Northern District of California
Press releases recorded for this federal judicial district.
San Francisco Design Company’s Controller Charged in $1.9 Million Dollar Fraud SchemeRead the Press Release
SAN FRANCISCO – Kerry Kit Yee Tang was arrested yesterday and appeared in federal court today to face bank fraud charges stemming from fraud committed upon her former employer, announced United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King.
According to the federal indictment unsealed today, Tang, 44, of San Francisco, was employed as the controller of a San Francisco-based company that provides interior design services. The indictment alleges that Tang made unauthorized payments to herself and to outside companies from two of the victim company’s bank accounts, embezzling a total of about $1.9 million.
The indictment alleges that from March 2019 to December 2020, Tang engaged in a scheme in which she obtained checks from her company’s bank accounts and inserted “Kerry Tang” on the payee line. The indictment describes that Tang, without authorization to do so, signed the checks with the signatures of one or more of the authorized signers. Tang then deposited these checks into her own personal bank accounts. The indictment alleges that in this manner Tang obtained approximately 66 unauthorized checks from her company and deposited them to her personal bank accounts. The total amount of these deposits exceeded $1.6 million.
The indictment further alleges that in November 2020 and December 2020 Tang wrote checks from a company bank account in amounts up to $99,000 to pay various companies for providing services to Tang’s company. The indictment alleges that Tang signed each check with the signature of her company’s authorized signers. However, Tang’s company never engaged the services of these companies, and Tang was not authorized to write the checks. Moreover, the indictment describes that three of the companies shared the same location, a residential address in Bayonne, New Jersey.
Tang made her initial appearance in federal court today in San Francisco before United States Magistrate Judge Sallie Kim. Her next court appearance is scheduled for March 15, 2022, at 2:30 p.m. before United States District Judge Richard Seeborg in San Francisco. Tang is out of custody.
The federal indictment charges Tang with five counts of bank fraud in violation of 18 U.S.C. § 1344(2). The maximum statutory sentence for a violation of 18 U.S.C. § 1344(2) is 30 years in prison, a fine up to $1,000,000 or twice the gross gain or loss amount, and five years of supervised release following prison. However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the criminal indictment are only allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
The case is being prosecuted by the Corporate and Securities Fraud Section of the United States Attorney’s Office. The prosecution is the result of an investigation by Homeland Security Investigations (HSI) and the San Francisco Police Department.
Richmond Man Sentenced to More Than 19 Years for Producing Child PornographyRead the Press Release
OAKLAND – Ranbir Singh was sentenced today to 230 months in prison in Oakland federal court today for the production of child pornography, announced United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The sentence was handed down by United States District Judge Haywood S. Gilliam, Jr.
“No statute of limitations exists for federal child pornography crimes, including the production of child pornography,” said United States Attorney Stephanie M. Hinds. “This tragic child sexual abuse occurred nine years ago, yet we still obtained justice for these victims. Their strength and perseverance in coming forward enabled our successful result. For those who suffered at any time from a similar crime, please find the strength to come forward as these victims did.”
“HSI special agents worked closely with Richmond Police Department and the U.S. Attorney’s Office for the Northern District of California to hold Singh accountable for the production of child sexual abuse material which involved the exploitation of a 16-year-old victim,” said Tatum King, Special Agent in Charge, Homeland Security Investigations (HSI) San Francisco. “Singh’s sentence will hopefully bring closure to the impacted victims and their families so they can begin the process of healing after surviving this horrible crime.”
Singh, 47, of San Pablo, California, pleaded guilty on September 15, 2021, to one count of production of child pornography. In his plea agreement, Singh admitted that on March 13, 2013, he engaged in sexual acts in an Alameda County hotel room with a female high school student. At the time, the minor female was 16 years old. He was 38 years old. The plea agreement describes that Singh set up a video camera in the hotel room before the crime occurred. Singh then persuaded the minor female to engage in sex acts. Singh positioned the camera, he admitted, to record the acts. The minor female repeatedly protested during sex and told Singh to stop, but he continued.
Singh further admitted that earlier, in January 2013, he video-recorded the same minor female sitting in a car’s backseat in a compromising and exposed sexual position.
In a memo filed for sentencing, the government describes that Singh first contacted the minor female on Facebook after he observed her at a local temple when she was 14 years old. He made in-person contact with her when she was 15 years old. At that time Singh told her he was in his 20s, despite being 38 and married with three children. In the months that followed, Singh picked up the minor female from her high school after classes or during breaks. He made ongoing attempts to pressure her into sexual acts. The sexual contact eventually occurred when the minor female was 16, a high school junior.
Singh also admitted in his plea agreement that he traveled later, in May 2013, to a casino hotel in Placer County with a different minor female. Singh admitted he knew this female was also a minor. The government’s sentencing memo describes that Singh enticed the minor female onto the trip using a ruse about tickets to a concert. Singh admitted in his plea agreement that he rented a casino hotel room for them and then showed this minor female a video recording depicting Singh’s sexual acts with the other minor female described above. Singh admitted he engaged in sex with this minor female in the Placer County casino hotel room.
Singh’s conduct traumatized both minor female victims, as the government’s sentencing memo describes. The first victim suffered severe adverse consequences that have become well documented. The second victim could not, years later, describe what happened in the Placer County hotel without weeping uncontrollably.
The initial federal charges were brought against Singh in a complaint filed March 1, 2021. The complaint reflects that a local law enforcement investigation began when the two minor female victims came forward, but they did not know Singh’s true name. After determining his identity, and years after Singh had sexually abused these minor victims, the video recordings were discovered on Singh’s laptop, having been stored there for years.
The federal investigation began when the video recordings were discovered on Singh’s laptop. There is no federal statute of limitations for charges relating to child pornography crimes, including production of child pornography, under 18 U.S.C. § 3299.
In addition to the 230 month prison term, United States District Judge Haywood S. Gilliam Jr. sentenced Singh, who was in custody at the sentencing hearing, to a 15 year term of supervised release to follow his release from prison. He began serving his prison sentence immediately.
Jonathan U. Lee is the Assistant U.S. Attorney who prosecuted the case, with the assistance of Leeya Kekona, Kay Konopaske, and Kathleen Turner. The prosecution is the result of an investigation by Homeland Security Investigations (HSI) and the Richmond Police Department.
This federal case was brought in U.S. District Court as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse, launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend and prosecute individuals who exploit children via the internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Theranos Founder Elizabeth Holmes Found Guilty of Investor FraudRead the Press Release
SAN JOSE - A jury found Elizabeth A. Holmes guilty of one count of conspiracy and three counts of wire fraud in connection with a multi-million-dollar scheme to defraud investors in Theranos, Inc., announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation (FBI) Special Agent in Charge Craig D. Fair; Food and Drug Administration (FDA) Acting Commissioner Janet Woodcock; and U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez. The verdicts follow a 15-week trial before the Honorable Edward J. Davila, United States District Judge.
“The jurors in this 15-week trial navigated a complex case amid a pandemic and scheduling obstacles,” said U.S. Attorney Hinds. “I thank the jurors for their thoughtful and determined service that ensured verdicts could be reached. The guilty verdicts in this case reflect Elizabeth Holmes’ culpability in this large-scale investor fraud and she must now face sentencing for her crimes.”
“Elizabeth Holmes chose fraud over business failure. A jury has determined, beyond a reasonable doubt, that she intentionally misled investors,” said Special Agent in Charge Craig Fair. “I want to thank the FBI San Francisco agents and analysts who spent years investigating allegations of fraud within Theranos to uncover the truth and ensure justice in this case.”
“The FDA’s Office of Criminal Investigations (OCI) will continue to investigate and help bring to justice individuals and companies responsible for putting the public health at risk,” said FDA Assistant Commissioner for Criminal Investigations Catherine A. Hermsen. “FDA-OCI is proud to have partnered with the United States Attorney’s Office and its law enforcement counterparts to bring this prosecution.”
“The U.S. Postal Inspection Service is committed to protecting consumers and investors from fraud,” said USPIS Inspector in Charge Nuñez. “We are proud of the dedication shown by Postal Inspectors and our partners at the U.S. FDA and the FBI by seeing this case through to a verdict.”
Holmes, 37, of Woodside, Calif., founded Theranos in 2003. Theranos was a blood testing company based in Palo Alto and Newark, Calif. Holmes used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to induce investments. She claimed Theranos had developed an analyzer, variously referred to as, among other things, the Theranos Sample Processing Unit (TSPU), Edison, or minilab. She claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick. She also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.
The evidence submitted during the trial demonstrated Holmes knowingly made materially false representations to investors and potential investors about the analyzer. For example, the evidence showed that Holmes knew the analyzer had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines. Evidence also showed that Holmes resorted to using conventional machines bought from third parties to perform much of Theranos’s blood testing.
The trial included evidence that Holmes made numerous misrepresentations to potential investors about Theranos’s financial condition and its future prospects. For example, the evidence showed that Holmes represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that Theranos expected to generate approximately $1 billion in revenues in 2015 when, in truth, she knew Theranos would generate only negligible or modest revenues in 2014 and 2015.
Further, the evidence showed that Holmes represented to investors that Theranos had a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos’s technology had deployed to the battlefield when, in truth, Theranos had limited revenue from military contracts and its technology was not deployed in the battlefield. The evidence showed Holmes represented to investors that Theranos had been comprehensively validated by numerous major pharmaceutical companies and provided reports to investors with logos from pharmaceutical companies falsely suggesting the pharmaceutical companies endorsed Theranos. In addition, the evidence showed that Holmes represented to investors that Theranos would soon dramatically increase the number of Wellness Centers within Walgreens stores even though Theranos’s retail Walgreens rollout had stalled because of several issues.
Holmes was initially charged on June 14, 2018. On July 28, 2020, a federal grand jury returned a superseding indictment charging Holmes with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and ten counts of wire fraud, in violation of 18 U.S.C. § 1343. One of the conspiracy counts alleged Holmes defrauded investors while the second count alleged Holmes defrauded patients who used Theranos services. Similarly, the indictment charged Holmes with ten counts of wire fraud, several of the counts alleging investor fraud and several alleging Holmes defrauded patients who were induced to purchase Theranos services.
The jury convicted Holmes of the investor wire fraud conspiracy count and three substantive wire fraud counts relating to the scheme to defraud investors, including wire transfers totaling more than $140 million. The jury acquitted Holmes of the patient-related conspiracy wire fraud count and three additional wire fraud counts. One count of wire fraud relating to a Theranos patient was dismissed during the trial. The jury could not reach a unanimous verdict with respect to three investor fraud-related counts.
Holmes faces a maximum sentence of twenty (20) years in prison, and a fine of $250,000, plus restitution, for the conspiracy count and 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.
Judge Davila has not yet scheduled Holmes’s sentencing hearing. She remains free on bond, pending further hearings.
Assistant U.S. Attorneys Robert S. Leach, Jeff Schenk, John C. Bostic, and Kelly Volkar are prosecuting the case with the assistance of Lakisha Holliman, Madeline Wachs, Elise Etter, Susan Kreider, and Leeya Kekona. The prosecution is the result of an investigation by the FBI, USPIS, and FDA Office of Criminal Investigations.
Department of Justice Awards More Than $125 Million in Grants Under the Stop School Violence ActRead the Press Release
SAN FRANCISCO –The Department of Justice today announced nearly $126 million in funding to advance school safety under the STOP School Violence Act. The grants, awarded by the Office of Justice Programs’ Bureau of Justice Assistance (BJA) and the department’s Office of Community Oriented Policing Services (COPS Office), will help institute safety measures in and around primary and secondary schools, support school violence prevention efforts, provide training to school personnel and students, and implement evidence-based threat assessments.
“The Justice Department has no greater responsibility than protecting Americans from harm,” said Attorney General Merrick B. Garland. “Schools must be safe places to learn, and today’s investment of more than $125 million under the STOP School Violence Act will help ensure that they are.”
The Students, Teachers and Officers Preventing School Violence Act of 2018 (the “STOP School Violence Act”) gives the Justice Department the authority to provide awards directly to states, units of local government, Indian tribes, and public agencies (such as school districts and law enforcement agencies) to improve security at schools and on school grounds through evidence-based school safety programs. It also provides grants to ensure a positive school climate by helping students and teachers recognize, respond quickly to, and help prevent acts of violence.
The 78 BJA annual awards, totaling almost $74 million, are intended to support training and education for school personnel and students on preventing violence against others and themselves, including anti-bullying training and specialized training for school officials to respond to mental health crises. Funds also help develop and implement multidisciplinary threat assessment or intervention teams and design technology solutions such as anonymous reporting systems, hotlines and websites.
The COPS School Violence Prevention Program (SVPP) provides up to 75% of the funding for school safety measures in and around primary and secondary schools. The 153 SVPP awards, totaling almost $52 million, are statutorily obligated to be used for coordination with law enforcement; training for local law enforcement officers to prevent student violence; locks, lighting and other deterrent measures; technology for expedited notification of local law enforcement during an emergency; and other measures that provide a significant improvement in security.
The full list of SVPP awards can be found here: https://cops.usdoj.gov/svpp-award.
A list of BJA awards, as they are made, can be found on the OJP Grant Awards page.
The COPS Office is the federal component of the Department of Justice responsible for advancing community policing nationwide. The only Department of Justice agency with policing in its name, the COPS Office was established in 1994 and has been the cornerstone of the nation’s crime fighting strategy with grants, a variety of knowledge resource products, and training and technical assistance. Through the years, the COPS Office has become the go-to agency for law enforcement agencies across the country and continues to listen to the field and provide the resources that are needed to reduce crime and build trust between law enforcement and the communities served. The COPS Office has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and tribal law enforcement agencies to fund the hiring and redeployment of more than 135,000 officers.
The Office of Justice Programs provides federal leadership, grants, training, technical assistance and other resources to improve the nation’s capacity to prevent and reduce crime, advance racial equity in the administration of justice, assist victims and enhance the rule of law. More information about OJP and its components can be found at www.ojp.gov.
Former Uber Chief Security Officer to Face Wire Fraud ChargesRead the Press Release
SAN FRANCISCO – A federal grand jury handed down a superseding indictment today adding wire fraud to the list of charges pending against Joseph Sullivan for his role in the alleged attempted cover-up of the 2016 hack of Uber Technologies Incorporated, announced Acting United States Attorney Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair. The 2016 hack implicated approximately 57 million user and driver records—Sullivan already was charged with obstruction of justice and misprision of a felony in connection with the alleged attempted cover-up of the incident.
Sullivan, 52, of Palo Alto, Calif., was serving as Uber’s Chief Security Officer when hackers revealed to him that they had accessed and downloaded an Uber database containing personally identifying information, or PII, including approximately 600,000 driver’s license numbers associated with certain Uber drivers. The superseding indictment describes how Sullivan allegedly orchestrated the disbursement of a six-figure payment to two hackers in exchange for their silence about the hack. The superseding indictment further alleges that Sullivan took deliberate steps to prevent persons whose PII was stolen from discovering that the hack had occurred and took steps to conceal, deflect, and mislead the U.S. Federal Trade Commission (FTC) about the data breach.
“Institutions that store personal information of others must comply with the law,” said Acting U.S. Attorney Hinds. “When hacks like this occur, state law requires notice to victims. Federal law also requires truthful answers to official government inquiries. The indictment alleges that Sullivan failed to do either. We allege Sullivan falsified documents to avoid the obligation to notify victims and hid the severity of a serious data breach from the FTC, all to enrich his company.”
“If Mr. Sullivan had immediately reported the breach—instead of misleading the government by withholding information—the FBI could have been better able to assist Uber; also, the data breach of at least one additional large tech company may have been prevented,” said FBI Special Agent in Charge Fair. “This case should serve as an example to corporations and company executives that working with the FBI is crucial when dealing with the aftermath of a breach; such communication is a best practice in preventing the loss of data and private information.”
The newly filed allegations of wire fraud center around Sullivan’s attempt to defraud Uber’s drivers by failing to disclose the 2016 breach. Specifically, the superseding indictment describes how California law, under certain circumstances, requires businesses operating in the state to notify residents whose information may have been stolen in such data breaches. The superseding indictment further alleges that, rather than notify the drivers of the breach, Sullivan took deliberate steps to ensure Uber’s drivers and others did not learn the true nature of the incident. Among the steps taken by Sullivan to suppress discovery of the breach was his plan to have two of the hackers execute non-disclosure agreements. The non-disclosure agreements falsely stated the hackers had neither taken nor stored Uber’s data in the 2016 breach. In addition, Sullivan allegedly misrepresented to Uber’s new chief executive officer the nature and scope of the data that was compromised; falsely suggested to the new CEO that the incident was not a data breach; and sent an email falsely claiming that the data breach was not, in fact, a data breach at all, but rather an incident that was no more severe than other security incidents.
The superseding indictment also incorporates the obstruction of justice and misprision of a felony charges described in previously filed documents. Documents filed earlier in the case provide background for the charges. For example, the documents describe how Sullivan played a pivotal role in responding to FTC inquiries about Uber’s cyber security. Specifically, Uber had been hacked in September of 2014 and the FTC was gathering information about that 2014 breach. After the FTC demanded responses to written questions and required Uber to designate an officer to provide testimony under oath on a variety of topics, Sullivan assisted in the preparation of Uber’s responses to the written questions and was designated to provide sworn testimony on a variety of issues. On November 14, 2016, approximately 10 days after providing his testimony to the FTC, Sullivan received an email from a hacker informing him that Uber had been breached again. Sullivan’s team was able to confirm the breach within 24 hours of his receipt of the email.
Rather than report the 2016 breach, Sullivan allegedly took deliberate steps to prevent knowledge of the breach from reaching the FTC. For example, as described above, Sullivan arranged to pay off the hackers in exchange for them signing non-disclosure agreements that contained the false representation that the hackers did not take or store any data. In addition, Sullivan sought to pay the hackers off by funneling the payoff through a bug bounty program—a program in which a third-party intermediary arranges payment to so-called “white hat” hackers who point out security issues but have not actually compromised data. In addition, Uber paid the hackers $100,000 in BitCoin in December 2016, despite the fact that the hackers refused to provide their true names. Uber was ultimately able to identify the two hackers in January 2017 and required them to execute new copies of the non-disclosure agreements in their true names. The two hackers identified by Uber were ultimately prosecuted in the Northern District of California. Both pleaded guilty on October 30, 2019, to computer fraud conspiracy charges and now await sentencing. The separate guilty pleas entered by the hackers demonstrate that after Sullivan assisted in covering up the nature of the hack of Uber, the hackers were able to commit an additional intrusion at another corporate entity—Lynda.com—and attempt to ransom that data as well.
The superseding indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Sullivan is charged with three counts of wire fraud, in violation of 18 U.S.C. § 1343; obstruction of justice, in violation of 18 U.S.C. § 1505; and misprision of a felony, in violation of 18 U.S.C. § 4. If convicted, he faces a maximum statutory penalty of 20 years in prison for each count of wire fraud, five years in prison for the obstruction charge, and a maximum three years in prison for the misprision charge. 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.
Sullivan’s arraignment on the new charges has not yet been scheduled.
Uber’s new management ultimately discovered the truth about the breach and disclosed the breach publicly, and to the FTC, in November 2017. Since that time, Uber has responded to additional government inquiries.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. The prosecution is the result of an investigation by the FBI.
Former San Francisco Public Works Director Admits to String of Briberies and Corruption During Years in OfficeRead the Press Release
SAN FRANCISCO – Former San Francisco City Hall public official Mohammed Nuru agreed in a plea agreement filed today to plead guilty to honest services wire fraud, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service–Criminal Investigation Special Agent in Charge Mark H. Pearson.
Today’s development follows the January 15, 2020, 79-page federal complaint filed against then San Francisco Department of Public Works (DPW) Director Mohammed Nuru charging him with public corruption and describing a long-running scheme involving multiple bribes and kickbacks during his tenure as DPW’s Director. Nuru, 59, of San Francisco, served as DPW’s Director from 2011 until charges were brought against him in 2020. Nuru was also charged in a second federal complaint filed on January 28, 2020, with lying to a federal agent in the course of the San Francisco City Hall corruption investigation. Today, in anticipation of entering his plea agreement resolving his cases, Nuru was arraigned today on an information – a charging document – that charges him with his sweeping scheme to defraud the San Francisco public of its right to his honest services in violation of 18 U.S.C. §§ 1343 and 1346.
“Mohammed Nuru admits to a staggering amount of public corruption in his plea agreement,” said Acting United States Attorney Stephanie M. Hinds. “For years, Nuru held a powerful and well-paid public leadership position at San Francisco City Hall, but instead of serving the public, Nuru served himself. He took continuous bribes from the contractors, developers, and entities he regulated. He now faces a prison sentence for enriching himself at the expense of the public as he sat in high office. Federal authorities will investigate public corruption wherever it leads in San Francisco and throughout the district.”
“Today’s announcement, while significant, is by no means the end of the FBI’s investigation into the corrupt conduct we have uncovered in San Francisco city government," said FBI Special Agent in Charge D. Fair. “We will continue to hold accountable those who seek to personally benefit by corrupting the fair administration of public business and we will persist in our commitment to protect the integrity of the institutions that serve the people of San Francisco.”
“Our communities place great trust and responsibility in our public figures. Mohammed Nuru ultimately betrayed this trust when he abused his power to defraud the City and County of San Francisco and its people,” said IRS Criminal Investigation Special Agent in Charge Mark H. Pearson. “We will not tolerate public corruption and will hold perpetrators accountable for their actions. Today’s guilty plea is a direct result of the hard work and dedication of IRS Criminal Investigation and our law enforcement partners towards obtaining justice.”
Nuru signed today’s plea agreement and the agreement has been filed with the United States District Court in preparation for Nuru’s upcoming appearance to enter his guilty plea orally. As the plea agreement outlines, before Nuru was appointed Director of DPW in 2011 he became DPW’s Deputy Director of Operations in 2000. The Deputy Director of Operations is DPW’s second most senior position, behind only the Director. In 2014, Nuru was also appointed to the Board of the Transbay Joint Powers Authority (TJPA) and eventually served as its Chair. As Deputy Director and eventually Director of DPW, and as Chair of the TJPA, Nuru exercised great influence over San Francisco (the City) business and policy, including public contracts, permits, and construction projects. His power and influence extended beyond DPW’s jurisdiction to numerous other City departments and agencies, making him one of the most powerful public officials in the City.
Nuru admits in his plea agreement to a spectrum of public corruption involving bribery and kickbacks he received while in DPW leadership. His admissions are summarized below:
Walter Wong:
In his plea agreement, Nuru admits he received a stream of bribes from Walter Wong. Wong did business in the City through Walter Wong Construction, among other businesses. In exchange for Wong’s bribes, Nuru helped Wong secure City contracts. Sometimes Nuru provided Wong with confidential insider City information on competitors’ bids or specifications. At other times Nuru allowed Wong to structure the requirements for the City’s Request for Proposals (RFP) for projects ahead of time, to tailor their requirements to ensure that Wong’s company would be the most-qualified bidder. Nuru also helped Wong expedite permit approvals.
Nuru admits in his plea agreement that his “corrupt relationship” with Wong began in approximately 2008 when Nuru was the Deputy Director for Operations at DPW. Wong installed a gate for free at Nuru’s San Francisco home in exchange for future business with DPW and the City. Wong continued to perform construction services for free, or nearly free, at Nuru’s San Francisco home and later primarily at Nuru’s vacation ranch property in Colusa County.
Nuru admits that, in exchange for Wong providing construction and other things of value, he exercised his official influence and took actions to benefit Wong. In one example outlined in the plea agreement, Nuru used DPW’s emergency contract process, which did not require a public bidding process, to direct construction work to Walter Wong Construction on a navigation center located at 1515 South Van Ness Street and on the Jelani House (a housing shelter), resulting in City payments to Wong’s company during fiscal years 2017-2018 and 2019-2020. In another example, Nuru used his position and official influence to direct DPW, the Market Street Association, and the San Francisco Public Utilities Commission to purchase Christmas lights from one of Wong’s businesses, regularly leading to tens of thousands of dollars’ worth of purchases.
