Northern District of California
Press releases recorded for this federal judicial district.
Former IRS-CI Special Agent Convicted of Filing False Tax Returns, Theft of Government Money and Obstruction of JusticeRead the Press Release
A former special agent for the Internal Revenue Service Criminal Investigation (IRS-CI) Division was convicted on June 15 after a jury in Sacramento, California found her guilty of filing false tax returns, obstruction of justice and stealing government money, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and Acting U.S. Attorney Alex G. Tse for the Northern District of California.
According to court documents and evidence introduced at trial, Alena Aleykina, who is also a Certified Public Accountant and holds a master’s degree in business administration, filed six false tax returns: three personal tax returns for years 2009, 2010, and 2011 and three in the names of trusts she created for years 2010 and 2011. On her personal tax returns, Aleykina fraudulently claimed the head of household filing status, false dependents, and deductions for education expenses to which she was not entitled. On her trust tax returns, she failed to report rent she received from the tenants of her rental property and falsely claimed to be paying wages to her mother and her sister to care for her son and for her father.
Additionally, Aleykina stole government funds and obstructed justice during the investigation. She stole from the IRS’s Tuition Assistance Program by falsely claiming $4,000 in tuition reimbursement for classes that she did not take. When criminal investigators approached Aleykina to retrieve her government laptop, Aleykina lied to the agents about the location of the laptop and began deleting files from the computer after the agents left. The total loss to the government from Aleykina’s conduct is more than $60,000.
Sentencing has been scheduled for Sept. 25 before Judge John A. Mendez. Aleykina faces a maximum statutory penalty of three years in prison for each false tax return count, 10 years in prison for theft of government funds, and 20 years in prison for obstruction of justice as well as a period of supervised release, restitution and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman and Acting U.S. Attorney Tse thanked special agents of the Treasury Inspector General for Tax Administration and IRS-CI, who conducted the investigation, and Assistant U.S. Attorney William Frentzen and Tax Division Trial Attorneys Arthur Ewenczyk and Charles O’Reilly, who are prosecuting the case.
Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.
Former IRS-CI Special Agent Convicted of Filing False Tax Returns, Theft of Government Money and Obstruction of JusticeRead the Press Release
SAN FRANCISCO – Alena Aleykina, former special agent for the Internal Revenue Service Criminal Investigation (IRS-CI) Division, was convicted on June 15 after a jury in Sacramento, Calif., found her guilty of filing false tax returns, obstruction of justice, and stealing government money, announced Acting U.S. Attorney Alex G. Tse and Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. The verdict followed a two-week trial in the district court in the Eastern District of California before the Honorable John A. Mendez, U.S. District Judge.
According to court documents and evidence introduced at trial, Aleykina, of Sacramento, is a Certified Public Accountant and holds a master’s degree in business administration. She filed six false tax returns: three personal tax returns for years 2009, 2010, and 2011 and three in the names of trusts she created for years 2010 and 2011. On her personal tax returns, Aleykina fraudulently claimed the head of household filing status, false dependents, and deductions for education expenses to which she was not entitled. She also falsely claimed on a trust tax return to be paying wages to her mother and her sister to care for her son and for her father.
Additionally, Aleykina stole government funds and obstructed justice during the investigation. She stole from the IRS’s Tuition Assistance Program by falsely claiming $4,000 in tuition reimbursement for classes that she did not take. When criminal investigators approached Aleykina to retrieve her government laptop, Aleykina lied to the agents about the location of the laptop and began deleting files from the computer after the agents left. The total loss to the government from Aleykina’s conduct is more than $60,000.
Sentencing has been scheduled for September 25, 2018, before Judge Mendez. Aleykina faces a maximum statutory penalty of three years in prison for each false tax return count, 10 years in prison for theft of government funds, and 20 years in prison for obstruction of justice. In addition, the court may order Aleykina to serve an additional period of supervised release, and pay restitution and monetary penalties. However, any sentence following conviction will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant U.S. Attorney William Frentzen and Tax Division Trial Attorneys Arthur Ewenczyk. The United States Attorney’s Office in San Francisco, California, is prosecuting this case with the Tax Division; the United States Attorney’s Office for the Eastern District of Califonia is recused from this matter.
Theranos Founder and Former Chief Operating Officer Charged in Alleged Wire Fraud SchemesRead the Press Release
SAN JOSE - A federal grand jury has indicted Elizabeth A. Holmes and Ramesh “Sunny” Balwani, announced Acting United States Attorney Alex G. Tse, Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett; Food and Drug Administration (FDA) Commissioner Scott Gottlieb; and U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez. The defendants are charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. According to the indictment returned yesterday and unsealed today, the charges stem from allegations Holmes and Balwani engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients. Both schemes involved efforts to promote Palo Alto, Calif.-based Theranos.
Holmes, 34, of Los Altos Hills, Calif., founded Theranos in 2003. Theranos is a private health care and life sciences company with the stated mission to revolutionize medical laboratory testing through allegedly innovative methods for drawing blood, testing blood, and interpreting the resulting patient data. Balwani, 53, of Atherton, Calif., was employed at Theranos from September of 2009 through 2016. At times during that period, Balwani worked in several capacities including as a member of the company’s board of directors, as its president, and as its chief operating officer.
According to the indictment, Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though the defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests. The tests performed on Theranos technology, in addition, were likely to contain inaccurate and unreliable results.
The indictment alleges that the defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors. Specifically, the defendants claimed that Theranos developed a revolutionary and proprietary analyzer that the defendants referred to by various names, including as the TSPU, Edison, or minilab. The defendants claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick. The defendants also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.
The indictment further alleges that Holmes and Balwani knew that many of their representations about the analyzer were false. For example, allegedly, Holmes and Balwani knew that the analyzer, in truth, had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines.
“This district, led by Silicon Valley, is at the center of modern technological innovation and entrepreneurial spirit; capital investment makes that possible. Investors large and small from around the world are attracted to Silicon Valley by its track record, its talent, and its promise. They are also attracted by the fact that behind the innovation and entrepreneurship are rules of law that require honesty, fair play, and transparency. This office, along with our other law enforcement partners in the Bay Area, will vigorously investigate and prosecute those who do not play by the rules that make Silicon Valley work. Today’s indictment alleges that through their company, Theranos, CEO Elizabeth Holmes and COO Sunny Balwani not only defrauded investors, but also consumers who trusted and relied upon their allegedly-revolutionary blood-testing technology.”
“This indictment alleges a corporate conspiracy to defraud financial investors,” said Special Agent in Charge Bennett. “This conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”
“The conduct alleged in these charges erodes public trust in the safety and effectiveness of medical products, including diagnostics. The FDA would like to extend our thanks to our federal law enforcement partners for sending a strong message to Theranos executives and others that these types of actions will not be tolerated,” said Catherine A. Hermsen, Acting Director, FDA Office of Criminal Investigations.
“The United States Postal Inspection Service has a long history of successfully investigating complex fraud cases,” said Inspector in Charge Rafael E. 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 both consumers and investors.”
The Indictment Alleges That Doctors And Patients Were Defrauded
The indictment alleges Holmes and Balwani defrauded doctors and patients by making false claims concerning Theranos’s ability to provide accurate, fast, reliable, and cheap blood tests and test results, and through omissions concerning the limits of and problems with Theranos’s technologies. The defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests, including the tests for calcium, chloride, potassium, bicarbonate, HIV, Hba1C, hCG, and sodium. The defendants nevertheless used interstate electronic wires to purchase advertisements intended to induce individuals to purchase Theranos blood tests at Walgreens stores in California and Arizona. Through these advertisements, the defendants explicitly represented to individuals that Theranos’s blood tests were cheaper than blood tests from conventional laboratories to induce individuals to purchase Theranos’s blood tests.
Further, the indictment alleges that based on the defendants’ misrepresentations and omissions, many hundreds of patients paid, or caused their medical insurance companies to pay, Theranos, or Walgreens acting on behalf of Theranos, for blood tests and test results, sometimes following referrals from their defrauded doctors. In addition, the defendants delivered to doctors and patients blood results that were inaccurate, unreliable, and improperly validated. The defendants also delivered to doctors and patients blood test results from which critical results were improperly removed.
The indictment describes a number of schemes that defendants allegedly employed to mislead investors, doctors, and patients. For example, with respect to investors, defendants performed technology demonstrations during which defendants intended to cause potential investors to believe blood tests were being conducted on Theranos’s proprietary analyzer when, in fact, the analyzer really was running a “null protocol” and was not testing the potential investor’s blood. Similarly, defendants purchased and used commercially-available analyzers to test patient blood, while representing to investors that Theranos conducted its patients’ tests using Theranos-manufactured analyzers.
The Indictment Alleges That Investors Were Defrauded
According to the indictment, the defendants also allegedly made numerous misrepresentations to potential investors about Theranos’s financial condition and its future prospects. For example, the defendants represented to investors that Theranos conducted its patients’ tests using Theranos-manufactured analyzers; when, in truth, Holmes and Balwani knew that Theranos purchased and used for patient testing third party, commercially-available analyzers. The defendants also represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that Theranos expected to generate approximately $1 billion in revenues in 2015 when, in truth, the defendants knew Theranos would generate only negligible or modest revenues in 2014 and 2015.
Further, defendants allegedly represented to investors that Theranos had a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos’s technology had deployed to the battlefield when, in truth, Theranos had limited revenue from military contracts and its technology was not deployed in the battlefield. In addition, the defendants represented to investors that Theranos would soon dramatically increase the number of Wellness Centers within Walgreens stores when, in truth, Holmes and Balwani knew by late 2014 that Theranos’s retail Walgreens rollout had stalled because of several issues, including that Walgreens’s executives had concerns with Theranos’s performance.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.
The indictment charges each defendant with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and nine counts of wire fraud, in violation of 18 U.S.C. § 1343. If convicted, the defendants face a maximum sentence of twenty (20) years in prison, and a fine of $250,000, plus restitution, for each count of wire fraud and for each conspiracy count. 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.
Both defendants appeared today before U.S. Magistrate Judge Susan van Keulen for their initial appearances. The matter was assigned to the Honorable Lucy H. Koh, U.S. District Judge, for further proceedings.Assistant U.S. Attorneys Jeff Schenk, Robert S. Leach, and John C. Bostic are prosecuting the case with the assistance of Laurie Worthen and Bridget Kilkenny. The prosecution is the result of an investigation by the FDA Office of Criminal Investigations, the FBI, and the US Postal Inspection Service.
Deputy Attorney General Recognizes U.S. Attorney’s Office ProsecutorsRead the Press Release
SAN FRANCISCO - Four Assistant United States Attorneys of the U.S. Attorney’s Office in the Northern District of California (NDCA) are among the 162 members of the Department of Justice recognized by Deputy Attorney General Rod Rosenstein, and Executive Office for U.S. Attorneys (EOUSA) James Crowell, IV at the 34th Director’s Awards Ceremony today in Washington D.C. The awards ceremony took place in the Great Hall at the Robert F. Kennedy Department of Justice Building. The local recipients of the awards include Joseph Alioto, Susan Badger, William Frentzen, and S. Waqar Hasib.
In his prepared remarks, Deputy Attorney General Rosenstein told the awardees: “Today’s honorees earned the esteem of their colleagues. But most importantly, they earned the gratitude of our fellow citizens — the people whose communities you made safer, whose lives you improved, and whose trust you rewarded. Today, we pause to honor and recognize a small portion of your work.”
Acting U.S. Attorney Alex G. Tse expanded on the Deputy Attorney General’s remarks stating, “We welcome the recognition by the senior members of the Department of Justice of the outstanding work of the members of this district. We also join in the celebration of the accomplishments being recognized today. The recipients of these awards have demonstrated that their commitment to ensuring that justice is done in even the most difficult cases will not be compromised, no matter how many hours of toil may be required. We are tremendously proud of the recipients’ accomplishments and the examples they provide for all prosecutors.”
Joseph Alioto was recognized for his exemplary work in the NDCA's Strike Force Section, notably his outstanding contribution in a RICO prosecution against 12 high-ranking members of the Nuestra Familia prison gang in United States v. Cervantes. The prosecution, involving three murders, multiple stabbings and robberies, and an arson and other crimes, culminated in a four-month trial and convictions against the gang's highest-ranking members. Four gang members went to trial, all of whom were convicted of racketeering conspiracy, murder, murder conspiracy, attempted murder, assault with dangerous weapon, arson, and various firearms and drug-related crimes.
Susan Badger, Wil Frentzen, and S. Waqar Hasib were recognized for their outstanding work in the investigation of organized crime and public corruption conspiracies centered in San Francisco’s Chinatown that culminated in the life sentence of Raymond “Shrimp Boy” Chow. Chow served as the Dragonhead, or leader, of the San Francisco-based Chee Kung Tong organization. Chow was charged in March 2014 with various racketeering crimes, including the illegal trafficking of controlled substances, extortion, and participation in the collection of illegal debts. On October 15, 2015, the charges were amended in a Third Superseding Indictment to include murder. On January 8, 2016, after a multi-month trial, Chow was convicted of arranging the murder of Allen Leung, conspiring with others to murder Jim Tat Kong, 162 counts of money laundering, laundering of proceeds of narcotics sales, and conspiring to deal in illegal sales of goods.
The Northern District of California was one of 35 districts represented at the ceremony. EOUSA provides oversight, general executive assistance, and direction to the 94 United States Attorneys’ offices around the country. For more information on EOUSA and its mission, visit http://www.justice.gov/usao.
Six Former and Current Fitbit Employees Indicted for Possessing Multiple Trade Secrets Stolen from JawboneRead the Press Release
On February 14, 2020, United States Attorney David L. Anderson issued the following statement:
Today, the United States filed a motion to dismiss the criminal trade secret theft charges against Patrick Narron, Jing Qi Weiden, Patricia Romano, and Rong Zheng. The filing of this motion to dismiss follows the filing on December 11, 2019, of a similar motion to dismiss against Ana Rosario, and the return of not-guilty verdicts on February 3, 2020, by the trial jury of all charges against Katherine Mogal. It is a serious step for the United States to move to dismiss criminal charges at any time, and more so without a presentation to a trier of fact and, as occurred here, after the pendency of charges for more than a year. However, it is the solemn duty of the United States to seek justice in all its cases, and to evaluate the appropriateness of charges at all times, not just at the point of indictment or trial. Our assessment of these cases led us to the firm conclusion that only an immediate dismissal of the criminal charges against all defendants would be in the interests of justice.
SAN JOSE – Six California residents were charged in a federal indictment filed today in San Jose, Calif., for their alleged possession of stolen trade secrets, announced Acting United States Attorney Alex G. Tse and Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin. The indictment charges each defendant with possession of one or more trade secrets. The secrets allegedly were stolen from now-defunct San Francisco-based AliphCom, Inc., doing business as Jawbone, after his or her employment with Jawbone ended and the defendant accepted employment with Fitbit, Inc., another San Francisco-based company.
The indictment charges Katherine Mogal, 52, of San Francisco; Ana Rosario, 33, of Pacifica; Patrick Narron, 41, of Boulder Creek; Patricio Romano, 37, of Calabasas; Rong Zhang, 45, of El Cerrito; and Jing Qi Weiden, 39, of San Jose, for being in possession of stolen trade secrets. The indictment describes Jawbone as a company that “designed, manufactured, and sold wearable electronic devices, fitness trackers, and wireless speakers in interstate and international commerce.” The indictment alleges Jawbone’s protected internal computer systems and cloud storage contained trade secrets, 14 of which are described in the indictment. Similarly, the indictment describes Fitbit as a publically traded company that promotes itself as “design[ing] products and experiences that track and provide motivation for everyday health and fitness.”
According to the indictment, each of the defendants worked for Jawbone for at least one year between May of 2011 and April of 2015, and had signed a confidentiality agreement with the company. The indictment alleges that in between March 2015 and April 2015, Mogal, Rosario, Narron, and Zhang, while still working for Jawbone, received an offer of employment from Fitbit and within three weeks, each had terminated his or her employment with Jawbone. Each of these defendants accepted his or her offer of employment from Fitbit. Weiden resigned from Jawbone in March 2014 and began working for Fitbit in November 2014. According to the indictment, at times in 2014 and 2015, after he or she was no longer employed by Jawbone, each defendant received and possessed one or more of the trade secrets for the economic benefit of someone other than Jawbone. Further, the indictment alleges each defendant was aware following his or her departure from Jawbone that the trade secrets were stolen and that they were being possessed without authorization.
“Intellectual property is the heart of innovation and economic development in Silicon Valley,” said Acting U.S. Attorney Tse. “The theft of trade secrets violates federal law, stifles innovation, and injures the rightful owners of that intellectual property. This office, together with our law enforcement partners, is committed to protecting the intellectual property rights and economic security of this district.”
