Southern District of California
Press releases recorded for this federal judicial district.
“tycoon” Owner Sentenced to Prison for Defrauding Lenders and IrsRead the Press Release
SAN DIEGO - Grant McCollough, a real estate investor and owner of Tycoon Investments, along with his wife Marisa McCollough, a former Wells Fargo Bank employee, were sentenced today by U.S. District Judge Michael M. Anello for participating in a mortgage fraud conspiracy involving dozens of properties in Colorado and Maui, Hawaii.
Grant McCollough was sentenced to 10 months in custody; Marisa McCollough was sentenced to four months. The court also ordered the couple to pay $25,746 in restitution to the IRS.
The McColloughs pleaded guilty on September 30, 2014, and admitted that as part of their conspiracy they recruited investors to act as “straw” buyers in real estate transactions. The defendants then arranged for false information to be submitted to mortgage lenders in support of the straw buyers’ loan applications. The McColloughs also fraudulently inflated the value of the homes and disguised the source of the down payments, in order to skim funds from the fraudulent transfer of property among their co-conspirators. They then hid their skimmed profits from the Internal Revenue Service.
Nearly all of the fraudulent mortgages were arranged by coconspirator Donald Totten, a mortgage loan officer and broker operating from Rancho Santa Fe. Totten was sentenced in October 2014 to 30 months in prison for his role in the scheme, which included mortgage fraud causing more than $20 million in losses to mortgage lenders, bankruptcy fraud, and filing a false tax return that failed to report more than $3 million in taxable income. Totten operated the businesses “Money World” and “Integrated Home Loans,” and specialized in brokering a particularly toxic stated-income, stated-asset “negative amortization” loan product, which allowed borrowers to make monthly payments less than the interest charged over the same period and without paying down the principle balance, so that the monthly payments were low but the outstanding balance of the loan increased over time.
Grant McCollough was not the only principal of Tycoon Investments involved in the conspiracy. McCollough’s business partner, Jason Kent, was also charged in the scheme. On July 21, 2014, Kent pleaded guilty to wire fraud, and admitted assisting Totten, Grant McCollough, Marisa McCollough, and others with carrying out this mortgage and “kickback” scheme. Kent’s case was transferred to the District of Hawaii and he is scheduled to be sentenced on February 26, 2015, before United States District Judge Leslie E. Kobayashi.
With Totten’s help, Marisa McCollough bought a $3.4 million oceanfront home in Lahaina, Hawaii. In order to qualify, she falsely claimed that she earned $90,000 per month, had close to $700,000 in savings, and made a down payment of $630,000. This was all false, and in fact Ms. McCollough did not contribute any of her own funds to the purchase. The McColloughs lived in the home for several years, but never made the mortgage payments they owed.
According to court documents, many of the fraudulently-obtained mortgage loans subsequently defaulted, causing mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, to suffer significant losses as a result of the conspiracy. Fannie Mae and Freddie Mac are government-sponsored enterprises with a mission to provide liquidity, stability, and affordability to the U.S. housing market. Both enterprises assist mortgage lenders by purchasing the loans they originate, enabling the lenders to replenish their funds to finance additional mortgage loans for American homebuyers. The statements borrowers make in loan applications are an important factor in Fannie Mae’s and Freddie Mac’s determination whether to purchase a mortgage loan.
DEFENDANTS Case Number: 14CR2787-MMA Grant McCollough Age: 38 Kearney, Nebraska Marisa McCollough Age: 36 Kearney, Nebraska CHARGES Conspiracy to commit wire fraud and defraud the United States, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT Case Number: 13CR2941-MMA Donald Totten Age: 58 Oakland, California CHARGES Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
Filing a false tax return, in violation of 26 U.S.C. § 7206(1)
Maximum Penalties: 3 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.
Bankruptcy fraud, in violation of 18 U.S.C. § 152
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT Case Number: 14CR1667-MMA Jason Kent Age: 37 Lahaina, HI CHARGES Wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT Case Number: 13CR2772-MMA Shellie Lockard Age: 44 Ventura, CA CHARGES Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution. INVESTIGATING AGENCIESFederal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal InvestigationFormer Supervisory Contracting Officer Arrested in Navy Bribery ScandalRead the Press Release
SAN DIEGO – Paul Simpkins, a former senior federal contracting officer for the U.S. Navy, was arrested this morning and charged with conspiracy to commit bribery in connection with his alleged role in a scheme to steer contracts and benefits to Glenn Defense Marine Asia (GDMA), a defense contracting firm headquartered in Singapore.
Simpkins, 60, was arrested this morning in Haymarket, Virginia. He was arraigned in federal court in the Eastern District of Virginia and is scheduled for a detention hearing tomorrow at 2 p.m. Eastern time before U.S. Magistrate Judge Rawles Jones. The government is seeking Simpkins’ removal to face charges in the Southern District of California.
“With the arrest of Paul Simpkins, who was recently among the Defense Department’s high ranking civilians we have uncovered yet another tentacle of this pervasive bribery scheme,” said U.S. Attorney Duffy. “The more we learn about the extent of the greed and corruption, the more determined we are to eviscerate it.”
“Today’s arrest in this ongoing investigation demonstrates our continued resolve to root out all of the corrupt officials involved in this bribery scheme,” said Assistant Attorney General Leslie R. Caldwell. “As alleged, Paul Simpkins misused his position as a contracting officer at the U.S. Navy to obtain bribes of cash, air travel, hotel rooms, and prostitutes, and his actions tarnish the reputation earned by the vast majority of U.S. Navy officers and enlisted and civilian personnel.”
“As we've mentioned previously, the GDMA investigation is far from over,” said Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS). “NCIS will follow the evidence wherever it leads, to bring to justice those who were involved in perpetrating this massive fraud on the Department of the Navy and the American taxpayer. Active leads remain and NCIS will stay on the case until our work is done.”
“As the filing of today's Criminal Complaint and subsequent arrest of Paul Simpkins shows, the Defense Criminal Investigative Service and its law enforcement partners will continue to identify and investigate those individuals who seek to defraud the U.S. taxpayer,” said Deputy Inspector General of Investigations James B. Burch of the Department of Defense (DCIS). “Any individual, regardless of position, who allowed Glenn Defense Marine Asia Ltd. to prosper at the expense of the American taxpayer, will be brought to justice.”
Simpkins is the latest individual to be arrested in connection with a corruption probe involving the U.S. Navy, GDMA, and its owner, Leonard Glenn Francis. To date, seven individuals, including Francis, and GDMA have entered guilty pleas as part of the investigation.
According to a criminal complaint unsealed today, Simpkins held several manager-level contracting positions throughout the federal government, including Supervisory Contract Special at the U.S. Navy Regional Contracting Center in Singapore from April 2005 through June 2007, and manager in the Department of Defense’s Office of Small Business Programs from December 2007 to August 2012. The complaint alleges that between May 2006 and September 2012, Simpkins accepted several hundred thousand dollars in cash and wire transfers, travel and entertainment expenses, hotel rooms and the services of prostitutes. In return, Simpkins allegedly helped steer lucrative U.S. Navy contracts to Francis and GDMA, advocated for and advanced the interests of GDMA in contract disputes, and assisted in preventing GDMA’s competitors from receiving U.S. Navy business.
The complaint specifically alleges that, beginning in early 2006, Simpkins and Francis held a series of meetings at a hotel in Singapore in which Francis agreed to provide Simpkins with things of value in return for help in steering lucrative ship husbanding contracts to GDMA. Specifically, the complaint alleges that Francis paid Simpkins by hand-delivering over $150,000 in cash and by making several wire transfers to a bank account held in the name of Simpkins’s wife at the time. To conceal the true nature of the wire transfers, Simpkins allegedly used an email account belonging to his mistress to advise Francis of the routing and account information of the bank account belonging to his wife.
In return for the things of value, Simpkins allegedly used his influence within the U.S. Navy to benefit GDMA, including by helping GDMA to secure lucrative ship husbanding contracts to service U.S. Navy vessels in Thailand and the Philippines. In addition, Simpkins allegedly interceded on GDMA’s behalf in contract disputes with the U.S. Navy. The complaint specifically alleges that in 2006, Simpkins’s subordinate recommended that GDMA’s husbanding contract in Thailand not be extended due to “many exceedingly high cost” items. Simpkins allegedly overruled his subordinate and extended GDMA’s contract.
In another example, Simpkins allegedly instructed U.S. Navy officials in Hong Kong to discontinue the use of meters that monitored the volume of liquid waste that GDMA removed from U.S. Navy ships under its husbanding contracts. The use of these meters would have ensured proper accounting of the actual amount of waste removed to ensure that no overbilling occurred. Simpkins also allegedly instructed a U.S. Navy official not to review invoices that GDMA submitted in connection to a recent port call in Hong Kong after Francis complained that U.S. Navy personnel were asking questions.
The ongoing investigation is being conducted by NCIS and DCIS. The case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Senior Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California.
Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.
DEFENDANT Case Number: 15MJ0325 Paul Simpkins Age: 60 CHARGESConspiracy to Commit Bribery, in violation of 18 U.S.C. § 371. Maximum penalty five years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater
INVESTIGATING AGENCIESDefense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit Agency*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Former DMV Official Guilty of Accepting BribesRead the Press Release
SAN DIEGO – Alva Benavidez pleaded guilty today in federal court to conspiracy to accept bribes stemming from her employment at the California Driver Safety Office at the Department of Motor Vehicles.
Appearing before U.S. Magistrate Judge Karen S. Crawford, Benavidez admitted that she accepted more than $5,000 in cash and gifts from attorneys and their law firms in exchange for helping their clients obtain positive results in DMV hearings and unauthorized temporary licenses.
According to court records, Benavidez was an employee of the DMV since August 2000, where she worked as a Driver Safety Officer (“DSO”). As a DSO, Benavidez’s duties included presiding over hearings to determine whether a person charged with Driving Under the Influence (“DUI”) should have their license suspended. As an employee of the DSO, Benavidez had access to files, records and information of the DMV, including temporary licenses. In her plea agreement, Benavidez admitted that between 2005 and August 2014, she entered into an agreement with six different attorneys and six of their staff or representatives (collectively “co-conspirators”) to aid the attorneys in obtaining favorable treatment for clients who were charged with DUIs. In exchange for the favorable treatment for the clients of the co-conspirators, Benavidez accepted goods and services of value, including cash, meals, and luxury items such as designer purses, from the co-conspirators.
Some of the activity Benavidez admitted to in her plea agreement included stealing arrest packets from the DSO before the information about a DUI arrest could be entered into the DSO database, setting aside driver license suspensions, and providing unauthorized temporary driver licenses for people who had been arrested for DUIs. In exchange for her participation in the conspiracy, Defendant accepted gifts and bribes worth over $5,000 total, including cash, gift certificates, sunglasses, purses and other items of value.
Benavidez retired from the DMV in December 2014 after search warrants were executed at her home and office. She has been released on bond pending sentencing. The guilty plea is not final until it has been accepted by the district court. Benavidez is scheduled to be sentenced on April 20, 2015 at 9 a.m. before U.S. District Judge Cynthia A. Bashant.
Anyone with information about corruption at the DMV is asked to contact the Federal Bureau of Investigation at 1-877-NO-BRIBE (662-7423), or the DMV’s Investigations Branch-Office of Internal Affairs at (951) 653-5357.
DEFENDANT Case Number: 15CR0233-BAS Alva Garrido Benavidez Age: 51 San Diego, California CHARGESConspiracy to Accept Bribes – Title 18, U.S.C., Section 371
INVESTIGATING AGENCIES
Maximum penalty: 20 years’ imprisonment and $250,000 fineFederal Bureau of Investigation
Department of Motor Vehicles, Investigations Division, Special Operations Command, Office of Internal AffairsPediatric Nurse Pleads Guilty to Sexual Exploitation of Children in His CareRead the Press Release
SAN DIEGO, CA – Michael William Lutts, a 50-year-old foster parent and pediatric nurse, pleaded guilty in federal court today to sexually exploiting a two-month-old premature boy and an 11-month-old girl who had been placed in his care last summer.
According to his plea agreement, Lutts admitted to 15 instances in July and August in which he photographed and videotaped the babies in sexually explicit situations at both his home and workplace. In one image, the defendant photographed his own exposed genitals beside the infant, who was still wearing his hospital bracelet. In some of the images and videos, the baby is crying as Lutts sexually abuses him. Lutts also admitted emailing sexually explicit images of children to others.
Lutts pleaded guilty to two counts of sexual exploitation of a minor and one count of distribution of child pornography before U.S. Magistrate Judge Jill L. Burkhardt. He faces up to 80 years in prison, and has agreed to forfeit his College area home where most of the crimes occurred.
“This is a deeply disturbing case,” said U.S. Attorney Laura Duffy. “We will do everything in our power to protect our precious, defenseless children from sexual abuse and exploitation, especially at the hands of caregivers who are supposed to keep them safe .”
FBI Special Agent in Charge Eric S. Birnbaum commented, “Though the FBI investigates many types of criminal investigations, it is particularly disturbing when the victims are sexually exploited children or infants. When this type of sexual exploitation takes place, the FBI and our law enforcement partners will aggressively pursue those who would exploit and abuse children, and bring them to justice."
DEFENDANT Case Number: 14CR2542-JAH Michael William Lutts Age: 50 San Diego, California CHARGESCounts 1, 17: Sexual Exploitation of a Minor, in violation of 18 U.S.C. §2251(a)
Maximum Penalties: Thirty years in prison, mandatory minimum 15 years per countCounts 16: Distribution of Child Pornography, in violation of 18 U.S.C. §2252(a)(2)
INVESTIGATING AGENCIES
Maximum Penalties: Twenty years in prison, mandatory minimum 5 yearsFederal Bureau of Investigation
Man Sentenced to Two Years in Prison for Defrauding River Boat Pilots in LouisianaRead the Press Release
SAN DIEGO –Mark A. Hofmann of San Diego, California, was sentenced today to two years in prison for his role in an investment fraud scheme whereby Hofmann misappropriated more than $400,000 in investment funds of a Louisiana riverboat pilots association known as Bolivar Investors Group, LLC.
During a hearing before U.S. District Judge Dana M. Sabraw, Hofmann was also ordered to pay more than $400,000 in restitution to members of the riverboat pilots association – the victims of Hofmann’s white collar crime.
According to court documents, Hofmann solicited $3 million from Bolivar Investors Group, LLC, as part of a joint venture to allegedly develop office buildings next to a medical center in Covington, Louisiana. As part of their deal, Hofmann agreed to open a bank account in San Diego, California, in order to use the investment funds to pay project expenses. Hofmann promised the investors in Bolivar Investors Group, LLC that they would have access to the bank account and would be able to review the statements online. However, Hofmann, and his co-conspirator, Timothy Monahan, were the only signatories on the bank account, and were the only ones with access to the bank account details. To conceal his fraudulent scheme, Hofmann provided the riverboat pilots that invested through Bolivar Investors Group with falsified bank records and other fraudulent financial documents.
According to court documents and Hofmann’s admissions, rather than spend the money on project expenses, Hofmann misappropriated more than $400,000 of funds that belonged to Bolivar Investors Group, LLC, for his own personal use and expenses, which were unrelated to the land development deal. In addition, as mentioned during the sentencing hearing today, Hofmann also withdrew from the joint venture bank account more than $230,000 in cash and checks that he wrote to himself, which was also unrelated to the land deal.
During the sentencing hearing, two of the riverboat pilots from Louisiana told the Court that Hofmann’s fraud had destroyed personal relationships between generations of pilots dating back 100 years. The two pilots said the victims are constantly reminded each month of Hofmann’s fraud because they continue to pay monthly interest and principal on loans they had taken out to invest in the joint venture with Hofmann.
United States Attorney Laura E. Duffy said, “Today, justice was served on behalf of the riverboat pilots association in Louisiana, who placed their trust in Mr. Hofmann. We hope that this case serves as a deterrent to those raising capital for joint ventures who might seek to take advantage of their investors and misappropriate their funds.”
This case was investigated by the New Orleans Division of the Federal Bureau of Investigation and presented for prosecution to the U.S. Attorney’s Office in the Eastern District of Louisiana. The case was transferred to the Southern District of California for entry of the guilty plea and for sentencing.
DEFENDANTS Case Number: 13CR4073-DMS Mark A. Hofmann Age: 57 CHARGESCount 1: Title 18, United States Code, Section 1343 – Wire Fraud -- statutory maximum sentence of 20 years’ custody, a maximum fine of $250,000, special assessment of $100, and a maximum term of supervised release of 3 years.
INVESTIGATING AGENCIESFederal Bureau of Investigation – New Orleans Division
U.S. Attorney’s Office for the Eastern District of Louisiana
U.S. Attorney’s Office for the Southern District of CaliforniaAlien Smuggler Pleads Guilty in Death of Two Mexican CitizensRead the Press Release
SAN DIEGO, CA – Nicholas George Zakov pleaded guilty to immigration crimes in federal court today, admitting that he acted with “extreme disregard” for the lives of two Mexican citizens who perished while being smuggled across the U.S.-Mexico border in Zakov’s trunk.
Zakov, 43, a U.S. citizen, admitted that on August 12, 2014, he attempted to transport two Mexican citizens, Tarcisio Casas-Blanco and Jose Aurelio Quiroz-Casas, into the United by hiding them within the trunk of his 2012 Dodge Challenger. Zakov was going to be paid $3,500 for his actions.
Zakov further admitted that he continued to drive the vehicle through the San Ysidro, California Port of Entry while ignoring the two Mexican citizens’ pleas to be let out of the trunk because of the extreme heat. At the Port of Entry, U.S. Customs and Border Protection officers discovered the two Mexican citizens unresponsive in Zakov’s trunk. Casas-Blanco and Quiroz-Casas later died of hyperthermia and mechanical asphyxiation.
Zokov entered his plea before U.S. Magistrate Judge David H. Bartick. He pleaded guilty to two counts of encouraging and inducing illegal aliens resulting in death and two counts of bringing illegal aliens into the United States for financial gain. According to his plea agreement, Zakov admitted that Casas-Blanco and Quiroz-Casas died as a result of being concealed in his trunk.
Zakov faces up to life imprisonment, a mandatory minimum sentence of three years in prison, and a $250,000 fine. Sentencing is scheduled for April 10, 2015 before U.S. District Judge Anthony J. Battaglia.
DEFENDANT Case Number: 14CR2363-AJB Nicholas George Zakov Age: 43 Hawthorne, California CHARGES Counts 1 and 2: Encouraging and Inducing Illegal Aliens, Aiding and Abetting, Resulting in Death, 8 U.S.C. §1324(a)(1)(A)(iv), (v)(II), and (a)(1)(B)(iv)Counts 3 and 4: Bringing in Illegal Aliens for Financial Gain, Aiding and Abetting 8 U.S.C. §1324(a)(2)(B)(ii) and 18 U.S.C. § 2
INVESTIGATING AGENCIESU.S. Customs and Border Protection
Homeland Security InvestigationsFour Members of Virtual Kidnapping Ring SentencedRead the Press Release
SAN DIEGO - Four members of an extortion ring were sentenced in federal court today for collectively duping 124 Latino families across the United States, in some cases falsely claiming a family member had been kidnapped and forcing them to pay almost $190,000 in ransom for kidnappings that never took place.
The defendants – Ruth Graciela Raygoza, Maria Del Carmen Pulido Contreras, Adrian Jovan Rocha and Jonathan Rocha – were sentenced by U.S. District Judge Jeffrey T. Miller to 40, 21, 21 and 14.5 months in prison, respectively. They pleaded guilty in July of 2014 to conspiracy to commit wire fraud and conspiracy to launder money.
According to the plea agreements and other court documents, the ring targeted victims from Mexico and Central America that spoke primarily Spanish and were not United States citizens. As part of the scheme, co-conspirators of the foursome called numerous families in the United States and falsely represented that they were holding a loved one captive, and demanded money for his or her safe release. The extortion victims were usually instructed to send thousands of dollars through either MoneyGram or Western Union. Defendants would then pick up the money in Southern California. After picking up the money, defendants re-wired or delivered the money to other conspirators in Mexico. The money was divided among defendants and co-conspirators in Mexico to fund and promote the scheme.
“This has been by far the worse experience of my life,” one victim wrote in a statement to the court. “I could not sleep for days because I was waiting for their phone call to give instructions since they told me that they would kill my niece if I did not send the money requested. I got sick as a result of not sleeping, not eating well and the stress that I was subjected to and feeling so powerless.”
U.S. Attorney Laura Duffy said, “This was a cruel hoax that caused significant emotional and financial damage to a large number of people. These sentences are appropriate for defendants who preyed on a vulnerable population with no regard for their suffering.”
“Homeland Security Investigations is committed to dismantling criminal rings that seek to exploit vulnerable victims through their daunting scams,” said interim Special Agent in Charge Joe Garcia. “These unscrupulous criminal networks are motivated by extreme greed and will go to extreme measures to gain illicit proceeds.”
DEFENDANTS Case Number: 13CR3984-JM Ruth Graciela Raygoza Age: 64 Chula Vista, California Maria Del Carmen Pulido Contreras Age: 43 Los Angeles, California Adrian Jovan Rocha Age: 27 Tijuana, Mexico Jonathan Rocha Age: 24 Tijuana, Mexico CHARGESTitle 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud
INVESTIGATING AGENCIES
Title 18, United States Code, Section 1956 - Conspiracy to Launder Money (international promotion)U.S. Immigration and Customs Enforcement’s Homeland Security Investigations
Qualcomm Sales Director Admits Insider TradingRead the Press Release
SAN DIEGO –Derek Montague Cohen, a former Sales Director at Qualcomm, Inc (NASD: QCOM) pled guilty today to insider trading and admitted netting almost $200,000 in fraudulent proceeds by trading ahead of Qualcomm’s 2011 acquisition of Atheros Communications. At the time of his illegal trade, Cohen was a director in Qualcomm’s North America Sales Department. Two of his former colleagues in the Sales Department -- Robert Herman and Michael Fleischli -- have already been charged and taken responsibility for their misconduct.
According to Cohen’s plea agreement, he and Herman were part of an informal stock trading group that occasionally shared tips and opinions with each other about the stock market. Beginning in December 2010, their immediate supervisor notified them that Qualcomm was contemplating a major acquisition of a public company, and emphasized that this information was secret. Because of his access to inside information at Qualcomm, Cohen knew there were a limited number of companies that could potentially be considered as acquisition targets by the company.
As detailed today in court, by the morning of January 4, 2011, Cohen had learned from his position at Qualcomm that the identity of the acquisition target was Atheros. Cohen then engaged in a series of stock and options trades to take advantage of this inside information at the expense of ordinary shareholders. Over the span of just a few hours, Cohen purchased 10,400 shares of Atheros stock, and 375 call options in Atheros, at a cost of over $430,000. Less than an hour after Cohen’s last illegal trade, the New York Times reported on the planned acquisition by Qualcomm, which caused Atheros’s stock price to rocket upward. Defendant sold his stock and stock options later that month for an illegal profit of just under $200,000 – an amount that he agreed to forfeit to the United States as part of his plea agreement.
