Northern District of California
Press releases recorded for this federal judicial district.
Department of Justice Seizes $2.3 Million in Cryptocurrency Paid to the Ransomware Extortionists DarksideRead the Press Release
SAN FRANCISCO - The Department of Justice today announced that it has seized 63.7 bitcoins currently valued at over $2.3 million. These funds allegedly represent a significant portion of the proceeds of a May 8 ransom payment to individuals in a group known as DarkSide, which had targeted Colonial Pipeline resulting in critical infrastructure being taken out of operation. The seizure warrant was authorized earlier today by U.S. Magistrate Judge Laurel Beeler.
“Following the money remains one of the most basic, yet powerful tools we have,” said Deputy Attorney General Lisa O. Monaco for the U.S. Department of Justice. “Ransom payments are the fuel that propels the digital extortion engine, and today’s announcement demonstrates that the United States will use all available tools to make these attacks more costly and less profitable for criminal enterprises. We will continue to target the entire ransomware ecosystem to disrupt and deter these attacks. Today’s announcements also demonstrate the value of early notification to law enforcement; we thank Colonial Pipeline for quickly notifying the FBI when they learned that they were targeted by DarkSide.”
“There is no place beyond the reach of the FBI to conceal illicit funds that will prevent us from imposing risk and consequences upon malicious cyber actors,” said FBI Deputy Director Paul Abbate. “We will continue to use all of our available resources and leverage our domestic and international partnerships to disrupt ransomware attacks and protect our private sector partners and the American public.”
“Cyber criminals are employing ever more elaborate schemes to convert technology into tools of digital extortion,” said Acting U.S. Attorney for the Northern District of California Stephanie Hinds. “We need to continue improving the cyber resiliency of our critical infrastructure across the nation, including in the Northern District of California. We will also continue developing advanced methods to improve our ability to track and recover digital ransom payments.”
"Despite the extraordinary lengths the criminals took to cover the digital tracks of their ill-gotten gains, FBI San Francisco's investigative team was relentless and used all technical means to make this seizure," said FBI Special Agent in Charge Craig D. Fair. "Hackers and other cybercriminals simply cannot rely on cryptocurrency to evade the reaches of law enforcement."
On or about May 7, Colonial Pipeline was the victim of a highly publicized ransomware attack resulting in the company taking portions of its infrastructure out of operation. Colonial Pipeline reported to the FBI that its computer network was, among other things, accessed by an organization named DarkSide and that it had received and paid a ransom demand for approximately 75 bitcoins.
As alleged in the supporting affidavit, by reviewing the Bitcoin public ledger, law enforcement was able to track multiple transfers of bitcoin and identify that approximately 63.7 bitcoins, representing the proceeds of the victim’s ransom payment, had been transferred to a specific address, for which the FBI has the “private key,” or the rough equivalent of a password needed to access assets accessible from the specific Bitcoin address. This bitcoin represents proceeds traceable to a computer intrusion and property involved in money laundering and may be seized pursuant to criminal and civil forfeiture statutes.
The Special Prosecutions Section and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Northern District of California is handling the seizure, with significant assistance from the Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section and Computer Crime and Intellectual Property Section, and the National Security Division’s Counterintelligence and Export Control Section. The Department components who worked on this seizure coordinated their efforts through the Department’s Ransomware and Digital Extortion Task Force, which was created to combat the growing number of ransomware and digital extortion attacks.
The Task Force prioritizes the disruption, investigation, and prosecution of ransomware and digital extortion activity by tracking and dismantling the development and deployment of malware, identifying the cybercriminals responsible, and holding those individuals accountable for their crimes. The Task Force also strategically targets the ransomware criminal ecosystem as a whole and collaborates with domestic and foreign government agencies as well as private sector partners to combat this significant criminal threat.
Monterey Attorney Sentenced to Two Years in Prison for Embezzling from Trust That Owned Premises of San Francisco’s Elite Cafe RestaurantRead the Press Release
SAN FRANCISCO – John Arthur Hudson was sentenced in federal court yesterday to two years in prison and ordered to pay $828,521.52 in restitution for his wire fraud convictions based on fraudulent loans he obtained that were secured by real property held in a trust that he administered, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig Fair. The sentence was handed down by the Honorable James Donato, United States District Judge.
Hudson, 71, an attorney whose law practice was based in the Monterey County area, pleaded guilty to two counts of wire fraud on October 28, 2020. According to the complaint that charged him, Hudson was appointed to be trustee of a trust in 2011. The trust owned a commercial property on Fillmore Street in San Francisco and received rental income from its tenant The Elite Cafe, a New Orleans-inspired restaurant.
According to the plea agreement, Hudson committed fraud by obtaining loans secured by the trust’s property in a scheme that began in or about April 2011 and continued through June 2018. As trustee of the trust, Hudson pledged the Fillmore property as security for loans and concealed the loans from the trust’s two beneficiaries, to whom he owed fiduciary duties. He also lied to the lenders by representing the loan proceeds would be used to improve the Fillmore property. Once he obtained the loan proceeds, Hudson did not put the funds towards improving the Fillmore property but instead used the funds to benefit himself personally, including paying his own mortgage, issuing checks payable to himself, paying credit card bills for expenses unconnected to the trust, and paying other personal expenses.
The plea agreement further revealed the steps Hudson took to conceal his fraud. For example, Hudson hid the existence of the loans in documents and communications regarding the trust by falsifying the balance of the trust’s funds. He concealed information regarding a personal injury lawsuit against the trust from the two trust beneficiaries, as the lawsuit named a lender as a co-defendant in the action. Hudson further obtained documentation reflecting improvements made to the Fillmore property but paid for by its tenant and then provided that documentation to a lender, misrepresenting to the lender that he had used the lender’s funds to pay for those improvements to the Fillmore property.
Hudson personally obtained at least $693,000 by embezzling from his victims, according to his plea agreement.
In addition to the prison term, United States District Judge Donato ordered Hudson to pay $828,521.52 in restitution and sentenced him to a three-year period of supervised release. Hudson remains out of custody and will begin serving his prison term on September 13, 2021.
The case is being prosecuted by the Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California. The prosecution is a result of an investigation by the Federal Bureau of Investigation.
Seven Defendants Charged in East Bay-Centered Fentanyl Distribution CaseRead the Press Release
SAN FRANCISCO – The U.S. Attorney’s Office has charged six East Bay residents and one Oregon resident with a drug trafficking charges related to the distribution of fentanyl in the Bay Area, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The arrest of the members of the drug trafficking organization was paired with the largest ever seizure of fentanyl in the Northern District of California.
The charges are set out in two simultaneously filed complaints. The complaints describe how law enforcement investigators conducted a wiretap investigation to develop evidence regarding the distribution of fentanyl by an organization referred to in the complaint as the Castro DTO. Specifically, the first complaint alleges Javier Castro Banegas-Medina, a/k/a Gio, 39, conspired with Elmer Rosales-Montes, 28, and Jose Ivan Cruz-Caceres, 31, to distribute fentanyl to numerous re-distributors who, in turn, disseminated the drugs to others. The re-distributors charged are Jihad Jad Tawasha, 34, William Joseph Laughren, 25, and Heather Borges, 33. The second complaint alleges that Keny Alduvi Romero-Lopez, 23, lived with Castro and possessed with intent to distribute over one-half kilogram of fentanyl. The defendants reside in Oakland, San Leandro, Alameda, and Tracy, Calif., as well as in Oregon.
According to documents filed in these cases, the fentanyl distributed by the Castro DTO was kept in stash houses in Oakland and San Leandro, and its distribution chain flowed throughout the Bay Area, including San Francisco, Concord, and Oakland, and beyond to re-distributors outside of the Northern District of California.
Law enforcement executed arrest warrants at the Castro DTO stash houses on May 25, 2021, where they found approximately 19 kilograms of fentanyl, much of it hidden in fence posts surrounding one of the residences. Law enforcement also discovered dyes likely used to color the fentanyl prior to sale, and approximately $36,000 in bulk currency. Fentanyl, a highly potent drug, is often referred to by the color emitted when the drug is burnt. In this case, the complaint alleges the Castro DTO sold blue, pink, purple, green, and yellow varieties of fentanyl.
The complaints and documents filed in the cases describe numerous transactions that occurred in the Spring of 2021. For example, the complaints describe how after intercepting wire communications in which Castro stated that “guys” would transport drugs ordered by a re-distributor, investigators observed Rosales-Montes or Cruz-Caceres, or both, leave one of Castro’s residences. On one such occasion, investigators intercepted approximately eight ounces of fentanyl being transported from Rosales-Montes and Cruz-Caceres to a re-distributor. Similarly, the complaint describes numerous transactions in which other people, including Laughren, distributed drugs or received drugs for further distribution. According to the complaints, it is estimated the DTO has filled over 100 orders for suspected fentanyl between approximately April 21, 2021 and May 19, 2021. Searches conducted in connection with the arrests of the defendants has resulted in the seizure of approximately 19 kilograms of fentanyl, including bricks concealed within the fence posts of one property. This seizure represents the largest federal seizure of fentanyl ever in the Northern District of California. In court filings requesting detention pending trial, the United States also describes how four of the defendants were recorded discussing their plans to flee to Honduras if released.
In sum, the defendants are charged with the following crimes and face the following maximum statutory penalties:
Castro, Rosales-Montes, and Cruz-Caceres are charged with conspiracy to distribute more than 40 grams of fentanyl, in violation of 21 U.S.C. § § 846, 841(b)(1)(B). If convicted, the defendants face a maximum prison term of 40 years, with a mandatory minimum of 5 years.
Laughren is charged with possession with intent to distribute fentanyl, in violation of 21 U.S.C. § 841(a)(1) &(b)(1)(C). If convicted, Laughren faces a maximum prison term of 20 years.
Tawasha, Romero-Lopez, and Borges are charged with possession with intent to distribute more than 40 grams of fentanyl, in violation of 21 U.S.C. § 841(a)(1) & (b)(1)(B). If convicted, Tawasha, Romero-Lopez, and Borges each face a maximum prison term of 40 years, with a mandatory minimum of 5 years.
The court also may order additional terms of supervised release, fines, forfeitures, 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.
The complaints contain allegations only and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Castro, Rosales-Montes, Cruz-Caceres, Romero-Lopez, and Laughren were arrested May 25, 2021, and made their initial appearances on May 26, 2021, before U.S. Magistrate Judge Kandis A. Westmore. Magistrate Judge Westmore, scheduled detention hearings on June 2, June 3, and June 4, 2021. The United States has moved for detention of the defendants pending trial. Borges was arrested in Oregon and made her initial appearance on June 1, 2021.
The case is being prosecuted by Assistant United States Attorney Noah Stern, Special Assistant United States Attorney Benjamin Kleinman, and the Oakland Branch Office. The prosecution is the result of an investigation by the FBI (through its Safe Streets Violent Gang Taskforce), the Drug Enforcement Administration, and the Concord Police Department with assistance from the Contra Costa County Safe Streets Task Force, the United States Marshal Service, the Walnut Creek Police Department, the Richmond Police Department, the Contra Costa County Probation Department, the Office of the Contra Costa County District Attorney, California Highway Patrol, the Contra Costa County Sheriff’s Office, and the Pleasant Hill Police Department.
This investigation and prosecution is part of 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.
Two City Contractors Plead Guilty to Charge of Seven Year Conspiracy to Bribe San Francisco City Hall OfficialRead the Press Release
SAN FRANCISCO – Alan Varela and William Gilmartin III appeared in federal court today and each pleaded guilty to the charge of conspiracy to commit honest services wire fraud, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Gilmartin further agreed in his plea agreement to cooperate with federal investigators in the San Francisco City Hall corruption investigation.
“Contractors with San Francisco like Alan Varela, William Gilmartin, and their ilk are not off the radar of our San Francisco City Hall corruption investigation just because they are not public officials,” said Acting United States Attorney Stephanie M. Hinds. “If you bribe a public official and our investigation uncovers it, you will face justice. Involved individuals who come to the FBI with what they know about bribes and kickbacks will be treated differently than those who don’t and get caught.”
“The investigation into San Francisco city government continues and we believe there are even more city employees and contractors who may have pertinent first-hand knowledge of the insidious corruption plaguing San Francisco,” said FBI Special Agent in Charge Craig D. Fair. “Instead of waiting for the FBI to knock on your door, we encourage others who have knowledge of this corruption to reach out to us and cooperate with our investigation.”
Today’s developments follow the September 17, 2020, federal complaint charging Varela, 59, of Orinda, and Gilmartin, 60, of San Mateo, with bribery of a public official. According to that complaint affidavit, Varela and Gilmartin, the president and vice-president of a Bay Area civil engineering and construction firm, respectively, provided gifts and benefits to Mohammed Nuru, then Director of San Francisco’s Department of Public Works (DPW), in exchange for inside information about an upcoming lucrative San Francisco public contract. Varela and Gilmartin were the seventh and eighth defendants charged in the federal San Francisco City Hall graft probe that has to this date charged a dozen defendants.
Varela’s plea agreement expounds on those complaint allegations. Varela admitted in his plea agreement that from 2013 until January 28, 2020 (the day of Nuru’s arrest), he conspired with his co-defendant Gilmartin, Balmore Hernandez – a construction company CEO who earlier pled guilty and is cooperating with the FBI – and others to pay bribes and kickbacks to Nuru. Nuru’s position as DPW Director provided him great influence over San Francisco public contracts, permits, and construction projects as well as other City departments and private companies requiring contracts from DPW. The bribes and kickbacks to Nuru were intended to influence his conduct in official actions. The items of value Varela and his co-conspirators provided to Nuru included cash, equipment for Nuru’s ranch, free meals and entertainment, and the prospect of portions of the proceeds from the expected awards of City contracts.
Varela further admitted that he and his co-conspirators focused on winning a DPW contract and a related Port of San Francisco lease to operate an asphalt recycling plant and a concrete plant on the Port of San Francisco’s land. According to Varela’s plea agreement, Nuru agreed in exchange for cash and other valuables to use his official position to get Varela and his co-conspirators’ bid selected. Nuru began sending early drafts of San Francisco’s Request for Proposals for the asphalt recycling plant project as well as other inside information to Varela and his co-conspirators to better position them to have their bid selected. Nuru also regularly met with Gilmartin and Hernandez to discuss the plans over expensive restaurant dinners, always paid for by Gilmartin.
According to Varela’s plea agreement, Gilmartin arranged to compensate Nuru by asking an unnamed company to award a $100,000 contract to Balmore Hernandez. The proceeds of that contract were intended to pay Nuru, and Hernandez used the proceeds to benefit Nuru. Once the co-conspirators’ bid was selected in September 2015, Nuru continued to meet with Varela and the co-conspirators and supply additional inside information, all over meals paid for by Gilmartin that ultimately totaled approximately $20,000. At one point during discussions, Nuru requested a tractor for his ranch. Varela admitted that in February 2019 he coordinated with Gilmartin and Hernandez to deliver the tractor to Nuru.
In January 2020, while the asphalt recycling plant agreements with DPW and the Port of San Francisco were still being finalized, Nuru was arrested.
Gilmartin also pleaded guilty today to the charge of conspiracy to commit honest services wire fraud. The terms of his plea agreement require Gilmartin to cooperate with the ongoing investigation and surrender assets acquired as a result of his illegal conduct. The criminal conduct Gilmartin admits was submitted to the Court in a separate “Exhibit A” that is filed under seal and thus unavailable to the public at this time.
Varela and Gilmartin both entered their guilty pleas before United States District Judge William H. Orrick. Judge Orrick set Varela’s sentencing hearing for September 16, 2021, at 1:30 p.m. Gilmartin’s next hearing date is a status conference set for December 2, 2021, at 1:30 p.m.
Varela and Gilmartin each pleaded guilty to one count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346 and 1349. The charge carries a maximum statutory 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. However, any sentence following conviction would be imposed by the Court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The prosecution is being handled by the Corporate Fraud Strike Force in the Office of the U.S. Attorney for the Northern District of California and is the result of an investigation by the FBI.
New Charges Filed Against Medical Technology Company President and Two Others in Alleged Fraudulent Covid-19 Testing SchemeRead the Press Release
SAN FRANCISCO –A federal grand jury handed down a superseding indictment against the president of California-based medical technology company Arrayit Corporation, Mark Schena, in connection with the submission of over $70 million in false and fraudulent claims for allergy and COVID-19 testing. Additionally, a criminal information was filed against each of Paul Haje, Arrayit’s Vice President of Marketing, and Marc Jablonski, president of an Arizona-based marketing organization, in related schemes. The new charges are part of coordinated law enforcement actions filed in seven federal districts throughout the United States in response to alleged health care fraud schemes that are said to have exploited the COVID-19 pandemic. The U.S. Department of Justice estimates that over $143 million in false billings were generated in connection with these cases. A press release issued by the U.S. Department of Justice summarizing the nationwide coordinated law enforcement actions can be found here.
The charges in the superseding indictment and informations filed in the Northern District of California were announced by Acting United States Attorney Stephanie M. Hinds; FBI Special agent in Charge Craig D. Fair; Acting Assistant Attorney General Nicholas L. McQuaid of the Department of Justice’s Criminal Division; Special Agent in Charge Steven J. Ryan for the Office of Inspector General of the U.S. Department of Health and Human Services; Inspector in Charge Delany De Leon-Colon of the U.S. Postal Inspection Service (USPIS) – Criminal Investigations Group; Special Agent in Charge Kim R. Lampkins of the Veterans Affairs Office of Inspector General (VA OIG); and Special Agent in Charge Bryan D. Denny, Defense Criminal Investigative Service, Western Field Office.
According to the superseding indictment and additional documents previously filed in the case, beginning 2015 and continuing to February 2020, Schena, 58, of Los Altos, Calif., engaged in a scheme to defraud Arrayit’s investors and the public by, among other things, overstating Arrayit’s status and influence and by artificially increasing and maintaining the share price of Arrayit securities. Schena and others allegedly paid kickbacks and bribes to recruiters and doctors to run an allergy screening test for 120 allergens (including things ranging from stinging insects to food allergens) on every patient regardless of medical necessity, and then made numerous misrepresentations to potential investors about Arrayit’s allergy test sales, financial condition, and its future prospects. Documents filed in the case allege Schena touted Arrayit as the “only laboratory in the world that offers” revolutionary “microarray technology” allowing Arrayit to test for allergy and COVID-19 based on a drop of blood that is 250,000 times smaller than the technology touted by Theranos. Schena stated that it was simple to develop a test for COVID-19 because the switch from testing for allergies to testing for COVID-19 was “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.” Schena and others issued press releases and tweeted about partnerships with Fortune 500 companies, government agencies and public institutions, without disclosing that such partnerships either did not exist or were of de minimis value.
The superseding indictment bolsters previous charges filed against Schena by adding new counts of health care fraud and conspiracy allegations. Specifically, the superseding indictment alleges Schena conspired with others to pay kickbacks, administer fraudulent and unnecessary testing, and to make false and fraudulent statements about the existence, regulatory status, and accuracy of an Arrayit COVID-19 test. According to the superseding indictment, the conspiracy allegedly sought to induce the ordering of the Arrayit COVID-19 test and to bundle, i.e., require combination with, the COVID-19 test and Arrayit’s medically unnecessary allergy test. The COVID-19 test results were not provided in a timely fashion and were not reliable in detecting COVID-19.
The information filed against Haje alleges he conspired with Schena to solicit and pay kickbacks and bribes in return for services such as ordering allergy testing for beneficiaries and inducing the referral of members. In addition, the information alleges Haje caused the submission of fraudulent claims to insurers including Medicare, Medicaid, TRICARE, and commercial insurers as well as diverted the proceeds of the illegal kickback scheme for his personal use and benefit as well as to further the illegal kickback conspiracy.
Similarly, the information filed against Jablonski, the president of an Arizona-based marketing organization, alleges he conspired to defraud the United States and agreed to pay and receive illegal health care kickbacks. Specifically, the information alleges Jablonski solicited and received kickbacks and bribes from Schena in exchange for arranging for medical practitioners to collect blood samples and order allergy testing for beneficiaries and members to be conducted by Arrayit. The information also alleges Jablonski paid illegal kickbacks and bribes to other marketers and that he illegally maximized the amount of claims for reimbursement Arrayit would send to insurers by causing medical practitioners to order unnecessary and otherwise improper allergy testing by Arrayit.
Superseding indictments and criminal informations contain allegations only and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The superseding indictment charges Schena with conspiracy to commit health care fraud and wire fraud, in violation of 18 U.S.C. § 1349; health care fraud, in violation of 18 U.S.C. § 1347; conspiracy to pay illegal kickback, in violation of 18 U.S.C. § 371; payment of illegal kickbacks, in violation of 18 U.S.C. § 220; and securities fraud, in violation of 15 U.S.C. §§ 78j & 78ff and 17 C.F.R. 240.10b-5. Haje and Jablonski are both charged with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371. Haje also is charged with conspiracy to commit health care fraud, in violation of 18 U.S.C. § 1349. If convicted, the defendants face the following statutory maximum sentences:
Defendant
Charge
Maximum Penalty (per count)
Schena
Conspiracy to Commit Health Care Fraud and Wire Fraud
(18 U.S.C. § 1349)
20 years imprisonment,
$250,000 fine
Health Care Fraud
(18 U.S.C. § 1347)
(two counts)
10 years imprisonment,
$5,000,000 fine
Conspiracy to Pay Illegal Kickbacks
(18 U.S.C. § 371)
5 years imprisonment,
$250,000 fine
Payment of Illegal Kickbacks
(18 U.S.C. § 220)
(two counts)
10 years imprisonment,
$200,000 fine
Securities Fraud
(15 U.S.C. §§ 78j & 78ff
and 17 C.F.R. 240.10b-5)
(three counts)
20 years imprisonment,
$5,000,000 fine
Haje
Conspiracy to Defraud the United States and Pay and Receive Kickbacks
(18 U.S.C. § 371)
5 years imprisonment,
$250,000 fine
Conspiracy to Commit Health Care Fraud
(18 U.S.C. § 1349)
20 years imprisonment,
$250,000 fine
Jablonski
Conspiracy to Defraud the United States
(18 U.S.C. § 371)
5 years imprisonment,
$250,000 fine
The court also may order additional terms of supervised release, fines, forfeitures, 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.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing [email protected]. To learn more about victims’ rights, please visit: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.
Assistant U.S. Attorney William Frentzen of the Northern District of California, Acting Principal Assistant Chief Justin Weitz of the Market Integrity and Major Fraud Unit of the Fraud Section, and Assistant Chief Jacob Foster of the National Rapid Response Strike Force are prosecuting the case. This case was investigated by HHS-OIG’s San Francisco Regional Office and Detroit Regional Office, USPIS, the FBI, VA-OIG and DCIS. The department appreciates the assistance of the Securities and Exchange Commission.
U.S. Government Seeks Information About Victims of December 2017 EtherDelta HackRead the Press Release
SAN FRANCISCO – The Office of the United States Attorney and the United States Secret Service have issued a call for victims of a December 2017 hack to come forward, announced Acting United States Attorney Stephanie M. Hinds and U.S. Secret Service (USSS) Special Agent in Charge James E. Anderson Jr. The hack was perpetrated by Anthony Tyler Nashatka, a/k/a “psycho,” and a co-conspirator who were indicted in 2019 in connection with a scheme to defraud victims of at least $1.4 million in cryptocurrency; Nashatka and a codefendant were charged with conspiracy to commit computer fraud and abuse, conspiracy to commit wire fraud, aggravated identity theft, and other charges. Victims of the hack may provide information to the government about their losses by clicking here and filling out the questionnaire at the website.
The call for victims follows the August 13, 2019, indictment handed down by a federal grand jury. According to the indictment, in December of 2017, Nashatka conspired with others to target cryptocurrency exchange platform EtherDelta to obtain the private keys and other information of hundreds of its users as part of a scheme to steal the users’ cryptocurrency. The indictment further describes how Nashatka and his co-conspirators unlawfully used the identity of a victim to gain access to the platform’s domain name settings, caused the transmission of a command to divert users from the actual platform to a fake website, and fraudulently induced victims to input their cryptocurrency addresses and private keys into the fake website. Between December 20 and 21, 2017, Nashatka and his co-conspirators logged the credentials of hundreds of victims, stole their cryptocurrency, and transferred approximately $600,000 in cryptocurrency to one cryptocurrency address controlled by Nashatka and his co-conspirators. In addition, using this fraud scheme, Nashatka and his co-conspirators stole and additional $800,000 from a single victim on December 26, 2017. The investigation to identify additional victims is continuing. Nashatka and his codefendant each were charged with one count of the following crimes: conspiracy to commit computer fraud and abuse, in violation of 18 U.S.C. § 1030(b); transmission of a program, information, code, and command to cause damage to a protected computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A), (c)(4)(B)(i) and (c)(4)(A)(i)(VI); unauthorized access to a protected computer to obtain value, in violation of 18 U.S.C. §§ 1030(a)(4) and (c)(3)(A); conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; and aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1).