Nuru further admits in his plea agreement that:
o between approximately 2008 and January 2020, Wong provided in excess of $260,000 in labor and materials for work on Nuru’s San Francisco home and Colusa County ranch.
o Wong paid for home furnishings for Nuru, including a chandelier, kitchen appliances, and furniture.
o Wong paid for Nuru to travel to China multiple times and to South America on one occasion, which included reimbursing Nuru in cash for the cost of international flights. Wong paid for Nuru and Sandra Zuniga, his girlfriend at the time, to accompany Nuru to South America and paid for their stay at the Ritz-Carlton in Santiago, Chile.
o On multiple occasions, Wong handed Nuru envelopes of cash, often as much as $5,000 at a time.Walter Wong was charged in June 2020 with conspiracy to defraud the public of its right to honest services and with conspiracy to engage in money laundering, both involving Nuru. Wong entered a guilty plea and agreed to cooperate with the government’s San Francisco City Hall corruption investigation.
Multimillion-Dollar Mixed-Use Development:
Nuru admits he received free travel, gifts, and benefits, for working with Walter Wong to use Nuru’s official position to benefit a billionaire developer from China, referred to as DEVELOPER 1 in the plea agreement, who was developing a large multimillion-dollar mixed use project in San Francisco. Wong, who worked as a consultant for DEVELOPER 1 on several of his large developments in the City, introduced Nuru to DEVELOPER 1. Nuru met with Wong, another Department of Building Inspection official, DEVELOPER 1, and others over dinner on multiple occasions and discussed DEVELOPER 1’s projects. Nuru never paid for the dinners. Nuru admits that he also met with DEVELOPER 1 multiple times in China. According to Nuru, DEVELOPER 1 owned multiple hotels in China, including five-star hotels. Nuru received gifts from him, including free hotel stays.
Nuru admits that, in exchange, he used his official position and influence to help DEVELOPER 1 obtain necessary approvals for his large, multimillion-dollar mixed-use project. Nuru admits, among other things, that he told Sandra Zuniga that DEVELOPER 1 was upset because he had spent large amounts of money and had provided “a whole list of things” that Nuru said “we need to get done[.]” Nuru admits that whenever DEVELOPER 1 or one of his employees notified him of an issue, Nuru directed one of his DPW managers to solve the problem and expedite the process. Nuru also used his official influence with other City officials to solve problems encountered by DEVELOPER 1 that fell within the other City officials’ area of responsibility.
Recology:
Recology Inc. is a waste management company headquartered in San Francisco and the parent company of Sunset Scavenger Company, Golden Gate Disposal & Recycling Company, and Recology San Francisco (referred to as the “SF Recology Group” and, collectively with Recology Inc., as “Recology”). Recology Inc. provided refuse collection and disposal services for residential and commercial customers in the City, as well as for the City itself, through the SF Recology Group.
As Director of DPW, Nuru presided over the process governing the rates Recology could charge in San Francisco. Nuru recommended to the Rate Board whether to approve any rate increase for Recology. Nuru also influenced “tipping fee” rates that Recology charged DPW when DPW dumped materials at a Recology facility, Sustainable Crushing. Nuru could approve, deny, or affect operational changes that Recology wanted to make in San Francisco which, Nuru admits in his plea agreement, gave him the ability in his official capacity to affect Recology’s business.
Nuru admits he accepted numerous valuable items from Recology and used his official position to help Recology’s business. Among other things, Recology paid for soil to be delivered to Nuru’s ranch property in Colusa County, for expensive meals for Nuru, and for a two-night trip to New York on the City’s business in December 2017.
Nuru admits that he also requested Recology to pay, and Recology did pay, hundreds of thousands of dollars to a San Francisco non-profit (Non-Profit A) in the form of donations for a cleaning program known as Giant Sweep. Non-Profit A would then donate the payments to another non-profit that administered funds for the Giant Sweep program. Nuru admitted he could then access the funds for a variety of other uses—including procuring goods and services for staff meals and appreciation events, volunteer programs, merchandise, community support, and events from specific vendors—in addition to their originally designated purpose for Giant Sweep. From 2014 through the end of 2019, Recology donated approximately $150,000 per year for Giant Sweep, in $30,000 installments—for a total of approximately $750,000.
Nuru also admits he requested Recology hire his son. Recology hired him and paid him, between 2015 and 2017, approximately $17,000. Recology also funded a paid internship for Nuru’s son at a different non-profit organization and, between 2017 and 2018, paid approximately $23,600 to fund the paid internship.
Nuru admits he requested that Recology fund his DPW holiday parties. Between 2016 and 2019, Recology paid approximately $60,000 for that purpose. Recology made the payments through the Lefty O’Doul’s Foundation, a non-profit organization run by Nick Bovis.
Two former Recology executives, Paul F. Giusti and John F. Porter, have been charged in this investigation. Giusti was charged in November 2020, and Porter was charged in April 2021. Both men were charged with bribery of Nuru and money laundering involving Nuru. Giusti pleaded guilty in August 2021 to engaging in a conspiracy to bribe Nuru and is cooperating with the government’s San Francisco City Hall corruption investigation. Porter’s charges remain pending.
The three subsidiaries of Recology, Inc. now have new leadership and have implemented enhanced corporate compliance programs to end any corrupt practices. Recology resolved corporate charges brought against them through a deferred prosecution agreement with the government. Pursuant to the agreement, the companies paid a $36 million fine, agreed to implement enhanced corporate compliance programs, and agreed to fully cooperate in the government’s San Francisco City Hall corruption investigation.
Nick Bovis:
Nuru admits in his plea agreement that he received multiple bribes from restaurateur Nick Bovis. The bribes were in exchange for Nuru using his official acts and influence to assist, or to promise to assist, in public business opportunities with the City. The bribes included free meals and entertainment for Nuru, his family, and associates at restaurants owned by Bovis and thousands of dollars in free appliances for Nuru’s ranch property. Nuru also anticipated and expected tens of thousands of dollars in kickbacks from proceeds that Bovis would earn from the City concessions or contracts awarded due to Nuru’s official acts or influence to assist Bovis.
In one plea agreement example, Nuru admits he helped Bovis in a plan to win a bid for a restaurant lease at San Francisco International Airport (SFO). Bovis expected to make money from the SFO concession, and Nuru expected Bovis would continue to provide bribes in exchange for Nuru’s help with the airport concession process and other public contracts.
In another example, Nuru admits he gave Bovis a price list of appliances that Nuru wanted for his ranch in or about 2018, a time when Bovis was seeking Nuru’s assistance with the SFO concession and other City business opportunities. Bovis purchased the appliances and brought them to Nuru’s ranch. Nuru accepted them as an exchange for his continued official acts and influence to help Bovis, and he did not pay for them. The appliances were worth approximately $22,000.
Nick Bovis pleaded guilty in May 2020 to wire fraud and honest services wire fraud involving Nuru and agreed to cooperate in the government’s San Francisco City Hall corruption investigation.
Florence Kong:
Nuru admits in his plea agreement that he accepted a gold Rolex watch from Bay Area businesswoman Florence Kong. The watch was valued at approximately $36,550. Nuru admits he used his official position to benefit Kong’s businesses and did so in exchange for the Rolex and for cash, free meals, and other items of value provided by Kong, including an iron fence that Kong installed at Nuru’s ranch. In one example, Nuru states that he used his official position to direct business to SFR Recovery Inc., a recycling business that Kong owned.
Florence Kong was charged and pleaded guilty to bribery of Nuru and to making false statements to FBI agents during the investigation. She was sentenced in February 2021 to one year and one day in prison and ordered to pay a $95,000 fine.
Balmore Hernandez, William Gilmartin, & Alan Varela:
Nuru admits in his plea agreement that between 2013 and January 2020 he accepted a series of bribes and kickbacks from Balmore Hernandez, William Gilmartin, and Alan Varela in exchange for past and future official actions benefitting their City business ventures. Nuru received free meals and entertainment, cash, and free labor and materials for his ranch – including a brand new tractor. Nuru also expected to receive a portion of the proceeds from anticipated City contracts awarded to them or their associates as a result of Nuru’s official acts or influence on their behalf.
In one example, Nuru admitted he helped Varela and Gilmartin’s joint venture win a DPW supply contract and a related lease with the Port of San Francisco (the “Port”) to operate an asphalt recycling plant and a concrete plant on the Port’s land. In the early stages, Nuru helped the group prepare their proposal by providing them inside non-public information on the project. The non-public information was delivered to Hernandez through emails or phone calls or through regular dinning meetings in San Mateo with Gilmartin and Hernandez. Gilmartin paid approximately $20,000 for the dinners, with the parties agreeing that Nuru’s dinners were worth approximately $7,000.
Nuru admits that Gilmartin promised him $100,000 for his official assistance to pressure a large developer to select one of Gilmartin and Varela’s joint-venture partners for a large project in San Francisco. The large developer complied with Nuru’s request because, as Nuru admits, the large developer needed DPW approvals for the project and for other large developments in the City.
Nuru admits that he received approximately $25,000 in cash from Hernandez and received approximately $250,000 in free labor and materials from Hernandez at Nuru’s ranch.
Nuru also requested the group give him a tractor. In February 2019, Alan Varela delivered a new tractor to the Nuru’s ranch, a benefit valued at approximately $20,000.
Balmore Hernandez was also charged in connection with this investigation. He pleaded guilty to honest services wire fraud in October 2020 and agreed to cooperate in the government’s San Francisco City Hall corruption investigation.
William Gilmartin was charged in connection with this investigation. He pleaded guilty to conspiracy to commit honest services wire fraud in May 2021 and agreed to cooperate in the government’s San Francisco City Hall corruption investigation.
Alan Varela was charged in connection with this investigation. He pleaded guilty to conspiracy to commit honest services wire fraud and was sentenced in September 2021 to two years in prison and ordered to pay a $127,000 fine.Sandra Zuniga Money Laundering:
Nuru admits that in or about 2010 he bought a 10-acre lot in Colusa County and developed it into his vacation ranch with free labor and materials provided by City contractors seeking favors from him. Nuru admits he also used the proceeds of his crimes to pay the mortgage. To conceal and launder the source of the proceeds, Nuru states he funneled the money through Sandra Zuniga who made the monthly $1,000 mortgage payments out of her checking account. Nuru admits that from 2014 through August 2017, he typically gave Zuniga approximately $1,000 per month, generally in cash, and she deposited the money into her bank account. She then made the $1,000 payment towards the mortgage. In this way, Zuniga paid at least $42,000 of the mortgage.
Zuniga was charged and pleaded guilty in March 2021 to engaging in a conspiracy to launder money with Nuru. She agreed to cooperate in the government’s San Francisco City Hall corruption investigation.
Other Bribes:
Nuru admits in his plea agreement that around 2018 he accepted a bribe of $20,000 in cash from a former government employee in exchange for Nuru using his position to help a particular person obtain an engineering job with the City. Nuru received the cash in three installments of $10,000, $5,000, and $5,000. Ultimately, the individual failed to maintain employment with the City.
Nuru also admits he accepted cash bribes from a prominent developer in San Francisco. The cash bribes usually consisted of a few thousand dollars. The developer would later call Nuru when he had any problems with DPW-related approvals or other matters that Nuru could help resolve.
In his plea agreement, Nuru admits guilt and agrees to plead guilty to one count of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346. If convicted of the count, he faces a maximum penalty of 20 years in prison and a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss of the crime.
The government indicates in the plea agreement its intent to ask for up to a 108 month (9 year) sentence for Nuru. However, any sentence imposed by the court will follow only after the court’s consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Today, in a procedural step towards orally entering his guilty plea, Nuru was arraigned and pleaded not guilty before United States Chief Magistrate Judge Joseph C. Spero to an information charging him with a count of honest services wire fraud in violation of 18 U.S.C. §§ 1343 and 1346.
Nuru’s next appearance is currently set before United States District Judge Susan Illston on January 14, 2022, at which he is currently scheduled to formally enter his guilty plea pursuant to his plea agreement. Nuru remains out of custody on bond.
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This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco. To date, 12 individuals and three corporate entities have been charged, including two high-ranking San Francisco public officials, Nuru and Harlan Kelly. Multiple city contractors and facilitators have been charged. Allegations in the complaint filed against Harlan Kelly assert that he received thousands of dollars in airfare, meals, jewelry, and travel expenses, along with repair work on his house.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 and IRS-Criminal Investigation.
San Francisco CEO Sentenced to Three Years for Scamming Banks and Investors Out of $8 MillionRead the Press Release
SAN FRANCISCO – Andrew James Chapin was sentenced in federal court today to 36 months in prison after pleading guilty to wire fraud, bank fraud, and securities fraud, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Chapin was also ordered to pay over $8 million in restitution to his victims. The sentence was handed down by United States District Judge Maxine M. Chesney.
Andrew James Chapin, 33, of San Francisco, started a company in Boston and in 2016 moved it to San Francisco and renamed it Benja Inc. He was Benja’s CEO. As a digital advertising company, Benja provided “shoppable media” by placing digital advertisements for a company’s overstocked goods that allowed shoppers to purchase products in the advertisement itself without being redirected to another website.
From June 2019 through September 2020 Chapin was looking for additional investors and lines of credit for Benja. He told creditors and prospective investors that Benja generated $6,200,000 and $13,200,000 in revenue in 2018 and 2019, respectively, and had signed large contracts with numerous well-known national sportswear companies to place advertisements for their excess inventory.
Chapin admitted in his plea agreement that these statements were false. He further admitted that he had no contracts with these companies and that he falsified Benja’s revenue. On a Benja investor call, Chapin admitted he arranged for people to impersonate employees from the well-known national corporations to bolster Chapin’s false representations of business relationships with the companies.
Chapin detailed in his plea agreement that he repeatedly submitted false information about Benja to a victim bank to obtain a credit line totaling $5,000,000. Chapin took advances on the line of credit for his company and used the money to pay off creditors and personal credit cards and to put money into his personal cryptocurrency exchange account.
Chapin also admitted his misrepresentations induced investors to fund Benja. His false statements produced investments of $1,000,000 from one venture capital firm and $1,800,000 from a SAFE (simple agreement for future equity) fundraising round involving multiple individual investors. To obtain these investments, Chapin created documents showing that Benja had millions in revenue and account receivables from companies that had never contracted with Benja.
In one example outlined in his plea agreement, on March 23, 2020, Chapin directed a New York venture capital firm to Benja’s virtual data room that displayed a spreadsheet showing Benja’s total 2019 revenue exceeded $13,000,000 and also listed contracts with national sportswear companies that provided over $7,000,000 of Benja’s total 2019 income. Benja, however, had no contracts with the sportswear companies. Chapin fabricated the spreadsheet. Chapin also admitted that in a reference call he paid a Benja employee to impersonate a national running shoe company’s representative and arranged for another individual to impersonate a national sportswear company’s representative. The venture capital firm relied on these misrepresentations and invested $1,000,000 in Benja. Chapin used the money to pay off a creditor.
Chapin admitted defrauding individual investors too. In his plea agreement Chapin admitted that in November 2018 he emailed false financial statements to an individual investor that reflected Benja had revenue of more than $4,000,000 in 2018. Chapin told the individual that a St. Louis, Missouri, venture capital firm was considering a $1,500,000 investment in Benja, although Chapin knew the firm had already declined to invest in Benja. Chapin also arranged for a person to impersonate the St. Louis venture capital firm’s manager during a reference call with the investor. The impersonator told the individual investor that a third party had verified Benja’s financials and had made customer reference calls about Benja that produced positive results. Chapin then provided false contact information for the St. Louis venture capital firm’s manager which allowed Chapin – not the venture capital firm’s manager – to respond to the individual’s questions about Chapin’s shareholder agreement. As a result, the individual investor signed the shareholder’s agreement and purchased 1,278 shares of common stock in Benja for $100,000. Chapin used the money to pay personal credit card bills and to fund his personal cryptocurrency accounts.
In a memo filed for sentencing, the government tallied the losses from Chapin’s bank fraud, his fraud upon a venture capital firm, and his fraud upon 11 individual investors. The loss amount from Chapin’s frauds totaled $8,069,900. Of that amount, at least $1.8 million came from defrauding the individual private investors.
Chapin was originally charged by federal complaint on November 23, 2020, and later by information on May 27, 2021. He pleaded guilty on June 16, 2021, to bank fraud in violation of 18 U.S.C. § 1344, wire fraud in violation of 18 U.S.C. § 1343, and securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5.
The case is prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation. The United States Attorney’s Office and the Federal Bureau of Investigation thank the San Francisco Regional Office of the Securities and Exchange Commission, which conducted a parallel investigation.
Former Netflix Executive Sentenced to 30 Months for Bribes and Kickbacks from Netflix VendorsRead the Press Release
SAN JOSE –Michael Kail, the former Vice President of IT Operations at Netflix, was sentenced today to 30 months in federal prison for his convictions for honest services wire, mail fraud, and money laundering, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Craig D. Fair, and IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson. Kail was also ordered to forfeit $700,000, pay a $50,000 fine, and serve a three term of supervision upon release from prison. The sentence was handed down by the United States District Judge Beth Labson Freeman.
Kail was indicted April 26, 2018, and charged with nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering, in violation of 18 U.S.C. §§ 1343 (wire fraud), 1341 (mail fraud), 1346 (honest services fraud), and 1957 (money laundering).
On April 30, 2021, after a three-week trial, a jury returned guilty verdicts on 28 of the 29 counts charged. The jury also made findings to support the forfeiture of property Kail had purchased with the proceeds of his fraud.
“Bribery and kickbacks are pernicious crimes that stifle Silicon Valley’s culture of competitive innovation,” said Acting United States Attorney Stephanie M. Hinds. “Michael Kail used his highly compensated Netflix position to siphon cash and valuable stock options from his tech vendors, the same vendors whose Netflix contracts he signed and whose technologies he pushed his teams to use. Such crimes come with a cost, as reflected by the prison sentence that Kail will now serve.”
“As alleged in the indictment, Mr. Kail chose which IT contracts were awarded by Netflix according to how he was able to bribe those companies to provide him with financial compensation, rather than choosing them on their merit,” said FBI San Francisco Special Agent in Charge Craig D. Fair. "Mr. Kail not only defrauded Netflix, but he also allowed for a ‘pay-to-play’ scheme, which he concocted, to take precedence over the free and fair competitive business environment that drives our economy."
“Mr. Kail’s greed to enrich himself cost Netflix and its shareholders money and property by agreeing to contracts for goods and services beyond what the company needed or would have paid for,” stated IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson. “Mr. Kail abused a position of trust and facilitated a scheme that benefited himself. IRS-Criminal Investigation is committed to uncovering these heinous acts of greed and prosecute such malevolent crimes.”
Kail, 52, of Los Gatos, was employed at Netflix as the Vice President in charge of IT Operations from 2011 until July 2014. Netflix policies prohibited conflicts of interest by its employees by its Code of Ethics and its “Culture Deck,” which required the disclosure of actual or apparent conflicts of interest and the reporting of gifts from entities seeking to sell products or services to the company.
Kail, as Netflix’s Vice President of IT Operations, approved the contracts to purchase IT products and services from smaller outside vendor companies and authorized payments to them. Evidence produced at trial proved that Kail solicited and received bribes and ‘kickbacks’ from nine tech companies providing products or services to Netflix. In exchange, Kail approved millions of dollars in contracts for goods and services provided by them to Netflix. Kail received over $500,000 and stock options from the outside companies. He used his kickback payments in multiple ways, including to pay his personal expenses and to buy a home in Los Gatos, California.
Kail facilitated the payments, the evidence at trial showed, by creating and controlling a limited liability corporation called Unix Mercenary, LLC. The LLC was created on February 7, 2012, and it had no employees and no business location. Kail was the sole signatory to its accounts.
Two days before Unix Mercenary was registered with the California Secretary of State, Kail signed a Sales Representative Agreement to receive cash payments from Netenrich, Inc., amounting to 12% of any billings from Netenrich to Netflix for staffing and IT services. Later in 2012, Kail’s Unix Mercenary began to receive 15% of all billing payments that VistaraIT, LLC, a wholly owned company of Netenrich, received from Netflix. From 2012 to 2014, Netenrich paid Unix Mercenary approximately $269,986, and VistaraIT paid Unix Mercenary approximately $177,863.
These payments stopped in late 2014, after Kail left Netflix.
Evidence at trial showed that several more companies paid Kail. Neither Netenrich, Vistara, nor any of the other companies were charged with criminal conduct. Only Kail was charged with devising the criminal scheme that defrauded Netflix.
In 2013, the trial evidence showed, Platfora, Inc. sought to do business with Netflix. In June 2013 – at a time Kail was seeking to buy his expensive Los Gatos residence – he met with Platfora employees and signed an evaluation agreement for Netflix engineers to test Platfora’s product, a data analytics software program. On July 13, 2013, Kail met with Platfora’s CEO for drinks and later thanked him in an email saying, “I look forward to helping you in both a Netflix and Advisory capacity.” Two days later, Kail signed an “advisory” agreement with Platfora that provided him with the right to purchase up to 75,000 options, approximately .25% of the company. Shortly thereafter, Kail provided Platfora with Netflix’s internal information about Platfora’s competitors’ prices. In September 2013, while he was a compensated “advisor” to Platfora, Kail signed, on behalf of Netflix, a multi-stage $250,000 per year contract with Platfora. Internally, Kail urged his Netflix employees to use the product, despite their satisfaction with a competing product for which Netflix was already paying. When an inquiry from the Netflix CEO ensued, Kail falsely denied that he was formally working with Platfora. Kail resigned from his advisory position at Platfora the following week.
Additional evidence showed that Kail received payments or compensation from other companies doing business with Netflix. In June 2012, he became an “advisor” to and received options for shares from the company Sumo Logic, Inc. The next month, Kail authorized and signed, on behalf of Netflix, a vendor agreement between Netflix and Sumo Logic. The agreement led to over $300,000 in payments by Netflix, approved by Kail, to Sumo Logic. Kail then approved a further $800,000 two-year contract with Sumo Logic.
Similarly, trial evidence showed Kail received $5,000 per month consulting for Netskope, Inc., and also received options to purchase 106,000 shares of Netskope stock options. Kail authorized Netflix to enter a $112,500 contract with Netskope just weeks before Kail resigned from Netflix. Kail also purchased, on behalf of Netflix, a small amount of storage from Maginatics, Inc., and then became an “advisor” to Maginatics, allowing him to purchase up to 30,000 shares. Kail thereafter increased Netflix’s purchase of storage from Maginatics by tenfold. Kail made approximately $120,000 when Maginatics was sold the next year. Kail also was promised stock options in the company ElasticBox, Inc., and thereafter signed a June 2013 Netflix order for a $600,000, 3-year subscription to ElasticBox’s cloud services. Later that year, he signed an additional $850,000 contract for more cloud services. Kail also accepted an “advisor” position with Numerify, Inc. in February 2014 that provided him an early option to purchase 36,000 shares. Three months later Kail, on behalf of Netflix, signed an $85,000 subscription agreement for Numerify’s software. Also in February 2014, Kail signed a $120,000 contract with Docurated, Inc., which had previously compensated him with two rounds of options, some of which Kail had already exercised.
The evidence at trial further showed that Netflix IT employees involved with testing some of these products did not know that many of the startups’ software was being paid for by Netflix; rather, they assumed many of the products were unpaid “pilots” of untested software, a routine practice in the tech industry. The employees further did not know that Kail was being paid by the companies.
United States District Judge Beth Labson Freeman further ordered Kail to surrender on March 8, 2022, to begin serving his prison sentence.
Assistant U.S. Attorneys Colin Sampson, Kyle Waldinger, Christopher Kaltsas, and Daniel Kaleba (former) prosecuted the case with the assistance of Laurie Worthen. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.
Justice Department Awards More Than $17.5 Million to Support Project Safe NeighborhoodsRead the Press Release
SAN FRANCISCO – The Department of Justice announced today that it has awarded more than $17.5 million in grants to support the Project Safe Neighborhoods (PSN) Program. Funding will support efforts across the country to address violent crime, including the gun violence that is often at its core. The San Diego Association of Governments was awarded $409,699 to administer PSN grant funds in the Northern District of California.
