resigned from the Air Force Research Laboratory in 2011 after his access to classified and other sensitive areas had been withdrawn, but he unlawfully retained the restricted materials he had obtained. The materials were labeled with warnings restricting their export from the United States.

From September 2013 until November 2013, Orr met with an individual whom he believed to be a representative of a Chinese intelligence service, but who was in reality an undercover FBI agent (UCA). Orr met with the UCA multiple times and provided a two thumb drives that contained sensitive military technical data he had obtained during his employment at the Air Force Research Laboratory.

According to the plea agreement filed in this case, Orr provided the training materials he had obtained at the AFRL to the UCA and received $5,000.

Orr told the UCA he was the “foremost expert on attacking the computer network.” During the course of his communications with the UCA, Orr stated that he could destroy or disrupt U.S. military satellites on behalf of the PRC government, the entity he believed the UCA was working for, according to the plea agreement.

According to sentencing papers filed by prosecutors, Orr suggested to the UCA that, for a “big reward,” he could explain “the full amount, how to…destroy it,” when discussing the satellite system.  Orr also suggested that he would need to be taken out of the country in order to “actually do something to this network.”

During one exchange, Orr explained to the UCA that he was providing him with 2 gigabytes of data that had “all the courses” used to “train satellite network operators.”

The investigation in this case was conducted by the Federal Bureau of Investigation and the Air Force Office of Special Investigations (AFOSI).

Release No. 14-116

SANTA ANA, California – A licensed tax return preparer has pleaded guilty to filing more than $41 million worth of false claims against the United States, making her the 53rd and final defendant linked to the quarter billion dollar “Old Quest” tax refund scheme to be convicted.

Alma M. Wilbur, 40, of Victorville, pleaded guilty Friday afternoon to one count of making a false claim against the United States. Wilbur admitted that in May 2009 she filing a false federal tax return in her name that sought a refund of $281,146. When she pleaded guilty before United States District Judge Josephine L. Staton, Wilbur also admitted that she prepared more than 70 false tax returns that fraudulently claimed more than $41 million in bogus tax refunds.

The scheme run out of the Fontana-based Old Quest Foundation was the largest tax refund fraud in history involving misuse of Original Issue Discount tax forms. The case against Wilbur and the other Old Quest defendants stems from Operation “Stolen Treasures,” an investigation conducted by Special Agents with IRS - Criminal Investigation that led to 55 people being indicted by a federal grand jury in the fall of 2011.

Old Quest and a related business – the Rancho Cucamonga-based De la Fuente and Ramirez and Associates (DLFRA) – prepared and filed more than 400 false income tax returns that together claimed more than $250 million in fraudulent tax refunds.

During a search warrant executed at Old Quest’s offices, investigators seized several unfiled tax returns, including one signed tax return that falsely reported $10,500,106 in federal income tax had been withheld and fraudulently claimed a $6,868,675 tax refund. Although the IRS stopped most of the false refunds before they issued, several very large refunds were issued, including one for $1,192,653.

With Wilbur’s guilty plea, all of the defendants have been adjudicated with prosecutors securing 53 convictions, with nine defendants found guilty at trial and 44 pleading guilty. One defendant remains a fugitive, and one defendant was acquitted.

Last week, another licensed tax return preparer, who is an ordained minister, also pleaded guilty to preparing false tax returns. Eugene H. Marzette Sr., 71, of San Bernardino, pleaded guilty on Thursday to one count of making a false claim against the United States for preparing a false tax return for an Old Quest customer that claimed a refund of $1,152,024. The evidence shows that the IRS paid a $1 million refund to that Old Quest customer.

Also, last month, Jose Tavares Hernandez, 42, of Riverside, a Correctional Officer for the state of California, was convicted at trial of making false claims against the United States, based on false income tax returns that resulted in a $769,963 refund issued to him by the IRS.

As a result of these convictions, Marzette, Wilbur, and Tavares Hernandez each face a statutory maximum sentence of five years in federal prison when they are sentenced by Judge Staton. Tavares is scheduled to be sentenced on December 12; Marzette on January 9, 2015; and Wilbur on February 13, 2015.

Thus far, many of the other Old Quest schemers have been sentenced to lengthy terms of imprisonment, including:

Old Quest CEO Arturo S. Ruiz, who was sentenced to 14 years in prison;

Old Quest and DLFRA promoter Arturo Villarreal-Alba, who was sentenced to eight years in prison;

DLFRA owner Osman Norales, who was sentenced to 87 months in prison;

Old Quest promoters Ricardo Bonilla and Maribel Rincon, who were each sentenced to 33 months in prison;

Old Quest tax preparer Adel Cotton, who was sentenced 27 months in prison; and

Old Quest customers Fernando Tavares Hernandez and Christine Rincon, who were each sentenced to 15 months in prison.

This case is the product of an investigation by the Internal Revenue Service - Criminal Investigation.

Release No. 14-115

SANTA ANA, California – The owner of a Huntington Beach-based military contractor who pleaded guilty to federal tax charges for failing to report to the Internal Revenue Service millions of dollars his company received for providing services to the military at Baghdad International Airport was sentenced today to 48 months in federal prison.

Nadim “Nick” Saifan Jr., 48, of Huntington Beach, was sentenced by United States District Judge Cormac J. Carney

Saifan pleaded guilty in May to two counts of attempted tax evasion and specifically admitted that he substantially underreported income on his company’s 2005 corporate tax return and his personal tax return for 2006.

Saifan was the owner and operator of Defense Logistical Support & Services Corporation (DLSS), which provided services to the military and some civilian companies in Iraq. From August 2004 through October 2007, DLSS received nearly $16 million from the United States military for services in Iraq, according to court documents that state Saifan reported only a small fraction of this income on DLSS’s corporate tax returns filed with the IRS. The court documents also show that Saifan used foreign bank accounts, specifically in Lebanon, to conceal his assets and profits from DLSS Corp.

“In addition to failing to report the millions of dollars in taxable income on DLSS Corp.’s tax returns, [Saifan] also used substantial corporate funds for personal purchases and payments to himself, without claiming these distributions and payments as income to himself on his individual tax returns,” prosecutors wrote in a sentencing memo filed with the court. Saifan used corporate money to make approximately $880,000 in down payments on real estate and approximately $292,000 in payments towards vehicles that included a Ferrari and a Rolls-Royce.

Saifan has been in federal custody since Judge Carney revoked Saifan’s bond in May.

The case against Saifan was investigated by the Defense Criminal Investigative Service and IRS – Criminal Investigation.

Release No. 14-114

LOS ANGELES – In coordinated criminal and civil actions filed today, federal prosecutors obtained an indictment and the Securities and Exchange Commission filed a civil complaint against a Los Angeles-based immigration attorney who allegedly ran an investment scheme that defrauded foreign investors seeking permanent residency status in the United States through the EB-5 Immigrant Investor Program.

The indictment and the SEC’s lawsuit alleges that Justin Moongyu Lee raised millions of dollars from dozens of investors – mainly in Korea and China – seeking to participate in the EB-5 program, which provides immigrants an opportunity to obtain permanent residency status by investing in a domestic project to create or preserve jobs for domestic workers.

Both cases allege that Lee – a 57-year-old lawyer who most recently resided in the Hancock Park section of Los Angeles – informed investors that they would be eligible to obtain a “Green Card” if they invested in an ethanol production facility. Instead of using the victims’ money for the biofuel project, Lee allegedly misappropriated the money for his own use. The ethanol plant was never built and the promised jobs were never created, and the foreign nationals lost their opportunity to obtain permanent residency.

A federal grand jury in Santa Ana late this morning returned a nine-count indictment that alleges Lee took approximately $47 million from 94 foreign investors. The indictment alleges that Lee used advertisements in foreign newspapers and other means to solicit Korean and Chinese nationals to invest $500,000 each, plus another $40,000 for administrative and legal fees. Lee guaranteed small annual returns on the investments, as well as “Green Cards” for the foreign nationals. But, according to the indictment, Lee did not make the investments in purported biofuel production facilities and he submitted bogus paperwork to U.S. Citizenship and Immigration Services, which administers the EB-5 program.

Lee is currently in custody in Korea on charges related to this alleged scheme.

Each of the nine wire fraud charges in the indictment carries a statutory maximum penalty of 20 years in federal prison.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

The SEC’s civil case – which names Lee; his wife, Rebecca Taewon Lee; and Thomas Edward Kent – alleges that the trio raised nearly $11.5 million from two dozen investors seeking to participate in the EB-5 program. According to the SEC’s complaint, the Lees and Kent concealed their failure to generate the jobs required by the EB-5 program by submitting false documents to the USCIS. The Lees allegedly misused several million dollars raised from the ethanol plant investors for other purposes, such as financing an iron ore project in the Philippines, an allegation that is mirrored in the indictment.

The SEC’s complaint, which was filed in United States District Court in Los Angeles, charges the Lees, Kent, and five companies founded and controlled by Justin Lee. The lawsuit seeks disgorgement, prejudgment interest and penalties, along with permanent injunctions (for further information on the SEC case, see: http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542843452).

The criminal investigation into Lee was conducted by the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement and IRS – Criminal Investigation.

The State Bar of California has taken disciplinary action against Lee because of an alleged “major misappropriation of client funds,” and he is now longer allowed to practice law (see: http://members.calbar.ca.gov/fal/Member/Detail/187507).