Cohen was the fourth former Qualcomm executive charged with insider trading in connection with the company’s Atheros acquisition. Jing Wang, Qualcomm’s former Executive Vice President and President of Global Business Operations, pled guilty in July 2014 to insider trading and money laundering based on three separate instances in which he misused Qualcomm’s confidential information to trade in a secret brokerage account in the name of a British Virgin Islands entity. Wang – who reaped over $240,000 from his insider trading and then attempted to obstruct federal investigations into his misconduct – is to appear in federal court on February 20, 2015, at which time his sentencing hearing will be scheduled. Cohen’s co-defendant Robert Herman – who made just under $30,000 in proceeds and pled guilty in late 2014 – was sentenced earlier this month to three years of probation, fined $50,000, and ordered to complete 1,500 hours of community service. The fourth insider trading defendant, Michael Fleischli, was charged in May 2014 with making approximately $3,000 from insider trading on the Atheros acquisition, and is currently on a three-year period of supervision pursuant to a deferred prosecution agreement.
Wang’s stock broker, former Merrill Lynch vice president Gary Yin, has also been convicted of conspiring with Wang to launder the proceeds of Wang’s insider trading and obstruct the investigation into his misconduct. Yin is also scheduled to appear in federal court on February 20, when it is expected that his sentencing hearing will be set.
United States Attorney Laura E. Duffy complimented the Federal Bureau of Investigation for its exemplary work on this matter and expressed appreciation for the Los Angeles office of the U.S. Securities and Exchange Commission, Division of Enforcement (“SEC”), which worked collaboratively with prosecutors while conducting separate civil investigations of the same securities fraud offenses.
Cohen’s sentencing is set for May 22, 2015 at 9:00 a.m. before the Honorable Janis L. Sammartino.
DEFENDANT Case Number: 14CR1202-JLS Derek Montague Cohen Age: 52 San Diego, California CHARGESTitle 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5 million fine and three years of supervised release.
DEFENDANT Case Number: 13CR3487-WQH Jing Wang Age: 52 Del Mar, California CHARGESTitle 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5,000,000 fine, three years of supervised release, and restitution.
Title 18, U.S.C., Secs. 1956(a)(1)(B)(i) – Money Laundering. Maximum penalties include 20 years in prison, $500,000 fine, and three years of supervised release.
DEFENDANT Case Number: 13CR3488-WQH Gary Yin Age: 56 San Diego, California CHARGESTitle 18, U.S.C., Sec. 371 – Conspiracy to obstruct proceedings and commit money laundering. Maximum penalties include 5 years in prison, $250,000 fine, three years of supervised release, and restitution.
INVESTIGATING AGENCIESFederal Bureau of Investigation
Dozens of Alleged Members of Sinaloa Cartel Charged; List Includes Kingpin “El Mayo,” His Sons and Other Top LeadersRead the Press Release
Distribution cells are dismantled in Chula Vista,
National City and OceansideCHARGING DOCUMENTS click HERE
SAN DIEGO – Sixty alleged members and associates of the Mexico-based Sinaloa Cartel - including the highest ranking leaders, lieutenants and operators of multiple distribution cells - are charged in 14 indictments unsealed today with trafficking huge quantities of methamphetamine, cocaine, heroin and marijuana to points around the United States.
The indictments mark the conclusion of the third phase of a three-year investigation that, in total, has resulted in charges against 117 people and has had a significant impact on the worldwide operations of the Sinaloa Cartel.
This investigation has also offered one of the most comprehensive views to date of the inner workings of one of the world’s most prolific, violent and powerful drug cartels. Cartel members and associates were targeted for three years in a massive probe involving multiple countries, scores of law enforcement agencies around the United States, a number of federal districts and over 200 court-authorized wiretaps in this district alone.
The primary indictment, unsealed in federal court in San Diego today, targets the alleged leader of the cartel, Ismael Zambada-Garcia, known as “El Mayo,” as well as two of his four sons - Ismael Zambada-Sicairos, known as “Mayito Flaco,” and Ismael Zambada-Imperial, known as “Mayito Gordo.” Zambada-Imperial was arrested by Mexican authorities in November 2014.
Also part of that indictment is Ivan Archivaldo Guzman-Salazar, known as “Chapito,” whose father Joaquín “El Chapo” Guzmàn Loera was the alleged leader of the Sinaloa Cartel along with Mayo and considered the world’s most powerful drug lord until his arrest in Mexico in February 2014.
This case began in late 2011 as an investigation of what was at first believed to be a small-scale drug distribution cell in National City and Chula Vista. The alleged leader of that cell – Jose Luis Iglesias, aka Jose Bautista Samano-Molina – and a number of his associates were indicted in 2012. Iglesias remains a fugitive, but most of his associates have been sentenced.
But it soon became evident that the drugs were being supplied by the Sinaloa Cartel, and the case morphed into a massive multi-national, multi-state probe that has resulted in scores of arrests and seizures from San Diego, Los Angeles, Riverside, San Bernardino and Imperial counties to the big cities of San Francisco, Chicago, New York City and Detroit; the states of Nevada, Texas, South Carolina, Delaware, Pennsylvania, Minnesota, Kentucky, Georgia; and the countries of Mexico, Canada, Colombia, Great Britain, the Philippines, Guatemala and China.
Law enforcement in San Diego has worked hand-in-hand with agents in Chicago to target the upper level leadership of the Sinaloa Cartel. This partnership resulted in the indictment of these leaders in San Diego as well as the indictment of numerous high-level Sinaloa Cartel leaders in Chicago, including Chapo and his son Jesus Alfredo Guzman-Salazar.
On the local front, one of the indictments unsealed today charges alleged members of an Oceanside distribution cell linked to the Sinaloa Cartel which is believed responsible for supplying about one-third of the methamphetamine to the streets of San Diego’s North County.
According to court records, the alleged leader of the cell, Miguel Iram Quiroz-Perez, was indicted along with 13 associates who were responsible for distribution to customers that included documented members of the Deep Valley Bloods and the Deep Valley Crips street gangs.
As part of this investigation, U.S. authorities previously arrested and prosecuted another son of Mayo - Serafin Zambada-Ortiz - who pleaded guilty in the Southern District of California in September 2014 to drug trafficking charges. Zambada Ortiz, a U.S. citizen born in San Diego, pleaded guilty to conspiring to buy more than 100 kilograms of cocaine and more than 1,000 kilograms of marijuana in Sinaloa, then import it into the United States. Zambada Ortiz faces 10 years to life in prison when sentenced on May 22, 2015.
José Rodrigo Aréchiga-Gamboa, commonly referred to by his alias "El Chino Ántrax,” was arrested in the Netherlands and extradited to the United States by Dutch authorities in July 2014. Arechiga-Gamboa is believed to have worked for the Sinaloa Cartel as the leader of a violent enforcement arm of the Sinaloa Cartel called “Los Antrax” and a key lieutenant of Mayo.
Two of the indictments unsealed today also target Alfonso Arzate-Garcia, aka “Aquiles,” the alleged Tijuana Plaza boss for the Sinaloa cartel, and his brother, Rene Arzate-Garcia, aka “La Rana,” alleged to be an enforcer for the cartel in Tijuana who is believed responsible for a significant amount of violence in the Tijuana plaza. Both men are fugitives.
Two alleged high-ranking cartel leaders - Alfonso Limon-Sanchez and Rafael Felix-Nunez - were arrested in separate incidents by Mexican authorities in November 2014.
Limon-Sanchez is alleged to be one of Mayo’s primary cocaine sources of supply. Felix-Nunez is alleged to have been one of Chino Antrax’s chief lieutenants in Los Antrax.
“This extraordinary case is this district’s most significant, comprehensive and large-scale cartel prosecution since the dismantling of the Arellano-Felix drug trafficking organization,” said U.S. Attorney Laura Duffy. “We are going after the Sinaloa Cartel with the same passion, knowing that the drugs and violence peddled by the cartel are destroying lives and tearing the fabric of our communities.”
“The culmination of this investigation is significant not only to the citizens of San Diego, but to citizens of our entire country,” said DEA San Diego Special Agent in Charge William R. Sherman. “DEA has long known that the reach of the Sinaloa Cartel extends beyond the US/Mexico border to locations throughout the world. This investigation targeted the highest ranking members of this powerful cartel, taking them out of commission, seriously impacting their operational structure. DEA and its law enforcement partners will continue to target and investigate this violent and dangerous cartel until its world-wide operations are completely dismantled.”
“San Diego is at the forefront of narco-dollar money laundering, with couriers using bulk cash smuggling, structured bank deposits, and high-end luxury vehicles and airplanes to move their illicit drug proceeds,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “Seizing the dirty cash and assets of these illegal organizations will hit the criminals where it hurts the most--it will deprive them of their profits."
In all, with the conclusion of this third phase, the government has seized more than 652 kilograms of methamphetamine, 1,343 kilograms of cocaine, 12.2 tons of marijuana, 53 kilograms of heroin, 5,500 oxycodone pills and $14.1 million in narcotics proceeds.
According to the main indictment, the alleged leaders of the cartel imported large quantities of cocaine, methamphetamine and other drugs, as well as the chemicals to manufacture methamphetamine, into Mexico from Asia and Central and South American countries including Colombia, Ecuador, Venezuela, Peru, Panama, Costa Rica, Honduras and Guatemala. The traffickers used various methods to move the drugs, including cargo aircraft, private aircraft, submarines and other submersible and semi-submersible vessels, container ships, supply vessels, go-fast boats, fishing vessels, buses, rail cars, tractor trailers, trucks, automobiles, and private and commercial interstate and foreign carriers, the indictment said.
The indictment alleges that the large quantities of drugs were then smuggled across the international border to San Diego via automobiles, tractor trailers, trucks, fishing vessels and tunnels and stored at various stash houses, safe houses and warehouses in San Diego County. The cocaine, methamphetamine and marijuana were transported and distributed from there to locations throughout the U.S.
According to the indictment, trafficking proceeds were laundered through bulk cash smuggling; structured bank deposits; wire transfers; currency exchange transfers; alternative credit-based systems used to transfer money without the use of wires or other traditional means; goods-based systems in which items, including high end luxury vehicles and airplanes, were purchased in one location and transferred to another location; and other methods by shared networks of money couriers and money launderers associated with the Sinaloa Cartel.
According to the indictment, the government is seeking criminal forfeiture of a number of possessions, including a 1982 Cessna Turbo 210 aircraft, a Lamborghini Murceilago luxury vehicle, and other vehicles and property.
In order to protect their drug distribution activities and evade law enforcement, the traffickers took a number of steps. They obtained guns and other weapons and used intimidation, violence and threats of violence against members of law enforcement, rival drug traffickers and members of their own drug trafficking organization, the indictment said.
DEFENDANTS Case Number: 14CR0658-DMS Ismael Zambada-Garcia, aka Mayo Age: 64Culiacan, Mexico
Ismael Zambada-Imperial aka Mayito Gordo Age: 30Culiacan, Mexico
Ismael Zambada-Sicairos, aka Mayito Flaco Age: 32Culiacan, Mexico
Ivan Archivaldo Guzman-Salazar Age: 31Culiacan, Mexico
FULL LIST OF DEFENDANTS Click HERE
CHARGESContinuing Criminal Enterprise, in violation of Title 21 U.S.C. §§ 848(a) and (b)
Term of custody including a mandatory minimum 20 years and up to life imprisonment, $2 million fine and 5 years supervised release.Ismael Zambada-Garcia is charged as the principal administrator, organizer or leader of the enterprise or is one of several such principal administrators, organizers, or leaders; and the violation involved 300 times the quantity of a substance described in subsection 841(b)(1)(B) (100 grams of heroin, 500 grams of cocaine, 100 kilograms of marijuana or 50 grams of Methamphetamine mixture), which is mandatory life imprisonment.
Conspiracy to Distribute Controlled Substances for Purpose of Unlawful Importation, in violation of Title 21 U.S.C. §§ 959, 960 and 963; Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.
Conspiracy to Import Controlled Substances, in violation of Title 21 U.S.C. §§ 952, 960 and 963. Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.
Conspiracy to Distribute Controlled Substances, in violation of Title 21 U.S.C. §§ 841 and 846
Term of custody including a mandatory minimum 10 years and up to life imprisonment, $10,000,000 fine and 5 years supervised release.Conspiracy to Commit Money Laundering, in violation of Title 18 U.S.C. §§ 1956 (a)(2)(A) and (h)
Term of custody up to 20 years imprisonment, a fine of the greater of $500,000 or twice the value of the monetary instrument or funds involved and 5 years supervised release. INVESTIGATING AGENCIESDrug Enforcement Administration
Customs and Border Protection Office of Field Operations
Customs and Border Protection Office of Border Patrol
Internal Revenue Service
Federal Bureau of Investigation
Homeland Security Investigations
United States Attorney’s Office, Northern District of Illinois
Department of Treasury, Office of Foreign Asset Control
Oceanside Police Department
San Bernardino County Sheriff’s Department
National City Police Department
Chula Vista Police Department
San Diego Police Department
San Diego County District Attorney’s Office
San Diego Law Enforcement Coordination Center
Interpol*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Malaysian Defense Contractor Leonard Francis Pleads Guilty to Corruption Conspiracy Involving “Scores” of Navy Officials; A Navy Captain – The Highest Ranking so Far - Admits He Was One of ThemRead the Press Release
SAN DIEGO - Leonard Glenn Francis, owner and chief executive of Glenn Defense Marine Asia, pleaded guilty to bribery and fraud charges in federal court today, admitting that he presided over a massive, decade-long conspiracy involving “scores” of U.S. Navy officials, tens of millions of dollars in fraud and millions of dollars in bribes and gifts – from cash, prostitutes and luxury travel to Cuban cigars, Kobe beef and Spanish suckling pigs.
Also today, U.S. Navy Capt. Daniel Dusek, 47, was charged via information and pleaded guilty to a single count of conspiracy to commit bribery before U.S. Magistrate Judge William V. Gallo. Dusek, the highest-ranking of five current or former Navy officials to plead guilty in the case so far, admitted that he used his influence as Deputy Director of Operations for the 7th Fleet, headquartered in Yokosuka, Japan, and later as executive officer of the USS Essex and the commanding officer of the USS Bonhomme Richard, to benefit Francis and GDMA, which for decades provided port services to U.S. Navy ships. Dusek admitted that in return, Francis plied him with meals, alcohol, entertainment, gifts, dozens of nights and incidentals at luxury hotels and the services of prostitutes.
Francis, a 50-year-old Malaysian national, and his corporate entity GDMA, both pleaded guilty to conspiracy to commit bribery, bribery and conspiracy to defraud the United States before U.S. Magistrate Judge Jan M. Adler. According to the plea agreement, Francis faces up to 25 years in prison.
Francis also admitted to defrauding the U.S. Navy of tens of millions of dollars by routinely overbilling for everything from fuel to tugboats to sewage disposal. The government and Francis have agreed that Francis and GDMA should forfeit $35 million of the ill-gotten proceeds and pay full restitution to the U.S. Navy, an amount to be determined by U.S. District Judge Janis L. Sammartino upon sentencing.
In his plea agreement, Francis conceded that over the course of the conspiracy, he and GDMA gave public officials millions of dollars in things of value, including over $500,000 in cash; hundreds of thousands of dollars in the services of prostitutes and associated expenses; hundreds of thousands of dollars in travel expenses, including airfare, often first or business class, luxurious hotel stays, incidentals and spa treatments; hundreds of thousands of dollars in lavish meals, top-shelf alcohol and wine and entertainment; and hundreds of thousands of dollars in luxury gifts, including designer handbags and leather goods, watches, fountain pens, fine wine, champagne, Scotch, designer furniture, consumer electronics, ornamental swords and hand-made ship models.
Francis identified seven Navy officials who accepted his bribes – including Dusek; Commanders Jose Luis Sanchez and Michael Vannak Khem Misiewicz; Naval Criminal Investigative Service Special Agent John Beliveau; Petty Officer First Class Dan Layug; and two unnamed, yet-to-be-charged individuals - a contract specialist and a lieutenant commander. All of the charged Navy officials have pleaded guilty except Misiewicz, whose case is pending. Misiewicz has pleaded not guilty.
“It is astounding that Leonard Francis was able to purchase the integrity of Navy officials by offering them meaningless material possessions and the satisfaction of selfish indulgences,” said U.S. Attorney Laura Duffy. “In sacrificing their honor, these officers helped Francis defraud their country out of tens of millions of dollars. Now they will be held to account.”
“Today’s guilty pleas of Leonard Francis, his company, and a Navy officer are vitally important steps in our active, ongoing investigation,” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division. “We will continue our efforts to root out those implicated in this long-running corruption scheme, both inside the Navy and out. The interests of justice and national security demand nothing less.”
“The greed of all those involved in this massive fraud and bribery case has cost American taxpayers tens of millions of dollars,” said Naval Criminal Investigative Service Director Andrew Traver. “NCIS and our law enforcement partners have pored through mountains of documents and emails, discovering and documenting the crimes so that those who participated can be held accountable. Although today's pleas are a significant milestone in the case, this investigation is far from over; there is much more work to be done.”
“The guilty pleas entered today send a clear message to those who, driven by greed, betray the faith and trust of the American taxpayers" said Deputy Inspector General for Investigations James B. Burch of the Department of Defense, Defense Criminal Investigative Service. “The DCIS, along with its law enforcement partners, will relentlessly pursue those who corrupt the procurement process for their own personal benefit.”
“I'm extremely gratified that the work of our investigative support team could make a significant contribution to the outcome in this egregious case of defrauding the government and, ultimately, the American taxpayer,” said Anita Bales, Director of Defense Contract Audit Agency.
According to Dusek’s plea agreement, he hand-delivered Navy ship schedules to the GDMA office in Japan or emailed them directly to Francis or a GDMA employee on dozens of occasions, each time taking steps to avoid detection by law enforcement or U.S. Navy personnel. Dusek was so helpful to GDMA that an employee identified him as “an official GDMA card holder.” And he was rewarded for his efforts. In one example cited in the plea agreement, GDMA paid for a hotel for Dusek and his family at the Marriott Waikiki in Hawaii on July 19, 2010. A few weeks later, on August 5, 2010, GDMA paid for a hotel room for Dusek at the Shangri-La in Makati, Philippines and while there, GDMA provided him with the services of a prostitute.
Soon after, Francis asked Dusek to exercise his influence on GDMA’s behalf by steering the aircraft carrier USS Abraham Lincoln and its associated strike group to Port Klang, Malaysia – a port terminal owned by Francis. Dusek replied in a series of emails to GDMA in late August 2010 that he would make it happen. “Good discussion with N00 (Admiral) today and convince him that PKCC (Francis’ terminal) is the better choice,” Dusek wrote to Francis on August 21, 2010. Three days later, Dusek reported to Francis that he had “everyone in agreement that the next CSG (Carrier Strike Group) through the AOR (area of responsibility) will stop at PKCC. Dates will be 08-12 Oct.”
The USS Abraham Lincoln Carrier Strike Group did, in fact, make that visit to Francis’ port on October 8-12, 2010.
In an email to one of his employees, Francis wrote on October 3, 2010: “(Dusek) is a golden asset to drive the big decks (aircraft carriers) into our fat revenue GDMA ports.”
On September 17, 2013, when Dusek learned that Francis and Navy personnel had been arrested, he deleted the contents of his email accounts in an effort to avoid detection by law enforcement.
In the Francis plea agreement, Francis admitted that he required his Navy contacts to use their influence to benefit GDMA by steering contracts to GDMA; by scheduling and directing Navy ships to various ports favored by GDMA; and by advocating for and advancing GDMA’s interests with the Navy with respect to ship husbanding issues.
Francis also said Misciewicz provided classified and proprietary Navy information on dozens of occasions and in return, he gave cash and paid travel expenses for Misciewicz. The plea agreement lists eight examples.
Francis acknowledged that he recruited NCIS Special Agent Beliveau, who was the first to plead guilty in this case, to conduct regular searches of the NCIS database which housed information about ongoing NCIS investigations; to download NCIS reports involving investigations into the activities of GDMA and Francis and provide copies of these reports to Francis; and to give Francis advice and counsel on how to respond to, stall and thwart these investigations.
As part of his plea, Francis admitted that Beliveau gave him the identities of subjects of these investigations; the information provided by witnesses and documents, including identifying information about cooperating witnesses and their testimony; the aspects of GDMA’s billings that were of concern to the investigations; the fact that the investigations had obtained email accounts, and the identity of those accounts; the particulars about bank records and financial information sought by the investigations; the reports to prosecutors; and outlines of planned future investigative activities.
Besides Francis, two other GDMA executives - Alex Wisidagama and Edmond Aruffo – have pleaded guilty, acknowledging their roles in defrauding the United States. That brings the total of guilty pleas to seven of eight defendants.
Francis and Dusek are scheduled to be sentenced on April 3, 2015 at 9 a.m by Judge Sammartino.
The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California and Director of Procurement Fraud Catherine Votaw and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section.
Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.
DEFENDANT Case Number: 13-CR-3781, 3782 and 4287 Leonard Glenn Francis Age: 50 Singapore Glenn Defense Marine Asia Pte. Ltd. Singapore CHARGESConspiracy to Commit Bribery, in violation of 18 U.S.C. § 371. Maximum penalty five years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater;
Bribery, in violation of 18 U.S.C. § 201. Maximum 15 years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater. Mandatory restitution.
Conspiracy to Defraud the United States, in violation of in violation of 18 U.S.C. sec. 371. Maximum penalty five years in prison $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater. Mandatory restitution.
DEFENDANT Case Number: 15-CR-131-JLS Daniel Dusek Age: 47 San Diego, CA CHARGESConspiracy to Commit Bribery, in violation of 18 U.S.C. § 371. Maximum penalty five years in prison, $250,000 fine or twice the gross pecuniary gain or loss from the offense, whichever is greater.
INVESTIGATING AGENCIESDefense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit Agency*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Doctor Sentenced to Four Years for Tax FraudRead the Press Release
SAN DIEGO – Judge Anthony J. Battaglia today sentenced Dr. James Francis Murphy to 48 months in custody for his years-long efforts to obstruct the IRS from assessing and collecting the hundreds of thousands of dollars of income taxes he owed from the operation of his medical practices in Encinitas, California, and Omaha, Nebraska. Dr. Murphy was also ordered to pay nearly half a million dollars in restitution to the Internal Revenue Service.
His wife, Denine Christine Murphy, a co-defendant in the case, was sentenced to 12 months of house arrest and ordered to pay restitution of $147,528.
Evidence presented at trial showed that despite earning as much as $1 million a year from their osteopathic medical practice, Dr. and Mrs. Murphy paid almost no federal income taxes for a decade. Instead of accurately declaring their income and paying taxes lawfully owed to the United States, and despite repeated warnings from the IRS, the Murphys filed false income tax returns for the medical practice using a bogus “trust,” and filed false personal income tax returns concealing their true income. In addition, in some years the Murphys simply refused to file required tax returns at all. Incredibly, for several years their fraudulent tax returns triggered the Earned Income Credit, and resulted in their receiving tax refunds from the IRS.
