Northern District of California
Press releases recorded for this federal judicial district.
Tenderloin Dealer Pleads Guilty to Six Drug Offenses, Including Conspiracy to Distribute Fentanyl and Possession with Intent to Distribute Fentanyl, Heroin, Cocaine, and MethamphetamineRead the Press Release
SAN FRANCISCO – Melvin Alexis Diaz Arteaga (Diaz), a resident of Oakland, has pleaded guilty to six drug charges stemming from his sale of—and intent to sell—fentanyl, methamphetamine, heroin, and cocaine in the Tenderloin district of San Francisco, announced United States Attorney Ismail J. Ramsey. Diaz’s guilty plea was accepted by the Hon. Charles R. Breyer, Senior United States District Judge, on October 26, 2023.
In his plea agreement, Diaz, 28, admitted he possessed 6.6 kilograms—that is, nearly 15 pounds—of fentanyl, along with lesser quantities of methamphetamine, heroin, cocaine, and other controlled substances, all of which he intended to sell, when he was arrested outside an apartment in Berkeley, California, on November 16, 2022.
According to the plea agreement, Diaz also admitted using the same Berkeley apartment to manufacture and store significant quantities of drugs for sale in the Tenderloin, among other locations. He also admitted he sold, or arranged the sale of, fentanyl and methamphetamine to an undercover officer of the San Francisco Police Department (SFPD) on four separate occasions between September 16, 2022, and October 5, 2022.
Finally, pursuant to the plea agreement, Diaz agreed to forfeit, among other things, more than $50,000 in cash that officers seized on the night of his arrest, including nearly $42,000 found in Diaz’s bedroom. Diaz acknowledged these funds either were, or were derived from, drug proceeds, or that they were used, or were intended to be used, to commit or facilitate his drug trafficking crimes.
Diaz and two co-defendants were indicted by a federal grand jury on January 5, 2023. Diaz was charged in six of the eight counts alleged in the indictment:
Count
Charge
Statute(s)
Statutory Maximum Prison Term
1
Conspiracy to Distribute and Possess with Intent to Distribute 400 Grams or More of Fentanyl
21 U.S.C. §§ 846 and 841(a)(1), (b)(1)(A)(vi)
Life
2
Possession with Intent to Distribute 400 Grams or More of Fentanyl
21 U.S.C. § 841(a)(1), (b)(1)(A)(vi)
Life
3
Possession with Intent to Distribute 100 Grams or More of Heroin
21 U.S.C. § 841(a)(1), (b)(1)(B)(i)
40 years
4
Possession with Intent to Distribute 500 Grams or More of Cocaine
21 U.S.C. § 841(a)(1), (b)(1)(B)(ii)
40 years
7
Possession with Intent to Distribute and Distribution of 50 Grams or More of Methamphetamine
21 U.S.C. § 841(a)(1), (b)(1)(B)(viii)
40 years
8
Possession with Intent to Distribute and Distribution of Methamphetamine
21 U.S.C. § 841(a)(1), (b)(1)(C)
20 years
Pursuant to his plea agreement, Diaz pleaded guilty to all six of the counts in which he was charged. In addition to the penalties listed above, as part of any sentence, the court may order the defendant to pay a fine of up to $10 million per count on Counts 1 and 2; $5 million per count on Counts 3, 4, and 7; and $1 million on Count 8. The defendant also faces a mandatory additional term of supervised release of five years on Counts 1 and 2; four years on Counts 3, 4, and 7; and three years on Count 8. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Diaz has been in custody since he was arrested on November 16, 2022. Judge Breyer has scheduled Diaz’s sentencing hearing for February 21, 2024.
Assistant United States Attorney Nicholas M. Parker is prosecuting the case with the assistance of Paralegal Specialist Jessie Chelsea. The prosecution is the result of an investigation by the Drug Enforcement Administration, with assistance from SFPD.
Former Employee of San Francisco Money Services Business Charged with Conspiring to Launder Drug ProceedsRead the Press Release
SAN FRANCISCO – The United States Attorney’s Office has charged Yessenia Margarita Barrientos-Lainez—a former employee of a money services business in the Tenderloin district—with conspiring to launder drug proceeds by wiring large sums of money abroad for a known drug trafficker in the San Francisco Bay Area, announced United States Attorney Ismail J. Ramsey; Drug Enforcement Administration (DEA), San Francisco Field Division, Special Agent in Charge Brian M. Clark; and Internal Revenue Service, Criminal Investigation (IRS-CI), Oakland Field Office, Special Agent in Charge Darren Lian. Barrientos made her initial federal court appearance on October 27 before U.S. Magistrate Judge Thomas S. Hixson to face the charge against her.
According to a federal criminal complaint, Barrientos, 42, of Daly City, California, worked as a teller at a money services business located in San Francisco until mid-May 2023 and used her position there to launder the drug proceeds of an unnamed co-conspirator—a man who was known to DEA agents as a Bay Area drug trafficker and who was arrested in possession of narcotics on June 1, 2023, in Daly City—by wiring significant sums of cash to various foreign bank accounts, including some in Mexico, at the unnamed co-conspirator’s direction.
Specifically, the complaint alleges that, on May 1, 2023, when she was still working as a teller at the money services business, Barrientos sent her unnamed co-conspirator text messages saying that her boss had left and therefore that the unnamed co-conspirator could send her information and come drop off cash. The complaint also alleges that, in the approximately two hours that followed, (i) the unnamed co-conspirator sent Barrientos a text message containing a photograph depicting three handwritten names and bank account numbers; and (ii) Barrientos sent her unnamed co-conspirator several messages containing photographs of receipts showing thousands of dollars being wired to each of the three names and account numbers depicted in the photograph she had earlier received from her unnamed co-conspirator. The complaint further alleges that records received from the money services business confirm Barrientos processed each of the three transactions, and that each of the three recipient bank accounts was located in Mexico, including two in Sinaloa. And the complaint alleges that Barrientos charged her unnamed co-conspirator an “under-the-table fee” to process the three wires, each of which she structured to “evad[e] certain reporting requirements.”
Finally, the complaint alleges that there is other evidence of Barrientos’ money laundering activity. For example, the complaint alleges that surveillance footage from the money services business from April 25, 2023, shows Barrientos (i) walking outside to retrieve a white plastic bag from an unknown individual in a parked car; (ii) bringing the white plastic bag inside the money services business and placing it under her teller station; (iii) pulling large amounts of cash from the bag and running it through a money counting machine; (iv) processing wire transfers with no customers present at her teller window; and (v) using her cellphone to take photographs of the cash and receipts.
Barrientos was arrested on October 26, 2023, and was released on bond at her initial appearance the following day. Her next scheduled appearance is on November 2, 2023.
A complaint merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum prison sentence of 20 years and a maximum fine of $500,000 or twice the value of the laundered funds, whichever is greater. As part of any sentence, the court also may order the defendant to pay restitution, if appropriate, and to serve an additional term of supervised release to begin after any prison sentence is complete. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Assistant U.S. Attorney Nicholas M. Parker is prosecuting the case. The prosecution is the result of an investigation by the DEA and IRS-CI.
Bay Area Doctor Convicted of Health Care Fraud and Kickback Scheme for Referrals to Medicare-Funded Home Health ServicesRead the Press Release
SAN FRANCISCO – Henry Geoffrey Watson, a medical doctor residing in Oakland, California, was convicted by a federal jury today of charges that included accepting kickbacks for patient referrals to home health agencies, health care fraud, and false statements relating to a health care matter, announced Attorney for the United States Thomas A. Colthurst, Robert K. Tripp, Federal Bureau of Investigation Special Agent in Charge, and Steven J. Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG).
The jury found that Watson, 67, engaged in three health care kickback schemes from 2013 to 2019, using his position as a licensed medical doctor. The first scheme involved a conspiracy in which Watson agreed to refer patients to home health agency Amity Home Health Care in exchange for illegal kickback payments. The evidence at trial proved that Watson and employees of Amity and its CEO, Amanda Singh, conspired to pay Watson regular and recurring amounts, sometimes in the form of cash payments of $3,000 a month, to ensure that Watson referred Medicare patients to Amity each month.
Title 42, United States Code, Section 1320a-7b, the Anti-Kickback Statute, makes it a crime for any person to knowingly solicit, offer, or pay a kickback, bribe, or rebate for furnishing services under a Federal health care program including Medicare.
In the second scheme proved at trial, Watson accepted kickback payments from an undercover FBI agent posing as a home health agency representative seeking Watson’s agreement to refer his patients to a particular Bay Area home health agency. The evidence at trial included video recordings of Watson accepting envelopes of cash, for a total of more than $10,000, at four meetings in 2017. The jury heard evidence that Watson also suggested other doctors who he believed would be willing to accept illegal payments for referrals from the undercover agent.
The third scheme proved at trial involved a conspiracy between Watson and others to repeatedly and falsely certify individuals for Medicare-funded home health services that the individuals did not seek and did not need. The evidence at trial showed that Watson and co-conspirators arranged for Watson to briefly meet large numbers of unwitting elderly residents of Bay Area retirement homes. After these meetings, held in common areas or recreation rooms, Watson certified that each and every resident he met was homebound, meaning they had a normal inability to leave the home. In fact, according to the evidence and the jury’s verdict, Watson knew that the patients were not homebound and did not need the services he prescribed. Watson did not conduct any tests or conduct any inquiry about whether they were homebound, according to trial evidence, but he nevertheless made fraudulent referrals to the three home health agencies. During time periods that Watson repeatedly certified that certain individuals were homebound, testimony from these individuals and their regular primary care doctors showed that the individuals were generally healthy and active, engaging in activities such as traveling internationally, shopping, walking stairs, and jogging. The evidence proved Watson falsely billed Medicare for certifying these individuals for home health and for supervising their home health care, despite the fact that the individuals did not need that care. As part of the conspiracy, Watson was paid illegal kickbacks of $100 per patient referral by a co-conspirator working for the three home health agencies.
“Henry Watson engaged in a scheme to enrich himself and his co-conspirators by falsely certifying patients needed expensive home health care services, causing Medicare to pay millions in unnecessary and fraudulent claims,” said FBI Special Agent in Charge Robert K. Tripp. “The FBI and its law enforcement partners will continue to pursue and prosecute medical professionals who cheat our critical healthcare programs like Medicare.”
HHS-OIG Special Agent in Charge Steven J. Ryan said: “Violations of the Anti-Kickback Statute harm patients by taking away their choice and by depriving them of a doctor committed to doing what is best for them. Kickbacks also can result in medically unnecessary services billed to Medicare, which can affect the availability of services and drive up the cost of health care for everyone. Individuals and entities that participate in the federal health care system must obey the laws meant to preserve the integrity of those programs.”
Criminal charges against Watson were unsealed on September 5, 2019, when the United States Attorney’s Office announced charges by criminal complaint against 30 defendants in a wide-ranging, patients-for-kickback scheme. Those charges included criminal kickback charges against Amity Home Health Care, which was then the largest home health care provider in the San Francisco Bay Area, and Advent Care, a provider of hospice care. In relation to the investigation that led to the charges and conviction of Watson, other individuals and doctors were also convicted of illegal kickbacks:
• Amity’s CEO, Ridhima Amanda Singh pled guilty to charges of conspiracy to pay kickbacks for the referrals of Medicare beneficiaries on August 5, 2022, in Court Case No. 22-CR-267 CRB.
• Dr. Bhupinder Bhandari pled guilty to violations of the Anti-Kickback Statute on June 6, 2022, in Court Case No. 20-CR-374 JD.
• Dr. Zheng Zhang pled guilty to violations of the Anti-Kickback Statute on April 25, 2022, in Court Case No. 22-CR-090 VC.
• Dr. Gerald Myint pled guilty to violations of the Anti-Kickback Statute on November 18, 2020, in Court Case No. 20-CR-408 CRB.
• Dr. Juan Posada pled guilty to violations of the Anti-Kickback Statute on January 27, 2021, in Court Case No. 20-CR-420 RS.All those defendants have been sentenced by the judges assigned to those cases.
Watson was charged by a federal grand jury in a Superseding Indictment dated March 9, 2021, that included the following counts, with the following maximum penalties:
NO. OF COUNTS
VIOLATION
DESCRIPTION
MAXIMUM PENALTIES FOR EACH COUNT
Two
18 U.S.C. § 371
Conspiracy to Pay and Receive Health Care Kickbacks
5 years in prison
$250,000 fine
Seven
42 U.S.C. § 1320a-7b(b)(1)(A)
Anti-Kickback Statute
10 years in prison
$100,000 fine
Eight
18 U.S.C. § 1347
Health Care Fraud
10 years in prison
$250,000 fine
Eight
18 U.S.C. § 1035
False Statements Relating to Health Care Matters
5 years in prison
$250,000 fine
Watson remains released on bond pending sentencing. Watson’s sentencing hearing is scheduled for February 28, 2024, before Judge Breyer in San Francisco. Any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Kristina Green and Katherine Lloyd-Lovett, and the Corporate and Securities Fraud Section of the U.S. Attorney’s Office, are prosecuting the case with the assistance of Helen Yee and Laurence Macaraeg. The prosecution is the result of an investigation by the FBI and HHS-OIG.
Alameda Resident Pleads Guilty to Four Counts of Wire Fraud, Admits Operating A Ponzi Scheme to Dupe Victims Out of Millions of DollarsRead the Press Release
SAN FRANCISCO - Long Nguyen, a resident of Alameda, California, has pleaded guilty to charges related to his scheme to defraud at least 20 individuals out of approximately $2 million, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. Nguyen’s guilty plea was accepted by the Hon. Trina L. Thompson, United States District Judge.
In his plea agreement, Nguyen, 35, admitted that, between September 2015 and July 2021, he operated a scheme to defraud his victims by making false statements about himself, his investment opportunities, how he would invest his victims’ money, and what he in fact did with their money.
For example, pursuant to the plea agreement, Nguyen admitted making the following false statements, among others, to induce victims to give him money: that (i) he was a billionaire; (ii) other people who invested with him had received large payouts at a high rate of return; (iii) he was starting his own hedge fund; (iv) he had access to pre-IPO investment opportunities that he would and did invest victims’ money into; and (v) he managed a real estate investment trust that he would and did invest victims’ money into and that would provide victims with monthly income. Nguyen also admitted creating fake screenshots that purported to show victims’ growing investment account balances, and falsely telling victims not only that they were making money, but also that he would buy—and, in some cases, had bought—them Teslas and homes.
According to the plea agreement, Nguyen also admitted that he did not, in fact, invest the majority of the money he received from his victims. Rather, Nguyen admitted spending victims’ money for his own personal use and operating a Ponzi scheme by using money he had received from some victims to pay other victims back. And Nguyen admitted he devised and executed his fraudulent scheme with the intent to defraud his victims.
Nguyen was indicted by a federal grand jury on October 18, 2022, on four counts of wire fraud, in violation of 18 U.S.C. § 1343. Pursuant to his plea agreement, Nguyen pleaded guilty to all four counts on October 27, 2023. As part of his guilty plea, Nguyen has agreed to pay at least $1 million in restitution to his victims.
Judge Thompson has scheduled Nguyen’s sentencing for February 2, 2024. Nguyen faces a statutory maximum of 20 years in prison for each of the wire fraud counts. As part of any sentence, Judge Thompson may also order the defendant to serve an additional term of supervised release, to pay a fine of up to $250,000 per count, and to pay restitution to his victims. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant United States Attorney Kelsey Davidson is prosecuting the case with the assistance of Paralegal Specialist Lance Libatique and Marina Ponomarchuk. The prosecution is the result of an investigation by the FBI.
U.S. Citizen Indicted for Filing False Tax Returns, Failing to Report Foreign Bank AccountRead the Press Release
SAN JOSE - A federal grand jury has indicted Chunsheng “Jay” Huang on charges of filing a false tax return and failing to file a report of a foreign bank or financial account, announced United States Attorney Ismail J. Ramsey; Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge of the Oakland Field Office Darren Lian; and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. The indictment was handed down on November 1, 2022, but unsealed this week.
According to the indictment, Huang, 67, of San Jose, is alleged to have been an employee of a company based in Milpitas, California, for over 15 years while also working for companies based in the People’s Republic of China (PRC) for at least six of those years. The indictment alleges that Huang used an account with Industrial and Commercial Bank of China (ICBC) in his sister-in-law’s name to receive payments from two companies in the PRC. The indictment alleges that Huang failed to report that income on his federal tax returns for 2016 through 2020.
In addition to the obligation to report foreign income for tax purposes, the indictment alleges that United States citizens and residents who have a financial interest in, or signature or other authority over, a bank account in a foreign country with an aggregate value of more than $10,000 at any time during a particular calendar year are required to file with the United States Treasury, Financial Crimes Enforcement Network (“FinCEN”), FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”) for that year. The indictment alleges that Huang failed to file the required FBAR report for the ICBC account for 2019 and 2020.
Huang has not made an appearance in the case. An arrest warrant was issued at the time of the indictment.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Huang faces a maximum sentence of (i) three years of imprisonment, a $250,000 fine, one year of supervised release, and a $100 special assessment for each count of violating 26 U.S.C. § 7206(1) (Making and Subscribing a False Tax Return); and (ii) 10 years of imprisonment, a $500,000 fine, three years of supervised release, and a $100 special assessment for each count of violating 31 U.S.C. §§ 5314 and 5322(b) (Failure to File Report of Foreign Bank and Financial Accounts). However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Special Prosecutions section of the United States Attorney’s Office. The prosecution is the result of an investigation by IRS-CI and the FBI.
Two Hells Angels Members Sentenced to Prison for Racketeering Conspiracy and Obstruction of JusticeRead the Press Release
SAN FRANCISCO – Two Hells Angels members, one from Fresno and one from Sonoma County, were sentenced to prison for four and seven years, respectively, for their participation in the activities of the criminal enterprise of the Sonoma County charter of the Hells Angels Motorcycle Club (HASC), announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Honorable Edward M. Chen, United States District Judge.
Jeremy Greer, 43, a former HASC member, was sentenced to a term of 84 months in prison for his violent crimes as part of the HASC racketeering conspiracy. Greer committed multiple brutal assaults, armed robbery, home invasion robbery, and witness intimidation. While on pre-trial release, Greer committed multiple violations of his release conditions, was arrested again, and was remanded to custody.
Merl Hefferman, 54, a member of the Fresno Hells Angels, was sentenced to a term of 48 months in prison for obstruction of justice. Hefferman arranged the illegal cremation of the body of former HASC member Joel Silva after Silva was murdered by Fresno Hells Angels president Brian Wendt, together with HASC president Jonathan Nelson and former HASC president Russell Ott. The murder took place at the Fresno Hells Angels clubhouse, and shortly after the killing, Hefferman arranged for Silva’s body to be taken to a nearby crematory and illegally incinerated. Wendt, Nelson, and Ott were convicted by a jury of the murder in 2022, and they are in custody awaiting sentencing by Judge Chen.
“The Hells Angels murdered one of their own, and Hefferman helped them try to get away with it. But for the dedicated efforts of FBI Task Force Officers and Special Agents, particularly officers from the Santa Rosa Police Department and the California Highway Patrol, they would have succeeded. Greer and other Hells Angels followed a malicious code of conduct, encouraging the beating, maiming, and even killing of anyone who dared to cross their criminal enterprise,” said U.S. Attorney Ramsey. “The defendants now face the consequences of their violent racketeering activities.”
“Hefferman used his connection at a funeral home to order the illegal cremation of a member of his own gang as part of the Hells Angels’ efforts to cover up a murder. For eight years, the victim's family grieved without a body to mourn or certainty about what had happened to their loved one. Greer committed serious violent crimes, including armed robbery, beating, and maiming,” said FBI Special Agent in Charge Tripp. “Hefferman, Greer, and other members of their criminal enterprise attempted to use fear and intimidation to get away with their crimes. I commend the witnesses for their courage. Without them, these men may not have pleaded guilty. Now, they have been brought to justice.”
The sentencings bring the total number of sentenced defendants to five, out of 10 convictions—five by jury verdicts in two separate trials and five by guilty pleas. The investigation into the HASC began with Silva’s disappearance in 2014, culminating in an indictment in 2017 and a superseding indictment in 2018. Eleven members and associates of HASC were charged with racketeering conspiracy and violent crimes associated with the Hells Angels transnational outlaw motorcycle gang, including the murder of Silva, narcotics distribution, assault, robbery, extortion, illegal firearms possession, obstruction of justice, and witness intimidation. The convicted defendants include five former Presidents of three Hells Angels charters: Sonoma County, Fresno, and Salem (Boston).
The first trial in 2022 centered on the murder of Silva, a former HASC member, on July 15, 2014. In the second trial, in 2023, a jury convicted Christopher Ranieri, President of the Salem charter of the Hells Angels, for his role in hatching the plan to murder Silva, as well as a second defendant, Raymond Foakes, former President of HASC, of assault with a firearm in aid of racketeering, in connection with a multi-hour beating of a former HASC member who was expelled from the enterprise. Foakes was also convicted of witness intimidation, in connection with his sexual assault of that former member’s wife while that former member was still being beaten at the HASC clubhouse and threatening her to keep silent.
Ranieri and Foakes were additionally convicted of racketeering conspiracy for their agreement to conduct the affairs of the HASC through a pattern of racketeering activity. Ranieri and Foakes are in custody pending sentencing by Judge Chen. The sentences for these two defendants, as well as those of Wendt, Nelson, and Ott, will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The sentencings of Hefferman and Greer were the last for the five defendants who pleaded guilty. The sentences for those five defendants are set forth below.
Defendant
Date Convicted
Date Sentenced
Sentence Imposed
Merl Hefferman
December 21, 2022
October 19, 2023
48 months
Jeremy Greer
December 21, 2022
October 19, 2023
84 months
Russell Lyles
November 17, 2022
August 31, 2023
63 months
Damien Cesena
October 7, 2022
January 19, 2023
52 months
David Diaz
October 7, 2022
January 26, 2023
30 months
Assistant U.S. Attorneys Kevin Barry, Lina Peng, and Ajay Krishnamurthy handled the case, with the assistance of Paralegal Specialist Kevin Costello. The prosecution is the result of an investigation by the FBI, the Santa Rosa Police Department, the Sonoma County Sheriff’s Department, and the California Highway Patrol.
Silicon Valley Executive Sentenced for Defrauding Investors and Participating in COVID-19 and Allergy Testing SchemeRead the Press Release
The president of a Silicon Valley-based medical technology company was sentenced today to eight years in prison and ordered to pay $24 million in restitution for participating in a scheme to defraud investors and a scheme to commit health care fraud and pay illegal kickbacks in connection with the submission of over $77 million in claims for COVID-19 and allergy testing.
“A Silicon Valley executive exploited the pandemic for profit, ultimately endangering patients with unproven COVID-19 tests,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “The Department of Justice is committed to protecting the people of this nation by investigating and prosecuting those who put public health at risk and use global emergencies to line their own pockets.”
“Schena put profit over public safety. He used the global pandemic as a backdrop to fuel a kickback scheme and a massive fraud upon investors and people searching for better health care during a time of great uncertainty,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “Even in times of national crisis, our office will ensure that Silicon Valley remains a place where innovation and ingenuity – and not fraud and deceit – fuel vibrant markets for investors and inventors.”
According to court documents, Mark Schena, 60, of Los Altos, California, was the president of Arrayit Corporation. Schena engaged in a scheme to defraud Arrayit’s investors by claiming that he had invented a revolutionary technology to test for virtually any disease using a single drop of blood from a finger stick sample. In meetings with investors, Schena and his publicist claimed that Schena was the “father of microarray technology” and that he was on the shortlist for the Nobel Prize. Schena also falsely represented to investors that Arrayit could be valued at $4.5 billion.
“Today’s outcome illustrates HHS-OIG’s unwavering commitment to protecting federal health care programs under any circumstance – especially when a public health emergency presents opportunities for bad actors to exploit,” said Deputy Inspector General for Investigations Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “We continue to work tenaciously with our law enforcement partners to bring to justice those who have constructed schemes to take advantage of the COVID-19 pandemic for personal gain.”
“Every time there’s a disaster of some type, scammers climb out of the woodwork with schemes to bilk people out of their money,” said Postal Inspector in Charge of Criminal Investigations Eric Shen of the U.S. Postal Inspection Service (USPIS). “In this case, Mark Schena and the Arrayit Corporation were already involved in deceiving the public before the COVID-19 pandemic hit. When the pandemic hit, the company then attempted to develop a COVID-19 antibody test but were unsuccessful. Despite having no product and on the verge of bankruptcy, Schena continued to defraud investors, claiming to have multimillion-dollar contracts and other business developments that all proved to be bogus.”
In furtherance of the scheme, Schena failed to release Arrayit’s financial disclosures – as required by the Securities and Exchange Commission (SEC) – and concealed that Arrayit was on the verge of bankruptcy. Schena lulled investors who were concerned that the company was a “scam” by engaging in television appearances and filming videos that fraudulently portrayed the laboratory as busy and high-tech. Schena also issued false press releases and public statements on social media that Arrayit had entered into lucrative partnerships with companies, government agencies, and public institutions, including a children’s hospital and a major California health care provider. The press releases and statements falsely claimed that such entities had agreed to use the Arrayit technology, when in fact no such agreements existed or were of minimal value.