“While we live in a free market economy, HSI is committed to ensuring employees are playing fair and within the limits of the law,” said Ryan L. Spradlin, Special Agent in Charge for northern California and northern Nevada. “HSI has devoted more than two years to investigating these allegations of the theft of trade secrets. HSI considers these types of charges extremely serious, and is dedicated to safeguarding against any illegal corporate practices adversely impacting other businesses.”
The defendants are scheduled to make an initial appearance on July 9, 2018, at 1:30 p.m. before the U.S. Magistrate Judge Virginia K. DeMarchi.
Each defendant has been charged with one or more counts of possession of stolen trade secrets, in violation of 18 U.S.C. § 1832(a)(3), as follows:
Defendant
Defendant
Defendant
Mogal
six counts
Weiden
one count
Romano
four counts
Rosario
five counts
Narron
two counts
Zhang
two counts
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face a maximum sentence of 10 years imprisonment and $250,000 fine per count, followed by a maximum three years 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.
Assistant U.S. Attorney Amie Rooney is prosecuting the case with assistance from Nina Burney Williams and Elise Etter. The prosecution is the result of an investigation by the Department of Homeland Security, Homeland Security Investigations.
Fremont Business Owner Sentenced to 30 Months in Prison for Role in Visa Fraud Conspiracy, Mail Fraud, Witness Tampering, and Related CrimesRead the Press Release
SAN JOSE – Venkat Guntipally was sentenced to 30 months in prison for his role in a conspiracy to commit several crimes including visa fraud, obstruction of justice, use of false documents, and mail fraud, announced Acting United States Attorney Alex G. Tse; U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin; and U.S. State Department, Diplomatic Security Service, San Francisco Field Office Special Agent in Charge Matthew Perlman. The sentence was handed down by the Honorable Lucy H. Koh, U.S. District Judge. Guntpally is the last of four defendants to be sentenced in connection with the visa fraud scheme.
A federal grand jury indicted Venkat Guntipally, 49, his wife, Sunitha Guntipally, 44, of Fremont, and two other defendants, Pratap “Bob” Kondamoori, 56, of Incline Village, Nev., and Sandhya Ramireddi, 58, of Pleasanton, in a 33-count indictment filed May 5, 2016. The indictment contains charges in connection with the submission of fraudulent applications for H-1B specialty-occupation work visas.
“Through this multi-year conspiracy, Mr. Guntipally and his co-conspirators exploited foreign workers for profit, defrauded the United States, and engaged in brazen obstruction of justice,” said Acting U.S. Attorney Tse. “Today’s sentence reflects that such crimes harm the nation’s immigration system and erode public trust. This office will continue to prosecute defendants who are out to make an unlawful profit and abuse our immigration laws for purely personal gain.”
“As the lead agency in this investigation, the Diplomatic Security Service demonstrated its commitment to maintaining the integrity of U.S. visas. We pursue those who fraudulently use worker visas, like the H-1B, for personal gain,” said Special Agent in Charge Perlman. “Diplomatic Security Service’s strong relationship with our law enforcement partners and the U.S. Attorney’s Office for the Northern District of California, continues to be essential in the pursuit of justice.”
“Unscrupulous actions by employers to gain an unfair advantage will not be tolerated and HSI will commit its resources to stop these types of criminals from gaming our immigration system to line their pockets with money at the cost of others,” said Ryan L. Spradlin, Special Agent in Charge of HSI operations in northern California and northern Nevada.
Venkat Guntipally pleaded guilty on April 24, 2017, at which time he admitted that he and his wife founded and owned DS Soft Tech and Equinett, two employment-staffing companies for technology firms. In addition, Guntipally admitted that between approximately 2010 and 2014, he and his wife, together with others, submitted to the government more than one hundred fraudulent petitions for foreign workers to be placed at other purported companies. The end-client companies listed in the fraudulent H-1B applications either did not exist or never received the proposed H-1B workers. None of the listed companies ever intended to receive those H-1B workers. The scheme’s intended purpose was to create a pool of H-1B workers who then could be placed at legitimate employment positions in the Northern District of California and elsewhere. Through this scheme, Venkat Guntipally, along with his co-conspirators, gained an unfair advantage over competing employment-staffing firms, and the Guntipallys earned millions in ill-gotten gains. Venkat Guntipally also admitted that he and his codefendants obstructed justice, including by directing workers to lie to investigators and by laundering money.
Venkat Guntipally was charged with one count of conspiracy, in violation of 18 U.S.C. § 371; ten counts of substantive visa fraud, in violation of 18 U.S.C. § 1546(a); seven counts of using false documents, in violation of 18 U.S.C. § 1001(a)(3); and four counts of mail fraud, in violation of 18 U.S.C. § 1341. He pleaded guilty to the conspiracy charge and the remaining charges were dismissed.
In addition to the prison term, Judge Koh ordered Venkat Guntipally to serve three years of supervised release and ordered him to forfeit $500,000. Venkat Guntipally was ordered to self-surrender on or before June 14, 2019.
All three of Venkat Guntipally’s co-defendants previously pleaded guilty to their respective roles in the scheme. Last year, Judge Koh sentenced Sunitha Guntipally to 52 months in prison, Ramireddi to 14 months’ imprisonment, and Kondamoori to 20 months’ imprisonment for their respective conduct.
Assistant U.S. Attorney Jonas Lerman is prosecuting the case with the assistance of Laurie Worthen. The prosecution is the result of an investigation led by the U.S. Department of State Diplomatic Security Service’s representative to the Document and Benefit Fraud Task Force (DBFTF) overseen by the Department of Homeland Security’s Homeland Security Investigations. The DBFTF is a multi-agency task force that coordinates investigations into fraudulent immigration documents. U.S. Citizenship and Immigration Service’s Office of Fraud Detection and National Security also assisted with the investigation.
Former CEO of Sunnyvale-Based Tech Company Sentenced to Two Years in Prison for Insider Trading in His Company’s SecuritiesRead the Press Release
SAN JOSE – Peter C. Chang, founder and former chief executive officer of a Sunnyvale-based fiber optics equipment maker, was sentenced to 24 months in prison today for insider trading and tender offer fraud, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The sentence was handed down by the Honorable Lucy H. Koh, United States District Judge.
Chang, 60, of Los Altos, Calif., was the President, Chief Executive Officer (CEO), and Chair of the Board of Directors of Alliance Fiber Optic Products, Inc. (AFOP), a manufacturer of fiber optic components based in Sunnyvale, Calif. AFOP was publicly traded on the NASDAQ until the company was acquired in June 2016. According to his February 21, 2018, guilty plea, Chang used two brokerage accounts, held in the names of his brother and his wife, to purchase and sell AFOP stock. He admitted that he had access to material nonpublic information about the company, and that his duty of confidentiality and company policies regarding insider trading prevented him from trading on the information.
Further, Chang admitted that he sold AFOP stock in the days prior to two public announcements of the company’s earnings on October 28, 2015 and February 18, 2016. The timing of these sales allowed Chang to avoid losses he would otherwise have incurred when the stock price dropped after the announcements. Chang further admitted that in March 2016, he purchased AFOP stock while he knew material nonpublic information about a potential acquisition of the company by a larger public company. The acquisition of AFOP was publicly announced on April 7, 2016.
In addition to the prison term, Judge Koh ordered Chang to serve three years of supervised release. Chang is currently free on bond; Judge Koh ordered him to self-surrender on or before September 12, 2018, to begin serving his sentence.
Assistant U.S. Attorney Lloyd Farnham is prosecuting the case with the assistance of Claudia Hyslop, Phillip Villanueva, and Bridget Kilkenny. The prosecution is the result of an investigation by the FBI. Additional assistance was provided by the San Francisco Regional Office of the Securities and Exchange Commission.
Daly City Methamphetamine Trafficker Sentenced to Ten Years in PrisonRead the Press Release
SAN FRANCISCO – Carlos Maturana was sentenced today to 10 years in prison for his role in a conspiracy to distribute and possess with intent to distribute methamphetamine, announced Acting United States Attorney Alex G. Tse and Drug Enforcement Administration Acting Special Agent in Charge Jerry A. Miller. The sentence was handed down today by the Honorable Charles R. Breyer, U.S. District Judge.
Maturana, 26, of Daly City, pleaded guilty on January 31, 2018. He admitted that from June 6, 2016, through August 15, 2016, he participated in a conspiracy to distribute and possess with intent to distribute methamphetamine. Specifically, Maturana admitted that on June 8, 2016, he supplied his co-defendant, Juan Guillermo Estrada-Zapata, 28, of Daly City, with approximately one-half pound of methamphetamine. Later that day, Estrada-Zapata sold that one-half pound of methamphetamine to an undercover DEA agent for $2,200. Further, Maturana admitted that on August 3, 2016, he again supplied Estrada-Zapata with approximately one-half of a pound of methamphetamine. Later that day, Estrada-Zapata again sold the one-half pound of methamphetamine to the undercover DEA agent for $2,200.
Maturana was arrested on August 15, 2016. On that day, Maturana arranged to supply Estrada-Zapata with approximately three pounds of methamphetamine that was supposed to besold the undercover agent for $11,000. Law enforcement authorities arrived at Maturana’s house prepared to execute a search warrant prior to the planned drug transaction. The authorities saw Maturana walk from his house to his car while carrying a brown shopping bag and a black gym bag. Authorities approached Maturana, searched the bags he was carrying, and executed the search warrant. Authorities seized approximately seven and a half pounds of methamphetamine, a Bersa .45 caliber pistol loaded with a magazine containing six rounds of ammunition, approximately 62 grams of cocaine, almost $3,000 in cash, a Browning .40 caliber pistol, one loaded magazine containing seven rounds of .45 caliber ammunition, 12 rounds of .38 caliber ammunition, and almost 800 grams of marijuana.
On May 4, 2017, a federal grand jury indicted Maturana and Estrada-Zapata with conspiracy to distribute and possess with intent to distribute 500 grams or more of methamphetamine, in violation of 21 United States, Code, Sections 846, 841(a)(1), and 841(b)(1)(A) as well as substantive distribution charges. Pursuant to his plea agreement, Maturana pleaded guilty to the conspiracy and the distribution charge was dismissed.
In addition to the prison term, Judge Breyer also sentenced Maturana to a five-year period of supervised release.
Estrada-Zapata pleaded guilty on December 6, 2017, to conspiring to distribute and possess with intent to distribute 500 grams or more of methamphetamine. On May 2, 2018, Judge Breyer sentenced Estrada-Zapata to two years in prison and a five-year term of supervised release.
Assistant U.S. Attorney Christiaan Highsmith is prosecuting the case with the assistance of Adria Trgovcich, Linda Love, and Theresa Benitez. The prosecution is the result of an investigation by the Drug Enforcement Administration Metro Task Force, the San Mateo County Narcotics Task Force, and the San Francisco Police Department Narcotics Unit.
California Residents Plead Guilty to Scheme to Illegally Export Components for Production of Night Vision Rifle ScopesRead the Press Release
Naum Morgovsky, 69, and Irina Morgovsky, 66, both of Hillsborough, California, pleaded guilty today for their respective roles in a scheme to export components for the production of night vision and thermal devices in violation of the Arms Export Control Act. Naum Morgovsky also pleaded guilty to laundering the proceeds of from the scheme.
Assistant Attorney General for National Security John C. Demers, Acting U.S. Attorney Alex G. Tse for the Northern District of California and Special Agent in Charge John F. Bennett of the FBI’s San Francisco field office made the announcement. The pleas were accepted by the Honorable Vince Chhabria, U.S. District Judge, during jury selection.
According to their guilty pleas, Naum Morgovsky and Irina Morgovsky admitted that from April 2012 until Aug. 25, 2016, they conspired to export without the necessary license to a company in Moscow, Russia, numerous scope components, including image intensifier tubes and lenses. They further admitted a coconspirator in Russia communicated to them lists of components necessary for the Russian business to manufacture certain night vision devises. The couple used their U.S. business, Hitek International, to purchase these components and misrepresented to the sellers that the products would not be exported. The couple then shipped the products to Russia and other countries in Europe where an associate arranged for them to be hand-carried into Russia. Further, the couple admitted the scope components they exported were on the U.S. Munitions List and that they therefore were not permitted to export the items without a license from the Department of State, Directorate of Defense Trade Controls. The defendants admitted they knew a license was required to export the components and that they did not obtain a license.
In addition to exporting the components, Naum Morgovsky admitted he took steps to conceal his crimes so that the couple could continue to run the illegal export business undetected. Specifically, he admitted he laundered the proceeds of the export crimes and used the name of a deceased person to conceal the fact that he was the source and owner of a U.S.-based account.
On April 27, 2017, a federal grand jury issued a superseding indictment charging the Morgovskys, along with Mark Migdal, 72, of Portola Valley, California, for their respective roles in three related schemes — the illegal export scheme resolved by today’s plea agreements, and two additional bank fraud schemes allegedly involving Naum Morgovsky. With respect to the illegal export scheme, the grand jury charged Naum Morgovesky with conspiracy to violate the Armed Export Control Act, and two counts of money laundering. The grand jury charged Irina Morgovesky with the conspiracy and with misuse of a passport. Pursuant to today’s plea agreements, the couple pleaded guilty all the charges with the exception of the passport charge pending against Irina Morgovesky — that charge will be dismissed.
On Nov. 10, 2017, Judge Chhabria severed the case to allow the illegal export charges to be handled separately from the allegations regarding the bank fraud scheme alleged in the April 27, 2017, indictment. The bank fraud charges are still pending against Naum Morgovesky. According to the indictment, Naum Morgovesky conspired with Migdal to defraud two federally-insured banks, now Bank of America and EverBank, by seeking those banks’ approval for a short sale of two condominiums. The condominiums were in Kihei, Maui, and were in the same building as a condominium that had been owned by Migdal. The indictment alleges Morgovsky and Midgal conspired to convince the banks to allow the properties to be sold in a short sale to an individual who was deceased. A short sale is a sale in which a lender allows a property to be sold at a price that is less than the amount owed on the loan. Morgovsky also is accused of submitting false statements to the banks about Midgal’s employment status and income. The indictment charges Naum Morgovsky and Migdal with conspiracy to commit bank fraud, and two counts of bank fraud, related to the sale of the Hawaii properties.
On July 25, 2017, Migdal pleaded guilty to his part in the conspiracy and to two counts of making false statements on loan and credit applications. On April 24, 2018, Judge Chhabria sentenced Migdal to 18 months in prison and ordered him to pay a $1,000,000 fine, to pay $460.215 in restitution, and to serve 3 years of supervised release.
In sum, the charges and maximum statutory sentences against Naum Morgovsky are as follows:
Count
Charge
Statue
Status
Maximum Sentence
One
Conspiracy to Commit Bank Fraud
18 U.S.C. § 1349
Pending
30 years; $1,000,000 fine
Two
Bank Fraud
18 U.S.C. § 1344
Pending
30 years; $1,000,000 fine
Three
Bank Fraud
18 U.S.C. § 1344
Pending
30 years; $1,000,000 fine
Four
Aggravated Identity Theft
18 U.S.C. § 1028A
Pending
2 years consecutive to any other sentence; $250,000 fine
Nine
Armed Export Control Act Conspiracy
22 U.S.C. § 2778
Pleaded Guilty
20 years; $1,000,000 fine
Ten
Money Laundering
18 U.S.C. § 1956(a)(1)(B)(i)
Pleaded Guilty
20 years; $500,000 fine or twice the value of funds involved
Eleven
International Money Laundering
18 U.S.C. § 1956(a)(2)(A)
Pleaded Guilty
20 years; $500,000 fine or twice the value of funds involved
The charges against Irina Morgovsky are as follows:
Count
Charge
Statue
Status
Maximum Sentence
Nine
Armed Export Control Act Conspiracy
22 U.S.C. § 2778
Pleaded Guilty
20 years; $1,000,000 fine
The maximum statutory sentences are prescribed by Congress and provided here for informational purposes; the sentencing of the defendants will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
A sentencing hearing for today’s guilty pleas is scheduled for Sept. 18. No date has been scheduled yet to resolve the remaining charges against Naum Morgovsky.
The prosecution is the result of an investigation by the counterintelligence squad of the FBI, with assistance from IRS-Criminal Investigation and the Department of Commerce, Bureau of Industry and Security.
The case is being prosecuted by Assistant U.S. Attorneys Colin Sampson and Erin Cornell of the Northern District of California, and Trial Attorney Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.
