Northern District of California
Press releases recorded for this federal judicial district.
Former Investment Banker and His Associate Plead Guilty in San Francisco to Insider Trading SchemeRead the Press Release
San Francisco - A former San Francisco investment banker and his college friend both pleaded guilty today for their roles in an insider trading scheme involving two impending corporate mergers, announced U.S. Attorney Melinda Haag and Acting Assistant Attorney General Mythili Raman of the Justice Department's Criminal Division.
Jauyo Lee, aka "Jason Lee," 29, of New York, and Victor Chen, 29, of Sunnyvale, Calif., both pleaded guilty before U.S. District Judge Richard Seeborg in the Northern District of California to one count of conspiracy to commit securities fraud and one count of securities fraud. Lee and Chen were charged in a criminal information on March 21, 2013.
"Securities professionals cannot exploit their positions of trust to enrich themselves and their friends," said U.S. Attorney Haag. "Those tempted to corrupt our markets in this manner should know: the government will get to the bottom of suspicious trading and prosecute securities fraud vigorously."
"Insider trading undermines ordinary investors' faith in our financial markets, and the Justice Department has zero tolerance for it," said Acting Assistant Attorney General Raman. "Today's guilty pleas show that you cannot trade on inside information, pocket the profit and expect to escape responsibility. Having now admitted their conduct, Mr. Lee and Mr. Chen must face the consequences."
According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients. Between Aug. 26, 2009, and Sept. 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink's client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market. Chen used the inside information to buy shares of Candela. After the merger was announced, Candela's stock price increased more than 40 percent and Chen sold his shares for a gain of approximately $62,589.
Between June 1 and 13, 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc. Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ. Chen used the inside information to buy shares and options of Somanetics. Following the merger announcement, the price of Somanetics stock increased more than 30 percent and Chen ultimately realized a profit of approximately $547,510.
Lee and Chen are scheduled for sentencing on July 23, 2013, before Judge Seeborg. The maximum penalty for conspiracy to commit securities fraud is five years in prison, and the maximum penalty for securities fraud is 20 years in prison.
This case is being prosecuted by Assistant U.S. Attorney Robert S. Leach and Trial Attorney Brian R. Young of the Criminal Division's Fraud Section with the assistance of Rayneisha Booth and Mary Mallory. The prosecution is the result of a one-year investigation by the FBI with substantial assistance from the Chicago Regional Office of the U.S. Securities and Exchange Commission.
This prosecution is part of efforts underway by President Obama's Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys' offices and state and local partners, it's the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.Ten Bay Area Residents Charged with Federal Passport OffensesRead the Press Release
SAN FRANCISCO – Over the past 18 months, ten Bay Area residents have been charged with federal passport offenses, United States Attorney Melinda Haag and Diplomatic Security Service Special Agent in Charge Dean K. Shear announced.
The individuals are part of more than 225 Bay Area residents who have been charged with or prosecuted for false passport offenses since 2007. According to court records and proceedings, the following 10 defendants all misrepresented their identity on applications for United States passports or committed related offenses in violation of either 18 U.S.C. § 1542, false statement in application for a passport, or 18 U.S.C. § 1028, fraud in connection with identification documents:
Ricardo Montano of San Jose, Calif., is alleged to have applied for a passport using another person’s birth certificate. Montano eluded arrest in September 2011, and remains a fugitive.
Xeres Mari Luciano Garcia Anicete II of San Francisco, Calif., was convicted of possessing a false identification document when he applied for a passport. Anicete II was sentenced to 24 days of imprisonment on September 30, 2011.
Erik Alan Murphy of San Francisco, Calif., was convicted of possessing a false identification document when he applied for a passport. Murphy was sentenced to 30 days of imprisonment on January 27, 2012.
Luse Lilomaiava of San Francisco, Calif., was convicted of possessing a false identification document when she applied for a passport. Lilomaiava was sentenced to three years of probation on July 26, 2012.
Mikhail Nijjar of Oakland, Calif., was convicted of applying for a passport using another person’s name. Nijjar was sentenced to approximately four and one-half months of imprisonment on August 29, 2012.
Marco Matute of San Francisco, Calif., was convicted of attempting to possess a false passport. Matute was sentenced to approximately two and one-half months of imprisonment on September 6, 2012.
Ruben Reyes Diaz of Oakland, Calif, was convicted of possessing a false identification document when he applied for a passport. Diaz was sentenced to approximately 50 days of imprisonment on February 20, 2013.
Richard Emmett Monroe of Santa Rosa, Calif., is alleged to have applied for a passport using another person’s name. Monroe was charged by a felony criminal complaint on January 11, 2013, and is currently in the custody of the Sonoma County Sheriff.
Manuel Sanchez of Salinas, Calif., was convicted of possessing a false identification document when he applied for a passport. Sanchez was sentenced to 10 months of imprisonment on March 14, 2013.
Quentin Chiang of San Jose, Calif., is alleged to have applied for a passport using another person’s name. A Federal grand jury in San Jose returned an indictment against Chiang on March 13, 2013. Chiang is currently in the custody of the United States Marshals while his case proceeds.
The prosecutions are the result of ongoing investigations by DSS.
Anyone with information about false or fraudulently issued passports or entry visas, or the whereabouts of the above fugitives, is encouraged to contact Diplomatic Security Service at (415) 705-1176.
Please note: Charges described in this document contain only allegations against defendants who must be presumed innocent unless and until proven guilty.
IRS Employee Pleads Guilty to Filing False Tax ReturnRead the Press Release
OAKLAND, Calif. – Kimberly S. Daniels, 46, an Internal Revenue Service (IRS) employee in Oakland, California, pleaded guilty yesterday to filing a false United States Individual Income Tax Return, announced United States Attorney Melinda Haag, Assistant Attorney General of the United States Department of Justice’s Tax Division Kathryn Keneally, and the Treasury Inspector General for Tax Administration J. Russell George.
According to the plea agreement, while an employee of the IRS in March 2011, Daniels filed her 2010 income tax return in which she fraudulently claimed two dependents, knowing they were not her dependents, and requested a tax refund of $4,175 to which she was not entitled.
Treasury Inspector General for Tax Administration J. Russell George noted that his office aggressively investigates all allegations of IRS employee corruption. “All IRS employees must properly file their tax returns, as they are expected to execute their duties with the highest standards of integrity in order to maintain the public’s trust in the American system of tax administration,” he said.
Daniels’ sentencing is scheduled for July 24, 2013 at 2:30 PM before United States District Court Judge Phyllis J. Hamilton in Oakland. The maximum statutory penalty for filing a false tax return as an IRS agent, in violation of Title 26, U.S.C. § 7214(a)(7) is 5 years in prison, a $250,000 fine, and mandatory dismissal from employment with the IRS. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
This case is the result of an investigation conducted by Treasury Inspector General for Tax Administration investigators. United States Department of Justice Tax Division Trial Attorney Matthew J. Kluge and Assistant United States Attorney Michael G. Pitman are prosecuting this case.
Career Offender Sentenced to 13 Years for Trafficking Methamphetamine, Possession of A FirearmRead the Press Release
SAN JOSE - Jose Ezequiel Monroy was sentenced on April 3, 2013, to thirteen years in prison for distributing methamphetamine and being a felon in possession of a firearm, United States Attorney Melinda Haag announced.
Monroy pleaded guilty on January 9, 2013, to one count of possession with intent to distribute and distribution of methamphetamine, in violation of 21 U.S.C. § 841(a)(1), and one count of being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g). According to the plea agreement, Monroy admitted to selling methamphetamine, a Intratec TEC-DC9 pistol with thirty rounds of ammunition, a Winchester shotgun, a Norinco model MAK-90 rifle, a Charter Arms revolver, and a Mossberg shotgun to a person working undercover for the government.
"Criminals who traffic in drugs regularly carrying firearms to protect their illicit enterprise. These drugs traffickers are a threat to our community and should be held accountable," stated Joseph M. Riehl, Special Agent in Charge, San Francisco Field Division, Bureau of Alcohol, Tobacco, Firearms and Explosives.
Monroy, 61, of Salinas, California, a Mexican national with no legal status in the United States, was indicted by a federal grand jury on September 14, 2011. He was charged with three counts of possession with intent to distribute and distribution of methamphetamine, and four counts of being a felon in possession of a firearm.
The sentence was handed down by U.S. District Court Judge Lucy H. Koh. Monroy had three prior felony convictions at the time of his arrest, each for possessing narcotics with the intent to sell. Judge Koh found that due to Monroy’s prior felony drug trafficking convictions he was a career offender under the U.S. Sentencing Guidelines. Judge Koh also sentenced Montoy to a ten-year period of supervised release.
Dan Kaleba is the Assistant U.S. Attorney who is prosecuting the case with the assistance of legal tech Elise Etter. The prosecution is the result of a nearly two year investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Managing Director of Walnut Creek Investment Company Arrested for Defrauding LendersRead the Press Release
OAKLAND, Calif. – Stephen B. Lopez, age 57, of Lafayette, California, was arrested on Thursday, March 28, 2013 on mail fraud, wire fraud and money laundering charges, United States Attorney Melinda Haag announced.
According to the indictment, Lopez was the managing director of Lighthorse Ventures, LLC, a private equity investment company founded in 2000 and located in Walnut Creek, California. Lopez solicited loans on behalf of Lighthorse, drafting and signing promissory notes in which he promised to timely pay the principal and interest of 10% and 12% per year. In furtherance of the fraud, Lopez allegedly produced and distributed brochures that falsely represented Lighthorse’s ownership interests in companies, real properties, and oil wells, and overvalued and misrepresented the entities owned by Lighthorse. When soliciting loans, Lopez allegedly failed to inform the prospective lenders that: (1) he had previously failed to return the principal and interest to the majority of lenders, and (2) he would shortly be required to make a final payment of $600,000 to Lonestar Trust as a result of a civil settlement agreement between Lopez and his former clients.
The money laundering charges allege that Lopez used the fraud profits, that is, money received from lenders on behalf of Lighthorse, to pay a personal debt of $600,000 owed to clients and to make a $50,000 payment to a consultant.
Lopez made his initial appearance on March 29, 2013 before a magistrate judge in San Francisco and was released on a $100,000 bond.
The maximum statutory penalty for each count of mail fraud and wire fraud is 20 years imprisonment, $250,000 fine or twice the amount of gain or loss, whichever is greater, three years of supervised release, a $100 special assessment, and restitution. The maximum statutory penalty for money laundering is 10 years in prison, a fine of $250,000 or twice the gain or loss from the offense conduct, three years supervised release, and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 355.
Stephen Corrigan is the Assistant U.S. Attorney who is prosecuting this case with the assistance of Kathleen Turner. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Lopez must be presumed innocent unless and until proven guilty.
(Lopez indictment )
Guadalajara Resident Sentenced to over 12 Years in Prison for Smuggling Drugs Through SFORead the Press Release
OAKLAND – Pedro Daniel RODRIGUEZ, 22, a resident of Guadalajara, Mexico, was sentenced to 150 months in prison on March 28, 2013, for his role in an international drug trafficking conspiracy, United States Attorney Melinda Haag announced.
Rodriguez pleaded guilty this past September to six different felony counts that resulted from his attempt to smuggle over 13 pounds of methamphetamine and 4 pounds of cocaine through the San Francisco International Airport. In pleading guilty, Rodriguez admitted that he knew that three suitcases in his possession contained a significant amount of drugs and that he intended to distribute the drugs to a person in Sydney, Australia.
The investigation revealed that on December 29, 2011, Rodriguez arrived at San Francisco International Airport from Guadalajara, Mexico, aboard a Continental Airlines flight. Rodriguez, a United States citizen, was bound for Sydney, Australia. When Rodriguez entered the baggage control area of the airport, he was selected by United States Customs and Border Protection officers for a secondary search. A subsequent search of Rodriguez’s suitcases revealed a large amount of amount of methamphetamine and cocaine hidden in a false bottom of three suitcases.
In handing down the sentence, United States District Judge Jeffrey S. White noted that the smuggling methamphetamine and cocaine was a “serious crime” and noted that such drugs have a “detrimental effect on our society.” The sentence handed down by Judge White also included a five-year period of supervised release.
Aaron Wegner is the Assistant U.S. Attorney prosecuting the case, with the assistance of legal technician Erica Doerr. The prosecution is the result of an investigation led by agents from Homeland Security Investigations.
UPS Agrees to Forfeit $40 Million in Payments from Illicit Online Pharmacies for Shipping ServicesRead the Press Release
SAN FRANCISCO - United Parcel Service, Inc. (“UPS”) and the United States Attorney’s Office for the Northern District of California (“USAO-NDCA”) entered into a Non-Prosecution Agreement (“NPA”) today in which UPS agreed to forfeit $40 million in payments it has received from illicit online pharmacies and to implement a compliance program designed to ensure that illegal online pharmacies will not be able to use UPS’s services to distribute drugs, U.S. Attorney Melinda Haag, Drug Enforcement Administration (DEA) Administrator Michele M. Leonhart, and Food and Drug Administration (FDA) Director of the Office of Criminal Investigations John Roth announced.
UPS has cooperated fully with the investigation and has already taken steps to ensure that illegal Internet pharmacies can no longer use its services to ship drugs. These voluntary improvements will be strengthened by the compliance program UPS will implement as a condition of this NPA.
U.S. Attorney Melinda Haag commented: “We are pleased with the steps UPS has taken to stop the use of its shipping services by illegal on-line pharmacies. Good corporate citizens like UPS play an important role in halting the flow of illegal drugs that degrade our nation’s communities. We are hopeful that the leadership displayed by UPS through this compliance program will set the standard for the parcel delivery industry and will materially assist the federal government in its battle against illegal Internet pharmacies.”