Release No. 14-112

LOS ANGELES – A Dutch national has pleaded guilty to federal drug trafficking and money laundering charges, admitting that he was one of the leaders of a conspiracy that developed and operated a secret, on-line narcotics marketplace known as the “The Farmer's Market” that sold controlled substances such as LSD, “ecstasy” and marijuana to thousands of customers around the world.

Marc Peter Willems, 45, of the Netherlands, pleaded guilty late yesterday to two federal charges – conspiracy to distribute controlled substances and conspiracy to launder money. When he is sentenced on December 10 by United States District Judge Dolly M. Gee, Willems faces a potential sentence of life in federal prison.

Willems was one of eight defendants charged in relation to The Farmer’s Market in April 2012 as the result of an investigation called Operation “Adam Bomb.” Willems is the sixth defendant to plead guilty, one defendant died after being indicted in the case, and the final defendant has agreed to plead guilty on Monday.

“Adam Bomb” was a two-year investigation led by the Drug Enforcement Administration that uncovered The Farmer’s Market, which was an international drug ring that attempted to operate in secret by using the TOR network, IP anonymizers and covert currency transactions. The encrypted TOR network allows websites and electronic mail communications to completely mask IP address information by spreading communications over a series of computers, or relays, located throughout the world. The Farmer’s Market accepted payments for illegal drug sales through Western Union, Pecunix, PayPal and I-Golder.

The eight defendants were initially charged in a 12-count indictment that described how The Farmer’s Market allowed independent narcotics dealers to anonymously advertise illegal drugs for sale. The Farmer’s Market (which had previously been known as “Adamflowers”) provided a marketplace, order forms, on-line forums, customer service, and payment methods for the different sources of supply. The operators screened all sources of supply and guaranteed delivery of the illegal drugs in exchange for a commission based upon the value of the order. Investigators identified customers in every one of the states of the United States and the District of Columbia and in approximately 45 other countries. One of the “customers” was an undercover DEA special agent based in Los Angeles.

In his plea agreement, Willems acknowledged that The Farmer’s Market processed approximately $2.5 million in orders for illegal drugs over the course of several years.

“The Illegal sale of narcotics cannot be cloaked through the use of the Internet, even when sophisticated technology is used to conceal the drug trafficking,” said Acting United States Attorney Stephanie Yonekura. “Working with our law enforcement partners domestically and around the world, we have the ability to uncover and prosecute this hidden, illegal activity.”

Anthony D. Williams, Special Agent in Charge of the DEA’s Los Angeles Field Division, said: “Today’s guilty plea demonstrates DEA’s commitment to identify, apprehend, and bring to justice all drug traffickers, including those who attempt to cloak their illegal activities utilizing the perceived anonymity of the Internet. This conviction sends a clear message that law enforcement can and will use creative investigative techniques to uncover and dismantle online drug marketplaces such as the one operated by Mr. Willems.”

Another key player in The Farmer’s Market – Michael Evron, 44, a United States citizen who was living in Buenos Aires when he was arrested in 2012 – pleaded guilty to conspiracy to distribute controlled substances and conspiracy to launder money and is scheduled to be sentenced by Judge Gee on November 19.

Four other defendants have previously pleaded guilty and are scheduled to be sentenced later this year.

The final defendant – Ryan Rawls, 33, of Alpharetta, Georgia – has agreed to plead to conspiracy to distribute controlled substances and is scheduled to formally enter his guilty plea on Monday.

Release No. 14-113

LOS ANGELES – An Antelope Valley man who admitted that he used his camera phone to make videos while he molested a 3-month-old relative was sentenced this afternoon to 250 months in federal prison.

Robert Dale Schrader, 34, of Littlerock, was sentenced by United States District Judge Gary A. Feess, who also ordered that Schrader, once released from prison, will be on supervised release for the rest of his life.

At today’s sentencing hearing, Schrader told Judge Feess there was a connection between looking at online child pornography and his actually molesting children. Schrader described how viewing child pornography created for him a link between children and sexual desire, ultimately leading him to molest children and produce child pornography.

According to court documents, authorities began investigating Schrader early this year after he communicated via email with an undercover law enforcement officer based in England. In those emails, Schrader sent sexually explicit images of an infant, and data embedded in those images led authorities to Schrader’s Littlerock home.

On January 29, investigators executed a federal search warrant at Schrader’s residence, where they rescued the infant who had been molested. Authorities discovered approximately 200 child pornography images and videos depicting the baby.

During the investigation, authorities uncovered evidence that Schrader also molested at least two other victims, a 12-year-old girl and a 9-year-old boy. Schrader currently faces additional charges that have been filed by the Los Angeles County District Attorney’s Office.

Schrader “repeatedly sexually abused his three-month-old [relative],” federal prosecutors wrote in a sentencing memorandum filed with the court. “He found online communities of like-minded individuals and bragged to them about his exploits with children, sharing his photographic trophies with them in hopes of obtaining similar child pornography in exchange. In this way, defendant emboldened and encouraged other individuals to also molest children, and also produce child pornography.”

The case against Schrader is the result of an investigation by the Child Exploitation Investigations Group, a task force based in Long Beach and spearheaded by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). Other agencies actively involved in the group include the Los Angeles Police Department, the FBI and the Los Angeles County Department of Children and Family Services (DCFS).

Release No. 14-111

LOS ANGELES – A Los Angeles County physician whose referrals led to more than $1.7 million in fraudulent Medicare billing pleaded guilty this afternoon to participating in a conspiracy to defraud Medicare by writing prescriptions for unneeded durable medical equipment (DME), such as power wheelchairs.

Charles Okoye, a 52-year-old Carson resident, pleaded guilty to one count of conspiracy to commit health care fraud.

Appearing before United States District Judge Michael W. Fitzgerald, Okoye admitted that he wrote prescriptions for medically unnecessary DME for patients referred to him through Adelco Medical Distributors, Inc., a Gardena-based DME supply company.

Between November 2008 and November 2011, Adelco recruited Medicare beneficiaries and took them to see Okoye, who would issue DME prescriptions – primarily for power wheelchairs – after giving the “patients” a single, cursory examination, according to Okoye’s plea agreement. Adelco then billed Medicare for providing the DME, which the beneficiaries did not want and often never used. In return for these referrals, Okoye received illegal kickbacks for every DME prescription from Adelco’s owner, Adeline Ekwebelem.

Okoye’s referrals led Adelco to submit approximately $1.7 million in fraudulent claims to Medicare, and Medicare paid Adelco more than $820,000. Okoye also fraudulently billed Medicare more than $50,000 for services he claimed to have provided to the “patients” who received unnecessary prescriptions.

Ekwebelem, 51, of Hawthorne, is also charged in the case, and she is scheduled to go on trial before Judge Fitzgerald on September 9.

The Adleco indictment charges four other defendants, three of whom have previously pleaded guilty. The final defendant is currently a fugitive.

In his plea agreement, Okoye also admitted that he engaged in a similar unlawful arrangement with another DME company, Esteem Medical Supply in Inglewood. 

Okoye is scheduled to be sentenced by Judge Fitzgerald on December 8. At sentencing, Okoye faces a statutory maximum sentence of 10 years in federal prison.

As part of his guilty plea, Okoye has agreed that the California Medical Board can revoke his license to practice medicine.

The investigation into Okoye, Ekwebelem, and the others involved in 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. 14-110

LOS ANGELES – A Los Angeles woman was sentenced today to three years in federal prison for orchestrating a scheme that led to the fraudulent purchase of four properties worth more than $2 million.

Soo Kyung Hong, who also used the name “Maria Hong,” 48, a resident of the Miracle Mile section of Los Angeles, was sentenced today by United States District Judge John F. Walter. In addition to the 36-month prison term, Judge Walter ordered Hong to pay approximately $2 million in restitution, which includes losses from four additional properties fraudulently purchased in a related scheme.

Hong pleaded guilty in April to conspiracy to commit wire fraud, admitting that she falsified income and employment information to fraudulently obtain mortgages to purchase four properties in Hesperia, Laguna Niguel, and Hacienda Heights.

To further the scheme, Hong engaged a co-conspirator to allow Hong to falsely list the co-conspirator’s company as a place of employment on the fraudulent mortgage applications that were filed under the name of a person who did not know their name was being used. Hong instructed the co-conspirator to direct calls seeking employment verification to Hong. As part of the scheme, banks funded mortgages on four properties, all of which fell into foreclosure and caused losses of more than $1 million.

This case is being investigated by the Federal Housing Finance Agency, Office of Inspector General; the Federal Bureau of Investigation; IRS – Criminal Investigation; and the Los Angeles Sheriff’s Department. The case was prosecuted by the Fraud Section in the Criminal Division of the Department of Justice and the United States Attorney’s Office in Los Angeles.

Release No. 14-109

LOS ANGELES – The leader of a $20 million health care fraud scheme based at a Glendale medical clinic was sentenced today to eight years in federal prison for overseeing a plot to fraudulently prescribe expensive anti-psychotic medications and to sell those drugs back to pharmacies through the black market, where the drugs would be billed to the government over and over.

Lianna “Lili” Ovsepian, 33, of Tujunga, was sentenced this morning by United States District Judge S. James Otero, who stated that “we can’t have a situation where crime pays.” In addition to the prison term, Judge Otero ordered Ovsepian to pay $9,146,137 in restitution to Medicare and Medi-Cal.

Last November, Ovsepian pleaded guilty to conspiracy to commit health care fraud and conspiracy to commit identity theft.