As presented at trial, when confronted by the IRS and notified that they owed substantial sums in taxes, the Murphys engaged in a variety of schemes to prevent the United States from correctly assessing and collecting these taxes. These schemes included: (1) falsely claiming that they were not citizens of the United States; (2) frivolously claiming that the federal tax laws did not apply to them; (3) fraudulently presenting fictitious documents such as “Private Offset Discharge and Indemnity Bonds” and “Bonded Promissory Notes,” purportedly worth hundreds of millions of dollars, as payment on their tax obligations; and (4) fraudulently claiming that the hundreds of thousands of dollars they paid to credit card companies, utilities, and other vendors were actually withholdings of federal income taxes, thereby entitling them to over a million dollars in refunds from the IRS. The defendants even claimed that the then-Secretary of the Treasury, Henry Paulson, was their “fiduciary,” who was responsible for paying their taxes.
The defendants were found guilty by a jury on June 20, 2014 after a two-week jury trial held before Judge Battaglia. At today’s sentencing, Judge Battaglia described Dr. Murphy’s conduct as “a calculated, deliberate, and orchestrated series of efforts…to avoid tax liability.” The court noted that Dr. Murphy’s crimes represented “a pretty offensive set of circumstances.” Judge Battaglia decried the “nature of the arrogance, [in] how these mechanisms were utilized” to carry out what the court characterized as an “all out scheme to defraud the government.”
U.S. Attorney Laura E. Duffy commented, “The Murphys went to outrageous lengths to deprive the U.S. taxpayers of their fair share of the tax burden. It is especially egregious that they exploited the Earned Income Tax Credit, a credit intended to benefit low-income working families, to collect refunds they were not entitled to receive. Taxpayers should be aware that schemes to avoid paying taxes will result in serious consequences – including significant jail time – in addition to having to pay back taxes with interest.”
“As we approach tax filing season, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation. “No matter what the source of income, all income is taxable. The prosecution of individuals who intentionally conceal income and evade taxes is a vital element of the IRS’ enforcement strategy.”
Rod Ammari, Special Agent in Charge of the Treasury Inspector General for Tax Administration stated, “James and Christine Murphy’s attempts to corruptly impede tax administration by submitting fraudulent documents to the IRS will not be tolerated. These schemes that are used to avoid paying their fair share affects all hard working taxpayers, and Treasury Inspector General for Tax Administration is committed to investigating these criminal schemes.”
Dr. Murphy is required to surrender to begin his custodial term by February 24, 2015.
DEFENDANT Case Number: 12CR2497-AJB Dr. James Francis Murphy Age: 53Encinitas, California
Denine Christine Murphy Age: 52Encinitas, California
CHARGESCount 1: Corrupt interference with the administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a). Both defendants. Maximum penalties – 3 years’ custody, $250,000 fine.
Counts 2-5: Presenting fictitious financial obligations, in violation of 18 U.S.C. § 514. Defendant Dr. James Francis Murphy. Maximum penalties – 10 years’ custody and $250,000 fine (per count).
Counts 6-8: False claims to the United States, in violation of 18 U.S.C. § 287. Both defendants. Maximum penalties – 5 years’ custody and $250,000 fine (per count). INVESTIGATING AGENCIESInternal Revenue Service, Criminal Investigation
Treasury Inspector General for Tax AdministrationFurniture Company Used as Front for International “Fish” Smuggling OperationRead the Press Release
A Los Angeles-based furniture business, Kaven Company, Inc. (“Kaven”) and its owner, Kam Wing Chan, were arraigned yesterday on charges related to the smuggling of millions of dollars in endangered abalone, sea cucumber, and Totoaba into San Diego from Mexico.
The indictment alleges that Chan used Kaven, which was ostensibly an importer of Asian furniture, to purchase endangered fish in Mexico, import them into the United States, and then export them to Asia. For example, as noted in the charging documents, on various occasions, Chan smuggled: (1) 37 pounds of dried abalone (including the endangered white and black abalone) and 58 Totoaba swim bladders into the United States on October 9, 2013; (2) 20,006 pounds of sea cucumber on March 23, 2012; and (3) 1,014 pounds of abalone on January 15, 2013. The seafood was allegedly purchased in violation of Mexican law because the invoices presented did not properly demonstrate the origin of the fish.
In total, Chan and Kaven are charged with illegally exporting (from September 1, 2009 through May 30, 2013) more than $3 million in seafood to China. These exports were destined primarily to companies owned by one of Chan’s relatives.
All three smuggled fish are prized in Asia where they are considered "culinary delicacies," and often adorn the buffets of festival meals and are served at formal dinners. For example, dried-out versions of the 377 known tropical species of Sea Cucumber retail between $10 and $600 per kilogram in Hong Kong and on mainland China. One species has been reported to sell on the black market for $3000 per kilo.
According to scientists, Sea Cucumbers provide an important service for reef ecosystems. Among other things, they help to keep the sand in reef lagoons and sea grass beds fresh by turning them over, and by feeding on the dead organic matter that's mixed in with the sand, the nutrients they excrete can re-enter the biological web by algae and coral. Without the sea cucumbers, that sort of nutrient recycling could not occur. It's also thought that sea cucumbers help to protect reefs from damage due to ocean acidification. Feeding on reef sand appears to increase the alkalinity of the surrounding seawater.
Totoaba macdonaldi, also known as Cynoscion macdonaldi, is the largest species within the scaienidae family of fish. It can grow to more than 6-1/2 feet in length, weigh up to 220 pounds, and can live up to 30 years. These fish are found only in the Gulf of California, the narrow inlet between Baja California and the Mexico's mainland (also called the Sea of Cortez). The fish can be identified by its dusky silver color, elongated body, sharp snout, projecting lower jaw, and a slightly convex tail. According to the indictment, a single Totoaba swim bladder, highly prized for use in soups, can sell for $1400-$4000 in Mexico and up to ten time that amount in Asia.
Totoaba macdonaldi was included in the most protected list (Appendix 1) of species covered by the Convention on International Trade in Endangered Species (“CITES”) in 1976, and was listed as endangered under the U.S. Endangered Species Act in 1979. Both Mexico and the United States are signatories to CITES. It is a violation of law in both countries to trade in Totoaba or any part of a Totoaba.
Black abalone (Haliotis cracherodii) and white abalone (Haliotis sorenseni) are also species listed as endangered pursuant to the Endangered Species Act. Black abalone was listed as endangered on January 14, 2009, and white abalone was listed as endangered on May 29, 2001.
Mexican fisheries law (the General Law on Sustainable Fishing and Aquaculture) requires that the lawful origin of fisheries products be demonstrated by means of an arrival, harvest, production, or collection notice, an import permit, or a fisheries waybill (for transport). The failure to demonstrate such lawful origin is a violation of law.
“In collaboration with our international, federal and state law enforcement partners, NOAA will do everything in its power to make sure marine resources are protected and wildlife trafficking is shut down and those who attempt to profit from the exploitation of vulnerable and threatened species are brought to justice,” said Eileen Sobeck, Assistant Administrator for NOAA Fisheries.
Kaven Company and Kam Wing Chan are scheduled to appear before United States District Court Judge Anthony J. Battaglia on February 6, 2015, at 1:30 p.m. for a hearing on all motions.
DEFENDANTS Case Number: 14CR3662-AJB Kaven Company Los Angeles, CA Kam Wing Chan Age: 61 Monterey Park, CA CHARGESCount 1
INVESTIGATING AGENCIES
Conspiracy, in violation of Title 18, United States Code, Section 371; Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment
Counts 2, 4, 5, and 7
Unlawful Importation of Wildlife, in violation of Title 16, United States Code, Sections 3372(a)(2)(A) and 3373(a)(1)(A); Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment
Counts 3 and 6
Smuggling/Importation Contrary to Law, in violation of Title 18, United States Code, Section 545; Maximum Penalty: 20 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment
Count 8
Unlawful Trafficking in Wildlife, in violation of Title 16, United States Code, Sections 3372(a)(1)(A) and 3373(d)(1)(B); Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss and a $100 penalty assessment
Forfeiture
In violation of Title 16, United States Code, Section 3374 and Title 18, United States Code, Section 981.National Oceanic and Atmospheric Administration, Office of Criminal Enforcement; U.S. Fish and Wildlife Service, Office of Criminal Enforcement
*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Three-Time Convicted Sex Offender Convicted of Possession of Child PornographyRead the Press Release
United States Attorney Laura E. Duffy announced that today Norman Paul Felts, a United States citizen who had been living in Mexico, was convicted after a bench trial before U.S. District Judge Cathy Ann Bencivengo of possession of child pornography with a prior sex offense. Felts has been in custody since his arrest by Special Agents with Homeland Security Investigations in June 2013.
According to the evidence presented to the Court, between January 2010 and May 28, 2013, Felts possessed a loose hard drive that contained several images of child pornography. On May 28, 2013, Felts entered the United States and was found in possession of a loose hard drive which was later found to have contained several images of minors engaged in sexually explicit conduct concealed in a folder called “One Million Recipes.”
Felts’ arrest was a result of an investigation stemming from a Cybertip to the National Center for Missing and Exploited Children (NCMEC). NCMEC referred the tip to the HSI Representative for the Office of the Assistant Attaché in Tijuana, Mexico for further investigation. Authorities located a male minor who worked on Felt’s boat in Mexioc, and Felt stipulated at trial that he took sexually-explicit pictures of the boy, knowing the boy was underage. When Felts was contacted at the Tecate Port of Entry on May 28, 2013, Special Agents from the Cyber Crimes and Computer Forensics Group assigned to the Office of the Special Agent in Charge in San Diego, California became involved with the investigation. Felts has three prior sex offense convictions as far back as 1972, when he was convicted of oral copulation. Felts was also convicted for child molestation in Georgia in 1977. Felts’ most recent sex offense conviction was in 1999 for procurement of a minor under 16 for a lewd act.
“The U.S. Attorney’s Office commends the CBP officers and HSI Special Agents who work diligently to prevent purveyors of child pornography from continuing to exploit these children both here in the United States and abroad,” said United States Attorney Laura E. Duffy.
Felts faces a mandatory minimum sentence of 10 years and up to 20 years in prison, a lifetime of supervised release and a $250,000 fine. Sentencing is scheduled for March 27, 2015.
DEFENDANTS Case Number: 13CR2296-CAB Norman Paul Felts Age: 70 Ensenada, Mexico CHARGESTitle 18, United States Code, Section 2252(a)(4) and (b) – Possession of Matters Containing Images of Minors Engaged in Sexually Explicit Conduct
INVESTIGATING AGENCIESHomeland Security Investigations
*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
ANSUN BIOPHARMA to Pay More Than $2 Million for Overbilling the U.S.Read the Press Release
Local Biotech Company Doctored Timesheets on NIH ContractsUnited States Attorney for the Southern District of California Laura E. Duffy announced that a local biopharmaceutical company, Ansun Biopharma, Inc., entered into criminal and civil settlements with the Department of Justice that will require it to make approximately $2 million in payments to the United States. These settlements resolve a criminal and related civil investigation against Ansun for submitting false and fraudulent claims on grants and a contract with the National Institutes of Health (“NIH”).
Ansun Biopharma, Inc., formerly known as NexBio, Inc., is a biotechnology company headquartered in San Diego, California, that, from 2004 through 2011, had received several research grants and a contract from the NIH. Among these were a grant award for “Broad-Spectrum Therapeutics for Influenza,” a grant award for “Development of Fludase as an Anti-Influenza Agent,” and, in September 2006, a $50 million contract to develop a drug to combat influenza (the “Fludase Contract”). Fludase was an experimental antiviral drug for the treatment of influenza.
According to the settlements, Ansun’s former Chief Executive Officer, Mang Yu, directed its then-Vice President of Finance and Administration (who was responsible for the accounting department) Dongmei Wang, to fabricate timesheets for company employees to maximize billing on the NIH grants and the Fludase Contract.
The company admitted that in 2009, it created a time-keeping policy that required employees to accurately record the number of hours devoted to certain projects, including projects covered under the Fludase Contract and other NIH-funded grants. The policy also required employees to accurately record the number of hours attributed to overheard, General &Administrative, and other labor categories. Despite these time-keeping requirements instituted by NexBio, Yu directed accounting personnel to maximize reimbursements from NIH, regardless of the actual number of employee hours spent on the Fludase Contract or the other NIH-funded grants. In particular, Yu directed Wang to bill employee hours to the Fludase Contract, even if the project the employee was working on did not fall within the scope of the Fludase Contract.
The company also acknowledged that Yu informed Wang that NexBio should use the money authorized by the Fludase Contract whenever possible, in case NIH terminated the Fludase Contract before NexBio had used all the allotted funds. In addition, Yu told Wang to extend the funding available on the NIH grants for as long as possible because he needed access to the money from the grants to manage cash flow problems at the company.
To comply with Yu’s orders, Wang corrupted the integrity of the employee time-keeping system by fabricating timesheets for certain employees, altering the number of hours entered on certain timesheets and moving employee hours from one labor category to another, and from non-government projects to either the Fludase Contract or one of the NIH grants. The purpose and effect of these alterations was to obtain money from NIH, even if the work was not covered under the terms of the Fludase Contract or NIH grants.
For this conduct, occurring from the 2004 to 2011, a criminal information was filed today charging Ansun with a violation of Title 18, United States Code, Section 1031, executing a scheme to defraud the United States in a contract valued more than $1 million. As part of its settlement, Ansun has agreed to pay the NIH $1,654,600.00.
Separately, Ansun entered into a settlement agreement with the United States to resolve civil allegations that it violated the False Claims Act by submitting invoices that falsely stated the number and category of hours worked by employees in connection with several research grants and a contract funded by NIH. The fabricated invoices resulted in the submission of false claims from September 1, 2006, through June 30, 2011. Ansun agreed to settle the civil matter with a payment of $495,000 to the United States. The False Claims Act is the government’s primary civil remedy to redress false claims for government funds under government contracts and research grants.
Wang was previously charged and pled guilty to executing a scheme to defraud the United States in a contract valued more than $1 million, in violation of Title 18, United States Code, Section 1031. After Wang complied with the terms of a deferral agreement, that charge was dismissed in December 2014.
Yu was previously charged and pled guilty to interfering with officers of the Department of Health and Human Services, in violation of Title 42, Section 262(c), (e), and (f), and was sentenced to one year of probation in August 2014.
DEFENDANTS Case Number: 15CR0024-DMS ANSUN BIOPHARMA, INC. San Diego, CA Case Number: 14CR2352-AJB MANG YU Age 58 Rancho Santa Fe, CA Case Number: 13CR2056-MMA DONG MEI WANG Age 49 San Diego, CA CHARGESExecuting a Scheme to Defraud the United States, in violation of 18 U.S.C. § 1031.
Maximum Penalties for a corporation: 5 years’ probation, $5,000,000 fine or twice the gross gain or gross loss resulting from the offense, $400 special assessment, restitution.Interference with Officers of United States Department of Health and Human Services, in violation of 42 U.S.C. § 262
INVESTIGATING AGENCIES
Maximum Penalties: 1 year imprisonment, $100,000 fine, $25 special assessment, 5 years’ probation.Department of Health and Human Services, Office of the Inspector General
Federal Bureau of InvestigationNavy Commander Pleads Guilty to Accepting Cash and Prostitutes in International Bribery SchemeRead the Press Release
U.S. Navy Commander Admits Providing Contractor with Classified Ship Schedules; Becomes Fifth of Seven Defendants to Plead GuiltySAN DIEGO, CA – U.S. Navy Commander Jose Luis Sanchez pleaded guilty to bribery charges in federal court today, admitting that he provided a government contractor with classified ship schedules and other internal U.S. Navy information in exchange for cash, travel and entertainment expenses and the services of prostitutes.
Sanchez, 42, an active duty U.S. Navy Officer stationed in San Diego, is one of seven defendants charged – and the fifth to plead guilty – in the corruption probe involving Glenn Defense Marine Asia (GDMA), a defense contractor based in Singapore that serviced U.S. Navy ships and submarines throughout the Pacific.
Sanchez, the highest-ranking Naval official to plead guilty in the case so far, admitted to bribery and bribery conspiracy before U.S. Magistrate Judge David H. Bartick. A sentencing hearing was scheduled for March 27, 2015, at 9 a.m., before U.S. District Judge Janis L. Sammartino.
“Commander Sanchez lost sight of the Navy’s core values and embraced a lifestyle of greed,” said U.S. Attorney Laura Duffy. “We continue to unearth the full scope of this pernicious fraud and bribery scheme, and we will pursue the evidence, wherever it leads us.”
“Commander Sanchez sold out his command and country for cash bribes, luxury hotel rooms, and the services of prostitutes,” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division. “After today’s guilty plea, instead of free stays at the Shangri-La hotel, Sanchez is facing many nights in federal prison. The Department of Justice’s Criminal Division is committed to prosecuting those who abuse positions of public trust for personal enrichment at the expense of national security and the American taxpayers.”
“During the course of the investigation into the criminal enterprise, investigators have compiled voluminous evidence identifying multiple persons of interest, generating numerous leads, and establishing and corroborating connections,” said Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS). “NCIS and our law enforcement partners are committed to seeing this massive fraud and bribery investigation through to its conclusion, so that those responsible are held accountable.”
“This outcome again sends the message that corruption will be vigorously investigated and prosecuted,” said Deputy Inspector General of Investigations James B. Burch of the Department of Defense, Defense Criminal Investigative Service. “This is an unfortunate example of dishonorable Naval officers who recklessly risked the safety of our troops by trading classified information for cash, extravagant gifts and prostitutes. Cases such as these are not motivated by need or other difficult personal circumstances; they are the product of simple greed. This investigation should serve as a warning that those who compromise the integrity of the United States will face their day of reckoning. DCIS and our law enforcement partners will pursue these crimes relentlessly.”
According to his plea agreement, from April 2008 to April 2013, Sanchez held various logistical positions with the U.S. Navy’s Seventh Fleet in Asia. Sanchez admitted that, beginning in September 2009, he entered into a bribery scheme with Leonard Glenn Francis, the CEO of GDMA, in which Sanchez provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to benefit GDMA. In return, Francis gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes. Sanchez admitted that this bribery scheme continued until September 2013.
In his plea agreement, Sanchez admitted to seven specific instances in which he provided Francis with classified U.S. Navy ship and submarine schedules. He also admitted using his position and influence with the U.S. Navy to benefit GDMA and Francis on various occasions. Further, Sanchez admitted that he tipped Francis off about investigations into GDMA overbillings and briefed Francis on internal U.S. Navy deliberations.
Sanchez further admitted that, in exchange for this information, Francis provided him with cash, entertainment and stays at high-end hotels. For example, in May 2012, Francis paid for Sanchez to stay five nights at the Shangri-La, a luxury hotel in Singapore, and, two months later, Francis paid for Sanchez’s travel from Asia to the United States, at a cost of over $7,500. According to the plea agreement, Francis arranged and paid for the services of prostitutes for Sanchez while Sanchez was in Singapore and elsewhere in Asia.
In addition to Sanchez, two other U.S. Navy officials – former NCIS Special Agent John Beliveau and Petty Officer First Class Dan Layug – have pleaded guilty in this case, as well as former GDMA executives Alex Wisidagama and Edmond Aruffo.
Also today, U.S. Navy Captain-Select (Commander) Michael Vannak Khem Misiewicz, 47, who was previously charged via information, was indicted by a federal grand jury in the Southern District of California on seven additional bribery counts.
According to allegations in the indictment, from at least as early as July 2011 until September 2013, Misiewicz provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to advance the interests GDMA. In return Francis allegedly gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes.
The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California and Director of Procurement Fraud Catherine Votaw and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section.
Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.
DEFENDANT Case Number: 13-CR-4287 Jose Luis Sanchez Age: 42 San Diego, CA CHARGESConspiracy to Commit Bribery, in violation of 18 U.S.C. § 371
DEFENDANT Case Number: NYA Michael Vannak Khem Misiewicz Age: 47 San Diego, CA CHARGES
Bribery, in violation of 18 U.S.C. § 201Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371
INVESTIGATING AGENCIES
Bribery, in violation of 18 U.S.C. § 201Defense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit Agency*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Alleged Gang Members and Associates Indicted in Cross-Country Sex Trafficking ConspiracyRead the Press Release
Read the indictment - Click HERE Presentation slides - Click HERESAN DIEGO – Twenty-two alleged gang members and associates are charged in a federal grand jury indictment with participating in a racketeering conspiracy involving the cross-country sex trafficking of underage girls, including many who were recruited from East County middle and high schools.
Early this morning detectives and agents from the San Diego County Sheriff’s Department, Homeland Security Investigations and the FBI, with assistance from other agencies, made 15 arrests and served 11 search warrants here and in Hemet, California; Tucson, Arizona, and Austin, Texas. Just one defendant remained at large at midday; seven were already in state custody. Some of the local defendants are scheduled to make their first court appearances tomorrow at 10:30 a.m. before U.S. Magistrate Judge Ruben Brooks.
The indictment, unsealed today, alleges that the defendants are associated with a relatively new gang formed in 2008 called “Tycoons,” which, until this morning, operated a nationwide prostitution enterprise primarily from its base in Lemon Grove and Spring Valley.
According to the indictment and other court documents, the enterprise was also involved in other crimes such as attempted murder, assaults, drug trafficking, robberies, residential and commercial burglaries, and beatings, intimidation and threats of violence against female victims, witnesses in criminal cases and members of the community.
Over the course of the two-year investigation, law enforcement identified approximately 100 girls and young women - as young as 12 years old, up to the mid-twenties - who were manipulated with promises of a lavish lifestyle or were forced through threats or actual violence to work as prostitutes for the enterprise, according to a search warrant.
Many of them were recruited on school campuses in East County by pimps and experienced, high-ranking prostitutes, the warrant said. During the course of the conspiracy, the girls and women were transported from San Diego County to customers in California and beyond – to Texas, Arizona, Kansas, Michigan, Nevada and elsewhere, the indictment said.
The defendants allegedly used a number of methods to manipulate the recruits, including false promises of a luxurious lifestyle, intimidation, and actual or threatened violence. Court records indicate that the alleged pimps regularly furnished drugs and alcohol to lower the recruited prostitute’s inhibitions and increase her productivity.
“Victims of sex trafficking are young, just getting started in life,” said U.S. Attorney Laura Duffy. “They have hopes and dreams of being loved and having beautiful lives ahead of them. Gang members are exploiting these dreams and stealing the souls of children. They are crushing them with false promises that lead to physical and emotional abuse and sexual slavery.”
The ranks of “Tycoons” are mostly made up of documented gang members from gangs all over the county, including the West Coast Crips, Neighborhood Crips, Lincoln Park, Skyline Piru (Eastside Piru), O’Farrell Park, 5/9 Brims, Emerald Hills and Linda Vista Crips. These gang members have a sort of dual membership in Tycoons. Within Tycoons, there are cliques known as PGF, for Playgirl Fantasy; Tycoon/Additup; and BYB, or Break Your Bitch.