“Those who used the pandemic for illicit profit by engaging in health care fraud and defrauding investors must face the consequences of their actions,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI and its partners will work relentlessly to protect the American people from abuses to our financial and health care systems, and this sentencing reflects those efforts.”
Schena also orchestrated an illegal kickback and health care fraud scheme that involved submitting fraudulent claims to Medicare and private insurance for unnecessary allergy testing. Arrayit ran allergy screening tests on every patient for 120 different allergens regardless of medical necessity. To obtain patient blood specimens, Schena paid kickbacks to marketers in violation of the Eliminating Kickbacks in Recovery Act and orchestrated a deceptive marketing plan that falsely claimed that the Arrayit test was highly accurate in diagnosing allergies, when it was not, in fact, a diagnostic test. The Health Care Fraud Unit’s Data Analytics Team supported the prosecution and, as the evidence at trial showed, Arrayit billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the United States.
“This sentence holds the defendant accountable for his large-scale fraud scheme that impacted multiple federal agencies and robbed the taxpayers of millions of dollars,” said Inspector General Michael J. Missal of the Department of Veterans Affairs Office of Inspector General (VA-OIG). “The VA-OIG will continue to work zealously with our law enforcement partners to ensure schemes like this are uncovered, investigated, and prosecuted to the fullest extent of the law.”
“Mr. Schena’s sentencing is a fitting resolution that holds him accountable for a multimillion-dollar fraudulent scheme driven purely by greed and devoid of fiscal responsibility or concern for the patients that would ultimately use his nearly useless products,” said Director Kelly P. Mayo of the Department of Defense (DoD) Office of Inspector General, Defense Criminal Investigative Service (DCIS). “DCIS remains committed to working with its partners to identify and eliminate fraudulent schemes that potentially endanger patient safety and corrupt the integrity of TRICARE, the DoD’s health care program.”
In early 2020, Schena falsely announced that Arrayit “had a test for COVID-19.” Schena told federal agents that it was simple to develop a test for COVID-19 because the switch from testing for allergies to testing for COVID-19 was “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.” Seeking to capitalize on the nationwide shortage of COVID-19 testing, Schena orchestrated a deceptive marketing scheme that falsely claimed that Dr. Anthony Fauci and other prominent government officials had mandated testing for COVID-19 and allergies at the same time, and required that patients receiving the Arrayit COVID-19 test also be tested for allergies. Schena also concealed from investors and patients that the Food and Drug Administration had informed him that the Arrayit test was not accurate enough to receive an Emergency Use Authorization for use in the United States.
A federal jury convicted Schena on Sept. 6, 2022.
The HHS-OIG’s San Francisco and Detroit Regional Offices, USPIS, FBI, VA-OIG, and DCIS investigated the case.
Principal Assistant Chief Jacob Foster and Trial Attorney Laura Connelly of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Christina Liu for the Northern District of California prosecuted the case.
The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, comprised of 15 strike forces operating in 25 federal districts, has charged more than 5,000 defendants who collectively have billed federal health care programs and private insurers more than $24 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.
The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing [email protected]. To learn more about victims’ rights, please visit www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas. If you believe you are a victim who has invested in Arrayit, or you have taken a COVID-19 test prepared or marketed by Arrayit, please visit www.justice.gov/criminal-vns/case/Arrayit.
Silicon Valley Executive Sentenced for Defrauding Investors and Participating in Covid-19 and Allergy Testing SchemeRead the Press Release
SAN JOSE – The president of a Silicon Valley-based medical technology company was sentenced today to eight years in prison and ordered to pay $24 million in restitution for participating in a scheme to defraud investors and a scheme to commit health care fraud and pay illegal kickbacks in connection with the submission of over $77 million in claims for COVID-19 and allergy testing.
Mark Schena, 60, of Los Altos, California, served as the president of Arrayit Corporation. Schena engaged in a scheme to defraud Arrayit’s investors by claiming that he had invented a revolutionary technology to test for virtually any disease using a single drop of blood from a finger stick sample. In meetings with investors, Schena and his publicist claimed that Schena was the “father of microarray technology” and that he was on the shortlist for the Nobel Prize. Schena also falsely represented to investors that Arrayit could be valued at $4.5 billion.
“Schena put profit over public safety. He used the global pandemic as a backdrop to fuel a kickback scheme and a massive fraud upon investors and people searching for better health care during a time of great uncertainty,” said U.S. Attorney for the Northern District of California Ismail J. Ramsey. “Even in times of national crisis, our office will ensure that Silicon Valley remains a place where innovation and ingenuity – and not fraud and deceit – fuel vibrant markets for investors and inventors.”
“A Silicon Valley executive exploited the pandemic for profit, ultimately endangering patients with unproven COVID-19 tests,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “The Department of Justice is committed to protecting the people of this nation by investigating and prosecuting those who put public health at risk and use global emergencies to line their own pockets.”
“Today’s outcome illustrates HHS-OIG’s unwavering commitment to protecting federal health care programs under any circumstance – especially when a public health emergency presents opportunities for bad actors to exploit,” said Deputy Inspector General for Investigations Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “We continue to work tenaciously with our law enforcement partners to bring to justice those who have constructed schemes to take advantage of the COVID-19 pandemic for personal gain.”
“Every time there’s a disaster of some type, scammers climb out of the woodwork with schemes to bilk people out of their money,” said Postal Inspector in Charge of Criminal Investigations Eric Shen of the U.S. Postal Inspection Service (USPIS). “In this case, Mark Schena and the Arrayit Corporation were already involved in deceiving the public before the COVID-19 pandemic hit. When the pandemic hit, the company then attempted to develop a COVID-19 antibody test but were unsuccessful. Despite having no product and on the verge of bankruptcy, Schena continued to defraud investors, claiming to have multimillion-dollar contracts and other business developments that all proved to be bogus.”
In furtherance of the scheme, Schena failed to release Arrayit’s financial disclosures – as required by the Securities and Exchange Commission (SEC) – and concealed that Arrayit was on the verge of bankruptcy. Schena lulled investors who were concerned that the company was a “scam” by engaging in television appearances and filming videos that fraudulently portrayed the laboratory as busy and high-tech. Schena also issued false press releases and public statements on social media that Arrayit had entered into lucrative partnerships with companies, government agencies, and public institutions, including a children’s hospital and a major California health care provider. The press releases and statements falsely claimed that such entities had agreed to use the Arrayit technology, when in fact no such agreements existed or were of minimal value.
“Those who used the pandemic for illicit profit by engaging in health care fraud and defrauding investors must face the consequences of their actions,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI and its partners will work relentlessly to protect the American people from abuses to our financial and health care systems, and this sentencing reflects those efforts.”
Schena also orchestrated an illegal kickback and health care fraud scheme that involved submitting fraudulent claims to Medicare and private insurance for unnecessary allergy testing. Arrayit ran allergy screening tests on every patient for 120 different allergens regardless of medical necessity. To obtain patient blood specimens, Schena paid kickbacks to marketers in violation of the Eliminating Kickbacks in Recovery Act and orchestrated a deceptive marketing plan that falsely claimed that the Arrayit test was highly accurate in diagnosing allergies, when it was not, in fact, a diagnostic test. The Health Care Fraud Unit’s Data Analytics Team supported the prosecution and, as the evidence at trial showed, Arrayit billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the United States.
“This sentence holds the defendant accountable for his large-scale fraud scheme that impacted multiple federal agencies and robbed the taxpayers of millions of dollars,” said Inspector General Michael J. Missal of the Department of Veterans Affairs Office of Inspector General (VA-OIG). “The VA-OIG will continue to work zealously with our law enforcement partners to ensure schemes like this are uncovered, investigated, and prosecuted to the fullest extent of the law.”
“Mr. Schena’s sentencing is a fitting resolution that holds him accountable for a multimillion-dollar fraudulent scheme driven purely by greed and devoid of fiscal responsibility or concern for the patients that would ultimately use his nearly useless products,” said Director Kelly P. Mayo of the Department of Defense (DoD) Office of Inspector General, Defense Criminal Investigative Service (DCIS). “DCIS remains committed to working with its partners to identify and eliminate fraudulent schemes that potentially endanger patient safety and corrupt the integrity of TRICARE, the DoD’s health care program.”
In early 2020, Schena falsely announced that Arrayit “had a test for COVID-19.” Schena told federal agents that it was simple to develop a test for COVID-19 because the switch from testing for allergies to testing for COVID-19 was “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.” Seeking to capitalize on the nationwide shortage of COVID-19 testing, Schena orchestrated a deceptive marketing scheme that falsely claimed that Dr. Anthony Fauci and other prominent government officials had mandated testing for COVID-19 and allergies at the same time, and required that patients receiving the Arrayit COVID-19 test also be tested for allergies. Schena also concealed from investors and patients that the Food and Drug Administration had informed him that the Arrayit test was not accurate enough to receive an Emergency Use Authorization for use in the United States.
A federal jury convicted Schena on Sept. 6, 2022.
The HHS-OIG’s San Francisco and Detroit Regional Offices, USPIS, FBI, VA-OIG, and DCIS investigated the case.
Assistant U.S. Attorney Christina Liu and Principal Assistant Chief Jacob Foster and Trial Attorney Laura Connelly of the Criminal Division’s Fraud Section prosecuted the case.
The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, comprised of 15 strike forces operating in 25 federal districts, has charged more than 5,000 defendants who collectively have billed federal health care programs and private insurers more than $24 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.
The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing [email protected]. To learn more about victims’ rights, please visit www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas. If you believe you are a victim who has invested in Arrayit, or you have taken a COVID-19 test prepared or marketed by Arrayit, please visit www.justice.gov/criminal-vns/case/Arrayit.
Property Developer Z&L Properties Fined $1 Million After Pleading Guilty to Honest Services Fraud ConspiracyRead the Press Release
SAN FRANCISCO – Z&L Properties Inc., a Foster City, California-based subsidiary of a Chinese property development company, was ordered to pay a $1 million fine as part of its sentence for bribing a San Francisco official in exchange for favorable treatment on a construction project, announced First Assistant United States Attorney Patrick D. Robbins and Federal Bureau of Investigation, San Francisco Field Office, Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. William H. Orrick, United States District Judge.
According to the plea agreement, Z&L Properties’ executives approved or paid bribes to former San Francisco Department of Public Works Director Mohammed Nuru, including providing him and another individual with food, drinks, lodging, and transportation during a trip to China in 2018. The purpose of the payments was to influence Nuru to act favorably on Z&L Properties’ requests for city approvals needed to complete construction of a mixed-use property owned by Z&L Properties at 555 Fulton Street in San Francisco.
Z&L Properties was charged by Information on July 18, 2023, with one count of conspiracy to commit honest services wire fraud and one count of honest services wire fraud. Z&L Properties pleaded guilty to the criminal scheme on August 17, 2023. In addition to the $1 million fine, Judge Orrick ordered Z&L Properties to implement a three-year anti-corruption corporate compliance program.
Also charged in the scheme was Zhang Li, 70, of Guangzhou, China. Zhang was the owner and controlling member of Z&L Properties as well as the chairman, co-founder, and chief executive officer of R&F Properties Co. Ltd., a real estate holdings and development company based in Guangzhou, China. R&F Properties does business in the United States through Z&L Properties Ltd. Zhang was charged by Criminal Complaint for his role in bribing Nuru. Zhang was arrested in London in November 2022 on an arrest warrant issued in the Northern District of California. He was required to post a £15 million ($19.1 million) bond and remained under house arrest in London for seven months before being extradited to the United States. Zhang waived extradition in June, returned to the United States, and entered into a deferred prosecution agreement with the United States.
This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco. Nuru was charged in January 2020 with a long-running honest services fraud scheme. Nuru pleaded guilty to several charges on January 6, 2022, and was sentenced to serve 84 months in federal prison on August 25, 2022. Another defendant, Wing Lok “Walter” Wong was charged in June 2020 with conspiracy to defraud the public of its right to honest services and with conspiracy to engage in money laundering, both involving Nuru and others. Wong entered a guilty plea and agreed to cooperate with the government’s corruption investigations. Judge Orrick has scheduled Wong’s sentencing hearing for January 18, 2024.
Assistant United States Attorney David Ward is prosecuting the case. The prosecution is the result of a multi-year investigation by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation.
California Lawyer Sentenced to Six Years in Prison for Racketeering Conspiracy, Mail Fraud, and Multiple Conspiracy Counts, Including Mail and Wire Fraud, Money Laundering, and the Illegal Distribution of $157 Million in Diverted Prescription DrugsRead the Press Release
SAN FRANCISCO – David Jess Miller was sentenced to serve 72 months in prison for his role in a variety of crimes stemming from conspiracies involving racketeering, mail and wire fraud, and money laundering, in addition to substantive mail fraud and conspiracy against the United States, announced First Assistant United States Attorney Patrick D. Robbins; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge of the Oakland Field Office Darren Lian; U.S. Postal Inspection Service (USPIS) Pittsburgh Division Inspector in Charge Lesley Allison; and U.S. Food and Drug Administration Office of Criminal Investigations (FDA-OCI) Special Agent in Charge of the Metro Washington Field Office George A. Scavdis. The sentence was handed down by the Hon. Charles R. Breyer, Senior United States District Judge.
A jury convicted Miller, 58, of Santa Ana, California, and his company, Minnesota Independent Cooperative (MIC), of all charges on January 26, 2023, following a two-week trial.
“Miller and his co-conspirators disregarded the health and safety of thousands of people in need of medication,” said First Assistant United States Attorney Patrick D. Robbins. By putting profits over patients, Miller and his criminal enterprise undermined important safeguards designed to ensure the safety of prescription drugs in the United States. This sentence sends the clear message that the diversion of prescription drugs and the intentional circumvention of these critical regulatory requirements will not be tolerated.”
“The FDA oversees the prescription drug supply chain; when criminals breach that supply chain, patients can no longer be assured of the safety or effectiveness of the drugs they may take,” said Special Agent in Charge George A. Scavdis, FDA-OCI Metro Washington Field Office. “We will continue to pursue and bring to justice those who would put the public health at risk through their criminal actions.”
“David Miller greedily put the health and well-being of people at risk with the orchestration and implementation of his prescription drug diversion scheme. He attempted to capitalize on his disregard for people’s health by laundering money around the world,” said Special Agent in Charge Darren Lian, IRS-CI Oakland Field Office. “Let today’s sentencing be a warning to those who aspire to profit from deception against the U.S. government and innocent taxpayers: IRS Criminal Investigation and partner law enforcement agents will catch you and justice will be served.”
The trial was the result of indictments filed in two separate districts—the Northern District of California and the Southern District of Ohio. The convictions included charges handed down in a second superseding indictment by a grand jury in the Northern District of California on February 11, 2016, and by a separate indictment handed down on May 6, 2015, in the Southern District of Ohio. Both indictments involved additional defendants and charges that were not presented at the trial.
The evidence at trial established that Miller, 58, of Santa Ana, Calif., was at the center of a vast racketeering enterprise responsible for the fraudulent distribution of hundreds of millions of dollars’ worth of diverted prescription drugs, including instances in which Miller and his co-conspirators distributed tampered medication that posed a health risk to consumers. The scheme targeted brand-name prescription drugs designed to treat HIV, hepatitis C, mental disorders, and various other serious conditions. Miller and MIC lied to their customers about the nature and sources of the prescription drugs being sold, falsely claiming that the drugs had been maintained in the safe, federally- and state-regulated supply chain. The evidence at trial established that Miller and his company agreed with many others, including Mihran Stepanyan, 37, and Artur Stepanyan, 45, to conduct the affairs of their wide-ranging and long-lasting criminal enterprise. The evidence established that the enterprise, operating primarily out of Southern California and Minnesota, was responsible for distributing diverted prescription drugs to unsuspecting pharmacies throughout the county. In finding Miller guilty, the jury concluded that he played a role in promoting the racketeering conspiracy. For example, as the owner and operator of MIC between 2007 and 2015, Miller bought approximately $157 million of diverted prescription drugs from co-defendants Mihran and Artur Stepanayan. Miller and MIC also knew that the Stepanyans were not licensed to sell prescription drugs and that they procured their drugs from street suppliers. Miller and MIC nevertheless purchased the diverted drugs from the Stepanyans and lied to their customers about the sources and nature of those drugs.
Further, the jury concluded Miller engaged in a money laundering conspiracy. The evidence established that Miller and others laundered hundreds of millions of dollars between approximately 2007 and 2015 to promote their criminal activities and to conceal the nature of their scheme. For example, to hide the fact Miller was paying the Stepanyans for the illegally sourced drugs they were distributing, Miller made payments to the Stepanyans’ company GC National Wholesale through companies he controlled in Puerto Rico. As to another supplier, Miller authorized payments to accounts held in the names of various front companies at banks in multiple countries. In this way, Miller and his co-conspirators sought to obscure the illicit sources of MIC drugs and to conceal the true identities of the suppliers.
In sum, at the conclusion of the trial, Miller was convicted of one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); ten counts of mail fraud, in violation of 18 U.S.C. § 1341; and one count of conspiracy to engage in the unlicensed wholesale distribution of drugs and making a false statement to the FDA, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(2)(A), and 18 U.S.C. § 371.
In addition to the prison term, Judge Breyer ordered Miller to pay a $250,000 fine, due immediately; to serve three years of supervised release to begin after the prison term is completed; and to pay a $1,400 special assessment. Judge Breyer also ordered MIC, currently a defunct entity, to pay a special assessment of $4,500.
Of the 38 defendants charged in the February 2016 second superseding indictment, all have either been convicted or resolved their case, and six remain to be sentenced.
Assistant United States Attorneys Claudia Quiroz, Andrew Dawson, and Chris Kaltsas are prosecuting the case, with the assistance of Paralegal Specialist Kevin Costello. The prosecution is the result of an investigation by the FBI, IRS-Criminal Investigation, U.S. Food and Drug Administration Office of Criminal Investigations, and U.S. Postal Inspection Service.
CEO of Company Providing Homes for Parolees and Probationers Sentenced to 17 Years in Prison for Bank Fraud, Wire Fraud, Witness Tampering, and Other OffensesRead the Press Release
OAKLAND – Attila Colar, aka Dahood Sharieff Bey, aka Sharieff Dahood Bey, aka Sharieff Pasha, aka David Lee, aka Georgi Petrakov, was sentenced to serve 204 months (17 years) in prison after being convicted of forty-four (44) felonies including conspiracy, bank fraud, wire fraud, aggravated identity theft, false statements to a bank, destruction of property to prevent a search, possession of a firearm as a felon, making a false tax return, obstruction, and witness tampering. The sentence was handed down by the Honorable Haywood S. Gilliam, Jr., U.S. District Judge.
Colar, 51, of Richmond, Calif., was convicted of the crimes by a jury on June 23, 2023, after a three-week trial. Colar is the former Chief Executive Officer of All Hands on Deck, a Richmond, Calif., company that held itself out as providing a residential reentry home for probationers, parolees, homeless persons, and persons with mild mental illness. In finding him guilty of the sundry crimes, the jury concluded Colar carried out multiple schemes to defraud, including defrauding organizations that placed residents at his company’s transitional housing facilities and defrauding several lenders that were participating in the Paycheck Protection Program (PPP). The jury also found that Colar attempted to destroy evidence, obstructed the FBI’s and grand jury’s investigations into his crimes, and tampered with a witness by attempting to concealing the witness while law enforcement was taking steps to execute a material witness order.
“In the wake of a national crisis, the government established programs, including the Paycheck Protection Program, to ease the pain inflicted by a global pandemic,” said Ismail J. Ramsey, United States Attorney for the Northern District of California. “Colar took this opportunity to defraud the government, while also defrauding several other initiatives intended to help the homeless, newly released prisoners, and those with drug problems, to name just a few of his victims. This sentence should serve as a warning that this office will pursue with vigor those who seek to line their own pockets by defrauding government efforts to address our communities’ needs.”
“Colar is now facing the consequences for his attempt to steal from a taxpayer-funded program designed to offer crucial relief to those businesses affected during the pandemic,” said Robert K. Tripp, Special Agent in Charge, San Francisco Field Office, Federal Bureau of Investigation. “We are proud to have worked in close coordination with our federal partners to ensure justice prevailed in this case.”
“This sentencing sends a clear warning that you will be brought to justice if you defraud the federal government of pandemic relief funds,” said Jon Ellwanger, Special Agent in Charge, Western Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau. “We are proud to have worked with our federal law enforcement partners and the U.S. Attorney’s Office to hold Mr. Colar accountable for his crimes.”
“Abusing SBA’s pandemic relief programs that are intended to provide critical relief to small businesses is unconscionable.” said SBA OIG’s Western Region Special Agent in Charge Weston King. “This sentencing further showcases that those who fraudulently take advantage of federal government programs will face justice for their selfish deeds. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and commitment to seeing justice served.”
“Mr. Colar attempted to defraud the U.S. government by filing multiple false tax documents to further his Paycheck Protection Program scheme. Along the way, he harmed the members of the community those funds are designed to aid and protect,” said IRS-Criminal Investigation Special Agent in Charge Darren Lian of the Oakland Field Office. “This sentencing reinforces that people who abuse the U.S. tax system and victimize taxpayers will be held accountable. IRS Criminal Investigation agents work closely with multiple agencies to help ensure those who choose to break the law are caught and punished. I would like to thank the United States’ Attorney’s Office’s and its federal partners for working together to achieve a just result.”
“When individuals corruptly obstruct the due administration of the Internal Revenue Code and file documents under false pretenses, they defraud and steal funds from taxpayer-funded programs intended to assist small businesses. TIGTA will always pursue these individuals and ensure they are prosecuted to the fullest extent of the law,” stated Special Agent in Charge Rod Ammari. “I want to thank our law enforcement partners and the U.S. Attorney’s Office for their joint efforts to hold these criminals accountable for their actions.”
Evidence at trial showed that starting in late 2018, Colar engaged in a scheme to defraud, among others, GEO Reentry, which provided treatment and supervision programs for adult probationers, parolees, and pretrial defendants in residential, in-custody, and non-residential reentry centers for the California Department of Corrections and Rehabilitation (CDCR). Specifically, in or about 2019, Colar fraudulently induced GEO Reentry to refer parolees to All Hands on Deck using falsified fire inspection clearance reports, a false letter of recommendation, false security clearance documents, and false and misleading information about its staff.
Additional evidence demonstrated that in April and June of 2020, Colar engaged in a second scheme to defraud lenders participating in the PPP lending plan authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act was designed to provide emergency financial assistance to the millions of Americans who were suffering from the economic effects caused by the COVID-19 pandemic. Pursuant to the CARES Act, the SBA managed the PPP lending plan. Trial evidence established Colar submitted multiple loan applications on behalf of All Hands on Deck to lenders that were false and misleading. For example, the applications substantially overstated the number and payroll of All Hands on Deck employees—while Colar’s loan applications stated All Hands on Deck had approximately 73 to 81 employees, the business had, in fact, perhaps other than himself, no salaried employees.
Colar was also convicted of offenses related to the submission of multiple fraudulent loan applications in the name of other companies. The evidence demonstrated Colar hastily revived two dormant companies, and then submitted loan applications from the PPP lending plan for the bogus businesses. To carry out this scheme to defraud, Colar used, without legal authority, the names and identities of two persons living in his residential reentry facility. Colar falsely represented that the residents were “CEO”s of companies with hundreds of employees with million-dollar payrolls.
In all, the evidence at trial showed that Colar submitted a total of 16 fraudulent loan applications to the PPP lending plan seeking approximately $34,655,437 in PPP loans.
Colar also was convicted of obstruction and witness tampering relating to the investigations into his crimes. Colar has been found guilty of destroying documents during a search of his home, lying to the FBI about a firearm, falsifying records produced to the grand jury, interfering with the representation by counsel of a material witness by impersonating the witness’s Power of Attorney, coaching a witness to falsely state that the witness was the CEO of one of Colar’s bogus companies that submitted fraudulent loan applications, and concealing a witness in multiple hotels and other locations in the Bay Area to forestall or prevent the witness from providing testimony in the federal grand jury.
In sum, Colar was convicted of forty-four (44) federal criminal offenses for his conduct. The convictions include the following: one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; one count to commit conspiracy to commit bank fraud and wire fraud, in violation of 18 U.S.C. § 1349; two counts of bank fraud, in violation of 18 U.S.C. § 1344; sixteen counts of wire fraud, in violation of 18 U.S.C. § 1343; eight counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A; two counts of false statement to a bank, in violation of 18 U.S.C. § 1014; one count of possession of a firearm by a felon, in violation of 18 U.S.C. § 922(g); one count of destruction of property to prevent a search or seizure, in violation of 18 U.S.C. § 2232(a); one count of obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2); two counts of falsification of records in a federal investigation, in violation of 18 U.S.C. § 1519; six counts of making a false tax return, in violation of 26 U.S.C. § 7206; one count of conspiracy to tamper with a witness, in violation of 18 U.S.C. § 1512(k); one count of tampering with a witness, in violation of 18 U.S.C. § 1512(b)(1); and one count of tampering with a witness, in violation of 18 U.S.C. § 1512(b)(2).
In addition to the prison term, Judge Gilliam also ordered Colar to serve 60 months (five years) of supervised release, to begin after his prison term. Restitution will be determined at a later date. Colar is currently in federal custody and will begin serving his prison term immediately.