The United States Attorney’s Office for the Northern District of California and the USSS have posted the following message seeking information about users of the EtherDelta cryptocurrency platform between December 19, 2017, and December 21, 2017, who may have later suffered losses as a result of the scheme:
Anyone with questions or concerns about their EtherDelta account, including anyone who believes they are a victim, should fill out the questionnaire at this website https://go.usa.gov/xHCP2 and email it to [email protected]. The email should have “US v Gunton, et al” in the Subject Line. All responses are voluntary, but complete responses would be useful to identify respondents as potential victims of the fraud scheme. Based on the information provided, respondents may be contacted by the U.S. Secret Service and asked to provide additional information.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. The defendants face the following maximum statutory sentences:
CHARGE
MAXIMUM PENALTY
Conspiracy to Commit Computer Fraud and Abuse
10 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the scheme
Transmission of a Program, Information, Code, and Command to Cause Damage to a Protected Computer
10 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the scheme
Unauthorized Access to a Protected Computer To Obtain Value
5 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the scheme
Conspiracy to Commit Wire Fraud
20 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the scheme
Aggravated Identity Theft
2 years in prison (to run consecutive to any other term imposed) and a $250,000 fine or twice the gross gain or loss resulting from the scheme
The court also may order additional periods of supervised release, fines, and restitution for each violation. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
This case is being prosecuted by the Special Prosecutions Section of the United States Attorney’s Office. The prosecution is the result of an investigation by the United States Secret Service.
Modesto Woman Charged with Submitting 121 Stimulus Check Claims Using PII Obtained Through Her Imprisoned SonRead the Press Release
SAN FRANCISCO – Sheila Denise Dunlap was arraigned in federal court today on an indictment charging her with conspiracy to commit wire fraud and aggravated identity theft, announced Acting United States Attorney Stephanie M. Hinds, Internal Revenue Service Criminal Investigation Acting Special Agent in Charge Michael Daniels, and Treasury Inspector General for Tax Administration J. Russell George.
Dunlap, 50, of Modesto, is charged with engaging in a wire fraud conspiracy from March 2020 through July 2020 involving the fraudulent filing for Economic Impact Payment (EIP) payments, commonly known as stimulus checks. EIP payments were included as one of the provisions of the CARES Act signed into law on March 27, 2020, to address the economic fallout of the COVID-19 pandemic in the United States. This provision of the CARES Act provided that individuals who made less than $99,000 on their 2019 tax returns and those whose income was sufficiently low that a tax return filing was not required (known as non-filers) were eligible to receive EIP funds. EIP payments amounted to as much as $1,200 per adult and $500 for a qualifying child.
According to the indictment, Dunlap conspired with her son to obtain the personal identifiable information (PII) of others and used that PII to apply for EIP funds. Her son is imprisoned in San Quentin State Prison. Dunlap communicated with him through telephone and text messaging. The indictment alleges Dunlap’s son sent Dunlap the PII of fellow prisoners and others and, in or around April 2020, he coordinated with an unknown third party to email Dunlap a spreadsheet containing the PII of 9,043 individuals. Dunlap and her son devised a strategy that the first applications should use the PII of the youngest adults on the list as they were more likely to be tax non-filers and thereby qualify for EIP funds. According to the indictment, Dunlap used the PII to file 121 claims for stimulus checks, with all applications directing payment to her bank account. On May 28, 2020, five EIPs in the amount of $1,200 each were electronically deposited into Dunlap’s bank account, each as a payment to a different individual. Dunlap immediately withdrew the funds and used them for personal expenses. In total, Dunlap filed claims for $145,200 in EIP payments.
Dunlap is charged with one count of wire fraud conspiracy, in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 1349. The charge carries a maximum statutory 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. Dunlap is also charged with one count of aggravated identity theft, in violation of 18 U.S.C. § 1028A, which carries a penalty of two years imprisonment and a maximum fine of $250,000. Any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The charges are merely allegations, and the defendant is presumed innocent unless proven guilty in a court of law.
Dunlap was arraigned today on the indictment before United States Magistrate Judge Thomas S. Hixson. Her next appearances are scheduled for May 27, 2021, at 10:30 a.m. for a hearing regarding release conditions before Magistrate Judge Hixson and a status hearing on May 28, 2021, at 11 a.m. before United States District Judge Susan Illston. She is out of custody on bond.
Annie Hsieh is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Llessica Chan Fierro, along with Ralph Banchstubbs and Maribel Gallegos. The prosecution is the result of an investigation by IRS-CI and TIGTA.
Two North Bay Brothers Plead Guilty to Separate but Similar Pandemic Relief Fraud Schemes Netting over $2 MillionRead the Press Release
SAN FRANCISCO – Caesar Oskan, also known as Sezer Ozkan, and his brother Ester Ozkar, also known as Eser Ozkay, pleaded guilty today in federal court to making false statements to a financial institution in separate schemes to defraud the federal government of pandemic relief funds, announced Acting United States Attorney Stephanie M. Hinds; Internal Revenue Service Criminal Investigation Acting Special Agent in Charge Michael Daniels; United States Secret Service Special Agent in Charge of San Francisco Field Office James Anderson; Federal Bureau of Investigation Special Agent in Charge Craig D. Fair; Treasury Inspector General for Tax Administration J. Russell George; Small Business Administration Office of Inspector General, Western Region Special Agent in Charge Weston King; and Office of Inspector General for the Board of Governors of the Federal Reserve System and Bureau of Consumer Financial Protection, Western Region Special Agent in Charge Scott Redington.
Both Caesar Oskan, 66, of San Rafael, and Ester Ozkar, 66, of Novato, admitted as part of their guilty pleas that between March 2020 and June 2020 they each submitted multiple separate fraudulent applications for Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans in a scheme to defraud the Small Business Administration and the banks handling the PPP loans. EIDL and PPP are loan programs designed to help businesses survive during the Covid-19 pandemic.
In his written plea agreement, Caesar Oskan admitted that he obtained $1,006,004 in fraudulent PPP loans and $713,500 in fraudulent EIDL loans and advances. In Ester Ozkar’s plea agreement, he admitted that he obtained $474,132 in fraudulent PPP loans and $9,000 in EIDL advances.
“Pandemic relief funds are limited and intended to save legitimate struggling businesses from failing,” said Acting United States Attorney Stephanie M. Hinds. “Individuals, like these two brothers, who treat these pools of relief funds as their personal bank accounts deserve to be vigorously prosecuted.”
“Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with money intended to help businesses affected by the pandemic,” said Michael Daniels, Acting Special Agent in Charge IRS Criminal Investigation. “Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”
“The U.S. Secret Service is dedicated to investigating those who prey on businesses by taking advantage of pandemic relief funds,” said United States Secret Service Special Agent in Charge of the San Francisco Field Office James Anderson. “This investigation exemplifies the success we can achieve when the Secret Service and our law enforcement partners work together to protect America’s financial infrastructure.”
“The FBI and our partners are actively working to identify individuals, like the Oskan brothers, who are taking advantage of COVID relief programs intended to support hardworking Americans and small businesses struggling with financial challenges due to the pandemic,” said FBI Special Agent in Charge Craig D. Fair. “We will continue to collaborate across agency lines to combat this type of fraud and ensure these crucial funds are used as intended – not to enrich those who exploit the system for their own greed.”
“The Treasury Inspector General for Tax Administration will aggressively pursue those who endeavor to defraud taxpayer-funded Coronavirus Aid, Relief, and Economic Security Act programs, which were established to provide assistance to American business owners during these unprecedented times,” said J. Russell George, Treasury Inspector General for Tax Administration. “We appreciate the efforts of the U.S. Department Justice and our law enforcement partners in this effort.”
“Lying to gain access to economic stimulus funds will be met with justice,” said Small Business Administration Office of Inspector General, Western Region Special Agent in Charge Weston King. “SBA OIG will relentlessly pursue evidence of fraud against SBA’s programs aimed at assisting the nation’s small businesses struggling with pandemic challenges. I want to thank the U.S. Attorney’s Office for its leadership and dedication to pursuing justice.”
“The defendants admitted to defrauding the federal government of pandemic relief funds and are now convicted felons,” said Scott Redington, Special Agent in Charge, Western Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and Bureau of Consumer Financial Protection. “We are fully committed to bringing to justice wrongdoers who exploit and defraud financial institutions and the government’s response to the COVID-19 pandemic.”
The admissions of the two defendants in their respective written plea agreements describe the breadth of their criminal schemes. In Caesar Oskan’s plea agreement, he admitted that he submitted 27 fraudulent applications for PPP and EIDL loans. The applications were submitted on behalf of several entities with names such as “Bake and Wrap LLC”, “Comfort Plus Transportation LLC”, “Fast Food Plus LLC”, “Healthy Comfort Food”, and “CTC Trade LLC”. Oskan admitted that for many of his applications he registered the fictitious entities with the California Secretary of State, then backdated the Secretary of State documents to reflect earlier creation dates for the entities so that the entity could qualify for a pandemic relief loan. For each of his 27 applications, Oskan created fake IRS tax documents that contained false statements about the number of employees, false payroll costs, and false wage amounts paid.
In an example from his plea agreement, Oskan admitted applying on June 1, 2020, in the name of “CTC Trade LLC” to a bank for a PPP loan in the amount of $268,719. He had registered CTC Trade LLC as a business with the California Secretary of State less than a month before, on May 6, 2020. However, in his application Oskan represented that CTC Trade LLC was created prior to February 15, 2020 (the creation cutoff date for PPP and EIDL loan qualification), employed 17 employees, and had an average monthly payroll of $107,468. Oskan admitted in his plea agreement that each of these representations was false. He further admitted submitting fraudulent Articles of Incorporation and a fraudulent IRS form with the application. The application succeeded, and the bank disbursed $268,719 to him.
Separately, Ester Ozkar admitted in his plea agreement that he submitted eight fraudulent applications for PPP and EIDL loans on behalf of six entities with names such as “7Transportations”, “Alya LLC”, “Century Transportations Inc”, and “Last Mile Shuttle”. Ozkar admitted that Alya LLC was a fictitious entity that he registered with the California Secretary of State and then modified the Secretary of State documents to reflect a creation date earlier than February 15, 2020, so that the entity would qualify for PPP and EIDL loans. He further admitted that for every application, he created and submitted fake IRS tax documents containing false statements about the entity’s number of employees, payroll costs, and wages paid to fictitious employees.
In an example from his plea agreement, Ozkar states that he applied on or about April 7, 2020, on behalf of “Blockchain Tech, LLC” to a bank for a PPP loan in the amount of $46,250. He admitted he represented in the application that Blockchain Tech, LLC was in operation prior to February 15, 2020, employed four employees, and averaged a monthly payroll of $18,500. Ozkar further admitted that each of these representations was false. He also admitted that he submitted multiple fraudulent IRS forms in the application. The application succeeded, and the bank disbursed $46,250 to him.
Caesar Oskan and Ester Ozkar each pleaded guilty to one count of making a false statement to a financial institution, in violation of 18 U.S.C. § 1014. Each defendant faces a maximum penalty of 30 years in prison and a one million dollar fine. 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.
United States District Judge Charles R. Breyer set a sentencing hearing for each defendant on December 15, 2021, at 10 a.m. The defendants remain out of custody on bond.
For background information, the PPP is administered by the U.S. Small Business Administration (SBA) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is a federal law enacted in March 2020 to provide emergency financial assistance to the millions of Americans suffering from the economic effects caused by the COVID-19 pandemic. PPP loan proceeds must be used by the business on certain permissible business expenses, including payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on a PPP loan to be entirely forgiven if the business spends the loan proceeds on these business expense items within a designated period of time and uses at least 60% of the PPP loan proceeds on payroll expenses. Loans made through the PPP are 100% guaranteed by the SBA.
Similarly, the EIDL Program provides low-interest non-forgivable loans and fully forgivable advances to small businesses, among others, in regions affected by disasters. In March 2020 EIDL funds were made available to all states and territories due to the magnitude and severity of the COVID-19 pandemic.
Maya Karwande is the Assistant U.S. Attorney who, along with Assistant U.S. Attorney Chris Kaltsas, is prosecuting the case with the assistance of Ralph Banchstubbs. The prosecution is the result of an investigation by the Internal Revenue Service Criminal Investigation; the United States Secret Service; the Federal Bureau of Investigation; the U.S. Department of the Treasury Inspector General for Tax Administration; the Office of Inspector General for the Small Business Administration; and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
San Jose Man Sentenced to 20 Months for Computer Hack That Shut Down Opening Day Concession Sales at Earthquakes StadiumRead the Press Release
SAN JOSE – Salvatore A. La Rosa was sentenced today to 20 months in prison and ordered to pay $268,733 in restitution as well as a $5,000 fine for intentional damage to a protected computer, 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 Lucy H. Koh.
La Rosa, 41, of San Jose, pled guilty on February 17, 2021, to accessing without permission the Spectra Food Services and Hospitality’s (Spectra) on-line concessions management account for Earthquakes Stadium on February 29, 2020, the first home game of the San Jose Earthquakes 2020 MLS season. Spectra was the stadium’s concessions contractor, and its employees used Spectra’s mobile tablets as Point-of-Sale terminals to sell food and other items. The tablets displayed menus and payment selections from an online-based application developed for sports stadiums.
According to his plea agreement and a filing by the government for sentencing, La Rosa worked at the stadium from February 14, 2015, until Spectra terminated him from his job as Operations and Premium Services Manager on January 6, 2020. La Rosa admitted that he later logged into the administrative portal for the Earthquakes Stadium from his residence and used a password, without authority, to access Spectra’s concessions menu and payment selections. He then deleted them. The deletion caused the Point-of-Sale tablets used by Spectra’s staff to stop working during the February 29, 2020, opening day soccer match and disabled Spectra’s ability to accept credit cards. Spectra’s employees were forced to resort to handwriting orders and using calculators to complete cash transactions. The resulting delays led to lost sales from the inability to process orders and, according to the government’s filing, a devastating impact on staff due to verbal abuse from frustrated, angry customers. In some instances, Spectra had to provide free food and beverages to club members due to its inability to process credit card transactions.
On March 7, 2020, Spectra and the San Jose Earthquakes, in an attempt to regain the trust and business of customers, offered a fifty-percent discount on all concessions at that day’s game.
Spectra suffered a loss of $268,733 in damages, consisting of lost revenue, concession discounts offered at the March 7 game, employee time to repair the damage to the data, and labor costs.
On October 27, 2020, La Rosa was charged by Information with one count of Intentional Damage to a Protected Computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(i), a charge to which he pleaded guilty on February 17, 2021.
United States District Judge Koh also sentenced the defendant to a three year period of supervised release. The defendant remains out of custody on bond and will begin serving the sentence on July 28, 2021.
Susan Knight is the Assistant U.S. Attorney who prosecuted the case with the assistance of legal tech Elise Etter and paralegal Rebecca Shelton. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Northridge Man Sentenced to 33 Months in Prison for Sales of Black Market Drugs to Unsuspecting Prescription Drug CustomersRead the Press Release
SAN FRANCISCO – Hakob Kojoyan was sentenced today in United States District Court to 33 months in prison and ordered to forfeit his Palm Springs house for participating in a scheme involving the unlicensed wholesale distribution of prescription drugs, 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 the Honorable Richard Seeborg, United States District Judge.
Kojoyan, 29, of Northridge, California, admitted that he engaged in a scheme from February 2017 to April 2018 to distribute illegally obtained prescription drugs to unsuspecting purchasers. In his plea agreement, Kojoyan stated that he and his associates used a Pennsylvania company, Mainspring Distribution LLC (Mainspring), to pose as legitimate prescription drug wholesalers. They then obtained prescription drugs from unlicensed, black market sources in California. They sold the drugs through Mainspring to unknowing wholesale customers, falsely representing that the drugs were legitimately sourced from licensed suppliers. Kojoyan and his co-defendants avoided dealing in generic drugs and instead specialized in expensive name-brand prescription drugs used to treat HIV, such as Atripla. Kojoyan himself also supplied prescription drugs for such resale, though he had no license to do so.
In a memo filed for the sentencing, the government pointed out that to combat prescription drug fraud, Congress mandated prescription drug wholesalers provide their customers with detailed information about the drugs they sell, including a transaction history tracing the drugs back to their licensed manufacturer. The government asserted Kojoyan and his co-conspirators knew about these federal regulations designed to protect vulnerable patients, and they worked diligently to evade them. They stole the identity of a licensed prescription drug company supplier in California and prepared paperwork falsely suggesting their drugs came from that supplier. The government described how they further mimicked the appearance of a legitimate supply chain by opening bank accounts in names misleadingly similar to the licensed supplier and routing the proceeds of their fraudulent sales through the accounts.
The government further asserted that bank accounts under the control of Kojoyan received approximately $2.2 million from Mainspring-associated accounts, much of which was laundered and distributed to co-conspirators. Kojoyan’s earnings were invested into a house in Palm Springs, which the Court ordered forfeited to the government.
The government filed a superseding information on July 6, 2020, charging Kojoyan with unlicensed wholesale distribution of prescription drugs, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(1). On July 15, 2020, Kojoyan entered a guilty plea to the charge.
In addition to sentencing Kojoyan to a prison term of 33 months and ordering the forfeiture of his Palm Springs house, U.S. District Judge Richard Seeborg also sentenced Kojoyan to a three-year period of supervised release to follow his prison term. The defendant remains out of custody on bond and was ordered to surrender to begin his sentence on June 2, 2021.
This case is being prosecuted by the Corporate Fraud Strike Force of the United States Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Three San Jose Residents Charged with Conspiracy to Commit Wire Fraud in Automobile Resale SchemeRead the Press Release
SAN FRANCISCO – A criminal complaint was unsealed today in federal court charging Seymur Khalilov, Ramil Heydarov, and Orkhan Aliyev with conspiracy to commit wire fraud, 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.
According to the complaint, between 2016 and the present, Khalilov, 32; Heydarov, 31; and Aliyev, 31, all of San Jose, conspired to purchase high-mileage vehicles, roll back the odometers, and falsify documentation to make the vehicles appear newer. The co-conspirators then allegedly sold the vehicles on Craigslist at significant profits. The complaint alleges defendants fraudulently sold at least a dozen vehicles in this way for a total of at least $300,000. In addition, the complaint states that the number of cars and amount of money at issue will likely change as the ongoing investigation into the scope and extent of the scheme continues.
The complaint describes the multiple steps taken by the coconspirators to defraud purchasers of the cars. For example, the complaint describes how defendants purchased high-mileage or old-model vehicles and then, with the assistance of other co-conspirators, rolled back the odometers of the vehicles. Further, the defendants altered documentation related to the vehicles, including titles and registrations, to reflect the lower mileage amount and other fraudulent information. The complaint alleges the fraudulent alterations were made with the goal of increasing the prospective sale price of the vehicles. In addition, when selling the vehicles, the defendants portrayed themselves as the prior owners of the vehicles, including by altering California identification cards, so that the defendants’ true names would not appear in the vehicles’ transaction history.
Each defendant is charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. The conspiracy charge carries a maximum statutory penalty of up to 20 years in prison 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 imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the 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 defendants each made their initial federal court appearance earlier today before U.S. Magistrate Judge Thomas S. Hixson. Aliyev’s next court date is May 6, 2021, and Khalilov and Heydarov’s next court date is May 7, 2021.
Assistant U.S. Attorney Ankur Shingal is 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.
Bay Area Executives Charged with Conspiracy to Commit Wire FraudRead the Press Release
SAN FRANCISCO – A federal grand jury indicted Geoffrey M. Palermo and Adan Roldan, aka George Villanuevo, charging the defendants with conspiracy in connection with an alleged plot to bilk a California company of more than $1.5 million as part of a kickback scheme, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The indictment adds to charges filed by the grand jury against Palermo in June of last year.
According to the indictment, Palermo, 57, of Novato, Calif., was working as the manager of a Hilton hotel located in downtown San Francisco between 2008 and 2016. During this timeframe, Palermo had authority to enter into contracts, choose contractors, and otherwise manage construction and capital improvement projects at the hotel. Further, between January 2013 and June 2016, Roldan, 53, was the owner of a construction company, A. Roldan Construction, that Palermo hired to perform various construction projects at the San Francisco Hilton. The indictment describes how Palermo arranged for the review and approval of millions of dollars of checks paid from Hilton’s owners to A. Roldan Construction based on invoices submitted by Roldan’s construction company.
According to the indictment, much of the billing dispensed by Roldan’s construction company to the Hilton was contained in fraudulent and inflated invoices. In addition, the indictment explains that Roldan allegedly created and submitted the false and fraudulent invoices as part of the scheme to conceal kickbacks to Palermo. Specifically, Palermo continued to hire Roldan to perform work at the Hilton and arranged to have the fraudulent invoices paid while Roldan arranged to kick back part of the funds to Palermo. The indictment alleges that between January 2013 and June 2016, Palermo authorized issuance and payment to Roldan’s construction company of more than 450 checks totaling approximately $6.4 million.
The indictment also describes how Palermo and Roldan used various bank accounts to carry out their scheme. Most prominently, Roldan maintained an account entitled “Bahama Reef Living Trust” from which he withdrew funds to make payments to various accounts controlled by Palermo. For example, the indictment describes how Roldan deposited four checks in October of 2015 totaling approximately $145,915 from the Hilton’s owners into the construction company bank account. On the same day, Roldan then allegedly transferred $125,000 from the construction company account into the Bahama Reef account and then, again on the same day, wrote a check for $125,000 from the Bahama Reef account to an account controlled by Palermo. The indictment estimates that by writing checks from the Bahama Reef account to various bank accounts controlled by Palermo, Roldan funneled to Palermo kickbacks totaling approximately $1,535,965.
The indictment filed against Palermo and Roldan charges each defendant with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. The conspiracy charge carries a maximum statutory penalty of up to 20 years in prison and a $250,000 fine. These charges are in addition to a separate indictment against Palermo filed on June 30, 2020, in which he was charged with honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346; wire fraud, in violation of 18 U.S.C. § 1343; and making a false statement in a loan application to an FDIC-insured lender, in violation of 18 U.S.C. § 1014. The honest services fraud charges carry the same maximum penalties as the wire fraud charges and the false statement charge carries a maximum of 30 years in prison and a $1,000,000 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 imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the indictments are mere allegations. As in any criminal case, the defendants are presumed innocent unless and until proven guilty in a court of law.
The defendants are scheduled to make their initial appearances in federal court on May 13, 2021, before U.S. Magistrate Judge Thomas S. Hixson. The court will likely determine bond conditions at that time.
The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The case is being investigated by the FBI.
Former Netflix Executive Convicted of Receiving Bribes and Kickbacks from Companies Contracting with NetflixRead the Press Release
Amended as of May 4, 2021.
SAN JOSE – A federal jury convicted Michael Kail, the former Vice President of IT Operations at Netflix, of wire fraud, mail fraud, and money laundering, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Craig D. Fair, and IRS-Criminal Investigation Acting Special Agent in Charge Michael Daniels. The verdict follows a two and a half-week trial before the Honorable Beth L. Freeman, U.S. District Judge.
Kail was indicted May 1, 2018, of nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering, in violation of 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1346 (honest services fraud), and 1957 (money laundering). The indictment also sought forfeiture of Kail’s Los Gatos residential property. The jury returned a verdict of guilty on 28 of the 29 counts. The jury further found real property purchased by Kail with laundered money is forfeitable to the government.
“Bribery undermines fair competition and innovation in any business arena, and particularly Silicon Valley’s highly competitive environment of cutting-edge innovation,” said Acting United States Attorney Stephanie M. Hinds. “As Netflix’s Vice President of IT Operations, Michael Kail wielded immense power to approve valuable Netflix contracts with small tech vendors, and he rigged that process to unlock a stream of cash and stock kickbacks to himself. Netflix and other companies expect and deserve honest services from its employees.”
“Not only did Mr. Kail deprive Netflix of its money and resources by abusing his position as VP of IT Operations, he created a pay-to-play environment whereby he stole the opportunity to work with an industry pioneer from honest, hardworking, Silicon Valley companies,” said FBI Special Agent in Charge Craig D. Fair. “Bribes and kickback schemes, such as those facilitated by Mr. Kail, undermine the fabric of competition in Silicon Valley, and the FBI will aggressively pursue anyone who attempts to criminally exploit their position for personal gain.”
“High-ranking corporate officials hold positions of trust not only in their companies, but also in the eyes of the public,” said Michael Daniels, Acting Special Agent in Charge IRS Criminal Investigation. “That trust is broken when such officials abuse their power and commit crimes to unjustly enrich themselves.”
According to the evidence presented at trial to the federal jury, Kail, 49, of Los Gatos, was employed at Netflix as the Vice President in charge of IT Operations from 2011 until July 2014. In this position, Kail owed Netflix his honest services. Netflix prohibited conflicts of interest by its employees in its Code of Ethics and its “Culture Deck” which required disclosure of actual or apparent conflicts of interest and the reporting of gifts from people or entities seeking to sell to the company.
As Netflix’s Vice President of IT Operations, Kail approved contracts to purchase IT products and services from smaller outside vendor companies and authorized their payment. The evidence demonstrated that Kail accepted bribes in ‘kickbacks’ from nine tech companies providing products or services to Netflix. In exchange, Kail approved millions of dollars in contracts for goods and services to be provided to Netflix. Kail ultimately received over $500,000 and stock options from these outside companies. He used his kickback payments to pay personal expenses and to buy a home in Los Gatos, California, in the name of a family trust.
To facilitate kickback payments, the evidence at trial showed that Kail created and controlled a limited liability corporation called Unix Mercenary, LLC. Established on February 7, 2012, Unix Mercenary had no employees and no business location. Kail was the sole signatory to its bank accounts.
Two days before Unix Mercenary was registered, Kail signed a Sales Representative Agreement to receive payments from Netenrich, Inc. amounting to 12% of the billings from Netenrich, Inc. to Netflix for its contract providing staffing and IT services to Netflix. Later in 2012, Kail 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, Inc. paid Unix Mercenary approximately $269,986, and VistaraIT, LLC paid Unix Mercenary approximately $177,863. The payments stopped in mid-2014, after Kail left Netflix.
Evidence at trial showed that several more companies paid Kail. Neither Netenrich, Vistara, nor any of these other companies were charged with criminal conduct. Only Kail was charged with devising the criminal scheme to defraud Netflix.