From 2003 through 2010, UPS was on notice, through some of its employees, that Internet pharmacies were using its services to distribute controlled substances and prescription drugs without valid prescriptions in violation of the law. Internet pharmacies operate illegally when they distribute controlled substances and prescription drugs that are not supported by valid prescriptions. A prescription based solely on a customer’s completion of an on-line questionnaire is not valid. Despite being on notice that this activity was occurring, UPS did not implement procedures to close the shipping accounts of Internet pharmacies.
“DEA is aggressively targeting the diversion of controlled substances, as well as those who facilitate their unlawful distribution,” said DEA Administrator Michele M. Leonhart. “This investigation is significant and DEA applauds UPS for working to strengthen and enhance its practices in order to prevent future drug diversion.”
John Roth, Director of the FDA Office of Criminal Investigations added: “The results of this investigation will prompt a significant transformation of illicit internet pharmacy shipping and distribution practices, limiting the chances of potentially unapproved, counterfeit or otherwise unsafe prescription medications from reaching U.S. consumers. The FDA is hopeful that the positive actions taken by UPS in this case will send a message to other shipping firms to put public health and safety above profits.”
Kirstin M. Ault is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Legal Technician Rawaty Yim. The prosecution is the result of an investigation by the Financial Investigative Team of the DEA, with the assistance of the FDA Office of Criminal Investigations. This investigation is part of USAO-NDCA’s Health Care Fraud program and was initiated as an investigation with the Organized Crime and Drug Enforcement Task Force. Substantial assistance was provided by the North Carolina Board of Pharmacy.
(UPS signed NPA )
(UPS Attachment A )
(UPS Attachment B )
Defendants Indicted for Defrauding NASA and NSFRead the Press Release
SAN JOSE - A federal grand jury in San Jose indicted Ali Kashani, of San Jose, and Yang Zhao, of El Cerrito, Wednesday with wire fraud and conspiracy to commit wire fraud, United States Attorney Melinda Haag announced. Mr. Kashani was also indicted for money laundering.
According to the indictment, Mr. Kashani, 52, and Ms. Zhao, 40, through their scientific research company, Atlas Scientific, are alleged to have defrauded the National Science Foundation (NSF) and the National Aeronautics and Space Administration (NASA) by creating the false impression that they had not applied for overlapping Small Business Innovation Research (SBIR) grants with both NSF and NASA. The SBIR program requires that grantees disclose similar or “essentially equivalent” research proposals the grantee has submitted to other federal agencies.
Atlas Scientific, a San Jose-based research company, performed research into adhesive tape based on carbon nanotubes. Mr. Kashani, the owner and founder of Atlas Scientific, and Ms. Zhao, Atlas’s principal investigator, applied for and received multiple research grants from NSF and NASA. During each application process, Mr. Kashani and Ms. Zhao allegedly denied having submitted overlapping project proposals to both NSF and NASA. Mr. Kashani and Ms. Zhao also allegedly denied already having received funding from NSF and NASA, when they requested additional grant monies.
Ms. Zhao is additionally alleged to have misrepresented her employment status with the University of California Berkeley, when she applied for these grants.
Yesterday, Mr. Kashani was arrested, and made his initial appearance in federal court in San Jose. Mr. Kashani is currently detained pending a hearing on Tuesday, April 2 at 9:30AM before Magistrate Judge Grewal.
Ms. Zhao is currently living in the People’s Republic of China.
The maximum penalty for each count of Conspiracy to Commit Wire Fraud in violation of Title 18, United States Code, Section 1349, and for the substantive Wire Fraud counts, is 20 years imprisonment and a fine of $250,000 fine, or twice the gross gain or gross loss from the offense, plus restitution. The maximum penalty for each count of Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, in violation of Title 18, United States Code, Section 1957(a), is 10 years imprisonment and a fine of $250,000 fine, or twice the amount of the criminally derived property involved in the transaction, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Jeff Schenk is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kamille Singh. The prosecution is the result of an investigation by the National Science Foundation Office of the Inspector General, NASA Office of the Inspector General, and the Internal Revenue Service Criminal Investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Mr. Kashani and Ms. Zhao must be presumed innocent unless and until proven guilty.
(Kashani and Zhao indictment )
Cupertino Businessman Charged with High-Tech Worker Visa FraudRead the Press Release
SAN JOSE, CA - A Cupertino businessman made his initial appearance in federal court yesterday after being charged with 19 counts of Visa Fraud, U.S. Attorney Melinda Haag announced.
According to an indictment filed on March 27, 2013, Balarkishan Patwardhan made false statements in visa petitions for 19 applicants, in violation of Title 18, United States Code, Section 1546(a). The indictment alleges that Patwardhan knowingly submitted false immigration forms and supporting documentation to the government related to I-129 petitions. I-129 petitions relate to the H-1B high-technology worker visa program which requires, among other things, that an American employer certify it has high-technology jobs that cannot be filled by Americans. The indictment alleges that Patwardhan falsely represented to the government that 19 non-immigrant applicants had high technology job offers with an American employer, when in reality he knew that he did not have jobs for the applicants.
Patwardhan was arrested today, and was released on a $50,000 bond with one of the conditions of his pretrial release being that he not provide consulting services for technology companies or provide any visa services. His next scheduled court appearance is April 22, 2013 at 1:30 p.m. before United States District Judge Edward J. Davila.
The maximum statutory penalty for Visa Fraud, in violation of Title 18, United States Code, Section 1546(a) is 10 years in prison and a $250,000 fine. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Jeff Nedrow and Joseph Fazioli are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Susan Kreider. The prosecution is the result of an investigation led by the U.S. Department of State Diplomatic Security Service’s representative to the Document and Benefit Fraud Task Force (DBFTF) overseen by U.S. Immigration and Customs Enforcement Homeland Security Investigations. The DBFTF is a multi-agency task force that coordinates investigations into fraudulent immigration documents. U.S. Citizenship and Immigration Service’s Office of Fraud Detection and National Security also assisted with the investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Mr. Patwardhan must be presumed innocent unless and until proven guilty
Nine Sentenced for Illegally Distributing Controlled Substances over the InternetRead the Press Release
SAN FRANCISCO - Nine defendants were sentenced over the last two days for their roles in illegally distributing controlled substances to customers who bought the drugs from illicit Internet pharmacies, United States Attorney Melinda Haag and Drug Enforcement Administration Acting Special Agent in Charge Bruce C. Balzano announced. The defendants were also collectively ordered to forfeit more than $94 million in illegal proceeds.
“Illegal Internet pharmacies bring significant harm to communities across the nation by making controlled substances available to teenagers, addicts, and others who are endangered when these drugs are obtained without proper medical supervision. Anyone who engages in this criminal activity can expect to be prosecuted and held accountable for their conduct,” stated U.S. Attorney Haag.
“Prescription drug abuse has risen to alarming levels, often times leaving a trail of devastation behind and negatively impacting our communities. The individuals sentenced this week were involved in online pharmacy schemes that were illegally distributing controlled substances. DEA will aggressively pursue all who choose profits over the health and safety of the public,” stated DEA Acting Special Agent in Charge Balzano.
Michael Arnold, 42, of Boca Raton, Florida, was sentenced to 5 years in prison for his role as the organizer and leader of the Pitcairn Internet pharmacy. From 2003 through 2007, Pitcairn sold more than 14 million doses of Schedule III and IV controlled substances, earning over $69 million in its four years of operation using websites such as ezdietpills.net, pillsavings.com, and doctorrefill.net. Arnold laundered Pitcairn’s illegal proceeds through accounts in at least eight different countries, including Switzerland, Liechtenstein, the Netherlands, Canada, Panama, the Bahamas, St. Kitts & Nevis, and Curacao. Arnold was ordered to forfeit $69,692,488.39.
Christopher Napoli, 46, of Newtown Square, Pennsylvania, was sentenced to 4 years in prison for his role as the founder and leader of the Pharmacy USA/ SafescriptsOnline (“Safescripts”) Internet pharmacy. From November 2004 through December 2006, Safescripts sold more than 13 million doses of Schedule III and IV controlled substances, earning more than $24 million in its two years of operation. Napoli paid affiliates located in foreign countries, including Argentina, India, the Dominican Republic, Panama, Latvia, Lithuania, Romania and Poland to market drugs to potential customers using websites and call centers that placed outbound calls pushing the sale of the drugs listed on the Safescripts website. Napoli was ordered to forfeit $24,609,611.48.
Daniel “DJ” Johnson, 40, of Pekin, Illinois, was sentenced to 3 years in prison for his role as the software developer and manager for Safescripts. From his father’s business, Internet Commerce Corporation, Johnson assisted Napoli with the day-to-day operation of Safescripts, managing the maintenance and development of the software and hardware used to process drug orders, as well as the relationships between Safescripts at the brick-and-mortar pharmacies that filled the drug orders and shipped the pills to customers. Johnson was ordered to forfeit $835,540.
Jeffrey Herholz, 45, of Fayetteville, North Carolina, was sentenced to 2 years in prison for his role as the owner and operator of Kwic Fill, a brick-and-mortar pharmacy located in Fayetteville, North Carolina, that filled drug orders exclusively for Internet pharmacies, including Pitcairn and Safescripts. From February through April 2006, Kwic Fill shipped more than 7 million doses of Schedule III and IV controlled substances to customers located in all 50 states. Kwic Fill earned more than $3 million in criminal proceeds in its three months of operation. Herholz was ordered to forfeit $3,386,829.
Joseph Carozza, 67, of West Orange, New Jersey, was sentenced to 2 ½ years in prison for his role as one of the doctors who reviewed drug orders for Safescripts. Customers who wished to purchase controlled substances from Safescripts selected their drug of choice from a list of available options, answered a 23-question on-line questionnaire, and provided a credit card number and shipping address. After reviewing the questionnaire, Carozza clicked a button to “approve” or “deny” the drug order without meeting with or speaking to the customer who placed the drug order. The evidence at trial showed that Carozza approved more than 184,000 drug orders for Safescripts during an eleven-month period, once approving more than 12,000 orders in a single day. Carozza was ordered to forfeit $400,067.
Arnold and Herholz were convicted of conspiracy to distribute and possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846, and conspiracy to launder money internationally, in violation of 18 U.S.C. § 1956, on March 1, 2012, after a four-week jury trial.
Napoli, Johnson and Carozza were convicted of conspiracy to distribute and possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846, on November 15, 2012, after a six-week jury trial. Napoli and Johnson were also convicted of conspiracy to launder money, in violation of 18 U.S.C. § 1956.
Evidence at trial established that more than 90% of the drugs sold by Pitcairn and Safescripts were Schedule III and IV controlled substances. The drugs were primarily diet pills, such as phentermine and didrex, and anti-anxiety drugs known as benzodiazepenes, such as Xanax, Valium and clonazepam. All of these drugs carry a potential for addiction and may be dangerous if not taken under proper medical supervision.
Also sentenced were:
Salvatore Lamorte, 54 of Freehold, New Jersey, was sentenced to 1 year and 1 day in prison. Lamorte pled guilty to conspiracy to distribute and to possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846, and conspiracy to launder money internationally, in violation of 18 U.S.C. § 1956, based on his role as a recruiter and consultant who located brick-and-mortar pharmacies willing to fill drug orders for illegal Internet pharmacies. Lamorte was ordered to forfeit $2,011,927.
Jeffrey Entel, 43, of Lake Placid, Florida, was sentenced to 13 months in prison. Entel pled guilty to conspiracy to distribute and possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846. Entel owned and operated Groupo Call Center in the Dominican Republic, a call center that placed out-bound calls soliciting drug orders for Safescripts. Entel was ordered to forfeit $3,856,453.
Dino Antonioni, 45, of Miramar, Florida, was sentenced to 9 months of imprisonment followed by 9 months of home confinement. Antonioni pled guilty to conspiracy to distribute and to possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846, based on his role as the pharmacist for a brick-and-mortar pharmacy that filled drug orders for illegal Internet pharmacies. Antonioni was ordered to forfeit $300,000.
Darrell Creque, 63, of Clayton, North Carolina, was sentenced to 4 years of probation. Creque pled guilty to conspiracy to distribute and to possess with intent to distribute Schedule III and IV controlled substances, in violation of 21 U.S.C. § 846, based on his role as the pharmacist for Kwic Fill. Creque was ordered to forfeit $23,865.
These convictions were the result of a lengthy investigation by the Drug Enforcement Administration, San Francisco Field Division’s Financial Investigative Team. The prosecution is part of the Northern District of California United States Attorney’s Office’s Health Care Fraud program and was initiated as an investigation with the Organized Crime and Drug Enforcement Task Force. Substantial assistance was provided by the North Carolina Board of Pharmacy. Assistant United States Attorneys Kirstin Ault, Thomas Stevens, and Tracie Brown, with assistance from Denise Oki, Maryam Beros, Rawaty Yim, and Rayneisha Booth, prosecuted this case on behalf of the United States.
San Francisco Resident Charged with Aggravated Identity Theft and False ClaimsRead the Press Release
SAN FRANCISCO, California – A federal grand jury in San Francisco indicted Eric Flentoil of San Francisco last week with identity theft, access device fraud, and filing false claims, United States Attorney Melinda Haag and IRS-CI Special Agent in Charge Jose M. Martinez, announced.
According to the indictment, in 2012, Flentoil knowingly transferred, possessed, and used, without lawful authority, a means of identification of another person in connection with using an unauthorized access device to obtain things of value, totaling $1,000 or more. The indictment further alleges that Flentoil made and presented to the IRS, two false federal income tax returns, claiming tax refunds which he knew he was not entitled to receive. One of the false tax returns was in the name of Eric Flentoil, the other in the name of an individual identified as A.R.