Assistant U.S. Attorneys Barbara J. Valliere, Adam A. Reeves, and Ross D. Mazer are prosecuting the case with the assistance of Paralegal Specialist Laurie Worthen and Legal Assistant Kathy Tat. The prosecution is the result of an investigation by the FBI, IRS-Criminal Investigation, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau, Internal Revenue Service: Criminal Investigation, Treasury Inspector General for Tax Administration, and Office of Inspector General for the U.S. Small Business Administration.
U.S. Attorney and U.S. Postal Inspector in Charge Unveil Charges Against Multiple Defendants Alleged to Have Interfered with Delivery of the MailRead the Press Release
OAKLAND – U.S. Attorney Ismail J. Ramsey and U.S. Postal Inspector in Charge Rafael Nuñez announced today that multiple arrests have been made in cases involving the interference with delivery of the U.S. mail. The announcement was made at a press conference held this morning at the Ronald V. Dellums Federal Building.
The theft of postal keys, break-ins of postal vehicles, assaults on letter carriers, and various other criminal acts involving interference with delivery of the mail and the alleged illegal possession of personally identifying information were all discussed at the press conference. According to U.S. Attorney Ramsey, defendants in each case now are facing severe federal penalties that make clear their alleged crimes were not worth the consequences.
“In each of the cases I will discuss,” said U.S. Attorney Ramsey, “the government alleges the defendants have violated federal criminal laws and, as a consequence, federal agents and local law enforcement has tracked them down . . .. The penalties for these crimes can be sobering.”
Inspector in Charge Nuñez reinforced the U.S. Attorney’s remarks and announced that the reward for information leading to arrest and conviction of any individual who robs or assaults a postal worker is now $150,000. “There is no more important mission for us as federal agents than protecting postal workers from crime and violence,” said Inspector in Charge Nuñez. “To any copycats or wannabes out there who might consider robbing a postal worker, I ask you to consider the years you will face in federal prison, the price on your head, and that postal inspectors will not stop hunting you. The proceeds of this crime are not worth your freedom.”
U.S. Attorney Ramsey stated that most of the cases involved the theft of specialized postal keys that often grant access to large mailboxes or mail storage facilities. Holding one such postal key in his hand, U.S. Attorney Ramsey explained that federal laws have been “carefully crafted to protect the sanctity of the mail, including the sensitive information we entrust to the mail system; the safety of the federal employees and contractors who deliver the mail; and the federal property that is used to ensure mail delivery.” He then went on to describe how three of the defendants are alleged to have violated the law as follows:
• Anthony Medina, 42, of American Canyon, Calif., is alleged to have unlawfully possessed seven mail keys. According to the complaint, officers with the San Francisco Police Department were attempting to perform a traffic stop when the defendant attempted to flee. Officers arrested the defendant and, in addition to the keys, defendant is alleged to have possessed credit cards in the names of other individuals, images of suspected stolen mail, and access codes for an apartment complex in San Francisco. Medina now faces 10 years in prison for each violation of 18 U.S.C. section 1704—the unlawful possession of the postal keys, as well as possible prosecution for unlawful possession of mail and credit cards. (Case No. 23-mj-71443 MAG)
• Robert Devon Nicholson Bell, Jr., 19 , of Antioch, Calif., is alleged to have participated in at least two armed robberies of letter carriers, one in Antioch and one in San Francisco. Allegations in the criminal complaint filed against the defendant describe Bell’s use of mail keys to steal mail from blue mailboxes. According to a criminal complaint, Bell was found in Antioch in possession of robbed postal keys, a substantial quantity of stolen mail, a fraudulent USPS ID with his picture, and stolen and counterfeit checks. He now faces a statutory maximum of 10 years in prison for the unlawful possession of the postal key, as well as 25 years for each of the armed robberies. (Case No. 23-mj-71439 MAG)
• Derek Hopson, 33, of Oakland, Calif., is alleged to have stolen mail and postal keys in two separate incidents that occurred in June of 2023. The complaint alleges the San Francisco Police Department responded to a burglary in progress at a residence in the Mission District of San Francisco when officers encountered the defendant in possession of several postal keys. Hopson also allegedly used a mailbox key to gain access to mailboxes at a residential complex in the Presidio of San Francisco. He now faces a statutory maximum of 15 years in prison for violating 18 U.S.C. sections 1704 and 1706. (Case No. 23-mj-71403 MAG)
Additional recently-filed cases being prosecuted in the Northern District of California include the following:
CASE NUMBER
DEFENDANT NAME
STATUTES ALLEGED
MAXIMUM STATUTORY SENTENCE
23-CR-0086 HSG
Craig Curtis Freeman
Kaylynn Nicole Ulrich
18 U.S.C. § 2117 (Breaking and Entering into a Carrier Facility)
18 U.S.C. § 1708 (Possession of Stolen Mail and Theft of Mail)
10 years of imprisonment
10 years of imprisonment
23-mj-70714 MAG
Stephen Hilton
18 U.S.C. § 2114
(Robbery of a Mail Carrier)
25 years of imprisonment
23-cr-317 HSG
Michael Derryberry
Lucas Ostolaza
18 U.S.C. § 2114
(Robbery of a Mail Carrier) (2 counts, each defendant)
18 U.S.C. §§ 1704 and 2: (Unlawful Possession of Mail Keys) (2 counts, each defendant)
25 years of imprisonment
10 years of imprisonment
23-mj-71424
Michael Morgan
18 U.S.C. §§ 1704 and 2: (Unlawful Possession of Mail Keys)
18 U.S.C. § 1708 (Possession of Stolen Mail and Theft of Mail)
10 years of imprisonment
5 years of imprisonment
23-cr-126 WHO
Vo Nguyen
18 U.S.C. § 111(a) and (b) (Assault on a Federal Employee with a Deadly or Dangerous Weapon)
18 U.S.C. § 1114(a)(3) (Attempted Murder of an Employee of the United States)
18 U.S.C. § 924(c)(1) Using, Carrying, and Discharging a Firearm in Connection with a Crime of Violence
20 years of imprisonment
20 years of imprisonment
Minimum 10 years of imprisonment and maximum life in prison
Indictments and criminal complaints merely allege that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. Further, in addition to the prison terms described, as part of any sentence following conviction the court may order defendants to serve an additional term of supervised release to begin after a prison term, additional fines, and restitution, if appropriate. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The prosecution of these cases are the result of investigations by the United States Postal Inspection Service.
Telecommunications Consultant Pleads Guilty to Violating Sanctions on IranRead the Press Release
Farhad Nafeiy, 70, of Alamo, California, was charged with and pleaded guilty yesterday to a violation of the International Emergency Economic Powers Act (IEEPA) in the Northern District of California.
Under IEEPA, the President of the United States is granted authority to address unusual and extraordinary threats to the national security, foreign policy, or economy of the United States. Under that law, the President has issued orders prohibiting certain activities and transactions with Iran and the Government of Iran. The Department of Treasury’s Office of Foreign Assets Control (OFAC) has issued regulations, referred to as the Iranian Transactions and Sanctions Regulations (ITSR), implementing those orders. These sanctions on Iran generally prohibit, among other things, exporting or facilitating the export of U.S.-origin products to Iran and providing services to Iran.
According to court documents, Nafeiy obtained licenses – or approvals – from OFAC for advising non-Iranian telecommunications companies on doing business with Iran. However, those licenses did not authorize Nafeiy to provide any hardware, software or technology directly to Iran. Nafeiy exceeded his OFAC licenses, thereby violating the ITSR and IEEPA, by directly providing software upgrades to telecommunications equipment in Iran. Nafeiy admitted in his plea agreement that he knew he exceeded these licenses when he did so. In his plea agreement, Nafeiy further admitted that the total amount of sales of such software upgrades to Iran was approximately $400,000. Nafeiy separately was charged with, and admitted to, evading his federal income taxes, and specifically not paying income tax on some of the proceeds of these sales.
On Aug. 10, Nafeiy was charged by information with one count of violating IEEPA and one count of tax evasion. Sentencing is set before the Honorable Aracelli Martínez-Olguín on Jan. 29, 2024.
Homeland Security Investigations and the IRS-Criminal Investigation are investigating the case.
Assistant U.S. Attorney Benjamin Kingsley for the Northern District of California and Trial Attorney David Ryan of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case, with assistance from Kathleen Turner of the U.S. Attorney’s Office for the Northern District of California. Former Trial Attorney Elizabeth Abraham provided valuable assistance in prior phases of the prosecution.
Nafeiy InformationBay Area Telecommunications Consultant Pleads Guilty to Violating Sanctions on IranRead the Press Release
OAKLAND - The U.S. Attorney’s Office today announced charges against and guilty pleas by Farhad Nafeiy for violating sanctions by exporting software upgrades for commercial-grade telecommunications servers to the Islamic Republic of Iran (“Iran”), and for tax evasion. The plea was accepted by the Honorable Araceli Martínez-Olguín, United States District Judge. The announcement was made by United States Attorney for the Northern District of California Ismail J. Ramsey, Assistant Attorney General Mathew G. Olsen, Homeland Security Investigations (HSI) Special Agent in Charge Tatum King, and Special Agent in Charge of the IRS Criminal Investigation’s Oakland Field Office Darren Lian.
Nafeiy, 70, of Alamo, Calif., was charged with and pleaded guilty to a violation of the International Emergency Economic Powers Act (“IEEPA”). Under IEEPA, the President of the United States is granted authority to address unusual and extraordinary threats to the national security, foreign policy, or economy of the United States. Under that law, the President has issued orders prohibiting certain activities and transactions with Iran and the Government of Iran. The Department of Treasury’s Office of Foreign Assets Control (OFAC) has issued regulations, referred to as the Iranian Transactions and Sanctions Regulations (ITSR), implementing those orders. These sanctions on Iran generally prohibit, among other things, exporting or facilitating the export of U.S.-origin products to Iran and providing services to Iran.
Nafeiy obtained licenses—or approvals—from OFAC for advising non-Iranian telecommunications companies on doing business with Iran. However, those licenses did not authorize Nafeiy to provide any hardware, software, or technology directly to Iran. Nafeiy exceeded his OFAC licenses, thereby violating the ITSR and IEEPA, by directly providing software upgrades to telecommunications equipment in Iran. Nafeiy admitted in his plea agreement that he knew he exceeded these licenses when he did so. In his plea agreement, Nafeiy further admitted that the total amount of sales of such software upgrades to Iran was approximately $400,000. Nafeiy separately was charged with, and admitted to, evading his federal income taxes, and specifically not paying income tax on some of the proceeds of these sales.
On August 10, 2023, Nafeiy was charged by information with one count of violating IEEPA, in violation of 50 U.S.C. § 1705, and one count of tax evasion, in violation of 26 U.S.C. § 7201. Pursuant to the plea agreement, he pleaded guilty to both charges.
Judge Martínez-Olguín scheduled Nafeiy’s sentencing hearing for January 29, 2024. For the 50 U.S.C. § 1705 violation, Nafeiy faces a maximum statutory prison term of 20 years, a maximum fine of $1,000,000, and restitution, if appropriate. For the tax evasion charge, Nafeiy faces a maximum prison term of five years, a maximum fine of $250,000, and restitution of at least $79,124 to the IRS. As part of any sentence, the court may also order Nafaiy to serve a period of supervised release and to pay additional assessments, however, the court will impose a sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant U.S. Attorney Benjamin Kingsley and Trial Attorney David Ryan of the National Security Division’s Counterintelligence and Export Control Section, with the assistance of Kathleen Turner of the U.S. Attorney’s Office. Former Trial Attorney Elizabeth Abraham provided valuable assistance in prior phases of the prosecution. The prosecution is the result of an investigation by Homeland Security Investigations and the Internal Revenue Service-Criminal Investigation.
County Water District Agrees to Pay over $1.5 Million to Resolve False Claims Act Allegations That It Knowingly Retained Overpayment of Federal and State Grant FundsRead the Press Release
SAN FRANCISCO – The Clearlake Oaks County Water District (District), located in Lake County, California, has agreed to pay approximately $1.6 million to resolve claims that it failed to repay federal and state grant funds that it received, but was not entitled to keep.
In February 2017, severe winter storms, flooding, and mudslides affected California counties statewide. In June, the Federal Emergency Management Agency (FEMA) declared a major disaster and allowed eligible entities, including public entities, to apply for assistance in the form of reimbursement for disaster-related expenses from FEMA and the California Governor’s Office of Emergency Services (Cal OES). One such applicant was the District, a county water district formed pursuant to the California Water Code.
The United States alleges that following the District’s application for disaster relief funds, the District received reimbursements from FEMA and Cal OES for expenses for which the District had already been reimbursed by its insurer California Joint Powers Insurance Authority (CJPIA). The United States alleges further that the District knew the funds it received from FEMA and Cal OES were an overpayment, but instead of returning those funds, retained the funds in violation of the False Claims Act and state law. The United States alleges that the District knowingly concealed the funds and made false statements to the United States and Cal OES material to its obligation to return the funds. These false statements included quarterly reports in which the District stated that it had not received excess funds and project closeout certifications in which the District claimed that it was entitled to the full dollar amount approved without deducting the amount it had already received from its insurer.
“FEMA disaster relief funds play a critical role in helping communities recover from natural disasters,” said U.S. Attorney Ismail J. Ramsey. “It is unacceptable for any entity, including a public entity, to divert funds from these programs through fraud and enrich itself at the expense of the American taxpayer. This Office will continue to pursue recipients of disaster relief funds that misused the program by retaining funds to which they were not entitled.”
Dr. Joseph V. Cuffari, Inspector General of the U.S. Department of Homeland Security, said, “DHS OIG is grateful for our collaboration with our partners in the United States Attorney’s Office for the Northern District of California. Together, we ensured that more than $1.1 million are repaid to the United States. We will continue to aggressively investigate and support the prosecution of these kinds of fraudsters to ensure that appropriated relief funds are accounted for and used for the purpose Congress intended.”
The total amount of the settlement to be paid is $1,589,725.50, plus interest. Of that amount, the District will pay $1,192,294.12 to the United States and $397,431.38 to Cal OES.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Nicole Mitchell, a former employee of the District. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. Nicole Mitchell v. Clearlake Oaks County Water District, Case No. 1:20-cv-02388 (N.D. Cal.).
Assistant U.S. Attorney Savith Iyengar is handling this matter for the government, with assistance from Garland He. The investigation and settlement resulted from a coordinated effort by the U.S. Attorney’s Office for the Northern District of California and DHS-OIG.
The investigation and resolution of this matter illustrate the government’s emphasis on combating fraud in federal grants. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Homeland Security Office of Inspector General at www.oig.dhs.gov/hotline.
The claims resolved by the settlement are allegations only, and there has been no determination of liability.
San Francisco Daycare Worker Sentenced to 25 Years in Prison for Using Access to Children to Produce, Possess, and Distribute Child PornographyRead the Press Release
SAN FRANCISCO – Jace Wong was sentenced to serve 300 months in prison for production, attempted production, distribution, and possession of child pornography in connection with a scheme to take pictures and videos of four- to six-year-olds that he could share on child pornography sites online announced U.S. Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. James Donato, United States District Judge.
Wong pleaded guilty to the charges on April 24, 2023. According to his plea agreement, Wong admitted that beginning March 19, 2021, while he was employed at a daycare facility in San Francisco, he surreptitiously took sexually explicit photos and videos of prepubescent minors at the facility while they were going to the bathroom. Wong acknowledged that the children were approximately four to six years old and that the photos and videos he captured depicted the prepubescent minors’ genitalia. Wong admitted that he distributed those videos and images online in group chats and in private messages.
“This case is heartbreaking, to say the least,” said U.S. Attorney Ramsey. “Jace Wong worked at daycare facilities and victimized at least six young children in his care, not to mention other minors whose images he possessed and distributed. It is not possible to measure the harm he caused. His decades-long prison sentence, however, makes crystal clear that the Department of Justice will work tirelessly to remove perpetrators who victimize our most vulnerable citizens — young children — from society so they cannot continue their heinous behavior.”
“Wong's actions were shocking. Instead of attending to their safety, Wong exploited children of tender years for his own gratification. His sentence makes clear child predators will be held accountable,” said FBI Special Agent in Charge Tripp. ”The FBI is committed to protecting our most vulnerable citizens and apprehending sexual offenders.”
Wong admitted in his plea agreement that between August 2019 and December 2020, he worked at a separate daycare center in Livermore, Calif., where he took at least three videos of the prepubescent minors in his care. The victims were approximately three to four years old. He posted photos and videos of his victims on the dark web in October and December 2020. Wong admitted that these videos contained hands-on sexual contact. He stopped recording these videos when the victims moved away from him. Further, Wong admitted that he possessed and distributed visual depictions of minors engaging in sexually explicit conduct, including at least one video of material containing child sexual abuse. Wong was arrested after he sent a video containing child pornography to an undercover officer and investigators were able to deduce where the video was created.
On October 18, 2022, a federal grand jury indicted Wong charging him with five counts of production or attempted production of child pornography, in violation of 18 U.S.C. § 2251(a) and (e); one count of distribution of child pornography in violation of 18 U.S.C. § 2252(a)(2) and (b); and one count of possession of child pornography in violation of 18 U.S.C. § 2252(a)(4)(B) and (b)(2). Wong pleaded guilty to all the counts.
Wong has been in custody since his arrest in April of 2021. He will begin serving his prison term immediately. In addition to the prison term, Judge Donato also ordered Wong to serve 15 years of supervised release which will begin after his term of imprisonment.
The case is being prosecuted by Assistant United States Attorney Kelsey Davidson, with assistance from Kevin Costello and Maria Sunga. The prosecution is the result of an investigation by the FBI with assistance from U.S. Homeland Security Investigations and the Winnebago County Sheriff’s Office in Wisconsin.
Right-Wing Extremist Convicted of Murder and Attempted Murder After Drive-By Shooting at Federal CourthouseRead the Press Release
SAN FRANCISCO – A federal jury convicted Robert Alvin Justus, Jr. of aiding and abetting the murder of Protective Services Officer (“PSO”) Dave Patrick Underwood and aiding and abetting the attempted murder of a second PSO in the May 29, 2020, drive-by shooting at the Ronald V. Dellums Federal Building and U.S. Courthouse in Oakland, Calif., announced U.S. Attorney Ismail J. Ramsey, FBI Special Agent in Charge Robert K. Tripp, and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) San Francisco Field Division Special Agent in Charge Jennifer Cicolani. The verdict follows a two-week trial before the Hon. Yvonne Gonzalez Rogers, United States District Judge.
The evidence at trial established that Justus, 33, of Millbrae, was the driver of the vehicle from which Steven Carrillo, 35, of Santa Cruz fired the gunshots that killed Officer Underwood and wounded the second officer. The trial evidence demonstrated that, at approximately 9:27 p.m., on May 29, 2020, Justus parked a white Ford Econoline van directly across the street from the federal building in Oakland on Jefferson Street. The van was on the southeast corner in the spot closest to the intersection with an unobstructed view of the guard post where Officer Underwood and his partner that evening stood guard to protect the building and its occupants. At approximately 9:44 p.m., the exterior lights of the van turned on and Justus drove the van north on Jefferson Street toward the guard post. The passenger-side sliding door opened, and Carrillo fired numerous rounds from an AR-style rifle toward the guard post, killing Officer Underwood and seriously injuring his partner.
The incident set off an eight-day manhunt that resulted in Carrillo’s capture at his residence in Ben Lomond, Calif., -- but not before Carrillo killed a Santa Cruz Sheriff’s Deputy and injured another. Carrillo opened fire on the deputies when they arrived at his property. Several days later, after Justus became aware that he was under investigation, he travelled to the Federal Building in San Francisco, met with the FBI, and admitted to his involvement in the shooting including his role as the driver of the vehicle. Justus claimed—during that meeting and in his trial testimony—that Carrillo had forced him to participate in the shooting against his will.
The trial evidence established that Justus and Carrillo shared an allegiance to a right-wing anti-government movement called Boogaloo. Both men’s social media activity and other correspondence in the months before the shooting demonstrated a strong desire to carry out violent acts against federal law enforcement officers and other public servants. In February of 2020, Justus commented on Facebook that he had a “bloodlust for police.” In April 2020, Justus corresponded with an armed anti-government militia group he was interested in joining. On May 27, 2020, Justus posted an image depicting a police officer being shot in the head with a caption reading “Speak to cops in a language they understand.” On the day before the shooting, Carrillo posted a video of a mob attacking police cruisers and commented, “[T]his needs to be nationwide. It’s a great opportunity to target the specialty soup bois”—a Boogaloo slang term for federal agents. Justus responded to Carrillo’s post that same day, writing “Let’s boogie.” The following day, the two met in a San Leandro parking lot to go to Oakland. They planned to capitalize on protests that night in response to the death of George Floyd, hoping that their attack would spark further anti-government violence.
The trial evidence also showed that, after arriving in Oakland the evening of May 29, Justus and Carrillo circled the downtown area several times. In the hour leading up to the shooting, Justus exited the van twice to scout the area on foot and locate targets, returning to the van both times. Following the fatal shooting, Justus drove Carrillo back to Milbrae and the two separated. In the days following the murder, Justus destroyed digital and physical evidence connecting him to the shooting, continued to post anti-law enforcement content on Facebook, and corresponded with Carrillo about future meetings.
The jury convicted Justus of murder of a federal employee and attempted murder of a federal employee, in violation of 18 U.S.C. §§ 1114(3), 1111. Justus now faces a mandatory term of life in prison. Judge Gonzalez Rogers scheduled Justus’s sentencing hearing for February 24, 2024.
On February 11, 2022, Carrillo pleaded guilty to two federal charges related to the May 29, 2020, shooting—use of a firearm in furtherance of a crime of violence resulting in death, in violation of 18 U.S.C. §§ 924(j)(1) and 2, and attempted murder of a person assisting an officer of the United States Government, in violation of 18 U.S.C. §§ 1114(3), 1111. On June 3, 2022, Judge Gonzalez Rogers sentenced Carrillo to serve 41 years in prison followed by a lifetime of supervised release for his role in the crimes. Carrillo also received a life sentence in Santa Cruz County Superior Court in connection with his murder of the Santa Cruz Sheriff’s Deputy.
Assistant United States Attorneys Jonathan U. Lee and John C. Bostic are prosecuting the case with the assistance of Patricia Mahoney, Yenni Weinberg, and Lynette Dixon. The case is being investigated by the FBI, the ATF, the FPS, and the U.S. Marshal Service with assistance from the Oakland Police Department and the Santa Cruz County Sheriff’s Office.
San Mateo Man Sentenced to 18 Years in Prison for Crimes Including Coercing and Enticing Minors to Produce Child PornographyRead the Press Release
SAN FRANCISCO – San Mateo-based driving instructor Johnnatan Zelaya Izaguirre (Zelaya) was sentenced to serve 18 years in prison for coercing and enticing teenaged girls to produce child pornography and related crimes announced U.S. Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. William H. Orrick, United States District Judge.
Zelaya pleaded guilty to the charges on May 4, 2023. According to his plea agreement, Zelaya admitted that between November 2013 until January 4, 2022, he recruited minor girls—between the ages of 14 and 17 years old—to create sexually explicit images for posting online. Zelaya admitted that he had sex with at least two victims while they were minors and, on one occasion, filmed himself having sexual intercourse with a minor. He later distributed that video, depicting his sex acts with a minor, to a client knowing the minor was under 18 in the video.
Zelaya’s plea agreement describes how he recruited seven of his victims, using social media and in person. Online, he used social media accounts, including Instagram and Snapchat, to identify minor girls and to persuade them to produce sexually explicit content. In person, Zelaya used the driving school that he owned and operated to find students to recruit. When persuading his victims to create sexually explicit content, Zelaya offered to “manage” the sale of that content over social media. He told his victims about the content that customers wanted, how much the customers were willing to pay, and how much the minor should expect to make from videos, depending upon the type of video and whether they were nude or non-nude. At the time of his arrest on January 4, 2022, Zelaya had in his possession at least 41 videos and 10 photographs of the victims, as well as photos of additional unidentified girls.
On May 1, 2023, Zelaya was charged by superseding information with two counts of coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b); one count of receipt of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2) and (b)(1); one count of possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B) and (b)(2); and one count of distribution of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2) and (b)(1). Pursuant to his plea agreement, Zelaya pleaded guilty to all the charges.
In addition to the prison term, Judge Orrick also ordered Zelaya to serve 15 years of supervised release which will begin after his term of imprisonment. Zelaya was immediately remanded into custody.
The case is being prosecuted by Assistant United States Attorney Lauren Harding with assistance from Patricia Mahoney and Amala James. The prosecution is the result of an investigation by the FBI and the Redwood City Police Department with assistance from the California State Department of Motor Vehicles, the Atherton Police Department, and the Burlingame Police Department.
Danville Woman Sentenced to 22 Months in Federal Prison for Embezzling $1.7 Million from Public CompanyRead the Press Release
OAKLAND – Gina Suzanne Lonestar was sentenced to 22 months in federal prison in connection with a wire fraud scheme pursuant to which she embezzled over $1.7 million from her former employer, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Jon S. Tigar, United States District Judge.