In 2013, the evidence showed, Platfora, Inc. sought to do business with Netflix. In June 2013 – at the time Kail was seeking to buy his 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 competitor’s contract bid price to Netflix. In September 2013, while being a paid advisor to Platfora, Kail signed on behalf of Netflix a multi-stage $250,000 per year contract with Platfora. Kail then urged his Netflix employees to find a use for the product, despite their objections and preference for a competing product that Netflix was already paying for. 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 next week.
Additional evidence showed that Kail received payments or other compensation from numerous other companies doing business with Netflix. In June 2012, he became an advisor to and received options for shares in 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, despite his IT team feedback about the product underperforming. Kail acknowledged the problem in an email to Sumo Logic, saying “[i]t is becoming increasingly difficult for me to champion Sumo internally and then continue to have severe performance issues.”
Similarly, trial evidence showed Kail received $5,000 per month consulting for Netskope, Inc., and also received options to purchase 71,500 shares of Netskope stock options, and then authorized Netflix to enter a $112,500 contract with that company, in the same month that Kail resigned from Netflix. Kail also purchased, on behalf of Netflix, a small amount of storage from Maginatics, Inc., and thereafter became an advisor to Maginatics, which allowed him to purchase up to 30,000 shares. Kail then increased Netflix’s purchase of storage from Maginatics by tenfold. Kail made approximately $120,000 when Maginatics was sold the next year to EMC. Kail also was promised shares 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, which provided him with 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.
The evidence further showed that many Netflix IT employees involved with testing the products did not know that many of the startups’ software was being paid for by Netflix, assuming it instead to be unpaid “pilots” of the untested software, which was routine.
Kail faces a maximum sentence of twenty years in prison and a fine of $250,000, or twice his gross gain or twice the gross loss to Netflix, whichever is greater, for each count of a wire or mail fraud conviction, and ten years in prison and a fine of $250,000 for each count of a money laundering conviction. 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.
United States District Judge Beth L. Freeman scheduled post-verdict motions to be heard on June 29, 2021, at 10 a.m., with a sentencing hearing to follow on September 14, 2021.
Assistant U.S. Attorneys Colin Sampson and Daniel Kaleba 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.
Two Men Charged with Laundering Money from Multiple Internet Romance ScamsRead the Press Release
SAN FRANCISCO – Kinston Osagie appeared today in United States District Court to face a federal indictment charging him and Roland Ighiwiyisi, also known as Roland Osagie, with conspiring to commit money laundering and charging him alone in four additional counts of laundering money from women duped in online romance scams, announced Acting United States Attorney Stephanie M. Hinds and United States Secret Service Special Agent in Charge James E. Anderson, Jr.
Osagie, 53, based in Los Angeles, and Ighiwiyisi, 40, based in Nigeria, are alleged in the indictment to have conspired to launder proceeds obtained from victims of wire fraud. According to the indictment, Osagie opened at least 18 different U.S. bank accounts between January 2015 and August 2020 which received approximately $6 million in cash, check, and wire deposits. Of that amount, the indictment alleges $3 million dollars is traceable primarily to victims of romance fraud.
The indictment describes romance scams as online schemes that target susceptible individuals looking for romantic partners on dating and social websites such as Tinder and Match.com. Scam artists create profiles using intriguing names, photos, personas, and locations to draw their online victims into romantic relationships. Victims become convinced they are engaged in true romance – though the fake romantic partners offer myriad excuses why they cannot meet face to face – and eventually the victims are persuaded to send money or gifts to their fake partners, which is appropriated by the scam artists.
Osagie and Ighiwiyisi are both charged in one count of the indictment with conspiracy to commit money laundering from March 2019 to April 2020, a time period in which Osagie transferred fraud victims’ money to accounts owned or controlled by Ighiwiyisi. Osagie is also charged in the indictment with four additional counts of specific acts of laundering money from romance scam victims. Of these four counts, three charge Osagie with laundering a total of $267,000 obtained from one woman who sent money to help a fake male persona named “Merry Mattias” she had met through Match.com. The fourth count charges Osagie with laundering $20,300 sent by another woman to a different fake persona she met through the online platform Words with Friends.
According to the indictment, Ighiwiyisi is owner and director of a company incorporated in Nigeria, banks at a Nigeria-incorporated bank, and is living or has resided in Nigeria. Osagie and Ighiwiyisi, according to the indictment, discussed their common mother who lived in Nigeria.
Kinston Osagie and Roland Ighiwiyisi, aka Roland Osagie, are charged with one count of conspiracy to commit money laundering in violation of Title 18, United States Code, Section 1956(h). Kinston Osagie is charged additionally with four counts of money laundering in violation of Title 18, United States Code, Section 1957. Each count carries a maximum sentence of 10 years in prison and a maximum fine of $250,000, as well as three years of supervised release once imprisonment ends. 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 all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Osagie was arraigned on the indictment’s charges today before United States Magistrate Judge Jacqueline Scott Corley in United District Court in San Francisco today. Osagie was released on a $100,000 bond. His next appearance is scheduled for July 23, 2021, at 11 a.m., before the Honorable Susan Illston, U.S. District Court Judge.
Mohit Gourisaria is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Nalini Rae Viavant, Mimi Lam, and Marina Ponomarchuk. The prosecution is the result of an investigation by the United States Secret Service.
Bay Area Physician Charged in Alleged Scheme to Buy and Inject Misbranded or Adultered Botox and Juvederm SubstitutesRead the Press Release
SAN FRANCISCO – A federal grand jury handed down an indictment charging Lindsay Marie Clark with receiving, offering, and delivering misbranded drugs and misbranded and adulterated devices, in a scheme to buy at a discount and inject into patients products lacking FDA approval, announced Acting United States Attorney Stephanie M. Hinds and Lisa L. Malinowski, Special Agent in Charge of the Food and Drug Administration (FDA) Office of Criminal Investigations, Los Angeles Field Office.
The indictment, filed April 1, 2021, and unsealed earlier today, alleges that Clark, 44, of San Francisco, is a California physician, with practices in San Francisco and San Mateo, who specialized in procedures that use injectable drugs and devices for cosmetic or aesthetic purposes. The indictment explains that federal law regulates the manufacture, labeling, distribution, and administration of biologics, drugs, and devices shipped or received in interstate commerce. The law forbids, as a felony, the receipt and delivery of misbranded or adulterated products with intent to defraud and mislead. Regulated products include drugs such as injectable botulinum toxin and devices such as injectable hyaluronic acid dermal fillers. Under Congress’s regulatory scheme, the FDA approved the use of Botox®, the brand name of a drug derived from Botulinum Toxin Type A. In addition, the FDA approved the use of dermal fillers made from hyaluronic acid, as Class III medical devices, under the name Juvederm® and related names.
According to the indictment, from at least April 2016 until no earlier than February 2020, Clark obtained drugs and devices, represented by sellers to be foreign versions of Botox® and Juvederm®, that were not the subjects of FDA approval. Clark allegedly obtained these products from sources abroad, primarily by ordering the drugs and devices over the phone and internet. The indictment alleges that Clark purchased at least $270,951 worth of products from these foreign online “pharmacies” and “depots,” and obtained revenue from services rendered in connection with these products, perhaps more than $1,069,880.
The indictment alleges that Clark instructed staff to conceal the true identity, name, and source of these products from patients. The indictment also alleges that Clark had patients sign misleading “consent” forms that referred only to products approved by the FDA, rather than informing patients that they were receiving unlicensed and unapproved products. The indictment further alleges that Clark charged patients the same price for the “Botox” and “Juvederm” products whether the products were FDA-licensed and approved, or unlicensed and unapproved.
“Health care professionals who dispense and administer misbranded and adulterated prescription drugs and devices of unknown origin put the health of their patients at significant risk,” said Special Agent in Charge Lisa L. Malinowski, FDA Office of Criminal Investigations Los Angeles Field Office. “We will continue to pursue and bring to justice those who choose to subvert the safeguards of the legitimate drug and device regulatory regime and supply chain and jeopardize the public health.”
Clark is charged with receipt in interstate commerce of a drug that is misbranded, and a device that is adulterated and misbranded, and the delivery or proffered delivery thereof for pay or otherwise, with intent to defraud and mislead, in violation of 21 U.S.C. §§ 331(c), 333(a)(2). If convicted, she faces a maximum penalty of three years in prison and a maximum fine of $10,000. 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.
Clark made an initial appearance today in federal court before the United States Magistrate Judge Jacqueline Scott Corley. She remains out of custody on bond. Her next scheduled appearance is for a status conference before Senior District Judge Susan Illston on June 4, 2021.
The charges contained in the indictment are mere 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 Joseph Tartakovsky is prosecuting this case with assistance from Laurie Worthen. The prosecution is a result of an investigation by the FDA’s Office of Criminal Investigations.
Alleged Bay Area Gang Members Charged with August 11, 2018, Murder in San FranciscoRead the Press Release
SAN FRANCISCO – A federal grand jury indicted Jonathan Escobar (aka Wicked, aka Rico) and Jose Aguilar (aka Slim), charging both defendants with firearms violations in connection with crimes including murder and attempted murder committed to enhance the defendants’ position in the Sureño criminal street gang, announced Acting United States Attorney Stephanie M. Hinds and Homeland Security Investigations (HSI) San Francisco Special Agent in Charge Tatum King.
“Street gangs resort to violence to assert control over peaceful neighborhoods, expecting to create safe havens for drug trafficking, robberies, and other violent crimes,” said Acting U.S. Attorney Hinds. “In this case, the indictment describes how firearms are deliberately used to achieve these goals through murder and attempted murder. This office will continue to partner with local and federal law enforcement agencies to wrest control of our streets from the gangs who threaten our residents.”
“Our communities have the right to be safe and not succumb to senseless violence. I am proud of the dedicated agents who have duly executed their duties in our collective pursuit of law, order and justice," said Special Agent in Charge King, who oversees HSI operations in Northern California. "Gang violence will not be tolerated, and law enforcement’s collaborative efforts are key to disrupting the lawless activities that threaten public safety."
The indictment, filed April 15, 2021 and unsealed this morning, alleges that Escobar, 24, of Richmond, Calif., and Aguilar, 32, of San Francisco, were members of a racketeering enterprise referred to in the indictment as “the 19th Street/16th Street Sureños.” The street gang was the amalgamation of two gangs, one that claimed “territory” bounded by 19th Street to the South, 16th Street to the North, Folsom Street to the East, and Dolores Street to the West and the other that generally operated around 16th Street and Mission Street, in the Mission District of San Francisco. The enterprise also operated in Dolores Park and Franklin Square Park (also known as Bryant Park). The indictment describes how the gang sought to maintain control of drug distribution in the areas that it sought to claim and how gang members engaged in numerous illegal acts to meet its aims including narcotics sales, robberies, and other violent crimes, including murder.
According to Count One of the two-count indictment, on August 11, 2018, in San Francisco, Escobar and Aguilar used a firearm during the commission of a murder in aid of racketeering and committed the murder for the purpose of maintaining and increasing their position in the criminal enterprise. The indictment also alleges that the murder was premeditated, deliberate, and willful, and therefore “murder in the first degree” under California law.
In addition to the murder allegations, the indictment alleges in Count Two that Escobar and Aguilar used a firearm during the commission of attempted murder in aid of racketeering. In this count of the indictment, the document alleges that the defendants willfully and with deliberation and premeditation attempted to murder five additional victims, again for the purpose of maintaining and increasing position in the 19th Street/16th Street Sureños.
Both defendants are charged with use or carrying of a firearm resulting in death during and in relation to a crime of violence (murder in aid of racketeering), in violation of 18 U.S.C. §§ 924(j)(1) and 2 and use or carrying of a firearm during and in relation to of a crime of violence (attempted murder in aid of racketeering), in violation of 18 U.S.C. §§ 924(c) and 2. If convicted of the murder count, both defendants are eligible for the death penalty. If convicted of the attempted murder count, both defendants can be sentenced to a maximum prison term of life and a minimum term of not less than ten years. In addition to a prison term, the court may also order a term of supervised release, restitution, 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.
The defendants were arrested on April 20, 2021 and made their initial federal court appearance this morning before U.S. Magistrate Judge Jacqueline S. Corley. Magistrate Judge Corley ordered the defendants to remain in custody pending trial. The next federal court appearance for the defendants is scheduled for May 12, 2021, before United States Magistrate Judge Thomas S. Hixon for appointment of counsel.
The case is being prosecuted by the Organized Crime Strike Force of the United States Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by Homeland Security Investigations with assistance from the San Francisco Police Department’s Gang Task Force and Homicide Unit.
First Engineer of International Commercial Cargo Tanker Convicted of Falsifying Records and Obstructing Justice in Scheme to Dump Oily Bilge in International WatersRead the Press Release
OAKLAND – A federal jury convicted Gilbert Fajardo Dela Cruz of aiding and abetting an environmental crime and obstruction of justice in connection with the intentional dumping in February of 2019 of oily bilge water from a commercial tanker, announced Acting United States Attorney Stephanie M. Hinds and U.S. Coast Guard Investigative Service Special Agent in Charge Kelly S. Hoyle. The verdict follows a two-week trial before the Honorable Jon S. Tigar, U.S. District Judge.
“The crew members of the Zao Galaxy dumped oily bilge water into the ocean and then tried to cover up the environmental damage by submitting bogus paperwork to the United States Coast Guard," said Acting U.S. Attorney Hinds. "As First Assistant Engineer of an ocean-going commercial tankship, Gilbert Dela Cruz was charged with ensuring the crew would follow the rules, not try to circumvent them. This verdict will serve as a reminder that there are stiff penalties for those who try to violate federal and international rules designed to protect our precious natural resources from polluters.”
In January of 2019, Dela Cruz, 38, a Philippine national, was the First Engineer of the M/T Zao Galaxy (Zao Galaxy), a 16,408 gross-ton, ocean-going oil tankship when it traveled from the Philippines to Richmond, Calif. The Zao Galaxy was operated by Dela Cruz’s employer, Unix Line PTE Ltd. (Unix), a Singapore-domiciled company. The Zao Galaxy, like all such large oil tanker vessels, generates “oily bilge water” when traveling. Typically, oily bilge water is collected, stored, and processed to separate the water from the oil and other wastes using a pollution prevention control device known as an Oil Water Separator and an oil-sensing device known as an Oil Content Meter. Only after passing through an Oily Water Separator that limits the amount of oil in water may oily bilge water be discharged overboard.
On February 11, 2019, United States Coast Guard examiners boarded the Zao Galaxy while it was moored in Richmond to conduct an examination. During the examination, a crewmember passed a note to an examiner requesting a meeting after the inspection so that the crewmember could “tell something” about a “magic pipe” and “damage [to the] marine environment.” After the inspection and a follow-up investigation, Unix ultimately admitted that a ship officer directed crew members to discharge oily bilge water overboard, using a configuration of drums, flexible pipes, and flanges to bypass the vessel’s oil water separator. On February 26, 2020, the company admitted the discharges were done knowingly and that they were not recorded in the Zao Galaxy’s oil record book when it was presented to the U.S. Coast Guard during the vessel’s inspection. Unix pleaded guilty to one count of violating the Act to Prevent Pollution from Ships. On March 20, 2020, Judge Tigar sentenced Unix to pay a fine of $1,650,000.00, placed Unix on probation for a period of four years, and ordered the company to implement a comprehensive Environmental Compliance Plan as a special condition of probation.
Notwithstanding these admissions, Dela Cruz denied responsibility for the environmental crimes and went to trial. In finding Dela Cruz guilty, the jury concluded Dela Cruz aided and abetted a violation of the Act to Prevent Pollution from Ships by causing the captain of the Zao Galaxy to maintain an inaccurate oil record book and that he also committed obstruction of justice.According to the evidence presented at trial, in preparation for a Coast Guard inspection in Richmond, California, Dela Cruz ordered a lower level employee who worked as his assistant to dump oily waste from the ship’s engine room directly into the ocean using a “magic pipe.” Dela Cruz then worked to conceal the dumping by not recording the movement or discharge of oily waste in the ship’s oil record book, which he was responsible for. Dela Cruz ordered that certain pieces of equipment be repainted and the “magic pipe” be hidden to avoid Coast Guard detection. During the Coast Guard’s inspection, Dela Cruz told his assistant who had dumped the oily waste overboard not to throw him “under the bus” and that they needed to get their stories straight for the Coast Guard.
A federal grand jury indicted Dela Cruz on October 24, 2019, charging him with one count of violating the Act to Prevent Pollution from Ships, in violation of 33 U.S.C. § 1908(a); one count of obstruction of justice, in violation of 18 U.S.C § 1519, and one count of obstruction of an agency proceeding, in violation of 18 U.S.C. § 1505. The jury found Dela Cruz guilty of all three counts. Dela Cruz faces a maximum of six years’ imprisonment and $250,000 for and three years of supervised release for the pollution count, 20 years’ imprisonment and $250,000 for the obstruction of justice count, and five years of imprisonment and $250,000 for the obstruction of the agency proceedings count. The court may also order an additional term of supervised release, restitution, 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.
Judge Tigar ordered Dela Cruz released on bond pending sentencing and scheduled the sentencing for June 11, 2021, at 9:30 a.m.
Assistant U.S. Attorneys Katherine Lloyd-Lovett and Noah Stern are prosecuting the case with assistance from Kay Konopaske. The prosecution is the result of an investigation by the United States Coast Guard Sector San Francisco and the Coast Guard Investigative Service.
Former San Francisco Resident Charged with Multi-Year Campaign of Cyberstalking Against Three MinorsRead the Press Release
SAN FRANCISCO – A federal grand jury has charged Ramajana Hidic Demirovic with cyberstalking and conspiracy to commit cyberstalking in connection with a scheme to harass and intimidate victims, including teenagers who had romantic relationships with the defendant’s co-conspirator, announced Acting United States Attorney Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair.
According to the indictment, Demirovic, 46, of San Francisco at the time of the alleged offense and currently of Brentwood, and her co-conspirator, sent hundreds of malicious, deceptive, and abusive communications intended to sabotage the personal relationships, social reputation, academic life, and work prospects of her intended victims. The indictment describes how Demirovic’s co-conspirator dated three male teenagers between February 2016 and March 2018. In each case, after the relationship ended, Demirovic engaged in a campaign to punish the victims.
Demirovic’s first victim, identified in the indictment as 14-year-old Victim A, allegedly dated Demirovic’s co-conspirator for a few days in February 2016. Demirovic contacted the victim’s mother with intimidating messages and allegedly appeared at the victim’s school and asked students where she could find the victim. Demirovic found Victim A, accosted him, and threatened to “rip [his] f*cking heart out.”
Demirovic’s abuse escalated later in 2016. Victim B, a 15-year-old, dated Demirovic’s co-conspirator in spring 2016. In July and August 2016, Demirovic sent Victim B multiple series of text messages. Among other things, she allegedly said that Victim B should be “condemned” and that he was “awful human being.” Demirovic also threatened that her husband would find Victim B and that “it’s not going to look pretty.” The abuse continued in fall 2016 when Demirovic called Victim B’s employer and school to report, falsely, that Victim B was physically abusive, used drugs, and had alcohol problems. Administrators at Victim B’s high school barred Demirovic from campus. By October, Demirovic and her co-conspirator were using Instagram to mock the minor.
Demirovic’s abuse escalated yet again beginning in 2018. Demirovic’s co-conspirator dated Victim C for about ten months from May 2017 until March 2018. What followed allegedly was a 17-month campaign of cyberstalking by Demirovic and her co-conspirator in an effort to humiliate Victim C and destroy his social relationships. Among other acts, in May 2018, the co-conspirators began using social media accounts systematically to impersonate Victim C and others. By June 2018, dozens of friends had reached out to Victim C in confusion and concern.
Later messages from Demirovic included a complaint to Title IX officers at Victim C’s university alleging that he “harassed and stalked” girls. Demirovic also sent vulgar text messages to Victim C’s prom dates, promoted falsities about Victim C’s supposed drug use, and visited Victim C’s home.
The indictment describes the toll that Demirovic’s alleged conduct took on her victims.
• Victim A began skipping field trips and singing classes when he knew Demirovic might be present. He grew anxious, depressed, and fearful. He sought therapeutic help. His grades slipped so far that his parents considered withdrawing him from school.
• Victim B deleted his social-media accounts, curtailed his friendships, and changed his phone number. He could not sleep, saw his grades decline, and began seeing a therapist after experiencing feelings of helpless, fearfulness, and distress. His mother disallowed him from taking the bus and hired a private driver to transport him to school and soccer practice.
• Victim C suffered panic attacks, sought therapeutic help, abandoned social media, and changed his phone number. He suffered social ostracism and permanent damage to his personal relationships. The indictment describes Victim C as “traumatized” and “a changed person.”
Demirovic is charged with one count of cyberstalking, in violation of 18 U.S.C. § 2261A(2), and one count of conspiracy to commit cyberstalking, in violation of 18 U.S.C. § 371.
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted of the cyberstalking count, the defendant faces a maximum sentence of five years in prison, and a fine of $250,000. If convicted of the conspiracy count, the defendant faces a maximum sentence of five years in prison, and a fine of $250,000. The court may also order an additional term of supervised release, restitution, 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.
Demirovic was arrested at her home on April 16, 2021. She made her initial court appearance this morning before United States Magistrate Judge Jacqueline Scott Corley. She was released on April 19, 2021 on a bond. Her next court appearance is scheduled for April 27, 2021, at 3 p.m., before Judge Vince Chhabria, for purposes of arraignment or status conference.
Assistant U.S. Attorney Joseph Tartakovsky is prosecuting the case with assistance from Lance Libatique. The prosecution is the result of an investigation by the FBI.
Tax Attorney Indicted for Facilitating Multi-Million Dollar Tax FraudRead the Press Release
SAN FRANCISCO – A federal grand jury returned an indictment today charging Houston-based tax attorney Carlos E. Kepke with conspiring with the Chairman and Chief Executive Officer of a private equity firm, to defraud the Internal Revenue Service (IRS), announced Acting United States Attorney Stephanie M. Hinds; Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; and Jim Lee, Chief of the Internal Revenue Service, Criminal Investigations (IRS-CI). The grand jury further charged Kepke with three counts of aiding and assisting in the preparation of the CEO’s false income tax returns for the years 2012 through 2014.
According to the indictment, from 1999 to 2014, Kepke helped Robert F. Smith create and maintain a structure of offshore entities and foreign bank accounts that were used to conceal from the IRS approximately $225 million of capital gains income that Smith had earned. In approximately March 2000, Kepke allegedly created a Nevisian limited liability company (Flash Holdings) and a Belizean trust (Excelsior Trust) to serve as the tax evasion vehicles. When Smith earned capital gains income from his private equity funds, a portion was allegedly deposited into Flash’s bank accounts in the British Virgin Islands and Switzerland. As alleged, Smith was able to hide this income because Excelsior, and not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS. Kepke allegedly assisted in the preparation of Smith’s false 2012 to 2014 returns.
The indictment alleges that since 2007 Smith paid Kepke more than $1,000,000 for his services. These fees, as charged, included an annual payment for Kepke to purge or “securitize” his records related to Smith, Excelsior, and Flash.
An indictment contains only allegations and the defendants is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Kepke’s initial federal court appearance on the charges is scheduled for April 22 before U.S. Magistrate Judge Jacqueline Scott Corley. If convicted, Kepke faces a maximum term of up to five years in prison on the conspiracy count and three years in prison for each count of assisting in the preparation of a false return. The court also may order an additional term of supervised release, restitution, and additional fines, if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant United States Attorney Michael G. Pitman and Department of Justice Senior Litigation Counsel Corey Smith and Trial Attorneys Lee Langston and Christopher Magnani of the Tax Division are prosecuting the case. This case is the result of an investigation by IRS-CI.
Second Trash Company Executive Charged with Bribing San Francisco Public RegulatorRead the Press Release
SAN FRANCISCO – John Francis Porter, the former Vice President and Group Manager of Recology’s San Francisco Group, has been charged in a federal criminal complaint unsealed today with bribing former Director of San Francisco Department of Public Works (DPW) Mohammed Nuru and with money laundering, announced Acting United States Attorney Stephanie Hinds, Internal Revenue Service–Criminal Investigation Acting Special Agent in Charge Michael Daniels, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
The complaint unsealed today alleges that Porter, 37, of San Francisco, bribed Nuru and participated in laundering the proceeds of the bribe as part of an alleged years-long scheme to defraud the public of its right to honest services. Porter was Group Controller and later Vice President and General Manager of Recology’s San Francisco Group, which provides refuse collection and disposal services in the City of San Francisco. Porter was a central player in the scheme detailed in the complaint that provided Nuru, then the DPW Director, with a continuous stream of money and benefits to influence Nuru to engage in official acts benefitting Recology.
Nuru resigned as the Director of San Francisco’s DPW after being charged in a January 16, 2020, federal complaint with honest services fraud for a scheme to bribe a San Francisco Airport Commissioner. The prosecution of Nuru remains underway.
Porter is the second Recology employee charged. Paul Giusti, the former Recology San Francisco Group Government and Community Relations Manager who reported to Porter, was charged in a November 18, 2020, federal complaint with bribery and money laundering for his role in the same conduct described in today’s complaint allegations against Porter. Giusti’s prosecution is continuing.