According to court documents, members of Tycoons are akin to a crime family, where all members work together committing various crimes for the purpose of making money. The indictment alleges that the defendants took on different responsibilities within the criminal enterprise. Some managed prostitutes and transported them all over the country. Some forcefully coerced the girls and young women into prostitution and maintained their obedience and loyalty through acts of violence. Some handled the money. Some placed advertisements to generate business or booked motel rooms in which acts of prostitution took place; and others distributed drugs and committed other crimes.
For that reason, the defendants are charged with racketeering conspiracy—the statute traditionally used for organized-crime syndicates and mobsters. But as criminal street gangs such as these join forces and become more sophisticated and prolific in their illicit business pursuits, this statute is an effective tool to address all aspects of the criminal conduct.
This is the third time the U.S. attorney’s office here has used the racketeering statute to charge large numbers of gang members with operating a criminal enterprise that included drugs, human trafficking, and violence. In the first case, 39 Oceanside gang members and associates were charged with racketeering, and, to date, 35 have pleaded guilty. The second involved gangs in North Park; that case is pending, with three guilty pleas so far.
The investigation began as a result of information provided by members of the East County community who saw troubling signs and reported them. Duffy said she is encouraged that community members came together to address this problem.
“They did not look the other way,” Duffy said. “They saw signs of trouble, and they reported it. As a result, girls and young women exploited in this case have been extended a path from misery to safety, and we have started on a path to end this criminal enterprise.”
“This investigation was initiated through the vigilance of parents and school resource officers," commented Sheriff Bill Gore. “Local, state, and federal law enforcement will always collaborate and bring to bear all resources available, when the safety of our youth is at stake. I'm very proud of the work done today, and during the entire course of this matter.”
“This investigation pulls back the curtain on a growing threat involving sexual exploitation occurring in plain sight,” said Joe Garcia, interim special agent in charge for HSI in San Diego. “As part of the Department of Homeland Security’s Blue Campaign, HSI agents are committed to combating human trafficking in collaboration with our law enforcement partners. In doing so, we need the public’s assistance in reporting suspicious activity, which is even more critical when the targets involve our local area teenagers.”
“Exploiting and harming America's children through sex trafficking is a serious crime with detrimental effects to the victims and our communities,” said FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI will continue to collaborate with our law enforcement partners in cases like this and our Operation Cross Country initiative where we have rescued over 3,600 children from the grips of sex traffickers and hold them accountable.”
DEFENDANTS Case Number: 14cr33537-BAS James Terelle King Age: 23 Michael Dean Richardson Age: 21 Andrew Damon Richardson Age: 22 Brian Keith Scott Age: 22 Alondre Shamil Dickerson Age: 20 Anthony Robert Dennison Age: 22 Keyon Renta Gill Age: 30 Donavyn Keith Dove Age: 21 Ryan Mcintoch Izumi Age: 22 William Henry Mitchell Age: 23 Jordan Renee Mitchell Age: 21 David Michael Stokes Age: 21 Christian Darwin Wilcox Age: 21 Marquis Dominique Davis Age: 21 Cortes Tizzaro Prater Age: 23 Emmanuel Gumataotao Farol Age: 20 Donald Mickey Stokes Age: 21 *Wiley Junius Greeno Age: 23 Deija Renee Lamb Age: 19 Joseph Benjamin Taylor Age: 21 Frank Gibson III Age: 20 Christal Marie Torres Age: 24 *fugitive CHARGESConspiracy to Commit RICO in violation of Title 18, U.S.C. 1962(d); Maximum Penalties: Life in prison, $250,000 fine, up to life of supervised release.
INVESTIGATING AGENCIESSan Diego County Sheriff’s Department
Immigration and Customs Enforcement, Homeland Security Investigations
Federal Bureau of Investigation*An indictment or complaint itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Ranch-Owner Found Guilty in Alien Smuggling Conspiracy and Must Forfeit 76-Acre Ranch to the U.S. GovernmentRead the Press Release
SAN DIEGO, CA – Today a federal jury convicted Potrero, California, resident Kala D. Rains, 47, of seven counts of conspiracy and alien smuggling after a trial before the Honorable Anthony J. Battaglia. The jury also found that the ranch used by Rains to facilitate the conspiracy should be forfeited to the United States Government.
According to evidence presented in court, Rains acted in concert with other co-conspirators to use her ranch to facilitate the bringing in and harboring of illegal aliens in order to transport them further into the interior of the United States. Evidence showed that she was part of a conspiracy that orchestrated the smuggling of several loads of illegal aliens from Mexico into the United States in and around the Tecate, California- area.
Her arrest resulted from an investigation conducted by Homeland Security Investigations’ (HSI) Border Enforcement Security Task Force, which is comprised of HSI special agents and U.S. Border Patrol agents. Prosecutors presented evidence of video-recorded undercover meetings, audio recordings, and telephonic evidence to build the case of the conspiracy. Jurors also heard from aliens smuggled into the United States by the organization who testified that they were to pay between $6,500 and $7,500 to members of the conspiracy as a smuggling fee.
“The U.S. Attorney’s Office commends the HSI Special Agents and U.S. Border Patrol Agents who worked tirelessly over the two-year investigation to infiltrate, disrupt, and dismantle this transnational criminal organization,” said United States Attorney Laura E. Duffy.
Previously, co-defendants Caroline Haro Espindola, Jose Maria Partida-Esquivel, and Alexander Flores pleaded guilty for their roles in the alien smuggling conspiracy.
Rains faces a mandatory minimum sentence of three years and a maximum sentence of 10 years in prison and a $250,000 fine. Sentencing is scheduled for February 27, 2015.
DEFENDANT Kala Rains Age: 47 Potrero, California CHARGESCount 1: Conspiracy, 18 U.S.C. § 371
Counts 2 and 3: Bringing in Illegal Aliens for Financial Gain, 8 U.S.C. §1324(a)(2)(B)(ii) and 18 U.S.C. § 2
Counts 4-5: Harboring Illegal Aliens, 8 U.S.C. §1324(a)(1)(A)(iii) and (v)(II)
Counts 6-7: Transporting Illegal Aliens, 8 U.S.C. §1324(a)(1)(A)(ii) and (v)(II)
INVESTIGATING AGENCYHomeland Security Investigations
U.S. Border Patrol
Doctor Sentenced to 57 Months in Prison for Selling Oxycodone Prescriptions to Addicts and Dealers for Cash and GiftsRead the Press Release
SAN DIEGO – Del Mar physician William Joseph Watson today became the first doctor in the Southern District of California in recent memory to be sentenced to federal prison for prescribing thousands of Oxycodone pills and other highly addictive painkillers without any legitimate medical purpose.
U.S. District Judge James M. Lorenz sentenced Watson to almost five years in custody at a hearing this morning in federal court. Watson pleaded guilty in August - the morning his trial was set to begin - to one count of conspiracy to distribute and dispense oxycodone, known by the brand name of OxyContin, without a legitimate medical purpose.
Watson admitted that he sold the prescriptions to addicts, who then used them recreationally or sold them on the street. According to court records, Watson accepted thousands of dollars in cash or luxury goods, such as designer handbags, jewelry and fine wines, in exchange for the Oxycodone prescriptions.
“This is a sentence that sends a very strong message to doctors,” said U.S. Attorney Laura Duffy. “If you disregard your sacred duty as a physician to do no harm, and you use your prescription pad to fuel the painkiller epidemic gripping this country, you do so at your own peril, with the very real prospect of going to prison.”
“The sentencing of former doctor Joseph Watson today demonstrates the seriousness of the crimes involving prescription drugs,” said San Diego DEA Special Agent in Charge William R. Sherman. “Mr. Watson went from being a physician to a drug dealer for the simple reason that any criminal resorts to drug trafficking: Greed. The diversion of prescription drugs from their intended use continues to be a serious issue and DEA is committed to investigating and arresting anyone who diverts prescription drugs for illegal use.”
At today’s sentencing hearing, Assistant U.S. Attorney Fred Sheppard urged the court to impose a significant sentence as a warning to other doctors. Sheppard noted that Watson’s actions contributed to the overdose death of one of his young patients.
“Let it ring from this court room: If you take that oath to do no harm and sell it for a couple hundred dollars, you're going to prison,” Sheppard said.
Watson was ordered to surrender on January 8, 2015, to begin serving his sentence. He was also sentenced to three years of supervised release.
DEFENDANTS Case Number: 13cr2988 William Joseph Watson Age: 59 Del Mar, California CHARGESTitle 21, United States Code, Sections 841(a)(1)
INVESTIGATING AGENCYU.S. Drug Enforcement Administration
Rancho Santa Fe Businessman Pleads Guilty; Admits Scheme to Sell but Not Deliver Imaging Systems for Breast ExamsRead the Press Release
SAN DIEGO - Rancho Santa Fe Businessman Christopher John Cozzie pleaded guilty to fraud charges in federal court today, admitting that he sold imaging and diagnostic systems for breast examinations that he either did not deliver or partially delivered.
According to court documents, Cozzie operated two companies, Advance Functional Imaging, and Green Screen Labs, which purported to sell equipment that included infrared cameras, laptops or touchscreen computers and imaging software plus training and interpretation services for less invasive breast examinations.
He admitted that between 2007 and 2009, he marketed the equipment to holistic healthcare providers via the internet and at health and wellness conventions in Las Vegas and various locations in California. He charged up to $35,000 per system to customers from California to Australia.
Cozzie admitted in his plea agreement that by 2008, he had no capital to run his business and was unable to provide the entire package of equipment to customers – particularly the cameras needed to do the imaging. He was selling used cameras, as well as selling the same camera to more than one customer.
According to the plea agreement, in February of 2009, when Cozzie had already failed to deliver his systems to other customers, a doctor in Texas contracted with Cozzie for an imaging system, including a new camera, computer and training. According to his plea, on April 6, 2009, the doctor wired Cozzie $32,000 for the system, but never received the camera, despite repeated contacts with Cozzie.
According to the plea agreement, some customers received partial systems; some received nothing. Yet Cozzie continued to market and sell the systems. The approximate loss suffered by Cozzie’s customers exceeds $200,000.
According to the indictment, Cozzie even removed a camera from the offices of one of his clients and delivered it to another client in another part of California.
Sentencing was set for March 3, 2015, before U.S. District Judge William Q. Hayes.
DEFENDANTS Case Number: 14cr0900WQH Christopher John Cozzie Age: 57Rancho Santa Fe, California
CHARGESWire Fraud, 18 U.S.C. 1343
INVESTIGATING AGENCY
Maximum Sentence: 20 years, $250,000 fine, $100 penalty assessment, restitutionFederal Bureau of Investigation
Local Businessman Pleads Guilty to Tax EvasionRead the Press Release
SAN DIEGO – Ho Sung Lim, owner of three Cricket Wireless outlets in San Diego County, pleaded guilty in federal court today to a tax evasion charge, admitting that he used a number of methods to avoid paying income and employment taxes to the Internal Revenue Service.
According to his plea agreement, Lim acknowledged that he failed to report income from his business; he paid employees in cash and underreported their wages to avoid payroll taxes; and he paid personal expenses from a corporate account – all of which lowered his tax bill by more than $160,000 over four years.
Lim’s plea was accepted by U.S. Magistrate Judge Mitchell D. Dembin and is subject to final approval by U.S. District Court Judge Larry A. Burns. He was charged via information today.
“We all have to pay our fair share of taxes,” said U.S. Attorney Laura Duffy. “Anyone who deliberately shirks this obligation takes a big risk, as Mr. Lim has learned.”
Erick Martinez, IRS Criminal Investigation’s Special Agent in Charge said, “Business owners have a responsibility to pay their fair share of taxes—both income and employment—and remit those taxes to the Internal Revenue Service. The failure to do so is a very serious offense. Those Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t.”
According to his plea agreement, Lim admitted that on several occasions between 2009 and 2012 he skipped his duty to file Employer’s quarterly Federal Tax Return, Form 941 (“Payroll Taxes”), on behalf of his business Telecell, Inc. Lim admitted that he attempted to evade or defeat the payment of Payroll Taxes by various means, including, but not limited to paying employees from his business, Telecell, Inc., in cash, and without reporting to the IRS the full amount of income he paid to those employees.
DEFENDANTS Case Number: 14cr3484-LAB Ho Sung Lim Age: 47 San Diego, California CHARGESTax Evasion – Title 26 U.S.C., Section 7201
INVESTIGATING AGENCY
Maximum Penalty: 5 years’ imprisonment; $100,000 fine; costs of prosecution.Internal Revenue Service Criminal Investigation
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Asbestos Removal Trainer Pleads Guilty to Sale of False CertificatesRead the Press Release
SAN DIEGO - United States Attorney Laura E. Duffy announced that Lachelle Rene Thrower pled guilty today to falsifying federal asbestos training certificates, admitting that over a four-year period she falsely certified over a hundred workers as being trained and qualified to safely remove asbestos.
According to court documents, Thrower was employed by an approved provider of asbestos removal training. Any student seeking to be accredited to remove asbestos was required to complete four, eight-hour days of training, and to pass a written examination. Thrower admitted that between May 14, 2010, and August 5, 2014, she falsely certified 100-150 training certificates for asbestos workers who did not actually attend the training courses or take the necessary exam. Thrower kept the money paid by the non-attending trainees, and falsified the certificates by using an electronic signature of the authorized trainer. Her false certifications caused her employer to falsely report to the EPA-delegated agency (Cal/OSHA) that certain individuals had attended the asbestos training and passed the exam. Thrower also admitted that when trainees did actually attend classes and paid in cash, defendant would keep this cash herself instead of providing it to her employer. All told, Thrower caused a financial loss to her employer of between $10,000 and $30,000.
Training for asbestos abatement professionals is required under the Asbestos Hazard Emergency Response Act of 1986 (AHERA), as well as the Toxic Substances Control Act (TSCA). Section 206(a) of TSCA prohibits any person from removing asbestos from schools and commercial buildings unless that person has been trained under an EPA-approved program, or a State program accredited by the EPA that has been found to be at least as stringent as the model program developed by the EPA. The EPA has accredited the asbestos training program of the State of California, administered by the Occupational Safety and Health Administration of the State (Cal/OSHA).
“Unsafe disposal of asbestos endangers human health. To ensure compliance with environmental laws and regulations, government agencies need accurate and truthful information,” said Jay M. Green, Special Agent in Charge of EPA's criminal enforcement program in California. “Workers and the public are at risk when proper asbestos remediation training is not conducted, while people like the defendant fraudulently and cynically line their pockets. Fortunately, Thrower’s employer has cooperated with investigators and has identified the falsified certificates for Cal/OSHA. Today’s guilty plea demonstrates, however, that those who try to make money by breaking the law will be prosecuted.”
FBI Special Agent in Charge, Eric S. Birnbaum, commented, “Because Ms. Thrower's employer expeditiously reported her criminal conduct to the FBI and the Cal OSHA, law enforcement was able to swiftly identify and prevent improperly credentialed asbestos workers from any asbestos removal employment. The FBI and our law enforcement partners will aggressively pursue those who jeopardize the public's health while satisfying their own greed.”
Thrower is scheduled to appear before United States District Court Judge Marilyn L. Huff on February 17, 2015, at 8:30 a.m. for sentencing.
DEFENDANTS Case Number: 14-CR-3485-H Lachele Rene Thrower Age: 44 San Diego, California CHARGESFalse Statements: Title 18, United States Code, Section 1001.
Maximum Penalty: 5 years in custody, the greater of a $250,000 fine or twice the illegal gain or loss, and a $100 penalty assessment.
INVESTIGATING AGENCYEnvironmental Protection Agency, Criminal Investigations Division
Federal Bureau of InvestigationManaging Director Sentenced for Investment Fraud and EmbezzlementRead the Press Release
SAN DIEGO – United States Attorney Laura E. Duffy announced that Walter Andrew Mills, 45, of San Diego County was sentenced today to 30 months in prison for investment fraud and embezzlement.
U.S. District Court Judge Roger T. Benitez also ordered Mills to pay $844,800 in restitution.
Mills pleaded guilty to wire fraud on June 6, 2014. According to court documents and his admissions, Mills fraudulently convinced a victim to invest $419,800 in Mills’ company, Cabrillo Investment Group, LLC, by concealing the fact that the victim’s previous investments in HessGen, Inc. had been misappropriated. Upon receiving the investment, Mills diverted a significant portion of the money to his own personal use.
As part of a larger scheme, between November 5, 2010, and March 26, 2012, Mills convinced additional victims to invest $425,000 in HessGen and another company, Smart Gaming Software, knowing that a significant portion of the money would not be used for the purposes represented. Mills similarly diverted a significant portion of those funds to his own personal use.
“The defendant cheated investors out of hundreds of thousands of dollars and now he is being held to account,” said U.S. Attorney Laura Duffy. “The victims placed their faith and financial futures in the hands of a man who thought only of himself.”
FBI Special Agent in Charge Eric S. Birnbaum commented, “Mr. Mills violated the trust of the people who had faith in him and the ones he was supposed to serve. The FBI is committed to holding those accountable who abuse their position of trust for the sole purpose of unlawfully enriching themselves.”
DEFENDANTS Case Number: 14-cr-01576-BEN Walter Andrew Mills Age: 45 San Diego, California CHARGESWire Fraud – Title 18, U.S.C., Section 1343
INVESTIGATING AGENCY
Maximum penalty: 20 years’ imprisonment and $250,000 fineFederal Bureau of Investigation
Dispensary Operator Indicted for Endangering Lives After Explosion Related to the Illegal Manufacturing of Hash OilRead the Press Release
SAN DIEGO – San Diego resident Steve Elar Mora is charged in a federal grand jury indictment unsealed today with various drug and weapons charges, including endangering human life while illegally manufacturing hashish oil, after an explosion at the marijuana dispensary that he operated alerted authorities to the location.
According to court records, the explosion allegedly occurred due to an illicit Butane Honey Oil lab operating at the marijuana dispensary. Butane Honey Oil is an extremely potent form of tetrahydrocannabinol, or THC, the chemical responsible for most of marijuana's psychological effects.
The product, known as “butane hash oil” or “honey oil,” is made by dissolving marijuana using dangerous substances such as butane – or lighter fluid - and selling the resulting residue to users at over twice the price of other high quality marijuana products.
Efforts to extract hash oil are on the rise. According to the DEA, in 2014 alone there have been eight fires or explosions related to the illegal production of Butane Honey Oil. Since October 2011, there have been approximately 20 BHO fires/explosions in San Diego County.
The explosion connected to the indictment of Mora occurred on July 21, 2014, at the Greenworks Dispensary in the Clairemont area of San Diego. While executing a search warrant after the explosion, law enforcement also found a handgun and ammunition at the dispensary. According to the indictment, Mora has been convicted of two state felonies and is not allowed to possess a firearm under federal law.
Law enforcement also searched Mora’s residence, located near Mission Bay High School, in the Pacific Beach area. At his residence, DEA agents found an AR-15 assault rifle among his possessions.
The process of extracting THC from marijuana is known as “blasting.”
Marijuana is tightly packed into an extraction device such as a glass, plastic, or metal tube. A butane canister is then sprayed into the top of the extraction device. The butane strips the plant matter of its cannabinoid-containing oils, which drip from the bottom of the extraction device, often through a filter and into a holding container. The resulting honey-like mixture of psychotropic plant oil and chemicals is then purified to improve the quality of the product. The end product is highly-profitable and can be ingested as an oil, consumed in edibles or solidified to make concentrated forms of cannabis known as “wax.” In an act called “dabbing,” dabs of wax are vaporized and inhaled with the use of electronic cigarettes and other vaporizing devices.
During the different purification methods, butane, a flammable gas that is odorless, colorless, and heavier than air, can evaporate out of the substance and collect on the floor, accumulating to explosive levels without proper ventilation. Thus, while chemists are in the process of manufacturing BHO, they may simultaneously create an invisible risk of explosion.
Given the popularity of BHO in the marijuana market, the inexpensive equipment needed to manufacture BHO, and the countless how-to-blast videos posted on YouTube, hash oil labs are multiplying, as are explosions.
Mora made his first appearance in court today before U.S. Magistrate Judge Jan M. Adler, who set a detention hearing for Monday at 2 p.m. He also scheduled a motions hearing before U.S. District Judge Barry Ted Moskowitz for Dec. 19.
DEFENDANTS Steve Elar Mora Age: 34 San Diego, California CHARGESCount 1: Manufacturing of Marijuana and Hashish Oil-21 U.S.C. § 841(a)(1)
Maximum penalty: 20 years’ imprisonment and $1,000,000 fine
Count 2: Conspiracy to Manufacture/Distribute Hashish Oil -21 U.S.C. §§ 841(a)(1) and 846
Maximum penalty: 5 years’ imprisonment and $250,000 fineCount 3: Maintaining Drug-Involved Premises -21 U.S.C. § 856(a)(1)
Maximum penalty: 20 years’ imprisonment and $500,000 fineCount 4: Endangering Human Life While Illegally Manufacturing Hashish Oil -21 U.S.C. § 858
Maximum penalty: 10 years’ imprisonment and $250,000 fineCount 5,6: Felon in Possession of Firearm and Ammunition-18 U.S.C. § 922(g)(1)
Maximum penalty: 10 years’ imprisonment and $500,000 fineCount 7: Possession of Firearm in Furtherance of Drug Trafficking Crime-18 U.S.C. § 924(c)
INVESTIGATING AGENCY
Mandatory 5 years’ imprisonment consecutive to drug trafficking sentenceDrug Enforcement Agency
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
El Centro Clinic Owner Pleads Guilty to Defrauding Medicare Out of over $1 MillionRead the Press Release
SAN DIEGO - Gevorg Kupelian, owner of the El Centro Clinic located at 485 Broadway Street in El Centro, California, pleaded guilty today to participating in a conspiracy that targeted the Medicare program and its beneficiaries.
Kupelian admitted to defrauding Medicare by billing for unnecessary procedures, pretending that patients were being seen by medical professionals, and billing for tests and services that were never actually provided.
At today’s hearing, Kupelian admitted that after he leased the premises used by the El Centro Clinic, he found a doctor, hired employees, and recruited “cappers” to bring Medicare beneficiaries to the clinic. While Kupelian and his co-conspirators operated the clinic to give the impression to beneficiaries and outside observers that patients were being seen by qualified medical professionals, in fact, patients would rarely see a doctor or other qualified medical professionals during visits to the clinic.
Kupelian and his co-conspirators caused tests to be performed on the recruited patients without regard to medical necessity, including allergy tests, breathing tests, bladder tests, EKGs, and ultrasounds – all for the purpose of generating bills to Medicare. Kupelian instructed employees that all patients were to undergo all of the tests offered by the clinic, without regard to the patients’ actual diagnoses. Kupelian also created “sample” lab sheets and billing forms with certain tests and diagnoses already requested, and directed employees to simply fill in patients’ names and Medicare beneficiary information. Some tests were never performed at all, and Kupelian inserted phony test results into patient files to make it appear that the tests had been done and results had been appropriately generated.