The Bureau of Justice Assistance (BJA), part of the department’s Office of Justice Programs (OJP), will administer the 88 grant awards, which are being made to designated fiscal agents to support local PSN projects that work in partnership with U.S. Attorneys’ Offices.
“This latest Project Safe Neighborhoods grant is critical to addressing the violent crime threatening cities and towns all across our country,” said Deputy Attorney General Lisa O. Monaco. “Ensuring the safety of all Americans is the highest priority for the Department of Justice, but when it comes to violent crime, there is not a one-size-fits-all solution. We have to work closely with local public safety agencies as well as community organizations to craft individual strategies unique to each community’s needs. Programs like Project Safe Neighborhoods and the funding it provides allow us to do just that.”
Grant funds in the Northern District of California will support ongoing efforts for violence reduction by identifying individuals who are most at risk of either engaging in gun violence or falling victim to gun violence. This work will focus on violence interruption strategies that are based on well-known models which have been rigorously evaluated and found to be successful at significantly reducing severe violence and reducing the re-arrest rate among program participants.
“Investing in our communities, supporting victims and building a justice system that both keeps people safe and earns their trust – these are mutually reinforcing goals that stand at the heart of Project Safe Neighborhoods,” said Principal Deputy Assistant Attorney General Amy L. Solomon for OJP. “The Office of Justice Programs is pleased to join with our U.S. Attorneys’ Offices, and with jurisdictions across the country, as we work together to meet the challenges of crime and violence and achieve our shared aspirations of public safety and community trust.”
In May 2021, Attorney General Merrick B. Garland announced a new effort to reduce violent crime, including the gun violence that is often at its core. Integral to that effort was the reinvigoration of PSN, a two-decade old evidence-based and community-oriented program focused on reducing violent crime. The updated PSN approach, outlined in the department’s Comprehensive Strategy for Reducing Violent Crime issued by Deputy Attorney General Monaco, is guided by four key principles: fostering trust and legitimacy in our communities, supporting community-based organizations that help prevent violence, setting focused and strategic enforcement priorities and measuring the results of our efforts. The fundamental goal is to reduce violent crime, not simply to increase the number of arrests or prosecutions.
This fall, U.S. Attorney’s Offices across the country have enhanced their violent crime reduction efforts to ensure alignment with the department’s comprehensive violent crime reduction strategy. U.S. Attorneys’ Offices have engaged in outreach to law enforcement and other agencies and organizations serving communities to identify the most significant drivers of violence in their districts. Working together with a broad coalition of stakeholders, the U.S. Attorneys’ Offices are addressing the most pressing violent crime issues in their district to make our neighborhoods safer for all.
PSN programs are led by U.S. Attorneys’ Offices in collaboration with local public safety agencies, community stakeholders and other agencies and organizations that work to reduce violent crime.
For a list of all grantees, please visit: LINK HERE.
East Bay Resident Sentenced to Five Years in Prison for Targeting Minors on Instagram in Sexual Extortion SchemeRead the Press Release
OAKLAND – Delaney Tang was sentenced today to 60 months in prison for solicitation of child pornography and conspiracy to commit cyberstalking in connection with a sexual extortion scheme, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Haywood S. Gilliam, U.S. District Judge.
Tang, 22, of Oakland, pleaded guilty to the charges on April 28, 2021. The plea agreement describes how Tang used Instagram to harass, threaten, and successfully extort a 12 year old victim into sending him nude photos and videos of herself. The agreement further describes how Tang provided instructions to the victim specifying what she must wear, say, and do in her photos and videos as well as how Tang also attempted to coerce the victim into filming a video of herself performing additional sex acts with an underage male. Tang received assistance executing the scheme from co-defendant Vincenz Sison, 21, of Concord. Sison attempted to convince the victim to comply with Tang’s extortion requests. Ultimately, Tang publicly posted to Instagram and other sites sexually explicit images and videos of the 12-year-old victim after she stopped responding to Tang’s requests for additional photos and videos.
The government’s memorandum regarding Tang’s sentencing further explains how Tang used Instagram to extort additional victims, including seven identified underage victims who were between 11 and 14 years old.
On February 10, 2021, the United States filed a criminal information charging Tang and Sison with conspiracy to commit cyberstalking, in violation of 18 U.S.C. §§ 371 & 2261A(2)(B), and charging Tang with an additional count of solicitation of child pornography, in violation of 18 U.S.C. § 2252A(a)(3)(B). Tang pleaded guilty to both counts charged against him.
In addition to the prison term, Judge Gilliam ordered Tang to serve an eight year period of supervision following his release from prison. Tang will surrender to begin serving his sentence on January 19, 2022. Tang’s next scheduled appearance is on January 12, 2022, at 10:00 a.m., for a hearing to determine restitution for his victims.
For his part in the scheme, Sison pleaded guilty to conspiracy to commit cyberstalking on April 28, 2021. Judge Gilliam scheduled Sison’s sentencing for February 2, 2022, at 10:00 a.m.
Special Assistant U.S. Attorney Christopher Vieira is prosecuting the case with the assistance of Marina Ponomarchuk. The prosecution is the result of an investigation by the San Francisco Police Department and the Department of Homeland Security.
Bay Point Man Sentenced to over 17 Years in Prison for Production of Child PornographyRead the Press Release
OAKLAND - Sergio Luiz Cruz Esparza was sentenced today to 210 months in prison for producing child pornography, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations Special Agent in Charge Tatum King. The sentence was handed down by the Hon. Yvonne Gonzalez Rogers, U.S. District Judge.
Cruz Esparza, 23, of Bay Point, pleaded guilty to the charge today and was sentenced during the same proceeding. According to the guilty plea, Cruz Esparza admitted that during 2019 and 2020, when he was 20 or 21 years old, he used social media applications, including Snapchat, to communicate with female minors for the purpose of requesting or persuading the minors to meet him in person and have sexual contact. Cruz Esparza admitted he told the minors he was younger than his real age. The plea agreement describes Cruz Esparza’s encounter with a 15-year-old in June of 2019. In the plea agreement, Cruz Esparza acknowledged how he initiated contact with the 15-year old on Snapchat, told the girl he was 17 years old, and sent the teenage girl images depicting sexually explicit conduct involving minors. Cruz Esparza arranged to meet this teenage minor in June 2019. During the meeting, Cruz Esparza molested her; and, using his telephone, created digital images as the intercourse occurred. Further, according to his guilty plea, Cruz Esparza sent images in March of 2020 to another user of a social media application of sexually explicit conduct by a minor female.
According to the sentencing memorandum filed by the government, during 2019-2020, Cruz Esparza enticed thirteen minor victims to send him images depicting sexually explicit conduct using social media platforms, and he had sexual contact with five of the victims, including sexual intercourse with four of them.
On December 14, 2020, the United States filed a three-count Superseding Information charging Cruz Esparza with one count each of distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2) and (b)(1); coercion and enticement of a minor, in violation of 18 U.S.C. § 2422(b); and production of child pornography, in violation of 18 U.S.C. § 2251(a). Cruz Esparza pleaded guilty to the production count; the other two counts were dismissed.
In addition to the prison term, Judge Gonzalez Rogers ordered a 10-year term of supervised release and set a restitution hearing for February 9, 2022. Cruz Esparza is in custody and will begin serving his prison term immediately.
Assistant U.S. Attorney Jonathan U. Lee is prosecuting the case with the assistance of Jessica Gonzalez Rodriguez and Kathleen Turner. The prosecution is the result of an investigation by the Department of Homeland Security, Homeland Security Investigations, and the Silicon Valley Internet Crimes Against Children Task Force.
Federal Correctional Officer Charged with Sexual Abuse of an InmateRead the Press Release
OAKLAND–John Russell Bellhouse appeared today in federal court to face the charge of sexual abuse of a prison ward, announced Acting U.S. Attorney Stephanie M. Hinds, Department of Justice Office of the Inspector General Los Angeles Field Office Special Agent in Charge Zachary Shroyer, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
According to the complaint filed November 29, 2021, and unsealed today, Bellhouse, 39, of Pleasanton, was employed as a correctional officer at the Federal Correctional Institute Dublin (FCI Dublin), an all-female correctional institution that houses federal prisoners and is operated by the Federal Bureau of Prisons (BOP). Bellhouse held the position of Safety Administrator. As a correctional officer, he supervised and had disciplinary authority over female inmates incarcerated at FCI Dublin. Bellhouse was trained in BOP policies and procedures, which included training that sexual, financial, and social relationships with inmates are prohibited.
The complaint charges that in 2020 Bellhouse engaged in sexual acts with an inmate. The complaint describes that Bellhouse began to express an interest in a particular female inmate and started calling the inmate his “girlfriend.” Among other benefits, he allegedly provided the female inmate with a gift of earrings and allowed her to use an office phone. The complaint further alleges that Bellhouse began to engage in sexual touching with the inmate and eventually engaged in oral sex on two occasions. The complaint describes that on one of those occasions oral sex allegedly occurred in the Safety Office, a space inside the prison accessible to both BOP staff and inmates. Another inmate acted as a “lookout” during at least one of the sexual encounters, according to the complaint’s allegations.
In March 2021, Bellhouse was put on administrative leave due to the allegations described in the complaint.
Bellhouse was arrested yesterday and made his initial court appearance today in U.S. District Court in Oakland before United States Magistrate Judge Donna M. Ryu. His next court appearance is scheduled for January 10, 2022, at 1:00 p.m. before U.S. Magistrate Judge Ryu.
Bellhouse is charged with one count of sexual abuse of a ward in violation of 18 U.S.C. § 2243(b). If convicted, Bellhouse faces a maximum statutory sentence of 15 years imprisonment, a three-year term of supervised release, and a $250,000 fine. However, any sentence following a conviction would be imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the criminal complaint are 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 Molly K. Priedeman is prosecuting the case with the assistance of Leeya Kekona. The prosecution is the result of an investigation by the Department of Justice Office of the Inspector General and the Federal Bureau of Investigation.
California Man Sentenced to More Than Six Years in Prison for Federal Hate Crime ConvictionRead the Press Release
A California man was sentenced to 82 months in prison for committing a federal hate crime in connection with attacking a Black man with a knife in Santa Cruz, California. The sentence was handed down by the Hon. Edward J. Davila, U.S. District Judge for the Northern District of California.
Ole Hougen, 45, of Santa Cruz, California, was convicted of the crime on April 9. According to evidence presented at trial, Hougen confronted a 29-year-old Black man who was crossing the street in Santa Cruz. Hougen began screaming racial slurs at him. Hougen then brandished a nine-inch knife and slashed multiple times at the man’s head, chest and stomach, while yelling the racial slurs. A witness testified that Hougen slashed and stabbed at the victim’s head and chest approximately 10-20 times. At the time of the attack, Hougen was on probation after pleading no contest to state charges that he committed a racially motivated assault on a different Black man in 2018. The trial also included evidence of several other incidents where Hougen threatened or committed violent acts while yelling racial slurs. This conviction represents Hougen’s fourth known racially motivated attack against Black men in the last seven years.
A federal grand jury indicted Hougen on Nov. 17, 2020, charging him with a violation of the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act. After a six-day trial, a jury convicted Hougen of the charge. It is the first conviction and sentencing in the Northern District of California under the Shepard-Byrd Act, which was signed into law by President Barack Obama in 2009.
“Racially motivated crimes have no place in our society. This defendant has attacked at least four people because they are Black, and for his most recent racially motivated attack of a Black man the defendant has been convicted,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Justice Department will continue to vigorously prosecute bias-motivated crimes in an effort to secure justice for victims of these crimes and the communities they are meant to target and intimidate.”
“Racially motivated violent attacks cannot be tolerated in any society,” said Acting U.S. Attorney Stephanie Hinds for the Northern District of California. “The Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act provides significant penalties for violence motivated by racism and other group-hate. This office will use this and every other tool to ensure prosecutions are brought down on criminals committing violence motivated by animus towards our community’s protected groups.”
“Ole Hougen’s violent assault didn't just attack an individual, he attacked the entire community associated with the victim,” said Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division. “All crime is unacceptable, but hate crimes are particularly cruel. They strike at an unchangeable, fundamental, and defining part of a victim's identity. In this way, they attack everyone who identifies with this victim. Hate crimes are the highest priority of the FBI’s Civil Rights Program because each crime threatens the freedoms and protections guaranteed to all our communities.”
In addition to the prison term, Judge Davila also sentenced Hougen to three years of supervised release.
Assistant U.S. Attorney Marissa Harris and Trial Attorney Michael J. Songer of the Civil Rights Division are prosecuting the case on behalf of the government. The FBI San Francisco Field Office conducted the investigation with the assistance of the Santa Cruz Police Department.
For more information and resources on the department’s efforts to combat hate crimes, visit www.justice.gov/hatecrimes. If you believe you have been a victim of a civil rights violation, please visit: https://civilrights.justice.gov/ to file a report.
California Man Sentenced to More Than Six Years in Prison for Federal Hate Crime ConvictionRead the Press Release
SAN JOSE –Ole Hougen was sentenced to 82 months in prison for committing a federal hate crime in connection with attacking a Black man with a knife on a street in Santa Cruz, Calif. The sentence was handed down by the Hon. Edward J. Davila, United States District Judge.
Hougen, 45, of Santa Cruz, California, was convicted of the crime on April 9. According to evidence presented at trial, Hougen confronted a 29-year-old Black man who was crossing the street in Santa Cruz. Hougen began screaming racial slurs at him. Hougen then brandished a nine-inch knife and slashed multiple times at the man’s head, chest and stomach, while yelling the racial slurs. A witness testified that Hougen slashed and stabbed at the victim’s head and chest approximately 10-20 times. At the time of the attack, Hougen was on probation after pleading no contest to state charges that he committed a racially motivated assault on a different Black man in 2018. The trial also included evidence of several other incidents where Hougen threatened or committed violent acts while yelling racial slurs. This conviction represents Hougen’s fourth known racially motivated attack against Black men in the last seven years.
A federal grand jury indicted Hougen on Nov. 17, 2020, charging him with a violation of the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act. After a six-day trial, a jury convicted Hougen of the charge. It is the first conviction and sentencing in the Northern District of California under the Shepard-Byrd Act, which was signed into law by President Barack Obama in 2009.
“Racially motivated violent attacks cannot be tolerated in any society,” said Acting U.S. Attorney Hinds. “The Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act provides significant penalties for violence motivated by racism and other group-hate. This office will use this and every other tool to ensure prosecutions are brought down on criminals committing violence motivated by animus towards our community’s protected groups.”
“Racially motivated crimes have no place in our society. This defendant has attacked at least four people because they are Black, and for his most recent racially motivated attack of a Black man the defendant has been convicted,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Justice Department will continue to vigorously prosecute bias-motivated crimes in an effort to secure justice for victims of these crimes and the communities they are meant to target and intimidate.”
"Ole Hougen’s violent assault didn't just attack an individual, he attacked the entire community associated with the victim,” said Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division. “All crime is unacceptable, but hate crimes are particularly cruel. They strike at an unchangeable, fundamental, and defining part of a victim's identity. In this way, they attack everyone who identifies with this victim. Hate crimes are the highest priority of the FBI’s Civil Rights Program because each crime threatens the freedoms and protections guaranteed to all our communities."
“Justice was served in this landmark investigation,” said Special Agent in Charge Craig Fair of the FBI San Francisco Field Office. “This case shows how critical it is for the community to report hate crimes to law enforcement. Thanks to the work of our FBI Special Agents, the Santa Cruz Police Department, and the brave reporting of members of our community, Ole Hougen was convicted of a federal hate crime by a jury of his peers and will now serve his sentence in federal prison.”
When announcing his sentence from the bench, Judge Davila stated that it was “profoundly wrong to attack someone because of their race” and told Hougen to use his time in prison to “remove the hate from his heart.” In addition to the prison term, Judge Davila also sentenced Hougen to a three-year term of supervised release. Hougen will begin serving his prison term immediately.
Assistant U.S. Attorney Marissa Harris and Trial Attorney Michael J. Songer of the Civil Rights Division are prosecuting the case on behalf of the government. The FBI San Francisco Field Office conducted the investigation with the assistance of the Santa Cruz Police Department.
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Owner of East Bay Tax Preparation Company Charged with Tax FraudRead the Press Release
OAKLAND – A federal criminal complaint unsealed today charges Traci Austin with aiding and assisting in the preparation of fraudulent tax returns, announced Acting U.S. Attorney Stephanie M. Hinds and Internal Revenue Service, Criminal Investigation, and IRS-Criminal Investigation Special Agent in Charge Mark H. Pearson.
The complaint describes Austin, 44, of Brentwood, Calif., as the owner of a tax return preparation business called Emeryville Tax Services (“ETS”). According to the complaint, Austin prepared materially false and fraudulent tax returns for her clients by including false and/or inflated Schedule A expenses, false and/or inflated Schedule C income and expenses, and false dependents. By doing this, Austin fraudulently reduced her clients’ taxable income and tax liability, thereby resulting in larger refunds for the client and higher return preparation fee income for Austin. The investigation has revealed that Austin allegedly assisted in the preparation of at least 42 fraudulent tax returns and an estimated tax loss of well over $697,000 to the federal government.
In addition to the false and fraudulent tax return preparation scheme, the complaint also alleges that since 2016, Austin has hosted a “Tax School” through ETS and charged a fee of at least $200 for students to attend the tax school. According to the complaint, the goal of the tax school was to hire the attendees as preparers for ETS and prepare tax returns for ETS clients as well as the attendees’ own clients. During the tax school, Austin allegedly instructed prospective tax preparers how to fraudulently manipulate tax returns to generate the maximum tax refund, and thus the maximum tax preparation fee by listing fictitious side businesses under Schedule C and fake business expenses on Schedule A, for example, the complaint describes how Austin taught her students how she created a fictitious dog grooming business for a client, created a fictitious profit and loss statement for the fake business, and how she instructed the client to print out some photos of dogs to support the idea of her fictitious business.
Austin is charged with aiding and assisting in the preparation of false and fraudulent federal income tax returns, in violation of 26 U.S.C. § 7206(2).
The charges in the complaint are merely allegations and the defendant is presumed innocent unless proven guilty in a court of law.
If convicted, Austin faces a maximum penalty of three years in prison and a $100,000 fine; 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.
Austin made her initial federal court appearance this morning before United States Magistrate Judge Kandis A. Westmore. Austin remains out of custody and her next scheduled appearance is at 10 a.m., on February 24, 2022, for a status conference before Magistrate Judge Westmore.
Assistant U.S. Attorney Abraham Fine is prosecuting the case with the assistance of Kay Konopaske and Helen Yee. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Sunnyvale Man Sentenced to 15 Months for Visa FraudRead the Press Release
SAN JOSE – Kishore Kumar Kavuru was sentenced late yesterday in federal court to 15 months in prison for making false statements in foreign worker visa applications, announced Acting United States Attorney Stephanie M. Hinds, U.S. Department of Labor Office of Inspector General Special Agent in Charge Quentin Heiden, Los Angeles Region, and Homeland Security Investigations Special Agent in Charge Tatum King. The sentence was handed down by United States District Judge Edward J. Davila.
Kavuru, 49, of Sunnyvale, California, pleaded guilty to one count of visa fraud on May 24, 2021. In his plea agreement, Kavuru stated he owned, operated, and was CEO of four different staffing companies. His companies specialized in obtaining H-1B visas for foreign skilled workers and placing these individuals in the United States at technology firms seeking qualified H-1B contractors. Known as H-1B Specialty Occupation Workers program, the H-1B visa program allows an employer to temporarily hire a skilled foreign worker in the United States on a nonimmigrant basis. The position must qualify as a “specialty occupation,” that is, one that requires the application of specialized knowledge and a bachelor’s degree or equivalent in the specialty. At the four staffing companies he owned and ran, Kavuru was responsible for creating H-1B visa applications for foreign workers and submitting them to the appropriate government agencies of the United States.
Kavuru admitted in his plea agreement that from 2009 through at least 2017 he engaged in a scheme to obtain H-1B visas from government agencies by submitting H-1B applications that contained false and fraudulent statements. Kavuru admitted to submitting more than one hundred applications that falsely described available H-1B positions and falsely stated that the H-1B workers were to be placed at the positions at specific companies. Kavuru admitted he knew at the time he submitted the applications that the companies did not have the named jobs and that he did not intend to place the workers at those companies. None of those foreign skilled workers were ever placed at those companies. Kavuru – or one of his employees at Kavuru’s direction – nevertheless signed the visa applications attesting under penalty of perjury to the truth of those false statements.
Kavuru further admitted that he required the H-1B foreign skilled workers to pay him thousands of dollars in cash for the cost of preparing and submitting their H-1B visa petitions, which is a violation of U.S. Department of Labor (US DOL) regulations. He also admitted requiring his H-1B visa recipients to go unpaid for months while he looked for legitimate H-1B positions for them, violating US DOL regulations by failing to pay H-1B workers while they are “benched” in this manner.
In a memo filed for sentencing, the government calculated that Kavuru orchestrated the submission of over 100 fraudulent H-1B visa applications that earned him more than $1.5 million in fraudulently-obtained proceeds.
In addition to his 15 month prison sentence imposed for visa fraud in violation of 18 U.S.C. § 1546(a), United District Judge Edward J. Davila entered a forfeiture money judgment in the amount of $533,350.03. The sentence also included a three year period of supervision following Kavuru’s release from prison.
Kavuru will surrender to begin serving his sentence on February 10, 2022.
Assistant United States Attorney Maia T. Perez prosecuted the case, with the assistance of Lakisha Holliman. The prosecution is the result of an investigation by the U.S. Department of Labor, Office of Inspector General and Homeland Security Investigations.
New Obstruction-Related Charges Filed Against Former Bank Vice President Convicted in Insider Trading Securities Fraud ScamRead the Press Release
SAN JOSE – The U.S. Attorney’s Office has filed new federal criminal charges against former Silicon Valley Bank vice president Mounir Gad adding document tampering, identity theft, and criminal contempt to the list of federal charges the convicted fraudster now will face, announced Acting U.S. Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The new charges are filed in connection with allegedly false and altered documents Gad submitted to the federal court for his sentencing in his securities fraud case.
The criminal complaint was filed on November 19, 2021, and unsealed today. According to the complaint, on October 27, 2021, Gad, 35, of Los Gatos, submitted to the federal court 12 letters of support in advance of his sentencing for two counts of securities fraud. The criminal complaint alleges that half of these letters were improperly altered or entirely fabricated. Specifically, of the twelve letters submitted, Gad altered three of them without the authors’ knowledge, adding additional language praising Gad. Additionally, Gad submitted three more letters that were not written by the purported authors and without the purported authors’ knowledge. On November 3, 2021, before the alleged problems with the sentencing documents had come to light, the Honorable Lucy H. Koh, U.S. District Judge, sentenced Gad to two years of probation, a $500 fine, and a $200 assessment for each count of securities fraud. Gad now faces criminal charges in connection with the documents he submitted for that sentencing.
This sentencing followed Gad’s guilty plea to two counts of securities fraud, in violation of 15 U.S.C. § 78j(b) and 78ff, 17 C.F.R. §§ 240.10b-5, 240.10b5-1, and 240.10b5-2, 18 U.S.C. § 2. In connection with the guilty plea, Gad admitted he was a trained investment banking professional who repeatedly received training and guidance about the proper use of material non-public and confidential information. Gad also admitted he knew about the prohibitions against the improper use of such information including how the use of such information for personal gain may violate the insider trading laws. Gad nevertheless violated the insider trading laws on two occasions. Specifically, in April of 2015 and again in August of 2016, Gad obtained material non-public information through his employer when the bank advised clients about financial matters related to the acquisition of certain companies; Gad shared the non-public information with a codefendant who used the information to execute securities transactions.
After accepting Gad’s request to enter a plea of guilty, Judge Koh scheduled Gad’s sentencing hearing for November 3, 2021. According to the criminal complaint, one of Gad’s references, identified as B.L., prepared a letter for the court in advance of the hearing and emailed the letter to Gad. B.L. then attended the November 3 sentencing hearing. The criminal complaint describes how B.L. heard at the sentencing hearing the court reference statements in a letter submitted in her name that she had not written and were not true. B.L. contacted Gad’s defense attorney who, in turn, notified the Court. The criminal complaint further describes how the Court scheduled a subsequent hearing on November 10, 2021, at which Judge Koh stated, “What I considered and what I found to be very compelling about this letter, are lies that Mr. Gad put in the letter.”