“Once again a person employed by a company contracting with San Francisco has been charged with bribing a San Francisco City Hall official with more than $1 million of funds and benefits,” said Acting U.S. Attorney Stephanie M. Hinds. “A person who pays a bribe is as criminally liable as the public official who takes it. Our investigation of San Francisco City Hall corruption continues. If you have information about corruption among San Francisco public officials or contractors with San Francisco, reach out to the FBI. Your cooperation is important.”“Rooting out public corruption remains one of the highest priorities for IRS – Criminal Investigation,” said Acting Special Agent in Charge Michael Daniels. “IRS – Criminal Investigation provides financial investigative expertise in our work with our law enforcement partners. Pooling the skills and resources of each agency makes a formidable team as we investigate allegations of criminal wrong-doing.”
"John Porter is the eleventh individual charged in the FBI's probe into public corruption in San Francisco City Hall," said FBI Special Agent in Charge D. Fair. "This complaint reflects the FBI’s commitment to hold corporate executive leadership accountable for their actions. The FBI will continue to investigate all individuals, regardless of their position, who seek to improperly influence public officials for corporate gain at the expense of the public. If you have any information on bribery, corruption, or other illegal acts, please contact the FBI."
The specific charge of the complaint alleges that in the summer of 2018, Recology sought to raise the “tipping fees” it charged the City of San Francisco for dumping materials at the Recology Sustainable Crushing facility. During the summer and fall of 2018, the complaint alleges, Porter sought Nuru’s assistance with Recology’s efforts to increase the tipping fee. Porter enlisted the help of his subordinate Giusti, who had a close relationship with Nuru.
The complaint states that Porter emailed Nuru seeking assistance in obtaining the tipping fee increase on November 26, 2018. Thereafter, Giusti agreed to give Nuru a bribe of $20,000 to influence his official actions on the proposed increase. The complaint describes that Porter gave written approval for Recology to issue a $20,000 check described as a “holiday donation” to the Lefty O’Doul’s Foundation for Kids, a non-profit organization to help underprivileged San Francisco children run by Nick Bovis. Giusti provided the bribe money to the Lefty O’Doul’s Foundation, and Bovis used the Recology money to pay for Nuru’s elaborate DPW holiday party, not to help underprivileged San Francisco children. Despite the bribe, the attempt to increase the tipping fee was ultimately unsuccessful. Bovis pleaded guilty to honest services fraud in May 2020 for bribing Nuru.
The complaint further describes Porter’s role in the Recology San Francisco Group’s efforts, acting through executives including Giusti and Porter, to direct benefits to Nuru totaling over $1 million to influence Nuru, who was Recology’s regulator. Recology had an ongoing need for Nuru’s approvals, including for rate increases for residential garbage collection. The complaint cites an email that Porter sent in 2015 to a colleague at Recology: “Mohammed is the Director of the DPW who ultimately signs off on our rates. Needless to say, keeping him happy is important.”
To keep Nuru happy, the complaint alleges that Giusti, with the approval of Porter or Porter’s immediate predecessor, arranged for Recology to provide Nuru with a stream of benefits over years. Porter ultimately approved $55,000 to fund Nuru’s DPW holiday parties in payments disguised as charitable Lefty O’Doul’s Foundation donations. The complaint also describes Porter’s role in approving hundreds of thousands of dollars over years in Recology payments made, at Nuru’s directions, to a San Francisco non-profit, ostensibly for a DPW program called “Giant Sweep.” That non-profit held the money for about a week or two, then took a 5 percent cut and sent the money at Nuru’s direction to accounts controlled by Nuru at another non-profit. Recology’s payments to Nuru were closely tied in time to specific needs for Nuru’s assistance and approval.
Porter is charged with one count of bribery, in violation of 18 U.S.C. § 666(a)(2), and one count of laundering the proceeds of honest services fraud, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). If convicted of bribery, he faces a maximum penalty of 10 years in prison and a fine of $250,000. If convicted of concealment money laundering, he faces a maximum penalty of 20 years in prison, a fine of $500,000 or twice the value of the property involved in the transaction, or both. 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 complaint are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
Porter is expected to make his initial appearance in federal court in San Francisco on April 20, 2021, at 10:30 a.m. before U.S. Magistrate Judge Jacqueline Scott Corley.
Thus far in the San Francisco City Hall corruption probe, 11 defendants have been charged, and multiple defendants have pled guilty. Most recently, Sandra Zuniga, 45, of South San Francisco and the former Director of both the San Francisco Mayor’s Office of Neighborhood Services and San Francisco’s Fix-It Team, entered her plea of guilty to a charge of conspiring to launder money with the former DPW Director Muhammed Nuru. Zuniga entered her guilty plea in a plea agreement that remains partly under seal in which she agrees to cooperate with the FBI in the public corruption investigation relating to San Francisco government.
The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The case is being investigated by IRS Criminal Investigation and the FBI.
Texas Woman Sentenced to One Year and A Day in Prison for Using Fraudulently Obtained PassportRead the Press Release
SAN FRANCISCO – Shakisha Haskins was sentenced today to a year and a day in prison for using a passport secured by a false statement and making false statements to a government agency after using a fraudulently obtained passport and other false information to gain access to a repatriation flight from India, announced Acting United States Attorney Stephanie M. Hinds and U.S. State Department, Diplomatic Security Service (DSS), San Francisco Field Office Special Agent in Charge Matthew Perlman. The sentence was handed down by the Honorable James Donato, U.S. District Judge.
“The Diplomatic Security Service (DSS) is firmly committed to working with the U.S. Department of Justice and our local law enforcement partners to investigate and prosecute all criminal activity related to passport fraud, identity theft, and theft of public money,” said Special Agent in Charge Perlman. “The strong relationship we enjoy with our partners, including U.S. Customs and Border protection, is vital towards preventing fugitives from concealing their attempts to enter the U.S., ensuring the integrity of U.S. travel documents, and protecting greater U.S. interests.”
Haskins pleaded guilty to the charges on September 23, 2020. According to her plea agreement, Haskins admitted that in 2017 she obtained a passport by submitting fraudulent documents or information, including the victim’s social security number, birth certificate, and driver’s license. Haskins used her own photograph substituted in place of the photograph of the victim on the passport application. Once in possession of the fraudulently obtained passport, Haskins began to use it—according to the date stamps in the passport, Haskins used the fraudulently obtained passport to travel 37 times between March 2017 and April 2020. Haskins used the passport while living abroad for three years.
Haskins’s use of the passport came to an end in the spring of 2020. In March of 2020, as a means of managing travel during the Covid pandemic, the government of India announced that it would end commercial flights from India to the United States. The end of commercial flights prompted American citizens to seek assistance from the United States Embassy when making plans to return to the United States. On March 28, 2020, Haskins requested a repatriation flight for her and her son, and on April 4, 2020, she provided information to the United States Consular Officers in New Delhi as part of her effort to be added to the manifest for a flight back to the United States. Haskins provided to the United States government the victim’s social security number, date of birth, and passport number so she could be added to the repatriation flight. Haskins also used the fraudulently obtained passport to enter the United States on April 5, 2020.
On April 6, 2020, Haskins was charged by Complaint with one count of use of a passport secured by a false statement, in violation of 18 U.S.C. § 1542. On July 8, 2020, Haskins was charged by information with one count of use of a passport secured by a false statement, in violation of 18 U.S.C. § 1542, and one count of making a false statement to a government agency, in violation of Title 18 U.S.C. § 1001(a)(2). Haskins pleaded guilty to both counts.
In addition to the prison term, Judge Donato ordered Haskins to serve thirty-six months of supervised release and to pay restitution in the amount of $7,932.89.
Special Assistant United States Attorney Denise M. Oki is prosecuting the case with assistance from Soana Katoa and Daniel Fuentes. The prosecution is the result of an investigation by the DSS.
San Francisco Daycare Center Employee Charged with Possession of Child PornographyRead the Press Release
SAN FRANCISCO – Jace Wong was charged today in a federal complaint with possession of child pornography, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
According to the federal complaint filed today, Wong, 26, of San Francisco, used the social media application Kik to join an online chat group that shared child sexual abuse material. The complaint alleges that Wong posted child sexual abuse videos to the chat group and communicated directly with an undercover officer in the group. During their chat yesterday, April 13, 2021, Wong sent the undercover officer a 36 second video in which a prepubescent female, estimated to be 4 to 6 years old, is seen standing on a black and white tiled bathroom floor with her pants down to her ankles and her vagina exposed. Law enforcement was able to identify Wong and his current location, which was a San Francisco daycare center where he was employed. Wong was arrested as he left the daycare center yesterday afternoon. After the arrest, agents observed a black and white tiled bathroom in the facility believed to be where the video was produced.
Wong is scheduled to make his initial appearance on the complaint on Thursday, April 15, 2021, at 10:30 a.m. in San Francisco before the Honorable Jacqueline Scott Corley, United States Magistrate Judge. He currently remains in custody.
Investigators are asking anyone who has further information about Jace Wong or his activities that are relevant to this case to email the FBI tip line at tips.fbi.gov or call (415) 553-7400.
Wong is charged with possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B) and (b)(2). If convicted, he faces a maximum sentence of 20 years in prison 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.
A complaint merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Assistant United States Attorney Joseph Tartakovsky is prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Four Members of Militia Group Identifying with “Boogaloo” Movement Charged with Conspiracy to Obstruct Justice by Destroying Records and Destruction of RecordsRead the Press Release
SAN FRANCISCO – A federal grand jury has indicted four members of a militia group associated with the “boogaloo” movement in connection with a scheme to obstruct justice and destroy records to thwart the investigation and proceedings involving the May 29, 2020 shooting of federal Protective Services Officers, announced Acting United States Attorney for the Northern District of California Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair. The grand jury returned an indictment alleging that Jessie Alexander Rush, Robert Jesus Blancas, Simon Sage Ybarra, and Kenny Matthew Miksch, all members of a militia group, conspired to destroy communications and other records relating to the May 29, 2020 murder and attempted murder of two federal security officers in Oakland, California. The indictment charges Rush with an additional count of obstruction of official proceedings and Blancas with an additional count of destruction of records in official proceedings.
The indictment, filed March 23, 2021 and unsealed today, alleges that Rush, 29, a resident of Turlock, Calif.; Blancas, 33, a transient resident of the Bay Area; Ybarra, 23, a resident of Los Gatos; and Miksch, 21, a resident of San Lorenzo, were members of the “1st Detachment, 1st California Grizzly Scouts” (Grizzly Scouts), a militia group based in Northern California. Beginning in April 2020, the Grizzly Scouts connected via a Facebook group and periodically met in person for firearms training and other purposes. The Facebook group’s description stated, “they say the west won’t boog,” a reference to the “boogaloo” movement, and that “were [sic] here to gather like minded Californians who can network and establish local goon squads.” As alleged in the indictment, “boogaloo” is a term sometimes used by certain militia extremists to reference a politically motivated civil war or uprising against the government. The “boogaloo” is not a single cohesive group, but rather a loose concept that has become a rallying point for some extremists.
According to the indictment, at times, including on June 1, 2020, and June 2, 2020, members of the Grizzly Scouts, including Rush, Blancas, Ybarra, Miksch, and others, communicated with each other using a WhatsApp group in which discussions repeatedly referenced “boog” and tactics involving the killing of police officers and other law enforcement.
The indictment references the May 29, 2020 shootings at the Ronald V. Dellums Federal Building and United States Courthouse in Oakland, Calif. At about 9:44 p.m. that evening, a passenger inside of a white van opened fire and shot two federal Protective Security Officers (PSOs); one of the PSOs died of his gunshot wounds and the other sustained serious injuries that required surgery.
The indictment also references the June 6, 2020 shootings of deputies of the Santa Cruz County Sheriff’s Office. At about 2:00 p.m. that day, sheriff’s deputies responded to an address in Ben Lomond, Calif., associated with an abandoned white van. According to the indictment, a member of the Grizzly Scouts exchanged messages on the WhatsApp group with other Grizzly Scouts, in which that member allegedly told the group that he was preparing to engage in a shoot-out with law enforcement. The member allegedly asked the other Grizzly Scouts to come to his aid.
The indictment alleges Rush immediately instructed the Grizzly Scout member on the WhatsApp group to delete evidence on his phone. In addition, the indictment alleges that less than an hour after the shooting in Ben Lomond, Blancas deleted files related to the Grizzly Scouts from a Dropbox account. Further, within hours of the shooting, members of the Grizzly Scouts including Rush, Blancas, Ybarra, and Miksch allegedly began to reconnect on an alternative communications application. Moreover, the indictment alleges that the four defendants each deleted records of the WhatsApp group communications from their phones, including the prior discussions regarding violence against law enforcement.
Rush, Blancas, Ybarra, and Miksch are charged with conspiracy to obstruct justice by destroying records, in violation of 18 U.S.C. § 1512(k), and the destruction of records in official proceedings, in violation of 18 U.S.C. § 1512(c)(1). Rush is charged with an additional count of obstruction of official proceedings, in violation of 18 U.S.C. § 1512(c)(2), and Blancas is charged with an additional count of destruction of records in official proceedings, in violation of 18 U.S.C. § 1512(c)(1).
An indictment merely alleges that crimes have been committed, and defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants each face a maximum statutory penalty of up to 20 years in prison and a fine of $250,000 for each of the conspiracy, obstruction, and destruction charges. In addition, the court may order additional terms of supervised release. 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.
Ybarra was arrested in the Eastern District of California and made his initial appearance there on April 8, 2021. He will appear for detention proceedings on April 9, 2021. Rush and Miksch appeared in federal court in San Francisco to make their initial appearances on April 9, 2021. Rush and Miksch are currently held in federal custody pending further proceedings and will appear next on April 14, 2021 for detention hearings before U.S. Magistrate Judge Jacqueline Scott Corley. Blancas will make his initial appearance in this matter on April 12, 2021. Federal authorities previously arrested Blancas on other charges and he is currently in federal custody pending further proceedings.
The prosecution is being handled by 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 prosecution is the result of an investigation by the Federal Bureau of Investigation.
California Man Convicted of Hate CrimeRead the Press Release
SAN JOSE – A federal jury convicted a California man today for a federal hate crime for attacking a Black man with a knife on a street in Santa Cruz.
Ole Hougen, 44, was convicted of willfully attempting to cause bodily injury by using a dangerous weapon because of a person’s actual or perceived race and color.
According to evidence presented at trial, Hougen confronted a 29-year-old Black man who was crossing a street in Santa Cruz. Hougen took out a nine-inch knife and swiped multiple times at the man’s head, chest, and stomach, while yelling racial slurs at him. 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.
Hougen is scheduled to be sentenced on July 26 and faces a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The verdict comes on the heels of a decision by the U.S. Attorney General to conduct a 30-day review of the Department’s enforcement efforts to address hate-based violence and discrimination. The working group was assembled to make recommendations for improving hate crime and unlawful discrimination investigations and prosecutions. Additional information regarding the Attorney General’s working group can be obtained here.
“Strict enforcement of laws prohibiting the targeting of vulnerable groups is essential to the proper functioning of our democratic society,” said Acting U.S. Attorney Hinds. “This Office is one of the four U.S. Attorney’s Offices throughout the country chosen by the Attorney General to work with other Department of Justice components to review our structure of anti-hate law enforcement and make recommendations to improve the system. This is just another indication that this Office is committed to ensuring the thoughtful deployment of resources to address hate crimes and unlawful discrimination.”
“The Justice Department will continue to vigorously prosecute bias-motivated crimes like this one in an effort to secure justice for victims of these crimes and the communities they are meant to target and intimidate,” said Principal Deputy Assistant Attorney General Pamela S. Karlan.
“The FBI worked closely with the Santa Cruz Police Department to bring justice for this shocking, horrific attack,” said FBI Special Agent in Charge Craig Fair. “The FBI will use all authority granted to us by federal law to investigate hate crimes meant to threaten and intimidate an entire community. Acts of hate and racism have no place here and will not be tolerated. I urge members of our community to report any hate incidents to local or federal law enforcement so we can bring offenders to justice.”
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 conducted the investigation with the assistance of the Santa Cruz Police Department.
United States Attorney’S Office, Through the Department of Justice Project Safe Neighborhoods Program, Funds the Tenderloin Community Benefit District’S New Youth Voice Program in San Francisco’S Tenderloin NeighborhoodRead the Press Release
SAN FRANCISCO – Acting U.S. Attorney Stephanie M. Hinds is proud to join the Tenderloin Community Benefit District in announcing the launch of the Youth Voice Program, funded by a grant from the U.S. Department of Justice Project Safe Neighborhoods program and provided through the United States Attorney’s Office. The Youth Voice Program is a new youth-focused initiative designed to bring together community programs and organizations to center Tenderloin youth on positive change through collective impact.
“I am pleased to support the work done in the Tenderloin through the Tenderloin Community Benefit District,” said Acting U.S. Attorney Stephanie M. Hinds. “My office is dedicated to improving public safety and preventing violence and other crimes in the Tenderloin neighborhood. The funds provided to the Tenderloin Community Benefit District, and other organizations elsewhere in our district, reflect the Department of Justice’s continuing commitment to support youth and other programs designed to improve communities and in turn to decrease crime.”
This work is made possible by a U.S. Department of Justice Project Safe Neighborhoods grant, and is provided through the United States Attorney’s Office, Northern District of California. The total $588,664 grant amount will be used to launch, implement, and sustain the Youth Voice Program through September 30, 2023.
The United States Attorney’s Office has funded a variety of Project Safe Neighborhoods programs in the communities of Salinas, Oakland, and San Francisco over the past several years.
About Project Safe Neighborhoods:
Project Safe Neighborhoods (PSN) is a nationwide Department of Justice program that brings together federal, state, local and tribal law enforcement officials, prosecutors and community leaders to identify the most pressing violent crime problems in a community and develop comprehensive solutions to address them—solutions that include prevention, enforcement, and reentry efforts.PSN is an evidence-based violent crime reduction program that takes a collaborative approach to public safety. Drawing from academic research and decades of experience, the program is based on the fundamental principle that law enforcement agencies and communities must work together to address violent crime to make our neighborhoods safer. PSN leverages law enforcement and community partnerships, along with strategic enforcement efforts, to focus on violent crime and restoring safety and security to vulnerable neighborhoods.
Union City Man Charged with Robbery in Connection with Series of Bay Area Commercial RobberiesRead the Press Release
OAKLAND - Nelson Enrike Ramirez was arraigned today on a federal criminal complaint charging him with robbery affecting interstate commerce, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
The complaint charges Ramirez, 40 years old and from Union City, with a November 6, 2020, robbery of a 7-Eleven convenience store on Washington Boulevard in Fremont. According to the complaint, Ramirez entered the store wearing a black or grey inside-out hooded sweatshirt, a black COVID-19-style mask, and a grey glove. He allegedly told the clerk he needed a soda from the soda machine and as the clerk approached to help, Ramirez pulled what appeared to be a black handgun from his pocket. He ordered the clerk to walk to the cash register, where the clerk gave Ramirez approximately $200 from the register. Ramirez looked in another register and then left the store.
The criminal complaint also alleges that between May and November 2020, Ramirez committed 21 commercial robberies and two attempted commercial robberies in the San Francisco Bay Area, with 22 of them taking place in October or November 2020. According to the complaint, Ramirez committed his robberies in Fremont, Newark, Hayward, Union City, Campbell, Milpitas, Mountain View, Los Altos, and Sunnyvale.
Ramirez made his initial appearance in federal court today before United States Magistrate Judge Susan van Keulen. Ramirez remains in custody and his next scheduled appearance is on Friday, April 2, for status on his detention before United States Magistrate Judge Robert M. Illman.
A complaint merely alleges that crimes have been committed, and Ramirez is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Ramirez faces a maximum sentence of 20 years in prison, and a maximum fine of $250,000 or twice the gross pecuniary gain to the defendant or twice the gross pecuniary loss inflicted on victims, plus 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.
Noah Stern is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kay Konopaske and Kathleen Turner. The prosecution is the result of an investigation by the FBI, the Fremont Police Department, the Union City Police Department, the Newark Police Department, the Hayward Police Department, the Campbell Police Department, the Milpitas Police Department, the Mountain View Police Department, the Los Altos Police Department, and the Sunnyvale Police Department.
Northridge Man Sentenced to 33 Months in Prison for Sales of Black Market Drugs to Unsuspecting Prescription Drug CustomersRead the Press Release
SAN FRANCISCO – Hakob Kojoyan was sentenced today in United States District Court to 33 months in prison and ordered to forfeit his Palm Springs house for participating in a scheme involving the unlicensed wholesale distribution of prescription drugs, 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 the Honorable Richard Seeborg, United States District Judge.
Kojoyan, 29, of Northridge, California, admitted that he engaged in a scheme from February 2017 to April 2018 to distribute illegally obtained prescription drugs to unsuspecting purchasers. In his plea agreement, Kojoyan stated that he and his associates used a Pennsylvania company, Mainspring Distribution LLC (Mainspring), to pose as legitimate prescription drug wholesalers. They then obtained prescription drugs from unlicensed, black market sources in California. They sold the drugs through Mainspring to unknowing wholesale customers, falsely representing that the drugs were legitimately sourced from licensed suppliers. Kojoyan and his co-defendants avoided dealing in generic drugs and instead specialized in expensive name-brand prescription drugs used to treat HIV, such as Atripla. Kojoyan himself also supplied prescription drugs for such resale, though he had no license to do so.
In a memo filed for the sentencing, the government pointed out that to combat prescription drug fraud, Congress mandated prescription drug wholesalers provide their customers with detailed information about the drugs they sell, including a transaction history tracing the drugs back to their licensed manufacturer. The government asserted Kojoyan and his co-conspirators knew about these federal regulations designed to protect vulnerable patients, and they worked diligently to evade them. They stole the identity of a licensed prescription drug company supplier in California and prepared paperwork falsely suggesting their drugs came from that supplier. The government described how they further mimicked the appearance of a legitimate supply chain by opening bank accounts in names misleadingly similar to the licensed supplier and routing the proceeds of their fraudulent sales through the accounts.
The government further asserted that bank accounts under the control of Kojoyan received approximately $2.2 million from Mainspring-associated accounts, much of which was laundered and distributed to co-conspirators. Kojoyan’s earnings were invested into a house in Palm Springs, which the Court ordered forfeited to the government.
The government filed a superseding information on July 6, 2020, charging Kojoyan with unlicensed wholesale distribution of prescription drugs, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(1). On July 15, 2020, Kojoyan entered a guilty plea to the charge.
In addition to sentencing Kojoyan to a prison term of 33 months and ordering the forfeiture of his Palm Springs house, U.S. District Judge Richard Seeborg also sentenced Kojoyan to a three-year period of supervised release to follow his prison term. The defendant remains out of custody on bond and was ordered to surrender to begin his sentence on June 2, 2021.This case is being prosecuted by the Corporate Fraud Strike Force of the United States Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
San Jose Physician Charged with Unlawfully Distributing Hydrocodone and OxycodoneRead the Press Release
SAN JOSE – Donald Siao appeared today to face federal charges that he illegally distributed hydrocodone and oxycodone pills in his medical practice and committed health care fraud, announced Acting United States Attorney Stephanie M. Hinds, Drug Enforcement Administration Acting Special Agent in Charge Peter A. Vainauskas, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Special Agent in Charge Steven Ryan, and the California Department of Justice, Division of Medi Cal Fraud and Elder Abuse (DMFEA).
The federal complaint alleges that Siao, 55, of San Jose, is a medical doctor licensed by the state of California who conducted his practice in San Jose. His license authorized him to write prescriptions for Schedule II through V controlled substances for medical care. The complaint alleges that a prescription monitoring system identified Siao was a high prescriber, exemplified by a recent year when Siao wrote 8,201 prescriptions for controlled substances, including large quantities of hydrocodone and oxycodone and many instances of the dangerous combination of opioid, muscle relaxant, and benzodiazepine. An investigation followed.
During the investigation, the complaint alleges that undercover law enforcement agents posed as new patients and met with Siao at his medical practice. The complaint describes that during initial visits, the agents complained of pain in vague or general terms. Siao conducted little or no physical examinations, the complaint alleges. The initial and subsequent visits usually lasted approximately two minutes. In initial visits Siao prescribed hydrocodone or oxycodone, and the complaint describes that in follow-up appointments Siao continued to prescribe the same medicine and increased the amounts.
In one example in the complaint, an uncover agent posing as a patient met with Siao at an initial appointment and complained of pain. Following an eight second physical examination, Siao wrote a prescription for 30 pills of Norco, a hydrocodone-acetaminophen combination. In subsequent visits as short as 2 minutes and 10 seconds, the undercover agent requested larger prescriptions for reasons that included he had given away pills to his employees as work incentives and that he had ran out of pills when he went to a concert. Siao increased the size of the prescriptions, eventually writing a prescription for 90 Norco pills at his last visit. In another example in the complaint, an undercover agent requested and received a larger prescription of Norco so he could pay back friends with the pills. The agent then requested a prescription for Marinol, explaining he would not take the Marinol but rather would display the prescription at work as a pretext for his positive drug tests, saying “that way it covers the dirty drug test.” Siao replied “gotcha” and wrote the prescription.
The complaint also charges Siao with health care fraud and alleges that on May 9, 2018, he wrote alprazolam and oxycodone prescriptions for a patient without any legitimate medical purpose.
Siao is charged with three counts of illegal distribution of hydrocodone and one count of illegal distribution of oxycodone, all in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C). If convicted of any of these counts, he faces a maximum penalty of 20 years in prison and a maximum fine of $1,000,000. Siao is also charged with two counts of health care fraud, in violation of 18 U.S.C. § 1347. If convicted of either of these counts, he faces a maximum penalty of 10 years in prison and a maximum fine of $250,000. 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.
Siao made an initial appearance today in federal court before the Honorable Susan van Keulen, United States Magistrate Judge. He remains out of custody on bond. His next scheduled appearances are a hearing to review bond conditions on March 24, 2021, at 1 p.m., before U.S. Magistrate Judge van Keulen and a hearing for status on indictment set for April 19, 2021, at 1 p.m., before United States Magistrate Judge Robert M. Illman.