Ovsepian was the manager and owner of Manor Medical Imaging, Inc. in Glendale, which generated thousands of fraudulent prescriptions for unneeded and expensive anti-psychotic medications for “patients” who were typically low-income beneficiaries of the government-funded health care programs Medicare and Medi-Cal, and who did not need those drugs. The prescriptions appeared to be issued by co-conspirator Dr. Kenneth Johnson, who pre-signed thousands of blank prescriptions that were filled out by Ovsepian’s mother-in-law, Nuritsa Grigoryan.

The beneficiaries who received the prescriptions were brought to pharmarcies, where the prescriptions were filled. The drugs were returned to Manor, the “patients” were given nominal payments (usually around $100), and the drugs were diverted into the black market, where they were sold to other pharmacies and re-billed to health care programs as though the drugs were being dispensed for the first time.

As prosecutors argued at sentencing, the beneficiaries included veterans recruited from dual diagnosis programs for drug addiction and schizophrenia, elderly Medicare beneficiaries whose identities were stolen and homeless beneficiaries recruited from skid row.

From September 2009 through October 27, 2011, when the scheme was shut down by authorities, Medi-Cal and Medicare was billed more than $20 million, and the programs paid more than $9.1 million to pharmacies based on more than 14,000 claims submitted in relation to the scheme, prosecutors wrote in a sentencing brief filed in Ovsepian’s case.

The case involving Manor was the first one in the nation alleging an organized scheme to defraud government health care programs through fraudulent claims for anti-psychotic medications. The case is also the largest of its kind in Southern California involving a fraud targeting Medicare Part D.

Following a trial earlier this year, Dr. Johnson, Grigoryan and Ovsepian’s brother, Artak Ovsepian, were found guilty of a host of charges related to the scheme (see: http://www.justice.gov/usao/cac/Pressroom/2014/023.html). Those three defendants are currently pending sentencing.

Ovsepian oversaw a scheme that involved several family members and other co-conspirators. A total of 16 defendants have been convicted either through guilty pleas or by jury verdicts.          

Other defendants who were charged in this case include a Pasadena couple whose Huntington Pharmacy in San Marino saw its business grew dramatically due its affiliation with Manor Medical. The owner of the pharmacy, Phic Lim, is scheduled for trial in this case in March 2015.

The investigation in this case, which was called Operation “Psyched Out,” was conducted by the San Marino Police Department; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; the United States Food and Drug Administration, Office of Criminal Investigations; IRS-Criminal Investigation; the United States Department of Health and Human Services, Office of the Inspector General; U.S.
Immigration and Customs Enforcement’s Homeland Security Investigations; the Glendale Police Department, Organized Crime Team; and the California Department of Health Care Services, Audits and Investigations Branch.

Release No. 14-107

LOS ANGELES – An associate of the Armenian Power gang, who was convicted at trial for his role in a racketeering conspiracy that included stealing personal and financial information of elderly bank customers for accounts valued at more than $25 million, was sentenced today to 160 months in prison.

Andranik Aloyan, 41, of Hollywood, was sentenced by United States District Judge Philip S. Gutierrez. In addition to the prison term of more than 13 years, Judge Gutierrez ordered Aloyan to pay $3,516,711 in restitution.

A federal jury in February found guilty Aloyan guilty of racketeering conspiracy, attempted bank fraud, access device fraud, four counts of aggravated identity theft and possession of a firearm by a convicted felon.

According to the evidence presented at trial, Aloyan possessed and used stolen personal and financial information belonging to more than 80, mostly elderly bank customers, whose accounts combined to be worth more than $25 million.

Aloyan was among 90 individuals charged three years ago in two indictments that alleged a variety of criminal activities associated with the Armenian Power gang.  One indictment accused 27 defendants, including Aloyan, of participating in the Armenian Power racketeering conspiracy that involved illegal activities such as sophisticated bank fraud, identity theft, debit-card skimming, manufacturing counterfeit checks and money laundering. Some of the defendants also were involved in violent crimes, such as kidnapping, extortion and firearms offenses, along with other crimes including drug trafficking and illegal gambling. Eighty-five defendants have previously been convicted or pleaded guilty to the charges, including 26 defendants who were convicted of or pleaded guilty to racketeering charges.

According to court documents, the Armenian Power street gang formed in the East Hollywood district of Los Angeles in the 1980s. The gang’s membership consisted primarily of individuals of Armenian descent, as well as of other countries within the former Soviet bloc. Armenian Power has been designated under California state law as a criminal street gang and is believed to have more than 250 documented members, as well as hundreds of associates. According to court documents, Armenian Power members and associates regularly carry out violent criminal acts, including murders, attempted murders, kidnappings, robberies, extortions and witness intimidation to enrich its members and associates and preserve and enhance the power of the criminal enterprise.

The 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,RS – Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the U.S. Secret Service.

The cases are being prosecuted by the United States Attorney’s Office and the Department of Justice, Criminal Division, Organized Crime and Gang Section.

Release No. 14-108

LOS ANGELES – A Los Angeles-area doctor has been found guilty of federal drug trafficking charges for illegally distributing the powerful painkillers, such as Vicodin and Norco, and laundering the proceeds of his drug dealing.

Dr. Andrew Sun, 78, of La Mirada, was found guilty late Thursday by a federal jury in Los Angeles.

Following a three-day trial, the jury convicted Sun of 17 felony counts, including three counts of money laundering. Sun was found of guilty distributing controlled substances outside of the usual course of professional practice and without a legitimate medical purpose, including seven counts of distributing of hydrocodone (best known under the brand name Vicodin), four counts of distributing alprazolam (best known under the brand name Xanax), one count of distributing carisoprodol (best known under the brand name Soma), and two counts of distributing promethazine with codeine (known as the street as “purple drank” and “sizzurp”).

As a result of the guilty verdicts, Sun faces a statutory maximum sentence of 157 years in federal prison when he is sentenced by United States District Judge Manuel Real on November 10.

The case presented by federal prosecutors, at its core, involved a doctor who “profited by prescribing addictive pain killers and other controlled substances to persons whom he believed were drug addicts, and thus that defendant acted without a lawful medical purpose,” according to a court document that outlines the government’s case.

Sun, who operated medical clinics in San Gabriel and East Los Angeles, issued more than 24,000 prescriptions for controlled substances and Sun generated well over $1 million in cash proceeds from 2009 through 2012, the evidence at trial showed.

Law enforcement authorities conducted a series of undercover operations at Sun’s clinic. During each operation, Sun failed to conduct any physical examination and he sold prescriptions for $150 in cash – even when he believed he was writing prescriptions for drug addicts.

The jury heard recordings of the undercover operations in which Sun told his “patients” what symptoms they should feel in an effort to justify prescriptions for potent painkillers. During one interaction, Sun offered to write a prescription for maximum strength Vicodin and told the “patient” that “you got to tell me if there’s any pain anywhere.” The “patient” asked, “What’s a legitimate one?  What’s a good one?” Sun suggested “back pain,” and the “patient” responded, “There you go. Sounds good to me.”

The evidence also included Medical Board disciplinary filings against Sun showing that he was subject to a separate undercover investigation in 2004, during which he prescribed Vicodin to patients even though they said they didn’t feel pain. The Medical Board placed Sun’s license on probation, which included a requirement that Sun document and report all of his prescriptions for Vicodin and other controlled drugs.  As shown at trial, Sun falsified the records that he submitted to the Medical Board by reporting diagnoses that were never mentioned during his meetings with patients.

Judge Real also scheduled an August 25 hearing, at which time the court will consider if Sun will be ordered to forfeit nearly $350,000 in drug proceeds that were previously seized by the government.

The investigation into Sun was conducted by the Drug Enforcement Administration, IRS - Criminal Investigation, the California Medical Board, the California Department of Health Care Services and the Monterey Park Police Department.

Release No. 14-106

LOS ANGELES – A federal grand jury has indicted a Chinese national on five felony offenses stemming from a computer hacking scheme that involved the theft of trade secrets from American defense contractors, including The Boeing Company, which manufactures the C-17 military transport aircraft.

Su Bin – who also used the names “Stephen Su,” “Stephen Subin” and “Steven Subin” – was named in a five-count indictment returned Thursday afternoon and filed in United States District Court.

Su is currently in custody in British Columbia, Canada, where he is being held pursuant to a provisional arrest warrant submitted by the United States. Su was previously charged in a criminal complaint filed in Los Angeles, but the indictment is now the operative charging document.

The indictment alleges that Su, a 49-year-old businessman, worked with two unindicted co-conspirators based in China to infiltrate computer systems and obtain confidential information about military programs, including the C-17 transport aircraft, the F-22 fighter jet, and the F-35 fighter jet.

The indictment specifically alleges three charges related to unauthorized computer access, a conspiracy to illegally export defense articles and a conspiracy to steal trade secrets. The charges carry a total maximum statutory penalty of 30 years in prison.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

The investigation in this case was conducted by the Federal Bureau of Investigation and the Air Force Office of Special Investigations.

Release No. 14-105

LOS ANGELES – A San Francisco man was sentenced to three months in federal prison, followed by six months of home confinement with electronic monitoring, for his involvement in insider trading by purchasing Marvel Entertainment, Inc. stock options immediately prior to its acquisition by The Walt Disney Company in August 2009.

Toby G. Scammell, 29, was sentenced this morning by United States District Judge S. James Otero.  In addition to the prison term, which Scammell was ordered to begin serving on September 22, 2014, Judge Otero ordered him to pay restitution in the amount of $122,494.05 to victim broker-dealers who sold the options to Scammell, and ordered him to make payments upon his release from prison toward a judgment to disgorge his trading profits and pay civil penalties and interest totaling $800,985 in a related civil action filed by the Securities and Exchange Commission.