In addition, the criminal complaint further describes how Gad allegedly altered the letters of two additional persons who submitted letters on Gad’s behalf. In each case, the alterations included praise of Gad’s good character, including praise for having “the highest integrity and character,” for being “productive in a moral and ethical way,” and for how Gad “saved [B.L.’s] life with his story, with his accountability, and with his dignity.” Furthermore, the complaint describes how Gad allegedly submitted three letters to the Court without the purported authors’ knowledge. The bogus letters were from Gad’s ex-fiancé, and two additional people who previously submitted letters on behalf of Gad in connection with other litigation.
In sum, the criminal complaint charges Gad with document tampering, in violation of 18 U.S.C. § 1512(c)(1); identity theft, in violation of 18 U.S.C. § 1028(a)(7); and criminal contempt, in violation of 18 U.S.C. § 401(1).
A criminal complaint contains allegations only. Gad is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. If convicted, Gad faces a maximum statutory penalty of 20 years in prison and a fine of $250,000 for document tampering and 5 years in prison and a $250,000 fine for identity theft. There is no statutory maximum penalty for criminal contempt. The court also may order additional terms of supervised release and fines; 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.
Gad made his initial federal court appearance today before U.S. Magistrate Judge Kandis Westmore. Magistrate Judge Westmore scheduled Gad’s ’s next appearance on the new charges for November 26, 2021, for detention and identification of counsel. Gad also is scheduled to appear December 8, 2021, before Judge Koh for further proceedings related to the securities fraud charges.
Assistant U.S. Attorney Sarah E. Griswold is prosecuting this case with assistance from Lynette Dixon. The case is being investigated by the FBI.
San Francisco Man Pleads Guilty to Gang ShootingRead the Press Release
SAN FRANCISCO – Aramis Alvarez-Arroyo pleaded guilty in federal court today to attempted murder in aid of racketeering, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
A federal grand jury indicted Alvarez-Arroyo on April 15, 2021. In the plea agreement that Alvarez-Arroyo, 20, of San Francisco, entered today, he admitted that from 2018 through April 2021 he aspired to join the Norteños, a street gang operating in San Francisco’s Mission District (SFMD) whose members enrich themselves and the gang by robbery, drug dealing, firearms trafficking, and other crimes. Violence quickly earns prestige in the gang, Alvarez-Arroyo acknowledged in his plea agreement, and SFMD Norteños members and associates commit acts of violence, including murder and attempted murder, against perceived gang rivals to gain prestige and promotion within the gang.
Alvarez-Arroyo pleaded guilty to an attempted murder charge based on a shooting he committed on April 9, 2020, in order to gain entrance into the SFMD Norteños. Alvarez-Arroyo admitted the details of his crime in his plea agreement, which describes the events in the late afternoon of April 9 near Richland Avenue and Mission Street in San Francisco. Red is the color claimed by Norteños, and Alvarez-Arroyo was walking in the area at that time wearing red pants and a red bandana. Outside of a restaurant, four people were sitting in a parked car, with one person sitting in the driver’s seat (Vicim-1) and another in the front passenger seat (Victim-2). In his plea agreement, Alvarez-Arroyo acknowledged that he recognized Victim-1 as an associate of the Sureño gang. The Sureño gang is a primary rival of the SFMD Norteños gang. According to the plea agreement, Alvarez-Arroyo approached the parked car while carrying a loaded .40 caliber pistol and called out to Victim-1 by name. Victim-1 saw Alvarez-Arroyo, put the car into drive, and fled. Alvarez-Arroyo stated he fired three shots at the car as it drove away, hitting the front, side, and back windows of the car, as well as the front passenger headrest. He missed the car’s occupants. In his plea agreement, Alvarez-Arroyo admitted that he intended to kill Victim-1 and Victim-2.
Alvarez-Arroyo also admitted in his plea agreement that in the days following he bragged about the shooting in posts and messages on Instagram, stating that next time he “won’t miss.” Around the same time, Alvarez-Arroyo sent messages referring to an assault rifle he was assembling and expressed his interest in finding rivals from another gang, Army Street.
The indictment charged one count of attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5), to which Alvarez-Arroyo pleaded guilty today. The maximum sentence for a violation of 18 U.S.C. § 1959(a)(5) is 10 years in prison and a fine of $250,000, plus restitution and forfeiture. 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.
Alvarez-Arroyo’s sentencing hearing is scheduled for March 7, 2022, at 2:30 pm, before United States District Judge Vince Chhabria in San Francisco. Alvarez-Arroyo remains in custody.
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 and San Francisco Police Department.
Southern California Man Charged in Cryptocurrency Fraud SchemeRead the Press Release
SAN FRANCISCO – Ryan Mark Ginster was arrested today in Los Angeles on federal charges filed in San Francisco of wire fraud and money laundering, announced Acting United States Attorney Stephanie M. Hinds and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service-Criminal Investigation Washington D.C. Field Office. Ginster will appear in Los Angeles federal court, the first step in a procedure to obtain Ginster’s appearance in United States District Court in San Francisco.
The complaint’s affidavit alleges that Ginster, 34, of Corona, California, engaged in an online investment fraud scheme that began as early as February 2018 and continued to February 2021. During this time, Ginster ran multiple websites, including one he created and operated named Socialprofimatic.com. Socialprofimatic.com offered a high-yield investment program that promised outlandishly high returns on investments with little or no risk to investors. Investors could only invest with cryptocurrency, which creates transactions that are irrevocable even in instances of fraud. The complaint describes that the Socialprofimatic.com website falsely represented that investors’ funds would be used to support social media marketing campaigns, that the invested funds would generate returns of 8% per day, and that investors could withdraw funds at any time. Socialprofimatic.com received approximately $844,667 from investors, and then it shut down without warning after only 38 days of operation. The complaint affidavit describes that Ginster used proceeds of this fraud for his own personal benefit.
Ginster ran other similar investment websites during the fraud scheme time period, according to the complaint. Those websites included MyMicroProfits.com, Automaticbitcome.com, eProfithub.io, and YourNetProfits.com. As did Socialprofimatic.com, each website promised enormously high yields on investments and required individuals to invest only with cryptocurrencies. Also like Socialprofimatic.com, the websites were short-lived, shutting down or ceasing to communicate with investors within weeks after taking in the investors’ cryptocurrency. Lastly, as with Socialprofimatic.com, Ginster diverted investors’ funds to himself.
The cryptocurrency received from investors in the above five websites, including Socialprofimatic.com, was valued at the time at more than $5 million.
Ginster is charged by a federal complaint with one count of wire fraud in violation of Title 18, United States Code, Section 1343, and six counts of engaging in monetary transactions to conceal or disguise (money laundering), in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i). Title 18, United States Code, Section 1343 carries a maximum sentence of 20 years in prison. Title 18, United States Code, Section 1956(a)(1)(B)(i) carries a maximum sentence of 10 years in prison. Both statutes carry a fine as well as mandatory restitution. Any sentence following conviction, however, would be imposed by a judge only after its consideration of the United States Sentencing Guidelines and the federal statute governing sentencing, 18 USC § 3553.
Charges contained in a criminal complaint are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
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. This prosecution is the result of an investigation by the IRS-CI Washington D.C. Cyber Crimes Unit.
The Los Angeles Regional Office of the Securities and Exchange Commission also announced today the filing of a civil enforcement action against Ginster in the Central District of California.
If you believe you have been a victim of this fraud scheme, please contact IRS-Criminal Investigation at [email protected]. The criminal complaint in this matter can be viewed on PACER and by visiting the U.S. Attorney’s Office for the Northern District of California website at www.usdoj.gov/usao/can.
Justice Department Announces $139 Million for Law Enforcement Hiring to Advance Community PolicingRead the Press Release
SAN FRANCISCO – The Department of Justice today announced more than $139 million in grant funding through the department’s Office of Community Oriented Policing Services (COPS Office) COPS Hiring Program (CHP). The awards provide direct funding to 183 law enforcement agencies across the nation, allowing those agencies to hire 1,066 additional full-time law enforcement professionals. In the Northern District of California, San Francisco County received $6,250,000 and Alameda County received $375,000 for a total of $6,625,000 in funding.
“We are committed to providing police departments with the resources needed to help ensure community safety and build community trust,” said Attorney General Merrick B. Garland. “The grants we are announcing today will enable law enforcement agencies across the country to hire more than 1,000 additional officers to support vitally important community oriented policing programs.”
“Community policing is proven to be a valuable tool in crime prevention,” said Acting U.S. Attorney Stephanie M. Hinds. “The millions of dollars in funding from the Department of Justice that is being announced today represents critical resources to enhance the capacity for community policing programs in our neighborhoods. We are proud to announce the availability of these funds to ensure that community policing will remain an integral part of a comprehensive crime prevention strategy.”
CHP is a competitive award program intended to reduce crime and advance public safety through community policing. CHP provides funds directly to law enforcement agencies to hire new or rehire additional career law enforcement officers, thereby increasing their community policing capacity and crime prevention efforts. Of the 183 agencies awarded grants today, approximately half will use the funding to focus on building legitimacy and trust between law enforcement and communities; 41 agencies will seek to address high rates of gun violence; 21 will focus on other areas of violence; and 19 will focus CHP resources on combating hate and domestic extremism or supporting police-based responses to persons in crisis. The complete list of awards can be found here.
Since its creation in 1994, COPS has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and Tribal law enforcement agencies to fund the hiring and redeployment of more than 135,000 officers. CHP, COPS’ flagship program, continues to be in demand today: In FY21, COPS received 590 applications requesting nearly 3,000 law enforcement positions. For FY22, President Biden has requested $537 million for CHP, an increase of $300 million.
To learn more about CHP, please visit https://cops.usdoj.gov/chp-award. For additional information about the COPS Office, please visit https://cops.usdoj.gov/.
The COPS Office is the federal component of the Department of Justice responsible for advancing community policing nationwide. The only Department of Justice agency with policing in its name, the COPS Office was established in 1994 and has been the cornerstone of the nation’s crime fighting strategy with grants, a variety of knowledge resource products, and training and technical assistance. Through the years, the COPS Office has become the go-to organization for law enforcement agencies across the country and continues to listen to the field and provide the resources that are needed to reduce crime and build trust between law enforcement and the communities served.
San Francisco Woman Sentenced to 18 Months for Pandemic Relief Loan Fraud and Impersonating AttorneysRead the Press Release
SAN FRANCISCO – Miranda Devlin, aka Miranda M., aka Miranda P., was sentenced today in United States District Court to 18 months in federal prison for making false statements in a loan application for federal government pandemic relief funds and for mail fraud involving the stealing of California attorneys’ identities and practicing law, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Treasury Inspector General for Tax Administration J. Russell George. The sentence was handed down by United States District Judge Maxine M. Chesney.
Devlin, 37, of San Francisco, pleaded guilty on July 21, 2021. In her plea agreement, Devlin described multiple crimes she committed from March 2012 through May 2020 to defraud individuals and the government. In one of her schemes, Devlin – who has never been an attorney – admitted she stole the identities of two female attorneys licensed by the State Bar of California and deceived people into believing she was a licensed attorney. Beginning in 2012, Devlin started to assume attorneys’ names and used their license numbers. She even paid one attorney’s State Bar dues, without knowledge of the attorney, to keep the attorney’s license active. Devlin further admitted to submitting change of address requests to the U.S. Postal Service in order to have other people’s mail forwarded to her, including one attorney’s State Bar license card. Several people hired Devlin as their attorney. Devlin admitted she represented multiple individuals in the courtrooms of Bay Area county Superior Courts.
Devlin further admitted engaging in a scheme to defraud the federal government’s pandemic relief program of $368,800. To commit one fraud, Devlin submitted a Paycheck Protection Program (PPP) borrower application form requesting money from the United States Small Business Administration (SBA) program. The PPP arose out of the CARES Act passed by Congress in March 2020 that authorized forgivable PPP loans to small businesses, to promote job retention and cover specified business expenses during the pandemic. Devlin’s PPP application contained several deliberately false statements that Devlin certified as true. Her statements included that she had a business named Common Nucleus of Cancer (CNC) and that it had 2019 payroll expenses and also had paid taxes in 2019. CNC was, however, only a shell company. In her plea agreement, Devlin admitted that CNC had no employees and no business expenses. Devlin admitted that with her PPP loan application she submitted false tax forms and records for 2019 as evidence of the salaries and business expenses she purportedly paid. As a result of that application, Devlin received a PPP loan of $32,700. Devlin admitted that she did not pay any purported business expenses or salaries with that money but rather used it for her own personal benefit.
Devlin further admitted that she continued the scheme and applied for and eventually received a larger, additional loan in the amount of $336,100 from the SBA. In all, Devlin admitted that she unlawfully received a total of $368,800 from the SBA in government pandemic relief loans.
In addition to her 18 month prison sentence imposed for mail fraud in violation of 18 USC § 1341 and making false statements in a loan application in violation of 18 USC § 1014, United District Judge Maxine M. Chesney ordered that Devlin pay restitution in the amount of $565,355. The sentence also included a 5 year period of supervision following Devlin’s release from prison.
Devlin has been in custody since March 2, 2021, and begins her sentence immediately.
The United States Attorney’s Office Special Prosecutions Section prosecuted the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Treasury Inspector General for Tax Administration (TIGTA).
Members and Associates of MS-13 in San Francisco Charged with Participation in Gang-Related Murders in Furtherance of Racketeering ConspiracyRead the Press Release
SAN FRANCISCO- A federal grand jury returned a second superseding indictment charging 13 current and former Bay Area residents for a broad range of racketeering crimes, including allegations that many defendants participated in gang-related murders and attempted murders as part of a racketeering conspiracy, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) Special Agent in Charge Tatum King. The second superseding indictment handed down on November 4, 2021, and is now unsealed includes new allegations against defendants previously indicted on February 18, 2020, and adds charges against three new defendants.
“We will never stop seeking justice for murder,” said Acting U.S. Attorney Hinds. “The new indictment reflects our commitment to a partnership of federal, state, and local law enforcement to protect our community against violence, especially from criminal street gangs such as MS-13.”
“Public safety is paramount for the HSI San Francisco investigative team,” wrote HSI Special Agent in Charge Tatum King. “Our agents and analysts are focused on apprehending the most dangerous criminals. This new indictment contains allegations that should concern everyone and is the result of effective collaboration with the San Francisco Police Department, the U.S. Attorney’s Office, and local law enforcement agencies, all of whom are committed to holding criminals accountable for their actions.”
According to the second superseding indictment, the defendants were members of the transnational criminal organization MS-13. MS-13 operates in El Salvador, Honduras, Guatemala, Mexico, and at least 20 states in the United States. The MS-13 clique in San Francisco is the 20th Street clique. The second superseding indictment describes how the 20th Street clique relies on crime to operate, including to avoid detection by law enforcement, to initiate new recruits, to enhance the reputation of the gang and individual gang members, to maintain control of drug distribution channels, and to intimidate people who might testify against or otherwise defy the gang.
The second superseding indictment builds on the February 18, 2020 indictment by describing additional violent crimes the defendants have allegedly committed, including three murders. It alleges that, on or about March 17, 2017, Elmer Rodriguez, a/k/a “Gordo,” ordered another gang member to kill a victim perceived to be a gang rival outside the Beauty Bar in the Mission District of San Francisco. It further alleges that on May 25, 2017, Edwin Alvarado Amaya, a/k/a “Muerte,” murdered a fellow member of the 20th Street clique with a bladed weapon in Bernal Heights under the direction of Rodriguez because they believed the victim had violated gang rules. Finally, it alleges that on February 13, 2018, Abner Marroquin Alegria, a/k/a “Coche” or “Chapin,” Jose Maria Tercero Perez, a/k/a “Delito,” Kevin Reyes Melendez, a/k/a “Neutron,” Kevin Guatemala Zepeda, a/k/a “Mision,” and Fernando Romero Bonilla, a/k/a “Black,” all played a culpable role in the murder, or its aftermath, of a suspected gang rival in the parking lot of the Gray Whale Cove trail in Pacifica. According to the indictment, Tercero Perez, Reyes Melendez, Guatemala Zepeda, and Romero Bonilla encountered the victim at the Mission Playground, which is at the heart of the gang’s territory. Marroquin then drove Tercero Perez, Reyes Melendez, and the victim to the Gray Whale Cove parking lot, where Reyes Melendez and Tercero Perez attacked and murdered the victim with a bladed weapon and a 9mm firearm. Guatemala Zepeda and Romero Bonilla later arrived on scene to remove potentially incriminating evidence.
The second superseding indictment also alleges that on April 20, 2018, Tercero Perez, Reyes Melendez, and Brigido Josue Gonzales Sales, a/k/a “Inocente” or “Kiko” attempted to murder a suspected gang rival near South Van Ness Avenue and Adair Street in the Mission District of San Francisco.
In all, the second superseding indictment alleges 15 overt acts of violence – including murders, attempted murders, and assaults with a dangerous weapon – allegedly perpetrated by the defendants in furtherance of the racketeering conspiracy. The charges pending against each defendant are as follows:
Defendant
Age
Charges
Maximum Statutory Penalty
ROGELIO BELLOSO ALEMAN
a/k/a “Smiley”
28
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
EDWIN ALVARADO AMAYA
a/k/a “Muerte”
24
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2
10 years in prison
Fine of $250,000
FERNANDO ROMERO BONILLA
a/k/a “Black”
24
Racketeering Conspiracy
18 U.S.C. § 1962(d)
20 years in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
KENNETH CAMPOS,
a/k/a “Nesio”
32
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering (two counts)
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
EVERT
GALDAMEZ
CISNEROS
a/k/a “Talentoso”
23
Racketeering Conspiracy
18 U.S.C. § 1962(d)
20 years in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
LUIS VELIS DIAZ
a/k/a “Popa”
23
Racketeering Conspiracy
18 U.S.C. § 1962(d)
20 years in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
BRIGIDO JOSUE GONZALES SALES a/k/a “Inocente” or “Kiko”
21
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Attempted Murder in Aid of Racketeering
18 U.S.C. § 1959(a)(5) and 2
10 years in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
ABNER MARROQUIN ALEGRIA
a/k/a “Coche” or “Chapin”
41
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
KEVIN REYES MELENDEZ
a/k/a “Neutron”
28
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Attempted Murder in Aid of Racketeering (two counts)
18 U.S.C. §§ 1959(a)(5) and 2
10 years in prison
Fine of $250,000
Discharge of a Firearm During and in Furtherance of a Crime of Violence
18 U.S.C. § 924(c)
Life in prison
(Mandatory minimum of 5 years (7 years if brandished, 10 years if discharged))
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
ELMER RODRIGUEZ
a/k/a “Gordo”
32
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2
10 years in prison
Fine of $250,000
Discharge of a Firearm During and in Furtherance of a Crime of Violence
18 U.S.C. § 924(c)
Life in prison
(Mandatory minimum of 5 years (7 years if brandished, 10 years if discharged)
Fine of $250,000
KEVIN RAMIREZ VALENCIA
a/k/a “Delincuente”
24
Racketeering Conspiracy
18 U.S.C. § 1962(d)
20 years in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
JOSE MARIA TERCERO PEREZ a/k/a “Delito”
28
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Attempted Murder in Aid of Racketeering
18 U.S.C. §§ 1959(a)(5) and 2
10 years in prison
Fine of $250,000
KEVIN GUATEMALA ZEPEDA
a/k/a “Mision”
25
Racketeering Conspiracy
18 U.S.C. § 1962(d)
Life in prison
Fine of $250,000
Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959(a)(3) and 2
20 years in prison
Fine of $250,000
The court also may order additional terms of supervised release, fines, and restitution. Nevertheless, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.
This 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.
Texas Woman Charged for Assault on Flight AttendantRead the Press Release
SAN FRANCISCO – Debby Dutton appeared today in federal court in Houston, Texas, to face the charge filed in San Francisco federal court of interference with an aircraft flight by assault upon a flight attendant, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Today’s hearing in Houston federal court initiates the first steps in a procedure to obtain an order directing Dutton to appear to face the charge against her in San Francisco federal court.
According to the complaint, Dutton, 50, of Cypress, Texas, was a passenger onboard a United Airline flight from Alaska to San Francisco International Airport (SFO) on June 29, 2021. Early in the flight, flight attendants broadcasted several safety announcements over the plane’s intercom. The broadcasts included multiple announcements about the federal mask mandate on commercial flights. The broadcasts announced that passengers must wear their masks at all times and further advised the passengers that their masks will likely fall off and, if while asleep, a flight attendant will wake them up to put their masks back on, which may upset them.
The complaint affidavit describes that approximately three and a half hours into the four and a half hour flight, a flight attendant walked down the aisle to collect trash and check passengers for face mask compliance. The flight attendant noticed several passengers without face masks and asked them to put their face masks back on. One passenger was asleep, and his face mask had fallen from his face. According to the complaint, the flight attendant used two fingers to tap that passenger on the shoulder and asked him to put his face mask back on. The passenger complied.
Dutton was the wife of that passenger and was sitting next to him. As the flight attendant continued down the aisle, the complaint affidavit describes that Dutton got up from her seat and angrily shouted at the flight attendant. The flight attendant tried to explain that the passenger had not been wearing his face mask, but Dutton continued to scream and walked towards the flight attendant.
The complaint affidavit describes that Dutton pushed the flight attendant. The force of the push on the flight attendant’s right arm caused the attendant to step back to maintain balance. Dutton pushed the flight attendant again, once more on the flight attendant’s right arm. The flight attendant told Dutton to stop. The passenger asked his wife Dutton to return to her seat, which Dutton eventually did. The flight attendant immediately reported the incident to the captain.
The flight attendant, as described in the complaint, was caught off guard and felt threatened and afraid. The flight attendant further described the assault as painful and forceful. The pushes left bruising on the flight attendant’s right bicep. The flight attendant sought medical attention after the flight.
Law enforcement officers subsequently interviewed multiple passengers who either saw or heard part of the incident.
Dutton initially appeared on the federal complaint today before a United States Magistrate in Houston, Texas. Dutton’s next appearance is scheduled for Tuesday, November 16, in Houston federal court. Dutton is out of custody.
Dutton has been charged with one count of interference by assault, threat, or intimidation with flight crew members or attendants, in violation of Title 49, United States Code, Section 46504. The charge carries a maximum possible sentence of 20 years in prison and a fine. Any sentence following conviction, however, is imposed by a court only after the court’s consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 USC § 3553.
Charges contained in a criminal complaint are mere allegations. As in any criminal case, the defendants are presumed innocent unless and until proven guilty in a court of law.
The case is being prosecuted by the General Crimes Section of the U.S. Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by the FBI, with thanks to the San Francisco Police Department, the San Mateo County Sheriff's Office, United Airlines, and the San Francisco International Airport for their cooperation.
Justice Department Sues Uber for Overcharging People with DisabilitiesRead the Press Release
SAN FRANCISCO — The Justice Department today filed a lawsuit against Uber Technologies Inc. (Uber) for charging “wait time” fees to passengers who, because of disability, need more time to enter a car. Uber’s policies and practices of charging wait time fees based on disability have harmed many passengers and potential passengers with disabilities throughout the country. The lawsuit, filed in the U.S. District Court for the Northern District of California, alleges that Uber violated Title III of the Americans with Disabilities Act (ADA), which prohibits discrimination by private transportation companies like Uber.
In April 2016, Uber began charging passengers wait time fees in a number of cities, eventually expanding the policy nationwide. Wait time fees start two minutes after the Uber car arrives at the pickup location and are charged until the car begins its trip.
The department’s complaint alleges that Uber violates the ADA by failing to reasonably modify its wait time fee policy for passengers who, because of disability, need more than two minutes to get in an Uber car. Passengers with disabilities may need additional time to enter a car for various reasons. A passenger may, for example, use a wheelchair or walker that needs to be broken down and stored in the car. Or a passenger who is blind may need additional time to safely walk from the pickup location to the car itself. The department’s lawsuit alleges that, even when Uber is aware that a passenger’s need for additional time is clearly disability-based, Uber starts charging a wait time fee at the two-minute mark.
