Northern District of California
Press releases recorded for this federal judicial district.
Scottish Citizen Indicted for Twitter-Based Stock Manipulation SchemeRead the Press Release
Defendant Tweeted False Information about Publicly Traded Companies, Causing More than $1 Million in Losses
A federal grand jury in San Francisco indicted James Alan Craig today with securities fraud, announced Acting U.S. Attorney Brian J. Stretch of the Northern District of California and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.
According to the indictment, Craig, 62, of Dunragit, Scotland, alleged set up Twitter accounts using names similar to real market research firms for the purpose of manipulating stock prices. Craig issued tweets with false and fraudulent information about publicly-traded securities, causing the price of the securities to rapidly decline. Craig then bought securities of the targeted companies through his girlfriend’s brokerage account and later sold them at a higher price per security. Craig’s actions are alleged to have caused of more than $1.6 million in losses to shareholders.
According to the indictment, on Jan. 25, 2013, Craig set up a Twitter account with the handle @Mudd1Waters using the alias “Shun Ho” and a Gmail address he previously created. In an effort to make the account appear to be associated with Muddy Waters Research, a market research firm, Craig used the firm’s logo as the Twitter account’s profile picture. Craig also used a name associated with the founder of Muddy Waters Research as the account’s handle. On Jan. 29, 2013, Craig used the @Mudd1Waters Twitter account to publish multiple false and fraudulent tweets about the Bay Area sound technology company, Audience. For example, Craig tweeted that Audience was being investigated by the “DOJ” on rumored fraud charges. Audience’s security price on the NASDAQ stock exchange fell significantly in the wake of Craig’s tweets until trading was halted. That same day, Craig used his girlfriend’s TradeMonster account to purchase 300 shares of Audience’s securities. The next day, he bought another 100 shares of Audience’s securities. Craig then sold all 400 securities at a per-share price higher than the 300 he had bought the day before.
The indictment describes a similar scheme involving Sarepta, a biopharmaceutical firm based in Washington. According to the indictment, on Jan. 29, 2013, Craig set up a Twitter account with the handle @citreonresearc using a false email address purporting to belong to Citron Research, a market research firm. Craig used Citron Research’s logo as the Twitter account’s profile picture in an effort to make the account appear to be associated with the firm. The next day, Craig used the @citreonresearc Twitter account to publish multiple false and fraudulent tweets about Sarepta’s business activities, such as that Sarepta’s trial papers were seized by the “FDA.” Sarepta’s security price fell significantly in the wake of Craig’s tweets. That same day, Craig used his girlfriend’s TradeMonster account to purchase 700 total shares of Sarepta’s securities. Then, on or about Feb. 1, 2013, Craig sold all 700 securities at an average per-share price higher than the average per-share price at which he had bought them.
Craig was charged with a single count of securities fraud. The Securities and Exchange Commission filed a separate complaint today charging Craig with securities fraud.
“The allegations in this indictment describe a significant stock price manipulation committed through the use of social media,” said Acting U.S. Attorney Stretch. “This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside.”
“This investigation dismantled a stock market manipulation scheme that operated with one goal in mind — to falsely defame a company in order to destroy its stock value for financial gain,” said Special Agent in Charge Johnson. “The FBI is dedicated to stopping this type of predatory behavior. It causes substantial harm to businesses, deceives the average investor and erodes overall confidence in the markets.”
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Craig faces a maximum sentence of 25 years’ imprisonment and a fine of $250,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.
Assistant U.S. Attorney Robert David Rees of the Northern District of California is prosecuting the case with the assistance of Trina Khadoo. The prosecution is the result of an investigation by the FBI.
Scottish Citizen Indicted for Twitter-Based Stock Manipulation SchemeRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted James Alan Craig today with securities fraud, announced Acting United States Attorney Brian J. Stretch and the Federal Bureau of Investigation, Special Agent in Charge David J. Johnson.
According to the indictment, Craig, 62, of Dunragit, Scotland, is alleged to have set up accounts at Twitter using names similar to real market research firms for the purpose of manipulating stock prices. Craig issued so-called “Tweets” with false and fraudulent information about publicly-traded securities, causing the price of the securities to rapidly decline. Craig then bought securities of the targeted companies through his girlfriend’s brokerage account and later sold them at a higher price per security. Craig’s actions are alleged to have caused losses to shareholders in excess of $1,600,000.00.
According to the indictment, on January 25, 2013, Craig set up a Twitter account with the handle @Mudd1Waters using the alias “Shun Ho” and a Gmail address he previously created. In an effort to make the account appear to be associated with Muddy Waters Research, a market research firm, Craig used the logo of that firm as the Twitter account’s profile picture. As part of that same effort, Craig used a name associated with the founder of Muddy Waters Research, as the account’s handle. A few days later, on January 29, 2013, Craig used the @Mudd1Waters Twitter account to publish multiple false and fraudulent Tweets about the Bay Area sound technology company, Audience. For example, Craig Tweeted that Audience was being investigated by the “DOJ” on rumored fraud charges. Audience’s security price on the NASDAQ stock exchange fell significantly in the wake of Craig’s Tweets until trading was halted. That same day, Craig used his girlfriend’s TradeMonster account to purchase 300 shares of Audience’s securities. The next day, he bought 100 more shares of Audience’s securities. Craig then sold all 400 securities at a per-share price higher than the 300 he had bought the day before.
The indictment describes a similar scheme involving the Washington-based biopharmaceutical firm Sarepta. According to the indictment, on January 29, 2013, Craig set up a Twitter account with the handle @citreonresearc using a false email address purporting to belong to Citron Research. As the Twitter account’s profile picture, Craig used the logo of Citron Research, a market research firm, in an effort to make the account appear to be associated with that firm. The next day, Craig used the @citreonresearc Twitter account to publish multiple false and fraudulent Tweets about Sarepta’s business activities, such as that Sarepta’s trial papers were seized by the “FDA.” Sarepta’s security price fell significantly in the wake of Craig’s Tweets. That same day, Craig used his girlfriend’s TradeMonster account to purchase 700 total shares of Sarepta’s securities. Then, on or about February 1, 2013, Craig sold all 700 securities at an average per-share price higher than he average per-share price he had bought them the day before.
Craig was charged with a single count of securities fraud, in violation of Title 18, United States Code, Section 1348. The Securities and Exchange Commission has filed a separate complaint today charging Craig with securities fraud.
“The allegations in this indictment describe a significant stock price manipulation committed through the use of social media,” said Acting United States Attorney Brian Stretch. “This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside.”
“This investigation dismantled a stock market manipulation scheme that operated with one goal in mind — to falsely defame a company in order to destroy its stock value for financial gain,” said Special Agent in Charge David J. Johnson. “The FBI is dedicated to stopping this type of predatory behavior. It causes substantial harm to businesses, deceives the average investor and erodes overall confidence in the markets.”
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Craig faces a maximum sentence of 25 years’ imprisonment and a fine of $250,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Robert David Rees is prosecuting the case with the assistance of Trina Khadoo. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Oakland Man Sentenced to Life in Prison Plus 10 Years for Murder in Christmas Marijuana Robbery Near Oakland AirportRead the Press Release
OAKLAND – Damion Sleugh was sentenced today to life in prison plus 35 years for murder and related drug trafficking charges, announced Acting U.S. Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge David J. Johnson. The charges stemmed from the murder of Vincent Muzac in a parking lot near the Oakland Airport three days before Christmas in 2013.
Evidence at trial showed that Sleugh, 28, of Oakland, helped arrange a meeting to purchase five pounds of marijuana. In the early afternoon of December 22, 2013, Sleugh met with Mr. Muzac, of Alameda, in the parking lot of a Walmart store near Hegenberger Road and interstate 880 in Oakland. Surveillance video showed Mr. Muzac enter a car where he remained for four minutes before he was robbed and shot. His body was seen lying on the ground as the car sped away. A joint investigation by the FBI and the Oakland Police Department revealed that Sleugh was the driver. The evidence submitted at trial included incriminating text messages, FBI crime scene recreations, and images of Sleugh with the stolen marijuana. The photographs of Sleugh included a “selfie” taken from Sleugh’s phone two hours after the shooting; in the photograph, Sleugh is pictured in the same passenger seat where Mr. Muzac had just been shot.
On March 27, 2014, Sleugh was indicted in a six-count indictment charging him with conspiracy and attempt to possess with the intent to distribute marijuana, in violation of 21 U.S.C. § 841; robbery affecting interstate commerce, in violation of 18 U.S.C. § 1951(a); the use of a firearm during a drug trafficking crime or a crime of violence, in violation of 18 U.S.C. § 924(c); the use of a firearm during a drug trafficking crime or a crime of violence resulting in murder, in violation of 18 U.S.C. § 924 (j); and being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g).
According to the government’s filings, all but one of the charges against Sleugh arose from his participation in a conspiracy to distribute marijuana. The government asserted the drug deal with Mr. Muzac was just a ploy to rob him of marijuana. Moreover, once apprehended, Sleugh attempted to escape responsibility for the murder by blaming the person who drove Sleugh to and from the place where the marijuana deal was so have taken place. The government argued in papers filed with the court:
Defendant Sleugh pulled a loaded gun on an unarmed man in a closed vehicle. When Muzac refused to give up the marijuana, Sleugh formed the requisite premeditation—pressing the muzzle of the gun an inch from Muzac’s flesh and then firing, even as Muzac begged him not to. After he fired the shot, the defendant pushed the dying Muzac out of the car and sped away. As if this were not sufficiently callous, the defendant felt compelled to memorialize the moment with that notorious selfie from Vincent Muzac’s seat.
On July 17, 2015, a jury convicted Sleugh of all six counts in the indictment. The verdict also included a special finding that Sleugh committed first degree murder. The guilty verdict followed a two-week jury trial before the Honorable Yvonne Gonzalez-Rogers, U.S. District Judge. The sentence was handed down by the Judge Gonzalez-Rogers.
Assistant United States Attorneys Damali Taylor and Joseph Alioto Jr. prosecuted the case, along with paralegals Patty Lau and Christine Tian. The prosecution is the result of an investigation led by the FBI and of the Oakland Police Department.
Oakland Resident Sentenced to 30 Months in Prison in False Tax Refund SchemeRead the Press Release
OAKLAND – Kenneth Brown was sentenced to 30 months in prison for conspiracy to file false claims in a fraudulent tax refund scheme, announced Acting United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
Kenneth Brown, 50, of Oakland, pleaded guilty on July 23, 2015, to conspiracy to file false claims. According to the plea agreement, from April 2009 through June 2011, Kenneth Brown conspired with his daughter, Kenya Brown, to file false federal income tax returns with the IRS. The false tax returns that Kenneth Brown and Kenya Brown filed contained fictitious W-2 forms requesting refunds based on the fictitious W-2s. To carry out the scheme, the defendants asked the IRS to wire the fraudulent tax refunds onto pre-paid debit cards or bank accounts they controlled. For example, Kenneth Brown used his sister’s bank account to receive a fraudulent tax refund. He also listed the bank account number for a beauty supply business he partly owned. The defendants also directed that pre-paid debit cards associated with the fraudulent refunds be sent to addresses where they could access the mail. From 2009 through 2011, Brown obtained $167,152 in illegal proceeds.
The sentence was handed down by the Honorable Jon Tigar, U.S. District Judge. In addition to the prison term, Judge Tigar ordered Brown to a term of 3 years of supervised release and ordered him to pay restitution in the amount of $167,152. Brown will begin serving his sentence on January 4, 2016.
Assistant U.S. Attorney Thomas Newman is prosecuting these cases. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Former Danville Middle School Teacher Sentenced to 65 Months’ Imprisonment for Possession of Child PornographyRead the Press Release
OAKLAND – Mitchell Phillip Wolf was sentenced today to 65 months in prison for possession of child pornography announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge David J. Johnson.
Wolf, 60, of Danville, pleaded guilty on July 8, 2015, to possessing child pornography. According to the plea agreement, Wolf admitted to knowingly possessing approximately 50,000 digital files depicting minors engaged in sexually explicit conduct. Wolf admitted to intentionally saving the image and video files to his personal desktop computer and to assorted CD-ROMs and DVDs that he stored in his home office and bedroom. On many of the CD-ROMs and DVDs, Wolf hand-labeled their content with terms consistent with child pornography, such as “PTHC” for “pre-teen hardcore.” Wolf admitted to downloading the digital files from the internet using an online peer-to-peer file sharing program. Wolf was charged by an information on April 3, 2015, with a single count of possession of child pornography in violation of 18 U.S.C. § 2252(a)(4)(B).
The sentence was handed down by the Honorable Phyllis J. Hamilton, U.S. District Judge, following a guilty plea to the charged count. In addition to the prison term, Judge Hamilton also ordered Wolf to serve a ten-year period of supervised release, including conditions prohibiting his use of computers and Internet, prohibiting him from frequenting locations where children may be present, and requiring him to submit to searches upon request of law enforcement, among other conditions. Wolf will begin serving the prison term on January 4, 2016.
Assistant U.S. Attorney Wade M. Rhyne is prosecuting the case with the assistance of Janice Pagsanjan. The prosecution is the result of an investigation by the Federal Bureau of Investigation, the Silicon Valley Internet Crimes Against Children’s Task Force, and the Contra Costa County District Attorney’s Office.
San Francisco Resident Indicted for “Straw Hat Bandit” Bank RobberiesRead the Press Release
SAN FRANCISCO - A federal grand jury indicted Richard Laurence Stewart today for committing a string of bank robberies throughout San Francisco, announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge David J. Johnson. The indictment follows a complaint and affidavit filed on October 19, 2015.
Stewart, 52, of San Francisco, was arrested on October 18, 2015, after an investigation by the San Francisco Police and the FBI led to a search of his San Francisco residence. According to a previously filed complaint and the indictment, the FBI has been investigating the Straw Hat Bandit since a robbery on October 27, 2014. The FBI believes Stewart went on to commit a number of robberies, each time wearing a disguise. The affidavit describes a number of different disguises allegedly used by Stewart during the robberies, including glasses, hats, a black curly wig, a fake beard and mustache, and a single surgical glove.
According to the affidavit, Stewart eventually was identified as the bandit after a witness saw him leaving the scene of one of the robberies in a taxicab. Authorities later linked Stewart to the taxicab request. In the search of Stewart’s apartment, agents found hats worn during some of the robberies, a blue surgical glove, and a demand note that stated, “This is a robbery.” The indictment charges Stewart with four counts of bank robbery or attempted bank robbery, in violation of 18 U.S.C. § 2113(a). The robberies charged occurred on May 12, May 13, October 14, and October 16, 2015.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Stewart faces a maximum sentence of 20 years’ imprisonment and $250,000 on each count of bank robbery. Additional terms of supervised release, penalties, and restitution may be ordered upon conviction. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Stewart made his initial appearance on October 20, 2015, in San Francisco before U.S. Magistrate Judge Elizabeth D. Laporte. He is scheduled to be arraigned on the indictment on November 3, 2015, before U.S. Magistrate Judge Laurel Beeler.
The case is being prosecuted by Assistant U.S. Attorneys Lloyd Farnham and Shailika Kotiya with the assistance of Veronica Ramirez. The prosecution is the result of an investigation by the FBI and the San Francisco Police Department.
APL Ltd. to Pay $9.8 Million to Resolve Alleged False Claims Under the Department of Defense Shipping ContractRead the Press Release
WASHINGTON - APL Limited has agreed to pay the government $9.8 million to resolve allegations that it violated the False Claims Act in connection with a contract to provide GPS tracking of shipping containers in Afghanistan, the Justice Department announced today. APL, an ocean carrier based in Scottsdale, Arizona, is a wholly-owned American subsidiary of Singapore-based Neptune Orient Lines Limited.
The Department of Defense contract required APL to affix a satellite tracking device to each shipping container transported from Karachi, Pakistan, to U.S. military bases in Afghanistan when the Department of Defense (DOD) requested the tracking services. The United States alleges that APL billed the DOD for tracking services despite knowing that the tracking devices completely or partially failed to transmit data, or were not affixed to shipping containers. The government also claims that APL attached a single satellite tracking device to two shipping containers despite being required to affix one device to every container.
“The U.S. Attorney’s Office will continue to work with our partners to protect the public fisc from government contractors who fail to deliver what they promise,” said Acting U.S. Attorney Brian J. Stretch of the Northern District of California.
“Today’s settlement demonstrates our commitment to ensure that contractors doing business with the military perform their contracts honestly,” said Principal Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will continue to ensure that there are appropriate consequences for those who knowingly fail to live up to their bargain and misuse taxpayer funds.”
“Thanks to the collaborative efforts of many U.S. law enforcement professionals, APL is today being held accountable for their actions,” said Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “I applaud all those responsible for their continued pursuit of those who attempt to take advantage of the U.S. military through false claims for services that were not provided.”
The settlement with APL was the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office of the Northern District of California, Affirmative Civil Enforcement Unit; DOD’s Defense Criminal Investigative Service; the Army’s Criminal Investigation Command and DOD’s Defense Contract Audit Agency.
The claims resolved by today’s civil settlement are allegations only; there has been no determination of liability.
Former San Francisco Real Estate Tycoon Sentenced to Seven Years’ Imprisonment for Mail Fraud, Wire Fraud, Making False Declarations, Escape, and ContemptRead the Press Release
SAN FRANCISCO - Luke D. Brugnara was sentenced yesterday to seven years in prison after his conviction for mail fraud, wire fraud, false declarations to a court, escape, and contempt of court, announced Acting United States Attorney Brian J. Stretch, Federal Bureau of Investigation Special Agent in Charge David J. Johnson, and U.S. Marshal Don O’Keefe.
Brugnara, 52, of San Francisco, was originally charged with fraud in a criminal complaint filed May 27, 2014. The criminal complaint described Brugnara’s refusal to pay for several pieces of art after he convinced a New York art dealer to ship the art to his California home. Brugnara was arrested on May 28, 2014, but then escaped from custody of his lawyer on February 5, 2015. He was apprehended six days later and stood trial beginning April 27, 2015. Brugnara waived his right to counsel and conducted the trial as a pro se defendant with the assistance of two attorneys appointed as advisory counsel. On May 19, 2015, the jury convicted Brugnara of three counts of wire and mail fraud, one count of making false declarations to a court, one count of escape, and one count of contempt.