The maximum statutory penalty for each count of filing a false claim, in violation of Title 18, U.S.C § 287 is five years in prison and a fine of $250,000. The maximum penalty for access device fraud in violation of Title 18, United States Code, Section 1029(a)(2), is 10 years (20 years, if the defendant has a prior conviction under Section 1029). The aggravated identity theft count, 18 U.S.C. § 1028A, requires a mandatory minimum term of 2 years imprisonment consecutive to any other sentence imposed. 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.
Cynthia Stier is the Assistant U.S. Attorney who is prosecuting this case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Flentoil must be presumed innocent unless and until proven guilty.
Fremont Woman Charged in Million Dollar Fraud SchemeRead the Press Release
SAN JOSE - A San Jose federal grand jury indicted Rosemarie Gan, of Fremont, on March 13, 2013 with five counts of wire fraud, United States Attorney Melinda Haag announced.
According to the indictment, Gan, 49, is alleged to have stolen over $1,000,000 from various investors who believed they were investing in her company, Argee’s Travel and Gifts. Investors into Argee’s Travel and Gifts expected their investments to fund the purchase of airplane tickets, and, thereafter, entitle them to commission payments following the sale of these airplane tickets. Instead, Gan allegedly stole investors’ funds and used them to pay delinquent investor commission payments and to pay for her personal living expenses.
Yesterday, Gan made her initial appearance in federal court in San Jose before Magistrate Judge Howard Lloyd. Gan was detained pending a detention hearing. Gan’s detention hearing is scheduled for 10:30 AM on March 28, 2013 before Magistrate Judge Paul Grewal.
The maximum statutory penalty for each count of wire fraud, in violation of Title 18, United States Code, Section 1343, is 20 years’ imprisonment and a fine of $250,000 or twice the gross gain or gross loss from the offense, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Jeff Schenk is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kamille Singh. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Gan must be presumed innocent unless and until proven guilty.
Former Bookkeeper of East Bay Real Estate Investment Company Sentenced to Prison for Embezzlement and Tax Evasion SchemeRead the Press Release
OAKLAND - Kristie Gale Meyer was sentenced yesterday to 41 months in prison and ordered to pay $1,332,329.35 in restitution to the victims and $584,092 to the IRS, arising from a multi-year scheme to embezzle funds from her employer, United States Attorney Melinda Haag and IRS-CI Special Agent in Charge Jose M. Martinez announced.
Meyer pleaded guilty on November 21, 2012, to mail fraud and tax evasion. According to the plea agreement, Meyer admitted to engaging in a multi-year scheme to defraud her employer, Ansil Realty & Investment Co. and its partner, KLP Properties, Inc. Meyer worked as Ansil’s secretary, office manager, and bookkeeper. She stole money by several means, including paying her credit card bills with checks drawn on the companies’ bank accounts and using those funds for her personal benefit, by taking cash advances, and by making payments to online gambling websites. Meyer also wrote checks drawn on the companies’ bank accounts and made deposits directly into her personal bank account. Meyer took steps to conceal her fraud by making false accounting entries in the companies’ accounting system to make her fraudulent transactions appear to be legitimate business expenditures, and by destroying copies of the fraudulent checks.
For the tax years 2006, 2007, and 2008, Meyer also willfully attempted to evade a large part of the income tax due and owing by filing false returns. Meyer knew that her taxable income for those years was substantially in excess of the amounts stated on her returns.
Meyer, 56, of Woodland Hills, CA, was indicted by a federal grand jury on August 2, 2010, on ten counts of wire fraud and three counts of tax evasion.
The sentence was handed down by U.S. District Court Judge Phyllis J. Hamilton following a guilty plea on one count of mail fraud in violation of 18 U.S.C. § 1341 and one count of tax evasion in violation of 26 U.S.C. § 7201. Judge Hamilton also sentenced the defendant to a three year period of supervised release, along with an order forfeiting $2,013,149.09.
Wade M. Rhyne is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Janice Pagsanjan. The prosecution is the result of a year-long investigation by the Internal Revenue Service, Criminal Investigation.
Federal Jury Convicts Vallejo Woman of Bankruptcy and Mortgage Fraud SchemeRead the Press Release
SAN JOSE, CA— A federal jury convicted Vallejo resident Myra Holmes yesterday of one count of Bankruptcy Fraud, one count of Bank Fraud, and three counts of Making a False Statement to a Bank, United States Attorney Melinda Haag announced. The guilty verdict followed a three-week trial before U.S. District Court Judge Edward J. Davila. The jury acquitted Myra Holmes on two other false statement counts.
Evidence at trial showed that Holmes, 55, enriched herself by knowingly receiving from her father his half-interest in a Vallejo residence in which she lived. Holmes knew at the time she received this property that her father had previously declared bankruptcy and that as a result his half-interest in the Vallejo property now belonged to his Chapter 7 bankruptcy estate. Holmes took this half-interest in the Vallejo property without paying anything to the bankruptcy estate and also without notifying or obtaining the permission of the United States Bankruptcy Court or the bankruptcy trustee. After Holmes received her father’s half-interest in the Vallejo property, she drained the equity from the property through a fraudulent refinancing mortgage loan application. The jury found that Holmes falsely told World Savings Bank in her refinancing mortgage applications: (1) that she earned $15,000 a month; (2) that she had a bank account balance of $15,000; and (3) that she was not a party to a lawsuit. Evidence at trial showed that Holmes knew at the time she filed her refinancing mortgage applications that she was overstating her monthly income and account balance, and also knew that the bankruptcy trustee had recently filed a lawsuit against her seeking to recover the bankruptcy estate’s half-interest in the Vallejo property.
As a result of her bankruptcy fraud and mortgage fraud, Holmes received approximately $147,000 directly and arranged for personal debts to be paid (including her debts to Neiman Marcus, Lord & Taylor, Macy’s and Spiegel). By the end of April 2006, Holmes had spent on personal expenses (including gambling and shopping) all of the approximately $147,000 that she had fraudulently received as a result of the November 2005 refinancing of the Vallejo property. To date, Holmes has not repaid the bankruptcy estate for the funds she took out of the Vallejo property in the November 2005 refinancing.
Holmes is scheduled to be sentenced on July 1, 2013, before Judge Davila in San Jose. Judge Davila ordered that Holmes remain out of custody pending sentencing on a co-signed $50,000 release bond.
The maximum statutory penalty for 18 U.S.C. § 152(5) - Bankruptcy Fraud/Concealment of Assets - is five years' imprisonment, a $250,000 fine and restitution. The maximum statutory penalty for 18 U.S.C. § 1344 - Bank Fraud, and 18 U.S.C. 1014 - Making a False Statement to a Bank - is 30 years' imprisonment, a $1,000,000 fine and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Joseph Fazioli and Assistant U.S. Attorney Grant Fondo are prosecuting the case with the assistance of Paralegal Specialist Lakisha Holliman and Legal Assistants Laurie Worthen and Kamille Singh. This prosecution is the result of a multi-year investigation by the Federal Bureau of Investigation.
San Anselmo Contractor Pleads Guilty to Tax FraudRead the Press Release
SAN FRANCISCO, Calif. – John Kieran Hynes pleaded guilty last week to filing a false tax return, United States Attorney Melinda Haag and IRS-CI Special Agent in Charge Jose M. Martinez, announced.
According to court documents, during 2005, Hynes was the owner of Newtown Construction. Hynes admitted that when he received check payments for contracted construction services rendered during the 2005 tax year, he would either deposit the entire check into his business bank account, cash the entire amount of the check, or cash a portion of the check and deposit the remainder of the check into his business account. The amount Hynes received back in cash when he deposited only a portion of the check was called a “less-cash withdrawal.”
Hynes’ bookkeeper relied on the deposited amounts shown on his monthly bank statements to determine his gross business receipts in 2005. Hynes intentionally did not tell his bookkeeper about the less-cash withdrawals to prevent his bookkeeper from including the less-cash withdrawal amounts among the gross receipts that the bookkeeper tracked in the company accounting records.
In order to file his 2005 tax return, Hynes provided his tax return preparer with the company accounting records prepared by his bookkeeper. Hynes knew those accounting records understated the gross receipts earned under the name Newtown Construction because the gross receipts recorded did not include the less-cash withdrawals.
On his 2005 tax return, Hynes knowingly failed to report additional gross receipts of $214,595 earned by Newtown Construction which resulted in a tax loss to the United States of $66,524.
On June 21, 2012, Hynes, 45, of San Anselmo, California, was charged with four counts of filing a false tax return. According to the plea agreement, he pleaded guilty to one count.
The maximum statutory penalty for each count of making and subscribing to a false income tax return, in violation of Title 26, U.S.C § 7206(1) is three 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.
Special Assistant United States Attorney Charles Parker and Assistant United States Attorney Thomas Moore are prosecuting this case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Former East Bay Resident Sentenced for His Role in Tax Refund ScamRead the Press Release
SAN FRANCISCO – Clexton Ward was sentenced last week to 24 months in prison for conspiring to file false claims, United States Attorney Melinda Haag and Internal Revenue Service Criminal Investigation Special Agent in Jose M. Martinez, announced.
Ward pleaded guilty on August 22, 2012 to one count of Conspiracy to File False Claims. In pleading guilty, Ward acknowledged participating in a conspiracy to file false income tax returns electronically with the IRS. Ward admitted that, as part of the conspiracy, he gathered and supplied the names, personal identifying information and bank accounts that were used to file the false tax returns. Ward acknowledged that the false tax returns requested that the fraudulent refunds be deposited into various bank accounts controlled by either him or by his co-conspirators, and that he and his co-conspirators split the proceeds from the fraudulent refunds.
On April 17, 2012, Ward was charged with one count of Conspiracy to File False Claims. He is scheduled to begin his sentence on May 5, 2013.
Thomas Newman is the Assistant U.S. Attorney, who is prosecuting this case. The prosecution is the result of an investigation by the IRS, Criminal Investigation.
Former CalPERS CEO and Former Placement Agent Indicted for Conspiracy and FraudRead the Press Release
SAN FRANCISCO - A federal grand jury in San Francisco indicted Alfred J. Villalobos, of Reno, Nevada, and Federico R. Buenrostro, Jr., aka Fred Buenrostro, of Sacramento, California, on charges of conspiracy to defraud the United States, engaging in a false scheme against the United States, and conspiracy to commit mail fraud and wire fraud, United States Attorney Melinda Haag announced. Mr. Buenrostro was also charged in the same indictment with making a false statement to the United States and obstruction of justice.
According to the indictment, Mr. Villalobos, age 69, and Mr. Buenrostro, age 64, conspired to create and transmit fraudulent documents in connection with a $3 billion investment by the California Public Employee Retirement System (“CalPERS”) into funds managed by Apollo Global Management (“Apollo”), a private equity firm based in New York City.
ARVCO Capital Research LLC (“ARVCO”), a financial services firm founded and managed by Mr. Villalobos, acted as a placement agent in helping Apollo to secure these investments by CalPERS. In each instance, Apollo required ARVCO to obtain an Investor Disclosure letter from CalPERS prior to paying ARVCO any fees for its efforts in securing CalPERS’ investments into Apollo-managed funds, citing, among other reasons, Apollo’s obligations under the securities laws.
After CalPERS’ legal and investment offices declined to sign a certain Investor Disclosure letter documenting ARVCO’s legal relationship with Apollo, Mr. Villalobos and Mr. Buenrostro conspired to create a series of fraudulent Investor Disclosure letters that were transmitted to Apollo. Apollo paid ARVCO a total of approximately $14 million dollars in fees after receiving the fraudulent letters.
ARVCO transmitted the last fraudulent Investor Disclosure letter in June 2008, a few weeks before Mr. Buenrostro retired from CalPERS. On July 1, 2008, Mr. Villalobos hired Mr. Buenrostro to work for ARVCO. When civil and later criminal investigations were opened into the operations of ARVCO and its role as a placement agent in connection with CalPERS’ investments in Apollo-managed funds, both defendants made false statements to, and concealed information from, the SEC, the USPIS, and the FBI, about the authenticity of the Investor Disclosure letters in order to defeat and obstruct the lawful functions of those agencies.
Mr. Villalobos and Mr. Buenrostro made their initial appearance in federal court in San Francisco on March 18, 2013, and are currently out on bond. Mr. Buenrostro’s next scheduled appearance is Monday, March 25, 2013, at 9:30 a.m., for identification of counsel and review of the terms of his bond. Mr. Villalobos’ next scheduled appearance is April 9, 2013, at 9:30 a.m., for review of the terms of his bond. Both defendants are scheduled to appear before in District Court on May 8, 2013, at 2:00 p.m., before Judge Breyer.
The maximum statutory penalty for conspiracy to commit mail fraud and wire fraud is 20 years imprisonment, $250,000 fine or twice the amount of gain or loss, whichever is greater, three years of supervised release, and a $100 special assessment. The maximum penalty for each count of conspiracy to defraud the United States, false scheme against the United States, false statement to the United States, and obstruction of justice is five years of imprisonment, $250,000 fine or twice the amount of gain or loss, whichever is greater, three years of supervised release, and a $100 special assessment. Restitution may also be ordered as to each of the five counts. 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.
Timothy J. Lucey is the Assistant United States Attorney who is prosecuting the case with the assistance of Laurie Worthen and Maryam Beros. The prosecution is the result of a two-and-a half year investigation by the United States Postal Inspection Service and the Federal Bureau of Investigation, with substantial assistance from the Los Angeles Regional Office of the Securities and Exchange Commission as well as the United States Secret Service.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Mr. Villalobos and Mr. Buenrostro must be presumed innocent unless and until proven guilty.