The lawsuit seeks relief from the court, including ordering Uber to stop discriminating against individuals with disabilities. Additionally, the department asks the court to order Uber to modify its wait time fee policy to comply with the ADA; train its staff and drivers on the ADA; pay money damages to people subjected to the illegal wait time fees; and pay a civil penalty to vindicate the public’s interest in eliminating disability discrimination.
“Uber’s wait time fees take a significant toll on people with disabilities,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “Passengers with disabilities who need additional boarding time are entitled to access ridesharing services without discrimination. This lawsuit seeks to assist people with disabilities to live their lives with independence and dignity, as the ADA guarantees.”
“People with disabilities deserve equal access to all areas of community life, including the private transportation services provided by companies like Uber,” said Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division. “This lawsuit seeks to bring Uber into compliance with the mandate of the Americans with Disabilities Act while sending a powerful message that Uber cannot penalize passengers with disabilities simply because they need more time to get into a car. Uber and other companies that provide transportation services must ensure equal access for all people, including those with disabilities.”
If you believe you have been a victim of disability discrimination by Uber because you, or someone you were traveling with, were charged wait time fees, please contact 833-591-0425 (toll-free), 202-305-6786, or send an email to [email protected]. For more information on the ADA, please call the department’s toll-free ADA Information Line at 1-800-514-0301 (TDD 800-514-0383) or visit www.ada.gov. For more information on the Civil Rights Division, please visit www.justice.gov/crt. The complaint can be viewed on PACER and by visiting the U.S. Attorney’s Office for the Northern District of California website at www.usdoj.gov/usao/can.
Former Broadcom Engineer Charged with Theft of Trade SecretsRead the Press Release
SAN JOSE – A federal grand jury has indicted Peter Kisang Kim, a former Broadcom engineer, with trade secret theft involving Broadcom trade secrets, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation, Special Agent in Charge Craig D. Fair.
The indictment, filed November 4, 2021, and unsealed today, alleges that Kim, 50, a resident of Ben Lomond, worked as a principal design engineer at Broadcom and had been employed by the company for over twenty years. Broadcom is headquarted in San Jose and its products include networking chips used in equipment sold worldwide, including for enterprise and data center networking.
In the days before his July 17, 2020, departure from Broadcom, the indictment alleges that Kim stole Broadcom trade secrets from the company that were associated with a Broadcom family of chips often used in high-volume data centers. According to the indictment, the trade secrets were stored in non-public document repositories that were restricted to Broadcom employees within the same suborganization, or to Broadcom employees working on a project.
About ten days after his departure from Broadcom, Kim began working at the director level for Company-1, a China-based startup company focused on chip design and the market for networking chips, according to the indictment. The indictment alleges that Kim received a laptop for his work at Company-1 and, during the nine months following his departure from Broadcom and the start of his work at Company-1, that Kim possessed and repeatedly used Broadcom trade secrets on the newly-issued laptop and on other electronic devices. These trade secrets were associated with test plans, design verification environment files, and design specifications for the Broadcom family of chips.
The indictment charges Kim with eighteen counts trade secret theft, in violation of 18 U.S.C. § 1832(a). An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Kim faces a maximum statutory sentence of 10 years of imprisonment, a $250,000 fine, and three years of supervised release, for each count. The court also may order additional assessments, forfeiture, and restitution; 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 afternoon, Kim made his initial appearance in federal court in San Jose, where he was arraigned on the indictment and entered a plea of not guilty to the charges. Kim was released on a $500,000 bond and ordered to surrender his passport and other travel documents. Kim is next scheduled to appear at 1:30 pm on January 31, 2022, before the Honorable Edward J. Davila, U.S. District Judge.
The prosecution is being handled by Assistant U.S. Attorneys Eric Cheng and Kyle Waldinger of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California, with the assistance of Kathy Tat and Margoth Turcios. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Crackdown on Illegal Firearms Possession and Trafficking Executed by Federal and State Law Enforcement in South Bay CitiesRead the Press Release
SAN JOSE – The Office of the United States Attorney has filed federal firearms charges against nine individuals in connection with a crackdown against illegal firearms trafficking and possession, announced Acting U.S. Attorney Stephanie M. Hinds; Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) San Francisco Field Division Special Agent in Charge Patrick T. Gorman; and U.S. Drug Enforcement Administration (DEA) Special Agent in Charge Wade R. Shannon.
The operation, spearheaded by the ATF, involved close coordination with the U.S. Drug Enforcement Administration (DEA), the California Highway Patrol, the Monterey County District Attorney’s Office, the Monterey County Sheriff’s Office, the Salinas Police Department, and the Watsonville Police Department. The operation reflects the continued efforts of federal and state law enforcement to work jointly to combat violent crime in South Bay counties by targeting the illegal sale of firearms and the illicit possession of firearms. In addition to federal charges levied against nine defendants, the Monterey County District Attorney’s Office has filed similar charges against a number of defendants that stem from same operation.
“This operation has removed over 80 firearms from the street, including privately made firearms also known as a “ghost guns” and conversion devices that enable firearms to function as fully automatic weapons,” said Acting U.S. Attorney Hinds. “Operations such as this one target the pipeline of firearms to the street. By reducing the availability of illegal firearms, we take an important step toward reducing violent crime.”
“Earlier this year, the Department of Justice announced the launch of Cross- Jurisdictional Firearms Trafficking Strike Forces,” said ATF Special Agent in Charge Gorman. “The Cross-Jurisdictional Firearms Trafficking Strike Forces were developed to help reduce gun violence by disrupting illegal firearms trafficking in key regions across the United States. The Bay Area was listed as one of those key regions. ATF works closely with our partners to track the illegal movement of firearms which creates an avenue for criminals and violent offenders to gain access to firearms. There were numerous firearms seized in this case that we allege were trafficked across state lines. We will continue to work diligently alongside our partners to honor our commitment to reducing violent gun crime in our communities.”
Criminal complaints were filed against the nine federal defendants on November 2, 2021; the complaints were unsealed earlier today. The complaints are supported by five separate affidavits that describe the alleged crimes, including the dates that the defendants unlawfully possessed and sold guns, as well as the types of guns that were sold. According to the affidavits, between February of 2020 and September of 2021, ATF, utilizing undercover methods, purchased from the nine federal defendants a total of at least 35 firearms (including machine guns), numerous rounds of ammunition, and quantities of methamphetamine. Additional firearms were seized from defendants who were charged in the Monterey County courts as part of the same operation. The sales occurred in various locations in Salinas and Watsonville, including the parking lots of local businesses and the defendants’ residences. In addition, at least 50 firearms were seized in connection with the arrests of the defendants on November 4.
The affidavits also describe the wide variety of firearms and ammunition that were purchased from the defendants during the operation. The weapons purchased were handguns, including handguns with high-capacity magazines; rifles, including a short-barreled rifle; shotguns, including a short-barreled shotgun; and machine guns. The complaints also allege that many of the defendants sold privately manufactured firearms, also known as “ghost guns.”
Further, as described in the affidavits, ATF purchased eight machine gun conversion devices – called “switches” or “sears” – from the federal defendants. According to the complaints, a switch is a machine gun conversion device that allows a semi-automatic firearm to function as a fully automatic weapon. The sear functions similarly. According to the complaints, the switches were used to convert semi-automatic pistol-type weapons to fire fully automatically and the sear was used to convert a semi-automatic AR-type rifle to fire fully automatically. The possession and/or transfer of these devices are illegal under federal law.
Six of the defendants are alleged to be convicted felons, and therefore, ineligible to possess firearms under federal law. In addition, each of the defendants facing gun charges is alleged to have either engaged in the business of dealing firearms without a license, or to have illegally possessed firearms, or illegally transferred firearms as follows:
Defendant
Charges
Maximum Statutory Penalties
Gregory Cabrera, 34, Salinas
18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
18 U.S.C. § 922(a)(1)(A) (dealing firearms without a license)
5 years of imprisonment, $250,000 fine, 3 years of supervised release
Francisco Javier Jaramillo, a/k/a “Chito,” 27, Salinas
18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
18 U.S.C. §922(a)(1)(A) (dealing firearms without a license)
5 years of imprisonment, $250,000 fine, 3 years of supervised release
Martin Campos, Jr., a/k/a “Silent,” 24, Springdale, Ariz.
18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
Cody Lee Moreno, 23, Salinas
18 U.S.C. § 922(o) (illegal possession and transfer of a machinegun)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
Gabriel Penuelas-Garcia, 43, Aromas, Calif.
18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
Ruben Adolfo Pimentel, 29, Salinas
18 U.S.C. § 922(g)(1) (felon in possession of a firearm and ammunition)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
21 U.S.C. § 841(a)(1) (distribution of methamphetamine)
20 years of imprisonment, $1,000,000 fine, not less than 3 years of supervised release to life
Gregory Smith, a/k/a “GNutty,” 50, Salinas
21 U.S.C. § 841(a)(1) (distribution of methamphetamine)
20 years of imprisonment, $1,000,000 fine, not less than 3 years of supervised release to life
Carlos Manuel Ruiz-Montanez, 20, Watsonville
18 U.S.C §§ 922(o) and 2 (aiding and abetting the illegal possession and transfer of machineguns)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
18 U.S.C. § 922(a)(1)(A) (dealing firearms without a license)
5 years of imprisonment, $250,000 fine, 3 years of supervised release
Ramon Castillo, 25, Watsonville
18 U.S.C. § 922(o) (illegal possession and transfer of machineguns)
10 years of imprisonment, $250,000 fine, 3 years of supervised release
In connection with the arrests of the defendants today, ATF seized approximately 50 firearms, including AR-type rifles, short-barrel rifles, shotguns, handguns, ghost guns, a machinegun, and over 5000 rounds of ammunition. Additionally, ATF made an arrest in Madera, California, that stemmed from this operation. The suspect was charged by the United States Attorney’s Office in the Eastern District of California by complaint alleging a violation of 18 U.S.C. § 922(o) (illegal possession and transfer of a machinegun) and 26 U.S.C. § 5861(d) (possession of an unregistered National Firearms Act weapon)
The some of the defendants are anticipated to make their initial federal court appearances on November 5, 2021. The criminal complaints merely allege that crimes have been committed, and each defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Assistant U.S. Attorney Neal C. Hong is prosecuting the case with the assistance of Elise Etter. These prosecutions are the result of investigations by the ATF in coordination with the DEA, California Highway Patrol, the Monterey County District Attorney’s Office, the Office of the Monterey County Sheriff, and the police departments of Salinas and Watsonville.
Texas Man Sentenced to Five Years in Prison for Multi-Year Embezzlement Scheme to Defraud Alameda-Based Labor UnionRead the Press Release
OAKLAND – Scott A. Wilson was sentenced today to sixty months in prison and ordered to pay more than $4 million in restitution for executing a multi-year embezzlement scheme targeting his former employer, Operating Engineers Local No. 3, announced Acting United States Attorney Stephanie Hinds, Federal Bureau of Investigation San Francisco Division Special Agent in Charge Craig D. Fair, and U.S. Department of Labor Office of Inspector General, Special Agent in Charge, Los Angeles Region, Quentin Heiden. The sentence was handed down by the Honorable Jeffrey S. White, U.S. Senior District Judge.
“Scott Wilson abused his authority as the IT director of the Operating Engineers Local 3 by creating a complex scheme to steal millions of dollars in union funds. Today’s sentencing affirms the U.S. Department of Labor Office of Inspector General’s commitment to safeguard union funds from those who seek to enrich themselves at the expense of union members,” said Special Agent-in-Charge Quentin Heiden.
Wilson, 54, formerly of Tracy, Calif., has been residing in Texas since 2017 and pleaded guilty to the charge on July 6, 2021. Wilson was the director of the union’s information technology department where he had authority to purchase goods and services. According to his plea agreement and other documents in the case, while working for the union, Wilson set up a front company called OST. Using the alias, “John Lasson,” Wilson used OST to receive funds from the union, at first directly and then through two other front companies set up by a friend and a relative under Wilson’s direction. Between 2011 and 2017, Wilson used these front companies to fraudulently invoice the union for IT-related goods and services that were never to be delivered, taking some funds directly through OST, and others through kickbacks paid by his friend and relative. Wilson also used the front companies to conceal payments made with union funds to his own family members, primarily for work that was never done. At one point, Wilson arranged for the union funds to be withdrawn from the front companies’ accounts and delivered to him in the form of cash wrapped in bundles.
Over the course of six years, Wilson fraudulently misdirected at least $3.98 million to the front companies, $2.44 million of which was kicked directly back to Wilson in various ways. In the plea, Wilson admitted that he used the embezzled funds to, among other things, purchase land in Corsicana, Texas, and build himself a house there.
Wilson was charged by information with one count of embezzlement of labor organization assets, in violation of 29 U.S.C. § 501(c). He pleaded guilty to the count.
In sentencing Wilson to the five-year prison term, Judge White pointed out that Wilson committed more than a single fraudulent act—instead, the defendant engaged in “hundreds of decisions to steal money” and that he was “embarking on a campaign to cover up” the offense with “perjury, false statements” and “fantastical” stories. Judge White stated, “[it is] hard to conceive of a white-collar offense significantly more serious than this one.”
In addition to the prison term, Judge White also ordered White to pay restitution of $4,669,577 and to serve a three-year term of supervised release. Judge White ordered Wilson to surrender and begin serving his prison term on or before January 3, 2022.
This case is being prosecuted by Assistant United States Attorney Colin Sampson of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Department of Labor Office of Inspector General.
Two Former Silicon Valley Executives Charged with Defrauding Tech Company Through Kickback SchemeRead the Press Release
SAN JOSE – Kevin Chao and Richard Sze, who worked together as executives at a prominent Silicon Valley technology company, were arrested and each charged today in separate federal criminal complaints with conspiracy to commit honest services wire fraud and money laundering based on a kickback scheme that defrauded their technology company, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Chao was additionally charged with substantive wire fraud and honest services wire fraud in the complaint against him.
According to the federal complaint unsealed today, Chao, 62, of Mountain View, and Sze, 54, of Saratoga, began working for “Company-1” in 2005 after Company-1 acquired the business where Chao and Sze were employed. Company-1 is considered a global leader in industrial automation and digital transformation and provides hardware and software productions, solutions, and services to its clients. Company-1’s common stock is traded on the New York Stock Exchange.
Chao rose to the position of Global Business Director of Company-1. Sze became a Manager of Software Engineering. Sze reported directly to Chao.
The criminal complaints for each defendant allege that in 2012, Company-1 switched from its established software development vendor to a new company. The new software development company had been incorporated in China at about that time and was 80% owned by an individual who worked at the previous software development vendor for Company-1. That individual seemed to know Chao, according to a former supervisor of Chao.
The complaints describe that beginning in 2016 or earlier and continuing through 2020, Chao and Sze orchestrated a kickback scheme with the new software development company. In the scheme, Chao and Sze steered software development work from Company-1 to the new software development company. Inflated or false invoices were submitted to Company-1 for the software development work. Chao and Sze authorized or otherwise caused Company-1 to pay the invoices. The paid funds were then funneled to Chao and Sze through a California limited liability company named Mooteec. Mooteec was entirely controlled by Chao and Sze. According to the complaint’s affidavit, Mooteec produces no product or service, has a P.O. box as its mailing address, has no physical office, and appears to be a shell corporation designed to conceal and move kickback money. Money that moved through Mooteec passed to Chao, Sze, and Chao-related bank accounts.
Company-1 paid the new software company more than $30 million, which was deposited into the software company’s bank account, according to the complaint. From 2016 until early 2020, the complaint describes that nearly $17 million was deposited from the new software company’s bank account into a Mooteec account. Withdrawals from the Mooteec account reflect that more than $5.4 million was sent to Chao’s accounts and over $1.3 million went to Sze’s accounts.
In late 2019, an employee who was resigning from Company-1’s employment reported that “something funny” was happening between Chao and the new software development company. The complaint describes that the report led Company-1 to begin an internal investigation. In December 2019, Chao and Sze resigned on the same day from Company-1.
Chao and Sze are scheduled to make their initial appearance in San Jose federal magistrate court to face the charges in their respective criminal complaints on October 29, 2021, at 1 p.m.
Chao is charged in his complaint with wire fraud, honest services wire fraud, and conspiracy to commit wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 1349, and money laundering in violation of 18 U.S.C. § 1956. Sze is charged with conspiracy to commit honest services wire fraud in violation of 18 U.S.C. § 1349 and money laundering in violation of 18 U.S.C. § 1956. If convicted of wire fraud, honest services wire fraud, or conspiracy to commit wire fraud, the maximum sentence for each count is 20 years in prison and a fine of $250,000 or twice the gross gain or gross loss. If convicted of money laundering, each defendant faces a maximum sentence of 20 years in prison and a fine of $500,000 or twice the value of the property involved. Any sentence following conviction, however, 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.
A complaint merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California and forfeiture is being handled by the Office’s Asset Forfeiture Unit. The prosecution is the result of an investigation by the FBI.
Russian Bank Founder Sentenced for Evading Exit Tax Upon Renouncing U.S. CitizenshipRead the Press Release
OAKLAND – The founder of a Russian bank was sentenced today for his felony conviction of filing a false tax return. As required under his plea agreement, prior to sentencing Oleg Tinkov, aka Oleg Tinkoff, paid $508,936,184, which is more than double the amount he sought to escape paying to the U.S. Treasury through renouncing his U.S. citizenship and concealing from the IRS large stock gains, which he knew were reportable. This payment includes $248,525,339 in taxes, statutory interest on that tax, and a nearly $100 million fraud penalty. Tinkov was additionally fined $250,000, which is the maximum allowed by statute, and sentenced to time served and one year of supervised release. The sentence was handed down by United States District Judge Jon S. Tigar.
Tinkov was indicted in Sept. 2019 for willfully filing false tax returns and was arrested on Feb. 26, 2020, in London, United Kingdom (UK). The United States sought extradition from the UK, and Tinkov contested extradition on medical grounds. In public records, Tinkov has disclosed that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease which has rendered him immunocompromised and unable to safely travel in the foreseeable future.
On October 1, 2021, Tinkov entered a plea to one count of filing a false tax return, a felony. According to the plea agreement, Tinkov was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares.
In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO reached a fair market value of more than $1.1 billion.
Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, and relinquished his U.S. citizenship.
As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.
Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answering the question Tinkov filled out the expatriation form himself and falsely reported that his net worth as only $300,000. On February 26, 2014, Tinkov filed a 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339, and he has now paid that in full with substantial penalties and interest as part of his plea, together with tax liabilities for other years.
Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California, Acting Deputy Assistant Attorney General Stuart M. Goldberg, and Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office made the announcement.
The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the UK secured Tinkov’s arrest overseas.
Assistant U.S. Attorney Michelle J. Kane, along with Assistant U.S. Attorneys Katherine Lloyd-Lovett and Colin Sampson and former Assistant U.S. Attorney Jose A. Olivera, of the U.S. Attorney’s Office for the Northern District of California and Trial Attorney Peter Anthony and former Assistant Chief Yael T. Epstein of the Tax Division prosecuted the case.
Convicted Corporate Securities Fraudsters Sentenced to 22 and 12 Months in PrisonRead the Press Release
SAN FRANCISCO – Nathaniel A. Brown and Benjamin J. Wylam and were sentenced to 22 months and 366 days in prison, respectively, for their separate roles in a scheme to engage in transactions in corporate securities using material nonpublic information about Sunnyvale-based Infinera Corporation (“Infinera”), announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentences were handed down by the Honorable Edward M. Chen, United States District Judge, following their guilty plea.
Brown, 49, and Wylam, 42, both of San Jose, Calif., pleaded guilty to the charges in separate plea agreements on July 14, 2021. Further, in a related case, on March 31, 2021, Naveen Sood, 49, of Campbell, Calif., signed a written agreement in connection with submitting his guilty plea.
According to Brown’s plea agreement, Brown admitted that, between 2011 and 2017, he was employed as a Senior Revenue Manager at Infinera. The technology company’s common shares were registered pursuant to Section 12(b) of Securities Exchange Act of 1934 and publicly traded on the NASDAQ Stock Market under the ticker symbol INFN. During Brown’s employment at Infinera, he was regularly privy to material nonpublic information about Infinera’s financial performance and financial projections. Beginning in or about April 2016 and continuing until the termination of his employment from Infinera in November 2017, Brown admitted that he regularly shared material nonpublic information that he obtained during his employment with Wylam. Brown admitted he knew Wylam intended to, and did, use the material nonpublic information to purchase Infinera securities in advance of Infinera’s quarterly public earnings announcements.
According to Wylam’s plea agreement, Wylam admitted that between April 2016 and November 2017, he obtained material nonpublic information about Infinera, and then engaged in transactions in Infinera securities. Wylam admitted that he obtained this material nonpublic information directly from Brown. As with Brown, Wylam admitted Infinera’s common shares were registered pursuant to section 12(b) of Securities Exchange Act of 1934 and publicly traded on the NASDAQ Stock Market under the ticker symbol INFN. Wylam acknowledged the gross gains he made from trading based on material nonpublic information belonging to Infinera that he received from Brown amounted to approximately $999,959.
The plea agreements further revealed the steps Brown and Wylam took to conceal their actions and relationship. Both men admitted to having begun using the messaging application WhatsApp to communicate with each other because of its encrypted communications and as an extra measure to conceal the facts that Brown was providing Wylam with material nonpublic information and that the two were friends. Both men admitted that Wylam also “unfriended” Brown on Facebook to achieve these ends.
According to Sood’s plea agreement, Sood admitted he used his own and another person’s brokerage accounts to execute trades based upon material nonpublic information and that he acquired no less than $215,000 in criminal proceeds from violations of the law that are described in his plea agreement.
Brown, Wylam, and Sood each were charged with one count of securities fraud, in violation of 18 U.S.C. § 1348, and each defendant pleaded guilty to the count.
During Brown’s and Wylam’s sentencing proceedings, in addition to prison terms, Judge Chen also ordered forfeiture money judgments against the two defendants. As to Wylam, the court ordered a forfeiture money judgment in the amount of $999,000; as to Brown, the court ordered a forfeiture money judgment in the amount of $30,000. In addition, both defendants were ordered to serve a three-year term of supervised release to begin after their prison term. The defendants will begin serving their prison terms on or before January 10, 2022.
Judge Chen scheduled Sood’s sentencing for December.
Assistant U.S. Attorney Kyle Waldinger of the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California is prosecuting the case with assistance from Kathy Tat. This case was investigated by the FBI. The Department of Justice appreciates the assistance of the Securities and Exchange Commission.
San Jose Residents Plead Guilty to Wire Fraud Conspiracy in Craigslist Automobile Resale Fraud SchemeRead the Press Release
SAN FRANCISCO –Ramil Heydarov and Orkhan Aliyev pleaded guilty today to conspiracy charges related to a scheme to defraud purchasers of vehicles on the Craigslist website by rolling back the odometers on vehicles before reselling them, announced Acting United States Attorney Stephanie M. Hinds, Homeland Security Investigations Special Agent in Charge Tatum King, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The guilty pleas were accepted by the Honorable Susan Illston, Senior U.S. District Judge, and, along with the October 12, 2021, guilty plea of Seymur Khalilov, establishes that all three defendants charged in the case have now pleaded guilty to fraud conspiracy charges.
According to the defendants’ plea agreements, from at least October 2017 through December 2020, Khalilov, 32; Heydarov, 31; and Aliyev, 32, all of San Jose, conspired to purchase high-mileage vehicles, roll back the odometers, and falsify documentation to make the vehicles appear newer. Specifically, the co-conspirators altered the odometers of numerous vehicles and altered registrations and titles, among other items, to fraudulently decrease the mileage readings of the vehicles and, thus, increase their sales value. The co-conspirators then posted advertisements of the vehicles on Craigslist to advertise the vehicles to victims who were not aware of the fraudulent alterations. Additionally, the defendants admitted using doctored driver’s licenses containing their photograph but the names of prior vehicle owners to facilitate the sale of these vehicles. The co-conspirators each acknowledged that the goal of the conspiracy was to sell vehicles to victims for an increased price based on the fraudulent odometer readings. According to the plea agreements, the co-conspirators sold at least 78 vehicles with rolled back odometer readings, resulting in a total loss to the victims of greater than $550,000.
