Central District of California
Press releases recorded for this federal judicial district.
Brothers Who Made 'Contributions' to Orthodox Jewish Organizations Plead Guilty to Tax Evasion After Taking Secret Refunds from GroupsRead the Press Release
LOS ANGELES – Two brothers who made tens of thousands of dollars of contributions to charitable organizations operating under the umbrella of a New York-based orthodox Jewish group known as Spinka pleaded guilty today to tax fraud for taking tax deductions for contributions that were refunded by the non-profits.
Alan Goldstein, 78, and David Goldstein, 74, both of the Hancock Park district of Los Angeles, pleaded guilty before United States District Court Judge John F. Walter. Alan Goldstein pleaded guilty to one count of subscribing to a false income tax return and one count of tax evasion. David Goldstein pleaded guilty to two counts of tax evasion.
According to court documents, the Goldsteins each entered into an arrangement under which they would make contributions to Spinka charitable organizations -- including Yeshiva Imrei Yosef, Mosdos Hachesded, Central Rabbinical Seminary, and Kollel Ner A’Avrohom – and in return agents of Spinka would secretly refund 90 percent of the contributions through various third parties. In addition, agents of Spinka would mail charitable contribution receipts for the full amounts of the contributions.According to plea agreements filed in federal court, in 2005 and 2006, Alan Goldstein made $135,000 in contributions to charitable organizations operating under the Spinka umbrella. Alan Goldstein accepted kickbacks equaling 90 percent of his contributions on these Spinka-related contributions. Similarly, for the same two years, David Goldstein made $145,000 in contributions to Spinka-related entities, and he received 90 percent of the money back through kickbacks. David Goldstein received $356,400 in kickbacks on behalf of himself and his brothers.
Both defendants filed their respective 2005 and 2006 tax returns claiming the inflated contribution amount for the purpose of tax fraud. Consequently, the tax loss to the government was $45,961 with respect to Alan Goldstein, and $46,531 with respect to David Goldstein, according to the plea agreements.
Spinka is a religious group within Orthodox Judaism that operated a variety of charitable organizations, contributions to which could be tax deductible under the Internal Revenue Code. Prior to the Goldsteins, 16 other defendants pleaded guilty to charges arising from an investigation of kickbacks provided by Spinka charitable organizations to wealthy contributors.
The Goldsteins are scheduled to be sentenced by Judge Walter on August 19, 2013. At sentencing, Alan Goldstein faces a statutory maximum sentence of eight years in federal prison and a fine of $500,000. David Goldstein faces a statutory maximum sentence of 10 years in prison and a fine of $500,000. In addition, each defendant may be ordered to pay full restitution for the tax loss, which is estimated to be $55,145 for Alan Goldstein and $70,039 for David Goldstein.
The investigation and prosecution of the Goldsteins was conducted by IRS Criminal Investigation’s Los Angeles Field Office.
Release No. 13-076
Orange County Man Who Ran Investment Fraud Scheme That Cost Victims $3 Million Sentenced to over Eight Years in Federal PrisonRead the Press Release
SANTA ANA, California – A retired colonel in the California Army National Guard who admitted running an investment scheme that caused two dozen victims to suffer a losses of nearly $3 million was sentenced today to 97 months in federal prison.
Timothy Melvin Murphy, 70, of Orange, was sentenced this afternoon by United States District Judge David O. Carter. In addition to the prison term, Judge Carter ordered Murphy to pay full restitution – $2,953,758 – to his fraud victims.
In April 2012, Murphy pleaded guilty to one count of mail fraud, admitting that he executed a scheme through his business, the Orange-based Capital Investors Inc., by offering fraudulent investment opportunities that typically yielded annual returns of 12 percent and, in some cases, came with “guaranteed” rates of return. Murphy falsely told most of the investors that their money would be invested in truck-leasing companies based in Gulfport, Mississippi. As part of the scheme, Murphy created false account statements to mislead his clients into thinking that their money was properly invested and was generating the promised income. The false documentation included bogus account statements that appeared to be issued by “The Sterling Trust Company,” a third-party financial services firm.
Instead of using the victims’ money to make investments, Murphy used the funds to make Ponzi payments to earlier investors and to pay for a variety of personal expenses, including refurbishing and maintaining classic automobiles, making payments on home loans and buying a members at a weight loss clinic.
While in the California Army National Guard, Murphy served as the commanding officer of the Joint Forces Training Base in Los Alamitos.
The case against Murphy was investigated by the Federal Bureau of Investigation.
Release No. 13-073
Former Senior Partner at KPMG Agrees to Plead Guilty in Los Angeles to Federal Charges Related to Insider Trading SchemeRead the Press Release
Former Chief of KPMG’s Audit Practice in Southwest Admits He Passed Confidential Information in Exchange for Cash Bribes
LOS ANGELES – A former senior partner at the accounting firm KPMG LLP has agreed to plead guilty to securities fraud for his involvement in an insider trading scheme in which he provided confidential information to a man who paid him with cash bribes and luxury items.
Scott London, 50, of Agoura Hills, who oversaw KPMG’s audit practice for the Pacific Southwest, was charged today in a criminal information with one count of securities fraud through insider trading. In a plea agreement also filed today in United States District Court, London agreed to plead guilty to the felony count that carries a statutory maximum penalty of 20 years in federal prison.
According to court documents, London provided confidential information about KPMG clients to Bryan Shaw, a close friend of his, over a period of several years. Shaw then used this information to make highly profitable securities trades that Shaw has admitted earned him more than $1 million dollars in illegal proceeds.
“Over the course of several years, Mr. London secretly fed confidential, insider information to a man he knew would use that information to make trades,” said United States Attorney André Birotte Jr. “Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field. As a result of his illegal conduct, Mr. London has agreed to plead guilty and will face a lengthy prison term.”
Bill L. Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office, stated: “This case illustrates the FBI’s commitment to investigating insider trading and working to ensure integrity in our financial markets. “We will continue to work with our partners to identify, investigate and prosecute securities fraud cases in order to maintain that confidence in the marketplace.”
London was a senior partner at KPMG who supervised more than 500 accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA, Inc. As a result of his position, London had access to confidential information about KPMG’s clients before that information was disclosed to the public. In his plea agreement, London admitted that he disclosed inside information to Shaw regarding at least 14 separate earnings announcements or acquisitions for KPMG clients, including:
Herbalife’s May 2, 2011 Earnings Announcement;
United Rentals’ December 16, 2011 Announcement of its Acquisition of RSC Holdings;
Herbalife’s February 21, 2012 Earnings Announcement;
Deckers Outdoors’ February 23, 2012 Earnings Announcement;
Union Bank’s March 12, 2012 Announcement of its Acquistion of Pacific Capital Bancorp; and
Deckers Outdoors’ April 26, 2012 Earnings Announcement
Shaw has admitted that he gave London tens of thousands of dollars in cash in exchange for the inside information about KPMG’s clients. According to court documents, Shaw also said that he typically arranged to meet London on a side street near Shaw’s business so that he could give London bags containing $100 bills wrapped in $10,000 bundles. Shaw also said that he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.
On two occasions earlier this year, acting at the direction of the Federal Bureau of Investigation, Shaw met with London and gave him cash as supposed payment for confidential information about KPMG clients, according to court documents. In the first instance, London met with Shaw on a street corner in Encino and accepted a bag with $5,000 in cash as payment for confidential information about Herbalife’s earnings announcement in February 2013. London later met with Shaw in a parking lot in Woodland Hills and accepted another bag with $5,000 in cash, which was supposedly London’s share of the illegal profits from trades based on confidential information about Decker’s February 2013 earnings announcement.
London is scheduled to appear in United States District Court on June 17 for an arraignment.
Shaw pleaded guilty to a conspiracy charge on May 20 before United States District Judge George H. Wu, who scheduled a sentencing hearing for Shaw on September 16 (for background on Shaw’s plea, see: http://www.justice.gov/usao/cac/Pressroom/2013/063.html).
The criminal investigation into the insider trading scheme was conducted by the Federal Bureau of Investigation.
In a separate action filed last month, the U.S. Securities and Exchange Commission filed a civil lawsuit against London and Shaw (see: http://www.sec.gov/litigation/litreleases/2013/lr22670.htm).
Release No. 13-074
Three Involved in Ventura County-Based ‘Ad-Toppers’ Ponzi Scheme That Cost Victims over $27 Million Sentenced to Federal Prison TermsRead the Press Release
LOS ANGELES – Three Ventura residents were sentenced today to federal prison – with one defendant being ordered to serve more than 17 years – for their roles in an investment scheme that victimized hundreds of investors across the United States and caused losses of more than $27 million.
The three defendants – two brothers and woman, all of whom share a house in Ventura – fraudulently raised money by telling victim-investors that funds would be used to purchase Ad Toppers, a video device that can be placed on ATMs or vending machines and used to display advertisements.
The defendants sentenced today were:
Alan G. Flesher, 65, the leader of the scheme, who was sentenced to 210 months in federal prison;Wayne D. Flesher, 62, Alan’s brother, who was sentenced to 72 months in prison; and
Nancy Carol Khalial, 65, who was sentenced to 48 months in prison.
All three were sentenced by United States District Judge Terry J. Hatter Jr., who also ordered the defendants collectively to pay $27,377,470 in restitution.
All three defendants pleaded guilty last July to 17 counts of mail fraud and admitted that they used Oxnard companies called Unlimited Cash, Inc. (UCI) and Douglas Network Enterprises, Inc. (DNE) to run the Ponzi scheme. The defendants told victims that UCI would sell ATM machines and “Ad Toppers” – computer monitors capable of displaying video advertisements – and DNE would place the devices in commercial locations that would generate income. Victims were told they would earn income from ATM transaction fees and advertisement revenue generated by Ad Toppers which would show ads for companies such as Coca-Cola, Gold’s Gym and Paramount Pictures. Even though the scheme took in approximately $41 million from approximately 790 victim-investors from approximately 2001 to 2005, the defendants did not place most of the ATMs and Ad Toppers sold to investors.
“In other words, defendants sold nonexistent ATMs and Ad Toppers and paid the later investors with the funds from the earlier investors,” prosecutors wrote in court documents filed in relation to today’s sentencings.
The defendants used the majority of investor funds to pay personal expenses and to continue operating the fraudulent scheme by paying personal salaries, sales commissions and by making Ponzi-style payments.
This investigation was conducted by the FBI and the United States Postal Inspection Service, which received assistance from the Securities Exchange Commission.
Release No. 13-072
San Fernando Valley Doctor Who Sold Bogus Cancer ‘Cure’ to Victims Across the Nation Sentenced to 14 Years in Federal PrisonRead the Press Release
LOS ANGELES – The owner of a Mission Hills medical clinic who sold a bogus cancer cure to dozens of victims across the country as part of a “treatment” program that prosecutors said was “despicable, cruel and heinous” and hastened the death of some patients was sentenced today to 14 years in federal prison.
Christine Daniel, 58, of Santa Clarita, who operated a clinic under names such as the Sonrise Wellness Center, was sentenced to 168 months in prison by United States District Judge Robert J. Timlin, who remanded Daniel into custody following today’s hearing. In addition to the prison term, Judge Timlin ordered that Daniel forfeit a total of $1,277,083.
Following a federal court trial in September 2011, a jury convicted Daniel of four counts of mail and wire fraud, six counts of tax evasion and one count of witness tampering.
The basic facts of the case are that Daniel, a medical doctor and prominent Pentecostal minister, fraudulently marketed and collected more than $1 million for a medical treatment that she and her employees claimed could cure many diseases and conditions, including cancer, multiple sclerosis, stroke, Alzheimer’s Disease, Parkinson’s Disease, diabetes and hepatitis. Daniel claimed that her bogus cancer cure had a success rate of between 60 percent and 80 percent for the most advanced forms of cancer.
The evidence presented at trial showed that Daniel’s treatment did not cure anyone of cancer, nor was it was made from herbs from around the world or blended for an individual patient, as she has promised patients. Chemical analyses determined that the product contained sunscreen preservative and beef extract flavoring, among other ingredients, none of which could have had any effect on cancer or other diseases, according to expert testimony.
“The scope of Daniel’s fraud was breathtaking,” said United States Attorney André Birotte Jr. “Daniel robbed victims of more than money - she also stole their hopes and dreams for a cure. Daniel is responsible for a shockingly cold-hearted fraud that has brought her a richly deserved federal prison sentence.”
Lisa Malinowski, Special Agent in Charge of the Food and Drug Administration’s Office of Criminal Investigations (OCI), Los Angeles Field Office, stated: “The defendant in this case exhibited a blatant and heartless disregard for the desperately sick and vulnerable patients she repeatedly victimized. Today’s sentence aptly reflects the consequences of Dr. Daniel’s actions and demonstrates OCI’s commitment to relentlessly investigating modern-day snake oil salesmen that prey on sick and defenseless victims.”
The evidence presented during the trial showed that Daniel used her status as a Pentecostal minister to create a bond of trust with members of the Evangelical Christian community, an affinity that gave her access to victims to whom she sold bogus hope and worthless treatments. Daniel promoted the product under a variety of names – including “C-Extract,” “the natural treatment” and “the herbal treatment” – through a program televised on the Trinity Broadcasting Network.
Daniel and her employees falsely claimed that the product was made with herbs from around the world and was manufactured in a laboratory according to the needs of each patient. Depending on the purported level or strength of the herbal product, Daniel would charge her customers up to $4,270 for one week’s worth of the herbal product. She offered a six-month treatment program for between $120,000 and $150,000.
Daniel “personally met with her victims in her medical office, looked them in the eyes, and represented that she had a miracle, herbal cancer cure that could save their lives,” according to the government’s sentencing memorandum.
During the trial, the jury heard testimony from 28 victim-patients, or close family members of victims who had died while taking Daniel’s product. Some described how Daniel urged them to avoid conventional cancer treatments, such as radiation or chemotherapy, because such therapies would reduce the efficacy of Daniel’s herbal “cure.” Family members testified that Daniel also forbid her cancer patients to take any pain relief medication for the same reason. Some of these patients spent the last few months of their lives in agony as the cancers spread throughout their bodies. The evidence presented at trial showed that a significant percentage of Daniel’s patients died within three to six months after they started taking Daniel’s bogus cure.
According to testimony at trial, one victim who had been diagnosed with metastatic breast cancer contacted Daniel and was told that chemotherapy would not help. After the victim traveled to Southern California, Daniel told the victim that the herbal treatment program would shrink her tumors and kill her cancer cells. For almost five months, the victim and her husband paid Daniel thousands of dollars for the herbal product. After taking the herbal “cure” for four months and within two weeks after Daniel pronounced her to be cancer-free at a party held for patients, the victim died. The cancer had spread from her breasts to her bones and brain.
“Daniel repeatedly demonstrated a merciless and callous indifference to the suffering of her patients and their family members,” prosecutors wrote in court papers.
Daniel and employees working at her direction induced approximately 60 victims to send more than $1.2 million to Daniel’s Sonrise clinic. In an attempt to operate the business under the guise of a non-profit organization, Daniel instructed patients to classify their medical service payments as donations. According to documents filed with the court, for the tax years 2002 through 2004, Daniel failed to report nearly $1.3 million on her corporate income tax returns, which resulted in a tax loss to the government of approximately $438,809. Similarly, Daniel failed to report approximately $315,109 on her personal income tax returns for the same time period, resulting in an additional tax loss to the government of $73,895.
“Christine Daniel used her position of trust -- as a medical doctor and Pentecostal minister -- to defraud vulnerable cancer patients in a $1.2 million dollar scheme,” said Jose A. Gonzalez, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “Defendant Daniel’s convictions for failing to pay federal income taxes on the proceeds of her fraudulent cancer fraud scheme confirm her greed and the criminal nature of her character. Today, Justice is served, and Christine Daniel is being held accountable for her criminal actions.”
The evidence presented at trial showed that Daniel attempted to influence the testimony of at least two witnesses who were called to testify before the grand jury. One of those witnesses, a long-time patient of Daniel, admitted during trial that he lied to both law enforcement officers and the federal grand jury after being improperly influenced by her.
The investigation of Daniel was conducted by IRS - Criminal Investigation, the U.S. Food and Drug Administration’s Office of Criminal Investigations, and the Medical Board of California.
Release No. 13-071
Two Orange County Men Receive Multi-Year Federal Prison Terms for Orchestrating International Plot That Smuggled Rhino HornsRead the Press Release
LOS ANGELES – A father and son team from Orange County who were described by prosecutors as being “at the apex of the rhino horn smuggling pyramid within the United States” each were sentenced today to spend several years in federal prison for their convictions on federal smuggling and money laundering charges.
Vinh Chuong “Jimmy” Kha, 49, of Garden Grove, was sentenced to 42 months in federal prison for overseeing a U.S.-based operation that prosecutors argued played a direct role in a huge increase in rhinoceros poaching in Africa over the past several year.
Felix Kha, 27, the son of Jimmy Kha, also of Garden Grove, was sentenced to 46 months in federal prison for working with alongside his father in the scheme that generated millions of dollars that provided them with profits, as well as money to purchase more contraband rhino horns and pay bribes to customs officials in at least one other nation.
The Khas and Win Lee were sentenced this afternoon by United States District Judge Christina A. Snyder, who said the Khas engaged in “conduct not acceptable by anyone in the world.” Calling the matter a “serious crime against the environment and wildlife,” Judge Snyder said: “There are portions of Africa where the rhino is gone, and Lord knows if they will ever come back.”
In addition to the prison terms, the Khas were each ordered to pay a $10,000 fine. Additionally, Judge Snyder ordered them to pay a cumulative total of more than $185,000 in tax fraud penalties to the Internal Revenue Service. Both Khas, along with the father’s company, were also ordered to pay a total of $800,000 in restitution to the Multinational Species Conservation Fund, a fund managed by the U.S. Fish and Wildlife Service (FWS) to support international efforts to protect and conserve rhinos and other critically endangered species around the world.
“The Khas’ smuggling operation fueled international demand and played a significant role in driving the price of rhino horn to nearly $25,000 per pound,” said United States Attorney André Birotte Jr. “It was that rising value of rhino horn that encouraged ruthless poachers to scour the South African wilderness in search of profits. The Khas played a role in pushing species like the African black rhino to the brink of extinction, which is why we aggressively prosecuted this case and sought lengthy prison terms.”
A third defendant in the case, Win Lee Corporation, which is owned by Jimmy Kha, was sentenced today to five years of probation and ordered to pay a $100,000 fine after it pleaded guilty to charges of smuggling and wildlife trafficking.
The Khas each pleaded guilty last September to five felony counts – conspiracy, smuggling, wildlife trafficking in violation of the Lacey Act, money laundering and tax evasion. The Khas were among 14 individuals charged with federal crimes as a result of “Operation Crash,” an ongoing FWS-led investigation named for the word used to describe a herd of rhinoceros (see, for example: http://www.fws.gov/home/feature/2012/servicecrashesrhinotrafficking1.html).
“On average, a rhino is slaughtered in Africa every 11 hours to feed the black market for their horns,” said FWS Director Dan Ashe. “Criminals in this country who are cashing in on this illegal trade should know that the United States will hold them accountable for their crimes and do everything possible to protect wild populations of rhinos.”
