Northern District of California
Press releases recorded for this federal judicial district.
San Mateo Company to Pay More Than $1,000,000 for Improperly Seeking and Obtaining Paycheck Protection Program LoansRead the Press Release
SAN FRANCISCO – Fujisoft America, Inc., a San Mateo-based subsidiary of Fujisoft Inc., has agreed to pay $1,050,000 to resolve allegations that it knowingly violated the False Claims Act when it applied for, received, and retained two Paycheck Protection Program (PPP) loans totaling $400,000 in violation of PPP rules, announced United States Attorney Ismail J. Ramsey and Small Business Administration Office of Inspector General (SBA OIG) Western Region Acting Special Agent in Charge Keven Standley.
“PPP loans were intended as economic lifelines for small businesses during the pandemic,” said U.S. Attorney Ramsey. “It is unacceptable for large companies to claim a portion of this limited pool of PPP funds, which was meant for small businesses, in order to enrich themselves at the expense of the American taxpayer. This Office will continue to pursue businesses that misused the program by obtaining PPP loans for which they were not eligible.”
“Those who violate the False Claim Act by fraudulently receiving and retaining SBA program funds meant for eligible small businesses will be held accountable,” said SBA OIG’s Western Region Acting Special Agent in Charge Keven Standley. “This settlement sends a strong message that those responsible will be brought to justice. I want to thank the Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”
Congress created the PPP in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide emergency financial support to the millions of Americans suffering the economic effects caused by the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other business expenses. PPP loan applicants were required to certify that they were in fact small businesses in order to be eligible for PPP loans. Among other things, PPP loan applicants generally were required to certify that they and their affiliates had no more than 500 employees to be eligible for a “first-draw” loan and had no more than 300 employees to be eligible for an additional “second-draw” loan. PPP loan applicants were also required to certify that they had a decrease in revenue of at least 25% from 2019 to 2020 to be eligible for a second-draw loan. Pursuant to the settlement announced today, Fujisoft America acknowledged that it sought and obtained PPP loans in violation of these rules.
Fujisoft America’s parent company, Fujisoft Inc, is a publicly-traded company listed on the Tokyo Stock Exchange; together with its various subsidiaries, Fujisoft Inc. has over 15,000 employees and its earnings have increased steadily between 2019 and 2021—its revenue in 2019 before the pandemic was over $1.6 billion and during the pandemic grew to over $1.7 billion in 2020 and then $1.8 billion in 2021. Fujisoft America nevertheless sought and obtained loans intended for small businesses.
As part of the settlement, Fujisoft America, Inc. admitted, among other things, that:
• Fujisoft America, Inc. knew that it was not eligible for PPP loans because, with its affiliates, it had more than 500 employees.
• In 2020, Fujisoft America, Inc. applied for and received a $250,000 PPP first-draw loan, and subsequently obtained loan forgiveness and retained that $250,000, by falsely certifying that it met the company size restrictions necessary to be eligible for a PPP first-draw loan.
• In 2021, Fujisoft America, Inc. applied for and received a $150,000 PPP second-draw loan, and subsequently obtained loan forgiveness and retained that $150,000, by falsely certifying that it met the company size restrictions necessary to be eligible for a PPP second-draw loan. Fujisoft America, Inc. also falsely certified that it had a decrease in revenue in excess of 25% from 2019 to 2020 when, with its affiliates, its revenue from 2019 to 2020 had increased.
• As a result of its false claims and false statements, Fujisoft America, Inc. received and retained $400,000 in PPP funds to which it was not entitled.Assistant U.S. Attorney Shiwon Choe handled this matter for the government. The investigation and settlement resulted from a coordinated effort by the U.S. Attorney’s Office for the Northern District of California and SBA OIG.
fsai_settlement_agreement.pdfRussian Nationals Charged with Hacking One Cryptocurrency Exchange and Illicitly Operating AnotherRead the Press Release
The Justice Department unsealed charges related to the 2011 hack of the cryptocurrency exchange Mt. Gox and the operation of the illicit cryptocurrency exchange BTC-e.
According to court documents, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, both Russian nationals, are charged with conspiring to launder approximately 647,000 bitcoins from their hack of Mt. Gox. Bilyuchenko is also charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.
“This announcement marks an important milestone in two major cryptocurrency investigations. As alleged in the indictments, starting in 2011, Bilyuchenko and Verner stole a massive amount of cryptocurrency from Mt. Gox, contributing to the exchange’s ultimate insolvency. Armed with the ill-gotten gains from Mt. Gox, Bilyuchenko allegedly went on to help set up the notorious BTC-e virtual currency exchange, which laundered funds for cyber criminals worldwide,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “These indictments highlight the department’s unwavering commitment to bring to justice bad actors in the cryptocurrency ecosystem and prevent the abuse of the financial system.”
“As cyber criminals have become more sophisticated in their methods of thievery, our career prosecutors and law enforcement partners, too, have become experts in the latest technologies being abused for malicious purposes,” said U.S. Attorney Damian Williams for the Southern District of New York. “As alleged, Alexey Bilyuchenko and Aleksandr Verner thought they could outsmart the law by using sophisticated hacks to steal and launder massive amounts of cryptocurrency, a novel technology at the time, but the charges unsealed demonstrate our ability to tenaciously pursue these alleged criminals, no matter how complex their schemes, until they are brought to justice.”
“For years, Bilyuchenko and his co-conspirators allegedly operated a digital currency exchange that enabled criminals around the world – including computer hackers, ransomware actors, narcotics rings, and corrupt public officials – to launder billions of dollars,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “The Department of Justice will work tirelessly to identify cyber criminals, no matter where they are. And Bilyuchenko and his co-conspirators will learn that the Department of Justice has long arms and an even longer memory for crimes that harm our communities.”
Southern District of New York indictment
According to court documents unsealed in the Southern District of New York (SDNY), in or about September 2011, Bilyuchenko, Verner, and their co-conspirators allegedly gained unauthorized access to the server holding the cryptocurrency wallets for Mt. Gox. At the time, Mt. Gox was the largest Bitcoin exchange in existence, servicing thousands of users worldwide. Mt. Gox stored the cryptocurrency wallets containing its customers’ bitcoin, and the corresponding private keys used to authorize bitcoin transfers from those wallets, on a computer server in Japan.
“The FBI will continue to work with our U.S. government and international partners to relentlessly pursue and disrupt malicious cyber actors wherever they may reside,” said Assistant Director Bryan Vorndran of the FBI’s Cyber Division. “When cyber criminals engage in fraudulent activity, such as hacking and illicitly operating cryptocurrency exchanges, it is critical that we impose cost on the bad actors and ensure they face justice.”
Bilyuchenko, Verner, and their co-conspirators allegedly used their unauthorized access to Mt. Gox’s server to fraudulently cause bitcoin to be transferred from Mt. Gox’s wallets to bitcoin addresses controlled by Bilyuchenko, Verner, and their co-conspirators. From September 2011 through at least May 2014, Bilyuchenko, Verner, and their co-conspirators allegedly caused the theft of at least approximately 647,000 bitcoins from Mt. Gox, representing the vast majority of the bitcoins belonging to Mt. Gox’s customers. Bilyuchenko, Verner, and their co-conspirators allegedly laundered the bulk of the bitcoins stolen through Mt. Gox principally through bitcoin addresses associated with accounts Bilyuchenko, Verner, and their co-conspirators controlled at two other online bitcoin exchanges.
“Cryptocurrency offers a new way for criminals to steal and launder money, but greed and deceit are nothing new,” said Chief Jim Lee of IRS Criminal Investigation (IRS-CI). “IRS-CI is specially equipped to follow the complex financial trail left by criminals, and we are dedicated to holding those accountable for crimes committed. IRS-CI is proud to stand with our law enforcement partners to announce this indictment.”
In furtherance of the money laundering scheme, in or about April 2012, Bilyuchenko, Verner, and their co-conspirators allegedly negotiated and entered into a fraudulent contract (the “Advertising Contract”) to provide purported advertising services to a Bitcoin brokerage service based in the Southern District of New York (the “New York Bitcoin Broker”). Under the guise of the Advertising Contract, in order to conceal and liquidate the bitcoins stolen from Mt. Gox, Bilyuchenko and Verner allegedly made regular requests to the owner and operator of the New York Bitcoin Broker to make large wire transfers into various offshore bank accounts, including in the names of shell corporations, controlled by Bilyuchenko, Verner, and their co-conspirators. In accordance with these requests, between in or about March 2012 and in or about April 2013, the New York Bitcoin Broker allegedly transferred more than approximately $6.6 million to overseas bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators. In exchange for the wire transfers, the New York Bitcoin Broker allegedly received “credit” on Exchange-1, through which Bilyuchenko, Verner, and their co-conspirators allegedly laundered more than 300,000 of the bitcoins stolen from Mt. Gox. The fraudulent Advertising Contract with the New York Bitcoin Broker allegedly enabled Bilyuchenko, Verner, and their co-conspirators to conceal and liquidate bitcoins stolen through the Mt. Gox Hack.
Mt. Gox ceased operations in 2014 after the theft was revealed.
Northern District of California indictment
According to court documents unsealed in the Northern District of California (NDCA), Bilyuchenko allegedly worked with Vinnik and others to operate the BTC-e exchange from 2011 until it was shut down by law enforcement in July 2017. During that time period, BTC-e was one of the world’s largest cryptocurrency exchanges and was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.
BTC-e served over one million users worldwide, moving millions of bitcoin worth of deposits and withdrawals, and processing billions of dollars’ worth of transactions. BTC-e received criminal proceeds of numerous computer intrusions and hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and narcotics distribution rings.
“The Secret Service has a long tradition of pursuing and bringing to justice those who aim to exploit our financial systems and target innocent victims,” said Special Agent in Charge William Mancino of the U.S. Secret Service’s Criminal Investigative Division. “Working together with our local, state, and federal law enforcement partners, we will continue to investigate criminal organizations that operate in the ever-evolving cyber domain.”
“Homeland Security Investigations (HSI) continues to investigate cyber criminals illicitly operating in virtual spaces, and we are proud to have worked collaboratively with our law enforcement partners to bring these two individuals to justice,” said Acting Executive Associate Director Katrina W. Berger of HSI. “Our special agents continue to investigate transnational criminal organizations operating in emerging technologies, leveraging our broad authorities to identify, and dismantle those behind sophisticated crypto-scams.”
The SDNY indictment charges Bilyuchenko and Verner with conspiracy to commit money laundering. The NDCA indictment charges Bilyuchenko with money laundering conspiracy and operating an unlicensed money services business.
The U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling the SDNY case. The FBI and IRS-CI are investigating the case and SDNY Assistant U.S. Attorney Olga I. Zverovich is prosecuting the case.
The Corporate and Securities Fraud Section of 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. The FBI; IRS-CI Oakland Field Office and Cyber Crime Unit in Washington, D.C.; U.S. Secret Service Criminal Investigative Division; and HSI are investigating the case. CCIPS Trial Attorney C. Alden Pelker and NDCA Assistant U.S. Attorney Claudia Quiroz, both members of the National Cryptocurrency Enforcement Team, and NDCA Assistant U.S. Attorney Katherine Lloyd-Lovett are prosecuting the case. The Justice Department’s Office of International Affairs provided invaluable assistance.
A criminal indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Russian Nationals Charged with Hacking One Cryptocurrency Exchange and Illicitly Operating AnotherRead the Press Release
SAN FRANCISCO – The Department of Justice today unsealed charges related to the 2011 hack of the cryptocurrency exchange Mt. Gox and the operation of the illicit cryptocurrency exchange BTC-e.
According to court documents, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, both Russian nationals, are charged with laundering approximately 647,000 bitcoins from their hack of Mt. Gox. Bilyuchenko is also charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.
“This announcement marks an important milestone in two major cryptocurrency investigations. As alleged in the indictments, starting in 2011, Bilyuchenko and Verner stole a massive amount of cryptocurrency from Mt. Gox, contributing to the exchange’s ultimate insolvency. Armed with the ill-gotten gains from Mt. Gox, Bilyuchenko went on to help set up the notorious BTC-e virtual currency exchange, which laundered funds for cyber criminals worldwide,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “These indictments highlight the department’s unwavering commitment to bring to justice bad actors in the cryptocurrency ecosystem and prevent the abuse of the financial system.”
Southern District of New York Indictment
According to court documents unsealed in the Southern District of New York (SDNY), in or about September 2011, Bilyuchenko, Verner, and their co-conspirators allegedly gained unauthorized access to the server holding the cryptocurrency wallets for Mt. Gox. At the time, Mt. Gox was the largest Bitcoin exchange in existence, servicing thousands of users worldwide. Mt. Gox stored the cryptocurrency wallets containing its customers’ bitcoin, and the corresponding private keys used to authorize bitcoin transfers from those wallets, on a computer server in Japan.
“As cyber criminals have become more sophisticated in their methods of thievery, our career prosecutors and law enforcement partners, too, have become experts in the latest technologies being abused for malicious purposes,” said U.S. Attorney Damian Williams for the Southern District of New York. “As alleged, Alexey Bilyuchenko and Aleksandr Verner thought they could outsmart the law by using sophisticated hacks to steal and launder massive amounts of cryptocurrency, a novel technology at the time, but the charges unsealed today demonstrate our ability to tenaciously pursue these alleged criminals, no matter how complex their schemes, until they are brought to justice.”
Bilyuchenko, Verner, and their co-conspirators allegedly used their unauthorized access to Mt. Gox’s server to fraudulently cause bitcoin to be transferred from Mt. Gox’s wallets to bitcoin addresses controlled by Bilyuchenko, Verner, and their co-conspirators. From September 2011 through at least May 2014, Bilyuchenko, Verner, and their co-conspirators allegedly caused the theft of at least approximately 647,000 bitcoins from Mt. Gox, representing the vast majority of the bitcoins belonging to Mt. Gox’s customers. Bilyuchenko, Verner, and their co-conspirators allegedly laundered the bulk of the bitcoins stolen through Mt. Gox principally through bitcoin addresses associated with accounts Bilyuchenko, Verner, and their co-conspirators controlled at two other online bitcoin exchanges.
“The FBI will continue to work with our U.S. government and international partners to relentlessly pursue and disrupt malicious cyber actors wherever they may reside,” said Assistant Director Bryan Vorndran of the FBI’s Cyber Division. “When cyber criminals engage in fraudulent activity, such as hacking and illicitly operating cryptocurrency exchanges, it is critical that we impose cost on the bad actors and ensure they face justice.”
“Cryptocurrency offers a new way for criminals to steal and launder money, but greed and deceit are nothing new,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “IRS-CI is specially equipped to follow the complex financial trail left by criminals, and we are dedicated to holding those accountable for crimes committed. IRS-CI is proud to stand with our law enforcement partners to announce this indictment.”
In furtherance of the money laundering scheme, in or about April 2012, Bilyuchenko, Verner, and their co-conspirators allegedly negotiated and entered into a fraudulent contract (the “Advertising Contract”) to provide purported advertising services to a Bitcoin brokerage service based in the Southern District of New York (the “New York Bitcoin Broker”). Under the guise of the Advertising Contract, in order to conceal and liquidate the bitcoins stolen from Mt. Gox, Bilyuchenko and Verner allegedly made regular requests to the owner and operator of the New York Bitcoin Broker to make large wire transfers into various offshore bank accounts, including in the names of shell corporations, controlled by Bilyuchenko, Verner, and their co-conspirators. In accordance with these requests, between in or about March 2012 and in or about April 2013, the New York Bitcoin Broker allegedly transferred more than approximately $6.6 million to overseas bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators. In exchange for the wire transfers, the New York Bitcoin Broker allegedly received “credit” on Exchange-1, through which Bilyuchenko, Verner, and their co-conspirators allegedly laundered more than 300,000 of the bitcoins stolen from Mt. Gox. The fraudulent Advertising Contract with the New York Bitcoin Broker allegedly enabled Bilyuchenko, Verner, and their co-conspirators to conceal and liquidate bitcoins stolen through the Mt. Gox Hack.
Mt. Gox ceased operations in 2014 after the theft was revealed.
Northern District of California Indictment
According to court documents unsealed in the Northern District of California (NDCA), Bilyuchenko allegedly worked with Vinnik and others to operate the BTC-e exchange from 2011 until it was shut down by law enforcement in July 2017. During that period, BTC-e was one of the world’s largest cryptocurrency exchanges and was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.
“For years, Bilyuchenko and his co-conspirators operated a digital currency exchange that enabled criminals around the world – including computer hackers, ransomware actors, narcotics rings, and corrupt public officials – to launder billions of dollars,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “The Department of Justice will work tirelessly to identify cyber criminals, no matter where they are. And Bilyuchenko and his co-conspirators will learn that the Department of Justice has long arms and an even longer memory for crimes that harm our communities.”
“Bilyuchenko conspired with Vinnik and others to create a lawless and anonymous space in service to cybercriminals and cryptocurrency laundering,” said Robert Tripp, SAC of the FBI San Francisco Field Office. “FBI investigators were committed to shining a light on this activity through dogged investigation, technical skill, and partnerships. We will continue to work with our local and global law enforcement colleagues to identify, pursue, and arrest criminals no matter where they reside and no matter how long it takes.”
BTC-e served over one million users worldwide, moving millions of bitcoin worth of deposits and withdrawals, and processing billions of dollars’ worth of transactions. BTC-e received criminal proceeds of numerous computer intrusions and hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and narcotics distribution rings.
“The Secret Service has a long tradition of pursuing and bringing to justice those who aim to exploit our financial systems and target innocent victims,” said Special Agent in Charge William Mancino of the U.S. Secret Service’s Criminal Investigative Division. “Working together with our local, state, and federal law enforcement partners, we will continue to investigate criminal organizations that operate in the ever-evolving cyber domain.”
“Homeland Security Investigations (HSI) continues to investigate cyber criminals illicitly operating in virtual spaces, and we are proud to have worked collaboratively with our law enforcement partners to bring these two individuals to justice,” said Acting Executive Associate Director Katrina W. Berger of HSI. “Our special agents continue to investigate transnational criminal organizations operating in emerging technologies, leveraging our broad authorities to identify, and dismantle those behind sophisticated crypto-scams.”
“HSI San Francisco/NorCal is on the alert to money laundering via crypto currency and other criminal activity that pervade the dark web,” said Special Agent in Charge Tatum King of HSI San Francisco. “In addition to the multi-year efforts of HSI personnel, partnerships continue to be key in this monumental and complex work and we are appreciative of joint efforts with FBI San Francisco, U.S. Secret Service San Francisco, IRS-CI San Francisco, and the Northern District U.S. Attorney’s Office, all of whom have expended significant resources in pursuit of this investigation.”
The SDNY indictment charges Bilyuchenko and Verner with conspiracy to commit money laundering. The NDCA indictment charges Bilyuchenko with money laundering conspiracy and operating an unlicensed money services business.
The U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling the SDNY case. The FBI and IRS-CI are investigating the case and SDNY Assistant U.S. Attorney Olga I. Zverovich is prosecuting the case.
The Corporate and Securities Fraud Section of 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. The FBI; IRS-CI Oakland Field Office and Cyber Crime Unit in Washington, D.C.; U.S. Secret Service Criminal Investigative Division; and Homeland Security Investigations are investigating the case. CCIPS Trial Attorney C. Alden Pelker and NDCA Assistant U.S. Attorney Claudia Quiroz, both members of the National Cryptocurrency Enforcement Team, and NDCA Assistant U.S. Attorney Katherine Lloyd-Lovett are prosecuting the case. The Justice Department’s Office of International Affairs provided invaluable assistance.A criminal indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
biluchenko_indicment_redacted_cr-22-0255_vc.pdf u.s._v._bilyuchenko_and_verner_indictment.pdfSan Francisco Residents Charged with Allegedly Committing Crimes in Front of Surveillance Cameras of Federal BuildingRead the Press Release
SAN FRANCISCO – Two defendants allegedly committed crimes while standing in front of the surveillance cameras of the federal building on Seventh and Mission Streets in San Francisco’s Tenderloin neighborhood. A federal grand jury indicted Rodolfo Sagastume-Pineda and the Office of the United States Attorney has filed a federal criminal complaint against Natalin Mauricio Martinez-Hernandez—both charging documents involve felonies the defendants allegedly committed within view of surveillance cameras monitoring the streets outside the federal building. The announcement of Sagastume-Pineda’s case was made by United States Attorney Ismail J. Ramsey and Drug Enforcement Administration Special Agent in Charge Brian M. Clark. The announcement of Hernandez case was made by United States Attorney Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp.
The Sagastume-Pineda Case
According to a complaint filed May 25, 2023, Sagastume-Pineda was on the sidewalk of Seventh Street between Natoma and Mission Streets when he was observed engaging in a series of hand-to-hand drug transactions. The complaint describes four hand-to-hand drug sales that allegedly occurred on April 24, 2023, over the course of several minutes. Sagastume-Pineda was arrested the same day.
The complaint describes certain details regarding the circumstances of Sagastume-Pineda’s arrest. For example, the complaint alleges Sagastume-Pineda was carrying a backpack that contained 96.7 grams of fentanyl and over 30 grams of methamphetamine. Further, according to the complaint, the backpack also contained 11.1 grams of heroin, 4.3 grams of cocaine, and a digital scale.
A federal grand jury indicted Sagastume-Pineda on June 6, 2023, charging him with two counts of possession with intent to distribute fentanyl, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(C), as well as one count of possession with intent to distribute methamphetamine, its salts, isomers, or salts of its isomers, in violation of 21 U.S.C. §§ 841(a)(1), and (b)(1)(C).
Sagastume-Pineda appeared yesterday before Magistrate Judge Sallie Kim who ordered Sagastume-Pineda detained. Sagastume-Pineda’s next court appearance is scheduled for July 12, 2023, for a status conference before Hon. Charles R. Breyer, United States District Judge.
The Hernandez Case
The complaint filed May 26, 2023, describes how Hernandez was observed on three occasions near the federal building at 90 Seventh Street in San Francisco.
On the first occasion, August 14, 2022, San Francisco Police officers were alerted to shots fired near the federal building. The law enforcement officers did not apprehend the shooter, who fled, but watched security video footage showing the incident. The complaint describes how video footage allegedly showed Hernandez near the federal building and eventually arguing with an unidentified man who brandished and put away what appeared to be a machete. The video allegedly showed Hernandez responding by removing a firearm from a backpack and firing in the direction of the unknown man. The unknown man apparently was not struck or injured by the firearm. The video showed the shooter leaving the area on a scooter.
The second occasion occurred more than a month later, on October 24, 2022, when San Francisco Police officers again were alerted to Hernandez’s presence near the federal building. On that day, a security guard who had reviewed footage from the August 14, 2022, shooting reported that he recognized Hernandez as the August 2022 shooter when Hernandez parked a vehicle near the federal building. Hernandez left the scene before law enforcement officers arrived.