Lonestar, 52, of Danville, Calif., pleaded guilty to the charge on May 19, 2023. According to her plea agreement, Lonestar admitted that, in December 2010, she devised a scheme to create a fake vendor to defraud Men’s Wearhouse and later Tailored Brands (Men’s Wearhouse’s parent company) of money by submitting and approving false invoices for the fake vendor to the accounts payable department. Lonestar created a document stating the vendor was a sole proprietorship associated with a family member and then began submitting and approving invoices falsely claiming the vendor was performing work at Men’s Wearhouse stores throughout California, such as inspections and handyman work. Lonestar admitted that she submitted and approved false invoices in the name of the fake vendor for approximately eight years, defrauding her employer of over $1.7 million, which was paid to her joint checking account. Lonestar admitted that the vendor did not exist and the family member with whom she co-owed the company performed none of the work for which she provided invoices.
At the time Lonestar devised the scheme, she was a Director in the Facilities Department of Men’s Wearhouse. During the relevant time period she was promoted to Senior Director of Facilities and Corporate Services and then to Vice President of Construction, Maintenance, and Facilities. In all of her roles, she had the authority to approve invoices for work done by vendors. Lonestar’s scheme ended in 2019 when the company discovered the conduct during an internal audit.
On September 8, 2022, a federal grand jury indicted Lonestar charging her with six counts of wire fraud, in violation of 18 U.S.C. § 1343. Pursuant to her plea agreement, Lonestar pleaded guilty to one count and the court dismissed the remaining counts during her sentencing hearing.
In addition to the 22-month sentence, Judge Tigar ordered Lonestar to pay a $1,736,216 forfeiture money judgment and to serve three years of supervised release which will begin after she leaves prison. Judge Tigar ordered that Lonestar begin serving her sentence on January 5, 2024. In addition, Judge Tigar scheduled a hearing for December 1, 2023, to determine issues regarding restitution.
The case is being prosecuted by Assistant United States Attorney Noah Stern with assistance from Elizabeth Kim and Kathleen Turner. The prosecution is the result of an investigation by the FBI.
Bay Area Resident Sentenced to 15 Years in Prison for Producing Child Pornography and Engaging in Sex Trafficking of A MinorRead the Press Release
SAN FRANCISCO – Kenneth Orlando Sparks was sentenced to serve 15 years in prison for producing child pornography and for engaging in the sex trafficking of a minor, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Honorable Vince Chhabria, United States District Judge.
A jury convicted Sparks, 37, of Oakland, Calif., of the charges on March 20, 2023. The evidence at trial established that Sparks produced child pornography by recording multiple videos of himself having sex with a minor victim in July 2019. Further, the evidence demonstrated that Sparks engaged in sex trafficking of a minor for his actions enticing, recruiting, and transporting the minor victim to Oakland and San Francisco to engage in commercial sex work on “the Blade” (a generic term used to describe both cities’ commercial sex strips).
Trial evidence demonstrated Sparks had been warned about the minor victim’s age and nevertheless transported her to the Bay Area for commercial sex on three occasions after receiving the warning. Sparks provided the minor accommodation in the Bay Area, offered her advice and instruction while she was working on the Blade, and arranged to transport the minor to and from the Blade to facilitate her ability to engage in commercial sex.
A federal grand jury indicted Sparks on September 29, 2021, charging him with one count each of production of child pornography, in violation of 18 U.S.C. § 2251(a); sex trafficking of a minor, in violation of 18 U.S.C. § 1591(a)(1), (b)(2), (c); coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b); and receipt of child pornography, in violation of 18 U.S.C. § 2252(a)(2). The government dismissed the receipt of child pornography charge before trial and the jury acquitted Sparks of the enticement charge.
In addition to the prison term, Judge Chhabria ordered Sparks to serve five years of supervised release to begin after the prison term is completed.
Assistant U.S. Attorneys Ilham Hosseini and Alethea Sargent are prosecuting the case with the assistance of Veronica Hernandez and Megan Pagaduan. The prosecution is the result of an investigation by the FBI and San Francisco Police Department.
Unlicensed Firearms Dealer Pleads Guilty to Multiple Weapons ChargesRead the Press Release
SAN FRANCISCO –Craig Bolland pleaded guilty to crimes he committed related to his storage and sale of a firearms arsenal he maintained in his San Francisco home, announced United States Attorney Ismail J. Ramsey and Bureau of Alcohol Tobacco, Firearms, and Explosives Special Agent in Charge Jennifer Cicolani. The guilty plea was accepted by the Hon. Vince Chhabria, United States District Judge.
In his plea agreement, Bolland admitted he was involved in the business of manufacturing and selling firearms from at least June 2021 through May 30, 2023, the date of his arrest. Bolland admitted that he engaged in these activities even though he previously had been convicted of a felony and therefore was prohibited from possessing firearms.
According to his plea agreement, Bolland admitted that he manufactured his own firearms using parts he had shipped to himself. He also used manufacturing equipment—including a 3D printer, a drill press, and a machine called a Ghost Gunner 3—to fabricate privately manufactured “ghost guns” (both pistols and rifles) which lacked serial numbers. In addition to manufacturing his own guns, Bolland admitted he used his equipment to modify pre-existing firearms. Modifications included installing “switches” to enable semi-automatic firearms to become fully-automatic firearms.
In addition to illegally manufacturing firearms, Bolland admitted that he also sold the weapons although he did not have a license to do so. Bolland admitted he sold dozens of commercially manufactured firearms and at least five firearms that he manufactured himself privately. Some of the firearms Bolland possessed for sale had obliterated serial numbers. The plea agreement describes how Bolland accepted payment for the firearms in cash, cryptocurrency, and narcotics and how Bolland had reason to believe some of his customers were involved in criminal activity of their own and were legally prohibited from possessing firearms. Moreover, in addition to selling firearms that he manufactured and acquired for resale, Bolland acknowledged in his plea agreement that he also brokered multiple firearms and ammunition sales between other buyers and sellers. Bolland admitted he received a commission for brokering such deals.
Bolland was convicted of a felony in 2007 and therefore was prohibited from lawfully possessing firearms and ammunition. Nevertheless, Bolland admitted that at the time of his arrest he possessed hundreds of rounds of pistol and rifle ammunition, more than a dozen firearm frames and receivers, at least four pistols and an AR-15 style 5.56mm caliber rifle.
On August 2, 2023, a federal grand jury indicted Bolland, charging him with the following crimes:
Count
Charge
Statute
Maximum Statutory Penalty
One
Manufacturing and dealing firearms without a license
18 U.S.C. § 922(a)(1)(A)
5 years
Two
Felon in possession of a firearm
18 U.S.C. § 922(g)(1)
15 years
Three
Possession of a firearm with an obliterated serial number
18 U.S.C. § 922(k)
5 years
Four
Possession of a machinegun
18 U.S.C. § 922(o)
10 years
Pursuant to the plea agreement, Bolland pleaded guilty to all four counts. In addition to the penalties listed above, as part of any sentence, Judge Chhabria may order the defendant to serve an additional period of supervised release and to pay a fine of $250,000 per count. However, the court will impose a sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Bolland has been in custody since the date of his arrest. Judge Chhabria has scheduled Bolland’s sentencing for December 6, 2023.
Assistant United States Attorney George Hageman is prosecuting the case with the assistance of Carolyn Young and Amala James. The prosecution is the result of an investigation by the ATF and the San Francisco Police Department.
Second Gunman Sentenced to 22 Years in Prison for August 11, 2018, Gang-Related MurderRead the Press Release
SAN FRANCISCO –Jose Aguilar, aka Slim, was sentenced to serve 22 years in prison for his role in the August 11, 2018, murder of then-19-year-old Gerson Romero, announced United States Attorney Ismail J. Ramsey and San Francisco Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Vince Chhabria, United States District Judge.
“We will not surrender the streets of San Francisco to violent street gangs,” said U.S. Attorney Ramsey. “Gang violence will not lead to personal profit. To the contrary; where appropriate we will seek severe, impactful sentences, such as the decades-long one imposed here.”
“This sentencing sends a message to criminal gang members that they will face justice for menacing our communities through murder and other violent crime,” said Special Agent in Charge King. “This case has been hard fought by the men and women of HSI, the San Francisco Police Department, and the U.S. Attorney’s Office, Northern District of California, and we hope that this sentencing provides some solace for the senseless loss of loved ones.”
Aguilar, 34, of San Francisco, pleaded guilty to the charge on May 3, 2023. According to his plea agreement, Aguilar admitted that on the day of the murder, he was a member of the 19th Street/16th Street Sureños, a San Francisco street gang. He further admitted that the gang was an amalgamation of two gangs, one that claimed “territory” bounded by 19th Street to the South, 16th Street to the North, Folsom Street to the East, and Dolores Street to the West and the other that generally operated around 16th Street and Mission Street, in the Mission District of San Francisco. The gang also operated in Dolores Park and Franklin Square Park (also known as Bryant Park). Aguilar acknowledged that the street gang operated as a “racketeering enterprise” and that members of the gang sought to maintain control of designated neighborhoods by, among other things, committing crimes. In this case, the indictment described, and Aguilar admitted, how members of the 19th Street/16th Street Sureños committed acts of violence, sold narcotics, and engaged in robberies to meet the aims of the criminal enterprise.
Aguilar admitted that on the day of the murder, he and fellow gang members were scouting for rival gang members to retaliate for an earlier drive-by shooting when they spotted Romero and several of his friends. Aguilar and his fellow gang members, including Jonathan Escobar, 24, of Richmond, Calif., concluded that Romero and the others were members of a rival gang. After two pedestrians passed by, Aguilar and his fellow gang members took aim and began firing. The bullets killed Romero. Aguilar and Escobar fired repeatedly, continuing to shoot even after Romero had fallen. Five other victims fled from the gunfire, three of them struck and wounded.
On April 15, 2021, a federal grand jury indicted Aguilar and Escobar, charging each defendant with the murder (using a firearm in furtherance of a crime of violence resulting in death, in violation of 18 U.S.C. §§ 924(j)(1) and 2) and with an additional firearm charge (use and carrying of a firearm during and in relation to a crime of violence, in violation of 18 U.S.C. §§ 924(c)(1)(A) and 2). Aguilar pleaded guilty to the first count, and the second count was dismissed.
On April 5, 2023, Escobar pleaded guilty to his role in the crime, and on June 28, 2023, Judge Chhabria sentenced him to 26 years in prison for that crime and two others committed while he was in pretrial detention. Aguilar and Escobar both have been in federal custody since their arrest on April 20, 2021.
The case is being prosecuted by the Organized Crime Strike Force of the United States Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by Homeland Security Investigations with assistance from the San Francisco Police Department’s Gang Task Force and Homicide Unit.
Software Development CEO Sentenced to Two Years in Prison for Tax and Conspiracy ChargesRead the Press Release
SAN JOSE – Kishore Kethineni, the CEO of multiple software development and IT services companies in the Bay Area, was sentenced to two years in prison for his role in a conspiracy to commit bank fraud and for his failure to pay over more than $2 million in employment taxes, announced United States Attorney Ismail J. Ramsey, Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp, and Internal Revenue Service—Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian of the Oakland Field Office. The sentence was handed down by the Hon. Edward J. Davila, United States District Judge.
Kethineni, of Dublin, Calif., pleaded guilty to the charges on February 21, 2023. In pleading guilty, Kethineni admitted that he conspired with his two brothers to engage in a scheme in which they fraudulently obtained over $3.1 million in loans under the Paycheck Protection Program (PPP).
The PPP is a COVID-19 pandemic relief program administered by the Small Business Administration (SBA) that provided forgivable loans through third-party lenders to small businesses for payroll and certain other expenses. Kethineni was the sole owner and CEO of four of the companies involved in the scheme: BiteGate, Inc., Dinenamics, Inc., Neelinfo, Inc., and TechPMC, Inc. His brothers were the owners of the three other companies involved: Boxstertech, Inc., Hiretechforce, Inc., and TechGlobalSystems, Inc. From April 2020 through May 2021, Kethineni and his brothers submitted multiple PPP loan applications on behalf of their various respective companies, in which they made fraudulent representations and provided falsified payroll data and records to obtain loans and loan forgiveness under the program.
Collectively, Kethineni and his brothers submitted at least twelve PPP loan applications on behalf of their seven companies. The applications sometimes were virtually identical. The applications resulted in the approval and funding of nine loans totaling over $3.1 million in PPP funds. Upon receipt of the PPP loan funds, Kethineni redirected significant amounts to himself and his family members instead of using the funds for payroll and other authorized business expenses under the program.
Kethineni also admitted to willfully failing to account for and pay over employment taxes that his company, Neelinfo, Inc., had withheld from the pay of its employees, incurring an employment tax liability of over $2 million over the course of five years (from 2014 through 2018). Kethineni acknowledged that he used a payroll service company to process Neelinfo’s employee payroll and track its employment tax obligations. Every quarter, the payroll service company provided Neelinfo with a prepared Form 941 that reflected the taxes withheld from Neelinfo’s employees, which Neelinfo was required to pay over to the IRS. Despite receiving these prepared tax forms each quarter, Kethineni did not file them with the IRS, nor did he pay over any employment taxes on behalf of Neelinfo, while still causing Neelinfo to make thousands of dollars in other expenditures. At the end of each year, the payroll service also provided Neelinfo with its employees’ Forms W-2, which were used by the employees to file their personal income taxes. However, due to Kethineni’s failure to file any employment tax forms or pay over Neelinfo’s employment taxes as required, some of Neelinfo’s employees were subject to audits and inspection by the IRS after filing income tax returns based on income that Neelinfo never reported.
On February 15, 2023, Kethineni was charged by Superseding Information with one count of failure to pay over employment tax in violation of 26 U.S.C. § 7202 and one count of conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349. Kethineni pleaded guilty to both counts.
In addition to the prison term, Judge Davila also ordered Kethineni to serve two years of supervised release—to begin after the prison term—to pay $3,295,514.25 in restitution, and to pay a $15,000 fine. The court also ordered entry of a money forfeiture in the amount of $3,186,315.00.
Assistant U.S. Attorney Annie Hsieh is prosecuting the case with the assistance of Maryam Beros and Lance Libatique. The prosecution is the result of an investigation by IRS-CI and the FBI.
San Francisco Man Charged with Tax Evasion and Embezzling $2.7 Million from San Francisco CompanyRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Aubrey Jackson Shelton II with bank fraud, wire fraud, and tax evasion in connection with his scheme to embezzle more than $2.7 million from his employer, a San Francisco technology company, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service Criminal Investigation Special Agent in Charge Darren Lian. Shelton was arrested today and appeared in federal court to face the charges.
According to the indictment, filed August 15, 2023, and unsealed today, Shelton, of San Francisco, Calif., allegedly embezzled approximately $2.7 million from his employer, a San Francisco-based automobile services and technology company where Shelton worked as the Senior Vice President of Finance. According to the indictment, from November 2013 and through December 2021, Shelton used his exclusive control over the company’s payroll processing software to inflate his salary and bonuses over the authorized amounts and to direct the payroll processor to cause the company to pay him large amounts categorized as “Executive Loan,” “Misc Reimbursement,” “Mileage Reimbursement,” or other reimbursements that were not authorized or expended by Shelton.
In November 2013, Shelton submitted false information to the payroll processor about his salary, causing the gross amount to double despite the fact that his authorized salary had not changed. Then, in 2014, Shelton falsely submitted to the payroll processor that he was entitled to $5,000 mileage reimbursements on twelve consecutive semi-monthly paychecks while reducing his gross salary to the authorized amount. Shelton’s use of mileage reimbursement rather than increased salary resulted in less tax being withheld from his paycheck and the embezzled amounts not being reported to the IRS. Shelton then began submitting false information to the payroll processor claiming he was entitled to amounts described as “Executive Loan” and, later, amounts described as “Misc Reimbursement,” including during irregular payroll cycle runs. During this time, Shelton again increased his salary above the authorized amount and defrauded the company of even more money through misuse of the “Executive Loan” and reimbursement payment categories. Taxes were not withheld from both of these categories, nor were the amounts reported to the IRS. To accomplish his scheme, Shelton submitted false payroll approval documentation to the company’s CEO and submitted false payroll information to auditors, in addition to the false information he submitted to the payroll processor in connection with processing payroll. Shelton submitted false tax returns to the IRS that falsely reported his income by not including the amounts he embezzled from the company.
In sum, the indictment charges Shelton with three counts of bank fraud, in violation of 18 U.S.C. § 1344(2); five counts of wire fraud, in violation of 18 U.S.C. § 1343; and four counts of tax evasion in violation of 26 U.S.C. § 7201. Shelton was scheduled to appear today in court for identification of counsel and his initial San Francisco federal district court appearance is scheduled for October 18, 2023.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Shelton faces a maximum sentence of 30 years in prison, and a fine of $1,000,000, plus restitution, if appropriate, for each violation of 18 U.S.C. § 1344. Shelton faces a maximum sentence of 20 years in prison, and a fine of $250,000, plus restitution, if appropriate, for each violation of 18 U.S.C. § 1343. Shelton faces a maximum sentence of five years in prison, and a fine of $100,000 for each violation of 26 U.S.C. § 7201. The court also may order an additional term of supervised release to begin after a prison term as part of any sentence. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Noah Stern is prosecuting the case, with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the Internal Revenue Service Criminal Investigation.
United States Attorney’s Office and the Asian American Foundation Host Oakland Roundtable Discussion Addressing Fighting HateRead the Press Release
OAKLAND- On August 17, 2023, the U.S. Attorney’s Office for the Northern District of California (USAO), in conjunction with The Asian American Foundation (TAAF), hosted a roundtable to discuss how federal law enforcement may support local communities in addressing hate crimes and similar incidents. The roundtable was the third in a series held in furtherance of the Department of Justice’s nationwide United Against Hate initiative, and the first to be held in Oakland.
The roundtable took place at the Oakland Asian Cultural Center and was supported by the Oakland Chinatown Chamber of Commerce. U.S. Attorney Ismail J. Ramsey attended the forum along with several attorneys from the USAO. Also in attendance were numerous representatives from various government agencies—including supervisory agents from the FBI, representatives of the Alameda County District Attorney’s Office and the Oakland City Attorney’s Office, and Oakland City Council District 7 Councilmember Treva Reid—and leaders from approximately thirty community-based organizations, including Advancing Justice – Asian Law Caucus, Alliance of South Asians Taking Action, Anti-Defamation League, NAACP, National Federation of Filipino American Associations, and SALT SF.
Prior to the community discussion, U.S. Attorney Ramsey gave introductory remarks. Benjamin Kingsley, Chief of the Oakland Branch of the U.S. Attorney’s Office, gave an overview of federal hate crimes enforcement. Sai Mohan, Deputy Chief of the Civil Division’s Affirmative Civil Enforcement Section, then gave an overview of civil remedies for federal civil rights violations.
Several community leaders said that Oakland was in crisis and expressed that hate crime, in particular, caused enduring pain. Leaders spoke about crime including violent attacks on AAPI elders, the lack of material support for Samoan and Tongan communities, and increased threats against houses of worship. Community leaders stated that solidarity between communities against hate crime was critical. They also emphasized that cooperation between government agencies and community-based organization, and more resources, were necessary to devise and implement effective solutions that provide meaningful consequences for offenders, and tackle roots causes of crime. Community leaders welcomed the U.S. Attorney’s Office’s participation in addressing these difficult problems and thanked the U.S. Attorney’s Office for bringing community groups together to discuss these issues.
U.S. Attorney Ramsey expressed the importance of the dialogue and his hope for the future. “I am looking forward to continuing this dialogue and finding ways to prevent—and fight against—crimes that originate in hate,” said U.S. Attorney Ramsey. “I cannot emphasize enough the importance to my office of bringing the entire community together to address this issue; only with all of us at the table will we find the collective strength and wisdom to find the best solutions.”
If you believe yourself to be a victim or witness of a federal hate crime, please report it at 1-800-CALL-FBI or fbi.gov. To report a civil rights violation, please visit civilrights.justice.gov.
Pennsylvania Resident Sentenced to Three Years in Prison for Role in Conspiracy to Defraud and Extort Cryptocurrency ExecutivesRead the Press Release
SAN FRANCISCO – Anthony Francis Faulk was sentenced to serve 36 months in prison and ordered to pay nearly $3 million in restitution for his role in a conspiracy to defraud more than a dozen cryptocurrency owners, announced United States Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Honorable William H. Orrick, United States District Judge. The Court also ordered forfeiture of numerous assets constituting or derived from proceeds obtained by Faulk’s crime.
Faulk, 26, of Latrobe, Penn., acknowledged his role in the conspiracy in a written plea agreement filed on March 2, 2023. According to his plea agreement, from October 2016 through May 2018, Faulk, using the alias “shade,” conspired with Matthew Ditman, aka “lord crump,” and Ahmad Hared, aka “special547” aka “winblo,” to defraud and extort cryptocurrency owners. The scheme involved “SIM swapping”—duping cellphone companies into giving Faulk and his co-conspirators control of victims’ cellphone numbers, using that access to hack into email and other victim accounts, and ultimately stealing the victims’ cryptocurrency or digital assets.
SIM stands for Subscriber Identity Module or Subscriber Identification Module. A SIM card is a technology used to identify and authenticate subscribers on mobile phone devices. According to his plea agreement, Faulk admitted that he used fraud, deception, and social engineering techniques to induce representatives of cellphone service providers to transfer or port cellphone numbers from SIM cards in the devices possessed by victims to SIM cards in devices possessed by members of the conspiracy. Once in possession of the illegally obtained information, members of the conspiracy reset passwords of their victims’ email, electronic storage, and other accounts. The co-conspirators then were able to control the accounts, access cryptocurrency accounts, and transfer cryptocurrencies from accounts owned by the victims to accounts or wallets controlled by Faulk and his co-conspirators.
Faulk also admitted that, in addition to transferring cryptocurrencies, the co-conspirators contacted some of their victims by telephone and threatened to compromise further accounts unless the victims paid additional money to the fraudsters.
Faulk was ordered to pay $2,816,433 in restitution to 11 victims of the scheme. (After the indictment in this matter, Faulk was charged in separate criminal case, pleaded guilty to one count of conspiracy to commit money laundering, and was ordered to pay restitution to two additional victims.) The court also ordered forfeiture of numerous assets, seized by the government, constituting or derived from proceeds traceable to the conspiracy. Those assets include a nearly $1 million home in Latrobe, Pennsylvania; three J.P. Morgan Chase accounts totaling approximately $12,525,592, $6,242,919, and $18,118, respectively; a 2018 Mercedes-Benz GTS; a 2018 Nissan Rouge; a 2019 Chevrolet Silverado K1500; diamond jewelry; a Rolex; Tiffany earrings; and a Louis Vuitton handbag and wallet.
On December 10, 2019, a federal grand jury indicted Faulk, charging him with one count of conspiracy to commit wire fraud, in violation of 18 U.S. C. § 1349, and one count of interstate communications with intent to extort, in violation of 18 U.S.C. § 875(d). Pursuant to his plea agreement, Faulk pleaded guilty to the conspiracy count. On the government’s motion, Judge Orrick dismissed the extortion count at the sentencing hearing.
Hared and Ditman were separately charged. Hared’s sentencing is set for August 31, 2023, and Ditman’s for October 12, 2023.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. Assistant United States Attorney Robert Leach is prosecuting the case, with assistance from Mimi Lam and Megan Pagaduan. This case is the result of an investigation from FBI.
Castro Valley Resident Sentenced to 2½ Years in Prison in Connection with Prolific Pandemic Relief Fraud SchemeRead the Press Release
SAN FRANCISCO– Idowu Hashim Shittu was sentenced to 30 months in prison for fraudulently obtaining pandemic-related unemployment benefits from numerous state agencies, announced United States Attorney Ismail Ramsey; United States Department of Labor, Office of Inspector General (“DOL-OIG”) Special Agent in Charge Quentin Heiden; and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Haywood S. Gilliam, Jr., United States District Judge.
Shittu, 48, of Castro Valley, pleaded guilty to the charges on March 1, 2023. According to his plea agreement, from at least April through July of 2020, Shittu engaged in a scheme to obtain reloadable debit cards issued in the names of other people and to use the cards to make expenditures for his personal use. The cards, referred to in the plea agreement as “Green Dot Cards,” contained unemployment benefits distributed by various state agencies. Shittu did not know the persons to whom the unemployment insurance benefits were issued, nor did Shittu obtain the consent of the persons before he used the cards issued in their names.
“In the wake of a global pandemic, our federal government passed laws to ease the suffering of those who were in financial distress. Shittu sought to take advantage of the situation by stealing unemployment benefits made available to those in need. We are proud to be working with our partners at the FBI and the Department of Labor to bring such bad actors to justice.”
“Idowu Hashim Shittu engaged in a scheme to fraudulently obtain over $1,600,000 in unemployment insurance (UI) benefits in the names of identity theft victims. He stole benefits intended to assist those who became unemployed due to the COVID-19 pandemic,” said Quentin Heiden, Special Agent-in-Charge, Western Region, U.S. Department of Labor, Office of Inspector General. “This sentencing demonstrates that those who defraud the UI program will be held accountable. We will continue to work with our law enforcement partners to investigate those who exploit these benefit programs.”
“Shittu stole more than $2.2 million in unemployment benefits by using the identities of innocent victims. His scheme deprived those truly in need during the pandemic crisis, and he will now face the consequences of his actions," said FBI Special Agent in Charge Tripp. "The FBI is committed to identifying and investigating those who steal government benefits designed to help our citizens in need."