With no known predators other than humans, rhinoceros are a prehistoric species and one of the largest herbivores on earth. All rhinoceros species are protected under United States and international law, and the black rhinoceros is listed as an endangered species. Despite national and international protection efforts dating back nearly 40 years, the demand for rhino horn and black market prices has skyrocketed in the past several years due to the value that some cultures have placed on the horns for ornamental carvings, good luck charms or alleged medicinal purposes. For several decades, rhino poaching was a relatively isolated event in countries like South Africa, where the number of wild rhinos illegally killed there averaged 15 animals per year – at least until 2008 when the Khas began trafficking rhino horns. At the peak of the Khas’ wildlife trafficking conspiracy in 2011, 448 wild rhinos were slaughtered that year for their horns in South Africa alone. Between 2007 and the end of 2011, the poaching of wild South African rhinos increased 3,400 percent.
In sentencing papers filed in United States District court, prosecutors argued that “although they themselves did not shoot the rhinos, defendants Jimmy and Felix Kha
share direct culpability for the recent spike in the price of rhino horn, the increase in Vietnamese and Chinese demand for rhino, and thus the consequent wholesale slaughter of rhinos in the wild in Africa in recent years.”Over the course of about two years – from January 2010 through February 2012 – the Khas conspired with individuals throughout the United States to purchase white and black rhinoceros horn with the full knowledge that these animals were protected by federal law as endangered and threatened species. The horns acquired by the Khas during the course of their conspiracy had a market value of up to $2.5 million.
In their plea agreements, both defendants admitted that they purchased the horns in order to export them overseas to be sold and made into libation cups or used for traditional medicine, made at least one illegal payment to Vietnamese customs officials to ensure clearance of horn shipments to that country, and evaded income taxes owed in 2009 and 2010.
“The Khas engaged in egregious criminal conduct by taking the horns of a species on the brink of extinction and making millions of dollars in the illegal trade in rhino horns,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “The Khas’ sentence sends a strong message that those who violate the law by illegally trading in rhino horns will be held accountable to the fullest extent of the law.”
Operation Crash is an investigation being conducted by the U.S. Fish and Wildlife Service, which has received extensive assistance from the U.S. Postal Inspection Service, IRS - Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The case against the Khas was prosecuted by the United States Attorney’s Office for the Central District of California and the Department of Justice’s Environmental Crimes Section.
Release No. 13-070
12 Los Angeles-Area Residents Accused of Attempting to Bilk Medicare Out of $22 Million Arrested as Part of Nationwide CrackdownRead the Press Release
LOS ANGELES – Twelve Los Angeles-area residents – including California’s second-largest biller for chiropractic services, a physician’s assistant, and owners of durable medical equipment (DME) and ambulance companies – were taken into custody today in relation to seven criminal cases that allege they cumulatively submitted more than $22 million in false billings to Medicare.
The charges filed in Los Angeles are part of a nationwide “takedown” by Medicare Fraud Strike Force operations in eight cities that led to charges against 89 individuals for their alleged participation in schemes to collectively submit about $223 million in fraudulent claims to Medicare (for national press release and all related charging documents, see: http://www.justice.gov/opa/mfsf-pc-docs-2013.html).
The dozen defendants taken into custody are among 13 people charged in Los Angeles in cases that allege health care fraud. The 12 either were arrested this morning or self-surrendered to authorities after learning that they had been charged in federal court. All of those defendants are scheduled to be arraigned this afternoon. A thirteenth defendant is a fugitive.
Dr. Houshang Pavehzadeh, of the Sylmar Physician Medical Group, allegedly billed Medicare more than $1.7 million for chiropractic treatments he never performed. During the scheme, which ran from 2005 through 2012, Dr. Pavehzadeh, 40, of Agoura Hills, became the second-largest Medicare biller in California for chiropractic services – even though he was not in the United States when some of the alleged services were performed. In addition to being charged with health care fraud, Pavehzadeh is charged with aggravated identity theft related to Medicare beneficiaries whose information he used to bill Medicare as a part of the scheme. When investigators tried to conduct an audit of Pavehzadeh’s claims, he falsely reported to the Los Angeles Police Department that he had been carjacked and that patient files requested by the auditors had been stolen from his car. Pavehzadeh surrendered this morning, and he is scheduled to be arraigned with other Los Angeles-area defendants this afternoon in the Roybal Federal Building.
Nine defendants affiliated with DME companies were also charged in five separate indictments.
Olufunke Fadojutimi, 41, of Carson, a registered nurse; Ayodeji Temitayo Fatunmbi, 41, formerly of Carson, and now believed to be residing in Nigeria; and Maritza Velazquez, 40, of Las Vegas, were charged with health care fraud. The scheme allegedly revolved around Lutemi Medical Supplies, a DME company Fadojutimi owned and where Fatunmbi and Velazquez worked. According to the indictment in this case, Lutemi billed Medicare more than $8.3 million in claims, primarily for medically unnecessary power wheelchairs. Fadojutimi and Fatunmbi allegedly laundered Medicare funds in order to purchase fraudulent prescriptions for those power wheelchairs and pay illegal kickbacks to recruit Medicare beneficiaries. Fadojutimi was arrested this morning in Los Angeles, while Velazquez was arrested in Las Vegas. Fatunmbi is currently a fugitive being sought by federal authorities.
Susanna Artsruni, 45, of North Hollywood, and Erasmus Kotey, 76, of Montebello, a licensed physician’s assistant, allegedly worked together to commit health care fraud out of a medical clinic on Vermont Avenue where they both worked. Kotey allegedly prescribed medically unnecessary DME, including power wheelchairs, for Medicare beneficiaries. Many of those power wheelchair prescriptions were then used by Artsruni’s DME company, Midvalley Medical Supply, to support fraudulent claims to Medicare. In only four months, the clinic and Midvalley billed Medicare more than $525,000 for these fraudulent claims. Artsruni has previously been convicted of health care fraud and was on pretrial supervision at the time she allegedly laundered some of the proceeds of this fraud. Artsruni was arrested this morning, while Kotey self-surrendered.
Three other DME cases were also charged, alleging fraudulent Medicare billing for medically unnecessary power wheelchairs that were sometimes never even delivered. In one case, Akinola Afolabi, 53, of Long Beach, the owner of Emmanuel Medical Supply, allegedly submitted more than $2.6 million in in false and fraudulent billing to Medicare. In another case, Queen Anieze-Smith, 52, of Encino, and Abdul King-Garba, 47, of Westwood, the owners and operators of ITC Medical Supply, allegedly submitted more than $1.8 million in false and fraudulent billing to Medicare. In the third case, Clement Etim Aghedo, 53, of Fontana, the owner of Ace Medical Supply Company, allegedly submitted more than $1.8 in false and fraudulent claims to Medicare. Afolabi, Anieze-Smith, and King-Garba were all arrested this morning, while Aghedo self-surrendered.
In the seventh case brought as part of today’s takedown, three defendants affiliated with Gardena-based ProMed Medical Transportation, an ambulance company, were charged with submitting more than $5.9 million in false claims to Medicare between 2008 and 2011. ProMed’s owner, Yaroslav Proshak, 45, of Valley Village; general manager Sharetta Wallace, 35, of Inglewood; and office manager and biller Sergey Mumjian, 40, of West Hollywood, submitted claims for medically unnecessary transportation services and then created fake documentation purporting to support those claims. Proshak, Wallace, and Mumjian were arrested this morning.
The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and the Department of Health and Human Services to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
The Los Angeles cases announced today are being investigated by a Medicare Fraud Strike Force team, which is comprised of agents and investigators with the Federal Bureau of Investigation; the Department of Health and Human Services, Office of Inspector General; IRS - Criminal Investigation; and Medicaid Fraud Control Units, including the California Department of Justice. The cases are being prosecuted by attorneys from the United States Attorney’s Office and the Fraud Section of the Justice Department’s Criminal Division.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
The charge of health care fraud carries a statutory maximum penalty of 10 years in federal prison. Money laundering carries a potential penalty of 20 years in prison. Aggravated identity theft carries a mandatory two-year prison term.
Release No. 13-069a
West Hollywood Doctor Indicted on Federal Charges for Writing Prescriptions for Narcotics After Being Ordered to StopRead the Press Release
LOS ANGELES – A West Hollywood doctor surrendered to federal authorities this morning after being indicted last Friday on federal drug trafficking charges that allege he wrote more than 1,200 prescriptions for powerful painkillers after a federal order revoked his authority to prescribe those drugs.
James William Eisenberg, 72, who resides in the Venice district of Los Angeles, surrendered this morning at the United States Courthouse, where he is expected to be arraigned this afternoon.
Eisenberg is named in an indictment that charges him with four counts of using a revoked DEA registration number and three counts of distribution of hydrocodone, which is the generic drug found in brand-name products such as Vicodin and Norco.
Eisenberg allegedly wrote the prescriptions while he worked out of several medical offices in West Hollywood, including a Santa Monica Boulevard storefront he called Pacific Support Services. Eisenberg also issued “medical marijuana” recommendations from these West Hollywood locations, according to court documents and DEA administrative records.
In order to legally prescribe controlled substances such as hydrocodone, physicians must be registered with the United States Attorney General and have a valid DEA registration number. On December 14, 2011, a DEA administrative judge determined that Eisenberg acted as a “drug dealer” and suspended his registration number. The DEA issued an order permanently revoking Eisenberg’s registration on July 24, 2012.
The orders issued by the administrative judge were based on findings that Eisenberg, who at the time was working out of a “medical marijuana” club in Arizona, “lacked a legitimate medical purpose and acted outside of the usual course of professional practice” when he wrote prescriptions for oxycodone (the generic form of a drug often best known as the brand-name OxyContin) and Xanax in exchange for $150 cash payments. The DEA judge also found that Eisenberg wrote “medical marijuana” recommendations to undercover officers posing as patients, and that Eisenberg prescribed OxyContin to one of the undercover agents “before [Eisenberg] had even performed a physical examination.”
DEA investigators later learned that Eisenberg continued to prescribe controlled substances, including hydrocodone, in violation of the DEA’s orders. A review of a California Department of Justice database that can be used to track prescriptions showed that, following the suspension of Eisenberg’s registration number, patients filled more than 1,700 of his prescriptions for controlled substances, including more than 1,200 prescriptions for hydrocodone. As charged in the indictment, Eisenberg wrote one of those prescriptions on December 27, 2011, less than two weeks after his registration number was suspended.
DEA investigators executed a federal search warrant on one of Eisenberg’s West Hollywood offices on February 19, 2013. The affidavit in support of the search warrant outlines evidence, including surveillance and undercover operations, that Eisenberg continued to write prescriptions for controlled substances in violation of the DEA’s revocation order. The evidence included an operation in which an undercover agent, posing as a patient, obtained a prescription from Eisenberg for hydrocodone and alprazolam (the generic form of a drug best known as Xanax). A receptionist at Eisenberg's office asked the undercover agent if “he was looking for medical marijuana” as well, according to the search warrant affidavit.
According to the affidavit, when a West Hollywood pharmacist refused to fill Eisenberg prescriptions for hydrocodone and alprazolam in June 2012, Eisenberg called the pharmacy and asked the pharmacist to make an “exception” and fill the prescription.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
If convicted of the seven counts in the indictment, Eisenberg faces a statutory maximum sentence of 46 years in federal prison.
The investigation into Eisenberg was conducted by the Drug Enforcement Administration.
Release No. 13-068
Argentine National Sentenced for Receiving and Storing over 700,000 Tablets of Prescription Drugs from OverseasRead the Press Release
LOS ANGELES - A federal judge today sentenced an Argentine man, Felix Gabriel Alderete, to one year of imprisonment for his participation in a conspiracy to traffic in prescription drugs, including Lorazepam, Diazepam, Alprazolam, Ketamine, and Sibutramine.
In January 2013, Alderete pleaded guilty to the offense and admitted that in 2010, he had picked up packages from mailbox facilities in the Los Angeles area that had been sent by express mail from overseas. The packages contained tens of thousands of tablets of these drugs. According to court documents, on October 22, 2010, a search of a storage unit that defendant had visited and for which he had paid rent resulted in the discovery of nearly 60 boxes of over 700,000 tablets and over 5,000 empty pill bottles and bottles with labels. A search of an apartment that Alderete shared with others uncovered nearly 1,000 tablets along with labels and pill bottles, as well as a computer containing spreadsheets documenting sales of pharmaceuticals to customers throughout the country. Defendant left the country shortly after the searches were conducted and he was arrested when he tried to reenter the country in October 2012.
In pronouncing the sentence, United States District Judge Percy Anderson observed that the defendant had participated in a "serious offense" for over seven months that warranted a custodial sentence.This case is the product of an investigation by the Department of Homeland
Security, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, and U.S. Customs and Border Protection.Release No. 13-068
Father and Son Linked to Separate Fraud Schemes Arrested at LAX as They Prepared to Leave U.S. with One-Way Plane Tickets to RussiaRead the Press Release
LOS ANGELES – A father and son were arrested yesterday afternoon as they were about to board a plane to Moscow on federal fraud charges that include allegations that the older man sent tens of thousands of bogus “invoices” to small business owners in California in a shakedown scheme that caused at least 5,000 victims to send $225 to a fake company that purported to be a state agency.
The men – Viktor Ryzhkin, 45, of the Little Armenia section of Los Angeles; and his son, Evgenii Ryzhkin, 22, who lived with his father – were arrested late yesterday afternoon at Los Angeles International Airport by federal agents as they prepared to board a Transaero Airlines flight to Russia. The Ryzhkins, both of whom are Russian nationals, and two other family members, all had one-way tickets to Moscow that had been purchased on Monday.
According to a criminal complaint filed Thursday afternoon in United States District Court, Viktor Ryzhkin targeted more than 170,000 California small business owners in a mail fraud scheme that would have brought in nearly $40 million had all of the potential victims complied with demands to send payments to “Corporate Business Filings,” a Beverly Hills company set up and controlled by Viktor Ryzhkin.
The small business owners targeted in this scheme received invoices that appeared to be from the State of California, notifying them that they each owed $225 to the state and directing them to fill out certain forms related to their businesses. The letters sent to the victims – all of which were sent over the course of several days at the end of March and beginning of April – each listed the correct, publicly available California Small Business Administration entity number assigned to the particular small business. The business owners were told in the letters that they would face $250 penalties if they did not remit payment by April 15, 2013, and did not fill out the forms as directed. The letters and invoices that appeared to be from the State of California were completely bogus.
Investigators believe that Viktor Ryzhkin became aware of the investigation into his scheme in late last month. Viktor and Evgenii Ryzhkin, accompanied by the two family members, were about to board a plane at 4:00 p.m. yesterday, when they were arrested by United States Postal Inspectors.
Evgenii Ryzhkin was charged in a separate criminal complaint filed yesterday in United States District Court. Evgenii Ryzhkin is charged with participating in a conspiracy to take over home equity lines of credit in a scheme that caused at least $1.2 million in losses. According to the affidavit in support of the criminal complaint against Eygenii Ryzhkin, he was caught on surveillance video depositing a stolen check linked to a hijacked HELOC account.
Both Ryzhkins are expected to make their initial court appearances this afternoon in United States District Court.
Viktor Ryzhkin is charged in a criminal complaint with mail fraud, which carries a statutory maximum sentence of 20 years in federal prison.
Evgenii Ryzhkin is charged in a separate criminal complaint with bank fraud and conspiracy to commit bank fraud, each of which carries a statutory maximum sentence of sentence of 30 years in federal prison.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
This two cases against the Ryzhkins are being investigated by the United States Postal Inspection Service. The Federal Bureau of Investigations and U.S. Customs and Border Protection assisted during yesterday’s arrests.
Release No. 13-067
Former UCLA Physics Professor Agrees to Plead Guilty in Federal Contract Fraud Case and Pay Nearly $1.7 Million in DamagesRead the Press Release
LOS ANGELES – A former physics professor of the University of California, Los Angeles has agreed to plead guilty to federal fraud charges and pay nearly $1.7 million in penalties for submitting fraudulent invoices related to nanotechnology research he was performing for the Defense Advanced Research Projects Agency (DARPA) and other federal government entities.
Dr. Alfred Wong, 75, who resides in the Westwood district of Los Angeles, was charged this morning with making a false claim to the United States. Wong was charged in a criminal information filed in United States District Court in Los Angeles.
Federal prosecutors also filed a plea agreement in the criminal case and an agreement to settle a potential civil lawsuit. In those documents, Wong agreed to plead guilty to the federal fraud offense and pay a total of $1,686,000 in fines, restitution and damages to the United States and UCLA.
A longtime professor of physics at UCLA, Wong served as the director of the Plasma Physics Laboratory at UCLA, as well as the director of the High Power Auroral Stimulation (HIPAS) Observatory near Fairbanks, Alaska. About 10 years ago, Wong and two companies he founded – Non-Linear Ion Dynamics, Inc. (NID) and the
International Foundation for Science, Health, and the Environment (IFSHE), both of which were based in Van Nuys – entered into a series of contracts worth more than $25 million with the United States to research the feasibility of nanotechnology batteries for defense applications and to conduct ionospheric research at HIPAS. Wong also founded and controlled Alfred Wong Technologies (AWT), a Beverly Hills-based concern he established to manage various patent rights.According to court documents filed today, Wong created fictitious invoices at AWT that claimed AWT had manufactured and sold to NID certain nanotechnology components. Fraudulent invoices totaling $160,000 were then submitted to the Defense Department for payment.
Wong also caused IFSHE and NID to submit false vouchers to the Department of Interior for improvements on his privately owned land, as well as equipment and labor costs unrelated to the government Department contract.
The charge of submitting a false claim to the government a statutory maximum penalty of five years in federal prison.
Wong will be summoned to appear in federal court to be arraigned in this case on June 6.
The case against Wong is the result of an investigation by the Defense Criminal Investigative Service and the U.S. Department of the Interior’s Office of Inspector General.
Release No. 13-066
Grand Jury Indicts Five in Large-Scale Immigration Fraud Scheme Orchestrated by Attorney Who Paid Bribes to Government OfficialsRead the Press Release
Officials with Homeland Security Agencies Allegedly Took Payments of up to $10,000
LOS ANGELES – An agent with the Department of Homeland Security and a former immigration officer surrendered to federal authorities this morning after a grand jury yesterday indicted them and three others who allegedly participated in a long-running immigration fraud scheme that was fueled by official corruption.
The conspiracy was allegedly orchestrated by a Los Angeles attorney who paid bribes as high as $10,000 to officials with several agencies in the Department of Homeland Security to help secure immigration benefits for aliens he was representing.
An 18-count superseding indictment returned yesterday afternoon outlines a wide-ranging bribery scheme in which attorney Kwang Man “John” Lee – who was previously charged in a criminal complaint and is not named in the indictment issued yesterday – used illegal tactics to procure immigration benefits for clients. Lee allegedly paid bribes to public officials to secure admission stamps and lawful permanent residency status for aliens who paid fees ranging from a few hundred dollars to well over $50,000. Lee paid bribes to government officials, with payments ranging from $50 to as much as $10,000 given to an officer with U.S. Citizenship and Immigration Services (USCIS).