Scammell pleaded guilty in April 2014 to one count of securities fraud through insider trading.

According to court documents, Scammell learned that Disney planned to acquire another company “that people would recognize right away” from his then-girlfriend, who was an extern at Disney in the Summer of 2009 and who worked on the deal to acquire Marvel. Scammell later learned from a supervisor at his then-employer -- which had periodically provided corporate consulting services to Disney and had confidentiality obligations to Disney -- that Disney had previously been interested in acquiring Marvel. Scammell admitted that he learned the planned acquisition by Disney was estimated to close by Labor Day 2009, based on his observations of his girlfriend’s work schedule at Disney and their own travel plans at the time.

Scammell used the information that he learned from his girlfriend to acquire 659 call options to purchase Marvel stock for $5,465. He purchased more than half of the options in his brother's account. Scammell did not tell his girlfriend or his brother about the purchases of the Marvel call options.

Marvel’s stock rose approximately 25 percent after the deal with Disney was announced on August 31, 2009. After the acquisition was publicly disclosed by Disney, Scammell immediately sold his options, realizing more than $192,000 in profits. Scammell transferred $100,000 of the profits out of his brother's account to conceal the trading and profits from his brother.    

This case was investigated by the Federal Bureau of Investigation, which received assistance from the Securities and Exchange Commission.

Release No. 14-104

LOS ANGELES – Two men involved in setting an illegal campfire above Glendora that erupted out of control to become the destructive Colby Fire were sentenced today to federal prison.

At today’s hearing, Clifford Eugene Henry Jr, 22, of Glendora, received a prison term of 6 months, plus a three-year term of supervised release, and Steven Robert Aguirre, 21, of Baldwin Park, received a prison term of 5 months, plus a three-year term of supervised release, from United States District Judge George H. Wu. 

Clifford Henry and Steven Aguirre were tried together in May and each was found guilty of four charges (one felony and three misdemeanors) related to the fire.   At today’s hearing, the government agreed to dismiss one of the misdemeanor charges.

One other defendant in the case, Jonathan Carl Jarrell, was also found guilty of a felony offense of unlawfully setting timber afire and a misdemeanor offense of illegally starting a fire.  Jarrell is scheduled to be sentenced by Judge Wu later this month.

The Colby Fire started on the morning of January 16. By that evening, the fire had consumed more than 1,700 acres of federal, state, local and private lands. The fire destroyed six residences, damaged eight other residences and 17 additional structures, and resulted in injuries to one civilian and two firefighters.  Prosecutors argued that the damages and costs associated with fire-fighting efforts were in excess of $6,000,000.

Henry and Aguirre were detained by Glendora Police Officers after they were seen fleeing from area of the fire in a flood control channel.  During interviews with Glendora Police and personnel with the Los Angeles County Fire Department’s Arson Investigations Unit – interviews that the jury heard during the trial – both defendants admitted playing a role in the starting the illegal campfire that led to the Colby Fire after wind blew burning paper into the brush in the hills above Glendora.  Strong Santa Ana winds drove the fire into the residential communities below the hills.

A United States Forest Service fire investigator determined that the origin of the Colby Fire was at a point near a fire ring built by the three men at a location on federal lands within the Angeles National Forest.

“The devastation directly caused by defendants conduct points to the incredible seriousness of their offense,” prosecutors wrote in a brief filed in relation to the sentencing. “But the fact that it could have been worse underscores that degree of seriousness. But for the quick thinking and courageous reactions of the Glendora and Azusa Police Departments to evacuate the residents in harm’s way; but for the heroic actions of individual fire fighters, helicopter pilots and aircraft tanker pilots in battling the blaze; but for the winds dying down and the humidity increasing…this could have been so much worse.”

The investigation in this case was conducted by the United States Forest Service, the Glendora Police Department, the Azusa Police Department, the Los Angeles County Fire Department’s Arson/Fire Investigation Unit, and CAL FIRE.

Release No. 14-102

SANTA ANA, California – A former sales associate with the Federal National Mortgage Association (Fannie Mae) was sentenced today to 15 months in federal prison for taking kickbacks from a real estate broker who sold properties on behalf of the mortgage agency. 

Armando Granillo, 45, of Huntington Beach, who worked in the Fannie Mae’s Irvine office, was sentenced by United States District Judge David O. Carter.  In addition to his 15 month sentence in federal prison, Granillo was ordered to spend 6 months in a residential reentry center.  

Following a two-day trial in March, Granillo was found guilty of three counts of “honest services” wire fraud for soliciting kickbacks while working for Fannie Mae. 

As a “real estate owned foreclosure specialist” for Fannie Mae, Granillo reviewed applications submitted by real estate brokers who wanted to list Fannie Mae foreclosure properties, and he had the authority to approve sale offers presented by the brokers. In late 2012, Granillo asked a real estate broker in Tucson to pay a percentage of the commissions the broker earned for selling Fannie Mae foreclosure properties. The broker brought the matter to the attention of federal law enforcement officials and assisting in the investigation.

During subsequent conversations between Granillo and the broker, Granillo demanded 20 percent of the real estate broker’s commissions in exchange for preferential treatment in the assignment and sales of Fannie Mae properties. In February 2012, Granillo traveled from Orange County to the Phoenix area, where he met with the broker. During the recorded meeting, Granillo stated that the kickback arrangement was a “natural part of business.” Granillo promised to increase the broker’s portfolio and ensure that he always had at least 100 listings, to give the broker the best properties, and to help the broker get offers approved by Fannie Mae. Granillo then arranged to receive the $11,200 payment from the broker. 

Granillo was arrested in this case on March 5, 2013 during an undercover operation after accepting an $11,200 payment from the real estate broker.

Granillo “violated Fannie Mae and the public’s trust by engaging in a form of public corruption,” prosecutors wrote in a sentencing brief filed with the court. “This crime is akin to those involving governmental officials who solicit bribes in exchange for favorable treatment. The reputational damage is devastating and potentially permanent.”

Fannie Mae is currently under the conservatorship of the Federal Housing Finance Agency. The investigation into Granillo was conducted by the Federal Housing Finance Agency’s Office of Inspector General.

Release No. 14-103

RIVERSIDE, California – A man who left pipe bombs in a residential neighborhood in Palm Springs near the residence of an ex-girlfriend was sentenced today to 72 months in federal prison after pleading guilty to possession of an unregistered destructive device.

Edward Allen Costa, 49, who resided in Desert Hot Springs but was a fugitive for a time last year, was sentenced by United States District Judge Virginia A. Phillips.

Costa pleaded guilty in 2012 to being a felon in possession of a firearm as a result of evidence obtained during an investigation into the pipe bombs. He was sentenced to a year in prison and was finishing his sentence at a halfway house in Rubidoux when he walked away from the facility in August 2013. The fugitive was taken into custody in November 2013 by the Banning Police Department and the FBI.

While a fugitive last year, Costa was indicted for possessing six pipes bombs that were left in Palm Springs from May 8 through May 12 of 2012. “This type of device falls into the general category of “improvised explosive devices,” or more plainly, “homemade” bombs, prosecutors wrote in a sentencing memo that cited the “enormous public safety danger” posed by the devices.

The Federal Bureau of Investigation and the Bureau of Alcohol, Tobacco, Firearms, and Explosives investigated the case involving the pipe bombs. The Palm Springs Police Department and the Riverside County Sheriff’s Department provided substantial assistance.

Release No. 14-101

SANTA ANA, California – A former immigration officer was convicted on Friday afternoon in federal court for taking bribes from Cambodian immigrants in exchange for immigration benefits, including granting the immigrants temporary legal status, while he was working in the Santa Ana federal building.  The former immigration officer and his wife were also convicted of witness tampering. 

Billy Louis Nelms, Sr., 54, of Los Angeles, was convicted of felony counts of conspiracy to commit bribery and defraud the United States, bribery, conspiracy to witness tamper, and witness tampering.  Sokhon Nelms, 60, of Los Angeles, was convicted of conspiracy to witness tamper and witness tampering.  As a result of Friday's convictions, Mr. Nelms faces a statutory maximum sentence of 95 years, and Mrs. Nelms faces a statutory maximum sentence of 60 years. 

The evidence at trial showed that between 2005 and August 2008, Mr. Nelms worked in the Santa Ana federal building as an immigration officer in the Fraud Detection and National Security unit.  The evidence showed that during that time, as part of the scheme, the Cambodian immigrants were promised permanent legal status.  The Cambodian immigrants were present in the United States without legal status.  The immigrants typically paid approximately $5,000 in cash for the permanent legal status.  In exchange, Mr. Nelms stamped immigration documents, giving the immigrants temporary legal status in the United States.  The evidence at trial showed that following Mr. Nelms’s original indictment in this case for bribery and defrauding the United States in June 2013, Mr. Nelms and Mrs. Nelms tampered with two of the witnesses identified in the original indictment.  On one occasion, with Mr. Nelms present, Ms. Nelms told a witness not to speak to anyone. 

This case is the product of an investigation by the Department of Homeland Security’s Office of Inspector General (DHS-OIG).  The United States Citizenship and Immigration Services (USCIS) and Immigration & Customs Enforcement’s Homeland Security Investigations Forensic Laboratory (HSI-FL) provided assistance in the investigation

Release No. 14-100

LOS ANGELES – More than 400 law enforcement officers this morning conducted an operation that led to the arrest of 17 members and associates of the El Monte Flores gang, an organization that takes direction from the Mexican Mafia prison gang and controls criminal activity in the cities of El Monte and South El Monte.