All three defendants were charged in a single criminal complaint filed on May 3, 2021, and each was charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. As a result of today’s proceedings, all three defendants now have pleaded guilty to the charge. In addition, the defendants each have agreed as part of their plea agreements to pay restitution to the victims of the conspiracy in amounts reflecting the defendant’s respective role in the conspiracy. Khalilov has agreed to pay restitution in an amount between $360,000 and $534,072 that will be set by the court. Heydarov agreed to pay restitution in the amount of $379,235 and Aliyev agreed to pay restitution in the amount of $196,578.
Judge Illston scheduled the defendants’ sentencing for February 4, 2022. In addition to restitution, the conspiracy charge carries a maximum statutory prison term of up to 20 years and a $250,000 fine. The court also may order a term of supervised release to follow the 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 imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Leif Dautch and Ankur Shingal are prosecuting the case with the assistance of Marina Ponomarchuk and Soana Katoa. The prosecution is the result of an investigation by Homeland Security Investigations and the Federal Bureau of Investigation with assistance from the California Department of Motor Vehicles Investigations Division in Vallejo, the San Ramon Police Department, and the National Highway Transportation Safety Administration Office of Odometer Fraud Investigations.
Oakland Oral Surgeon Sentenced to 16 Years in Federal Prison for Multiple Child Sex CrimesRead the Press Release
SAN FRANCISCO – Cassidy Migan Lavorini-Doyle was sentenced today in federal court to 192 months (16 years) in prison for his convictions of attempted sex trafficking of a child, attempted production of child pornography, traveling with the intent to engage in illicit sexual conduct, and the receipt of child pornography, announced Acting United States Attorney Stephanie M. Hinds, Homeland Security Investigations Special Agent in Charge Tatum King, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentence was handed down by United States District Judge Charles R. Breyer.
Lavorini-Doyle, 38, a Yale-educated oral surgeon and Oakland resident, entered into a plea agreement and pleaded guilty to the above charges on May 26, 2021. In the plea agreement, Lavorini-Doyle admitted to numerous acts that involved sexual abuse or intended sexual abuse of children. Lavorini-Doyle admitted in his plea agreement that in 2018 he met an adult prostitute online and asked her to arrange “sex dates” with female children. He eventually met with the prostitute in person in Berkeley to further the plans. Lavorini-Doyle arranged the timing, location, and payment for sex with minor girls when he communicated with the adult prostitute. Lavorini-Doyle admitted that he had sex dates with each of two girls, and he believed they were minors. During these encounters, he recorded the sex acts without the girls’ permission. He saved the videos with file names that included “14 yo” and “12YO”, referencing his understanding of their ages. Subsequently, one of the two females was identified and determined to have been 18 years old at the time of the sex date, despite her youthful appearance.
Lavorini-Doyle also admitted in his plea agreement that in the evening hours of December 6, 2019, he approached a woman and her two minor daughters, aged 10 and 11, in a Walnut Creek parking lot. The woman worked as a janitor for an office building and had brought her two daughters to work that night. When she went outside to a dumpster in the parking lot, Lavorini-Doyle spotted the mother and approached them. He offered the mother $30,000 to buy her two daughters for the night. He admits that he intended to engage in sex acts with the children. As outlined in a sentencing memo filed by the government, the mother yelled “no” and called 911.
Lavorini-Doyle further described in his plea agreement that the next day, December 7, 2019, he traveled from San Francisco to Cambodia. He admitted his purpose for traveling to Asia was to engage in commercial sex with minors. He withdrew $10,000 in cash from his bank account before the trip so that he could pay for the sex acts when abroad. He also purchased zip ties and duct tape at Home Depot and a digital camera and SD card at Target. His cell phone reflects that, when in Cambodia, he made plans to engage in commercial sex acts with a minor. He admits that he sent a text message with words to the effect of: “Is super skinny 9yo avAO.”On December 11, 2019, law enforcement searched Lavorini-Doyle’s home in Oakland and seized several of his electronic devices. Lavorini-Doyle returned to the United States from Cambodia on December 12, 2019. When he landed at San Francisco International Airport, law enforcement officials seized several of his electronic devices. In his seized devices, Lavorini-Doyle possessed over 100 videos of child pornography, which he had downloaded from the internet. Sexual conduct depicted in the videos involved minors who had not attained the age of 12, violent sexual conduct, and sexual abuse of infants or toddlers.
In addition to the 192 month prison term, U.S. District Judge Breyer sentenced Lavorini-Doyle, who was in custody at the sentencing hearing, to a lifelong term of supervised release upon his release from prison. A restitution hearing will be held in 90 days.
Kevin Rubino and Noah Stern are the Assistant U.S. Attorneys prosecuting the case with the assistance of Ralph Branchstubbs. The prosecution is the result of an investigation by Homeland Security Investigations, the Federal Bureau of Investigation, the Walnut Creek Police Department, and the Contra Costa Human Trafficking Task Force.
Lavorini-Doyle is next scheduled to appear in custody in Contra Costa County Superior Court, where he faces related child sex trafficking state criminal charges being prosecuted by the Contra Costa County Office of the District Attorney.
This federal case was brought in U.S. District Court as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse, launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend and prosecute individuals who exploit children via the internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.Shooting at Drug Deal in Redwood City Results in More Than Seven-Year Prison Sentence for Stockton ManRead the Press Release
SAN FRANCISCO– Khari Moore and Malik Lott were sentenced today to 87 months and 12 months and one day in prison for their respective roles in a scheme to obtain marijuana from a Redwood City drug dealer for distribution, announced Acting United States Attorney Stephanie M. Hinds and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge, San Francisco Field Division, Patrick Gorman. Moore also sentenced after pleading guilty to brandishing a weapon during the attempted drug deal. The sentence was handed down by the Honorable Susan Illston, Senior U.S. District Judge.
On July 9, 2021, Lott pleaded guilty to one count of conspiracy to distribute and possess with intent to distribute marijuana, in violation of 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(D). On July 20, 2021, Moore pleaded guilty to the conspiracy charge and, in addition, to one count of brandishing of a firearm during and in relation to and in furtherance of a drug trafficking crime, in violation of 18 U.S.C. § 924(c)(1)(A)(ii). The facts underlying the convictions were set out in the defendants’ plea agreements.
According to the plea agreements, Moore made contact on the Internet with a person who agreed to sell marijuana. Lott admitted that in the days before April 8, 2018, he communicated with the seller of the marijuana via text message and settled the details of the drug transaction. Lott and Moore admitted that on April 8, 2018, they both travelled with others from Stockton, Calif., to Redwood City and with the purpose of purchasing four pounds of marijuana for the agreed-upon price of $4,000. Further, Moore and Lott acknowledged that the purpose of obtaining the marijuana was to resell the drugs for a profit. At the time of meeting, Moore and Lott met with the seller of the marijuana and another individual in a pickup truck that was parked in the parking lot of a liquor store in Redwood City. At some point during the meeting in the pickup truck, Moore brandished a .45 caliber handgun and fired it multiple times. The driver of the pickup truck was shot multiple times in the face and back, causing extensive injuries. Moore and Lott then fled the scene and returned to Stockton without the marijuana from the seller.
On July 13, 2021, Moore was charged with the drug distribution conspiracy and weapons charge. He pleaded guilty to both counts. Lott was charged by indictment on October 1, 2020, with the conspiracy charge, as well as additional drug trafficking, robbery, and conspiracy to commit robbery charges. As part of his plea agreement, Loot pleaded guilty to the drug distribution conspiracy charge and the other charges were dismissed.
The defendants both will begin serving their prison terms immediately. In addition to the prison terms, Senior District Judge Illston ordered the defendants to serve five years and three years of supervised release and ordered Moore to pay restitution.
Assistant U.S. Attorney Ross Weingarten is prosecuting the case with the assistance of Linda Love. The prosecution is the result of an investigation by the ATF and Redwood City Police Department.
CEO of East Bay-Based Internet Companies Marketing Child-Friendly Services Indicted on Wire Fraud and Securities Fraud ChargesRead the Press Release
SAN FRANCISCO – A federal grand jury has indicted Alan Anderson, charging him with wire fraud and securities fraud charges related to a scheme to use materially false and fraudulent pretenses to induce investors to make contributions to three businesses that were marketed as providing child-friendly internet services, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
The indictment filed October 13, 2021, and unsealed today, describes how Anderson, 59, of Walnut Creek, used misrepresentations to solicit investments for the three businesses. According to the indictment, Anderson owned and controlled Imbee, Inc., a Delaware corporation based in Walnut Creek marketed as a child-friendly social media platform; Fanlala, a California corporation marketed as a service providing internet-based music streaming for children; and Fruit Punch, a California corporation marketed as providing music-streaming service for children. The indictment alleges that beginning as early as April of 2010 through May of 2019, Anderson raised money for his companies by making false representations and creating false documents to support his bogus claims. For example, the indictment alleges Anderson created fraudulent income statements and profit and loss statements and misrepresented the companies’ profitability to investors and potential investors; that Anderson created and altered contracts to represent falsely that one or more of his companies would be acquired by larger companies; and that Anderson created and altered contracts to make fraudulent claims that his companies created partnerships with other existing companies. In addition, the indictment describes how Anderson emailed an investor to falsely claim Imbee was worth $21.6 million and that the investor owned 70% of the company.
In sum, the indictment charges Anderson with four counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff and 17 C.F.R. 240.10b-5. Anderson was arrested today in Walnut Creek. He will make his initial federal court appearance tomorrow at 10:30a.m., before U.S. Magistrate Judge Thomas S. Hixson, in San Francisco.
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 count of wire fraud carries a maximum sentence of 20 years in prison and a maximum $250,000 fine. The securities fraud charge carries a maximum 20 years of imprisonment and a $5,000,000 fine. In addition, the court also may order a term of supervised release, fines or other assessments, and restitution, if appropriate. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Christiaan Highsmith and Scott Joiner of the Office’s Corporate and Securities Fraud Section are prosecuting this case with the assistance of Claudia Hyslop, Morgan Byrne and Ralph Banchstubbs. This prosecution is the result of an investigation by the FBI.
Federal Charges Against Former San Francisco PUC General Manager Expanded to Include Bank Fraud ConspiracyRead the Press Release
SAN FRANCISCO – A federal indictment filed today charges Harlan Kelly, the former General Manager of the San Francisco Public Utilities Commission (PUC), and Victor Makras, a locally prominent San Francisco real estate investor, with bank fraud and conspiracy to commit bank fraud, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service-Criminal Investigation Special Agent in Charge Mark H. Pearson. The indictment also charges honest services wire fraud and conspiracy to commit honest services wire fraud in connection to a bribery scheme that was first leveled against Kelly in a November 2020 federal complaint. That complaint is superseded by today’s federal indictment.
Today’s indictment alleges, as did the November 2020 complaint, that Kelly, 59, engaged in a long-running bribery scheme and corrupt partnership with an individual identified in the indictment as “Contractor #1.” Kelly was appointed General Manager of the San Francisco PUC in 2012 and held that position until November 30, 2020, when he resigned upon the filing of criminal charges in the federal complaint. Contractor #1 is a San Francisco construction company executive and permit expediting consultant who ran or controlled multiple entities doing business with the City of San Francisco. Today’s indictment alleges that Kelly provided confidential internal PUC documents and information to Contractor #1 to give Contractor #1 competitive advantages during public contract bidding competitions. In exchange, Contractor #1 lavished Kelly with personal financial benefits, including discounted construction work on Kelly’s residence and an international vacation for Kelly and his family that included Contractor #1 paying for hotel charges, hundreds of dollars for meals, and jewelry.
The indictment’s further allegations, made public for the first time today, describe the conduct leading to the indictment’s bank fraud and bank fraud conspiracy charges against Kelly and Victor Makras. Makras, 63, who resides in San Francisco, is a San Francisco real estate broker and the principal of Makras Real Estate. He also brokered a consortium of individual real estate investors (here referred to as Makras Investors) that collectively made residential real estate loans secured by San Francisco Bay Area real property and real property elsewhere. Makras sat on a number of San Francisco public agency commissions and boards, including the San Francisco PUC, the San Francisco Port Commission, and the San Francisco Employees Retirement System Board.
According to the indictment’s allegations, Kelly and Makras conspired to defraud Quicken Loans, the financial lending institution, in a $1.3 million dollar real estate loan to Kelly. The indictment describes that in applying for the $1.3 million loan, Kelly and Makras represented to Quicken Loans a falsely inflated debt amount that Kelly owed on his existing real estate loan to Makras Investors. That falsely inflated amount allowed Kelly to obtain an increased amount of loan funds from Quicken Loans and at a lower loan rate. The alleged conspiracy also involved concealing from Quicken Loans the other outstanding debts of Kelly, including thousands of dollars owed to Contractor #1 for extensive remodel work on Kelly’s residence and a $70,000 personal loan made earlier by Makras to Kelly. The scheme further included repaying Kelly’s undisclosed debts using the loan proceeds from Quicken Loans. The undisclosed debts are alleged to have been paid, with the assistance of Makras, in a method designed to conceal that Quicken Loans’ loan proceeds were used to repay these other debts.
Kelly will make his initial appearance on the indictment tomorrow, October 20, in San Francisco federal court at 10:30 a.m. before United States Magistrate Judge Thomas S. Hixson.
The court date for the initial appearance of Makras on today’s indictment has not yet been set.
Kelly is charged with one count of honest services wire fraud and one count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 1349. If convicted, each count carries a maximum statutory penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss. Kelly and Makras are both charged in one count of bank fraud and one count of conspiracy to commit bank fraud, in violation of 18 U.S.C. §§ 1344(1),(2) and 1349. If convicted, each count carries a maximum statutory penalty of 30 years imprisonment and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross loss. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the criminal indictment are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco. To date, twelve individuals have been charged, including two high-ranking San Francisco public officials, Mohammed Nuru and Harlan Kelly. Multiple city contractors and facilitators have been charged. According to the charges earlier filed against Mohammed Nuru and others, Nuru allegedly took hundreds of thousands of dollars in bribes in cash, meals, and work on his vacation home from contractors who obtained San Francisco public contracts.
The case is being prosecuted by the Corporate And Securities Fraud Team of the U.S. Attorney’s Office. The case is being investigated by the FBI and the Internal Revenue Service-Criminal Investigation (IRS-CI).
Eight Defendants Charged in Tenderloin-Based Drug Trafficking ConspiracyRead the Press Release
SAN FRANCISCO – The U.S. Attorney’s Office has charged eight defendants with conspiracy, each in connection with the activities of one of two drug trafficking organizations that are alleged to have supplied the Tenderloin district of San Francisco with copious amounts of narcotics, including several varieties of fentanyl, announced Acting United States Attorney Stephanie M. Hinds, Drug Enforcement Administration (DEA) Special Agent in Charge Wade D. Shannon, and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge, San Francisco Field Division, Patrick Gorman. The charges were made in two complaints, both filed October 14, 2021, and unsealed hours ago, that provide details of the large-scale drug distribution conspiracies.
The complaints signal the continued commitment of the Office of the United States Attorney to coordinate efforts of federal and local law enforcement to deal with the endemic drug dealing in the Tenderloin District.
“The disturbing upward trend of organized fentanyl sales in our cities is a triple threat: fentanyl is deadly, its organized trade attracts violent offenders, and its sales and use devastates neighborhoods,” said Acting U.S. Attorney Hinds. Our prosecutions target those who seek to turn our city streets into open fentanyl marketplaces.”
“Fentanyl, regardless of color, can be lethal in the smallest amounts. Whether it is pink, blue, green, purple, red, or silver, it all can be fatal. Marketing gimmicks, such as changing the color, are not uncommon, but nevertheless can be dangerous,” said DEA Special Agent in Charge Shannon. “As overdoses continue to plague the Tenderloin, so will our efforts to investigate those who supply the region with deadly drugs.”
“Through the collaboration of local, state, and federal agencies, law enforcement works diligently to remove key distributors of narcotics from our communities,” said ATF Special Agent in Charge Gorman. “Throughout this case, ATF has worked side by side with our partners at DEA & the San Francisco Police Department to fulfill one of our core duties to the public. That duty being to ensure the safety of the public. ATF will continue to work hard every day alongside our partners to honor our pledge to this city.”
“The staggering loss of life we’ve seen due to drug overdoses is a public health calamity San Franciscans haven’t witnessed since the height of the AIDS crisis,” said Chief of Police Bill Scott. “Our street drug trade has been nearly twice as deadly as COVID-19 in San Francisco. While the primary chemical culprit is fentanyl, drug-related gun violence is beginning to take an increasingly troubling toll. We are incredibly thankful to Acting U.S. Attorney Stephanie M. Hinds; DEA Special Agent in Charge Wade D. Shannon; ATF Special Agent in Charge Patrick Gorman and their enormously dedicated investigators and prosecutors who’ve been our full partners in this operation.”
The first complaint describes a conspiracy allegedly headed by Luis Ochoa, 24, of Alameda, and his brother Roger Arteaga, 28, of Berkeley. The complaint alleges that since at least May of 2021, Ochoa, Arteaga , and three co-conspirators participated in a drug trafficking organization whose members distribute primarily fentanyl. The name of one of the co-conspirators has been redacted from court papers.
According to the complaint, the defendants supplied narcotics for resale to multiple local narcotics re-distributors. Some of the co-conspirators also allegedly engaged in street-level drug sales. The complaint describes several cell phone conversations intercepted by wiretaps in which Ochoa allegedly is heard receiving orders for drugs and arranging to have the drugs delivered to customers.
The complaint also describes a branding scheme by which the organization sought to sell fentanyl to customers by colors, each color reflecting a type of fentanyl that either burns a particular color or has been dyed a particular color. Intercepted communications described in the complaint reveal the large array of colors or types of fentanyl that the organization allegedly sold, including fentanyl that burns or has been colored blue, yellow, pink, green, purple, red, and silver. The complaint describes how members of the organization colored some of the fentanyl themselves using different dyes.
The complaint also describes the large quantities of fentanyl sold by the organization. A single seizure by law enforcement resulted in the recovery of approximately one kilogram of fentanyl, a quantity with the potential to create 500,000 lethal doses of the drug. Among the items seized at the time of Ochoa’s arrest was four pounds (about 1.8 kilograms) of fentanyl.
The second complaint describes a separate drug-distribution organization led by Fernando Viera, 27, of Oakland. According to the complaint, Viera is a mid-level drug trafficker in the Bay Area who allegedly supplied drugs to multiple resellers and street-level dealers. The street-level dealers, in turn, sold the drugs in the Tenderloin. The complaint describes several transactions indicating that in addition to fentanyl, numerous other drugs continue to be sold in the Tenderloin. For example, a recent seizure by law enforcement from one co-conspirator recovered more than 250 grams of fentanyl, as well as ounce quantities of methamphetamine, heroin, cocaine, and cocaine base.
According to both complaints, the investigation of these drug distribution organizations took over a year and involved law enforcement resources of the DEA, the ATF, and the San Francisco Police Department.
In sum, the defendants in the two cases include the following:
OCHOA COMPLAINT
Defendant
Aliases
Age
Luis Ochoa
Luis Valle
Luis Castro-Valle
Panda
24
Roger Arteaga
Jorge Miguel Casco-Raudales
Alfredo Zuniga
Rorro
28
Rosales Avila
Jamileth Avila
29
Jose Aguilar
Joe Aguilar Estrada
Danny
22
VIERA COMPLAINT
Defendant
Aliases
Age
Fernando Viera
Oscar F Viera
Oscar Fernando Viera Rodriguez
Tata
27
Edgardo Aguilar-Cruz
Jose
22
Nelson Casteneda
42
Nolan Ramos
Nelson Ramos
26
The complaint contains allegations only and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
All defendants are charged with engaging in a conspiracy to distribute controlled substances, in violation of 21 U.S.C. §§ 841(a)(1)(C) and 846. If convicted, each defendant faces a statutory maximum of 20 years in prison, a maximum fine of $1,000,000, and between 3 years and a lifetime term of supervised release. 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.
The defendants made the following appearances and are next scheduled to appear as follows:
OCHOA COMPLAINT
Defendant
Initial Appearance
Next Appearance
Luis Ochoa
October 15, 2021
October 20, 2021, at 10:30 a.m. for detention hearing
Roger Arteaga
October 15, 2021
October 20, 2021, at 10:30 a.m. for detention hearing
Rosales Avila
Pending Arrest
--
Jose Aguilar
Pending Arrest
--
VIERA COMPLAINT
Defendant
Initial Appearance
Next Appearance
Fernando Viera
October 15, 2021
October 25, 2021, at 10:30 a.m. for detention hearing
Edgardo Aguilar-Cruz
October 15, 2021
October 22, 2021, at 10:30 a.m. for detention hearing
Nelson Casteneda
Pending Transfer to Federal Custody
--
Nolan Ramos
--
October 19, 2021 at 10:30 a.m. for initial appearance and arraignment
Assistant U.S. Attorneys Sailaja Paidipaty, Kristina Green, Sloan Heffron, and Kenneth Chambers are prosecuting the case. The prosecution is the result of an investigation by the DEA, ATF, and San Francisco Police Department.
This investigation and prosecution are part of the Organized Crime Drug Enforcement Task Force (“OCDETF”), which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Southern California Man Pleads Guilty to Multimillion-Dollar Medical Device Fraud SchemeRead the Press Release
SAN FRANCISCO – Joseph Albert Corey pleaded guilty in federal court today to one count of wire fraud conspiracy and three counts of wire fraud involving a multimillion-dollar medical device loan scheme, announced Acting United States Attorney Stephanie Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
Corey, 56 and last known to live in or near Los Angeles, earlier pleaded guilty to mail fraud in a separate federal criminal case. He was released from custody in that case and then absconded from his February 2020 sentencing hearing. While a fugitive, he continued committing a second fraud scheme. Corey remained a fugitive until he was detained by Mexican immigration authorities in January 2021 and deported to the United States.
Today Corey pleaded guilty to the second fraud scheme. He now awaits sentencing in both fraud cases.
Corey pleaded guilty today to a wire fraud conspiracy to defraud medical device lenders that began no later than March 2019 and continued through October 2020. According to his plea agreement, Corey assumed the identities of multiple medical doctors. In the scheme, Corey would impersonate an actual doctor and apply to a loan company for a loan to purchase an expensive medical device from a medical device supply company. Once the lender approved the loan for the doctor Corey impersonated, Corey directed the lender to deposit the loaned purchase funds into a specific bank account. The bank account was opened earlier in the scheme under an account name that closely resembled or was identical to the name of a legitimate medical device supply company, and Corey controlled that bank account. Once the unsuspecting lender deposited the funds into the account, Corey appropriated the money and, under a different false identity, used the money to purchase gold from a precious metals dealer, thus obscuring the trail of the stolen loan money.
Corey admitted in his plea agreement that he defrauded more than 10 victims in this scheme and that the scheme caused losses of at least $3.5 million.
In the earlier mail fraud case from which Corey absconded, Corey was charged for depositing fraudulent checks into an account opened under a false name and then purchasing gold with the deposited money. Corey entered a guilty plea in November 2019 to the charge of mail fraud in that case and, while out on bond, failed to appear at his February 2020 sentencing hearing.
According to a filing by the government, when Corey was detained in January 2021 he possessed numerous false identifications, including one identifying him as a “special agent” of the CIA.
The sentencing of Corey on both criminal cases is scheduled for January 6, 2022, at 10 a.m. before the Honorable Edward M. Chen, U.S. District Court Judge.
Corey pleaded guilty today in the more recent case (CR 20-481 EMC) to one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349 and three counts of wire fraud in violation of 18 U.S.C. § 1343. The conspiracy and wire fraud charges carry a maximum sentence of 30 years in prison and a $1,000,000 fine. The plea agreement specifies that restitution to the victims shall be ordered in an amount no less than $3.5million.