Authorities have identified several dozen aliens who improperly received immigrations benefits, but that number is growing as the investigation continues.
Those named in the indictment filed yesterday are:
USCIS Supervisory Officer Jesus Figueroa, 66, of Tujunga;
former USCIS Officer Paul Lovingood, 71, of Newhall, who surrendered to federal authorities this morning;James Dominguez, a special agent with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), 46, of Ventura, who surrendered to federal authorities this morning;
U.S. Customs and Border Protection Officer Michael Anders, 53, of Torrance; and
Mirei Hofmann, 38, of Los Angeles, a native of Japan, who allegedly paid Lee tens of thousands of dollars to secure a permanent resident card.
Figueroa and Hofmann were named in an earlier indictment returned by the grand jury about a month ago. Anders and Lee, a 47-year-old resident of Los Angeles, were named in a criminal complaint filed about a month ago. All four were previously arrested and released on bond. They will be summoned into court for arraignments on the new indictment in the coming weeks.
Dominguez and Lovingood were charged for the first time in yesterday’s indictment, and both are expected to be arraigned on the indictment this afternoon in United States District Court.
The indictment alleges two conspiracies involving bribery and fraud against the United States (Figueroa, Dominguez and Lovingood are charged in one conspiracy; Anders is charged in the second). The indictment also alleges seven counts of bribery, two counts of making false statements, three counts of misuse of government seals (USCIS approval stamps), three counts of false stamps, and Hofmann is charged alone in one count of immigration fraud.
“The allegations in this case concern federal law enforcement officers selling their services and betraying their oaths to our nation so they could profit from a clandestine immigration fraud ring that allowed scores of aliens to improperly enter and reside in the United States,” said United States Attorney André Birotte Jr. “Immigration fraud subverts the orderly process of citizenship and compromises the security of the homeland. We will do everything possible to protect our system of government when it is threatened by public officials who are more concerned with private profit than upholding the law.”
The four current and former government officials named in yesterday’s indictment allegedly conducted a number of official acts to help Lee’s clients obtain immigration benefits. For example, the indictment specifically alleges that Figueroa, Dominguez and Lovingood added documents to, and removed documents from, immigration files (A-files) related to Lee’s clients. In exchange for their official acts, Lee allegedly paid the officials with cash and expensive gifts – including at least three Thailand vacations for Dominguez, computers and television sets for Lovingood, and thousands of dollars in cash for Figueroa.
"Guarding against illegal or unethical behavior by those in positions of public trust is not an option – it is an obligation we have to the people we serve,” said Joe Jeronimo, Special Agent in Charge of ICE’s Office of Professional Responsibility, West Region. “We will move aggressively to target those who corrupt the integrity of our nation’s immigration system, particularly when the actions involve individuals sworn to safeguard that process.”
Lee, a former officer with an agency previously known as the Immigration and Naturalization Service, became an attorney in 1997 and maintains offices in the Mid-Wilshire district of Los Angeles. According to an affidavit in support of a criminal complaint previously filed in this case, “The investigation has revealed that Lee is the middleman in a corruption ring that solicits bribes from aliens in exchange for immigration benefits, ranging from fraudulent admission stamps to citizenship. Lee appears to be the point-of-contact between government officials, whom Lee pays to procure these immigration benefits, and known and unknown co-conspirators, who refer aliens to Lee. The investigation has also revealed that Lee uses his position as a licensed attorney to facilitate the bribery conspiracy by, among other things, assisting alien bribe payors in submitting false and fraudulent immigration petitions to U.S. Citizenship and Immigration Services.”
Criminal complaints and indictments contain allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
The conspiracy counts carry a statutory maximum penalty of five years in federal prison, and the bribery counts carry a statutory maximum penalty of 15 years in prison. If convicted of all counts in which they are charged, Figueroa would face a statutory maximum penalty of 80 years in federal prison; Anders would face a statutory maximum sentence of 65 years in federal prison; Lovingood would face a statutory maximum penalty of 20 years in federal prison; Dominguez would face a statutory maximum sentence of 20 years in federal prison; and Hofmann would face a statutory maximum sentence of 10 years in federal prison.
The superseding indictment returned yesterday is the result of an ongoing investigation being conducted by U.S. Immigration and Customs Enforcement’s Office of Professional Responsibility and ICE’s Homeland Security Investigations, which are receiving substantial assistance from U.S. Customs and Border Protection, Office of Internal Affairs; the Department of Homeland Security, Office of Inspector General; U.S. Citizenship and Immigration Services, Office of Security and Integrity; and the Los Angeles County Sheriff’s Department.
Release No. 13-065
Ventura County Man Who Profited More Than $1 Million Through Illegal Insider Stock Trades Based on Information Obtained from Former Partner at KPMG Agrees to Plead Guilty to Federal Conspiracy ChargeRead the Press Release
LOS ANGELES – The owner of a San Fernando Valley jewelry store was charged today with receiving insider information from a senior partner with KPMG LLP and using that confidential information about KPMG’s clients to make illegal stock trades that generated well over $1 million in illicit profits.
Bryan Shaw, 52, of Lake Sherwood, California, was charged this morning in United States District Court with one count of conspiracy. In a plea agreement also filed this morning, Shaw agreed to plead guilty to the felony offense and admitted that he plotted with the former KPMG partner to commit securities fraud. As part of the agreement with federal prosecutors, Shaw agreed to disgorge approximately $1,271,787 in illegal stock trading profits.
Shaw is expected to make his initial appearance later this week in United States District Court.
In a criminal information and plea agreement filed this morning by federal prosecutors, Shaw admitted that he conspired with former KPMG senior partner Scott London to violate federal securities laws by using insider information to make illegal stock transactions in publicly traded companies.
London, 50, of Agoura Hills, was charged last month in a criminal complaint with one count of conspiracy to commit securities fraud. London is scheduled to be arraigned in the case in United States District Court on May 17.
“These two men were close friends who shared dinners, concerts, sporting events and secret information that brought profits to each of them,” said United States Attorney André Birotte Jr. “London provided, and Shaw was all too happy to use,
proprietary information that should have remained confidential. These men broke ethical rules and criminal laws for the sole purpose of lining their pockets with illegal profits.”Bill L. Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office, stated: “The FBI is committed to investigating allegations of insider trading and will hold violators accountable to ensure the public playing field is even and fair. We will continue to work with our partners to identify securities fraud so that investors maintain a high level of confidence in the marketplace.”
The documents filed in the case against Shaw, as well as the 24-page affidavit in support of the criminal complaint in London’s case, outline how London provided Shaw with confidential information about KPMG clients, and how Shaw used this information to make trades that generated the illegal proceeds.
London was a senior partner at KPMG who supervised hundreds of accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA, Inc. As a result of his position, London had access to confidential information about KPMG’s clients before that information was disclosed to the public.
In February 2013, Shaw began to cooperate with the government’s investigation. London’s alleged criminal conduct continued until March, when he was recorded in telephone conversations passing highly sensitive and confidential information to Shaw regarding upcoming earnings announcements for KPMG clients Herbalife, Ltd. and Deckers Outdoor Corporation.
During the course of the scheme, London, in some instances, called Shaw two to three days before press releases were issued for KPMG clients and read confidential information from the draft releases to Shaw, according to court documents. London allegedly also disclosed to Shaw confidential information about impending mergers concerning KPMG clients before that information was made public. At times, London even discussed with Shaw how to structure Shaw’s purchases of the stock in certain companies in order to protect them from being discovered.
Shaw admits in his plea agreement that he gave London more than $60,000 in cash in exchange for confidential information about KPMG’s clients, typically meeting with London near Shaw’s Encino jewelry store to give him bags containing stacks of $100 bills. Shaw also admits in his plea agreement that he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.
The criminal complaint against London details recorded conversations between Shaw and London in February 2013 in which London disclosed information about earnings announcement for Herbalife and Deckers. The complaint further details that on two occasions, acting at the direction of the FBI, Shaw met with London and gave him cash as payment for confidential information about KPMG clients.
The federal charge of conspiracy to commit securities fraud carries a statutory maximum penalty of five years in prison, and a fine of $250,000 or twice the gross gain or loss from the offense.
The criminal complaint naming London contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
The criminal investigation in this case was conducted by the Federal Bureau of Investigation.
In a separate action filed last month, the U.S. Securities and Exchange Commission filed a civil lawsuit against London and Shaw (see: http://www.sec.gov/litigation/litreleases/2013/lr22670.htm).
Release No. 13-063
Co-Owner of Los Angeles County Toy Company Sentenced to Federal Prison in Drug Money Laundering CaseRead the Press Release
LOS ANGELES – The owner of a San Fernando Valley jewelry store was charged today with receiving insider information from a senior partner with KPMG LLP and using that confidential information about
LOS ANGELES – A Diamond Bar woman, who along with her husband owns a Los Angeles-area toy wholesaler, was ordered today to serve a total of 14 months in custody for participating in an elaborate scheme known as a Black Market Peso Exchange, which is an underground money-transfer system that enables international drug trafficking organizations to launder narcotics proceeds.
Dan “Daisy” Xin Li, 44, co-owner of the Industry-based Woody Toys, Inc., was sentenced today to eight months in prison, to be followed by six months of home detention. At the conclusion of today’s hearing, Li was remanded into custody.
Li was sentenced by United States District Judge R. Gary Klausner, who this morning delayed the sentencing for Li’s husband – Jia “Gary” Hui Zhou, 44 – until January 6, 2014.
As part of their agreements with federal prosecutors, the couple forfeited to the federal government $2 million in proceeds that were derived from their money laundering scheme. Some of that money was previously seized by investigators, but most of the money to satisfy a forfeiture order – $1,982,641 – was paid last Wednesday.
Zhou and Li pleaded guilty in September to conspiring to structure currency transactions with a U.S. financial institution to avoid the filing of a Currency Transaction Report.
The scheme used “structured” cash deposits in the United States to launder illicit proceeds generated by drug trafficking organizations based in Mexico and Colombia. Structured deposits are cash deposits of $10,000 or less that are designed to avoid laws requiring all cash transactions over $10,000 to be reported to federal authorities. From 2005 through 2011, approximately $3 million in structured, out-of-state cash was deposited into Woody Toys’ bank accounts, according to court documents. During that same time, Woody Toys took in approximately $3 million in cash without filing the required federal documents.
As part of the Black Market Peso Exchange scheme alleged in this case, foreign toy retailers with Colombian and Mexican pesos would contact currency brokers to buy discounted U.S. dollars, which they used to purchase merchandise from Woody Toys. The dollars being “sold” were allegedly proceeds from illegal drug sales that had been deposited in the toy company’s accounts or delivered to the business. The Colombian or Mexican pesos the currency broker received from the foreign toy retailer were remitted to the drug trafficking organizations.
In a sentencing memo to the court, prosecutors described Woody Toys as “the last ‘spoke in the wheel,’ that cleaned illicit proceeds and enabled drug trafficking organizations to convert their dirty dollars into clean pesos.”
The case involving Woody Toys is the result of an investigation conducted by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), IRS-Criminal Investigation, and the multi-agency Southern California Drug Task Force, which is spearheaded by the Drug Enforcement Administration.
Previously in this case, Woody Toys, Inc. was sentenced in November to five years of probation after pleading guilty to money laundering conspiracy charges involving drug proceeds. The sentence prohibits the company from receiving payments of more than $2,000 in cash and the business may not receive cash from anyone who is not a customer. The company must also report the identity and contact information of all its customers. Finally, the business will be subject to unannounced examinations of its books and records.
The probe targeting Woody Toys began in November 2010 based on evidence uncovered during a similar investigation targeting another Los Angeles-area toy wholesaler called Angel Toys, whose owners also went to prison (see: http://www.justice.gov/archive/usao/cac/Pressroom/2012/021.html). Several former employees of Angel Toys subsequently went to work for Woody Toys.
Investigators say schemes of this kind benefit criminal organizations by giving them a means to launder illicit proceeds using international trade. The system also gives foreign retailers access to discounted U.S. currency, which enables the foreign retailers to avoid steep exchange rates and other fees. Finally, for the U.S.-based company, the scheme is a way to substantially increase sales volume and cash flow.
Release No. 13-064
Operator of San Fernando Valley Medical Clinics Sentenced to 14 Years in Federal Prison for Illegally Distributing OxycodoneRead the Press Release
SANTA ANA, California – A woman who operated four medical clinics in Reseda and Northridge was sentenced today to 14 years in federal prison for distributing the powerful and widely abused prescription narcotic oxycodone.
Anush Davtyan, 53, of Encino, was sentenced by United States District Judge David O. Carter after she pleaded guilty last September to one count of conspiracy to distribute oxycodone and possess with intent to distribute oxycodone.
In a plea agreement filed with the court, Davtyan admitted that she and her common-law husband operated four clinics where people could purchase oxycodone prescriptions for cash following a medical exam.
Oxycodone is sold under brand names such as Oxycontin, Percocet and Percodan.
Cappers brought customers to one of the clinics to obtain prescriptions for oxycodone. Those prescriptions were filled, and the drugs were brought back to Davtyan’s clinic and were diverted to a dealer for later sale on the street.
Davtyan admitted that she had bribed pharmacists to fill the large number of oxycodone prescriptions generated by her clinics. In one exchange recorded by investigators, Davtyan and her husband brought a pharmacist flowers and cognac to a pharmacist and then explained to the pharmacist how the prescriptions would be filled and how the pharmacist would get paid for filling prescriptions that came from her clinics.
During the execution of search warrants on September 1, 2011, federal agents found 1,116 pills in Davtyan’s Encino home and another 7,589 pills in her Mercedes parked in her garage.
Davtyan’s co-defendant and common-law husband, Armen Ayrappetyan, remains a fugitive and is believed to be residing in Russia.
The oxycodone distribution case against Davtyan was investigated by the Federal Bureau of Investigation; the Drug Enforcement Administration; IRS - Criminal Investigation; the United States Department of Health and Human Services, Office of Inspector General; the California Department of Justice; the Los Angeles County Sheriff’s Department; the Los Angeles County Health Authority Law Enforcement Task Force (HALT); the California Medical Board; the Simi Valley Police Department; and the Ventura County Sheriff’s Department.
Release No. 13-062
Nine People Linked to Cocaine Distribution to Italy and Domestic Methamphetamine Sales Named in Federal IndictmentRead the Press Release
LOS ANGELES – A federal investigation into a drug-trafficking organization led by two brothers who oversaw the distribution of cocaine to Italy and across the United States – as well as methamphetamine being trafficked across the U.S. – has led to the indictment of nine people, three of whom were arrested this morning.
Operation “Family Guy” targeted the Urena family drug-trafficking organization through the use of undercover operatives and wiretaps that led to the interception of telephone calls, text messages, and communications sent through BlackBerry Messenger.
The investigation, which culminated with a seven-count indictment being returned by a federal grand jury on April 24, resulted in the seizure of approximately 40 kilograms of cocaine being smuggled into Italy from the Dominican Republic and Mexico. That cocaine was being smuggled by female drug couriers allegedly recruited by two Urena brothers, who were assisted by their uncle Francisco Javier Vargas-Oseguera and others. The investigation also uncovered a conspiracy to distribute significant quantities of methamphetamine and cocaine throughout the United States through the use of vehicles with hidden compartments.
The indictment also alleges that members of the narcotics-trafficking operation laundered drug proceeds from the Dominican Republic through the use of Western Union wire transfers sent to Fontana and Rancho Cucamonga.
Operation “Family Guy” is the product of an investigation conducted by the Los Angeles High Intensity Drug Trafficking Area (HIDTA) Task Force, which is coordinated by the Drug Enforcement Administration and is comprised of agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and
IRS - Criminal Investigation. The Los Angeles Sheriff’s Department and the Whittier Police Department also participated in this investigation.Those named in the indictment unsealed this morning are:
Milton Urena, 29, of the Dominican Republic, who is currently being sought by authorities;Rafael Urena, 27, of Rancho Cucamonga, Milton Urena’s brother, who was arrested this morning;
Daniel Alejandro Agredano Vazquez, 22, of the Dominican Republic, who allegedly oversaw the distribution of cocaine from the Dominican Republic to Italy and conspired to launder drug proceeds, and who is currently being sought by authorities;
Francisco Javier Vargas-Oseguera, 51, an uncle of the Urena brothers, previously of Seattle and recently of Fontana, who is currently in federal custody in Seattle after being charged in federal court there in relation to his alleged possession of eight pounds of methamphetamine in a case unrelated to Operation Family Guy;
Leonel Urena-Partida, 49, of Guadalajara, Mexico, another uncle of the Urena brothers, who allegedly conspired to transport cocaine to Italy, and who is being sought by authorities;
Carmen Garcia, 35, of San Bernardino, who supplied methamphetamine and assisted with the recruitment of drug couriers, and who was arrested this morning;
Eliseo Carrillo Duarte, 45, of Montebello, who is currently in federal custody in Indianapolis after being arrested there in March on unrelated drug-trafficking charges stemming from the seizure of approximately 10 pounds of methamphetamine;
Jenna Michelle Martin (also known as Jenna Michelle Smith), 25, of Upland, an alleged drug courier who was arrested this morning; and
Beth Rene Ford (also known as Beth Rene Florance), 26, formerly of Ontario and now living in the Denver area, a second alleged drug courier, who is expected to self-surrender soon to authorities.
The defendants arrested this morning are expected to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.
The indictment specifically charges eight defendants (not Duarte) with conspiracy to distribute cocaine to Italy, which carries a mandatory minimum sentence of 10 years in federal prison and a statutory maximum sentence of life imprisonment. Six of the defendants (not Agredano Vasquez, Martin or Ford) are charged in another conspiracy involving the domestic distribution of cocaine and methamphetamine, a charge that also carries a mandatory minimum sentence of 10 years in federal prison.
Various defendants are also named in a charge that alleges the distribution of approximately one pound of methamphetamine, three counts of use of a communication facility in committing a felony drug offense, and conspiracy to launder money.
Release No. 13-061
Southern California Man Sentenced to 10 Years in Federal Prison in Schemes That Sold Unregistered Securities in Internet, Energy FirmsRead the Press Release
LOS ANGELES – A previously convicted felon was sentenced late this afternoon to 120 months in federal prison for selling unregistered stock in Internet companies and a fake energy company to victims across the country who lost at least $10 million.
De Elroy Beeler Jr., 56, was sentenced by United States District Judge Dean D. Pregerson. Beeler, who has been in federal custody since 2007 when authorities arrested him to stop an ongoing scheme, previously lived with his family in Carpinteria in Santa Barbara County and had a residence in the Tujunga district of Los Angeles.
Beeler will be back in court in about one month, at which time Judge Pregerson is expected to rule on how much money Beeler should pay in restitution to the hundreds of victims of the scheme.
Beeler pleaded guilty to one count of conspiracy and two counts of mail fraud in late 2008.
In the scheme at the center of the federal prosecution, Beeler worked with former IRS Revenue Agent George Tannous to solicit victims across the country to purchase unregistered stock in the Tujunga-based Bidbay.com, Inc. (a company that was later known as Auctiondiner.com, Inc.) and related companies AskGT.com and Rose Laboratories.