The unemployment benefits at issue were made available as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In passing the CARES Act, the federal government authorized the payment of hundreds of billions of dollars in unemployment benefits to those affected by the COVID-19 pandemic. In most cases, state authorities were responsible for distributing those unemployment benefits to their residents. Shittu admitted that he obtained Green Dot Cards issued to other people, that the cards were obtained by fraud, and that the persons whose unemployment insurance benefits were loaded onto the cards never consented to have Shittu use the cards. Shittu also admitted that his participation in the scheme resulted in a loss of between $1.5 million and $3.5 million.
The plea agreement describes how Shittu used the Green Dot Cards issued to three different persons—all residents of the State of Washington. The first victim is identified in the plea agreement only by the initials, “S.O.” Shittu admitted that S.O. never submitted a claim for unemployment benefits and that S.O.’s card was obtained through fraud. Further, Shittu acknowledged that he completed multiple transactions with the card—including one transaction for $950 and two transactions, each for $1,000, at a Walmart store in San Jose, Calif.—with the intent to defraud. Similarly, Shittu acknowledged using a card issued in the name of a second victim to make multiple cash withdrawals at Walmart stores in Hayward, Castro Valley, and San Leandro. In addition, in the Spring of 2020, Shittu used the card of a third victim to withdraw cash and to pay for service to his BMW 5-series automobile.
On July 29, 2020, law enforcement officers searched Shittu’s residence and found over $500,000 in cash split between a plastic container in a garage and a backpack under a bathroom sick. Officers also found over 400 Green Dot Cards issued to other individuals. The Green Dot Cards were loaded with over $1.6 million in unemployment benefits from various state agencies.
On May 18, 2022, Shittu was charged by felony information with three counts of effecting transactions with access devices issued to other persons, in violation of 18 U.S.C. § 1029(a)(5). Shittu pleaded guilty to all three counts.
In addition to the prison term, Judge Gilliam also ordered Shittu to serve a three-year term of supervised release after being released from prison and pay restitution in the amount of $1,615,614 split among state employment agencies in Illinois, Nevada, New York, and Ohio. Judge Gilliam ordered Shittu to self-surrender on or before October 11, 2023, to begin serving his prison term.
Special Assistant U.S. Attorney Christopher J. Carlberg is prosecuting the case with the assistance of Mark DiCenzo. The prosecution is the result of an investigation by the United States Department of Labor, Office of Inspector General (“DOL-OIG”), Office of Investigations, Labor Racketeering and Fraud and the FBI.
Antioch and Pittsburg Police Officers and Employee Charged with Various Crimes Ranging from Using Excessive Force to Defrauding Their EmployersRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco returned four separate indictments August 17, 2023 that, collectively, charge ten current and former officers and employees from the Antioch and Pittsburg police departments with various crimes ranging from excessive force to fraud, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The indictments all were filed August 16, 2023, and unsealed the following day. The charges were described by U.S. Attorney Ramsey and Special Agent in Charge Tripp at a press conference held on August 17, 2023.
“Police officers promise to enforce laws for the protection of the public and to protect the rights of the accused,” said U.S. Attorney Ramsey. “That is the job. The indictments describe officers who are alleged to have violated this oath. When this happens, the damage done to the public trust cannot easily be calculated. This office will not rest until all persons who have engaged in this sort of behavior are apprehended and prosecuted.”
“This case is one of the highest priorities for the San Francisco Field Office,” said FBI Special Agent in Charge Tripp. “Law enforcement officers bear a tremendous responsibility to police our communities lawfully in keeping with the Constitution, and we must always be true to that guiding principle. I want to extend my sincere appreciation to the FBI agents, analysts, and law enforcement partners who worked tirelessly on this case and whose efforts culminated in the operations today.”
At the press conference, U.S. Attorney Ramsey referred to the first indictment as the “college degree benefits fraud indictment.” According to the indictment, six defendants engaged in a conspiracy to defraud police departments out of taxpayer dollars, including the Antioch and Pittsburg Police Departments, by claiming they had earned college credits toward degrees when, instead, they paid others to attend classes and take exams for them. Specifically, beginning in June of 2019, Officer Patrick James Berhan of the Pittsburg Police Department utilized a person identified as “Individual 1” to complete multiple college courses on his behalf. The courses were credited toward Berhan’s completion of a Bachelor of Science degree in Criminal Justice. Berhan allegedly received a degree and then applied for and received reimbursements and increases to his pay from Pittsburg Police Department. Further, the indictment alleges Berhan “promoted Individual 1’s services” and “benefited from payments received by Individual 1 in furtherance of the scheme.” The indictment describes how five other members of the police departments retained Individual 1 to complete similar coursework from the university. Each paid money to Individual 1, obtained a degree based on the fraudulent coursework, and applied for benefits including reimbursements and increases in pay from their law enforcement employer.
The second indictment charges two defendants with conspiring to distribute anabolic steroids. The indictment describes how Officers Daniel Harris and Devon Wenger, both employed by the Antioch Police Department, allegedly conspired illegally to distribute the drugs to an unnamed customer. The indictment also alleges that Harris possessed and attempted to possess the drugs, and that Wenger attempted to delete evidence of the scheme from his cellular phone prior to handing the phone over to law enforcement officers.
The third indictment charges a single defendant, Timothy Allen Manly Williams (Manly), also then with the Antioch Police Department, with three charges—two involving alleged interference with a wiretap investigation and the third involving the illegal seizure and destruction of a telephone. The indictment alleges that on March 23, 2021, Manly was assigned to a “wire room” where, pursuant to a court order, he was supposed to monitor communications between a target and others who contacted the target by telephone. While monitoring the target, Manly allegedly used his personal cellphone, dialed a special code to ensure his number would not appear to others, and called a target of the investigation. After dialing the number, Manly also designated his call to the target to be “non-pertinent” ensuring the 14-second conversation would not be recorded. Manly also allegedly made entries on the wire logs to suggest that the call he made resulted in no answer and no audio. The indictment further alleges that on May 6, 2021, Manly was on the scene when another officer deployed a police dog when arresting a person. Upon seeing a witness using a cellular telephone to record the aftermath of the incident, Manly allegedly seized the witness’s telephone and destroyed it.
The fourth indictment charges three Antioch police officers—Morteza Amiri, Eric Rombough, and Devon Wenger—with conspiracy against rights and deprivation of rights under color of law. The 29-page indictment describes how the defendants allegedly communicated with each other and others about using and intending to use excessive force against individuals in and around Antioch. The uses of excessive force included deployment of a K9, deployment of a 40mm “less lethal” launcher, and other unnecessary violence. Further, the indictment alleges that the defendants deployed uses of force as “punishment” to subjects “beyond any punishment appropriately imposed by the criminal justice system,” and allegedly made repeated reference to or suggestion of violating the civil rights of their victims. Examples in the indictment include the following:
• On July 24, 2019, Amiri allegedly pulled over a bicyclist, identified as A.A., for failing to have lights on after dark. The indictment alleges that “[i]n the course of apprehending A.A., Amiri punched him multiple times; K9 Purcy then bit A.A. in the arm, injuring him.” Amiri then shared pictures of the victim’s wounds with other Antioch police officers who exchanged text messages including: “Yeah buddy good boy pursy,” “F[expletive] that turd,” and Amiri later stated “Detectives already called PRCS and got him a 45 day violation and we are gonna leave it at that so i don’t have to go to court for the bite. easy.” In response to a question from another officer about what cut the dog’s face, Amiri responded, “that’s a piece of the suspect’s flesh lol.”
• On October 8, 2020, Amiri allegedly sent a text message identifying a transient living in Antioch identified as M.Z. stating “anyone that finds him gets code [a free meal or beverage]. This f[expletive] stole my mail and was trying to open accounts under my name.” Wenger responded “Lets beat his f[expletive] ass I’m down after work morty” According to the indictment, the recipients of Amiri’s message located M.Z. later that evening. Amiri then arrived on the scene, shoved M.Z. against a wall and threatened to kill him. The indictment also alleges that a few months later Amiri texted another group of officers in reference to M.Z., “few months ago, I tracked him down and dragged him to the back of a car to ‘discuss’ the matter,” and “putting a pistol in someone’s mouth and telling them to stop stealing isn’t illegal. . . it’s an act of public service to prevent further victims of crimes”
• On May 5, 2021, Rombough accompanied other Antioch police officers who responded to a report that transients were living inside a privately-owned unit. While responding, Rombough and another officer located a couple lying on a bed inside a room. Rombough deployed a 40mm less lethal launcher at one of the persons on the bed, hitting them in the chest and knocking them off the bed.
• On August 24, 2021, Rombough accompanied other Antioch police officers as they executed a search warrant at a residence in Antioch. Officers located a subject—identified as J.W.—inside a locked bedroom holding a video game controller while sitting on an air mattress, with a video game on a television screen. J.W. removed a pair of headphones and raised his hands as officers, including Rombough, entered the room. One officer took J.W.’s left arm to arrest him as four other officers surrounded J.W. As the other officer held J.W.’s left arm on the bed, Rombough deployed the 40mm less lethal launcher at J.W., injuring him.
The indictment describes several other incidents of excessive force as well as the collection and sharing of pictures to memorialize acts of violence and the collection by defendant Rombough of spent munitions to commemorate his deployment of the 40mm launcher.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
The indictments charge the following defendants with crimes as follows:
In addition, as part of any sentence following conviction, the court may order defendants to serve an additional term of supervised release to begin after a prison term as well as additional fines, and restitution, if appropriate. Any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Special Prosecutions Section and Oakland Branch of the United States Attorney’s Office. The prosecution is the result of an investigation by the FBI and the Office of the District Attorney of Contra Costa County.
antioch_and_pittsburg_chart_rev3.pdf 23-cr-00269_amo_08162023_indictment.pdf 23-cr-00268_hsg_08162023_indictment.pdf 23-cr-00267_ygr_08162023_indictment.pdf 23-cr-00264_jsw_08162023_indictment.pdfSan Mateo Man Charged with Embezzling More Than $1.1 Million from San Francisco Law FirmRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Jairo Tomas Santos with bank fraud, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. Santos was arrested on August 4, 2023, and appeared in federal court on August 7 to face the charges.
According to the indictment (CR 23-00230 WHA), filed July 25, 2023, Santos, 42, formerly of San Mateo, Calif., allegedly embezzled more than $1.1 million from his employer, a San Francisco-based law firm, where Santos worked as the office manager. According to the indictment, Santos began his embezzlement scheme no later than March 2016 and continued it through February 2023. As part of the scheme, Santos obtained checks from the victim law firm, filled out the payee line of those checks, addressing them to “Jairo Santos,” and signed each check with the signature of the law firm’s senior partner even though Santos was not authorized to do so. Santos then deposited these checks into his personal checking accounts at Wells Fargo Bank.
Between March 9, 2016, and February 2023, Santos allegedly deposited approximately 806 unauthorized checks from the victim law firm made payable to Santos into his personal checking accounts. The total value of these unauthorized deposits was approximately $1,191,683. Further, as part of the scheme to defraud, Santos made and deleted entries in the general ledger for the victim law firm that concealed the fact that the payments were made for Santos’s own use. The indictment further alleges that Santos deposited these checks from the victim law firm knowing that the payments were not authorized by the firm or its senior partner and knowing that they exceeded the amounts he was legitimately owed by the firm for his salary and expenses.
In sum, the indictment charges Santos with three counts of bank fraud, in violation of 18 U.S.C. § 1344. Santos’s initial San Francisco federal district court appearance is scheduled for August 22, 2023.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Santos faces a maximum sentence of 30 years in prison, and a fine of $1,000,000, plus restitution, if appropriate, for each violation of 18 U.S.C. § 1344. The court also may order an additional term of supervised release to begin after a prison term as part of any sentence. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. Assistant U.S. Attorney Christiaan Highsmith is prosecuting the case, with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the FBI.
santos_jairo_indictment.pdfRobbery Crew Charged with Perpetrating $1.1 Million Jewelry HeistRead the Press Release
SAN FRANCISCO – The Office of the United States Attorney has charged five defendants—Sunia Mafileo Faavesi, Ryan Kentrell Montgomery, Paul Christopher Tonga, John Ioane Tupou, and Kyle Vehikite—with conspiracy to commit robbery affecting interstate commerce for their roles in the March 17, 2023, robbery of Heller Jewelers in San Ramon, Calif., announced United States Attorney Ismail J. Ramsey and Bureau of Alcohol Tobacco, Firearms, and Explosives Special Agent in Charge Jennifer Cicolani. All the defendants except Tupou made their initial federal court appearance on July 27 before U.S. Magistrate Judge Alex G. Tse to face the charges. Tupou remains at large.
According to a federal criminal complaint, filed July 21, 2023, and unsealed at the initial appearance, Faavesi, 30, Montgomery, 35, Tonga, 33, Tupou, 30, and Vehikite, 34, planned and executed the armed heist, which involved at least eleven individuals, some armed, taking approximately $1.1 million in stolen watches and jewelry from the family-owned San Ramon jewelry store. The complaint alleges that while some of the participants were inside the store or immediately outside it during the armed robbery, others acted as lookouts and get-away drivers of at least four waiting vehicles. The robbery took place at a bustling mall in San Ramon in the middle of the afternoon and resulted in multiple bystanders, including children, fleeing the masked and armed robbers.
The complaint affidavit provides details regarding how the defendants originally cased the location a week prior to the robbery and then returned on March 17, 2023, with co-conspirators to execute the robbery. The complaint alleges investigators were able to identify one of the defendants by evaluating GPS information emitted from a stolen Rolex watch. Law enforcement investigators thereafter conducted a covert investigation that ultimately enabled them to identify each of the five defendants and to piece together the movements of the defendants on the day of the robbery.
Faavesi, Montgomery, Tonga, and Vehikite all were arrested on July 26, 2023. The government has filed a motion asking that they be detained pretrial. Defendants’ next scheduled appearances are on August 1, 2023, and August 4, 2023, for their respective detention hearings.
A complaint merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants each face a maximum sentence of 20 years, and a fine of $250,000. As part of any sentence, the court also may order defendants to pay restitution, if appropriate, and to serve an additional period of supervised release to begin after a prison term. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Alethea M. Sargent is prosecuting the case with the assistance of Kay Konopaske. The prosecution is the result of an investigation by the San Ramon Police Department and the ATF, with assistance from the Drug Enforcement Administration, the IRS, and Bureau of Customs and Border Protection.
San Francisco Man Charged with Stealing More Than $340,000 in Section 8 Housing BenefitsRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Gregory Finkelson with conspiracy, theft of government property, and money laundering, announced United States Attorney Ismail J. Ramsey, Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp, United States Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) Special Agent in Charge Mark Kaminsky, and IRS-Criminal Investigation Special Agent in Charge Darren Lian of the Oakland Field Office.
According to the indictment, between August 2006 and February 2020, Finkelson, 63, of San Francisco, stole approximately $341,455 in Section 8 rental assistance by hiding from housing authorities his true income, his ownership interest in the house where he lived and for which he received Section 8 vouchers, and the fact that he was the owner and president of a company called American Corporate Services (ACS) – all to qualify for and receive Section 8 benefits. For example, Finkelson reported to housing authorities that from 2015 to 2017 he earned $12,000 per year working as a notary public for ACS. In fact, Finkelson was the president and sole owner of ACS, a company that earned $2.8 million in gross income between 2013 and 2018.
The Section 8 program, funded by HUD, is a rent subsidy program that helps low- and moderate-income families obtain housing. To qualify for Section 8 assistance, families must have an income no higher than 80% of the area medium income. Further, to be eligible, a tenant cannot have an ownership interest in their rental unit, and tenants must accurately report their income and assets. In San Francisco, the San Francisco Housing Authority (SFHA) administers the Section 8 program for HUD.
Finkelson, according to the indictment, worked with a coconspirator in Russia to hide the fact that he owned the house where he lived. Finkelson also established numerous bank accounts in his coconspirator’s name or in the name of both Finkelson and his coconspirator to conceal the fact that he received and controlled the Section 8 payments rather than a separate landlord. In addition, Finkelson subdivided the single-family home where he lived into three units. Finkelson lived in one unit, his business operated out of a second unit, and Finkelson rented out a third unit. Finkelson caused rent payments from all three units to be funneled into accounts that he controlled, and Finkelson paid personal expenses out of those accounts using rental income. For example, from January 2018 to February 2020, at Finkelson’s direction, SFHA direct deposited Section 8 funds into a Wells Fargo Bank account. Finkelson paid personal expenses with Section 8 funds from that account and transferred funds, including Section 8 payments for his home, to his business, ACS. According to the indictment, Finkelson made payments toward a vacation timeshare in Maui, Hawaii, in part with Section 8 funds designed to help low- and moderate-income families rent decent housing.
In sum, the indictment charges Finkelson with conspiracy, in violation of 18 U.S.C. § 371; theft of government property, in violation of 18 U.S.C. § 641; and three counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i).
Finkelson’s initial appearance in San Francisco federal court has not yet been scheduled.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Finkelson faces a maximum sentence of 5 years in prison, and a fine of $250,000, plus restitution, if appropriate, for a violation of 18 U.S.C. § 371; 10 years in prison, and a fine of $250,000, plus restitution, if appropriate, for a violation of 18 U.S.C. § 641; and 20 years’ in prison, a fine of $500,000 or twice the value of the laundered funds, plus restitution, if appropriate, for each violation of 18 U.S.C. § 1956(a)(1)(B)(i). The court also may order an additional term of supervised release to begin after a prison term as part of any sentence. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. Assistant U.S. Attorney Christiaan Highsmith is prosecuting the case, with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the FBI, HUD-OIG, and IRS-CI.
California Man Sentenced to More Than Four and A Half Years in Prison for Directing $2.6 Million Fraud Scheme from PrisonRead the Press Release
OAKLAND – Ratha Yin was sentenced to 55 months in prison for his part in a conspiracy to commit mail and wire fraud in a scheme to defraud the State of California by filing unemployment claims in the names of other people, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp, and Department of Labor Office of the Inspector General Special Agent in Charge Quentin Heiden. The sentence was handed down by the Hon. Yvonne Gonzalez Rogers, United States District Judge.
Yin, 36, pleaded guilty to the charges on November 10, 2022. According to his plea agreement, from June of 2020 to at least September of 2021, Yin conspired with Steven Mavromatis, 28, of San Leandro, Calif., and others, including his wife, Amanda Yin, 33, of Indio, Calif., to submit fraudulent claims to the California Employment Development Department (EDD) for unemployment insurance. Ratha Yin admitted that he was an inmate housed in the California State Prison at Centinela in Imperial, Calif., when he devised the scheme. He used the identities of people from whom he did not obtain permission to fraudulently obtain funds being administered as part of the federal Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act)—a program he has acknowledged was meant to provide unemployment insurance to people who had lost their jobs due to the economic slow-down resulting from the coronavirus pandemic.
CARES Act funds were administered in relation to the presidentially declared national emergency related to the COVID-19 pandemic. Under the program, people were permitted to submit claims for unemployment to EDD online and qualified applicants were able to receive benefits by mail on pre-loaded debit cards. Ratha Yin admitted in his plea agreement that he used at least 136 different individuals’ personally identifiable information to claim EDD funds in their names.
Yin described the scheme in his plea agreement. For example, Yin admitted most of the people whose identities he used were incarcerated at prisons and other facilities throughout the country. Yin admitted he directed Mavromatis to create email addresses for people whose identities he had obtained and then used the email addresses to submit claims to the EDD online system. After receiving acknowledgements from EDD, Yin certified many of the fraudulent unemployment insurance claims and directed Mavromatis to certify other claims, as well. In addition, Yin further directed Marvomatis to rent mailboxes at, among other places, a UPS Store in San Leandro, Calif., to receive the debit cards on which the unemployment benefits were pre-loaded. Mavromatis and at least four other individuals then used the debit cards to withdraw the fraudulently obtained unemployment insurance funds in cash from ATMs. A portion of the fraudulently obtained funds were provided to Yin’ wife who, at Yin’s direction, deposited the cash into various financial accounts, including cryptocurrency wallets, controlled by her or others.
Ratha Yin admitted that he and the others involved in the scheme obtained at least $2,646,221 through the fraud.
On November 2, 2022, a federal grand jury indicted Ratha Yin, Amanda Yin, and Mavromatis, charging each with conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349 and conspiracy to launder proceeds of fraud, in violation of 18 U.S.C. § 1956(h). In addition, Ratha Yin and Mavromatis were charged with an additional three counts of aggravated identity theft, in violation of 18 U.S.C. § 1028(A)(a)(1). On November 10, 2022, Amanda Yin pled guilty to conspiracy to launder proceeds of fraud and Steven Mavromatis pled guilty to conspiracy to commit mail and wire fraud.
In addition to the prison term Judge Gonzalez Rogers also ordered Ratha Yin to serve five years of supervised release, to begin after the prison term. Judge Gonzalez Rogers also sentenced Amanda Yin and Mavromatis for their respective roles in the conspiracy, and scheduled a hearing on October 5, 2023, to determine restitution. Judge Gonzalez Rogers sentenced Amanda Yin to five years’ probation, including eight months of home detention. Judge Gonzalez Rogers sentenced Mavromatis to time served (6 days) and five years of supervised release.
The case is being prosecuted by the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California. This case was investigated by the FBI with assistance from the U.S. Department of Labor-Office of the Inspector General, the California EDD, the California Department of Corrections and Rehabilitation Bay Area Special Service Unit, and the Centinela State Prison Investigative Service’s Unit.
South Bay Man Charged with Fraud in Alleged Scheme to Use His Position with Technology Company to Divert Software License PaymentsRead the Press Release
SAN JOSE – Kevin Chao, a former executive at a technology company with offices in San Jose, Calif., appeared on charges he engaged in a years-long scheme to defraud his employer by directing millions of dollars of business to entities he controlled and by diverting more than $2 million in software license fees to benefit himself and co-conspirators, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation, Special Agent in Charge Robert K. Tripp. Richard Sze and Suryanarayana Murthy Bobba, both former employees of the same technology company as Chao, face related charges. Chao made his initial appearance before the Honorable Nathanael M. Cousins, United States Magistrate Judge.
Chao, 64, of Mountain View, was charged in an Information filed July 19, 2023. Chao was a former Global Business Director at a technology company identified in the Information as Company-1. According to the Information, Chao had a duty of loyalty to, and a duty to disclose outside business to, Company-1. Instead, the Information alleges, Chao engaged in a scheme in which he directed millions of dollars in business to entities in which he had an interest but kept his control and financial interest secret from Company-1.
There were various aspects of the alleged scheme. First, the Information alleges Chao defrauded his employer by working with other company employees, Sze, 56, of Saratoga, Calif. and Bobba, 55, of Los Altos, Calif., to direct software development service contracts to Zillsoft, a company they controlled. Chao, Sze, and Bobba did not inform Company-1 that they controlled Zillsoft. Chao allegedly directed millions of dollars in business to Zillsoft, then split the profits with Sze and Bobba. The Information further alleges Chao continued the scheme by arranging for the sale of Zillsoft to a third entity that also performed work for Company-1, and the co-conspirators again secretly profited from Company-1’s business with that entity.
According to the Information, Chao and Sze formed another entity, SPSoft China, also to steer contracts and payments to themselves. Chao profited about $5.4 million from this arrangement. He concealed his control and interest in the company from Company-1 to continue to direct millions of dollars in business to the entity, according to the allegations.
In another aspect of the scheme, Chao and Bobba arranged for Company-1 to obtain a license to a software program for Company-1, and then secretly arranged to divert more than $2 million to themselves without disclosing the diversion to Company-1.
Chao originally was arrested on October 29, 2021, on a criminal complaint. Chao is charged with one count of wire fraud, in violation of 18 U.S.C. § 1343. After today’s appearance, Magistrate Judge Cousins released Chao on bond. Chao’s next appearance is scheduled for October 17, 2023, before Hon. Beth Labson Freeman, U.S. District Judge.
Sze was also previously arrested on a criminal complaint unsealed on October 29, 2021. Sze is now charged by an Information filed on April 24, 2023. Sze is charged with one count of conspiracy, in violation of 18 U.S.C. § 317, and he made his initial appearance on the Information on May 9, 2023. Sze was previously released pending further proceedings. Sze is set for a change of plea hearing before Judge Freeman on October 3, 2023.
Bobba was charged by an Information filed on April 24, 2023, with one count of conspiracy, in violation of 18 U.S.C. § 317. He made his initial appearance on the Information on May 16, 2023, and was released on bond. Bobba is set for a status conference before Judge Freeman on October 10, 2023.
The Informations and criminal complaints contain mere allegations that crimes have been committed and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Chao faces a maximum sentence of 20 years imprisonment, and defendants Bobba and Sze face a maximum sentence of 5 years imprisonment. Each defendant faces a fine of $250,000, plus restitution if appropriate, for each violation. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California and forfeiture is being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys Chris Kaltsas and Sailaja M. Paidipaty are prosecuting the case with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
East Bay Resident Charged with Fraud in Alleged Quarter-Million Dollar Embezzlement SchemeRead the Press Release
SAN FRANCISCO – A federal grand jury has indicted Athena Harven, charging her with four counts of wire fraud in connection with an alleged scheme to embezzle more than a quarter of a million dollars from the now-defunct San Francisco non-profit organization where she formerly worked, announced United States Attorney Ismail J. Ramsey and United States Department of Housing and Urban Development (“HUD”) Office of the Inspector General (“OIG”) Special Agent in Charge Mark Kaminsky. Harven made her initial appearance in federal court this morning before U.S. Magistrate Judge Alex Tse to face the charges.