The following day, October 25, 2022, Hernandez was sighted near the federal building for a third time and, this time, was arrested. During the arrest, officers seized a backpack that Hernandez was wearing that allegedly contained a loaded, black, 9mm Ruger Security 9 semi-automatic pistol; a pair of silver brass knuckles; and three .38 caliber bullets. Officers also allegedly recovered from Hernandez’s jacket pockets multiple baggies containing a total of 104.5 grams of fentanyl.
The complaint charges Hernandez with possession with intent to distribute fentanyl, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(C). Hernandez is next scheduled to appear on June 9, 2023, before Magistrate Judge Sallie Kim for a detention hearing.The Hernandez complaint and Sagastume-Pineda indictment merely allege that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, both defendants may be ordered to serve an additional period of supervised release and to face additional monetary assessments. 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.
Assistant U.S. Attorney Emily Dahlke is prosecuting the cases with the assistance of Lakisha Holliman and Jasmine Sanders. The Hernandez case is being investigated by the FBI and the Sagastume-Pineda case is being investigated by the DEA, both with the assistance of the San Francisco Police Department and the Federal Protective Service.
Leader of San Francisco MS-13 Clique Convicted by Jury of Racketeering Conspiracy, and Murder & Attempted Murder in Aid of RacketeeringRead the Press Release
SAN FRANCISCO - A federal jury found Elmer Rodriguez, a/k/a Gordo, guilty of racketeering conspiracy, two counts of murder in aid of racketeering, one count of attempted murder in aid of racketeering, and one count of use of a firearm in furtherance of a crime of violence related to his participation in the MS-13 20th Street clique, announced Acting First Assistant United States Attorney Thomas Colthurst and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The verdicts follow a three-week trial before the Honorable Richard Seeborg, Chief United States District Judge.
“Bringing these violent criminal gang members to justice is a direct result of the partnerships between HSI SF, the U.S. Attorney’s Office, the San Francisco Police Department and the San Mateo County Sherriff’s Office,” said Tatum King, special agent in charge, HSI San Francisco / NorCal. “HSI personnel and law enforcement partners dedicated years to this complex investigation with the ultimate goals of holding criminals accountable and prevention of additional victimization in our communities.”
The trial centered on the conduct of Elmer Rodriguez, the alleged leader of the MS-13 20th Street clique. Rodriguez was convicted of ordering the murder of Jorge Martinez near 19th and Mission Street on March 17, 2017. Martinez had been celebrating his birthday after attending a Warriors basketball game with his son. After the game, they went to a bar in the Mission District. Rodriguez and other MS-13 clique members were also present at the bar that night and identified Martinez as a possible rival Norteño gang member. Rodriguez ordered another clique associate to murder Martinez. The associate followed Martinez out of the bar and shot him to death.
Rodriguez was also convicted for ordering the murder of Giovanni Alvarez, a/k/a “P Wee,” on May 25, 2017. Alvarez was a 20th Street clique member who Rodriguez and others in the clique believed to be cooperating with law enforcement. Rodriguez sanctioned Alvarez’s murder because of these suspicions. Rodriguez and his associates, including Edwin Alvarado Amaya, a/k/a “Muerte” and Kenneth Campos, a/k/a “Nesio,” lured Alvarez into a car. Campos drove the group to Bernal Heights Park where the group intended to kill him. At the park, Rodriguez gave a signal to Alvarado Amaya, who then hacked Alvarez to death by inflicting dozens of deep wounds to his face and torso with a machete. Alvarado Amaya and Campos pleaded guilty to the crime and have been sentenced for their roles in this murder.
Rodriguez was further convicted of attempted murder and use of a firearm in furtherance of a crime of violence following a shooting that followed an extortion attempt by Rodriguez and other MS-13 associates on Eddy Street in the Tenderloin District on November 26, 2017.
Rodriguez’s trial featured evidence of the MS-13 20th Street clique’s other racketeering activities, including two other previously unsolved homicides. A member of the 20th Street clique shot German Polanco Gil to death on September 2, 2015, in the Bayview District of San Francisco after he and another member spotted Gil walking near his home. The gang member believed Gil was a rival Norteño gang member so they drove around the block, returned to where Gil was walking, and fatally shoot him on the sidewalk. Clique member Rogelio Belloso Aleman, a/k/a “Smiley,” pleaded guilty to, and admitted his role in, this murder.
Members of the 20th Street clique also murdered Gilberto Rodriguez at the Gray Whale Cove parking lot in Pacifica. Clique members including Kevin Reyes Melendez, a/k/a “Neutron,” Kevin Guatemala Zepeda, a/k/a “Mision,” and Abner Marroquin Alegria, a/k/a “Coche,” lured Gilberto Rodriguez away from San Francisco and ultimately drove him to a remote parking lot in Pacifica where multiple associates, including Reyes Melendez, murdered him by stabbing him with a machete and shooting him to death.
In addition to these murders, the trial featured evidence of additional acts of violence including:
- a September 16, 2016 shooting of a suspected Norteño at 21st Street and Hampshire Street;
- an October 27, 2016 gang assault in the Mission District;
- a May 17, 2017 gang assault outside of a taqueria in the Mission District;
- a November 30, 2017 attempted murder at 24th Street and Potrero Avenue in the Mission District.
In sum, the jury convicted Rodriguez of participating in a racketeer influenced and corrupt organizations (RICO) conspiracy, in violation of 18 U.S.C. § 1962(d). In addition, the jury convicted Rodriguez of two counts of murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(1), one count of attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5), and one count of use of a firearm in furtherance of a crime of violence, in violation of 18 U.S.C. § 924(c).
Rodriguez faces a mandatory term of life imprisonment. Further, additional fines, forfeitures, and restitution may be ordered; 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.
Rodriguez is in federal custody pending sentencing. Rodriguez’s sentencing hearing is set for September 19, 2023.
In total, 14 defendants have been convicted as a part of this investigation, which has resulted in convictions relating to four murders, four attempted murders, and multiple assaults with dangerous weapons.
Defendant Age Charges Sentence ABNER MARROQUIN ALEGRIA
a/k/a “Coche” or “Chapin” 42 Racketeering Conspiracy
18 U.S.C. § 1962(d) 204 months in prison ROGELIO BELLOSO ALEMAN
a/k/a “Smiley” 30 Racketeering Conspiracy
18 U.S.C. § 1962(d) 204 months in prison Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2 EDWIN ALVARADO AMAYA
a/k/a “Muerte” 26 Racketeering Conspiracy
18 U.S.C. § 1962(d) 300 months in prison Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2 KENNETH CAMPOS,
a/k/a “Nesio” 33 Racketeering Conspiracy
18 U.S.C. § 1962(d) 204 months in prison Assault with a Dangerous Weapon in Aid of Racketeering (two counts)
18 U.S.C. §§ 1959(a)(3) and 2 EVERT
GALDAMEZ
CISNEROS
a/k/a “Talentoso” 25 Racketeering Conspiracy
18 U.S.C. § 1962(d) 60 months in prison Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2 OSCAR ESPINAL a/k/a “Chuy” 32 Racketeering Conspiracy
18 U.S.C. § 1962(d) 144 months in prison Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2 KEVIN REYES MELENDEZ, a/k/a “Neutron” 30 Racketeering Conspiracy
18 U.S.C. § 1962(d) 300 months in prison Attempted Murder in Aid of Racketeering (two counts)
18 U.S.C. §§ 1959(a)(5) and 2 MISSAEL MENDOZA 22 Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2 36 months in prison CHRISTIAN QUINTANILLA 22 Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2 36 months in prison BRIGIDO JOSUE GONZALES SALES a/k/a “Inocente” or “Kiko” 22 Racketeering Conspiracy
18 U.S.C. § 1962(d) 144 months in prison Attempted Murder in Aid of Racketeering
18 U.S.C. § 1959(a)(5) and 2 Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2 ALEXIS CRUZ ZEPEDA a/k/a “Zorro” 29 Racketeering Conspiracy
18 U.S.C. § 1962(d) 192 months in prison Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2 KEVIN GUATEMALA ZEPEDA 27 Racketeering Conspiracy 18 U.S.C. § 1962(d) 204 months in prison Assault with a Dangerous Weapon in Aid of Racketeering 18 U.S.C. §§ 1959(a)(3) and 2 FERNANDO ROMERO BONILLA 25 Racketeering Conspiracy 18 U.S.C. § 1962(d) 84 months in prison Assault with a Dangerous Weapon in Aid of Racketeering 18 U.S.C. §§ 1959(a)(3) and 2This case is being prosecuted by the Organized Crime Strike Force of the Office of the United States Attorney. The prosecution is the result of an investigations by HSI, the San Francisco Police Department Homicide Unit and Community Violence Reduction Team, San Mateo County Sheriff’s Office Gang Intelligence Unit and Investigations Bureau, Daly City Police Department, Pinole Police Department, Redwood City Police Department Street Crimes Reduction Team, and San Pablo Police Department.
Tenderloin Dealer Who Sold Fentanyl That Killed One and Injured Another Sentenced to Six Years in PrisonRead the Press Release
SAN FRANCISCO – Celin David Doblado-Canaca was sentenced to 72 months in federal prison for selling fentanyl, including fentanyl that caused the death of one victim and injured another, announced United States Attorney Ismail J. Ramsey and Drug Enforcement Administration Special Agent in Charge Brian M. Clark. The sentence was handed down by the Hon. James Donato, United States District Judge.
Doblado-Canaca, 40, of San Francisco, pleaded guilty, without a written agreement, on April 4, 2023, to the charge of distributing fentanyl. In pleading guilty, Doblado-Canaca admitted he sold drugs in the San Francisco’s Tenderloin District. On May 18, 2020, Doblado-Canaca sold drugs to a buyer that he had sold to before. He later learned that the buyer then provided the drugs to two other individuals in San Bruno, Calif., referred to in court documents as Victim 1 and Victim 2. Both Victim 1 and Victim 2 snorted the drugs, believing they were taking cocaine, when in fact they ingested fentanyl. Both Victim 1 and Victim 2 overdosed; Victim 1 died, and Victim 2 survived the ordeal.
Court documents demonstrate Doblado-Canaca was arrested after he continued to sell drugs in the Tenderloin. Specifically, on May 20, 2020, the same buyer Doblado-Canaca sold to on May 18 called him to set up another buy, this one on Hyde Street in the Tenderloin. In the early evening, Doblado-Canaca met the buyer and another person, who was an undercover police officer. Doblado-Canaca sold three baggies of what he knew was fentanyl and was arrested shortly thereafter. At the time of his arrest, Doblado-Canaca possessed eight more baggies of fentanyl and 13 baggies of heroin, respectively.
On October 28, 2021, Doblado-Canaca was charged by Information with one count of distributing fentanyl, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C). Doblado-Canaca pleaded guilty to the charge.
In addition to the six year prison term, U.S. District Judge Donato ordered Doblado-Canaca to serve three years of supervision following release from federal prison, and to pay restitution.
Assistant U.S. Attorney Ross Weingarten prosecuted the case with the assistance of Linda Love and Margoth Turcios. The prosecution is the result of an investigation by DEA and the San Bruno Police Department.
One Pill Can Kill: Avoid pills bought on the street because One Pill Can Kill. Fentanyl is a highly potent opioid that drug dealers dilute with cutting agents to make counterfeit prescription pills that appear to be Oxycodone, Percocet, Xanax, and other drugs. Fentanyl is used because it’s cheap. Small variations in the quantity or quality of fentanyl in a fake prescription pill can accidentally create a lethal dosage. Fentanyl has now become the leading cause of drug poisoning deaths in the United States. Fake prescription pills laced with fentanyl are usually shaped and colored to look like pills sold at pharmacies, like Percocet and Xanax. For example, fake prescription pills known as “M30s” imitate Oxycodone obtained from a pharmacy, but when sold on the street the pills routinely contain fentanyl. These particular pills are usually round tablets and often light blue in color, though they may be in different shapes and a rainbow of colors. They often have “M” and “30” imprinted on opposite sides of the pill. Do not take these or any other pills bought on the street – they are routinely fake and poisonous, and you won’t know until it’s too late.
San Rafael Resident Sentenced to Five Years in Prison for Receiving Child Pornography After Grooming Child in Texas over Two-Year PeriodRead the Press Release
SAN FRANCISCO – Robert Haeuser was sentenced to 60 months in prison for soliciting and receiving child pornography from a child victim after grooming her over the internet, announced U.S. Attorney Ismail Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Susan Illston, United States Senior District Judge.
Haeuser, 33, of San Rafael, pleaded guilty to the charge on December 2, 2022. In 2015, he began communicating with a victim he would learn was 11 years old through the chat function of a mobile game called “Dynasty Wars.” The victim lived with her parents in Houston while Haeuser lived in Marin County. By November of 2015, Haeuser knew his victim was not yet in high school, and by October of 2016, Hauser engaged in an exchange during which he acknowledged she was not older than 12 years old and that if the world were aware of their conversations, “I would be in jail.” Haeuser and the victim eventually switched their communications to email where Haeuser repeatedly asked the victim to produce sexually explicit images and videos of herself and to send them to him by email. His instructions included telling her to pose and masturbate for him. The victim complied with Haeuser’s directions. Haeuser and the victim exchanged approximately 20,760 emails and 13,600 text messages between July 15, 2015, and October 5, 2017. In total, the victim sent Haeuser at least 29 images and 4 videos depicting herself engaged in sexually explicit conduct.
On May 3, 2022, a federal grand jury indicted Haeuser, charging him with one count of receipt of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2) and (b)(1). Haeuser pleaded guilty to the charge.
In addition to the prison term, Judge Illston ordered Haeuser to serve ten years of supervised release—to begin after his prison term. Judge Illston ordered Haeuser to begin serving his prison term on August 25, 2023.
Assistant United States Attorneys Kevin Yeh and Leif Dautch are prosecuting the case with assistance from Mark DiCenzo. The prosecution is the result of an investigation by the FBI.
Jury Convicts Federal Correctional Officer for Sexual Abuse of Two Female InmatesRead the Press Release
A federal jury convicted a federal correctional officer of five counts involving sexually abusive conduct against two female victims who were serving prison sentences. U.S. District Judge Yvonne Gonzalez Rogers presided over the trial.
John Bellhouse, 40, formerly of Pleasanton, California, was initially charged with sexual abuse of an inmate on Feb. 17, 2022. A federal grand jury issued a superseding indictment on Sept. 29, 2022, charging Bellhouse with two counts of sexual abuse and three counts of abusive sexual contact. The charges involved conduct that was alleged to have occurred against two female inmates from December 2019 to December 2020. On Monday, a jury convicted Bellhouse of all counts.
“Correctional Officer Bellhouse committed an egregious breach of trust by using the cover of the BOP facility’s Safety Office to sexually abuse individuals in his custody,” said Deputy Attorney General Lisa O. Monaco. “This guilty verdict is yet another warning that any Bureau employee who abuses their authority will be held accountable. The Department of Justice is committed to rooting out sexual assault within the BOP and continuing to prioritize cases involving sexual abuse of individuals in BOP custody.”
“The heinous crimes in this case destroyed the sense of safety and security every human being is entitled to,” said FBI Deputy Director Paul Abbate. “While he was a federal corrections officer, the defendant sexually abused two victims in his care over the course of a year, an unimaginable violation of the most basic human rights. Today’s conviction demonstrates that the FBI remains unyielding in our protection of all people no matter where the crime occurs or who commits it.”
“Bellhouse violated vulnerable women under his custody and care, and a jury held him accountable for these despicable acts. Four other FCI Dublin employees, including the former Warden and Chaplain, have been convicted of sexually abusing inmates. Our investigation of sexual abuse at FCI Dublin remains ongoing, and we will continue to aggressively pursue justice for victims of sexual abuse at the hands of BOP employees,” said Inspector General Michael E. Horowitz.
“As an officer in a federal correctional facility, Bellhouse had an obligation to ensure the safety of all the persons serving their sentences,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “Instead, Bellhouse used the power entrusted to him to serve his own corrupt purposes. The sexual abuse of inmates will not be tolerated, and Bellhouse will now face the consequences for committing his despicable crimes.”
Bellhouse was employed as a correctional officer at the Federal Correctional Institute in Dublin, California (FCI Dublin), an all-female low security federal correctional institution. Trial evidence showed that Bellhouse sexually abused and committed abusive sexual contact against a victim beginning December 2019 through October 2020. The victim was incarcerated and serving a prison sentence at FCI Dublin under Bellhouse’s custodial, supervisory, and disciplinary authority. The trial evidence demonstrated Bellhouse engaged in oral sex with the victim in the prison Safety Warehouse and Safety Office and that Bellhouse touched the victim’s vagina and breasts in the prison Safety Office.
The trial evidence also demonstrated Bellhouse committed abusive sexual contact against a second victim between October and December of 2020. Trial evidence showed that the acts occurred in the Safety Office at the FCI Dublin Camp.
Bellhouse was convicted of two counts of sexual abuse of a ward and three counts of abusive sexual conduct. Each count of sexual abuse carries a maximum term of 15 years in prison. Each count of abusive sexual conduct carries a maximum term of two years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Judge Gonzalez Rogers scheduled Bellhouse’s sentencing hearing for Aug. 30. Bellhouse remains out of custody pending his sentencing.
The DOJ OIG and FBI investigated the case.
Assistant U.S. Attorneys Molly Priedeman and Andrew Paulson for the Northern District of California are prosecuting the case, with the assistance of Madeline Wachs, Sara Slattery, and Leeya Kekona.
Jury Convicts Federal Correctional Officer for Sexual Abuse of Two Female InmatesRead the Press Release
OAKLAND – A federal jury convicted a federal correctional officer of five counts involving sexually abusive conduct against two female victims who were serving prison sentences. United States District Judge Yvonne Gonzalez Rogers presided over the trial.
John Bellhouse, 40, formerly of Pleasanton, California, was initially charged with sexual abuse of an inmate on Feb. 17, 2022. A federal grand jury issued a superseding indictment on Sept. 29, 2022, charging Bellhouse with two counts of sexual abuse and three counts of abusive sexual contact. The charges involved conduct that was alleged to have occurred against two female inmates from December 2019 to December 2020. A jury convicted Bellhouse of all counts.
“Correctional Officer Bellhouse committed an egregious breach of trust by using the cover of the BOP facility’s Safety Office to sexually abuse individuals in his custody,” said Deputy Attorney General Lisa O. Monaco. “This guilty verdict is yet another warning that any Bureau employee who abuses their authority will be held accountable. The Department of Justice is committed to rooting out sexual assault within the BOP and continuing to prioritize cases involving sexual abuse of individuals in BOP custody.”
“As an officer in a federal correctional facility, Bellhouse had an obligation to ensure the safety of all the persons serving their sentences,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “Instead, Bellhouse used the power entrusted to him to serve his own corrupt purposes. The sexual abuse of inmates will not be tolerated, and Bellhouse will now face the consequences for committing his despicable crimes.”
“The heinous crimes in this case destroyed the sense of safety and security every human being is entitled to,” said FBI Deputy Director Paul Abbate. “While he was a federal corrections officer, the defendant sexually abused two victims in his care over the course of a year, an unimaginable violation of the most basic human rights. Today’s conviction demonstrates that the FBI remains unyielding in our protection of all people no matter where the crime occurs or who commits it.”
"Instead of fulfilling his duty as the prison Safety Manager, Bellhouse used his position to abuse the women he was responsible for keeping safe," said FBI Special Agent in Charge Robert Tripp. "The FBI and our partners will continue to pursue allegations of abuse by Dublin FCI correctional officers and hold perpetrators accountable for their crimes."
“Bellhouse violated vulnerable women under his custody and care, and a jury held him accountable for these despicable acts. Four other FCI Dublin employees, including the former Warden and Chaplain, have been convicted of sexually abusing inmates. Our investigation of sexual abuse at FCI Dublin remains ongoing, and we will continue to aggressively pursue justice for victims of sexual abuse at the hands of BOP employees,” said Inspector General Michael E. Horowitz.
Bellhouse was employed as a Correctional Officer at the Federal Correctional Institute in Dublin, Calif. (FCI Dublin), an all-female low security federal correctional institution. Trial evidence showed that Bellhouse sexually abused and committed abusive sexual contact against a victim beginning December 2019 through October 2020. The victim was incarcerated and serving a prison sentence at FCI Dublin under Bellhouse’s custodial, supervisory, and disciplinary authority. The trial evidence demonstrated Bellhouse engaged in oral sex with the victim in the prison Safety Warehouse and Safety Office and that Bellhouse touched the victim’s vagina and breasts in the prison Safety Office.
The trial evidence also demonstrated Bellhouse committed abusive sexual contact against a second victim between October and December of 2020. Trial evidence showed that the acts occurred in the Safety Office at the FCI Dublin Camp.
Bellhouse was convicted of two counts of sexual abuse of a ward, in violation of 18 U.S.C. § 2243(b), and three counts of abusive sexual conduct, in violation of 18 U.S.C. § 2244(a)(4). Each count of sexual abuse carries a maximum term of imprisonment of 15 years. Each count of abusive sexual conduct carries a maximum term of two years imprisonment. A federal district judge will determine any sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.
Judge Gonzalez Rogers scheduled Bellhouse’s sentencing hearing for August 30, 2023. Bellhouse remains out of custody pending his sentencing.
The case is being prosecuted by Assistant U.S. Attorneys Molly Priedeman and Andrew Paulson, with the assistance of Madeline Wachs, Sara Slattery, and Leeya Kekona. The prosecution is the result of an investigation by the DOJ OIG and the FBI.
bellhouse_sup_indictment.pdfMountain View Resident Sentenced to 12.5 Years in Prison for Enticing Children to Engage in Production of PornographyRead the Press Release
SAN FRANCISCO – Christopher Raymond Campbell was sentenced today to 150 months in prison for possessing, and enticing children to engage in the production of, child pornography, announced U.S. Attorney Ismail J. Ramsey and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Vince Chhabria, United States District Judge.
Campbell, 37, of Mountain View, pleaded guilty to the charges on January 17, 2023. According to his plea agreement, Campbell admitted that, between March of 2021 and March of 2022, he corresponded with multiple minors through social media platforms using his iPhone and other electronic devices. Campbell admitted he often used aliases and screennames to dupe his victims into taking sexually explicit photos of themselves and sending the images to him. For example, Campbell admitted he presented himself as a young female, and then talked to victims he knew to be young girls; by pretending to be a girl, he would gain the trust of his victims and persuade them to send him pornographic photographs and videos of themselves. Similarly, Campbell acknowledged he sometimes pretended to be other individuals to make his victims think they were talking to multiple different people; Campbell then pressured the minors into creating sexually explicit images of themselves.