Victim-investors were enticed to put money into the companies with various false claims, including that the companies would conduct initial public offerings, and that Bidbay.com and/or the shell companies would soon be acquired by Ebay, Inc. for $20 per share. Ebay never had any intention of acquiring Bidbay.com and had even sued Bidbay.com for trademark infringement over the use of “bay” in its name. Beeler personally received $4.8 million of investor money as commissions that were not disclosed to investors.
Tannous pleaded guilty to one count of conspiracy and one count of subscribing to a false tax return in 2008. Judge Pregerson sentenced Tannous in March 2012 to 33 months in prison.
A former United States Congressman involved in the scheme was sentenced in December to one year and one day in federal prison in a tax fraud case related to his failure to disclose to the IRS nearly $500,000 of investor funds he received from the Bidbay scheme. Wester Shadric Cooley, 80, a native of Los Angeles who now resides in Bend, Oregon, admitted in court that he received approximately $1.1 million during the scheme and that he failed to report approximately $494,000 on his 2002 tax return.
After Beeler was charged in the Bidbay case in 2007, he was charged in a second case involving the sale of securities in 2006 and 2007 in a fake energy company called First Global One. Beeler falsely told investors that First Global One would have an initial public offering and that it had business relationships with Exxon Mobile Corporation. Beeler received the 10-year sentence today after pleading guilty in both the Bidbay and First Global One schemes.
Beeler was previously convicted in federal court in relation to another fraud scheme that sent him to prison for 36 months, a term he completed in 2005 just before launching the First Global One scheme.
The investigation into Bidbay.com was conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation.
Release No. 13-060
Central Coast Man Pleads Guilty in Fraud Scheme That Bilked In-Laws, In-Laws’ Friend, and Banks Out of Nearly $50 MillionRead the Press Release
SANTA ANA, California – A Central Coast man pleaded guilty this afternoon in a wide-ranging fraud scheme that caused more than $47 million in losses to several victims, including his in-laws, who were long-established and well-respected farmers in San Luis Obispo County.
John Mark Moore, 51, of Nipomo, pleaded guilty today to federal charges relating to his fraud scheme, which continued for well over a decade until he came clean to his family in the fall of 2011 and then to federal authorities last year.
Appearing before United States District Judge David O. Carter, Moore pleaded guilty to four federal offenses: two counts of making false statements to Farm Credit West (FCW), a production credit association in Templeton, California; one count of mail fraud; and one count of wire fraud.
Over the course of 11 years, Moore misappropriated approximately $24 million from his in-laws, plus another $23 million from five banks and another individual who was a friend and business associate of his in-laws.
According to court documents, Moore took unauthorized disbursements from the bank accounts and lines of credit belonging to his father-in-law and mother-in-law. Once he had control of the funds derived from his in-law’s accounts, Moore used the money to support businesses that he and his father controlled. Over the course of approximately 11 years, Moore diverted approximately $13.8 million from his in-law’s
business and personal accounts at FCW and transferred the money to his father’s company, Moore Agricultural Products (which after March 2004 was owned by his mother) or to companies Moore himself owned, such as American Microtech, LLC.In another scheme, Moore also stole money from his in-laws by fraudulently increasing their personal and business lines of credit at FCW, and then fully drawing down on these lines of credit without having the ability to repay these loans. Moore improperly increased these lines of credit by repeatedly forging his in-law’s signatures on several loan applications that allowed him to increase their personal and business lines of credit at FCW in one case from $1 million to $6.5 million and, in another case, from $1 million to $4 million. Accordingly, Moore fraudulently borrowed $10.5 million against his in-law’s business and personal lines of credit from 2000 through 2011, and he fully defaulted on these obligations.
In another scheme, Moore fraudulently obtained funds by increasing his lines of credits he obtained in the name of himself, his wife, his companies, and his mother through various means, including forging his wife’ signature, submitting false personal financial statements, and pledging phony collateral to secure the loans. As a result of this fraudulent borrowing, the victim lending institutions – including FCW, Heritage Oaks Bank, Union Bank, Rabobank and Happy State Bank in Dumas, Texas – sustained aggregate losses of approximately $11.4 million.
In the fourth scheme in this case, Moore bilked a friend and business associate of his in-laws beginning in 2002 when Moore entered into a series of ranching and farming ventures with the victim. As part of Moore’s scheme to defraud his in-laws’ friend, who is identified in court documents as GLM, Moore entered into a bogus contract in which he agreed to undertake various agricultural ventures and share the proceeds of these ventures with GLM in exchange for GLM providing the start-up capital. However, Moore had no intention of starting agricultural ventures, and instead he used GLM’s money for other purposes. As a result of Moore’s defendant’s fraudulent scheme, GLM lost more than $12 million, which was never repaid.
The false statement charges each carry a statutory maximum penalty of 30 years in federal prison, and the fraud charges each carry a potential penalty of 20 years in prison. Therefore, as a result of his guilty pleas today, Moore faces a potential sentence of 100 years in federal prison. The actual sentence will be determined by Judge Carter when he sentences Moore on July 29.
Moore self-reported his illegal conduct to federal authorities over the course of 2012. Based on the information he provided and a subsequent investigation, the case against Moore is the product of work completed by special agents with the Federal Bureau of Investigation.
Release No. 13-059
F.B.I. Arrests Century City Man for Allegedly Running Ponzi Scheme and Bilking Additional Victim After Being Sued by S.E.C.Read the Press Release
LOS ANGELES – A Century City man was arrested this morning by FBI special agents after he was charged with running a Ponzi scheme and then bilking another victim out of millions of dollars that he used to pay back earlier victims after the S.E.C. took him to court.
Shervin Neman, whose given name is Shervin Davatgarzadeh, 31, was arrested without incident this morning at his residence. Neman was arrested pursuant to a three-count fraud indictment that alleges he caused victims to suffer losses of more than $3 million.
The indictment alleges that Neman claimed to be a successful investor who made significant profits, but he in fact operated a Ponzi scheme from the summer of 2010 through last June by soliciting funds from investors with false claims that their money would be used to purchase foreclosed real estate and stocks, including pre-initial public offering shares. Instead of using investor funds to make these investments, the indictment alleges that Neman was spending most of the victims’ investment funds on personal expenditures and to repay other victims.
The Securities and Exchange Commission filed a civil complaint against Neman and his company, the Century City-based Neman Financial, Inc., on April 11, 2012, in United States District Court in Los Angeles. The lawsuit alleged that Neman was operating a multi-million dollar Ponzi scheme that was targeting primarily members of the Persian-Jewish community in Los Angeles. Subsequently, a federal judge issued orders prohibiting Neman from committing securities fraud (see, for example: https://www.sec.gov/litigation/litreleases/2012/lr22331.htm).
The month after the SEC filed its lawsuit, Neman solicited $2 million from another victim with false promises that Neman could obtain pre-IPO shares in Facebook, according to the indictment. Neman allegedly used the funds obtained from the new victim to pay, among other things, most of his earlier victims and the law firm representing him in the SEC action. Neman then had victims who had been “paid back” write e-mails saying that Neman did not owe them money, according to the indictment, which goes on to say that Neman used these e-mails as part of his defense in the SEC case. In June 2012, Neman sent to the later victim a $2,235,800 check that purported to be the return on the Facebook investment, but that check bounced, according to the indictment.
Neman was charged in an indictment returned under seal Wednesday by a federal grand. That indictment, which was unsealed this morning after Neman’s arrest, charges him with two counts of wire fraud and one count of mail fraud.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
The three fraud charges in the indictment each carry a statutory maximum sentence of 20 years in federal prison.
Neman is expected to be arraigned this afternoon in United States District Court in downtown Los Angeles.
This case is the result of an investigation by the Federal Bureau of Investigation.
Release No. 13-058
Glendale Man Who Played Role in Kickback Scheme That Bilked San Francisco Food Company Sentenced to Federal PrisonRead the Press Release
LOS ANGELES – A Glendale man who pleaded guilty in a scheme that led to his San Francisco employer suffering losses of more than $2 million – a plot that has connections to a kickback scheme that defrauded Huntington Hospital in Pasadena – has been sentenced to 20 months in federal prison.
Tony Hamedany, 58, who formerly resided in Hillsborough, California, was sentenced yesterday by United States District Judge Percy Anderson, who also ordered the defendant to pay $1.54 million in restitution to his former employer, Columbus Manufacturing, Inc., the San Francisco-based manufacturer of salame and other deli products.
Tony Hamedany pleaded guilty in October 2011 to two counts of mail fraud in relation to a kickback scheme he orchestrated during his tenure as director of engineering for Columbus. Tony Hamedany’s position at Columbus enabled him to negotiate construction contracts that he agreed to award in exchange for kickback payments from vendors. The construction contracts – for construction projects related to the salame company’s production facilities in South San Francisco – were adjusted so that vendors would pay Tony Hamedany kickbacks from payments they received from the contracts with Columbus.
Among the people who paid kickbacks to Tony Hamedany was Alexander Svidler, 55, of San Francisco, who pleaded guilty to mail fraud stemming from his participation in the kickback schemes pertaining to both Huntington Hospital and Columbus and was sentenced to 18 months in federal prison (see: http://www.justice.gov/archive/usao/cac/Pressroom/2012/152.html).
Tony Hamedany is the brother of David Hamedany, 56, also of Glendale, who is serving a three-year prison term for executing a $4.8 million kickback and fictitious billing scheme during his tenure as director of construction for Huntington Memorial Hospital. The Hamedany brothers ran separate, but parallel, kickback schemes and commingled proceeds in bank accounts in the names of entities formed by the brothers.
In addition to the Hamedany brothers and Svidler, an attorney has pleaded guilty pursuant to this investigation. John Haw, 52, of Aliso Viejo, pleaded guilty to two counts of mail fraud in relation to the Huntington Hospital kickback scheme in which Haw received business in exchange for kicking back money to an entity set up by the Hamedany brothers. Haw is scheduled to be sentenced by Judge Anderson on May 6.
The investigation into the kickback schemes, which cost victim companies approximately $7 million, was conducted by the Federal Bureau of Investigation.
Release No. 13-056
Federal Court Issues Permanent Injunction Prohibiting Los Angeles Tax Service and Its Owner from Preparing Federal Tax ReturnsRead the Press Release
LOS ANGELES – A federal judge has permanently barred Yonny Torres, who does business under the name Yonny’s Income Tax in downtown Los Angeles, from preparing federal tax returns, the Justice Department announced today.
The civil injunction, which was filed last Thursday by United States District Judge Stephen V. Wilson, determined that Torres engaged in “dishonest conduct” when he prepared federal income tax returns that contained false information that increased his clients’ earned income credit (EIC) so that their tax refunds would be fraudulently inflated.
“This overall scheme spanned over multiple years, comprised thousands of instances of noncompliance, and accumulated losses to the government estimated as high as $6.5 million,” Judge Wilson wrote in his order.
Torres was sued by the United States on December 10, 2012. The permanent injunction was issued last week along with a default judgement in the lawsuit.
Two years ago, Torres was assessed a $52,000 penalty for failing to perform due diligence on clients tax returns.
Release No. 13-057
Two Northern California Men in ‘Sextortion’ Plot Targeting Professional Poker Players Receive Federal Prison SentencesRead the Press Release
LOS ANGELES – Two Silicon Valley men were sentenced today to federal prison terms of 3½ years and two years for their roles in a scheme that used naked photographs and other private information stolen from email accounts in an attempt to extort hundreds of thousands of dollars from professional players on the World Poker Tour.
Tyler Schrier, 23, of Menlo Park, was sentenced to 42 months in prison after pleading guilty to conspiracy, extortion and unauthorized access to a protected computer to obtain information.
In addition to the “sextortion” plot, Schrier admitted that he had previously extorted and received more than $26,000 from professional poker players in another plot. He further admitted that while free on bond after being charged in the “sextortion” case, he illegally accessed two email accounts that allowed him to steal approximately $4,000 from online poker accounts.
The second man sentenced today – Keith James Hudson, 39, of San Jose – received a two-year prison term after pleading guilty to unauthorized access to a protected computer to obtain information for purposes of private financial gain. Hudson admitted that he hacked into a poker player’s email account, stole naked photographs from the illegally accessed account, and plotted with Schrier to extort poker players with those naked images.
Schrier and Hudson were sentenced by United States District Judge S. James Otero.
According to court documents, the sextortion scheme took place in the fall of 2010, after members of the conspiracy illegally accessed an email account belonging to Joe Sebok. Armed with intimate e-mails and photographs of the victim, Schrier threatened to post those intimate photographs and e-mails on the Internet unless Sebok and other victims paid hundreds of thousands of dollars in extortion payments. Sebok and the other victims in this sextortion case did not make any payments.
As part of the scheme, in November 2010, Schrier sent an e-mail with a nude photograph of Sebok to approximately 100 individuals.
During today’s sentencing hearing, Sebok addressed the court and said the victims of the plot had “their lives altered and shattered in irreparable ways.”
After the defendants hacked into his email account and released some information to the public, the fallout “instantly damaged my ability to sustain my livelihood doing what I had been since 2005,” Sebok told Judge Otero. “In short, I was no longer able to maintain my then-current level of participation in the poker industry, representing the brands that I had been previously, as well as greatly destroying my ability to do so with new companies moving forward. Without belaboring the point too much, it was a nightmare, and one that I was forced to live through with millions of people watching.”
A third defendant in the case, Ryder Finney, 22, of Philadelphia, pleaded guilty to conspiracy and will be sentenced later this year in federal court in Philadelphia. At sentencing, Finney faces a statutory maximum sentence of five years in prison.
The sextortion case was investigated by the Federal Bureau of Investigation.
Schrier pleaded guilty pursuant to a plea agreement that involved federal prosecutors in Los Angeles, San Francisco, Connecticut, Boston, Tampa and Minnesota.
Release No. 13-055
Member of LulzSec Hacking Group Sentenced to over Year in Federal Prison for 2011 Intrusion into Sony Pictures Computer SystemsRead the Press Release
LOS ANGELES – A member of the LulzSec hacking group was sentenced today to one year and one day in federal prison for his conviction on federal computer hacking charges related to an extensive computer attack that compromised the computer systems of Sony Pictures Entertainment.
Cody Andrew Kretsinger, who used the online moniker “recursion,” 25, who formerly lived in Phoenix, Arizona, and currently resides in Decatur, Illinois, was sentenced this morning by United States District Judge John A. Kronstadt.
In addition to the prison term, Judge Kronstadt ordered Kretsinger to serve one year of home detention following the completion of his prison sentence, to perform 1,000 hours of community service, and to pay $605,663 in restitution.
Kretsinger pleaded guilty in April 2012 to conspiracy and the unauthorized impairment of a protected computer. According to court documents, during a one-week period in late May and early June of 2011, the computer systems of Sony Pictures were compromised by a computer hacking group known as “LulzSec” or “Lulz Security,” whose members anonymously took responsibility for the attack.
Kretsinger and others involved in the intrusion obtained confidential information from Sony Pictures’ computer systems by using an “SQL injection” attack against Sony Pictures’ website. Kretsinger and the other attackers distributed the stolen data on the Internet, information that included names, addresses, phone numbers and e-mail addresses for tens of thousands of Sony customers.
LulzSec is known for its affiliation with the international group of hackers known as “Anonymous,” which is a loose collective of computer hackers and others around the world who conduct cyber attacks and disseminate confidential information stolen from victims’ computers.
Another member of LulzSec, Raynaldo Rivera, known by the online moniker “neuron,” of Chandler, Arizona, 20, pleaded guilty last October to conspiracy charges in connection with his participation in the Sony Pictures attack. Rivera is currently scheduled to be sentenced by Judge Kronstadt on May 16.
This investigation into the attack on Sony Pictures’ computer systems was conducted by the Electronic Crimes Task Force (ECTF) in Los Angeles. The ECTF is comprised of agents and officers from the FBI, the United States Secret Service, the Los Angeles Police Department, the Los Angeles County Sheriff’s Department, the United States Attorney’s Office, the Los Angeles County District Attorney’s Office and the California Highway Patrol.
Release No. 13-054
Commercial Marijuana Businesses in City of Santa Ana Targeted with Justice Department Warning Letters and Asset Forfeiture LawsuitsRead the Press Release
LOS ANGELES – In the latest of a series of federal enforcement actions against the commercial marijuana industry in California, federal authorities today moved against 63 illegal marijuana stores in the City of Santa Ana.
In federal court this morning, prosecutors filed three asset forfeiture lawsuits against properties in Santa Ana where a total of seven marijuana stores are currently operating. Authorities also executed federal search warrants at two of the stores involved in the asset forfeiture actions. Additionally, prosecutors sent warning letters to people associated with 56 other stores not involved in the forfeiture actions. The federal actions involve all known marijuana stores in the City of Santa Ana.
The federal actions in Santa Ana were done in cooperation with the Santa Ana Police Department and the Santa Ana City Attorney’s Office.
The three civil asset forfeiture complaints filed this morning in United States District Court target three properties in Santa Ana where seven marijuana stores are currently operating. The civil lawsuits state: “Under federal law, the distribution of marijuana (a Schedule I controlled substance under Title 21) is prohibited except under very limited circumstances not applicable here. The government is informed and believes that at all times relevant to this complaint, the operation of the [marijuana stores] on the defendant property was not (and is not) permitted under California law.”
The forfeiture lawsuits allege that the owners of the properties knowingly allowed commercial marijuana stores to operate. The buildings named in the asset forfeiture lawsuits currently house:
GLC (or the Green Love Collective, currently in a suite that formerly housed a store called Old Remedies) and The Dispensary Store, which are operating in a building at 1638 East 17th Street, a property owned by chiropractor Mark Burcaw, and previously have been the subject of administrative citations issued by the city;
SoCal Compassion, Club Meds and Well Greenz, which are located in a building at 1651 East Edinger, another building owned by Burcaw, and are illegal marijuana operations that prompted Santa Ana to file a civil lawsuit last year seeking injunctive relief against Burcaw and the three marijuana stores; and
J Pacific Life (which is located in a suite that formerly housed marijuana stores called Saddleback Meds and The Natural Alternative) and Healing OC, which operate out 1665 East 4th Street and have been the subject of numerous warnings and administrative citations from the City of Santa Ana.
In conjunction with the filing of the asset forfeiture complaints, the United States Attorney’s Office today mailed out letters to the property owners and operators of 56 marijuana stores that are either currently operating or were recently closed in Santa Ana. The warning letters give the operators and landlords 14 days to come into compliance with federal law or risk potential civil or criminal actions.
The Drug Enforcement Administration executed two federal search warrants this morning with the assistance of the Santa Ana Police Department at J Pacific Life and Healing OC.
Today’s enforcement actions in Santa Ana follow similar actions over the past 18 months across the seven-county Central District of California. Starting in October 2011, prosecutors began filing asset forfeiture lawsuits and sending letters to marijuana operations in selected areas in the Central District of California (see, for example, http://www.justice.gov/usao/cac/Pressroom/2012/129.html).