(CalPERS Indictment )
Convicted Felon Operating A Grow House and Illegally Possessing Firearms in San Leandro Sentenced to 78 Months in PrisonRead the Press Release
OAKLAND, Calif. – This week, Vincent Nguyen was sentenced to 78 months in prison for conspiring to possess with the intent to distribute marijuana, possessing with the intent to distribute marijuana, and being a felon in possession of firearms, United States Attorney Melinda Haag announced.
Nguyen was arrested on Jan. 10, 2012, after complaints from citizens led to an investigation by the San Leandro Police Department. Nguyen pleaded guilty on Oct. 31, 2012.
In his plea agreement, Nguyen admitted that from August 2011 through January 2012, he, along with others, operated a marijuana grow house at 3471 Carrillo Drive in San Leandro, Calif. He was found in possession of 82 mature marijuana plants, almost one kilogram of marijuana packaged for sale, a Norinco US 7.62 caliber rifle with a high capacity magazine, a Romak-Romarm 7.62 caliber assault rifle that had been stolen, and a .45 caliber Smith & Wesson semiautomatic pistol. In addition, about $10,000 in cash, a 9mm Bryco Arms semiautomatic pistol, and more than 100 rounds of various caliber ammunition were found at 3471 Carrillo Drive and seized by law enforcement.
Nguyen, 21, of Oakland, had previously been convicted in 2010 for felony possession of marijuana for sale.
The sentence was handed down by U.S. District Court Judge Phyllis J. Hamilton, who also sentenced Nguyen to 3 years of supervised release. Nguyen was indicted, with others, by a federal grand jury on June 7, 2012. Co-defendants Van Do Nguyen and Loc Huynh were sentenced by Judge Hamilton on January 23, 2013, to 72 months and 87 months in prison, respectively.
Brian C. Lewis is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Janice Pagsanjan. The prosecution is also the result of an investigation by the Federal Bureau of Investigation.
Berkeley Man Sentenced to Prison for Possessing A Destructive DeviceRead the Press Release
SAN FRANCISCO – Emoru Oboke Obbanya was sentenced March 12, 2013, to 27 months in prison for possessing a destructive device, announced United States Attorney Melinda Haag, Special Agent in Charge Joseph M. Riehl of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and Special Agent in Charge David J. Johnson of the Federal Bureau of Investigation, San Francisco Field Office (FBI).
A federal grand jury indicted Obbanya in September 2011 on a charge of possessing a firearm not identified by a serial number, in violation of 26 U.S.C. § 5861(i). In March 2012 the grand jury returned a superseding indictment charging Obbanya with additional crimes. Count one of the superseding indictment charged Obbanya with possession of a firearm in the form of components from which a destructive device may be readily assembled, in violation of 26 U.S.C. § 5861(d). Count four of the superseding indictment carried forward the charge from the original indictment of possessing a firearm not identified by a serial number, in violation of 26 U.S.C. § 5861(i).
In July 2009, Berkeley Police Department served a search warrant at Obbanya’s residence and found in Obbanya’s bedroom a loaded firearm – specifically a flare gun that had been converted into an operable .38 caliber handgun. The firearm bore no serial number and had not been registered, and Obbanya had not applied for or received permission from ATF to make the gun. In addition to the altered firearm, the officers found .38 caliber ammunition, and numerous bomb-making materials in Obbanya’s bedroom
On September 17, 2012, Obbanya entered guilty pleas to counts one and four of the superseding indictment. Specifically, he admitted to possessing explosive components and a converted .38 caliber handgun.
The sentence was handed down by Chief District Court Judge Claudia Wilken. Drew Caputo is the Assistant U.S. Attorney who prosecuted the case. The prosecution is the result of a joint investigation by the ATF and the FBI with the assistance of Berkeley Police Department.
San Diego Man Indicted for Fraudulently Obtaining Millions of Dollars of Cash and Equipment from CiscoRead the Press Release
SAN FRANCISCO – Yesterday, a federal grand jury in San Francisco indicted Quin Rudin (aka Dean Rubin, aka David Rubin) with two counts of wire fraud and one count of aggravated identity theft, United States Attorney Melinda Haag announced.
According to court documents, Rudin controlled CGC Digital (“CGC”), a company that was as an authorized partner of Cisco Systems, Inc. Last fall, CGC contacted Cisco to arrange for the lease of Cisco equipment on behalf of an end user, Altura Pharmaceuticals Inc. (“Altura”). Based on the information provided by CGC, Cisco approved the lease of equipment to Altura and agreed to provide more than $5.8 million in financing for the lease. According to the agreements, CGC would receive the Cisco equipment and the financing to install and service the equipment at Altura. In truth, Altura did not intend to lease any Cisco equipment, and no employee of Altura had engaged CGC to arrange a lease.
At the end of October 2012, a representative of CGC e-mailed to Cisco signed copies of agreements regarding Altura’s purported lease of Cisco equipment. Each agreement was purportedly signed by Altura’s Chief Financial Officer. Days prior to submission of these forged Altura documents to Cisco, Rudin allegedly caused the creation of an Internet domain purported to be that of Altura ending in “.net.” This .net domain was registered, not to Altura, but to CGC. Rudin then allegedly caused e-mails to be sent from the Altura.net domain to a Cisco representative. Each e-mail purported to be from the same employee at Altura who had executed the agreements, and each e-mail prompted Cisco to make a payment to CGC. These payments to CGC totaled approximately $2 million dollars.
The FBI arrested Rudin in San Diego on February 26. Rudin made his initial appearance in federal court in San Diego, and he remains in custody pending his arrival in San Francisco to face these charges.
The maximum statutory penalty for each count of wire fraud, in violation of 18 U.S.C. § 1343, is 20 years’ imprisonment, a fine of $250,000 or twice the gross gain or loss, whichever is greater, plus restitution if appropriate. The maximum statutory penalty for aggravated identity theft, in violation of 18 U.S.C. § 1028A, is 2 years’ imprisonment, to be imposed consecutively to any term of imprisonment imposed for wire fraud. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Kyle Waldinger and Hallie Hoffman are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth and Rawaty Yim. The prosecution is the result of a one-month investigation by the Federal Bureau of Investigation.
Please note that an indictment contains only allegations against an individual, and, as with all defendants, Rudin must be presumed innocent unless and until proven guilty.
Saratoga Man Pleads Guilty to Tax EvasionRead the Press Release
SAN JOSE, Calif. – Jonathan Jianguo Jiang pleaded guilty yesterday to tax evasion, United States Attorney Melinda Haag and Special Agent in Charge, IRS Criminal Investigation, Jose M. Martinez announced.
According to his plea agreement, on January 28, 2004, Jiang incorporated SecureM in the Cayman Islands. He was the director, president, and sole shareholder of SecureM. On April 17, 2004, SecureM was sold to a UK company for at least $8,600,000. From the sale of SecureM, Jiang received capital gains of at least $113,462 during 2004, $195,000 during 2005 and $2,635,575 during 2006, which he willfully omitted from his 2004, 2005, and 2006 federal income tax returns. These omissions resulted in $467,336 in additional tax due.
On March 6, 2012, Jiang, 47, of Saratoga, California, was charged with one count of willfully attempting to evade or defeat tax for the 2004 tax year. He pleaded guilty to the charge. Due to Jiang’s regular travel overseas, Jiang posted a bond of approximately $2,044,144.20.
The maximum statutory penalty for Tax Evasion, in violation of Title 26, U.S.C § 7201 is five years in prison and a fine of $100,000. 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.
Cynthia Stier is the Assistant U.S. Attorney who is prosecuting this case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation
Armed Drug Dealer Sentenced to Fifteen Years in PrisonRead the Press Release
OAKLAND - Quentel Reed was sentenced today to fifteen years in prison for possession of a firearm in furtherance of a drug trafficking crime, United States Attorney Melinda Haag announced.
Reed pleaded guilty on November 1, 2012, to possessing a firearm in furtherance of drug trafficking. According to the plea agreement, Reed admitted that on February 9, 2012, he knowingly possessed approximately 59 grams of cocaine base on his person, packaged for distribution as more than 75 individually wrapped rocks. Mr. Reed also admitted that, in furtherance of his drug trafficking, he was carrying a 9mm firearm fitted with a large capacity magazine and loaded with 17 rounds of ammunition.
Reed, 31, of Oakland, was indicted by a federal grand jury on March 8, 2012. He was charged with being a felon in possession of a firearm and ammunition, possession with intent to distribute cocaine base, and possession of a firearm in furtherance of drug trafficking.
According to filed court documents, Reed was arrested after leading Oakland Police Officers on a foot pursuit through the neighborhood near McClymonds High School in Oakland. As Oakland Police Officers approached Reed standing on the street, he discarded a bag containing the drugs and ran from the officers. During the chase, Reed attempted to get rid of the gun by throwing it over a fence into a vacant lot.
The sentence was handed down by United States District Court Judge Yvonne Gonzalez Rogers.
This case was part of Operation Gideon and an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Oakland Police Department. Operation Gideon, undertaken by federal law enforcement authorities in 2012 to help combat street crime in Oakland and neighboring cities, has resulted in the federal conviction of more than 60 defendants in the Northern District of California.
FBI Reunites Children with Mother After Eighteen Months in CaptivityRead the Press Release
SAN JOSE - Two children, both United States citizens, were reunited with their mother, a Mexican national, after spending more than eighteen months in captivity in Mexico, United States Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson announced.
On December 19, 2012, a federal grand jury returned an indictment against three Mexican nationals, Jesus Salinas and Patricia Delatorre, of Mount Vernon, Washington, and Maria Guadalupe Valenzuela Castaneda, of Juarez, Mexico. According to the indictment, in June, 2011, Salinas and Delatorre agreed, in exchange for money, to transport the children from Mexico, where the children were living at the time, to Washington State, where the mother of the children was living. Rather than return the children to the United States, however, in July, 2011, Salinas and Delatorre transported the children to Castaneda, in Juarez, Mexico. The conspirators then demanded more money from the mother for the return of the children. For months, the mother sent payments to the conspirators, but the children were never returned. The conspirators also threatened to kill the mother if she contacted law enforcement or if she went to Juarez in search of the children.
On December 11, 2012, the FBI, together with Mexican law enforcement, located the children in Juarez, Mexico, in the custody of Castaneda and placed the children into the temporary care of Mexican social services.
On Friday, March 1, 2013, the children, through the work of the FBI, the Watsonville Police Department, the National Center for Missing and Exploited Children, and the United States Department of State, were repatriated from Mexico to the United States, and reunited with their mother in San Jose, California.
“I commend the work of the FBI, local law enforcement, and the Mexican authorities. Because of their hard work and collaboration, a family was reunited this weekend.”
“The FBI worked closely with our law enforcement partners in California, Washington, Texas and Mexico to safely recover these children from their kidnappers and reunite them with their mother,” said FBI Special Agent in Charge Johnson. “We will continue to actively pursue and bring to justice those individuals who kidnap children and extort family members for money. These crimes take a terrible toll on the victims and we will hold the perpetrators accountable.”
The indictment charges the defendants with one count of kidnapping minor victims in interstate and foreign commerce, in violation of 18 U.S.C. §§ 1201(a)(1), (c) and (g)(1); and two counts of unlawful seizure and detention of a United States national, in violation of 18 U.S.C. § 1203(a). The statutory penalty for the count of kidnapping a minor victim is a mandatory minimum sentence of twenty (20) years imprisonment, and a maximum term of up to life, and a maximum fine of $250,000. The maximum statutory penalty for each count of unlawful seizure and detention of a U.S. national is life imprisonment, and a maximum 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.
On January 4, 2013, Salinas and Delatorre were arrested by the FBI in Mount Vernon, Washington, and were ordered detained by Honorable Brian A. Tsuchida, in Seattle, Washington. On January 28, 2013, Salinas and Delatorre made their initial appearances before Judge Howard R. Lloyd in San Jose, California, where the defendants were arraigned, and ordered detained pending trial. The matter is assigned to Judge Edward J. Davila for trial purposes. The next scheduled appearance is March 11, 2013 at 1:30 p.m. for further status. Salinas and Delatorre remain in custody.
An arrest warrant was issued for Maria Guadalupe Valenzuela Castaneda. Anyone with information about her whereabouts should contact the FBI at (408) 369-8000 (San Jose field office), or (915) 832-5000 (El Paso, Texas field office).
AUSA Daniel Kaleba is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Elise Etter. The prosecution is the result of the investigation of the Federal Bureau of Investigation, the Watsonville Police Department, the Department of Homeland Security Customs and Border Protection, and the United States Department of State.
Please note, an indictment contains only allegations against an individual and, as with all defendants, the defendants must be presumed innocent unless and until proven guilty.
Former CFO and Two Associates Given Prison Sentences for Multimillion Dollar Insider Trading SchemeRead the Press Release
SAN FRANCISCO - King Chuen Tang was sentenced yesterday for his role in an insider trading scheme in which he and others obtained more than $5 million, United States Attorney Melinda Haag announced.
United States District Judge Jeffrey S. White sentenced Tang to serve one year and one day in prison followed by three years of supervised release. While on supervised release, Tang is to serve six months in home confinement and to perform 1,000 hours of community service. On February 21, 2013, Judge White sentenced two other defendants involved in this scheme, Joseph Seto and Zisen Yu, to six months in prison followed by three years of supervised release. While on supervised release, Seto and Yu are to serve twelve months in home confinement.
Mr. Tang pleaded guilty on March 15, 2010, to one count of conspiracy and one count of insider trading. On September 8, 2011, Seto and Yu each pleaded guilty to conspiracy. According to the plea agreements, in March 2008, Tang was the CFO at a private equity fund. As the CFO, he learned that Tempur-Pedic International, Inc. (Tempur) was planning a pre-announcement before its regularly scheduled earnings announcement. He also learned that his employer was planning to buy up to $50 million in Tempur securities. Tang shared that information with Seto and Yu. Together they traded on the inside information and netted approximately $1.9 million. In a separate scheme, in April 2007, Tang received a tip from his brother-in-law, who was a CFO at another private equity fund. Tang and others traded on that information and made approximately $3.7 million dollars.