Evidence at trial showed that, in late March and early April 2014, Brugnara told the art dealer that he would pay approximately $11 million for works of art. Based on his representations that he would pay for the artwork and put it in a museum, the artwork was shipped to Brugnara at his house in the Sea Cliff neighborhood of San Francisco. The evidence at trial demonstrated that the artwork was delivered in five wooden crates to Brugnara’s residence on April 7, 2014. When the artwork arrived, Brugnara refused to pay for it, return it, or inspect it, and told the art dealer that she had given the artwork to him as a gift. Eventually, the art dealer reported the crime to the FBI, which executed a search warrant at Brugnara’s residence in late May 2014. During the search, the FBI recovered only four of the five crates of artwork. The fifth crate, containing a “Little Dancer” sculpture by Edgar Degas, was never recovered. Evidence at trial also demonstrated that defendant had lied in testimony at an evidentiary hearing, and that he had absconded from a furlough to the federal building, in violation of a court order.
The sentence was handed down by the Honorable William H. Alsup, U.S. District Judge. In addition to the prison term, Judge Alsup sentenced Brugnara to three years’ supervised release and approximately $688,000 in restitution. Brugnara will begin serving his sentence immediately.
Assistant U.S. Attorneys Robin Harris and Benjamin Kingsley are prosecuting the case with the assistance of Denise Oki, Jessica Meegan, and Trina Khadoo. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the U.S. Marshal Service.
Former Silk Road Task Force Agent Sentenced to 78 Months in Prison for Extortion, Money Laundering, and ObstructionRead the Press Release
SAN FRANCISCO – Carl M. Force was sentenced to 78 months in prison today for extortion, money laundering, and obstruction of justice announced Acting U.S. Attorney Brian J. Stretch, Assistant Attorney General Leslie R. Caldwell, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Department of Justice Office of the Inspector General’s Washington, D.C. Field Office and Special Agent in Charge James E. Ward of the Department of Homeland Security’s Office of the Inspector General. The sentence follows a guilty plea in which Force admitted to using his position as an undercover agent with the Drug Enforcement Administration to steal digital currency during a federal investigation.
Force, 46, of Baltimore, had been a Special Agent with the DEA for 15 years. Between 2012 and 2014, he was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on the Silk Road. Force was the lead undercover agent in communication with Ross Ulbricht, a/k/a “Dread Pirate Roberts,” who ran the Silk Road from the Northern District of California. On July 1, 2015, Force pleaded guilty to charges that he used his position during that investigation to steal money during the investigation and then took steps to cover up his wrongdoing.
“The prosecution and conviction of Mr. Force illustrates that the public and law enforcement alike are subject to the same rules,” said Acting U.S. Attorney Brian J. Stretch. “The vast majority of the men and women in this country who are entrusted to enforce the law to do so honorably, skillfully, and in a manner that instills confidence and trust in government. Mr. Force has dishonored that majority and has today received a just punishment for his criminal conduct.”
“Law enforcement officials receive certain powers from the government so they can defend the rights of people and prevent wrong doing,” said FBI Special Agent In Charge David J. Johnson. “When individuals working in an official capacity violate the trust of their communities by abusing that power, they undermine the hard work of the entire law enforcement community. The FBI will continue to prioritize corruption investigations and hold those who abuse the public's trust accountable.”
“Through a series of complex transactions the defendant stole bitcoins worth hundreds of thousands of dollars,” said Thomas McMahon, Acting Special Agent in Charge, IRS Criminal Investigation. “The defendant’s crimes began with creating fictitious personas. He then stole bitcoins that he received in his official capacity and deposited them into his own personal accounts. This case is an excellent example of the financial expertise of our special agents. Through the analysis of both the block chain and data from the Silk Road servers, we were able to trace the flow of funds, which eventually led to the defendant.”
In his plea agreement, Force admitted to being on Ulbricht’s payroll in a variety of ways while assigned to investigate Ulbricht and the Silk Road. For example, Force used his official undercover persona, “Nob,” to get Ulbricht to send bitcoin payments in exchange for information, including “insider” law enforcement information; ironically, Force duped Ulbricht into making payments in part by claiming Nob had access to a corrupt government employee. Then, rather than disclose Ulbricht’s payments or turn them over to the government, Force lied on official reports and stole the funds. Force liquidated the digital currency into dollars and had the funds deposited into his own bank account in order to convert the funds to his own personal use. Further, Force also created other unofficial and fictitious personas that he used to extort payment from Ulbricht. For example, Force convinced Ulbricht he was “French Maid” named Carla Sophia who was willing to sell inside law enforcement information about the government’s investigation into the Silk Road in exchange for approximately $100,000 worth of bitcoin. Ulbricht ultimately made the payment and Force, again, stole the funds.
Ulbricht and the government were not the only targets of Force’s scheme: Force also admitted in the plea agreement that he extorted “R.P.,” a California resident. R.P. maintained a digital currency balance with CoinMKT, a California digital currency exchange. Force directed CoinMKT to seize R.P.’s funds despite there being no legal basis to do so. Force then pocketed those sums belonging to R.P., once again transferring them to his own personal digital currency exchange and subsequently converting them to dollars using his personal bank account.
Force also admitted to abusing his position by engaging in a wide array of outside activities without permission while he was a federal agent, all designed to enrich himself. For example, in March 2014, while still employed as a DEA agent, Force entered into a movie contract with Twentieth Century Fox Film Studios related to a movie deal concerning the government’s investigation into the Silk Road. The movie deal called for up to $240,000 in payments to Force. Further, Force also moonlighted as a de facto compliance officer for CoinMKT, the same digital currency exchange involved with Force’s attempt to extort R.P. Force offered to help CoinMKT investigate its customers by using his position as a federal agent and his access to government databases. In addition, Force sent an unauthorized but official Justice Department subpoena to Venmo, a mobile payments company, directing them to unfreeze his own personal account. When Venmo did not comply, Force wrote to another agent suggesting a criminal seizure directed at Venmo’s accounts.
With the proceeds of his criminal activities, Force engaged in a series of complicated transactions, using the bitcoin block chain and several different accounts, all designed to conceal the true source and nature of the proceeds. In today’s plea agreement, Force also admitted he obstructed justice by interfering both with the evidence in the Baltimore case against Ulbricht, and with the San Francisco case into his own illegal acts. For example, Force admitted lying to federal prosecutors and investigators when he, among other things, denied ever using the moniker, “French Maid.” In his agreement with the government, Force has agreed to ask the Judge to impose sentencing enhancements for this obstruction. On June 22, 2015, Force was charged in a three-count information with money laundering with predicates of wire fraud and theft of government property, in violation of 18 U.S.C. § 1956(a)(1)(A) and (B); obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2); and extortion under color of official right, in violation of 18 U.S.C. § 1951. On July 1, 2015, Force pleaded guilty to all counts.
The Honorable Richard Seeborg, U.S. District Judge in San Francisco, handed down the sentence. Judge Seeborg also sentenced Force to a three year period of supervised release and ordered restitution of $340,000.
Force is one of two federal agents to be charged with illegal activity in connection with the investigation into the Silk Road. Shaun W. Bridges, 32, of Laurel, Maryland, was a Special Agent with the U.S. Secret Service who also was assigned to the Baltimore Silk Road Task Force. Bridges was charged in a two-count information on June 16, 2015 with money laundering with a predicate of wire fraud, in violation of 18 U.S.C. § 1957, and obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2), related to his diversion of over $800,000 in digital currency to which he gained control as part of the Silk Road investigation. In his plea agreement scheduled to be entered before Judge Seeborg on August 31, 2015, Bridges has admitted to the conduct with which he was charged.
The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, with the assistance of San Francisco Legal Assistant Daniel Charlier-Smith, Christine Tian and Lance Libatique. Assistant U.S. Attorney Arvon Perteet assisted with Asset Forfeiture aspects of the case. The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General and the Department of Homeland Security Office of the Inspector General in Washington D.C. The prosecution team is also thankful for the assistance of the following components for their support throughout the investigation of this case: IRS Criminal Investigation – New York Field Office, HSI’s Chicago/O’Hare Division, the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Computer Crime and Intellectual Property Section, the U.S. Embassy in Slovenia, and the FBI Legal Attaché Office in Tokyo, Japan.
Two Oakland Men Sentenced to 57 and 55 Years in Prison for String of Armed RobberiesRead the Press Release
OAKLAND – Melvin Landry, Jr. and Dominique Marquis Martin were sentenced on October 13, 2015, for their participation in a case involving a spree of armed robberies of commercial businesses in and around the Bay Area, announced Acting United States Attorney Brian J. Stretch; FBI Special Agent in Charge David J. Johnson; and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
Landry, 24, of Oakland, was sentenced to 685 months in prison and ordered to pay restitution in the amount of $52,387.28. Martin, 24, also of Oakland, was sentenced to 661 months in prison and ordered to pay $53,387.28 in restitution.
Landry and Martin were defendants in a 25-count Superseding Indictment filed on July 29, 2014. Both defendants were charged with, among other things, conspiracy to commit robbery affecting interstate commerce (Hobbs Act robbery) and Hobbs Act robbery, in violation of 18 U.S.C. § 951(a); and use, possession, and brandishing of a firearm in furtherance of and during and in relation to a crime of violence, in violation of 18 U.S.C. § 924(c).
According to evidence presented at trial, beginning in 2012, the defendants, operating with others in the greater Bay Area including Mill Valley, Fremont, and San Leandro, engaged in numerous armed robberies of McDonald’s restaurants and Walmart stores. During these robberies, the defendants brandished firearms and stole cash and checks while the stores were full of customers. The defendants and others broadcast and boasted about their criminal activities on Facebook, Instagram, and YouTube. The defendants appeared in pictures taken in the aftermath of their crimes in which they were rolling around in large amounts of cash. They also documented themselves on spending sprees with the proceeds from their robberies. On July, 1, 2015, a jury found Landry and Martin guilty of conspiracy to commit robbery affecting interstate commerce, robbery affecting interstate commerce, and using/possessing/brandishing a firearm in furtherance of and during and in relation to a crime of violence.
The sentence was handed down on October 13, 2015, by the Honorable Jeffrey S. White, United States District Judge. Landry and Martin have been in federal custody since July 29, 2013, and will begin serving their sentence immediately.
This case was prosecuted by Assistant United States Attorneys Kathryn Haun, Cynthia Frey, and Kimberly Hopkins with the assistance of Kevin Costello, Daniel Charlier-Smith, Ponly Tu, and Assistant United States Attorney Olusere Olowoyeye of the Eastern District of California. The prosecution is the result of an investigation by the FBI, IRS Criminal Investigation, the California Highway Patrol, the Fremont Police Department, the Alameda County Sheriff’s Department, the Alameda County DA’s Office, the San Leandro Police Department, the San Mateo Police Department, the San Mateo District Attorney’s Office, the Oakland Police Department, the Pinole Police Department, the San Rafael Police Department, the Marin County Sheriff’s Office, the Antioch Police Department, the Richmond Police Department, the Vallejo Police Department, and the Sacramento Police Department.
Former Hedge Fund Manager Convicted of Wire Fraud, Money Laundering, and Contempt of CourtRead the Press Release
SAN FRANCISCO – A jury convicted James Murray today of 22 felonies—including wire fraud, money laundering, and aggravated identity theft—and contempt of court, announced Acting U.S. Attorney Brian J. Stretch, FBI Special Agent in Charge David J. Johnson, and U.S. Secret Service Special Agent in Charge David Thomas.
Murray, 45, formerly of Larkspur, was the sole member and investment advisor of Market Neutral Trading, LLC (MNT), a purported hedge fund. MNT’s marketing materials claimed the fund was audited by Jones, Moore & Associates (JMA), a sham entity that Murray started and controlled. After being charged in a criminal complaint with wire fraud in February of 2012, Murray was charged on March 17, 2015, in a fourth superseding indictment with 22 felonies including 16 counts of wire fraud, in violation of 18 U.S.C. § 1343; 4 counts of engaging in money transactions in criminally derived property, in violation of 18 U.S.C. § 1957; 2 counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1); as well as contempt of court, in violation of 18 U.S.C. § 401(3).
According to the indictment, beginning in 2007, Murray used JMA and MNT to defraud merchant banks and investors. Among the schemes devised by Murray was a scheme involving fraudulent credit card transactions in JMA’s merchant account. Murray used credit cards he controlled to process more than $650,000 in sham transactions, followed by fraudulent refunds on those same cards, leading to a loss of more than $550,000 to the credit card processing company.
Also according to the indictment, Murray defrauded victim investors out of more than $2.5 million. Murray caused false and misleading marketing materials to be created and provided potential investors with false monthly performance numbers for the fund. For example, the materials indicated that the fund had been audited by accountants with JMA. Murray never disclosed JMA was not a real auditing firm and never disclosed that JMA did not actually conduct an audit and that the performance numbers in the JMA audit reports grossly overstated the performance of the fund in 2009. Murray also provided potential investors with a fake resume that included honors and a master’s degree he had never achieved.
Also according to the indictment, in July of 2012, Murray convinced a New York brokerage to advance 50,000 shares of stock in Netflix in order to complete a short sale stock transaction. Murray represented to the bank that at the time MNT had $5 million of assets available to invest, a fact Murray knew was not true.
Also according to the indictment, while this matter was pending, the Honorable Edward M. Chen, U.S. District Judge, issued an order setting conditions for Murray’s release on bond. According to Judge Chen’s order, Murray was prohibited from using a computer to access the Internet, prohibited from using a telephone other than at the halfway house, and prohibited from contacting witnesses. According to the indictment, Murray nevertheless obtained a computer and used it to access the Internet, sent messages to and communicated with a witness in the case, and committed additional violations of the order. The evidence at trial established that Murray used the computer at his former attorney’s office when he was released from the halfway house for the purpose of meeting with his counsel. A search conducted pursuant to a warrant revealed Murray hid the computer above ceiling tiles in a conference room in his former attorney’s office.
Today’s verdict followed a three-week jury trial and resulted in a finding by the jury that Murray was guilty of all the charges in the indictment. The maximum penalties Murray faces are as follows:
For each of the 16 counts of wire fraud, twenty years and $250,000 or two times the gross gain or loss resulting from the crime.
For each of the 4 counts of money laundering, 10 years and $250,000 or two times the amount of the criminally derived property.
For each of the 2 counts of aggravated identity theft, a two year mandatory sentence to run consecutively to the other crimes.
There is no maximum penalty for contempt of court, in violation of 18 U.S.C. § 401(3). Additional terms of supervised release, penalties 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. Murray is scheduled to appear for a sentencing hearing on January 20, 2016.
Assistant U.S. Attorneys Robin Harris and Lloyd Farnham are prosecuting the case with the assistance of Lillian Arauz-Haase, Maryam Beros and Jessica Meegan. The prosecution is a result of an investigation by the FBI and U.S. Secret Service.
Salinas Residents Charged in Tax and Mortgage Fraud SchemeRead the Press Release
SAN JOSE – A federal grand jury in San Jose indicted Elizabeth Calderon and Esther Sanchez, AKA Trinidad Carrillo, with filing false tax returns, theft of government funds, aggravated identity theft, making false statements to federally insured institution, and conspiracy, announced Acting United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
According to the indictment, beginning on or about November 24, 2010, and continuing to the present, Calderon, 39, a resident of Salinas, Calif., has been a professional tax return preparer. Calderon is charged with willfully assisting in the preparation and presentation of thirteen false U.S. Individual Income Tax Returns, Forms 1040, for other taxpayers. Calderon is also charged with theft of government funds and aggravated identity theft for using someone else’s identification to obtain fraudulent income tax refunds, and with filing false Forms 1040 in her own name for 2010, 2011 and 2012. In addition, Calderon and Sanchez, 54, also a resident of Salinas, are charged with conspiring to submit a loan application to Bank of America that contained false information and was supported by counterfeited documents.
Calderon and Sanchez were arrested in Salinas this morning. They made their initial appearance this afternoon in federal court in San Jose before the Honorable Paul S. Grewal, U.S. Magistrate Judge. Both defendants’ next appearance is scheduled for October 13, 2015 at 9:00 AM before the Honorable Beth Labson Freeman.
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 three years in prison and a fine of $250,000 for each count of filing false tax returns and each count of aiding or advising false tax returns, in violation of 26 U.S.C. §§ 7206(1) and 7206(2). The maximum sentence for theft of government funds, in violation of 18 U.S.C. § 641, is ten years in prison and a fine of $250,000. The maximum penalty for aggravated identity theft, in violation of 18 U.S.C. § 1028A, is two years in prison to run consecutive with the underlying felony and a fine of $250,000. The maximum sentence for making false statements to federally insured institution, in violation of 18 U.S.C. § 1014, is thirty years in prison and a $1,000,000 fine. The maximum penalty for conspiracy, in violation of 18 U.S.C. § 371, is five years in prison and a $250,000 fine. 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.
Former Marin County Mortgage Broker Sentenced to 36 Months in PrisonRead the Press Release
SAN FRANCISCO– Paul Sloane Davis was sentenced to 36 months in prison today for a Ponzi scheme he perpetrated along with co-defendant Diane Cobb, announced acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation, Special Agent in Charge David J. Johnson. The sentencing follows a guilty plea in which Davis admitted to running a fraudulent scheme. Court documents establish that Davis and Cobb profited by more than a million dollars.
Davis, 76, of Santa Rosa, Calif., was charged by indictment on October 31, 2013, for his part in the scheme. According to the indictment, Davis and Cobb, 58, currently a resident of the State of Ohio, operated a financial services company in Marin County known as DM Financial. Through DM Financial, Davis and Cobb offered investors the opportunity to fund purported short-term “bridge loans” to borrowers who, according to Davis and Cobb, needed short-term financing for residential real estate transactions. The defendants fraudulently provided to these investors, among other things, the identity of the purported borrower, a promissory note reflecting the amount and terms of the loan, and a deed of trust securing the loan to the borrower’s real property. Based upon these documents and other representations made by Davis and Cobb, the investors believed the defendants were directing the funds into secured loans with borrowers.
Purported borrowers received none of the investors’ money and did not even know that their identities were being used to solicit investments. Instead, Davis and Cobb diverted substantially all the money—approximately $2.4 million—for their own personal use or to make interest payments to prior investors to keep them from discovering the true nature of the scheme.