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.
The case is being prosecuted by the United States Attorney’s Office for the Northern District of California. This prosecution is the result of an investigation by DEA, FBI, HHS-OIG, and DMFEA. Through DMFEA, the California Department of Justice regularly works with other law enforcement agencies to investigate and prosecute fraud perpetrated on the Medi Cal program against a wide variety of healthcare providers, including doctors and pharmaceutical companies. Through DMFEA’s civil and criminal enforcement efforts, the Attorney General has recovered tens of millions of dollars from and secured the convictions of hundreds of Medicaid providers who violate California laws through fraudulent and wrongful practices.
Fremont Man Sentenced to 18 Months in Prison and Ordered to Forfeit $1.7 Million for Smuggling Illegal High-Intensity Discharge HeadlightsRead the Press Release
OAKLAND – Chu-Chiang Ho, a/k/a Kevin Ho was sentenced today in United States District Court to 18 months in prison and ordered to forfeit $1.7 million for illegally importing automobile headlights for years that he knew failed to meet U.S. safety standards, announced Acting United States Attorney Stephanie M. Hinds, Homeland Security Investigations NorCal Special Agent in Charge Tatum King, and Customs and Border Protection San Francisco Director of Field Operations Richard F. Di Nucci. The sentence was handed down by the Honorable Jon S. Tigar, United States District Judge.
Ho, 44, of Fremont, admitted he was aware that the headlights and headlight kit parts he imported from China violated U.S. safety laws because they emit a much brighter light than conventional headlights and create a public safety hazard. In his plea agreement, Ho admitted that in October 2005 he reported to the National Highway Transportation Safety Administration that the High-Intensity Discharge (HID) lights he imported from China were too bright and did not meet regulatory photometric requirements. Ho also claimed he discontinued the sale of all illegal headlights. Instead, for the next 13 years he smuggled these illegal parts into the United States and sold them through websites he controlled, including HIDExtra.com, kalex.us, and opt7.com.
Ho also admitted in his plea agreement that he acted to conceal his scheme. He worked with suppliers to mischaracterize the merchandise he imported in documents provided to U.S. Customs and Border Protection to deceive that agency into believing the merchandise was legal. Ho also changed company names numerous times to avoid detection and listed a variety of family members as corporate officers of his companies despite maintaining his control over the business at all times.
Ho admitted that he profited from his scheme and used the proceeds of the illegal HID Kits to assist in his purchase of various properties in the Bay Area. He admitted that at least $1.7 million in proceeds from his sales is traceable to products he illegally smuggled into the United States.
A federal grand jury indicted Ho on March 14, 2019, charging him with seven counts of smuggling illegal headlights into United States, in violation of 18 U.S.C. § 545. Under the plea agreement, Ho pleaded guilty to one count and the United States dismissed the remaining charges.
In addition to sentencing Ho to a prison term of 18 months and to forfeit $1.7 million, U.S. District Judge Jon S. Tigar also sentenced Ho to a three year period of supervised release to follow his prison term. The defendant remains out of custody on bond and was ordered to surrender to begin his sentence on April 27, 2021.
Assistant U.S. Attorneys Thomas R. Green and Chris Kaltsas are prosecuting the case with the assistance of Noble Hughes and Kay Konopaske. The prosecution is the result of an investigation by the U.S. Department of Homeland Security, Homeland Security Investigations and Customs and Border Protection, with the assistance of the Customs and Border Protection Office of Assistant Chief Counsel, San Francisco, and counsel for the U.S. Trade Fraud Task Force.
uBiome Co-Founders Charged with Federal Securities, Health Care Fraud ConspiraciesRead the Press Release
SAN FRANCISCO – A federal grand jury handed down a 33-page indictment today charging Zachary Schulz Apte and Jessica Sunshine Richman with multiple federal crimes including conspiracy to commit securities fraud, conspiracy to commit health care fraud, money laundering, and related offenses in connection with alleged schemes to defraud health insurance providers and investors raise to capital for now-bankrupt microbiome testing company uBiome.
The announcement was made by Acting U.S. Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez; U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Special Agent in Charge Steven J. Ryan; Defense Criminal Investigative Service (DCIS) Western Field Office Special Agent in Charge Bryan D. Denny; U.S. Department of Veterans Affairs, Office of Inspector General (VA OIG) Special Agent in Charge is Jason P. Root; Amtrak Office of the Inspector General Special Agent In Charge, Western Field Office, Thomas M. Hopkins; Office of Personnel Management Office of Inspector General (OPM-OIG) Deputy Inspector General Performing the Duties of the Inspector General Norbert E. Vint.
According to the indictment, Apte, 36, and Richman, 46, both of whom resided in San Francisco at relevant times, co-founded uBiome in October 2012. Initially, uBiome offered a direct-to-consumer service, called “Gut Explorer,” which allowed an individual to submit a fecal sample that uBiome would analyze in its laboratory and produce a report comparing the customer’s microbiome to the microbiomes of others who had submitted fecal samples to uBiome, all for less than $100. The indictment describes how the defendants eventually expanded uBiome’s business model to include development and marketing of “clinical” tests regarding the gut and vaginal microbiomes, which tests would ostensibly be used by medical professionals to make medical decisions and as to which uBiome would seek reimbursement from health insurance providers in amounts up to nearly $3,000. The indictment alleges that Apte’s and Richman’s efforts to have uBiome develop clinical tests that could be billed to insurance companies were intended to attract large-scale venture capital investment. By late 2015, shortly before it raised millions of dollars in its “Series B” fundraising round, uBiome began to market a “clinical” version of a test. Thereafter, the indictment alleges that Apte and Richman caused uBiome to employ various methods to secure health care provider orders for its clinical gut test and clinical vaginal test, including by having its Chief Medical Officer review test requests from customers and endeavoring to build a network of health care providers external to uBiome.
“The innovation that emerges from our Bay Area companies is unparalleled,” said Acting U.S. Attorney Hinds, “but all innovation must exist within the boundaries of the law. Today’s indictment alleges that in their efforts to move fast to drive business and investment capital to their microbiome start up, defendants turned a blind eye to compliance and pursued at all costs a path designed to bring the greatest investment in their company. The indictment alleges defendants bilked insurance providers with fraudulent reimbursement requests, a practice that inevitably would result in higher premiums for us all. Further, defendants cashed out on the investment that flowed into the company to benefit themselves. Today’s indictment is a cautionary tale about the importance of robust compliance programs rather than lip service, and the importance of honesty with investors.”
“This was the result of a very complex investigation conducted by the FBI and our federal and state partners,” said FBI Special Agent in Charge Fair. “This indictment illustrates that the heavily regulated healthcare industry does not lend itself to a ‘move fast and break things’ approach, but rather to an approach of compliance and accountability.”
“The United States Postal Inspection Service has a long history of successfully investigating complex fraud cases,” said USPIS Inspector in Charge Nuñez. “Anyone who engages in deceptive practices should know they will not go undetected and will be held accountable. The collaborative investigative work on this case conducted by Postal Inspectors, our law enforcement partners, and the United States Attorney’s Office illustrates our efforts to protect American consumers and businesses.”
“The announced indictment is a crucial step forward in holding accountable those who, among other things, allegedly engaged in fraudulent schemes against TRICARE, the Department of Defense’s healthcare system for military members and their families,” said DCIS Special Agent in Charge Denny. “DCIS will continue to work with its law enforcement partners to see this matter through in order to protect the best interests of the Department of Defense and the American public.”
“This indictment demonstrates the VA OIG’s unwavering commitment to safeguard the integrity of the programs that support our nation’s veterans and their families” said VA OIG Special Agent in Charge Root.
“We are very proud of this well-coordinated, joint effort—a true partnership between the U.S. Attorney’s Office and multiple investigative agencies like Amtrak’s Office of Inspector General,” said Amtrak OIG Special Agent in Charge Hopkins. “Because of this joint effort and efforts like it, we continue to achieve success across the country in bringing justice to those who target Amtrak’s health care plan, its employees and their dependents.”
“The OPM OIG is committed to investigating unscrupulous providers that take advantage of the system and defraud the American taxpayer,” said OPM OIG Deputy Inspector General Vint.
The indictment describes how the defendants ultimately adopted several fraudulent practices with respect to its clinical tests. Specifically, according to the indictment, the defendants developed, implemented, and oversaw practices designed to deceive approving health care providers and reimbursing insurance providers regarding tests that were not validated and not medically necessary. Further, the indictment alleges the defendants falsified documents and lied about and concealed material facts when insurance providers asked questions to which truthful answers would reveal the fraudulent nature of uBiome’s billing model. The indictment alleges such practices included (1) fraudulently submitting reimbursement claims for re-tests or re-sequencings of archived samples (referred to internally at uBiome as “upgrades”); (2) utilizing a captive network of doctors and other health care providers who fraudulently were given partial and misleading information about the test requests they were reviewing; (3) fraudulently submitting reimbursement claims with respect to tests that had not been validated under applicable federal standards and/or for which patient test results had not yet been released; (4) manipulating dates of service to conceal uBiome’s actual testing and marketing practices from insurance providers, and to maximize billings; (5) fraudulently not charging patients for patient responsibility required by insurers, and instead, in some cases, incentivizing them with gift cards, and then making false or misleading statements about, or concealing, those practices from insurance providers; and (6) falsifying documents, using the identity of doctors and other health care providers without their knowledge or authorization, and lying to insurance providers in response to requests for information, overpayment notifications, requests for recoupment of billings, denials of reimbursement requests, or audits investigating uBiome’s billing practices. The indictment alleges that, between 2015 and 2019, uBiome submitted more than $300 million in reimbursement claims to private and public health insurers. Of these reimbursement claims, uBiome was paid more than $35 million.
The indictment also includes allegations that defendants oversaw an effort to deceive and mislead investors about various aspects of uBiome’s business during its Series B and Series C fundraising rounds, which occurred primarily in 2016 and 2018, respectively. Specifically, the indictment alleges defendant misled investors about (1) the success of uBiome’s business model in terms of revenues and reimbursement rates; (2) the threats to future revenues represented by uBiome’s failure to collect patient responsibility, marketing of upgrades, and reliance a captive group of health care providers to generate orders; and (3) the lack of clinical utility and acceptance in the medical community of uBiome’s tests. The indictment alleges that the defendants failed to disclose to investors, and otherwise concealed from investors, that “not only were insurance providers’ questions about and responses to uBiome’s billing practices calling uBiome’s entire business model into question, but [defendants] had had to falsify documents and lie to insurance providers in order to attempt to keep them at bay.” The indictment alleges that Apte and Richman induced investors to invest more than $64 million in uBiome stock during the Series B and Series C fundraising rounds and, furthermore, that Apte and Richman together sold investors more than $12 million of their personal uBiome during those rounds.
In addition to these charges, the indictment contains allegations that defendants engaged in aggravated identity theft and engaging in transactions with the proceeds of the specified unlawful activities of wire fraud and securities fraud (i.e., money laundering). With respect to the identity theft charges, the indictment provides examples of how defendants used the names and personal information of various health care providers to create documents for submission to health insurance companies with respect to certain uBiome customers during and in relation to the conspiracy and scheme to defraud those insurers. With respect to money laundering, the indictment alleges Apte used more than $10,000 of proceeds of the scheme to defraud investors to make a $2,250,000 payment ostensibly to a law firm for a retainer and to deposit $500,000 into a bank account. Also with respect to money laundering, the indictment alleges Richman used more than $10,000 of proceeds of the scheme to defraud investors to make payments related to real property in Washington State and Florida, to purchase an annuity from a life insurance company, to pay a law firm $2,000,000 ostensibly for a legal retainer, and to transfer funds in the amount of $900,000 intended as partial payment for the purchase of a residence in south Florida.
In sum, the defendants are charged with the following crimes and face the following maximum penalties:
Offense
Statute
Maximum Statutory Penalty (per count)
Conspiracy to Commit Health Care Fraud
(one count, each defendant)
18 U.S.C. § 1349
20 years
Health Care Fraud
(14 counts, each defendant)
18 U.S.C. § 1347
20 years
Aggravated Identity Theft and Aiding and Abetting
(six counts, each defendant)
18 U.S.C. § 1028A & 2
Two years, consecutive to underlying sentence
Conspiracy to Commit Wire Fraud and Securities Fraud
(one count, each defendant)
18 U.S.C. § 371
5 years
Wire Fraud and Aiding and Abetting
(10 counts, each defendant)
18 U.S.C. § 1343 & 2
20 years
Fraud in Connection with the Purchase and Sale of Securities
(nine counts, each defendant)
15 U.S.C. §§ 78j(b), 78ff;
17 C.F.R. § 240.10b-5;
18 U.S.C. § 2
20 years
Engaging in Monetary Transactions with Proceeds of Specified Unlawful Activity
(Apte, two counts; Richman, four counts)
18 U.S.C. § 1957
10 years
The court may order additional terms of supervised release, as well as additional monetary penalties and restitution. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An indictment merely alleges that crimes have been committed, and defendants are presumed innocent until proven guilty beyond a reasonable doubt.
The defendants’ initial federal court appearances have not yet been scheduled.
The case is being prosecuted by the Special Prosecutions 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, USPIS, HHS-OIG, DCIS, VA-OIG, Amtrak-OIG; OPM-OIG; and the U.S. Department of Labor, Employee Benefits Security Administration, with assistance from the California Department of Justice Division of Medi-Cal Fraud & Elder Abuse and the California Department of Insurance. The U.S. Attorney’s Office and all the federal law enforcement agencies also thank the San Francisco Regional Office of the Securities and Exchange Commission (SEC). The SEC conducted a parallel investigation that was also announced today.
Former Rohnert Park Police Officers Charged with Conspiracy to Commit Extortion and Related Charges in Marijuana Seizure SchemeRead the Press Release
SAN FRANCISCO – The United States Attorney’s Office for the Northern District of California unsealed charges today in a criminal complaint charging former Rohnert Park police officers Brendon Jacy Tatum and Joseph Huffaker with conspiracy to commit extortion under color of official right, announced Acting United States Attorney for the Northern District of California Stephanie M. Hinds, FBI Special Agent in Charge Craig D. Fair, and Internal Revenue Service-Criminal Investigations Acting Special Agent in Charge Michael Daniels. Tatum also is charged with falsification of records in a federal investigation and tax evasion.
According to the complaint, Tatum, from Santa Rosa, and Huffaker, from Rohnert Park, were employed as officers by the City of Rohnert Park Department of Public Safety Police Services Patrol Division (RPDPS). Tatum was employed with RPDPS between 2003 and 2018, and Huffaker was employed with RPDPS between 2012 and 2019. RPDPS operated an interdiction team between 2014 and early 2017 that conducted traffic stops on vehicles along Highway101 between Cloverdale and Rohnert Park in a program designed to seize illegal drugs. Tatum and Huffaker were both assigned to the interdiction team at various times between 2015 and January 2017—when interdiction operations were terminated by RPDPS.
The criminal complaint describes how Tatum and others allegedly conducted numerous interdictions while on duty, in which Tatum is alleged to have extorted at least $3,700 in cash and significant amounts of marijuana from victim drivers they stopped along Highway 101, by threatening to arrest them and seize the assets and marijuana if the victim drivers did not consent to the seizures. In these cases, Tatum and the other officers made no reports of the seizure, did not submit the marijuana or assets into evidence, and sought no destruction orders for the marijuana. These seizures were completely undocumented by the officers, contrary to policy, but were captured in audio and video footage from the officers’ body-worn cameras.
The undocumented stops and seizures allegedly occurred even after termination of the interdiction team’s operations. On December 5, 2017, the complaint alleges, Tatum and Huffaker stopped a driver along Highway 101. Neither were wearing RPDPS uniforms and they claimed to be ATF agents. The complaint alleges Tatum and Huffaker extorted marijuana from the victim driver and the seizure went completely undocumented. Again, on December 18, 2017, Tatum and another officer stopped another driver carrying 23 pounds of marijuana, packaged in one-pound bags, labeled by date and strain. That driver also had four crates of hash, all destined for a dispensary lab. Again, Tatum and the other officer were not in RPDPS uniforms and identified themselves as ATF agents when they told the driver they would either arrest him and seize the marijuana and hash, or the driver could agree to let them take the marijuana. Tatum and the officer took the marijuana.
In February 2018, the press began reporting on robberies along Highway 101 by purported law enforcement agents, and specifically the robbery that took place on December 5, 2017. These reports indicated that the victims had been interviewed by the FBI. The criminal complaint alleges that Tatum responded by drafting a press release claiming RPDPS was responsible for the December 5, 2017 stop, and then prepared a false police report to conceal his criminal activity.
The complaint also alleges that during 2016, at the same time Tatum was extorting marijuana from drivers along Highway 101, he made hundreds of thousands of dollars in cash deposits into his own accounts, as well as his wife’s bank account. The complaint explains that the deposits all were made in amounts under $10,000, in an apparent attempt to avoid banking laws requiring disclosure of the deposits. In addition, during the same period, Tatum used approximately $46,000 in cash that did not come from any of his accounts to purchase a fishing boat. In summary, the cash deposits into Tatum’s and his family members’ accounts during that year, along with the cash used to purchase the fishing boat, totaled $443,059. The complaint alleges all these assets went unreported on Tatum’s tax returns for 2016.
“The public entrusts police officers to enforce the law,” said Acting U.S. Attorney Hinds. “The public faith erodes when that trust is violated. The abuse of police powers cannot be tolerated and must be vigorously prosecuted.”
“The FBI has a solemn responsibility to investigate allegations of public corruption and the abuse of power by any public servant. The Rohnert Park Department of Public Safety cooperated fully with the FBI to put a stop to this serious breach of public trust and to hold these individuals accountable for their actions,” said FBI Special Agent in Charge Craig Fair. “There is no greater responsibility for law enforcement than to abide by the oath of office and respect the Constitutional rights of all people.”
“The IRS enforces the nation’s tax laws, but also takes particular interest in cases where someone, like Tatum, allegedly deposits large amounts of cash below the Currency Transaction Reporting requirements to evade any filings by financial institutions and evade income taxes from the IRS,” said IRS Criminal Investigation, Acting Special Agent in Charge Michael Daniels. “With both law enforcement and financial investigation expertise, our agents are uniquely qualified to follow these types of financial transactions. Today’s action show the IRS is committed pursing justice for all including those who violate the public trust.”
In sum, Tatum and Huffaker are charged with conspiracy to commit extortion under color of official right, in violation of 18 U.S.C. § 1951. In addition, Tatum is charged with falsifying records in a federal investigation, in violation of 18 U.S.C. § 1519, and tax evasion, in violation of 26 U.S.C. § 7201.
A complaint merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Tatum and Huffaker are scheduled to make their initial appearance on March 12, 2021, before the United States Magistrate Judge Sallie Kim.
If convicted, the defendants face a maximum sentence of 20 years in prison, 3 years of supervised release, and a fine of $250,000 on the conspiracy charge. In addition, Tatum faces a maximum statutory sentence of 20 years on the false records charge and 5 years on the tax evasion charge. 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 case is being prosecuted by the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California. This case is being investigated by the FBI and the IRS-CI.
Man Convicted of Carjacking That Occurred Minutes After He Was Released from Santa Rita JailRead the Press Release
OAKLAND – Rocky Lee Music was sentenced to five years in prison for carjacking, announced Acting United States Attorney Stephanie M. Hinds and FBI Special Agent in Charge Craig D. Fair. The sentence was handed down by the Honorable Yvonne Gonzalez Rogers, U.S. District Judge.
Music, 33, with a last known address in Walnut Creek, pleaded guilty to the carjacking charge today and was sentenced at the same hearing. According to his plea agreement, Music admitted that on April 19, 2020, he violently carjacked a Prius parked in the 5200 block of Campus Drive of Dublin, Calif. To carjack the vehicle, Music opened the driver’s door, punched the male victim seated in the driver’s seat, pulled the victim out of the Prius while continuing to punch him on the head, and forced his way into the driver’s seat. Music drove away in the Prius while the victim hung onto the driver’s side door. According to the plea agreement, the carjacking occurred approximately 40 minutes after Music was granted pretrial release from Santa Rita Jail, where he had been held while awaiting prosecution by Alameda County authorities on other charges. After carjacking the Prius, Music drove to San Ramon, where he later approached a female victim seated in the driver’s seat of a parked vehicle. The female driver drove away. Music was apprehended later that same day in San Ramon, and he has remained in custody since his arrest. A federal grand jury indicted Music on June 16, 2020, charging him with one count of carjacking, in violation of 18 U.S.C. § 2119(1). Music pleaded guilty to the count.
In addition to the prison term, Judge Gonzalez Rogers sentenced Music to a three-year period of supervised release. The defendant will begin serving the sentence immediately.
Assistant U.S. Attorney Jonathan U. Lee is prosecuting the case with the assistance of Kay Konopaske and Kathleen Turner. The prosecution is the result of an investigation by the FBI, the Dublin Police Department, and the San Ramon Police Department.
Former Director of San Francisco Mayor’s Office of Neighborhood Services and San Francisco’s Fix-It Team Agrees to Plead Guilty to Money Laundering Conspiracy and to Cooperate with Federal InvestigationRead the Press Release
SAN FRANCISCO – Former San Francisco public official Sandra Zuniga, charged in an information filed yesterday with conspiracy to commit money laundering, agreed in a plea agreement filed today to plead guilty and to cooperate with federal investigators in the corruption investigation into San Francisco City Hall, 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 Acting Special Agent in Charge Michael Daniels.
“Today a top San Francisco City Hall public official agreed to plead guilty to charges in our political corruption investigation and will cooperate with the FBI against others involved,” said Acting United States Attorney Stephanie M. Hinds. “This investigation continues, but the window of time for cooperation is closing. If you are involved in public corruption at any level, reach out to the FBI before the FBI reaches out to you. Early cooperation is always viewed favorably.”
"The FBI is very interested in interviewing San Francisco city government employees and contractors who may have first-hand knowledge of this public corruption scandal,” said FBI Special Agent in Charge Craig D. Fair. "We believe that there are still city employees and contractors who may have pertinent knowledge that would be crucial to the ongoing investigation. In her plea agreement, Sandra Zuniga has agreed to cooperate with the FBI. We encourage others who have knowledge of this to do the same."
“Sandra Zuniga thought she could circumvent the law,” said IRS Criminal Investigation, Acting Special Agent in Charge Michael Daniels. “Through numerous financial transactions, over a period of almost ten years, she attempted to hide the true source of Mohammed Nuru’s funds. No public official should be allowed to behave as if they are above the law.”
Today’s developments follow the June 3, 2020, federal complaint that charged Zuniga, 45 years old and of South San Francisco, with engaging in a money laundering conspiracy. That earlier complaint against Zuniga followed public corruption charges filed in January 2020 against Mohammed Nuru, then Director of San Francisco’s Department of Public Works (DPW). The charges against Nuru allege he engaged in schemes to bribe a San Francisco Airport Commissioner and to accept bribes from those doing business with DPW and the City. Multiple individuals have been charged with bribing Nuru, and some have pled guilty and are cooperating with the government’s investigation.
The June 3, 2020, federal complaint against Zuniga alleged that she laundered the proceeds of Nuru’s schemes from 2014 through January 2020. The Zuniga complaint details how she made all-cash deposits in amounts that exceeded her San Francisco government paychecks by tens of thousands of dollars. She is alleged to have deposited checks from associates of Nuru and followed those deposits with transactions that benefitted Nuru. For example, the complaint alleged Zuniga made monthly mortgage payments for years on Nuru’s Colusa County vacation home, almost always after depositing approximately $1,000 in cash into her own checking account and then writing a check for $1,000 to pay Nuru’s monthly mortgage bill. The complaint also details a September 2018 set of transactions in which Zuniga received a $5,000 check from a contractor doing business with DPW and the City of San Francisco, deposited that check, executed a series of transactions with those funds through different banks, and then paid a $2,400 construction bill on Nuru’s vacation home by writing a $2,500 check to herself, depositing it into another bank account, and sending a check from that account to the construction contractor to pay Nuru’s bill. In another example, on one day in May 2014 Zuniga made two cash deposits into her account totaling $5,600, then four days later wrote a $3,800 check to Nuru and the next day paid $1,000 towards Nuru’s mortgage bill. Further, the June 2020 complaint against Zuniga describes how she traveled in the fall of 2018 with Nuru on a lavish two-week trip to South America, with business class flights and Ritz-Carlton accommodations, all subsidized or paid entirely by a contractor doing business with the City.
Yesterday’s filed information charges Zuniga with engaging in the money laundering conspiracy with Nuru by conducting financial transactions with the proceeds of the crime of fraud, specifically wire fraud, and with the intent to conceal the nature and source of those funds, all while knowing the funds were derived from illegal activity. Zuniga has signed a plea agreement filed with the court today admitting the money laundering crime and expressing her intention to plead guilty to the crime.
In her plea agreement, Zuniga agrees to cooperate with federal investigators in the ongoing federal investigation.
Zuniga’s admission of her own criminal conduct in her signed plea agreement, and a description of its circumstances and the people involved, has been submitted to the court in a separate “Exhibit A” to the plea agreement. Exhibit A is filed under seal with the court and not available at this time for viewing. While the Exhibit A description is not public, yesterday’s publicly filed information does reveal further details. The money laundering conspiracy charged in today’s information is alleged now to have begun years earlier than the date alleged in the original June 2020 complaint against Zuniga. While that complaint alleged the conspiracy began in March 2014, yesterday’s information alleges the money laundering conspiracy began on “an unknown date, but at least as early as 2010” and continued into January 2020. Further, today’s information alleges Zuniga conspired “with Mohammed Nuru and with other persons known” to the United States Attorney’s Office in conducting and attempting to conduct the financial transactions to launder the proceeds of wire fraud.