According to the indictment, Harven, 53, of Vallejo, Calif., was Director of Operations at a San Francisco-based non-profit organization that provided academic support and employment assistance to students in the Sunnydale and Visitacion Valley neighborhoods of San Francisco. The non-profit received funding from, among other sources, the City and County of San Francisco and HUD. As Director of Operations, Harven had access to, and control over, the non-profit’s finances. According to the indictment, for almost four years between April 2015 and December 2018, Harven engaged in a scheme to defraud the organization. Specifically, Harven allegedly wrote herself 119 checks on the non-profit’s bank account and prepared paperwork to suggest that the funds from many of those checks would be used to pay the non-profit’s payroll taxes; in fact, Harven allegedly deposited the checks into bank accounts she controlled and spent the funds to enrich herself, including to withdraw cash from ATMs; to pay for travel expenses, rent, utilities, and groceries; to shop online; to make purchases at various retail stores, restaurants, hotels, casinos, and gas stations; and to shore up the finances of—and to pay expenses associated with—a bakery that she owned and operated.
The indictment alleges that Harven took money earmarked to pay the non-profit’s payroll taxes and spent it instead at merchants including Victoria’s Secret, Forever 21, VIP Luggage & Leather, H&M, and Hollister. She also allegedly withdrew thousands of dollars in cash and allegedly used the funds to pay business rent for her bakery.
The indictment further alleges that Harven took several steps to conceal her fraud from the non-profit allowing the fraud to continue. For example, she allegedly altered the non-profit’s records to show the payee on many of the checks she wrote to herself was ADP, a payroll processing company that formerly worked with the non-profit; in fact, Harven was the payee on the checks. Further, Harven allegedly intercepted dozens of communications over several years from the state tax authorities to the non-profit regarding the organization’s unpaid payroll taxes, allowing her fraud to continue undetected. Additionally, Harven allegedly concocted a fake email, purportedly from an employee of the California Economic Development Department, to conceal her fraudulent scheme.
The indictment alleges that the non-profit and Harven failed to make any payroll tax payments to the federal or state tax authorities between April 2015 and December 2018 and that, as a result, the non-profit owed hundreds of thousands of dollars in unpaid taxes in December 2018, when the organization laid off its employees (including Harven), ceased its operations, and collapsed. Finally, the indictment alleges that “the amount of payroll taxes [the non-profit] failed to pay from 2015 through 2018 closely approximated the $256,771.84 Harven embezzled during that same time period.”
The indictment charges Harven with four counts of wire fraud, in violation of 18 U.S.C. § 1343.
Magistrate Judge Tse released Harven on a personal recognizance bond after this morning’s initial appearance. Harven’s next appearance in this case is scheduled for August 30, 2023, for a status hearing before the Honorable Charles R. Breyer, Senior United States District Judge.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Harven faces a maximum sentence of 20 years’ imprisonment and a fine of twice the gross loss resulting from her criminal conduct. As part of any sentence, the court also may order Harven to serve up to three years of supervised release to begin after any term of imprisonment, and may impose additional assessments and restitution, if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Nicholas Parker is prosecuting the case with assistance from Lance Libatique and Andy Ding. The prosecution is the result of an investigation by the United States Department of Housing and Urban Development - Office of Inspector General.
Chinese National Real Estate Developer Appears in Court to Face Charges of Bribing A Prominent San Francisco Public OfficialRead the Press Release
SAN FRANCISCO - Zhang Li, founder and chief executive officer of a Chinese real estate development company appeared last night in U.S. District Court on charges that he bribed former head of the San Francisco Department of Public Works Mohammed Nuru, announced First Assistant United States Attorney Patrick Robbins, Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp, and Internal Revenue Service-Criminal Investigation Special Agent in Charge Darren Lian. A U.S. company that Zhang controls, Z&L Properties, Inc., was also charged with honest services wire fraud for providing bribes and gifts to Nuru in exchange for favorable city treatment of Z&L Properties’ mixed-use project at 555 Fulton Street in San Francisco, Calif. As part of a negotiated disposition both Zhang and Z&L Properties will waive the right to indictment and admit that they engaged in certain conduct.
Zhang, 70, of Guangzhou, China, has been charged by Information with one count of conspiracy to commit honest services fraud. According to the Information, Zhang bribed Nuru by providing him with food, drinks, luxury lodging, and transportation during a trip Nuru took to China in 2018. The Information alleges the purpose of the bribe was to influence Nuru so that he would provide favorable treatment on decisions and city approvals needed during the construction and development of a mixed-use property at 555 Fulton Street in San Francisco being developed by Zhang and a company Zhang controlled.
Z&L Properties Inc., a U.S. company formerly based in Fremont, Calif., and controlled by Zhang, was also charged in a separate Information with conspiracy to commit honest services fraud and honest services wire fraud for its participation in the bribery scheme. Z&L Properties managed the development of the 555 Fulton Street project and the company facilitated the payment of bribes to Nuru in exchange for favorable treatment regarding the 555 Fulton project, according to the allegations in the criminal Information.
“Zhang Li and Z&L Properties have admitted that they bribed a top San Francisco public official. The criminal charges and resolutions announced today send a clear message that this office will not tolerate the corruption of public officials in the District by anyone, including individuals acting from outside of the United States,” said First Assistant U.S. Attorney Patrick Robbins. “To those who seek to corrupt public officials in the United States, wherever they are, we will use the powers at our disposal to bring them to justice and hold them accountable to the rule of law.”
“Zhang Li, who earned his profits through bribery of a San Francisco public official, is yet another individual charged in connection to our ongoing public corruption case,” said FBI Special Agent in Charge Robert Tripp. “Public corruption erodes public confidence and strikes at the very foundation of our government. The citizens of San Francisco deserve better, and we stand firmly committed to investigating both corrupt officials and private citizens who attempt to bribe them, no matter where they reside.”
“IRS-Criminal Investigation’s priority is to ensure a fair and level playing field for all taxpayers,” said Special Agent in Charge Darren Lian of the Oakland Field Office. “Mr. Li’s conduct shows that greed and financial crimes have no borders, and we will continue to pursue those who take advantage of our system and taxpayers by following the money worldwide. We are proud to have worked alongside our federal law enforcement partners and the U.S. Attorney’s Office in bringing this case a step closer to closure.”
Zhang originally was charged by criminal complaint in May of 2021. At the request of the United States, Zhang was arrested when he arrived in the United Kingdom in December 2022 and the United States pursued extradition. After approximately six months, Zhang consented to extradition and was subsequently surrendered to U.S. authorities. The charges against Zhang now are set forth in an Information filed by the government.
Zhang appeared yesterday before U.S. Magistrate Judge Alex Tse in the Northern District of California. Magistrate Judge Tse released Zhang on a bond pending further proceedings.
According to the documents filed in Zhang’s case, the defendant and the U.S. Attorney’s Office have entered a deferred prosecution agreement. Under that agreement filed today, Zhang admitted to the conduct that forms the basis of the charge in the Information, and, if Zhang abides by the terms of the deferred prosecution agreement, the charge will be dismissed in three years.
According to filed documents, Z&L Properties also will plead guilty to charges set out in the Information filed against it; Z&L also will agree to a comprehensive compliance and remediation program designed to prevent bribery and corruption in connection with Z&L Properties’ real estate development work. Z&L Properties has agreed to plead guilty to one count of conspiracy to commit honest services wire fraud and one count of honest services wire fraud, will pay a fine of $1,000,000, and will enter into a corporate compliance program acceptable to the Office of the U.S. Attorney. Z&L Properties appeared before U.S. Magistrate Judge Alex Tse today, and the court set a further hearing before U.S. District Judge William H. Orrick, on August 10, 2023, at 1:30 p.m.
The charges against Zhang and Z&L Properties arose from an investigation into bribery and public corruption in San Francisco city government led by the U.S. Attorney’s Office, the FBI, and IRS-CI. To date, more than 14 individuals and entities have been charged in connection that larger set of investigations, including Mohammed Nuru, former director of the San Francisco Public Works department; Harlan Kelly, the former general manager of the San Francisco Public Utilities Commission; and multiple city contractors and other facilitators of bribes and corruption.
Nuru was charged in January 2020, pleaded guilty in January 2022, and on August 25, 2022, Nuru was sentenced to 84 months in federal prison. A separate defendant charged in the investigation, Walter Wong, was charged in June 2020 with conspiracy to defraud the public of its right to honest services and with conspiracy to engage in money laundering, both involving Nuru. Wong entered a guilty plea and agreed to cooperate with the government’s San Francisco City Hall corruption investigation.
An Information merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant Zhang faces a maximum sentence of 20 years imprisonment, a maximum fine of $250,000, plus restitution if appropriate. Z&L Properties faces a maximum fine of $500,000 per count, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California. Assistant U.S. Attorneys David Ward and Robert Leach are prosecuting the case. The prosecution is the result of an investigation by the FBI and the Internal Revenue Service-Criminal Investigations (IRS-CI). First Assistant U.S. Attorney Patrick Robbins thanked the Department of Justice’s Office of International Affairs and United Kingdom authorities for their assistance in the extradition.
2023-07-18_information_zhang_li.pdf 2023-07-18_information_zl_properties.pdfSouthern California Man Charged with Diverting $4.8 Million in San Francisco-Based Investment Fraud SchemeRead the Press Release
SAN FRANCISCO – A federal grand jury in San Francisco indicted Joon Woo Kim with fraud in connection with two related fraud schemes—the first, an alleged scheme to mislead investors to contribute to a fund he formed in San Francisco, and the second, a scheme to obtain a multi-million dollar business loans and line of credit by lying to a bank—announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. Kim was arrested earlier today in New Haven, Conn., and appeared in U.S. District Court for the District of Connecticut to face the charges.
According to the indictment, filed June 27, 2023, and unsealed today, Kim, 57, of Montebello, Calif., allegedly engaged in the first fraud scheme beginning June 2015 through at least March 19, 2022. Kim created an investment fund called the M5 Doctors Fund and allegedly induced investors to contribute to the fund by making false statements and omissions about the kinds of investments Kim would make while managing the fund’s assets. For example, Kim allegedly advertised that he would invest assets of the M5 Doctors Fund in securities of Tesla, Inc. and electric vehicle companies. Nevertheless, rather than invest the funds as he promised, Kim allegedly transferred nearly all M5 Doctors Fund assets, including funds from the liquidation of investments and the return on those investments, to CKR Enterprise, Inc., a wholesale food distribution company owned and operated by Kim and his wife.
As General Partner of the M5 Doctors Fund and the person who held himself out as manager and person responsible for the fund, Kim had a duty to disclose all material business, transactions, and investments to the fund’s investors and Limited Partners. Nevertheless, according to the indictment, from 2015 through July 2018, Kim transferred approximately $4.8 million in M5 Doctors Fund assets to CKR without informing the fund’s investors. Additionally, the indictment alleges Kim continued to tell investors he was investing in Tesla stock and the stock of public electric vehicle companies; failed to disclose to M5 Doctors Fund investors that he had transferred essentially all of the fund’s assets to his business, CKR; and took actions to mislead fund investors into believing that the M5 Doctors fund was solvent and engaged in investment activities.
In the second fraud scheme, Kim defrauded Hanmi Bank by applying for two loans for CKR, a $1,300,000 line of credit and a $3,200,000 business loan, that contained materially false and fraudulent representations and promises.
In sum, the indictment charges Kim with eight counts of wire fraud, in violation of 18 U.S.C. § 1343; two counts of bank fraud, in violation of 18 U.S.C. § 1344; and one count of making a false statement to a bank, in violation of 18 U.S.C. § 1014.
Kim’s initial San Francisco federal court appearance is scheduled for July 28, 2023.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Kim faces a maximum sentence of 20 years in prison, and a fine of $250,000, plus restitution, if appropriate, for each violation of 18 U.S.C. § 1343; 30 years in prison, and a fine of $1,000,000, plus restitution, if appropriate, for each violation of 18 U.S.C. §§ 1344 and 1014. The court also may order an additional term of supervised release to begin after a prison term as part of any sentence. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. Assistant U.S. Attorney Christiaan Highsmith is prosecuting the case, with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the FBI.
Jury Convicts Former San Francisco Public Utilities Commission General Manager of Felony Bribery and Bank Fraud ChargesRead the Press Release
SAN FRANCISCO – A federal jury today convicted Harlan Kelly, the former General Manager of the San Francisco Public Utilities Commission (PUC) of charges that he accepted bribes and gifts from a local businessman in a scheme to provide confidential information about the city public bidding process and steer city contracts to that person’s businesses, announced First Assistant United States Attorney Patrick Robbins, Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp, and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The verdict follows a two-week trial before United States Chief District Judge Richard Seeborg.
Kelly, 61, of San Francisco, was arrested on a criminal complaint in November 2020, and he was tried on charges contained in a May 31, 2022, superseding indictment that included charges of conspiracy to commit honest services wire fraud and honest services wire fraud. The superseding indictment also included charges of false statements to a bank, conspiracy to make false statements to a bank, bank fraud, and bank fraud conspiracy, related to a scheme to defraud Quicken Loans in connection with a $1.3 million mortgage refinance loan obtained by Kelly.
Kelly was convicted of one count of conspiracy to commit honest services wire fraud, one count of honest services wire fraud, and all four counts related to the bank fraud scheme. The jury found Kelly not guilty of two honest services wire fraud counts.
The charges against, and prosecution of, Kelly grew out of a years-long investigation into bribery and public corruption in San Francisco city government, led by the U.S. Attorney’s Office, the FBI, and IRS-CI. To date, 13 individuals have been charged in connection that larger set of investigations, including Mohammed Nuru, former director of the San Francisco Public Works department, and multiple city contractors and other facilitators of bribes and corruption.
The evidence at trial showed that Kelly, appointed in 2012 as General Manager of the San Francisco PUC, had access to confidential information about city contract bidding processes, and the ability to influence the awarding of some city contracts. Documents and testimony showed that Kelly had a close personal and professional relationship with San Francisco business owner and contractor Walter Wong, and that during the time Wong both conducted business with the city and sought additional lucrative contracts to supply the PUC with LED streetlights. While he was doing business with the city and seeking contracts, Wong provided numerous gifts, benefits, and bribes to Kelly. These bribes including discounted construction work on Kelly’s personal residence and a lavish international trip hosted by and in part paid for by Wong. Evidence showed that Wong paid travel and personal expenses for Kelly and his family during a March 2016 Kelly family vacation to Hong Kong, Macau, and China, and that Wong paid for hotel expenses and incidentals such as meals and luxury excursions. Wong has previously pleaded guilty to charges that he engaged in an honest services fraud conspiracy in connection with his interactions with Kelly and others.
The evidence at trial showed that as part of the bribery conspiracy, Kelly provided confidential information and documents about the details of bids submitted by other contractors, including proprietary pricing and cost information, and information and documents with internal notes about how city employees in the PUC were evaluating and rating the bidders. The evidence showed that Kelly delivered these documents to Wong and his associates in violation of Kelly’s fiduciary obligations to the city and its residents, and that the confidential information assisted Wong and his company in improving Wong’s chances to obtain the contract award.
Trial evidence also showed that Kelly defrauded Quicken Loans, a financial institution, in a $1.3 million dollar real estate mortgage loan provided to Kelly. The evidence at trial showed that Kelly worked with an associate, prominent city businessman and property manager Victor Makras, to mislead the bank. According to the evidence, in the application for the loan Kelly falsely represented that he had a $915,000 mortgage and concealed the true nature of his debts from Quicken. According to the trial evidence, these misrepresentations were material to the bank’s evaluation of the borrower and the loan. The outstanding debts that Kelly concealed from Quicken included a construction debt owed to the contractor, Walter Wong that amounted to about $89,000. Another debt concealed from the company was a $70,000 unsecured personal loan made by Makras to Kelly, a result of Makras directly paying Kelly’s credit card debt in order to conceal the fact that Kelly received this loan from Makras.
Co-defendant Makras, 64 of San Francisco, was also charged in the May 31, 2022 superseding indictment, and was convicted of making false statements to a bank and bank fraud at a separate trial in August 2022.
The federal jury today convicted Kelly of the following:
• One count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 1349, which carries a maximum possible penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss
• One count of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, which carries a maximum possible penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss
• One count of making false statements to a bank in violation of 18 U.S.C. § 1014, which carries a maximum possible penalty of 30 years in prison and a $1,000,000 fine
• One count of conspiracy to make false statements to a bank in violation of 18 U.S.C. § 371, which carries a maximum possible penalty of 5 years in prison and a fine of $250,000
• One count of bank fraud, in violation of 18 U.S.C. §§ 1344(1),(2), which carries a maximum possible penalty of 30 years in prison and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross loss
• One count of conspiracy to commit bank fraud, in violation of 18 U.S.C. §§ 1344(1),(2) and 1349, which carries a maximum possible penalty of 30 years in prison and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross lossAs part of any sentence, the court also may order the defendant to serve an additional period of supervised release to begin after any prison term, to pay additional penalties, and to pay restitution, if appropriate. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553. Defendant Kelly remains out of custody pending sentencing. No future date has yet been set.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. Assistant U.S. Attorneys David Ward and Kristina Green prosecuted the case at trial with the assistance of Tina Rosenbaum. The case is being investigated by the FBI and the IRS-CI.
Former San Francisco Senior Building Inspector Sentenced to Prison Term for Accepting Illegal GratuitiesRead the Press Release
SAN FRANCISCO – Bernard Curran, a former San Francisco Senior Building Inspector, was sentenced today to serve a year and a day in prison in connection with charges that he accepted cash payments and charitable donations from developers and property owners whose projects Curran had responsibility for approving, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The sentence was handed down by United States Senior District Judge Susan Illston.
Curran, 62, of San Francisco, pleaded guilty to the charges on December 9, 2022. According to his plea agreement, Curran acknowledged that he was a Building Inspector for the San Francisco Department of Building Inspection (“DBI”) in 2005, and in approximately 2009, was promoted to Senior Building Inspector. As a Senior Building Inspector, Curran was responsible for conducting physical inspections of buildings and construction sites in San Francisco to verify that construction or renovation work had been completed according to approved permits and plans. Curran admitted that after he became a Senior Building Inspector, he received improper financial benefits in connection with his employment.
“San Francisco government officials must always work with the public’s best interest in mind and rebuff invitations for corrupt personal gain,” said U.S. Attorney Ramsey. “Curran is not the first, and he will not be the last, defendant sentenced in rooting out corruption in San Francisco. Today’s sentence makes clear that officials who abuse the public trust will serve time in federal custody.”
“Bernard Curran chose to line his own pockets instead of performing his duties with integrity,” said Special Agent In Charge Robert K. Tripp. “That’s not a small lapse: building inspectors ensure our new construction is safe, and play a key role in creating new housing and businesses that make San Francisco a vibrant place to live and work. Curran’s time in prison should be a stark warning to all that if you’re a public servant who takes a bribe, you will be held to account.”
According to his plea agreement, Curran admitted that he received cash payments from a San Francisco developer “in connection with and as rewards for” the inspections that he conducted or for the approvals that Curran granted as an inspector. In addition, Curran admitted that he accepted what amounted to a $260,000 interest-free loan from the same developer, $30,000 of which was never paid back. Curran admitted that he understood the developer never required the outstanding $30,000 balance to be repaid, “in part due to our friendship, but also in connection with and as a reward for conducting past and future inspections,” on the developer’s projects. Further, Curran admitted that in 2021, the San Francisco City Attorney’s Office investigated potential conflicts of interest related to his employment and, in response, Curran falsely certified that the loan he received was not from the developer, but rather was from a relative and had been issued at a 6% interest rate. Curran admitted that he submitted this false statement in an effort to deceive the City officials.
In addition to the improper gifts from the developer, Curran also admitted in his plea agreement that he accepted illegal gifts from co-defendant Rodrigo Santos. Santos, a licensed civil engineer, worked with project owners and contractors seeking building permits in San Francisco. Curran admitted that between May of 2017 and April of 2020, Santos asked some of his San Francisco clients to make “charitable” donations in connection with inspections that Curran conducted. Specifically, Curran was a volunteer for, and supporter of, a non-profit organization and Santos instructed his clients to write checks for the organization. Curran admitted that on several occasions Santos discussed with Curran the checks that his clients donated while also asking for official action to be taken on specific projects. Curran admitted that the government could prove that between May of 2017 and April of 2019, Santos’s clients wrote $9,600 in donations from 13 clients and that Curran took at least one official action for all 13 of the donors.
On November 28, 2022, Curran was charged by superseding information with two counts of accepting illegal gratuities, in violation of 18 U.S.C. § 666(a)(1)(B). Curran pleaded guilty to both counts.
In addition to the prison term, Judge Illston sentenced Curran to two years of supervised release following his prison term. The court set a further hearing on September 8, 2023, to determine the amount of restitution that Curran must pay to DBI to compensate the agency for the costs of an internal audit of projects that Curran inspected. DBI initiated the audit after the charges in this case
The case is being prosecuted by the Special Prosecutions Section of the U.S. Attorney’s Office. The case is being investigated by the FBI and the IRS-CI.
Two More Dublin Federal Correctional Officers to Plead Guilty to Sexually Abusing Multiple Female InmatesRead the Press Release
OAKLAND - As part of its ongoing investigation into Bureau of Prisons officials at FCI Dublin, the U.S. Attorney’s Office today announced charges against two more federal prison correctional officers (CO), Nakie Nunley and Andrew Jones, for sexually abusing multiple female inmates. The two officers were each charged by Information with multiple counts of sexually abusing female inmates and then lying about the abuse to federal investigators. Both Nunley and Jones were employed as federal correctional officers at the time of the abuse. Both have agreed to plead guilty in written plea agreements, which were filed concurrently with the charging documents.
“The sexual abuse charges and guilty pleas announced today are the result of the Department of Justice’s sustained commitment to rooting out sexual misconduct at the Bureau of Prisons,” said Deputy Attorney General Lisa O. Monaco. “As these guilty pleas reflect, we will continue to hold accountable correctional officers who abuse their positions of trust and fail to humanely care for those in their custody.”
“This Office’s ongoing investigation into FCI Dublin has revealed significant findings of wrongdoing by multiple correctional officers at that facility,” said U.S. Attorney Ismail J. Ramsey of the Northern District of California. “The Department of Justice has repeatedly warned that criminal misconduct in the care and safety of incarcerated persons will not be tolerated. Correctional officers have an obligation to ensure the safety of incarcerated persons and all Bureau of Prisons employees should view these latest two prosecutions as confirmation that the Department of Justice will do its part to ensure that those who stray from these obligations are held accountable.”
“Nunley and Jones are the seventh and eighth individuals charged with sexually abusing inmates at FCI Dublin. Five individuals, including the Warden and Chaplain, have been convicted of sexual abuse of inmates. The Department of Justice Office of the Inspector General is continuing to investigate these heinous allegations at FCI Dublin and is aggressively pursuing justice for victims of sexual abuse at the hands of rogue BOP employees," said Inspector General Michael E. Horowitz.
“Incarcerated individuals should be able to serve their sentences without fear of being sexually assaulted by correctional institution staff,” said FBI San Francisco Special Agent In Charge Robert Tripp. “Nakie Nunley and Andrew Jones abused their positions and will be held accountable. Protecting civil rights stands among the FBI’s highest priorities, and we will continue to investigate such claims as they come to light.”
Nunley, 48, of Fairfield, was charged with engaging in sexual acts and sexual contacts with five women who were serving prison sentences at FCI Dublin at the time of the abuse. He was also charged with lying to federal investigators about the sexual abuse and writing sexually explicit notes with one of his victims. Jones, 35, of Pleasanton, was charged with engaging in sexual acts with three women who were serving prison sentences at FCI Dublin, as well as lying to federal investigators about sexually abusing one of these victims.
Nakie Nunley
Nunley was employed as a correctional officer at FCI Dublin where he supervised prisoners who worked in UNICOR, a trade name for the federal prison industries. All of Nunley’s victims worked at the UNICOR call center at the time of his abuse. According to his plea agreement, Nunley admits that between March 2020 and November 2021, he engaged in sexual acts with two prisoners, including having oral and vaginal sex with one victim and digitally penetrating another victim on multiple occasions. He also admitted that he engaged in illegal sexual contacts with three other prisoners and that he lied to federal investigators about sexually abusing his victims and about sending one of his victims sexually explicit notes.
In addition to the five victims he is charged with abusing in the Information, Nunley also admitted in his plea agreement that he sexually abused two other prisoners who worked at UNICOR. Nunley admitted that he digitally penetrated one victim’s vagina and caused her to touch his penis under his pants, resulting in him ejaculating in her hand. Nunley admitted that he caused another victim to perform oral sex on him.
Nunley also admitted that he engaged in other inappropriate behavior. For example, Nunley agreed that he wrote sexual notes to one of his victims and made sexual comments to multiple victims. Moreover, when one of his victims approached him about his conduct towards another victim, Nunley threatened her by raising with her the potential that she could be transferred to another facility and that she could lose her job. Similarly, Nunley admitted that he told another victim that if she wanted to keep her job at UNICOR, she needed to pull down her underwear and bend over. When she complied, Nunley slapped her buttocks several times.