Davis was charged with one count of conspiracy, in violation of 18 U.S.C. § 1349; four counts of mail fraud, in violation of 18 U.S.C. § 1341; and nine counts of wire fraud, in violation of 18 U.S.C. § 1343. On March 19, 2015, Davis pleaded guilty to all counts.
The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge. Judge Breyer also sentenced the defendant to a three year period of supervised release, and ordered restitution of approximately $1.7 million to the victims of Davis’s offense. Cobb pleaded guilty to the same charges on July 2, 2014, and is scheduled to be sentenced on January 13, 2016, before Judge Breyer.
Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with the assistance of Jessica Meegan. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Operator of $228 Million Fraudulent Tax Refund Scheme Sentenced to 57 Months’ ImprisonmentRead the Press Release
SAN FRANCISCO – Duffy R. Dashner (a/k/a Kevin Dashner) was sentenced to 57 months’ imprisonment for conspiring to submit false claims and ordered to pay restitution of $1,769,418 to the Internal Revenue Service announced Acting United States Attorney Brian J. Stretch, Acting Assistant Attorney General for the Tax Division Caroline D. Ciraolo, and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas P. McMahon.
According to court documents, Dashner, 42, of Reseda, Calif., and his co-conspirators, including Mark R. Maness, operated a business called O.I.D. Process through which they helped others prepare and file individual federal income tax returns. In the returns, the filers claimed false Original Issue Discount (OID) interest income and federal tax withholdings resulting in fraudulent claims for tax refunds (OID returns). Dashner and Maness charged clients of O.I.D. Process a non-refundable registration fee to join the organization and a 20 percent “refund acquisition fee” for any refund check issued by the Internal Revenue Service (IRS). Dashner and Maness also operated a website and conducted weekly conference calls with clients to promote their business and to assist clients in preparing and filing OID returns.
Dashner and Maness required clients of O.I.D. Process to change their mailing address with the IRS to the address of another co-conspirator who was an attorney in San Francisco. As a result, all correspondence from the IRS to the clients and the clients’ refund checks were sent to the attorney’s address rather than to the clients’ home address. In this way, Dashner and Maness ensured they would receive a 20 percent refund acquisition fee. O.I.D. Process clients filed approximately 200 OID returns claiming refunds that totaled approximately $228 million.
Dashner was charged by indictment with one count of conspiracy to submit false claims, in violation of 18 U.S.C. § 286, and two counts of aiding and assisting in the presentation of a false income tax return, in violation of 26 U.S.C. § 7206(2). On June 18, 2015, Dashner pleaded guilty to one count of conspiracy to submit false claims, in violation of 18 U.S.C § 286.
Dashner’s sentencing hearing took place before the Honorable Susan Illston, United States District Judge, in San Francisco. In addition to the prison term, Dashner was ordered to pay $1.7 million in restitution to the IRS. Dashner will begin serving his prison term immediately.
Maness previously pleaded guilty to conspiracy to submit false claims against the United States and was sentenced in February 2015 to serve 41 months in prison, and ordered to pay $1,176,668 in restitution to the IRS.
United States Department of Justice Tax Division Trial Attorney Matthew J. Kluge and Assistant United States Attorney Michael G. Pitman are prosecuting the case. The prosecution is the result of an investigation by IRS-CI.
Salinas Man Charged in Embezzlement SchemeRead the Press Release
SAN JOSE – A federal grand jury in San Francisco indicted Neal Morton on bank fraud and aggravated identity theft charges, announced Acting United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
According to the indictment, Morton, a resident of Salinas, was employed in the accounting department at Tehama Golf Club, a privately owned entity located in Carmel. From 2009 through February 2014, Morton allegedly devised a scheme to embezzle funds from the Tehama Golf Club. As part of the scheme, he issued or caused to be issued checks drawn on the Tehama Golf Club bank accounts that were made payable to himself. To conceal the scheme, Morton either made or caused to be made entries in Tehama Golf Club’s accounting records falsely reflecting that the checks were for valid business expenses when in fact they were made payable to himself. Morton deposited the proceeds from the fraudulent checks into a bank account he controlled. Many of the fraudulent checks Morton signed were required to be co-signed by another authorized signatory at Tehama Golf Club. To evade this requirement, and in furtherance of his fraudulent scheme, Morton forged those signatures using electronic copies of them he had saved on his computer. In at least one instance, Morton also forged a co-signer’s signature by hand.
Morton is scheduled to make his initial appearance in federal court in San Jose on October 29, 2015, before the Honorable Paul Singh Grewal, U.S. Magistrate Court Judge.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of thirty years in prison and a fine of $1,000,000 for bank fraud, in violation of 18 U.S.C. § 1344(2). The maximum sentence for aggravated identity theft, in violation of 18 U.S.C. § 1028A, is two years in prison to run consecutive to the underlying felony and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant United States Attorneys Thomas Newman and Jose A. Olivera are prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
San Francisco Restaurant Owner Indicted for Concealing Non-Payment of Wages and Threatening EmployeesRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Ming Lian Zhou for making false statements to a government agency about paying his employees overtime wages and for threatening his employees with economic harm if they did not return their wages to him, announced Acting United States Attorney Brian J. Stretch and U.S. Department of Labor Office of Inspector General Special Agent in Charge Abel Salinas.
According to the indictment unsealed yesterday, Zhou, 57, of San Francisco, was the partial owner and manager of Hong Kong Lounge I and Hong Kong Lounge II, dim sum restaurants located in San Francisco. The Department of Labor (DOL) determined in 2012 that the restaurants had underpaid 48 employees by over $90,000. The DOL directed Zhou and the restaurants to pay this money to the employees and then certify to DOL that they had been paid. Zhou allegedly submitted signed forms to DOL stating that he had paid the employees, but in reality, Zhou had not paid any of the employees. Zhou then allegedly directed his employees to tell DOL they had been paid when, in fact, they had not. The indictment further alleges that in 2013, DOL learned of Zhou’s failure to pay the employees as directed and, as a result, required Zhou to provide the money directly to the DOL; in such cases, DOL can issue checks directly to the underpaid employees. The indictment alleges that Zhou provided the money to DOL but then directed his employees to cash the checks that they received from DOL and to give the money back to him. Zhou allegedly reduced hours, changed employee schedules, and terminated employees who failed to comply with his instructions to kick back their wages. Zhou was charged with concealing a material fact from a government agency, in violation of 18 U.S.C. § 1001(a)(1), and interfering with commerce by threats of economic harm, in violation of 18 U.S.C. § 1951.
Zhou made his initial appearance in San Francisco before U.S. Magistrate Judge Sallie Kim. He appeared before Judge Kim again today for arraignment and identification of counsel.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. Zhou faces a maximum sentence of 5 years’ imprisonment if convicted of concealing material facts from a government agency, and a maximum sentence of 20 years’ imprisonment if convicted of interfering with commerce by threats. Additional terms of supervised release, penalties, and restitution may be ordered upon conviction. 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 Special Assistant U.S. Attorney Daniel P. Talbert with the assistance of Trina Khadoo. The prosecution is the result of an investigation by the DOL’s Office of Inspector General and Wage and Hours Division. This case originated with an investigation by the DOL’s Wage and Hours Division into whether restaurants in the Bay Area complied with the Fair Labor Standards Act.
Saratoga Attorney and Co-Conspirator Indicted in Alleged Scheme to Defraud InvestorsRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted John Jason Gentry Mullins and Bradley Howell in an alleged conspiracy to defraud investors of more than a million dollars, announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation, Special Agent in Charge David J. Johnson.
According to the indictment unsealed earlier today, Mullins, 59, of Saratoga, was an attorney with a San Francisco business address and was admitted to practice in California. Mullins and Howell, 31, of Louisville, Ky, allegedly conspired to defraud investors by convincing them that they could obtain financial instruments, such as bank guarantees and standby letters of credit, in return for small down payments. As part of the scheme, Mullins and Howell allegedly told investors that Mullins, a licensed attorney in California, would serve as an escrow agent in these transactions and that after money was wired to them, the two would obtain the financial instruments. The indictment describes several transactions in which Mullins and Howell allegedly convinced investors to wire hundreds of thousands of dollars to the conspirators for the ostensible purpose of obtaining the instruments. Also according to the indictment, rather than establish the escrow accounts, the defendants used the money for personal expenses; for example, on a least two occasions, Mullins used the money to purchase a condominium. Mullins and Howell were charged with 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. In addition, Mullins is charged with two counts of engaging in monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.
Mullins made an initial court appearance this morning in San Francisco before United States Magistrate Judge Sallie Kim. He will appear again before Judge Kim for a bond hearing this Thursday, September 24, 2015, at 9:30 a.m., and then before United States District Judge Susan Illston on Friday, October 2, at 11:00 a.m. for further proceedings. Howell made an initial court appearance in Louisville; he will appear in San Francisco before Judge Illston on Friday, October 2, 2015, at 11:00 a.m.
An indictment merely alleges that crimes have been committed and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. The defendants face a maximum term of imprisonment of 20 years if convicted of the conspiracy charge or the wire fraud charges. Mullins also faces a maximum term of 10 years’ imprisonment for each count if convicted of engaging in money transactions in property derived from unlawful activity. Additional terms of supervised release, penalties and restitution may be ordered upon conviction. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Special Assistant U.S. Attorney Daniel P. Talbert with the assistance of Beth Margen and Trina Khadoo. The prosecution is the result of an investigation by the FBI.
Former U.S. Army Specialist Sentenced to 30 Months in Prison for Taking Bribes While Deployed in AfghanistanRead the Press Release
A former specialist with the U.S. Army stationed at Forward Operating Base (FOB) Gardez, Afghanistan, was sentenced today to 30 months in prison for accepting a $20,000 bribe from a truck driver in exchange for allowing him to take thousands of gallons of fuel from the base.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Brian Stretch of the Northern District of California and U.S. Attorney Michael J. Moore of the Middle District of Georgia made the announcement.
Anthony Don Tran, 28, of Stockton, California, pleaded guilty on June 9, 2015, to bribery of a public official. In addition to imposing the prison term, U.S. District Judge Beth L. Freeman of the Northern District of California ordered Tran to pay $69,000 in restitution and to forfeit $11,437 as well as a vehicle that he purchased with bribe proceeds.
In connection with his guilty plea, Tran admitted that, in exchange for approximately $20,000 in cash, he permitted a local Afghan fuel truck driver to depart FOB Gardez without downloading roughly 12,000 gallons of fuel purchased by the U.S. government and designated for the base. Tran admitted that, on May 21, 2013, after returning to the U.S., he used the cash to purchase a 2010 Dodge Challenger.
Tran also admitted to accepting at least $1,000 in cash from another member of his unit, former U.S. Sergeant Seneca Darnell Hampton, 31, of Columbus, Georgia, in exchange for Tran’s agreement not to report Hampton or former U.S. Sergeant First Class James Edward Norris, 33, of Fort Irwin, California, for also taking cash bribes in exchange for fuel. Both Hampton and Norris previously pleaded guilty to one count of conspiracy to commit bribery of a public official and one count of money laundering. Hampton was sentenced to 24 months in prison, and Norris was sentenced to 51 months in prison. In addition, both Hampton and Norris were ordered to pay restitution and to forfeit vehicles purchased with bribe proceeds.
The case was investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency’s Investigative Support Division. The case is being prosecuted by Trial Attorneys John Keller and Sean Mulryne of the Criminal Division’s Public Integrity Section and the U.S. Attorney’s Offices of the Northern District of California and Middle District of Georgia.
Former U.S. Army Specialist Sentenced to 30 Months in Prison for Taking Bribes While Deployed in AfghanistanRead the Press Release
SAN JOSÉ – A former specialist with the U.S. Army stationed at Forward Operating Base (FOB) Gardez, Afghanistan, was sentenced today to 30 months in prison for accepting a $20,000 bribe from a truck driver in exchange for allowing him to take thousands of gallons of fuel from the base announced Acting U.S. Attorney Brian Stretch, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, and U.S. Attorney Michael J. Moore of the Middle District of Georgia.
Anthony Don Tran, 28, of Stockton, California, pleaded guilty on June 9, 2015, to bribery of a public official. The sentence was handed down by U.S. District Judge Beth L. Freeman. Judge Freeman also ordered Tran to pay $69,000 in restitution and to forfeit a vehicle that he purchased with bribe proceeds as well as $11,437.
In connection with his guilty plea, Tran admitted that, in exchange for approximately $20,000 in cash, he permitted a local Afghan fuel truck driver to depart FOB Gardez without downloading roughly 12,000 gallons of fuel purchased by the U.S. government and designated for the base. Tran admitted that, on May 21, 2013, after returning to the U.S., he used the cash to purchase a 2010 Dodge Challenger.
Tran also admitted to accepting at least $1,000 in cash from another member of his unit, former U.S. Sergeant Seneca Darnell Hampton, 31, of Columbus, Georgia, in exchange for Tran’s agreement not to report Hampton or former U.S. Sergeant First Class James Edward Norris, 33, of Fort Irwin, California, for also taking cash bribes in exchange for fuel. Both Hampton and Norris previously pleaded guilty to one count of conspiracy to commit bribery of a public official and one count of money laundering. Hampton was sentenced to 24 months in prison, and Norris was sentenced to 51 months in prison. In addition, both Hampton and Norris were ordered to pay restitution and to forfeit vehicles purchased with bribe proceeds.
The case was investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency’s Investigative Support Division. The case is being prosecuted by Trial Attorneys John Keller and Sean Mulryne of the Criminal Division’s Public Integrity Section and the U.S. Attorney’s Offices of the Northern District of California and Middle District of Georgia.
Union Organizer Indicted for Corruption, Attempted Extortion, and Money LaunderingRead the Press Release
OAKLAND - A federal grand jury in Oakland indicted Daniel Rush today with taking illegal payments as a union employee, honest services fraud, attempted extortion, and money laundering announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation, Special Agent in Charge David J. Johnson.
According to the indictment, Rush, 54, of Oakland, is alleged to have used his position as a union organizer with the United Food and Commercial Workers (UFCW) to obtain money and other things of value over a five year period from 2010 to 2015.
Rush was an organizing coordinator of the medical cannabis division of the UFCW. The indictment alleges that, while a union employee, Rush accepted $550,000 in debt forgiveness from an individual affiliated with medical marijuana dispensaries. According to an affidavit filed by an FBI agent in connection with a criminal complaint filed in the same matter, Rush and a coconspirator formulated a scheme to obtain debt forgiveness in exchange for favorable treatment by the union. The individual who agreed to the debt forgiveness was cooperating with the FBI’s investigation at the time Rush proposed the arrangement.
The indictment also charges Rush with taking kickbacks from an attorney to whom he had referred medical marijuana dispensaries as clients. Rush, the indictment alleges, had a duty to provide honest services to the UFCW; that duty including refraining from self-dealing when interacting with the marijuana dispensaries whose workers it was his job to organize. Rush is charged with engaging in a scheme in which he violated that duty in exchange for kickbacks from the attorney.
The indictment further charges Rush with taking kickbacks from the same attorney in exchange for arranging for the attorney to represent clients in worker’s compensation matters. Rush was an officer and director of an advocacy organization for the working poor. Rush directed the organization’s referral of worker’s compensation clients to the attorney. In exchange, the attorney provided Rush with a credit card on which Rush charged thousands of dollars of personal expenses which ultimately were paid by the attorney.
Rush also is charged with attempted extortion. Rush was a member of the Berkeley Medical Cannabis Commission, which is a commission of the City of Berkeley organized to facilitate the appropriate licensing and regulation of medical marijuana in the city. Rush demanded a well-compensated job from a prospective medical marijuana dispensary in exchange for his influence as a member of the commission.
In addition, the indictment alleges that Rush engaged in a conspiracy to commit money laundering and financial structuring, as well as substantive money laundering. The indictment and FBI agent’s affidavit filed in the case explain that Rush took a loan totaling $600,000 in cash from a person engaged in the marijuana business. Rush and the attorney engaged in a series of structuring transactions designed to obscure the origin of the money. Over the ensuing years, Rush required the attorney to fund interest payments on the loan and, when Rush ultimately was not able to repay the loan, he offered favorable union benefits in exchange for forgiveness of the loan.
In sum, Rush was charged with taking illegal payments as a union employee, in violation of 29 U.S.C. §§ 186(a) and (b); honest services fraud, in violation of 18 U.S.C. §§ 1341, 1343 and 1346; attempted extortion, in violation of 18 U.S.C. § 1951; conspiracy to commit structuring and money laundering, in violation of 18 U.S.C. § 371; and money laundering by concealment, in violation of 18 U.S.C. § 1956(a)(1)(B)(i).
The investigation began with cooperation from individuals in the medical marijuana industry who reported Rush’s allegedly corrupt activities. According to the affidavit, the attorney with whom Rush was working has been cooperating with the FBI and has agreed to plead guilty to offenses related to the charges against Rush.
Rush was originally charged by criminal complaint and arrested in Oakland on August 11, 2015, and made his initial appearance in federal court in Oakland on August 12, 2015. Rush was released on bond and bail was set at $500,000. Rush’s next scheduled appearance is September 23, 2015, at 9:30 am for arraignment before the Honorable Kandis Westmore, U.S. Magistrate Judge, in Oakland. The case has been assigned to the Honorable Haywood S Gilliam, Jr., U.S. District Court Judge, in Oakland.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. The defendant faces a maximum term of imprisonment of 20 years if he is convicted of the charges of honest services fraud, attempted extortion, or money laundering, along with a fine as much as $500,000 and restitution if appropriate. If the defendant is convicted of accepting an illegal payment as a union employee or engaging in a criminal conspiracy, he faces a maximum term of imprisonment of 5 years. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office in San Francisco and investigated by the FBI.
Justice Department Awards over $97 Million to Improve Public Safety and Victim Services for American Indians and Alaska NativesRead the Press Release
WASHINGTON, DC. – The Department of Justice today announced 206 awards, totaling more than $97 million, to American Indian tribes, Alaska Native villages, tribal consortia and tribal designees. The announcement was made at the 2015 Tribal Leader Briefing, sponsored by the National Congress of American Indians, and included Tribal leaders, Members of Congress and Administration officials.