Bay Area Residents Plead Guilty to Scheme to Illegally Export Components for Production of Night Vision Rifle ScopesRead the Press Release
SAN FRANCISCO – Naum Morgovsky and Irina Morgovsky pleaded guilty today for their respective roles in a scheme to export components for the production of night vision and thermal devices in violation of the Arms Export Control Act, announced Acting United States Attorney Alex G. Tse, Assistant Attorney General for National Security John C. Demers, and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. Naum Morgovsky also pleaded guilty to laundering the proceeds of from the scheme. The pleas were accepted by the Honorable Vince Chhabria, U.S. District Judge.
According to their guilty pleas, Naum Morgovsky, 69, and Irina Morgovsky, 66, both residing in Hillsborough, Calif., admitted that from April 2012 until August 25, 2016, they conspired to export without the necessary license to a company in Moscow, Russia, numerous scope components, including image intensifier tubes and lenses. They further admitted a coconspirator in Russia communicated to them lists of components necessary for the Russian business to manufacture certain night vision devises. The defendants used their U.S. business, Hitek International, to purchase these components and misrepresented to the sellers that the products would not be exported. The defendants then shipped the products to Russia and other countries in Europe where an associate arranged for them to be hand-carried into Russia. Further, the defendants admitted the scope components they exported were on the United States Munitions List and that they therefore were not permitted to export the items without a license from the Department of State, Directorate of Defense Trade Controls. The defendants admitted they knew a license was required to export the components and that they did not obtain a license.
“Protecting sensitive technology from unlawful export is crucial to our national security, especially when that technology has military uses,” said Acting U.S. Attorney Tse. “This prosecution and today’s guilty pleas demonstrate the Department of Justice’s continuing commitment to using all available tools, including criminal charges, to safeguard national security.”
In addition to exporting the components, Naum Morgovsky admitted he took steps to conceal his crimes so that the couple could continue to run the illegal export business undetected. Specifically, he admitted he laundered the proceeds of the export crimes and used the name of a deceased person to conceal the fact that he was the source and owner of an US-based account.
On April 27, 2017, a federal grand jury issued a superseding indictment charging the Morgovskys, along with Mark Migdal, 72, of Portola Valley, Calif., for their respective roles in three related schemes—the illegal export scheme resolved by today’s plea agreements, and two additional bank fraud schemes allegedly involving Naum Morgovsky. The charges related to the alleged bank fraud scheme remain pending against Naum Morgovesky. The defendant is presumed innocent until proven guilty beyond reasonable doubt with regard to those charges.
With respect to the illegal export scheme, the grand jury charged Naum Morgovesky with conspiracy to violate the Armed Export Control Act, in violation of 22 U.S.C. § 2778, and two counts of money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(B)(i) and (a)(2)(A). The grand jury charged Irina Morgovesky with the § 2778 conspiracy and with misuse of a passport, in violation of 18 U.S.C. § 1544. Today the defendants pleaded guilty to all the charges with the exception of the passport charge pending against Irina Morgovesky—that charge will be dismissed at the time of sentencing if she complies with the terms of the plea agreement. Bank fraud charges alleged in the indictment against Naum Morgovsky remain pending and will be scheduled for trial.
The defendants face a maximum sentence of 20 years in prison for each of the counts to which they pleaded guilty. The maximum fine for the Armed Export Conspiracy charges is $1,000,000, and the maximum fine for the money laundering charges is $500,000. 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.
Judge Chhabria has scheduled a hearing for sentencing with respect to today’s guilty pleas for September 18, 2018. No date has been scheduled yet to resolve the remaining charges against Naum Morgovsky.
The case is being prosecuted by Assistant United States Attorneys Colin Sampson and Erin Cornell and National Security Division Trial Attorney Jason McCullough. The prosecution is the result of an investigation by the counterintelligence squad of the Federal Bureau of Investigation; Internal Revenue Service, Criminal Investigation; and the Department of Commerce, Bureau of Industry and Security.
Two Members of “Central Divisadero Players” Gang Sentenced to Multiple Life Sentences for Murder and PimpingRead the Press Release
SAN FRANCISCO – Charles Heard (aka “Cheese”), and Jaquain Young (aka “Loc”), were sentenced today to multiple terms of life in prison, announced Acting United States Attorney Alex Tse and FBI Special Agent in Charge John F. Bennett. The sentences were handed down by the Honorable William Orrick, U.S. District Judge.
Heard, 33, and Young, 44, as well as co-defendants Adrian Gordon (aka “Tit”), 29, Esau Ferdinand (aka “Sauce”), 35, and Monzell Harding, Jr., 26, were each convicted of racketeering charges by a federal jury on March 5, 2018. The verdict followed a 14-week trial in which the jury heard evidence about the San Francisco gang referred to as Central Divisadero Players, often referred to as Central Divis Playas or CDP.
“The multiple life sentences handed down today is the just punishment under the law for the proven heinous crimes of violence,” said Acting U.S. Attorney Tse. “This office will zealously advocate for the strongest sentences in these gang related crimes to vindicate the rights of victims and protect our community against crimes of violence.”
Heard was convicted of murdering Andre Helton and Isiah Turner in a double-homicide that took place on August 14, 2008, near the University of San Francisco. He was also convicted of racketeering conspiracy.
Young was convicted of murdering Andre’s brother, Jelvon Helton, at the Gravity bar in the Marina District of San Francisco on November 1, 2010. In addition, Young was convicted of racketeering conspiracy, as well as separate pimping charges – including attempting to entice and persuade a minor to engage in prostitution between August 9, 2012, and March 11, 2013.
Judge Orrick sentenced Heard to four life sentences for the murders of Turner and Andre Helton. He sentenced Young to three life sentences for the murder of Jelvon Helton and one life sentence for the attempted pimping of a minor, plus a ten-year sentence to run consecutively for a related firearms charge. Judge Orrick also sentenced Young to 20 years in prison (the statutory maximum) for attempting to persuade an individual to travel for prostitution.
The defendants currently are in custody and will begin serving their sentences immediately. Defendants Ferdinand, Gordon, and Harding will be sentenced on June 29, 2018. Any sentence for these individuals 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.
Gordon, Heard, Ferdinand, Young, and Harding, were the first five defendants to stand trial for crimes alleged in an eleven-defendant, 22-count second superseding indictment filed on August 14, 2014. The indictment described CDP as a racketeering organization that worked collectively with other gangs in the Western Addition of San Francisco to preserve and protect power, territory, reputation, and profits of the enterprise through the use of intimidation, violence, assaults, and murder. During the trial, the jury heard evidence that the five defendants, all from San Francisco, each played a role in the racketeering conspiracy whose crimes ranged from murder to pimping. The jury concluded that the five defendants were guilty of the following specific crimes:
Defendant Found Guilty of the Following Charges Maximum Penalties
All Five Defendants
Racketeering conspiracy
in violation of 18 U.S.C. § 1962(d)
Life in prison and a $250,000 fine
Racketeering, including murder,
in violation of 18 U.S.C. § 1962(d)
Life in prison and a $250,000 fine
Gordon
Attempted racketeering murder of Victim 3 on May 20, 2011,
in violation of 18 U.S.C. § 1959(a)(5)
10 years in prison and a $250,000 fine
Racketeering assault with a dangerous weapon May 20, 2011,
on Victim 3, in violation of 18 U.S.C. § 1959(a)(3)
20 years in prison and a $250,000 fine
Use, carry, brandishing, or discharge of a firearm during a crime of
violence during the May 20, 2011, assault with a deadly weapon
of Victim 3, in violation of 18 U.S.C. § 924(c)
10 years in prison (mandatory minimum) consecutive to term of imprisonment for other offenses
Heard
Racketeering murder of Andre Helton on August 14, 2008, in violation of 18 U.S.C. § 1959(a)(1)
Life in prison (mandatory minimum) and a $250,000 fine
Racketeering murder of Isiah Turner on August 14, 2008, in violation of 18 U.S.C. § 1959(a)(1)
Life in prison (mandatory minimum) and a $250,000 fine
Use of a firearm in aid of the August 14, 2008, racketeering murders of Andre Helton and Isiah Turner, in violation of 18 U.S.C. § 924(j)(1)
Life in prison and a $250,000 fine
Young
Racketeering murder of Jelvon Helton on November 1, 2010, in violation of 18 U.S.C. § 1959(a)(1)
Life in prison (mandatory minimum) and a $250,000 fine
Use, carry, brandishing, or discharge of a firearm in connection with November 1, 2010, murder in aid of racketeering of Jelvon Helton, in violation of 18 U.S.C. § 924(c)
10 years in prison (mandatory minimum) consecutive to term of imprisonment for other offenses
Use of a firearm in aid of the November 1, 2010, racketeering murder of Jelvon Helton, in violation of 18 U.S.C. § 924(j)(1)
Life in prison and a $250,000 fine
Attempting to entice and persuade an individual to travel for prostitution (from August 9, 2012, to March 11, 2013), in violation of 18 U.S.C. § 2422(a)
20 years in prison and fine of $250,000
Attempting to entice and persuade a minor to engage in prostitution (from
August 9, 2012, to March 11, 2013),
in violation of 18 U.S.C. § 2422(b)
Life in prison (10 years mandatory minimum) and fine of $250,000
As described in the chart above, the jury concluded that Adrian Gordon attempted to murder Victim 3, that Charles Heard murdered Andre Helton and Isiah Turner, and that Jaquain Young murdered Jelvon Helton. The evidence at trial also demonstrated that the gang intimidated victims, potential victims, and community members through violence and threats of violence.
The prosecution is the result of joint investigation by the Federal Bureau of Investigation; San Francisco Police Department’s Gang Task Force, Homicide Detail, Robbery Detail, Special Victims Unit, and the Northern, Park, and Bayview Stations; San Francisco District Attorney’s Office; and the San Pablo Police Department.
Bay Area Man Sentenced to Ten Years’ Imprisonment for Transporting and Possessing Child PornographyRead the Press Release
SAN FRANCISCO – Randall Steven Curtis was sentenced today to 10 years in prison for transporting and possessing child pornography, announced Acting United States Attorney Alex G. Tse and Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin. The sentence was handed down by the Honorable Susan Illston, Senior U.S. District Judge.
Curtis, 62, of Morgan Hill, pleaded guilty to the charges on July 13, 2017. The investigation began when his luggage was flagged for a secondary inspection at the San Francisco International Airport upon his return from Cambodia. In Curtis’s luggage, Customs and Border Protection agents found six electronic devices containing child pornography and a falsified identification card for an individual known as “C.C.” According to the plea agreement, Curtis admitted that his devices contained more than 600 images depicting child pornography, including images depicting bondage and penetration and images of toddlers and infants engaged in sexually explicit conduct. In addition, Curtis admitted that his devices contained sexually explicit images of C.C. exposing her genitals—images he admitted to taking on a 2016 trip to Cambodia. Had the case gone to trial, the government would have presented evidence that C.C. was just sixteen years old at the time the photographs were taken.
A federal grand jury indicted Curtis on December 15, 2016, charging him with one count each of transporting child pornography, in violation of 18 U.S.C. § 2252(a)(1), and possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B). Curtis pleaded guilty to both charges.
In addition to the prison term, Judge Illston also sentenced the defendant to a five-year period of supervised release and ordered him to pay restitution to the victims in an amount to be determined at a later hearing. The defendant was immediately remanded into custody.
Assistant United States Attorneys Shailika S. Kotiya and Julie D. Garcia are prosecuting the case with the assistance of Alycee Lane and Maria Sunga. The prosecution is the result of an investigation by HSI.
Richmond Resident Convicted of Hacking into Online Newspaper’s Account and Causing DamageRead the Press Release
SAN JOSE – A federal jury returned a verdict yesterday against Ross Colby, finding him guilty of three counts of computer intrusion, one count of attempting to damage a protected computer, and one count of intentionally damaging a protected computer, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett. The verdict was delivered by the jury after a six-day trial before the Honorable Lucy H. Koh, U.S District Judge.
According to court documents and evidence presented during the trial Colby, 35, of Richmond, Calif., illegally accessed the web accounts of San Francisco Bay Area print and online newspaper publisher Embarcadero Media. Embarcadero Media is the Palo Alto-based parent company of numerous Bay Area newspaper publications, including Palo Alto Weekly, Mountain View Voice, Pleasanton Weekly, and The Almanac in Menlo Park. In September of 2015, the FBI was asked to investigate the computer intrusion after Embarcadero’s news websites were replaced with a picture of Guy Fawkes, the image associated with “Anonymous,” a hacking collective. Investigators found that in July of 2015, Colby accessed Embarcadero’s corporate email and obtained the contents of an account belonging to an Embarcadero employee. Then, in September of 2015, Colby used the information from the email account to disrupt Embarcadero’s operations. Among the actions that Colby carried out were to cancel Embarcadero’s domain names and change the publisher’s mail exchange records to redirect its corporate email. At trial, a witness testified that this conduct caused approximately $32,000 in damages and remediation costs to Embarcadero Media.
On April 6, 2017, a federal grand jury in San Jose indicted Colby and charged him with three counts of misdemeanor computer intrusion, in violation of 18 U.S.C. § 1030(a)(2)(C); one count of felony attempt to damage a protected computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(ii); and one count of felony intentional damage to a protected computer, in violation of §§ 1030(a)(5)(A) and (c)(4)(B)(i). Pursuant to yesterday’s verdict, Colby was found guilty of all the charges.
Colby is free on bail, pending sentencing. Judge Koh scheduled Colby’s sentencing for September 19, 2018. Colby faces a statutory maximum sentence of up to 10 years in prison and a $250,000 fine for each of the felony counts and up to a year in prison and a $100,000 fine for each of the misdemeanor charges. In addition to the prison terms and fines, the court also may order Colby to serve an additional period of supervised release, pay restitution, and pay other monetary penalties. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant United States Attorneys Susan Knight and Joseph Springsteen are prosecuting the case with the assistance of Lakisha Holliman and Elise Etter. The prosecution is the result of an investigation by the FBI.
Saratoga Resident Convicted of Tax FraudRead the Press Release
SAN JOSE – A federal jury returned a verdict yesterday against Jyh-Chau “Henry” Horng, finding him guilty of two counts of filing false tax returns and one count of lying to the IRS during a 2010 audit, announced Acting United States Attorney Alex G. Tse and Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. Horng’s wife, Meili “Ally” Lin, was also tried with respect to two counts of tax fraud; the jury failed to reach a verdict with respect to one count and acquitted Lin of the second count. The verdicts were delivered by the jury after a four-week trial before the Honorable Beth Labson Freeman, U.S District Judge.
Horng, 51, owned and operated an international trading business from his Saratoga home. The evidence at trial showed that Horng filed joint tax returns for 2006 and 2007 that underreported the couple’s income. In the 2006 tax return, Horng reported the couple’s income was only $232,116. In the 2007 tax return, Horng reported that the couple suffered a loss in the amount of $212,217. In addition, while the couple was under audit, Horng told an IRS auditor that the information in their loan applications were lies made up by their loan brokers and that the couple had no foreign bank accounts. The evidence demonstrated the reported income figures and Horng’s statements to the auditor were demonstrably false. During the same 2006-2007 period, the defendants purchased millions of dollars of real estate, reported on numerous loan applications annual income of over $1 million, invested over $5 million into a Milpitas shopping center, and spent over $350,000 using credit cards.
On January 28, 2015, a federal grand jury in San Jose indicted Lin and Horng on two counts of filing false tax returns, in violation of 26 U.S.C. § 7206(1). Horng was also charged with one count of making false statements to a government agency, in violation of 18 U.S.C. § 1001(a)(2), and two counts of making false statements to a federally insured institution, in violation of 18 U.S.C. § 1014. Lin also was charged with one count of making false statements to a federally insured institution, in violation of 18 U.S.C. § 1014. The 18 U.S.C. § 1014 charges were severed prior to trial and will be tried in the future. The jury convicted Horng of all three charges at issue in the trial. Lin was acquitted of fraudulently filing the 2007 tax return, and the jury could not reach a verdict with respect to the 2006 tax return.
Horng is free on bail, pending sentencing. Judge Freeman has not yet scheduled his sentencing hearing. Horng faces a statutory maximum sentence of three years in prison for each false tax return and up to an additional five years in prison for lying to the IRS auditor. In addition to the prison terms, the court also may order Horng to serve an additional period of supervised release and to pay restitution and monetary penalties. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant United States Attorney Michael G. Pitman and Trial Attorney Christopher Magnani are prosecuting the case with the assistance of Jonathan Deville. The prosecution is the result of an investigation by the IRS, Criminal Investigation.