Mr. Tang, 42, of Fremont, California, was charged on February 5, 2010, in a two-count Information with conspiracy to commit insider trading, in violation of Title 18, United States Code, Section 371, and insider trading, in violation of Title 15, United States Code, Sections 78j(b) and 78ff. Mr. Seto, 42, of San Francisco, California, and Mr. Yu, 44, of Fremont, California, were charged on June 22, 2011, in a one-count Information with conspiracy to commit insider trading, in violation of Title 18, United States Code, Section 371.
Mr. Tang, Mr. Seto, and Mr. Yu were ordered to begin serving their sentences on April 29, 2013.
Jonathan Schmidt is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Marina Pononmarchuk. The prosecution is the result of a one-year investigation by the FBI.
Man Pleads Guilty to Conspiring to Sell over 4 Kilos of Methamphetamine in OaklandRead the Press Release
OAKLAND - Miguel Bedoya pleaded guilty in federal court in Oakland on Wednesday, February 27, 2013, to conspiracy to distribute and possess with intent to distribute methamphetamine, United States Attorney Melinda Haag announced.
In pleading guilty, Bedoya admitted to conspiring with other individuals to distribute methamphetamine in Oakland, California. He admitted that, on September 5, 2012, he met with an individual in Oakland, and showed him approximately 4.4 kilograms of crystal methamphetamine inside a speaker box in the trunk of a vehicle that Bedoya’s co-conspirator was driving.
The co-conspirator, Hassan Johnny Valenzuela, pleaded guilty on February 20, 2013.
Bedoya, 56, of Mexico, was indicted by a federal Grand Jury on September 27, 2012. He was charged with one count of conspiracy to distribute and possess with the intent to distribute methamphetamine in violation of Title 21, United States Code Sections 846, 841(a)(1) and 841(b)(1)(A)(viii), and possession with the intent to distribute methamphetamine in violation of Title 21, United States Code Sections 841(a)(1) and 841(b)(1)(A)(viii).
Bedoya has been in continuous federal custody since October 3, 2012.
The sentencing of Bedoya is scheduled for May 15, 2013, before the Honorable Phyllis J. Hamilton in Oakland. The maximum statutory penalty for violating 21 U.S.C. §841(a)(1) and 846 is life imprisonment and a fine of $10,000,000. 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.
Chinhayi Cadet is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Jacquelyn Lovrin. The prosecution is the result of a an investigation by the Federal Bureau of Investigation and the Oakland Police Department.
Cynthia Suratos Lorica Sentenced for Mortgage Fraud and Tax EvasionRead the Press Release
OAKLAND - Cynthia Suratos Lorica was sentenced yesterday to 18 months in prison and ordered to pay more than $1 million in restitution for bank fraud and tax evasion, United States Attorney Melinda Haag announced.
Ms. Lorica, age 51, of Hayward, California, waived indictment and pleaded guilty to an information charging her with bank fraud and tax evasion. According to the plea agreement, Ms. Lorica admitted to participating in a fraudulent scheme to obtain money from Washington Mutual Bank in 2006 and 2007 by making false statements in loan applications secured by real property. During that time period, she was the owner and Chief Executive Officer of All Ways Financial Services, Inc., a financial services company. She was also an officer of Absolute Value Financial, Inc. Absolute Value was licensed by the State of California to originate mortgage loans and to engage in real estate transactions. Both businesses were located at 3900 Newpark Mall Road, Suite 201, Newark, California. Ms. Lorica was involved in the preparation and submission of loan applications to various federally insured financial institutions and other lending institutions.
Ms. Lorica also admitted to evading taxes on income she received in 2006 and 2007. She admitted to substantially under-reporting her gains from the sale of real estate as well as under-reporting her income from All Ways Financial and claiming a mortgage interest deduction that she was not entitle to receive.
The sentence was handed down by Chief U.S. District Court Judge Claudia Wilken following a guilty plea on one count in violation of 18 U.S.C. § 1344(2) and one count in violation of 26 U.S.C. § 7201. Judge Wilken also sentenced the defendant to a three year period of supervised release. The defendant will begin serving the sentence on March 27, 2013.
This prosecution is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service.
Chicago Man Convicted of Multimillion Dollar Investment Fraud SchemeRead the Press Release
SAN FRANCISCO - Michael Steven Banuelos (aka Ferrari Mike, aka Mike Banuelos) pleaded guilty today in federal court in San Francisco to running a three-year investment fraud scheme through which he fraudulently obtained more than $2 million, United States Attorney Melinda Haag announced.
In pleading guilty, Banuelos admitted that he falsely told the business manager of a musical group that Banuelos had arranged a concert tour during which the musical group would open for a famous recording artist. In addition, Banuelos falsely told this business manager that Banuelos had negotiated a multimillion contract with a major recording label for the rights to the music group, and Banuelos produced phony documentation of that alleged deal. Banuelos also used false statements and phony documents to lure in additional investors in this purported music deal and other non-existent deals regarding musical artists. Several of the investors in these purported deals lived in the Bay Area.
Banuelos admitted that of the more than $2 million dollars he obtained through this scheme, he spent the overwhelming majority of it on personal expenses. Those expenses included payments to his ex-wife, scores of thousands of dollars on car payments, and thousands of dollars paid for a country club membership and dues.
Finally, Banuelos admitted that after the music deal scam ended, he defrauded other individuals out of an additional $217,000. In connection with this scheme, Banuelos falsely claimed that he was a successful money manager whom one client had entrusted with $45 million for investment. Banuelos provided false documentation of these claims, too, resulting in additional victims providing more money to Banuelos in the mistaken belief it would be invested on their behalf.
Banuelos, 42, was indicted by a federal grand jury on July 12, 2012. He was charged with twelve counts of wire fraud, in violation of Title 18, United States Code, Section 1343, and one count of money laundering, in violation of Title 18, United States Code, Section 1957. He was arrested on July 26, 2012, in Chicago, where he had lived for the preceding few months. Prior to moving to Chicago, he had lived in and around Atlanta, Georgia. He has remained in federal custody since his arrest.
The sentencing of Mr. Banuelos is scheduled for May 21, 2013, before Judge William H. Alsup in San Francisco. The maximum statutory penalty for a violation of wire fraud, in violation of Title 18, United States Code, Section 1343, is 20 years in prison, a fine of $250,000, plus restitution. Any sentence following conviction, however, 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.
Doug Sprague is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of a one-year investigation by the Federal Bureau of Investigation.
Former Silicon Valley Engineer Will See Prison After Conviction for Stealing Marvell Trade SecretsRead the Press Release
SAN JOSE - Suibin Zhang was sentenced this morning following his conviction on five felony counts of Theft of Trade Secrets by a federal district judge, United States Attorney Melinda Haag announced today.
United States District Judge Ronald M. Whyte sentenced Zhang to serve three months in prison, to be followed by a three-year term of supervised release. Among the conditions of supervised release are that Zhang shall perform 200 hours of community service. The defendant was also ordered to pay $75,000 in restitution to the victim, Marvell Semiconductor, Inc. (Marvell); that sum is to be paid in full on or before May 31, 2013. Judge Whyte stated that Zhang’s conduct was “unacceptable” and that he hoped his sentence would carry a “strong deterrent message.”
In a verdict published on May 29, 2012, Judge Whyte found Zhang guilty of three counts of Theft and Copying of Trade Secrets for downloading the trade secrets from a secure database, one count of Duplication of Trade Secrets for loading those trade secrets onto a laptop provided by his new employer, and one count of Possession of Stolen Trade Secrets. Zhang was acquitted of three counts of Computer Fraud and one count of Unauthorized Transmission of a Trade Secret. The guilty verdict followed a 2½ week trial before Judge Whyte, which began on October 24, 2011 and concluded on November 9, 2011.
Evidence at trial showed that Zhang, 44, of Belmont, CA, was employed as a Project Engineer at Netgear, Inc., of San Jose, which gave him access to Marvell’s secure database (“Extranet”). On March 8, 2005, Zhang accepted a position at Broadcom Corporation (Broadcom), which is also Marvell’s chief competitor. Beginning the very next day, March 9, 2005, and continuing on two other days before he left Netgear, Zhang used his Netgear account to download and steal trade secret information found in dozens of documents, datasheets, hardware specifications, design guides, functional specifications, application notes, board designs, and other confidential and proprietary items from Marvell. On April 27, 2005, Zhang loaded the Marvell trade secrets onto a laptop issued by Broadcom, where they continued to reside on June 24, 2005, when the FBI served search warrants at Zhang’s home and at Broadcom, and took possession of his laptop.
“The protection of intellectual property rights, especially in Silicon Valley, is of vital importance to the economic security of our region,” said United States Attorney Melinda Haag. “The investigation and prosecution of thefts of trade secrets remains a significant priority for this office. I certainly hope the court’s sentence sends a strong message that in addition to the personal, professional, and financial costs, which are significant in themselves, these offenses result in prison time.”
The conviction is the result of an investigation by the Federal Bureau of Investigation. The investigation was overseen by the Computer Hacking and Intellectual Property (CHIP) Unit of the U.S. Attorney’s Office. Matthew Parrella and David Callaway are the Assistant U.S. Attorneys in the CHIP Unit who prosecuted the case with the assistance of Legal Tech Nina Burney-Williams. Both Marvell Semiconductor, Inc., and Netgear, Inc., cooperated fully with the FBI in the investigation.
San Bernardino Man Pleads Guilty to Distributing MethamphetamineRead the Press Release
OAKLAND - Hassan Johnny Valenzuela pleaded guilty in federal court in Oakland on Wednesday, February 20, 2013, to conspiracy to distribute methamphetamine and possession with the intent to distribute methamphetamine, United States Attorney Melinda Haag announced.
In pleading guilty, Valenzuela admitted to possessing with the intent to distribute 50 grams or more of methamphetamine and agreeing with another individual to do so.
According to the plea colloquy, when Valenzuela was arrested on September 5, 2012, he had approximately 4.4 kilograms of crystal methamphetamine inside a speaker box in the trunk of a vehicle that he was driving. According to the plea colloquy, Valenzuela had agreed with his co-conspirator to distribute 50 grams or more of methamphetamine at a distribution point in Oakland, California.
Valenzuela, 22 years old, of San Bernardino, California, was indicted by a federal grand jury on September 27, 2012. He was charged with one count of conspiracy to distribute and possess with the intent to distribute methamphetamine in violation of Title 21, United States Code Sections 846, 841(a)(1) and 841(b)(1)(A)(viii), and possession with the intent to distribute methamphetamine in violation of Title 21, United States Code Sections 841(a)(1) and 841(b)(1)(A)(viii). Valenzuela pleaded guilty to both counts without a plea agreement.
At the conclusion of his guilty plea, Valenzuela was remanded to the custody of the United States Marshal. The sentencing of Valenzuela is scheduled for May 8, 2013, before the Honorable Phyllis J. Hamilton in Oakland. The maximum statutory penalty for each count in violation of 21 U.S.C. §841(a)(1) and 846 is life imprisonment and a fine of $10,000,000. 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.
Chinhayi Cadet is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Jacquelyn Lovrin. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Oakland Police Department.
Monterey County Strawberry Farm Owner Sentenced to 12 Months Imprisonment for Submitting Fraudlent Claims for Federal Disaster ReliefRead the Press Release
SAN JOSE, Calif. – An owner-operator of a Monterey County Commercial Strawberry Farm was sentenced on Monday to 12 months and one day in prison for submitting fraudulent claims to the U.S. Department of Agriculture’s Community Credit Corporation which resulted in his receiving over $223,000 in federal crop disaster assistance, United States Attorney Melinda Haag announced.
Marco Antonio Barbosa, 50, of Salinas, California, pleaded guilty on December 15, 2010, to making a false statement to the Commodity Credit Corporation, in violation of 15 U.S.C. § 714m(a). Barbosa admitted in his plea agreement that he and his wife Maria Guadalupe Barbosa owned and operated a commercial strawberry farm named “Barbosa Farms JV (joint venture)” in Monterey County, California. Barbosa admitted that he submitted fraudulent claims to the Community Credit Corporation to receive crop disaster assistance funds to which he was not entitled. Barbosa defrauded two federal programs: the Crop Disaster Program and the Non-insured Crop Disaster Assistance Program. Barbosa falsely claimed that he had suffered strawberry crop losses due to excessive heat, falsely claimed to be farming as a joint venture instead of a corporation, and failed to disclose the full extent of his strawberry production. Barbosa received over $223,000 in federal disaster relief as a result of his fraudulent claims.
Lori Chan, the Special Agent-in-Charge for the Western Region of the U.S. Department of Agriculture’s Office of Inspector General for Investigations, said, “the Office of Inspector General will continue to vigorously investigate individuals and entities that seek to violate USDA farm programs and misuse public funds.”
In sentencing Barbosa, U.S. District Court Judge Ronald M. Whyte emphasized that Barbosa had committed a “serious offense,” and that “deterrence is an appropriate concern here.” Judge Whyte stressed that “programs like the one involved here are threatened if people steal from them and don’t respect the requirements of the program.” In addition to the prison sentence, Judge Whyte ordered the defendant to pay $223,484 in restitution, and debarred him from any Department of Agriculture program or Farm Service Agency contract, and sentenced him to a three-year period of supervised release.
Assistant U.S. Attorney Joseph Fazioli is prosecuting the case with the assistance of Legal Assistant Laurie Worthen. The prosecution is the result of a multi-year investigation by U.S. Department of Agriculture’s Office of Inspector General for Investigations.