In his earlier case (CR 19-530 EMC), Corey pleaded guilty in November 2019 to one count of mail fraud in violation of 18 U.S.C. § 1341. In that case, he faces a maximum sentence of 20 years in prison and a maximum fine of $250,000, along with restitution in an as-yet unspecified amount.
While these are the maximum possible penalties, in a criminal case a court imposes a sentence only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Mohit Gourisaria is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Maddi Wachs and Maribel Gallegos. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Bay Area Woman Pleads Guilty to Wire Fraud for Soliciting Donations in Bogus Cancer Treatment SchemeRead the Press Release
SAN JOSE – Amanda Christine Riley pleaded guilty in federal court today to wire fraud in connection with a scheme to solicit donations from individuals to help her pay for cancer treatments she never needed nor received, announced Acting United States Attorney Stephanie M. Hinds and Internal Revenue Service (IRS) Criminal Investigation, Special Agent in Charge Mark H. Pearson. The Honorable Beth Labson Freeman, U.S. District Judge, accepted the plea.
According to the written plea agreement, Riley, 36, admitted that in September 2012, when she was living in San Jose, she devised and executed a plan to obtain money from donors by falsely claiming she had Hodgkin’s lymphoma, a type of cancer. Riley acknowledged her intent was to deceive people into believing she had cancer and, in doing so, to convince them to donate money to her. She continued to execute that plan until at least January 3, 2019.
In approximately October 2012, Riley began documenting her purported illness on social media, including on Facebook, Instagram, and Twitter. She also created a blog located at http://lymphomacansuckitblogspot.com/. On these social media platforms, she posted photos of medications, photos of herself at hospitals, and photos of herself allegedly suffering the side effects of chemotherapy. Riley added captions to the photos with false statements claiming that she was taking cancer drugs and receiving cancer treatment. She even shaved her head to make it appear as if she had lost her hair as a result of chemotherapy.
Riley admitted taking additional steps to raise money for her phony illness. For example, Riley’s blog included a link to a support page, http://www.supportamanda.com, which also included false information about Riley’s purported “battle with cancer.” The support page featured a clickable “donate now” icon for visitors to donate money online, and encouraged visitors to donate money to “support Amanda” and help “Amanda’s battle with cancer.” In addition, Riley organized several fundraisers, including in-person fundraisers at the Family Community Church in San Jose, to solicit donations and raise money for her supposed cancer-related expenses.
In reality, Riley did not have – and has never had – Hodgkin’s lymphoma, or any other type of cancer. When people donated to Riley over the internet or at in-person fundraisers, they believed their donations would be used to pay Riley’s cancer-related expenses. In fact, Riley had no cancer-related expenses, and donors’ funds were simply deposited into Riley’s personal bank account. In total, Riley admitted she received over four-hundred donations worth approximately $106,272 from her fake cancer fundraising scheme.
Today, Riley pleaded guilty to one count of wire fraud in violation of 18 U.S.C. § 1343. Riley was charged on January 6, 2021, by felony information.
Judge Freeman scheduled Riley’s sentencing for February 22, 2022. Riley faces a maximum statutory penalty of up to 20 years in prison and a fine of $250,000 (or twice the gross gain or loss resulting from the scheme). In addition, the court may order additional terms of supervised release and restitution. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Scott Simeon and Michael G. Pitman are prosecuting the case with the assistance of Sahib Kaur. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation, and the San Jose Police Department.
Federal Jury Convicts San Jose Woman in Sex Trafficking ConspiracyRead the Press Release
SAN JOSE – A federal jury convicted Araceli Mendoza today of conspiracy and sex trafficking of children, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The conviction follows a two-week trial before the Honorable Beth Labson Freeman, U.S. District Judge.
At trial, the government proved that Mendoza, 29, of San Jose, conspired with three co-defendants to operate an unlawful prostitution venture in cities throughout the South Bay, including San Jose and Santa Clara. Between September 2014 and January 2016, these four individuals collaborated to sell the sexual services of adult women and minor girls. The government demonstrated that, Ariel Guizar-Cuellar, 41, of San Jose, was the leader, primary facilitator, and main financial beneficiary of the unlawful commercial sex venture. He used social media networks to identify victims, took pictures of women and girls, and then posted the pictures online on “backpage.com” to advertise sexual services. Mendoza worked with Guizar-Cuellar; Jocelyn Contreras, 26, of Redwood City; and Alyssa Anthony, 27, of Gilroy, to recruit women and girls to work as prostitutes and exotic dancers, transport them to and from prostitution dates, book hotel rooms for the prostitution dates, collect money after the dates, and create and post prostitution advertisements on the internet. The jury found that Mendoza both conspired with her codefendants to facilitate the sex trafficking venture and specifically sex trafficked one minor girl by recruiting, enticing, harboring, providing, and transporting her for the purpose of commercial sex or by benefitting financially from the girl’s exploitation.
On April 7, 2016, a federal grand jury indicted all four coconspirators charging them with one count of conspiracy to commit sex trafficking of children, in violation of 18 U.S.C. § 371, and three counts of sex trafficking of children, in violation of 18 U.S.C. § 1591 as to each minor victim. Guizar-Cuellar also was charged with one count of sexual exploitation of children, in violation of 18 U.S.C. § 2251(a) and (e). Guizar-Cuellar, Contreras, and Anthony all previously pleaded guilty and await sentencing.
At trial, Mendoza asserted a duress defense. Nevertheless, today the jury convicted Mendoza of conspiracy and substantive sex trafficking as to one of the minor victims. The jury acquitted Mendoza of sex trafficking for a second minor victim and failed to reach a verdict as to the sex trafficking of the third minor victim.
Judge Freeman scheduled a sentencing status hearing for all four defendant on October 19, 2021. The 18 U.S.C. § 1591 charge carries a mandatory minimum sentence of 10 years. The statutory maximum sentence for the charge is life in prison. The maximum statutory penalty for the conspiracy charge is five years in prison. In addition, restitution is mandatory to all victims of sex trafficking. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Marissa Harris, Annie Hsieh, and Sarah Griswold are prosecuting the case with the assistance of Nina Burney, Sahib Kaur, and Elise Etter. The prosecution is the result of an investigation by the FBI, the San Jose Police Department, and the Santa Clara County District Attorney’s Office Bureau of Investigation, with assistance from the Santa Clara County Human Trafficking Task Force.
San Mateo Man Sentenced to More Than 11 Years in Prison for Receiving Child PornographyRead the Press Release
SAN FRANCISCO – Adrian Kyle Benjamin was sentenced today in federal court to 135 months in prison for his conviction for the receipt of child pornography, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentence was handed down by United States District Judge Susan Illston.
Before sentencing today, Benjamin, 25, of San Mateo, pleaded guilty to the July 30, 2018, receipt of child pornography. Benjamin admitted in his plea agreement filed today that in 2018 he began communicating with a girl based in Washington state whom he knew was 14 years old. Benjamin enticed the 14 year old to engage in sexually explicit conduct and to send him visual depictions of her engaging in the conduct. Benjamin admitted he received approximately seven images and three videos from this minor depicting sexually explicit conduct.
Benjamin further admitted in his plea agreement that he similarly exploited three other minor victims, enticing them also to engage in sexually explicit conduct and to send him visual depictions of it. He admitted that he communicated in 2018 with a minor victim based in Australia who told him she was 13 years old. Benjamin convinced her to make and send him three videos of herself engaging in sexually explicit conduct. Similarly, Benjamin admitted that he communicated in 2018 with a minor girl in Texas who informed him she was 15 years old. He convinced her to send images and videos of her sexually explicit conduct, and she made and sent Benjamin 50 images and four videos. In at least two of these videos, Benjamin provided specific instructions as to the conduct to be recorded. Benjamin further admitted in his plea agreement that in 2019 he communicated with a minor Canadian high school student. As stated in a sentencing memorandum filed by the government, in one communication Benjamin joked that the minor victim was “old” because she was 17 years old. Benjamin convinced her to send five videos and one image of her engaged in sexually explicit conduct.
Benjamin also admitted in his plea agreement that he attempted to entice at least two other minor victims to engage in sexually explicit conduct and send visual depictions of the conduct to him. One of them lived in California, and the other lived in Connecticut. These minor girls told Benjamin that they were between 14 and 15 years old.
The 135 month prison sentence for Benjamin was handed down today following Benjamin’s guilty plea to the receipt of child pornography in violation of 18 U.S.C. § 2252(a)(2) and (b)(1). United States District Judge Susan Illston also sentenced the defendant to a ten year period of supervised release following his release from prison.
Mohit Gourisaria and Molly Priedeman are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Veronica Hernandez and Maribel Gallegos. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse, launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Founder of Russian Bank Pleads Guilty to Tax FraudRead the Press Release
The founder of a Russian bank pleaded guilty today to filing a materially false tax return.
“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”
“Oleg Tinkov brazenly violated United States tax law,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “No one who enjoys the immense benefits of United States citizenship, as Tinkov did, may avoid the corresponding obligation to support the country he chose. Tax evaders should take notice of the long reach of U.S. law enforcement.”
“Tinkov renounced his U.S. Citizenship shortly after receiving millions of dollars,” said Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office. “Despite his knowledge of U.S. tax reporting requirements, he substantially understated his wealth on filings with the IRS. International tax cheats remain a priority for my office and our agency; and as such, the International Tax and Financial Crimes D.C.-based group will continue to aggressively pursue those committing international tax crimes.”
According to the plea agreement, Oleg Tinkov, also known as Oleg Tinkoff, was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares.
In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO had a fair market value of more than $1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, to relinquish his U.S. citizenship.
As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.
Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answer the question, Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only $300,000. On Feb. 26, 2014, Tinkov filed a false 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339.
Tinkov was arrested on Feb. 26, 2020, in London, United Kingdom (UK), on these charge. Since that time, he has been contesting extradition on medical grounds. Tinkov has provided to the government and a court in the UK expert medical reports supporting his claim that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease, which has rendered him immunocompromised and unable to safely travel. As part of the plea, Tinkov has agreed to make the expert reports available to the court.
Tinkov’s sentencing hearing is scheduled for Oct. 29 before U.S. District Judge Jon S. Tigar. Under the terms of the plea agreement, Tinkov agrees to pay no less than $506,828,377, which includes the 2013 taxes, the civil fraud penalty, and statutory interest on that tax, totaling $448,957,108 as well as tax liabilities for other years that Tinkov acknowledged he owes. Per the terms of the plea agreement, the parties have agreed to recommend a custodial sentence of time served, followed by one year of supervised release, and an additional fine of $250,000. This recommendation binds the court once it accepts the plea agreement.
The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the United Kingdom secured Tinkov’s arrest overseas.
Assistant Chief Yael T. Epstein of the Tax Division and Assistant U.S. Attorney Michelle J. Kane of the U.S. Attorney’s Office for the Northern District of California are prosecuting the case.
Founder of Russian Bank Pleads Guilty to Tax FraudRead the Press Release
OAKLAND – The founder of a Russian bank pleaded guilty today to filing a materially false tax return.
“Oleg Tinkov brazenly violated United States tax law,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “No one who enjoys the immense benefits of United States citizenship, as Tinkov did, may avoid the corresponding obligation to support the country he chose. Tax evaders should take notice of the long reach of U.S. law enforcement.”
“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”
“Tinkov renounced his U.S. Citizenship shortly after receiving millions of dollars,” said Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington D.C. Field Office. “Despite his knowledge of U.S. tax reporting requirements, he substantially understated his wealth on filings with the IRS. International tax cheats remain a priority for my office and our agency; and as such, the International Tax and Financial Crimes D.C.-based group will continue to aggressively pursue those committing international tax crimes.”
According to the plea agreement, Oleg Tinkov, also known as Oleg Tinkoff, was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares.
In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO had a fair market value of more than $1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, to relinquish his U.S. citizenship.
As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.
Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answer the question, Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only $300,000. On Feb. 26, 2014, Tinkov filed a false 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339.
Tinkov was arrested on February 26, 2020, in London, United Kingdom (UK), on the charges. Since that time, he has been contesting extradition on medical grounds. Tinkov has provided to the government and a court in the UK expert medical reports supporting his claim that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease, which has rendered him immunocompromised and unable to safely travel. As part of the plea, Tinkov has agreed to make the expert reports available to the court.
Tinkov’s sentencing hearing is scheduled for October 29 before U.S. District Judge Jon S. Tigar. Under the terms of the plea agreement, Tinkov agrees to pay no less than $506,828,377, which includes the 2013 taxes, the civil fraud penalty, and statutory interest on that tax, totaling $448,957,108 as well as tax liabilities for other years that Tinkov acknowledged he owes. Per the terms of the plea agreement, the parties have agreed to recommend a custodial sentence of time served, followed by one year of supervised release, and an additional fine of $250,000. This recommendation binds the court once it accepts the plea agreement.
The IRS-Criminal Investigation Division investigated the case. The Justice Department’s Office of International Affairs and law enforcement partners in the United Kingdom secured Tinkov’s arrest overseas.
Assistant Chief Yael T. Epstein of the Tax Division and Assistant U.S. Attorney Michelle J. Kane, with the assistance of Katie Turner and Kay Konopaske, of the U.S. Attorney’s Office for the Northern District of California are prosecuting the case.
Warden of Federal Corrections Institute in Dublin Charged with Sexual Abuse of A WardRead the Press Release
OAKLAND – Ray J. Garcia has been charged in a criminal complaint with sexual abuse of a ward, announced Acting U.S. Attorney Stephanie M. Hinds; Department of Justice (DOJ), Office of the Inspector General (OIG) Los Angeles Field Office Special Agent in Charge Zachary Shroyer; and FBI Special Agent in Charge Craig D. Fair.
According to the complaint filed September 24, 2021, and unsealed today, Garcia, 54, of Merced, Calif., is the warden of Bureau of Prison Federal Correctional Institute Dublin (FCI Dublin), an all-female low security federal correctional institution. At the time of the offense, he was the associate warden at FCI Dublin. As an associate warden and warden, Garcia had disciplinary authority over inmates incarcerated at FCI Dublin. He received training regarding inappropriate relationships with inmates, including the fact that sexual or financial involvement were prohibited. In addition, in 2019 and 2020 Garcia directed training on the Prison Rape Elimination Act (“PREA”), and trained new supervisors on PREA procedures and policies.
According to the complaint, Garcia knowingly had sexual contact with at least one inmate victim while she was incarcerated at FCI Dublin and was under his custodial, supervisory, or disciplinary authority. In particular, the complaint alleges that Garcia digitally penetrated the victim on multiple occasions. The complaint describes an occasion during which Garcia assaulted a victim and when the victim pushed Garcia’s hand away, Garcia put the victim’s hand on his genitals. Further, the complaint alleges that Garcia requested that the victim, and at least one other inmate, strip naked for him when he did his rounds at FCI Dublin. Garcia allegedly took photographs of the victim naked in a cell at FCI Dublin and also showed the victim pictures on his cellphone of his own genitalia. The complaint alleges Garcia maintained several nude photographs of the victim on his personal computer.
The complaint further alleges that Garcia took actions to deter the victim from coming forward. As detailed in the complaint, Garcia told the victim that he was “close friends” with the individual responsible for investigating allegations of misconduct by inmates and told the victim that he could not be fired. In addition, law enforcement located hundreds of sexually graphic photographs—including photographs of male and female genitalia and nude photographs of Garcia—on Garcia’s work cellphone issued by BOP.
As stated in the complaint, Garcia was placed on administrative leave in July 2021 in connection with the investigation.
Garcia is charged with one count of sexual abuse of a ward, in violation of 18 U.S.C. § 2243(b). He made an initial federal court appearance this afternoon in the U.S. District Court for the Northern District of California before U.S. Magistrate Judge Nathaneal Cousins. Garcia’s next federal court appearance is scheduled for November 12, 2021, before U.S. Magistrate Judge Kandis A. Westmore for a status conference.
The charges contained in the criminal complaint are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law. If convicted of the charge, Garcia faces a maximum statutory sentence of 15 years imprisonment, a three-year term of supervised release, and a $250,000 fine. 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 Molly K. Priedeman is prosecuting the case with the assistance of Leeya Kekona. The prosecution is the result of an investigation by the DOJ OIG and the FBI.
Soledad Norteño Gang Member Sentenced to Eight Years in Prison for Participation in Federal Rico ConspiracyRead the Press Release
SAN JOSE – Michael Cazares, a/k/a “Lil Rhino,” was sentenced today in federal court to eight years in prison for his racketeering conspiracy convictions, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
Cazares, 30, of Soledad, was a Norteño gang member who participated in a conspiracy to commit violent attacks on other inmates in the Monterey County Jail. He pleaded guilty on June 10, 2021, to engaging in a RICO Conspiracy, Conspiracy to Commit Murder in Aid of Racketeering, and Conspiracy to Commit Assault with a Dangerous Weapon in Aid of Racketeering.
In his plea agreement, Cazares admitted to being a member of the Nuestra Familia/Salinas Norteños enterprise. This enterprise consists of members and associates of the Nuestra Familia prison gang as well as Norteño street gangs in Salinas and the surrounding areas. Norteño gang members pledge their allegiance and loyalty to the prison gang Nuestra Familia and are instructed on its rules, rituals, and obligations. Members agree to commit crimes to carry out the enterprise’s racketeering activity, including murder, narcotics trafficking, and other acts of violence.
Gang rules and discipline are enforced by threatening and attacking those individuals who violate the rules or pose a threat to the organization. Inside prisons and local jails, members and associates of Nuestra Familia and the Norteños work together to maintain the structure and rules of their enterprise.
In his plea agreement, Cazares admitted that while in jail he conspired with enterprise members to enforce the most important rules by conducting “removals” of inmates. His plea agreement described a “removal” as a pre-planned vicious attack designed to inflict maximum physical injury on a fellow inmate gang member who committed a serious infraction of the gang’s rules and to remove that gang member from both the gang’s custodial housing unit and the gang itself. A removal, as described in the plea agreement, is carried out by one or more “hitters” who stab the victim with a jail-made weapon and are followed by at least two “bombers” who beat the victim. The purpose of the subsequent beating by bombers, who carry no weapons, is to inflict injury while providing time for the hitters to wash blood off of themselves and to get rid of the weapons.
Drug trafficking inside jail is a significant source of revenue for Nuestra Familia and Norteños. Cazares further admitted that he also conspired with other gang members in the enterprise to support the distribution of narcotics within Monterey County Jail.
Cazares and 14 other Norteño gang members were indicted by a federal grand jury on September 27, 2018. They were charged with one count of a RICO racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5); and one count of conspiracy to commit assault with a dangerous weapon in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(6). In addition, some of the defendants, but not Cazares, were charged with attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5) and assault with a dangerous weapon, in violation of 18 U.S.C. § 1959(a)(3).
To date, 13 of the charged defendants have pleaded guilty and 12 have been sentenced, while two defendants remain scheduled for a trial set to commence on October 25, 2021. Each of the 13 defendants listed below pleaded guilty to a RICO conspiracy, and their status is as follows:
Defendant
Date of Sentencing
Sentence
JOHNNY MAGDALENO, a/k/a “Soldier Boy”
November 10, 2020
30 years in prison
RODNEY LUIS ROMERO,
a/k/a “Speedy”
November 17, 2020
18 years in prison
MICHAEL JAMES RICE,
a/k/a “Redwood”
March 3, 2020
13 years in prison
RAMON MONTOYA,
a/k/a “Ray Ray”
October 27, 2020
10 years in prison
JUAN ALVAREZ,
a/k/a “Chucky”
August 17, 2021
10 years in prison
ERIK LOPEZ,
a/k/a “Bimbo”
August 18, 2020
10 years in prison
ALEJO ALEX ALEGRE, IV,
a/k/a “Chino”
October 13, 2020
10 years in prison
CARLOS CERVANTES, a/k/a “Lil Huero”
September 22, 2020
10 years in prison
MICHAEL CAZARES, a/k/a “Lil Rhino”
September 28, 2021
8 years in prison
ALBERTO MORENO,
a/k/a “Doughboy”
January 7, 2020
7 years in prison
STEVEN ANTHONY DORADO,
a/k/a “Castro”
July 14, 2020
7 years in prison
JEFFREY LOPEZ,
a/k/a “T-Bone”
May 11, 2020
7 years in prison
ALBERTO CERVANTES, a/k/a “Littles”
November 2, 2021
TBD – pending sentencing
The eight year prison sentence for Cazares was handed down today by the Honorable Beth Labson Freeman, United States District Judge, following Cazares’s guilty pleas on three counts: one count of engaging in a RICO racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit attempted murder in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(5); and one count of conspiracy to commit assault with a dangerous weapon in aid of racketeering, in violation of 18 U.S.C. § 1959(a)(6). Judge Freeman also sentenced the defendant to a five year period of supervised release following release from prison.
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 FBI with assistance from the Salinas Police Department, the Monterey County Sheriff’s Office, the California Highway Patrol, and the California Department of Corrections and Rehabilitation.
This investigation and prosecution are part of the Organized Crime Drug Enforcement Task Force (“OCDETF”), which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Three California Residents Charged with Conspiring to Defraud Unemployment Insurance ProgramRead the Press Release
SAN FRANCISCO – The United States Attorney’s Office for the Northern District of California filed a criminal complaint against Ratha Yin, Amanda Yin, and Steven Mavromatis charging the defendants with conspiracy to commit mail and wire fraud for their respective roles in a scheme to defraud the State of California by filing unemployment claims in the names of other people, announced Acting United States Attorney Stephanie Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
According to the criminal complaint indictment, Ratha Yin, 34, was an inmate at Centinela State Prison located in Imperial County, on October 16, 2020, when he and his cellmate were found to be in possession of two cell phones and two SD cards. The contraband electronics contained a trove of information about communications Ratha Yin and his co-defendants—his wife, Amanda Yin, 31, of Indio, Calif., and Stephen Mavromatis, 26, of San Leandro, Calif.—as well as with the California Employment Development Department (EDD) and the Bank of America. Subsequent investigation uncovered evidence that Ratha Yin used at least one of the cell phones to communicate from prison with Mavromatis to file fraudulent claims for unemployment insurance made available through EDD under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”). Amanda Yin allegedly knew about the fraud, assisted with the collection of the proceeds, and disposed of some of the ill-gotten gains.
The complaint alleges that the defendants accessed the dark web to obtain personally identifying information for hundreds of individuals and then created email accounts for many of the victims to be used in connection with the scheme. Ratha Yin and Mavromatis then used the personal information and emails to file fraudulent unemployment claims. The complaint explains that when the EDD issues unemployment insurance benefits under the unemployment insurance program, it contracts with Bank of America which sends the recipient a pre-loaded Bank of America debit card with a set cash balance. Ratha Yin and Mavromatis allegedly used this system by requesting benefits and requesting the EDD to mail the prepaid debit cards to a post office box controlled by Mavromatis. The complaint estimates that an analysis revealed that of 91 fraudulent claims filed by Ratha Yin and Mavromatis at least $1.9 million of cash withdrawals were made from fraudulently obtained debit cards. In addition, the complaint alleges Ratha Yin and other co-conspirators filed claims and withdrew at least an additional $132,000 from accounts developed using similar methods.
The complaint further alleges that Amanda Yin collected funds from Mavramatis, assisted in deciding where and how to deposit the funds, and deposited some of the illegally obtained funds in accounts in her own name and in a joint account with Ratha Yin. In addition, Amanda Yin allegedly used the proceeds of the scheme to purchase personal items; for example, according to the complaint, Amanda Yin used a straw purchaser to obtain a $71,000 Audi sport utility vehicle and, in May of 2021, she allegedly used the proceeds for a down payment on a home in Indio, Calif.
In sum, the complaint charges all three defendants with conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C. § § 1341, 1343, and 1349. A criminal complaint merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants each face a maximum sentence of 20 years of prison, 3 years of supervised release following incarceration, and a fine of $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.
Amanda Yin and Mavromatis were arrested on September 21, 2021. Amanda Yin made her initial federal court appearance on September 21, 2021, before a magistrate judge in the Central District of California. She will appear in the Northern District of California on September 28, 2021. Mavromatis made his initial appearance before a magistrate judge in the Northern District of California on September 22, 2021. He will appear next on September 24, 2021, before United States Magistrate Judge Sallie Kim.