Andrew Jones
Jones was employed as a correctional officer at FCI Dublin where he supervised prisoners who worked in the Food Services Department. According to his plea agreement, between July 2020 and June 2021, Jones admitted that he received oral sex from, or had sexual intercourse with, three female prisoners who worked for him in the FCI Dublin kitchen. Jones admitted that he sexually abused these prisoners in multiple places near the FCI Dublin kitchen, including a staff bathroom, a warehouse, and a room where kitchen utensils were kept. In addition, like Nunley, Jones admitted in his plea agreement that he engaged in improper conduct in addition to the conduct for which he was charged in the Information. Specifically, Jones admitted that he also had sexual intercourse and received oral sex from an additional victim on multiple other occasions between July and December 2020, and that he had sexual intercourse with yet another victim multiple times between March and June 2021.
FCI Dublin Investigation
As part of the Department of Justice’s ongoing investigation into FCI Dublin, eight FCI Dublin correctional officers, including the former Warden, have been charged with crimes related to the sexual abuse of the female prisoners at the facility. In December of 2022, former Warden Ray J. Garcia was convicted by a jury of sexually abusive conduct against three female victims and was sentenced to 70 months in prison for his crimes. To date, the tally of correctional officers (“COs”) charged with misconduct as part of the Department of Justice’s investigation are as follows:
NAME
CASE NUMBER
STATUS
Warden Ray J. Garcia
4:21-cr-00429-YGR
Convicted on all counts by jury on December 8, 2022; sentenced to 70 months in prison
CO John Bellhouse
4:22-cr-00066-YGR
Convicted on all counts by jury on June 5, 2023; sentencing scheduled for October 27, 2023
Chaplain James Highhouse
4:22-cr-00016-HSG
Pleaded guilty on February 24, 2022; sentenced to 84 months in prison
CO Enrique Chavez
4:22-cr-00104-YGR
Pleaded guilty on October 27, 2022; sentenced to 20 months in prison
CO Ross Klinger
4:22-cr-00031-YGR
Pleaded guilty on February 10, 2022; sentencing scheduled for December 13, 2023
CO Darrel Smith (a/k/a “Dirty Dick Smith”)
4:22-cr-00110-YGR
Indicted on April 13, 2023; status conference scheduled for August 3, 2023
CO Nakie Nunley
4:23-cr-00213-HSG
Information and Plea Agreement filed on July 13, 2023
CO Andrew Jones
4:23-cr-00212-HSG
Information and Plea Agreement filed on July 13, 2023
These cases are being prosecuted by Assistant U.S. Attorneys Molly K. Priedeman and Andrew Paulson, with the assistance of Madeline Wachs, Sara Slattery, Christine Tian, Claudia Hyslop, Leeya Kekona, and Kay Konopaske. The prosecutions are the result of an investigation by the DOJ-OIG and the FBI.
4-23-cr-00212-hsg_information_2023_07_13.pdf 4-23-cr-00213-hsg_information_2023_07_13.pdfFormer Oklahoma Undersheriff Sentenced for Using Excessive Force and Violating Civil Rights of DetaineeRead the Press Release
A former Oklahoma undersheriff was sentenced to 22 months in prison and three months of supervised release for violating the civil rights of a handcuffed detainee by using excessive force.
On Nov. 8, 2022, Kendall Bryan Morgan, 45, pleaded guilty to one count of deprivation of rights under color of law. At the plea hearing, Morgan, the former undersheriff in the LeFlore County Sheriff’s Department, admitted that on Jan. 25, 2017, he repeatedly struck a person under arrest and in handcuffs, causing the victim bodily injury. At the time of the assault, the individual was not resisting arrest and posed no threat to officers or the public. Morgan’s excessive force furthered no legitimate law enforcement purpose and violated the victim’s constitutional right to be free from unreasonable force by law enforcement.
“This defendant abused his authority as a law enforcement officer and violated the public’s trust by repeatedly assaulting and injuring a handcuffed arrestee,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Justice Department will continue to hold accountable those officers who abuse their authority, wherever such abuses occur.”
“The reputation of the entire law enforcement profession is tarnished when an officer betrays the oath to protect and serve,” said Special Agent in Charge Edward J. Gray of the FBI Oklahoma City Field Office. “The sentencing of Mr. Morgan sends a clear message that the FBI will not tolerate anyone who dishonors the badge by using excessive force.”
“Law enforcement officers are bound by oath to serve and protect all citizens equally – this requires consistency, compassion, and respect for the dignity of all,” said U.S. Attorney Christopher J. Wilson for the Eastern District of Oklahoma. “The defendant violated that oath, and justice demands he pay the price for blatantly disregarding the law and the civil rights of others.”
Morgan will remain in the custody of the U.S. Marshal pending transportation to a designated U.S. Bureau of Prisons facility to serve a non-paroleable sentence of incarceration.
Assistant Attorney General Clarke, U.S. Attorney Wilson and Special Agent in Charge Gray made the announcement.
The FBI Oklahoma City Field Office investigated the case.
Assistant U.S. Attorney Jarrod Leaman for the Eastern District of Oklahoma and Trial Attorney Avner Shapiro of the Civil Rights Division’s Criminal Section prosecuted the case.
Two More Dublin Federal Correctional Officers Plead Guilty to Sexually Abusing Multiple Female InmatesRead the Press Release
As part of its ongoing investigation into Bureau of Prisons (BOP) officials at Federal Correctional Institution (FCI) Dublin, two more federal prison correctional officers were charged for sexually abusing multiple female inmates.
Nakie Nunley, 48, of Fairfield, California, and Andrew Jones, 35, of Pleasanton, California, were each charged by information with multiple counts of sexually abusing female inmates and then lying about the abuse to federal investigators. Both Nunley and Jones were employed as federal correctional officers at the time of the abuse. Both have agreed to plead guilty in written plea agreements, which were filed concurrently with the charging documents.
“The sexual abuse charges and guilty pleas announced today are the result of the Department of Justice’s sustained commitment to rooting out sexual misconduct at the Bureau of Prisons,” said Deputy Attorney General Lisa O. Monaco. “As these guilty pleas reflect, we will continue to hold accountable correctional officers who abuse their positions of trust and fail to humanely care for those in their custody.”
“The FBI is unrelenting in its protection of the civil rights of all individuals, including those who are incarcerated,” said FBI Deputy Director Paul Abbate. “No matter where these crimes occur, violence of any type destroys the safety and protection that every person deserves. We will continue to pursue investigations into any Bureau of Prisons official who abuses their position and assaults those in their care.”
“This office’s ongoing investigation into the conditions at FCI Dublin has revealed significant wrongdoing by multiple correctional officers at that facility,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “The Department of Justice will not tolerate misconduct in the care of incarcerated persons. Correctional officers have an obligation to ensure the safety of incarcerated persons, and all Bureau of Prisons employees should view these latest two prosecutions as confirmation that the Department of Justice will do its part to ensure that those who stray from these obligations are held accountable.”
“Nunley and Jones are the seventh and eighth individuals charged with sexually abusing inmates at FCI Dublin. Five individuals, including the Warden and Chaplain, have been convicted of sexual abuse of inmates,” said Inspector General Michael E. Horowitz. “The Department of Justice Office of the Inspector General (DOJ-OIG) is continuing to investigate these heinous allegations at FCI Dublin and is aggressively pursuing justice for victims of sexual abuse at the hands of rogue BOP employees.”
“Incarcerated individuals should be able to serve their sentences without fear of being sexually assaulted by correctional institution staff,” said Special Agent in Charge Robert Tripp of FBI San Francisco Field Office. “Nakie Nunley and Andrew Jones abused their positions and will be held accountable. Protecting civil rights stands among the FBI’s highest priorities, and we will continue to investigate such claims as they come to light.”
Nunley was charged with engaging in sexual acts and sexual contacts with five women who were serving prison sentences at FCI Dublin at the time of the abuse. He was also charged with lying to federal investigators about the sexual abuse and writing sexually explicit notes with one of his victims. Jones was charged with engaging in sexual acts with three women who were serving prison sentences at FCI Dublin, as well as lying to federal investigators about sexually abusing one of these victims.
Nakie Nunley
Nunley was employed as a correctional officer at FCI Dublin where he supervised prisoners who worked in UNICOR, a trade name for the federal prison industries. All of Nunley’s victims worked at the UNICOR call center at the time of his abuse. According to his plea agreement, Nunley admits that between March 2020 and November 2021, he engaged in sexual acts with two prisoners, including having oral and vaginal sex with one victim and digitally penetrating another victim on multiple occasions. He also admitted that he engaged in illegal sexual contacts with three other prisoners and that he lied to federal investigators about sexually abusing his victims and about sending one of his victims sexually explicit notes.
In addition to the five victims, Nunley also admitted in his plea agreement that he sexually abused two other prisoners who worked at UNICOR. Nunley admitted that he digitally penetrated one victim’s vagina and caused her to touch his penis under his pants, resulting in him ejaculating in her hand. Nunley admitted that he caused another victim to perform oral sex on him.
Nunley also admitted that he engaged in other inappropriate behavior. For example, Nunley agreed that he wrote sexual notes to one of his victims and made sexual comments to multiple victims. Moreover, when one of his victims approached him about his conduct towards another victim, Nunley threatened her by raising with her the potential that she could be transferred to another facility and that she could lose her job. Similarly, Nunley admitted that he told another victim that if she wanted to keep her job at UNICOR, she needed to pull down her underwear and bend over. When she complied, Nunley slapped her buttocks several times.
Andrew Jones
Jones was employed as a correctional officer at FCI Dublin where he supervised prisoners who worked in the Food Services Department. According to his plea agreement, between July 2020 and June 2021, Jones admitted that he received oral sex from, or had sexual intercourse with, three female prisoners who worked for him in the FCI Dublin kitchen. Jones admitted that he sexually abused these prisoners in multiple places near the FCI Dublin kitchen, including a staff bathroom, a warehouse, and a room where kitchen utensils were kept. In addition, like Nunley, Jones admitted in his plea agreement that he engaged in improper conduct in addition to the conduct for which he was charged in the Information. Specifically, Jones admitted that he also had sexual intercourse and received oral sex from an additional victim on multiple other occasions between July and December 2020, and that he had sexual intercourse with yet another victim multiple times between March and June 2021.
FCI Dublin Investigation
As part of the Justice Department’s ongoing investigation into FCI Dublin, eight FCI Dublin correctional officers, including the former Warden, have been charged with crimes related to the sexual abuse of the female prisoners at the facility. In December 2022, former Warden Ray J. Garcia was convicted by a jury of sexually abusive conduct against three female victims and was sentenced to 70 months in prison for his crimes. To date, the tally of correctional officers charged with misconduct as part of the Justice Department’s investigation are as follows:
NAME
CASE NUMBER
STATUS
Warden Ray J. Garcia
4:21-cr-00429-YGR
Convicted on all counts by jury on Dec. 8, 2022; sentenced to 70 months in prison
CO John Bellhouse
4:22-cr-00066-YGR
Convicted on all counts by jury on June 5; sentencing scheduled for Oct. 27
Chaplain James Highhouse
4:22-cr-00016-HSG
Pleaded guilty on Feb. 24, 2022; sentenced to 84 months in prison
CO Enrique Chavez
4:22-cr-00104-YGR
Pleaded guilty on Oct. 27, 2022; sentenced to 20 months in prison
CO Ross Klinger
4:22-cr-00031-YGR
Pleaded guilty on Feb. 10, 2022; sentencing scheduled for Dec. 13
CO Darrel Smith (aka “Dirty Dick Smith”)
4:22-cr-00110-YGR
Indicted on April 13; status conference scheduled for Aug. 3
CO Nakie Nunley
4:23-cr-00213-HSG
Information and Plea Agreement filed on July 13
CO Andrew Jones
4:23-cr-00212-HSG
Information and Plea Agreement filed on July 13
DOJ-OIG and the FBI investigated the case.
Assistant U.S. Attorneys Molly K. Priedeman and Andrew Paulson for the Northern District of California, with the assistance of Madeline Wachs, Sara Slattery, Christine Tian, Claudia Hyslop, Leeya Kekona, and Kay Konopaske, are prosecuting the case.
Tracy Resident Charged with Computer Attack on Discovery Bay Water Treatment FacilityRead the Press Release
OAKLAND – A federal grand jury has indicted Rambler Gallo, charging him with intentionally causing damage to a protected computer after he allegedly accessed the computer network for the Discovery Bay Water Treatment Facility, located in the Town of Discovery Bay, Calif., and intentionally uninstalled the main operational and monitoring system for the water treatment plant and then turned off the servers running those systems causing a threat to public health and safety, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp.
According to the indictment, filed June 27, 2023, and unsealed earlier today, prior to the attack on the Discovery Bay Water Treatment facility, Gallo, 53, of Tracy, Calif., was a full-time employee of a private Massachusetts-based company identified in the indictment as Company A. Company A contracted with Discovery Bay to operate the town’s wastewater treatment facility; the facility provides treatment for the water and wastewater systems for the town’s 15,000 residents. During his employment with Company A, from July of 2016 until December of 2020, Gallo was the company’s “Instrumentation and Control Tech,” with responsibility for maintaining the instrumentation and the computer systems used to control the electromechanical processes of the facility in Discovery Bay.
The indictment alleges that while Gallo was employed with Company A, he installed software on his own personal computer and on Company A’s private internal network that allowed him to gain remote access to Discovery Bay’s Water Treatment facility computer network. Then, in January of 2021, after Gallo had resigned from Company A, he allegedly accessed the facility’s computer system remotely and transmitted a command to uninstall software that was the main hub of the facility’s computer network and that protected the entire water treatment system, including water pressure, filtration, and chemical levels.
The indictment charges Gallo with one count of transmitting a program, information, code, and command to cause damage to a protected computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(i).If convicted, Gallo faces a maximum statutory penalty of 10 years in prison and a fine of $250,000. In addition, as part of any sentence, the court may order an additional term of supervised release, additional assessments, and restitution, if appropriate. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in an indictment are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
Gallo made his initial federal court appearance this morning before U.S. Magistrate Judge Kandis A. Westmore. Gallo’s next appearance is scheduled for July 20, 2023 before Judge Westmore for further hearing on release conditions.
Assistant United States Attorney Cynthia Frey is prosecuting this case with assistance from Kathy Tat and Kevin Costello. The case is being investigated by the FBI.
Brentwood Couple Sentenced for Conspiracy to Produce and Production of Child PornographyRead the Press Release
OAKLAND – Matthew Lee Pelton and Heather Electa Halwig Gharibian were sentenced to 360 and 264 months in prison, respectively, for producing and conspiring to produce child pornography, announced United States Attorney Ismail J. Ramsey and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The sentences were handed down by the Hon. Jefferey S. White, U.S. District Judge.
Pelton, 50, of Brentwood, pleaded guilty to the charges on February 14, 2023. Gharibian, 53, of Brentwood, pleaded guilty to the charges on February 21, 2023. According to the plea agreements, both Pelton and Gharibian admitted that from March 29, 2021, to at least June 14, 2021, they conspired with each other to produce and film visual depictions of two minors engaged in sexually explicit conduct. The defendants communicated via WhatsApp messenger that Pelton used to request that Gharibian perform sexual acts on a then 10-year-old child in her care. Pelton described his arousal, gave instructions on how to perform sexual acts on the victim, and requested that Gharibian make a video of the molestation of the child. In response to Pelton’s request, Gharibian performed requested sexual acts on the victim, filmed it, and sent it to Pelton. Further, both minor victims described how ring cameras were placed throughout their house, including their bedrooms and bathrooms, allowing Gharibian and Pelton to view them at will.
In papers submitted in connection with sentencing, the government argued Gharibian sexually exploited the minor victims in her care for the sexual gratification of her then-boyfriend, Pelton, who the government described as a “pedophile with a seeming predilection for preteens and teenagers.” At sentencing, Judge White stated that the defendants stole the victims’ childhood.
On November 17, 2022, a federal grand jury indicted the defendants charging both with conspiracy to produce child pornography, in violation of 18 U.S.C. §§ 2251 (a) and (e); production of child pornography, in violation of 18 U.S.C. §§ 2251 (a) and (e). In addition, Gharibian was charged with two counts of distribution of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2), (b) and (e); and Pelton was charged with two counts of receipt of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2), (b) and (e). Both defendants pleaded guilty to the conspiracy and production charges. In accordance with the plea agreements, Judge White dismissed the remaining charges at sentencing.
In addition to the prison term, Judge White ordered Pelton and Gharibian to serve 180 months of supervised release, which will begin after their respective prison terms. Restitution will be decided at a later hearing.
Assistant U.S. Attorneys Kenneth Chambers and Kelly Volkar are prosecuting the case with the assistance of Jasmine Sanders and Laurie Worthen. The prosecution is the result of an investigation by HSI, the Contra Costa District Attorney’s Investigation Office, and the Brentwood Police Department.
Permanent Injunction Imposed on Online Education Platform Company Edmodo, LLC for Alleged Violations of Children’s Privacy LawRead the Press Release
SAN FRANCISCO – The Department of Justice, together with the Federal Trade Commission (FTC), today announced that Edmodo, LLC (Edmodo) has agreed to a permanent injunction and a $6 million civil penalty in connection with its online educational platform, as part of a settlement to resolve alleged violations of the Children’s Online Privacy Protection Act (COPPA), the Children’s Online Privacy Protection Rule (COPPA Rule), and the Federal Trade Commission Act. The civil penalty is suspended due to Edmodo’s inability to pay.
The Edmodo educational platform, sold to schools throughout the United States, enabled teachers to interface with students, including children under 13 years old, to host virtual class spaces, conduct discussions, share materials, make assignments, and provide quizzes and grades, among other things. In a complaint filed in the U.S. District Court for the Northern District of California, the government alleges that, until approximately September 2022, Edmodo collected the personal information of children under 13, including their names, email addresses, phone numbers, device information, and IP addresses. Edmodo allegedly collected such information without providing notice to the children’s parents or obtaining parental authorization to collect such personal information, as required by the COPPA Rule, and used this personal information to enable third-parties to display targeted advertising to student users between 2018 and September 2022.
The complaint further asserts that Edmodo was retaining this personal information indefinitely. As of March 2020, Edmodo retained the personal information associated with approximately 36 million student accounts, of which only one million were actively using the platform. This indefinite retention violated COPPA’s requirement that an operator not retain personal information of children for longer than “reasonably necessary to fulfill the purpose for which [the information] was collected.”
The stipulated order, entered by the federal district court yesterday, enjoins Edmodo from collecting personal information from children in a manner that violates the COPPA Rule and prohibits Edmodo from retaining children’s personal information for longer than reasonably necessary to fulfill the purpose for which it was collected. The order also enjoins Edmodo from collecting more personal information than reasonably necessary for a child to participate in any activity offered on its service. It also requires Edmodo to destroy personal information improperly collected from children under age 13 and to comply with reporting, monitoring, and recordkeeping requirements. Edmodo is also subject to a civil penalty judgment of $6 million dollars, which is suspended due to Edmodo’s inability to pay.
“Children do not lose their privacy protections when they use the internet,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “Congress and the FTC have established rules to govern websites and apps collecting and storing the personal information of children. The settlement being announced today demonstrates the Department of Justice’s resolve to enforce those rules. We will continue to work with our partners at the FTC to safeguard children’s online privacy.”
“The Justice Department takes seriously its mission to protect the online privacy rights of children and their parents. This order spells out clearly to all online providers that it is unacceptable to collect children’s personal information without their parents’ consent,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Department of Justice’s Civil Division. “The department is committed to protecting against unauthorized online collection and retention of information, especially from children.”
“This order makes clear that ed tech providers cannot outsource compliance responsibilities to schools, or force students to choose between their privacy and education,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “Other ed tech providers should carefully examine their practices to ensure they’re not compromising students’ privacy.”
This matter was handled by Assistant U.S. Attorney Vivian Wang for the Northern District of California, Senior Trial Attorney James T. Nelson and Assistant Director Lisa Hsiao of the Civil Division’s Consumer Protection Branch, and Gorana Neskovic and Peder Magee of the FTC.
For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at www.justice.gov/civil/consumer-protection-branch. For more information about the FTC, visit its website at www.FTC.gov.
Oakland Motorist Charged with Being Felon in Possession of Ammunition After Firing Shots During I-580 Road Rage IncidentRead the Press Release
OAKLAND – Antoyne Terrell Bullock appeared today in United States District Court to face a federal charge that he possessed ammunition during a road rage incident on Interstate 580, announced United States Attorney Ismail J. Ramsey and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jennifer Cicolani. Bullock made his initial appearance today in United States District Court in Oakland before United States Chief Magistrate Judge Donna M. Ryu.
The charge was set out in a criminal complaint filed June 16, 2023, and unsealed in federal court today. The criminal complaint alleges the defendant, Bullock, 43, shot at a fellow motorist causing the motorist to lose control of their vehicle. Specifically, on May 25, 2023, the defendant, in his Ford SUV, sped up next to the driver of a Dodge truck, and while beside the Dodge, the defendant rolled down the rear back passenger window of his SUV and shot at the driver of the Dodge. The defendant struck the driver side window causing it to shatter.
The complaint further details, the driver of the Dodge ducked, while turning the steering wheel, causing his vehicle to collide with the defendant’s SUV. The SUV overturned, rolling over several times before coming to a stop on its roof. The defendant, and the female passenger, attempted to leave the scene of the accident when California Highway Patrol officers arrived. Upon canvasing the scene, officers recovered a P80 handgun and keys to the Ford SUV alongside the highway. When officers arrested the defendant, they recovered a loaded magazine in his pants pocket.
In sum, the complaint charges Bullock with being a felon in possession of ammunition, in violation of 18 U.S.C. § 922(g)(1). The statutory maximum for the charge for the violation is 10 years’ imprisonment, a maximum fine of $250,000, a maximum of 3 years’ supervised release, and a $100 special assessment. However, any sentence following a conviction would be imposed by a court only after considerations of the U.S. Sentencing Guidelines and the federal statue governing the imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the criminal complaint are only allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
Bullock is scheduled to make his next federal court appearance on July 18, 2023, for a preliminary hearing and arraignment.
Assistant U.S. Attorney Kenneth Chambers is prosecuting the case with the assistance of Jasmine Sanders. The prosecution is the result of an investigation by ATF, California Highway Patrol, the Oakland Police Department, and the Alameda County Sheriff’s Office.
All Hands on Deck CEO Convicted of Bank Fraud, Wire Fraud, Witness Tampering, and Other OffensesRead the Press Release
OAKLAND – Attila Colar, aka Dahood Sariff Bey, aka Sharieff Dahood Bey, aka Saharieff Pasha, aka Georgi Petrakov, was convicted of forty-four counts that included conspiracy, bank fraud, wire fraud, aggravated identity theft, false statements to a bank, destruction of property to prevent a search, possession of a firearm as a felon, making a false tax return, obstruction, and witness tampering, by a federal jury on June 23, 2023. The guilty verdicts followed a three-week jury trial before the Honorable Haywood S. Gilliam, Jr., U.S. District Judge.
Colar, 51, of Richmond, Calif., is the former Chief Executive Officer of All Hands on Deck in Richmond, Calif., a residential reentry home for probationers, parolees, homeless persons, and persons with mild mental illness. In finding him guilty of the sundry crimes, the jury concluded Colar carried out multiple schemes to defraud, including defrauding organizations that placed residents at his company’s transitional housing facilities and defrauding several lenders that were participating in the Paycheck Protection Program (PPP). The jury also found that Colar attempted to destroy evidence, obstructed the FBI’s and grand jury’s investigations into his crimes, and tampered with a witness by attempting to conceal a witness while law enforcement was taking steps to execute a material witness order.
“The evidence in this case demonstrates that during his various fraud schemes, Colar trafficked in multiple people’s identities.” U.S. Attorney Ismail J. Ramsey said. “He targeted some of the most marginalized and dispossessed persons in our community. Their badly needed cash went into the defendant’s pocket. In the end, the defendant manipulated the very people who came to him for help.”
“Colar attempted to defraud the Paycheck Protection Program of $34 million intended to help honest businesses in need during the pandemic,” said FBI Special Agent in Charge Robert Tripp. “Today's verdict should serve as a warning to fraudsters like Colar that the FBI and our government partners will continue to pursue those who have exploited government programs for personal gain and stolen from American taxpayers.”
“The brazen fraud scheme committed in this case simply for personal gain harmed legitimate businesses in need. This conviction sends a clear message that those who defraud the federal government of pandemic relief funds will be held accountable and brought to justice for their actions,” said Jon Ellwanger, Special Agent in Charge, Western Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau. “I commend our agents and their federal law enforcement partners for their hard work and persistence, which ultimately led to this conviction.”
“Providing false information to fraudulently gain access to pandemic relief funds is a theft of taxpayer funds,” said U.S. Small Business Administration (SBA) Office of Inspector General Western Region Acting Special Agent in Charge Keven Standley. “OIG will relentlessly pursue fraudsters and bring them to justice. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and commitment to seeing justice served.”
“Mr. Colar abused the tax system by submitting fraudulent federal employment tax returns and W-2s to further a scheme he devised and orchestrated that aimed at defrauding the U.S. government of funds designed to help businesses that were impacted by the pandemic under the CARES Act,” said IRS-Criminal Investigation Special Agent in Charge Darren Lian of the Oakland Field Office. “IRS-Criminal Investigation will continue to provide resources to help uncover and prosecute such egregious acts. I want to thank those on the trial team, including our federal law enforcement partners and U.S. Attorney’s Office for diligently working together to serve justice.”