Zuniga is schedule to be arraigned tomorrow, Wednesday, March 10, on the information before the Honorable Sallie Kim, United States Magistrate Judge. Zuniga is tentatively scheduled to make her initial appearance before the Honorable William H. Orrick, United States District Judge, in San Francisco on March 18, 2021. Zuniga remains out of custody on bond.
Zuniga is charged with one count of conspiracy to launder money, in violation of 18 U.S.C. § 1956(h). The charge carries a maximum statutory penalty of 20 years in prison, a fine of $500,000 or twice the value of the property involved in the transactions, or both. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An information merely alleges that a crime has been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Investigators are asking anyone who has further information that may be relevant to the investigation to email the FBI tip line at tips.fbi.gov or to call the FBI at (415) 553-7400.
The prosecution is being handled by the Office of the U.S. Attorney, Northern District of California’s new Corporate Fraud Strike Force and is the result of an investigation by the FBI and IRS-CI.
Cryptocurrency Fraudster Pleads Guilty to Securities Fraud and Money Laundering Charges in Multi-Million Dollar Investment SchemeRead the Press Release
SAN FRANCISCO – Roger Nils-Jonas Karlsson, a citizen of Sweden, pleaded guilty to securities fraud, wire fraud, and money laundering charges, announced Acting United States Attorney Stephanie M. Hinds; Acting Assistant Attorney General Nicholas McQuaid of the Justice Department’s Criminal Division; and Kelly R. Jackson, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Washington, D.C. Field Office.
A criminal complaint filed March 4, 2019, charged Karlsson, 47, and his company, Eastern Metal Securities (EMS), with crimes involving a scheme to defraud victims of more than $16 million. Karlsson, also known by several aliases including Steve Heyden, Euclid Deodoris, Joshua Millard, Lars Georgsson, Paramon Larasoft, and Kenth Westerberg, was arrested on June 17, 2019, in Thailand and was extradited to the United States to face the charges. A federal grand jury indicted Karlsson and EMS on July 25, 2019.
“The internet has pioneered extraordinary opportunities for commerce,” said Acting U.S. Attorney Hinds. “Unfortunately, the same tools that have provided innovative methods of doing business also have provided fertile grounds for fraudsters to take advantage of the unwary. This case demonstrates that we will pursue fraudsters who seek to find their victims in the Northern District of California, even if such criminals operate from outside the country.”
“Karlsson’s false promises of a profitable investment with minimal risk bilked tens of millions of dollars from his unsuspecting victims,” said IRS-CI Special Agent in Charge Jackson. “Karlsson’s admission today will hopefully provide some measure of justice for more the more than 3,500 victims he scammed and put them on a path to financial restoration. We were glad to provide our expertise in tracing virtual currency in this investigation, diminishing the belief of anonymity associated with these transactions.”
The indictment and a factual basis filed by the government describe a long-running scheme by which Karlsson and EMS used a website to commit wire fraud against thousands of victims. Specifically, the indictment explains that from November 27, 2012, through June 19, 2019, Karlsson and EMS used www.easternmetalsecurities.com to make fraudulent representations and convince victims to send funds using a virtual currency exchange. During the same period, Karlsson and EMS used deceptive “devices and contrivances” to sell securities and then tried to conceal the proceeds of the wire fraud and securities fraud. In sum, the indictment charges Karlsson and EMS with one count each of wire fraud, in violation of 18 U.S.C. § 1343; securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. § 240.10b-5; and money laundering, in violation of 18 U.S.C. § 1957. Karlsson pleaded guilty to all the charges pending against him. EMS has ceased to exist.
During the hearing, Karlsson admitted that he used the website to invite potential investors to purchase shares of the plan for less than $100 per share, promising an eventual payout of 1.15 kilograms of gold per share, an amount of gold which as of Jan. 2, 2019, was worth more than $45,000. Karlsson advised investors that, in the unlikely event that the gold payout did not happen, he guaranteed to them 97% of the amount they invested. Karlsson admitted he had no way to pay off the investors. Instead, the funds provided by victims were transferred to Karlsson’s personal bank accounts and he then used proceeds to purchase expensive homes and a resort in Thailand.
As the government has alleged, Karlsson also used a second website, www.hci25.com, to make multiple false communications to potential investors. Karlsson brought the investors in HCI25 together with the investors in the “Pre Funded Reversed Pension Plan” and posted multiple communications to delay the moment investors would realize there would be no payout. For example, on one occasion, Karlsson explained that a payout had not occurred because releasing so much money all at once could cause a negative effect on financial systems throughout the world. Karlsson also falsely represented that EMS was working with the U.S. Securities and Exchange Commission to prepare the way for a payout.
Karlsson directed his victims to make investments using virtual currencies, such as Bitcoin. Karlsson admitted he defrauded no less than 3,575 victims of more than $16 million.
Karlsson faces a maximum sentence of 20 years in prison and a maximum $250,000 fine for the wire fraud and securities fraud charges, and 20 years in prison and a $500,000 maximum fine for the money laundering charge. In addition, the court also may order an additional 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. Attorney William Frentzen and Trial Attorney Catherine Alden Pelker of the Department of Justice Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting this case. Assistant U.S. Attorney Karen Beausey of the Asset Forfeiture Unit of the U.S. Attorney’s Office is prosecuting the forfeiture proceedings. This prosecution is the result of an investigation by the IRS-CI Washington, D.C. Cyber Crimes Unit. The Criminal Division’s Office of International Affairs, the FBI Legal Attaché Office in Thailand, the IRS Criminal Investigation Attaché Office in Hong Kong and the Royal Thai Police Crime Suppression Division provided significant assistance.
Cryptocurrency Fraudster Pleads Guilty to Securities Fraud and Money Laundering Charges in Multi-Million Dollar Investment SchemeRead the Press Release
A citizen of Sweden pleaded guilty to securities fraud, wire fraud, and money laundering charges that defrauded more than 3,500 victims of more than $16 million.
Roger Nils-Jonas Karlsson, 47, and his company, Eastern Metal Securities (EMS), was charged in a criminal complaint filed March 4, 2019, with crimes involving a scheme to defraud victims of more than $16 million. Karlsson, also known by several aliases including Steve Heyden, Euclid Deodoris, Joshua Millard, Lars Georgsson, Paramon Larasoft, and Kenth Westerberg, was arrested on June 17, 2019, in Thailand and was extradited to the United States to face the charges. A federal grand jury indicted Karlsson and EMS on July 25, 2019. Karlsson pleaded guilty to all the charges pending against him. EMS has ceased to exist.
The indictment and a factual basis filed by the government describe a long-running scheme by which Karlsson and EMS used a website to commit wire fraud against thousands of victims. Specifically, the indictment explains that from Nov. 27, 2012, through June 19, 2019, Karlsson and EMS used www.easternmetalsecurities.com to make fraudulent representations and convince victims to send funds using a virtual currency exchange. During the same period, Karlsson and EMS used deceptive “devices and contrivances” to sell securities and then tried to conceal the proceeds of the wire fraud and securities fraud.
During the proceedings, Karlsson admitted that he used the website to invite potential investors to purchase shares of the plan for less than $100 per share, promising an eventual payout of 1.15 kilograms of gold per share, an amount of gold which as of Jan. 2, 2019, was worth more than $45,000. Karlsson advised investors that, in the unlikely event that the gold payout did not happen, he guaranteed to them 97% of the amount they invested. Karlsson admitted he had no way to pay off the investors. Instead, the funds provided by victims were transferred to Karlsson’s personal bank accounts and he then used proceeds to purchase expensive homes and a resort in Thailand.
As the government has alleged, Karlsson also used a second website, www.hci25.com, to make multiple false communications to potential investors. Karlsson brought the investors in HCI25 together with the investors in the “Pre Funded Reversed Pension Plan” (PFRPP) and posted multiple communications to delay the moment investors would realize there would be no payout. For example, on one occasion, Karlsson explained that a payout had not occurred because releasing so much money all at once could cause a negative effect on financial systems throughout the world. Karlsson also falsely represented that EMS was working with the U.S. Securities and Exchange Commission to prepare the way for a payout.
Karlsson directed his victims to make investments using virtual currencies, such as Bitcoin. Karlsson admitted he defrauded no less than 3,575 victims of more than $16 million.
Karlsson faces a maximum sentence of 20 years in prison and a maximum $250,000 fine for the wire fraud and securities fraud charges, and 20 years in prison and a $500,000 maximum fine for the money laundering charge. In addition, the court also may order an additional 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.
Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division; Acting U.S. Attorney Stephanie Hinds of the Northern District of California; and Special Agent in Charge Kelly R. Jackson of the IRS Criminal Investigation (IRS-CI) Washington, D.C. Field Office made the announcement.
Trial Attorney Catherine Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney William Frentzen are prosecuting this case. Assistant U.S. Attorney Karen Beausey of the Asset Forfeiture Unit of the U.S. Attorney’s Office is prosecuting the forfeiture proceedings.
IRS-CI Washington, D.C. Cyber Crimes Unit investigated the case. The Justice Department’s Office of International Affairs, the FBI Legal Attaché Office in Thailand, the IRS-CI Attaché Office in Hong Kong and the Royal Thai Police Crime Suppression Division provided significant assistance.
Apprehended Fugitive Charged in Second Fraud SchemeRead the Press Release
SAN FRANCISCO – Joseph Albert Corey appeared today in federal court to face an indictment filed December 15, 2020, charging him with wire fraud, conspiracy to commit wire fraud, and money laundering, announced Acting United States Attorney Stephanie Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Corey also re-appeared on a 2019 federal indictment for mail fraud to which he had already pleaded guilty but had absconded in February 2020 before sentencing.
According to the new indictment (CR 20-481 RS), between March 2019 and October 2020, Corey, age 56 and last known to live in Los Angeles, engaged in a fraud scheme that involved impersonating different physicians and applying for loans in the physicians’ names. The applications sought loans purportedly to purchase expensive medical devices. The indictment outlines that once a fraudulent loan application was approved for a loan, Corey directed the lender to deposit the funds in a bank account set up by Corey in a deceptive name, one that closely resembled or was identical to that of a legitimate medical-device supply company. After the lender deposited the money loaned for the medical device purchase into the apparent medical-device supplier’s bank account, the indictment alleges that Corey withdrew the money and purchased gold. The gold purchase obscured the financial trail of the funds, laundering the money for Corey. The indictment alleges three different executions of this scheme – twice in April 2019 and once in August 2020 after Corey pleaded guilty to the fraud outlined below and had absconded – that netted more than $300,000.
Corey is also indicted in this district in an earlier federal criminal case charging a different fraud (CR 19-530 EMC). In October 2019, an indictment charged Corey with engaging in a mail fraud scheme that obtained approximately $34,000. The scheme involved Corey opening an account under a false name and depositing checks into the account that were drawn without authority on a legitimate company’s bank account. Corey then purchased gold with the deposited funds. Corey ultimately pleaded guilty to this mail fraud charge in November 2019. While sentencing was pending, the Court ordered Corey to appear for a bond hearing. Corey failed to appear and on February 19, 2020, the Court issued a bench warrant for his arrest. Corey remained at large for almost a year, and during that time he was charged in the new indictment.
In another filing by the government, the government asserts that Corey left the country and remained at large until arrested in January 2021. When arrested, he possessed numerous false identifications, including one identifying him as a special agent of the CIA. He was transferred to this district to face both cases outlined above.
Investigators are asking anyone who has further information about Joseph Albert Corey or his activities that may be relevant to these cases to email the FBI tip line at tips.fbi.gov.
Corey’s next scheduled court appearance is set for March 8, 2021, at 10:30 a.m., for identification of his counsel in front of the Honorable Sallie Kim, United States Magistrate Judge, who Corey appeared before this morning. Corey is also set to appear on April 7, 2021, at 9:00 a.m., for a status conference before the Honorable Edward M. Chen, United States District Judge.
The new indictment (CR 20-481 EMC) charges Corey with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; three counts of wire fraud, in violation of 18 U.S.C. § 1343; and two counts of money laundering, in violation of 18 U.S.C. § 1957. An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
If convicted of a wire fraud or wire fraud conspiracy charge, Corey faces a maximum sentence of 30 years in prison, a $1,000,000 fine, and five years of supervised release once imprisonment ends. If convicted of a money laundering charge, Corey faces a maximum sentence of 10 years in prison and a maximum fine of $250,000, or twice the amount of the criminally derived proceeds, as well as three years of supervised release once imprisonment ends. 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.
Corey already pleaded guilty in November 2019 in the earlier case (CR 19-530 EMC) to one count of mail fraud. He faces a maximum sentence of 20 years in prison, a maximum fine of $250,000, and term of up to three years of supervised release once imprisonment ends.
Mohit Gourisaria is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Maddi Wachs and Marina Ponomarchuk. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Federal Prosecutions Demonstrate A Sustained Effort to Bring Law and Order to the Tenderloin District of San FranciscoRead the Press Release
SAN FRANCISCO- On August 7, 2019, U.S. Attorney David L. Anderson announced a new federal initiative to address crime in San Francisco’s Tenderloin District. The program, called the Federal Initiative for the Tenderloin (FIT), has brought together the resources of more than 15 federal law enforcement agencies to combat endemic drug trafficking, firearms offenses, robberies and other crime in the neighborhood. U.S. Attorney Anderson pledged to assign 15 federal prosecutors to handle cases brought against offenders violating federal law in the neighborhood.
“The Tenderloin is a wonderful neighborhood mostly populated by good people leading law-abiding lives,” said U.S. Attorney Anderson. “It is not fair to tolerate lawlessness in the Tenderloin that we simply would not accept in other neighborhoods in San Francisco. The good people of the Tenderloin should have equal access to schools, stores, transportation, and other services without having to run a gauntlet of crime.”
The Tenderloin neighborhood encompasses about 50 square blocks of downtown San Francisco. Generally, it is bounded on the north by Geary Street, on the east by Powell Street, on the south by Mission Street, and on the west by Van Ness Avenue. The FIT initiative has prioritized federal charges for criminal misconduct with a nexus to the Tenderloin.
Since announcing the initiative, cases have involved a broad array of criminal conduct ranging from mail theft to attempted murder. Cases brought against defendants also include charges of bank fraud, escape, firearms offenses, transportation of child pornography and conspiracy to commit sex trafficking of a minor. So far, 244 defendants have been charged and 114 have been sentenced. Sixteen cases were resolved in just the past six months, including the following:
Defendant Name
Sentence imposed
Charges
Manuel Arteaga (aka Angel David Centeno)
36 months
Conspiracy to Distribute methamphetamine, cocaine base, and heroin, in violation of 21 U.S.C. §§ 841(a), 846
Arturo Salamanca
65 months
Possession of Child Pornography, in violation of 18 U.S.C. § 2252(a)
Darwin Villatoro
28 months
Possession with Intent to Distribute heroin and cocaine base, in violation of 21 U.S.C. § 841(a)
Brazil Harris
40 months
Possession with Intent to Distribute methamphetamine, in violation of 21 U.S.C. § 841(a), and Felon in Possession of a Firearm and Ammunition, in violation of 18 U.S.C. § 922(g)(1)
Chantel Williams
81 months
Conspiracy to Commit Sex Trafficking of a Minor, in violation of 18 U.S.C. § 1594(C)
U.S. Attorney Anderson pledged to continue with the effort for a minimum of one year and there are no current plans to terminate or provide an end date for the initiative.
Redding Man Charged with Two Counts of Being a Felon in Possession of a FirearmRead the Press Release
SACRAMENTO, Calif. — A federal grand jury returned a two-count indictment today against Tyson Farrell, 26, of Redding, charging him with being a felon in possession of a firearm, U.S. Attorney McGregor W. Scott announced.
According to court documents, Farrell was arrested twice in the span of five months and found to be in possession of a firearm each time. Farrell has multiple felony convictions and may not legally possess firearms.
On Sept. 16, 2020, while driving without a valid license, Farrell was stopped by a law enforcement officer who noticed that Farrell’s car had a nonfunctioning brake light, in violation of the California Vehicle Code. Farrell was on post release community supervision from a prior conviction and found to have a partially dismantled Ruger Model 77/17 in the back seat.
On Jan. 10, 2021, a police officer stopped a car in which Farrell was a passenger, having recognized the driver and knowing he was driving on a restricted license. The officer also recognized Farrell and confirmed through a records check that Farrell was the subject of a pending felony warrant. The officer searched the car and recovered a Colt .38 caliber revolver from a laundry bag in the car’s back seat where Farrell had been sitting.
This case is the product of an investigation by the Redding Police Department, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, and the Shasta County District Attorney’s Office. Assistant U.S. Attorney James Conolly is prosecuting the case.
If convicted, Farrell faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. The Department of Justice reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local, and tribal law enforcement and the local community to develop effective, locally based strategies to reduce violent crime. To learn more about Project Safe Neighborhoods, go to www.justice.gov/psn.
Federal Charges Against Stanford University Researcher ExpandedRead the Press Release
A federal grand jury issued a superseding indictment charging Chen Song with visa fraud, obstruction of justice, destruction of documents, and false statements in connection with a scheme to conceal and lie about her status as a member of the People’s Republic of China’s military forces while in the United States, the Justice Department announced yesterday.
“We allege that while Chen Song worked as a researcher at Stanford University, she was secretly a member of China’s military, the People’s Liberation Army,” said U.S. Attorney David L. Anderson for the Northern District of California. “When Song feared discovery, she destroyed documents in a failed attempt to conceal her true identity. This prosecution will help to protect elite institutions like Stanford from illicit foreign influences.”
"Members of the Chinese People's Liberation Army cannot lie on their visa applications and come to the United States to study without expecting the FBI and our partners to catch them." said Assistant Director Alan E. Kohler Jr. of the FBI's Counterintelligence Division. "Time and again, the Chinese government prioritizes stealing U.S. research and taking advantage of our universities over obeying international norms."
“The FBI’s investigation revealed Song Chen took active steps to destroy evidence of her official affiliation with the Chinese military, including her current PLA credentials depicting her in military dress uniform,” said Special Agent in Charge Craig D. Fair of the FBI's San Francisco Field Office. “The FBI is committed to protecting academic institutions in the Bay Area from PRC military officers who knowingly and willfully lie about their military affiliations to access American research and development. We will exhaust all investigative techniques and measures to ensure the safety, security, and hard work of American universities.”
The superseding indictment expands on the allegations set out in an affidavit supporting a criminal complaint filed on July 17, 2020, and an indictment filed on Jan. 7, 2021. According to the superseding indictment, Song, 39, a Chinese national, entered the United States on Dec. 23, 2018, using a J-1 non-immigrant visa to conduct research at Stanford University. Song obtained the J-1 visa, a document “for individuals approved to participate in work-and study-based exchange visitor programs” with an application she submitted in November 2018.
In that application, Song described herself as a neurologist who was coming to the United States to conduct research at Stanford University related to brain disease. As part of the application, Song stated that she had served in the Chinese military only from Sept. 1, 2000, through June 30, 2011. She further stated that her employer was “Xi Diaoyutai Hospital” located at “No. 30 Fucheng Road, Beijing, 100142,” and that her highest rank was “STUDENT.” The superseding indictment alleges that these were lies, and that Song was a member of the People’s Liberation Army (PLA), the Chinese military, when she entered and while she was in the United States, and that the hospital she listed on her visa as her employer was a cover for her true employer, the PLA Air Force General Hospital in Beijing.
The superseding indictment also adds allegations and charges of obstructive conduct by Song. Specifically, the superseding indictment alleges that Song found out about a case against another PLA member, who was charged on June 7, 2020, in the Northern District of California with visa fraud. The superseding indictment alleges that she then attempted to delete a digital folder of documents on an external hard drive that she possessed containing records relating to her military service and visa fraud, including:
- A digital version of a letter from Song, written in Chinese and addressed to the People’s Republic of China consulate in New York, in which Song explained that her stated employer, “Beijing Xi Diaoyutai Hospital” was a false front, and that because relevant approval documents were classified, she had attempted to mail them;
- An image of Song’s PLA credentials, with a photograph of her in military dress uniform, covering the time period from July 2016 to July 2020; and
- A digital version of a resume for Song, written in Chinese, again with a photograph of her in military dress uniform and listing her employer as the Air Force General Hospital.
Further, according to the superseding indictment, Song lied to FBI agents when interviewed, denying any affiliation with the PLA after 2011, and information associating Song with the PLA or Air Force General Hospital began to disappear from the Internet after the FBI’s investigation of Song was known to her. Finally, the superseding indictment alleges that, after Song had been charged by criminal complaint in this case, she selectively deleted relevant emails from that account, including certain emails relevant to her military service, employment, and affiliations.
Song is charged with visa fraud, in violation of 18 U.S.C. § 1546(a); obstruction of official proceedings, in violation of 18 U.S.C. § 1512(c)(2); two counts of alteration, destruction, mutilation, or concealment of records, in violation of 18 U.S.C. § 1512(c)(1); and making false statements to a government agency, in violation of 18 U.S.C. § 1001(a)(2).
An indictment merely alleges that a crime has been committed and Song, like all defendants, is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, she faces a maximum statutory penalty of up to 10 years in prison and a fine of $250,000 for the visa fraud count; up to 20 years in prison and a fine of $250,000 for each of the obstruction and alteration charges; and up to five years in prison and a fine of $250,000 for the false statements charge. In addition, the court may order additional terms of supervised release. 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.
Song’s next appearance is scheduled for April 7, 2021, at 12:00 p.m. PST, before the Honorable William Alsup, U.S. District Judge, for pretrial conference, with a trial scheduled to begin on April 12, 2021.
The FBI San Francisco Field Office led the investigation. The U.S. Attorney’s Office Special Prosecutions Section is prosecuting the case.
Federal Charges Against Stanford University Researcher ExpandedRead the Press Release
SAN FRANCISCO – A federal grand jury issued a superseding indictment charging Chen Song with visa fraud, obstruction of justice, destruction of documents, and false statements in connection with a scheme to conceal and lie about her status as a member of the People’s Republic of China’s military forces while in the United States, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
“We allege that while Chen Song worked as a researcher at Stanford University, she was secretly a member of China’s military, the People’s Liberation Army,” said U.S. Attorney Anderson. “When Song feared discovery, she destroyed documents in a failed attempt to conceal her true identity. This prosecution will help to protect elite institutions like Stanford from illicit foreign influences.”
“The FBI’s investigation revealed Song Chen took active steps to destroy evidence of her official affiliation with the Chinese military, including her current PLA credentials depicting her in military dress uniform,” said FBI Special Agent in Charge Craig Fair. “The FBI is committed to protecting academic institutions in the Bay Area from PRC military officers who knowingly and willfully lie about their military affiliations to access American research and development. We will exhaust all investigative techniques and measures to ensure the safety, security, and hard work of American universities.”
The superseding indictment expands on the allegations set out in an affidavit supporting a criminal complaint filed on July 17, 2020, and an indictment filed on January 7, 2021. According to the superseding indictment, Song, 39, a Chinese national, entered the United States on December 23, 2018, using a J-1 non-immigrant visa to conduct research at Stanford University. Song obtained the J-1 visa, a document “for individuals approved to participate in work-and study-based exchange visitor programs” with an application she submitted in November 2018. In that application, Song described herself in her visa application as a neurologist who was coming to the U.S. to conduct research at Stanford University related to brain disease. As part of the application, Song stated that she had served in the Chinese military only from September 1, 2000, through June 30, 2011. She further stated that her employer was “Xi Diaoyutai Hospital” located at “No. 30 Fucheng Road, Beijing, 100142,” and that her highest rank was “STUDENT.” The superseding indictment alleges that these were lies, and that Song was a member of the People’s Liberation Army (PLA), the Chinese military, when she entered and while she was in the United States, and that the hospital she listed on her visa as her employer was a cover for her true employer, the PLA Air Force General Hospital in Beijing.
The superseding indictment also adds allegations and charges of obstructive conduct by Song. Specifically, the superseding indictment alleges that Song found out about a case against another PLA member, who was charged on June 7, 2020, in the Northern District of California with visa fraud. The superseding indictment alleges that she then attempted to delete a digital folder of documents on an external hard drive that she possessed containing records relating to her military service and visa fraud, including:
- A digital version of a letter from Song, written in Chinese and addressed to the People’s Republic of China consulate in New York, in which Song explained that her stated employer, “Beijing Xi Diaoyutai Hospital” was a false front, and that because relevant approval documents were classified, she had attempted to mail them;
- An image of Song’s PLA credentials, with a photograph of her in military dress uniform, covering the time period from July 2016 to July 2020; and
- A digital version of a resume for Song, written in Chinese, again with a photograph of her in military dress uniform and listing her employer as the Air Force General Hospital.
Further, according to the superseding indictment, Song lied to FBI agents when interviewed, denying any affiliation with the PLA after 2011, and information associating Song with the PLA or Air Force General Hospital began to disappear from the Internet after FBI’s investigation of Song was known to her. Finally, the superseding indictment alleges that, after Song had been charged by criminal complaint in this case, she selectively deleted relevant emails from that account, including certain emails relevant to her military service, employment, and affiliations.
Song is charged with visa fraud, in violation of 18 U.S.C. § 1546(a); obstruction of official proceedings, in violation of 18 U.S.C. § 1512(c)(2); two counts of alteration, destruction, mutilation, or concealment of records, in violation of 18 U.S.C. § 1512(c)(1); and making false statements to a government agency, in violation of 18 U.S.C. § 1001(a)(2).