Among the tribes in the Northern District of California are the Coyote Valley Band of Pomo Indians, Hoopa Valley Tribe, Hopland Band of Pomo Indians, Round Valley Indian Tribes, and the Yurok Tribe. Combined, the tribes will receive a total of $5,244,787 for a number of programs focusing on a wide range of issues such as public safety and community policing, justice systems and correctional alternatives, as well as reduction of violence and juvenile healing.
The awards are made through the Department’s Coordinated Tribal Assistance Solicitation (CTAS), a single application for tribal-specific grant programs. The Department developed CTAS through its Office of Community Oriented Policing Services, Office of Justice Programs and Office on Violence Against Women, and administered the first round of consolidated grants in September 2010.
“The programs funded by these awards can be extremely effective in reducing violence and promoting a positive and productive relationship between Native Americans and law enforcement,” said Acting United States Attorney Brian J. Stretch. “The dramatic increase of funds granted directly to area tribes emphasizes the Justice Department's support of local efforts to reduce violence and promote public safety.”
“For the past five years, the CTAS program has helped tribes develop their own comprehensive approaches to making their communities safer and healthier,” said Acting Associate Attorney General Stuart F. Delery. “CTAS grants have funded hundreds of programs to better serve crime victims, promote community policing, and strengthen justice systems. This year’s awards also support efforts to reduce domestic and dating violence, and promote wellness and healing for tribal youth, among many other programs.”
The awards are made through the Department’s Coordinated Tribal Assistance Solicitation (CTAS), a single application for tribal-specific grant programs. The Department developed CTAS through its Office of Community Oriented Policing Services, Office of Justice Programs and Office on Violence Against Women, and administered the first round of consolidated grants in September 2010.
Since then, more than 1,400 grants totaling more than $620 million have been provided to enhance law enforcement practices, victim services, and sustain crime prevention and intervention efforts in nine purpose areas; public safety and community policing; justice systems planning: alcohol and substance abuse; corrections and correctional alternatives; children’s justice act partnerships; services for victims of crime; violence against women; juvenile justice; and tribal youth programs.
American Indians and Alaska Natives experience disproportionate rates of violence and victimization and often encounter significant obstacles to identifying and accessing culturally relevant services. CTAS funding helps tribes to develop and strengthen tribal justice systems’ response to crime, while significantly increasing programs and services available to them.
A listing of today’s awards is available at www.justice.gov/tribal/.
Today’s announcement is part of the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in American Indian and Alaska Native communities.
Hayward Man Sentenced to over Ten Years Imprisonment for Receipt of Child Pornography and Travel with the Intent to Engage in Illicit Sexual ConductRead the Press Release
SAN FRANCISCO – Craig Patrick Burt was sentenced yesterday to 127 months’ imprisonment for receipt of child pornography and travel with the intent to engage in illicit sexual conduct, announced Acting United States Attorney Brian J. Stretch and FBI Special Agent in Charge David J. Johnson.
In 2007, Burt, 60, of Hayward, helped to create the Children’s Grace learning center, a charity for impoverished children living in the Philippines. On June 15, 2015, Burt pleaded guilty to receiving child pornography and travelling with the intent to engage in illicit sexual conduct. As part of his plea agreement, Burt admitted that starting in July 2013 he received through his email accounts images of girls ages 10-15 years old who were engaged in sexually explicit conduct. Burt asked for and received these images from an individual in the Philippines and he sent money and gifts to the young girls. Burt further admitted that in January of 2015, he flew to the Philippines where he intended to engage in sexual contact with girls between 10 and 15 years of age. He described in great detail in internet chat messages what specific sexual acts he wanted to perform with the young girls. On February 15, 2015, Burt was arrested at San Francisco International Airport, when he was attempting to reenter the United States.
Burt was indicted on March 3, 2015. He was charged in four counts of conspiracy to engage in sex trafficking, in violation of 18 U.S.C. § 1594(c); sex trafficking, in violation of 18 U.S.C. §§ 1591(a)(1) and (b)(1); receipt or distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2); and travel with the intent to engage in illicit sexual conduct, in violation of 18 U.S.C. § 2423(b). Under the plea agreement, Burt pleaded guilty to violating 18 U.S.C. §§ 2252(a)(2) and 2423(b).
The sentence was handed down by the Honorable Thelton E. Henderson, Senior U.S. District Judge. Judge Henderson also imposed a five year period of supervised release.
Assistant U.S. Attorney Sheila A.G. Armbrust is prosecuting the case with the assistance of Patricia Mahoney. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Former CEO of Local University Sentenced to 12 Months Imprisonment for Submitting False Documents to Department of Homeland SecurityRead the Press Release
SAN JOSE- Jerry Wang, the Chief Executive Officer of Herguan University in Sunnyvale, California, was sentenced yesterday to 12 months’ imprisonment for submitting false documents to the Department of Homeland Security (DHS), announced Acting United States Attorney Brian Stretch and Special Agent in Charge, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Ryan L. Spradlin.
On July 24, 2012, Jerry Wang, 34, of Santa Clara, was indicted on fifteen charges arising out of a visa fraud scheme in connection with Herguan University. The superseding indictment filed October 30, 2014, alleges that, starting in July 2007, Wang and others caused Herguan to submit fraudulent documents to DHS’s Student and Visitor Exchange Program (SEVP) in support of a petition to admit foreign students. Wang was charged with conspiracy to commit visa fraud, in violation of 18 U.S.C. § 371; aiding and abetting visa fraud, in violation of 18 U.S.C. §§ 1546; aiding and abetting unauthorized access of a government computer, in violation of 18 U.S.C. § 1030(a); use of false documents, in violation of 18 U.S.C. § 1001(a)(3); and aggravated identity theft, in violation of 18 U.S.C. § 1028A.
“Jerry Wang has admitted submitting over one hundred fraudulent documents to the government in an effort to circumvent the rules applying to international students,” said Acting U.S. Attorney Brian J. Stretch. “In doing so, he has imperiled the programs that allow international students to visit the United States in order to engage in valuable educational exchanges.”
“International students represent an invaluable asset to our nation. We’re committed to working with our government partners and with educators to enable legitimate students to pursue their studies here,” said Ryan L. Spradlin, Special Agent in Charge of HSI San Francisco. “However, HSI will aggressively target those who commit student visa fraud out of greed and self-interest. Their actions undermine the integrity of this country’s immigration laws and it will not be tolerated.”
Wang pleaded guilty on April 9, 2015, to one false document count, specifically submitting a fraudulent Academic Warning Letter to DHS, in violation of 18 U.S.C. § 1001(a)(3). As part of his plea, he also admitted participating in the scheme to commit visa fraud, involving more than one hundred immigration-related documents known as “Forms I-20,” as well as aiding and abetting the unauthorized access of a DHS computer database.
The Honorable Edward J. Davila, U.S. District Judge, sentenced Wang on September 14, 2015. The sentence included the criminal forfeiture of $700,000 and three years of supervised release. Wang has been ordered to self-surrender and begin serving his prison term by November 3, 2015.
Assistant U.S. Attorneys Hartley M. K. West and Maia T. Perez are prosecuting the case with the assistance of Helen Yee, Natachiana Williams, Rosario Calderon, and Trina Khadoo. This prosecution is the result of an investigation by Document and Benefit Fraud Task Force (DBFTF) overseen by HSI. The DBFTF is a multi-agency task force that coordinates investigations related to fraud schemes involving immigration documents and benefits.
San Francisco Resident Charged in Alleged Identity Theft, Bank Fraud, and Aggravated Identity Theft SchemeRead the Press Release
SAN FRANCISCO – Charlyne Basada, AKA Charlyne Melendres, was arrested today in connection with an alleged bank fraud, wire fraud, and identity theft scheme, announced Acting United States Attorney Brian Stretch and Jean Ackerman, Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration.
In an indictment unsealed this morning, Basada, 38, of San Francisco, was charged with fraudulently making payments to herself from her employers’ checking accounts. According to the indictment, Basada was employed by three separate companies between 2010 and 2015, and at each company, she obtained access to the payment systems of her employer. The indictment alleges that Basada devised and executed a scheme to defraud by using these corporate payment systems to initiate fraudulent payments to herself. In so doing, she created the false appearance that she was entitled to funds for wages, reimbursements, and other payments. The indictment further alleges that vendors for the companies were not paid and employee contributions to retirement plans were not made in order to help conceal the fraud.
Also alleged in the indictment, Basada prepared checks that were intended to pay personal vendors of one of her employers. Her employer signed these checks believing that they would be paid to vendors. However, Basada fraudulently completed the payee portion of the check to “cash” and deposited the checks into her own personal bank account. Basada was charged with twelve counts of bank fraud, in violation of 18 U.S.C. § 1344; four counts of wire fraud, in violation of 18 U.S.C. § 1343; and two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1).
Basada was arrested this morning by Special Agents from the United States Department of Labor’s Office of the Inspector General. She was then arraigned and released on a $100,000 bond. Her next court appearance is scheduled for September 24, 2015, at 2:00 p.m., for an initial appearance before U.S. District Judge Charles R. Breyer.
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 statutory penalty for bank fraud is 30 years’ imprisonment and $1,000,000 or twice the gross gain or loss The maximum statutory penalty for each count of wire fraud is 20 years’ imprisonment and $250,000 or twice the gross gain or loss. The maximum statutory penalty for aggravated identity theft is a mandatory two years of imprisonment in addition to any sentence imposed. Additional periods of supervised release, fines, and special assessments also could be imposed. 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 Benjamin Kingsley is prosecuting the case with the assistance of Mary Mallory and Jessica Meegan. The prosecution is the result of an investigation conducted by the San Francisco Regional Office of the United States Department of Labor, Employee Benefits Security Administration.
Humboldt County Juvenile Corrections Officer Sentenced to 60 Months in Prison for Possession of Child PornographyRead the Press Release
SAN FRANCISCO – Keith Monroe Wallace was sentenced today to 60 months in prison for possession of child pornography, announced Acting United States Brian J. Stretch and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Special Agent in Charge Ryan L. Spradlin.
Wallace, 53, of Eureka, Calif., pleaded guilty on June 24, 2015, to possession of child pornography. According to the plea agreement the defendant admitted to knowingly possessing 600 or more visual depictions of prepubescent minors or minors who had not attained 12 years of age engaging in sexually explicit conduct. The images included depictions of sadistic or masochistic conduct or other depictions of violence. Wallace was indicted by a federal grand jury on March 10, 2015, and charged with one count of possession of child pornography, in violation of 18 U.S.C. §§ 2252(a)(4)(B) and (b)(2).
At the time of his arrest, Wallace was employed by the Humboldt County Juvenile Probation Office as a Supervising Juvenile Corrections Officer in the Northern California Regional Facility in Eureka. According to court documents, federal law enforcement agents with HSI were led to Wallace as a result of an investigation into the sexual exploitation of children in the Northern District of California. On February 26, 2015, a federal search warrant was executed at Wallace’s residence in Eureka. HSI agents and Humboldt County District Attorney Investigators seized various computers and digital media storage devices pursuant to the search warrant. A forensic review of the computers and digital media storage devices seized from Wallace’s residence revealed the existence of videos and images depicting minors engaging in sexually explicit conduct. Wallace was taken into federal custody at the time of the execution of the search warrant.
The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge. Judge Breyer also sentenced Wallace to a ten-year period of supervised release and a number of other conditions. One such condition is that Wallace will be required to register with the state sex offender registration agency as required by state law. Restitution will be determined by the court at a later date. The defendant will begin serving his prison term immediately.
Assistant U.S. Attorney Claudia A. Quiroz is prosecuting the case with the assistance of Marina Ponomarchuk. The prosecution is the result of an investigation by the HSI Child Exploitation Investigations Group, as well as investigators from the Humboldt County District Attorney’s Office.
If members of the public have any information relevant to this investigation or regarding child sexual exploitation crimes they are encouraged to call the ICE tip line at 1-866-347-2423 (1-866-DHS-2ICE).
Former Marin Attorney Charged in Securites Fraud, Money Laundering SchemeRead the Press Release
SAN JOSE – James Seltzer, a former attorney and resident of Marin County, appeared today in San Jose on charges he defrauded several clients by convincing them to make contributions for sham investments, announced Acting United States Attorney Brian Stretch, FBI Special Agent in Charge David J. Johnson, and IRS Criminal Investigation Special Agent in Charge José M. Martinez. Seltzer was apprehended in Hawaii and ordered to appear in San Jose to face the charges presented in an indictment filed the Northern District of California.
According to the indictment unsealed today, beginning in 2005 through 2011, Seltzer, 67, of Belvedere, approached several clients of his law practice, as well as their friends and acquaintances, to solicit funds for sham investments. For some potential investors, Seltzer invited them to invest in real estate outside the United States. For other potential investors, Seltzer convinced them to hand over funds for stock investments. For example, Seltzer allegedly represented to victims that he could purchase shares of private companies before the companies were acquired by publically traded companies. Seltzer allegedly told his victims that his status as a shareholder of the private companies gave him special access to the shares before the companies were acquired. Then, rather than invest the money as he promised, Seltzer deposited the funds from potential investors into his own personal bank accounts. According to the indictment, Seltzer spent the money on his own personal expenses including home mortgages, credit card bills, and international travel. In addition, Seltzer engaged in a “Ponzi” scheme in which he diverted monies received from later investors to return monies to earlier investors. In sum, Seltzer was charged with five counts of securities fraud, in violation of 15 U.S.C. § 78; one count of mail fraud, in violation of 18 U.S.C. § 1341; and three counts of money laundering, in violation of 18 U.S.C. § 1957.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the maximum term of imprisonment for securities fraud is 20 years for each count, the maximum term of imprisonment for mail fraud is 20 years, and the maximum term of imprisonment for money laundering is 10 years for each count. Additional periods of supervised release, fines, and special assessments also could be imposed. 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.
Seltzer remains free on a bond and is scheduled to appear on September 17, 2015, before U.S. Magistrate Judge Howard R. Lloyd to assess the conditions of release pending trial.
Assistant U.S. Attorneys Timothy Lucey and Arvon Perteet are prosecuting the case with the assistance of Laurie Worthen and Yolanda Singletary. The prosecution is the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation.
Six More Defendants Plead Guilty in Case Charging Leland Yee and Others with RacketeeringRead the Press Release
SAN FRANCISCO – George Nieh, Leslie Yun, Kevin Sui, Alan Chiu, Yat Wa Pau, and Andy Li all pleaded guilty today to a broad range of charges alleged against them in a superseding indictment filed January 29, 2015, announced Acting United States Attorney Brian J. Stretch and FBI Special Agent in Charge David J. Johnson. The indictment charged the defendants, Leland Yee, and twenty-one others with illegal conduct stemming from an alleged racketeering operation. The guilty pleas bring to ten the number of people who have pleaded guilty to one or more of the charges in the indictment. Unlike earlier pleas, today’s guilty pleas do not include an admission of guilt with respect to the charge that the defendants conspired to conduct the affairs of an enterprise through a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(d) (RICO conspiracy); yet, the each defendant pleaded guilty one or more of the crimes alleged as part of the RICO conspiracy.
Each defendant, all San Francisco residents, pleaded guilty on the basis of separate individualized facts, but virtually all the facts admitted today were set out in the superseding indictment. George Nieh pleaded guilty to all the counts pending against him in the second superseding indictment with the exception of Count One, the RICO charge. The charges to which Nieh pleaded guilty include 146 counts of money laundering, in violation of 18 U.S.C. § 1956; one count of conspiracy to distribute and possession with intent to distribute marijuana, in violation of 21 U.S.C. § 841; two counts of conspiracy to receive stolen property, in violation of 18 U.S.C. §§ 371, 2314 and 2315; four counts of being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g); three counts of distribution and possession with intent to distribute marijuana, in violation of 21 U.S.C. § 841; three counts of conspiracy to traffic and trafficking contraband cigarettes, in violation of 18 U.S.C. § 371, 2315, 2342 and 2344; and two counts of dealing firearms without a license, in violation of 18 U.S.C. § 922(a).
Leslie Yun pleaded guilty to five of the 34 counts of money laundering pending against her, two counts of distribution and possession with intent to distribute marijuana, and three counts of conspiracy to traffic and trafficking in contraband cigarettes. Yun did not plead guilty to the remaining money laundering charges nor the RICO charge. In pleading guilty, Yun admitted she believed funds that she had received were proceeds from unlawful activities. Yun also admitted that on at least three occasions, she shipped, received, or sold contraband cigarettes for which she paid a total of more than $400,000.
Kevin Siu pleaded guilty to eight of the 24 money laundering counts pending against him. He did not plead guilty to the RICO conspiracy charge.
Alan Chiu pleaded guilty to 13 of the 36 money laundering charges pending against him. He, too, did not plead guilty to the RICO charge.
Yat Wa Pau pleaded guilty to two counts of conspiracy to traffic and trafficking of contraband cigarettes. Pau did not plead guilty to the remaining charges pending against him which include the RICO charge; 18 counts of money laundering; and one count of manufacturing, distribution, and possession with intent to distribute marijuana. As part of his guilty plea, Pau admitted he participated in two sales of contraband cigarettes for which he paid over $300,000.
Andy Li pleaded guilty to two counts of being a felon in possession of a firearm, two counts of dealing in firearms without a license, two counts of money laundering, and one count of possession of marijuana with intent to distribute. He did not plead guilty to the RICO charge, the remaining eighteen counts of money laundering, and one count of conspiracy to manufacture marijuana with intent to distribute.
The superseding indictment charged twenty-eight people in all. Eight of the defendants, including the six defendants who pleaded guilty today, Raymond Chow, and Kongphet Chanthavong, are scheduled for trial on November 2, 2015, before U.S. District Judge Charles R. Breyer. The charges against the six defendants to which they have not pleaded guilty are still pending. Judge Breyer scheduled a hearing for Tuesday, September 14, 2015, to discuss additional matters in light of the guilty pleas.