Campbell acknowledged in his plea agreement that he sometimes used a recording function on his phone to take and save live video of his communications with the minor females. He also admitted he gave his victims instructions on how to take the photos, including coaching them while they masturbated or, in the case of one victim (who was 9 years old), instructing her to insert various objects into her vagina despite the pain it caused her. Campbell admitted he enticed one minor to send him at least 10 videos of herself engaged in sexually explicit conduct and that another minor victim (estimated to be between 10 and 14 years old) sent him videos including one showing her breasts and pubic region.
On August 25, 2022, a federal grand jury indicted Campbell, charging him with one count each of coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b); receipt of child pornography, in violation of 18 U.S.C. §§ 2252(a)(2) and (b); and possession of child pornography, in violation of 18 U.S.C. §§ 2252(a)(4)(B) and (b)(2). Campbell pleaded guilty to the possession charge and the coercion and enticement of a minor charge. Judge Chhabria dismissed the receipt of child pornography charge at sentencing.
In addition to the prison term, Judge Chhabria also ordered Campbell to serve 60 months of supervised release—to begin after his prison term. Judge Chhabria ordered Campbell to begin serving his prison term on July 28, 2023.
Assistant United States Attorney Kevin Yeh is prosecuting the case with assistance from Lakisha Holliman and Amala James. The prosecution is the result of an investigation by HSI.
Former Chief Financial Officer of San Francisco Seafood Company Indicted in Alleged $2+ Million Embezzlement SchemeRead the Press Release
SAN FRANCISCO - A federal grand jury has indicted Antonietta Nguyen charging her with five counts of wire fraud in connection with an alleged scheme to embezzle millions of dollars from her former employer, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation, Special Agent in Charge Robert K. Tripp.
According to the indictment filed May 31, 2023, and unsealed earlier today, Nguyen, 55, of Brisbane, is alleged to have stolen approximately $2.7 million from ABS Seafood, a private seafood wholesaler and importer based in San Francisco. Nguyen, a minority shareholder in the company, served as its Chief Financial Officer. In that role, Nguyen allegedly used corporate funds to pay for personal expenses that she charged to credit cards, including her own personal credit cards and a corporate card issued on behalf of the company. The indictment describes some of the illegal purchases Nguyen allegedly made; they include luxury items from such brands as Louis Vuitton, Hermes Las Vegas and Paris, Goyard, Chanel, and Neiman Marcus. In addition, the indictment alleges Nguyen used company funds to pay her state property taxes, college tuition fees for a relative, and personal travel expenses. Further, to conceal her actions, Nguyen also allegedly falsified the company’s accounting records.
The indictment charges Nguyen with five counts of wire fraud and aiding and abetting wire fraud, in violation of 18 U.S.C. §§ 1343 and 2.
An indictment 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 sentence of 20 years, and a fine of $250,000, plus restitution, for each count of wire fraud. 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.Nguyen was arrested this morning at her home in Brisbane and made her initial federal court appearance before United States Magistrate Judge Sallie Kim. Magistrate Judge Kim ordered Nguyen released on a $250,000 bond. Nguyen’s next federal court appearance is scheduled for July 21, 2023, for a status hearing before the Honorable Susan Illston, U.S. District Judge.
Assistant U.S. Attorney Sailaja M. Paidipaty is prosecuting the case with the assistance of Megan Pagaduan. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
dkt._1_-_indictment.pdfSouthern California Man Pleads Guilty to Kickback Scheme to Defraud Williams SonomaRead the Press Release
SAN FRANCISCO – Kourosh Mirmehdi 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 plea was accepted by the Hon. Richard Seeborg, U.S. District Judge.
In his plea agreement, Mirmehdi, 63, of Irvine, Calif., admitted he conspired with two co-defendants to divert and steal millions of dollars in commercial real estate broker commission rebates. Mirmehdi worked for a global logistics company that assisted Williams Sonoma, Inc. (WSI) in securing commercial warehouse space. WSI is a home-goods retailer headquartered in San Francisco that operates brands such as Williams Sonoma, Pottery Barn, and West Elm. As an employee of the global logistics company, Mirmehdi assisted commercial real estate brokers in locating warehouses for WSI to lease. Mirmehdi also assisted in negotiating the lease terms for WSI. As part of the negotiations, WSI often was entitled to receive millions of dollars in broker rebates after entering into commercial leasing agreements. Mirmehdi admitted that, beginning around 2020, he was involved in a conspiracy to divert and steal those rebates.
Mirmehdi acknowledged that the scheme involved duping commercial real estate brokers into sending rebates to a co-conspirator’s shell company, rather than to WSI. Mirmehdi and his co-conspirators—one of whom was employed by WSI—falsely represented to commercial real estate brokers that the co-conspirator’s company was connected to WSI. In fact, the company had nothing to do with WSI and was merely a shell company owned by a co-conspirator. Mirmehdi split the diverted payments with his co-conspirators. In total, the scheme to defraud garnered approximately $4.1 million, with more than $1.35 million going to Mirmehdi.
Mirmehdi was indicted by a federal grand jury on April 11, 2023. He was charged with one count of wire fraud conspiracy, in violation of 18 U.S.C. § 1349; four counts of wire fraud, in violation of 18 U.S.C. § 1343; and one count of money laundering conspiracy, in violation of 18 U.S.C § 1956(h). Under the plea agreement, Mirmehdi pleaded guilty to the wire fraud conspiracy and the money laundering conspiracy counts. If Mirmehdi complies with his plea agreement, the remaining counts will be dismissed at sentencing.
Mirmehdi is currently released on bond. His next appearance is November 14, 2023. Mirmehdi now faces a statutory maximum of 20 years in prison for each of the wire fraud 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 Mirmehdi 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.
Charges against Mirmehdi’s three co-defendants remain pending.
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.Dublin Man Charged with Damaging Computers Belonging to His Former EmployerRead the Press Release
OAKLAND - A federal grand jury in Oakland indicted Vamsikrishna Naganathanahalli, charging him with a felony related to the alleged improper accessing and damaging of a protected computer, announced United States Attorney Ismael J. Ramsey and Federal Bureau of Investigation, Special Agent in Charge Robert K. Tripp.
According to the indictment filed May 11, 2023, and unsealed earlier today, Naganathanahalli, 47, of Dublin, Calif., accessed a computer system belonging to his former employer, Vituity, after his company login privileges had been revoked. The indictment alleges Naganathanahalli used his access to the computer system to replace real data with masked data causing damage to an important Vituity database.
Vituity comprises a group of related companies based in Emeryville, Calif., including physician partnerships and other entities. According to the indictment, Vituity maintained a computer database that was central to its business and was connected to systems responsible for hiring and payroll, among other functions. The indictment alleges that in late May of 2022, Naganathanahalli was informed that his employment with Vituity would be terminated in mid-June. The indictment alleges that after he was informed his employment would be terminated, but before his last day on the job, he changed a password to another employee’s account so he would be able to gain access to a Vituity computer system after access to Vituity’s computers using his own password was revoked. Further, the indictment alleges that in September 2022, Naganathanahalli used the changed password to access a Vituity computer system remotely, change yet another employee’s password, and then use that employee’s account to overwrite the company’s personnel data. In doing so, Naganathanahalli uploaded generic, “masked” data to overwrite the real data for thousands of current and former employees.
Defendant was arrested on May 25, 2023, and made his initial appearance before U.S. Magistrate Judge Kandis A Westmore in federal court in Oakland this morning. Magistrate Judge Westmore ordered Naganathanahalli released on a $100,000 bond. Naganathanahalli’s next scheduled appearance is at 2 p.m. on June 15, 2023, for before the Honorable Yvonne Gonzalez Rogers, U.S. District Judge for a review of case status.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of 10 years of imprisonment, and a fine of $250,000, plus restitution if appropriate for each violation of 18 U.S.C. §§ 1030(a)(5)(A), (c)(4)(A)(i)(I). 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 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 the Federal Bureau of Investigation.
Orange County Resident Sentenced to over Four Years in Prison for Scheme to Defraud Multiple Victim InvestorsRead the Press Release
SAN JOSE – Jonathan Vu Hoang, aka Co Vu Hoang, was sentenced today to 49 months in prison in connection with a scheme to create a bogus investment company and defraud multiple victim-investors by falsely promising them he would invest their money, announced U.S. Attorney Ismail Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Edward J. Davila, United States District Judge.
Hoang, 59, formerly of San Jose and residing more recently in Orange County, pleaded guilty to the charges on July 11, 2022. According to his plea agreement, Hoang admitted that beginning June of 2017, he devised and implemented a scheme by which he defrauded multiple investors of their money by promising to make investments that would yield significantly high returns. The scheme continued through May of 2019 by which time Hoang solicited over $1.6 million from his victims.
Hoang admitted in his plea agreement that he told his victim-investors he was a wealthy and successful businessman and that he had access to special investment opportunities. Hoang created a bogus investment company called Dunamis Global Holdings, Ltd. and asked his victim-investors to sign Subscription Agreements with the company as a means of assuring the victims that he was making legitimate investments on their behalf. Hoang also established bank accounts and email accounts to create the appearance of a legitimate investment company. For example, when emailing with his victim-investors, Hoang copied fake Dunamis employees with fake titles. Also, Hoang created email addresses and domain names of others that appeared to belong in prominent firms and companies, such as “@deloittewealthmanagement.com” and “@dlapipercapital.com.” Hoang used the fabricated email addresses to generate and transmit emails regarding proposed investment opportunities as a means of bolstering the appearance of his legitimacy. Hoang admitted that he obtained at least $1.6 million in funds from his victim-investors and acknowledged that rather than invest any of the funds he received as promised, he spent the funds on his personal expenses and to support his lifestyle.
Hoang was charged by Felony Information on April 7, 2022, with three counts of wire fraud in violation of 18 U.S.C. § 1343. Hoang pleaded guilty to the three counts.
At sentencing, Judge Davila described Hoang’s conduct as harmful to his community, noting the financial harm and trauma caused to the victims. In directly addressing Hoang, Judge Davila expressed, “It’s a pity that these victims were preyed upon in the way that they were, and a pity that you know better.” In addition to the prison term, Judge Davila also ordered Hoang to pay a $15,000 fine and restitution and entered a forfeiture money judgment in the amount of $1.5 million. Judge Davila ordered Hoang to begin serving his sentence on August 17, 2023.
Assistant United States Attorney Anne Hsieh is prosecuting the case with assistance from Helen Yee. The prosecution is the result of an investigation by the FBI.
Bay Area Physician Sentenced to Two Years in Prison for Possession of Child PornographyRead the Press Release
SAN FRANCISCO– Joseph Andrew Mollick was sentenced today to 24 months in prison for being in possession of child pornography, announced United States Attorney Ismail J. Ramsey and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Vince Chhabria, U.S. District Judge.
Mollick, 60, of Menlo Park, pleaded guilty to the charge on January 9, 2023. Mollick identifies himself in a filing with the court as a medical doctor who has worked as a hospitalist at San Francisco Bay Area hospitals. According to his plea agreement, Mollick admitted that in August of 2019, he used the social media application Kik to upload a visual depiction of a minor engaged in sexually explicit conduct. The image depicted a prepubescent female wearing a red shirt in a sex act with an adult male. Mollick admitted he knew the image was of a prepubescent minor and that its production involved the use of a prepubescent minor engaging in sexually explicit conduct. Mollick also possessed on his personal laptop at least 2000 images and videos depicting minors engaged in sexually explicit conduct.
A federal grand jury indicted Mollick on November 16, 2021, charging him with one count possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B). Mollick pleaded guilty to the charge.
In addition to the prison term, judge Chhabria ordered Mollick to serve 60 months of supervised release, to begin after his prison term, and to pay a fine of $25,000. Judge Chhabria scheduled a hearing to decide issues regarding restitution for July 26, 2023.
Assistant U.S. Attorney Kenneth Chambers is prosecuting the case. This case is a result of an investigation by Homeland Security Investigations.
Owner of Two California Construction Firms Sentenced to Prison for Employment Tax CrimesRead the Press Release
A California man was sentenced yesterday to 12 months in prison for willfully failing to account for and pay over employment taxes.
According to court documents and statements made in court, Larry Kudsk of Berkeley, California, operated two construction businesses, Kudsk Construction, Inc., and M. Gutierrez, Inc. These companies served as general contractors or subcontractors, including on some government projects. For both companies, Kudsk was responsible for filing quarterly employment tax returns and collecting and paying over to the IRS payroll taxes withheld from employees’ wages. Kudsk, however, did not timely file employment tax returns or pay over withholdings to the IRS for 2014 and the last three quarters of 2015 for M. Gutierrez, Inc., and for all four quarters of 2016 for Kudsk Construction, Inc. In total, Kudsk caused a tax loss to the IRS exceeding $250,000.
In addition to the term of imprisonment, U.S. District Judge Jeffrey S. White ordered Kudsk to serve three years of supervised release and to pay approximately $244,973 in restitution to the United States.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Ismail J. Ramsey for the Northern District of California made the announcement.
IRS-Criminal Investigation investigated the case.
Trial Attorneys Julia M. Rugg and Charles A. O’Reilly of the Tax Division and Assistant U.S. Attorney Katherine Lloyd-Lovett of the Northern District of California prosecuted the case.
Federal Correctional Officer Makes California Federal Court Appearance to Face Charges of Aggravated Sexual AbuseRead the Press Release
OAKLAND – A federal correctional officer at Federal Correctional Institution, Dublin (FCI Dublin) made his first appearance before the Northern District of California after a federal grand jury returned a 12-count indictment charging him for sexually abusing three female inmates in his custody.
According to the indictment filed April 13, 2023, Darrell Wayne Smith, 54, now residing in Florida, was employed at FCI Dublin as a correctional officer when he engaged in sexual acts and sexual contact with three female inmates who were then serving prison sentences. The indictment describes twelve incidences between May 2019 and May 2021 during which Smith allegedly engaged in illegal sexual contact and acts with his victims, including digitally penetrating a victim’s anus by use of force.
“The charges announced today are the latest in the Justice Department’s campaign to root out sexual misconduct within the Bureau of Prisons,” said Deputy Attorney General Lisa O. Monaco. “As alleged, Darrell Smith exploited his authority to sexually abuse three vulnerable victims in custody at FCI Dublin. To enforce the BOP’s dual mission of providing a safe, humane environment for those in custody while preparing them to return to society, we will hold accountable all BOP personnel who abuse their authority.”
“This indictment shocks the conscience of anyone reading it,” said U.S. Attorney Ramsey. “The alleged conduct falls far below the minimum standards of decency required—much less, the standards of integrity expected—of any Bureau of Prisons employee. Rest assured, the Department will root out any such conduct and prosecute all persons who are responsible.”
“For years, the defendant allegedly used his position of authority, as a federal corrections officer, to commit unspeakable acts of abuse and violence against multiple victims in a correctional institution,” said FBI Deputy Director Abbate. “The FBI and our law enforcement partners are committed to aggressively pursuing those who violate the civil rights of others, no matter their rank or title. Nothing can undo the pain inflicted on the victims, but we hope today’s indictment is a further step towards justice.”
“The Department of Justice Office of the Inspector General is committed to bringing to justice every single BOP employee at FCI Dublin who sexually abused inmates. To date, those efforts have already included arrests and convictions of FCI Dublin’s former Warden and Chaplain,” said Inspector General Michael E. Horowitz. Today’s indictment alleges brazen and violent sexual assault by Smith and alleges abuse of multiple inmates over several years. As evidenced by these charges, the OIG and FBI investigation remains ongoing, and we will continue to aggressively investigate allegations of abuse at FCI Dublin and across the Federal Bureau of Prisons.”
Each of the alleged victims is identified in the indictment by initials and was in official detention and under Smith’s custodial, supervisory, and disciplinary authority at the time of the alleged illegal conduct. In addition, each count in the indictment corresponds with one encounter during which Smith allegedly engaged in unlawful sexual acts or contact with one of the victims.
Smith is charged with five counts of sexual abuse of a ward, in violation of 18 U.S.C. § 2243(b); six counts of abusive sexual contact, in violation of 18 U.S.C. § 2244(a)(4); and one count of aggravated sexual abuse, in violation of 18 U.S.C. § 2241(a).
The charges presented in an indictment are merely allegations and the defendant is presumed innocent unless proven guilty in a court of law.
Smith faces a maximum term of life in prison if convicted of the charge under 18 U.S.C. § 2241(a). In addition, Smith faces a statutory maximum of 15 years of imprisonment for each count under § 2243(b) and a maximum of two years of imprisonment for each count under § 2244(a)(4). In addition, as part of any sentence, the court may order a term of supervised release, a fine of up to $250,000 for each count, restitution, and additional assessments. 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.
Smith was arrested in Crawfordville, Fla., on May 11, 2023. He made an appearance in the Northern District of Florida before District Judge Martin A. Fitzpatrick the same day. Smith made his initial Northern District of California appearance this morning before U.S. Magistrate Judge Kandis A. Westmore. Smith’s next federal court appearance is scheduled for July 10, 2023, before U.S. District Judge Araceli Martínez-Olguín for a status conference.
Assistant U.S. Attorneys Molly Priedeman and Andrew Paulson are prosecuting the case with the assistance of Leeya Kekona. The prosecution is the result of an investigation by the DOJ OIG and the Federal Bureau of Investigation.
Berkeley Resident Sentenced to Prison for Employment Tax CrimesRead the Press Release
OAKLAND – Larry Kudsk was sentenced today to 12 months in prison for willfully failing to account for and pay over employment taxes announced U.S. Attorney Ismail J. Ramsey and Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge Darren Lian. The sentence was handed down by the Hon. Jeffrey S. White, U.S. District Judge.
Kudsk, who resides in Berkeley, pleaded guilty to the charge on August 2, 2022. According to court documents, Kudsk operated two construction businesses, Kudsk Construction Inc. and M. Gutierrez Inc. These companies served as general contractors or subcontractors on various construction projects, including some government projects. For both companies, Kudsk was responsible for filing quarterly employment tax returns and collecting and paying to the IRS employment taxes withheld from employees’ wages. Kudsk, however, did not timely file employment tax returns nor pay over tax withholdings to the IRS, for M. Gutierrez, Inc. for the four quarters of 2014 and the last three quarters of 2015, and for Kudsk Construction Inc. for all for quarters of 2016. In all, Kudsk caused a tax loss to the IRS of more than $250,000.
A federal grand jury indicted Kudsk on February 3, 2022, charging him with seven counts of willfully failing to pay over employment taxes, in violation of 26 U.S.C. § 7202. Kudsk pleaded guilty to one count.
In addition to the term of imprisonment, U.S. District Judge Jeffrey S. White ordered Kudsk to serve three years of supervised release and to pay and $244,973 in restitution to the United States. Judge White ordered Kudsk to self-surrender on August 15, 2023, to begin his prison term.
IRS-Criminal Investigation investigated the case.
Assistant U.S. Attorney Katherine Lloyd-Lovett of the U.S. Attorney’s Office for the Northern District of California and Trial Attorney Julia M. Rugg and Charles A. O’Reilly of the Justice Department’s Tax Division prosecuted the case.
Bay Area Woman Faces Federal Charges for Distributing FentanylRead the Press Release
OAKLAND – Jianna Coppedge appeared today in United States District Court to face a federal charge that she distributed fentanyl in the form of counterfeit “M30” pills, announced United States Attorney Ismail J. Ramsey and Drug Enforcement Administration (DEA) Special Agent in Charge Brian Clark. Coppedge made her initial appearance today in United States District Court in Oakland before United States Magistrate Kandis A. Westmore.
The basis for the charge was set out in a criminal complaint filed April 4, 2023, and unsealed in federal court today. The criminal complaint describes a transaction in which Coppedge, 19, of Alameda County, arranged the sale of, and then sold, “M30” pills containing fentanyl. The individual to whom the drugs were sold subsequently died of an overdose.
The complaint charges Coppedge with distribution of fentanyl, in violation of 21 U.S.C. § § 841(a)(1), (b)(1)(C). The statutory maximum for the charge is a maximum 20 years’ imprisonment, a maximum fine of $1,000,000 a maximum lifetime of 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.
Assistant U.S. Attorney Kenneth Chambers of the Oakland Branch of the United States Attorney’s Office is prosecuting the case with the assistance of Leeya Kekona and Lance Macaraeg. The prosecution is the result of an investigation by DEA and the Dublin Police Department.
One Pill Can Kill: Beware of pills bought on the street: One Pill Can Kill. Fentanyl, a Schedule I controlled substance, is a highly potent opiate that can be diluted with cutting agents to create counterfeit pills that purport to mimic the effects of Oxycodone, Percocet, and other drugs, but can be obtained at a lower cost. However, very small variations in the amount or quality of fentanyl create huge effects on the potency of the counterfeit pills and can easily cause death. Fentanyl has now become the leading cause of drug overdose deaths in the United States. Counterfeit, fentanyl-laced pills are usually shaped and colored to resemble pills that are sold legitimately at pharmacies.
Federal Correctional Officer Charged with Aggravated Sexual AbuseRead the Press Release
A federal correctional officer at the Federal Correctional Institution, Dublin (FCI Dublin) made his first appearance before the Northern District of California after a federal grand jury returned a 12-count indictment charging him for sexually abusing three female inmates in his custody.
According to the indictment, Darrell Wayne Smith, 54, now residing in Florida, was employed at FCI Dublin as a correctional officer when he engaged in sexual acts and sexual contact with three female inmates who were then serving prison sentences. The indictment describes 12 incidents between May 2019 and May 2021 during which Smith allegedly engaged in illegal sexual contact and acts with his victims, including digitally penetrating a victim’s anus by use of force.
“The charges announced today are the latest in the Justice Department’s campaign to root out sexual misconduct within the Bureau of Prisons,” said Deputy Attorney General Lisa O. Monaco. “As alleged, Darrell Smith exploited his authority to sexually abuse three vulnerable victims in custody at FCI Dublin. To enforce the BOP’s dual mission of providing a safe, humane environment for those in custody while preparing them to return to society, we will hold accountable all BOP personnel who abuse their authority.”
“For years, the defendant allegedly used his position of authority, as a federal corrections officer, to commit unspeakable acts of abuse and violence against multiple victims in a correctional institution,” said FBI Deputy Director Paul Abbate. “The FBI and our law enforcement partners are committed to aggressively pursuing those who violate the civil rights of others, no matter their rank or title. Nothing can undo the pain inflicted on the victims, but we hope today’s indictment is a further step towards justice.”
“The Department of Justice Office of the Inspector General is committed to bringing to justice every single BOP employee at FCI Dublin who sexually abused inmates. To date, those efforts have already included arrests and convictions of FCI Dublin’s former Warden and Chaplain,” said Inspector General Michael E. Horowitz. “Today’s indictment alleges brazen and violent sexual assault by Smith and alleges abuse of multiple inmates over several years. As evidenced by these charges, the OIG and FBI investigation remains ongoing, and we will continue to aggressively investigate allegations of abuse at FCI Dublin and across the Federal Bureau of Prisons.”