Those taken into custody today are among 41 defendants named in a 167-page racketeering indictment that alleges “El Monte Flores gang members commit crimes, including acts of violence (ranging from battery to murder), drug trafficking offenses, robbery, burglary, carjacking, witness intimidation, kidnapping, weapons trafficking, credit card fraud, identity theft, and hate crimes directed against African-Americans who might reside or be present in the cities of El Monte and South El Monte in an effort to rid these cities of all African-Americans.”

Other gang-related crimes are outlined in the 62-count indictment, including the execution of a former Mexican Mafia member and the fatal shooting of four others in an El Monte residence in 1995. The indictment also outlines an ongoing dispute involving members of the Mexican Mafia who are attempting to exercise control over the gang. One of those Mexican Mafia members – James “Chemo” Gutierrez, 52, who is currently in federal custody after his supervised release following a 20-year sentence in a federal homicide case was revoked – is the lead defendant in the indictment. Other Mexican Mafia members serving life prison terms are not charged in the indictment, but they are listed as co-conspirators.

The gang maintains a significant presence at the Boys & Girls Club of America – San Gabriel Valley Club on Mountain View Road, where gang members openly sold drugs, held gang meetings and even held a car wash fundraiser, according to the indictment. Members of the gang also regularly use and threaten to use violence to extort “taxes” from drug dealers at “Crawford’s Plaza” (at Valley Boulevard and Garvey Avenue) and the “Klingerman” apartments, as well as from fraudulent document vendors who operate at Crawford’s Plaza. The indictment further alleges several incidents dating back to early 2001 in which African-American victims in El Monte were attacked, threatened and subjected to racial epithets.

The investigation into the El Monte Flores gang was conducted by a task force that included the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; IRS – Criminal Investigation; and the El Monte Police Department

According to the indictment that was unsealed this morning, El Monte Flores, which has an estimated 800 members, operated as a criminal enterprise that used violence and intimidation to exercise authority in the area it claimed. The multi-generational gang was formed in the 1960s, and since then it has controlled the drug trade in El Monte and South El Monte.

The defendants named in the federal indictment face various charges, including conspiracy to engage in racketeering activity in violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act; violent crimes in aid of racketeering; conspiracy to possess with intent to distribute and distribute controlled substances; using a firearm in relation to a crime of violence or drug trafficking; weapons charges; conspiracy to launder money; and being an illegal alien after previously being deported.

Those taken into custody today are expected to be arraigned this afternoon in United States District Court.

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, all of the defendants would face up to 20 years for the RICO and potentially decades more depending on which additional offenses they are charged with. One defendant – Johnny Mata, 33, of Baldwin Park, California – faces a potential death penalty if he is convicted of being the shooter in the slaying of a rival gang member in Baldwin Park on Christmas Eve in 2010.

Out of the 41 defendants named in the federal indictment, 17 were arrested this morning. Fifteen defendants named in the grand jury indictment were already in custody. Authorities are continuing to search for nine defendants.

In addition to the law enforcement agencies who conducted the investigation, several agencies provided substantial assistance during this morning’s takedown, including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the California Department of Corrections and Rehabilitation, the Irvine Police Department, the Covina Police Department, the Montebello Police Department, the Azusa Police Department, the Baldwin Park Police Department, the United States Marshals Service, the Los Angeles Sheriff’s Department, the San Bernardino Sheriff’s Department, and the Los Angeles County District Attorney’s Office.

Release No. 14-099

LOS ANGELES – A registered nurse who operated GreatCare Home Health, Inc., a home health agency based in the Westlake district of Los Angeles, has been sentenced to 57 months in federal prison for orchestrating a $5 million Medicare fraud scheme involving kickbacks to doctors and patients who did not qualify for in-home health services provided by GreatCare.

Hee Jung Mun, who often used the name Angela Mun, 52, of Rancho Palos Verdes, was sentenced late yesterday by United States District Judge Dean D. Pregerson. In addition to the prison term, Judge Pregerson also ordered Mun to pay $5.144 million in restitution to Medicare.

As part of the investigation, authorities previously seized $1.2 million from bank accounts owned by Mun and GreatCare. Another federal judge ordered Mun to pay nearly $15 million to resolve a “whistleblower” lawsuit associated with the scheme (see: http://www.justice.gov/usao/cac/Pressroom/2013/116.html).

Mun pleaded guilty in 2012 and admitted orchestrating a three-year scheme to defraud Medicare. In her plea agreement, Mun admitted that she bilked Medicare out of millions by 1) paying illegal kickbacks to doctors and individuals known as “cappers” or “marketers” for patient referrals, and to patients themselves to sign up for home health services, 2) billing Medicare for patients who were not homebound or who otherwise did not quality for home health services, and 3) billing Medicare for services provided by unlicensed individuals or not provided at all.

The scheme targeted elderly, primarily Korean, Medicare beneficiaries. GreatCare was shut down by federal agents after the execution of a search warrant there in March 2011.

While Mun was the leader of the scheme, seven other defendants have been convicted in related cases for their roles in the Greatcare fraud:

shortly after Mun’s sentencing yesterday, Sang Whan Ahn, 60, of Koreatown, who recruited many of GreatCare’s Medicare beneficiaries in exchange for illegal kickbacks, was sentenced to four months in prison;

doctor Whan Sil Kim, also known as “Victoria,” 71, of Hancock Park, was sentenced to a year and a day in prison for receiving illegal kickbacks for health care referrals;

one of GreatCare’s nurses, Hwa Ja Kim, also known as “Helen,” 70, of Harbor City, was sentenced to 18 months in prison for signing off on patient evaluations and visits she did not do;

Yeong Ja Lee, 52, of Mid-City, one of the unlicensed individuals Greatcare used to see patients and create fake paperwork, was sentenced to 15 months in prison just last week;

physical therapist Seonweon Kim, 48, of Arcadia, is scheduled to be sentenced on October 6; and

GreatCare employee Jung Sook Lee, 53, of Koreatown is scheduled to be sentenced on October 20.

An eighth defendant in the case, Registered nurse Ji Hae Kim, 43, of Fullerton, is a fugitive.

“Home health scams and the payment of illegal kickbacks to physicians remain serious problems in the Los Angeles area, costing taxpayers millions of dollars,” said Glenn R. Ferry, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (OIG) Los Angeles Region. “Home health remains a top oversight priority for OIG, and we will continue to work with our law enforcement partners to aggressively investigate and prosecute anyone who engages in home health fraud.”

In a related “whistleblower” lawsuit brought by one of GreatCare’s former employees, two other GreatCare referring doctors, Dr. Dong Shin and Dr. Bo W. Paik, agreed to pay $217,810 and $530,000, respectively, to resolve allegations that they received cash payments and patient referrals in exchange for referring Medicare beneficiaries to GreatCare.

Dr. Kim has agreed to pay $1.088 million as a part of a consent judgment for her conduct, while Seonweon Kim has agreed to pay $205,000 to resolve his civil liability related to GreatCare.

The investigation into GreatCare was conducted by the Federal Bureau of Investigation and United States Department of Health and Human Services, Office of the Inspector General.

Release No. 14-098

RIVERSIDE, California – A United Parcel Service driver was arrested this afternoon on federal gun trafficking charges for allegedly stealing dozens of guns going through the shipping company’s Ontario hub and providing them to an associate who sold the weapons in underground transactions.

Curtis Hays, 36, of Rancho Cucamonga, was arrested without incident by special agents with the ATF. Hays is expected to be arraigned this afternoon in United States District Court.

The associate who allegedly sold some of the firearms – Dennis Dell White Jr., 35, of Moreno Valley – will be summoned to appear in federal court for an arraignment in the coming weeks.

The 16-count indictment, which was filed on July 23, alleges that Hays stole a series of packages containing guns that were supposed to be delivered to Turner’s Outdoorsman in Rancho Cucamonga. The indictment also accused Hays of stealing jewelry and mobile phones that were supposed to be delivered to other retailers, and this merchandise also was allegedly given to White.

Hays allegedly provided the 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 and White are charged with conspiracy; six counts of theft of firearms; six counts of receipt and possession of stolen firearms; and two counts of theft, receipt, and possession of good in interstate commerce.

White is additionally charged with being a felon in possession of firearms and ammunition.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

The conspiracy count carries a statutory maximum penalty of five years in federal prison. The weapons charges each carry a potential penalty of 10 years in prison. The stolen goods charges each carry a maximum possible penalty of five years in prison. And, if convicted of being a felon in possession of firearms and ammunition, White could face up to an additional 10 years in prison.

The investigation into the stolen firearms was conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives in conjunction with the Ontario Police Department.

Release No. 14-097

SANTA ANA, California – An Orange County businessman has pleaded guilty to federal charges related to a series of fraud schemes that include one in which he worked with his criminal defense attorney to fraudulently apply for millions of dollars in loans backed by the Small Business Administration.

Donald Keith Goff, 66, of Laguna Niguel, pleaded guilty late yesterday to three felony counts – mail fraud, wire fraud and bank fraud – for leading a group of conspirators in a series of complex, multi-million dollar fraud schemes. In one scheme, Goff admitted that he and his criminal defense attorney conducted a scam after Goff had already been indicted by a federal grand jury in the prior fraud.