Kupelian admitted that through the El Centro Clinic, the conspirators fraudulently billed Medicare over $2.7 million and received over $1.285 million in payments. Of that amount, Kupelian’s management company received over $964,000.
Kupelian is next scheduled to appear before the Honorable Larry A. Burns on February 9, 2015 for sentencing.
DEFENDANTS Case Number: 14CR3419-LAB GEVORG KUPELIAN Age: 41 CHARGESCount 1: Conspiracy to commit health care fraud, in violation of 18 U.S.C. § 371.
INVESTIGATING AGENCY
Maximum Penalties: 5 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.Federal Bureau of Investigation
Health and Human Services, Office of the Inspector GeneralU.S. Attorney Offers Groundbreaking Training to Build Trust Between Law Enforcement and Transgender CommunityRead the Press Release
SAN DIEGO – United States Attorney Laura Duffy, together with law enforcement partners and transgender leaders, will offer a groundbreaking training session today to promote respect and trust between officers and a transgender community that has faced discrimination, abuse and ridicule.
About 100 local police officers and Sheriff’s deputies as well as state and federal prosecutors, public defenders, federal agents and court staff are scheduled to take part in the first-of-its-kind event. The hour-long session is part of a Department of Justice training initiative launched in March that is designed to educate the nation’s law enforcement officers about problems and needs of transgender people and how to better serve them.
The training session is scheduled on this day to commemorate “International Transgender Day of Remembrance,” an annual event to memorialize those who have been killed as a result of fear or hatred of transgender people. The Day of Remembrance, which began as a tribute to murdered transgender activist Rita Hester, has become an empowering time to renounce the history of violence and discrimination perpetrated against the transgender community.
Every day, law enforcement personnel across the country encounter transgender individuals, including those who are victims of - or witnesses to - discrimination, abuse, hate crimes, intolerance and injustice. Yet many crimes involving transgender people often go unreported due to fear of marginalization, misunderstandings, harassment, and even assault. Because transgender individuals often feel re-victimized by the criminal justice system, they are reluctant to complain when hate crimes occur.
“Today’s training will help lay a stronger foundation of trust between the transgender community and those who are charged with the tremendous responsibility of protecting and serving,” said U.S. Attorney Laura Duffy. “Sometimes creating trust is as simple as using a person's preferred name, or gender pronoun, or asking for identification in a safe and respectful way. With better education, we can open minds. And with open minds, tensions and misperceptions start to fall away.”
This program is designed to teach officers the relevant terminology, pierce through stereotypes, improve interviewing skills, and reject the misconceptions that often drive the response to hate crimes.
According to recent studies, 78% of transgender individuals have been harassed at school, 41% have attempted suicide, and 26% have lost a job due to bias. Last year in Minnesota, a transgender woman lost her home and service dog due to alleged arson. In the 18 month period from January 2011- May 2012, approximately 18 transgender individuals were murdered in Puerto Rico. In Colorado a few years ago, the murder of a transgender woman became the first-ever transgender incident to result in a hate crimes conviction. And this year alone, violence against the transgender community has claimed the lives of 16 individuals nationally.
The Justice Department’s Community Relations Service unit, known as CRS, is in charge of the training program. CRS was created as part of the 1964 Civil Rights Act as a way to dial down desegregation tensions in the South. The Civil Rights Division protects gender identity and expression by investigating and prosecuting gender-identity motivated violence under the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act. CRS has responded to several incidents of hate violence in recent years, including in Puerto Rico, where 18 LGBT people were murdered between 2010 and 2012.
Today’s training program expands upon the work already accomplished in our proactive law enforcement community. To their credit, the San Diego Police Department and the San Diego County Sheriff have already developed “best practices” protocols.
*For an interview with U.S. Attorney Laura Duffy, please contact Media Relations Director Kelly Thornton at 619-546-9726.
Oceanside Lawyer Convicted of Defrauding Distressed Homeowners in $13 Million Loan Modification Scheme That Victimized Thousands Jury Convicts Dean G. Chandler, President and CEO of “1st American Law Center,” of 8 Felony CountsRead the Press Release
SAN DIEGO - United States Attorney Laura E. Duffy announced the convictions today of two defendants for their roles in defrauding 3,261 homeowners from across the nation through 1st American Law Center, a sham law firm in Oceanside, California. After a three week trial and a day of deliberation, the jury returned guilty verdicts against Dean Gregory Chandler, the former president, chief Executive officer and attorney for the company; and Michael Eccles, a manager in the telemarketing call center. Chandler was convicted of eight felony counts: Three counts of mail fraud, three counts of wire fraud, and one count each of conspiracy and money laundering. Eccles was convicted of five counts: Conspiracy and two counts each of mail fraud and wire fraud.
According to evidence presented at trial, Chandler created 1st American Law Center in 2009 in partnership with convicted drug trafficker Gary Bobel (who has been separately convicted and sentenced for his role in the scheme). Chandler arranged to have Bobel oversee the call center and its teams of telemarketers, who pitched loan modification services on behalf of the law center. Those telemarketers, including Michael Eccles, promised potential clients that a panel of attorneys would pre-screen applicants’ financial information to ensure that only the most qualified applicants would be approved as clients of the law firm; that a team of attorneys would negotiate with clients’ mortgage lenders; that those attorneys would draft all documents to be submitted to the mortgage lenders; that the “attorney retainer fee” averaging $3,495 would be preserved in an attorney client trust account until the client was satisfied, and that clients were protected by a money back guarantee.
As presented at trial, Michael Eccles was promoted to manager of the call center in December 2009, and he took advantage of the new position to script additional lies for the telemarketers to use with clients, including that the law firm had been in business since 1992; that they had been successfully modifying loans for over 20 years; that they had helped over a hundred thousand homeowners, and that it took attorneys on average 200 hours to complete a successful loan modification – all to suggest that the clients could take hope and comfort in the expertise and established success of the “law firm” they had hired. The telemarketers even persuaded homeowners to pay the company=s fees instead of using their limited funds to stay current on their mortgage payments.
Witness testimony and documentary evidence at trial proved that Chandler had almost no role in the loan modification process, and that nearly all of the statements made by telemarketers to the clients were lies. Chandler, the attorney, did not pre-screen all of the applications or negotiate with lenders. Rather than successfully modifying 98% of their client’s mortgages, the firm failed to modify 3 out of every 4 loans. Instead of keeping clients’ payments in an attorney trust account, they were funneled into various other accounts to pay co-schemers, sales commissions, and company expenses. Instead of having funds available to deliver on its money-back-guarantee, the firm failed to provide refunds to untold numbers of clients who requested them.
For his part, Chandler served as the face of the law firm, and the firm’s commercial, website, and brochure featured Chandler’s name, image, and state bar license number. Chandler reviewed telemarketer call scripts submitted to him for approval, and also listened in real time and on recordings to telemarketer calls to clients.
According to evidence at trial, however, Chandler’s chief role was to mislead regulatory and enforcement agencies which threatened the law firm’s profitable operations. In that capacity, in October 2009 Chandler lied under oath in a sworn declaration to an Assistant Attorney General at the California Department of Justice. Multiple witnesses testified that the statements in Chandler’s declaration were false. And when the customer complaints threatened the company’s bottom line, Chandler also lied repeatedly to the Better Business Bureau in efforts to try to inflate the law center’s sagging ratings. For his role in the scheme, Chandler earned over $275,000 in about a 14-month period. In July 2010, after the Federal Bureau of Investigation and Internal Revenue Service executed a search warrant at his law firm, Chandler also drained one of the firm’s bank accounts of $16,500 and used it for his own benefit, instead of to pay employees or refund victims. This transaction was the basis of the money laundering charge.
During the trial, multiple victims of the defendants’ fraudulent scheme came from across the country to testify about their experiences. For example, a couple from Evansville, Indiana, both in their 70s, related how they contacted 1st American Law Center to avoid losing the home where they had spent 27 years raising a family, which was specially modified to accommodate their paraplegic son’s wheelchair. Due to medical problems which forced the husband to retire as an auto mechanic, the couple fell behind on their payments. The couple put their faith in the promise that an attorney would negotiate with their lender. They also counted on the money back guarantee if the firm was unsuccessful. The couple ultimately lost their home, and their money.
The defendants will next appear before United States District Judge Roger T. Benitez on February 23, 2015 for sentencing. A restitution hearing for the victims of 1st American Law Center is set for April 21, 2015.
Today’s jury verdicts bring to a total of 13 the convictions that have resulted from the fraudulent operation of 1st American Law Center. Gary Bobel received a sentence of 92 months in custody. Telemarketer Shelveen Singh, who operated out of Riverside, was sentenced to 110 months in custody. Other convicted telemarketers include Travis Iverson, Scott Spencer, Johnny Hearn, Anthony Calandriello, Mark Spencer, and Roger Jones. Information Technology Director Steven Gersztyn was convicted and sentenced for lying to federal agents during the investigation of the case, and Amy Hintz and Sarah Grimm were each convicted of theft of government property for stealing documents while making copies of evidence in the custody of the FBI.
United States Attorney Laura E. Duffy commented, AThe real tragedy of this case is that the defendants chose to profit from the suffering of others. In difficult economic times, they exploited a particularly vulnerable segment of our population B homeowners who were desperately trying to make ends meet and stay in their homes.
“Mr. Chandler and Mr. Eccles misused and abused their positions of trust to prey upon those who were financially vulnerable and desperate to save their homes,” said FBI Special Agent in Charge Eric S. Birnbaum. “Today's convictions reaffirm our commitment to hold accountable the guilty who profit by taking advantage of vulnerable people.”
“The defendants used a slew of lies to sell their loan modification services and obtain money from distressed homeowners throughout the United States,” said IRS Criminal Investigation's Special Agent in Charge Erick Martinez. “Loan modification scams thrived for a time, but that time is gone, and as this verdict shows, it's time for those responsible to face judgment.”
DEFENDANTS Case Number: 12CR4031-BEN Dean Gregory Chandler Age: 57 Fallbrook, California Michael Eccles Age: 35 Vista, California CHARGESDefendant Chandler was convicted of Counts 1-8.
Defendant Eccles was convicted of Counts 1, 3-4, 6 and 7.
Count 1: Conspiracy to commit mail fraud or wire fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Counts 2-4: Mail Fraud, in violation of 18 U.S.C. § 1341.
Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Counts 5-7: Wire Fraud, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Count 8: Money Laundering, in violation of 18 U.S.C. § 1957.
INVESTIGATING AGENCIES
Maximum Penalties: 10 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Federal Bureau of Investigation
Internal Revenue Service, Criminal InvestigationImperial Sand Dunes Storage Firm and Owner Plead Guilty to Illegal Disposal of Untreated Human Waste and SewageRead the Press Release
SAN DIEGO - Glamis Dunes Storage Inc. and its owner, Michael Mamelli, Sr., pleaded guilty today to the illegal underground disposal of potentially millions of gallons of untreated human waste and sewage at the Glamis Dunes Storage site for more than four years, in violation of the Safe Drinking Water Act. The Glamis Dunes site is located off of Highway 78 in Imperial County, and advertises storage services near the Imperial Sand Dunes Recreation Area.
The defendants admitted at today’s hearing that in August of 2007, Glamis Dunes Storage obtained a conditional use permit from Imperial County to install and operate a 20,000 gallon holding tank for RV waste (including human waste and grey water) at the facility. When acquiring the permit, Glamis Dunes Storage represented that the wastewater would be pumped out by a licensed septage hauler and disposed of at the Holtville wastewater treatment plant. According to Glamis Dunes Storage, the holding tank could be expected to dispose of approximately 1,250,000 gallons of RV sewage and grey water per year. The permit specifically prohibited any underground leach system attached to the holding tank.
As the defendants admitted, however, between February 16, 2010, and March 12, 2010, the defendants arranged for a contractor to build a leach field in the rear of the property, install a pump in the RV holding tank, and connect a pipe directly from the RV holding tank out to the leach field. The defendants also arranged for the power connection for the pump to be concealed under gravel near the RV holding tank. Thereafter, they admitted that they repeatedly disposed of the human waste and sewage from the RV holding tank by activating the pump and discharging the sewage through the underground leach field.
The defendants acknowledged that between August and October of 2012, they had a contractor add a new pump and two 2,500 gallon tanks in series to the pipe connecting the RV holding tank to the leach field. The defendants continued to illegally dispose of the sewage in the RV holding tank by discharging it through the underground tanks and leach field without a permit or other authorization from the EPA.
The defendants agreed to forfeiture of the sum of $50,000, as the proceeds of the offense, and to make restitution to the Bureau of Land Management and the Imperial County Department of Environmental Health and to fund the restoration of the site to the satisfaction of the Imperial County Department of Environmental Health.
Michael Mamelli and Glamis Dunes Storage, Inc. are scheduled to appear before U.S. District Court Judge William Q. Hayes on February 17, 2015, at 9:00 a.m. for sentencing.
DEFENDANTS Case Number: 14-CR-1766-WQH Glamis Dunes Storgage, Inc. Inc., 2006 Glamis, California Michael J. Mamelli, Sr. Age: 63 Newport Beach, California CHARGESUnlawful Injection of Pollutants, a felony, in violation of Title 42, United States Code, Section 300h-2(b)(2)
Maximum Penalty for Individual: Three years in prison; up to $250,000 fine or twice the illegal gain or loss, whichever is greater.
Maximum Penalty for corporation: Fine of up to $500,000.
INVESTIGATING AGENCYEnvironmental Protection Agency, Criminal Investigations Division
Bureau of Land ManagementDefendant Found Guilty in Maritime Alien Smuggling ConspiracyRead the Press Release
SAN DIEGO – A federal jury yesterday convicted San Ysidro resident Sofia Martinez, 27, of alien smuggling charges after a two week trial before the Honorable William Q. Hayes.
According to evidence presented in court, Martinez conspired with others to use jet skis and panga boats to deliver numerous undocumented aliens to the United States from Mexico. Martinez hired three Mexican citizens, whom she trained and used as jet ski drivers. She partnered with co-conspirators to purchase jet skis in the United States and bring them to Mexico for use in the conspiracy.
Martinez, who lived in Tijuana at the time, coordinated with others in the United States to pick up the illegal aliens once they were dropped off at beaches in San Diego County, and deliver them to their final destinations in the United States. Martinez and her co-conspirators charged $7,000 to $10,000 per illegal alien.
Prosecutors presented evidence of numerous smuggling events at trial, including a delivery by panga boat on May 9 and 10, 2013. The boat traveled from Rosarito, Mexico and landed south of the Children’s Pool in La Jolla, California in the early morning hours of May 10. Agents, alerted by a 911 call from a security guard and phone calls intercepted under court-ordered wiretaps, found 15 illegal aliens hiding in various locations around La Jolla.
Martinez was first indicted in September 2013 for conspiring to bring illegal aliens to the United States for financial gain. Her arrest resulted from an investigation conducted by Homeland Security Investigation’s (HSI) San Ysidro Border Enforcement Security Task Force, which is comprised of HSI special agents and Border Patrol agents.
“In addition to undermining this nation’s border security, smuggling by ocean is extremely hazardous for undocumented aliens,” said United States Attorney Laura Duffy. “Martinez’s arrest and the dismantling of this alien smuggling group is the product of countless hours of work and close coordination by numerous dedicated investigators.”
“Homeland Security Investigations invested a significant amount of resources into this investigation to reach the organizers and coordinators of the maritime smuggling events plaguing our coast,” said HSI San Diego Interim Special Agent in Charge Jose Garcia. “It was only through the hard work of the entire law enforcement team, processing numerous smuggling events and analyzing countless amounts of evidence, that they were able to develop a strong case against Sofia Martinez and her co-conspirators for a successful prosecution.”
Chief Patrol Agent Paul A. Beeson of the U.S. Border Patrol’s San Diego Sector said, “Sofia Martinez was finally caught due to the dedicated work of several law enforcement agencies who diligently worked together watching our shores. Border Patrol remains dedicated to protecting the borders of the United States, including the maritime border.”
After trial, Judge Hayes revoked Martinez’s bond and immediately remanded her into custody. Sentencing is set for February 23, 2015 at 9 a.m.
DEFENDANTS Case Number: 13CR3560-WQH Sofia Martinez Age: 27 San Ysidro, California CHARGESCount 1: Title 18, United States Code, Section 371: Conspiracy to bring in illegal aliens for financial gain. Maximum Penalty five years in prison and $250,000 fine
Counts 2-4: Title 8, United States Code, Section 1324(a)(2)(B)(ii): Bringing in illegal aliens for financial gain. Maximum Penalty: Fifteen years in prison and mandatory minimum of five years.
INVESTIGATING AGENCIESHomeland Security Investigations
Border PatrolSan Diego Realtor Sentenced for Commercial Sex with 13-year-old GirlRead the Press Release
SAN DIEGO – San Diego realtor Michael E. Lustig was sentenced today to 10 years in federal prison for prostitution-related crimes, including his admissions that he paid for sex with a 13-year-old girl on several occasions.
Lustig, 71, was indicted by a federal grand jury in October of 2013 and pleaded guilty in July. He was sentenced by U.S. District Judge Roger T. Benitez.
According to court records, Lustig was first contacted in June of 2012 by San Diego Sheriff's deputies during an operation targeting customers of prostitution in the Encinitas area. At the time that Lustig was arrested, deputies seized two cellular telephones which led to information that he had been in contact with two minor females.
Interviews with the minors conducted by FBI Agents and San Diego Sheriff’s Deputies during a joint investigation revealed that Lustig had contacted them separately to engage in commercial sex activity. One of the minors was 11 years old at the time that sexual activity began with Lustig, and the other was 13 years of age. According to court records, surveillance video from a motel in El Cajon, California, showed Lustig entering a motel room with one of the minors and emerging 43 minutes later.
According to court records, Lustig had contacted the minors multiple times over a span of multiple months. Interviews with the minors confirmed that Lustig, known to them as “George,” had paid them for sexual activity and that at least one of the minors had identified herself as a minor.
In the plea agreement, Lustig admitted that he used a cellular telephone to contact the 13-year-old minor on multiple occasions between at least October 2011 and June 2012, seeking to engage in commercial sex activity. Lustig admitted that he thereafter engaged in commercial sex activity with the minor, paying the minor in return for sexual activity.
For example, according to the plea agreement, Lustig admitted that on October 15, 2011, he wrote the minor, asking, “Hey, is the bookstore open? I'm in desperate need of books rite now.” Lustig admitted in court that he was using code for commercial sex activity. On November 11, 2011, Lustig wrote the same minor, “U free sometime in the next 2 hours?” and “Any chance for library in 35 min, @ 7:15?”
Similarly, on June 8, 2012, Lustig wrote the minor simply “Bookstore?” meaning that he wanted to establish a date for commercial sex activity.
“Michael Lustig victimized the most vulnerable population in our community – children – and today he was brought to justice,” said U.S. Attorney Laura Duffy. “We will do everything in our power to protect children from predators.”
“This investigation serves as another example of how seamless law enforcement is in San Diego County when it comes to those who prey on the vulnerable," commented San Diego Sheriff Bill Gore. “We will offer any resources available to protect our children.”
“Michael Lustig, a sexual predator, is off the streets today because of the dedicated work of the San Diego law enforcement community,” said FBI Special Agent in Charge, Eric S. Birnbaum. “The FBI remains dedicated to protecting our children from sexual predators and will continue to work with our law enforcement partners to make our cities a safer place for all of our children to live and succeed.”
DEFENDANT Case Number: 13CR3921-BEN Michael Lustig Age: 71 Rancho Santa Fe, California CHARGESThree counts of Interstate Travel in Aid of Racketeering Enterprises, in violation of 18 U.S.C. §1952(a) Maximum Penalty: Five years per count, 15 years total; 3 years supervised release.
INVESTIGATING AGENCYSan Diego County Sheriff’s Department
Federal Bureau of InvestigationAlmost Five Years in Custody for Defendant Who Stole Identities of Deceased Children to Evade TaxesRead the Press Release
SAN DIEGO - Lloyd Irving Taylor, formerly a licensed California tax attorney and certified public accountant, was sentenced today by U.S. District Court Judge Michael Anello to 57 months in prison and ordered to pay over $2.2 million in restitution to the Internal Revenue Service (“IRS”).
A jury previously convicted Taylor of 19 felony charges, including aggravated identity theft, false statements to a financial institution, tax evasion, corrupt interference with the IRS, and making false statements on United States passport applications. Taylor has been in custody since his arrest in San Diego in April 2013.
According to evidence presented at trial, Taylor stole the identities of deceased children and used them as aliases to obtain fraudulent passports and other identification documents. He then used the passports (which he obtained from U.S. Embassies throughout Europe) and other fraudulent documents to open and maintain multiple financial accounts so that he could hide his income and assets from the IRS. Taylor also misused the stolen identities to transfer funds between his nominee accounts, and to purchase various assets, such as gold coins, which he used to evade taxes.
Similarly, Taylor fabricated over a dozen fraudulent religious institutions, and opened 31 related bank and investment accounts in the names of these fake churches. Defendant then misused the tax-exempt status of these fake religious institutions to fraudulently claim that his income was not subject to federal taxes. Following a week-long trial in June 2014, the jury deliberated for just 30 minutes before finding the defendant guilty on all counts.
Among the witnesses who testified at trial was the brother of one of the deceased victims whose identity was stolen, as well as a blind elderly woman whose social security number was stolen and misused by the defendant. The jury also saw the $1.6 million worth of gold coins that the defendant had hidden in a storage locker prior to the execution of a search warrant.
Evidence introduced at trial proved that despite working and earning money for over 40 years, Taylor filed federal tax return just seven times. All told, Taylor failed to report approximately $5 million in income, on which he owed the IRS approximately $1.6 million.
U.S. Attorney Laura E. Duffy commented: “Identity theft is a dangerous crime that not only traumatizes the unsuspecting victims and their family members, but also facilitates the commission of further criminal activity. For years, Lloyd Taylor stole the identities of deceased children and travelled internationally to obtain fraudulent identification documents. Far from living up to his obligation to be an officer of the court and trusted financial advisor, Mr. Taylor took advantage of his victims to line his pockets and avoid paying his taxes.”
U.S. Attorney Duffy praised the efforts of the San Diego Regional Fraud Task Force, working cooperatively with the IRS and Department of State, to uncover the defendant’s criminal activities and bring him to justice.
“Mr. Taylor, a tax professional, tried in every conceivable way to avoid paying his taxes—from using the identities of dead children and fake churches to converting income to gold coins,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “Today’s sentence reinforces our commitment to every American taxpayer to investigate and prosecute those who use the identities of others to evade their tax obligations.”
“The sentencing of Lloyd Taylor brings to a conclusion the multi-agency investigation in which the U.S. Department of State’s Bureau of Diplomatic Security (DS) brought passport fraud investigative experience and a global reach, to bear. DS is committed to protecting the integrity of the most highly sought after travel document in the world – the United States Passport,” said Michael Rohlfs, DS Resident Agent-in-Charge for San Diego.”