The case is being prosecuted by the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California. This case was investigated by the FBI with assistance from the U.S. Department of Labor-Office of the Inspector General, the California EDD, the California Department of Corrections and Rehabilitation Bay Area Special Service Unit, and the Centinela State Prison Investigative Service’s Unit.
Justice Department Reaches $1.6M Agreement to Remedy Title IX Violations at San José State UniversityRead the Press Release
WASHINGTON - The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Northern District of California announced a settlement with San José State University (SJSU) to ensure that students can attend school and participate in college athletics free from sexual harassment, including sexual assault. The department conducted its investigation under Title IX of the Education Amendments of 1972 (Title IX).
The department found that SJSU failed for more than a decade to respond adequately to reports of sexual harassment, including sexual assault, of female student-athletes by an athletic trainer then working at SJSU. Beginning in 2009, female student-athletes reported that the trainer subjected them to repeated, unwelcome sexual touching of their breasts, groins, buttocks, and/or pubic areas during treatment in the campus training facilities. The department concluded that for years, SJSU’s ineffective response exposed additional student-athletes to harm. The department also found that SJSU retaliated against two SJSU employees. The first employee repeatedly alerted school officials to the threat the athletic trainer posed, and the second employee expressed opposition to retaliating against the reporting employee and was terminated by SJSU. The department and SJSU entered into a comprehensive agreement to address the findings of the investigation, which began in June 2020.
“No student should be subjected to sexual harassment at a college or university in our country, especially by an employee who wields a position of power,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “With this agreement, San José State University will provide relief to survivors and transform its Title IX process to ensure accountability in its athletics program and create a safer campus for all its students. The Justice Department thanks the current and former students who came forward and shared their experiences, and the employees who unceasingly advocated for their students. Because of them, San José State University will adopt major reforms to prevent such an abuse of authority from happening ever again.”
“The department’s findings provide a stark reminder that schools must respond quickly to protect students from sexual harassment. Title IX requires no less,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “We acknowledge the San José State University students and employees whose efforts shined a light on this issue and look forward to working with the university to implement this important agreement.”
Under the agreement, among other relief, SJSU will:
• significantly improve SJSU’s process for responding to complaints of sexual harassment;
• bolster the Title IX Office by revising the office structure and providing adequate authority, independence, and resources to the Title IX Coordinator;
• publicize Title IX policies and protocols and develop user-friendly materials so everyone in the SJSU community knows how to report Title IX concerns;
• improve the policies and procedures of the SJSU Sports Medicine and Athletics Training Program to prevent sexual harassment by athletic trainers;
• deliver training to student-athletes and SJSU Athletics employees on giving and receiving informed consent for medical treatments and athletic training services;
• survey SJSU Athletics employees to assess their understanding of SJSU policies and identify barriers to reporting;
• take concrete steps to prevent retaliation under Title IX, including through training that provides clear examples of prohibited conduct; and
• provide supportive measures and remedies to current and former student-athletes who were sexually harassed by the athletic trainer.The agreement also requires SJSU to pay financial relief totaling $1.6 million to individuals who were sexually harassed by the athletic trainer and who came forward to participate in the department’s Title IX investigation or SJSU’s internal investigations. The department will monitor implementation of the agreement through the 2024-2025 academic year.
Attorneys from the Educational Opportunities Section of the Department of Justice’s Civil Rights Division and the U.S. Attorney’s Office for the Northern District of California jointly conducted this investigation, with which SJSU cooperated. Individuals with information related to SJSU’s compliance with Title IX are encouraged to contact the Department of Justice at 1-833-591-0289 or at [email protected].
The enforcement of Title IX, which prohibits sex discrimination in education programs and activities operated by recipients of federal financial assistance, is a top priority of the Civil Rights Division. Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt, and additional information about the work of the Educational Opportunities Section is available at https://www.justice.gov/crt/educational-opportunities-section. Additional information about the U.S. Attorney’s Office of the Northern District of California is available on its website at https://www.justice.gov/usao-ndca. Members of the public may report possible civil rights violations at https://civilrights.justice.gov/report/.
Justice Department Reaches $1.6M Agreement to Remedy Title IX Violations at San José State UniversityRead the Press Release
The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Northern District of California announced a settlement with San José State University (SJSU) to ensure that students can attend school and participate in college athletics free from sexual harassment, including sexual assault. The department conducted its investigation under Title IX of the Education Amendments of 1972 (Title IX).
The department found that SJSU failed for more than a decade to respond adequately to reports of sexual harassment, including sexual assault, of female student-athletes by an athletic trainer then working at SJSU. Beginning in 2009, female student-athletes reported that the trainer subjected them to repeated, unwelcome sexual touching of their breasts, groins, buttocks, and/or pubic areas during treatment in the campus training facilities. The department concluded that for years, SJSU’s ineffective response exposed additional student-athletes to harm. The department also found that SJSU retaliated against two SJSU employees. The first employee repeatedly alerted school officials to the threat the athletic trainer posed, and the second employee expressed opposition to retaliating against the reporting employee and was terminated by SJSU. The department and SJSU entered into a comprehensive agreement to address the findings of the investigation, which began in June 2020.
“No student should be subjected to sexual harassment at a college or university in our country, especially by an employee who wields a position of power,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “With this agreement, San José State University will provide relief to survivors and transform its Title IX process to ensure accountability in its athletics program and create a safer campus for all its students. The Justice Department thanks the current and former students who came forward and shared their experiences, and the employees who unceasingly advocated for their students. Because of them, San José State University will adopt major reforms to prevent such an abuse of authority from happening ever again.”
“The department’s findings provide a stark reminder that schools must respond quickly to protect students from sexual harassment. Title IX requires no less,” said Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “We acknowledge the San José State University students and employees whose efforts shined a light on this issue and look forward to working with the university to implement this important agreement.”
Under the agreement, among other relief, SJSU will:
- significantly improve SJSU’s process for responding to complaints of sexual harassment;
- bolster the Title IX Office by revising the office structure and providing adequate authority, independence, and resources to the Title IX Coordinator;
- publicize Title IX policies and protocols and develop user-friendly materials so everyone in the SJSU community knows how to report Title IX concerns;
- improve the policies and procedures of the SJSU Sports Medicine and Athletics Training Program to prevent sexual harassment by athletic trainers;
- deliver training to student-athletes and SJSU Athletics employees on giving and receiving informed consent for medical treatments and athletic training services;
- survey SJSU Athletics employees to assess their understanding of SJSU policies and identify barriers to reporting;
- take concrete steps to prevent retaliation under Title IX, including through training that provides clear examples of prohibited conduct; and
- provide supportive measures and remedies to current and former student-athletes who were sexually harassed by the athletic trainer.
The agreement also requires SJSU to pay financial relief totaling $1.6 million to individuals who were sexually harassed by the athletic trainer and who came forward to participate in the department’s Title IX investigation or SJSU’s internal investigations. The department will monitor implementation of the agreement through the 2024-2025 academic year.
Attorneys from the Educational Opportunities Section of the Department of Justice’s Civil Rights Division and the U.S. Attorney’s Office for the Northern District of California jointly conducted this investigation, with which SJSU cooperated. Individuals with information related to SJSU’s compliance with Title IX are encouraged to contact the Department of Justice at 1-833-591-0289 or at [email protected].
The enforcement of Title IX, which prohibits sex discrimination in education programs and activities operated by recipients of federal financial assistance, is a top priority of the Civil Rights Division. Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt, and additional information about the work of the Educational Opportunities Section is available at https://www.justice.gov/crt/educational-opportunities-section. Additional information about the U.S. Attorney’s Office of the Northern District of California is available on its website at https://www.justice.gov/usao-ndca. Members of the public may report possible civil rights violations at https://civilrights.justice.gov/report/. View the summary of agreement here.
Los Angeles Man Charged with Enticement of Minor Girl Who Ran Away in San FranciscoRead the Press Release
SAN FRANCISCO – Kingjohn Baylon Asuncion appeared in court today to face a federal criminal complaint charging him with coercion and enticement of a minor, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
The complaint alleges that Baylon, 23 years old and last known to live in Los Angeles, enticed a 13 year old girl to produce and send him child pornography on Instagram during the timeframe of December 25 through December 29, 2019. The complaint further alleges that on January 3, 2020, the minor female, who is from Northern California, ran away from her family, who were in San Francisco visiting the UCSF Medical Center, to meet up with Baylon. Two days later, the minor girl was found with Baylon at the Ferry Building in San Francisco.
Baylon made his initial appearance in federal court today before United States Magistrate Sallie Kim. Baylon remains in custody and his next scheduled appearance is Friday, September 24, 2021 at 10:30 a.m. for a detention hearing, again before United States Magistrate Judge Sallie Kim.
The complaint charges Baylon with persuading, coercing, or enticing a person younger than 18 years old to engage in a sexual activity, which includes the production of child pornography, in violation of 18 U.S.C. § 2422(b). If convicted, Baylon faces a minimum mandatory sentence of 10 years to a maximum of life in prison and a maximum fine of $250,000. However, any sentence following conviction is imposed by a court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
A complaint merely alleges that crimes have been committed, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Yoosun Koh is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Senna Milstead. The prosecution is the result of an investigation by the FBI who worked jointly with the University of California, San Francisco, Police Department, and the San Francisco Police Department, and with assistance from the Los Angeles Police Department.
Four Militia Group Members Plead Guilty to Obstruction of Justice ConspiracyRead the Press Release
SAN FRANCISCO – Four members of the “Grizzly Scouts” militia group, a group connected to the “boogaloo” movement, have pleaded guilty to conspiring to obstruct justice by destroying records connected to the investigation of the murder of a federal Protective Security Officer (PSO) contracted to the Federal Protective Service and the shooting and attempted murder of a second PSO on May 29, 2020, at the Oakland federal building, announced Acting United States Attorney Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair.
Jessie Rush, 29, of Turlock; Robert Blancas, 33, a transient resident of the Bay Area; Simon Ybarra, 23, of Los Gatos; and Kenny Miksch, 21, of San Lorenzo, were indicted on March 23, 2021, in connection with their scheme to obstruct justice by destroying records material to the murder and shooting investigation. Today, Kenny Miksch pleaded guilty in United States District Court, the last of the four defendants to do so.
According to each of their plea agreements entered into at the time of their guilty pleas, Rush, Blancas, Ybarra, and Miksch admitted that in April 2020 they joined an armed anti-government militia group named the “1st Detachment, 1st California Grizzly Scouts” (Grizzly Scouts). They had connected earlier via a Facebook group created in connection to the “boogaloo” movement. “Boogaloo” is a term, as noted in their indictment, used by some militia extremists to reference a purportedly impending politically-motivated civil war or uprising against the government. The “boogaloo” movement is not a single cohesive group but rather a loose concept used as a rallying point for some extremists.
According to their plea agreements, Rush named himself the Commanding Officer of the Grizzly Scouts and assumed the rank of “Major.” Blancas assumed the rank of “1st Lieutenant” with responsibilities for the group’s security and intelligence. Ybarra received the rank of “Corporal” and handled recruitment. Miksch received the rank of “1st Lieutenant” with responsibilities for the group’s training and firearms instruction.
All four admitted they periodically held group meetings for firearms training and other purposes. They engaged in armed, in person “training operations” in May 2020 with “operations orders” that labeled law enforcement as potential “enemy forces” and suggested using lethal force and taking prisoners. All four acknowledged in their plea agreements that they engaged in June 2020 discussions with other Grizzly Scouts about “boog” (boogaloo), waging war against the government, and tactics for killing law enforcement personnel, including police officers.
Rush, Blancas, Ybarra, and Miksch each acknowledged in their plea agreements that they learned a Grizzly Scouts member was allegedly involved in the May 29, 2020, murder of a federal PSO and the attempted murder of his fellow PSO in Oakland. They also each admitted that the Grizzly Scouts member sent group communications via a WhatsApp group entitled “209 Goon HQ” during that member’s alleged attack on and shoot-out with Santa Cruz County Sheriff’s deputies in Ben Lomond, California on June 6, 2020. According to their plea agreements, that member asked the other group members to come to his aid and said, “Dudes i offed a fed.” Rush admitted he instructed that member to delete data on his phone and get out of there.
Rush, Blancas, Ybarra, and Miksch each admitted to conspiring with other group members to destroy the records of their interactions and communications because they foresaw authorities would investigate and prosecute that Grizzly Scouts member. Specifically, they each admitted in their plea agreements to destroying records associated with the WhatsApp “209 Goon HQ” group, including communications with that Grizzly Scouts member. Blancas also admitted to destroying files on Dropbox regarding the Grizzly Scouts that consisted of the group’s rank structure, a non-disclosure agreement requiring members to maintain confidentiality of group materials, a liability release waiver, descriptions of the Grizzly Scouts uniforms, and a scorecard assessing the skills of Grizzly Scouts members in combat, firearms, medical, and other training.
Each of the four defendants admitted they intended to impair the integrity and availability of the above records for use in official proceedings, including the investigation and prosecution of the May 29, 2020, murder of one PSO and attempted murder of another PSO at the Oakland federal building.
Blancas was also earlier charged in a separate complaint and information with the enticement of a minor to engage in sexual activity, that is, the production of child pornography. In entering his plea of guilty, Blancas admitted that from about April through September 2020 he enticed a 15-year old girl to repeatedly make and send him pornographic photographs and videos of herself. Blancas admitted that he received at least 77 pornographic photographs and 31 videos from the victim, all while exchanging thousands of messages with her and speaking to her by audio and video call. Blancas admitted that he knew she was a minor when he did so.
Blancas pleaded guilty on August 23, 2021, to enticing a minor to engage in sexual activity in violation of 18 U.S.C. § 2422(b). On the same date Blancas pleaded guilty in the destruction of records case to three counts: one count of conspiracy to obstruct justice by destroying records in an official proceeding in violation of 18 U.S.C. § 1512(k), and two counts of destroying records in official proceedings in violation of 18 U.S.C. § 1512(c)(1). He was arrested on December 1, 2020, and remains in custody as he awaits sentencing. He entered all of his guilty pleas before the Honorable Vince Chhabria, United States District Judge.
Rush and Ybarra pleaded guilty on September 13, 2021, and Miksch pleaded guilty on September 20, 2021. Each defendant pleaded to one count of conspiracy to obstruct justice by destroying records in violation of 18 U.S.C. § 1512(k). They entered their guilty pleas before the Honorable James Donato, United States District Judge.
Blancas’s sentencing hearing is scheduled for December 6, 2021, before U.S. District Judge Chhabria in San Francisco.
The sentencing hearing for Rush is scheduled for January 10, 2022. The sentencing hearings for Ybarra and Miksch are scheduled for February 7, 2022. These sentencing hearings will occur before U.S. District Judge Donato in San Francisco.
Rush, Blancas, Ybarra, and Miksch each face a maximum statutory penalty of 20 years in prison and a fine of $250,000 for conspiracy to destroy records in an official proceeding in violation of 18 U.S.C. § 1512(k) and, as applies to Blancas only, for each of his two counts of the destruction of records in an official proceeding in violation of 18 U.S.C. § 1512(c)(1).
Blancas also faces an additional penalty of a minimum of 10 years imprisonment to a maximum of life in prison and a maximum $250,000 fine for enticing a minor to engage in sexual activity in violation of 18 U.S.C. § 2422(b).
All sentences imposed by a court, however, are imposed only after the court’s consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The cases are being prosecuted by Eric Cheng and Frank Riebli from the Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California, with assistance from the National Security Division’s Counterterrorism Section. The prosecutions are the result of investigations by the Federal Bureau of Investigation.
The Nuestra Familia’s General Council and Other Members and Associates Charged with RacketeeringRead the Press Release
SAN JOSE - A federal grand jury returned an indictment charging 17 defendants with racketeering conspiracy, including acts involving murder, robbery, drug trafficking, and money laundering, and charging five others with drug trafficking-related crimes. The indictment handed down onAugust 25, 2021, and unsealed today, catalogues a litany of crimes allegedly directed by the Nuestra Familia’s command structure incarcerated in California prisons. The charging announcement was made by Acting United States Attorney Stephanie Hinds, Federal Bureau of Investigation Special Agent in Charge Crag D. Fair, and Drug Enforcement Administration Special Agent in Charge Wade R. Shannon at a press conference this morning. Also appearing at the press conference were Chief of the Office of Correctional Safety for the California Department of Corrections and Rehabilitation Derrick Marion, Santa Clara Sheriff Laurie Smith, and San Jose Deputy Chief of Police Elle Washburn.
“The indictment charges all seven of the members who make up the Nuestra Familia’s ruling body: the General Council,” said Acting U.S. Attorney Hinds. “While the physical movement of this leadership was restricted by prison walls, the indictment alleges their power and influence were not so constrained. By disrupting gang leadership, we reduce violence on our streets. By removing violent actors and crime drivers from the streets, we make our neighborhoods safer.”
"The arrests made yesterday, most significantly the arrests of the Nuestra Familia leadership, will severely cripple the ability of this criminal enterprise to continue to facilitate crimes in communities throughout the state and help break a decades-old cycle of violence," said FBI San Francisco Special Agent in Charge Fair.
“Today’s operation strikes a substantial blow to Nuestra Familia leadership. This investigation revealed the wide-ranging influence of the gang that extends far beyond prison walls. It is clear they have hard and fast rules, and those who run afoul are met with intimidation and violence that spills into our communities,” said DEA Special Agent in Charge Wade R. Shannon. “We will continue to look at these organizations structurally to disrupt and dismantle them.”
According to the indictment, the 17 racketeering defendants were members and associates of the Nuestra Familia (“NF”) prison gang, a violent and lucrative organization formed in the 1960s. The NF is alleged in the indictment to be a criminal enterprise that was created to organize, protect, discipline, profit from, and maintain the allegiance of gang members on the streets of and within custodial facilities in California. As outlined in the indictment, membership in the NF involved a process of sponsorship, approval, and indoctrination. The perpetration of violence and other crimes was ordinarily a prerequisite to entrance, continued membership, and advancement in the organization. Once membership was achieved, this membership was for life. The indictment alleges an NF oath provides: “If I lead, follow. If I stumble, push me. If I fall, avenge me. If I betray you, kill me.”
The indictment also describes the NF’s organizational structure and, in particular, the gang’s governing body: a seven-member “General Council,” made up of three Generals and a four-member Inner Council, which makes significant decisions and oversees the activities of the NF and its subservient gangs. The indictment outlines each position according to the NF Constitution. According to the NF Constitution, the Street Regiment General oversees the NF’s “overall street operations.” The General of the Prisons is responsible for the NF’s “overall pinta [prison] functions,” and the General Advocates Office is the NF’s “justice department.” Tiered just below these three NF Generals was the Inner Council, which consisted of four senior NF members who served as “advisors” to the Generals and provided a system of checks and balances. All seven members of the NF’s General Council led the NF organization while incarcerated in the California prison system. Each is charged in this indictment.
Further, the indictment describes the appointment by these leaders of NF members to positions of power over hierarchical and paramilitary structures called “regiments,” imposed on its gang members operating on the streets in California. While the NF was composed of a relative few, it exercised control and wielded influence over thousands of subordinate gang members in counties and prisons throughout Northern California using such regiments. These regiments primarily guaranteed the NF’s vast influence and control over its own and its street gang members, ensured avenues to direct violence and other illicit activity, and secured means for the NF to make money through the commission of criminal activity. The NF oversaw such regiments in Santa Clara County, Monterey County, Santa Cruz County, San Benito County, San Francisco County, San Mateo County, Contra Costa County, Alameda County, Solano County, San Joaquin County, Fresno County, Kings County, Tulare County, Madera County, Merced County, Kern County, Sacramento County, Yolo County, Humboldt County, Shasta County, Lassen County, Tehama County, Butte County, Yuba County, Sutter County, Lake County, Placer County, and Sonoma County, as well as in Salinas Valley State Prison, Pelican Bay State Prison, Pleasant Valley State Prison, California State Prison - Solano, California State Prison - Sacramento, and High Desert State Prison.
According to the indictment, NF members and associates were involved in plots to kill 14 victims between April 2013 and July 2019 as part of the charged racketeering conspiracy. The defendants charged in the alleged racketeering conspiracy include the following:
Defendant
Age
Charges
Maximum Statutory Penalty
DAVID CERVANTES aka “DC”
73
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
ANTONIO GUILLEN aka “Chuco”
55
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
JAMES PEREZ aka “Conejo”
67
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
SAMUEL LUNA aka “Sammy”
46
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
GUILLERMO SOLORIO aka “Capone”
42
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
TRINIDAD MARTINEZ aka “Trino”
41
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
GEORGE FRANCO aka “Puppet”
56
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
STEVEN TRUJILLO aka “Esteban”
56
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
SALVADOR CASTRO aka “Gangster”
51
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
BRYAN ROBLEDO aka “Turtle”
48
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
ALEX YRIGOLLEN aka “Sleepy”
52
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
JUAN SOTO aka “Drifter”
38
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
EDGARDO RODRIGUEZ aka “Big Evil”
41
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
ROBERT MALDONADO aka “KJ”
46
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
ERIC ZARATE aka “Baby G”
43
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
ROCKY BRACAMONTE aka “Fox”
37
18 U.S.C. § 1962(d) – Racketeering Conspiracy
Life
JOSHUA CORTEZ aka “Buddah”
28
18 U.S.C. § 1962(d) – Racketeering Conspiracy
20 years
Also charged in the indictment are defendants who allegedly participated in two conspiracies to possess and distribute methamphetamine, one in May of 2019 and the other in September 2020 to March 2021. The charges pending against these defendants are as follows:
Defendant
Age
Charges
Maximum Statutory Penalty
WILLIAM RODRIGUEZ aka “Negro”
34
21 U.S.C. §§ 846, 841(a)(1), (b)(1)(B) – Conspiracy to Distribute and Possess with Intent to Distribute Methamphetamine
At least 5 years, up to 40 years
MARVIN RODRIGUEZ
34
21 U.S.C. §§ 846, 841(a)(1), (b)(1)(B) – Conspiracy to Distribute and Possess with Intent to Distribute Methamphetamine
At least 5 years, up to 40 years
CRISTIAN MORA aka “C-Fresh”
28
21 U.S.C. §§ 846, 841(a)(1), (b)(1)(B) – Conspiracy to Distribute and Possess with Intent to Distribute Methamphetamine
At least 5 years, up to 40 years
MARTIN JOSEPH RUPPEL JR.
42
21 U.S.C. §§ 846, 841(a)(1), (b)(1)(B) – Conspiracy to Distribute and Possess with Intent to Distribute Methamphetamine
At least 5 years, up to 40 years
ANAELISA CUEVAS
35
21 U.S.C. §§ 846, 841(a)(1), (b)(1)(B) – Conspiracy to Distribute and Possess with Intent to Distribute Methamphetamine
At least 5 years, up to 40 years
The court also may order additional terms of supervised release, fines, and restitution. Nevertheless, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.
The defendants are scheduled to make initial federal court appearances before U.S. Magistrate Court Judge Nathanael Cousins and U.S. Magistrate Court Judge Sallie Kim today.
This case is being prosecuted by the Organized Crime Strike Force of the United States Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by the FBI (San Francisco, Sacramento, and Phoenix Divisions), the DEA, the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives, and the U.S. Marshal Service, with the assistance of the Santa Clara County Sheriff’s Office, the California Department of Corrections and Rehabilitation, the Santa Clara County District Attorney’s Office, and the San Jose Police Department, and with support from the Alameda County Sheriff's Office, Antioch Police Department, Campbell Police Department, Fremont Police Department, King’s County Sheriff’s Office, Monterey County Sheriff’s Office, Mountain View Police Department, Sacramento Police Department, Salinas Police Department, Menlo Park Police Department, Santa Clara County Parole Department, Santa Clara County Probation Department, Santa Clara Police Department, Santa Cruz County District Attorney's Office, Santa Cruz County Sheriff's Office, Modesto Police Department, San Francisco Police Department, the Stanislaus County Sheriff's Department, and Sunnyvale Department of Public Safety.
This investigation and prosecution are part of the Organized Crime Drug Enforcement Task Force (“OCDETF”), which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.