On 500th Day of Trump Administration, Attorney General Sessions Announces 311 New Assistant United States Attorney PositionsRead the Press Release
SAN FRANCISCO- On the 500th day of the Trump Administration, Attorney General Jeff Sessions and Acting U.S. Attorney for the Northern District of California Alex G. Tse announced that the Department of Justice is taking a dramatic step to increase resources to combat violent crime, enforce our immigration laws, and help roll back the devastating opioid crisis.
In the largest increase in decades, the Department of Justice is allocating 311 new Assistant United States Attorneys to assist in priority areas. Those allocations are as follows: 190 violent crime prosecutors, 86 civil enforcement prosecutors, and 35 additional immigration prosecutors. Many of the civil enforcement AUSA’s will support the newly created Prescription Interdiction & Litigation Task Force which targets the opioid crisis at every level of the distribution system.
"Under President Trump's strong leadership, the Department of Justice is going on offense against violent crime, illegal immigration, and the opioid crisis—and today we are sending in reinforcements," said Attorney General Jeff Sessions. "We have a saying in my office that a new federal prosecutor is 'the coin of the realm.' When we can eliminate wasteful spending, one of my first questions to my staff is if we can deploy more prosecutors to where they are needed. I have personally worked to re-purpose existing funds to support this critical mission, and as a former federal prosecutor myself, my expectations could not be higher. These exceptional and talented prosecutors are key leaders in our crime fighting partnership. This addition of new Assistant U.S. Attorney positions represents the largest increase in decades."
In the Northern District of California, two of these AUSAs will focus on violent crime and one will focus on civil enforcement. In addition, the Northern District of California previously was allocated another two AUSA positions that were dedicated to violent crime. This brings the total number of newly allocated positions to five since January 2017.
“We are very pleased to receive additional resources consistent with the demonstrated needs of the district and the priorities of the Department of Justice,” said Acting US Attorney Tse. “We intend to take full advantage of these resources to efficiently and effectively prosecute violent crime and further build upon our robust civil fraud work.”
International Hacker-For-Hire Who Conspired with and Aided Russian FSB Officers Sentenced to 60 Months in PrisonRead the Press Release
Karim Baratov, aka Kay, aka Karim Taloverov, aka Karim Akehmet Tokbergenov, 23, was sentenced to five years in prison and ordered to pay a fine, which encompasses all of his remaining assets.
Assistant Attorney General for National Security John C. Demers, Acting U.S. Attorney Alex G. Tse for the Northern District of California, and Special Agent in Charge John F. Bennett of the FBI’s San Francisco Field Office made the announcement. The sentence was handed down today by U.S. District Judge the Honorable Vince Chhabria.
“Criminal hackers and the countries that sponsor them make a grave mistake when they target American companies and citizens. We will identify them wherever they are and bring them to justice,” said Assistant Attorney General Demers. “I would like to thank Canadian law enforcement authorities for their tremendous assistance in bringing Baratov to justice. We will continue to work with our foreign partners to find and prosecute those who would violate our laws.”
“The sentence imposed reflects the seriousness of hacking for hire,” said Acting U.S. Attorney Tse. “Hackers such as Baratov ply their trade without regard for the criminal objectives of the people who hire and pay them. These hackers are not minor players; they are a critical tool used by criminals to obtain and exploit personal information illegally. In sentencing Baratov to five years in prison, the Court sent a clear message to hackers that participating in cyber attacks sponsored by nation states will result in significant consequences.”
“It's difficult to overstate the unprecedented nature of this conspiracy, in which members of a foreign intelligence service directed and empowered criminal hackers to conduct a massive cyber-attack against 500 million victim user accounts,” said Special Agent in Charge Bennett. “Today's sentencing demonstrates the FBI's unwavering commitment to disrupt and prosecute malicious cyber actors despite their attempts to conceal their identities and hide from justice.”
Baratov, a Canadian national and resident, and three other defendants, including two officers of the Russian Federal Security Service (FSB), Russia’s domestic law enforcement and intelligence service, were charged with a number of offenses relating to the hacking of webmail accounts at Yahoo and other service providers. In particular, the defendants were charged in a computer hacking conspiracy in which the two Russian FSB officers hired criminal hackers to collect information through computer intrusions in the United States and abroad, which resulted in the unauthorized access of Yahoo’s network and the spear phishing of webmail accounts at other service providers between January 2014 and December 2016.
Baratov’s role in the charged conspiracy was to hack webmail accounts of individuals of interest to his coconspirator who was working for the FSB and send those accounts’ passwords to Dokuchaev in exchange for money.
The Indictment is available here, and its allegations are summarized in greater detail in the press release that attended the unsealing of the Indictment on March 15, 2017.
Baratov has been detained since his arrest in Canada in March 2017. Baratov waived extradition to the United States and was transferred to the Northern District of California in August 2017. In November 2017, Baratov pleaded guilty to Count One and Counts Forty through Forty-Seven of the Indictment. Count One charged Baratov, Dokuchaev, Sushchin and Belan with conspiring to violate the Computer Fraud and Abuse Act by stealing information from protected computers and causing damage to protected computers. Counts Forty through Forty-Seven charged Baratov and Dokuchaev with aggravated identity theft. As part of his plea agreement, Baratov not only admitted to agreeing and attempting to hack at least 80 webmail accounts on behalf of one of his FSB co-conspirators, but also to hacking more than 11,000 webmail accounts in total from in or around 2010 until his March 2017 arrest by Canadian authorities. In addition to any prison sentence, Baratov agreed to pay restitution to his victims, and to pay a fine up to $2,250,000, at $250,000 per count, with any assets he has remaining after satisfying a restitution award.
The FBI, led by the San Francisco Field Office, conducted the investigation that resulted in the charges in the Indictment. The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of California and the U.S. Department of Justice National Security Division’s Counterintelligence and Export Control Section, with support from the Justice Department’s Office of International Affairs.
International Hacker-For-Hire Who Conspired with and Aided Russian FSB Officers Sentenced to Five Years in PrisonRead the Press Release
SAN FRANCISCO – Karim Baratov, aka Kay, aka Karim Taloverov, aka Karim Akehmet Tokbergenov, 23, was sentenced to 60 months in prison and ordered to pay a $250,000 fine, which encompasses all of his remaining assets.
The sentence was announced by Acting U.S. Attorney Alex G. Tse for the Northern District of California, Assistant Attorney General for National Security John C. Demers, and Special Agent in Charge John F. Bennett of the FBI’s San Francisco Field Office. The sentence was handed down today by the Honorable Vince Chhabria, U.S. District Judge.
“The sentence imposed reflects the seriousness of hacking for hire,” said Acting U.S. Attorney Tse. “Hackers such as Baratov ply their trade without regard for the criminal objectives of the people who hire and pay them. These hackers are not minor players; they are a critical tool used by criminals to obtain and exploit personal information illegally. In sentencing Baratov to five years in prison, the Court sent a clear message to hackers that participating in cyber attacks sponsored by nation states will result in significant consequences.”
“Criminal hackers and the countries that sponsor them make a grave mistake when they target American companies and citizens. We will identify them wherever they are and bring them to justice,” said Assistant Attorney General Demers. “I would like to thank Canadian law enforcement authorities for their tremendous assistance in bringing Baratov to justice. We will continue to work with our foreign partners to find and prosecute those who would violate our laws.”
“It's difficult to overstate the unprecedented nature of this conspiracy, in which members of a foreign intelligence service directed and empowered criminal hackers to conduct a massive cyber-attack against 500 million victim user accounts,” said Special Agent in Charge John F. Bennett. “Today's sentencing demonstrates the FBI's unwavering commitment to disrupt and prosecute malicious cyber actors despite their attempts to conceal their identities and hide from justice.”
Baratov, a Canadian national and resident, and three other defendants, including two officers of the Russian Federal Security Service (FSB), Russia’s domestic law enforcement and intelligence service, were charged with a number of offenses relating to the hacking of webmail accounts at Yahoo and other service providers. In particular, the defendants were charged in a computer hacking conspiracy in which the two Russian FSB officers hired criminal hackers to collect information through computer intrusions in the United States and abroad, which resulted in the unauthorized access of Yahoo’s network and the spear phishing of webmail accounts at other service providers between January 2014 and December 2016.
Baratov’s role in the charged conspiracy was to hack webmail accounts of individuals of interest to his coconspirator who was working for the FSB and send those accounts’ passwords to Dokuchaev in exchange for money. The Indictment and additional documents setting out the allegations are available at www.justice.gov/usao-ndca/us-v-dmitry-dokuchaev-et-al.
Baratov has been detained since his arrest in Canada in March 2017. Baratov waived extradition to the United States and was transferred to the Northern District of California in August 2017. In November 2017, Baratov pleaded guilty to Count One and Counts Forty through Forty-Seven of the Indictment. Count One charged Baratov, Dokuchaev, Sushchin, and Belan with conspiring to violate the Computer Fraud and Abuse Act by stealing information from protected computers and causing damage to protected computers. Counts Forty through Forty-Seven charged Baratov and Dokuchaev with aggravated identity theft. As part of his plea agreement, Baratov not only admitted to agreeing and attempting to hack at least 80 webmail accounts on behalf of one of his FSB co-conspirators, but also to hacking more than 11,000 webmail accounts in total from in or around 2010 until his March 2017 arrest by Canadian authorities. In addition to any prison sentence, Baratov agreed to pay restitution to his victims, and to pay a fine up to $2,250,000, at $250,000 per count, with any assets he has remaining after satisfying a restitution award.
The FBI, led by the San Francisco Field Office, conducted the investigation that resulted in the charges in the Indictment. The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of California and the U.S. Department of Justice National Security Division’s Counterintelligence and Export Control Section, with support from the Justice Department’s Office of International Affairs.
North Bay Marijuana Distributor Pleads Guilty to Tax FraudRead the Press Release
SAN FRANCISCO – Charles T. Woods pleaded guilty in federal court in San Francisco today to tax fraud for underreporting income from his marijuana distribution business, announced Acting United States Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The plea was accepted by the Honorable Susan Illston, U.S. District Judge.
In pleading guilty, Woods, 44, of Santa Rosa, Calif., admitted he engaged in marijuana distribution in 2012, 2013, and 2014, and to knowingly and willfully filing U.S. Individual Income Tax Returns for those years that underreported income from his marijuana distribution. For all three years, Woods consistently reported business gross receipts on his tax returns of under $85,000 per year despite earning hundreds of thousands of dollars more. To evade bank currency transaction reporting requirements and conceal his income, Woods deposited more than $1 million into numerous bank accounts under his control in amounts less than $10,000. Combined, Woods failed to report more than $1.1 million in gross receipts from his marijuana distribution business, which resulted in a tax loss of $466,707 to the United States.
Woods was charged by information on April 25, 2018, with two counts of willfully making and subscribing false tax returns to the Internal Revenue Service, in violation of 26 U.S.C § 7206(1). Pursuant to today’s plea agreement, he pleaded guilty to one count and the second count will be dismissed.
Judge Illston scheduled Woods’ sentencing hearing for September 14, 2018. The maximum statutory penalty for willfully a violation of 26 U.S.C. § 7206(1) is three years in prison and a fine of $250,000. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney José A. Olivera is prosecuting this case with the assistance of Kathy Tat. The prosecution is the result of an investigation by IRS Criminal Investigation.
Former Child Psychologist Sentenced to 78 Months in Prison for Possession of Child Pornography and Contempt of CourtRead the Press Release
OAKLAND – Kenneth Allen Breslin was sentenced today to 78 months in prison for possessing child pornography and contempt of court, announced Acting United States Attorney Alex G. Tse and Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin. The sentence was handed down by the Honorable Yvonne Gonzalez Rogers, U.S. District Judge, following the entry of a guilty plea on March 1, 2018.
According to his guilty plea, Breslin, 69, of Berkeley, Calif., admitted to possessing well over 600 images and videos of child pornography on a variety of electronic devices at his former Lafayette residence and former psychology office in Orinda, including visual depictions of prepubescent children being subjected to sadistic conduct. While released on bond in this case, Breslin, a former child psychologist, also admitted possessing over 300 images and videos of child pornography, with some files depicting prepubescent children being subjected to sadistic conduct.
Further, Breslin admitted he willfully violated conditions of his pretrial release in this case. As a condition of his release, U.S. Magistrate Judge Jacqueline Corley ordered Breslin not to use a computer or access the internet. Nevertheless, Breslin: repeatedly accessed the internet through an Apple iPhone 6; used a laptop computer to access and possess child pornography images and videos; and used a thumb drive to access and possess child pornography material. Breslin was eventually detained pending trial in this case following his violations of pretrial release.
“We applaud today’s sentence as a reflection of our work to seek justice and protect the most vulnerable members of our community,” said Acting U.S. Attorney Tse. “These cases would not succeed but for the cooperation of many of our law enforcement partners. We are grateful to Homeland Security Investigations, the Contra Costa County District Attorney’s Office, and the Silicon Valley Internet Crimes Against Children Task Force.”
“A lengthy prison sentence is appropriate for these crimes, which involve repeatedly and willfully violating the law,” said Special Agent in Charge Spradlin. “What’s most disturbing about this particular case is that Breslin was in a position of public trust as a psychologist and had worked extensively with children in the past. HSI will do whatever it takes to continue investigating these types of crimes to hold people accountable for children being victimized here or abroad.”
On January 18, 2018, a federal grand jury returned a three-count superseding indictment charging Breslin with two counts of possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B), and one count of criminal contempt of court, in violation of 18 U.S.C. § 401(3).
In addition to the prison term, Judge Gonzalez Rogers ordered Breslin to serve a 5-year period of supervised release following his custodial sentence. Breslin voluntarily agreed to pay restitution totaling $85,000 to 13 victims in this case, and agreed to deposit that money into the court’s registry prior to his guilty plea, so that the victims will receive the money even while Breslin is serving his sentence. Further, as part of his release conditions, Judge Gonzalez Rogers ordered Breslin to register as a sex offender and participate in sex offender-specific treatment.
Breslin has been in custody since he was remanded due to his pretrial release violations in September of 2017, and he will begin serving the sentence immediately.
Assistant U.S. Attorney Christina McCall is prosecuting the case with assistance from Vanessa Quant. The prosecution is the result of an investigation by HSI, the Contra Costa County District Attorney’s Office, and the Silicon Valley Internet Crimes Against Children Task Force.
Tax Return Preparer Sentenced to A Year in PrisonRead the Press Release
OAKLAND – Eric Oase was sentenced today to 12 months and one day in prison for filing false claims with the United States, and ordered to pay restitution of $357,531.76, announced Acting United States Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The sentence was handed down by the Honorable Yvonne Gonzalez Rogers, U.S. District Judge, following the entry of Oase’s guilty plea to the charges on January 25, 2018.
Oase, 53, of Las Vegas, Nev., pleaded guilty to two counts of filing false claims with the United States. According to his plea agreement, Oase admitted to owning and operating E&K Tax Solutions in San Leandro, Calif., a business under which he prepared and filed false tax returns. In 2012, Oase prepared, and caused to be filed for his clients, tax returns covering varying calendar years between 2008 and 2011. The tax returns reported false wages, false education expenses, or both. Often, Oase caused to be delivered or filed on behalf of his clients tax returns that were preprinted and completed with income and expenses even before the taxpayer provided any income or expense information. By reporting false wages and expenses, Oase generated fraudulent tax refunds and then kept approximately 20% of the fraudulent refund as a fee. In total, Oase prepared tax returns claiming fraudulent tax refunds of $477,333. The IRS actually disbursed $357.531.76 pursuant to Oase’s scheme.
A federal grand jury indicted Oase on January 17, 2017, charging him with multiple counts of filing false claims with the United States, in violation of 18 U.S.C. § 287. Pursuant to his plea agreement, Oase pleaded guilty to two of the counts and the remaining counts were dismissed.
In addition to the prison term, Judge Gonzalez Rogers also ordered Oase to serve three years of supervised release. Judge Gonzalez Rogers ordered the defendant to self-surrender to begin serving his sentence on or before July 16, 2018.
Assistant U.S. Attorney José A. Olivera is prosecuting the case. The prosecution is the result of an investigation by IRS, Criminal Investigation.
Taj Armon Reid Convicted of Conspiracy and Receiving BribesRead the Press Release
SAN FRANCISCO – Taj Armon Reid was convicted of conspiracy and receiving bribes by a federal jury today, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge Jack Bennett. The guilty verdicts followed a four-day jury trial before the Honorable Charles R. Breyer, U.S. District Court Judge.
The jury found that Reid, 47, of Oakland, received bribes on two occasions in connection with business being offered by the California Department of Veterans Affairs, also known as CalVet. The jury also concluded Reid conspired to receive the bribes with Eric Worthen, 46, of Pleasant Hill, who at the time was an employee of CalVet.