DEFENDANT Case Number: 13CR1390-MMA Lloyd Taylor Age: 71 San Diego, California CHARGESCounts 1-3: Title 18, United States Code, Section 1542 – Making a False Statement on a United States Passport Application
Maximum penalties: 10 years custody; $250,000 fine; $100 Special Assessment; 3 year supervised release.Count 4: Title 26, United States Code, Section 7212 – Corrupt Endeavor to Impede and Impair the Due Administration of the Internal Revenue Laws
Maximum penalties: 3 years in prison, a fine up to $250,000, and term of supervised release of not more than 1 year.Counts 5-6: Title 26, United States Code, Section 7201 – Tax Evasion
Maximum penalties: 5 years in prison, a fine of $250,000, and a term of supervised release of not more than 3 years.Counts 7-13: Title 18, United States Code, Section1014 – False Statements to a Federally Insured Financial Institution
Maximum penalties: 30 years in prison, a fine of $1,000,000, and a term of supervised release of 5 years.Counts 14-19: Title 18, United States Code, Section 1028A – Aggravated Identity Theft
INVESTIGATING AGENCY
Maximum penalties: 2 years consecutive to the sentence imposed for the underlying offense.San Diego Regional Fraud Task Force (multi-agency task force comprised of members of the United States Secret Service, the San Diego Police Department, and the San Diego District Attorney’s Office)
Internal Revenue Service – Criminal Investigation
United States Department of State, Office of Diplomatic SecurityReal Estate Developer Sentenced for Orchestrating $50 Million Securities Fraud SchemeRead the Press Release
SAN DIEGO – Commercial real estate developer and mortgage broker Bradley Holcom was sentenced to 10 years in prison today for his role in a $50 million securities fraud scheme.
Holcom, 57, pleaded guilty in July before U.S. District Judge Cathy Ann Bencivengo to committing wire fraud in connection with the sale of approximately $50 million worth of promissory notes which he sold to more than 150 investors located throughout the United States.
At the sentencing hearing today, elderly investors who had lost millions of dollars asked the judge to impose the maximum sentence. The investors – some tearful, some angry, all financially and emotionally debilitated – told the court of the devastating impact of losing their life’s savings at retirement age with no ability to recover.
“My retirement funds for my golden years are gone,” one of the victims said during the hearing. “He could’ve pointed a gun to my head or held a knife to my chest, and he couldn’t have hurt me more.”
According to court documents, Holcom solicited investors to provide funds for the development of raw land for commercial and residential purposes through an investment program he operated called the Trust Deed Investment Program. Holcom admitted that he falsely told investors who purchased notes through the Trust Deed Investment Program that they would receive a lien on a specific piece of property he was developing and that the lien would be in first position.
However, as Holcom further admitted, he never provided investors with a lien in the property he was purportedly developing and instead conveyed to investors a lesser interest that did not allow them to directly foreclose on the property to protect their investment. In addition, Holcom admitted that while he promised investors that their purported lien would be in first position, he subsequently solicited investments for properties that he knew were already encumbered by first position liens.
According to court documents, Holcom also sold properties that were supposedly serving as the security for investors without informing them that the property they had financed for development was gone. Holcom admitted that in 2008 and 2009, even though his financial condition had seriously deteriorated, he continued to solicit investors for new funds by making misrepresentations about his true financial condition and the manner in which he was using investor money. As a result of the scheme, Holcom admitted that his conduct caused approximately $50 million in losses.
Holcom was also sentenced to three years of supervised release and ordered to pay restitution to his victims, with the final amount of restitution to be determined at a hearing on January 9, 2015. Holcom was ordered to begin serving his sentence on January 12, 2015.
This case was investigated by the FBI’s Phoenix Division – Yuma Resident Agency. The case is being prosecuted by Trial Attorney Henry P. Van Dyck and Deputy Chief Daniel Braun of the Criminal Division’s Fraud Section, and by Assistant United States Attorney Mark Pletcher of the United States Attorney’s Office for the Southern District of California. The Department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.
DEFENDANT Case Number: 13-cr-1723 Bradley Holcom Age: 57 Canby, Oregon CHARGESWire fraud, in violation of 18 U.S.C. § 1343.
INVESTIGATING AGENCY
Maximum Penalties: 20 years in prison, $250,000 fine or twice the gain or loss from the offense.Federal Bureau of Investigation
Officials Take Down Alleged Gang-Affiliated Drug Traffickers in Imperial County; Take Drugs and Guns Off the StreetRead the Press Release
EL CENTRO – Thirty alleged members of a large-scale methamphetamine and heroin drug trafficking organization in Imperial County are charged in federal grand jury indictments unsealed today with conspiring to import and distribute the illicit drugs.
Early this morning, a contingent of federal, state, and local law enforcement officials arrested 43 people – including those under federal indictment plus others who will be charged by the state - and seized drugs, cash, vehicles and 14 firearms in connection with the year-long investigation. During the predawn raids, agents also served 38 search warrants in Calipatria, El Centro and Brawley. The firearms ranged from handguns to assault rifles.
The arrests were based on two grand jury indictments. The charges include conspiracy to import and distribute methamphetamine and heroin and possession of methamphetamine and heroin with intent to distribute. So far, authorities have seized more than 30 pounds of methamphetamine with an estimated street value of 1 million dollars.
“With these arrests and charges, we have taken the first step in wiping out a major connection to methamphetamine in the valley,” said U.S. Attorney Laura Duffy. “This type of investigation and prosecution has a significant impact on public safety and quality of life in this community.”
“Today the Imperial Valley law enforcement community has taken down a widespread narcotics distribution ring that supplied the vast majority of the meth and heroin on the streets in El Centro, Brawley and Calipatria,” said Joe Garcia, interim special agent in charge for ICE HSI in San Diego. “While the impact on public safety in these communities will be far-reaching for the law abiding residents, our united force sends a bold message that criminals involved in smuggling drugs and weapons and gang activity should fear.”
The investigation involved federal wiretaps and extensive surveillance. Numerous defendants are documented members or associates of gangs, including individuals with ties to the North Side Centro, East Side Centro, and West Side Centro street gangs in El Centro, California; the Broleno street gang operating in Brawley, California; and the Calipas street gang operating in Calipatria, California.
The indictments and search warrants describe a conspiracy among a number of family members – parents, siblings, cousins, married couples - who formed the Lozano-Gonzalez drug trafficking organization. The organization allegedly imported methamphetamine and heroin from Mexicali and smuggled it through the Calexico ports of entry via pedestrian couriers and cars, into Imperial County.
Imperial Valley street gang members and those associated with the street gangs acted as a distribution network for the methamphetamine and heroin supply. Several documented gang members and associates are charged in the indictments.
Methamphetamine is a scourge in just about every community in this country, and Imperial County is no exception.
The U.S. Attorney’s office in the Southern District of California has seen a startling increase in the number of methamphetamine cases in the last five years in Imperial County – from 88 in FY 2010 to 134 cases in FY 2014. That’s 52 PERCENT more meth cases.
Today, methamphetamine-related prosecutions make up 70 percent of all federal drug prosecutions in the Imperial Valley. Just a few years ago, in 2010, methamphetamine was just 18 percent of our drug cases.
According to the Imperial County Coroner, the number of deaths due to methamphetamine has remained steady over the last several years in the county, averaging about 8 a year, except for a big spike last year, when there were 18 deaths attributed to methamphetamine use.
“We’ve really got a tremendous public health crisis on our hands,” U.S. Attorney Duffy said. “Meth destroys lives, families and communities. We are absolutely committed to making our neighborhoods safe from violent gang activity, drug trafficking and the devastating impact of methamphetamine and other dangerous drugs.”
Duffy said her office is engaged in ongoing communications with Mexican counterparts, both here and in Mexico City, on jointly attacking this issue. “We are evaluating the problem and working to come up with strategies.”
U.S. Attorney Duffy praised the law enforcement agencies of the Immigration and Customs Enforcement, Homeland Security Investigations; the Imperial County District Attorney’s Office; the El Centro Police Department; and more than a dozen other agencies that assisted with this huge takedown, believed to be the largest in Imperial County to date.
This investigation was conducted under the federal Organized Crime Drug Enforcement Task Force (OCDETF) program. The OCDETF program was created to consolidate and utilize all law enforcement resources in this country’s battle against major drug trafficking.
United States Attorney, Laura Duffy appearing at the press conference.
DEFENDANTS Case Number: 14-CR-3007 Francisco Lozano-Moreno, Jr. Daniel Becerra-Jimenez Ismael Lucio Guadalupe Avila-Parra Jose Alberto Jose Aquiles Gomez-Zayas Jesus Gonzalez-Lozano Rodrigo Gonzalez-Lozano Mike Angel Saiza, Jr. Armando Mayorga Ramon Munoz Joe Angel Franco Abel Hernandez Ambriz Raul Rodriguez Julissa Janeth Leal-Hernandez Alexis Pinedo Ambriz Juan Carlos Lozano Carolina Orozco-Vasquez Isabel Sanchez Breanne Nicole Williams Cindy Marie Mendivel Gerald Anthony Phillips Jason Jerry Gonzalez CHARGESConspiracy to Import Methamphetamine in violation of Title 21, U.S.C. Secs. 952, 960 and 963;
Conspiracy to Distribute Methamphetamine in violation of Title 21, U.S.C., Secs. 841(a)(1) and 846;
Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1);
(Not all counts apply to all defendants)
Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a $10 million dollar fine.
DEFENDANTS Case Number: 14-CR-3008 Raphael Villasenor Cesar Adrian Gomez Eriberto Gonzalez-Ruiz Luis Fernando Calderon Nava Orlando Quintero Monique Vania Camargo Shandra Decoye Camargo *Fugitives CHARGESConspiracy to Distribute Heroin in violation of Title 21, U.S.C. Secs. 841(a)(1) and 846;
INVESTIGATING AGENCY
Conspiracy to Distribute Methamphetamine in violation of Title 21, U.S.C., Secs. 841(a)(1) and 846;
Possession of Heroin with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1);
Possession of Methamphetamine with Intent to Distribute in violation of Title 21, U.S.C., Sec. 841(a)(1);
(Not all counts apply to all defendants)
Maximum Penalties: Life in prison with a mandatory minimum sentence of 10 years and a 10 million dollar fine.El Centro Police Department
Immigration and Customs Enforcement, Homeland Security Investigations
Imperial County District Attorney’s Office
Imperial County Sheriff’s Office
U.S. Customs and Border Protection, Field Operations
U.S. Border Patrol
Brawley Police Department
Calipatria Police Department
Calexico Police Department
Imperial County Narcotics Task Force
Drug Enforcement Agency
Bureau of Alcohol, Tobacco, Firearms and Explosives
Bureau of Land Management
California Highway Patrol
U.S. Marshals Service*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Unlicensed Money Transmitters Charged with Money LaunderingRead the Press Release
SAN DIEGO – San Diego-based business attorney Richard Medina Jr. and alleged co-conspirator Omar Trevino Caro Del Castillo appeared in federal court today to face allegations that they laundered almost $12 million via international financial transactions in an attempt to promote their unlicensed money transmitting business.
According to an indictment unsealed this afternoon, the defendants are charged with operating as a commercial enterprise, willing and able to transfer cash on behalf of third parties without registering with the Secretary of the Treasury, as required by Title 31, United States Code, Section 5330. In turn, the defendants’ customers availed themselves of the defendants’ ability to collect cash anywhere throughout the United States, and transmit it anywhere in the world. According to the indictment, the defendants obtained commissions for their services, extracting a fee from the millions of dollars transmitted abroad.
The indictment alleges that in an effort to mask the transmission of currency, Medina opened several “Interest on Lawyers Trust Accounts,” known as IOLTA accounts, at national financial institutions. Other co-conspirators picked up cash at various locations throughout the United States and deposited the cash into one of Medina’s IOLTA Accounts.
By depositing the money into the IOLTA Accounts, the defendants, along with their clients abroad, intended to avoid financial institutions from filing accurate Department of Treasury FinCEN Form 104, Currency Transaction Reports. Financial Institutions must file Currency Transactions Reports for all currency transactions exceeding $10,000 during any one banking day. The defendants sent their clients’ funds internationally through an informal and unlicensed transfer network, in furtherance of the conspiracy to promote the operation of the unlicensed money transmitting business.
The criminal case is assigned to U.S. District Court Judge Roger T. Benitez.
During today’s hearing, the government asked that Caro Del Castillo be held without bond based on risk of flight, and U.S. Magistrate Judge Bernard G. Skomal agreed; Medina was ordered released on $200,000 bond.
DEFENDANT Case Number: 14cr2936 Richard Medina, Jr. Age: 38 Omar Trevino Caro Del Castillo Age: 37 CHARGESMoney Laundering Conspiracy – Title 18, U.S.C., Section 1956(h)
Maximum penalty: 20 years’ imprisonment, $500,000 fine, and forfeitureOperating an Unlicensed Money Transmitting Business – Title 18 U.S.C., Section 1960
Maximum penalty: 5 years’ imprisonment, $250,000 fine, and forfeitureConspiracy – Title 18, U.S.C., Section 371
Maximum penalty: 5 years’ imprisonmentMoney Laundering – Title 18, U.S.C., Section 1956(a)(2)(A)
Maximum penalty: 20 years’ imprisonment, $500,000 fine, and forfeitureCause or Attempt to Cause Financial Institution to File CTR that Contains Material Omission or Misstatement of Fact – Title 31, U.S.C., Section 5324(a)(2)
INVESTIGATING AGENCY
Maximum penalty: 10 years’ imprisonment, $500,000 fine, and forfeitureFederal Bureau of Investigation
Drug Enforcement Administration
Internal Revenue Service*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Trust Administrator Sentenced for Embezzling over $1 Million from Trusts of Elderly ClientsRead the Press Release
San Diego, CA - United States Attorney Laura E. Duffy announced that Brian Lee of San Diego County was sentenced today to 21 months in prison for embezzling over $1 million from trust accounts he had opened and managed on behalf of an elderly couple.
U.S. District Judge Barry Ted Moskowitz also ordered Lee to pay over $750,000 in remaining restitution, and commented Lee’s behavior was like “Dr. Jekyll and Mr. Hyde” as he was “little by little bleeding money away from persons who trusted him and were trying to do charitable things.”
Lee pleaded guilty to wire fraud on February 19, 2014. According to court documents and his admissions, an elderly San Diego couple hired Lee in approximately June 2004 to create trusts and corporations on their behalf in order to manage their assets. The couple also hired and paid Lee to maintain the bank accounts he opened for the couple’s entities.
Soon after opening these accounts, however, Lee began making unauthorized transfers of the couple’s funds and depositing the money into other bank accounts over which he had exclusive control. Lee continued to embezzle funds for almost a decade by systematically withdrawing funds from the couple’s accounts, including one account he opened as a trust account for the couple’s grandchildren. In total, Lee embezzled over $1 million from the couple, much of which he used to pay his own personal expenses.
United States Attorney Duffy said, “It is gratifying to achieve justice on behalf of these senior citizens, who unfortunately placed their trust in Mr. Lee. We hope that this case serves as a deterrent to other fiduciaries and trust administrators who might seek to take advantage of vulnerable victims.”
DEFENDANT Case Number: 14CR0385-BTM Brian P. Lee Age: 44 CHARGESTitle 18, United States Code, Section 1343 (Wire Fraud)
INVESTIGATING AGENCY
Maximum penalty: 20 years of custody; $250,000 FineFederal Bureau of Investigation
Chase Banker Convicted of Bribery Admits Taking Hundreds of Thousands of Dollars in Return for Selling Loans on Secondary Mortgage MarketRead the Press Release
SAN DIEGO – Lynda Sanabria, a J.P. Morgan Chase banker, admitted in federal court today to receiving more than $200,000 in bribe payments related to Chase’s sale of mortgages on the secondary market. As detailed in her guilty plea, Sanabria used her position and influence at Chase to ensure that her preferred customers won their bids to purchase mortgage notes. Sanabria received these bribe payments from San Diego businessman Israel Hechter, who pleaded guilty in September and admitted paying a total of $1 million in bribes to Sanabria and others.
As detailed in Court documents, Sanabria began accepting bribes from Hechter and his associates as early as 2004, when Hechter offered to pay her on the side in return for providing inside information on loans that Chase was putting up for sale. Around 2004, he arranged to make a $70,000 payment to Sanabria, which Sanabria used to purchase property near Lake Havasu, Arizona. In addition, Hechter would provide the former Chase banker with a fixed payment (up to around $300) for each loan on which he bid. Pursuant to this arrangement, Sanabria provided Hechter with details about his competitors’ bids, which helped to ensure that Hechter was the winning bidder.
By 2008, Hechter stopped reporting the illegal payments to the Internal Revenue Service, and Sanabria stopped paying taxes on the illegal income. As noted in Sanabria’s guilty plea, Hechter later referred to the payments as birthday gifts or consulting fees, in order to disguise the fact that he was paying for influence over her decisions at Chase.
Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted as part of his guilty plea that he paid a million dollars in bribes to Sanabria and other bankers at GMAC and National City Bank. In order to make sure that Hechter’s bids were successful, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding process by supplying Hechter with confidential information about prices and competing bids.
Robert Moreno, of GMAC, was one of the other bankers to receive bribes from Israel Hechter. Last week, Moreno pleaded guilty, and admitted that he accepted more than $1 million in bribes from Hechter and from other GMAC customers.
After purchasing the mortgages from the various financial institutions, Hechter pooled the loans and sold shares of the pools to investors, usually friends and family members including his father, Zeev Hechter, his brother, Amir Hechter, and his employee, Jack Prober, each of whom also invested in the pools. After purchasing the loans, Ocean 18, LLC would service them and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.
“When bankers accept bribes, the real losers here are businesses who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes,” said U.S. Attorney Laura Duffy. “We will continue to prosecute insiders who exploit their positions for personal gain.”
FBI Special Agent in Charge Eric S. Birnbaum commented, “By pleading guilty, Ms. Sanabria admitted corrupting the process and denying other businesses the opportunity to obtain valuable contracts. The FBI and our law enforcement partners are committed to pursuing anyone who illegally lines his or her own pockets at the expense of the public good."
Sanabria entered her guilty plea today before U.S. Magistrate Judge Bernard G. Skomal. Sanabria is scheduled to be sentenced by U.S. District Judge Roger T. Benitez on January 19, 2015, at 9 a.m.
Israel Hechter, Zeev Hechter, Amir Hechter, and Prober each pleaded guilty in September to participating in the conspiracy and making hidden payments to Sanabria, Moreno, or others. They are all scheduled to be sentenced on January 5, 2014, at 9:00 am. Moreno pleaded guilty to the same offense, and is scheduled to be sentenced on January 19, 2014, at 9:00 am. Each of these defendants will also be sentenced by Judge Benitez.
The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.
DEFENDANT PLEADING GUILTY Case Number: 14CR-2980-BEN Lynda Sanabria Age: 51 Rockwall, TX DEFENDANTS PREVIOUSLY CHARGED Israel Hechter, 14CR2703-BEN Age: 47 San Diego, CA Amir Hechter, 14CR2701-BEN Age: 42 San Diego, CA Jack Prober, 14CR2704-BEN Age: 56 La Jolla, CA Zeev Hechter, 14CR2702-BEN Age: 68 Aventura, FL Robert Moreno, 14CR2277-BEN Age: 42 Tempe, AZ CHARGESConspiracy to commit bank bribery and tax evasion, in violation of 18 U.S.C. § 371.
INVESTIGATING AGENCY
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal InvestigationCouple Who Lost Home in Witch-Creek Fire Indicted for FraudRead the Press Release
San Diego, CA - United States Attorney Laura E. Duffy announced that Deborah and Douglas Tumlinson of Valley Center were arraigned today before U.S. Magistrate Judge Bernard G. Skomal on a ten-count indictment for various fraud charges they allegedly orchestrated after losing their home in the 2007 Witch Creek fire.
In October 2007, the Tumlinsons’ home in Ramona was destroyed by wildfire. The Tumlinsons originally joined a class-action lawsuit against San Diego Gas & Electric (“SDG&E”) to recoup losses from the fire. The indictment alleges that although the Tumlinsons did not enter a settlement with SDG&E, they obtained a loan from U.S. Claims, a funding company, by falsely claiming they had reached a settlement and promising to use the settlement funds as collateral. They were later sued by U.S. Claims for not making any payments on the loan.
The indictment also charges that the Tumlinsons took the proceeds from the U.S. Claims loan and laundered over $500,000 to purchase a new house in Valley Center. Next, the Tumlinsons allegedly made material misrepresentations on a loan application to Seaside Funding, Inc., a Carlsbad mortgage broker company, to obtain a $250,000 home equity loan on their new Valley Center home. They also failed to repay the Seaside Funding loan.
Finally, the Tumlinsons filed for bankruptcy three times, but are accused of intentionally failing to list the outstanding loan debt to U.S. Claims on their bankruptcy petitions.
The Tumlinsons are scheduled to appear before U.S. District Court Judge Janis L. Sammartino for a motion hearing on November 14, 2014.
DEFENDANT Case Number: 14CR2978-JLS Deborah Tumlinson Age: 43 (Counts 1-9) Douglas Tumlinson Age: 40 (Counts 1, 3-8, 10) CHARGESCount 1: Title 18, United States Code, Sections 371 (Conspiracy)
Maximum penalty: 5 years of custody; $250,000 FineCount 2: Title 18, United States Code, Sections 1343 (Wire Fraud)
Maximum penalty: 20 years of custody; $250,000 FineCounts 3-4: Title 18, United States Code, Sections 1341 (Mail Fraud)
Maximum penalty: 20 years of custody; $250,000 FineCount 5: Title 18, United States Code, Sections 1344 (Bank Fraud)
Maximum penalty: 30 years of custody; $150,000 FineCount 6: Title 18, United States Code, Sections 1014 (False Statement on Loan Application)
Maximum penalty: 30 years of custody; $1,000,000 FineCount 7: Title 18, United States Code, Sections 1957 (Money Laundering)
Maximum penalty: 10 years of custody; $250,000 FineCounts 8-10: Title 18, United States Code, Sections 152(3) (Bankruptcy Fraud)
Maximum penalty: 5 years of custody; $250,000 Fine INVESTIGATING AGENCYFederal Bureau of Investigation
*Indictments and complaints are not evidence that the defendant committed the crime charged.
All defendants are presumed innocent until the United States meets its burden in court of proving
guilt beyond a reasonable doubt.Convicted Businessman Pleads Guilty to Obstructing JusticeRead the Press Release
San Diego, CA - James Yiu Lee pled guilty earlier today to obstructing justice in relation to a fraud scheme that resulted in investor’s losing more than $10 million. In his guilty plea, Lee also admitted hiding stolen funds in shell corporation accounts and using a series of elaborate transactions to avoid having to pay restitution he owed the United States from a previous felony conviction.