The maximum statutory penalty for participating in the affairs of an enterprise through a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(d), is a 20 years of imprisonment, a fine of $250,000, plus restitution. The maximum penalty for money laundering, in violation of 18 U.S.C. § 1956, is 20 years imprisonment plus $500,000; the maximum penalty for conspiracy to distribute, distribution and possession with intent to distribute marijuana, in violation of 21 U.S.C. § 841 or § 846, is 20 years and a $1,000,000 fine; the maximum penalty for conspiracy to receive stolen property, in violation of 18 U.S.C. §§ 371, 2314 and 2315, is 5 years and $250,000; the maximum penalty for being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g), is 10 years and $250,000; the maximum penalty for conspiracy to traffic and trafficking contraband cigarettes, in violation of 18 U.S.C. § 371, 2315, 2342 and 2344, is 5 years and $250,000; the maximum penalty for dealing firearms without a license, in violation of 18 U.S.C. § 922(a), is 5 years and $250,000. Additional periods of supervised release and additional fines and assessments may apply. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys William Frentzen, Susan Badger, and S. Waqar Hasib are prosecuting the case with the assistance of Rosario Calderon, Kurk Kosek, Ana Guerra, Marina Ponomarchuk, Victoria Etterer, and Lance Libatique. The prosecution is the result of an investigation by the Federal Bureau of Investigation; San Francisco Police Department Gang Task Force; Oakland Police Department; Internal Revenue Service, Criminal Investigation; New York Police Department; and the Mercer County New Jersey Sheriff's Office.
Four South Bay Residents Charged in Wide-Ranging Visa Fraud, Loan Fraud, and Money Laudering OperationRead the Press Release
SAN JOSE – Two residents of Cupertino and two residents of Sunnyvale were indicted, along with seven business entities they allegedly owned, in connection with conspiracy that included visa fraud and mail fraud, announced Acting United States Attorney Brian Stretch, U.S. Homeland Security Investigations Acting Special Agent in Charge Tatum King; Abel Salinas, Special Agent in Charge Department of Labor Office of the Inspector General; and U.S. State Department, Diplomatic Security Service, San Francisco Field Office Special Agent in Charge David Zebley.
In an indictment unsealed yesterday, Ragini Vecham, 36, of Cupertino; Kishore Pallapothu, 42, of Cupertino; Satyanarayana Tota, 45, of Sunnyvale; and Ramana Reddy, 44, of Sunnyvale, were indicted for their part in an alleged conspiracy by which individuals used companies to fraudulently submit fraudulent H-1B visa applications and other documents to the U.S. Department of Homeland Security and the U.S. Department of Labor. The companies indicted include Horizon Technologies, Inc., Softnet Technology Solutions, Inc., Rose Hayward LLC, Sage 20 Hayward LLC, Jasmine 20 Hayward LLC, Tulip 26 Hayward LLC, and Lily 20 Hayward LLC.
According to the indictment, since at least 2006, Vecham and Pallapothu held themselves out as staffing specialists for technology firms based in Santa Clara County. Along with Tota, they allegedly submitted fraudulent documents to DHS and DOL in connection with applications for H-1B visas. The documents, according to the indictment, contained false representations and material omissions. For example, several of the documents allegedly falsely stated that Atiric Software was a legitimate business with a legitimate need for H-1B beneficiaries, a statement which was not true. Also according to the indictment, as part of the scheme, Vecham and Pallapothu created and funded numerous limited liability companies for the purpose of purchasing commercial and residential real estate to conceal funds generated from the illegal visa fraud and conceal assets from the Government investigation. Vechum and Pallapothu allegedly also fraudulently obtained several loans to finance the purchases that were then titled in the names of the limited liability companies.
The indictment also describes criminal behavior undertaken by the defendants to avoid having the conspiracy exposed. For example, the indictment contains allegations that Vecham, Pallapothu, and Tota lied to federal law enforcement authorities when interviewed about the visa fraud. Pallapothu is also charged with attempting to persuade visa beneficiaries to provide false and misleading information to federal agents, including allegedly providing visa beneficiaries with false facts about job offers they were supposed to have received and facts about jobs they were supposed to have performed.
Vecham, Pallapothu, Tota, and Reddy all are charged with participating in a conspiracy to commit visa fraud, mail fraud, obstruction of justice, witness tampering and to defraud the United States, in violation of 18 U.S.C. § 371. In addition, Vecham and Pallapothu are charged with thirteen counts of visa fraud, in violation of 18 U.S.C. § 1546; thirteen counts of mail fraud, in violation of 18 U.S.C. § 1341; five counts of loan fraud, in violation of 18 U.S.C. § 1014; one count of wire fraud, in violation of 18 U.S.C. § 1343; and two counts of money laundering, in violation of 18 U.S.C. § 1957. Additionally, Pallapothu and Tota are charged with one count each of obstruction of justice, in violation of 18 U.S.C. § 1505, and Pallapothu is charged with two counts of witness tampering, in violation of 18 U.S.C. § 1512.
The individual defendants made their initial appearances in federal court yesterday and were released pursuant to various individual bond restrictions. All the individual defendants are next scheduled to appear on September 17, 2015, for further status before U.S. Magistrate Judge Howard R. Lloyd in San Jose.
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 term of imprisonment for conspiracy to commit fraud is 5 years; the maximum term of imprisonment for visa fraud is 10 years; the maximum term for imprisonment for mail fraud is 20 years; the maximum term of imprisonment for money laundering is 10 years; the maximum term for obstruction of justice is 5 years; the maximum term for loan fraud is 30 years; the maximum term for wire fraud is 20 years; and the maximum term for witness tampering is 20 years. Additional periods of supervised release, fines, and special assessments also could be imposed. 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 Timothy Lucey is prosecuting the case with the assistance of Laurie Worthen and Yolanda Singletary. The prosecution is the result of an investigation by U.S. Department of Labor, Office of Inspector General; U.S. State Department, Diplomatic Security Service; and U.S. Homeland Security Investigations.
United States Sues Qualium Corporation and Bay Area Sleep Clinics to Recover Damages Under the False Claims ActRead the Press Release
SAN JOSE – The United States has filed a False Claims Act complaint against the owners and operators of Bay Sleep Clinic and their related businesses, Qualium Corporation, CPAP Specialist, and Amerimed Corporation, announced Acting United States Attorney Brian J. Stretch and U.S. Department of Health and Human Services Acting Special Agent in Charge Gerald Roy.
The government’s complaint alleges that Saratoga, Calif., residents Anooshiravan Mostowfipour, 57, and Tahereh Nader, 56, and their companies fraudulently billed the Medicare program for diagnostic sleep tests. Defendants Mostowfipour and Nader own Qualium Corporation, which operates fourteen sleep clinics doing business as Bay Sleep Clinic. The defendants also own Amerimed Corporation, which distributes durable medical equipment under the names Amerimed Sleep Diagnostics and Amerimed CPAP Specialists. The defendants are alleged to have submitted over 14,000 false claims to Medicare for diagnostic sleep studies and durable medical equipment.
The United States’ complaint was filed in a whistleblower action, captioned United States ex rel. Dresser v. Qualium Corp., et al., Civil Action No. 12-1745 (N.D. Cal.), that was filed under the qui tam provisions of the False Claims Act. The False Claims Act allows for private persons, such as Elma F. Dresser in this case, to file actions to provide the government information about wrongdoing. The United States is entitled to intervene, as it did here in May 2015, and take over such lawsuits. By filing its complaint in intervention today, the government provides the allegations that will establish the parameters of its claims. In this case, the government alleges defendants billed Medicare for tests that were conducted at unapproved locations and performed by technicians lacking the licenses or certifications required by Medicare payment rules and regulations. Specifically, the government alleges that defendants obtained approval to treat Medicare patients at only two of their locations and then treated patients at all their Bay Sleep Clinic locations. Defendants then falsified documents to state that the patients had been treated at one of the two approved locations. The government also alleges that the defendants fraudulently billed Medicare for medical devices in violation of Medicare rules, and regulations that prohibit providers of diagnostic sleep tests from supplying medical devices and from sharing a sleep laboratory location with a durable medical equipment supplier.
Under the False Claims Act statute, if it is established that a person has submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each false or fraudulent claim filed. If the government is successful in resolving or litigating its claims, the whistleblower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered.
The whistleblower action in this case contained additional allegations. However, the United States is intervening only with regard to certain allegations, i.e., that Qualium Corporation (doing business as Bay Sleep Clinic), Amerimed Corporation (doing business as Amerimed Sleep Diagnostics and Amerimed CPAP Specialists), Nader, and Mostowfipour submitted false claims to Medicare for durable medical equipment and for sleep tests performed at unapproved locations or by unqualified technicians. The United States is not pursuing the whistleblower’s additional claims against the third-party company used by the defendants to submit claims to Medicare nor claims regarding alleged improper payments made by the defendants to medical providers.
Assistant U.S. Attorneys Kimberly Friday and Robin M. Wall are handling the case with assistance from Financial Fraud Investigator Michael Zehr. The investigation was conducted by the U.S. Attorney’s Office for the Northern District of California and the Office of Inspector General of the Department of Health and Human Services.
The claims asserted in the complaint are allegations only, and there has been no determination of liability.
Former United Commercial Bank Chief Credit Officer Sentenced to over Eight Years for Felony Fraud ConvictionRead the Press Release
The Fraud Caused the Ninth Largest Bank Failure with Estimated Losses in Excess Of $677 Million
Ebrahim Shabudin, 66, of Moraga, California, was sentenced today to 97 months in prison for his role in a securities fraud scheme and other corporate fraud offenses stemming from the failure of United Commercial Bank (UCB), announced U.S. Attorney Melinda Haag of the Northern District of California, Acting Inspector General Fred W. Gibson, Jr. of the Office of the Inspector General for the Federal Deposit Insurance Corporation (FDIC), Special Inspector General Christy Goldsmith Romero of the Troubled Asset Relief Program (SIGTARP), Inspector General Mark Bialek of the Board of Governors of the Federal Reserve System and the Office of the Inspector General of the Consumer Financial Protection Bureau and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division. The sentencing brings to a close one of the most significant prosecutions to arise out of the 2008 financial crisis.
Shabudin was the Chief Operating Officer and Chief Credit Officer at UCB in 2008 and 2009. Shabudin was the second most senior officer in executive management at UCB after former Chief Executive Officer Thomas Shiu-Kit (“Tommy”) Wu.
On Nov. 6, 2009, UCB was taken over by the FDIC. With over $10.9 billion in assets, UCB’s failure was the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund, according to the FDIC. In 2013, FDIC estimated that total losses for UCB would exceed $1.1 billion. Through 2014, however, with the recovery of the United States economy, FDIC now estimates the loss to the Deposit Insurance Fund to be approximately $677 million. On Nov. 14, 2008, the Troubled Asset Relief Program (TARP) provided approximately $298 million in federal funds to UCB during the financial crisis. Shabudin was charged with conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements. Among the records Shabudin was charged with falsifying were those filed with the United States Securities and Exchange Commission (SEC) and FDIC related to the third and fourth quarters of 2008 describing UCB’s so-called Allowance for Loan Losses. Also falsified were documents relating to UCB’s quarterly and year-end earnings per share as announced by the bank to the investing public. On March 25, 2015, following a six-week trial before the U.S. District Judge Jeffrey S. White , a jury found Shabudin guilty of seven crimes related to the scheme:
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Count One:Conspiracy to Commit Securities Fraud, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a five year term of supervised release and a $100 special assessment.
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Count Two:Securities Fraud, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a five year term of supervised release and a $100 special assessment.
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Count Three:Falsifying Corporate Books and Records, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
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Count Four:False Statements to Accountants, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
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Count Five:Circumventing Internal Accounting Controls, with a maximum penalty of 20 years or imprisonment, a $5,000,000 fine, a three year term of supervised release and a $100 special assessment.
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Count Six:Conspiracy to Commit False Bank Entries, Reports, and Transactions, with a maximum penalty of five years of imprisonment, a $250,000 fine, a three year term of supervised release and a $100 special assessment.
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Court Seven:False Bank Entries, Reports, and Transactions, with a maximum penalty of 30 years of imprisonment, a $1,000,000 fine, a five year term of supervised release and a $100 special assessment.
“As the Chief Operating Officer and Chief Credit Officer of United Commercial Bank, Ebrahim Shabudin presided over one of the largest securities fraud schemes in the history of this district,” said U.S. Attorney Haag. “His prison term should serve as a warning to persons who believe that complex commercial crime will not be detected and prosecuted. I am proud of all the hard work of the attorneys and staff of this office and of our federal partners that resulted in this successful prosecution.”
“Today's sentencing of Mr. Shabudin sends a powerful message to the public that bank insiders who abuse their positions of trust and cause irreparable harm to their banks will be brought to justice and held accountable,” said Acting Inspector General Gibson, Jr. “We appreciate the U.S. Attorney’s Office’s efforts in bringing this matter to a successful conclusion and achieving results that should deter others from similar criminal activity. We are committed to continuing to work with our law enforcement colleagues on cases like this one, in the interest of ensuring the safety and soundness of the nation's banks and the viability of the FDIC’s Deposit Insurance Fund—which suffered massive losses when United Commercial Bank failed.”
“This is the most significant prosecution for crimes arising out of the bailout,” said Special Inspector General Romero. “Like many bankers during the financial crisis, this senior officer of a TARP bank faced defaulting loans and declining collateral, but unlike others, Ebrahim Shabudin deliberately turned to crime to deceive and now he will spend the next eight years in federal prison. Fixated on protecting the bank’s reputation, Shabudin embarked on an elaborate criminal scheme to hide the bank’s declining financial condition that resulted from the bank’s risky aggressive growth strategy pre-crisis. Hoping that things would get better, Shabudin gambled with $300 million of taxpayer bailout money, all of which was lost when the bank failed. We commend U.S. Attorney Melinda Haag for standing united with SIGTARP in our relentless pursuit to bring justice for bailout-related crime.”
Shabudin’s sentence was handed down today by the Honorable U.S. District Judge Jeffrey S. White. Judge White also sentenced Shabudin to three years supervised release and ordered restitution in the amount of $348,000. Shabudin surrendered to the U.S. Marshal on, in November to begin his sentence.
On Dec. 9, 2014, Chief Financial Officer Craig S. On for UCB pleaded guilty to one count of Conspiracy to Make a Materially False and Misleading Statement to an Accountant. On Oct. 7, 2014, the bank’s Senior Vice President, Thomas Yu, pleaded guilty to charges of conspiracy to commit false bank entries, reports and transactions related to his preparation of false and misleading reports. Both On and Yu await sentencing.
Assistant U.S. Attorneys Adam A. Reeves and Robert David Rees are prosecuting the case with the assistance of Denise Oki, Phillip Villanueva, Bridget Kilkenny and Trina Khadoo. The prosecution is the result of a five year investigation by the FDIC-OIG, SIGTARP, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau Office of Inspector General and the FBI
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Former United Commercial Bank Chief Credit Officer Sentenced to over Eight Years for Felony Fraud ConvictionRead the Press Release
OAKLAND –Ebrahim Shabudin was sentenced today to 97 months in prison for his role in a securities fraud scheme and other corporate fraud offenses stemming from the failure of United Commercial Bank, announced U.S. Attorney Melinda Haag; Federal Deposit Insurance Corporation, Office of the Inspector General, Acting Inspector General Fred W. Gibson, Jr.; Special Inspector General for the Troubled Asset Relief Program Christy Goldsmith Romero; Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau, Office of the Inspector General, Inspector General Mark Bialek; and FBI Special Agent in Charge David J. Johnson. The sentencing brings to a close one of the most significant prosecutions to arise out of the 2008 financial crisis.
Shabudin, 66, of Moraga, Calif., was the Chief Operating Officer and Chief Credit Officer at United Commercial Bank (“UCB”) in 2008 and 2009. Shabudin was the second most senior officer in executive management at UCB after former Chief Executive Officer Thomas Shiu-Kit (“Tommy”) Wu.
On November 6, 2009, UCB was taken over by the Federal Deposit Insurance Corporation (“FDIC”). With over $10.9 billion in assets, UCB’s failure was the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund, according to the FDIC. In 2013, FDIC estimated that total losses for UCB would exceed $1.1 billion. Through 2014, however, with the recovery of the United States economy, FDIC now estimates the loss to the Deposit Insurance Fund to be approximately $677 million. On November 14, 2008, the Troubled Asset Relief Program (“TARP”) provided approximately $298 million in federal funds to UCB during the financial crisis. Shabudin was charged with conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements. Among the records Shabudin was charged with falsifying were those filed with the United States Securities and Exchange Commission (“SEC”) and FDIC related to the third and fourth quarters of 2008 describing UCB’s so-called Allowance for Loan Losses. Also falsified were documents relating to UCB’s quarterly and year-end earnings per share as announced by the bank to the investing public. On March 25, 2015, following a six-week trial before the Honorable Jeffrey S. White, U.S. District Judge, a jury found Shabudin guilty of seven crimes related to the scheme:
Count One: Conspiracy to Commit Securities Fraud, in violation of 18 U.S.C. § 1349, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a 5 year term of supervised release, and a $100 special assessment.
Count Two: Securities Fraud, in violation of 18 U.S.C. § 1348, with a maximum penalty of 25 years of imprisonment, a $250,000 fine, a 5 year term of supervised release, and a $100 special assessment.
Count Three: Falsifying Corporate Books and Records, in violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff, and 17 C.F.R. § 240.13b2-1, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a 3 year term of supervised release, and a $100 special assessment.
Count Four: False Statements to Accountants, in violation of 15 U.S.C. § 78ff, and 17 C.F.R. § 13b2-2, with a maximum penalty of 20 years of imprisonment, a $5,000,000 fine, a 3 year term of supervised release, and a $100 special assessment.
Count Five: Circumventing Internal Accounting Controls, in violation of 15 U.S.C. §§ 78m(b)(2)(B) and 78ff, with a maximum penalty of 20 years or imprisonment, a $5,000,000 fine, a 3 year term of supervised release, and a $100 special assessment.
Count Six: Conspiracy to Commit False Bank Entries, Reports, and Transactions, in violation of 18 U.S.C. § 371, with a maximum penalty of 5 years of imprisonment, a $250,000 fine, a 3 year term of supervised release, and a $100 special assessment.
Court Seven: False Bank Entries, Reports, and Transactions, in violation of 18 U.S.C. § 1005, with a maximum penalty of 30 years of imprisonment, a $1,000,000 fine, a 5 year term of supervised release, and a $100 special assessment.
“As the Chief Operating Officer and Chief Credit Officer of United Commercial Bank, Ebrahim Shabudin presided over one of the largest securities fraud schemes in the history of this district,” said U.S. Attorney Melinda Haag. “His prison term should serve as a warning to persons who believe that complex commercial crime will not be detected and prosecuted. I am proud of all the hard work of the attorneys and staff of this office and of our federal partners that resulted in this successful prosecution.”