Evidence at trial showed that Reid accepted cash from a source on April 18, and again on May 8. In April, Reid offered a developer an inside advantage on two CalVet construction projects in exchange for $10,000 cash. Specifically, Reid offered to use Worthen’s position at CalVet to circumvent the normal bidding process for a residential home project in Ventura, California. The May transaction involved a kitchen remodel project at the veterans’ home in West Los Angeles. On this occasion, Reid and Worthen accepted $2,000 cash in exchange for providing to the developer inside information that the co-conspirator took from the CalVet office. Unbeknownst to Reid and Worthen, the “developer” to whom they were providing an inside track on the CalVet contracts was a source working under the direction of the FBI and posing as a developer willing to pay bribes in order to obtain contracts with public agencies. At the conclusion of the trial, the jury found Reid guilty of conspiracy, in violation of 18 U.S.C. § 371, and two counts of receiving a bribe or reward, in violation of 18 U.S.C. § 666(a)(1)(B).
“Defendant Reid, motivated by the lure of easy money, attempted to take advantage of inside access to state contract,” said Acting U.S. Attorney Tse. “The kind of ‘pay to play’ corruption exposed in this case is unfair to honest government contractors, inflates the cost of public projects, and undermines the public’s confidence in the integrity of government agencies and their employees. Combatting public corruption is and will continue to be a priority of the U.S. Attorney’s Office.”
Reid’s sentencing hearing is scheduled for August 29, 2018, before Judge Breyer in San Francisco. The maximum statutory penalty for the violation of 18 U.S.C. § 371 is five years and a fine of $250,000, and the maximum penalty for the violations of 18 U.S.C. § 666(a)(1)(B) is ten years and a fine of $250,000. However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Worthen pleaded guilty in August of 2017 to his part in the conspiracy and for taking bribes. His sentencing is scheduled has not yet been scheduled.
The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office and the FBI, with assistance from the Department of Treasury, Office of Inspector General.
San Francisco Methamphetamine Trafficker Sentenced to Ten Years in PrisonRead the Press Release
SAN FRANCISCO – Michael Pon was sentenced today to 120 months in prison for his role in a conspiracy to possess with the intent to distribute methamphetamine and related charges announced Acting United States Attorney Alex G. Tse and Drug Enforcement Administration (DEA), Special Agent in Charge, San Francisco Field Division, Chris Nielsen. The sentence was handed down by the Honorable Vince Chhabria, U.S. District Judge.
Pon, 46, of San Francisco, was convicted on February 2, 2018, after a week-long jury trial. The evidence at trial demonstrated Pon set the prices, arranged for the supply, and collected the money for drug deals in which he engaged with his co-defendants, Kenneth Ng and Flavia Lino. Pon participated in three controlled purchases of pure methamphetamine, in amounts ranging from a quarter pound to one pound, during the months of January and February 2014. He supplied the drugs for each transaction, and received the bulk of the money as a result of the sales. On April 23, 2014, Pon helped arrange and then called off a transaction for 11 pounds of methamphetamine after an undercover government agent refused to show the money to pay for the drugs.
On June 18, 2015, a federal grand jury indicted Pon and charged him with two counts of distributing methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(A)(viii), and one count of conspiracy to distribute methamphetamine, in violation of 18 U.S.C. § 846. Pon was convicted on all three counts.
In addition to the prison term, Judge Chhabria also ordered Pon to serve a five-year period of supervised release.
Pon’s co-defendants are currently in custody. Lino pleaded guilty to distributing methamphetamine and participating in the conspiracy, while Ng was convicted after a bench trial. On December 19, 2017, Judge Chhabria sentenced Ng to ten years in prison for his role in the drug distribution scheme. On February 14, 2018, Judge Chhabria found Ng in criminal contempt for refusing to testify during the Pon trial. On March 30, 2018, Judge Chhabria sentenced Ng to 180 days of confinement for his refusal to testify. Similarly, on March 27, 2018, Judge Chhabria sentenced Lino to serve an additional 180 days of confinement for having been found in criminal contempt for her refusal to testify during Pon’s trial. Earlier, U.S. District Judge Susan Illston sentenced Lino to 36 months in prison for Lino’s part in the drug distribution scheme.
Assistant U.S. Attorneys Meredith Osborn and Brian Faerstein are prosecuting the case. The prosecution is the result of an investigation by the DEA.
Bay Area Doctors Agree to Pay $260,000 to Settle Department of Justice Claims That They Failed to Maintain Adequate Records Regarding Controlled SubstancesRead the Press Release
SAN FRANCISO – Drs. William Longton, Ruben Kalra, and Richard Shinaman have agreed to collectively pay $260,000 to settle allegations by the U.S. Department of Justice that they failed to keep and maintain adequate records and other allegations pertaining to controlled substances at their Novato, Pleasant Hill, and Pleasanton offices, announced Acting United States Attorney Alex G. Tse and Drug Enforcement Administration (DEA), Special Agent in Charge, San Francisco Field Division, Christopher D. Nielsen.
The settlement agreement resolves allegations by the government that a January 2014 DEA inspection uncovered multiple violations by Longton, Kalra, and Shinaman of the Controlled Substances Act, 21 U.S.C. § 801. The physicians operate under the name Pain Medicine Consultants, Inc., with offices in multiple Bay Area locations. In the agreement, the physicians acknowledge that they each, at the relevant time, were registered with the DEA as Practitioners, providing them with authorizations to handle Schedules II through V controlled substances. They also acknowledge they had an obligation to “keep and maintain” records related to their receipt and distribution of controlled substances in connection with their practices. According to the agreement, following the DEA’s inspection, the government concluded that between January 10, 2012, through January 17, 2014, Shinaman, Longton, and Kalra failed to keep and maintain adequate records pertaining to controlled substances, as required by 21 C.F.R. § 1304, et seq.; failed to include the address of the patient on controlled substance prescriptions that they each issued as required by 21 C.F.R. § 1306.05(a); and exceeded the authority of their registrations by filling a prescription for a controlled substance, in violation of 21 C.F.R. § 1306.06.
According to the terms of the agreement, Longton, Kalra, and Shinaman will collectively pay the government $260,000 to resolve all civil claims related to the violations identified in the investigation.
Assistant U.S. Attorney Rebecca A. Falk is handling the matter on behalf of the U.S. Attorney’s Office for the Northern District of California, with assistance from the DEA San Francisco Field Division, Oakland Resident Office Diversion Group.
Orinda Man Pleads Guilty to Transportation of Child PornographyRead the Press Release
SAN FRANCISCO– John D. Warbritton, III pleaded guilty today to transportation of child pornography, announced Acting United States Attorney Alex G. Tse, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin, Drug Enforcement Administration (DEA) Special Agent in Charge Chris Nielsen, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The guilty plea was accepted by the Honorable Charles R. Breyer, U.S. District Judge.
According to his plea agreement, on March 27, 2016, Warbritton, 64, a former resident of Orinda, Calif., traveled from Bangkok, Thailand, to San Francisco International Airport (SFO) with electronic devices containing child pornography. Specifically, Warbritton was traveling with a laptop and a cellular telephone both of which contained images depicting children under the age of 12 engaged in sexually explicit conduct. The plea agreement describes some of the images that were on the devices, including depictions of grown men engaged in sexual acts with girls under the age of 12. Warbritton stipulated that between 150 and 300 images of child pornography were on his electronic devices as he traveled to SFO.
A federal grand jury indicted Warbritton on October 13, 2016, charging him with one count of transportation of child pornography and access with intent to view child pornography, in violation of 18 U.S.C. §§ 2252A(a) and (b). Pursuant to the plea agreement, Warbritton pleaded guilty to the charge.
Judge Breyer scheduled a sentencing hearing for August 8, 2018, at 10:00 a.m.. The maximum statutory sentence for violating 18 U.S.C. § 2252 is a 20-year prison term. Additional fines, victim restitution, and a term of supervised release also may be imposed; however, any sentence following conviction will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Sheila Armbrust is prosecuting the case with the assistance of Ana Guerra. The prosecution is the result of an investigation by HSI, DEA, and IRS-CI.
If members of the public have any information relevant to this investigation or to suspected child predators or suspicious activity, they should contact Homeland Security Investigations through the toll-free Tip Line at 1-866-DHS-2-ICE or complete the online tip form at: https://www.ice.gov/webform/hsi-tip-form. Both are staffed around the clock by investigators. Suspected child sexual exploitation or missing children may also be reported to the National Center for Missing & Exploited Children, an Operation Predator partner, via its toll-free 24-hour hotline, 1-800-THE-LOST.
Novato Man Sentenced to 84 Months in Prison for Possession of Child PornographyRead the Press Release
SAN FRANCISCO - David Andrew Nielsen was sentenced today to 84 months in prison for possessing child pornography, announced Acting United States Attorney Alex G. Tse and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin. The sentence was handed down by the Honorable Susan Illston, U.S. District Judge, following the entry of a guilty plea on February 2, 2018.
According to his guilty plea, Nielsen, 54, of Novato, Calif., admitted to possessing over 600 images and videos of child pornography, including images of minors younger than 12 years old and portrayals of the sexual abuse or exploitation of an infant or toddler. Further, in determining the applicable calculation under the United States Sentencing Guidelines, Judge Illston found that an enhancement should be imposed because the defendant engaged in a pattern of activity involving the sexual abuse or exploitation of a minor.
On August 31, 2017, a federal grand jury returned a one-count indictment charging Nielsen with possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4)(B).
In addition to the prison term, Judge Illston ordered Nielsen to serve a 7-year period of supervised release following his custodial sentence. As part of his release conditions, Nielsen must register as a sex offender and participate in sex offender-specific treatment. Nielsen has been in custody since his arrest in August 2017, and he will begin serving the sentence immediately.
Assistant U.S. Attorneys Sailaja M. Paidipaty and Christina McCall are prosecuting the case with assistance from Marina Ponomarchuk and Michelle Alter. The prosecution is the result of an investigation by ICE, the Novato Police Department, the Concord Police Department, and the Silicon Valley Internet Crimes Against Children task force.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Fugitive Marijuana Trafficker Sentenced to PrisonRead the Press Release
SAN FRANCISCO – Peyton Erwin Eidson was sentenced this morning to 36 months in prison for aggravated identity theft and conspiracy to distribute marijuana, announced Acting United States Attorney Alex G. Tse, Special Agent in Charge Matthew Perlman of the U.S. State Department’s Diplomatic Security Service San Francisco Field Office, and Drug Enforcement Administration (DEA) Assistant Special Agent in Charge Chris Nielsen. The sentence was handed down by the Honorable Susan Illston, U.S. District Judge, following Eidson’s guilty plea to the charges on January 5, 2018.
According to his plea agreement, Eidson admitted he had been a part of a conspiracy to import almost 6,700 pounds of marijuana from Thailand in the mid-80s. Eidson admitted that he went to Thailand to arrange for the load and that he tracked the distribution of those drugs once they made it to the United States. Eidson also admitted he fled the United States in 1985, after he was arrested in connection with the drug offense, and that he obtained a passport in another person’s name to facilitate his flight. He further admitted he renewed that passport in 1995 and 2005, and that he submitted false information to the State Department each time he did so. Eidson eventually settled in Australia and lived there under his assumed identity for approximately 26 years, until agents from the Diplomatic Security Service discovered who he was. Eidson was returned to the United States in 2017 to face drug charges filed against him in 1988 (based on the 1985 conduct) and charges arising out of his use of fraudulent documents to obtain U.S. passports.
“Peyton Eidson’s arrest and successful prosecution, 32 years later, should send a strong message to all fugitives of crime, and to the community, that the government will not give up just because time has passed,” said Acting United States Attorney Tse. “Mr. Eidson was involved in an international smuggling ring responsible for transporting a large amount of drugs. Today, he has finally answered for his crime,” Tse said.
“Our tremendous success in finally closing this decades-old case could never have been possible if not for the diligent efforts of our Diplomatic Security Service colleagues overseas and the assistance and close cooperation of the Australian Federal Police,” said Special Agent in Charge Perlman of the U.S. State Department’s Diplomatic Security Service.
The investigation of Eidson’s participation in drug trafficking began in 1985 with an undercover operation involving special agents from the Drug Enforcement Administration and deputies from the Sonoma County Sheriff’s Department. On August 8, 1985, DEA agents and sheriff’s deputies arrested Eidson and several others in Santa Rosa, Calif. The next day, they seized about 2,000 of the 6,700 pounds of marijuana that Eidson and others had imported from Thailand. Eidson fled the country shortly after that arrest, while his co-defendants were convicted of drug trafficking and importation charges.
The sentence was handed down by the Honorable Susan Illston, U.S. District Judge. The defendant is in custody and will begin serving his sentence immediately.
This case was investigated and prosecuted by member agencies of the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies.
Bay Area Executive Indicted in Investment Fraud SchemeRead the Press Release
SAN FRANCISCO – Bay Area executive and Croatian national Renato Libric was arrested yesterday in Redwood City, Calif., on charges related to an alleged $1.5 million investment fraud scheme, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. In an indictment filed yesterday and unsealed this morning, a federal grand jury charged Libric with forging signatures on documents to carry out the fraud.
According to the indictment, between August of 2017 and February of 2018, Libric, 39, was a shareholder in, and chief executive officer of, Delaware corporation Bouxtie, Inc. The indictment alleges Libric fraudulently placed on a term sheet the signature of an executive of a large publicly traded corporation. The term sheet indicated the publicly traded corporation was interested in purchasing Bouxtie at a price of $150,000,000. Libric then allegedly caused the fraudulent term sheet to be transmitted to potential investors. In addition, the indictment alleges Libric fraudulently placed the signatures of several members of Bouxtie’s board of directors on a Bouxtie corporate resolution. The corporate resolution purported to authorize Libric to enter into agreements pursuant to which Bouxtie could receive a $1.5 million loan from a Las Vegas-based company. Under the terms of the loan, the Las Vegas investor eventually would receive just under 4% of the shares of Bouxtie. According to the indictment, the Las Vegas company was, in fact, defrauded and invested $1.5 million in Bouxtie. Further, the indictment alleges that after the $1.5 million was deposited into a Bouxtie bank account, Libric withdrew more than $130,000 of the invested funds from the account. In sum, the indictment charges Libric with one count of wire fraud, in violation of 18 U.S.C. § 1343 and 2.
Libric made his initial appearance this morning in before Joseph C. Spero, United States Magistrate Judge. Libric’s next appearance is scheduled for May 15, 2018, before Magistrate Judge Spero for identification of counsel and issues related to pretrial detention or release.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of 20 years in prison. 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 Matthew McCarthy is prosecuting the case with assistance from Bridget Kilkenny. This prosecution is the result of an investigation by the Federal Bureau of Investigation.
Salinas Gang Member Sentenced to over Nine Years in Prison for Multiple Bank RobberiesRead the Press Release
SAN FRANCISCO – Francisco Javier Marmolejo, aka “Blindy,” was sentenced to 114 months in prison today for robbing and conspiring to rob three San Francisco Bay Area banks, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The sentence was handed down by the Honorable Lucy H. Koh, United States District Judge, following Marmolejo’s guilty plea to the bank robbery on January 5, 2018.
According to the plea agreement, Marmolejo, 36, of Salinas admitted robbing Bay Area banks on three occasions between November of 2011 and January of 2012. Marmolejo admitted that on November 9, 2011, together with others, he robbed a bank in Pacific Grove, Calif. Marmolejo admitted that at least one of the robbers brandished a firearm and that he was the getaway driver while his fellow robbers went inside the bank to rob it. On that occasion, Marmolejo and his fellow robbers stole approximately $18,383.00 from the bank. Further, on December 2, 2011, Marmolejo, together with others, robbed a bank in Seaside, Calif. Marmolejo acknowledged that on that occasion, he brandished a firearm during the robbery. Finally, on January 19, 2012, Marmolejo, together with others, robbed a bank in Salinas, Calif., during which one of the robbers brandished a gun.
In addition to the three robberies in which Marmolejo admitted he participated, he also admitted that in March of 2012, he possessed three semi-automatic handguns, bear repellant, three ballistic vests, three ski masks, and other items all of which were used and intended to be used during the commission of bank robberies and to avoid detection by law enforcement.