According to court documents and his admissions in court, Goff orchestrated a scheme in 2006 and 2007 to defraud Grand Pacific Financing Corporation (GPFC), which provided a $4.5 million loan to finance the purchase of a gas station business in Fountain Valley. Goff was unable to obtain the loan himself as a result of his poor credit rating, history of being sued by creditors and failure to pay judgments. To obtain the loan, Goff created a shell corporation and recruited an unemployed truck driver to act as a “straw buyer” who posed as the owner of the shell company and applied for the loan in the corporation’s name. As part of the scheme, Goff and a co-conspirator included false information in the loan application regarding the straw buyer’s experience and assets. In addition, Goff and a co-conspirator bribed an escrow agent to falsely advise the bank that a $600,000 equity down payment had been used for the purchase, when in fact no down payment was made. During this scheme, Goff worked with his wife, Melanie Goff; his step-daughter, Monty Brown; a business associate named Leon Draper; and others.

Later in 2007, after obtaining the loan from GPFC and gaining control of the Fountain Valley gas station business, Goff orchestrated a scheme to defraud Nara Bank. In this fraud, Goff formed another shell corporation, installed his wife as owner and had the new shell corporation “buy” the gas station business. Goff then had his wife and step-daughter apply to Nara Bank for a loan to “refinance” the supposed debt one shell company owed the other, without disclosing to the bank that they controlled both companies. Nara Bank was provided false information regarding his wife’s credit history and a $600,000 deposit supposedly put down on the purchase.  When the deal closed, more than one-third of the $1.4 million in loan proceeds were transferred to a bank account the Goffs controlled.

Over the rest of 2007, Goff and his family used the Nara Bank loan proceeds, as well as money siphoned from the gas station business, to pay personal expenses, including purchasing luxury items. By early 2008, the shell corporations had defaulted on the GPFC and Nara Bank loans, which caused each financial institution to suffer losses of several hundred thousand dollars. The SBA, which partially guaranteed the Nara Bank loan, lost nearly $1 million.

In May 2012, a federal grand jury in Santa Ana indicted Goff, his wife, Brown and Draper in the schemes to defraud GPFC and Nara Bank. After he was charged, Goff was represented in the case by defense attorney Gino Pietro.

After the indictment, Goff, Brown and Pietro engaged in a similar plot to defraud Hana Small Business Lending, Inc. In this scheme, Goff and Pietro created a shell corporation and recruited a straw buyer – this time, former attorney Gregory Sullivan – to pose as the owner of the new shell corporation and to apply for $4.5 million in loans to finance the purchase of gas station businesses in Anza, California and Imperial, California. This scheme also involved providing false information regarding the straw buyer’s experience and assets, bribing an escrow agent to falsely tell Hana that there were $2.1 million in down payments, and overstating the sale prices of the businesses. Hana funded the loans, which were guaranteed by the SBA. From the loan proceeds, Goff and his family received nearly $300,000, Pietro received $250,000, and Sullivan received $100,000. Over the next six months, Goff and his family used the loan proceeds and substantial funds from the gas station businesses for personal expenses, as they began to default on the loans from Hana, which has since foreclosed on the business. Hana and the SBA now face an estimated $3 million in losses.

As a result of these schemes, investigators believe that banks and the SBA suffered losses of approximately $5 million.

“Attempts to use SBA’s 7(a) loan program as a personal checking account will be met with the full force of the U.S. justice system,” said SBA Inspector General Peggy E. Gustafson. “Together with our law enforcement partners, the OIG will continue to ensure those who commit fraud are brought to justice.”

Goff pleaded guilty late Monday afternoon before United States District Judge Andrew J. Guilford, who is scheduled to sentence the defendant on November 17. As a result of today’s guilty pleas, Goff faces a statutory maximum sentence of 70 years in federal prison.

Melanie Goff and Brown previously pleaded guilty and are scheduled to be sentenced by Judge Guilford, respectively, on October 6 and January 12, 2015.

Draper has signed a plea agreement and is scheduled to plead guilty on Friday in federal court in Santa Ana.

Pietro, who was charged separately by the United States Attorney’s Office in San Diego, has also pleaded guilty. Pietro is scheduled to be sentenced by Judge Guilford on October 20.

Sullivan is scheduled to go on trial in Santa Ana federal court on December 9.

These criminal cases are the result of an investigation by the U.S. Small Business Administration – Office of Inspector General and the Federal Bureau of Investigation. The United States Attorney’s Office for the Southern District of California provided substantial assistance on this case.

Release No. 14-095

LOS ANGELES – Federal agents this morning arrested three defendants who worked at Orange County businesses that allegedly offered bogus loan modification programs to financially distressed homeowners. As a result of the fraudulent scheme allegedly run out of U.S. Homeowners Relief and several related entities, hundreds of financially distressed homeowners across the United States lost millions of dollars, and many victims also lost their homes in subsequent foreclosure proceedings.

The three defendants taken into custody this morning were among four defendants named in a federal indictment following an investigation by the United States Postal Inspection Service, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and IRS - Criminal Investigation.

According to the indictment, the four defendants operated a series of telemarketing “boiler rooms” that pitched loan modification services to distressed homeowners in the wake of the financial collapse in 2008. The defendants operated offices in Irvine, Santa Ana, Newport Beach, Garden Grove and Westminster under a series of company names from late 2008 to early 2010. Initially called Greenleaf Modify, they subsequently used the names U.S. Homeowners Relief, Waypoint Law Group and, finally, American Lending Review. The defendants would shut down each company name once their businesses attracted too many consumer complaints at the Better Business Bureau or attracted attention from state regulators such as the California Department of Justice.

The defendants and their associates used a consistent sales pitch throughout the scheme. According to the indictment, their advertising materials and telemarketers promised distressed mortgage holders that after paying advance fees ranging from about $1,450 to approximately $4,200, homeowners were highly likely to obtain a long-term modification to their current mortgage obligation, meaning they would have a lower monthly payment, an interest rate reduced to as low as 2 percent, and/or a reduction of principal. Many consumers were falsely told that their up-front money would be refunded if the promised loan modification failed to materialize.

The companies’ marketing materials implied that they were affiliated with a government program, sometimes making specific references to actual government websites, the indictment alleges. Telemarketers associated with the companies also told consumers that their mortgage relief services were part of the “Obama Act.” The defendants claimed in writing that one or more of the entities were licensed California real estate brokers and that payments would be placed in a trust account, not to be withdrawn until loan modification services were actually performed. The defendants often claimed that specific attorneys were assigned to work on consumers’ individual cases.

According to the indictment, all of the defendants’ claims were false and/or materially misleading. The vast majority of the hundreds of victims received no favorable loan modifications as per promises made by the defendants. Several of the victims learned from their mortgage lenders that the defendants’ companies had never made any contacts on the consumers’ behalf. The defendants’ companies were neither licensed real estate brokers, nor were they affiliated with any government program. The consumers’ funds were generally spent on the defendants themselves, on payments to sales people and other business expenses, and were not placed in trust accounts as promised. While the defendants paid attorneys to write substantially identical form letters to some lenders, the attorneys did not give personalized attention to the individual victims. The defendants routinely used stalling tactics or simply ignored consumers’ repeated demands for refunds after the customers did not receive their promised loan modifications.

The four defendants named in the indictment are:

Samuel Paul Bain, who also used the name Paul Bain, 35, of Tustin, an owner and principal of the businesses, who is currently in state custody;

Aminullah Sarpas, who also used the names Amin Sarpas and David Sarpas, 32, of Irvine, California, an owner and principal of the businesses, who was arrested this morning;

Damon Grant Carriger, 36, of Corona, California, the principal sales manager, who was arrested this morning; and

Louis Saggiani, 64, of Huntington Beach, California, the manager and chief accountant for the businesses, who was arrested this morning.

The defendants who were arrested this morning are scheduled to be arraigned this afternoon in United States District Court in Los Angeles.

The defendants are charged in a 33-count indictment. All four defendants are charged with conspiracy, 21 counts of mail fraud and two counts of wire fraud. Bain, Sarpas and Saggiani are charged in an additional five counts of mail fraud and two counts of wire fraud. Bain is also charged with two counts of money laundering.
The conspiracy count carries a statutory maximum penalty of five years in prison, while each of the mail fraud, wire fraud and money laundering charges carry a statutory maximum penalty of 20 years in prison.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

Release No. 14-096

RIVERSIDE, California – A school custodian who sexually abused a child over a period of several years and shared visual images of the molestations online pleaded guilty today to federal child pornography charges.

Matthew Frazer, 39, of Yucca Valley, pleaded guilty today to one count of distribution of child pornography and one count of possession of child pornography.

Frazer, who has been in custody since his arrest earlier this year, is scheduled to be sentenced by United States District Judge Virginia A. Phillips on October 6.

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 female being abused by a white male. 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 admits 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.

As a result of today’s guilty pleas, Frazer faces a mandatory minimum sentence of five years for the distribution charge and a statutory maximum sentence of 30 years in prison as a result of his guilty pleas to both counts.

The plea agreement calls for Judge Philips to impose a sentence of at least 10 years and up to 23 years, which will be followed by 10 years of supervised release.

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. 14-092

LOS ANGELES – A man who conspired with a former assistant manager of a Bank of America branch in East Los Angeles was sentenced today to 14 years in federal prison for plotting a heist in which his one-time girlfriend wore a fake bomb to simulate a kidnapping to steal approximately $565,000 from the bank.

Reyes “Ray” Vega, 35, of Bell, received the 168-month sentenced from United States District Judge Manuel Real. In addition to the prison term, Judge Real ordered Vega and his co-defendants to pay $556,800 in restitution.