"Today's sentencing of Mr. Shabudin sends a powerful message to the public that bank insiders who abuse their positions of trust and cause irreparable harm to their banks will be brought to justice and held accountable,” said Fred W. Gibson, Jr.
Acting Inspector General, Federal Deposit Insurance Corporation. “We appreciate the U.S. Attorney’s Office’s efforts in bringing this matter to a successful conclusion and achieving results that should deter others from similar criminal activity. We are committed to continuing to work with our law enforcement colleagues on cases like this one, in the interest of ensuring the safety and soundness of the nation's banks and the viability of the FDIC's Deposit Insurance Fund—which suffered massive losses when United Commercial Bank failed.”
“This is the most significant prosecution for crimes arising out of the bailout,” said Christy Goldsmith Romero, Special Inspector General for TARP (SIGTARP). “Like many bankers during the financial crisis, this senior officer of a TARP bank faced defaulting loans and declining collateral, but unlike others, Ebrahim Shabudin deliberately turned to crime to deceive, and now he will spend the next eight years in federal prison. Fixated on protecting the bank’s reputation, Shabudin embarked on an elaborate criminal scheme to hide the bank’s declining financial condition that resulted from the bank’s risky aggressive growth strategy pre-crisis. Hoping that things would get better, Shabudin gambled with $300 million of taxpayer bailout money, all of which was lost when the bank failed. We commend United States Attorney Melinda Haag for standing united with SIGTARP in our relentless pursuit to bring justice for bailout-related crime.”
Shabudin’s sentence was handed down today by the Honorable Jeffrey S. White, United States District Judge. Judge White also sentenced Shabudin to three years’ supervised release and ordered forfeiture of $ 348,000. Shabudin will surrender to the U.S. Marshal in November to begin his sentence.
On December 9, 2014, UCB’s Chief Financial Officer, Craig S. On, pleaded guilty to one count of Conspiracy to Make a Materially False and Misleading Statement to an Accountant. On October 7, 2014, the bank’s Senior Vice President, Thomas Yu, pleaded guilty to charges of conspiracy to commit false bank entries, reports, and transactions related to his preparation of false and misleading reports. Both On and Yu await sentencing.
Assistant U.S. Attorneys Adam A. Reeves and Robert David Rees are prosecuting the case with the assistance of Denise Oki, Phillip Villanueva, Bridget Kilkenny and Trina Khadoo. The prosecution is the result of a five year investigation by the FDIC-OIG, SIGTARP, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau Office of Inspector General, and the FBI.
Former Silk Road Task Force Agent Pleads Guilty to Money Laundering and ObstructionRead the Press Release
Ex-Secret Service Agent Used Status to Pocket $820,000 Worth of Bitcoin
A former U.S. Secret Service special agent pleaded guilty today to money laundering and obstruction of justice in connection with his theft of digital currency during the federal investigation of Silk Road, an online marketplace used to facilitate the purchase and sale of illegal drugs and other contraband.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Justice Department’s Office of the Inspector General’s Washington, D.C. Field Office, and Special Agent in Charge Lori Hazenstab of the Department of Homeland Security’s Office of the Inspector General in Washington D.C. made the announcement.
Shaun W. Bridges, 32, of Laurel, Maryland, had been a special agent with the U.S. Secret Service for approximately six years in the Baltimore Field Office and was assigned to the Electronic Crimes Task Force. He pleaded guilty before the U.S. District Judge Richard Seeborg of the Northern District of California and a sentencing hearing is scheduled for Dec. 7, 2015.
“There is a bright line between enforcing the law and breaking it,” said Assistant Attorney General Caldwell. “Law enforcement officers who cross that line not only harm their immediate victims but also betray the public trust. This case shows we will act quickly to hold wrongdoers accountable, no matter who they are.”
“Mr. Bridges has now admitted that he brazenly stole $820,000 worth of digital currency while working as a U.S. Secret Service special agent, a move that completely violated the public’s trust,” said U.S. Attorney Haag. “We depend on those in federal law enforcement having the highest integrity and unshakeable honor, and Mr. Bridges has demonstrated that he utterly lacks those qualities. We appreciate the hard work of our federal partners that went into bringing Mr. Bridges to justice.”
“Through a series of complex transactions, the defendant stole bitcoins worth hundreds of thousands of dollars,” said Chief Weber. “This case is an excellent example of the financial expertise of our special agents. Through the analysis of both the block chain and data from the Silk Road servers, we were able to trace the flow of funds, which eventually led to the defendant.”
Between 2012 and 2014, Bridges was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on Silk Road. Bridges’ responsibilities included, among other things, conducting forensic computer investigations in an effort to locate, identify and prosecute targets, including Ross Ulbricht, aka Dread Pirate Roberts, who ran Silk Road.
According to his plea agreement, Bridges admitted that in January 2013 he used an administrator account on the Silk Road website that belonged to another individual to fraudulently obtain access to that website, reset passwords of various accounts and to move bitcoin from those accounts into a bitcoin “wallet” that Bridges controlled. Bridges admitted that he moved and stole approximately 20,000 bitcoin, which at that time was worth approximately $350,000.
Bridges admitted that he moved the stolen bitcoin into an account at Mt. Gox, an online digital currency exchange based in Japan. According to his admissions, he liquidated the bitcoin into $820,000 of U.S. currency between March and May 2013, and had the funds transferred to personal investment accounts in the United States.
Bridges’ plea agreement also established that he obstructed the Baltimore federal grand jury’s investigations of Silk Road and Ulbricht in a number of ways, including by impeding the ability of the investigation to fully utilize a cooperator’s access to Silk Road. In addition, Bridges admitted that he made multiple false and misleading statements to investigators in connection with the San Francisco federal grand jury’s investigation into his own illegal acts, and that he encouraged another government employee to lie to investigators.
Bridges is one of two federal agents to plead guilty in connection with illegal activity during the investigation of Silk Road. Carl M. Force, 46, of Baltimore, was a special agent with the Drug Enforcement Administration and was also assigned to the Baltimore Silk Road Task Force. On July 1, 2015, Force pleaded guilty to a three-count information charging him with money laundering related to his theft of over $700,000 in digital currency while acting as an undercover agent on the Task Force. Force is scheduled to be sentenced by Judge Seeborg on Oct. 19, 2015.
The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Justice Department’s Office of the Inspector General and the Department of Homeland Security’s Office of the Inspector General in Washington, D.C. The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, with assistance from Assistant U.S. Attorney Arvon Perteet.
Former Secret Service Agent Pleads Guilty to Money Laundering and ObstructionRead the Press Release
SAN FRANCISCO – Shaun W. Bridges pleaded guilty today to money laundering and obstruction of justice in connection with his position as an agent with the U.S. Secret Service announced U.S. Attorney Melinda Haag, Assistant Attorney General Leslie Caldwell, IRS Criminal Investigation Chief Richard Weber, FBI Special Agent in Charge David J. Johnson, IRS Criminal Investigation Special Agent in Charge José M. Martinez, Department of Justice Inspector General Special Agent in Charge Michael P. Tompkins and Department of Homeland Security Inspector General Special Agent in Charge Lori Hazenstab. The plea marks the end of a major portion of the investigation into the Silk Road, an underground black market that allowed vendors and buyers to conduct illegal transactions over the internet.
Bridges, 32, of Laurel, Maryland was a Special Agent with the U.S. Secret Service and was assigned to the Baltimore Silk Road Task Force, a multi-agency team investigating illegal activity on the Silk Road. Among the targets of the Task Force was Ross Ulbricht, a/k/a “Dread Pirate Roberts,” who was prosecuted for his involvement with the Silk Road.
In the plea agreement filed today, Bridges admitted he used an administrator account to reset passwords and pins of various accounts on the Silk Road. This enabled Bridges to move bitcoin into a “wallet” he controlled and which he used to fraudulently move and steal approximately 20,000 bitcoin from Silk Road accounts. At the time Bridges stole the bitcoin in January 2013, 20,000 bitcoin would have been worth approximately $350,000. Shortly after Bridges stole the bitcoin, he moved it into an account at Mt. Gox, an online digital currency exchange based in Japan. Between March and May of 2013, he liquidated the bitcoin into $820,000 of U.S. currency and had the funds transferred to the United States to a personal investment account at Fidelity. He owned the Fidelity account under the name of Quantum International Investments, LLC. Later, in June 2014, Bridges transferred money from the Quantum Fidelity account into a personal bank account that he shared with another person.
On June 16, 2015, Bridges was charged by information with money laundering, in violation of 18 U.S.C. § 1956, and obstruction of justice, in violation of 18 U.S.C. § 1512. In today’s plea agreement, Bridges pleaded guilty to both charges. In connection with his guilty plea, Bridges acknowledged his actions compromised a District of Maryland grand jury investigation into Ulbricht and the Silk Road. Bridges also acknowledged he made multiple false and misleading statements to both prosecutors and investigators in connection with an investigation being conducted by a San Francisco grand jury. In addition, Bridges tried to get other government employees to tell false stories to prosecutors and investigators. In his agreement with the government, Bridges agreed his sentence for money laundering will include enhancements for abuse of trust and obstruction of justice.
“Mr. Bridges has now admitted that he brazenly stole $820,000 worth of digital currency while working as a U.S. Secret Service special agent, a move that completely violated the public’s trust,” said U.S. Attorney Melinda Haag. “We depend on those in federal law enforcement having the highest integrity and unshakeable honor, and Mr. Bridges has demonstrated that he utterly lacks those qualities. We appreciate the hard work of our federal partners that went into bringing Mr. Bridges to justice.”
“There is a bright line between enforcing the law and breaking it,” said Assistant Attorney General Caldwell. “Law enforcement officers who cross that line not only harm their immediate victims but also betray the public trust. This case shows we will act quickly to hold wrongdoers accountable, no matter who they are.”
“Through a series of complex transactions, the defendant stole bitcoins worth hundreds of thousands of dollars," said Richard Weber, Chief, IRS-Criminal Investigation. "This case is an excellent example of the financial expertise of our special agents. Through the analysis of both the block chain and data from the Silk Road servers, we were able to trace the flow of funds, which eventually led to the defendant.”
Bridges’ sentencing is scheduled for December 7, 2015, before the Honorable Richard Seeborg, United States District Judge in San Francisco. The maximum penalty for each count in the information is 20 years and $250,000, but any sentence following conviction would be imposed after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.
Bridges is one of two federal agents to be charged with illegal activity in connection with the investigation into the Silk Road. Carl M. Force, 46, of Baltimore, Maryland, was a Special Agent with the DEA who also was assigned to the Baltimore Silk Road Task Force. On July 1, 2015, Force pleaded guilty to a three-count information charging him with money laundering with predicates of wire fraud and theft of government property, in violation of 18 U.S.C. § 1956(a)(1)(A) and (B); obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2); and extortion under color of official right, in violation of 18 U.S.C. § 1951, related to his theft and diversion of over $700,000 in digital currency to which he gained control as part of undercover role on the Baltimore Silk Road Task Force. Force is scheduled to be sentenced by Judge Seeborg on October 19, 2015.
The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section. Assistant U.S. Attorney Arvon Perteet assisted with Asset Forfeiture aspects of the case. The attorneys were assisted by Daniel Charlier-Smith, Lance Libatique, and Christine Tian. The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General, and the Department of Homeland Security Office of the Inspector General in Washington D.C. Additional assistance was provided by IRS Criminal Investigation – New York Field Office, HSI’s Chicago/O’Hare Division, the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Computer Crime and Intellectual Property Section, the U.S. Embassy in Slovenia, the Financial Crimes Enforcement Network, the International Organized Crime Center IOC-2, and the FBI Legal Attaché Office in Tokyo, Japan.
Silicon Valley Employee Arrested for Theft of Trade SecretsRead the Press Release
SAN FRANCISCO – Jing Zeng appeared in United States District Court today after being arrested by the Federal Bureau of Investigation (FBI) on a criminal complaint alleging theft of trade secrets, announced United States Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson.
According to the affidavit in support of the criminal complaint, Zeng, 42, of San Ramon, Calif., is alleged to have downloaded over one hundred files containing propriety, non-public information from a confidential Machine Zone, Inc. database after he learned that his employment was to be terminated. Machine Zone, Inc., makes the on-line video game Game of War: Fire Age. The affidavit also sets forth evidence that after Zeng downloaded this information onto his company laptop, he transferred it to an external device, wiped and reformatted the laptop, and then returned the laptop to the company. The complaint alleges there is probable cause to believe Zeng’s acts amount to a theft of trade secrets in violation of 18 U.S.C. § 1832(a)(2).
Zeng was arrested at San Francisco International Airport on August 20, 2015, as he prepared to board a flight for China. He made his initial appearance on August 21 in federal court in San Francisco and has been detained pending determination of bail. The complaint was unsealed today at Zeng’s bail hearing before Magistrate Judge Joseph C. Spero in San Francisco. Zeng was released on a $100,000 secured bond and placed on electronic monitoring.
A criminal complaint only alleges probable cause that a defendant committed a crime, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted violating 18 U.S.C. § 1832(a)(2), Zeng faces a maximum sentence of 10 years in prison, and a fine of $250,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office, and is being investigated by the Federal Bureau of Investigation, Palo Alto.
Sanford Wallace Pleads Guilty to Spamming Facebook Users and Disobeying A Court OrderRead the Press Release
SAN JOSE – Sanford Wallace pleaded guilty in federal court in San Jose today to fraud and criminal contempt in connection with misusing electronic mail and related activity, announced United States Attorney Melinda Haag and Federal Bureau of Investigation Special Agent in Charge David J. Johnson.
In connection with his guilty plea, Wallace, 47, of Las Vegas, Nevada, admitted that, from approximately November 2008 through March 2009, he developed and executed a plan to fraudulently obtain Facebook users’ login credentials in order to gain access to their accounts and send them unsolicited commercial electronic messages (spam). Wallace further admitted that as a result of his plan he accessed approximately 500,000 Facebook accounts and sent more than 27 million commercial electronic messages through Facebook’s servers.
Wallace, also known as “Spam King,” acknowledged accessing Facebook’s computer network in order to send transmissions on three occasions: November 5, 2008, December 28, 2008 and February 17, 2009. As part of his November 2008 activity, Wallace initiated transmission of a program that resulted in more than 125,000 messages being sent to Facebook users. His December 2008 activity resulted in transmission of nearly 300,000 messages to Facebook users and his February 2009 activity resulted in transmission of 125,000 spam messages being sent to Facebook users.
Furthermore, as part of his plea agreement, Wallace admitted he knowingly violated the order of United States District Judge Jeremy Fogel directing Wallace not to access Facebook’s computer network. Specifically, during the proceedings in the civil case Facebook, Inc. v. Sanford Wallace, et al, No.C09-00798 JF, Judge Fogel specifically ordered Wallace not to access Facebook’s computer network on three occasions: March 2, 2009, March 24, 2009, and September 18, 2009. Wallace admitted that that he nevertheless willfully and knowingly violated Judge Fogel’s order on April 17, 2009, by logging into his Facebook account while aboard a Virgin Airlines flight from Las Vegas, Nevada, to New York, New York.
Wallace was indicted by a grand jury on July 6, 2011. He was charged with six counts of fraud and related activity in connection with electronic mail, in violation of 18 U.S.C. §§ 1037(a)(1) and (b)(2)(A); 18 U.S.C. §§ 1037(a)(2) and (b)(2)(C), and 18 U.S.C. §§ 1037(a)(4) and (b)(2)(B). Wallace was also charged with three counts of intentional damage to a protected computer, in violation of 18 U.S.C. §§ 1030(a)(5)(A) and (c)(4)(B)(i), and two counts of criminal contempt, in violation of 18 U.S.C. § 401(3). Under the plea agreement, Wallace pleaded guilty to one count of fraud and related activity in connection with electronic mail and one count of criminal contempt.
Wallace is currently released on bond. His sentencing hearing is scheduled for December 7, 2015, before the Honorable Edward J. Davila, U.S. District Court Judge, in San Jose. The maximum statutory penalty for a violation of 18 U.S.C. §§ 1037(a)(1) and (b)(2)(A) is three years imprisonment, and a fine of $250,000, plus restitution if appropriate. The maximum statutory penalty for a violation of 18 U.S.C. § 401(3) is determined by the Court. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Susan Knight and Hanley Chew are prosecuting the case with the assistance of Elise Etter. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Former President of Bay Area Home Builder Pleads Guilty to Mortgage Fraud ConspiracyRead the Press Release
Ayman Shahid Admits to Participation in Builder Bailout Scheme to Inflate Home Prices during Peak of Mortgage Crisis
Ayman Shahid, 39, of Danville, California, the former president of Discovery Sales Inc. (DSI), pleaded guilty in federal court in Oakland, California, to conspiracy to commit bank fraud announced U.S. Attorney Melinda Haag for the Northern District of California, Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division, Acting Special Agent in Charge Thomas McMahon of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Leslie DeMarco for the Federal Housing Finance Agency’s Office of Inspector General (FHFA-OIG). Shahid is the most recent and highest placed individual charged by the U.S. Attorney’s Office of the Northern District of California as a result of a wide-ranging investigation by the FBI into mortgage fraud in connection with the sale of homes by DSI and its affiliates.
Shahid was the president of DSI, which was the sales arm of affiliated residential construction companies, including Discovery Home Builders and Albert D. Seeno Construction Co. According to Shahid’s plea agreement that was unsealed today, DSI was created to sell new homes built by Discovery Builders Inc. (DBI), Albert D. Seeno Construction Co. Inc. (AD Seeno) and other entities affiliated with Albert Seeno III and the Seeno family. The homes were built in developments throughout the East Bay Area, including in Contra Costa and Alameda Counties.
In connection with his plea agreement, Shahid admitted that he conspired with others to fraudulently cause bank underwriters to approve mortgage loans for unqualified buyers during the height of the financial crisis. From 2006 to 2008, when Shahid was DSI’s vice president, buyers with little or no money of their own were induced to purchase homes at prices that were inflated through the use of financial incentives. The buyers were not required to possess or post any of their own money when buying a home; DSI, the builders and their affiliates provided money to buyers to make down payments. Further, DSI inflated the sale price of the new homes by offering significant cash and other incentives to new home buyers. The primary purpose of the price inflation was to support a large line of credit maintained by the builders; the new homes and the property on which the homes would be built collateralized the line of credit.