With the lawsuits filed this morning, the United States Attorney’s Office has filed a total of 30 asset forfeiture complaints against properties housing illegal marijuana operations in the district. Eighteen of those actions have been resolved with the closure of the marijuana stores and consent decrees. In some cases, consent decrees required property owners to disgorge rent payments made by a marijuana store operator, and in all cases the consent decrees required the property owners to agree, among other things, that they would no longer rent to people associated with illegal marijuana operations or the property would be subject to an immediate forfeiture to the government.
Including today’s efforts in Santa Ana, federal enforcement actions – asset forfeiture lawsuits, warning letters and related activity – have now targeted more than 525 illegal marijuana businesses in the Central District of California. The majority of those businesses previously targeted are now closed, are the subject of eviction proceedings by landlords, or have been the subject of additional federal enforcement actions.
In October 2011, the four United States Attorneys in California announced the coordinated enforcement actions targeting illegal marijuana cultivation and trafficking (see: http://www.justice.gov/usao/cac/Pressroom/2011/144a.html).
The United States Attorney’s Office is working in Santa Ana with the Drug Enforcement Administration, IRS - Criminal Investigation, the Santa Ana Police Department and the Santa Ana City Attorney’s Office.
Release No. 13-053
San Fernando Valley Doctor Who Pleaded Guilty in $3 Million Medicare Fraud Case Sentenced to 3½ Years in Federal PrisonRead the Press Release
LOS ANGELES – A medical doctor who owns a cosmetic medicine clinic in the Winnetka district of the San Fernando Valley has been sentenced to 42 months in federal prison for bilking Medicare out of more than $3 million by submitting bills for procedures he never performed.
Pezhman Ebrahimzadeh, who uses the name “Pez Abrahams,” 50, of Calabasas, received the 3½-year sentence yesterday from United States District Judge George H. Wu.
In addition to the prison term, Judge Wu ordered Ebrahimzadeh to pay $3,184,000 in restitution, most of which is to be paid to the Medicare program.
Ebrahimzadeh owns the Winnetka Medical Group, a cosmetic health care clinic that operates under the name Health & Beauty Clinic. At his clinic, Ebrahimzadeh provides cosmetic treatments that involve radiofrequency lasers and liposuction. As some of his patients were Medicare beneficiaries, Ebrahimzadeh obtained their beneficiary information, which was used to bill Medicare for procedures he did not perform.
Ebrahimzadeh also obtained beneficiary information for patients he never met or treated, and he used that information to submit other fraudulent bills to Medicare.
In relation to the bogus bills submitted to Medicare, Ebrahimzadeh typically claimed he had performed three expensive procedures: revascularization, ablation of a bone tumor, or the placement of a radiotherapy catheter in a breast. Ebrahimzadeh made these claims, even though he lacked the equipment needed to perform revascularizations or the placement of radiotherapy catheters.
Ebrahimzadeh’s “conduct was so brazen that he billed Medicare for purportedly performing dozens of procedures on patients who were dead,” prosecutors wrote in a sentencing memorandum to the court. “For one such patient, defendant billed Medicare for seven separate high-paying procedures. [Ebrahimzadeh] also altered medical records in an attempt to conceal his fraudulent conduct. In addition to defrauding Medicare, defendant billed private insurance carriers for similar procedures, some of which he claimed he performed on himself.”
Between September 2008 and April 2012, Ebrahimzadeh submitted $7.5 million in bogus claims, and Medicare paid just over $3 million.
Ebrahimzadeh pleaded guilty in January to one count of health care fraud.
In the sentencing memo, prosecutors noted that Ebrahimzadeh was arrested last month on suspicion of sexually assaulting a patient during a physical examination.
The case against Ebrahimzadeh was investigated by the U.S. Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and the California Department of Justice, Bureau of Medi-Cal Fraud & Elder Abuse.
Release No. 13-052
San Bernardino County Physician’s Assistant Sentenced to 14 Years in Federal Prison for Illegally Distributing OxyContinRead the Press Release
RIVERSIDE, California – A physician’s assistant who operated a mobile health clinic based in Hesperia was sentenced today to 14 years in federal prison for distributing the powerful and widely abused prescription narcotic OxyContin.
Christopher Henry Lister, 51, of Victorville, was sentenced by United States District Judge Virginia A. Phillips. Lister pleaded guilty last November to one count of conspiracy to distribute and attempt to distribute oxycodone, which is the generic drug that is in the brand name OxyContin.
In a plea agreement filed with the court, Lister admitted that he used his powers as a physician’s assistant to supply OxyContin prescriptions to others, including an undercover operative with the Drug Enforcement Administration. Lister sold prescriptions for OxyContin to co-conspirators knowing that they would in turn sell the popular drug to street-level users.
In one exchange captured on videotape during the DEA investigation, Lister told one of his customers to “stockpile” his supply of OxyContin because Lister was considering getting out of the business. Lister advised the co-conspirator that OxyContin prices on the street would likely increase if he stopped writing prescriptions.
Lister “entered into an ongoing scheme to provide oxycodone, a dangerous opiate, to street-level dealers,” federal prosecutors wrote in a sentencing memo filed with the court. “Using his license as a physician’s assistant, he not only provided these dealers with an avenue to obtain the controlled substance, his use of his prescription-writing powers lent an air of legitimacy to the actions that could have frustrated law enforcement attempts to combat the abuse of a drug closely aligned with heroin abuse.”
Prosecutors noted in court that Lister was previously convicted in a case related to another abuse of public trust. In a case filed in 2003 by the United States Attorney’s Office for the Eastern District of California stemming from an investigation into Medi-Cal fraud, Lister was ultimately convicted of making false statements to a government agent. In court documents, prosecutors said that the case related to Lister “illegally billing Medi-Cal for human growth hormone prescriptions written for non-Medi-Cal recipients [and Lister] himself filled those prescriptions and then sold the drug to users in Los Angeles.”
The OxyContin distribution case against Lister was investigated by the Drug Enforcement Administration.
Release No. 13-051
Former Senior Audit Partner at KPMG Charged with Insider TradingRead the Press Release
Former Chief of KPMG’s Audit Practice For The Pacific Southwest Received Cash Bribes For Passing Confidential Information About KPMG Clients That Led To More Than $1 Million In Illegal Profits
LOS ANGELES – A former senior partner from the accounting firm KPMG LLP, who oversaw KPMG’s audit practice for the Pacific Southwest, was charged today for his involvement in an alleged insider trading scheme, announced United States Attorney André Birotte Jr., the United States Attorney for the Central District of California, and Bill L. Lewis, Assistant Director in Charge of the Federal Bureau of Investigation in Los Angeles.
Scott London, 50, of Agoura Hills, is charged in a federal complaint with one count of conspiracy to commit securities fraud through insider trading. The 24 page affidavit filed in support of the federal criminal complaint alleges that London provided confidential information about KPMG clients to Bryan Shaw, a close friend of his, over a period of several years and that Shaw used this information to make highly profitable securities trades that generated more than $1 million dollars in illegal proceeds.
“The public has every right to fully expect a level playing field in our financial markets," said United States Attorney André Birotte Jr. “As alleged in the complaint, Mr. London chose to betray the trust placed in him as a financial auditor and to tip the trading scales for the benefit of insiders like himself.”
“Mr. London’s alleged activity paints a disturbing picture in which confidential information was compromised for personal greed at the expense of the investing public,” said Bill L. Lewis, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The FBI is committed to investigating allegations of insider trading and holding its beneficiaries accountable.”
In a separate action today, the U.S. Securities and Exchange Commission (SEC) announced the filing of civil charges against London and Shaw.
According to the criminal complaint filed today:
London was a senior partner at KPMG who supervised more than 500 accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA, Inc. As a result of his position, London had access to confidential information about KPMG’s clients before that information was disclosed to the public.
From late 2010 and continuing until March 2013, London secretly passed highly sensitive and confidential information to Shaw regarding upcoming earnings announcements by certain KPMG clients, including Herbalife, Skechers, and Deckers Outdoor Corporation, before that financial information was disclosed to the public. On some occasions, London called Shaw two to three days before press releases were issued for KPMG clients and read confidential information from the draft releases to Shaw. London also disclosed to Shaw confidential information about impending mergers concerning KPMG clients before that information was made public. At times, London even discussed with Shaw how to structure Shaw’s purchases of the stock in certain companies in order to protect them from being discovered.
In exchange for passing the confidential information about KPMG’s clients, Shaw gave London tens of thousands of dollars in cash, typically arranging with London to meet him on a side street near Shaw’s business in order to give him bags containing $100 bills wrapped in $10,000 bundles. Shaw also gave London a Rolex Daytona Cosmograph watch worth an estimated $12,000, as well as jewelry and concert tickets, in exchange for the confidential information. Shaw profited more than $1 million from illegal securities trades based on the confidential information given to him by London.
As part of the government’s investigation of London’s insider trading scheme, Shaw agreed to cooperate with federal authorities and recorded conversations with London. In recorded conversations, London told Shaw specific details about upcoming earnings announcements for Herbalife and another KPMG client, Deckers Outdoor Corporation. In one call, London referenced rumors that had been spread about Herbalife going private, and told Shaw that if that took place, “[t]hat is going to be where you make a ton of money.” He suggested to Shaw that if London learned that Herbalife was going to go private, “what we oughta do is, when I know that it’s gonna start happening, what you do is you start just buying in small blocks, right, so it doesn’t draw attention and then, you know, then it doesn’t look unusual at all.”
On two occasions, acting at the direction of the Federal Bureau of Investigation, Shaw met with London and gave him cash as supposed payment for confidential information about KPMG clients. In the first instance, London met with Shaw on a street corner in Encino, California and accepted a bag with $5,000 in cash as payment for confidential information about Herbalife’s earnings announcement in February 2013. London later met with Shaw in a parking lot in Woodland Hills, California and accepted another bag with $5,000 in cash, which was supposedly London’s share of the illegal profits from trades based on confidential information about Decker’s February 2013 earnings announcement. In accepting the money, London told Shaw that they would have more opportunities to make money in the future. A surveillance photograph of London accepting one of these payments from Shaw is attached as an exhibit to the complaint.
London is expected to make his initial court appearance in United States District Court this afternoon at the Roybal Federal Courthouse in downtown Los Angeles.
The federal charge of conspiracy to commit securities fraud through insider trading carries a statutory maximum penalty of 5 years in prison, and a fine of $250,000 or twice the gross gain or loss from the offense.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
The criminal investigation in this case is being conducted by the Federal Bureau of Investigation. United States Attorney Birotte praised the investigative work of the FBI and also thanked the SEC.
Release No. 13-049
San Fernando Valley Man Sentenced to 15 Months in Federal Prison for Trafficking in Counterfeit, Chinese-Made PharmaceuticalsRead the Press Release
LOS ANGELES – A North Hollywood man was sentenced today to 15 months in federal prison in relation to a plot in which he possessed, and had the intent to distribute for profit, more than 2,000 Chinese-made counterfeit pharmaceutical pills.
Edward Alarcon, 44, was sentenced this morning by United States District Judge George H. Wu. In addition to the prison term, Judge Wu ordered Alarcon to pay $1,000 restitution to Eli Lilly and Company, the manufacturer of Cialis, and $1,000 to Purdue Pharma L.P., the manufacturer of OxyContin.
After a three-day jury trial in January, Alarcon was convicted on two counts of trafficking in counterfeit OxyContin and Cialis. The evidence presented at trial showed that Alarcon had purchased the bogus OxyContin from Bo Jiang, a Chinese national and the alleged head of a counterfeit drug ring. Alarcon had offered to sell counterfeit Cialis, Viagra and Levitra on Craigslist.
“The size, shape and color of the pills, as well as the markings on them and their packaging were identical to and substantially indistinguishable from genuine marks in use and registered for the brand-name pills on the principal register of the United States Patent and Trademark Office,” prosecutors wrote in a sentencing memo filed in Alarcon’s case. “The use of these marks was likely to cause confusion, to cause mistake, or to deceive because the pills and their packaging appeared to be the legitimate, brand-name products but were not. Moreover, the chemical composition of the pills was not the same as that of the legitimate products.”
Jiang, whose last known residence was in New Zealand, was taken into custody in January 2011 by New Zealand law enforcement authorities after being named with Alarcon in a federal grand jury indictment. However, Jiang was released on bond and became a fugitive.
On November 10, 2009, federal agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) found approximately 237 counterfeit OxyContin pills and approximately 1,592 counterfeit Cialis pills in Alarcon’s car and house. Investigators also found hundreds of other counterfeit pills, including Viagra and Levitra (at trial, Alarcon was acquitted on charges related to the Viagra and Levitra). Only a month before the federal search, Alarcon had been convicted in state court on counterfeit drug charges for selling bogus Cialis to an undercover Los Angeles Police Department officer.
In a related case, Francis Ortiz Gonzalez, who worked as a “dropshipper” for Jiang in the United States, was sentenced by Judge Wu in January to two years in federal prison and was ordered to pay $324,530 in restitution for trafficking counterfeit pharmaceuticals (see: http://www.justice.gov/usao/cac/Pressroom/2013/012.html).
The cases against Alarcon, Jiang and Ortiz Gonzalez are the result of investigations by HSI; the Food and Drug Administration, Office of Criminal Investigations; and the United States Postal Inspection Service.
Release No. 13-048
Owner of Nine Marijuana Stores in Orange and Los Angeles Counties Pleads Guilty to Drug Trafficking and Tax Evasion ChargesRead the Press Release
SANTA ANA, California – A San Clemente man pleaded guilty this morning to federal drug trafficking and tax offenses in relation to a string of nine illegal marijuana storefronts that generated millions of dollars in income.
John Melvin Walker, also known as “Pops,” 56, of San Clemente, pleaded guilty to one count of conspiring to distribute well over a ton of marijuana and to maintain drug-involved premises. He also pleaded guilty to a tax evasion count in a second case that was filed in February.
The investigation into Walker’s chain of marijuana stores was conducted by the Orange County Sheriff’s Department; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; IRS - Criminal Investigation; the California Board of Equalization; and the Orange County District Attorney’s Office.
Walker was one of 14 people named in an indictment returned by a federal grand jury in October (see: http://www.justice.gov/archive/usao/cac/Pressroom/2012/150.html). The indictment outlines a drug-trafficking conspiracy led by Walker, who owned and operated at least nine marijuana stores in cities across Los Angeles and Orange counties. The nine marijuana stores were Alternative Herbal Health in Long Beach, Safe Harbor Collective in Dana Point, Garden Grove Alternative Care in Garden Grove, Santa Ana Superior Care in Santa Ana, Belmont Shore Natural Care in Long Beach, Santa Fe Compassionate Health Care in Santa Fe Springs, Costa Mesa Patients Association in Costa Mesa, the Whittier Collective in Whittier, and APCC in San Juan Capistrano.
Walker, who has two prior felony drug-trafficking convictions from state court, admitted that he directed the managers of his marijuana stores to shred records as part of his effort to conceal from tax authorities income earned from the sale of marijuana. Accordingly, it was routine for Walker’s managers to destroy sales records.
Walker admitted in the federal tax case that he earned approximately $25 million from marijuana sales over the course of six years. Walker specifically admitted that he earned $11.4 million in 2009, but reported to the Internal Revenue Service income of only $200,180 and that he owed $2,656 in taxes. In fact, as Walker admitted in the plea agreement, he owes the IRS $944,133 in relation to the 2009 tax year alone.
In relation to the tax years 2006 through 2011, Walker agreed to pay the IRS more than $2.4 million, as well as $1.8 million in restitution to the California Board of Equalization. In addition to the $4.2 million he has agreed to pay to federal and state tax authorities, Walker has agreed to forfeit to the government $25 million in illegally obtained income, which includes, among other assets, cash, his $1.7 million home in San Clemente, a string of mobile homes in Mammoth Lakes, rental properties in Long Beach, and his interest in two strip clubs.
The plea agreement provides for an enhancement to Walker’s sentence because he possessed firearms in relation to the drug-trafficking offense. Authorities discovered in one of Walker’s “stash houses” an AK-47-style assault rifle, three other firearms and ammunition. During a search of Walker’s residence, authorities also found nearly $400,000 in cash hidden in a safe, as well as another approximately $145,000 in cash throughout the house.
After Walker pleaded guilty to the drug conspiracy and tax evasion charges, he surrendered and is now in federal custody.
United States District Judge James V. Selna is scheduled to sentence Walker on July 22. At sentencing, Walker faces a maximum possible sentence of life in federal prison and a mandatory minimum sentence of 10 years. In the plea agreement, which contemplates a sentence of more than 20 years, Walker agreed not to argue for a sentence of less than 15 years. The actual prison sentence will be determined by Judge Selna.
The remaining defendants in this case are scheduled to go on trial on September 24.
Release No. 13-047
Orange County Woman Sentenced to Five Years in Federal Prison for Providing Material Support to Terrorists by Sending Money to Pakistan to Be Used in Attacks Against U.S. Forces OverseasRead the Press Release
SANTA ANA, California – A Turkish citizen who resides in Orange County was sentenced this morning to five years in federal prison after admitting she provided material support to terrorists by wiring money to Pakistan to help fund attacks against American military personnel.
Oytun Ayse Mihalik, 40, of La Palma, a lawful permanent resident of the United States, was sentenced by United States District Judge Josephine Staton Tucker. Mihalik pleaded guilty on August 10, 2012, to one count of providing material support to terrorists. When she pleaded guilty, she specifically admitted that she provided money to an individual in Pakistan with the intention that the money would be used to prepare for and carry out attacks against United States military personnel and other persons overseas. Using the alias “Cindy Palmer,” Mihalik sent a total of $2,050 in three wire transfers to the person in Pakistan over the course of three weeks at the end of 2010 and the beginning of 2011.
“International terrorists require a steady pipeline of money to maintain and support their operations,” said United States Attorney André Birotte Jr. “The defendant in this case knowingly and deliberately made wire transfers to fund terrorist operations overseas, where contributions like these could have a significant and devastating impact on American interests.”
Mihalik’s “support for terrorism was knowing and intentional – not the product of undue influence or misguided good intentions and not aberrant conduct,” federal prosecutors wrote in a sentencing memo. “In fact, as [Mihalik] herself told the FBI shortly after her arrest, she believed [the person in Pakistan] was a member of the Taliban and Al Qaeda, and she knew he was using the money for mujahadin operations against American military forces in the Afghanistan/Pakistan region,..."
“The FBI is committed to the prevention of terrorist attacks targeting the United States,” said Bill Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Through the partnerships of the Joint Terrorism Task Force, we will continue to hold accountable those who support terrorist causes by financing operations that target Americans and her interests.”
Mihalik has been in federal custody since she was arrested on August 27, 2011, as she was preparing to board a flight to her native Turkey with a one-way ticket. As part of this case, Mihalik agreed that the United States can take away her immigration status and that she will be removed from the United States to Turkey after serving her prison sentence.
“While the sum of money involved in this case may not seem substantial, there’s no doubt the funds this defendant sent overseas would have covered the cost of an attack on U.S. soldiers,” said Claude Arnold, special agent in charge for HSI Los Angeles. “Money is the mother’s milk of terrorism and we will move aggressively against those who provide financial support to groups and individuals bent on harming the U.S. and its allies.”
The case against Mihalik was investigated by the FBI’s Joint Terrorism Task Force. The JTTF includes special agents with the Federal Bureau of Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, as well as investigators with the Orange County Sheriff’s Department.