Vega and his then-girlfriend – Aurora Barrera, 33, who now resides in Downey – were convicted in March following a one-week trial in United States District Court. The jury found the couple guilty of conspiracy to commit bank robbery and bank robbery. The jury also found that Vega and Barrera committed the robbery by assaulting a bank employee with a dangerous weapon – the hoax explosive device that Barrera wore when she entered the bank on September 5, 2012.

During the robbery, Barrera walked into the bank with what appeared to be an explosive device taped to her body, convinced a co-worker that she had been kidnapped from her home that morning by two men, and told the co-worker that they had to open the vault and place money outside the bank or else the kidnappers would harm them.

Barrera and her co-worker placed $565,800 of the bank’s money into bags and then threw the bags out the bank’s side door. One of Vega’s longtime friends, Richard Menchaca, picked up the money and drove it away from the bank. Menchaca met up with another accomplice, Bryan Perez, and they moved the money to a safe location.

The device attached to Barrera’s body turned out to be a hoax, but “because the device was attached to a human, the Los Angeles Police Department’s Bomb Squad rushed in without their full protective gear to remove it from Barrera,” according to court documents. “Due to its detailed construction, the Bomb Squad then used a robot to remotely detonate the device, for fear that it might explode and injure a member of law enforcement.”

Menchaca and Perez pleaded guilty and testified at the trial of Vega and Barrera. They are scheduled to be sentenced by Judge Real next month.

Menchaca and Perez collectively received about $150,000 of the robbery proceeds, most of which they spent. The remaining approximately $400,000 has not been recovered.

Barrera is scheduled to be sentenced by Judge Real on August 6.

The investigation in this case was conducted by the Federal Bureau of Investigation and the Huntington Park Police Department.

Release No. 14-091

RIVERSIDE, California – A resident of Quail Valley who pleaded guilty to sex trafficking charges – and admitted forcing a 14-year-old girl to work as a prostitute – was sentenced today to 210 months in federal prison.

Kawaum Marquez Scott, 24, received the 17½-year sentence from United States District Judge Virginia A. Phillips.

Scott pleaded guilty in May to two counts of sex trafficking of a child.

Scott’s codefendant – Nekeyia Necole Weatherspoon, who also used the name “Keey Bee,” 22, of Perris – pleaded guilty at the same time to one count of conspiracy to engage in child sex trafficking.

According to court documents, Scott and Weatherspoon forced a 14-year-old victim into prostitution. The defendants, who took photos of the victims and used the pictures to advertise services on the Internet, drove the victim to destinations in Hemet to engage in prostitution, made her use an alias, and advised her to tell male customers that she was 18 years old. Scott and Weatherspoon took all the money paid to the girl for the sex acts.

According to court documents, on one occasion in October 2012, Scott and Weatherspoon brought the victim to a motel in Hemet, where she engaged in sex with multiple men over a two-day period, and received approximately $2,500 in payment, all of which went to the defendants.

“Scott knowingly sold a child to adult men for sex,” prosecutors wrote in a sentencing memorandum filed with the court. “He did so repeatedly and without regard for her safety or well-being. He provided her with drugs and alcohol while she worked for him. He threatened the child victim and her family, and at one point used force to retrieve money from her that he perceived to be his.”

Weatherspoon is scheduled to be sentenced by Judge Phillips on September 8. In a plea agreement for Weatherspoon, prosecutors and the defense agreed that she should be sentenced to between 84 and 168 months in federal prison.

The investigation in this case was conducted by the Riverside County Sheriff’s Department and the Federal Bureau of Investigation, which are members of the Inland Child Exploitation Task Force (ICEP), a multi-agency effort that investigates matters of child exploitation, primarily the sexual trafficking of minors.

Release No. 14-093

LOS ANGELES – The former mayor of the City of Rosemead was sentenced today to 21 months in federal prison after pleading guilty to attempted witness tampering and making false statements to FBI agents conducting a corruption investigation.

John Tran, 38, of Rosemead, was sentenced this morning by United States District Judge Dale S. Fischer.

Tran pleaded guilty late last year to the witness tampering and false statement charges. In a plea agreement filed in United States District Court, Tran acknowledged that he received approximately $38,000 in payments from a developer in exchange for Tran’s promise to help her obtain permits for a project.

The witness tampering resulted from Tran asking the developer to lie to a federal grand jury by denying that she had recently met with Tran or paid Tran any money.

Tran made false statements to the FBI in 2011 when special agents went to his home to conduct an interview and Tran denied receiving anything but campaign contributions from the developer.

Tran was elected to the Rosemead City Council in 2005 and was mayor of Rosemead from 2007 to 2009.

In addition to the prison term, Judge Fischer ordered Tran to pay $38,000 in restitution, most of which has already been recovered by the FBI.

The case against Tran was investigated by the Federal Bureau of Investigation.

Release No. 14-089

LOS ANGELES – A former Bank of America employee was sentenced this morning to 30 months in federal prison for taking more than $1.2 million in bribes to approve artificially low-price short sales of properties on which the bank held mortgages.

Kevin Lauricella, 29, of Thousand Oaks, was sentenced by United States District Judge Otis D. Wright II. In addition to the 2½-year prison term, Judge Wright ordered Lauricella to pay $5.7 million restitution to Bank of America and to forfeit his residence, which had been purchased with some of the bribe money.

In January, Lauricella pleaded guilty to two felony charges – receiving bribes and making false entries in the bank’s books and records. The fraudulent short sales that Lauricella approved in return for the bribes resulted in at least $5.7 million in losses to the bank. The fraudulent short sales also clouded the title on the properties, which in turn resulted in expensive litigation for innocent parties, including individuals who purchased the homes later.

Lauricella worked in the Short Sale Department of Bank of America’s Simi Valley office in 2010 and 2011. He was responsible for negotiating short sale transactions, in which a lender allows property securing a mortgage or deed of trust to be sold for less than the existing loan balance, usually because the borrower can no longer make the payments due on the loan or because the fair market value of the property has dropped below the balance due. By approving the short sale, the lender agrees to release the lien on the property securing the mortgage even though the lender will receive less than the full amount owed.

In return for bribes – which were paid by various individuals who purchased the properties so they could be “flipped” – Lauricella used his position to “approve” short sales that he was not authorized to approve and that were for sales prices far below the fair market value of the subject properties. Lauricella then made false entries in Bank of America’s computer system to make it appear that Bank of America had approved the short sales for the below-market prices. When he pleaded guilty, Lauricella admitted approving fraudulent short sales for at least nine properties.

The case against Lauricella is the result of an investigation by the Federal Bureau of Investigation.

Release No. 14-090

SANTA ANA, California – An Orange County man pleaded guilty to defrauding dozens of doctors and others of more than $2 million in separate schemes that promised large returns on investments in the medical and dental fields.

David Rose, 57, of Coto de Caza, pleaded guilty today in United States District Court 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) 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-a-month rent for a house in Coto de Caza, college tuition, luxury vehicles, 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. 

Rose was arrested in May 2013 and has remained in custody since that time.

Rose pleaded guilty before United States District Judge James V. Selna, who is scheduled to sentence the defendant on November 24. At sentencing Rose faces a maximum statutory sentence of 40 years in federal prison.

The case against Rose is the product of an ongoing investigation by the Federal Bureau of Investigation.

Release No. 14-094

SANTA ANA, California – A federal grand jury today indicted three Southern California residents in a scheme to defraud health insurance programs by submitting bills for more than $50 million in medically unnecessary medical procedures performed on insurance beneficiaries who received free or discounted cosmetic surgery.

The indictment outlines a scheme in which marketers or cappers lured patients to a surgery center in Orange known at various times as Empire Surgical Center, Vista Surgical Center and Princess Cosmetic Surgery. The marketers told patients that they could use their union or PPO health insurance plans to pay for cosmetic surgeries, which are generally not covered by insurance.

When patients came to the surgery center for a consultation, they were told that they could receive free or discounted cosmetic surgeries if they underwent multiple, medically unnecessary procedures that would be billed to their union or PPO health care benefit program, the indictment alleges. The unnecessary procedures typically performed on the “patients” were endoscopies (usually esophagogastroduodenoscopies, or EGDs), colonoscopies and cystoscopies. Once the health care benefit program paid the claims, the patients were given free or discounted cosmetic surgeries, including “tummy tucks,” breast augmentations, rhinoplasties (“nose jobs”) and liposuction. Further, according to the indictment, tummy tucks were billed as hernia repair surgeries, and rhinoplasties were billed as deviated septum repair surgeries.

The three defendants charged in today’s indictment are:

Vi Nguyen, 31, of Placentia, who was a consultant at the surgery center and who is charged with 10 counts of mail fraud;

Theresa Fisher, 44, of Tustin, who was another consultant at the surgery center and who is charged with five counts of mail fraud; and

Lindsay Hardgraves, 30, of San Pedro, who was a marketer and charged with two counts of mail fraud.

“As a result of the fraudulent scheme, defendants Nguyen, Fisher and Hardgraves caused losses to union and PPO health care benefit programs of more than $50 million in claims for functional procedures that were not medically necessary and in some cases not provided,” the indictment alleges.

The three defendants were arrested on July 1 pursuant to a still-under-seal criminal complaint. They made their initial court appearances on the same day, and all three were released on bond. The three defendants have been ordered to appear for an arraignment on July 28 at 10:00 a.m.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

If convicted, the defendants each face a statutory maximum sentence of 20 years in federal prison for each mail fraud count.

This case is the product of an ongoing investigation by the Federal Bureau of Investigation, the United States Department of Labor – Office of Inspector General, and United States Department of Labor – Employee Benefits Security Administration.