“The Treasury Inspector General for Tax Administration aggressively pursues those who endeavor to defraud taxpayer-funded Coronavirus Aid, Relief, and Economic Security Act programs, which were established to provide assistance to American business owners during unprecedented times,” stated Inspector General J. Russell George. “I want to thank our law enforcement partners and the U.S. Attorney’s Office for their efforts to ensure individuals engaged in criminal activity are held to account.”
Evidence at trial showed that starting in late 2018, Colar engaged in a scheme to defraud, among others, GEO Reentry, which provided treatment and supervision programs for adult probationers, parolees, and pretrial defendants in residential, in-custody, and non-residential reentry centers for the California Department of Corrections and Rehabilitation (CDCR). Specifically, in or about 2019, Colar fraudulently induced GEO Reentry to refer parolees to All Hands on Deck using falsified fire inspection clearance reports, a false letter of recommendation, false security clearance documents, and false and misleading information about its staff.
Additional evidence demonstrated that in April and June of 2020, Colar engaged in a second scheme to defraud lenders participating in the PPP lending plan authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act was designed to provide emergency financial assistance to the millions of Americans who were suffering from the economic effects caused by the COVID-19 pandemic. Pursuant to the CARES Act, the SBA managed the PPP lending plan. Trial evidence established Colar submitted multiple loan applications on behalf of All Hands on Deck to lenders that were false and misleading. For example, the applications substantially overstated the number and payroll of All Hands on Deck employees—while Colar’s loan applications stated All Hands on Deck had approximately 73 to 81 employees, the business had, in fact, perhaps other than himself, no salaried employees.
Colar was also convicted of offenses related to the submission of multiple fraudulent loan applications in the name of other companies. The evidence demonstrated Colar hastily revived two dormant companies, and then submitted loan applications from the PPP lending plan for the bogus businesses. To carry out this scheme to defraud, Colar used, without legal authority, the names and identities of two persons living in his residential reentry facility. Colar falsely represented that the residents were “CEO”s of companies with hundreds of employees with million-dollar payrolls.
In all, the evidence at trial showed that Colar submitted a total of 16 fraudulent loan applications to the PPP lending plan seeking approximately $34,655,437 in PPP loans.
Colar also was convicted of obstruction and witness tampering relating to the investigations into his crimes. Colar has been found guilty of destroying documents during a search of his home, lying to the FBI about a firearm, falsifying records produced to the grand jury, interfering with the representation by counsel of a material witness by impersonating the witness’s Power of Attorney, coaching a witness to falsely state that the witness was the CEO of one of Colar’s bogus companies that submitted fraudulent loan applications, and concealing a witness in multiple hotels and other locations in the Bay Area to forestall or prevent the witness from providing testimony in the federal grand jury.
In sum, Colar was convicted of forty-four (44) federal criminal offenses for his conduct. The convictions include the following: one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; one count to commit conspiracy to commit bank fraud and wire fraud, in violation of 18 U.S.C. § 1349; two counts of bank fraud, in violation of 18 U.S.C. § 1344; sixteen counts of wire fraud, in violation of 18 U.S.C. § 1343; eight counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A; two counts of false statement to a bank, in violation of 18 U.S.C. § 1014; one count of possession of a firearm by a felon, in violation of 18 U.S.C. § 922(g); one count of destruction of property to prevent a search or seizure, in violation of 18 U.S.C. § 2232(a); one count of obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2); two counts of falsification of records in a federal investigation, in violation of 18 U.S.C. § 1519; six counts of making a false tax return, in violation of 26 U.S.C. § 7206; one count of conspiracy to tamper with a witness, in violation of 18 U.S.C. § 1512(k); one count of tampering with a witness, in violation of 18 U.S.C. § 1512(b)(1); and one count of tampering with a witness, in violation of 18 U.S.C. § 1512(b)(2).
Colar is currently being held without bail pending his sentencing. Judge Gilliam scheduled Colar’s sentencing hearing for September 6, 2023. Colar faces the following maximum statutory penalties:
Charge
Maximum Statutory Penalty (per count)
Conspiracy to commit wire fraud, in violation 18 U.S.C. § 1349
20 years’ imprisonment and a $250,000 fine
Conspiracy to commit brank fraud and wire fraud, in violation of 18 U.S.C. § 1349
30 years’ imprisonment and a $1,000,000 fine
Bank fraud, in violation of 18 U.S.C. § 1344
30 years’ imprisonment and a $1,000,000 fine
Wire fraud, in violation of 18 U.S.C. § 1343
20 years’ imprisonment and a $250,000 fine
Aggravated identity theft, in violation of 18 U.S.C. § 1028A
Mandatory 2 years’ imprisonment, consecutive to prison terms
False statement to a bank, in violation of 18 U.S.C. § 1014
20 years’ imprisonment and a $250,000 fine
Possession of a firearm by a felon, in violation of 18 U.S.C. § 922(g)
10 years’ imprisonment and a $250,000 fine
Destruction of property to prevent a search or seizure, in violation of 18 U.S.C. § 2232(a)
5 years’ imprisonment and a $250,000 fine
Obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2)
20 years’ imprisonment and a $250,000 fine
Falsification of records in a federal investigation, in violation of 18 U.S.C. § 1519
20 years’ imprisonment and a $250,000 fine
Making a false tax return, in violation of 26 U.S.C. § 7206
3 years’ imprisonment and $100,000 fine
Conspiracy to tamper with a witness, in violation of 18 U.S.C. § 1512(k)
20 years’ imprisonment and a $250,000 fine
Witness tampering, in violation of 18 U.S.C. § 1512(b)(1) & (2)
20 years’ imprisonment and a $250,000 fine
However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Barbara J. Valliere, Adam A. Reeves, and Ross D. Mazer are prosecuting the case with the assistance of Paralegal Specialist Laurie Worthen and Legal Assistant Kathy Tat. The prosecution is the result of an investigation by the FBI, IRS-Criminal Investigation, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau, Internal Revenue Service: Criminal Investigation, Treasury Inspector General for Tax Administration, and Office of Inspector General for the U.S. Small Business Administration.
U.K. Citizen Sentenced to Five Years for Cybercrime OffensesRead the Press Release
SAN FRANCISCO – Joseph James O’Connor, a/k/a “PlugwalkJoe,” a U.K. citizen, was sentenced today to five years in federal prison for his role in a wide array of cybercrime offenses. O’Connor was extradited from Spain on April 26, 2023, and pleaded guilty on May 9, 2023, before Southern District of New York U.S. District Judge Jed S. Rakoff to two sets of charges: (i) a set of charges filed in the Northern District of California, and transferred to the Southern District of New York under Federal Rule of Criminal Procedure 20, relating to O’Connor’s role in the July 2020 hack of Twitter, Inc. (Twitter), computer intrusions related to takeovers of TikTok and Snapchat user accounts, and cyberstalking two separate victims (the “NDCA Case”), and (ii) conspiracy to commit computer hacking and other charges pending in the Southern District of New York relating to a fraudulent scheme perpetrated by O’Connor and his co-conspirators to use a cyber intrusion technique known as a SIM swap attack to steal cryptocurrency, then valued at approximately $794,000, from a Manhattan-based cryptocurrency company and then to launder the proceeds of the scheme (the “SDNY Case”). U.S. District Judge Rakoff handed down today’s sentence.
“The investigation, charging, extradition, and prosecution of this case required the cooperation and coordinated efforts of many people,” said United States Attorney Ismail Ramsey. “This case demonstrates why cybercriminals can take no comfort in any anonymity they may think they enjoy. They will be identified, diligently pursued, and brought to justice.”
The NDCA Case
According to the publicly filed charging documents, court filings, and statements made in court, between 2019 and 2020, O’Connor participated in a variety of crimes associated with exploitation of social media accounts, online extortion, and cyberstalking.
In July 2020, O’Connor participated in a conspiracy to gain unauthorized access to social media accounts maintained by Twitter. In early July 2020, O’Connor co-conspirators used social engineering techniques to obtain unauthorized access to administrative tools used by Twitter to maintain its operations. Those co-conspirators were able to use the tools to transfer control of certain Twitter accounts from their rightful owners to various unauthorized users. In some instances, the co-conspirators took control themselves and used that control to launch a scheme to defraud other Twitter users. In other instances, the co-conspirators sold access to Twitter accounts to others. O’Connor communicated with others regarding purchasing unauthorized access to a variety of Twitter accounts, including accounts associated with public figures around the world. A number of Twitter accounts targeted by O’Connor were subsequently transferred away from their rightful owners. O’Connor agreed to purchase unauthorized access to one Twitter account for $10,000.
O’Connor also accessed without authorization one of the most highly visible TikTok accounts in August 2020, which was associated with a public figure with millions of followers (“Victim-1”). O’Connor and his associates obtained unauthorized access to Victim-1’s account via a SIM swap after discussing a variety of celebrities to target, and O’Connor used his unauthorized access to Victim-1’s platform to post self-promotional messages, including a video in which O’CONNOR’s voice is recognizable. O’Connor also stated publicly, via a post to Victim-1’s TikTok account, that he would release sensitive, personal material related to Victim-1 to individuals who joined a specified Discord server.
O’Connor targeted another public figure (“Victim-2”) in June 2019. O’Connor and his associates obtained unauthorized access to Victim-2’s account on Snapchat via a SIM swap. They used that access to obtain sensitive materials, to include private images, that Victim-2 had not made publicly available. O’Connor sent copies of these sensitive materials to his associates. O’Connor and his associates also reached out to Victim-2 and threatened to publicly release the stolen sensitive materials unless Victim-2 agreed to publicly post messages related to O’Connor online persona, among other things.
Lastly, O’Connor stalked and threatened a minor victim (“Victim-3”) in June and July 2020. In June 2020, O’Connor orchestrated a series of swatting attacks on Victim-3. A “swatting” attack occurs when an individual makes a false emergency call to a public authority in order to cause a law enforcement response that may put the victim or others in danger. On June 25, 2020, O’Connor called a local police department and falsely claimed that Victim-3 was making threats to shoot people. O’Connor provided an address that he believed was Victim-3’s address, which would have the result of causing a law enforcement response. That same day, O’Connor placed another call to the same police department and stated that he was planning to kill multiple people at the same address. In response to that call, the police department dispatched every on-duty officer to that address in reference to an armed and dangerous individual. O’Connor sent other swatting messages that same day to a high school, a restaurant, and a sheriff’s department in the same area. In those messages, O’Connor represented himself as either Victim-3 or as a resident at the address he believed was Victim-3’s. The following month, O’Connor called multiple family members of Victim-3 and threatened to kill them.
The NDCA Case was transferred to the Southern District of New York pursuant to Federal Rule of Criminal Procedure 20 and consolidated with the SDNY Case before U.S. District Judge Rakoff.
The SDNY Case
During a cyber intrusion known as a subscriber identity module (“SIM”) swap attack, cyber threat actors gain control of a victim’s mobile phone number by linking that number to a SIM card controlled by the threat actors, resulting in the victim’s calls and messages being routed to a malicious unauthorized device controlled by the threat actors. The threat actors then typically use control of the victim’s mobile phone number to obtain unauthorized access to accounts held by the victim that are registered to the mobile phone number.
Between approximately March 2019 and May 2019, O’Connor and his co-conspirators perpetrated a scheme to use SIM swaps to conduct cyber intrusions in order to steal a large amount of cryptocurrency from a Manhattan-based cryptocurrency company (“Company-1”), which, at all relevant times, provided wallet infrastructure and related software to cryptocurrency exchanges around the world.
As part of the scheme, O’Connor and his co-conspirators successfully perpetrated SIM swap attacks targeting at least three Company-1 executives. Following a successful SIM swap attack targeting one of the executives on or about April 30, 2019, O’Connor and his co-conspirators successfully gained unauthorized access to multiple Company-1 accounts and computer systems. On or about May 1, 2019, through their unauthorized access, O’Connor and his co-conspirators stole and fraudulently diverted cryptocurrency of various types (the “Stolen Cryptocurrency”) from cryptocurrency wallets maintained by Company-1 on behalf of two of its clients. The Stolen Cryptocurrency was worth at least approximately $794,000 at the time of the theft and is currently worth more than $1.6 million.
After stealing and fraudulently diverting the Stolen Cryptocurrency, O’Connor and his co-conspirators laundered it through dozens of transfers and transactions and exchanged some of it for Bitcoin using cryptocurrency exchange services. Ultimately, a portion of the Stolen Cryptocurrency was deposited into a cryptocurrency exchange account controlled by O’Connor.
* * *
O’Connor, 24, of the United Kingdom, pleaded guilty before U.S. District Judge Rakoff to the following charges: (i) as part of the NDCA Case – a conspiracy to commit computer intrusion, two counts of committing computer intrusions, making extortive communications, two counts of stalking, and making threatening communications; and (ii) as part of the SDNY Case – a conspiracy to commit computer intrusions, conspiracy to commit wire fraud, and conspiracy to commit money laundering. In addition to the prison term, O’Connor was sentenced to three years of supervised release. O’Connor was further ordered to pay $794,012.64 in forfeiture.
The FBI is investigating the case with assistance from the US Secret Service, San Francisco Field Office; US Secret Service, Criminal Investigations Division; IRS Criminal Investigations, Cyber Crimes Unit; Spanish National Police; and United Kingdom National Crime Agency.
The U.S. Attorney’s Office for the Northern District of California and the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) are handling the NDCA case. Assistant U.S. Attorney Andrew F. Dawson for the Northern District of California and CCIPS Assistant Deputy Chief Adrienne L. Rose are prosecuting the case.
The U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling the SDNY case. Assistant U.S. Attorney Olga I. Zverovich for the Southern District of New York is prosecuting the case.
The Justice Department’s Office of International Affairs provided valuable assistance in securing the extradition of O’Connor.
San Jose Doctor Convicted of Twelve Counts of Illegally Prescribing OpioidsRead the Press Release
SAN JOSE – A federal jury convicted physician Donald Siao of twelve counts of distributing the controlled substances Oxycodone and Hydrocodone outside of the usual course of his professional practice and without a legitimate medical purpose, announced United States Attorney Ismail J. Ramsey, Drug Enforcement Administration (DEA) Special Agent in Charge Brian M. Clark, and U.S. Department of Health & Human Services Office of Inspector General (HHS-OIG) Special Agent in Charge Steven J. Ryan. The verdicts follow a one-week trial before United States District Judge Beth Labson Freeman.
Siao, 58, is a licensed physician who practices family medicine in San Jose. At trial, evidence demonstrated that after identifying Siao in a separate prescription fraud investigation, investigators reviewed a California state database and discovered Siao had written 8,201 prescriptions for controlled substance medications in just the one-year period from May 2016 to May 2017. An investigation followed and resulted in Siao prescribing Oxycodone and Hydrocodone in increasing quantities over seventeen visits by four separate undercover law enforcement agents posing as patients. The undercover agents received prescriptions from Siao despite complaining of only vague pain or discomfort, requesting specific opioids by name, and admitting to sharing the pills with friends and coworkers.
Evidence at trial further established that Siao prescribed dangerous opioids to his patients E.J. and A.J., a mother and son, notwithstanding obvious red flags. Siao continued to prescribe opioids to the mother E.J. after she repeatedly claimed that her pills had been lost or stolen, despite Siao receiving an alert from E.J.’s insurer regarding her opioid prescriptions and despite Siao being advised that E.J. was jailed for selling pills, which was documented in Siao’s medical file for E.J. Similarly, Siao prescribed opioids to the son A.J. after he overdosed twice. Siao continued to prescribe opioids to A.J. after A.J. repeatedly claimed the opioids were lost or stolen and even after he had been flagged by his prior medical provider for drug-seeking behavior, after his mother reported he had stolen her medications, and after A.J.’s mother E.J. fatally overdosed on opioids. These facts were all documented in Siao’s medical file for A.J.
Trial evidence also demonstrated that Siao refused to heed warnings that his prescriptions were dangerous. Evidence showed Siao was aware that DEA closely scrutinized opioid prescriptions and pointed out to one of the undercover officers posing as a patient that a nationwide epidemic was underway in which large numbers of people were addicted to and dying from opioids. Siao nevertheless continued to prescribe opioids to the agents upon their request and with little to no physical examination, sometimes after visits lasting only a few minutes. Law enforcement agents interviewed Siao in November 2018 about his prescribing practices, and Siao admitted he was aware of the California Medical Board’s Guidelines for Prescribing Controlled Substances for Pain. During trial, Siao also admitted that he had been taught about the dangers of addiction and how to identify drug-seeking patients.
The jury convicted Siao of twelve counts of distributing opioids outside the usual course of professional practice and without a legitimate medical purpose, all in violation of 21 U.S.C. § 841(a)(1). Of the 12 counts, four related to the undercover agents and eight related to E.J. and A.J.
U.S. District Judge Freeman scheduled Siao’s sentencing for November 7, 2023. Each of the twelve counts carries a maximum sentence of 20 years in prison. The United States is also seeking forfeiture of Siao’s medical license. The court may also order additional fines, restitution, and supervision upon release from prison as part of any sentence. However, any sentence will be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Amani Floyd and Dan Karmel are prosecuting the case with the assistance of Mimi Lam. The prosecution is the result of an investigation by DEA, HHS-OIG, and the California Department of Justice Division of Medi-Cal Fraud and Elder Abuse.
The case was investigated and prosecuted by member agencies of the Organized Crime Drug Enforcement Task Force (OCDETF), a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies.
New York Man Agrees to Plead Guilty to Multiple Federal Crimes Related to “Ichioka Ventures” Cryptocurrency Fraud SchemeRead the Press Release
SAN FRANCISCO – Today, the United States announced the filing of an information charging William Koo Ichioka with multiple felonies in connection with “Ichioka Ventures,” an alleged investment fraud scheme involving cryptocurrencies and other investment vehicles. According to court documents filed in the case, Ichioka has agreed to plead guilty to charges of wire fraud, aiding or assisting in the preparation of a false or fraudulent tax return, fraud in connection with the purchase and sale of securities, and commodities fraud.
The announcement was made by Acting First Assistant U.S. Attorney Thomas A. Colthurst of the Northern District of California United States Attorney’s Office; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; and Internal Revenue Service – Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian.
According to the information filed in federal court, Ichioka, 30, of New York and formerly of San Francisco, operated a scheme in which he fraudulently raised tens of millions of dollars from over 100 persons and entities, including residents of the Northern District of California. Ichioka began doing business under the name “Ichioka Ventures” in or about 2019. Ichioka solicited investors by promising that their funds would be invested in various securities and/or commodities, including cryptocurrency and cryptocurrency arbitrage, futures, and derivatives, and foreign exchange currency transactions. He represented to prospective investors that they would earn 10% returns every 30 business days and that his investment and trading activities had been generating or had the ability to generate returns in excess of these amounts. Ichioka created a website for Ichioka Ventures that allowed investors to create and login to accounts to invest, view balances and investments, and view transaction history.
“The allure of using cryptocurrencies to make massive profits in a short timeframe provides fertile ground for fraudsters to take advantage of unwary victims,” said Abraham Simmons, a spokesperson from the Office of the U.S. Attorney. “The information filed in this case alleges Ichioka convinced victims to invest millions of dollars into his phony venture by claiming he was making legitimate profits when, in fact, he was reporting fake results and creating bogus documents.”
“William Ichioka was able to secure millions from investors by telling them lie after lie,” said FBI Special Agent in Charge Robert Tripp. “His ‘miraculous’ rates of return, however, were illusory. He stole from family, friends, and others to fund his lavish lifestyle while sustaining his deceit through investment repayments. The charges filed today are an important step to bring justice for Ichioka’s victims.”
“Mr. Ichioka operated a decades-old type of fraudulent scheme and defrauded over 100 investors,” said Special Agent in Charge Darren Lian of the IRS-CI Oakland Field Office. “The hard work and dedication of our investigators and prosecutors led to Mr. Ichioka’s agreement today to plead guilty. We will continue to work with our law enforcement partners to bring this investigation to a thorough and complete conclusion. IRS-Criminal Investigation remains dedicated to bringing to justice those who cheat and defraud.”
According to court filings describing Ichioka’s agreement to plead guilty, Ichioka admitted that he commingled investor money with his own funds and used investor money to make purchases of luxury items, including vehicles, watches, and jewelry, and to fund his own personal expenses, including for rent for his personal residence, restaurants, bars, grocery stores, taxi and car share rides, retail stores, gym membership fees, and online purchases. Moreover, Ichioka admitted that he and Ichioka Ventures did not actually earn 10% returns every 30 business days for his investors throughout the time that he represented that it did. Rather, he and Ichioka Ventures sustained losses from portions of funds that he invested. By the end of 2019 – unbeknownst to investors – Ichioka privately acknowledged that the “[c]ompany hasn’t made any money since we started.”
Ichioka admitted that he repaid existing investors using new investor funds to further perpetuate the scheme to defraud, according to court filings describing Ichioka’s agreement to plead guilty. According to the court filings, Ichioka has agreed that he owes non-family investors in “Ichioka Ventures” at least $21 million as a result of the scheme and additionally owes his family members over $40 million.
Ichioka also admitted that he concealed and hid the scheme by doctoring financial documents to overstate the value of assets (including bank, brokerage, and cryptocurrency exchange materials) and providing doctored documents to prospective investors, according to court filings. He also presented false statements of account to investors via the Ichioka Ventures website, failed to provide tax documentation to investors, and willfully failed to report income to the Internal Revenue Service in this scheme.
In sum, Ichioka has agreed to plead guilty to the following crimes and faces the following maximum penalties:
Offense
Statute
Maximum Statutory Penalty (per count)
Wire fraud (1 count)
18 U.S.C. § 1343
20 years
Aiding or assisting in the preparation of a false or fraudulent tax return (2 counts)
26 U.S.C. § 7206(2)
3 years
Fraud in connection with purchase and sale of securities (1 count)
15 U.S.C. §§ 78j(b), 78ff; 17 C.F.R. § 240.10b-5
20 years
Commodities fraud (1 count)
18 U.S.C. § 1348
25 years
The court may order additional terms of supervised release as well as additional monetary penalties and restitution. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An information merely alleges that crimes have been committed, and defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Ichioka’s initial federal court appearance has not yet been scheduled.
Individuals who believe that they may be a victim in this case but have not yet been contacted by the government should contact the FBI by email at: [email protected].
The case is being prosecuted by the Special Prosecutions Section and Oakland Branch of the U.S. Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by the FBI and IRS-CI. The U.S. Attorney’s Office and the federal law enforcement agencies also thank the San Francisco Regional Office of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC and CFTC each conducted parallel investigations that were also announced today.
New Jersey Man Pleads Guilty to Participating in Multi-Million-Dollar Kickback Scheme to Defraud Williams SonomaRead the Press Release
SAN FRANCISCO – Michael Podhurst pleaded guilty in federal court today to charges related to his role in a multi-million-dollar fraudulent kickback scheme, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The guilty plea was accepted by the Hon. Richard Seeborg, U.S. District Judge.
In his plea agreement, Podhurst, 62, of Monroe Township, New Jersey, admitted he conspired with a co-defendant, a former executive at Williams Sonoma, Inc. (WSI), to defraud WSI by paying kickbacks to a shell company controlled by the co-defendant. In the agreement Podhurst admitted that he paid kickbacks in exchange for his co-defendant directing WSI business to three warehouse logistics companies where Podhurst held executive positions and ownership interests. Per Podhurst’s plea agreement, the kickbacks were concealed from WSI. WSI is a home-goods retailer headquartered in San Francisco that operates brands such as Williams Sonoma, Pottery Barn, and West Elm.
As alleged in the indictment and admitted to in the plea agreement, between approximately October 2018 and July 2022, Podhurst worked for three companies that provided WSI warehouses with forklifts, warehouse racking systems, and machinery. WSI used these warehouses to store and distribute WSI goods around the United States. Using his position and interest within the companies where he worked, Podhurst caused his companies to pay his co-defendant kickbacks in exchange for his co-defendant causing WSI to award and sign contracts with and make payments to the companies affiliated with Podhurst. During a four-year period, Podhurst directed the three companies where he worked to pay more than $12 million in kickbacks to a shell company owned and controlled by his co-defendant.
Podhurst was indicted by a federal Grand Jury on April 11, 2023. He was charged with one count of wire fraud and honest services wire fraud conspiracy, in violation of 18 U.S.C. § 1349; six counts of wire fraud and honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346; and one count of money laundering conspiracy, in violation of 18 U.S.C § 1956(h). Under the plea agreement, Podhurst pleaded guilty to the wire fraud conspiracy and the money laundering conspiracy counts. If Podhurst complies with his plea agreement, the remaining counts will be dismissed at sentencing.
Podhurst is currently released on bond. His next scheduled appearance is November 14, 2023. Podhurst faces a statutory maximum of 20 years in prison for each of the wire fraud conspiracy and money laundering conspiracy counts, as well as a $250,000 fine for the wire fraud conspiracy count and a $500,000 fine for the money laundering conspiracy count. As part of any sentence the court also may order Podhurst to serve an additional term of supervised release and to pay restitution, if appropriate. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
On May 30, 2023, co-defendant Kourosh Mirmedhi pleaded guilty to wire fraud and money laundering conspiracy charges. Charges against two of Podhurst’s co-defendants remain pending.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California, and Assistant U.S. Attorneys Ross Weingarten and Christiaan Highsmith are prosecuting the case with the assistance of Elizabeth Kim. The prosecution is the result of an investigation by the IRS-CI.