Defendant Sentenced in $1.8 Million Scheme to Defraud Kaiser PermanenteRead the Press Release
OAKLAND, Calif. – Asim Waqar, a former employee of Kaiser Permanente, headquartered in Oakland, California, was sentenced on Wednesday, February 20, 2013, to 33 months in prison and ordered to pay restitution in the amounts of $1,803,667 to Kaiser and $142,530 to the United States Treasury for his guilty pleas to the conspiracy to commit wire fraud and tax evasion, United States Attorney Melinda Haag announced.
According to court documents, Waqar was employed by Kaiser in 2005 as a manager working in Oakland, California. Waqar convinced his college friend, co-defendant Farid Rahman, and his wife, co-defendant Mina Kuhl, living in the Detroit, Michigan area, to join Waqar in a scheme to defraud Kaiser by encouraging Kaiser to hire Kuhl who would purportedly work from Michigan under Waqar’s supervision. In fact, once Kuhl was hired by Kaiser, Waqar would arrange for Kuhl to be paid without having to perform any work. With Waqar’s assistance, Kaiser hired Kuhl and between 2005 and 2008, when Kaiser Permanente management learned of the fraudulent scheme, Waqar had authorized payment of $1,803,667.84 to third party vendors for the employment of Kuhl. From the money paid to Kuhl, Kuhl and Rahman kicked back $428,300 to Waqar, who failed to pay federal taxes in the amount of $142,300 due on this income.
Waqar was placed on administrative leave on August 21, 2008 and resigned from Kaiser on September 4, 2008.
Waqar, 40, Farid Rahman, 44, and Minda Kuhl, 38, all of Windsor, Canada, were charged in a Superseding Information filed in this district on November 3, 2011, with the conspiracy to commit wire fraud, and Rahman and Waqar were also charged with tax violations. The charges against Kuhl and Rahman were transferred to the Eastern District of Michigan where they both pleaded guilty and were sentenced. Rahman received a sentence of 18 months in custody and Kuhl was sentenced to a year and 1 day in custody. Both defendants were ordered to pay restitution to Kaiser, jointly with Waqar.
The case was prosecuted by Assistant U.S. Attorney Patrick Hurford in the Eastern District of Michigan and Assistant U.S. Attorney Stephen Corrigan in the Northern District of California, with the assistance of Chief Legal Tech Kathleen Turner. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation.
Montara Man Charged with Running Bankruptcy Fraud SchemeRead the Press Release
SAN FRANCISCO – A federal grand jury in San Francisco indicted Walter Bruce Harrell, of Montara, with eight counts of bankruptcy fraud and two counts of making false statements in bankruptcy proceedings, United States Attorney Melinda Haag announced. The Indictment alleges that Harrell devised and executed a scheme to defraud creditors who were attempting to lawfully foreclose on numerous properties, and that he did so by delaying and obstructing foreclosure sales through the improper use of the federal bankruptcy process.
According to the Indictment, Mr. Harrell, 71, is alleged to have arranged for property owners to grant fractional interests of between 2% and 20% of their properties to individuals whom Harrell had paid to file bankruptcy cases in the U.S. Bankruptcy Court for the Northern District of California. These actions invoked the “automatic stay” provision of the U.S. Bankruptcy Code, which halts foreclosure sales until the creditor seeks relief from the stay or until the bankruptcy case is dismissed. The Indictment alleges that Harrell’s scheme forced creditors to file motions to lift the automatic stays, or to wait until the debtors’ bankruptcy cases were dismissed, in order to proceed with the foreclosure sales. A number of the creditors affected by the scheme were recipients of funds under the Troubled Asset Relief Program. The Indictment identifies at least six properties involved in the scheme, one of which was occupied by Harrell. The Indictment also charges Harrell with making false statements in bankruptcy proceedings with respect to two bankruptcy cases that Harrell paid an individual identified as “T.W.” to file.
Mr. Harrell was arrested in Montara on February 20, 2013, and he made his initial appearance in federal court in San Francisco on February 21, 2013. He was released on a $50,000 bond. The defendant’s next scheduled appearance is at 9:30 a.m. on February 25, 2013, for identification of counsel before Magistrate Judge Maria-Elena James.
The maximum statutory penalty for each count of bankruptcy fraud, in violation of Title 18, United States Code, Section 157, and each count of making false statements in bankruptcy proceedings, in violation of Title 18, United States Code, Section 152(3), is 5 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.
Kyle F. Waldinger is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of a one-year investigation by the Federal Bureau of Investigation and the Special Inspector General for the Troubled Asset Relief Program, as well as investigators from the Alameda County District Attorney’s Office.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Mr. Harrell must be presumed innocent unless and until proven guilty.
Hayward Woman Pleads Guilty to Filing False ClaimsRead the Press Release
OAKLAND, Calif. – Claudia Robinson, age 39, pleaded guilty yesterday for her role in a false tax refund scheme, United States Attorney Melinda Haag and Special Agent in Charge, IRS Criminal Investigation, Jose M. Martinez announced.
According to her plea agreement, between January 26, 2008, and February 12, 2008, Robinson filed false claims for tax refunds with the IRS in other people’s names. According to her plea, Robinson admitted that the claims listed on the returns were false because the information she listed was largely fictitious, with the exception of the individuals’ identities. Specifically, Robinson admitted the returns were all false because they indicated that: 1) the taxpayer earned income that he or she did not, in fact, earn; 2) the taxpayer lived at the defendant’s residence, her father’s residence, or her sister’s residence, when, in fact, this was false; 3) the taxpayer had a dependent or dependents, when, in fact, the taxpayer did not financially care for such dependent or dependents; and 4) the taxpayer listed on each tax return did not, in fact, view and sign the return.
Robinson also prepared a false income tax return in an individual’s name who did not ask Robinson to prepare a tax return on her behalf. According to court documents, Robinson contacted that individual and offered to pay her to tell the IRS agents that Robinson prepared the return at the individual’s request, which was not true. The Indictment charges Robinson with obstructing the IRS investigation for offering that individual a television in exchange for false testimony.
On September 15, 2011, Robinson, of Hayward, Calif., was charged in a 25-count indictment with wire fraud, false claims, identity theft, and obstructing the IRS. She pleaded guilty to eight counts of filing false claims.
The maximum statutory penalty for each count of False Claims, in violation of Title 18, U.S.C § 287, 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.
In response to these types of cases, the Justice Department’s Tax Division issued a new directive to further the efforts of the Tax Division and help U.S. Attorneys’ Offices respond quickly and effectively to the challenges in stolen identity refund fraud cases. To further this goal, Tax Division Directive 144, which took effect on Oct. 1, 2012, was issued to streamline the process for prosecuting these offenses.
Denise Barton and Thomas Newman are the Assistant U.S. Attorneys prosecuting this case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation
San Francisco Man Sentenced to Eight Years in Prison for Possession of Child PornographyRead the Press Release
SAN FRANCISCO - Vincent Lee was sentenced yesterday to 96 months in prison, and ordered to pay $2,400 in restitution for possession of child pornography, United States Attorney Melinda Haag announced.
Mr. Lee pleaded guilty on September 6, 2012, to one count of possessing child pornography in violation of 18 U.S.C. § 2252(a)(4)(B). According to the plea agreement, Mr. Lee admitted that he possessed over 200 videos of child pornography, including videos of prepubescent children being sexually abused in ways that would cause them pain. Mr. Lee also admitted that upon learning a search warrant would be executed at his residence, he obstructed the investigation by deleting software and images on his computer before the police arrived.
Mr. Lee, age 54, of San Francisco, California, was indicted by a federal grand jury on May 3, 2012. He was charged with distributing and possessing child pornography. He has been in continuous custody since his initial bond was revoked after he cut off his electronic bracelet and left the District in violation of his bond conditions.
The sentence was handed down by U.S. District Court Judge Jeffrey S. White following a guilty plea to one count in violation of 18 U.S.C. § 2252(a)(4)(B) (possession of child pornography). Judge White also sentenced the defendant to a five-year period of supervised release.
Stacey Geis is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rania Ghawi. The prosecution is the result of an investigation by the Department of Homeland Security in coordination with the San Jose Police Department.
Co-Founders of South San Francisco Company Plead Guilty to Taking Money from Their Employees’ Benefit PlansRead the Press Release
SAN FRANCISCO – Kenneth A. Tholin and Enrique Quiles Sr., pleaded guilty Wednesday to a conspiracy to unlawfully and willfully convert to their own use, or the use of another, money from an employee benefit plan, in violation of 18 U.S.C. § 371, United States Attorney Melinda Haag announced.
According to their plea agreements, Tholin and Quiles were general partners and co-founders of a South San Francisco company called Geo Grout, Inc., which is a contractor that specializes in grouting techniques to solve soil and structural problems. They were the trustees of Geo Grout’s employee benefit plans and thus held the obligation and responsibility of ensuring that the employee benefit plans’ trust accounts only be used for the exclusive benefit of its participants or its beneficiaries.
According to their plea agreements, between March 2009 and April 2011, however, Tholin and Quiles removed a total of $1,772,500 from the employee benefit plans’ trust accounts for unauthorized purposes. Of the $1,772,500.00 removed from the employee benefit plans’ trust accounts, Tholin and Quiles have returned $908,481.26 to the employee benefit plans’ trust accounts.
Tholin and Quiles are scheduled to appear before United States District Court Judge Edward M. Chen at 2:30 p.m. on July 31 for sentencing. The maximum statutory penalty for a count of conspiracy, in violation of 18 U.S.C. § 371, is five years in prison and a fine of $250,000, or twice the gross gain or loss, whichever is greater, 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.
Katherine Dowling and Hallie Hoffman are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rawaty Yim and Christine Tian. The prosecution is the result of an investigation by the United States Department of Labor.
Santa Rosa Man Pleads Guilty to Wire Fraud, Money LaunderingRead the Press Release
SAN FRANCISCO - Douglas Dean Hollingsworth (aka Doug Hollingsworth) pleaded guilty in federal court in San Francisco yesterday to wire fraud and money laundering, United States Attorney Melinda Haag announced.
In pleading guilty, Hollingsworth admitted that from approximately June 2007 through approximately October 2012, he solicited money from numerous individuals by falsely representing that his business entities, Baytree Investors, Inc., and Capsule Partners, LLC, had developed a sophisticated computer system that permitted him to identify financial market trends and generate substantial profits from trading activity. Hollingsworth admitted that in soliciting money from the victims, he falsely stated that if they loaned him money, he could pay them significant monthly interest payments from the profits earned from successful trading activity. Hollingsworth, however, intentionally failed to tell some individuals from whom he solicited money that the Federal Bureau of Investigation had searched his residence in July 2010 and that he had been charged with wire fraud in August 2011. Hollingsworth admitted that he did not use the money received from the victims to engage in trading but instead spent the money on personal expenses (including, for example, purchasing jewelry) and to make monthly interest payments to other individuals who had provided him with money. Hollingsworth agreed that as a result of his scheme, he caused losses in an amount between $4 million and $7 million. In the plea agreement, Hollingsworth also agreed to forfeit approximately $80,000 that was in bank accounts seized in July 2010 during the course of the investigation. The defendant also agreed to pay restitution in an amount to be determined by the Court, but not less than $3 million.
Hollingsworth, 64, of Santa Rosa, Calif., was originally indicted by a federal grand jury on Aug. 16, 2011. On Aug. 28, 2012, and Dec. 18, 2012, the grand jury returned superseding indictments against Hollingsworth. In the most recent indictment, Hollingsworth was charged with two counts of mail fraud, in violation of 18 U.S.C. § 1341, 21 counts of wire fraud, in violation of 18 U.S.C. § 1343, and four counts of money laundering, in violation of 18 U.S.C. § 1957. Under the plea agreement, Hollingsworth pled guilty to one count of wire fraud and one count of money laundering.
The sentencing of Hollingsworth is scheduled for July 17, 2013, before Judge Charles R. Breyer in San Francisco. The maximum statutory penalty for wire fraud, in violation of 18 U.S.C. § 1343, is 20 years in prison and a fine of $250,000 or twice the gain or loss from the offense conduct, and restitution. The maximum statutory penalty for money laundering, in violation of 18 U.S.C. § 1957, is 10 years in prison and a fine of $250,000 or twice the gain or loss from the offense conduct, and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Denise Marie Barton and Tracie L. Brown are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Denise Oki, Rayneisha Booth, and Elizabeth Garcia. The prosecution is the result of an investigation by the Federal Bureau of Investigation.
(Hollingsworth Plea Agreement )
Santa Cruz Woman Pleads Guilty to Wire FraudRead the Press Release
SAN JOSE, Calif. – Tara Denise Bonelli today pleaded guilty in federal court in San Jose to Wire Fraud, United States Attorney Melinda Haag announced. In pleading guilty, Bonelli admitted to promoting false and fraudulent real estate investments by knowingly making false promises about how investor funds were to be invested and repaid. Among other inducements, Bonelli promised investors that their funds would be used to purchase foreclosed and distressed properties for resale, when in reality she used those funds for personal expenses.
Bonelli, 33 of Santa Cruz, Calif., was indicted by a federal Grand Jury on March 16, 2011. She was charged with 18 counts of wire fraud in violation of 18 United States Code § 1343. Under the plea agreement, Bonelli pleaded guilty to one count of wire fraud that included the total charged loss of more than $3 million.
The sentencing of Bonelli is scheduled for June 25, 2013, at 9 a.m. before United States District Court Judge Edward J. Davila in San Jose. The maximum statutory penalty for each count of wire fraud, in violation of 18 United States Code § 1343 is 20 years in prison and a fine of $250,000, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Matt Parrella and Susan Knight are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Elise Etter. The prosecution is the result of a two-year investigation by the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation Division.