Shahid’s plea agreement explained that it was important to the scheme to maintain inflated property values because if the home and property values dropped, the value of the collateral would drop and the line of credit would be put at risk. Specifically, the line of credit could be reduced or terminated, or additional collateral would be required to secure the line of credit. This is what has become known as a “builder bailout” scheme.
Shahid’s plea agreement also explains that DSI made loans that were secured by homes that were in some cases worth less than the loan amount and that DSI did not make an effort to determine the true value of these homes. Shahid admitted he and others took steps to ensure information that would reflect poorly on the value of the homes was kept out of bank loan files. Specifically, Shahid ensured the details of the incentives that were being given to specific buyers would not appear in the bank loan files because the loan-to-value ratio would not support the requested loan on the inflated sales price of the home. If the incentives appeared in the bank loan files, Shahid explained, the loan underwriters would likely reject the loans. Accordingly, Shahid instructed DSI employees not to inform appraisers of the incentives being given to buyers.
Over 325 Seeno and Discovery homes during the period of 2006 to 2008 involved the use of incentives, amounting to sales in excess of $200 million. Shahid agreed that the losses that resulted from foreclosures or short sales on these homes were approximately $75 million; Fannie Mae and Freddie Mac, which purchased mortgage loans used to pay for Seeno and Discovery Homes, lost almost $3.5 million.
Shahid was charged in April 2014 with one count of bank fraud conspiracy and 17 individual counts of bank fraud. Pursuant to the plea agreement, he pleaded guilty to the lead conspiracy count, which encompassed the conduct alleged in the remaining counts.
“Shahid and his coconspirators were responsible for saddling the banking system with dozens of fraudulent mortgage loans without regard for the damage those loans would cause to individual home buyers, downstream investors, and, ultimately, the U.S. economy as a whole,” said U.S. Attorney Haag. “Shahid fraudulently inflated the price of homes purchased by individuals who were unable to pay their mortgages in the long run. By doing this to serve their own narrow economic interests, Shahid, and actors like him, contributed to the housing bubble.”
“The actions of Ayman Shahid, certain sales managers and others directly contributed to one of the most significant housing and financial crises of recent memory,” said Special Agent in Charge Johnson. “While this case was extremely complex, the FBI and Department of Justice built this case, brick by brick, from low-level employees all the way up to the president of the company. We will continue to pursue executives and corporations who fraudulently took advantage of the country's financial turmoil for their own corporate gain.”
“Shahid participated in a fraudulent scheme involving over $230 million in mortgage loans, many of which ultimately defaulted, to the detriment of Fannie Mae, Freddie Mac and the American taxpayers,” said Special Agent in Charge DeMarco. “We are proud to support our law enforcement partners in investigating and prosecuting this case.”
Carey Hendrickson and Jason Sterlino, sales managers for Seeno properties, were previously charged. Former Bank of America loan officer Jennifer Xiao, Homecomings Financial underwriter Tony Phan and independent brokers Sharon Wang, Heather Yin, Miguel Arenas, George Zevada and Chang Park were also charged as participants in the scheme. All of these defendants have pleaded guilty pursuant to cooperation agreements with the government, except Xiao, who is a fugitive.
Because Shahid is cooperating with the ongoing FBI investigation, a sentencing date has not yet been scheduled. Shahid is next scheduled to appear in court for a status hearing on Dec. 10, 2015, at 3:00 p.m. PST before U.S. District Judge Yvonne Gonzalez-Rogers of the Northern District of California. The maximum penalty for conspiracy to commit bank fraud is 30 years in prison, a fine of $1 million or twice the gain or loss and restitution to be decided by the court. However, any sentence 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.
The case is being prosecuted by the U.S. Attorney’s Office in San Francisco’s Special Prosecutions Unit. The prosecution is the result of an investigation by the FBI, with assistance from IRS-CI and FHFA-OIG.
Former President of Bay Area Home Builder Pleads Guilty to Mortgage Fraud ConspiracyRead the Press Release
SAN FRANCISCO – Ayman Shahid, the former president of Discovery Sales, Inc. (DSI), pleaded guilty in federal court in Oakland to conspiracy to commit bank fraud announced U.S. Attorney Melinda Haag, Federal Bureau of Investigation Special Agent in Charge David J. Johnson, Internal Revenue Service Criminal Investigation Acting Special Agent in Charge (IRS-CI) Thomas McMahon, and Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) Special Agent in Charge Leslie DeMarco. Shahid is the most recent and highest placed individual charged by the Northern District of California U.S. Attorney’s Office as a result of a wide-ranging investigation by the FBI into mortgage fraud in connection with the sale of homes by DSI and its affiliates.
Shahid, 39, of Danville, Calif., was the president of DSI, which was the sales arm of affiliated residential construction companies, including Discovery Home Builders and Albert D. Seeno Construction Co. According to Shahid’s plea agreement unsealed today, DSI was created to sell new homes built by Discovery Builders, Inc. (“DBI”), Albert D. Seeno Construction Co., Inc. (“AD Seeno”), and other entities affiliated with Albert Seeno III and the Seeno family. The homes were built in developments throughout the East Bay Area, including in Contra Costa and Alameda Counties.
In connection with his plea agreement, Shahid admitted he conspired with others to fraudulently cause bank underwriters to approve mortgage loans for unqualified buyers during the height of the financial crisis. From 2006 to 2008, when Shahid was DSI’s vice president, buyers with little or no money of their own were induced to purchase homes at prices that were inflated through the use of financial incentives. The buyers were not required to possess or post any of their own money when buying a home; DSI, the builders, and their affiliates provided money to buyers to make down payments. Further, DSI inflated the sale price of the new homes by offering significant cash and other incentives to new home buyers. The primary purpose of the price inflation was to support a large line of credit maintained by the builders; the new homes and the property on which the homes would be built collateralized the line of credit.
Shahid’s plea agreement explained that it was important to the scheme to maintain inflated property values because if the home and property values dropped, the value of the collateral would drop and the line of credit would be put at risk. Specifically, the line of credit could be reduced or terminated, or additional collateral would be required to secure the line of credit. This is what has become known as a “builder bailout” scheme.
Shahid’s plea agreement explains that DSI made loans that were secured by homes that were in some cases worth less than the loan amount and that DSI did not make an effort to determine the true value of these homes. Shahid admitted he and others took steps to ensure information that would reflect poorly on the value of the homes was kept out of bank loan files. Specifically, Shahid ensured the details of the incentives that were being given to specific buyers would not appear in the bank loan files because the loan-to-value ratio would not support the requested loan on the inflated sales price of the home. If the incentives appeared in the bank loan files, Shahid explained, the loan underwriters would likely reject the loans. Accordingly, Shahid instructed DSI employees not to inform appraisers of the incentives being given to buyers.
Over 325 Seeno and Discovery homes sold during the period 2006 – 2008 involved the use of incentives, amounting to sales in excess of $200 million. Shahid agreed that the losses that resulted from foreclosures or short sales on these homes were approximately $75 million; Fannie Mae and Freddie Mac, which purchased mortgage loans used to pay for Seeno and Discovery Homes, lost almost $3.5 million.
Shahid was charged in April 2014 with one count of bank fraud conspiracy, in violation of 18 U.S.C. § 1349 and 17 individual counts of bank fraud, in violation of 18 U.S.C. § 1344. Pursuant to the plea agreement, he pleaded guilty to the lead conspiracy count, a violation of 18 U.S.C. §§ 1344 and 1349, which encompassed the conduct alleged in the remaining counts.
Shahid and his coconspirators were responsible for saddling the banking system with dozens of fraudulent mortgage loans without regard for the damage those loans would cause to individual home buyers, downstream investors, and, ultimately, the U.S. economy as a whole,” commented U.S. Attorney Melinda Haag. “Shahid fraudulently inflated the price of homes purchased by individuals who were unable to pay their mortgages in the long run. By doing this to serve their own narrow economic interests, Shahid, and actors like him, contributed to the housing bubble.”
FBI Special Agent in Charge David J. Johnson said, “The actions of Ayman Shahid, certain sales managers and others directly contributed to one of the most significant housing and financial crises of recent memory. While this case was extremely complex, the FBI and Department of Justice built this case, brick by brick, from low-level employees all the way up to the president of the company. We will continue to pursue executives and corporations who fraudulently took advantage of the country's financial turmoil for their own corporate gain.”
Special Agent in Charge Leslie DeMarco stated, “Shahid participated in a fraudulent scheme involving over $200 million in mortgage loans, many of which ultimately defaulted, to the detriment of Fannie Mae, Freddie Mac and the American taxpayers. We are proud to support our law enforcement partners in investigating and prosecuting this case.”
Sales managers for Seeno properties who have been previously charged are Carey Hendrickson and Jason Sterlino. Former Bank of America loan officer Jennifer Xiao, Homecomings Financial underwriter Tony Phan, and independent brokers Sharon Wang, Heather Yin, Miguel Arenas, George Zevada, and Chang Park were also charged as participants in the scheme. All of these defendants have pleaded guilty pursuant to cooperation agreements with the government, except Xiao who is a fugitive.
Because Shahid is cooperating with the on-going FBI investigation, a sentencing date has not yet been scheduled. Shahid is next scheduled to appear in court for a status hearing on December 10, 2015, at 3:00 pm before Judge Yvonne Gonzalez-Rogers. The maximum penalty for conspiracy to commit bank fraud is 30 years in prison, a fine of $1,000,000 or twice the gain or loss, and restitution to be decided by the court. However, any sentence would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Special Prosecutions Unit of the United States Attorney’s office in San Francisco. The prosecution is the result of an investigation by the FBI, with assistance from IRS-CI and FHFA-OIG.
Pittsburg Resident Pleads Guilty in Tax Fraud SchemeRead the Press Release
SAN FRANCISCO- Ebony Standifer pleaded guilty to conspiracy to file false claims and aggravated identity theft for her role in a tax fraud scheme, announced United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
According to the plea agreement, Standifer, 28, of Pittsburg, Calif., admitted she conspired with others to file false federal income tax returns with the Internal Revenue Service from 2010 through 2012. As part of the scheme, individuals with whom Standifer conspired provided her with names of people for whom to file false tax returns. Standifer used those identities and filed returns without showing the documents to the people listed on them. In addition to inserting the person’s name and Social Security number, Standifer made up figures for income and the amount of taxes that were withheld. She then requested a tax refund based on these made-up figures. Standifer filed the false returns electronically from various locations and kept notebooks that recorded information regarding the people whose identity she misappropriated. The information she recorded included the victim's name, Social Security number, the amount of the false tax refund that she claimed in that person's name, and whether the false tax return was “accepted” or “rejected.” Further, to carry out the scheme, Standifer requested that the IRS deposit the fraudulent tax refund onto pre-paid debit cards that she could access. In total, during 2010-2012, Standifer filed or assisted in filing false tax returns in the aggregate amount of $656,000 for the 2009-2011 tax years. Of that amount, the IRS actually paid fraudulent claims in the amount of $193,602.
Standifer was indicted by a grand jury on October 28, 2014. She was charged with one count of conspiracy to file false claims, in violation of 18 U.S.C. § 286; five counts of wire fraud, in violation of 18 U.S.C § 1343; and three counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A. Under the plea agreement, Standifer pleaded guilty to conspiracy to file false claims and one count of aggravated identity theft.
Standifer is scheduled to be sentenced on January 6, 2016, by the Honorable Charles R. Breyer, United States District Judge. The maximum statutory penalty for conspiracy to file a false claim is ten years in prison and a fine of $250,000. The maximum penalty for aggravated identity theft is a mandatory consecutive sentence of two years in prison and a fine of $250,000 plus restitution. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Thomas Newman is prosecuting the case. The prosecution is the result of an investigation by the IRS, Criminal Investigation.
Oakland Resident Sentenced to 42 Months in Prison for Tax Fraud SchemeRead the Press Release
OAKLAND – Paul Lamont Lee was sentenced today to 42 months in prison and ordered to pay restitution in the amount of $269,895 for his role in a tax fraud scheme, announced United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
On March 13, 2014, Lee, 51, of Oakland, was charged along with his former girlfriend, Akysha Rockwell, 42, of Oakland, in a twenty-count indictment. According to the indictment, between January 12, 2012, and July 16, 2012, Lee and Rockwell participated in a scheme to obtain and help others obtain refunds from the IRS based on false claims. The indictment alleges Lee and Rockwell obtained names, social security numbers, and dates of birth for numerous people then electronically filed federal income tax returns in the names of these other people. The indictment further alleged that the defendants claimed refunds derived from false tax credits, including the Earned Income Credit, the Additional Child Tax Credit, and the American Opportunity Credit. The indictment charged both Lee and Rockwell with conspiracy to file false claims, in violation of 18 U.S.C. § 286. In addition, the indictment charged Lee with thirteen counts of filing false claims, in violation of 18 U.S.C. § 287; and three counts of identity fraud, in violation of 18 U.S.C. § 1028(a)(7). Under the plea agreement, Lee pleaded guilty to the conspiracy and false claims counts.
Lee’s sentence was handed down today by the Honorable Jon S. Tigar, United States District Judge. Judge Tigar also sentenced Lee to a 3 year period of supervised release and ordered restitution in the amount of $269,895. Lee surrendered to the U.S. Marshal on December 17, 2014, and has been in custody since that date.
As for Rockwell, in addition to the conspiracy charge, she was charged with three counts of filing false claims. Rockwell, pleaded guilty on January 16, 2015, to conspiracy to file a false claim and one count of filing a false claim. She was sentenced on June 16, 2015, to eighteen months in prison and ordered to pay restitution in the amount of $285,034.
Assistant United States Attorney Thomas Moore is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation
East Bay Residents Plead Guilty to Tax Fraud ConspiracyRead the Press Release
OAKLAND – Cassandra Tompkins, Cordia Spearman, and Damien Mitchell pleaded guilty in federal court in San Francisco yesterday to conspiracy to file false federal tax returns, announced United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
Tompkins, 48, of Oakland; Spearman, 46, of Vacaville; and Mitchell, 52, of El Sobrante, were all charged on January 15, 2015, along with a fourth defendant, in a thirteen count federal indictment with conspiracy to file false claims. In pleading guilty, Tompkins, Spearman, and Mitchell admitted that between January 15, 2011, and May 15, 2012, they obtained and used personal identifying information to prepare and file 219 false federal income tax returns with the IRS. Tompkins admitted using the names and social security numbers of individuals to claim $678,426 in tax refunds, of which $287,498 was actually paid by the IRS. Tompkins further admitted she maintained notebooks that listed the names and other personal identifying information for some of the taxpayers, along with falseW-2s that she filed with the IRS. Tompkins, Spearman, and Mitchell each admitted they knew the tax returns were false except for the personal identifying information used to file the returns. All three defendants acknowledged having received a portion of certain tax refunds. Under the plea agreements, Tompkins, Spearman, and Mitchell pleaded guilty to conspiracy to file false claims, in violation of 18 U.S.C § 286.
The sentencing hearing for Tompkins and Spearman is scheduled for December 17, 2015, before The Honorable James Donato, U.S. District Court Judge, in Oakland. The sentencing hearing for Mitchell is not yet scheduled.
The maximum sentence for conspiracy to file false claims is 10 years in prison and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Cynthia Stier is prosecuting this case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Owner of Yountville Art Gallery Pleads Guilty to Conspiracy to Traffick Protected WildlifeRead the Press Release
SAN FRANCISCO- Michael Polenske pleaded guilty in federal court in San Francisco yesterday to wildlife trafficking and conspiracy, announced United States Attorney Melinda Haag and U.S. Department of Commerce, National Oceanic and Atmospheric Administration Special Agent in Charge William Giles.
Polenske, 53, of Napa, is the owner of Ma(i)sonry Napa Valley, a fine art and antique gallery as well as a wine tasting collective in Yountville, Calif. In pleading guilty today, Polenske admitted conspiring in 2007 through 2011 to sell wildlife that he knew or should have known was possessed, transported, and sold in violation of federal laws. Specifically, he pleaded guilty to trafficking a sea turtle shell protected by the Endangered Species Act in September 2011. He also admitted selling and purchasing for sale other sea turtle shells, whale bones, orca jaws, and a seal head. Polenske further admitted importing the wildlife items into the United States from European vendors using false labels, with the assistance of international shipping company Hedley’s Humpers, Ltd. Trafficking these items violated the Endangered Species Act, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the Marine Mammal Protection Act. The United States charged Polenske by Information on August 10, 2015, with one count of conspiracy to traffic and smuggle wildlife, in violation of 18 U.S.C. § 371, and one count of wildlife trafficking, in violation of 16 U.S.C. §§ 3372(a)(1) and 3373(d)(2).
Hedley’s Humpers, Ltd. pleaded guilty on March 31, 2015, to wildlife smuggling based on false labeling in connection with Polenske’s imports. On July 7, 2015, the corporation was sentenced to three years’ probation and was ordered to pay $100,000 in fines and community service payments.
Sentencing for Polenske is scheduled for November 13, 2015, at 10:30 a.m., before the Honorable Joseph C. Spero, U.S. Magistrate Judge, in San Francisco. The plea agreement specifies that Polenske will pay $63,231.68 in fines but does not resolve the amount of time, if any, Polenske will serve in prison. The maximum statutory prison term for violations of 16 U.S.C. §§ 3372(a)(1) and 3373(d)(2) and 18 U.S.C. § 371 is one year imprisonment. Polenske’s sentence also will include a special assessment and, if imprisonment is ordered, a term of supervised release. 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 Hartley M.K. West is prosecuting the case with the assistance of Rosario Calderon. The prosecution is the result of an investigation by the U.S. Department of Commerce, National Oceanic and Atmospheric Administration, and the U.S. Homeland Security Investigations Border Enforcement Security Task Force.
Former Executive Pleads Guilty to Conspiring to Bribe Panamanian OfficialsRead the Press Release
A former regional director of SAP International Inc. pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) by participating in a scheme to bribe Panamanian officials to secure the award of government technology contracts for SAP.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Special Agent in Charge George L. Piro of the FBI’s Miami Division and Acting Special Agent in Charge Thomas McMahon of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.