An indictment merely alleges that a crime has been committed and Song, like all defendants, is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, she faces a maximum statutory penalty of up to 10 years in prison and a fine of $250,000 for the visa fraud count; up to 20 years in prison and a fine of $250,000 for each of the obstruction and alteration charges; and up to 5 years in prison and a fine of $250,000 for the false statements charge. In addition, the court may order additional terms of supervised release. 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.
Song’s next appearance is scheduled for April 7, 2021, at 12:00 p.m., before the Honorable William Alsup, United States District Judge, for pretrial conference, with a trial scheduled to begin on April 12, 2021.
The United States Attorney’s Office Special Prosecutions Section is prosecuting the case. The prosecution is the result of an investigation by the FBI.
San Jose Man Pleads Guilty to Computer Hack That Shut Down Opening Day Concession Sales at San Jose Earthquakes StadiumRead the Press Release
SAN JOSE - Salvatore A. La Rosa pleaded guilty today in federal court in San Jose to intentional damage to a protected computer, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
La Rosa, 41, of San Jose, admitted in his guilty plea to intentionally accessing Spectra Food Services and Hospitality’s (Spectra) on-line concessions management account for the Earthquakes Stadium without permission on February 29, 2020. The Earthquakes Stadium is home to the San Jose Earthquakes, a Major League Soccer team, and their first home game of the 2020 season was February 29, 2020. Spectra, headquartered in Philadelphia, Pennsylvania, was the concessions contractor for the stadium, and employees used Spectra’s mobile tablets as their Point-of-Sale terminals to sell food and other concession items. The tablets displayed menus and payment selections from an online-based application developed for sports stadiums.
La Rosa admitted in his plea agreement that he was a former employee of Spectra and worked at the stadium from February 14, 2015, until his termination on January 6, 2020. He admitted that he thereafter logged into the administrative port for the Earthquakes Stadium from his residence and used a password, without authority, to access Spectra’s concession menu and payment selections. During his unauthorized access, he intentionally deleted Spectra’s concession menu and payment selections. This act caused all of the Point-of-Sale tablets used by Spectra’s staff to stop working. Spectra’s ability to accept credit cards was also disabled. During the soccer match on February 29, 2020, Spectra’s staff had to resort to handwriting orders and using calculators to complete cash transactions, with the resulting delay leading to lost sales and verbal abuse from customers. In some instances, Spectra had to provide free food and beverages to club members because of its inability to process credit card transactions.
On March 7, 2020, Spectra and the San Jose Earthquakes, in an attempt to regain the trust and business of customers, offered a fifty-percent discount on all concessions at that day’s game.
According to the charging document filed in the case, Spectra suffered a loss of over $268,000 in damages, consisting of lost revenue, concession discounts offered at the March 7 game, employee time to repair the damage to the data, and labor costs.
“Once a computer hack has been discovered, it is critically important for business leaders to report the intrusion promptly and to cooperate fully with law enforcement,” said U.S. Attorney Anderson. “I want to thank Spectra and the San Jose Earthquakes for their good corporate citizenship. La Rosa’s conviction follows their prompt reporting and effective cooperation.”
“Insider threats can be incredibly damaging to companies, their data, and intellectual property even after an individual is no longer employed by the company,” said FBI San Francisco Special Agent in Charge Craig Fair. “It is important that companies take the necessary steps to ensure that the security of their networks and operations remain intact and that they are only available to those with authorized access."
On October 27, 2020, La Rosa was charged by Information with one count of Intentional Damage to a Protected Computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(i). Under the plea agreement, La Rosa pled guilty to the sole count of the Information. La Rosa remains out of custody on bond.
La Rosa’s sentencing hearing is scheduled for 9:15 a.m. on May 19, 2021, before United States District Judge Lucy H. Koh in San Jose. The maximum statutory penalty for each count in violation of Intentional Damage to a Protected Computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(i), is ten years imprisonment and a fine of $25,000, plus restitution if appropriate. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Susan Knight is the Assistant U.S. Attorney who is prosecuting the case with the assistance of legal tech Elise Etter and paralegal Rebecca Shelton. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Interpreter in Federal Criminal Investigation Charged with Disclosing Investigation and Court-Ordered Wiretap to Targeted Drug DealerRead the Press Release
SAN JOSE – Liliana Moreno, a Spanish translator hired as a contractor by the Drug Enforcement Administration (DEA) in a drug trafficking investigation, appeared today in United States District Court to face federal charges that she intentionally disclosed the investigation and its court-ordered wiretap to the investigation’s target, announced United States Attorney David L. Anderson, Department of Justice Office of the Inspector General Los Angeles Field Office Special Agent in Charge Zachary Shroyer, and Drug Enforcement Administration Special Agent in Charge Daniel C. Comeaux.
“We trusted Liliana Moreno to keep her work confidential,” said U.S. Attorney Anderson. “Law enforcement needs confidentiality to protect the rights of the innocent and the guilty. We allege Moreno violated that trust.”
“Moreno jeopardized an investigation when she allegedly tipped off the subject of a court-authorized wiretap. DOJ employees and contractors who share confidential law enforcement information will be held accountable for their actions,” said Zachary Shroyer, Special Agent in Charge of the Department of Justice Office of the Inspector General Los Angeles Field Office.
“Releasing sensitive government information can have devastating consequences. Not only does it damage a case, often beyond repair, but more importantly, it also endangers the lives of those agents and officers assigned to the investigation,” said DEA Special Agent in Charge Daniel Comeaux. “In instances such as these we will ensure justice is served without delay.”
According to the federal complaint unsealed today, Moreno, age 35, of Modesto, California, worked for a private company that contracts with DEA to provide translation services. DEA regularly uses interpreters in court-authorized wiretaps to monitor and translate intercepted telephone calls in a foreign language. DEA hired Moreno as a contractor, and she promised in DEA employment contracts never to disclose any investigative information without authorization and to notify DEA if she had any personal association with a target of an investigation.
The complaint outlines that DEA assigned Moreno as the lead monitor and Spanish translator for a court-authorized wiretap in an investigation of a drug trafficking organization whose membership included numerous Spanish-speaking members. During February and March of 2018, the complaint alleges that while monitoring calls Moreno recognized an individual on a call who she knew from the individual’s romantic relationship with a friend of Moreno. DEA agents also displayed a surveillance photo and name of that individual, deemed Wire Target 2 in the complaint, in the wire room where Moreno worked. Despite this, Moreno did not notify DEA about her knowledge and association with Wire Target 2, the complaint outlines. Instead, Moreno met with her friend on March 17, 2018, and according to the complaint’s allegations, warned the friend that Wire Target 2’s calls were being intercepted in a DEA wiretap investigation and that DEA had a photo of Wire Target 2. Moreno’s friend relayed this information to Wire Target 2, and the complaint describes how Wire Target 2 and another drug-trafficking organization member thereafter discarded their wiretapped cell phones, frustrating and significantly delaying the investigation.
Moreno made her initial appearance on the complaint, which was unsealed today, before the Honorable Virginia K. DeMarchi, United States Magistrate Judge. Moreno remains out of custody on a $50,000 bond. Moreno’s next scheduled appearance is on February 19, 2021, for appointment of counsel before United States Magistrate Judge DeMarchi.
A complaint merely alleges that a crime has been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Moreno is charged with one count of unlawful disclosure of electronic surveillance, in violation of 18 U.S.C. § 2232(d). If convicted, the defendant faces a maximum sentence of 5 years in prison 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.
The United States Attorney’s Office Special Prosecutions Section is prosecuting the case. The prosecution is the result of an investigation by the Department of Justice Office of the Inspector General and the Drug Enforcement Administration.
San Francisco Woman Charged with Fraudulently Obtaining Pandemic Relief Funds and with Impersonating AttorneysRead the Press Release
SAN FRANCISCO – Miranda Devlin, aka Miranda Martin, aka Miranda Petrillo, has been charged in a federal criminal complaint with mail fraud and with making false statements on an application for coronavirus relief funds, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.
“We allege Miranda Devlin committed serial fraud,” said U.S. Attorney Anderson. “Among the schemes alleged in the complaint, Devlin used a shell company to defraud the Paycheck Protection Program, known as PPP, out of pandemic relief funds. PPP funds provide a critically important safety net for legitimate businesses suffering real losses. Anyone considering PPP fraud should know law enforcement is watching, and federal prosecution can follow.”
“By allegedly defrauding the Paycheck Protection Program, a program designed to assist our local businesses as they navigate stressful, uncertain times, Miranda Devlin violated the trust of her community,” said FBI San Francisco Special Agent in Charge Fair. “By allegedly exploiting this program and further straining resources designated for pandemic relief, she cheated legitimate, hardworking business owners and their employees.”
The criminal complaint alleges that Devlin, 37, of San Francisco, impersonated multiple California licensed attorneys by using their names and license numbers. The complaint states that Devlin assumed the name of “Miranda Martin” and later “Miranda Petrillo” and used those names to act as a criminal defense attorney. She was retained by two defendants facing serious criminal charges in Marin County Superior Court. Devlin initially appeared in court as “Miranda Martin.” The complaint alleges that when questioned, she thereafter pivoted and assumed the identity of another attorney who also shared her first name, Miranda Petrillo. Devlin was arrested for impersonating an attorney after a court appearance on November 26, 2019, in Marin County. The complaint alleges that the true Miranda Martin and Miranda Petrillo are licensed attorneys with the State Bar of California and are both victims of Devlin’s identity thefts.
The complaint further alleges that, in the course of investigating Devlin’s attorney impersonations, investigators uncovered that Devlin had recently defrauded the Small Business Administration by submitting a loan application to the Paycheck Protection Program (PPP) in the name of a shell business. The PPP arose out of the CARES Act passed by Congress in March 2020 which authorized forgivable PPP loans to small businesses to promote job retention and certain other expenses during the pandemic. A PPP loan must be used for payroll costs, interest on mortgages, rent, and utilities, and the applications for such loans, administered by the U.S. Small Business Administration, must meet certain requirements and be made under oath.
The complaint alleges that Devlin submitted an application for a PPP loan in the amount of $32,700 on behalf of an entity she created, the Common Nucleus of Cancer, LLC (CNC). In CNC’s application, Devlin made multiple false statements and provided false IRS documents to support the statements. For example, Devlin claimed that she was Miranda Martin, that CNC was managed by Miranda Martin, that Miranda Martin owned 100% of the entity, that CNC had two employees and a monthly payroll of $13,115, that it had paid employee salary and payroll taxes throughout the four quarters of 2019, and that CNC was in operation on February 15, 2020. Each of statements were made under oath. None of them are true. Once the loan was funded, Devlin used the money for a variety of unauthorized non-payroll expenses, such as purchases from Amazon, Bloomingdale’s, and Tiffany & Co., and for purchases of stock.
Devlin made her initial appearance in federal court on February 12, 2021, before the Honorable Laurel Beeler, United States Magistrate Judge. Devlin was released on bond and her next scheduled appearance is on March 8, 2021, for a status hearing before the Honorable Sallie Kim, United States Magistrate Judge.
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.
Devlin is charged with false statements on an application in violation of Title 18, United States Code Section 1014, and mail fraud in violation of Title 18, United States Code Section 1341. If convicted of making false statements on an application, she faces a maximum penalty of 30 years in prison and a fine of $1,000,000. If convicted of mail fraud, she faces a maximum penalty of 20 years in prison, a fine of $250,000. 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 United States Attorney’s Office Special Prosecutions Team is prosecuting 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).
The FBI believes that there may be more victims in this case and is urging the public to contact the FBI San Francisco at (415) 553-7400 if they believe they are a victim, have information about potential victims, or have information related to this ongoing case. Calls can remain anonymous.
Public Contractor Sentenced to Prison for Bribing A San Francisco Public Official and Making False Statements to Federal Law Enforcement AgentsRead the Press Release
SAN FRANCISCO – Florence Kong was sentenced today to one year and one day in prison and ordered to pay a $95,000 fine for bribery of a public official and making false statements to Federal Bureau of Investigation agents, announced United States Attorney David L. Anderson and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. The sentence was handed down by the Honorable William H. Orrick, United States District Judge.
“The sentence handed down today recognizes the seriousness of Florence Kong’s offenses,” said U.S. Attorney Anderson. “Both corrupt officials and those who corrupt them are accountable for their crimes. Our City Hall prosecutions are not over. The investigation continues.”
“The FBI’s ongoing public corruption investigation continues to uncover a pernicious pattern of criminal activity committed by San Francisco city contractors, motivated by greed, who exploit their relationships with public officials,” said FBI Special Agent in Charge Craig D. Fair. “In this case, a Bay Area millionaire used her wealth to bribe Mr. Nuru and secure her own company’s contract; leaving honest, hardworking contractors unable to compete for business and ultimately compromising the entire system of fair competition.”
Kong, 63, of Hayward and formerly of Hillsborough, California, pleaded guilty to the bribery and false statement charges on October 8, 2020. As part of the guilty plea, Kong admitted in her plea agreement to bribing Mohammed Nuru, then-Director of San Francisco’s Department of Public Works (DPW), by giving him a gold Rolex watch she purchased for him for $36,550 on or about December 19, 2019. Kong bribed Nuru in return for past and future actions benefitting her businesses, including as a reward for directing business to her company SFR Recovery Inc. SFR Recovery Inc. is a recycling plant that had a public contract with the City and County of San Francisco to dispose of construction debris. Kong admitted she believed that Nuru was one of the most powerful public officials in San Francisco who, as DPW Director, wielded tremendous influence over San Francisco’s public contracts, permits, and DPW business as well as other City departments and agencies. Kong also admitted to making false statements repeatedly to FBI agents who interviewed her during the investigation, falsely stating that Nuru was her friend but they never discussed business, that he never helped her with contracts, and that she never gave Nuru money.
In a filed sentencing memorandum, the government asserted facts providing a broader description of the investigation. The government stated the investigation developed information that Kong is a multi-millionaire owner of a group of construction and real estate businesses in the San Francisco Bay Area, of which SFR Recovery Inc. is only one. In 2018, Kong began pressuring Nuru to award SFR Recovery Inc. a permit to accept work from DPW and, once awarded, repeatedly pressed Nuru to increase the business DPW did with SFR Recovery Inc. During this time, Kong showered Nuru with gifts, including the $36,550 gold Rolex watch that Kong gave Nuru in return for official actions on Kong’s behalf.
In January 2020, Mohammed Nuru was arrested and charged with fraud and lying to investigators. According to the government’s sentencing memorandum, three months after that, on March 20, 2020, FBI agents interviewed Kong at her home in Hillsborough, California. Kong repeatedly lied to and attempted to mislead the agents. The agents, who by that time had substantial evidence through emails and recorded phone calls that Kong was bribing Nuru, warned Kong that providing false statements to the FBI was a crime. Kong stuck with her falsehoods.
A photograph of the gold Rolex watch is attached to the government’s sentencing memo and printed below:
On June 1, 2020, Kong was charged in United States District Court by a Complaint, with one count of False Statements to a Government Agency, in violation of 18 U.S.C. § 1001(a)(2). On September 16, 2020, Kong was further charged via an Information with the false statements charge and with the additional charge of Bribery, in violation of 18 U.S.C. § 666(a)(1). On October 8, 2020, Kong pled guilty to the charges in the Information, that is, one count of Bribery, in violation of 18 U.S.C. § 666(a)(1), and one count of False Statements to a Government Agency, in violation of § 18 U.S.C. 1001(a)(2).This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco. To date, ten 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, including cash, meals, and work on his vacation home from contractors who obtained San Francisco public contracts. According to allegations in the complaint filed earlier against Harlan Kelly, he similarly received thousands of dollars in airfare, meals, jewelry, and travel expenses, along with repair work on his house.
In addition to the prison term, United States District Judge Orrick also sentenced the defendant to a three-year period of supervised release. Kong is out of custody and will begin serving her prison sentence on Aug 13, 2021.
The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The case is being investigated by the FBI and the Internal Revenue Service-Criminal Investigation (IRS-CI).
Nineteen South Bay Residents Charged in Alleged Scheme to Funnel Drugs into U.S and Firearms to MexicoRead the Press Release
SAN FRANCISCO – A federal grand jury issued a superseding indictment charging fourteen defendants, mostly South Bay residents, with crimes related to two conspiracies—one to transport drugs from Mexico to the San Jose Area, the other to transport firearms illegally from the United States to Mexico, announced United States Attorney David L. Anderson, Drug Enforcement Administration (DEA) Special Agent in Charge Daniel C. Comeaux, and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. In a press conference earlier today, U.S. Attorney Anderson announced all the charges were the culmination of a federal investigation—one of four simultaneous investigations into the movement of drugs from Mexico to the streets of the San Jose area.
“One methamphetamine seizure outlined in this indictment represents the largest federal seizure of methamphetamine ever in the Northern District of California,” said U.S. Attorney Anderson. “The vast majority of these drugs were acquired in Mexico, including from Mexico’s Sinaloa Cartel. Firearms and their components, as described in the indictment, are acquired in the United States to export to Mexico. The two-way flow of drug shipments heading north and firearms, including assault weapons, sniper rifles and grenade launchers, heading south is a potently dangerous situation. It is impossible to characterize this alleged conduct as victimless.”
“Methamphetamine that is pure, potent and cheap has flooded the American market and drug trafficking organizations see an opportunity to profit. They utilize distribution hubs, like the Bay Area, to distribute their poison,” said DEA Special Agent in Charge Daniel C. Comeaux. “As methamphetamine overdoses rise, the significant drug seizures in this investigation has undoubtedly saved lives. DEA will continue to target and to bring to justice these criminal organizations who traffic drugs in our community to keep Americans safe.”
“As a result of Operation Burnt Orange, the FBI and DEA successfully seized 16 firearms, 17.4 pounds of heroin, and 817.7 pounds of methamphetamine from this dangerous organization - which ranks as one of the largest methamphetamine seizures in recent memory here in the Northern District of California,” said FBI Special Agent in Charge Fair. “Simply put, we won’t allow dangerous and violent groups to use our neighborhoods as a thoroughfare to traffic drugs or as a venue to conduct illegal activity.”
The superseding indictment, filed February 4, 2021, charges David Campoy as the leader of two related conspiracies: a drug trafficking conspiracy and a firearms trafficking conspiracy. With respect to the drug trafficking conspiracy, David Campoy, his adult son, Jose Melchor Campoy, and co-conspirators David Wilcott Greenman, Kimberly Carrasco, Lamberto (a Mexican national whose last name currently is unknown), Juan Carlos Velazquez Ortiz, Ignacio Espinoza, Jose Manuel Rodriguez Naranjo, and Nicolas Ardanuy are charged with conspiracy to distribute and possess with intent to distribute methamphetamine, heroin, cocaine, and marijuana. David Campoy allegedly used connections with the Cártel de Sinaloa (or Sinaloa Cartel) in Mexico as well as connections in Southern California to obtain methamphetamine and heroin. The indictment alleges David Campoy and Jose Campoy delivered controlled substances to other members of the drug trafficking organization for distribution. In addition to the conspiracy charge, several of the defendants face additional charges in connection with individual drug sales and use of a communication facility to assist in such sales.
The facts disclosed in the indictment and additional court documents depict a prolific drug distribution operation. The indictment describes a drug ledger in which drug purchase orders are recorded in quantities such as of hundreds of kilograms of methamphetamine, and payments are made in the hundreds of thousands of dollars. In addition, during his arrest in January 2021 with his son and others, law enforcement seized approximately 572 pounds of methamphetamine, several pounds of heroin, and 16 firearms. In additional court filings the government argues that based on intercepts and intelligence obtained during the investigation, David Campoy, through the quantity he controlled and trafficked, exercised market power over the price and availability of methamphetamine in Northern California.
With respect to the firearms conspiracy, the indictment alleges David Campoy, Michael Ozuna Guizar, Roberto Campoy Robles, Luis Guillermo Sendino, and Ivan Campoy Morales orchestrated illegal exports to Mexico of weapons and components of firearms for sale in the black market. The defendants manufactured, exported, and dealt in weapons including assault weapons. The superseding indictment describes how defendants allegedly unlawfully purchased firearms and components of firearms in the United States through licensed federal firearm dealers. The defendants allegedly combined the firearms with grenade launchers assembled in Mexico, and attempted to obtain .50 caliber sniper rifles and grenade launchers for resale on the black market.
In sum, the defendants are charged with the crimes and face maximum penalties as indicted in the chart below:
Defendant/Age
Charges
Statute
Maximum Penalties
David Campoy, 46
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Distribution and possession with the intent to distribute methamphetamine; Possession with the intent to distribute heroin; Use of a communication facility in facilitating the commission of a felony under the Controlled Substances Act; Felon in possession of firearms and ammunition; Possession of a firearm in furtherance of a drug trafficking crime; Conspiracy to manufacture and deal in firearms; Conspiracy to manufacture and deal in firearms; Conspiracy to export arms and munitions; Unlawfully manufacturing and dealing in firearms; Arms export control act export of arms and munitions
21 U.S.C.
§§ 846, 841(a)(1), (b)(1)(A), and (b)(1)(B)
21 U.S.C. § 843(b)
18 U.S.C. § 922(g)(1)
18 U.S.C. § 924(c)(1)(A)
18 U.S.C. § 371
18 U.S.C. §§ 922(a)(1)(A) and 924(n)
22 U.S.C. §§ 2778(b)(2) and (c) and 22 C.F.R. §§ 121.1, 123.1, and 127.1
Lifetime imprisonment
$10 million fine
Lifetime supervised release
4 years’ imprisonment
$30,000 fine
1 year supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
Lifetime imprisonment
$250,000 fine
5 years’ supervised release
5 years’ imprisonment
$250,000 fine
3 years’ supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
20 years’ imprisonment
$1 million fine
3 years’ supervised release
Jose Melchor Campoy, 21
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Distribution and possession with the intent to distribute methamphetamine; Possession with the intent to distribute heroin; Use of a communication facility in facilitating the commission of a felony under the Controlled Substances Act
21 U.S.C.
§§ 846, 841(a)(1), (b)(1)(A), and (b)(1)(B)
21 U.S.C. § 843(b)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
4 years’ imprisonment
$30,000 fine
1 year supervised release
David Wolcott Greenman, 34
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Attempt to possess with the intent to distribute heroin; Distribution and possession with the intent to distribute methamphetamine
21 U.S.C.
§§ 846, 841(a)(1), (b)(1)(A), and (b)(1)(B)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Kimberly Carrasco, 27
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Distribution and possession with the intent to distribute methamphetamine;
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Lamberto LNU, age unknown
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Use of a communication facility in facilitating the commission of a felony under the Controlled Substances Act
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
21 U.S.C. § 843(b)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
4 years’ imprisonment
$30,000 fine
1 year supervised release
Juan Carlos Velazquez Ortiz, 32
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana;
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Ignacio Espinoza, 30
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Use of a communication facility in facilitating the commission of a felony under the Controlled Substances Act
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
21 U.S.C. § 843(b)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
4 years’ imprisonment
$30,000 fine
1 year supervised release
Jose Manuel Rodriguez Naranjo, 39
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Distribution and possession with the intent to distribute methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Nicholas Ardanuy, 52
Conspiracy to distribute and possess with the intent to distribute methamphetamine, heroin, cocaine, and marijuana; Distribution and possession with the intent to distribute methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Michael Ozuna Guizar, 40
Use of a communication facility in facilitating the commission of a felony under the Controlled Substances Act; Conspiracy to manufacture and deal in firearms; Conspiracy to export arms and munitions; Unlawfully manufacturing and dealing in firearms; Arms export control act export of arms and munitions
21 U.S.C. § 843(b)
18 U.S.C. § 371
18 U.S.C. §§ 922(a)(1)(A) and 924(n)
22 U.S.C. §§ 2778(b)(2) and (c) and 22 C.F.R. §§ 121.1, 123.1, and 127.1
4 years’ imprisonment
$30,000 fine
1 year supervised release
5 years’ imprisonment
$250,000 fine
3 years’ supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
20 years’ imprisonment
$1 million fine
3 years’ supervised release
Miguel Angel Carrizal Zamora, 23
Possession with the intent to distribute and distribution of methamphetamine
21 U.S.C.
§§ 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Roberto Campoy Robles, 48
Conspiracy to manufacture and deal in firearms; Conspiracy to export arms and munitions; Unlawfully manufacturing and dealing in firearms; Arms export control act export of arms and munitions
18 U.S.C. § 371
18 U.S.C. §§ 922(a)(1)(A) and 924(n)
22 U.S.C. §§ 2778(b)(2) and (c) and 22 C.F.R. §§ 121.1, 123.1, and 127.1
5 years’ imprisonment
$250,000 fine
3 years’ supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
20 years’ imprisonment
$1 million fine
3 years’ supervised release
Luis Guillermo Sendino, 48
Conspiracy to manufacture and deal in firearms; Conspiracy to export arms and munitions; Unlawfully manufacturing and dealing in firearms; Arms export control act export of arms and munitions
18 U.S.C. § 371
18 U.S.C. §§ 922(a)(1)(A) and 924(n)
22 U.S.C. §§ 2778(b)(2) and (c) and 22 C.F.R. §§ 121.1, 123.1, and 127.1
5 years’ imprisonment
$250,000 fine
3 years’ supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
20 years’ imprisonment
$1 million fine
3 years’ supervised release
Ivan Campoy Morales, age unknown
Conspiracy to manufacture and deal in firearms; Conspiracy to export arms and munitions; Unlawfully manufacturing and dealing in firearms; Arms export control act export of arms and munitions
18 U.S.C. § 371
18 U.S.C. §§ 922(a)(1)(A) and 924(n)
22 U.S.C. §§ 2778(b)(2) and (c) and 22 C.F.R. §§ 121.1, 123.1, and 127.1
5 years’ imprisonment
$250,000 fine
3 years’ supervised release
10 years’ imprisonment
$250,000 fine
3 years’ supervised release
20 years’ imprisonment
$1 million fine
3 years’ supervised release
Juan Leopoldo Garate Aguirre, 25
Possession with the intent to distribute and distribution of methamphetamine
21 U.S.C. §§ 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Jose Manuel Rodriguez Naranjo, 39
Distribution and possession with the intent to distribute methamphetamine
21 U.S.C. §§ 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Miguel Martin Pacheco Martinez, 34
Conspiracy to distribute and possession with the intent to distribute methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Alberto Martinez Navarro, 36
Conspiracy to distribute and possession with the intent to distribute methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Miguel Angel Moreno, 46
Distribution and possession with the intent to distribute 500 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and (b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
An indictment and a criminal complaint merely allege that crimes have been committed, and each defendant must be presumed innocent until proven guilty beyond a reasonable doubt. The court may order additional terms of supervised release and restitution, if appropriate; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.The defendants who are scheduled to appear before the court are as follows:
Defendant
Next Court Date
David Campoy, David Wolcott Greenman, Kimberly Carrasco
February 12, 2021
Jose Melchor Campoy, Ignacio Espinoza, Nicholas Ardanuy, Michael Ozuna Guizar, Miguel Angel Carrizal Zamora, Luis Guillermo Sendino, Juan Leopoldo Garate Aguirre, Miguel Martin Pacheco Martinez
February 11, 2021
Miguel Angel Moreno
March 3, 2021
The case is being prosecuted by the Organized Crime Drug Enforcement Task Force (OCDETF) of the United States Attorney’s Office for the Northern District of California. The investigation of this case was conducted by the DEA and the FBI San Francisco Division. Assistance was provided by FBI Los Angeles, Phoenix and Tuscon; LA IMPACT Group 1; California Highway Patrol; San Jose Police Department the police departments of Santa Clara, Watsonville, Vallejo; the Sheriff’s Offices of Santa Clara County and Santa Cruz County; and the U.S. Marshal Service.