On January 3, 2018, Marmolejo was charged by superseding information with one count of conspiracy to commit armed bank robbery, in violation of 18 U.S.C. § § 2113(a) and (d), and 371; one count of armed bank robbery, in violation of 18 U.S.C. § § 2113(a) and (2) and 2; and one count of use or possession of a firearm in furtherance of a crime of violence, in violation of 18 U.S.C. § § 924(c)(1)(A) and 2. Pursuant to his plea agreement, Marmolejo pleaded guilty to all counts in the superseding information. Marmolejo was originally indicted on some of these charges on November 8, 2016. On December 18, 2017, Marmolejo’s co-defendant Jorge Lopez, aka “Cowboy,” pleaded guilty to the same charges. Judge Koh scheduled Lopez’s sentencing for July 11, 2018.
In addition to the prison term, Judge Koh also ordered Marmolejo to pay restitution in the amount of $52,854.00 and to serve five years of supervised release to begin after his prison term. Marmolejo currently is in state custody serving a 12-year prison sentence, part of which will be credited to his federal term. Upon his release from state custody, Marmolejo will have approximately 104 months remaining on his federal sentence.
The case is being prosecuted by Assistant U.S. Attorney Claudia A. Quiroz with the assistance of paralegal Jessica Meegan and legal assistant Lance Libatique. The prosecution is the result of an investigation by the FBI.
Former South Bay Resident Convicted of Defrauding Japanese Investors in Almost $7 Million Ponzi SchemeRead the Press Release
SAN FRANCISCO – Kevin Kyes was convicted of one count of conspiracy to commit wire fraud, seventeen counts of wire fraud, one count of conspiracy to commit money laundering, and two counts of money laundering by a federal jury today, announced Acting United States Attorney Alex G. Tse, Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and the Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The jury’s verdict followed a week-long trial before the Honorable Susan Illston, U.S. District Judge.
The jury found that Kyes, 69, formerly of Campbell, Calif. and currently of Roseville, Calif., conspired to commit wire fraud and committed wire fraud as part of a nearly $7 million Ponzi scheme in which the victims were a group of more than 60 Japanese investors. The jury also found that Kyes conspired to and did launder the proceeds of this fraud. The jury acquitted Kyes of one count of wire fraud.
The evidence at trial showed that, from December 2012 through July 2015, Kyes worked with John Holdaway, 73, of Sandy, Utah, to defraud the Japanese investors through a business that they referred to as “Money Management Strategies,” or MMS. Kyes and Holdaway told the investors their money would be invested in high-speed trading programs with historical returns of well over 100% annually. Kyes and Holdaway also told investors that their investments would be safe, in part because their principal investment would never leave the bank accounts into which the funds were sent, and that instead, MMS would draw a credit line secured by their funds and use that to fund trading. Kyes and Holdaway further explained that any trading losses would be borne by MMS. Based on the representations of Holdaway and Kyes, these investors wired money to bank accounts in Northern California controlled by Holdaway and Kyes. The Japanese investors sent approximately $6.8 million to Holdaway and Kyes during the scheme.
The evidence at trial demonstrated that, in reality, Holdaway and Kyes did not invest the money as promised. Instead, they spent the money themselves, used it to fund Ponzi-type payments back to investors, spent the money to pay back prior creditors to whom they owed funds, and spent it on gold-related businesses. In addition, Holdaway and Kyes told investors that they were receiving distributions or returns on their investment. To back up their claims, Holdaway and Kyes created and sent to investors fake documents, including phony account statements and forged letters from an accountant. Holdaway, with Kyes’s knowledge and participation, also sent emails to investors under fake names, to give the appearance that multiple people worked for Holdaway and Kyes, and lied about traveling to Europe or elsewhere to work on their investments.
On June 14, 2016, a federal grand jury indicted Kyes and Holdaway charging them with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; eighteen counts of wire fraud, in violation of 18 U.S.C. § 1343; one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1956(h); and five counts of engaging in monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.
On October 6, 2017, Holdaway pleaded guilty to one count of conspiracy to commit wire fraud. His next appearance is a status conference scheduled for October 5, 2018, at 11:00 a.m., before Judge Illston.
Kyes’s sentencing hearing on today’s convictions is scheduled for August 17, 2018, at 11:00 a.m., before Judge Illston, in San Francisco. The maximum statutory penalty for each count of conspiracy to commit wire fraud and wire fraud is 20 years in prison, a fine of $250,000, 3 years of supervised release, forfeiture, and restitution. The maximum statutory penalty for each count of conspiracy to commit money laundering and money laundering is 10 years in prison, a fine of $250,000, 3 years of supervised release, forfeiture, and restitution. Any sentence following conviction, however, will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Benjamin Kingsley and Helen Gilbert are prosecuting the case with assistance from Bridget Kilkenny and Patricia Mahoney. The prosecution is the result of an investigation by the FBI and the IRS, Criminal Investigation.
Dublin Man Sentenced to 16 Months in Prison for Filing False Corporate Tax ReturnRead the Press Release
OAKLAND –Shiv D. Kumar, the former president and sole shareholder of A-Paratransit Inc. (API), was sentenced today to 16 months in prison for filing a false corporate tax return with the Internal Revenue Service, announced Acting U.S. Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The sentence was handed down by the Honorable Jon S. Tigar, U.S. District Judge, following the entry of a guilty plea on April 20, 2018, in which Kumar admitted underreporting income on API’s 2010 corporate tax return.
Kumar, 61, of Dublin, Calif., was the sole shareholder and president of API, a multi-million dollar company that provided transportation services to disabled individuals in the Bay Area. Kumar filed false corporate returns with the IRS for tax years 2008, 2009, and 2010. The returns underreported API’s gross receipts in total by more than $4 million, resulting in a tax loss to the United States of more than $1.4 million. Kumar deposited API’s gross receipts into multiple bank accounts, concealed millions of dollars in gross receipts, and caused API to provide its tax return preparer with doctored and incomplete bookkeeping records showing less in gross receipts than API actually received. Kumar further admitted the unreported gross receipts were used to purchase real property in California.
In addition to the prison term, Judge Tigar ordered Kumar to serve a one-year term of supervised release. Judge Tigar ordered Kumar to self-surrender on or before June 15, 2018, to begin serving his prison term.
Assistant U.S. Attorney Jose A. Olivera is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Radiation Control Technician Supervisors Sentenced for Falsifying Former Hunter’s Point Naval Shipyard Clean-Up RecordsRead the Press Release
SAN FRANCISCO – Stephen C. Rolfe and Justin E. Hubbard have been sentenced to eight months in prison for falsifying records in a federal investigation, announced Acting United States Attorney Alex G. Tse; U.S. Nuclear Regulatory Commission Office of Investigations (NRC:OI) Acting Director Scott Langan; Environmental Protection Agency (EPA) Special Agent in Charge Jay Green; and Department of Defense, Office of Inspector General, Defense Criminal Investigative Service (DOD-OIG), Special Agent in Charge Chris D. Hendrickson. Both defendants supervised a team of radiation control technicians retained to conduct radiological remediation at the former Hunter’s Point Naval Shipyard. The Honorable James Donato, United States District Judge, sentenced the defendants after each pleaded guilty to falsifying documents in related criminal cases. The cases against Hubbard and Rolfe were unsealed yesterday during Hubbard’s sentencing proceedings.
Yesterday, Judge Donato sentenced Hubbard, 48, of Boulder City, Nevada, to eight months in prison for falsifying documents. Hubbard pleaded guilty on May 10, 2017, to the offense. On March 15, 2017, Rolfe, 65, of Bradenton, Florida, pleaded guilty to falsifying documents. On January 24, 2018, Judge Donato sentenced him to serve eight months in prison for the offense.
“When our community’s health and safety is in jeopardy, we must vigilantly respond with all of our law enforcement tools,” said Acting United States Attorney Tse. “This sentence reflects our commitment to ensure that bogus reports intended to deceive the protectors of our environment will be investigated and prosecuted to the fullest extent of the law. We could not have achieved this success without the coordinated efforts of the Justice Department and our partner agencies.”
“Today’s announcement by the U.S. Attorney’s Office reaffirms the NRC’s continuing commitment to protecting public health, safety and the environment. The collaborative work of all federal agencies involved in this case serves as a reminder that the NRC will hold accountable any individual who willfully provides inaccurate and incomplete information to a safety regulator,” said NRC Executive Director for Operations Victor M. McCree.
“Accurate data is a critical component of EPA’s efforts to protect communities and the environment at Superfund sites,” said Assistant Administrator Susan Bodine. “Yesterday’s sentence demonstrates that those who place communities at risk by deliberately falsifying information will be held accountable.”
“Rolfe and Hubbard’s lies and shortcuts in the soil-testing process potentially put the community at risk and frustrated the contracting efforts of the U.S. Navy to test and remediate soil at the former Hunter’s Point Naval Shipyard,” said Special Agent in Charge Hendrickson. “These results demonstrate that DCIS and its law enforcement partners are committed to holding accountable those who cheat the Department of Defense procurement process and U.S. taxpayers.”
According to their plea agreements (Hubbard, Rolfe), the defendants were employed by government contractors performing nuclear remediation work at the former Hunter’s Point Naval Shipyard located in the Bayview District of San Francisco. Contractors at the site were expected to take soil from certain marked sampling locations, referred to as survey units, have the samples bagged and labeled, and then send them to a laboratory for analysis to determine, among other things, whether they contained certain radionuclides above an acceptable level. If a laboratory analysis determined a collected sample to contain a higher-than-allowable level of radionuclides of concern, then additional remediation of the survey area was to be conducted until all samples passed laboratory analysis. The defendants admitted that, rather than take samples from the intended survey units undergoing analysis, they participated in the substitution of dirt that was “clean” (containing acceptable levels of radionuclides) fraudulently taken from other areas within the former naval base.
As part of his plea agreement, Hubbard admitted that during 2012, he drove his company truck to an area outside the marked survey unit that he was tasked with remediating, and filled a bucket with clean dirt that he then substituted for legitimate soil samples. He then placed bar code stickers on the bags of dirt that misidentified the locations from where the samples were obtained. Hubbard acknowledged that he knew he was falsifying data that would ultimately be submitted to the U.S. Navy to demonstrate the area had been successfully remediated. Hubbard specifically admitted that on May 31, 2012, he fraudulently switched soil samples for four survey units at the former naval shipyard.
Rolfe admitted that he directed employees on his team to get clean dirt from outside the appropriate marked survey units and to substitute this clean dirt for legitimately collected samples. Rolfe estimated that he told his subordinates to obtain clean dirt in this manner on approximately twenty occasions in 2012. Rolfe further admitted that during this period, he observed forms containing this false information being filled out on between ten and twenty occasions. Rolfe admitted that on one occasion in August 2012, he personally falsified data on a tracking sheet to suggest that a sample of soil came from an area that he knew it did not. Rolfe acknowledged that he knew his conduct would impede the proper investigation and administration of the U.S. Navy’s radiological remediation efforts at the former naval shipyard.
Hubbard and Rolfe both were charged by information (Hubbard, Rolfe), each with one count of destruction, alteration, or falsification of records in federal investigations and bankruptcy, in violation of 18 U.S.C. § 1519. Pursuant to their plea agreements, they each pleaded guilty to the charge.
In addition to their prison terms, Hubbard and Rolfe were ordered to pay fines of $10,000 and $2,000, respectively. Both will be placed on a three-year period of supervised release following their prison sentences. Counsel for the defendants informed the Court that both defendants no longer work in the remediation industry. Judge Donato ordered Hubbard to self-surrender on or before July 9, 2018, to begin serving his sentence. Rolfe is currently serving his sentence.
Assistant U.S. Attorneys Philip Kearney and Matthew McCarthy are prosecuting the case with the assistance of paralegal Alycee Lane, and legal assistants Bridget Kilkenny and Rosario Calderon. The prosecution is the result of an investigation by the NRC:OI, EPA, and DOD-OIG.
Former Netflix, Inc. VP Charged in Scheme to DefraudRead the Press Release
SAN JOSE – Michael Kail was arraigned in federal court today on an indictment that charges him with a scheme to defraud his former employer, Netflix, Inc., announced Acting United States Attorney Alex G. Tse, Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. A federal grand jury handed down the indictment on April 26, 2018, and U.S. Magistrate Judge Nathanael M. Cousins unsealed the indictment during today’s proceedings.
According to the indictment, Kail, 49, of Los Gatos, accepted kickbacks in exchange for approving payments to at least nine tech companies that were seeking to do business with Netflix. The indictment alleges that between February 2012 and July 2014, Kail, formerly a Netflix Vice President in charge of the company’s Internet Technology department, executed a scheme to defraud Netflix of its right to Kail’s employment without conflicts of interest resulting in bribes or kickbacks, commonly known as honest services fraud. Using the mail and interstate wires, including emails and an online document-signing platform, Kail received over $500,000 from at least three outside companies with which Netflix did business. Kail further sought and received valuable stock options from numerous other Netflix business partners. In exchange for these payments, Kail allegedly approved millions of dollars in contracts for goods and services to be provided to Netflix by these companies. The indictment alleges Kail created and controlled a limited liability company, Unix Mercenary LLC, to receive these kickback payments, which he used to pay personal expenses and to purchase a residence in Los Gatos, Calif.
In sum, the indictment charges nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering, in violation of 18 U.S.C. §§ 1341, 1343, 1346, and 1957. The indictment also seeks forfeiture of Kail’s Los Gatos property.
Kail was released on a $200,000 bond that is secured by the Los Gatos residence. Kail’s next appearance is scheduled for July 10, 2018, before the Honorable Beth Labson Freeman, U.S. District Judge, for a status conference.
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Kail faces a maximum sentence of twenty years in prison and a fine of $1,000,000, or twice his gross gain or twice the gross loss to Netflix, whichever is greater, for each count of wire or mail fraud, and ten years in prison and a fine of $250,000 for each count of money laundering. 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 Colin Sampson is prosecuting the case. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation.
Former Autonomy CFO Convicted of Wire FraudRead the Press Release
SAN FRANCISCO – Sushovan Hussain, the former Chief Financial Officer of Autonomy Corporation plc, was convicted of one count of conspiracy, fourteen counts of wire fraud and one count of securities fraud by a federal jury today, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The verdict follows a two-month trial before the Honorable Charles R. Breyer, U.S. District Judge.
“The jury verdict affirms that corporate criminals who cook their company’s books to the detriment of victims in the United States, and specifically this district, will be held to account in our courts,” said Acting United States Attorney Alex G. Tse. “From 2009 to 2011, Sushovan Hussain misused his special skills in accounting to falsely inflate Autonomy’s revenues. The defendant then touted Autonomy’s false and misleading financial statements to senior executives at Hewlett-Packard Company, and eventually defrauded HP of over $11.7 billion. Corporate citizens and their shareholders, just like all citizens, deserve the full protection of our criminal laws. I am proud of the sustained investigative commitment by our partners at the FBI and appreciate the cooperation of the Financial Reporting Council and Serious Fraud Office in the United Kingdom.”
“Today's verdict is a massive victory for the victim company, our community and for the American people," said FBI San Francisco Division Special Agent in Charge John F. Bennett. "Such egregious dishonesty in business practice violates the trust of our citizens and will not be tolerated by the FBI and our law enforcement partners.”
In 2011, Hewlett-Packard Company acquired Autonomy, the former software technology company, for about $11.7 billion. The evidence at trial demonstrated that for more than two years prior to the sale, Hussain, 54, a citizen and resident of the United Kingdom, falsely inflated Autonomy’s revenues to make it appear Autonomy was growing when it really was not. Specifically, Hussain used backdated contracts, roundtrips, channel stuffing, and other forms of accounting fraud to inflate Autonomy’s publicly-reported revenues by as much as 14.6% in 2009, 17.9% in 2010, 21.5% in the first quarter of 2011, and 12.4% in the second quarter of 2011.
In addition, Hussain, and his co-conspirators, fraudulently concealed from investors and market analysts the scale of Autonomy’s hardware sales, which were used to boost the company’s reported top-line revenue. Autonomy’s total revenues included re-sold hardware of approximately $53.3 million in 2009, $99.08 million in 2010, $20.09 million in the first quarter of 2011, and $20.85 million in the second quarter of 2011. The evidence at trial demonstrated that Hussain falsely suggested to Autonomy investors and analysts that the loss-generating hardware revenue was really high-margin software revenue.
On November 10, 2016, a federal grand jury indicted Hussain charging him with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and 14 counts of wire fraud, in violation of 18 U.S.C. § 1343. On May 4, 2017, the federal grand jury handed down a superseding indictment adding one count of securities fraud. The Jury convicted the defendant on all counts in the superseding indictment.