In December 1997, Lee (who was a part-time resident of La Jolla) was convicted of defrauding investors and embezzling from their pension funds. In November 1998, he was sentenced to 30 months in custody and ordered to pay $2,880,000 in restitution. To date, Lee has paid less than $30,000 of the owed restitution. According to documents filed in court, Lee began a new scheme in 2007, which he intentionally designed to obstruct the United States from collecting his income to pay the outstanding restitution.
As noted in his plea agreement, by 2009, Lee was soliciting new investors and falsely promising to share 50% of all realized gains and losses incurred from his online trading activity. In addition, he attracted clients by falsely informing them that he was a CPA, with Ph.D., J.D., and M.B.A. degrees. Lee also failed to disclose his 1997 felony fraud conviction.
In entering his plea, Lee admitted instructing clients to send management fees and profits from trades to bank accounts he opened in the name of shell corporations, including San Diego-based ELX Int., Inc. (“ELX”), which failed to list Lee as a corporate officer or on its bank account. Lee obtained use of his client’s funds by directing them to send payments to the ELX bank account. Once the assets were under his control, Lee would then transfer them to other shell accounts under his control. He would then use the hundreds of thousands of dollars of these stolen funds for personal expenses.
By January 2011, Lee admitted that his trading activity created significant realized losses to client accounts. Rather than pay clients for 50% of the losses, as promised, Lee restructured billing invoices to disguise the losses. He then proceeded to falsely bill his clients for non-existent gains. In total, Lee’s trading activity led to over $10 million in losses for over 14 clients.
Lee entered his guilty plea before Magistrate Judge Barbara L. Major. U.S. District Court Judge Roger T. Benitez will sentence Lee on January 19, 2015.
DEFENDANT Case Number: 14CR2937-BEN James Yiu Lee CHARGESTitle 18, United States Code, Section 1503 (Obstruction of Justice)
Maximum penalty: 10 years of custody; $250,000 Fine SUMMARY OF PREVIOUS CHARGE Case Number: 95CROO41-MMC-1 (NDCA)Wire Fraud (18 U.S.C. § 1343) & Pension Embezzlement (18 U.S.C. § 664)
INVESTIGATING AGENCYFederal Bureau of Investigation
Real Estate Investors Plead Guilty in Widening Multimillion Dollar Loan-Fraud and Kickback SchemeRead the Press Release
SAN DIEGO - Grant McCollough, a real estate investor and owner of Tycoon Investments, and his wife, Marisa McCollough, pleaded guilty today to participating in a conspiracy to defraud mortgage lenders and impede the Internal Revenue Service.
As part of their conspiracy, the McColloughs recruited investors to act as “straw” buyers and arranged for false information to be submitted to mortgage lenders in support of the buyers’ loan applications. The McColloughs also fraudulently inflated the value of the homes and disguised the source of the down payments, in order to skim funds from the fraudulent transfer of property among their co-conspirators. They also admitted hiding their skimmed profits from the IRS.
Over a dozen of the fraudulent mortgages were arranged by coconspirator Donald Totten, a mortgage loan officer and broker operating from Rancho Santa Fe. Totten pleaded guilty in February 2014 to mortgage fraud, bankruptcy fraud, and filing a false tax return that failed to report more than $3 million in taxable income. Totten operated the businesses “Money World” and “Integrated Home Loans,” and specialized in brokering a particularly toxic stated-income, stated-asset “negative amortization” loan product, which allowed borrowers to make monthly payments less than the interest charged over the same period and without paying down the principal balance, so that the monthly payments were low but the outstanding balance of the loan increased over time. As part of his plea agreement, Totten admitted that defaults in the mortgages he brokered caused losses of between $2.5 million and $20 million. Totten, who is in custody, will be sentenced on October 20, 2014, by U.S. District Judge Michael M. Anello.
McCollough’s business partner at Tycoon Investments, Jason Kent, was also charged in the scheme. On July 21, 2014, Kent pleaded guilty to wire fraud, and admitted assisting Totten, Grant McCollough, Marisa McCollough, and others with carrying out this mortgage and kickback scheme. Kent’s case was transferred to the District of Hawaii and he is scheduled to be sentenced on February 26, 2015, before U.S. District Judge Leslie E. Kobayashi.
As admitted as part of the guilty pleas, the McColloughs arranged for loan applications to include made-up employment (including false employment at Tycoon Investments) and represented that borrowers earned substantial salaries from the company when, in reality, Tycoon Investments had no employees. In addition, with Totten’s help, the McColloughs and Kent would falsely represent that they jointly owned a bank account at Wells Fargo Bank, to support false claims by Marisa McCollough and Kent that they held significant assets. In reality, the funds were Totten’s. During the conspiracy, Marisa McCollough worked at Wells Fargo Bank, a position she used to help falsify records about the loan applicants’ account balances.
With Totten’s help, Marisa McCollough bought a $3.4 million oceanfront home in Lahaina, Hawaii. In order to qualify, she falsely claimed that she earned $90,000 per month, had close to $700,000 in savings, and made a down payment of $630,000. This was all false, and in fact Ms. McCollough did not contribute any of her own funds to the purchase. The McColloughs lived in the home for several years, but never made the mortgage payments they owed.
The McColloughs’ guilty pleas were taken before U.S. Magistrate Judge Ruben B. Brooks. They are scheduled to be sentenced by Judge Anello on January 5, 2015 at 9 a.m.
In addition to these defendants, Totten’s employee and loan processor, Shellie Lockard, also pleaded guilty to participating in a conspiracy to defraud mortgage lenders. According to her plea agreement, Lockard processed fraudulent loans for Totten, and earned commissions of approximately $1,000 per loan. She was sentenced on September 15, 2014, by Judge Anello, and ordered to serve six months in home detention.
According to court documents, many of the fraudulently-obtained mortgage loans subsequently defaulted, causing mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, to suffer significant losses as a result of the conspiracy. Fannie Mae and Freddie Mac are government-sponsored enterprises with a mission to provide liquidity, stability, and affordability to the U.S. housing market. Both enterprises assist mortgage lenders by purchasing the loans they originate, enabling the lenders to replenish their funds to finance additional mortgage loans for American homebuyers. The statements borrowers make in loan applications are an important factor in Fannie Mae’s and Freddie Mac’s determination whether to purchase a mortgage loan.
“This kind of fraud has a ripple effect through our nation’s economy,” said U.S. Attorney Laura Duffy. “We will continue to investigate and prosecute those who defraud the mortgage market.”
FBI Acting Special Agent in Charge, Robert Howe, commented, “FBI investigations such as this expose the vulnerabilities in the mortgage industry and how criminals motivated by greed will stop at nothing to support their lavish lifestyles. This kind of dishonesty is profitable only in the short run, and ultimately leads to arrest and prosecution.”
IRS Criminal Investigation’s Special Agent in Charge Erick Martinez stated: “Today Grant McCollough and Marisa McCollough are being held accountable for their role in defrauding mortgage lenders and impeding the IRS. IRS Criminal Investigation is working hard to detect income from illegal sources intentionally hidden from the IRS and ensure that all forms of income are taxed.”
DEFENDANTS Case Number: 14CR2787-MMA Grant McCollough Age: 38 Kearney, Nebraska Marisa McCollough Age: 36 Kearney, Nebraska CHARGESConspiracy to commit wire fraud and defraud the United States, in violation of 18 U.S.C. § 371.
Maximum Penalties: Five years in prison, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, restitution.
DEFENDANT Case Number: 13CR2941-MMA Donald Totten Age: 58 Oakland, California CHARGESConspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
Filing a false tax return, in violation of 26 U.S.C. § 7206(1)
Maximum Penalties: 3 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.
Bankruptcy fraud, in violation of 18 U.S.C. § 152
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT Case Number: 14CR1667-MMA Jason Kent Age: 37 Lahaina, HI CHARGESWire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT Case Number: 13CR2772-MMA Shellie Lockard Age: 44 Ventura, CA CHARGESConspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349
INVESTIGATING AGENCIES
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal InvestigationMulti-Million Dollar Mortgage Fraud Ringleader SentencedRead the Press Release
San Diego, CA - Kathryn Sylvester of San Diego was sentenced today to 41 months in custody for operating a large-scale mortgage fraud scheme that caused over $6 million in losses on various properties in San Diego and Orange Counties.
A restitution order is pending. The government has asked the court to order Sylvester to pay $6.6 million to several financial institutions and individuals who were victimized by her scheme.
During today’s sentencing hearing, U.S. District Court Judge Cathy Ann Bencivengo said Sylvester orchestrated a “sophisticated operation” involving “repeated acts of criminal behavior.” Judge Bencivengo acknowledged Sylvester’s managerial role in the conspiracy and noted that she must be held responsible for the “serious offense.”
According to court records and Sylvester’s admissions, between June 2005 and May 2008, Sylvester recruited “straw buyers” to submit falsified mortgage loan applications in order to buy properties and obtain home equity loans. Sylvester also provided false documents to support the straw buyers’ misrepresentations regarding their income and employment, and added straw buyers to unrelated bank accounts so they could inflate the value of their assets on loan applications. Sylvester also helped convince lenders to fund loans for which Sylvester and the straw buyers would not otherwise qualify.
Although Sylvester promised some straw buyers that she would “flip” a number of the properties for a quick profit, she systematically drained equity from the properties for her own benefit. As a result of Sylvester’s criminal acts, the conspirators were able to fraudulently obtain over 80 loans resulting in over $24 million in funded loans -- loans that eventually went into default and resulted in the foreclosure of approximately 28 properties.
U.S. Attorney Laura Duffy commented: “It is our sincere hope that we have closed a chapter on the destructive wave of mortgage frauds that heavily contributed to this nation’s financial crisis. Due to the determined efforts of the FBI to ensure that financial crimes do not go unpunished, Kathryn Sylvester and her conspirators have been held accountable for the serious damage they caused.”
FBI Acting Special Agent in Charge Robert Howe commented, “This FBI investigation unraveled a sophisticated mortgage fraud scheme that involved straw buyers and people in trusted positions who had a role in protecting the integrity of the mortgage lending process. Because of her lies and deception, motivated by greed, Ms. Sylvester will now be spending close to four years in federal prison to think about whether it was all worth it. Today's sentencing sends a message that the FBI will continue to aggressively investigate those individuals that engage in fraudulent financial schemes that cause harm to our banking industry.”
The straw buyers involved in Sylvester’s conspiracy included Claudia Montes, Tad Lent, Timothy Shannahan, and Roderick Michener. Montes, a former notary public, notarized the signatures of other straw buyers on the false loan applications. On April 12, 2013, Montes pleaded guilty and admitted that she conspired with Sylvester to submit false loan applications to lenders. Montes was sentenced to 20 months in custody by U.S. District Judge Janis L. Sammartino on February 14, 2014 (13CR1313-JLS).
Lent pleaded guilty to conspiring with Sylvester to submit falsified loan applications to mortgage lenders by misrepresenting the amount of his assets (12CR3744-L). U.S. District Judge M. James Lorenz sentenced Lent to one year of custody on March 3, 2014.
On April 14, 2014, Judge Lorenz also sentenced Shannahan to one year in custody for his role as one of Sylvester’s straw buyers (13CR1650-L). Michener pleaded guilty to conspiring with Sylvester to commit bank fraud (13CR1130-CAB). Michener admitted that he permitted co-conspirators to claim an ownership interest in his bank account in order to include the account as an asset on their respective mortgage loan applications. He also admitted transferring fraud proceeds to Sylvester. On March 14, 2014, Judge Bencivengo sentenced Michener to time-served and ordered him to repay over $2 million in restitution.
DEFENDANT Case Number: 13CR1355-CAB Kathryn Sylvester Age: 44 CHARGESCount 1: Title 18, United States Code, Section 1349 (conspiracy to commit wire fraud and bank fraud)
Maximum penalty: 30 years of custody; $1,000,000 fineCount 5: Title 18, United States Code, Section 1343 (wire fraud)
INVESTIGATING AGENCY
Maximum penalty: 20 years of custody; $250,000 FineFederal Bureau of Investigation
Four Plead Guilty in Million Dollar Bank Bribery CaseRead the Press Release
SAN DIEGO - Israel Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted in federal court today that he paid $1 million in bribes to bank insiders at J.P. Morgan Chase Bank, GMAC Mortgage, LLC, and National City Bank.
According to his plea agreement, in exchange for the bribes, the bankers arranged for Hechter to win bids to purchase mortgage loans issued by the banks and sold on the secondary market. In order to make sure that Hechter’s bids won, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding by supplying Hechter with confidential information about prices and competing bids.
Assistant U.S. Attorney Phillip L.B. Halpern noted in court today that it was essential that the Department of Justice police the $10 trillion secondary mortgage market to ensure that there was a level playing field for all investors. “Individuals and corrupt bank employees who attempt to tilt this playing field for their own advantage cannot be tolerated,” he told the court.
Hechter’s brother, Amir Hechter, and his business associate, Jack Prober, pleaded guilty on Wednesday to participating in the conspiracy. Both Prober and Amir Hechter admitted writing personal checks to the bankers in order to assist the bankers in evading taxes on the illegal income. Israel and Amir’s father, Zeev Hechter, also admitted participating in the conspiracy. In entering his guilty plea on Tuesday, Zeev Hechter admitted hand-delivering approximately $330,000 in cash to GMAC banker Robert Moreno. In addition to meeting Zeev Hechter on New York City street corners, Moreno met him at Hechter’s car wash where the conspirators “laundered” the bribes. Each time they met, Zeev Hechter handed Moreno a bag containing tens of thousands of dollars in cash.
Moreno was arrested on July 15, 2014, for his alleged role in the conspiracy. As alleged in his charging documents, Moreno accepted hundreds of thousands of dollars in bribes in return for steering GMAC mortgages to Hechter’s company. After this relationship developed, Moreno allegedly used his position at the bank to help Hechter win bids to purchase mortgages – which Hechter previously had trouble winning. Moreno’s case is pending before U.S. District Judge Roger T. Benitez. A trial date has not been set.
According to his plea agreement, Israel Hechter and his coconspirators attempted to cover up the bribes by pretending that they were legitimate “commissions” unrelated to the bankers’ positions with the banks, using a phony “Consulting Agreement,” a sham business and a corresponding bank account to disguise the bribes.
Many of the mortgages at issue were non-performing or distressed second mortgages. Israel Hechter pooled the loans and sold share of the pools to investors, usually friends and family members including Zeev Hechter, Amir Hechter, and Jack Prober, each of whom invested in the pools. After purchase, Ocean 18, LLC would service the loans and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.
The mortgages at issue were purchased on the secondary market, after the banks had issued funds to homeowner borrowers. Secondary purchasers of mortgages provide primary lenders with additional capital and reduced credit risk, and in turn provide borrowers with greater access to mortgage loans. The secondary mortgage market in the United States exceeds $10 trillion.
Each of the four guilty pleas were taken before U.S Magistrate Judge Mitchell D. Dembin. The defendants are scheduled to be sentenced by Judge Benitez on January 5, 2015, at 9 a.m.
“People who think they can manipulate and bribe their way into the winner’s circle should take note: The integrity of our financial system is not for sale,” said U.S. Attorney Laura Duffy. “This behavior is criminal, and there are consequences.”
“The defendants in this case knowingly engaged in a pattern of corruption by paying hundreds of thousands of dollars in bribes to those responsible for ensuring the integrity of financial transactions,” said FBI Acting Special Agent in Charge, Robert Howe. “Today's conviction sends a clear message that the FBI will not allow greed and corruption to undermine our financial markets. The FBI will continue to pursue these cases to ensure confidence and trust in our financial markets.”
“Professionals, including bankers who line their pockets with the payment of illicit bribes, should know they will not go undetected and will be held accountable,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “IRS Criminal Investigation is working hard to ensure that all forms of income are taxed, including income from illegal sources.”
The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.
DEFENDANTS PLEADING GUILTY Israel Hechter Age: 47 San Diego, CA Amir Hechter Age: 42 San Diego, CA Jack Prober Age: 56 La Jolla, CA Zeev Hechter Age: 68 Aventura, FL CHARGESConspiracy to commit bank bribery and tax evasion, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years in prison, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT FACING CHARGES Robert Moreno Age: 42 Tempe, AZ CHARGESBank bribery, in violation of 18 U.S.C. § 215
Maximum Penalties: 30 years in prison, $1,000,0000 fine or three times the value of the bribe, $100 special assessment, restitution
INVESTIGATING AGENCIESFederal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal Investigation*As to defendant Robert Moreno, the public is reminded that the charges are not evidence that the defendant committed the crime charged. The defendant is presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Executive Director of La Jolla Synagogue Held to Account for Betrayal Leader Who Embezzled Hundreds of Thousands of Dollars from Congregation Beth El Sentenced to 18 Months in CustodyRead the Press Release
United States District Judge Dana M. Sabraw today sentenced Eric S. Levine to 18 months in prison for stealing hundreds of thousands of dollars from La Jolla’s Congregation Beth El synagogue.
Levine served as Beth El’s Executive Director from July 2007 to December 2013, overseeing the synagogue’s annual budget. Importantly, he also had access to, and control over, Beth El’s bank accounts, credit card accounts, and bookkeeping records. Starting in at least February 2008, he began embezzling money from the synagogue for his own use. He continued his thefts until he left the position in December 2013. As part of his guilty plea, Levine admitted misappropriating $394,872.99 from the synagogue over those five years. Based on additional accounting analysis and review of financial records, the congregation identified its ultimate losses from Levine’s conduct as over $540,000.
Levine was able to carry out his embezzlement by virtue of his control over Beth El’s bank account and credit card. On most occasions, he simply used money located in the congregation’s bank account to pay his own bills directly. On other occasions, he transferred balances from his personal credit card to the congregation’s credit card account, and then paid his balances with the congregation’s funds.
In order to fool the congregation, its bookkeepers, and its executive staff, Levine falsified Beth El’s books and records to cover up his ongoing theft. He hid thousands of dollars in payments to himself by creating entries for legitimate expenses of the synagogue, in categories such as “Ritual Fund,” “Rabbi Emeritus,” “High Holidays,” “Purim Baskets,” “janitorial expense,” “utilities,” “landscaping expense,” and “repair / replace reserve fund.” His mischaracterization of payments made it appear that more of Beth El’s funds were spent on legitimate synagogue expenses than was actually spent. Levine also prepared false financial reports and annual budget proposals based on these inflated figures.
Instead of these legitimate expenses, the funds were used to pay a variety of Levine’s credit card charges, including trips to Mexico, Hawaii, Las Vegas, and Canada; charges at La Costa Resort Spa; monthly membership and regular $1,400 charges for a personal trainer at 24 Hour Fitness; and expenditures at StubHub, Sleep Train, Discount Tire. Having his hand in Beth El’s till also allowed Levine to outfit his home with expensive leather furniture and BBQ equipment, buy fancy jewelry, send his children to private school, and purchase exclusive Disney vacations. After having pored over the congregation’s records from the time of Levine’s tenure, Beth El’s new Executive Director remarked in her letter to the Court: “From Eric’s first months at Beth El in 2007 until the day he left, every Beth El credit card statement is riddled with his personal expenses: restaurants, gas, iTunes, men’s clothing, travel for his family, home décor. Even after he gave notice of his departure to the Beth El board, Eric purchased expensive new smartphones for himself and his wife on Beth El’s Sprint account.”
The President of the synagogue described the impact of Levine’s thefts on the congregation: “Because of his crime, people lost their jobs, their livelihoods, and their lives were changed forever. "No money in the budget," he said, while taking our money to line his pockets.
Because of his crime, we could not install heat in the classrooms for our children. "No money in the budget," he said, while paying off his own credit cards. Because of him, we could not give complementary meals to families. “No money in the budget,” he said, while shopping for his own family, and himself. Our staff gets annual retirement employee contributions of about 2%. In 2009 he told the staff that due to the downturn in the economy, no contributions would be made that year…But there would have been sufficient funds if he had not been stealing…from his own employees, people who have dedicated their lives and souls to Beth El. He took our money, money we raised from our generous congregants, money to be used for the good of our community. He took it.”Beth El’s rabbi explained the personal impact of Levine’s breach of trust in a letter to the Court. “Eric and I worked closely together. Most of our interactions involved the synagogue’s finances, which means he lied to me every day, every time our paths crossed,” he wrote. “Almost the entirety of our operating budget comes from voluntary dues and contributions. Simply put, people will not trust [Beth El] as much, if at all. . . . [Now], our diminished staff spends much more time on accounting than on our mission of creating a lively Jewish community in San Diego. It’s hard to know if we’ll ever be the same.” He also described employees who were laid off by Levine due to claimed budget constraints, including a single mother of two who has yet to find a new job.
One member of the congregation summed up the impact of Levine’s crime on this community:
Even more important [than the theft of funds] is the breach of trust and loss of a sense of reliance on one previously so highly ‘esteemed’ by so many of our Beth El community. Mr. Levine touched the lives of hundreds in our synagogue. We will certainly recover from the loss of funds. What he has done in terms of disappointment as a human being will affect our members and their ability to feel a sense of trust for years to come.In imposing sentence, Judge Sabraw said the case involved “deeply troubling circumstances” because Levine’s scheme victimized both his employer and congregants who shared his life and faith.
“It’s a deception not only of the synagogue, but everyone who makes up the synagogue, so there are hundreds of victims…The sense of betrayal cannot be overstated.”
The Court ordered that Levine pay $543,000 in restitution for the monies he stole from Congregation Beth El. He was also sentenced to three years of supervised release upon completion of his prison term.
U.S. Attorney Laura Duffy said, “Mr. Levine embezzled hundreds of thousands of dollars to finance a life of luxury for himself while betraying the people who believed in him. This defendant was a one-man wrecking ball to this congregation, both financially and emotionally, and today the court imposed a fitting sentence for such abhorrent conduct.”
FBI Acting Special Agent in Charge Robert Howe commented, “Mr. Levine hid behind a facade of honesty and integrity while stealing money from his congregation to support his lavish lifestyle. In doing so, Mr. Levine betrayed the people who trusted him the most and today's sentencing sends a clear message that those who engage in similar criminal conduct will be held accountable for their actions.”
DEFENDANT Eric S. Levine Age: 37 CHARGESMail fraud, Title 18, United States Code, Section 1341
INVESTIGATING AGENCY
Maximum penalties: 20 years in custody; $250,000 fine; 3 years of supervised release; mandatory order of restitution to victimsFederal Bureau of Investigation
Owner of Mussari Motors, Inc. Pleads Guilty to Conspiracy to Evade Reporting Requirements After Receiving $719,000 in Cash from Drug TraffickerRead the Press Release
SAN DIEGO – John Frank Mussari Jr, owner of Mussari Motors Inc., a luxury car dealership in San Diego, admitted in federal court today that he conspired with a drug trafficker to evade laws requiring disclosure of cash transactions exceeding $10,000.
According to his plea agreement, Mussari admitted that he failed to report receiving $719,000 in cash from the drug trafficker, who purchased several high-end vehicles including a Ferrari and Porsche during a four-month period.