Release No. 13-046
SoCal Woman Sentenced to 13 Years in Federal Prison in Medicare Fraud Scheme Involving Durable Medical EquipmentRead the Press Release
LOS ANGELES – A Carson woman has been sentenced to 156 months in federal prison in an $8 million Medicare fraud case in which she illegally paid kickbacks for referrals to patients, whose beneficiary information was used to make bogus claims to the government health care program.
Uben Ogbu Rush, 54, received the 13-year sentence yesterday afternoon from United States District Judge George H. King.
During yesterday’s hearing, Judge King said Rush was motivated by greed and the lengthy sentence was necessary, in part, to send a message of deterrence to others who might commit crimes against Medicare.
Rush owned or controlled six companies that ostensibly sold durable medical equipment, such as motorized wheelchairs and powered pressure-reducing mattresses. The companies were located in Carson, Gardena, Torrance and Paramount.
At a trial in November 2011, federal prosecutors showed a jury how Rush paid marketers to recruit Medicare beneficiaries who would allow their identities and Medicare numbers to be used for the submission of false claims. The evidence also showed how Rush paid kickbacks to marketers, who in turn paid kickbacks to doctors who fraudulently wrote prescriptions, even though the physicians had not examined the patients or an examination revealed that the medical equipment was not medically necessary.
During the course of a scheme that ran from 1999 until 2008, Rush submitted more than $15 million in fraudulent claims to Medicare seeking payment for motorized wheelchairs, hospital beds, air pressure mattresses and other items for patients who did not need the equipment. Medicare paid more than $8.1 on the bogus claims.
A co-defendant in the case, Carlos Alberto Rezabala, 60, of Downey, was sentenced by Judge King in June 2012 to 41 months in federal prison. Rezabala was a recruiter who brought Medicare beneficiaries into the scheme so their information could be used to submit fraudulent bills.
Another co-defendant, Phitsamay Syvoravong, 58, of Orange County, another recruiter who brought Medicare beneficiaries into the scheme, is scheduled to be sentenced by Judge King on May 20.
A related defendant, Dr. Alfred Glover, 57, of Playa Vista, testified at trial that he was paid for writing fraudulent prescriptions for Medicare beneficiaries, many of whom he never saw. Glover is schedule to be sentenced on May 28.
The investigation into Rush and her Medicare fraud scheme was conducted by the Federal Bureau of Investigation.
Release No. 13-045
Federal Grand Jury Indicts Former Fannie Mae Employee for Allegedly Taking Kickbacks from Arizona Real Estate BrokerRead the Press Release
LOS ANGELES – A former sales associate with the Federal National Mortgage Association (Fannie Mae) was named today in a federal grand jury indictment that accuses him of taking kickbacks from a real estate broker in exchange for providing him with foreclosed properties to sell on behalf of the mortgage agency.
Armando Granillo, 44, of Huntington Beach, California was charged today with three counts of “honest services” wire fraud for soliciting kickbacks while working for Fannie Mae.
Granillo was arrested in this case on the morning of March 5, 2013, after he allegedly accepted an $11,200 payment from the real estate broker, who at the time was working with federal authorities. Granillo was freed on a $5,000 bond and is expected to be arraigned next month in United States District Court in Los Angeles.
Granillo, who worked in the Irvine Fannie Mae office as a Real Estate Owned Foreclosure Specialist, reviewed applications submitted by real estate brokers who wanted to list Fannie Mae foreclosure properties. Granillo 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 he began assisting in the investigation.
In subsequent conversations between Granillo and the broker, Granillo demanded 20 percent of the broker’s commissions.
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 then arranged to receive the $11,200 payment from the broker.
Each wire fraud count alleged 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 to be innocent until and unless proven guilty in court.
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. 13-044
Pueblo Bishops Bloods Gang Member Sentenced to 40 Years in Federal Prison for Role in Ambush Killing of Young FatherRead the Press Release
LOS ANGELES - A veteran member of the Pueblo Bishops Bloods street gang was sentenced today to 40 years in federal prison for his role in a racketeering plot that resulted in the death of a young man with no gang affiliation who was executed in front of his 2 year old son.
Anthony Gabourel, also known as "Bandit," 23, of South Los Angeles, was sentenced by United States District Judge S. James Otero for violating the federal Racketeer Influenced and Corrupt Organizations Act (RICO) in relation to the murder of 24 year old Francisco Cornelio.
During the sentencing hearing, Judge Otero stated Gabourel and other Pueblo Bishops executed Cornelio, who was minding his own business" simply because "he was of Mexican descent."
A federal jury determined that Gabourel plotted with other members of the Pueblo Bishops to retaliate against a Latino because members of the rival 38th Street Gang had recently shot and killed a member of the Pueblo Bishops (see: http://www.justice.gov/usao/cac/Pressroom/2012/094.html).
In papers filed in relation to today=s sentencing hearing, prosecutors asserted that Gabourel and another Pueblo Bishops members, armed with shotguns, ambushed the unarmed Cornelio while he was vacuuming his car with his young son. The Pueblo Bishops shot Cornelio once in the back without saying a word. Federal prosecutors argued to Judge Otero that Gabourel was the shooter.
The incident was unsolved prior to a federal racketeering indictment that was unsealed in August 2010. Gabourel was first tried in state court in relation to the Cornelio murder, but a jury acquitted him in August 2011.
Two other men were convicted at trial with Gabourel. Gary White, also known as "Big J Killa" 47, who resided in Los Angeles and Victorville, was sentenced to 14 years in prison. Jermaine Hardiman, also known as "Lil-J Killa," 31, of South Los Angeles, is scheduled to be sentenced by Judge Otero on April 8.
According to evidence presented at trial, the Pueblo Bishops Bloods street gang has been active in and around the Pueblo Del Rio Housing Projects of Los Angeles for decades. This case is the first federal RICO action in this district alleging that a Bloods or Crips street gang was a racketeering enterprise.
As a result of the federal investigation into the Pueblo Bishops Bloods, a total of 45 defendants were charged in federal indictments. Prosecutors have secured convictions of 40 of those defendants. Two defendants are in state custody, and two are fugitives. The forty-fifth defendant, Rondale Young, who is charged with conspiring with Gabourel in the murder of Cornelio, is scheduled to be tried before Judge Otero on November 5, 2013.
One of the 40 defendants convicted in this case B Marquis Edwards, 23, who was known by the moniker "Baby Uzi," and who pleaded guilty in relation to the murder of two people (see: http://www.justice.gov/usao/cac/Pressroom/2012/046.html) - was sentenced in November to 40 years in prison.
The investigation into the Pueblo Bishops Bloods was conducted by the Federal Bureau of Investigation, the Los Angeles Police Department, the United States Department of Housing and Urban Development Office of Inspector General, and the Los Angeles County District Attorney's Office.
Release No. 13-042
North Hollywood Man Who Aimed Laser at Aircraft in Violation of 2012 Federal Law Sentenced to 30 Months in PrisonRead the Press Release
LOS ANGELES – A federal judge who said the prison term should serve as a message to other would-be defendants today sentenced a North Hollywood man to 30 months in federal prison for aiming a laser beam at a plane and a police helicopter.
Adam Gardenhire, 19, was sentenced by United States District Judge Stephen V. Wilson.
In imposing the prison sentence, Judge Wilson rejected Gardenhire’s arguments that aiming a laser at an aircraft in flight was not really very dangerous and determined that, by deliberately targeting the aircraft with his laser, Gardenhire had recklessly endangered the safety of the aircraft.
Gardenhire pleaded guilty in October 2012 to one count of aiming the beam of a laser at aircraft. Gardenhire was arrested in April 2012 after being indicted by a federal grand jury on charges of aiming a laser pointer at a private plane and a helicopter operated by the Pasadena Police Department.
The federal statute used to charge Gardenhire is part of legislation signed into law in 2012 by President Obama making it a federal crime to deliberately aim a laser at an aircraft. The indictment of Gardenhire marked only the second time the new statute had been used in the United States.
According to court documents, Gardenhire deliberately aimed a commercial-grade green laser at multiple aircraft on the evening of March 29, 2012. The laser attack was initially reported by a pilot operating a privately owned Cessna Citation as the pilot was preparing to land at Burbank Airport. The laser struck the pilot in the eye multiple times and caused him to suffer vision impairment that lasted for hours.
Later that evening, Gardenhire aimed his laser at a police helicopter several times. The helicopter was operated by a pilot with the Pasadena Police Department, who was responding to the report of the laser attack on the Cessna. The helicopter pilot was wearing protective gear and did not suffer eye damage or vision impairment as a result of the laser.
Air and ground investigators with the Los Angeles Police Department, the Burbank Police Department, the Pasadena Police Department and the Burbank Airport Police Department identified Gardenhire as a suspect later that evening.
The investigation into Gardenhire was conducted by the Los Angeles Police Department, the Pasadena Police Department, the Burbank Police Department, the Burbank Airport Police Department, the Federal Aviation Administration, and the Federal Bureau of Investigation.
Reports of laser attacks have increased dramatically in recent years as strong laser devices have become more affordable and widely available to the public. Technology has advanced the effectiveness of laser devices and has increased potential safety hazards for pilots operating aircraft, as well as their passengers and crew. Hazards to pilots include distraction and impaired vision, both of which are particularly dangerous during the critical takeoff and landing phases of flight. In some cases, pilots have reported the need to abort landings or relinquish control of the aircraft to another pilot as a result of laser attacks. California consistently leads the nation in reports of laser attacks on aircraft, with more than 500 of the nearly 3,500 nationwide laser attacks reported in 2012.
Release No. 13-043
Authorities Charge Four Individuals and Shut Down Businesses Across SoCal That Allegedly Sold Nitrous Oxide as Recreational DrugRead the Press Release
LOS ANGELES – Law enforcement authorities today arrested three defendants and executed 26 search warrants as part of a federal criminal investigation into the sale of nitrous oxide – an inhalant ostensibly offered for use as a “booster” in sports cars, but in reality being distributed solely for recreational drug use.
Documents related to the investigation allege that nitrous oxide is being sold by stores across Southern California that purport to sell the gas for welding or car racing applications, but in fact are merely distributing a drug used by young people at rave-style parties.
A fourth defendant charged as part of the investigation is currently being sought by authorities.
The investigation into the illegal distribution of nitrous oxide was announced at a press conference this afternoon by United States Attorney André Birotte Jr.; Los Angeles County Sheriff Lee Baca; and Lisa Malinowski, Special Agent in Charge of the United States Food and Drug Administration’s Office of Criminal Investigations.
Nitrous oxide is a dangerous prescription drug that is inhaled by recreational users, typically from balloons that are filled from large, compressed gang cylinders. The drug can cause many significant and debilitating side effects, including, in extreme cases, death. During the past year, several adolescents in the Los Angeles region have been killed in car accidents linked to the use of nitrous oxide, and acts of violence have been associated with the inhalation or sale of the drug, according to court documents. Sales of nitrous oxide as a drug have dramatically increased in Southern California over the past five years, according to the Los Angeles Sheriff’s Department.
Two criminal complaints filed in United States District Court allege that the four defendants – as well as a host of storefronts across Los Angeles and Orange counties, as well as the Inland Empire – engaged in “misbranding” of nitrous oxide because they are distributing nitrous oxide for personal use without a prescription and in containers that do not include proper warning labels.
“Nitrous oxide is a dangerous inhalant when used for recreational purposes, and we want the public, especially parents, to be aware of its abuse by our youth,” said United States Attorney André Birotte Jr. “We also want those who choose to profit from the sale of nitrous oxide as a recreational drug to know that law enforcement is on your trail. We will find you, prosecute you, and convict you.”
A 73-page affidavit filed in support of the criminal complaints outlines a 15-month investigation dubbed “Operation No Laughing Matter,” a reference to “laughing gas,” a commonly used name for nitrous oxide. The prescription drug has legitimate uses, such as an anesthesia, but is used also for recreational purposes to create a temporary, euphoric “rush.” At high and prolonged exposure levels, nitrous oxide is an asphyxiant that can cause death from a lack of oxygen. The illegal use of nitrous oxide can also lead to spasms, convulsions and other health problems.
The illegal distribution of nitrous oxide also negatively impacts the environment. Nitrous oxide is a greenhouse gas with about 300 times the harmful impact of carbon dioxide, the most common and best-known greenhouse gas.
One criminal complaint charges three defendants associated with Victor Welding Supply on East 58th Street in South Los Angeles. Out of those three defendants, two were arrested earlier this afternoon at Victor Welding. Those charges are:
William Victor, 65, of Northridge, who is currently being sought by authorities;Edward Valencia, 51, of Lynwood, who was arrested; and
Federico Valencia, 58, of South Los Angeles, who was arrested.
The third defendant arrested today – Rose Marie Cuellar, 20, of Florence-Graham – is an employee of LA Rush, Inc., which operates stores in Norwalk and Huntington Park.
“The collaboration with the FDA and U.S. Attorney’s Office to crack down on these illegal nitrous oxide businesses enables us to prevent harm to youth that are using these drugs recreationally at illegal parties,” said Sheriff Lee Baca. “Through our Electronic Communication Unit, which observes open source social media sites at Sheriff’s Headquarters Bureau, we have been able to locate more than 350 illegal parties that were openly advertised on social media. The businesses that were targeted today sell a dangerous product that perpetrates violent assaults, sexual assaults, juvenile fatalities and overdoses.”
The three defendants arrested today are expected to remain in custody until they make their initial court appearances in United States District Court in downtown Los Angeles on Monday. Authorities will attempt to take Victor into custody.
In addition to the four arrests, authorities today executed federal search warrants at 17 businesses and on nine delivery vehicles.
“Today’s large-scale enforcement operation demonstrates the commitment of the FDA’s Office of Criminal Investigations to protect the health and safety of the public from the harms inherent in being exposed to unsafe and potentially life-threatening misbranded drugs,” said Lisa Malinowski, Special Agent in Charge of the Los Angeles Field Office of the FDA’s Office of Criminal Investigations. “OCI will continue to aggressively pursue those involved in the sale of misbranded drugs and will strive to ensure that they are prosecuted to the full extent of the law.”
The federal charge of misbranding a drug is a misdemeanor violation of the federal Food, Drug, and Cosmetic Act that carries a statutory maximum penalty of one year in prison and up to a $100,000 fine.
Operation No Laughing Matter is part of an ongoing investigation being conducted by the United States Food and Drug Administration’s Office of Criminal Investigations and the Los Angeles County Sheriff’s Department.
Release No. 13-041
Former Hedge Fund Manager Recently Arrested in Italy After Being on Run for Five Years Named in Grand Jury Indictment That Alleges Market Manipulation Scam That Caused $200 Million in LossesRead the Press Release
LOS ANGELES – A German national who managed a series of hedge funds based in the Cayman Islands has been indicted on federal fraud charges alleging that he oversaw a stock manipulation scheme designed to “pump up” the reported returns of his hedge funds, while self-dealing for his own benefit to the detriment of the funds, in a fraud that caused investors to loss approximately $200 million.
Florian Wilhelm Jürgen Homm, 53, was named in a 10-count indictment that was returned late Tuesday afternoon by a federal grand jury in Los Angeles.
The indictment specifically charges Homm with one count of conspiracy to commit securities fraud, eight counts of securities fraud and one count of wire fraud. The indictment also contains a forfeiture allegation that would cause Homm, if he is convicted of any of the 10 counts in the indictment, to forfeit to the United States “any and all property, real and personal, which constitutes or is derived from proceeds traceable to” any crime to which he is found guilty.
Homm is currently in custody in Italy after being arrested on March 8 at the Uffizi Gallery in Florence. Homm was arrested pursuant to the United States’ request for his provisional arrest pending extradition, based on a criminal complaint relating to the alleged fraud that had been filed by federal prosecutors in Los Angeles. The indictment filed yesterday in Los Angeles replaces the criminal complaint as the charging document.
Homm was the founder and chief investment officer of Absolute Capital Management Holdings Limited, a Cayman Islands-based investment advisor that managed eight hedge funds from 2004 until September 2007. As part of the alleged scheme, Homm bragged to investors that Absolute Capital was named overall winner for 2006 of the European Hedge Fund Group, by the publication Hedge Fund Review.Court documents filed in United States District Court in Los Angeles – specifically, the indictment and the affidavit in support of the criminal complaint – allege that Homm directed the hedge funds to buy billions of shares of thinly traded, United States-based “penny stocks.” Homm caused most of the purchases of penny stocks to be made through Hunter World Markets, Inc., a broker-dealer in Los Angeles that Homm co-owned. Homm, who at the time of the alleged scheme resided in Palma de Majorca, Spain, also allegedly obtained shares of the penny stock companies through various businesses he controlled.
After the hedge funds invested hundreds of millions of dollars in the illiquid penny stocks, Homm’s co-conspirators used a secret instant messaging system to avoid the scrutiny of regulators and caused the hedge funds to trade the stocks among themselves in “cross-trades” made through the Los Angeles-based broker dealer. The cross-trades served to increase the trading prices of the previously illiquid stocks and, in turn, to boost the net asset values and apparent performance of the hedge funds, in a practice called “portfolio pumping.” This apparent performance improvement at the hedge funds generated additional fees for Homm and Absolute Capital. It also boosted Absolute Capital’s stock price on the London Stock Exchange, Alternative Investment Market, from which Homm profited by selling shares. As part of the stock manipulation scheme, Homm and others also allegedly sold their own shares of the penny stocks to the hedge funds managed by Homm.
The indictment alleges that Homm and several co-conspirators who have not been indicted at this time “fraudulently manipulated these stocks to inflate and/or artificially prop up their prices to exaggerate the purported profitability of the hedge funds holding them.
“This enabled the co-conspirators to sell their own shares of the penny stocks at the inflated prices to the hedge funds. The stock price inflation also served to fraudulently overstate the performance of the hedge funds which, in turn, generated substantial performance fees and other compensation for defendant Homm and his co-conspirators,” according to the indictment.
Folllowing allegations made by a “whistleblower” in 2006, Homm dumped tens of millions of dollars worth of his own shares in Absolute Capital and resigned from the firm in the middle of the night on September 18, 2007. The scheme allegedly netted Homm and his co-schemers more than $53 million via trades made through Hunter World Markets alone.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
Each charge of conspiracy to commit securities fraud and securities fraud carry a statutory maximum penalty of 25 years in federal prison. The wire fraud count carries a maximum penalty of 20 years in prison.
The case against Homm is the product of an ongoing investigation by the Federal Bureau of Investigation. Agents in the FBI’s Los Angeles Field Office worked with the FBI’s Legal Attaché Office in Rome and its sub-office in Milan, where agents worked collaboratively with Italian authorities, to secure the apprehension of Homm. The U.S. Department of Justice Attaché in Rome provided substantial assistance.
The Securities and Exchange Commission provided assistance to the FBI’s investigation.Two years ago, the United States Securities and Exchange Commission filed a civil lawsuit in Los Angeles federal court against Homm and four other defendants, alleging a microcap stock manipulation scheme as part of “portfolio pumping” plot to increase the value of Absolute Capital (see: http://www.sec.gov/litigation/litreleases/2011/lr21865.htm).