Until its acquisition by HP on October 3, 2011, Autonomy Corporation plc was a company incorporated in England and Wales with a registered office in Cambridge, United Kingdom. Autonomy was the holding company of a group of companies engaged in software development and distribution. Autonomy maintained dual headquarters in San Francisco, California, and Cambridge. Autonomy’s major subsidiaries included Autonomy, Inc., with offices in San Francisco and San Jose; Interwoven, Inc., with offices in San Jose; and ZANTAZ, Inc., with offices in Pleasanton. Until 2011, Autonomy was a public company whose shares were listed on the London Stock Exchange under the trading symbol “AU” and were bought, held, and sold by individuals and entities throughout the United States. Autonomy reported total revenues of approximately $739 million in 2009 and approximately $870 million in 2010.
Judge Breyer scheduled Hussain’s next court appearance for Friday, May 4, 2018, at which time the court will consider conditions for the defendant’s continued release and a schedule for sentencing. The defendant faces a maximum sentence of twenty (20) years in prison, and a fine of $250,000, plus restitution, for the conspiracy count and each of the wire fraud counts. The defendant faces a maximum sentence of twenty-five (25) years in prison, and a fine of $250,000, plus restitution, for the securities fraud count. However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Robert S. Leach, Adam A. Reeves, and William Frentzen are prosecuting the case with the assistance of Beth Margen, Phillip Villanueva, Bridget Kilkenny, and Allen Williams. The prosecution is the result of investigations by the FBI and the United States Securities and Exchange Commission.
South Bay Resident Sentenced to over Four Years in Prison for Scheme to Illegally Structure Cash Deposits from Marijuana SalesRead the Press Release
SAN FRANCISCO– Steven J. Nemec was sentenced today to 57 months prison and ordered to forfeit $80,000 for structuring cash transactions, announced Acting U.S. Attorney Alex G. Tse, Drug Enforcement Administration (DEA) Assistant Special Agent in Charge Chris Nielsen, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The sentence was handed down by the Honorable Susan Illston, U.S. District Judge, following Nemec’s entry of a guilty plea on September 1, 2017.
According to his guilty plea, between November 14, 2012, and September 24, 2013, Nemec, 46, of Santa Clara, Calif., used seven bank accounts to structure 175 cash deposits, totaling $1,374,830. Nemec admitted that all of the cash deposits were made in amounts less than $10,000 in an effort to avoid scrutiny of his financial transactions. In addition, Nemec admitted he knew the funds being deposited were the proceeds of illegal activity, i.e., marijuana sales. Nemec also did not report to the IRS the portion of the money that was his own income.
On March 29, 2016, a federal grand jury issued an indictment charging Nemec with 54 counts of structuring, in violation of 31 U.S.C. § 5324(a)(3). Pursuant to his guilty plea, Nemec pleaded guilty to all the counts.
In addition to the term of imprisonment and restitution, Judge Illston ordered Nemec to serve 3 years of supervised release following his prison term.
Assistant U.S. Attorney Helen Gilbert is prosecuting this case with assistance from Ana Guerra and Linda Love. The prosecution is the result of an investigation by the Drug Enforcement Agency and Internal Revenue Service, Criminal Investigation. This case was investigated and prosecuted by member agencies of the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies.
Executives of Iranian Auto Parts Manufacturer Arrested and Indicted for Violating Iranian Sanctions StatuteRead the Press Release
SAN FRANCISCO - Sadr Emad-Vaez, Pouran Aazad, and Hassan Ali Moshir-Fatemi made their initial appearances in district court today after being indicted on April 19, 2018, for violating export control laws under the International Emergency Economic Powers Act (IEEPA), announced Acting United States Attorney Alex G. Tse; Assistant Attorney General for National Security John C. Demers; Department of Commerce, Special Agent in Charge Joseph P. Whitehead; Department of Homeland Security, Special Agent in Charge Ryan L. Spradlin; and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.
The defendants were charged in a three-count indictment with the following crimes: conspiracy to violate the IEEPA, in violation of 50 U.S.C. §§ 1701-1705; a substantive violation of the IEEPA, 50 U.S.C. § 1705; and smuggling, in violation of 18 U.S.C. §§ 554(a) and 2. The indictment alleges the defendants engaged in transactions involving the illegal export of goods and services to Iran and financial transactions designed to evade the Iranian Transactions Sanctions Regulations (ITSR). Under the IEEPA and the ITSR, it is illegal for a United States citizen to, among other things, export, reexport, sell, or supply, directly or indirectly, any goods, technology, or services to Iran or the government of Iran, without a license granted by the Department of Treasury, Office of Foreign Asset Control, or to engage in financial transactions supporting such activities.
According to the indictment, the defendants, all naturalized U.S. citizens who lived variously in Tehran and the Northern District of California, participated in the operation of the Ghare Sabz Company, aka GHS Technology, a large manufacturing corporation in Tehran, Iran. Emad-Vaez allegedly has described himself as the “Managing Director,” Aazad as the “Chief Financial Officer,” and Moshir-Fatemi as the “Engineering Manager” of the corporation. The defendants are alleged to have acquired and engaged in attempts to acquire components from manufacturers all over the world (including the U.S.), in order to funnel them to GHS in Tehran. They also allegedly used elaborate systems of international wire transfers—including through prohibited financial institutions—to fund the effort.
Defendants Emad-Vaez and Aazad were arrested at their residence in Los Altos Hills on April 7, 2018, and were brought before Magistrate Judge Elizabeth D. Laporte for their initial appearance on April 9, 2018. Defendant Moshir-Fatemi was arrested near San Francisco Airport on April 11, 2018, and similarly was brought before Magistrate Laporte. All three defendants have been released on secured bonds. The defendants’ next scheduled appearance is at 10:00 a.m. on July 11, 2018, before the Honorable Charles R. Breyer, U.S. District Judge.
The indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted of violating the IEEPA, the defendants face a maximum sentence of 20 years in prison, and a fine of $1,000,000. If convicted of smuggling, the defendants face a maximum penalty of 10 years in prison and a $250.000 fine. However, any sentence following conviction would be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant United States Attorney Philip J. Kearney and and the Counter Espionage Section of the National Security Division of the U.S. Department of Justice. The charges are the result of an investigation by agents of the Department of Commerce, Department of Homeland Security, and Internal Revenue Service, Criminal Investigation.
Portola Valley Resident Sentenced in Bank Fraud SchemeRead the Press Release
SAN FRANCISCO – Mark Migdal was sentenced today to 18 months in prison for conspiracy to commit bank fraud and providing false statements to banks in connection with short sale and loan modification requests, announced Acting United States Attorney Alex G. Tse, Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. The sentence was handed down by the Honorable Vince Chhabria, U.S. District Judge, following Migdal’s entry of a guilty plea on July 25, 2017.
According to his guilty plea, between June 2009 and April 2016, Migdal, 72, of Portola Valley, Calif., conspired to defraud two federally-insured banks, now Bank of America and EverBank. Migdal admitted the conspirators sought the banks’ approval for a short sale of two condominiums owned by Migdal in Kihei, Maui. Midgal conspired to convince the banks to allow the properties to be sold in short sales to an individual who was, in reality, deceased. A short sale is a sale in which a lender allows a property to be sold at a price that is less than the amount owed on the loan. Thereafter, Migdal controlled and rented the properties using the deceased person’s identity, and later transferred the properties back to himself. Migdal further admitted that, between June 2009 and January 2010, he provided false statements to another federally-insured bank, JP Morgan Chase Bank, in an attempt to obtain mortgage modifications on his residence in Portola Valley, Calif., and a condominium owned by him in Mountain View, Calif.
On April 27, 2017, a federal grand jury issued a superseding indictment charging Migdal with one count of conspiracy to commit bank fraud, in violation of 18 U.S. C. § 1349; two counts of bank fraud, in violation of 18 U.S.C. § 1344(1) and (2); one count of aggravated identity theft, in violation of 18 U.S.C. § 1028A; and two counts of making false statements to a federally insured institution, in violation of 18 U.S.C. § 1014. Pursuant to his guilty plea, Migdal pleaded guilty to the conspiracy count, and the two counts of making false statements to a federally insured institution. The remaining counts were dismissed.
In addition to the term of imprisonment, Judge Chhabria ordered Migdal to serve three years of supervised release and to pay restitution in the following amounts: $239,519 to Fannie Mae, successor to the deed of trust held by EverBank; $202,491 to Bank of America; and $18,205 to JP Morgan Chase. In addition, Migdal was also ordered to pay a $1,000,000 fine and to forfeit substitute assets totaling $539,784.98.
The case is being prosecuted by Assistant United States Attorneys Colin Sampson and Erin Cornell. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation.
Serial Bank Robber Pleads Guilty to Robberies Throughout Northern CaliforniaRead the Press Release
OAKLAND – Wesley Allen Krohn pleaded guilty today to two counts of armed bank robbery, four counts of bank robbery, and one count of attempted bank robbery in federal court, announced Acting United States Attorney Alex G. Tse, Special Agent in Charge John Bennett of the FBI’s San Francisco Field Division, and Special Agent in Charge Sean Ragan of the FBI’s Sacramento Field Division.
According to the plea agreement, Krohn, 34, of San Jacinto, Calif., admitted to committing two armed bank robberies in Pleasant Hill and Walnut Grove, as well as committing four unarmed bank robberies in Rohnert Park, Brentwood, Suisun City, and Elk Grove. Krohn further admitted to attempting a bank robbery in Lodi. On some of the robberies, Krohn entered the banks wearing a fake beard and a baseball hat in an attempt to disguise himself, approached the victim tellers, and presented a note that demanded money. In one robbery, Krohn raised what appeared to be a pistol, pointed it in the direction of the teller, and ordered her to open the bottom two drawers.
Krohn admitted to robbing the following banks:
- $9,000 from Exchange Bank in Rohnert Park, California, on December 3, 2015
- $496 from Tri Counties Bank in Brentwood, California on December 21, 2015
- $650 from Wells Fargo Bank in Pleasant Hill, California on December 22, 2015
- $1,439 from Bank of Rio Vista in Walnut Grove, California on December 31, 2015
- $884 from US Bank in Suisun City, California on January 9, 2016
- $2,144 from Tri Counties Bank in Elk Grove, California on January 19, 2016
Krohn also admitted to attempting to rob US Bank in Lodi, California on January 19, 2016.
As part of his plea agreement, Krohn also agreed to pay restitution in the amount of $14,623 to the above-listed banks.
Krohn was arrested on December 8, 2017, by FBI Agents and has been in custody since that date.
Krohn’s sentencing hearing is scheduled for August 6, 2018, at 2:00 p.m., before the Honorable Haywood S. Gilliam, Jr., U.S. District Court Judge, in Oakland. Krohn faces a maximum statutory sentence of 25 years in prison for each count of armed bank robbery and 20 years in prison for each count of bank robbery and attempted bank robbery. The actual sentence, however, will be determined at the discretion of the Court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines.
Assistant U.S. Attorney Christina McCall is prosecuting the case with the assistance of Vanessa Quant and Katie Turner. The prosecution is the result of an investigation by the FBI, the United States Attorney’s Offices for the Northern and Eastern Districts of California, the Sacramento County Sheriff’s Department, and the police departments of Rohnert Park, Brentwood, Pleasant Hill, Suisun City, Elk Grove, Lodi, and Clear Lake.
South Bay Methamphetamine Trafficker Sentenced to Ten Years in PrisonRead the Press Release
San Francisco– Alexander Mendoza was sentenced today to 10 years in prison for his part in a conspiracy to possess and distribute methamphetamine, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett. The sentence was handed down by the Honorable Susan Illston, U.S. District Judge, following a guilty plea entered in August of last year.
Mendoza, 36, of San Mateo, Calif., pleaded guilty on August 31, 2017, to one count of conspiracy to possess with intent to distribute and to distribute methamphetamine, and five counts of distribution and possession with intent to distribute 50 grams or more of methamphetamine. The defendant entered a guilty plea without a written agreement. As part of his plea agreement, he admitted to distributing methamphetamine from the Northern District of California to Texas, and to shipping the methamphetamine on five occasions through the mail. Mendoza pleaded guilty to all counts in the indictment.
In addition to the prison term, Judge Illston sentenced Mendoza to a 5-year period of supervised release. The defendant was remanded to custody and will begin serving his sentence immediately.
Assistant U.S. Attorney Laura Vartain is prosecuting the case with the assistance of Theresa Benitez. This case is the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies.
San Jose Resident Charged with Filing False Tax ReturnsRead the Press Release
SAN JOSE – Jose Sanchez Flores was indicted on charges he filed false tax returns, announced Acting U.S. Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf. Sanchez Flores was arrested and made his initial court appearance this morning in San Jose, before U.S. Magistrate Judge Howard R. Lloyd.
A federal grand jury in San Jose handed down the indictment, unsealed today, on September 21, 2017. The indictment charges Sanchez Flores, a resident of San Jose, Calif., with two counts of filing false tax returns, in violation of 26 U.S.C. § 7206(1). According to the indictment, Sanchez Flores filed false federal income tax returns for tax years 2010 and 2011. Magistrate Judge Lloyd scheduled Sanchez Flores’s next court appearance for April 27, 2018, at 1:30 p.m.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Sanchez Flores faces three years in prison and a fine of $250,000 for each count of filing false tax returns. Additional fines, penalties and supervised release also may be ordered. 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 is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
San Jose Resident Charged in Embezzlement Scheme at Emeryville Medical Device CompanyRead the Press Release
OAKLAND – Dinesh Shankar was arrested today on mail fraud charges stemming from an alleged embezzlement scheme, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett.
According to the indictment unsealed this morning, Shankar, 40, of San Jose, Calif., embezzled more than $2 million from his former employer, an Emeryville, Calif., company that develops medical devices. According to the indictment, Shankar’s position at the company involved obtaining laboratory testing and quality assurance services for the company’s medical devices. Shankar allegedly used his role at the company to initiate a scheme in January 2015, in which he created six fake entities, rented post office boxes associated with each entity, and opened bank accounts under the names of the six entities. The indictment alleges that Shankar submitted false invoices to the company for payment to the purported vendors, and that after the invoices were approved the company sent checks, made out to the fake entities, to the post office boxes rented by Shankar. In total, the payments to these entities were more than $2 million, according to the indictment.
Shankar was charged with six counts of mail fraud, in violation of 18 U.S.C. § 1341.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the maximum penalty for each count of mail fraud is twenty years’ imprisonment and a fine of $250,000 or the greater of twice the gross gain or twice the gross loss. 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.
Shankar made his initial federal court appearance in Oakland today before U.S. Magistrate Judge Donna M. Ryu. Magistrate Judge Ryu scheduled the defendant’s next appearance for April 24, 2018, before Magistrate Judge Kandis A. Westmore, for identification of counsel.
Assistant U.S. Attorney Lloyd Farnham is prosecuting the case with the assistance of Bridget Kilkenny and Claudia Hyslop. The prosecution is the result of an investigation by the FBI.
Oakland Resident Sentenced to over Seven Years in Prison for Being A Felon in Possession of A FirearmRead the Press Release
OAKLAND – Alberto Acosta was sentenced to 86 months in prison today for being a felon in possession of a firearm, announced Acting United States Attorney Alex G. Tse and Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Special Agent in Charge Jill Snyder. The sentence was handed down by the Honorable Jon S. Tigar, United States District Judge, following Acosta’s entry of a guilty plea on June 23, 2017.
As part of his plea agreement, Acosta, 31, of Oakland, admitted that on August 12, 2016, he ran from police when they approached him and that while he was running, he threw 12 Ziploc bags, each partially filled with methamphetamine, over a fence. Acosta further admitted he had been driving a stolen car and that, after his arrest, police recovered a pistol from the driver’s side pocket of the car. The pistol had eight rounds in the magazine and one round in the chamber. In addition, Acosta admitted that police found his backpack containing two additional .45 caliber extended magazines in the rear seat of the car. One magazine was filled with 15 rounds and the other with 14 rounds of ammunition. Also in the backpack were additional rounds of ammunition, two glass pipes, additional Ziploc bags, and a pocket sized digital scale.
A federal grand jury indicted Acosta on January 12, 2017, charging him with one count of being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g). Pursuant to his plea agreement, Acosta pleaded guilty to the charge.
In addition to the prison term, Judge Tigar also sentenced Acosta to a three-year period of supervised release to commence after Acosta completes his prison sentence.
Assistant U.S. Attorneys Christina McCall and Erin Cornell are prosecuting the case with assistance from Vanessa Quant and Katie Turner. The prosecution is the result of an investigation by the ATF and the Oakland Police Department.
San Francisco Man Charged with Making Threats to Federal OfficialsRead the Press Release
SAN FRANCISCO – A federal grand jury issued an indictment today charging Bay Area resident Ronald Joseph LaFaye with eight counts of making threats to federal officials, announced Acting United States Attorney Alex G. Tse and Special Agent in Charge of the U.S. Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division (VA OIG CID), James K. Wahleithner.