Release No. 14-088

SAN DIEGO – San Diego criminal defense attorney James Warner pleaded guilty today to two federal felony offenses, admitting that he laundered $100,000 of a client’s drug trafficking proceeds and then tampered with a potential witness in the case.

Warner, 65, a San Diego resident who has been a member of the California bar since December of 1974, pleaded guilty before United States District Judge Jeffrey T. Miller to conspiracy to launder drug proceeds and attempted harassment of a witness.

At today’s hearing in United States District Court in San Diego, which was Warner’s first court appearance in this case, bond was set at $5,000. Judge Miller also scheduled a sentencing hearing for October 16, at which time Warner will face a statutory maximum sentence of 23 years in federal prison.

According to the plea agreement filed today, federal drug agents searched the home and business of one of Warner’s clients in May of 2012. The drug trafficker told Warner that agents had overlooked $100,000 in cash during their search, and Warner agreed to conceal the money.

As part of the money laundering scheme, Warner took the $100,000 – which he knew to be drug proceeds – and invested it in an off-shore business. According to his plea agreement, Warner used his own funds from his U.S. bank accounts and wired approximately $99,965 to an off-shore bank account in the British Virgin Islands. Warner then structured the $100,000 he received from the drug trafficker into his personal and business bank accounts to further conceal and disguise the nature of the drug proceeds. Structuring is the breaking up of cash deposits under $10,000 to avoid bank reporting requirements.

According to the plea agreement, Warner created a fictitious corporation named Grenadine Development Inc., and opened a bank account in the name of Grenadine Development Inc., to issue checks to the drug trafficker.

To further conceal his criminal activity, Warner admitted that he failed to file an IRS Form 8300 “Report of Cash Payments Over $10,000 received in a trade or business” which was required to be filed by defendant Warner when he received currency greater than $10,000 in his business as an attorney.

According to his plea agreement, Warner also admitted that he tampered with a witness when he told his client, a drug trafficker identified as “T.K.,” that he should pay legal fees of another drug trafficker to Warner, to prevent him from cooperating against T.K. Warner further told T.K. that if a court-appointed taxpayer-funded lawyer would “squeeze” the other trafficker to cooperate against T.K.

Federal search warrants were executed at Warner’s law office and his residence on September 11, 2013, following an investigation by IRS - Criminal Investigation and the Drug Enforcement Administration/Narcotics Task Force.

As part of his guilty plea, Warner agreed to a criminal forfeiture in the amount of $100,000 – the sum that was laundered. Warner also agreed to administratively forfeit approximately $200,080 in cash which was seized from his law office during the execution of a federal search warrant, along with $34,527.60 seized from Warner’s personal and business accounts. 

Erick Martinez, Special Agent in Charge for IRS - Criminal Investigation, commented that James Warner is a well-known criminal defense attorney in San Diego, who devised a complex scheme to launder drug money. “Mr. Warner’s efforts were matched by the financial skill set and determination of our special agents. Today’s admission of guilt by Mr. Warner is another example of IRS Criminal Investigation’s continued commitment to protect the integrity of the nation’s financial system from illicit activity.”

DEA San Diego Special Agent in Charge William R. Sherman, stated: “Individuals who assist drug traffickers in their endeavors will be held just as accountable as the person who is actually selling the drugs. Regardless of your profession, if you assist drug dealers with their criminal activities, you will be punished.  The fines assessed show the seriousness of getting involved in this kind of illegal activity.”

The case is being prosecuted by San Diego-based Assistant United States Attorney Sherri Walker Hobson. The United States Attorney’s Office in San Diego was recused from the matter, and the prosecution was supervised by the United States Attorney’s Office in Los Angeles.

Release No. 14-087

LOS ANGELES – A Corona woman, who is already charged with a $15 million bank fraud and bankruptcy fraud, was indicted on Friday on new charges.  Carolyn Marie Jones, 51, of Corona, who was the Chief Executive Officer of a high-end denim jean company, was charged in an indictment returned by the grand jury late Friday afternoon.

According to the seven-count indictment returned on Friday, which charges wire fraud and contempt, Jones defrauded victims in an investment fraud scheme.  According to the indictment, Jones convinced investors to invest with her by representing that she was operating a clothing company called Premium Management and needed money to close a securities deal and for other business-related expenses.  The indictment alleges that Jones spent the money on her own personal expenses. Jones, who was on bond pending a September 23 trial in the bank and bankruptcy fraud case, was prohibited from soliciting money from investors while the trial is pending.   The new indictment also alleges that Jones failed to disclose to investors that she was under indictment and was prohibited from soliciting money.  Jones is now being held in custody pending trial.

According to the nineteen count indictment returned by a federal grand jury in September 2013, Jones was the Chief Executive Officer of Diamond Decisions, Inc., which sold denim jeans marketed under the labels of Privacywear and PRVCY Premium.  According to the indictment, Jones obtained a $15 million business line of credit from Union Bank, using fake financial statements and fake tax returns.  The indictment states that Jones gave the bank a Social Security Number that belonged to someone else.  Jones also hid from the bank that she had filed for bankruptcy previously and that she had a felony record.  According to the indictment, Jones defaulted on the $15 million loan after a year causing Union Bank to file a lawsuit in state court.  When Union Bank tried to seize the contents of the Diamond Decisions warehouse, Jones caused the company to file for bankruptcy and hid assets from the bankruptcy trustee. 

Jones faces a maximum statutory sentence of 80 years on the wire fraud and contempt indictment. Jones faces a maximum statutory sentence of 489 years in federal prison on the bank and bankruptcy fraud indictment.     

An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed innocent until and unless proven guilty.

The charges in the indictment are the result of an investigation conducted by the United States Secret Service and the Internal Revenue Service.

Release No. 14-086

SANTA ANA, California – Two Long Beach, California, men pleaded guilty today to conspiracy charges arising from a sex trafficking scheme that exploited adult women for prostitution.  Roshaun Nakia Porter, 39, and Marquis Monte Horn, 35, both pleaded guilty before Judge Josephine L. Staton in the U.S. District Court for the Central District of California to conspiring to engage in sex trafficking by force, fraud and coercion.  Sentencing has been set for Oct. 24, 2014, and each defendant faces a sentence of up to life imprisonment.

According to documents filed in court, from October 2009 through April 2012, Porter and Horn conspired together and with others to recruit, entice, harbor, transport and provide women to engage in commercial sex acts, using various coercive means to compel the women to engage in prostitution for the defendants’ financial benefit.  Porter and Horn’s scheme of force, fraud and coercion included false and deceptive internet advertisements they used to lure the victims into romantic relationships with the defendants, and psychological manipulation and control to cause the victims to engage in commercial sex acts for the defendants’ financial benefit. 

“Human trafficking is a horrific crime that causes significant damage to victims who are often forced to commit unspeakable acts,” said U.S. Attorney André Birotte Jr. for the Central District of California.  “This scheme to control and manipulate victims forced to work in the sex trade has come to an end.  With today’s guilty pleas, I hope that healing for the victims can begin.”

“The Department of Justice is committed to the vigorous prosecution of defendants who prey upon and exploit vulnerable individuals for their own financial gain,” said Acting Assistant Attorney General Jocelyn Samuels for the Justice Department’s Civil Rights Division.  “We will continue to pursue justice on behalf of victims of human trafficking to restore their rights and dignity and to hold their traffickers accountable.”

“Sex trafficking is not something that only happens outside of the United States, but victimizes Americans in our own backyards,” said Assistant Director of the FBI Los Angeles Field Office Bill Lewis.  “In this case, the defendants defrauded victims and forced them to work as sex slaves under threat to themselves and their families.  I hope this conviction reminds vigilant members of the public to report the signs of human and sex trafficking to law enforcement when they encounter it.” 

This matter was investigated by the FBI and is being prosecuted by the U.S. Attorney’s Office for the Central District of California and the Civil Rights Division’s Human Trafficking Prosecution Unit.

Release No. 14-085

LOS ANGELES – A Georgia man is scheduled to be arraigned today on federal charges that allege he fraudulently booked airline reservations by pretending to be a flight crew member.

Gilbert Myers Jr., 37, of Atlanta, was taken into custody late yesterday afternoon without incident at a Beverly Hills hotel after agreeing to meet a potential traveler who was actually an undercover FBI agent.

Myers was charged in an indictment returned by a federal grand jury on June 6 that accuses him of one count of conspiracy and three counts of wire fraud. The indictment, which was unsealed upon Myers’ arrest, outlines 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 $2,000 for one year of free flights.

The indictment alleges that 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 responding to questions about their employment at another airline, the indictment alleges. With the fraudulently obtained boarding pass and their real photo identification, the fraudulent traveler went through Transportation Security Administration security screening. If the fraudulent traveler was asked about his employment or how he received the tickets, the fraudulent traveler lied as instructed by Myers, according to the indictment. 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.

The indictment details a small number of flights, but investigators believe that Myers fraudulently booked hundreds of flights on air carriers such as JetBlue Airways and United Airlines, causing the victims to suffer hundreds of thousands of dollars in losses.

All of the victim airlines fully cooperated in the investigation.

Myers is expected to be arraigned on the indictment this afternoon at 2:00 in United States District Court in downtown Los Angeles.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

The conspiracy and wire fraud charges alleged in the indictment each carry a statutory maximum penalty of 20 years in federal prison.

The case against Myers is the result of an investigation by the FBI’s Joint Terrorism Task Force.

Release No. 14-084