Homm recently published a book that was translated into English under the title, Rogue Financier: The Adventures of an Estranged Capitalist.
Release No. 13-039
10 Linked to Network of Marijuana Grow Houses Across Three Southland Counties Arrested on Federal Drug Trafficking ChargesRead the Press Release
RIVERSIDE, California – Federal and state authorities this morning arrested 10 defendants charged in a federal criminal complaint that accuses them of participating in a wide-ranging drug conspiracy that operating marijuana grow houses across Los Angeles, Riverside and San Bernardino counties.
As part of the investigation led by the Drug Enforcement Administration, authorities this morning arrested 10 out of 11 people named in the complaint and executed search warrants at 26 locations – which includes 15 grow houses – stretching from Arcadia to Corona to Fontana. One defendant remains a fugitive who is being sought by authorities. During this morning’s operation, authorities seized more than $250,000 in cash, seven guns (including an assault rifle) and more than 8,000 marijuana plants.
A 124-page affidavit in support of the criminal complaint outlines an investigation into a narcotics trafficking ring allegedly led by Arcadia resident Raymond Lam. The drug trafficking organization purchased or leased single-family residences, which were converted to indoor farms with the sole purpose of growing marijuana. Each house contained industrial-size marijuana growing operations that contained, on average, 1,000 to 2,000 marijuana plants.
The marijuana grow houses exhibited identical arrangements that included specific types of hydroponic growing equipment and stolen electricity obtained through sophisticated bypasses of utility meters. After the marijuana was harvested, it was sold throughout California and across the United States. Previously during the two-year investigation, authorities shut down 15 grow houses and seized nearly 15,000 marijuana plants, nearly 1,000 pounds of harvested marijuana and four firearms.
The 11 defendants named in the criminal complaint filed in United States District Court in Riverside are charged with conspiracy to manufacture, to distribute, and to possess with intent to distribute marijuana. The 10 defendants arrested this morning are:
Raymond A. Lam, who also used the name “Nam A. Lam,” 42, of Arcadia, accused of being the overall leader of the drug trafficking organization and overseeing the acquisition of residences that were converted into full-scale, industrial-type marijuana grows;Simon Lam, 32, of Arcadia, a top lieutenant to Raymond Lam;
Ken Ho, also known as “Ken Lam,” 33, of Arcadia, a top lieutenant to Raymond Lam;
San S. Voong, also known as “Chen Sheng Wang,” 35, of Arcadia, another top lieutenant to Raymond Lam;
Phieu Tran, 35, of El Monte;
Augustine Bazan Camacho, 41, of Pomona, allegedly a veteran “plant tender” who was responsible for maintaining many of the grow houses;
Thanh Van Phu, 33, of El Monte;
Luc Kai Phoung, who is also known as “Wong Fong,” “Al Fong “ and “Na Na,” 50, of Rosemead, who allegedly built the electrical and utility meter by-pass systems used at the grow houses;
Steven Huytu Lam, 52, of Walnut; and
Li Ya Si, 42, of Temple City.
These 10 defendants are expected to make their initial court appearances this afternoon in federal court in Riverside.
The final defendant named in the criminal complaint – Andy Tran, who used several aliases, including “Long Kim Tank,” 39, of Monterey Park, and allegedly was a top lieutenant to Raymond Lam – is a fugitive currently being sought by authorities.
The criminal complaint outlines several seizures made during the investigation. For example, special agents with the DEA and officers with the Riverside County Sheriff’s Department executed a search warrant on Cedar Creek Road in Eastvale on February 10, 2012, when they discovered a residence that had been completely converted into a sophisticated marijuana grow house. Inside the residence, investigators found Camacho hiding under a hydroponic bin on the second floor of the residence. During the search, they seized more than 1,800 marijuana plants and more than 50 pounds of processed marijuana. There was a sophisticated electrical bypass system that was used to divert from the meter the electricity used to power the ballasts and lights to grow the marijuana plants.
In another search in Eastvale, this one on a residence on Bluebell Street in November 2012, authorities discovered that the entire residence had been converted into industrial-sized marijuana grow with 857 marijuana plants. Approximately 43 pounds of marijuana were found inside the residence.
Two months ago, during a search of a residence on Village Meadow in Riverside, authorities discovered another industrial-sized marijuana grow that had 576 marijuana plants.
During this morning’s takedown, search warrants were executed at locations in Eastvale, Corona, Fontana, Riverside, Rancho Cucamonga, Chino, Diamond Bar, El Monte, Arcadia, Los Angeles (90015), Monterey Park, Walnut and Temple City.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The narcotics conspiracy charge in the indictment carries a statutory maximum penalty of life – and a mandatory minimum sentence of 10 years – in federal prison.
The investigation into drug trafficking organization allegedly run by Raymond Lam was conducted by the Drug Enforcement Administration, the Riverside County Sheriff’s Department and the San Bernardino County Sheriff’s Department.
The following agencies provided substantial assistance during this morning’s takedown: the Riverside Police Department; the El Monte Police Department; the Fontana Police Department; the Chino Police Department; IRS - Criminal Investigation; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Los Angeles County Sheriff’s Department; the United States Marshals Service; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Federal Bureau of Investigation; the Los Angeles Police Department; and the Arcadia Police Department.
Release No. 13-040
Child Molester Sentenced to 25 Years in Federal Prison for Documenting Sexual Abuse and Sending Photos to Other PedophilesRead the Press Release
RIVERSIDE, California – An Inland Empire man who molested at least three children, photographed the abuse and traded those images over the Internet with other pedophiles was sentenced this morning to 25 years in federal prison.
Peter Ruiz, 33, of San Bernardino, who was described by prosecutors in court papers as a “ruthless predator,” was sentenced by United States District Judge Virginia A. Phillips.
In 2009 and 2010, Ruiz repeatedly molested a boy who lived in an apartment near where Ruiz resided with his family. Ruiz documented the abuse with photographs and videos, which he distributed to pedophiles, sometimes in exchange for money. When authorities searched Ruiz’s computer on Halloween in 2010, they discovered more than 6,000 images and over 600 videos of child pornography, which included images of Ruiz molesting the then-12-year-old victim.
Ruiz pleaded guilty on October 23, 2012, to one count of production of child pornography.
In addition to the molestation of his neighbor, Ruiz also sexually abused two other boys, who were 9 and 10 when they were attacked. Ruiz groomed all of his victims with small gifts and access to video games, according to prosecutors.
“Ruiz sexually abused at least three children, nearly destroying them and their families in the process,” federal prosecutors wrote in a document filed in relation to today’s sentencing hearing.
Prosecutors wrote in their sentencing memo that Ruiz “appears to show no remorse for his crimes.” Ruiz maintains a “brazen and nonchalant attitude toward his abuse of children...bragg[ing] about these sexual exploits to a fellow inmate.” Ruiz developed a pattern of “grooming his victim[s], professing his love for them, and eventually intimidating them into keeping silent,” prosecutors wrote.
The case against Ruiz is the result of an investigation by the Federal Bureau of Investigation.
Release No. 13-038
Manufacturer of Counterfeit Designer Handbags Sentenced to One Year in Federal Prison for Trafficking the Bogus ProductsRead the Press Release
LOS ANGELES – A Los Angeles woman was sentenced today to one year and one day in federal prison for trafficking in counterfeit handbags and wallets, including accessories bearing counterfeit marks belonging to Chanel, Gucci, Dolce & Gabbana, Fendi, Prada, and Versace.
Yeon Soon Lee, also known as Susie Lee, 55, who resides in the Koreatown District of Los Angeles, was sentenced today by United States District Judge George H. King.
Lee operated Anna Collection, a wholesale accessory distributor in the Fashion District in downtown Los Angeles. Lee attached emblems with counterfeit trademarks to generic bags and shipped them to retailers across the United States. After authorities executed a search warrant at Anna Collection in 2009 and seized more than 1,000 handbags and counterfeit emblems, Lee resumed operating her business in 2011. A second search in 2011 resulted in the seizure of additional goods and emblems.
During today’s sentencing hearing, Judge King said Lee had committed a “large-scale,” “serious offense.” Lee was a “clear recidivist,” who had shown “repeated disrespect for the law” by continuing to traffic in counterfeit goods after previously being convicted in state court (that conviction has been expunged) and being the subject of two search warrants, the judge said.
“The public has to know that these are not merely victimless crimes,” Judge King emphasized.
The case against Lee is the product of an investigation by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Customs and Border Protection, and the Los Angeles County Sheriff's Department.
Release No. 13-037
Former Fund Manager Sentenced to 10 Years in Federal Prison in Investment Fraud Scheme That Cost Victims More Than $24 MillionRead the Press Release
LOS ANGELES – A former investment fund manager and radio personality who admitted bilking investors out of millions of dollars by falsely promising to purchase corporate bonds backed by the Troubled Asset Relief Program (TARP) was sentenced this afternoon to 120 months in federal prison.
John Farahi, 56, of Bel Air Estates, who operated the Beverly Hills-based New Point Financial Services, Inc. and had a regular radio show on KIRN-AM, was sentenced by United States District Judge Phillip S. Gutierrez. In addition to the 10-year prison term, Judge Gutierrez ordered Farahi to pay $24,366,617 in restitution to 59 victims.
Farahi pleaded guilty last June to four felony counts – mail fraud, loan fraud, selling unregistered securities and conspiracy to obstruct justice while collaborating with his corporate counsel to cover-up the fraud. In a plea agreement filed in United States District Court, Farahi acknowledged that the scheme caused losses of more than $7 million, but prosecutors successfully demonstrated that the actual losses were well over $24 million.
When he pleaded guilty, Farahi admitted that he engaged in a long-running scheme that defrauded victims by using their funds for a range of unauthorized purposes, including paying off prior investors and subsidizing options futures trading. Farahi also admitted that he drew down on personal lines of credit based upon false statements to federally insured banks, including Bank of America, Sun West Bank and U.S. Bank. Farahi also acknowledged that he violated federal securities laws by selling unregistered securities and failing to comply with the SEC’s rules and regulations for selling unregistered securities. Farahi further admitted that he conspired with his attorney to obstruct an SEC investigation by, among other things, altering documents that were turned over to the SEC and providing false and misleading testimony under oath to the SEC on three separate occasions.
Attorney David Tamman, 46, of Santa Monica, was found guilty following trial last year of 10 counts, including obstruction of justice, altering records in a federal investigation, and being an accessory after the fact to Farahi’s crimes. The evidence presented at the trial showed that Tamman conspired with Farahi to obstruct the SEC investigation into Farahi’s fraud scheme. Tamman, who was suspended from practicing law earlier this year by the California State Bar, served as outside counsel for Farahi’s investment company and was a partner at Nixon Peabody. Tamman is scheduled to be sentenced by Judge Gutierrez on May 20.
The case against Farahi and Tamman is the result of an investigation by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Bureau of Investigation. The SEC provided substantial assistance during the investigation.
The SEC filed a federal civil complaint alleging violations of the federal securities laws against Farahi and others in January 2010. The lawsuit alleged that Farahi and others conducted an unregistered offering fraud aimed at Iranian-Americans in the Los Angeles area (see: http://www.sec.gov/news/press/2010/2010-3.htm). The SEC subsequently obtained a permanent injunction, as well as orders freezing Farahi’s and New Point’s assets and appointing a receiver over New Point Financial Services.
Release No. 13-036
Downey Man Who Participated in Tax Fraud and Identity Theft Scheme Sentenced to 54 Months in Federal PrisonRead the Press Release
LOS ANGELES – A Downey man who cashed tax refund checks that were issued based on false tax returns and fraudulently obtained more than $1.3 million was sentenced today to 54 months in federal prison.
William Gomez-Corzo, 52, who also used the name “William Perez,” was sentenced this afternoon by United States District Judge Christina A. Snyder, who ordered the defendant to pay $1,320,566 in restitution to the IRS.
Gomez-Corzo pleaded guilty to one count of theft of public money for his role in a scheme that defrauded the IRS of millions of dollars by filing false income tax returns. As part of the scheme, Gomez-Corzo and his associates used the names and social security numbers of residents of Puerto Rico to file more than 1,000 false federal income tax returns seeking tax refunds based on the earned income credit. Gomez-Corzo and his co-conspirators used false out-of-state drivers licenses to open private mail boxes to receive the tax refund checks.
Gomez-Corzo also pleaded guilty to one count of aggravated identity theft for using an identity stolen from a dead man to obtain a United States passport. The 54-month sentence included a mandatory two-year term for the identity theft charge.
The investigation of Ortega was conducted by IRS - Criminal Investigation, the United States Secret Service and the United States Postal Inspection Service.
Release No. 13-035
Orange County Couple Sentenced to Prison in Federal Fraud Case for Bilking Seven Banks Out of Nearly $5 MillionRead the Press Release
SANTA ANA, California – A husband and wife from Newport Coast have been sentenced to federal prison for defrauding a consortium of seven banks, including Bank of America, in connection with a $130 million line of credit.
Thomas Chia Fu, 64, was sentenced yesterday to 21 months in federal prison.
Fu’s wife, Cheri L. Shyu (also known as Cheri Fu), 61, was sentenced on March 4 to three years in federal prison.
In addition to the prison terms, United States District Judge Cormac J. Carney ordered to Fus to pay $4.7 million in restitution.
The Fus owned Anaheim-based Galleria USA, Inc., which imported home decor items manufactured in China. The Fus obtained a $130 million revolving line of credit for Galleria from a consortium of seven banks. In connection with that revolving line of credit, the couple overstated by tens of millions of dollars the accounts receivables of the company – lies they told the banks in order to continue borrowing funds under the revolving line of credit, according to court documents. When they pleaded guilty last year, the Fus also admitted to falsifying in Galleria’s computer system the accounts receivable amounts by a factor of 10 or more times the actual amount purchased to support the exaggerated numbers and hide Galleria’s true financial status.
“Bank fraud is not a victimless crime as it has detrimental effects on both creditors and consumers,” said United States Attorney André Birotte Jr. “The Fus plundered a consortium of banks, which deprived legitimate customers from having access to the those funds and caused the financial institutions to suffer millions of dollars in losses. The prison sentences issued to this couple demonstrate our resolve to hold fraudsters accountable for their crimes.”
The banks suffered losses of $4.7 million on the revolving line of credit from October 2008 to July 2009.
This case was investigated by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Federal Bureau of Investigation, and the United States Secret Service.
“At a time when taxpayers were bailing out Bank of America and United Commercial Bank with TARP funds, Thomas and Cheri Fu defrauded those banks and others out of nearly $5 million,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “The Fus fraudulently obtained funds from the TARP banks and other banks using a second set of books that overstated accounts receivable. They lived comfortably off the money, buying property and putting their daughter through college, when many taxpayers who funded the bailout were tightening their belts. Illegally profiting from the TARP bailout is reprehensible and will be met with swift justice by SIGTARP and our law enforcement partners.”
SIGTARP investigates fraud, waste, and abuse in connection with the Troubled Asset Relief Program (TARP). To report suspected illicit activity involving TARP, call the SIGTARP Hotline at 1-877-SIG-2009 (1-877-744-2009).
Release No. 13-034
Fugitive Hedge Fund Manager Arrested in Italy in U.S. Case Alleging Market Manipulation Scam That Led to at Least $200 Million in LossesRead the Press Release
LOS ANGELES – Florian Wilhelm Jürgen Homm, a German hedge fund manager who was on the run for more than five years, has been arrested in Italy on federal fraud charges that accuse him of orchestrating a market manipulation scheme designed to artificially improve the performance of his funds, a fraud that led to at least $200 million in losses to investors around the world.
Homm, 53, was arrested at the Uffizi Gallery in Florence, Italy at approximately 12:30 p.m. on Friday (local time). Federal prosecutors in Los Angeles obtained an arrest warrant on Wednesday, March 6, after filing a criminal complaint that charges Homm with four felony charges: conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud and securities fraud. Homm was arrested by Italian authorities after the United States submitted a request for a provisional arrest with officials in Rome.
Homm was the founder and chief investment officer of Absolute Capital Management Holdings Limited, a Cayman Islands-based investment advisor that managed nine hedge funds from 2004 until September 2007. The criminal complaint filed in United States District Court in Los Angeles alleges that Homm directed the hedge funds to buy billions of shares of thinly traded, United States-based “penny stocks.” Homm caused many of the purchases of penny stocks to be made through Hunter World Markets, Inc., a broker-dealer in Los Angeles that Homm co-owned. Homm also allegedly obtained shares of the penny stock companies through various businesses he controlled.
After the hedge funds invested hundreds of millions of dollars in the illiquid penny stocks, Homm caused the hedge funds to trade the stocks among themselves in “cross-trades” made through the Los Angeles-based broker dealer. As part of the stock manipulation scheme, Homm and others allegedly sold their own shares of the penny stocks to the hedge funds managed by Homm. The cross-trades served to increase the trading prices of the previously illiquid stocks and, in turn, to boost the net asset values and apparent performance of the hedge funds. This apparent performance improvement at the hedge funds generated additional fees for Homm and Absolute Capital, as well as boosting Absolute Capital’s stock price on the London Stock Exchange, Alternative Investment Market.
Folllowing allegations made by a “whistleblower” in 2006, Homm also dumped tens of millions of dollars worth of his own shares in Absolute Capital prior to resigning from the firm in the middle of the night on September 18, 2007. The allegedly fraudulent conduct caused at least $200 million in losses to investors in the hedge funds. The scheme allegedly netted Homm and his co-schemers more than $53 million via trades made through Hunter World Markets alone.
A complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The wire fraud conspiracy charge carries a statutory maximum penalty of five years in federal prison. The wire fraud count carries a maximum penalty of 20 years in prison. The two charges related to securities fraud each carry a maximum penalty of 25 years in prison.
The case against Homm is the product of an ongoing investigation by the Federal Bureau of Investigation. Agents in the FBI’s Los Angeles Field Office worked with the FBI’s Legal Attaché Office in Rome and its sub-office in Milan, where agents worked collaboratively with Italian authorities, to secure the apprehension of Homm. The U.S. Department of Justice Attaché in Rome provided substantial assistance.
The Securities and Exchange Commission provided assistance to the FBI’s investigation.Two years ago, the United States Securities and Exchange Commission filed a civil lawsuit in Los Angeles federal court against Homm and four other defendants, alleging a microcap stock manipulation scheme as part of “portfolio pumping” plot to increase the value of Absolute Capital (see: http://www.sec.gov/litigation/litreleases/2011/lr21865.htm).
Homm recently published a book that was translated into English under the title, Rogue Financier: The Adventures of an Estranged Capitalist.
Release No. 13-033a
Orange County Doctor Convicted of Six Counts of Health Care Fraud in Multi-Million Dollar Scam Involving Durable Medical EquipmentRead the Press Release
LOS ANGELES – A federal jury has convicted a Buena Park doctor for participating in a health care fraud scheme involving unnecessary procedures and prescriptions that led to Medicare paying out nearly $3 million on fraudulent claims for durable medical equipment and nutritional supplies.
Following a five-day trial, Dr. Augustus Ohemeng, 62, was found guilty yesterday afternoon of six counts health care fraud.