(Bonelli Plea Agreement )
Discovery Bay Resident Faces Class A Misdemeanor Charges for Failing to File Federal Tax ReturnsRead the Press Release
OAKLAND, Calif. – William H. Paris Jr., aka Bubba Paris, was charged yesterday with failing to file tax returns with the IRS, United States Attorney Melinda Haag and IRS Criminal Investigation Special Agent in Charge Jose M. Martinez announced.
According to a Criminal Information, for the calendar years 2006, 2007 and 2008, Paris received gross income of $57,186.96, $83,856 and $41,700, respectively, but failed to file federal income tax returns for those years as required.
Paris, of Discovery Bay, Calif., is scheduled to be arraigned in federal court in Oakland, before United States Magistrate Judge Kandis A. Westmore, on March 4, 2013.
The maximum statutory penalty for each count of failure to file a tax return, in violation of Title 26, U.S.C. § 7203, a class A misdemeanor, is one year in prison and a fine of $100,000. 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.
Charles Parker is the Special Assistant United States Attorney who is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Please note, an Information contains only allegations against an individual and, as with all defendants, Paris must be presumed innocent unless and until proven guilty.
Federal Agents Arrest Man After He Attempts to Bomb Bank in OaklandRead the Press Release
OAKLAND, Calif. – Federal agents arrested Matthew Aaron Llaneza, age 28, of San Jose, Calif., this morning after he allegedly attempted to detonate a vehicle-borne explosive device at a bank branch in Oakland. Llaneza’s arrest was the culmination of an undercover operation during which he was closely monitored by the Federal Bureau of Investigation’s South Bay Joint Terrorism Task Force. Unbeknownst to Llaneza, the explosive device that he allegedly attempted to use had been rendered inoperable by law enforcement and posed no threat to the public. Llaneza was charged this morning by criminal complaint with attempted use of a weapon of mass destruction against property used in an activity that affects interstate or foreign commerce, in violation of 18 U.S.C. § 2332a(a)(2)(B).
The arrest was announced by Melinda Haag, U.S. Attorney for the Northern District of California; Lisa Monaco, Assistant Attorney General for National Security; and FBI Special Agent in Charge, San Francisco Field Office, David J. Johnson.
According to the affidavit filed in support of the criminal complaint, on Nov. 30, 2012, Llaneza met with a man who led him to believe he was connected with the Taliban and the mujahidin in Afghanistan. In reality, this man was an undercover FBI agent. At this initial meeting, Llaneza proposed conducting a car-bomb attack against a bank in the San Francisco Bay Area. He proposed structuring the attack to make it appear that the responsible party was an umbrella organization for a loose collection of anti-government militias and their sympathizers. Llaneza’s stated goal was to trigger a governmental crackdown, which he expected would trigger a right-wing counter-response against the government followed by, he hoped, civil war.
The complaint further alleges that Llaneza subsequently selected the Bank of America branch at 303 Hegenberger Road in Oakland as the target for the attack. Llaneza ultimately specified a spot next to a support column of the bank building as a good location for the bomb, expressed a desire for the bomb to bring down the entire bank building and offered to drive the car bomb to the bank at the time of the attack.
According to the complaint, in January and February 2013, Llaneza and the undercover agent constructed the purported explosive device inside a sport utility vehicle (SUV) parked inside a storage facility in Hayward, Calif. As part of the process of assembling the device, Llaneza purchased two cellphones to be used in creating and operating the trigger device for the car bomb. One of these cellphones was incorporated into the trigger device itself. The other was reserved for use on the night of the attack.
The criminal complaint alleges that on the evening of Feb. 7, 2013, Llaneza drove the SUV containing the purported explosive device to the target bank branch in Oakland. He parked the SUV beneath an overhang of the bank building where he armed the trigger device. He then proceeded on foot to a nearby location a safe distance from the bank building, where he met the undercover agent. Once there, Llaneza attempted to detonate the bomb by using the second cellphone he had purchased to place two calls to the trigger device attached to the car bomb. Federal agents then arrested him.
Llaneza made his initial appearance in federal court in Oakland this morning before United States Magistrate Judge Donna M. Ryu. The defendant's next scheduled appearance is at 9:30 a.m. on Feb. 13, 2013, for a bail hearing before Judge Ryu. If convicted on the charge contained in the criminal complaint, he faces a maximum sentence of life in prison.
The case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s Office for the Northern District of California. The prosecution is the result of an investigation by the FBI’s San Jose Resident Agency, with the assistance of the FBI San Francisco Joint Terrorism Task Force, the California Highway Patrol, the San Jose Police Department, the Oakland Police Department, the Hayward Police Department, and the Union City Police Department.
The charges contained in the criminal complaint are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
(Llaneza complaint )
Oxycodone Trafficker Sentenced to 10 YearsRead the Press Release
SAN FRANCISCO - Ella Mae Simpson, 55, of Hayward, Calif., was sentenced yesterday to 10 years in prison for conspiracy to possess with intent to distribute and distribution of oxycodone, possession with intent to distribute and distribution of oxycodone, and possession with intent to distribute oxycodone, United States Attorney Melinda Haag announced.
On May 18, 2012, before U.S. District Court Judge Susan Illston, Simpson pled guilty to one count of conspiracy to possess with intent to distribute and to distribute oxycodone in violation of Title 21, U.S.C. § 846; three counts of possession with intent to distribute and distribution of oxycodone in violation of Title 21, U.S.C. §§ 841(a)(1), (b)(1)(C); and one count of possession with intent to distribute oxycodone in violation of Title 21, U.S.C. §§ 841(a)(1), (b)(1)(C). Simpson admitted that, between April 5, 2011, and June 9, 2011, she conspired with others to possess with intent to distribute and she conspired to distribute oxycodone. Simpson further admitted that on three separate dates between April 5, 2011, and June 8, 2011, she distributed oxycodone and that on June 9, 2011, she possessed oxycodone with the intent to distribute it, all in the Northern District of California. On June 9, 2011, law enforcement officers seized $235,524 along with a firearm from Simpson’s residence. There was no plea agreement.
At the sentencing hearing, Judge Illston also ordered the forfeiture of the $235,524 and imposed a three-year period of supervised release. Simpson was ordered to surrender to the Bureau of Prisons on March 22, 2013.
Denise Marie Barton and Katherine Dowling are the Assistant U.S. Attorneys who prosecuted the case with the assistance of AUSAs Patty Kenney, Dave Countrymen, Arvon Perteet and Alicia Jusey of the Asset Forfeiture Unit; and Maryam Beros and Rawaty Yim. The prosecution is the result of a lengthy investigation by the Federal Bureau of Investigation, Drug Enforcement Agency, and the Department of Health and Human Services.
(Simpson Superseding Indictment )
Dublin Woman Charged with Filing False Claims with IRSRead the Press Release
OAKLAND, Calif. – Denise LaShawn Reed, aka Brooke Nicholson, aka Lauren Roberts, aka Denise Berry, aka Savana Jones, aka Neyce Roberts was arrested yesterday morning on charges related to a false tax refund scheme, United States Attorney Melinda Haag and IRS Criminal Investigation Special Agent in Jose M. Martinez announced.
According to the indictment, between January 2009 and February 2010, Reed, of Dublin, Calif., presented claims to the IRS for refunds of taxes that she knew to be false, fictitious and fraudulent. Reed made the claims by preparing and presenting U.S. Individual Income Tax Returns, Forms 1040, in the names of other individuals. Reed, who knew she was not entitled to the requested refunds, was charged with 14 counts of filing false claims for refunds of taxes totaling $97,002.
Reed made her initial appearance before United States Magistrate Judge Donna Ryu, in Oakland, and was release on a $50,000 bond. Her next scheduled court appearance is Feb. 14, 2013.
The maximum penalty for each count of filing false claims, in violation of Title 18, United States 287, 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.
Cynthia Stier is the Assistant United States Attorney who is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Please note, an indictment contains only allegations against an individual and, as with all defendants, must be presumed innocent unless and until proven guilty.
In response to these types of cases, the Justice Department’s Tax Division issued a new directive to further the efforts of the Tax Division and help U.S. Attorneys’ Offices respond quickly and effectively to the challenges in stolen identity refund fraud (SIRF) cases. To further this goal, Tax Division Directive 144, which took effect on Oct. 1, 2012, was issued to streamline the process for prosecuting these offenses.
(Reed indictment )
Paralegal Charged in Scheme to Defraud Bay Area Law Firm and Its ClientsRead the Press Release
OAKLAND, Calif. – Ana Lissa Reyes, of San Lorenzo, Calif., was arraigned yesterday on an information charging her with multiple counts of mail fraud and tax evasion, United States Attorney Melinda Haag and IRS Criminal Investigation Special Agent in Charge Jose M. Martinez announced.
According to the information, Reyes is alleged to have worked as a secretary, office manager and paralegal for a Bay Area personal injury law firm. From about 2006 through June 2011, Reyes, without authorization, settled claims without the knowledge of the law firm or its clients and stole the settlement proceeds. It is also alleged that Reyes engaged clients without the law firm’s knowledge and stole client retainer fee payments. To carry out the scheme to defraud, Reyes created a bogus company to correspond with clients without the law firm’s knowledge and to defraud the clients into believing their cases were ongoing.
Reyes is also charged with willfully attempting to defeat a large part of the income tax due and owing for the calendar years 2006, 2007, 2008, 2009, 2010 and 2011. It is alleged that, for each of those tax years, Reyes knew her joint taxable income was substantially in excess of the amount stated on the returns, and, upon the additional taxable income, a substantial additional tax was due and owing to the United States.
Reyes made her initial appearance in federal court in Oakland yesterday and is currently out on bond. She is next scheduled to appear in federal court in Oakland at 2 p.m. on Feb. 28, 2013, for a status hearing before Judge Yvonne Gonzalez Rogers.
The maximum statutory penalty for each count of mail fraud in violation of 18 U.S.C. § 1341 is 20 years in prison and a fine of $250,000. The maximum statutory penalty for each count of tax evasion in violation of 26 U.S.C. § 7201 is six 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.
AUSA Wade M. Rhyne is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Janice Pagsanjan. The prosecution is the result of a year-long investigation by the Federal Bureau of Investigation and IRS, Criminal Investigation.
Please note, an information contains only allegations against an individual and, as with all defendants, Reyes must be presumed innocent unless and until proven guilty.
(Reyes Information )
Portola Valley Man Pleads Guilty to Failure to Report Foreign Bank AccountsRead the Press Release
SAN JOSE, Calif. – Christopher B. Berg of Portola Valley, Calif., entered a plea of guilty yesterday to willful failure to file the required report of foreign bank account (FBAR) for an account he controlled at United Bank of Switzerland AG (UBS), United States Attorney Melinda Haag announced.
In pleading guilty Berg admitted that in 1999, he began working as a consultant in the furniture industry. In 2000, he met with a Swiss financial consultant and Vice President of Banking at UBS in San Francisco, Calif., regarding setting up a bank account at UBS in Switzerland to shelter a portion of his consulting income from taxation. Beginning in 2001 and continuing through 2005, funds representing $642,069 in compensation earned by Berg from consulting services were deposited by wire transfer to UBS accounts. Berg used the money in these accounts at UBS in Switzerland to purchase a vehicle, to obtain cash while in Europe, and to pay the balance on a Eurocard he used while traveling in Europe. Berg did not disclose the existence of his accounts at UBS in Switzerland to his Certified Public Accountant, and did not disclose the income earned by these accounts or the consulting income deposited to the accounts. The tax harm associated with Berg’s conduct is $270,757.
United States citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns. Additionally, U.S. citizens and residents must file an FBAR with the United States Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.
On Dec. 18, 2012, Berg of Portola Valley, Calif., was charged with one count of Willfully Violating Foreign Bank Account Reporting Requirements. Under the plea agreement, Berg pled guilty to that count.
Berg is scheduled to be sentenced on July 10, 2013, before United States District Court Judge Lucy H. Koh in San Jose. The maximum statutory penalty for a violation of 31 U.S.C. §§ 5314 and 5322(a) 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.
Trial attorneys from the Department of Justice Tax Division are prosecuting the case. The prosecution is the result of an investigation by IRS - Criminal Investigation.
Owner of Japanese Restaurant Receives 33-Month Prison Sentence for Tax CrimesRead the Press Release
SAN FRANCISCO – Michael Chen, the owner of Fune Ya Japanese Restaurant in San Francisco was sentenced yesterday to 33 months in prison and ordered to pay restitution in the amount of $459,105 for filing false federal corporate income tax returns with the Internal Revenue Service (IRS), and mail fraud for filing false sales tax returns with the California Board of Equalization, United States Attorney Melinda Haag and Internal Revenue Service Criminal Investigation (IRS-CI) Special Agent in Charge Jose M. Martinez announced.
During a five day jury trial in March, 2012, a federal jury found that Michael Chen filed a false 2004 U.S. income tax return for an S Corporation (Form 1120S) for his restaurant, Fune Ya Japanese Restaurant; failed to file corporate income tax returns for Fune Ya Japanese Restaurant for 2005 and 2006; filed nine false employer’s quarterly federal tax returns (Forms 941) with the IRS, and used the U.S. mail to file nine false quarterly sales and use tax returns with the California Board of Equalization. Evidence at trial showed that Chen maintained detailed records of Fune Ya’s daily receipts in twenty-six boxes marked “Seasoned Octopus.” The boxes were stored in a crawl space beneath the restaurant floor. The cash sales shown on Fune Ya’s receipts were not reported to the IRS. The evidence also showed that Chen maintained an encrypted Excel spreadsheet documenting $1,910,803 in sales, while he reported $450,165 in sales to the California Board of Equalization, and $65,738 in sales to the IRS. Chen also paid Fune Ya employees cash wages totaling $548,919 for the 2004 through 2006 tax years. Employees received cash wages in white envelopes each payday. Chen failed to include these cash wages on the quarterly payroll tax returns (Forms 941) filed with the IRS.