“This indictment shocks the conscience of anyone reading it,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “The alleged conduct falls far below the minimum standards of decency required – much less, the standards of integrity expected – of any Bureau of Prisons employee. Rest assured, the Department will root out any such conduct and prosecute all persons who are responsible.”
Each of the alleged victims is identified in the indictment by initials and was in official detention and under Smith’s custodial, supervisory, and disciplinary authority at the time of the alleged illegal conduct. In addition, each count in the indictment corresponds with one encounter during which Smith allegedly engaged in unlawful sexual acts or contact with one of the victims.
Smith is charged with five counts of sexual abuse of a ward, six counts of abusive sexual contact, and one count of aggravated sexual abuse.
Smith faces a maximum of life in prison if convicted of the aggravated sexual abuse, a maximum of 15 years of in prison for each count of sexual abuse of a ward, and a maximum of two years in prison for each count of abusive sexual contact. In addition, as part of any sentence, the court may order a term of supervised release, a fine of up to $250,000 for each count, restitution, and additional assessments. A federal district judge will determine sentencing after considering the U.S. Sentencing Guidelines and other statutory factors.
Smith was arrested on May 11 and made his initial federal court appearance in the Northern District of Florida on the same day. Smith made his initial Northern District of California appearance this morning before U.S. Magistrate Judge Kandis A. Westmore. Smith’s next federal court appearance is scheduled for July 10.
DOJ OIG and the FBI investigated the case.
Assistant U.S. Attorneys Molly Priedeman and Andrew Paulson for the Northern District of California are prosecuting the case, with the assistance of Leeya Kekona.
An indictment is merely an allegation. All defendants are innocent until proven guilty beyond a reasonable doubt in a court of law.
Two Prominent Hells Angels Members Convicted of Racketeering Conspiracy and Murder Conspiracy in Second TrialRead the Press Release
SAN FRANCISCO – A federal jury found Raymond Foakes, a/k/a Ray Ray, and Christopher Ranieri, a/k/a Rainman, guilty of racketeering conspiracy, murder conspiracy and related crimes for their participation in 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 verdicts follow a two-month trial before the Honorable Edward M. Chen, United States District Judge. A third defendant, Brian Burke, was acquitted of a single count of witness intimidation.
“Foakes and Ranieri followed a malicious code of conduct that permitted—and sometimes encouraged—the beating, maiming, and even killing of anyone who dared to cross their criminal enterprise,” said U.S. Attorney Ramsey. “The defendants now will be sentenced for their conduct and face the consequences of their violent racketeering activities.”
“This criminal enterprise tried to intimidate the community through fear into silence,” said FBI Special Agent in Charge Robert Tripp. “The prosecution of a dozen members and associates of the Sonoma County Hells Angels brings an end to that fear and keeps our community safe. I commend the witnesses who did not succumb to this group's intimidation tactics and came forward to law enforcement. I am proud of the collaboration of the FBI with our partners at the United States Attorney's Office, California Highway Patrol, and Santa Rosa Police Department. All of us stand committed to removing violent criminals from our neighborhoods.”
The trial is the second following the October 10, 2017, indictment from a federal grand jury. The indictment described the Hells Angels as a violent transnational outlaw motorcycle gang and the HASC as a subset of the gang whose members primarily operate in Sonoma County, California. The indictment charged eleven members and associates of the HASC with being part of the criminal conspiracy that engaged in a broad swath of criminal activity including murder, conspiracy to commit murder, narcotics distribution, assault, robbery, extortion, illegal firearms possession, obstruction of justice, and witness intimidation. With yesterday’s jury verdict, nine of the eleven defendants, one of whom became deceased, have been convicted of crimes related to HASC activities, five by jury verdicts. 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 former HASC members, Joel Silva, a/k/a Doughboy. The jury convicted Jonathan Nelson, a/k/a Jon Jon, 46, of Santa Rosa; Brian Wayne Wendt, 45, of Tulare; and Russell Taylor Ott, a/k/a Rusty, 69, of Santa Rosa, each of whom played a role in carrying out the July 15, 2014, murder of Silva.
In the second trial, Christopher Ranieri, President of the Salem charter of the Hells Angels, was convicted for his role in hatching the plan to murder Silva, along with Wendt, President of Fresno charter of the Hells Angels, and Nelson, President of the Sonoma charter of the Hells Angels. In 2014, at a motorcycle event in Laconia, New Hampshire, Silva threatened a member of the Salem charter close to Ranieri, which was perceived to be disrespectful to Ranieri, Wendt, and Nelson. The three agreed that Silva had to be killed. On July 15, 2014, Silva was lured to the Fresno Hells Angels clubhouse and shot in the back of the head by Wendt. The next morning, Silva’s body was incinerated at a local crematory and his truck set on fire. Ranieri met with Wendt and others at Ranieri’s home in Lynn, Massachusetts, after the Laconia event, where they decided to kill Silva. Ranieri also met with Wendt and Nelson two days before the murder and was in frequent phone contact with Wendt and Nelson the day before and following Silva’s murder. Ranieri returned to Fresno, California for a party to celebrate the successful killing of Silva afterwards.
Foakes, former President of the Sonoma charter of the Hells Angels, was convicted of assault with a firearm in aid of racketeering, in connection with the multi-hour beating of a former HASC member by Foakes and other HASC members to expel the former member from the enterprise. The former member had an affair with Foakes’ then common law wife, which was a violation of HASC rules. During the expulsion, among other acts of violence, Foakes beat the victim with a baseball bat, forcibly tattooed the victim’s forehead, and induced Nelson to pistol-whip the victim in the face. Foakes was also convicted of witness intimidation, in connection with his sexual assault of the victim’s wife while the victim was still being beaten at the HASC clubhouse and threatening her to comply with his demands and not report to the authorities.
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, to include conspiracy to commit murder, robbery, drug dealing, witness intimidation, obstruction of justice, and arson. Ranieri was found to have understood that murder was a part of the pattern of racketeering activity.
In sum, the jury convicted both Ranieri and Foakes of participating in a racketeer influenced and corrupt organizations (RICO) conspiracy, in violation of 18 U.S.C. § 1962(d). In addition, the jury convicted Foakes of assault with a dangerous weapon in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(2), and witness intimidation, in violation of 18 U.S.C. §1512(b)(1). Further, Ranieri also was convicted of conspiracy to commit murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5).
Ranieri faces a statutory maximum prison term of life. Foakes faces a statutory maximum prison term of 60 years. Further, additional fines, forfeitures, and restitution may be ordered; 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.
Both defendants are in federal custody pending sentencing. Judge Chen has not yet scheduled the defendants’ sentencing hearings.Assistant U.S. Attorneys Lina Peng and Kevin Barry conducted the trial 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.
San Francisco Man Charged with Felony Violations for Firing Gun at U.S. Postal WorkerRead the Press Release
SAN FRANCISCO – A federal grand jury indicted Vo Nguyen, charging him with attempted murder and related crimes in connection with firing a gun at a U.S. Postal Service (USPS) employee who was delivering a package to his residence, announced U.S. Attorney Ismail J. Ramsey and San Francisco Division Postal Inspector in Charge Rafael Nuñez. Nguyen made his initial federal court appearance today before U.S. Magistrate Judge Laurel Beeler.
The indictment, filed May 2, 2023, and unsealed earlier today, alleges that on April 1, 2023, Nguyen used a Sig Sauer 9mm pistol while assaulting and attempting to murder the letter carrier.
According to documents filed by the government in connection with its request to detain Nguyen prior to trial, the government alleges that Nguyen assaulted and attempted to murder a postal worker who was delivering mail to his residence on April 1, 2023. The USPS employee was attempting to deliver mail to a woman outside Nguyen’s residence when Nguyen allegedly came out of the house and started to yell at the USPS worker and aggressively approached him. The USPS employee escaped down the street, but Nguyen allegedly gave chase and caught up. The USPS employee used pepper spray to repel Nguyen. Nguyen returned to his home for a couple of minutes before allegedly leaving and getting into a Toyota Land Cruiser. Nguyen allegedly found the USPS employee on a nearby street and rapidly fired a pistol approximately seven to eight times at the USPS employee. As the USPS employee tried to run away, Nguyen allegedly fired an additional five shots. The government further alleges that the USPS employee took cover behind a parked SUV in a driveway, and Nguyen made a U-turn, drove back up the street, and fired three more shots at the USPS employee before running out of ammunition. Nguyen then allegedly briefly drove away, returned in the Land Cruiser, and attempted to fight the USPS employee. The USPS employee pepper sprayed the defendant again and SFPD arrived shortly after, placing Nguyen under arrest.
The indictment charges with one count of assault on a federal employee with a deadly or dangerous weapon, in violation of 18 U.S.C. §§ 111(a) and (b); one count of attempted murder of an employee of the United States, in violation of 18 U.S.C. § 1114; and one count of using, carrying, and discharging a firearm in connection with a crime of violence, in violation of 18 U.S.C. § 924(c).
The charges presented in an indictment are merely allegations and the defendant is presumed innocent unless proven guilty in a court of law.
The assault with a deadly weapon and attempted murder charges both carry a statutory maximum of 20 years, and the firearm charge carries a minimum 10 years in prison and maximum term of life in prison In addition, as part of any sentence, the court may order a term of supervised release, a fine of up to $250,000 for each count, restitution, and additional assessments. 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.
Nguyen is scheduled to make his next federal court appearance on June 15, 2023, before Judge Orrick.
Assistant U.S. Attorney Kelsey Davidson is prosecuting the case with the assistance of Veronica Hernandez. The prosecution is the result of an investigation by the US Postal Inspection Service and the San Francisco Police Department.
San Jose Man Sentenced to Seven Years for Trafficking MethamphetamineRead the Press Release
OAKLAND – Ramiro Velasco Jr. was sentenced to 84 months in federal prison for distribution of more than 50 grams of methamphetamine, 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 District Judge Yvonne Gonzalez Rogers.
Velasco, 33, a resident of San Jose, pleaded guilty on January 12, 2023. According to his plea agreement, Velasco attended a meeting in October 2020 of the San Jose Grande (SJG). SJG is a Norteño street gang formed in San Jose in the 1990s and comprised of dozens of members operating in San Jose and within custodial facilities, according to the government’s sentencing memorandum.
Velasco described in his plea agreement that he discussed the sale of crystal methamphetamine with a potential buyer who also attended the SJG meeting. Velasco quoted a sales price of approximately $3,000 for a pound, which the buyer found acceptable. Over the next several days, Velasco made phone calls and sent text messages to broker the sale of methamphetamine to the buyer. Once he arranged the deal with a source of supply of the methamphetamine, Velasco advised the buyer, “Don’t trip he is good people, he is my peoples.” The sale that Velasco brokered occurred October 30, 2020, when the source of supply sold almost two pounds of nearly pure methamphetamine to the buyer for $3,200, according to the government’s sentencing memorandum.In addition to the 84 months imprisonment, U.S. District Judge Gonzalez Rogers ordered Velasco to serve four years of supervision following his release from prison. Velasco was in custody at the sentencing hearing and began serving his sentence immediately.
This case is being prosecuted by Assistant U.S. Attorneys Daniel N. Kassabian and Christoffer Lee, with the assistance of Nina Burney and Veronica Hernandez. The prosecution is the result of an investigation by the FBI and the Santa Clara County Violent Gang Task Force, with the assistance of the Santa Clara County District Attorney’s Office, the Santa Clara County Sheriff’s Office, and the San Jose Police Department.
Former Apple Employee Charged with Theft of Trade SecretsRead the Press Release
SAN FRANCISCO – A federal grand jury indicted former Apple Incorporated (Apple) employee Weibao Wang, charging him with theft and attempted theft of trade secrets in connection with a scheme to access, download, and steal Apple technology related to autonomous systems, announced United States Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp.
According to the indictment, Apple hired Wang, 35, formerly of Mountain View, Calif., to work as a software engineer beginning in March of 2016. The indictment describes how Wang signed a confidentiality agreement with Apple. The indictment further states that Apple provided Wang with in-person secrecy training that covered the appropriate handling of confidential material, and established rules prohibiting the transfer and transmission of the company’s intellectual property without Apple’s consent. Wang was assigned to work with a team at Apple that designed and developed hardware and software for autonomous systems, which can have a variety of applications, such as self-driving cars.
“Innovation is alive and well in Silicon Valley—indeed, throughout the Northern District of California,” said U.S. Attorney Ramsey. “Unfortunately, there will always be some who cheat the system by stealing and profiting from the fruits of others’ labor. The Wang prosecution is but one example. We are pleased that the Disruptive Technology Task Force renews energy and focus on securing innovation for those who actually create it.”
“The protection of intellectual property rights is crucial to the economic security of our region, which is home to world-renowned ingenuity and innovation,” said FBI Special Agent in Charge Tripp. “The FBI is committed to working with our law enforcement partners to pursue individuals who cut corners by using deceptive and illegal methods to obstruct law enforcement investigations and benefit themselves.”
According to the indictment, in November of 2017, a little more than two and a half years after being granted access to a range of Apple’s sensitive materials, Wang signed a letter accepting an offer of full-time employment as a Staff Engineer with the U.S.-based subsidiary of a company headquartered in the People’s Republic of China. The parent company is described in the indictment as “COMPANY ONE” and allegedly was working to develop self-driving cars. The indictment alleges Wang waited more than four months after signing the new employment agreement before informing Apple that he was resigning.
After Wang’s last day at Apple on April 16, 2018, Apple representatives reviewed access logs documenting historical activity on Apple’s network. Apple identified Wang as having accessed large amounts of sensitive proprietary and confidential information in the days leading up to his departure from Apple.
The indictment describes the June 27, 2018, search by law enforcement of Wang’s Mountain View residence and the discovery of large quantities of data taken from Apple prior to his departure. Wang was present during the search and told agents he had no plans to travel. Nevertheless, Wang purchased a one-way plane ticket from San Francisco International Airport to Guangzhou, China, and boarded a flight that night. Through subsequent investigation, law enforcement determined that Wang accessed Apple’s proprietary and confidential information after leaving Apple, during the period in which he was employed by the subsidiary of COMPANY ONE.
The indictment describes six categories of trade secrets that Wang allegedly stole, or attempted to steal, and charges him with one count of violating 18 U.S.C. § 1832(a)(1),(2),(3), & (4) for each category as follows:
Count
Date
Item Description
One
On or about August 11, 2016
Entire Autonomy Source Code
Two
On or about April 18, 2018
Tracking for an Autonomous System
Three
On or about April 15, 2018
Behavior Planner for an Autonomous System
Four
On or about April 14, 2018
Architecture Design for an Autonomous System
Five
In or about April 2018
Descriptions of Hardware Systems, Including Architecture, Modules, Power, and Inputs
Six
On or about April 15, 2018
Motion Planner for an Autonomous System
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. Wang faces a maximum statutory sentence of 10 years in prison and a fine in the amount of $250,000 (or twice the gross gain or loss resulting from the scheme) for each count of theft or attempted theft of trade secrets. As part of any sentence following conviction, the court also may order a term of supervised release, fines or other assessments, restitution, and forfeiture, 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 Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California is prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Michael Richard Lynch, Former CEO of Autonomy Corporation, Makes Appearance in Federal Court to Face Conspiracy, Fraud ChargesRead the Press Release
SAN FRANCISCO – Michael Richard Lynch, the former Chief Executive Officer of Autonomy Corporation, was extradited from the United Kingdom to the United States to face charges in the Northern District of California, announced First Assistant United States Attorney Stephanie M. Hinds; 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.
Lynch, 57, a citizen of the United Kingdom, was charged in a 17-count superseding indictment on March, 21, 2019. He made his initial appearance before the Honorable Charles R. Breyer, United States District Judge, who ordered the defendant released to home confinement in San Francisco upon his posting a $100 million bond.
The superseding indictment alleges Lynch and Stephen Chamberlain, Autonomy’s former Vice President of Finance, engaged in a scheme to defraud purchasers and sellers of Autonomy securities, including Palo Alto-based Hewlett-Packard Company (“HP”), about the true performance of Autonomy’s business, its financial condition, and its prospects for growth.
Prior to October 2011, Autonomy was a company with dual headquarters in San Francisco and Cambridge, England. In 2010, about 68% of Autonomy’s reported revenues came from the United States and other countries in the Americas. HP announced on August 18, 2011, it was acquiring Autonomy through a wholly owned subsidiary, Hewlett-Packard Vision B.V.
According to the superseding indictment, between 2009 and 2011, Lynch and Chamberlain, and other co-conspirators, (1) artificially inflated Autonomy’s revenues by backdating written agreements to record revenue in prior periods; recorded revenue on contracts that were subject to side letters or other contingencies that impacted revenue recognition; and improperly recorded revenue for reciprocal or roundtrip transactions; (2) made false and misleading statements to Autonomy’s independent auditor about transactions allegedly supporting the recognition of revenue and other items in Autonomy’s financial statements; (3) made false and misleading statements to market analysts covering Autonomy about Autonomy’s true performance and the nature and composition of its products, revenues and expenses; (4) made false and misleading statements to Autonomy’s regulators in response to inquiries about its financial statements; (5) made false and misleading statements that Autonomy was a so-called “pure software” company while concealing the fact that Autonomy engaged in hidden, loss-making resales of hardware separate from its sale of appliances; (6) made false and misleading statements about Autonomy’s alleged sales of original manufactured equipment or “OEM” licenses; and (7) intimidated, pressured and paid off persons who raised complaints about or openly criticized Autonomy’s financial practices and performance.
As part of the alleged scheme to defraud, Autonomy issued materially false and misleading quarterly and annual financial statements which the defendants allegedly provided to HP during the time that HP was considering whether to purchase Autonomy. The superseding indictment alleges that Lynch and Chamberlain caused Autonomy to make materially false and misleading statements directly to HP regarding Autonomy’s financial condition, performance, and business during the negotiations between HP and Autonomy leading up to the August 18, 2011, announcement by HP to acquire Autonomy for approximately $11 billion.
The superseding indictment further alleges that Lynch and Chamberlain conspired to commit offenses against the United States, the objectives of which were, among other things, to cover up, conceal, influence witnesses to, and otherwise obstruct investigations of the scheme to defraud.
In sum, the superseding indictment charges Lynch and Chamberlain with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; fourteen (14) counts of wire fraud, in violation of 18 U.S.C. § 1343; and one count of conspiracy, in violation of 18 U.S.C. § 371. The superseding indictment charges Lynch with an additional count of securities fraud, in violation of 18 U.S.C. § 1348.
Chamberlain appeared before the Court on February 4, 2019, and has pleaded not guilty to all counts.
The superseding indictment against Lynch and Chamberlain merely alleges that crimes have been committed, and Lynch and Chamberlain are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face a maximum sentence of 20 years in prison, and a fine of $250,000, plus restitution, for each count of wire fraud and for the count alleging conspiracy to commit wire fraud and 5 years on the count of conspiracy in violation of 18 U.S.C. § 371. The maximum penalty for the securities fraud count against Lynch is 25 years in prison. 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. Attorneys Robert S. Leach and Adam A. Reeves are prosecuting the case with the assistance of Beth Margen, Kathy Tat, and Megan Pagaduan. The prosecution is the result of an investigation involving the FBI, IRS-CI, and the United States Securities and Exchange Commission.
The Justice Department’s Office of International Affairs worked with law enforcement partners in the United Kingdom to secure the arrest and extradition of Lynch to the United States.
Chico Resident Charged with Wire Fraud in Scheme to Divert Company Accounts to Personal AccountsRead the Press Release
OAKLAND – A federal grand jury indicted Neil Divers, charging him with wire fraud and money laundering in connection with a scheme to divert tens of thousands of dollars owed to a company he co-owned to bank accounts he created for his personal use, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service – Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian.
Divers, 64, of Chico, Calif., was co-owner of Kodiak, Precision, Inc., a machined component manufacturer located in Richmond, Calif. According to the indictment, owners discovered in 2015 that Divers was taking money from the company without authorization. This revelation led to the development of new controls and procedures to prevent Divers from taking money without authorization from the company again. Although Divers maintained an ownership position with Kodiak, he was removed as a signatory on the company’s accounts. According to the indictment, Divers nevertheless allegedly orchestrated a fraudulent scheme to get around the controls and procedures designed to prevent him from taking money from Kodiak.
The indictment describes certain aspects of Divers’ scheme to defraud. For example, after Divers was removed as a signatory on Kodiak bank accounts, Divers opened additional bank accounts in the name of Kodiak; as part of the set up for the new bank accounts, Divers established himself as the only signatory on the new accounts and created the accounts without the knowledge or consent of the Kodiak’s additional owners. In addition, Divers instructed an employee to have customers deposit funds owed to Kodiak into the new, unauthorized bank accounts. In this way, Diver allegedly diverted funds owed to Kodiak and then used Kodiak funds to maintain his personal lifestyle.
The indictment charges Divers with five counts of wire fraud, in violation of 18 U.S.C. § 1343, and two counts of money laundering, in violation of 18 U.S.C. § 1957.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. Each wire fraud count has a maximum statutory sentence of 20 years in prison and a fine in the amount of $250,000. Each money-laundering count has a maximum statutory sentence of 10 years in prison and a fine in the amount of $250,000. The court also may order a term of supervised release, fines or other assessments, restitution, and forfeiture, 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.
Divers was arrested this morning in Texas and made an initial appearance before Magistrate Judge Hal R. Ray, Jr. Divers’ next appearance is scheduled before Chief Magistrate Judge Donna M. Ryu in Oakland, California on June 1, 2023, for initial appearance in this district.Assistant U.S. Attorney Robert Rees is prosecuting the case with the assistance of Leeya Kekona. The prosecution is the result of an investigation by the IRS-CI.
Massachusetts Man Convicted of Murder for Hire SchemeRead the Press Release
SAN FRANCISCO – A federal jury convicted Allen Gessen of murder for hire after he arranged to pay an undercover FBI agent to murder the mother of his young children, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The verdict follows a one-week trial before the Hon. Jacqueline Scott Corley, U.S. District Judge.
The evidence at trial established that Gessen, 48, of Massachusetts, was an attorney licensed in New York when he was introduced to an undercover FBI agent by a target of a separate FBI investigation into violations of international money laundering. In the summer of 2022, Gessen met with the undercover FBI agent on two occasions, first in Boca Raton, Florida and then again in New York City, New York. During the meetings, Gessen volunteered details of a years-long dispute with his former partner which had resulted in contentious child custody proceedings. At these meetings and through a series of encrypted electronic messages, Gessen initiated plans to commit two different crimes utilizing the undercover FBI agent’s connections. The evidence at trial established that over the course of the investigation, Gessen’s objectives quickly transformed from bribing an immigration official to deport his former partner to hiring someone to murder her.