Vicente Eduardo Garcia, 65, of Miami, pleaded guilty to a one-count information charging him with conspiracy to violate the anti-bribery provisions of the FCPA. Sentencing before Senior U.S. District Court Judge Charles R. Breyer of the Northern District of California is scheduled for Dec. 16, 2015.
According to plea documents, in late 2009, SAP sought a multi-million dollar contract to provide a Panamanian state agency with a technology upgrade package. In connection with his guilty plea, Garcia admitted that, to secure the contract, he conspired with others, including advisors and consultants to SAP, to pay bribes to two Panamanian government officials, as well as to the agent of a third government official (with the understanding that at least a portion of the money would be transmitted to the third official). According to Garcia’s admissions, the conspirators used sham contracts and false invoices to disguise the true nature of the bribes. Garcia further admitted that he believed paying such bribes was necessary to secure both the initial contract and additional Panamanian government contracts.
Ultimately, SAP’s Panamanian channel partner secured the technology upgrade contract for $14.5 million, which included $2.1 million in SAP software licenses. Soon thereafter, the Panamanian government awarded SAP’s channel partner additional contracts that included the provision of SAP products.
The investigation is being conducted by FBI and the IRS-CI. The Criminal Division’s Office of International Affairs and the Securities and Exchange Commission’s Division of Enforcement, which separately announced civil charges against Garcia, provided assistance. The case is being prosecuted by Trial Attorney Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Adam A. Reeves of the Northern District of California.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Former Executive Pleads Guilty to Conspiring to Bribe Panamanian OfficialsRead the Press Release
SAN FRANCISCO – A former regional director of SAP International Inc. pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) by participating in a scheme to bribe Panamanian officials to secure the award of government technology contracts for SAP. U.S. Attorney Melinda Haag, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge George L. Piro of the FBI’s Miami Division, and Acting Special Agent in Charge Thomas McMahon of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.
Vicente Eduardo Garcia, 65, of Miami, pleaded guilty to a one-count information charging him with conspiracy to violate the anti-bribery provisions of the FCPA. Sentencing before U.S. District Judge Charles R. Breyer is scheduled for December 16, 2015.
According to plea documents, in late 2009, SAP sought a multi-million dollar contract to provide a Panamanian state agency with a technology upgrade package. In connection with his guilty plea, Garcia admitted that, to secure the contract, he conspired with others, including advisors and consultants to SAP, to pay bribes to two Panamanian government officials, as well as to the agent of a third government official (with the understanding that at least a portion of the money would be transmitted to the third official). According to Garcia’s admissions, the conspirators used sham contracts and false invoices to disguise the true nature of the bribes. Garcia further admitted that he believed paying such bribes was necessary to secure both the initial contract and additional Panamanian government contracts.
Ultimately, SAP’s Panamanian channel partner secured the technology upgrade contract for $14.5 million, which included $2.1 million in SAP software licenses. Soon thereafter, the Panamanian government awarded SAP’s channel partner additional contracts that included the provision of SAP products.
The case is being prosecuted by Assistant U.S. Attorney Adam A. Reeves of the Northern District of California and Trial Attorney Aisling O’Shea of the Criminal Division’s Fraud Section with the assistance of Phillip Villanueva, Maryam Beros, and Bridget Kilkenny. The investigation is being conducted by FBI and the IRS-CI. The Criminal Division’s Office of International Affairs and the Securities and Exchange Commission’s Division of Enforcement, which separately announced civil charges against Garcia, provided assistance.
Former Oakland Accountant Sentenced to over Four Years in Prison for Identity Theft Tax Fraud SchemeRead the Press Release
OAKLAND – Robert Thomas Doyle was sentenced today to 51 months in prison and ordered to pay restitution in the amount of $142,031 for wire fraud and aggravated identity theft, announced United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
Doyle, 64, of Oakland, pleaded guilty on February 23, 2015. According to the plea agreement, during 2011, 2012, and 2013, Doyle implemented an identity theft and tax fraud scheme in which he caused the filing of a number of tax returns claiming fraudulent refunds. As part of his scheme, Doyle, a certified public accountant until 1987, created false businesses and claimed false income and expenses for his clients in order to maximize the Earned Income Tax Credit. The fraudulent income and expenses led to a larger-than-allowed claimed refund. Doyle did not ask his clients about any income earned or current or past employment history. Doyle also used the names and social security numbers of former clients to prepare and file false tax returns without these victims' knowledge or consent. On many of the tax returns, Doyle directed the refunds to be mailed to addresses where he could retrieve them or have the refunds electronically deposited into bank accounts that he controlled. Doyle was indicted on February 20, 2014, with two counts of mail fraud, in violation of 18 U.S.C. § 1341; six counts of wire fraud, in violation of 18 U.S.C. § 1343; and eight counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A.
The sentence was handed down today by the Honorable Jon S. Tigar, United States District Judge. Following his release from prison, the defendant will be required to serve three years of supervised release, and pay restitution in the amount of $142,031. The defendant will begin serving his sentence on October 5, 2015.
Assistant United States Attorney Thomas Moore and Special Assistant United States Attorney Jennifer Tolkoff are prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Bay Area Company Agrees to Pay $450,000 to Settle Claims of Failing to Maintain Adequate Records of Controlled Substance UseRead the Press Release
SAN FRANCISO – Sterigenics International LLC and its parent, Sterigenics U.S., LLC, agreed to pay $450,000 to settle allegations by the U.S. Department of Justice that the companies failed to keep and maintain adequate records pertaining to controlled substances, announced United States Attorney Melinda Haag and U.S. Drug Enforcement Administration Acting Special Agent in Charge Bruce Balzano.
Sterigenics is registered as a manufacturer with the DEA, with current authorization to handle certain substances under the Controlled Substances Act, 21 U.S.C. § 801. Specifically, Sterigenics has current authorization to handle certain Schedules II, III, III, and IV controlled substances. In addition, Sterigenics has been approved for a manufacturing license at its Hayward, Calif., location since 2007 and provides contract sterilization for the pharmaceutical, medical device, and food industries at its Hayward plant. In the agreement signed by the Justice Department last Friday, Sterigenics acknowledged it had an obligation to “keep and maintain” records related to its receipt, manufacturing, and distribution of controlled substances in connection with its operations at its Hayward plant. According to the settlement agreement, the Drug Enforcement Administration conducted an investigation and concluded that between April 4, 2011, and April 4, 2013, Sterigenics failed to comply with the Controlled Substances Act in at least 156 instances. The alleged violations included a wide range of documentary deficiencies including the failure to record or maintain adequate inventory records and the failure to record or maintain records of the receipt, storage, or shipment of controlled substances. According to the terms of the agreement, Sterigenics will pay the government $450,000 to resolve all civil and administrative claims related to the alleged recordkeeping violations identified in the investigation.
Assistant U.S. Attorney Jonathan U. Lee handled this matter with the assistance of paralegals Wilson Wong and Cheryl Wagerman.
Hillsborough Business Owner Charged with Tax FraudRead the Press Release
SAN FRANCISO – A federal grand jury indicted Brian Peter Stallings for tax fraud, announced United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
According to the indictment, from 2008 through 2011, Stallings, of Hillsborough, Calif., was the president and sole shareholder of Stallings Painting, Inc. (SPI), a company engaged in residential and commercial painting. During these years, SPI maintained at least two business bank accounts, one with Comerica Bank and another with First Bank. Stallings was the sole signatory on both bank accounts. From 2008 through 2010, SPI deposited gross receipts into both accounts. Stallings, however, only provided his accountants with bank statements from SPI’s Comerica Bank account and did not report the income deposited into the First Bank account. Stallings is charged with making and subscribing false tax returns for the 2008, 2009, and 2010 tax periods. Additionally, from the second quarter of 2009 through 2011, Stallings paid wages to his employees from the account with First Bank, but did not collect, account for, and pay over to the IRS federal income and Federal Insurance Contributions Act taxes required to be withheld from those wages.
The grand jury charged Stallings with one count of filing false tax returns, in violation of 26 U.S.C. § 7206(1), and 13 counts of willful failure to account for and pay over taxes, in violation of 26 U.S.C. § 7202.
Stallings made his initial appearance in federal court in San Francisco on July 31, 2015, at 9:30 a.m., before the Honorable Nandor J. Vadas, U.S. Magistrate Court Judge.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of three years in prison and a fine of $250,000 for filing false tax returns, in violation of 26 U.S.C. § 7206(1). The maximum sentence for each count of willful failure to account for and pay over taxes, in violation of 26 U.S.C. § 7202, is five years in prison and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
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.
Hayward Tax Return Preparer Sentenced to Two Years in PrisonRead the Press Release
OAKLAND – Runnveer Singh was sentenced today to two years in prison and ordered to pay restitution in the amount of $124,528 for aiding and assisting in the preparation of false tax returns, announced U.S. Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Thomas McMahon.
Singh, 54, of Hayward, Calif., pleaded guilty to one count of aiding and assisting in the preparation of false tax returns. According to his plea agreement, Singh admitted that for the tax years 2009 through 2011, he prepared false tax returns claiming both false and ineligible deductions and credits for clients. The false items included unreimbursed employee expenses, charitable deductions, schedule C business expenses, education credits, personal property tax, and other schedule A expenses. By including these items on his clients’ tax returns, he caused the IRS to issue inflated tax refunds of at least $130,435.
On November 14, 2012, during the execution of a search warrant at Singh’s Hayward residence, he told IRS Special Agents that he knowingly prepared false tax returns in order to obtain returning customers. Following the execution of the search warrant and his statement to IRS-CI Special Agents, Singh instructed one of his clients to submit both false and ineligible information to an IRS Revenue Agent during the audit of his 2010 income tax return. Singh did so to justify the false and ineligible business expenses he reported on the client’s 2010 tax return.
Singh operated his tax return preparation business in Hayward from 2008 through 2013. During the six year period, he obtained clients from the local Fijian community and prepared thousands of income tax returns.
The sentence was handed down today by the Honorable Jon S. Tigar, U.S. District Judge. Judge Tigar also sentenced the defendant to a one-year period of supervised release, with the condition that the defendant not prepare state or federal tax returns, and ordered him to pay $124,528 in restitution to the Internal Revenue Service. The defendant will begin serving the sentence on September 30, 2015.
Assistant US Attorney Thomas Moore is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Former Senior Project Manager and Subcontractor Convicted for Conspiring to Defraud Matrix Service CompanyRead the Press Release
OAKLAND – Yesterday, Kevin Laney, a former Senior Project Manager at Matrix Service Company, and Brian Federico, a former subcontractor of Matrix, were convicted of mail fraud conspiracy and mail fraud, announced United States Attorney Melinda Haag and Federal Bureau of Investigation Special Agent in Charge David J. Johnson. The guilty verdicts followed a three-week bench trial in front of The Honorable Yvonne Gonzalez Rogers, United States District Judge.
Evidence at trial showed that in 2010, Matrix, a company that constructs tanks and provides tank maintenance and repair services to petrochemical companies, discovered suspicious billing in its Suisun City, Calif. office. The suspicious billing involved concrete subcontractor Imperial Shotcrete, for whom Federico worked. Through additional investigation, Matrix and the FBI uncovered a complex fraudulent invoicing scheme involving bogus companies and downstream kickbacks through Imperial involving three Matrix project managers, including Laney. At the conclusion of its investigation, Matrix immediately reimbursed its customers over $1.3 million.
Prior to trial, the two remaining Matrix project managers and one owner of Imperial pleaded guilty for their roles in the scheme.
For Laney’s part, the trial evidence showed he established a bogus company called “Rogue Consultants” to submit false and fraudulent invoices to Imperial in order to collect and conceal later downstream kickback payments. Laney invoiced and was paid just over $1 million related to Matrix projects. From this money, Laney paid Federico just under $600,000, keeping the rest of the money for his own benefit. For his part, Federico created and submitted false and fraudulent invoices using inauthentic invoices from a real company and invoices from his company, CEMS. Federico also directed two Matrix project managers to submit false and fraudulent invoices and pocketed a total of $875,000 as a result of the scheme. In the scheme, the Matrix project managers receiving the downstream kickback payments were often the project managers responsible for authorizing Matrix to pay the Imperial invoices. Matrix’s project managers and its subcontractors were expressly forbidden by Matrix from engaging in this type of self-dealing.
In addressing the defendants’ “elaborate scheme,” the court rejected their contention that the law sanctions “under-the-table side deals, vigilante justice, and corporate facades created for the sole purpose of facilitating self-gain at the expense of one’s employer.” The court, however, acquitted Federico of two substantive counts of mail fraud.
Laney, of Three Forks, Mont., and Federico, of Tracy, Calif., were charged by Indictment on December 6, 2012. Laney and Federico have remained on bond pending trial, but were both ordered to surrender their passports.
Laney’s and Federico’s sentencing hearings are scheduled for November 13, 2015, before Judge Gonzalez Rogers in Oakland. The maximum statutory penalties for a violation of 18 U.S.C. §§ 1341 and 1349 are a maximum prison term of 20 years, a fine of $250,000, 3 years of supervised release, and restitution. 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 Brian C. Lewis and Wade M. Rhyne prosecuted this case with the assistance of Legal Assistant Janice Pagsanjan and Paralegal Noble Hughes. This prosecution is the result of an investigation by the Federal Bureau of Investigation.
Convicted Former Chief Financial Officer Indicted on Additional Fraud-Related ChargesRead the Press Release
SAN FRANCISCO- A federal grand jury issued a new indictment yesterday against Henry Lo, the former Chief Financial Officer of San Francisco-based Absolutely New, Inc., announced United States Attorney Melinda Haag and Federal Bureau of Investigation Special Agent in Charge David J. Johnson. The indictment alleges Lo committed numerous acts of fraud even as he was being prosecuted for other crimes.
Lo, 51, of San Francisco, pleaded guilty on November 20, 2014, to two counts of wire fraud and one count of mail fraud. He was sentenced on April 9, 2015, to 70 months in prison. Yesterday’s indictment alleges both before and after he was charged and pleaded guilty in 2014, Lo committed additional crimes. Specifically, Lo allegedly committed bank fraud by altering and misappropriating checks of Character SF, LLC, a company for which he was serving as a contract CFO. Further, according to the indictment, Lo committed aggravated identity theft by forging the signature of one of the owners of Character, and money laundering by engaging in transactions of more than $10,000 of funds that he had stolen from Character.
Lo also violated an order of federal Magistrate Judge Jacqueline Scott Corley who had directed Lo not to dispose of real property, according to the indictment. This order was issued by Judge Corley in a federal civil case. The order notwithstanding, Lo allegedly transferred real property, consisting of his $3.1 million home in San Francisco, to his wife so that she could own it as her sole property in her own name.
In sum, Lo was charged with two counts of contempt of court, in violation of 18 U.S.C. 401(3); eight counts of bank fraud, in violation of 18 U.S.C. 1344(2); one count of aggravated identity theft, in violation of 18 U.S.C. 1028(a)(1); and two counts of engaging in monetary transactions in property derived from unlawful activity, in violation of 18 U.S.C. 1957.
Lo already is in custody as a result of the charges for which he pleaded guilty in 2014. If convicted on these additional charges, there is no maximum prescribed prison term, fine or term of supervised release for contempt of court. The maximum penalty for each count of bank fraud is 30 years' imprisonment, $1,000,000 (or twice the gross gain or loss), and five years' supervised release. The maximum penalty for aggravated identity theft is a two year mandatory minimum consecutive imprisonment, a $250,000 fine (or twice the gross gain or loss), and a year of supervised release. The maximum penalty for money laundering is 10 years’ imprisonment, a $250,000 fine (or twice the amount of criminal derived property from the transaction), and three years of supervised release. Lo may be subject to additional fines, assessments, and restitution. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentience, 18 U.S.C. s 3553.
Assistant U.S. Attorney Kyle Waldinger is prosecution the case with the assistance of Jessica Meegan, Mary Mallory, and Allen Williams. The prosecution is a result of an investigation by the Federal Bureau of Investigation.
Two San Jose Men Plead Guilty to Posting Minor’s Info on Internet for ProstitutionRead the Press Release
SAN JOSE – Justin Everett Crutchfield and Demontae Terrell Toliver pleaded guilty in federal court yesterday to posting information about a minor on the internet to solicit prostitution customers, announced United States Attorney Melinda Haag and FBI Special Agent in Charge David Johnson.
In pleading guilty, Crutchfield and Toliver both admitted that on or about June 18, 2013, they posted a telephone number for the minor, who they knew to be under the age of 16, on the Internet site myRedbook.com, along with photographs of her, with the intent to solicit others to pay to engage in sexual activity with her. At the time of his arrest, Crutchfield was employed as a Peer Health Counselor with the Santa Clara County Department of Mental Health.
Crutchfield, 28, and Toliver, 24, both of San Jose, were indicted by a federal Grand Jury on January 29, 2014. They were charged with four counts, including two counts of sex trafficking of a minor, in violation of 18 U.S.C. §1591, two counts of production of child pornography, in violation of 18 U.S.C. § 2251(a). Under the plea agreement, both Crutchfield and Toliver pleaded guilty to a superseding information charging a single count of use of an interstate wire to transmit information about a minor for criminal sexual activity, in violation of 18 U.S.C. § 2425.
Toliver is currently being held in the Santa Clara County Main Jail, pending sentencing, while Crutchfield, who had been in custody since June 2013, was released to home confinement with his parents in March 2015. Bail for Crutchfield was set at $ 150,000.
Toliver’s sentencing hearing is scheduled for October 5, 2015, before the Honorable Ronald M. Whyte, U.S. District Court Judge, in San Jose. Crutchfield’s sentencing hearing is scheduled for December 14, 2015, also before Judge Whyte in San Jose. The maximum statutory penalty for each count in violation of 18 U.S.C. § 2425 is five years and a fine of $ 250,000, plus restitution to the minor victims. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Amie Rooney is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Laurie Worthen. The prosecution is the result of a joint investigation by the San Jose Police Department Human Trafficking Task Force and the Federal Bureau of Investigation.
Anyone who suspects instances of human trafficking are encouraged to call the FBI or the Human Trafficking Hotline at 1-888-373-7888. Anonymous calls are welcome.
In addition, suspected child sexual exploitation or missing children may be reported to the National Center for Missing & Exploited Children, via its toll-free 24-hour hotline, 1-800-843-5678.