Chen was convicted by a jury on March 27, 2012. The sentence was handed down by U.S. District Court Judge Maxine Chesney following a jury trial on 10 counts of filing false tax returns in violation of 26 U.S.C. Section 7206(1); two counts of failure to file tax returns in violation of 26 U.S.C. Section 7203; and nine counts of mail fraud in violation of 18 U.S.C. Section 1341. Judge Chesney also sentence the defendant to a three-year term of supervised release. The defendant is scheduled to self-surrender and begin serving his sentence on March 27, 2013.
Cynthia Stier and Damali Taylor are the Assistant U.S. Attorneys who prosecuted the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
Manager of Commodities Fund Pleads Guilty to ConspiracyRead the Press Release
SAN JOSE - Rodney Hatfield pleaded guilty in federal court in San Jose today to conspiracy to commit wire fraud, United States Attorney MELINDA HAAG announced.
In pleading guilty, Mr. Hatfield admitted that he conspired with his co-defendant to obtain money from investors by means of materially false representations about the value of their investment accounts. Mr. Hatfield admitted that he defrauded members of his own Jehovah’s Witness congregation in Watsonville, California. As part of the conspiracy, he solicited millions of dollars in investment money from his fellow congregants and others to invest in Landmark Trading Company, LLC (“Landmark”), a company he and his co-defendant had set up as a holding company for the purpose of trading in foreign currency exchange.
While Landmark did initially engage in legitimate currency trades on behalf of its investors, the company quickly began to run a negative return on its trading activity. Rather than accurately report this negative trading activity to investors, Hatfield and his co-defendant distributed false reports to investors in e-mails claiming that their trading accounts were profitable and increasing in value. While some investors did receive all or most of their principal back, Hatfield admitted his actions resulted in a net loss to investors of more $1 million but less than $2.5 million.
Mr. Hatfield, age 63, of Salinas, California, was indicted by a federal Grand Jury on December 17, 2009. He was charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, along with nine counts of wire fraud, in violation of 18 U.S.C. § 1343. Under the plea agreement, Mr. Hatfield pled guilty to the first count of the Indictment, conspiracy to commit wire fraud.
Mr. Hatfield remains free on a secured bond pending sentencing on Monday, June 24, 2013, at 1:30 p.m., before the Honorable Edward J. Davila in San Jose. The maximum statutory penalty for a violation of conspiracy to commit wire fraud is 20 years of imprisonment, a fine of $250,000 or twice the amount of gain or loss, whichever is greater, restitution if appropriate, and a special assessment. 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.
Timothy J. Lucey is the Assistant United States Attorney who is prosecuting the case with the assistance of Laurie Worthen. The prosecution is the result of a multi-year investigation by the United States Postal Inspection Service. The Commodities Future Trading Commission and the United States Trustee for the Northern District of California were also instrumental in this investigation.
Former President and Executive Director of Vanguard Public Foundation Sentenced to 40 Months in Prison for Fraud and Money LaunderingRead the Press Release
SAN FRANCISCO – Hari J. Dillon, the former President and Executive Director of the Vanguard Public Foundation, was sentenced today to 40 months in prison for diverting funds directed for the benefit of the Vanguard Public Foundation to his own purposes, United States Attorney Melinda Haag announced.
Dillon pleaded guilty in July 2010 to wire fraud and money laundering. According to the plea agreement and trial testimony in United States v. Samuel “Mouli” Cohen (CR 10-0547 CRB), Dillon met Mouli Cohen (aka Samuel Cohen) in approximately August 2002. Cohen presented Dillon with an investment opportunity through which Dillon and others associated with the Vanguard Public Foundation – a non-profit charitable organization – could purchase Cohen’s founder’s shares in his company, Ecast, which Cohen falsely claimed was soon to be acquired by Microsoft. According to Cohen, this would allow Dillon, Vanguard donors, and Vanguard to reap substantial profits after the acquisition of Ecast.
From late 2002 through mid-2003, individuals associated with Vanguard, including Dillon, paid more than $6 million to Cohen to purchase some of Cohen’s founder’s shares in Ecast. During the ensuing years, Cohen claimed the acquisition was suffering various delays by United States and European regulators, and that the investors had to pay additional bonds and fees to maintain their stake in the deal. From approximately late 2004 through 2007, individuals associated with Vanguard contributed more than an additional $25 million purportedly to cover these fees. In fact, there never was any such acquisition.
Dillon admitted that while soliciting and collecting these fees, he defrauded various victims by intentionally failing to tell them that he intended to and did use some of their contributions for his own personal expenses. For example, according to his plea agreement, Dillon used approximately $60,000 to pay his American Express bills. In addition, the government noted in connection with sentencing that Dillon used victim money toward luxury hotel expenses, fine dining, limousine travel and other personal expenses. In all, Dillon admitted that of the tens of millions he solicited and collected for this investment, most of which he passed on to Cohen, Dillon skimmed not less than $2.5 million, defrauding his victims out of that amount.
Dillon, 64, formerly of San Francisco, was charged by Information in June 2010. He was charged with two counts of wire fraud and two counts of money laundering. He pleaded guilty to all four counts.
In November 2011, after a one-month trial, a federal jury convicted Samuel “Mouli” Cohen of 15 counts of wire fraud, 11 counts of money laundering, and 3 counts of tax evasion. Dillon testified at that trial. In April 2012, Cohen was sentenced to 264 months in prison. He is currently in custody, and he has appealed his convictions and sentence.
The sentence was handed down by United States District Court Judge Charles R. Breyer. Judge Breyer also sentenced Dillon to a three-year period of supervised release following his prison term. The parties are scheduled to appear before Judge Breyer on Feb. 19 to discuss a date for Dillon to surrender to serve his prison sentence.
Hallie Hoffman and Doug Sprague are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth and Beth Margen. The prosecution is the result of a one-year investigation by the Internal Revenue Service, Criminal Investigation and the Federal Bureau of Investigation.
Pittsburg Woman Sentenced to 18 Months in Prison for Filing Tax Returns Using Stolen IdentitiesRead the Press Release
SAN FRANCISCO – Taneshia Stephenson yesterday was sentenced to 18 months in prison for conspiring to file false claims, United States Attorney Melinda Haag and Internal Revenue Service Criminal Investigation (IRS-CI) Special Agent in Charge Jose M. Martinez announced.
Stephenson pleaded guilty on Oct. 3, 2012. According to her plea agreement, beginning in July 2008, Stephenson helped other individuals obtain fraudulent tax refunds from the Internal Revenue Service based on tax returns that were filed using stolen identities. Stephenson admitted that each of the tax returns she assisted in filing claimed fictitious Social Security income and withholding as a basis for the fraudulent tax refund. As part of the scheme, Stephenson and her coconspirators asked the IRS to directly deposit the fraudulent refunds into a bank account that Stephenson could access. In 2008, Stephenson allowed her bank account to be used by another individual for that purpose.
According to documents filed with the court, this case is part of a larger investigation involving more than 20 other defendants. In response to these types of cases, the Justice Department’s Tax Division issued a new directive to further the efforts of the Tax Division and help U.S. Attorneys’ Offices respond quickly and effectively to the challenges in stolen identity refund fraud (SIRF) cases. To further this goal, Tax Division Directive 144, which took effect on Oct. 1, 2012, was issued to streamline the process for prosecuting these offenses.
Thomas Newman is the Assistant U.S. Attorney who prosecuted this case. The prosecutions are the result of an investigation by the Pittsburg Police Department and the Internal Revenue Service, Criminal Investigation Division.
Jury Convicts Mountain View Man of Heroin SmugglingRead the Press Release
SAN JOSE, Calif. – Mike Gama was convicted by a federal jury Tuesday of both possession with intent to distribute a kilogram or more of heroin and importation of a kilogram or more of heroin , United States Attorney Melinda Haag announced.
The jury found that Gama had knowingly participated in a scheme to import heroin into the United States from Mexico when he accepted delivery of a package containing more than a kilogram of heroin concealed within a wooden tortilla press, and that he had possessed that heroin with the intent to distribute it to someone else. The guilty verdict followed a one-week jury trial before U.S. District Court Judge Edward J. Davila.
Evidence at trial showed that on June 20, 2011, Gama, 23, of Mountain View, Calif., received a package shipped from an address in Michoacan, Mexico via the commercial shipping company, DHL Express. The DHL package, which was addressed to him personally, contained, among other things, a wooden tortilla press containing 1.07 kilograms of a black tar-like substance, which subsequent lab testing confirmed as Mexican black tar heroin. Gama signed for the package and a search warrant was executed immediately thereafter to recover the package containing the heroin.
The DHL package addressed to Gama containing the heroin was first intercepted by Customs and Border Protection officers inspecting international shipments arriving at the DHL hub in Cincinnati, Ohio. HSI agents in San Jose were alerted to the package and were prepared to seize the package and the heroin when it arrived in California.
Gama was indicted by a federal grand jury on July 6, 2011. He was charged with one count of possession with intent to distribute a kilogram or more of heroin and one count of importation of a kilogram or more of heroin.
Following the guilty verdict, Gama, who had been free on bond pending trial, was remanded immediately into the custody of the United States Marshal Service. Gama’s sentencing is scheduled for April 15, 2013, before United States District Court Judge Edward J. Davila in San Jose. The maximum statutory penalty for each count in violation of Title 21 of the United States Code, Sections 841 and 952 is life in prison, with a statutory mandatory minimum term of 10 years in prison, and a maximum fine of $10 million. 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.
Gary G. Fry and Amie D. Rooney are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Tracey Andersen and Laurie Worthen. The prosecution is the result of an 18-month investigation by U.S. Immigration and Customs Enforcement, Homeland Security Investigations and Customs and Border Protection.
Hayward Tax Preparer Pleads Guilty to Tax FraudRead the Press Release
Oakland, Calif. – Naushad Buksh today pleaded guilty to filing a false tax return and aiding and assisting in the preparation of false tax returns, United States Attorney Melinda Haag and Internal Revenue Service Criminal Investigation (IRS-CI) Special Agent in Charge Jose M. Martinez announced.
According to his plea agreement, Buksh has prepared tax returns for approximately 20 years. During 2007, 2008, 2009 and 2010, he operated a tax return preparation business in Hayward, Calif., and was responsible for all income and expenses at that business. Buksh intentionally signed and filed with the IRS false U.S. Individual Income Tax Returns for 2007 through 2010, which underreported his gross receipts by $599,226 and resulted in a tax loss of $160,528.
Buksh admitted in his plea that, in addition to filing false returns for himself, he also prepared tax returns on behalf of his clients that included false deductions and credits for the purpose of creating fraudulent tax refunds. Buksh knew the deductions and credits were false because he fabricated them. Some of the false deductions and credits included home mortgage interest and points, unreimbursed employee expenses, inflated education credits, student loan interest and/or tuition fee deductions, false personal property tax deductions, and false or inflated tax preparation fees.
Buksh, 56, of Hayward, Calif., was charged on May 15, 2012, with four counts of making and subscribing false tax returns and 41 counts of aiding and assisting in the preparation of false tax returns. He pleaded guilty to one count of each. Buksh is next scheduled to appear in federal court in Oakland at 2 p.m. on April 11 for sentencing before United States District Court Judge Yvonne Gonzalez Rogers.
The maximum statutory penalty for each count of making and subscribing to a false income tax return, in violation of Title 26, U.S.C § 7206(1), and aiding and assisting in the preparing of false tax returns, in violation of Title 26, U.S.C § 7206(2), is three 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.
Thomas Moore is the Assistant U.S. Attorney who is prosecuting the case. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.
U.S. Attorney’S Office Reaches Settlement with Mills College over Compliance with Americans with Disabilities ActRead the Press Release
SAN FRANCISCO – Mills College, a liberal arts college for women in Oakland, Calif., entered an agreement with the United States to bring its campus into full compliance with Title III of the Americans with Disabilities Act, United States Attorney Melinda Haag announced.
The settlement agreement resolves an investigation and compliance review of barriers to access by individuals with disabilities in buildings throughout the campus. Mills College fully cooperated in the review. The College agreed to remove all architectural barriers in its existing facilities, and to undertake alterations and construct new facilities so that they are readily accessible to and usable by people with disabilities.
“The ADA requires that people with disabilities have full access to public and private institutions,” U.S. Attorney Haag said . “We commend Mills College for its cooperation and commitment to providing people with disabilities unfettered access to its facilities. This agreement guarantees students and visitors with disabilities such access for years to come.”
Under the settlement, Mills is required to remedy approximately 260 separate violations that were revealed in a campus-wide survey conducted in March 2010. Mills is required to complete the majority of the remedial work by the end of 2014, while it will have a longer time to complete others. Remedial measures required under the agreement include installing or moving grab bars, towel dispensers, and signs; adjusting the force required to open doors; installing or adjusting the slope of ramps; installing accessible toilet stalls, and adjusting the height and center lines of existing toilet seats; adjusting the height of equipment and lab counters; adjusting the height of drinking fountains; making lecture halls, auditoriums, and the gymnasium fully wheelchair accessible; installing handrails; and installing more van-accessible parking.
Assistant U.S. Attorney Steven J. Saltiel handled the matter on behalf of the U.S. Attorney’s Office, together with Program Architect Diane Perry from the U.S. Department of Justice, Civil Rights Division, Disability Rights Section.
(Mills College Signed Settlement Agreement )