The trial evidence established that Gessen believed his former partner’s deportation would allow him to have full custody of their two minor children. Gessen initially agreed to pay the undercover FBI agent $100,000 to accomplish the bribery and deportation scheme. Gessen explained he could justify the expenditure because he would pay more in child support if his former partner remained in the United States. However, at the end of that same meeting, Gessen resolved to murder his former partner because it was a “cheaper way to get rid of her” and was a more permanent solution.
The trial evidence established that Gessen agreed to pay $50,000 to have the murder completed. Specifically, he agreed to pay a $25,000 deposit and have the remaining $25,000 be due after her murder. During these discussions, Gessen told the undercover FBI agent that he had previously researched murder for hire and paid $10,000 toward accomplishing the task. Gessen said he paid for a hit team from a foreign country to travel to Massachusetts, conduct reconnaissance, and surveil his former partner. Nevertheless, Gessen explained, after the team completed their reconnaissance, they told Gessen it would cost another $210,000 to commit the murder. Gessen did not continue with that plan because of the cost.
The government established at trial that Gessen finalized the details for the murder for hire plan at the subsequent meeting and gave the undercover FBI agent a gold coin worth approximately $2,000. Shortly thereafter, Gessen wired a total of $23,000 to an FBI undercover bank account in San Francisco, to carry out the murder. Around the same time, Gessen also sent to the undercover FBI agent a written agreement containing a promise to pay for phony “consulting services” as a method to disguise the true nature of the funds. Gessen also provided to the undercover FBI agent a target package containing details about his former partner’s whereabouts, schedule, and lifestyle habits.
A federal grand jury indicted Gessen on July 26, 2022, charging him with one count of murder for hire, in violation of 18 U.S.C. § 1958. The jury convicted Gessen of the charge.
Judge Corley has not yet set a date for Gessen’s sentencing hearing. Gessen faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. However, any sentence will be imposed 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 Corporate and Securities Fraud Section of the U.S. Attorney’s Office. The case is being investigated by the FBI.
Former IRS Revenue Officer, Along with Five Others, Charged in Alleged Multi-Million Dollar COVID-Fraud SchemeRead the Press Release
OAKLAND – The U.S. Attorney’s Office has filed two informations charging six defendants with a variety of crimes in connection with an alleged scheme to obtain millions of dollars by submitting fraudulent loan applications through the U.S. government’s Payroll Protection Program (PPP), announced U.S. Attorney Ismail J. Ramsey, Internal Revenue Service Criminal Investigation Special Agent in Charge Darren Lian, Small Business Administration Office of Inspector General, Western Region Special Agent in Charge Weston King, and Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau, Acting Western Region Special Agent in Charge Cory Nootnagel. All six defendants are scheduled to make their initial federal court appearances next week before U.S. Magistrate Judge Kandis Westmore.
Central to the allegations in the charging documents is the role of Frank Mosley, 58, of Oakland, a former IRS Revenue Officer and current City of Oakland Tax Enforcement Officer. According to the charging documents, Mosley conspired with others to submit fraudulent PPP-loan applications and then, after securing the proceeds from the loans, used his share of the illegally-obtained proceeds for personal investments and expenses. The PPP is administered by the U.S. Small Business Administration as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is a federal law enacted in March 2020 to provide billions of dollars in emergency financial assistance to millions of Americans suffering from the economic effects of the COVID-19 pandemic. The PPP provided forgivable loans to small businesses for job retention and limited other business expenses. According to the informations, the defendants, including Mosely, received approximately $3 million as a result of submitting fraudulent loan applications under the PPP program.
The two informations provide numerous details of the alleged conspiracy. According to the first information, between July of 2020 and September of 2021, Frank Mosely, along with four other defendants—his brother Reginald Mosley (60, of Sacramento), Marcus Wilborn (50, of Elk Grove), Aaron Boren (56, of Roseville), and Scott Conway (52, of Rocklin)—submitted fraudulent documents on behalf of four entities. Although each of the companies’ PPP loan applications certified that each company had between 19 and 49 employees and approximately $150,000 to $430,000 in monthly payroll, in reality, all four companies were little more than shell companies, with no payroll expenses. In addition, upon receipt of the PPP loan proceeds, the defendants allegedly did not use the funds for any legitimate business expenses, such as to pay employees. Rather, they used the funds for significant personal expenses, personal credit cards, personal investments, and distributions to their family members.
The first information further alleges that in August of 2020, Frank Mosley and Reginald Mosley submitted the first successful loan application on behalf of an entity they controlled called Forward Thinking Investors, Inc. After receiving over $1 million in fraudulently obtained funds in the first transaction, Reginald Mosley allegedly recruited acquaintances— including Wilborn, Boren, and Conway— who owned companies that existed prior to February 2020 to submit additional fraudulent loan applications. As part of the scheme, Frank and Reginald Mosley helped prepare the fraudulent loan applications for Wilborn, Boren, and Conway, who then funneled portions of the fraudulently-obtained funds back to Frank and Reginald Mosley. In fact, Frank and Reginald Mosley reduced their illegal agreement to writing, circulating via email a written contract laying out the amount they would receive for helping prepare and submit the fraudulent loan applications. Specifically, Frank and Reginald Mosley demanded a kickback of at least 15% of the fraudulently obtained proceeds for loans submitted by each of the other three co-conspirators. After obtaining the fraudulent loan proceeds, Frank and Reginald Mosley filed fraudulent payroll tax returns with the IRS in an attempt to cover up their scheme.
The second information describes how the sixth defendant, Kenya Ellis, 55, of Los Angeles, allegedly aided and advised Frank Mosley, Reginald Mosley, and others, in submitting fraudulent PPP loans on behalf of their own companies. In addition, the second information describes how in 2020 and 2021, Ellis allegedly obtained more than $296,000 in PPP and other COVID-related loans on behalf of an entity called Global Processor, Inc. (GPI). Specifically, the information alleges Ellis falsely represented in her loan applications that she was the owner of GPI. In fact, however, Ellis had no legitimate relationship with GPI and the true owner of GPI had no awareness of, nor involvement in, the preparation and submission of the loan applications. The applications Ellis submitted also made false statements about GPI’s monthly payroll and number of employees.
The charges presented in the informations are merely allegations and the defendants are presumed innocent unless proven guilty in a court of law.
Frank Mosley, Reginald Mosley, Wilborn, Boren, and Conway are charged with conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349, which carries a maximum sentence of 30 years in prison. Frank and Reginald Mosley are also charged with aiding and advising in the filing of false tax returns in violation of 26 U.S.C. § 7201(2), which carries a maximum sentence of three years in prison. Ellis is charged in a separate case with bank fraud in violation of 18 U.S.C. § 1344, which carries a maximum sentence of 30 years in prison. In addition to a prison sentence, the court can order the defendants to pay restitution, to serve an additional period of supervised release and to pay additional assessments. 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 defendants are scheduled to make their initial federal court appearances before Magistrate Judge Westmore on the following dates:
Defendant Date of Initial Appearance May 15 Conway May 16 Ellis May 18 Frank Mosley, Reggie Mosley, and Boren May 23 WilbornAssistant U.S. Attorney Abraham Fine is prosecuting the case with the assistance of Kay Konopaske. The prosecution is the result of an investigation by the Internal Revenue Service Criminal Investigations, the Office of Inspector General for the Small Business Administration, and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
U.K. Citizen Extradited and Pleads Guilty to Cyber Crime OffensesRead the Press Release
A U.K. citizen pleaded guilty today in New York to his role in cyberstalking and multiple schemes that involve computer hacking, including the July 2020 hack of Twitter.
Joseph James O’Connor, aka PlugwalkJoe, 23, was extradited from Spain on April 26.
“O’Connor’s criminal activities were flagrant and malicious, and his conduct impacted multiple people’s lives. He harassed, threatened, and extorted his victims, causing substantial emotional harm,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “Like many criminal actors, O’Connor tried to stay anonymous by using a computer to hide behind stealth accounts and aliases from outside the United States. But this plea shows that our investigators and prosecutors will identify, locate, and bring to justice such criminals to ensure they face the consequences for their crimes.”
“O’Connor has left an impressive trail of destruction in the wake of his wave of criminality,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “This case serves as a warning that the reach of the law is long, and criminals anywhere who use computers to commit crimes may end up facing the consequences of their actions in places they did not anticipate.”
“O’Connor used his sophisticated technological abilities for malicious purposes – conducting a complex SIM swap attack to steal large amounts of cryptocurrency, hacking Twitter, conducting computer intrusions to take over social media accounts, and even cyberstalking two victims, including a minor victim,” said U.S. Attorney Damian Williams for the Southern District of New York. “O’Connor’s guilty plea today is a testament to the importance of law enforcement cooperation, and I thank our law enforcement partners for helping to bring to justice those who victimize others through cyber-attacks.”
“Today’s guilty plea is confirmation that the FBI’s strategy to counter cyber crime is working. It’s also indicative of what can be accomplished when we work closely with our partners to bring these perpetrators to justice and make the cyber ecosystem more secure,” said Assistant Director Bryan Vorndran of the FBI’s Cyber Division. “O'Connor's extradition is as a warning to all dangerous cyber criminals that the FBI will work tirelessly to find them and hold them accountable wherever in the world they may try to hide.”
NDCA Case
According to court documents, 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 Inc. (Twitter). In early July 2020, O’Connor’s co-conspirators used social engineering techniques to obtain unauthorized access to administrative tools used by Twitter to maintain its operations. The 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 co-conspirators 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 also targeted another public figure (Victim-2) in June 2019. O’Connor and his co-conspirators 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 co-conspirators. O’Connor and his co-conspirators 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’s 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 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 SDNY pursuant to Federal Rule of Criminal Procedure 20 and consolidated with the SDNY Case.
SDNY Case
According to court documents, between approximately March 2019 and May 2019, O’Connor and his co-conspirators perpetrated a scheme to use subscriber identity module (SIM) swaps, a cyber intrusion technique, to conduct cyber intrusions to steal approximately $794,000 worth of cryptocurrency from a Manhattan-based cryptocurrency company (Company-1), which provided wallet infrastructure and related software to cryptocurrency exchanges around the world.
During a 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.
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 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.
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.
As part of the NDCA Case, O’Connor pleaded guilty to conspiracy to commit computer intrusion and two counts of committing computer intrusions, each of which carries a maximum penalty of five years in prison; making extortive communications, which carries a maximum penalty of two years in prison; two counts of stalking, each of which carries a maximum penalty of five years in prison; and making threatening communications, which carries a maximum penalty of five years in prison. As part of the SDNY case, O’Connor pleaded guilty to conspiracy to commit computer intrusions, which carries a maximum penalty of five years in prison; conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison; and conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison. O’Connor also agreed to forfeit $794,012.64 and to make restitution to victims of his crimes. He is scheduled to be sentenced on June 23. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI is investigating the case.
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.
U.K. Citizen Extradited and Pleads Guilty to Cyber Crime OffensesRead the Press Release
United States Attorney Ismail J. Ramsey for the Northern District of California, United States Attorney Damian Williams for the Southern District of New York, and Assistant Attorney General Kenneth A. Polite, Jr., for the Department of Justice’s Criminal Division announced today that Joseph James O’Connor, a/k/a “PlugwalkJoe,” a U.K. citizen, was extradited from Spain and entered a plea of guilty to two sets of charges involving crimes perpetrated in New York and California.
O’Connor was extradited from Spain on April 26, 2023, and pleaded guilty earlier today to two sets of charges: (i) a set of charges filed in the Northern District of California, and transferred to the SDNY under Federal Rule of Criminal Procedure 20, relating to O’Connor’s role in the July 2020 hack of Twitter, computer intrusions related to takeovers of TikTok and Snapchat user accounts, and cyberstalking two separate victims (the “NDCA Case”) and (ii) a 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 approximately $794,000 worth of cryptocurrency from a Manhattan-based cryptocurrency company and then to launder the proceeds of the scheme (the “SDNY Case”). Hon. Jed S. Rakoff, U.S. District Judge. accepted the guilty pleas.
“O’Connor has left an impressive trail of destruction in the wake of his wave of criminality,” said U.S. Attorney Ramsey. “This case serves as a warning that the reach of the law is long, and criminals anywhere who use computers to commit crimes may end up facing the consequences of their actions in places they did not anticipate.”
U.S. Attorney Damian Williams said: “Joseph O’Connor, a/k/a “PlugwalkJoe,” used his sophisticated technological abilities for malicious purposes – conducting a complex SIM swap attack to steal large amounts of cryptocurrency, hacking Twitter, conducting computer intrusions to take over social media accounts, and even cyberstalking two victims, including a minor victim. O’Connor’s guilty plea today is a testament to the importance of law enforcement cooperation, and I thank our law enforcement partners for helping to bring to justice those who victimize others through cyber-attacks.”
“O’Connor’s criminal activities were flagrant and malicious, and his conduct impacted multiple people’s lives. He harassed, threatened, and extorted his victims, causing substantial emotional harm,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “Like many criminal actors, O’Connor tried to stay anonymous by using a computer to hide behind stealth accounts and aliases from outside the United States. But this plea shows that our investigators and prosecutors will identify, locate, and bring to justice such criminals to ensure they face the consequences for their crimes.”
"O’Connor tried to use international borders and the anonymity of the internet to keep himself safe while engaging in hacking and cyberstalking,” said FBI Special Agent in Charge of the San Francisco Division Robert K. Tripp. “He learned about the tenacity of the FBI to identify and locate cybercriminals, and the power of law enforcement partnerships here and across the world to hold those people accountable."
According to the allegations in the publicly filed charging documents, court filings, and statements made in court, between 2019 and 2020, O’Connor, 23, of the United Kingdom, participated in a variety of crimes associated with exploitation of social media accounts, online extortion, and cyberstalking:
The NDCA Case
In July 2020, O’Connor participated in a conspiracy to gain unauthorized access to social media accounts maintained by Twitter, Inc. (“Twitter”). In early July 2020, O’Connor’s 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’s online persona, among other things.
Additionally, 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 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 Judge Rakoff.
The SDNY Case
Between approximately March 2019 and May 2019, O’Connor and his co-conspirators perpetrated a scheme to use SIM swaps to conduct cyber intrusions to steal approximately $794,000 worth 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.
During a cyber intrusion known as a SIM swap attack, cyber threat actors gain control of a victim’s mobile phone number by linking that number to a subscriber identity module (“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.
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.
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.
* * *
As part of the NDCA Case, O’Connor pleaded guilty to conspiracy to commit computer intrusion and two counts of committing computer intrusions, each of which carries a maximum penalty of five years in prison; making extortive communications, which carries a maximum penalty of two years in prison; two counts of stalking, each of which carries a maximum penalty of five years in prison; and making threatening communications, which carries a maximum penalty of five years in prison. As part of the SDNY case, O’Connor pleaded guilty to conspiracy to commit computer intrusions, which carries a maximum penalty of five years in prison; conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison; and conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison. O’Connor also agreed to forfeit $794,012.64 and to make restitution to victims of his crimes. He is scheduled to be sentenced on June 23. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
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.Justice Department Strengthens Efforts to Address the Crisis of Missing or Murdered Indigenous PersonsRead the Press Release
SAN FRANCISCO -- The Justice Department joins its partners across the federal government, as well as people throughout American Indian and Alaska Native communities, in recognizing May 5, 2023 as National Missing or Murdered Indigenous Persons Awareness Day. Responding to the unacceptable levels of violence that have led to the crisis of Missing or Murdered Indigenous Persons (MMIP) is a priority of the Department of Justice every day.
The department’s work to respond to the MMIP crisis is a whole-of-department effort that takes many forms. One year ago today, Deputy Attorney General Lisa Monaco joined Secretary of the Interior Deb Haaland to launch the Not Invisible Act Commission, a joint Commission established by the Not Invisible Act with an essential mission — to reduce violence against American Indians and Alaska Natives. In February, they welcomed the first in-person plenary meeting of the Not Invisible Act Commission. Since then, the department’s representatives on the commission—who are department leaders and subject matter experts—have participated in the Commission’s field hearings, which will continue through the summer. Later this year, the Commission will deliver recommendations for addressing the MMIP crisis to the Attorney General and the Secretary. In addition to supporting the Not Invisible Act Commission, the department remains steadfast in its commitment to addressing the MMIP crisis.
“The Justice Department is marshalling the full strength of its resources to confront the crisis of Missing or Murdered Indigenous Persons, which has devastated the lives of victims, their families, and entire Tribal communities,” said Attorney General Merrick B. Garland. “Addressing this crisis requires a whole-of-government approach, and we are grateful for the partnership of Tribal and other law enforcement agencies across the nation that are working alongside the Justice Department to help reduce crime and support victims in American Indian and Alaska Native communities.”
“Missing or Murdered Indigenous Persons Awareness Day calls on our nation to pause and honor the loved ones who have gone missing or who have been the victims of violent crime,” said Deputy Attorney General Lisa O. Monaco. “Acknowledging the many American Indian and Alaska Native people who have suffered, and continue to suffer, from the pain of a missing loved one or of violent crime serves as an important reminder of the urgency and importance of the department’s work to respond to the crisis of missing or murdered indigenous persons. The Justice Department—including our dedicated agents, analysts, and prosecutors—remains steadfast in our pledge to work as partners with Tribal governments in preventing and responding to the violence that has disproportionately harmed Tribal communities.”
“The Justice Department is committed to using every resource at its disposal to combat the Missing or Murdered Indigenous Persons Crisis,” said Associate Attorney General Vanita Gupta. “In addition to our core law-enforcement work, we are providing grant funding and guidance to help Tribes develop response plans for missing-persons cases, partner effectively with local law enforcement, and provide resources for victims of crime.”
“We are 100% committed to bringing the resources of the Department of Justice to bear in response to the crisis of missing or murdered indigenous persons,” said U.S. Attorney Ismail Ramsey for the Northern District of California. “We are engaged with our federal law enforcement partners, Tribal leadership, and the leadership of the Department to ensure an effective and coordinated approach to preventing and addressing violent crime in the District’s Tribal communities.”
Department Prioritization of MMIP Cases
In July 2022, Deputy Attorney General Monaco issued a memorandum reiterating that it is a priority of the Department of Justice to address the disproportionately high rates of violence experienced by American Indians and Alaska Natives, and relatedly, the high rates of indigenous persons reported missing. The memorandum directed each United States Attorney with Indian country jurisdiction — along with their law enforcement partners at DOJ — to update and develop new plans for addressing public safety in Indian country.
The Northern District of California is home to 33 recognized tribes. Last October, the Northern District of California was home to the First Annual Northern California Tribal Policy Summit on Missing and Murdered Indigenous People, hosted by the Yurok Tribe. Since the meeting, the attorneys and leadership of the U.S. Attorney’s Office for the Northern District of California has updated relevant policies, strengthened ties with tribal leaders, and made progress on individual open cases. For example, NDCA attorneys have updated the District’s internal operating plans to include Savanna’s Act Section 5(a) Guidelines and Resource Materials for Responding to Cases of Missing and Murdered American Indians. In addition, the USAO leadership sits on the Native American Issues Subcommittee of the Attorney General’s Advisory Committee—this subcommittee met in April in Cherokee, North Carolina, to propose updates to MMIP policy, including staffing of federal law enforcement investigating cases of missing and murdered indigenous people. Further, recent meetings and conferences coordinated with tribal leadership and federal law enforcement have focused attention on specific cases as well as the broader need to increase awareness of missing and murdered indigenous people. This effort has financial backing as nine tribes in the Northern District of California were awarded sixteen grants totaling $10,273,040 in funding. Nationwide, these grants were awarded to American Indian tribes, Alaska Native villages, and other tribal designees through the Coordinated Tribal Assistance Solicitation (CTAS). The CTAS is a streamlined application for tribal-specific grant programs.
Publication of Updated Attorney General Guidelines for Victim and Witness Assistance
In October 2022, Attorney General Merrick B. Garland issued revised Attorney General Guidelines for Victim and Witness Assistance. The revised guidelines, which was updated for the first time in a decade, address when and how department employees work with victims and witnesses of crime to ensure that their voices are heard and that they are protected during criminal justice proceedings. For the first time the guidelines include cultural and linguistic considerations for victims from American Indian and Alaska Native communities.
National Native American Outreach Services Liaison
Last year, the department announced the creation of a new National Native American Outreach Services Liaison. Since that announcement, the Liaison has begun to help amplify the voice of crime victims in Indian country and their families across the department as they navigate the federal criminal justice system. In the coming months, the Liaison will meet with survivors and family members of MMIP to learn more about the current challenges in MMIP cases and to make recommendations about the department’s continued response.
Federal Law Enforcement Strategy to Prevent and Respond to the MMIP Crisis
In July 2022, the Department of Justice and the Department of the Interior submitted a report pursuant to Sections 2 and 4(a) of Executive Order 14053, which called for “coordinated and comprehensive Federal law enforcement strategy to prevent and respond to violence against Native Americans, including to address missing or murdered indigenous people where the federal government has jurisdiction.” The report was published late last year and is available on the department website here.
Guide for Tribal Community Response Plans for Missing Persons Cases
In December 2022, the department published a Guide to Developing a Tribal Community Response Plan for Missing Persons Cases. This Guide is a resource for Tribes interested in developing a plan to respond to missing person cases that is tailored to the specific needs, resources, and culture of Tribal communities.
Launch of the COPS Office Tribal MOU/MOA Resource Library
On Monday of this week, the department’s Office of Community Oriented Policing Services (COPS) published its Tribal Memorandum of Understanding (MOU)/Memorandum of Agreement (MOA) Sample Resource Library. This library provides users with the resources to research and successfully draft agreements that will help agencies develop and solidify partnerships to address missing or murdered Indigenous persons cases.
Expanded Scope of the Tribal Victim Services Set-Aside Grant Program
The department’s Office for Victims of Crime (OVC) expanded the scope of allowable activities under its Tribal Victim Services Set-Aside (TVSSA) grant program to permit Tribal communities to pay for costs related to generating awareness of individual missing persons cases involving American Indians and Alaska Native persons, supporting private search efforts for missing American Indians and Alaska Native persons in certain circumstances, and supporting efforts to coordinate the Tribal, state, and federal response to MMIP cases.
Government-to-Government Tribal Consultation on Violence Against Women
In September 2022, the department’s Office of Violence Against Women (OVW) held the 17th Annual OVW Government-to Government Tribal Consultation on Violence Against Women in Anchorage, Alaska. OVW is responsible for conducting annual government-to-government consultations with the leaders of all Federally recognized Indian Tribal governments on behalf of the Attorney General. The 2022 Tribal consultation report is available here.