According to the indictment, LaFaye, 52, threatened to assault, kidnap, or murder federal officials. LaFaye is alleged to have made the threats with the intent to impede, intimidate, and interfere with those federal officials while they were engaged in the performance of official duties, and with intent to retaliate against the officials because of the way they performed those duties. The indictment sets out eight occasions between March 19, 2018, and March 26, 2018, in which the defendant threatened to assault, murder, beat, “pimp,” sodomize, or otherwise harm employees of the Department of Veterans Affairs.
An indictment merely alleges that crimes have been committed, and LaFaye, like all defendants, is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant in this case faces a maximum sentence of 10 years in prison and a fine of $250,000. In addition, LaFaye may be ordered to pay restitution and additional assessments as well as serve a period of supervised release as part of a sentence. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The defendant currently is in state custody on other charges. His next appearance in federal court has not yet been scheduled.
This prosecution is the result of an investigation by the VA OIG CID with assistance from the United States Department of Veterans Affairs Police, the FBI, the San Mateo Police Department, and the San Francisco Police Department.
Oakland Residents Charged with Cocaine Distribution Offenses and Related CrimesRead the Press Release
OAKLAND - A federal grand jury indicted six individuals, all of whom are Oakland residents, for distributing drugs in the area of 85th Avenue and International Boulevard in East Oakland, announced United States Attorney Alex G. Tse; Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Special Agent in Charge Jill A. Snyder; and Drug Enforcement Administration (DEA) Assistant Special Agent in Charge Chris Nielsen. The indictments were unsealed today.
The six defendants all were charged in separate indictments as part of a larger crackdown against drug distributers in the area. The indictments charge conduct occurring between February 2017 and April 2018, and each defendant is charged with distribution of cocaine, cocaine base, or both. In addition, two defendants, Timothy Crawford and Ridell Lambert, are charged with being felons in possession of a firearm. The precise charges against each defendant, as well as their ages, are set out in the chart below:
Defendant
Age
Charges
Statute
Timothy Crawford
55
Distribution of 28 Grams or More of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)
Distribution of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
Felon in Possession of a Firearm
18 U.S.C. §922(g)(1)
Alan Johnson
40
Distribution of 28 Grams or More of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)
Distribution of Cocaine and/or Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
Ridell Lambert
30
Distribution of 28 Grams or More of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)
Distribution of Cocaine and/or Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
Felon in Possession of a Firearm
18 U.S.C. §922(g)(1)
Wilmon Ingram
40
Distribution of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
Karlos Ely
52
Distribution of 28 Grams or More of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)
Keith Woodson
34
Distribution of Cocaine and/or Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. The maximum statutory penalties for the crimes of which the defendants have been accused are as follows:
Distribution of 28 Grams or More of Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(iii)
Minimum 5 years prison
Maximum 40 years
Minimum 4 years supervised release following incarceration
Maximum lifetime supervised release
Maximum $5,000,000 fine
Distribution of Cocaine and/or Cocaine Base
21 U.S.C. §§ 841(a)(1) and (b)(1)(C)
Maximum 20 years imprisonment
Maximum lifetime supervised release following incarceration
Minimum 3 years supervised release
Maximum $1,000,000 fine
Felon in Possession of a Firearm
18 U.S.C. § 922(g)(1)
Maximum 10 years in prison
Maximum 3 years supervised release
Maximum $250,000 fine
Additional fines, forfeitures, denial of federal benefits, and restitution may be ordered; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The defendants, except Crawford, were arrested yesterday as part of a criminal enforcement operation and made their initial appearances this morning in federal court before Kandis A. Westmore, U.S. Magistrate Judge. Magistrate Judge Westmore scheduled appearances for defendants Johnson and Ingram on April 23, 2018, and Lambert and Woodson on April 24, 2018, to consider their detention status. Judge Westmore scheduled an appearance for Ely on April 23, 2018, to identify his counsel. No federal appearance has been scheduled yet for Crawford.
In addition to these federal defendants, Arthur Long, 33, and Deshawn Murphy, 26, both from Oakland, are being prosecuted by the Alameda District Attorney’s Office for alleged violations of California Health and Safety Code § 11352. Questions about the state charges may be directed to the District Attorney’s Office.
Assistant U.S. Attorneys Helen Gilbert and Shailika Kotiya are prosecuting the case. The prosecutions are the result of an investigation by the ATF and the DEA with assistance from the Oakland Police Department. The investigation is part of this district’s Organized Drug Enforcement Task Force program.
South Bay Methamphetamine Trafficker Sentenced to Seven Years in PrisonRead the Press Release
SAN JOSE – Marlon Lee Davis was sentenced to 84 months in prison for his role in a conspiracy to possess with the intent to distribute methamphetamine announced Acting United States Attorney Alex G. Tse and Drug Enforcement Administration (DEA) Assistant Special Agent in Charge Christopher D. Nielsen. The sentence was handed down yesterday afternoon by the Honorable Beth Labson Freeman, U.S. District Judge, following the entry of Davis’s guilty plea on April 11, 2017.
According to his plea agreement, Davis, 56, of San Jose, admitted that in August and September of 2016, he knowingly conspired to possess and distribute methamphetamine with codefendant Yara Banderas Martinez. Davis admitted he let Banderas Martinez use his San Jose apartment to store the drugs that they intended to distribute. Also, on August 30, 2016, Davis accompanied Banderas Martinez to a one kilogram methamphetamine transaction. Davis admitted that he delivered the drugs to Banderas Martinez and her buyer while they were in the buyer’s car.
On September 14, 2016, law enforcement agents searched Davis’s apartment where they found 388.9 grams of methamphetamine. Davis admitted that he gave permission to store the drugs in his apartment as part of the drug distribution activity.
On April 10, 2017, Davis was charged in a superseding information with one count of conspiracy to possess with intent to distribute methamphetamine, in violation of 21 U.S.C. § 846, Pursuant to his guilty plea, Davis pleaded guilty to the charge.
In addition to the prison term, Judge Freeman ordered Davis to serve a five-year period of supervised release. Davis is currently in custody and will begin serving his sentence immediately. After pleading guilty to her role in the conspiracy, Banderas Martinez fled in February 2018 and became a fugitive.
Special Assistant U.S. Attorney Christopher Vieira is prosecuting the case with the assistance of Susan Kreider. The prosecution is the result of an investigation by the DEA.
Fugitive Yara Banderas MartinezFormer Elementary School Teacher Sentenced to Five Years in Prison for Possessing Child PornographyRead the Press Release
SAN JOSE – Robert Krietzman was sentenced to five years in prison and ordered to pay $5,000 in restitution for possession of child pornography, announced Acting United States Attorney Alex G. Tse and Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin. The sentence was handed down by the Honorable Beth L. Freeman, U.S. District Judge.
On April 17, 2018, Krietzman, 53, of Watsonville, Calif., pleaded guilty to possession of child pornography, in violation of 18 U.S.C. § 2252(a)(4). According to the plea agreement, Krietzman admitted to possessing over 600 images and videos depicting minors engaged in sexually explicit conduct. Many of the images depicted prepubescent female children engaged in masturbation, sexual intercourse with adult males, or in bondage. The images were discovered in May of 2016 by Santa Cruz Police detectives executing a search warrant at Krietzman’s home in Watsonville. The case later was referred for federal prosecution. Krietzman was a credentialed first grade teacher in Watsonville at the time the images were located on electronic devices in his home.
Krietzman was charged by information on September 6, 2017, with one count of possession of child pornography. Pursuant to his April 17, 2018, plea agreement, pleaded guilty to this count. He was sentenced the same day.
In addition to the prison term and restitution, Judge Freeman also sentenced the defendant to a five-year period of supervised release and required him to pay a $5,100 special assessment fee. The Court also imposed forfeiture of all devices recovered from Krietzman’s home containing child pornography. Judge Freeman also ordered Krietzman to register as a sex offender and participate in sex offender treatment and counseling. The defendant was immediately remanded into custody to begin serving his sentence.
Assistant U.S. Attorney Marissa Harris is prosecuting the case with the assistance of Susan Kreider. The prosecution is the result of an investigation by the HSI and the Santa Cruz Police Department.
California Resident Pleads Guilty to Conspiring to File Fraudulent Tax Returns Seeking More Than $9.7 Million in RefundsRead the Press Release
A Salinas, California, resident pleaded guilty today to conspiring to file fraudulent claims for income tax refunds, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and Acting U.S. Attorney Alex G. Tse for the Northern District of California.
According to documents and information provided to the court, during 2012, Ana Bajo a/k/a Ana Covarrubias, 43, conspired with others to obtain the personal identifying information of others and use it to file more than 2,300 fraudulent income tax returns with the Internal Revenue Service (IRS). These returns reported fake wages and fraudulently claimed dependents, education expenses and tax credits. In total, the returns sought approximately $9.7 million in refunds, of which the IRS paid more than $7.5 million. Bajo, and her co-conspirators, directed the fraudulently obtained refund checks into bank accounts that they controlled.
U.S. District Court Judge Koh scheduled sentencing for Sept. 26. Bajo faces a statutory maximum sentence of ten years in prison, as well as a period of supervised release, restitution, and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman and Acting U.S. Attorney Tse commended special agents of IRS Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Michael G. Pitman and Trial Attorney Christopher Magnani of the Tax Division, who are prosecuting this case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
California Resident Pleads Guilty to Conspiring to File Fraudulent Tax Returns Seeking More Than $9.7 Million in RefundsRead the Press Release
SAN FRANCISCO – Salinas resident Ana Bajo, a/k/a Ana Covarrubias, pleaded guilty today to conspiring to file fraudulent claims for income tax refunds, announced Acting U.S. Attorney Alex G. Tse and Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to documents and information provided to the court, during 2012, Bajo, 43, conspired with others to obtain the personal identifying information of others and use it to file more than 2,300 fraudulent income tax returns with the Internal Revenue Service (IRS). These returns reported fake wages and fraudulently claimed dependents, education expenses, and tax credits. In total, the returns sought approximately $9.7 million in refunds, of which the IRS paid more than $7.5 million. Bajo and her co-conspirators directed the fraudulently obtained refund checks into bank accounts that they controlled. On July 13, 2017, a federal grand jury indicted Bajo charging her with conspiracy to submit false claims, in violation of 18 U.S.C. § 286. Pursuant to today’s plea agreement, she pleaded guilty to the charge.
U.S. District Judge Lucy H. Koh scheduled Bajo’s sentencing hearing for September 26, 2018. Bajo faces a statutory maximum sentence of ten years in prison, as well as a period of supervised release, restitution, and monetary penalties.
Assistant U.S. Attorney Michael G. Pitman and Trial Attorney Christopher Magnani of the Tax Division are prosecuting this case. This prosecution is a result of an investigation by the IRS Criminal Investigation.
San Francsico Man Charged with Tax EvasionRead the Press Release
SAN FRANCISCO – San Francisco resident Jin Ming Yan was charged today in a criminal information with evading federal income taxes, announced Acting United States Attorney Alex G. Tse and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.
According to the information, Yan, 54, of San Francisco, Calif., is alleged to have substantially underreported the amount of taxable income he owed for the 2011 tax year.
Yan’s initial appearance and arraignment are yet to be scheduled.
An information merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant in this case faces a maximum sentence of five years in prison, a fine of $250,000 or twice the value of the gain or loss from the offense, restitution, three years of supervised release, and a $100 special assessment. 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 the result of an investigation by the Internal Revenue Service, Criminal Investigation, and the Federal Bureau of Investigation.
San Francisco Civic Center Heroin Trafficker Sentenced to More Than Five Years in PrisonRead the Press Release
SAN FRANCISCO – Marvin Gustavo Benegas-Castro was sentenced today to 62 months in prison for possessing with the intent to distribute heroin announced Acting United States Attorney Alex G. Tse and Drug Enforcement Administration (DEA) Special Agent in Charge John J. Martin. The sentence was handed down by the Honorable William H. Alsup, U.S. District Judge, following the entry of Benegas-Castro’s guilty plea to the charges on January 23, 2018.
The San Francisco Police Department (SFPD) began its investigation into Benegas-Castro, 32, a Honduran national residing in Oakland, after seeing what they believed was Benegas-Castro selling heroin in San Francisco’s Civic Center Plaza. According to his plea agreement, Benegas Castro admitted that on August 31, 2017, he was arrested by SFPD officers for possessing with the intent to distribute illegal drugs. Specifically, Benegas-Castro admitted he was carrying baggies and bindles of heroin weighing over 35 grams and an additional 15 baggies of methamphetamine weighing over 9 grams. At Benegas-Castro’s apartment, officers found baggies and bindles of heroin weighing over 471 grams, $3,572 in cash, a digital scale, plastic baggies, more methamphetamine, and cocaine. Benegas-Castro admitted that on the day of his arrest, he knowingly possessed with the intent to distribute more than 100 grams of heroin.
On November 14, 2017, a federal grand jury indicted Benegas-Castro charging him with one count of distribution and possession with intent to distribute heroin, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C); one count of possession with intent to distribute heroin, in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(B)(i); and one count of possession with intent to distribute methamphetamine, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C). Pursuant to his guilty plea, Benegas-Castro pleaded guilty to the second heroin charge; the remaining charges were dismissed.
In addition to the prison term, Judge Alsup ordered Benegas-Castro to serve a five-year period of supervised release. Benegas-Castro is currently in custody and will begin serving his sentence immediately.
Special Assistant U.S. Attorney Christopher Vieira is prosecuting the case with the assistance of Kimberly Richardson. The prosecution is the result of an investigation by the DEA and the San Francisco Police Department.
Mendocino County Resident Pleads Guilty to Illegally Importing Leopard Hunting Trophy from South AfricaRead the Press Release
OAKLAND – Adam Thatcher Lawrence pleaded guilty in federal court in Oakland today to mislabeling wildlife intended for importation, announced Acting United States Attorney Alex G. Tse and United States Fish and Wildlife Service Office of Law Enforcement Region 8 Assistant Special Agent in Charge Daniel Crum. The plea was accepted by the Honorable Haywood S. Gilliam, U.S. District Judge.
In pleading guilty, Lawrence, 38, of Willits, Calif., admitted that, in August 2011, he traveled to the Republic of South Africa and hunted, shot, and killed a leopard in that country. Lawrence did not personally possess a permit to kill a leopard in South Africa at that time, nor did he possess a permit allowing him to export the leopard from South Africa. Lawrence further admitted that in May 2012, he returned to South Africa with the primary purpose of bringing the leopard out of that country and into the United States. The leopard’s skin and skull were secretly transported into the Republic of Mozambique concealed inside a spare tire.
Leopards are a protected species under both the Endangered Species Act, 16 U.S.C. § 1531 et seq., and the Convention on International Trade in Endangered Species of Wild Fauna and Flora, an international treaty to which the United States, South Africa, and Mozambique are signatories. As a result, the import and export of leopards is strictly regulated.
Lawrence admitted that he falsely claimed he had killed the leopard in Mozambique. He acquired the permits required to export the leopard parts from Mozambique, import them into South Africa, re-export them from South Africa, and import them into the United States. In each of those documents, he falsely stated that he had killed the leopard in Mozambique in 2012, rather than South Africa in 2011. Further, in April 2013, he imported the leopard skin and skull into the United States. In connection with the importation, Lawrence knowingly submitted a United States Declaration for Importation or Exportation of Fish or Wildlife in which he falsely stated he killed the leopard in Mozambique in 2012.
A federal grand jury indicted Lawrence on January 11, 2018, charging him with one count of importing wildlife contrary to law, in violation of 18 U.S.C. § 545, and one count of mislabeling wildlife intended for importation, in violation of 16 U.S.C. §§ 3372(d) and 3373(d)(3). Under the plea agreement, Lawrence pleaded guilty to the mislabeling count and the importing count will be dismissed. Also as part of the plea agreement, Lawrence agreed to forfeit his interest in the leopard skin and skull that he imported, as well as the hunting rifle that he used to kill the leopard. He also has agreed to forfeit other contraband seized from his home in October 2016, including a mountain lion mount and skull, a carved hippopotamus tooth, whale bones, and a harbor seal skin.
Lawrence is released on bond. Judge Gilliam scheduled Lawrence’s sentencing hearing for June 25, 2018, at 2:00 p.m. The maximum statutory penalty for a violation of 16 U.S.C. §§ 3372(d) and 3373(d)(3) is five years’ imprisonment and a fine of $250,000 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.
Assistant U.S. Attorney Katherine Lloyd-Lovett is prosecuting the case with the assistance of Vanessa Quant. The prosecution is the result of an investigation by the United States Fish and Wildlife Service Office of Law Enforcement.