While serving as medical director at Pacific Clinic in Long Beach, Ohemeng and others recruited Medicare patients and billed the national healthcare program for office visits that typically included unnecessary tests and procedures. The evidence presented at trial showed that Ohemeng also generated fraudulent prescriptions for medical equipment, power wheel chairs and enteral nutritional supplies, prescriptions that were sold to medical supply companies that used the fraudulent documents to bill Medicare for millions of dollars of unnecessary and undelivered medical supplies. “Nearly all, if not all, of the wheelchair prescriptions Ohemeng and [George Tarryk, another doctor who worked at Pacific Clinic] signed were written for people who could walk,” according to court documents.
Over the course of four years, Ohemeng signed hundreds of these fraudulent prescriptions, many of which were blank so his office manager could fill in the details.
As a result of the fraudulent conduct involving Ohemeng and his co-conspirators, which took place from February 2005 through September 2009, $5.6 million in fraudulent claims were submitted to Medicare, which paid approximately $2.97 million.
As a result of yesterday’s guilty verdicts, Ohemeng faces a maximum statutory sentence of 60 years in federal prison when he is sentenced on June 17 by United States District Judge Christina A. Snyder.
Ohemeng was among 10 defendants – including two doctors and a nurse – who were charged as a result of an investigation into Pacific Clinic, Ivy Medical Supply in Anaheim and Santos Medical Supply in South Los Angeles. All 10 defendants, including the owner of Ivy Medical Supply, have now been convicted, either as the result of guilty pleas or jury verdicts.
The investigation in this case was conducted by the Federal Bureau of Investigations and the Office of Inspector General for the U.S. Department of Health and Human Services.
Release No. 13-033
Brothers Who Led Mexican Mafia-Backed Puente-13 Street Gang Sentenced to Life in Prison as Result of Federal Racketeering CaseRead the Press Release
LOS ANGELES – A member of the Mexican Mafia prison gang and longtime leader of the Puente-13 criminal street gang was sentenced today to life in federal prison after being convicted last year on federal racketeering charges that included a brutal stabbing designed to deter victims from cooperating with law enforcement and plotting to murder members of a rival gang.
The Mexican Mafia carnal, Rafael “Cisco” Munoz-Gonzalez, 42, of La Puente, who long controlled Puente-13 as part of his Mexican Mafia membership, was sentenced this morning by United States District Judge A. Howard Matz.
The brother of the Mexican Mafia member, Cesar “Blanco” Munoz-Gonzalez, 38, of Rowland Heights, was sentenced late yesterday afternoon to life in prison by Judge Matz.
There is no parole in the federal prison system.
The Gonzalez brothers were convicted in December by a federal jury that found them guilty of violating the Racketeer Influenced Corrupt Organizations (RICO) Act, as well as committing violent crimes in aid of racketeering, engaging in a conspiracy to distribute methamphetamine, illegally possessing firearms and other offenses. The evidence presented at the trial proved, among other criminal offenses, that Rafael Munoz-Gonzalez ordered an attack on a witness who was cooperating with federal investigators in this case – a man who was attacked at the federal jail in downtown Los Angeles, where he was stabbed 22 times and beat over the head, suffering a punctured lung and fractured skull.
The evidence introduced at trial last year showed that members of Puente-13 were involved in the manufacture and distribution of a substantial amount of narcotics, particularly methamphetamine, and that leaders of the gang extorted drug dealers by collecting “taxes,” the payment of which allows drug dealers to operate in gang-controlled territory. Among other things, the testimony during the six-week trial showed that, while Rafael Munoz-Gonzalez was in custody until 2007, his brother Cesar trafficked large amounts of methamphetamine with other gang members, spoke on his brother’s behalf at gang meetings, directed other members of Puente-13 to collect “tax” payments from area drug dealers on Rafael’s behalf, and warded off rival drug traffickers by announcing that certain Puente-13 drug stash houses were untouchable because they were “protected by Cisco.” The evidence also showed that the Gonzalez brothers’ racketeering activities brought them substantial amounts of cash, custom boats and luxury cars.
In early 2008, Puente-13 gang members and associates were arrested as part of a federal investigation into the drug trafficking activities of the gang (see:
http://www.justice.gov/archive/usao/cac/Pressroom/pr2008/026.html). The racketeering indictment that led to the life prison sentences for the Gonzalez brothers was filed on June 2, 2010 (see: http://www.justice.gov/archive/usao/cac/Pressroom/pr2010/091.html).Two other leaders of Puente-13 were also convicted of all charges against them at last year’s trial, and they were recently sentenced by Judge Matz.
Abraham “Listo” Aldana, 30, of West Covina, was sentenced on Monday to 27 years in federal prison. After Aldana was released from Pelican Bay State Prison in 2008, he became one of Rafael Munoz-Gonzalez’s most aggressive lieutenants, collecting tax payments and helping facilitate the conspiracy to murder and assault rival gang members.
On February 26, Michael “Mikey” Torres, 43, of La Puente, who was a key player in the gang’s narcotics trafficking, was sentenced to 25 years in federal prison for racketeering, drug, and firearm offenses.
From at least 2000, all four defendants were personally involved in the manufacturing and distribution of large quantities of methamphetamine, and they used violence to monopolize the drug trade in La Puente and extract taxes from gang members and non-gang members who also sold methamphetamine in the area.
Puente-13 is a street gang that was formed in the City of La Puente approximately 60 years ago under the name “Bridgetown Gentlemen.” The gang has since grown to include more than a dozen “cliques” or subgroups, all of which which are loyal to the Mexican Mafia. Puente-13 claims as its “turf” a large portion of La Puente, as well as unincorporated parts of the San Gabriel Valley and portions of nearby cities, such as Hacienda Heights, Walnut and West Covina.
Since 2008, as a result of the federal investigations into Puente-13, grand juries have issued four indictments, which resulted in the conviction of approximately 60 members and associates of the gang. The investigations have resulted in the seizure of approximately 77 firearms, 12 pounds of methamphetamine and $1.1 million in cash and other assets.
The RICO case against Puente-13 was the result of an investigation conducted by the Drug Enforcement Administration and the Los Angeles Sheriff’s Department.
Release No. 13-032
Two San Gabriel Valley Men Charged with Participating in ‘Black Market Peso Exchange’ Scheme Used to Move Money Out of U.S.Read the Press Release
LOS ANGELES – Two men and the import-export company they allegedly used to move millions of dollars linked to illegal activity from the United States to Mexico are scheduled to be arraigned this afternoon after being indicted on federal charges of operating an unlicensed money transmitting business and structuring cash transactions.
According to an indictment returned by a federal grand jury on February 13, the three defendants received large sums of cash and worked with “peso brokers” in Mexico to illegally convert the dollars to pesos.
The three defendants named in the 93-count indictment are:
Peace & Rich Import, Inc., a wholesale distributor of silk flowers and other goods, located on Weaver Avenue in South El Monte;Chaur Hwan “Kenny” Lin, 66, of San Marino, the president and co-owner of Peace & Rich; and
Antonio Pareja, 53, of San Gabriel, the manager of Peace & Rich.
All three defendants are scheduled to be arraigned this afternoon at 2:00 p.m. in United States District Court in downtown Los Angeles.
Lin and Pareja ran Peace & Rich as “an informal money transfer system” that, according to the indictment, “was involved in facilitating the transfer of money domestically outside of the conventional financial institutions system.”
An investigation by the Drug Enforcement Administration in Los Angeles determined that Lin and Pareja used Peace & Rich to receive large amounts of cash derived from illegal activity. The cash – tens of thousands of dollars, sometimes hundreds of thousands of dollars, according to the indictment – was typically delivered by couriers working in conjunction a peso broker in Mexico.
In a Black Market Peso Exchange scheme, a peso broker works with an individual engaged in illegal activity, such as a drug trafficker, who has United States currency in the United States that he needs to bring to Mexico and convert to pesos, according to the indictment. The peso broker finds business owners in Mexico who buy goods from vendors in the United States, such as Peace & Rich, and need dollars to pay for those goods. The peso broker arranges for the illegally obtained dollars in the United States to be delivered to the United States-based vendors, such as Peace & Rich, where they are used to pay for the goods purchased by the Mexico-based customers. Once the goods are shipped to Mexico and sold by the Mexico-based business owner for pesos, the pesos are turned over to the peso broker, who then pays the drug trafficker in Mexico.
The indictment alleges that Peace & Rich took in large amounts of cash and conducted transactions without being registered as a money transmitting business and without filing Currency Transaction Reports (CTRs), which are required when a business accepts cash payments of more than $10,000. Lin and Pareja allegedly disbursed cash as directed by a peso broker in Mexico to couriers for delivery to other United States-based businesses on behalf of their Mexico-based customers. Additionally, Lin allegedly “structured” cash deposits – or, made a series of deposits that were less than $10,000 – to avoid the filing of CTRs by the financial institutions where the deposits were made.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
The indictment charges all three defendants with conspiracy (five-year statutory maximum sentence), operating an unlicensed money transmitting business (five-year maximum sentence) and 63 counts of failure to file currency transaction reports (10-year statutory maximum sentence for each count). The indictment also charges Peace & Rich and Lin with 28 counts of structuring financial transactions (10-year maximum sentence per count).
Release No. 13-031
Santa Barbara Accountant Sentenced to Three Years in Federal Prison in Tax Fraud Case Involving Sham Non-Profit OrganizationRead the Press Release
LOS ANGELES – A Santa Barbara-based certified public accountant has been sentenced to 36 months in federal prison for failing to report more than $1 million on federal tax returns by pretending that money earned through his accounting business came from a charitable foundation he called the Foundation for Harmony and Happiness.
Steven Mark Pybrum, 61, who resided in Montecito and claimed on his website that he appeared as a tax and financial expert on national television shows, was sentenced late yesterday afternoon following his conviction last year on four counts of subscribing to false income tax returns.
Pybrum fraudulently used money from his non-profit organization to pay personal expenses, including renting a Montecito mansion and buying a plane, a fishing boat and an SUV.
At yesterday’s sentencing hearing, United States District Judge Gary A. Feess stated Pybrum operated a “blatant, calculated, tax-fraud scheme,” and that his conduct was “indefensible.”
Pybrum, who operated his accounting practice under the names of Pybrum & Company and Family Business Center, was convicted by a jury last October. The evidence presented during a three-day trial showed that Pybrum subscribed to false individual income tax returns for the tax years 1999 through 2002, and that he underreported his income on tax returns that were filed up to three years late.
In 1999, Pybrum began depositing receipts from his accounting practice into a bank account held in the name of the Foundation for Harmony and Happiness (FFHH). Documents filed with the IRS stated that FFHH was established to provide financial and conflict resolution to help couples avoid financial disputes, which Pybrum claimed was a leading cause of divorce.
The evidence presented at trial showed that between 1999 and 2002, Pybrum brought in as much as $380,000 per year from accounting work. But instead of reporting that income on his own tax return, he claimed that money had been earned by FFHH for providing marital counseling. Prosecutors stated at trial that there was no evidence that FFHH actually did any charitable work or earned any money for charitable activities during these four years, and that FFHH was simply a name on bank accounts that Pybrum set up to avoid paying taxes.
The investigation of Pybrum was conducted by IRS - Criminal Investigation in Los Angeles.
Release No. 13-030
Long Beach Man Arrested in Federal Sex Trafficking CaseRead the Press Release
Santa Ana, California – A Long Beach man was arrested yesterday and is scheduled to be arraigned this afternoon on federal sex trafficking charges that allege he worked with a previously charged defendant to coerce women to work as prostitutes.
Marquis Monte Horn, also known as “Taylor,” 34, was named in an eight-count superseding indictment returned by a federal grand jury on Wednesday. The indictment charges Horn with one count of conspiracy to engage in sex trafficking, and one count of sex trafficking by force, fraud or coercion.
The second man charged in the case – Roshaun Nakia Porter, 37, also of Long Beach – was arrested and indicted on sex trafficking charges in April 2012 (see: http://www.fbi.gov/losangeles/press-releases/2012/man-indicted-for-forced-labor-and-sex-trafficking-of-women-forced-to-work-as-prostitutes-in-orange-county). Porter is named in all eight counts in the superseding indictment.
According to the superseding indictment, Horn used websites such as www.modelmayhem.com to recruit victims to work in a prostitution organization by claiming he and Porter were running an upscale escort service in which women could make $500 per day. Horn, Porter and others used various coercive tactics to induce the victims into engaging in prostitution. For example, they allegedly developed a romantic relationship with some victims, falsely promised victims they would only be working as an escort, falsely promised financial assistance for the victims and their families, falsely promised help to obtain lawful immigration status in the United States, and isolated some victims from their friends and family.
The indictment further alleges that Horn recruited one victim into the prostitution organization who was subsequently beaten, whipped, and forced to engage in prostitution by Porter.
Investigators believe that there are additional, as-yet unidentified victims in this case. Anyone with information about this case is encouraged to contact the FBI’s Los Angeles Field Office at (310) 477-6565.
Horn is scheduled to be arraigned on the indictment this afternoon at 2:00 in United States District Court in Santa Ana.
If convicted of the charges in the indictment, Horn would face a statutory maximum penalty of life in federal prison.
Porter has previously pleaded not guilty in this case and was ordered detained (held without bond). A trial for Porter was previously scheduled for May 7 before United States District Judge Josephine Staton Tucker.
This week’s superseding indictment in the result of an ongoing investigation being conducted by the Federal Bureau of Investigation.
The case is being prosecuted by the United States Attorney's Office and the Department of Justice’s Human Trafficking Prosecution Unit.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
Release No. 13-029
Former Los Angeles Police Department 911 Operator Sentenced to Six Years in Federal Prison for Receiving Child PornographyRead the Press Release
LOS ANGELES – A Lancaster man who worked for the Los Angeles Police Department as a 911 operator has been sentenced to 72 months in federal prison for receiving child pornography.
Brandon Simpson, 28, was sentenced yesterday afternoon by United States District John A. Kronstadt, who said the child pornography found in this case – which included images of infants being sexually assaulted – were beyond “repugnant.”
Simpson was arrested during an investigation into a peer-to-peer network in September 2011, and he pleaded guilty in June 2012 to one count of receiving child pornography. Following a search of Simpson’s residence in 2011 – he resided in Long Beach at the time – investigators reviewed computer files and found hundreds of images of child pornography. In his plea agreement, Simpson admitted that his collection contained more than 600 images. Some of the image involving bondage of very small children, according to a sentencing memorandum filed by prosecutors. “The charges against [Simpson] are serious and involve the exploitation of the most vulnerable people in the community, children,” the memo states.
Simpson was terminated from the Los Angeles Police Department in 2012.
The investigation into Simpson was conducted by the Internet Crimes Against Children Task Force (ICAC), which is made up of agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Los Angeles Police Department.
Release No. 13-028
Six Arrested in San Fernando Valley-Based Tax Fraud Scheme That Used Stolen Identities to Seek More Than $19 Million in Tax RefundsRead the Press Release
LOS ANGELES – Authorities this morning arrested six people linked to a large-scale tax fraud scheme that allegedly used stolen identities to fraudulently file more than 2,500 income tax returns that sought over $19 million in fraudulent tax refunds.
The arrests by special agents with IRS - Criminal Investigation and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) are the result of “Operation National Treasure,” an eight-month investigation into a ring that allegedly obtained nearly $10 million from the IRS.
The six arrested this morning are among eight defendants named in a 132-count indictment that was filed Monday in United States District Court. The eight defendants allegedly operated a scheme that started in 2010 with the theft of personal identifying information, such as driver’s license and Social Security numbers. Armed with this data, members of the conspiracy allegedly submitted income tax returns to the IRS under the names of the identity theft victims. Members of the conspiracy allegedly established mailing addresses, which were used to receive the refunds sent through the U.S. Mail as United States Treasury checks. According to the indictment, the defendants took the fraudulently obtained checks to various “check cashers,” who took their own “cuts” before providing cash to the defendants.
“Identity theft is one of the nation’s fastest growing crimes, and it impacts more and more Americans every year,” said United States Attorney André Birotte Jr. “This Los Angeles-based crime ring is alleged to have combined identity theft with tax fraud to create an intrusive and sophisticated scheme designed to victimize more than 1,800 individuals and to defraud the United States Government out of millions of dollars.”
Richard Weber, Chief of IRS - Criminal Investigation, stated: “These individuals demonstrated a blatant disregard for the integrity of the United States tax system and caused immeasurable hardship to innocent victims. IRS - Criminal Investigation remains committed to the pursuit of identity theft and, together with our law enforcement partners and the United States Attorney’s Office, we will hold those who engage in similar conduct accountable.”
Those taken into custody this morning are:
Ashot Karapetian, 47, of North Hollywood;Suren “Sonny” Gambaryan, 33, of North Hollywood;
Artak “Max” Berberyan, 33, of Van Nuys;
Vigen “Vic” Tsaturyan, 47, of Sun Valley;
Armen “Roman” Berberyan, 33, of Van Nuys; and
Arman Zargaryan, 30, of Granada Hills.
These defendants are expected to be arraigned on the indictment this afternoon in federal court in Santa Ana, where this case will be litigated.
Additionally, two defendants named in the indictment are currently being sought be authorities. They are:
Akop “Jack” Kantrdzyan, 33, of Sylmar; and
David Samsonyan, also known as “Little Guy,” 31, of Winnetka.
According to the indictment, members of the scheme obtained 1,844 stolen identities. Many of the stolen identities came from retired individuals and residents of homeless shelters, some of whom had not filed federal income tax returns in years. In an effort to conceal their activities, the indictment alleges that the conspirators used coded language to refer to Treasury checks, referred to each other by nickname, and used false home addresses on their own driver’s licenses and other identity documents, and used third-party “straw buyers” to purchase property for the defendants’ own use.
The indictment specifically alleges that members of the conspiracy filed at least 2,977 false federal income tax returns (Forms 1040) with the IRS that fraudulently claimed a total of $19,324,632 in refunds. The IRS paid out approximately $9,952,077 based on the false and fraudulently filed 1040 Form tax returns.
“Today’s arrests are a clear warning that anyone who steals the identities of innocent taxpayers to file fraudulent income tax returns for personal profit will be aggressively pursued, investigated and prosecuted,” said Claude Arnold, Special Agent in Charge of HSI Los Angeles. “These crimes are pure theft, and they victimize us all. HSI will continue to use its unique investigative authorities to identify and dismantle these harmful schemes.”
The indictment contains charges of conspiracy, theft of government money, mail fraud, money laundering, aggravated identity theft, cashing government checks with forged signatures. All eight defendants are charged in the conspiracy count, and each are charged in various mail fraud counts. If convicted, each defendant would face a statutory maximum penalty of at least 45 years in federal prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
In addition to the six defendants named in the tax fraud case who were arrested this morning, authorities took into custody another two individuals on unrelated charges. Those also arrested this morning are:
Armine Nazaryan, 41, of North Hollywood, who was indicted on charges of making false statements to HSI agents; and
Spartak Karapetian, 23, of North Hollywood, the son of Ashot Karpetian, who was arrested on suspicion of being a felon in possession of a firearm.
Operation National Treasure was an investigation conducted by IRS - Criminal Investigation and HSI, which received substantial assistance from the Los Angeles Police Department.
Release No. 13-027