National Institute of Justice Study of MMIP Cases in New Mexico
Last year, the department’s National Institute of Justice (NIJ) funded a study that will provide vital information regarding the prevalence and context of cases of MMIP in New Mexico and, importantly, will inform long-term data collection, analysis, and reporting strategies on MMIP cases. These improvements will support data-driven decision-making regarding MMIP in New Mexico moving forward.
Additional Department of Justice Resources
For additional information about the Department of Justice’s efforts to address the MMIP crisis, please visit the Missing or Murdered Indigenous Persons section of the Tribal Safety and Justice website.
Click here for more information about reporting or identifying missing persons.
Former Chief Security Officer of Uber Sentenced to Three Years’ Probation for Covering up Data Breach Involving Millions of Uber User RecordsRead the Press Release
SAN FRANCISCO – Joseph Sullivan was sentenced to serve a three-year term of probation and ordered to pay a fine of $50,000, announced First Assistant United States Attorney Stephanie M. Hinds and FBI San Francisco Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. William H. Orrick, United States District Judge, after a jury found Sullivan guilty of two felonies in October 2022.
Sullivan, 54, from Palo Alto in Santa Clara County, previously served as the Chief Security Officer for Uber Technologies, Inc. (“Uber”). The evidence at trial established that while Sullivan was serving in that role, Uber was under investigation by the Federal Trade Commission (“FTC”) as a result of a data breach Uber had suffered in 2014. The FTC’s Division of Privacy and Identity Protection, which is charged with overseeing issues related to consumer privacy and information security, among other things, ultimately investigated both the nature and circumstances of that 2014 data breach and Uber’s broader cybersecurity program. Sullivan was hired soon after the FTC investigation launched, and he participated in Uber’s response to that investigation, including its efforts to comply with investigative demands issued by the FTC. Among other things, Sullivan participated in a presentation to the FTC in March 2016 regarding Uber’s cybersecurity program, and he testified under oath in November 2016.
As established at trial, ten days after his sworn FTC testimony, Sullivan learned that Uber had been hacked again. Furthermore, the hackers had exploited the same vulnerability that had led to the 2014 breach. Unlike the 2014 breach, however, the data stolen in 2016 was massive in scale and included records associated with approximately 57 million Uber users and drivers. Despite having testified regarding that same security vulnerability and related issues ten days prior, Sullivan executed a scheme to prevent any knowledge of the breach from reaching the FTC. For example, Sullivan told a subordinate that they “can’t let this get out” and stated that the breach would “play very badly based on previous assertions” to the FTC. He also arranged to pay off the hackers in exchange for them signing non-disclosure agreements in which the hackers promised not to reveal the hack to anyone. Those contracts, drafted by Sullivan and a lawyer assigned to his team, falsely represented that the hackers did not take or store any data in their hack. Thereafter, Sullivan continued to work with the Uber lawyers handling or overseeing the FTC investigation, including the General Counsel of Uber, but he withheld information about the breach from all of them. Uber ultimately entered into a preliminary settlement with the FTC in summer 2016 without disclosing the 2016 data breach to the FTC. As part of the negotiations, Sullivan learned that the FTC was relying on false information previously provided by Uber, but he failed to alert any of Uber’s lawyers or the FTC.
In Fall 2017, Uber’s new management began investigating facts surrounding the 2016 data breach. When asked by Uber’s new CEO what had happened, Sullivan lied about the circumstances of the breach, including by telling the CEO that the hackers did not steal any data. Sullivan lied again to Uber’s outside lawyers who were conducting an investigation into the incident. Nonetheless, the truth about the breach was ultimately discovered by Uber’s new management, which disclosed the breach publicly, and to the FTC, in November 2017.
Assistant U.S. Attorneys Andrew F. Dawson and Benjamin Kingsley are prosecuting the case, with the assistance of Patricia Mahoney and Nina Burney. The prosecution is the result of an investigation by the FBI.
Former San Francisco Garbage Company Executive Pleads Guilty to Honest Services Fraud ConspiracyRead the Press Release
SAN FRANCISCO – John Francis Porter pleaded guilty today in U.S. District Court in San Francisco to conspiring to commit honest services mail and wire fraud, admitting that he participated in a scheme with another Recology executive to bribe the former head of the San Francisco Department of Public Works, Mohammed Nuru, announced the United States Attorney’s Office, FBI Special Agent in Charge Robert K. Tripp, and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The guilty plea was accepted by the Honorable William H. Orrick, United States District Court.
Porter, 39, is the former Vice President and Group Manager of the SF Recology Group. According to his plea agreement, Porter admitted that he conspired with another former Recology executive and others to pay bribes to influence Nuru. The bribes included $55,000 in payments for holiday parties Nuru hosted for friends, political supporters, and select DPW employees, from October 2017 through January 2020.
According to Porter’s admissions in the plea agreement, the payments were concealed as “holiday donations” to a non-profit, the Lefty O’Doul’s Foundation for Kids, a charity established to provide access to baseball and baseball equipment for under-privileged children. Porter admitted in his plea agreement that he knew the funds were not being used for that purpose, but instead were made at the request of Nuru and used for his holiday parties.
Porter admitted that the bribes were made to influence Nuru to take official action and exercise influence in Recology’s favor, including making official decisions in his role at DPW that would benefit Recology’s business.
On November 29, 2022, a federal grand jury returned a superseding indictment, charging Porter with one count of conspiracy to commit honest services mail and wire fraud, in violation of 18 U.S.C. § 1349, two counts of honest services wire fraud in violation of 18 U.S.C. §§ 1346 and 1343, one count of honest services mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346, one count of conspiracy to commit bribery in violation of 18 U.S.C. § 371, and one count of bribery of a local official, in violation of 18 U.S.C. §§ 666(a)(2) and 2. Pursuant to today’s guilty plea, Porter pleaded guilty to the conspiracy to commit honest services wire and mail fraud count. If Porter complies with the plea agreement, the additional counts will be dismissed at sentencing.
Judge Orrick scheduled Porter’s sentencing for September 7, 2023. Porter faces a maximum statutory penalty of 20 years in prison and a fine of $250,000. In addition, as part of any sentence, a court may order up to three years of supervised release, restitution, forfeiture, and additional assessments, 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.
Porter is the second Recology executive to plead guilty. In July 2021, Paul F. Giusti, a former Government & Community Relations Manager with Recology, pleaded guilty to one count of conspiracy to bribe a local official and to commit honest services fraud, admitting to participating in a conspiracy to bribe Nuru. Giusti has not yet been sentenced.
Nuru was charged in January 2020 with a long-running honest services fraud scheme. On January 6, 2022, Nuru pled guilty to honest services wire fraud, and on August 25, 2022 was sentenced to 84 months in federal prison.
In September 2021, three subsidiaries of Recology that serve San Francisco have entered a deferred prosecution agreement related to the charge of conspiracy to commit honest services fraud and have agreed to pay $36 million in criminal penalties.
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 Ilham Hosseini are prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation (FBI) and the Internal Revenue Service-Criminal Investigation (IRS-CI).
East Bay Man Charged with Running $39 Million Ponzi SchemeRead the Press Release
SAN FRANCISCO – A federal grand jury indicted Derek Vincent Chu, charging him with crimes related to an alleged $39 million Ponzi scheme involving over 100 victims, on April 26, 2023, announced United States Attorney Ismail J. Ramsey, Internal Revenue Service – Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian, and FBI Special Agent in Charge Robert K. Tripp.
According to the indictment, between late 2013 and 2020, Chu, 41, of Alamo, Calif., used several companies to raise $39 million by fraudulently soliciting investments in the purchase and resale of professional basketball tickets and luxury suites at Oracle Arena, in Oakland, California; the Staples Center, in Los Angeles, California; and the Chase Center, in San Francisco, California. The indictment further alleges that Chu induced investors by making numerous materially false misrepresentations, including how the investor funds would be used, how investors would be repaid, and whether the investments were secured by collateral.
According to the allegations in the indictment, Chu commingled the investors’ money between his own personal accounts and his companies’ accounts, which resulted in investor money being used to repay other, earlier investors, and for other unrelated expenses. Furthermore, the indictment alleges that Chu misappropriated and diverted more than $7.3 million of investor funds for his own personal benefit, which included paying credit card debts; making cash withdrawals; paying for travel, luxury automobile and jewelry purchases; and paying utilities bills, among other things.
The indictment charges Chu with eight counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2, and three counts of money laundering, in violation of 18 U.S.C. §§ 1957 and 2.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. Each wire fraud count has a maximum statutory sentence of 20 years in prison and a fine in the amount of $250,000. Each money-laundering count has a maximum statutory sentence of 10 years in prison and a fine in the amount of $250,000. The court also may order a term of supervised release, fines or other assessments, restitution, and forfeiture, 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.
Chu was arrested this morning and made an initial appearance before the Hon. Laurel Beeler, U.S. Magistrate Judge for the Northern District of California. Chu’s next appearance is scheduled before Judge Beeler on Wednesday, May 10, 2023, for appearance of counsel.The Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, and the San Francisco Police Department.
Individuals who believe that they may be a victim in this case should contact the United States Attorney’s Office for the Northern District of California’s victim specialists by email at: [email protected].
Supervisor Charged with Aggravated Sexual Abuse of Subordinate at Palo Alto VA HospitalRead the Press Release
SAN JOSE – Onofre Salas-Lozano appeared in federal court today to face an indictment charging him with aggravated sexual abuse, sexual abuse, and making false statements to a federal agent during an investigation, announced United States Attorney Ismail J. Ramsey and Special Agent in Charge Jason Root of the Department of Veterans Affairs Office of the Inspector General (VA OIG).
During today’s appearance in federal court, the government described that Salas-Lozano, 40, of Palo Alto, and the victim both worked for a janitorial services company that cleans the Palo Alto VA Hospital. The indictment charges that Salas-Lozano used force and fear to cause the victim to engage in a sex act at the hospital on July 2, 2021. At the time of the incident, Salas-Lozano was the victim’s direct supervisor. Salas-Lozano is also charged with lying to a VA OIG special agent during a subsequent investigative interview by claiming he never had sexual intercourse with the victim.
The charges contained in the indictment are only allegations, and the defendant is presumed innocent unless and until proven guilty in a court of law. Salas-Lozano is charged in the indictment’s first count with aggravated sexual abuse in violation of 18 U.S.C. § 2241(a), which carries a maximum penalty of life imprisonment. The second count in the indictment charges him with sexual abuse in violation of 18 U.S.C. § 2242(1), which also carries a maximum penalty of life imprisonment. The third and last count in the indictment charges Salas-Lozano with making a materially false statement in a federal investigation, which carries a maximum penalty of eight years in prison. However, any sentence following a 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.
Salas-Lozano was arraigned in San Jose federal court today before United States Magistrate Judge Nathanael M. Cousins. The government moved for detention and Salas-Lozano’s detention hearing is scheduled for May 3, 2023, at 1:00 p.m. before United States Magistrate Judge Susan van Keulen. Salas-Lozano was ordered detained until then.
Assistant U.S. Attorney Marissa Harris is prosecuting the case, with the assistance of Sahib Kaur. The prosecution is the result of an investigation by VA OIG, with assistance from VA Police.
Silicon Valley Start-Up Founder Pleads Guilty to Securities Fraud for Overstating Revenue to InvestorsRead the Press Release
SAN FRANCISCO – Manish Lachwani pleaded guilty in federal court in San Francisco today to wire fraud and securities fraud charges in connection with his scheme to dupe potential investors into supporting the technology start-up he founded and led, announced United States Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp. The guilty pleas were accepted by U.S. District Judge Charles R. Breyer.
Lachwani, 47, of Los Altos, Calif., founded Silicon Valley-based HeadSpin, a company that provided clients with software tools and access to devices to test mobile applications. Lachwani founded the company in 2015 and served as its Chief Executive Officer until May 2020. Between April 2017 and April 2020, HeadSpin raised more than $100 million from investors over multiple rounds of fundraising, leading to a valuation of approximately $1.1 billion. According to his plea agreement, Lachwani admitted that he disseminated false and overstated revenue metrics to potential investors to lure investments into his company.
The plea agreement provides several details of the fraud. Lachwani acknowledged that while HeadSpin was raising money, he provided to prospective investors information about the company’s business, customers, revenue, and finances. Further, because HeadSpin was a software-as-a-service company, Lachwani knew that annual recurring revenue, known as “ARR,” was significant to investors and their decisions whether to invest in HeadSpin. According to the plea agreement, Lachwani admitted that he provided prospective investors with inflated ARR numbers and overstated revenue numbers. With respect to these metrics, Lachwani included amounts from potential customers that had not agreed to pay subscription fees to HeadSpin, amounts that were more than real customers had agreed to pay, and amounts from customers that had stopped using and paying for HeadSpin’s services. Lachwani maintained and controlled an ARR spreadsheet that contained this false information and which he shared with potential investors. In 2018, in connection with a round of fundraising, Lachwani sent a slide deck to investors that stated HeadSpin’s ARR was more than $33 million as of the second quarter of 2018, though Lachwani knew the company’s ARR was far less. In 2019, during another round of fundraising, Lachwani again provided information to investors that overstated ARR, this time stating that HeadSpin’s ARR was $54 million when, in fact, it was far less.
Similarly, with respect to revenues, Lachwani sent invoices to HeadSpin’s accountant that Lachwani knew were altered to show amounts not actually invoiced to clients. HeadSpin investors received financial statements that were impacted by the altered invoices.
On August 4, 2022, a federal grand jury handed down a superseding indictment that charged Lachwani with 11 counts of wire fraud in violation of 18 U.S.C. § 1343, one count of money laundering in violation of 18 U.S.C. § 1957, and four counts of securities fraud in violation of 15 U.S.C. § 78j(b) and 78ff and 17 C.F.R. § 240.10b-5. Pursuant to the plea agreement, Lachwani pleaded guilty to two counts of wire fraud and one count of securities fraud. If Lachwani complies with the plea agreement, the remaining counts will be dismissed at sentencing.
Lachwani is currently released on bond.
U.S. District Judge Breyer scheduled Lachwani’s sentencing hearing for September 27, 2023, at 10:00 a.m. The maximum statutory penalty for each count of wire fraud is 20 years in prison and a fine of $250,000. The maximum statutory penalty for securities fraud is 20 years in prison and a fine of $5 million, plus restitution if appropriate. In addition, as part of the sentence Lachwani may be ordered to pay additional fines and to serve an additional term of supervised release after any prison sentence. 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.
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 Lloyd Farnham, Noah Stern, and Ross Weingarten are prosecuting the case with the assistance of Elizabeth Kim and Pat Mahoney. The prosecution is the result of an investigation by the FBI. The U.S. Attorney’s Office and the FBI thank the San Francisco Regional Office of the Securities and Exchange Commission (SEC). An SEC civil enforcement action is currently pending against Lachwani in the Northern District of California.
Former Apple Employee Sentenced to Prison for Conspiracy to Defraud Apple and Tax CrimesRead the Press Release
SAN JOSE – Dhirendra Prasad was sentenced to serve three years in prison and ordered to pay $19,270,683 in restitution for conspiring to defraud Apple, Inc., of millions of dollars and for related tax crimes, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The sentence was handed down by the Hon. Beth L. Freeman, United States District Judge.
Prasad, 55, from Mountain House in San Joaquin County, was previously charged by Information with one count of conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. § 1349 (Count One); two counts of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Counts Two and Three); one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371 (Count Four); and one count of tax evasion, in violation of 26 U.S.C. § 7201 (Count Five). Prasad pleaded guilty to the first and fourth count on November 2, 2022. The remaining counts were dismissed at sentencing.
The criminal conduct in this case centered around Prasad’s employment at Apple from December 2008 through December 2018. For most of that time, he was a “buyer” in Apple’s Global Service Supply Chain. It was Prasad’s job as an Apple buyer to facilitate the process through which Apple bought parts to perform warranty repairs on older devices. Prasad exploited his position and conspired with two separate Apple vendors to defraud Apple by taking kickbacks, stealing parts, inflating invoices, and causing Apple to pay for items and services it never received – resulting in a loss to Apple of more than $17,000,000. In addition to engaging in two separate criminal conspiracies with Apple vendors, Prasad also acknowledged that he evaded tax on the proceeds of his schemes.
According to the government’s sentencing memorandum, by virtue of his position at Apple Prasad was given substantial discretion to make autonomous decisions to benefit his employer. Prasad betrayed this trust, and abused his power to enrich himself at his employer’s expense – all while accepting hundreds-of-thousands of dollars’ worth of compensation from Apple in the form of salary and bonuses. Additionally, Prasad used his insider information regarding the company’s fraud-detection techniques to design his criminal schemes to avoid detection.
In addition to the three-year prison sentence, Judge Freeman ordered Prasad to forfeit over $5,491,713 worth of assets—that already have been seized by the government—and to pay an additional forfeiture money judgment in the amount of $8,133,005. Judge Freeman also entered an order of restitution, requiring Prasad to pay $17,398,104 to Apple and $1,872,579 to the IRS, and also ordered Prasad to serve three years of supervised release, to begin after the prison term.
Assistant United States Attorneys Michael G. Pitman and Karen Beausey are prosecuting the case. The prosecution was the result of an investigation led by the Internal Revenue Service, Criminal Investigation.Fremont Business Owner Pleads Guilty to Crimes in Scheme to Avoid Millions of Dollars in Income TaxesRead the Press Release
SAN JOSE –Roger Chi Quan, pleaded guilty to crimes related to a scheme to underreport his 2017 business income by over $4 million, announced United States Attorney Ismail J. Ramsey and Kareem Carter, Acting Special Agent in Charge of the IRS - Criminal Investigation Washington D.C. Field Office. The guilty plea was accepted by the Honorable Edward J. Davila, United States District Court.
Quan, 55, of Milpitas, Calif., owned and operated QXQ, Inc. (“QXQ”), a manufacturer of circuit board test fixtures based in Fremont, Calif. QXQ shipped its products to customers in the United States and Asia. According to his plea agreement, Quan admitted that since before 2014, QXQ maintained two sets of QuickBooks bookkeeping files. One set of books recorded sales to customers in the United States and all QXQ’s expenses. The second set of books recorded sales to customers in Asia. Quan directed QXQ’s customers in Asia to wire transfer their payments to QXQ’s bank accounts in New Zealand. Quan admitted that he retained an income tax preparer but provided the preparer only with the QuickBooks bookkeeping file that recorded QXQ’s sales to customers in the United States and all of its expenses. Further, Quan acknowledged he knowingly did not provide his income tax return preparer with, or disclose to the tax preparer the existence of, the bookkeeping file that recorded QXQ’s sales to customers in Asia or the statements from his and QXQ’s foreign bank accounts. Quan agreed his actions caused his 2017 federal income taxes to be underreported by $1,783,339.
The plea agreement contains further details of the scheme. For example, Quan admitted that he had signature authority over at least eleven foreign bank accounts in 2017. One of these accounts held a balance of at least $12,137,288.50 on April 15, 2018. Quan admitted that he knowingly did not report the existence of these accounts as required. For example, Quan was required to report the existence of the accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Quan also did not report the interest earned in foreign bank accounts to his tax return preparer.
On March 27, 2023, Quan was charged by felony information with one count each of willfully aiding and assisting in the preparation of a false tax return, in violation of 26 U.S.C. § 7206(2), and willfully violating foreign bank account reporting requirements, in violation of 31 U.S.C. §§ 5314 and 5322(a). Quan pleaded guilty to both counts.
Judge Davila scheduled Quan’s sentencing for September 25, 2023. The maximum penalty for willfully violating foreign bank account reporting requirements, in violation of Title 31 U.S.C. §§ 5314 and 5322(a), is five years in prison and a fine of $250,000. The maximum penalty for filing a false tax return, in violation of Title 26 U.S.C. § 7206(2), is three years in prison and a fine of $250,000. Quan agreed to pay $8,167,733 of restitution to the Internal Revenue Service for the tax years 2014 through 2018.
Assistant U.S. Attorney Colin Sampson is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service – Criminal Investigation International Tax and Financial Crimes (ITFC), a group dedicated to investigating international tax crimes.
San Francisco Man Sentenced to 63 Months in Prison for Fleecing Victims in Fraudulent Investment SchemesRead the Press Release
SAN FRANCISCO – Min Jin Zhao was sentenced to over five years in prison and ordered to pay $1,883,503.93 in restitution for defrauding investors in two separate investment schemes, announced United States Attorney Ismail J. Ramsey and FBI Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Vince Chhabria, U.S. District Judge.
Zhao, 60, of San Francisco, pleaded guilty to the charges on February 6, 2023. According to his plea agreement, Zhao admitted he devised and participated in fraudulent schemes targeting two separate victims.
In the first scheme, Zhao convinced his victim that he would invest her money using a corporation he called “Big Block Consulting, Inc.” (BBC). From 2017 to 2021 Zhao claimed he would invest her money through BBC, convincing his victim to hand over her retirement for a 10% monthly return. Zhao admitted he knew the victim for three years prior to the point at which he convinced her to hand over her savings to him. Zhao also admitted in this plea agreement that he did not invest any of the over $2 million the victim gave him for her retirement. In documents filed in connection with Zhao’s sentencing, the government argued that Zhao’s victim trusted him because she believed Zhao was a dear friend; the victim gave Zhao her entire retirement savings, leaving her with so little to spend that she, at times, was forced to send him text messages in which she requested small sums so she could pay for personal expenses. Zhao admitted in the plea agreement that he used the funds in part to purchase a condominium in Indian Wells, Calif.
In the second scheme, Zhao falsely asserted to his victim that he was a film executive at Sony. Zhao admitted in his plea agreement that from 2018 to 2021, he attempted to convince his victim to invest $500,000 in BBC in exchange for allowing his victim to become an executive producer on BBC’s movie projects. Zhao acknowledged in his plea agreement that he was never associated with Sony, nor was he ever a film executive. Zhao admitted that he and his victim signed a written contract and the victim forwarded to Zhao a money wire in the amount of $300,000. Zhao admitted he did not invest the money as he promised his victim he would. The government submitted documents asserting that Zhao’s victim borrowed the $300,000 from a family member to provide the funds for the investment.
On January 5, 2022, a federal grand jury handed down a superseding indictment charging Zhao with three counts of wire fraud, in violation of 18 U.S.C. § 1343. Zhao pleaded guilty to all three counts.In addition to the prison term, Judge Chhabria ordered Zhao to serve a three-year period of supervised release and to pay $1,883,503.93 in restitution. Judge Chhabria also issued an order of forfeiture for Zhao’s interest in the Indian Wells property.
Assistant U.S. Attorney Alethea Sargent is prosecuting the case. The prosecution is the result of an investigation by the FBI.