This investigation and prosecution is part of 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.
Four Defendants Charged in Alleged Schemes to Transport Methamphetamine from Mexico and Distribute the Drugs in San JoseRead the Press Release
SAN FRANCISCO – A federal grand jury issued an indictment charging Mark Ogo, Anthony Christian Valdovinos, and William Reidy with conspiracy in relation to a scheme to transport methamphetamine from Mexico to the San Jose area for distribution, announced United States Attorney David L. Anderson and Drug Enforcement Administration (DEA) Special Agent in Charge Daniel C. Comeaux. In a separate criminal complaint, Johnathan Ratcliff was charged with distributing methamphetamine in San Francisco. In a press conference earlier today, U.S. Attorney Anderson announced that the charges against all of these defendants were the culmination of a federal investigation—one of four simultaneous investigations into the movement of drugs from Mexico to the streets of the San Jose area.
“The charges announced today involve large shipments of methamphetamine from Mexico to the Bay Area and reveal the ruthless capitalism of modern drug trafficking,” said U.S. Attorney Anderson. “Drug traffickers have no regard for the personal destruction caused by their sales. It is impossible to characterize their alleged conduct as victimless. Many drug users suffer miserable lives and early deaths. Neighborhoods populated by good people living law-abiding lives suffer from the crime and misery that drug trafficking brings. The crimes charged in these cases undermine the healthy aspirations of whole communities of law-abiding people.”
“Methamphetamine that is pure, potent and cheap has flooded the American market and drug trafficking organizations see an opportunity to profit. They utilize distribution hubs, like the Bay Area, to distribute their poison,” said DEA Special Agent in Charge Daniel C. Comeaux. “As methamphetamine overdoses rise, the significant drug seizures in this investigation has undoubtedly saved lives. DEA will continue to target and to bring to justice these criminal organizations who traffic drugs in our community to keep Americans safe.”
The indictment, filed February 9, 2021, alleges that in July of 2020, Ogo, 54, and Valdovinos, 27, made arrangements to fly from the Bay Area to Calexico, Calif., where they met Riedy, 57, and bought more than 26 pounds of methamphetamine from him. Documents filed in the case describe intercepted wire communications in which the defendants made arrangements for the drug transfer. Riedy allegedly retrieved the drugs from Mexico and brought them into the United States; indeed, on the day the drugs were transferred to Ogo and Valdovinos, Riedy allegedly crossed the border into Mexico to bring a second batch of controlled substances from Mexico into the United States. Riedy crossed the border back into Mexico after delivering approximately 28 to 30 packages of methamphetamines to Ogo and Valdavinos.
Ogo and Valdovinos allegedly packed the methamphetamine inside Ogo’s rental car and drove the methamphetamine to the Bay Area. Wire communications describe how some of the drugs were hidden inside a spare tire of the rented car Ogo and Valdovinos used to travel back to Northern California.
In sum, Ogo, Valdovinos, and Reidy are charged with one count of conspiracy to distribute and possess with intent to distribute 5 grams and more of methamphetamine, in violation of 21 U.S.C. §§ 846, 841(a)(1), and (b)(1)(B), as well as one count of distribution and possession with intent to distribute 5 grams and more of methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(B). If convicted, the defendants face a minimum of 5 years and a maximum of 40 years in prison for each count and a $5,000,000 fine.
In a separate complaint, Johnathan Ratcliff, 49, was charged with distributing drugs to an undercover officer. Specifically, on July 23, 2020, Ratcliff met the officer in San Francisco, and sold him or her 198.4 grams of methamphetamine and 25.4 grams of heroin in exchange for $3,700. Ratcliff is charged with distributing at least 5 grams of methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(B). If convicted the maximum statutory penalty for the offense is 40 years’ imprisonment and a $5,000,000 fine.
An indictment and a criminal complaint merely allege that crimes have been committed, and each defendant must be presumed innocent until proven guilty beyond a reasonable doubt. The court may order additional terms of supervised release 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.
Ogo’s next court appearance is scheduled for February 11, 202, and Ratcliff’s next court appearance is scheduled for February 22, 2021. The remaining defendants do not yet have court appearances scheduled.
The case is being prosecuted by the Organized Crime Drug Enforcement Task Force (OCDETF) of the United States Attorney’s Office for the Northern District of California. The investigation of this case was conducted by the DEA with assistance from Vacaville Police Department, the Redwood City Police Department, the San Mateo County Narcotics Task Force, the San Francisco Police Department, the Tracy Police Department, and Homeland Security Investigations, Calexico.
This investigation and prosecution is part of 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.
Five Related Indictments Target South Bay Drug Distribution SchemesRead the Press Release
SAN FRANCISCO – In five related indictments, federal grand juries charged fifteen South Bay residents with crimes related to the distribution of narcotics including heroin, methamphetamine, cocaine, and fentanyl in the San Jose area, announced United States Attorney David L. Anderson, Drug Enforcement Administration (DEA) Special Agent in Charge Daniel C. Comeaux. In a press conference earlier today, U.S. Attorney Anderson announced all the charges were the culmination of a federal investigation—one of four simultaneous investigations into the movement of drugs from Mexico to the streets of the San Jose area.
“These cases announced today provide insight into the ruthless capitalism of modern drug trafficking and the entire ecosystem of narcotics trafficking in Northern California,” said U.S. Attorney Anderson. “Their allegations reflect drug trafficking from procurement, to transportation, to distribution to mid-level dealers, and all the way down to street level sales. Countless individuals and entire communities suffer, but drug traffickers have no regard for the destruction caused in their path.”
“Methamphetamine that is pure, potent and cheap has flooded the American market and drug trafficking organizations see an opportunity to profit. They utilize distribution hubs, like the Bay Area, to distribute their poison,” said DEA Special Agent in Charge Daniel C. Comeaux. “As methamphetamine overdoses rise, the significant drug seizures in this investigation has undoubtedly saved lives. DEA will continue to target and to bring to justice these criminal organizations who traffic drugs in our community to keep Americans safe.”
The most recent indictment, filed January 21, 2021, charges Raudel Macias, Anthony Macias, Benito Macias, Oscar Macias, and Fawn Larance with various crimes in connection with an alleged conspiracy to distribute methamphetamine, cocaine, heroin, and fentanyl in the San Jose area. According to the indictment, Raudel Macias is the central figure of the drug distribution organization, referred to in the indictment as the Macias DTO. The indictment alleges the Macias DTO was a street-level drug distribution group, responsible for distributing narcotics to numerous street level customers and resellers in the Northern District of California. Raudel Macias allegedly handled all aspects of ensuring there was sufficient supplies of drugs for the group to distribute. Other members of the Macias DTO were responsible for delivering drugs to customers and collecting the proceeds. Court documents describe how wiretap information from the Macias DTO investigation led investigators to several other defendants, described in court documents as higher-level distributors and drug sources.
The remaining four indictments were filed December 1, 2020. One indictment charges Francisco Ricardo Miranda, Jesus Alberto Rojas-Vega, Gelacio Perez-Rojas, Uriel Soto, and Leonel Cisneros-Sosa with crimes in connection with a cocaine distribution conspiracy. According to the indictment, Miranda was the leader of the organization distributing the drugs. Court documents describe how Miranda allegedly used his ties to suppliers in Mexico to sustain the flow of drugs into the Bay Area. Miranda also allegedly obtained large quantities of cocaine and methamphetamine from Southern California-based suppliers.
Two of the December 1, 2020, indictments charge Juvencio Gamez Cid with crimes involving his efforts to obtain large amounts of methamphetamine. One indictment is based on Gamez Cid’s attempt to obtain 25 pounds of methamphetamine in June 2020. Gamez Cid’s co-defendants in that case, Alfredo Villalobos Cisneros and Sergio Villalobos-Cisneros are charged with actually possessing the drugs that Gamez Cid sought to obtain and distribute. According to court papers, the drugs were intercepted as they were being transported from Southern California. The other indictment charging Gamez Cid also charges Cristian Alvarado in connection with an alleged attempted delivery of five kilograms of methamphetamine. When Gamez Cid was arrested on November 17, 2020, law enforcement officials seized approximately 6 pounds of methamphetamine from his residence, a pistol that had been reported stolen, ammunition, six cellular telephones, and fraudulent documents including a California driver’s license and a California identity card with fake names.
The last indictment charges Jazmin Alejandra Cuevas-Capetillo with allegedly making the sale in San Jose of two kilograms of methamphetamine to a confidential source.
In sum, the defendants are charged with the crimes and face maximum penalties as indicted in the chart below:
Defendant/Age
Charges
Statute
Maximum Penalties
(per count)
Raudel Macias, 56
Conspiracy to distribute and possess with the intent to distribute heroin, methamphetamine, and fentanyl; Distribution of methamphetamine; and Distribution of 100 grams or more of heroin
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(B) and (b)(1)(C)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Anthony Macias, 29
Conspiracy to distribute and possess with the intent to distribute heroin, methamphetamine, and fentanyl; Distribution of methamphetamine; and Distribution of 100 grams or more of heroin
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(B) and (b)(1)(C)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Benito Macias-Lopez, 30
Conspiracy to distribute and possess with the intent to distribute heroin, methamphetamine, and fentanyl; Distribution of methamphetamine; and Distribution of 100 grams or more of heroin
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(B) and (b)(1)(C)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Oscar Macias, 32
Conspiracy to distribute and possess with the intent to distribute heroin, methamphetamine, and fentanyl; Distribution of fentanyl; and Distribution of methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(B) and (b)(1)(C)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Fawn Larance, 41
Conspiracy to distribute and possess with the intent to distribute heroin, methamphetamine, and fentanyl; Distribution of fentanyl; and Distribution of methamphetamine
21 U.S.C.
§§ 846, 841(a)(1) and (b)(1)(B) and (b)(1)(C)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Francisco Ricardo Miranda, 34
Conspiracy to distribute and possess with the intent to distribute a mixture and substance containing cocaine
21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Jesus Alberto Rojas-Vega, 27
Conspiracy to distribute and possess with the intent to distribute a mixture and substance containing cocaine
21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(B)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Gelacio Perez-Rojas, 36
Conspiracy to distribute and possess with the intent to distribute a mixture and substance containing cocaine
21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Uriel Soto, 51
Conspiracy to distribute and possess with the intent to distribute a mixture and substance containing cocaine; Possession with the intent to distribute a mixture and substance containing cocaine
21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(C)
20 years’ imprisonment
$1,000,000 fine
Lifetime supervised release
Leonel Cisneros-Sosa, 47
Conspiracy to distribute and possess with the intent to distribute a mixture and substance containing cocaine
21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(C)
20 years’ imprisonment
$1,000,000 fine
Lifetime supervised release
Juvencio Gamez Cid, 42
Attempt to possess with intent to distribute 500 grams or more of a mixture and substance containing methamphetamine; Possession with the intent to distribute 500 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Jose Alfredo Villalobos Cisneros, 48
Possession with the intent to distribute 500 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Sergio Villalobos-Cisneros, 34
Possession with the intent to distribute 500 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Cristian Alvarado, 26
Attempt to possess with intent to distribute 500 grams or more of a mixture and substance containing methamphetamine; Possession with the intent to distribute 500 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A)
Lifetime imprisonment
$10 million fine
Lifetime supervised release
Jazmin Alejandra Cuevas-Capetillo, 25
Distribution of 50 grams or more of a mixture and substance containing methamphetamine
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)
40 years’ imprisonment
$5 million fine
Lifetime supervised release
Teo Magana Sanchez, 52
Distribution and possession with the intent to distribute cocaine
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
20 years’ imprisonment
$1,000,000 fine
Lifetime supervised release
An indictment and a criminal complaint merely allege that crimes have been committed, and each defendant must be presumed innocent until proven guilty beyond a reasonable doubt. The court may order additional terms of supervised release and restitution, if appropriate; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The next court appearance for the defendants is scheduled for March 10, 2021, except Teo Magnana Sanchez, who is scheduled for a preliminary hearing on March 26, 2021.
The case is being prosecuted by the Organized Crime Drug Enforcement Task Force (OCDETF) of the United States Attorney’s Office for the Northern District of California. The investigation of this case was conducted by the DEA and the San Mateo County Narcotics Task Force. Additional assistance was provided by the police departments of Redwood City, Santa Clara, and San Jose; the San Mateo County Narcotics Task Force; the Sheriff’s Offices of San Mateo County and Santa Clara County; the U.S. Administration of Alcohol, Tobacco, Firearms and Explosives; and the Santa Clara County Specialized Enforcement Team.
This investigation and prosecution is part of 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.
Five Defendants Charged in San Jose Drug Distribution SchemesRead the Press Release
SAN FRANCISCO – The Office of the United States Attorney filed criminal complaints against Ramon Covarrubias Rangel, Jorge Lozano Guzman, Alejandro Alvarez, Kelman David De La Cruz Pedroza, and Erick Alexandro Torres Cruz for their alleged respective roles in drug distribution schemes in the San Jose area, announced United States Attorney David L. Anderson, Drug Enforcement Administration (DEA) Special Agent in Charge Daniel C. Comeaux, and Homeland Security Investigations (NorCal) Special Agent in Charge Tatum King. In a press conference earlier today, U.S. Attorney Anderson announced that the complaints were the culmination of one of four simultaneous federal investigations into the movement of drugs from Mexico to the streets of the San Jose area.
“We describe in these charging documents mid-level dealers operating in a thriving and deadly local market for methamphetamine and cocaine,” said U.S. Attorney Anderson. “The crimes and sheer lawlessness of their activity is a profound threat to individuals and neighborhoods, undermining the safety and aspirations of whole communities of law-abiding people.”
“Methamphetamine that is pure, potent and cheap has flooded the American market and drug trafficking organizations see an opportunity to profit. They utilize distribution hubs, like the Bay Area, to distribute their poison,” said Special Agent in Charge Comeaux. “As methamphetamine overdoses rise, the significant drug seizures in this investigation has undoubtedly saved lives. DEA will continue to target and to bring to justice these criminal organizations who traffic drugs in our community to keep Americans safe.”
“Homeland Security Investigations is committed to combating the illegal trafficking of firearms and drugs that fuel violence in the United States and abroad. Our investigation of 5 locations yielded: 4 arrests, 4 guns, over 7 kg of methamphetamine and 2 kg cocaine,” said Special Agent in Charge King. “Partnerships are a key facet of HSI’s approach to countering illegal activity. We are grateful for the important contributions of or partners with the DEA, FBI, CBP, California Highway Patrol, Alameda County Narcotics Task Force, Salinas Police Department, Soledad Police Department, Gilroy Police Department, and the U.S. Attorney’s Office – Northern District of California.”
The drug distribution charges are contained in three separate complaints. The first complaint, filed January 26, 2021, alleges Rangel, Lozano, and Alvarez conspired to distribute more than 500 grams of methamphetamine in the San Jose area. According to the complaint, the DEA, HSI, and the Federal Bureau of Investigation were conducting an investigation into the drug trafficking activities of these defendants when in December of 2019, investigators used confidential sources to make controlled purchases. The complaint describes how Lozano met the confidential source in a parking lot in San Jose and sold the source one ounce of cocaine for $860 and one kilogram of methamphetamine for $3,000. On February 26, 2020, a similar transaction occurred; however, on this occasion, confidential sources spoke with all three defendants. Covarrubias made initial contact with the confidential source, Lozano negotiated the price, and Alvarez made the delivery in a parking lot in San Jose. On that day, a confidential source purchased an additional kilogram of methamphetamine from the defendants for $2,700. Rangel, Lozano, and Alvarez are charged with conspiracy to distribute and possess with intent to distribute cocaine and more than 500 grams of methamphetamine, in violation of 21 U.S.C. §§ 846, 841(a)(1), (b)(1)(A)(viii). If convicted, the defendants each face a minimum 10 years and a maximum of life in prison, as well as a maximum $10,000,000 fine.
In the second complaint, De La Cruz is charged with selling a pound of methamphetamine to a confidential source in August of 2020. According to the complaint, after completing the transaction, De La Cruz informed the source that it would cost $34,000 for a kilogram of cocaine and that if the source needed cocaine, the source should call De La Cruz. De La Cruz is charged with distribution of 50 grams or more of methamphetamine, in violation of 21 U.S.C. §§ 841, 841(a)(1), (b)(1)(B)(viii). If convicted, De La Cruz faces a minimum 5 years and a maximum 40 years in prison as well as a maximum $5,000,000 fine.
In addition, Torres Cruz is charged with distributing a half kilogram of methamphetamine to a confidential source for $2,600 in January of 2021. The complaint alleges that the transaction occurred in a parking lot in San Jose and that after the transaction was completed, Torres Cruz offered to reduce the price of the methamphetamine if the source were willing to buy larger quantities. Like De La Cruz, Torres Cruz is charged with distribution of 50 grams or more of methamphetamine, in violation of 21 U.S.C. §§ 841, 841(a)(1), (b)(1)(B)(viii). If convicted, Torrez Cruz faces a minimum 5 years and a maximum 40 years in prison as well as a maximum $5,000,000 fine.
A criminal complaint merely alleges that crimes have been committed, and each defendant must be presumed innocent until proven guilty beyond a reasonable doubt. The court may order additional terms of supervised release and restitution, if appropriate; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The defendants are scheduled for court appearances as follows:
Defendant
Next Court Date
Covarrubia Rangel
March 11, 2021
Lozano
February 16, 2021
Alvarez
None Scheduled
De La Cruz
February 24, 2021
Torres Cruz
February 18, 2021
The case is being prosecuted by the Organized Crime Drug Enforcement Task Force (OCDETF) of the United States Attorney’s Office for the Northern District of California. The investigation of this case was conducted by the DEA and HSI with assistance from the Federal Bureau of Investigation; the California Highway Patrol; the police departments of Hawthorne, Salinas, Soledad, and Gilroy; LA IMPACT; the Alameda County Narcotics Task Force; and U.S. Customs and Border Patrol Tactical Analysis Unit.
This investigation and prosecution is part of 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.
United States Successfully Negotiates the Return of Two Thai Religious Relics Reported Stolen by Thailand and Displayed at San Francisco Asian Art MuseumRead the Press Release
SAN FRANCISCO – The United States obtained a settlement in its lawsuit today in which the City and County of San Francisco consented to the forfeiture of its two Thai lintels to the United States, announced United States Attorney David L. Anderson of the Northern District of California and Homeland Security Investigations (NorCal) Special Agent in Charge Tatum King.
On October 27, 2020, the United States filed a complaint to forfeit the two Thai lintels which are housed in and have been displayed at the San Francisco Asian Art Museum. The Thai lintels are two 1,500-pound hand-carved decorative relics which, according to the complaint, were originally part of ancient religious temples in Thailand and are prime examples of the decorative lintel and material art traditions of Southeast Asian art. These religiously-significant lintels are alleged to have been exported from Thailand in violation of Thai law over 50 years ago and thereafter were donated to San Francisco and displayed at its Asian Art Museum.
In 2017, the United States learned about the illegal exportation from Thailand of these relics, which renders them forfeitable under federal law, as the complaint alleges. The United States and the City and County of San Francisco entered into a settlement agreement, today signed by U.S. District Court Magistrate Donna M. Ryu, in which San Francisco consents to the forfeiture to the United States of the Thai lintels and, upon the completion of the San Francisco Asian Art Museum’s deaccessioning process, their repatriation to Thailand. The United States will thereafter coordinate with Thai authorities to ensure the safe return of the lintels to Thailand.
“I want to thank San Francisco and the Asian Art Museum for their agreement to forfeit these treasures so they may be returned to Thailand,” said U.S. Attorney Anderson. “The United States is committed to returning stolen relics to nations seeking to preserve their heritage. We will use all our power, including civil forfeiture, to ensure that misappropriated cultural items are returned to their rightful owners.”
Federal importation law provides Homeland Security Investigations (HSI), which led this investigation, with the authority to lead investigations into crimes involving the illicit importation and distribution of cultural property and art. Customs law allows HSI to seize cultural property and art in the United States illegally, such as when it is reported lost or stolen.
“The successful outcome of this investigation helps restore Thailand’s cultural heritage for the appreciation and study of this and future generations,” said Homeland Security Investigations (NorCal) Special Agent in-Charge Tatum King. “The theft and trafficking of cultural artifacts is a tradition as old as the cultures they represent. Returning a nation’s precious cultural antiquities promotes goodwill with foreign governments and citizens, while significantly protecting the world’s cultural history and knowledge of past civilizations. Through our work in this investigation in partnership with the U.S. Attorney’s Office in the Northern District of California, we have diligently sought to ensure the relationship between the United States and Thailand remains one of mutual respect and admiration.”
The Thai lintels, according to the agreement, will be returned to Thailand through the U.S. Department of Justice’s victim remission program. Upon their return, the lintels will be placed on exhibition for the religious and cultural appreciation of the people of Thailand.
Chris Kaltsas is the Assistant U.S. Attorney in the Northern District of California prosecuting this forfeiture with Amanda M. Bettinelli of the Central District of California, and with the assistance of Irene Zhu. The forfeiture action is the result of a three-year investigation by Homeland Security Investigations.
Former California State Assemblyman Sentenced to Prison for Money Laundering in Fraud Scheme Involving Bart Coffee ShopsRead the Press Release
OAKLAND – Terrence Patrick Goggin was sentenced today to one year and one day in prison and ordered to pay $685,000 in restitution for money laundering, announced United States Attorney David L. Anderson, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Michael Daniels. The sentence was handed down by the Honorable James Donato, United States District Judge.
Goggin, 79, of Dunsmuir, California, who is a former California State Assemblyman as well as a California-licensed attorney, pleaded guilty to the federal charge of money laundering on December 4, 2019. According to the plea agreement, Goggin admitted that he was the founder and CEO of Metropolitan Coffee and Concession Company, LLC (MC2). From July 2007 to February 26, 2014, Goggin solicited investor money for MC2 to build Peet’s Coffee retail centers, including two centers to be built at the Civic Center and Balboa Park BART stations. Among other investors in the MC2 projects, a group of four private equity investors invested $585,000 in the Civic Center project in September 2013, and an individual investor invested $100,000 in the Balboa Park project, also in September 2013. Goggin admitted that he falsely represented to those investors that their money would be used to build out those specific future Peet’s Coffee retail centers when, in truth, he planned to use the funds otherwise. He also failed to provide the investors with accurate information about the strained relationship between MC2 and BART and about the state of MC2’s finances.
Goggin further admitted as part of his guilty plea that in September 2013 he diverted and directed his employees to divert nearly all of the $685,000 in investment funds to other bank accounts associated with other business ventures into which the investors had neither agreed nor intended to invest. For one example, on September 12, 2013, the same day MC2 received $585,000 from the private equity investors, Goggin directed the transfer of $15,000 from the MC2 bank account to the business bank account of Aegis Atlantic LLC, a Delaware company of which Goggin was also the CEO. That money was never used for the agreed-upon BART projects and was instead spent for other purposes.
A Superseding Indictment returned by the grand jury on September 13, 2018, charged Goggin with four counts of wire fraud, in violation of 18 U.S.C. § 1343, and nine counts of money laundering, in violation of 18 U.S.C. § 1957. Under the plea agreement, Goggin pled guilty to one count of money laundering.
United States District Judge James Donato also sentenced Goggin to a three-year period of supervised release to follow his imprisonment. The defendant is presently out of custody and is ordered to surrender on June 28, 2021, to begin serving his sentence.
Katherine Lloyd-Lovett and Katie Medearis are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Kay Konopaske. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service – Criminal Investigation.