Former Executive at Williams Sonoma, Inc. Charged with Three Others in Alleged Multi-Million Dollar Fraud SchemesRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Eric Marsiglia, Kourosh Mirmehdi, Augusto Alizo, and Michael Podhurst, charging the defendants with conspiracy, wire fraud, money laundering, and related charges for their respective roles in two separate fraudulent schemes involving kickbacks and the diversion of millions of dollars of rebates belonging to Williams Sonoma, Inc., announced United States Attorney Ismail J. Ramsey and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The indictment was filed April 11, 2023, and unsealed earlier today.
Two of the defendants, Marsiglia, 49, of Olive Branch, Miss., and Augusto Alizo, 51, of Weston, Florida, were arrested today in Mississippi and Florida, respectively.
According to the indictment, while employed by Williams Sonoma, Inc. (WSI), Marsiglia was involved in two fraudulent schemes. The first scheme was a conspiracy to divert rebates from commercial real estate brokers that should have gone to WSI; the rebates were diverted to accounts that Marsiglia controlled. As part of this scheme, Marsiglia allegedly paid a portion of the diverted funds to his co-conspirators, Kourosh Mirmehdi, 63, of Irvine, Calif., and Alizo. The second scheme involved the payment of kickbacks in exchange for Marsiglia directing business to companies controlled by codefendant Michael Podhurst, 63, of Union, New Jersey.
“Today’s arrests target a years-long fraud centered on defendant Marsiglia, who abused the trust placed in him by a prominent San Francisco public company,” said U.S. Attorney Ramsey. “The indictment alleges how each defendant, in separate ways, sought to capitalize on Marsiglia’s valued position within the company—but all with the singular goal of lining their own pockets with millions of dollars at the expense of his employer. Rest assured, we will prosecute corporate executives who accept kickbacks and bribes in exchange for steering contracts to undeserving individuals or companies.”
“This investigation and today’s arrests are a result of the hard work and dedication of IRS Criminal Investigation and the U.S. Attorney’s Office in Northern District of California. Our agents and prosecutors pursued a group of individuals, across state lines, who took advantage of members of our community for greed and personal enrichment,” said Special Agent in Charge Darren Lian of IRS Criminal Investigation’s Oakland Field Office. “CI special agents are determined to hold those who deceive and cheat accountable for their actions.”
Williams Sonoma, Inc. (WSI) is a home-goods retailer that operates brands Williams Sonoma, Pottery Barn, West Elm, and others. Marsiglia was WSI’s Vice President of Engineering, Projects, Planning, Facilities, and Real Estate, and, as such, was responsible for identifying commercial real estate opportunities for the company. For example, Marsiglia located warehouses that WSI could use as distribution centers, worked with landlords and commercial real estate brokers to negotiate the terms of leases, and outfitted warehouses and distribution centers. In his position, Marsiglia allegedly orchestrated the negotiation of real estate contracts on behalf of WSI that required third parties to pay millions of dollars in brokerage fee rebates to WSI. According to the indictment, rather than ensure that WSI received the brokerage fee rebates, Marsiglia instead created a shell company and then conspired with others to have the rebates paid to his company. In addition, as part of this scheme, Marsiglia allegedly paid a portion of the proceeds of this illegal scheme to his co-conspirators. Separately, Marsiglia also allegedly received kickback payments from another co-conspirator in exchange for directing contracts for business to companies controlled by the co-conspirator.
The indictment describes details of the alleged rebate diversion scheme. According to the indictment, around 2020 WSI experienced an increase in its need for warehouse space to enable it to more easily store products and ship them to consumers around the country. To meet this need, WSI worked with third-party logistics companies to assist in the negotiations with commercial real estate brokers. Marsiglia allegedly worked with codefendant Mirmehdi, who worked for a global third-party logistics company, to assist in the negotiations with commercial real estate brokers and landlords. The indictment describes how a common feature of such leasing arrangements includes the payment of rebates from the real estate brokers to the entity leasing the warehouse space. The indictment alleges Marsiglia and Mirmehdi used their positions and influence to formulate contracts and/or agreements that directed commercial real estate brokers to forward rebate payments to Marsiglia’s company, rather than to WSI. Specifically, Marsiglia created, owned, and operated a shell company named REM Group LLC. Marsiglia or Mirmehdi then allegedly represented to real estate brokers that REM Group was connected to or a part of WSI, inducing the brokers to pay rebates to REM Group. Marsiglia allegedly thereafter sent portions of the illegal proceeds of the scheme to codefendants Mirmehdi and Alizo, who was Mirmehdi’s boss at the logistics company. Marsiglia, Mirmehdi, and Alizo redirected broker fees to REM Group for warehouses leased to WSI in Florida, New Jersey, and Arizona, and attempted to do so for an additional warehouse being leased in California. In total, the indictment alleges Marsiglia, Mirmehdi, and Alizo diverted and misappropriated approximately $5.9 million in broker commission rebates owed to WSI.
The indictment also provides details of the kickback scheme. In his role at WSI, Marsiglia had authority to identify vendors and authorize and approve contracts for work to be done in the distribution centers. According to the indictment, beginning in 2018, Marsiglia worked with Podhurst to arrange for kickback payments to be paid to Marsiglia and REM Group in exchange for Marsiglia directing contracts for business in WSI’s warehouses to companies connected to Podhurst. Podhurst worked as a salesperson at a forklift and supply chain company (the Forklift Company) based in New Jersey. The indictment alleges Marsiglia and Podhurst first agreed that Marsiglia would hire the Forklift Company to provide goods or services for Williams Sonoma; in exchange, Marsiglia established REM Group as a consultant and the Forklift Company made kickback payments to REM Group. This kickback scheme continued when Podhurst and others founded a storage and material handling company to provide and build racking systems in WSI warehouses. Later, Podhurst started his own company, Precision Industrial Installations, and Marsiglia awarded contracts to that company in exchange for more kickbacks.
In total, WSI awarded companies connected to Podhurst more than $48 million in contracts for work done at warehouses around the country, and Marsiglia and Podhurst arranged for more than $12 million in kickbacks to be paid to Marsiglia’s company, REM Group.
The indictment alleges that from approximately 2018-2022, Marsiglia received nearly $20 million through his shell company, REM Group, all of which was in the form of stolen broker rebate payments or kickbacks received for awarding business to entities related to Podhurst.
In sum, the defendants were charged with the following counts:
Count(s)
Defendants
Charge
1
Eric Marsiglia
Kourosh Mirmehdi
Augusto Alizo
18 U.S.C. § 1349 – Conspiracy to Commit Wire Fraud
2-5
Eric Marsiglia
Kourosh Mirmehdi
Augusto Alizo
18 U.S.C. § 1343 – Wire Fraud
6
Eric Marsiglia
Michael Podhurst
18 U.S.C. §§ 1343, 1346, 1349 - Conspiracy to Commit Wire Fraud and Honest Services Wire Fraud
7-12
Eric Marsiglia
Michael Podhurst
18 U.S.C. §§ 1343, 1346 – Wire Fraud and Honest Services Wire Fraud
13
Eric Marsiglia
Kourosh Mirmehdi
Augusto Alizo
18 U.S.C. § 1956(h) – Money Laundering Conspiracy
14
Eric Marsiglia
Michael Podhurst
18 U.S.C. § 1956(h) – Money Laundering Conspiracy
Marsiglia made his initial appearance this morning in U.S. District Court for the Northern District of Mississippi. An initial appearance in federal court in San Francisco has not yet been scheduled. Alizo made his initial appearance this morning in federal court in the Southern District of Florida. An initial appearance in federal court in San Francisco has not yet been scheduled. Mirmehdi and Podhurst have not yet appeared in federal court for their initial appearance.
An indictment merely alleges that crimes have been committed, and each defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face 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, 1346, and 1349, as well as a maximum sentence of 20 years in prison, and a fine of $500,000, plus restitution, if appropriate, for each violation of 18 U.S.C. §1956(h). 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. 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.
San Jose Group Homes Owner Sentenced to A Year in Prison for Scheme to Divert Foster Care FundsRead the Press Release
SAN JOSE – Annie Corbett, the owner of a company that provided group homes, primarily in San Jose, for foster children, was sentenced today to spend 12 months and a day in prison for wire fraud and failure to pay over employment taxes, announced United States Attorney Ismail J. Ramsey, FBI Special Agent in Charge Robert K. Tripp, Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian, and U.S. Department Health and Human Services—Office of Inspector General (HHS-OIG) Special Agent in Charge Steven J. Ryan. The sentence was handed down by the Hon. Beth L. Freeman, United States District Judge.
Corbett pleaded guilty to the charges on September 15, 2022. Corbett was the owner, CEO and President of Corbett Group Homes, Inc. (CGH), a company that provided foster care for children and adolescents in group homes located primarily in San Jose. According to her plea agreement, Corbett admitted that from 2011 through mid-2018, she was the sole signatory on CGH’s bank accounts and was solely responsible for hiring employees, firing employees, and processing employee payroll. During this time, CGH employed about 60 employees a year. In her plea agreement, Corbett acknowledged she knowingly failed to pay employment taxes. After contracting with payroll processing companies to determine the tax withholdings for CGH employees and issuing paychecks and W-2s to the employees, she never paid the employment taxes nor filed W-2s with the IRS. Corbett also admitted that she deceived her bookkeeper and CPA into believing these employment taxes had been paid. Corbett admitted in her plea agreement that from 2014 through 2017 she failed to pay employment taxes to the IRS in an amount totaling more than $752,000.
In addition, Corbett also admitted in her plea agreement that she fraudulently diverted for her own personal use funds CGH received from local county governments and private charities to support CGH’s care of foster children. Corbett admitted she controlled multiple CGH bank accounts—including an account that she concealed from CGH’s accountant and auditor—from which she diverted CGH funds to her and her husband’s personal bank accounts. Corbett used the diverted funds for her and her family’s personal enrichment, including making her own credit card payments, her personal retail business payments, and her payments on a vacation timeshare. As noted in the government’s sentencing memorandum, Corbett’s conduct impacted not only over 44 identified victim-donors (county governments, charities, and individuals who provided CGH over $13.2 million in foster care funds over the course of seven years), but also her own employees and the many foster children who were deprived of the benefit of the funds that should have been used for their care. Judge Freeman described Corbett’s crimes as “very serious” and found that the loss resulting from her embezzlement scheme exceeded $2.5 million.
In addition to the prison term, Judge Freeman ordered Corbett to serve 36 months of supervised release to begin after the expiration of her prison term. Judge Freeman also scheduled a hearing for June 27, 2023, to determine the amount of restitution Corbett will be ordered to pay. Judge Freeman ordered Corbett to surrender on or before September 5, 2023, to begin serving her prison term.
Assistant U.S. Attorney Anne Hsieh is prosecuting the case, with the assistance of Laurie Worthen. The prosecution is the result of an investigation by the FBI, IRS-CI, and HHS-OIG.President of Brisbane Recycling Company and Its Former Counsel Convicted of Tax Fraud ChargesRead the Press Release
SAN FRANCISCO – Joseph Nubla and Henry Ku were convicted of conspiracy to defraud the United States, and Nubla was convicted of an additional charge of tax evasion, all in connection with a scheme to evade taxes on millions of dollars of income derived from a rock crushing business, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Darren Lian. The verdicts followed a two-week jury trial before the Hon. Richard Seeborg, Chief U.S. District Judge.
Joseph Nubla is the President of Brisbane Recycling Company, Inc. (hereafter “Brisbane”), a rock crushing business located in Brisbane, Calif. Henry Ku was counsel for Brisbane and Nubla during the relevant time. Nubla ran the daily operations at Brisbane, and Ku owned and controlled separate businesses including Pegasus Aggregate, Inc. (“Pegasus”), Jupiter Prime Monarch (“JP Monarch”), and JPM Energy, Inc. (“JPM Energy”) (collectively, “Ku’s entities”). The evidence at trial demonstrated that between February 20, 2009, and March 30, 2015, Ku and his entities deposited checks written by Nubla from Brisbane, totaling more than $18,000,000. To avoid Brisbane paying corporate income taxes, Nubla then expensed Brisbane’s payments to Ku’s entities as royalties for the use of heavy equipment purportedly owned by Ku’s entities. In reality, Ku had used the funds from Brisbane’s checks to purchase that equipment. Ku also returned the funds from Brisbane’s checks to Nubla in a variety of ways: (1) by regular money transfers from 2009 through 2016; (2) by purchasing Nubla three homes; and (3) by writing Nubla cashier’s checks totaling $7 million pursuant to a fake loan. Nubla did not declare the funds given to him by Ku as personal income, even though they originated from Brisbane and thus were taxable, constructive dividends. In year 2014 alone, Nubla failed to report more than $5.8 million of income.
On April 6, 2021, a federal grand jury indicted Nubla and Ku, charging both with one count of conspiring to defraud the United States in violation of 18 U.S.C. § 371. In addition, the grand jury charged Nubla with one count of tax evasion in violation of 26 U.S.C. § 7201 for his 2014 federal income tax return. Pursuant to the trial jury’s verdict, the defendants were found guilty of all counts with which they were charged.
Chief Judge Seeborg has not yet scheduled the defendants’ sentencing hearing. The defendants each face a statutory maximum of five years in prison and a fine of $250,000 for the conspiracy charge. Nubla also faces a statutory maximum of five years in prison and a $100,000 fine for the tax evasion charge. In addition, the court may order the defendants to serve an additional term of supervised release and restitution as part of any sentence; 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.
Assistant United States Attorney Daniel N. Kassabian and Special Assistant United States Attorney Christopher J. Carlberg are prosecuting the case with the assistance of Helen Yee, Veronica Hernandez, and Amala James. The prosecution is the result of an investigation by the IRS-CI.
Santa Rosa Doctor Sentenced to Two-And-A-Half Years in Prison for Unlawfully Prescribing Controlled SubstancesRead the Press Release
SAN FRANCISCO – Thomas Keller, formerly a pain management doctor in Santa Rosa, has been sentenced to 30 months in prison for distributing Schedule II and IV controlled substances outside the scope of his professional practice and without a legitimate medical need, announced United States Attorney Ismail J. Ramsey, Drug Enforcement Administration (DEA) Acting Special Agent in Charge Bob P. Beris, FBI San Francisco Special Agent in Charge Robert K. Tripp, and U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Special Agent in Charge Steven J. Ryan, and the California Department of Justice Division of Medi-Cal Fraud and Elder Abuse (DMFEA). The sentence was handed down by the Hon. Vince Chhabria, United States District Judge, after a jury found Keller was guilty of the crimes at trial in November 2022.
Keller, 75, was a Santa Rosa resident and a licensed physician who ran a pain management practice in Santa Rosa when he was indicted on September 27, 2018. At trial, the evidence demonstrated that Keller repeatedly prescribed the opioid oxycodone and other strong, addictive drugs to his patient, A.M., in dosages and combinations that far exceeded the usual course of professional practice and were for no legitimate medical need. A.M. was 17-years old and was struggling with mental health issues when she first came to Keller seeking help. Trial evidence established that these facts made the drugs that Keller prescribed more dangerous. On December 22, 2016, Keller prescribed high dosage levels of oxycodone to A.M., along with two other controlled substances, Carisoprodol (also known as Soma), and Diazepam (also known as Valium); the combination magnified the potential health risks for the patient. Further, evidence showed that on January 20, 2017, Keller distributed Diazepam to A.M., and on February 16, 2017, Keller distributed Oxycodone to A.M., again knowing the distribution of both was outside the scope of professional practice and not for a legitimate medical purpose. Keller also distributed Carisoprodol, a muscle relaxant often referred to as “Soma,” to A.M. on July 10, 2017. Approximately two weeks later, A.M. died of an overdose of Oxycodone and other drugs.
On November 3, 2022, a jury convicted Keller on four counts of unlawful distribution of controlled substances, in violation of 21 U.S.C. § 841(a)(1). The jury was unable to reach a verdict on six additional counts.
Court documents filed in connection with Keller’s sentencing describe the dangerousness of the drug combinations prescribed by the defendant as well as Keller’s understanding that the drug prescriptions were unsafe. For example, trial evidence established that the combination of an opioid, a benzodiazepine, and Soma together – colloquially known as “the Holy Trinity” – is an extremely dangerous combination of drugs; nevertheless, Keller prescribed this combination of drugs to A.M repeatedly for more than two years. Further, the government argued that evidence submitted at trial – in the form of trainings that Keller had received and Keller’s own journal entries – demonstrated that Keller prescribed the drugs even though (1) he knew the dangerousness and addictiveness of opioids, (2) he knew medical professionals promulgated guidelines and recommendations that aim to decrease the amounts of opioids that clinicians prescribe, and (3) he knew that his prescriptions to A.M. were outside the normal course of medical practice.
In addition to the prison term, Judge Chhabria ordered a three-year term of supervised release upon release from prison. Judge Chhabria ordered the defendant to surrender on or before September 8, 2023, to begin serving his prison term.
Assistant U.S. Attorneys Kristina Green and Ross E. Weingarten are prosecuting the case with the assistance of Pat Mahoney. This case was investigated and prosecuted by member agencies of the Organized Crime Drug Enforcement Task Force, 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. This prosecution is the result of investigations by the DEA, FBI, HHS-OIG, and the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.
U.S. Attorney Ismail J. Ramsey Hosts “Unite Against Hate” Forum to Connect Asian-American Pacific Islander Community Groups to Federal, State, and Local Law EnforcementRead the Press Release
SAN FRANCISCO - United States Attorney Ismail J. Ramsey hosted the first of several planned forums to combat unlawful acts of hate. U.S. Attorney Ramsey partnered with The Asian American Foundation (TAAF) to organize the meeting arranged to build trust between law enforcement and nonprofit advocates and to create and strengthen coordination between government partners—including law enforcement—and community-based organizations. The first meeting occurred Wednesday, March 29, 2023, at the Deb Colloquium Room of the University of California Law San Francisco and featured leaders from Asian American Pacific Islander (AAPI) community and federal, state, and local law enforcement.
The theme of “united against hate” was initiated by Attorney General Merrick B. Garland. Attorney General Garland announced the initiative during a White House visit last year and encouraged all 94 U.S. Attorneys’ Offices to host local forums. Program participants engage in robust interaction on topics such as defining hate crimes versus hate incidents; the importance of reporting unlawful acts of hate; providing options for responding to hate incidents when situations do not constitute a federal or state crime; and distinguishing unlawful conduct from protected First Amendment activity, including identifying protected speech versus speech that advocates violence or encourages people to commit hate crimes. Several offices of the Department of Justice provided critical assistance in developing the program, including the Community Relations Service, the Community Oriented Policing Services Office, the FBI, and the Office of Justice Programs.
Members of a dozen AAPI community groups, including TAAF, participated in the program. Several government officials also attended. Government participants included officials having leadership roles such as San Francisco City Attorney David Chiu, District Attorney Brooke Jenkins, Special Agent in Charge of the FBI Robert Tripp, UC Law San Francisco Dean of Students Grace Hum, and U.S. Attorney Ramsey, who provided opening remarks for the event.
Special thanks are given to UC Law San Francisco for providing technical assistance and the venue for the event and to TAAF for co-hosting and providing invaluable assistance at every stage of organizing the event.
Oakland Assassin Sentenced to Life Plus 78 Months in Prison After Jury Finds Him Guilty of Carrying Out Murder for Hire PlotRead the Press Release
SAN FRANCISCO – Burte Gucci Rhodes, a.k.a. Moeshawn, was sentenced today to life in prison plus 78 months for conspiring to commit a murder for hire, committing a murder for hire, and possession with intent to distribute heroin, announced United States Attorney Ismail J. Ramsey, 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 sentence was handed down by the Hon. William H. Alsup, United States District Judge.
Rhodes, 41, of Oakland, was convicted of the charges after a week-long trial before Judge Alsup. The trial focused on the March 22, 2016, murder of Louisiana native Trince Thibodeaux, age 28. Trial evidence demonstrated that Marcus Etienne, a.k.a. Hitler, 41, of St. Martin Parish, La., was the leader of a racketeering enterprise based in St. Martin Parish near Lafayette, Louisiana. The criminal enterprise engaged in a wide range of crimes including narcotics distribution, assault, robbery, extortion, extortionate collection of extensions of credit, murder for hire, murder, money laundering, illegal firearms possession, gambling on dogfighting, and obstruction of justice. As early as 2009, the enterprise was led by Etienne and eventually, Thibodeaux became one of seven principal members of the enterprise. In 2016, Etienne tasked Thibodeaux with transporting several thousand dollars and drugs from Louisiana to California. Etienne suspected and then concluded that Thibodeaux had stolen money and narcotics from the enterprise and ordered that Thibodeaux be killed. Etienne offered Mario Robinson, 36, of Opelousas, La., and Oakland, Calif., $5,000 to murder Thibodeaux, and Robinson accepted. Robinson then contracted with Rhodes, a longtime friend of his from Oakland, to complete the murder in exchange for $5,000.
Evidence at trial showed that on the night of March 22, 2016, Robinson and another member of the organization lured Thibodeaux to a predetermined location near the intersection of 90th Avenue and International Boulevard in the eastern part of Oakland, where Rhodes was waiting. The evidence demonstrated that, once Thibodeaux arrived, Rhodes approached him from behind and shot him nine times. Thibodeaux was pronounced dead later that night.
One week after the murder, Robinson sent Rhodes a wire transfer of $1,250. In the months following the murder, Robinson had other associates in Louisiana send additional wire transfers to Rhodes.
The murder took place against the backdrop of a wide variety of criminal activity perpetuated by the criminal enterprise. For example, court documents, including plea agreements signed by Etienne and Robinson, describe how the enterprise purchased marijuana in California and used the United States Postal Service to ship the drugs to Louisiana and Texas. Robinson admitted he received packages containing between one and ten pounds of marijuana every one or two months. Robinson and Etienne used cash proceeds from the narcotics trafficking to purchase marijuana and other controlled substances in California. Robinson also purchased money orders in Louisiana to pay the enterprise’s marijuana suppliers in California. Both Etienne and Robinson admitted that they conducted financial transactions with proceeds of narcotics trafficking to conceal the nature, source, and ownership of the enterprise’s profits. In addition, Etienne admitted he purchased and maintained dogs used for fighting in Breaux Bridge, Louisiana, on a property owned by another member of the enterprise. At the property, Etienne and other members of the enterprise hosted dog-fighting events at which attendees would pay a cover fee and gamble on the dogfights. Dogs, including dogs owned by Etienne, were seriously injured and even killed either during the events or as a result of the training leading up to the events.
On December 18, 2018, a federal grand jury issued a Third Superseding Indictment charging Rhodes with murder for hire, in violation of 18 U.S.C § 1958, conspiracy to commit murder for hire, in violation of 18 U.S.C. § 371, and other crimes while Etienne and Robinson also were charged with several crimes related to the activities of the enterprise. On November 4, 2022, a federal jury convicted Rhodes of one count of murder for hire, in violation of 18 U.S.C. § 1958, and one count of conspiracy to commit murder for hire, in violation of 18 U.S.C. § 371. After the trial, Rhodes pleaded guilty to an additional charge of possession with intent to distribute heroin, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(i). Today, Judge Alsup sentenced Rhodes for all three crimes.
Etienne and Robinson admitted their respective roles in the crimes and both defendants pleaded guilty to conspiracy to distribute marijuana, in violation of 21 U.S.C. §§ 841(a)(1), (b)(1)(A)(vii), and 846; racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); and conspiracy to launder monetary instruments, in violation of 18 U.S.C. § 1956(h). Judge Alsup sentenced both Etienne and Robinson on October 13, 2020, ordering Etienne to serve 34 years in prison and Robinson to serve 32 years in prison. In addition, Etienne and Robinson twice refused to testify at trial about the murder for hire scheme when lawfully subpoenaed by the government and ordered to testify by the court. Consequently, Judge Alsup held Etienne and Robinson in contempt of court and added 12 months of prison time to each defendant’s sentence.
The United States Attorney’s Office’s Organized Crime Strike Force is prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation’s Oakland Division, the Internal Revenue Service, and the Oakland Police Department, with assistance from the St. Landry Parish, Louisiana, Sheriff’s Office, and the Opelousas, Louisiana, Police Department.
Milpitas Car Exporter Pleads Guilty to Crime in Scheme to Avoid Income Taxes on Multi-Million Dollar IncomeRead the Press Release
OAKLAND –Jie Suo, owner of a South Bay luxury car exporting business, pleaded guilty today to interfering with the administration of internal revenue laws stemming from statements she made to IRS investigators to corruptly impede their investigation into her multi-million dollar business she failed to disclose in her tax filings to avoiding paying several years’ income taxes for the business, 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. Haywood S. Gilliam, Jr., United States District Judge.
Suo, 56, of Milpitas, Calif., is a sole proprietor who owned and operated Golden Source Trading and Agneau Mobility—two companies that exported luxury vehicles to China. According to the plea agreement, Suo admitted that the business earned over $18 million in gross receipts from 2011-2017; however, rather than pay applicable taxes on the business income, Suo embarked on a scheme to avoid paying applicable income taxes and then made statements to federal agents to impede and hinder their investigation into her earnings.
Suo admitted that she did not disclose the existence of the businesses on four tax returns that she signed and filed with the IRS; indeed, Suo acknowledged that she paid nothing in federal income tax for the calendar years 2013 through 2016.
The plea agreement describes how Suo spoke with federal investigators by telephone on May 16, 2019, and in person on May 23, 2019, and made statements to hinder the IRS investigation with the intent of avoiding criminal prosecution from the pending IRS investigation. Specifically, after agreeing to speak with the IRS investigators voluntarily and after repeatedly being reminded of her obligation to be truthful, Suo denied that her business was profitable and made numerous corrupt statements to minimize her conduct and portray herself as a victim of loan sharks, poor investments, and poor advice. For example, Suo stated that she did not employ her son for his export car business; that she operated the businesses at a loss; that she reported her business sales to her tax preparer; and that the money used to purchase a home in Pittsburg was provided by a loan. Suo acknowledged in her plea agreement the truth of the facts she denied and her corrupt intent in hindering the investigation. Suo further acknowledged that, in contrast to the statements she made to the IRS investigators, her business was sufficiently profitable that she owed nearly $1 million, $997,673, in taxes to the federal government.
On March 27, 2023, Suo was charged by Superseding Information with four counts of making and subscribing a false tax return, in violation of 26 U.S.C. § 7206(1), and one count of corrupt endeavor to obstruct or impede the administration of Internal Revenue laws, in violation of 26, U.S.C. § 7212(a). Pursuant to today’s plea agreement, Suo pleaded guilty to the obstruction charge. If Suo complies with the plea agreement, the remaining counts will be dismissed at sentencing.
Suo faces a maximum statutory sentence of up to three years in prison. In addition, as part of sentencing, the court also may order Suo to pay a fine of up to $250,000, to pay restitution of at least $997,673, and to serve an additional period of supervised release of up to a year to begin after her prison term. 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.
Judge Gilliam scheduled Suo sentencing hearing for July 12, 2023.
Assistant United States Attorneys Thomas Green and Maya Karwande are prosecuting the case with the assistance of Jasmine Sanders and Kay Konopaske. The prosecution is the result of an investigation by the IRS-CI.Judgment Entered Against Fourteen Defendants in Case Dismantling Nationwide Racketeering ConspiracyRead the Press Release
SAN FRANCISCO – On Thursday, March 23, 2023, and Friday, March 24, 2023, the federal court entered judgment against fourteen defendants, including cousins and ringleaders Mihran Stepanyan and Artur Stepanyan, who were sentenced for their respective roles in a variety of crimes stemming from a wide-ranging racketeering conspiracy involving diversion of prescription drugs, money laundering, mail and wire fraud, and additional crimes, announced United States Attorney Ismail J. Ramsey; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Darren Lian. The sentences were handed down by the Hon. Charles R. Breyer, Senior United States District Judge, and leaves nine defendants remaining to be sentenced for crimes committed in connection with the case.
The fourteen defendants had been charged with various crimes as part of a Second Superseding Indictment filed on February 11, 2016. The Second Superseding indictment alleged that 38 defendants were involved with the activities of a nationwide conspiracy, referred to in court documents as the Karapedyan-Stepanyan Enterprise (Enterprise), that engaged in, among other crimes, a multi-million-dollar prescription drug diversion scheme, a tax fraud and Treasury check scheme, and several other criminal schemes. Information about charges brought earlier in the case can be found here and information about several defendants’ guilty pleas can be found here.
The Prescription Drug Diversion Scheme
Last week, seven defendants were sentenced for their respective roles in the prescription drug diversion scheme. Among them were four of the principal actors in the Enterprise: Mihran Stepanyan, 37, of Glendale, Calif., Artur Stepanyan, 45, both of Glendale, Calif., Yan German (a.k.a., Henrik Harutyunyan), 43, of Encino, and Arman Zargayan, 40, of Granada Hills, Calif. All four defendants pleaded guilty to racketeering conspiracy, in violation of 18 U.S.C. § 1962(d).
The prescription drug diversion scheme had nationwide reach; indeed, a separate investigation resulted in another indictment filed on May 6, 2015, in the Southern District of Ohio. That indictment charged the Stepanyans and others with various crimes arising from their sale of illicitly procured drugs and was transferred to the Northern District of California and consolidated with the instant case.
Court documents describe how the Enterprise took advantage of a “robust black market involving the wholesale distribution of prescription drugs.” According to the government’s filings, prescription drugs were procured illicitly at below market value and then were resold and re-introduced into the market as legitimate drugs at near-market prices. Illicit procurement can involve stealing drugs from manufacturers; buying drugs from patients with prescriptions at below-market prices (the patients’ costs are offset or reduced by insurance, including Medicare); buying drugs using false prescriptions and straw patients, usually with the aid of a corrupt doctor (again, with the costs offset or reduced by insurance); and purchasing drugs from a manufacturer at a discounted price through fraud, e.g., falsely claiming a charitable or similar discount. These “diverted” prescription drugs often are cleaned or repackaged to make them appear legitimate. Each of the defendants sentenced pleaded guilty to crimes in accordance with their participation in the crimes of the Enterprise. Each defendant’s plea agreement describes the role that the defendant played in the drug diversion scheme.
According to their plea agreements, Artur and Mirhan Stepanyan obtained illicit prescription drugs from a network of unlicensed drug suppliers and supplied the drugs to co-conspirators at deep discounts. The Stepanyans were responsible for nearly $200 million in sales to their co-defendants who sold the drugs to customers throughout the United States. The defendants used fraudulent documents to establish the pedigree of the drugs they sold. In addition, the Stepanyans sold prescription drugs to their co-defendants in California, although they were not licensed to do so. Starting as early as 2009, the Stepanyans sold tens of millions of dollars in diverted prescription drugs per year to their codefendants. The Stepanyans incorporated multiple entities in Nevada, including Panda Capital Group, Trans Atlantic Capital Group, and Red Rock Capital Group and in 2012, the Stepanyans began doing business as GC National Wholesale. The Stepanyans were paid more than $160 million for diverted drugs—typically at prices ranging from 15% to 25% off the Wholesale Acquisition Cost (“WAC”) established by manufacturers of prescription drugs. For their respective parts in the conspiracy, Mihran Stepanyan was sentenced to 60 months in prison and Artur Stepanyan, was sentenced to 54 months in prison.
German was sentenced to 23 months in prison for his role in the scheme. German admitted he was one of the suppliers of pharmaceutical drugs for the Stepanyans. According to his plea agreement, German admitted he engaged in a wire fraud and money laundering as part of the Enterprise and that he was involve in a separate prescription drug diversion and check cashing scheme with co-defendant Ara Karapedyan. German also acknowledged the loss amount for which he is responsible is between $9.5 and $25 million.
Zargayan was sentenced to 35 months in prison for his role in the scheme. Zargayan operated a California-licensed drug wholesale company, Nuvo Pharmaceuticals, with an unindicted co-conspirator. Zargayan admitted that he used Nuvo Pharmaceuticals as a front for the drugs that a company called ME Wholesale sold to LLC Wholesale from May to August 2013. Nuvo Pharmaceuticals was licensed in California, but it did not actually supply the drugs that ME Wholesale sold. In addition, the pedigrees for ME Wholesale’s drugs falsely claimed that Nuvo Pharmaceuticals had received the drugs from McKesson.
Fraudulent Check Scheme
Also sentenced last week were seven defendants, all California residents, in connection with attempts to negotiate over 500 fraudulent checks issued to a variety of payees and totaling more than $5 million. A substantial number of the fraudulent checks were tax refund checks sent by mail by the United States Treasury and many of these tax refund checks had been issued based on fraudulent tax returns filed with the Internal Revenue Service. The defendants acquired and possessed identifying information for dozens of individuals, which was used to file fraudulent tax returns online. Associates of the Enterprise negotiated numerous fraudulent checks through a business owned by one of the co-conspirators—a service that was offered in exchange for a percentage of the proceeds.
In sum, of the 38 defendants charged in the February 2016 Superseding Indictment, 33 have been convicted and nine remain to be sentenced. The charges against five defendants have been dismissed. Judge Breyer scheduled two additional hearings for May 31, 2023, at which time co-defendants Asatour Magzanyan and Loui Artin are scheduled to be sentenced.
Assistant United States Attorneys Claudia Quiroz, Andrew Dawson, and Chris Kaltsas are prosecuting the case with the assistance of Kevin Costello. The prosecution is the result of an investigation by the FBI, the IRS, the FDA, and USPIS.
San Jose Police Union Executive Charged with Attempted Illegal Importation of Fentanyl AnalogueRead the Press Release
SAN JOSE – The Office of the United States Attorney has filed a federal criminal complaint charging Joanne Marian Segovia with attempt to illegally import a controlled substance in connection with a scheme to bring synthetic opioids into the country and distribute them throughout the United States, announced United States Attorney Ismail J. Ramsey and Homeland Security Investigations Special Agent in Charge Tatum King. The criminal complaint was filed on March 27, 2023, and unsealed the next day.
According to the complaint, Segovia, 64, of San Jose, is the Executive Director of the San Jose Police Officers’ Association (SJPOA). The complaint alleges that Segovia used her personal and office computers to order thousands of opioid and other pills to her home and agreed to distribute the drugs elsewhere in the United States.
The complaint alleges that Segovia was apprehended as part of an ongoing Homeland Security investigation into a network that was shipping controlled substances into the San Francisco Bay Area from abroad.
The complaint alleges that between October 2015 and January 2023, Segovia had at least 61 shipments mailed to her home, originating from countries including Hong Kong, Hungary, India, and Singapore. The manifests for these shipments declared their contents with labels like “Wedding Party Favors,” “Gift Makeup,” or “Chocolate and Sweets.” But between July 2019 and January 2023, officials intercepted and opened five of these shipments and found that they contained thousands of pills of controlled substances, including the synthetic opioids Tramadol and Tapentadol. Certain parcels were valued at thousands of dollars’ worth of drugs.
Also alleged is that Segovia used encrypted WhatsApp communications to plan the logistics for receiving and sending pill shipments. For example, the complaint describes a three-year period between January 2020 and March 2023 during which Segovia is alleged to have exchanged hundreds of messages with someone using a phone with an India country code. The messages discussed details for shipping and payment of pills and contained hundreds of pictures of tablets, shipping labels, packaging, payment receipts, and payment confirmations.
The complaint alleges that Segovia used her office at the San Jose Police Officers’ Association to distribute controlled substances. For example, in spring 2021, Segovia was told by a supplier to send a package to a woman in North Carolina. Segovia then sent this supplier a photograph of a shipment made using the UPS account of San Jose Police Officers’ Association.
According to the complaint, Segovia continued to order controlled substances even after being interviewed by federal investigators in February 2023. On March 13, 2023, federal agents seized a parcel in Kentucky, containing valeryl fentanyl, addressed to Segovia. The package allegedly originated from China on March 10, 2023 and declared its contents as a “clock.”
Segovia is charged with attempt to unlawfully import valeryl fentanyl, in violation of 21 U.S.C. § 952(a).
A criminal complaint merely alleges that crimes have been committed, and, like all defendants, Segovia is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Segovia faces a maximum statutory sentence of 20 years. In addition, as part of any sentence, the court may order the defendant to serve at least 3 years of supervised release and to pay a fine of up to $250,000. 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 Joseph Tartakovsky is prosecuting the case with the assistance of Margoth Turcios. This prosecution is the result of investigation by HSI.
Two Oakland Residents Charged with Crimes Related to Separate Alleged Schemes to Distribute Drugs in the Tenderloin AreaRead the Press Release
OAKLAND - Esmun Moyses Moral-Raudales and Omar Zelaya appeared in federal court today to face charges each was engaged in a separate scheme to distribute drugs, including fentanyl and methamphetamine, in the Tenderloin District of San Francisco. The announcement was made by United States Attorney Ismail J. Ramsey and U.S. Drug Enforcement Administration Acting Special Agent in Charge Bob P. Beris. The indictments against the defendants were unsealed by U.S. Magistrate Judge Lisa J. Cisneros during today’s proceedings.
On March 7, 2023, a federal grand jury returned two indictments, one against Moral-Raudales, 27, and another against Zelaya, 26, both of Oakland. The government requested that the court detain both defendants.
According to documents filed by the government in connection with its request to detain Moral-Raudales prior to trial, Moral-Raudales used a vehicle to commute back and forth from Oakland to his favored selling location in the Tenderloin. On January 17, 2023, Moral-Raudales allegedly sold fentanyl to an undercover officer in the Tenderloin. Law enforcement officers allegedly attempted to arrest Moral-Raudales on March 16, 2023, after he exited his residence in Oakland. Moral-Raudales allegedly tossed his backpack and fled but was eventually apprehended. The government argues that Moral-Raudales possessed—in his residence, car, backpack and on his person—over 3400 grams of suspected fentanyl (3205 grams of which was in powder form), over 50 grams of suspected methamphetamine, equipment for mixing and coloring fentanyl, over $10,000 in cash, and a “ghost gun.” At the time of his arrest, Moral-Raudales was on supervised release, having been previously convicted of a federal felony offense in July 2020.
Moral-Raudales is charged with three counts of distributing a controlled substance in violation of 21 U.S.C. § 841(a)(1). The first count alleges he distributed methamphetamine to an undercover officer in the Tenderloin on January 10, 2023; the second count alleges he distributed methamphetamine to an undercover officer in the Tenderloin on February 7, 2023, and the third count alleges he distributed fentanyl to an undercover officer in the Tenderloin on February 7, 2023.
As for Zelaya, undercover officers used text messages to contact the defendant by cell phone and arrange a meeting that was to take place on March 16, 2023. On that day, law enforcement officers allegedly observed Zelaya leave his residence and walk in the direction of the agreed-upon location. When officers attempted to arrest Zelaya, he fled and resisted arrest but was eventually apprehended. Zelaya allegedly tossed two bags of suspected narcotics as he ran from the officers. The two bags of contained over 100 grams of fentanyl and over 50 grams of methamphetamine. Zelaya is charged with five counts of distribution of a controlled substance, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C)— three counts pertain to the alleged distribution of fentanyl, one count pertains to the alleged distribution of cocaine, and one count pertains to the alleged distribution of methamphetamine.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, each defendant faces a maximum of twenty years in prison for each count pending against him (five counts are pending against Zelaya and three counts are pending against Moral-Raudales). In addition, for each count, the court may order the defendant to serve up to a lifetime of supervised release and to pay a fine of up to one million dollars. 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.
Moral-Raudales’s next federal court appearance is scheduled for May 8, 2023, before Hon. James Donato, U.S. District Judge, for a status conference. Zelaya’s next federal court appearance is scheduled for April 11, 2023, before Hon. William Alsup, U.S. District Judge, for a status conference.
Assistant U.S. Attorney George Hageman is prosecuting the case against Moral-Raudales with the assistance of Erick Machado. Special Assistant United States Attorney Anna Nguyen is prosecuting the case against Zelaya with the assistance of Amala James and Laurence Macaraeg. Both prosecutions are the result of investigations by the DEA.
Justice Department Announces Arrest of the Founder of One of the World’s Largest Hacker Forums and Disruption of Forum’s OperationRead the Press Release
The founder of BreachForums made his initial appearance today in the Eastern District of Virginia on a criminal charge related to his alleged creation and administration of a major hacking forum and marketplace for cybercriminals that claimed to have more than 340,000 members as of last week. In parallel with his arrest on March 15, the FBI and Department of Health and Human Services Office of Inspector General (HHS-OIG) have conducted a disruption operation that caused BreachForums to go offline.
According to court documents unsealed today, Conor Brian Fitzpatrick, 20, of Peekskill, New York, allegedly operated BreachForums as a marketplace for cybercriminals to buy, sell, and trade hacked or stolen data and other contraband since March 2022. Among the stolen items commonly sold on the platform were bank account information, social security numbers, other personally identifying information (PII), means of identification, hacking tools, breached databases, services for gaining unauthorized access to victim systems, and account login information for compromised online accounts with service providers and merchants.
“Today, we continue our work to dismantle key players in the cybercrime ecosystem,” said Deputy Attorney General Lisa O. Monaco. “Like its predecessor RaidForums, which we took down almost a year ago, BreachForums bridged the gap between hackers hawking pilfered data and buys eager to exploit it. All those operating in dark net markets should take note: Working with our law enforcement partners, we will take down illicit forums and bring administrators to justice in U.S. courtrooms.”
“People expect that their online data will be protected, and the Department of Justice is committed to doing just that,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Criminal Division. “We must and will remain vigilant to the threat posed by those who attempt to undermine our digital security. We will continue to disrupt the forums that facilitate the theft and distribution of personal information and prosecute those responsible.”
Fitzpatrick’s alleged victims have included millions of U.S. citizens and hundreds of U.S. and foreign companies, organizations, and government agencies. Some of the stolen datasets contained the sensitive information of customers at telecommunication, social media, investment, health care services, and internet service providers. For instance, on Jan. 4, a BreachForums user posted the names and contact information for approximately 200 million users of a major U.S.-based social networking site. Further, on Dec. 18, 2022, another BreachForums user posted details of approximately 87,760 members of InfraGard, a partnership between the FBI and private sector companies focused on the protection of critical infrastructure.
“Cybercrime victimizes and steals financial and personal information from millions of innocent people,” said U.S. Attorney Jessica D. Aber for the Eastern District of Virginia. “This arrest sends a direct message to cybercriminals: your exploitative and illegal conduct will be discovered, and you will be brought to justice.”
“The FBI will continue to devote all available resources to deter, disrupt, and diminish criminal enterprise activity,” said FBI Deputy Director Paul Abbate. “We will work alongside our federal and international partners to impose costs on malicious cyber actors around the world and continue to bring justice to those who victimize the American public.”
“Following the seizure of RaidForums last year, cybercriminals turned to BreachForums to buy and sell stolen data, including breached databases, hacking tools, and the personal and financial information of millions of U.S. citizens and businesses,” said Assistant Director in Charge David Sundberg of the FBI Washington Field Office. “The FBI and our partners will not let cybercriminals and those who enable them profit from the theft of sensitive data while hiding behind keyboards. This arrest and disruption of yet another criminal marketplace demonstrates the potency of our joint work to dismantle the digital structures that facilitate cybercrime.”
As part of the scheme, Fitzpatrick allegedly supported the activities of cybercriminals by creating and operating a “Leaks Market” subsection that was dedicated to buying and selling hacked or stolen data, tools for committing cybercrime, and other illicit material. To facilitate transactions on the forum, Fitzpatrick allegedly offered to act as a trusted middleman, or escrow service, between individuals on the website who sought to conduct these types of illicit transactions. In addition, Fitzpatrick allegedly managed an “Official” databases section through which BreachForums directly sold access to verified hacked databases through a “credits” system administered by the platform. As of Jan. 11, the Official database section purported to contain 888 datasets, consisting of over 14 billion individual records. These databases belong to a wide variety of both U.S. and foreign companies, organizations, and government agencies. Fitzpatrick allegedly profited from the scheme by charging for forum credits and membership fees.
“This case sends a clear message that illicitly stealing, selling, and trading the personal information of innocent members of the public will not be tolerated, and that malicious cyber actors will be held accountable,” said Special Agent in Charge Stephen Niemczak of the HHS-OIG. “HHS-OIG and our law enforcement partners remain dedicated to protecting the American public and the integrity of government networks and data from these egregious cyberattacks.”
The BreachForums website has supported additional sections in which users discuss tools and techniques for hacking and exploiting hacked or stolen information, including in the “Cracking,” “Leaks,” and “Tutorials” sections. The BreachForums website also includes a “Staff” section that appears to be operated by the BreachForums administrators and moderators.
Fitzpatrick is charged with conspiracy to commit access device fraud. If convicted, he faces a maximum penalty of five years in prison.
Fitzpatrick’s arrest and the disruption of BreachForums comes nearly a year after the Department of Justice announced the seizure of a predecessor hacking marketplace, Raidforums, and unsealed criminal charges against RaidForums’ founder and chief administrator, who is the subject of extradition proceedings in the United Kingdom. The Justice Department’s Office of International Affairs is handling the extradition.
The law enforcement actions against Fitzpatrick and BreachForums are the result of an ongoing criminal investigation by the FBI Washington Field Office, FBI San Francisco Division, and HHS-OIG, with assistance provided by the U.S. Secret Service, Homeland Security Investigations New York Field Office, New York Police Department, U.S. Postal Inspection Service, and Peekskill Police Department. The U.S. Attorneys’ Office for the Northern District of California, the District of Maryland, and the Southern District of New York have also provided assistance in this matter.
The Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Carina A. Cuellar for the Eastern District of Virginia are prosecuting the case.
A criminal complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.