Under federal law, each person engaged in an automobile dealership, who in the course of that business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file “Report of Cash Payments Over $10,000 in Trade or Business” with the Financial Crimes Enforcement Network (FINCEN) within 15 days. Mussari admitted that he and the trafficker, who was identified in the plea agreement only as J.B., intentionally and willfully conspired with each other to avoid filing any of the required forms.
Drug traffickers often use this method to launder drug proceeds.
During his guilty plea today, Mussari admitted that he received $132,000 in cash for a Ferrari, $115,000 in cash for a Lamborghini, $147,000 in cash for a Porsche, and $205,000 for another Lamborghini. Mussari also admitted that he received $80,000, $60,000, and $31,000 in cash from the drug trafficker.
According to court documents, Mussari was initially detained attempting to leave in a Lamborghini at the time federal and state agents searched the residence of the drug trafficker’s home in Fallbrook, California. Agents found about $205,000 cash in Mussari’s Lamborghini. The money was forfeited to the United States.
Mussari is scheduled to be sentenced on December 5, 2014 at 8:30 a.m. before U.S. District Judge Gonzalo P. Curiel.
DEFENDANT Case Number: 13cr4072 John Frank Mussari, Jr. Age: 48 San Diego, California CHARGESConspiracy to Evade Reporting Requirements Received in Business
INVESTIGATING AGENCY
Title 18, U.S.C., Section 371
Maximum penalty: Five years in prison and $250,000 fineInternal Revenue Service
Drug Enforcement Administration*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Two Men Plead Guilty in International Stolen Car and Identity Theft Internet ScamRead the Press Release
San Diego – United States Attorney Laura E. Duffy announced that Edmund Seshie and Abdul Rezak Shaib pled guilty today to being part of a West African-based organized international car theft and identity theft ring.
In their guilty pleas, Shaib and Sheshie admitted purchasing stolen credit cards and corresponding counterfeit driver’s licenses in bulk from a Singapore-based “carder” website. So-called “carders” are people who buy, sell, and trade online the credit card data stolen from phishing sites or from large data breaches at retail stores. The stolen identities were then used to fraudulently purchase vehicles from U.S.-based car dealerships. In all, the defendants purchased scores of vehicles valued at almost a half a million dollars prior to the discovery of their scheme.
According to documents filed in court, co-defendant Henry Addo allegedly ran this international car theft ring from his home in Ghana. From various locations in Ghana, Addo placed international phone calls to car dealerships in the United States. During these call, he assumed the identity of the stolen credit card holders during the negotiation of each purchase, the indictment said. He then allegedly used a series of email accounts to transmit the counterfeit driver’s licenses and stolen credit card information to United States-based car dealerships.
According to the indictment, Addo motivated his United States-based co-conspirators to participate in the conspiracy by invoking “Sakawa,” which is a Ghanaian practice that combines modern internet-based fraud practices targeting foreigners with traditional African religious rituals.
Defendants paid for the cars using the stolen credit cards and (using the same stolen credit cards) paid automobile transportation companies to deliver the vehicles to various staging locations throughout the United States. Once multiple vehicles were accumulated at a particular staging location, a tractor trailer transported them in cargo containers to a New Jersey port for export to Africa, where the cars were then sold on the open market.
“This case is notable in terms of its level of sophistication, its audacious methods and the callous disregard for victims,” said U.S. Attorney Laura Duffy.” These guilty pleas are the first strike back on behalf of identity theft victims who now have to reclaim their good names – a frustrating task that can take years. We will continue to make these cases a priority.”
The FBI recommends that individuals take the following steps to minimize the chance of becoming a victim of identity theft:
- Don’t carry your Social Security card or any document containing your Social Security Number.
- Don’t give a business your Social Security Number just because they ask. Give it only when required.
- Protect your financial information.
- Check your credit report every 12 months.
- Secure personal information in your home.
- Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.
- Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.
Co-defendant Addo remains a fugitive and is believed to be residing in Africa.
DEFENDANT Edmund Seshie, aka Eddie Blay Age: 42 Columbus, Ohio Abdul Rezak Shaib, aka Zak Age: 28 Bronx, New York CHARGESConspiracy to Commit Mail and Wire Fraud – Title 18, U.S.C., Section 1349
Maximum penalty: 20 years’ imprisonment and $250,000 fine INVESTIGATING AGENCYFederal Bureau of Investigation
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Manhattan Beach Executive Charged with Raiding Company CoffersRead the Press Release
SAN DIEGO – James (“Jim”) Miller, a Manhattan Beach attorney and corporate executive, appeared in magistrate court in Los Angeles County yesterday to face allegations that he embezzled over a quarter-million dollars from his former employer, MWRC Internet Sales LLC (“MWRC”).
As alleged in a five-count Indictment, Miller – an attorney who worked for Body Glove, International and served as the President and Managing Partner of MWRC – devised a scheme to steal money from MWRC to pay for his personal, non-company related expenses.
The Defendant carried out his scheme by writing checks from MWRC’s bank account to pay himself unauthorized income and supplemented his legitimate salary to the tune of hundreds of thousands of dollars over approximately four years. The Indictment further alleges that the Defendant failed to disclose to other MWRC partners his on-going self-enrichment scheme and failed to disclose to the banks that the checks he wrote to himself were not authorized by MWRC.
The criminal case against Miller (14CR0471) is assigned to U.S. District Court Judge Andre Birotte, Jr. The trial is set for November 11, 2014 at 8:30 a.m. Magistrate Judge Patrick J. Walsh ordered the Defendant released on a $50,000 bond pending trial.
DEFENDANT Case Number: 14cr0471 James R. Miller Age: 65 Manhattan Beach, CA CHARGESWire Fraud – Title 18, U.S.C., Section 1343
INVESTIGATING AGENCY
Maximum penalty: 20 years’ imprisonment and $250,000 fineFederal Bureau of Investigation
Internal Revenue Service Criminal Investigations*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Ringleader Sentenced for Million Dollar Bank Fraud Conducted in California and Nevada CasinosRead the Press Release
SAN DIEGO – United States Attorney Laura E. Duffy announced today that Ara Keshishyan was sentenced last Friday to 57 months’ imprisonment for leading and organizing a 14-defendant conspiracy to steal more than $1,000,000 from Citibank using cash advance kiosks in a dozen casinos from Southern California to Las Vegas. Judge Sammartino also ordered Keshishyan to pay back the $1,045,585 stolen from Citibank.
Keshishyan presided over a conspiracy to exploit a gap in Citibank’s electronic transaction security protocols in order to overdraw more than 20 Citibank accounts by tens of thousands of dollars each. The scheme worked as follows: Keshishyan recruited conspirators to open Citibank checking accounts that Keshishyan would fund with “seed” money that would form the basis for future fraudulent withdrawals. Keshishyan and his various conspirators then traveled to casinos in Southern California and Nevada, including the Morongo, Pechanga, San Manuel, Agua Caliente, Chukchansi, and Spa Resort casinos in California; the Tropicana, Wynn, Bicycle, and Whiskey Pete’s casinos in Las Vegas, Nevada; and Harrah’s in Laughlin, Nevada. Once inside the casino, Keshishyan instructed the conspirator how to conduct identical, fraudulent withdrawals at cash advance kiosks within a short time window in order to circumvent Citibank security protocols. Keshishyan’s technique exploited a glitch that allowed his conspirators to withdraw several times the amount of seed money deposited into the accounts. In one case, Keshishyan and one of the co-conspirators were able to withdraw 10 times the amount of money deposited into one of the accounts opened in furtherance of the fraud. The conspirators were careful to keep their deposits and withdrawals under $10,000 (typically between $9,000 and $10,000) in order to avoid federal transaction reporting requirements. As the organizer of the conspiracy, Keshishyan personally took a cut of every fraudulent withdrawal that he directed.
United States Attorney Duffy said, “This is an example of a class of cyber-fraud that burdens our financial system and results in a higher cost of doing business for American consumers. Along with our agency partners, my office is committed to detecting and prosecuting these schemes in whatever form they take.”
FBI Special Agent in Charge Daphne Hearn commented, “While advancements in technology have created a world of accessibility to users and a convenience for consumers, they have also left room for cyber criminals to exploit even the smallest of loopholes. The FBI will continue to use our investigative expertise in cyber and financial crimes to pursue those who illegally abuse our financial system for their own personal gain.”
DEFENDANT Case Number: Ara Keshishyan Age: 32 Fillmore, CA CHARGESConspiracy to Commit Bank Fraud – Title 18, U.S.C., Section 371
INVESTIGATING AGENCYFederal Bureau of Investigation
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Lead Defendant Pleads Guilty to Using Hundreds of Stolen Identities to Steal More Than $1.5 Million from U.S. TreasuryRead the Press Release
Federal Authorities continue to focus on the growing problem of identity theft
SAN DIEGO – Arthur Grigorian admitted in federal court today that he defrauded the Internal Revenue Service of over $1.5 million by filing false tax returns in the names of stolen identities. Grigorian’s plea was the 27th conviction obtained by prosecutors since charges were filed in four related cases as part of a joint investigation by the FBI and IRS, dubbed “Operation Trillion Troubles,” in September, 2013.
Grigorian, the lead defendant in one indictment, admitted stealing personal identity information from unwitting victims in order to file false tax returns in their names. These false returns generated well over $1.5 million in fraudulent tax refunds that should never have been taken from the U.S. Treasury. According to the indictment, Grigorian and his conspirators falsely claimed refunds in the names of the victims in a number of ways, all of which involved some form of falsified income and withholdings. Most commonly, the conspirators claimed that the victims – many of whom were elderly and had not filed federal income tax returns in years – made tens of thousands of dollars in gambling winnings before losing nearly the identical amount.
The “losses” effectively canceled out the fabricated winnings, thus entitling the conspirators to a refund for the amount allegedly withheld on the initial winnings. As part of this scheme, Grigorian and his fellow conspirators directed the IRS to send the ill-gotten refunds to postal addresses and/or bank accounts under their control. The conspirators then would often circulate the money through several other accounts before withdrawing it and distributing the money amongst the group.
For his part, Grigorian admitted in court today that he stole the identities of people to use on the fraudulent tax returns, provided this personal information to conspirators, obtained fraudulent identification documents in the names of the stolen identity theft victims, facilitated the receipt of the ill-gotten funds, and enforced discipline on others related to the conspiracy. In all, Grigorian admitted to participating in filing false tax returns in the names of hundreds of victims. According to his plea agreement, Grigorian personally profited from his role in the organization’s activities.
Grigorian faces a maximum potential sentence of five years in prison. He is also required by the terms of his plea to make full restitution to the IRS for the losses caused by his criminal conduct, which totaled nearly $1.5 million.
Grigorian’s plea is the latest of 27 convictions following the September 2013 arrests of dozens of people in “Operation Trillion Troubles.” The four related cases charged the individuals with multiple tax fraud conspiracies and several schemes to defraud American banks. In all, over 58 defendants have been charged and 28 remain as international fugitives.
United States Attorney Laura E. Duffy praised the hard work of the agents from the FBI and IRS on their continued success in these related cases. "Today's guilty plea marks the culmination of the investigation and prosecution of a network of individuals whose scope of criminal actions was only exceeded by their brazen disregard for the sanctity of victims’ personal identity information. Our citizens’ identities are not commodities for criminals to trade and exploit for their own personal gain. Our office will continue to prosecute those who illegally take advantage of others at the expense of the American taxpayer."
FBI Acting Special In Charge Robert Howe commented, “Today's conviction is an example of the FBI's commitment to root out sophisticated fraudulent schemes by criminal enterprises. In this case, the defendant and his co-conspirators were involved in an elaborate scheme using Visa holders and stolen personal information to steal millions of dollars from American taxpayers. The FBI will continue to work with our law enforcement partners to protect American citizens from aggravated identity theft and protect our precious tax dollars from waste, fraud and abuse.”
Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented: “Identity theft and tax refund fraud was the lifeblood that Arthur Grigorian and his conspirators used to further their multi-million dollar fraud scheme. Operation Trillion Troubles exhibits the efforts of the IRS Criminal Investigation and the U.S. Attorney’s Office to protect the integrity of the federal tax administration system. Today’s guilty plea by Arthur Grigorian, the leader of the crime ring, demonstrates IRS Criminal Investigation’s commitment to holding accountable those individuals who victimize others through identity theft and tax refund fraud.”
DEFENDANT Case Number: Arthur Grigorian Age: 33 Glendale, CA CHARGESConspiracy to Commit Mail and Wire Fraud – Title 18, U.S.C., Section 371
Maximum penalty: 5 years’ imprisonment and $250,000 fine
PROGRESS OF CASES CHARGED AS PART OF
"OPERATION TRILLIONS TROUBLE"Summary: As of September 11, 2014, 27 (non-fugitive) defendants have been convicted.
13CR3479-BTM B Convictions (Conspiracy to commit wire fraud – All defendants)
Ernest Soloian
Harout Gevorgyan
Yvonne Mihailescu
Yermek Dossymbekov
Yelena Sklyarova
Vyacheslav Tsoy13CR3480-BTM B Conviction
Arman Eritsian – Conspiracy to commit wire fraud13CR3481-BTM B Convictions (Conspiracy to commit bank fraud – All defendants)
Karen Galstian
Vahag Stepanyan
George Karapetian
Christopher Buckely
Carlos Ferrufino
Akop Galstian
Farbob Golhassani
Paul Gonnelly
Tatyana Kabachinskya
David Megurian
Ashot Mnatsakanyan
Sedrak Movesyan
Robert Rodriguez
Christopher Ruiz13CR3482-BTM B Convictions (Conspiracy to commit bank fraud – All defendants)
INVESTIGATING AGENCIES
Hovakim Sogomonian
Harout Gevorgyan
Tigran Eritsyan
Konstantin Yugay
Mae Barbara WeissbergerFederal Bureau of Investigation
Internal Revenue Service
Los Angeles Police Department*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Banker Convicted of Taking More Than One Million Dollars in BribesRead the Press Release
SAN DIEGO - Robert Moreno, a banker who sold mortgages on behalf of GMAC, admitted receiving more than one million dollars in bribe payments while working on behalf of GMAC. As detailed during his guilty plea, in return, Moreno used his position and influence to ensure that his customers won their bids to purchase mortgage notes. Moreno took the bulk of these bribe payments from San Diego businessman Israel Hechter, who pled guilty in September and admitted paying $1,000,000 in bribes to Moreno and others. Moreno also accepted hundreds of thousands of dollars from another customer based in Woodland Hills, California.
Moreno initially accepted the bribes in cash and personal checks, so that he could conceal the payments from the IRS and avoid paying taxes on the illegal income. Several times in 2012, Hechter’s father, Zeev Hechter, met Moreno in New York City at the car wash he owned, where he delivered “laundered” cash payments totaling $330,000. Moreno travelled around the country, including Las Vegas, New York City, and Scottsdale, Arizona, arranging hand-to-hand cash deliveries of the bribes from Zeev Hechter and others. He also accepted personal checks from Israel’s brother Amir Hechter and their business associate Jack Prober.
Moreno and Israel Hechter later set up a sham “Consulting Agreement” and a phony consulting business, Phoenix Asset & Acquisition, Inc., to disguise the bribe payments and make them look like legitimate consulting fees unrelated to Moreno’s work with GMAC. Moreno then copied this sham contract and used it with other customers who paid him bribes, all to cover up the payments. Moreno took in over $500,000 in bribe payments under these bogus contracts.
Israel Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted as part of his guilty plea that he paid a million dollars in bribes to Moreno and other bank insiders at J.P. Morgan Chase Bank and National City Bank. In order to make sure that Israel Hechter’s bids were accepted, the bankers, including Moreno, corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding by supplying Israel Hechter with confidential information about prices and competing bids.
The mortgages Moreno sold on behalf of GMAC were mostly non-performing or distressed second mortgages. After purchase, Israel Hechter pooled the loans and sold shares of the pools to investors, usually friends and family members including Zeev Hechter, Amir Hechter, and Prober, each of whom invested in the pools. After purchase, Ocean 18, LLC would service the loans and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.
Moreno was arrested on July 15, 2014, for his role in the conspiracy. He entered his guilty plea today before United States Magistrate Judge Mitchell D. Dembin. Moreno is scheduled to be sentenced by United States District Judge Roger T. Benitez on January 19, 2015, at 9:00 a.m.
Israel Hechter, Zeev Hechter, Amir Hechter, and Prober each pled guilty in September to participating in the conspiracy and making hidden payments to Moreno. They are all scheduled to be sentenced by Judge Benitez on January 5, 2014, at 9:00 am.
The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.
DEFENDANT PLEADING GUILTY Case Number: 14CR2277-BEN Robert Moreno
DEFENDANTS PREVIOUSLY CHARGED Amir Hechter Case Number: 14CR2701-BEN Jack Prober Case Number: 14CR2704-BEN Zeev Hechter Case Number: 14CR2702-BEN CHARGESConspiracy to commit bank bribery and tax evasion, in violation of 18 U.S.C. § 371.
INVESTIGATING AGENCY
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal InvestigationSuspected Member of Armenian Smuggling Ring Arrested on ComplaintRead the Press Release
SAN DIEGO, CA – An alleged fourth member of an Armenian alien smuggling ring made her first appearance in federal court today before U.S. Magistrate Judge Nita L. Stormes.
Maria Yanakopulus, 57, is charged with participating in an international alien smuggling organization that brought undocumented Armenian nationals illegally into the United States in exchange for thousands of dollars.
A complaint unsealed today alleges that Yanakopulus was a member of an international smuggling enterprise whereby Armenian nationals were smuggled from Armenia to the United States by way of Moscow, Russia and Cancun, Mexico. In exchange, Armenian nationals were made to pay up to $18,000 each to be brought into the United States. Once in Mexico, the smuggling organization would transport the Armenian nationals to Tijuana, Mexico. The alien smuggling ring would then procure valid U.S. legal permanent resident or passport cards from within the United States and attempt to pass the Armenian nationals as imposters to those documents through the San Ysidro, California, Port of Entry.
In this case, on October 30, 2013, Yanakopulus allegedly drove her white Honda Civic with three undocumented Armenian nationals into the United States through the San Ysidro Port of Entry. Yanakopulus presented to a Customs and Border Protection officer valid I-551 cards (“green cards”) bearing the names and photographs of other individuals for the three Armenian nationals. The three Armenian nationals were then admitted into the United States as imposters to the green cards.
Yanakopulus is the fourth member of this alien smuggling organization arrested by federal agents. On November 1, 2013, Varduhi Avagyan, 42, and Meri Avetisyan, 40, both of Glendale, California were arrested for attempting to smuggle two Armenian nationals into the country. On June 12, 2014, Grigor Chatalyan, the alleged ring leader of the smuggling ring, was arrested as he crossed into the United States at the San Ysidro Port of Entry. Chatalyan is charged with coordinating and directing the international alien smuggling organization. Chatalyan, Avagyan, and Avestisyan are charged in case No. 14CR1646-MMA and a motion hearing/trial setting is scheduled for November 3, 2014 in that case.
Yanakopulus is charged with conspiracy and three counts of bringing in illegal aliens for financial gain. In addition, Yanakopulus is charged with aiding and abetting aggravated identity theft. She faces a maximum penalty of up to 15 years imprisonment and a $250,000 fine. If convicted on all charges, Yanakopulus could be sentenced to a mandatory minimum of five years in custody as well as an additional two year consecutive sentence for aggravated identity theft.
Judge Stormes held a bond hearing today and ordered conditions of release for Yanakopulus, which include the posting of a $30,000 cash or corporate surety bond. A preliminary hearing is scheduled for September 18, 2014, before Judge Stormes.
DEFENDANT Case Number: 14MJ3067 Maria Yanakopulus Age: 57 Glendale, California CHARGESConspiracy, 18 U.S.C. § 371
Bringing in Illegal Aliens for Financial Gain, 8 U.S.C. §1324(a)(2)(B)(ii)
Aiding and Abetting Aggravated Identity Theft, 18 U.S.C. § 1028A and 18 U.S.C. § 2
INVESTIGATING AGENCYHomeland Security Investigations
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Former DMV Employee Sentenced to Three Years in Prison for Conspiracy to Commit Bribery, Document Fraud and Witness Tampering in A Widespread Corruption Case at the DMV in Southern CaliforniaRead the Press Release
Jeffrey Bednarek, a former employee at the California Department of Motor Vehicles office in El Cajon, California, was sentenced today by U.S. District Court Judge Cathy A. Bencivengo to three years in prison for his leadership role in a conspiracy to commit bribery, identification document fraud and witness tampering. In addition to the prison sentence imposed, the court also ordered Bednarek to pay a fine of $25,000.
In handing down the sentence, Judge Bencivengo told the defendant that as a DMV employee and a former corrections officer, he should have known better. “You were in fact violating the public trust…You had to know it was wrong.”
In comments at today’s hearing, Assistant U.S. Attorney Joseph Orabona argued for a significant sentence and gave examples of Bednarek’s cavalier attitude about his crimes. “Bednarek’s greed overrode his integrity. His attempt to alter the testimony of a witness just prior to trial showed his determination to mask the truth about his criminal activities.”
Orabona told the judge that Bednarek processed a fraudulent license for an undercover agent, and after it was complete, he handed the agent the temporary license, made the sign of the cross, and said, “Be good. Be gone. And sin no more.”
The prosecutor also read text messages from Bednarek to co-conspirator Jim Bean, referring to the substantial amount of cash he was collecting through the bribery scheme. “Come drop the package chubby. Cha-ching.”
Bednarek pleaded guilty on January 28, 2014. According to court documents, Bednarek was a Licensing Registration Examiner at the El Cajon DMV who was responsible for conducting driving tests for driver’s license applicants. Beginning in at least April 2009, and continuing up to at least April 26, 2012, Bednarek conspired with his co-defendants to commit federal program bribery and identification document fraud. In his plea agreement, Bednarek admitted that he falsely entered “passing” scores for both written and behind-the-wheel tests for applicants who applied for regular (Class C) and commercial (Class A) driver’s licenses in exchange for bribes. Bednarek also acknowledged that he directed others to enter false “passing” test scores and that he created false driving test score sheets to create the appearance that the applicant had completed the test. Bednarek said in his plea agreement that during the conspiracy, he produced more than 100 fraudulent driver’s permits and licenses, and that applicants paid more than $50,000 in total bribes for permits and licenses that he fraudulently produced.
While awaiting an upcoming trial that was scheduled for December 2, 2013, Bednarek tampered with one of the Government’s witnesses, the plea agreement said. According to court documents, Bednarek was arrested on November 13, 2013 pursuant to a complaint for witness tampering. On November 22, 2013, Judge Bencivengo ordered that Bednarek be detained pending trial. Bednarek admitted in his plea agreement that between January 26, 2013 and November 4, 2013, he knowingly attempted to corruptly persuade a Government witness to alter his testimony, namely, to provide false testimony regarding cash bribes that Bednarek had received for his aggravating role in the conspiracy. Bednarek admitted that he intended to prevent and influence the Government witness’s testimony in the trial that was scheduled for December 2, 2013.
U.S. Attorney Laura Duffy said, “Public corruption is one of our highest priorities. Today’s sentence demonstrates that those who violate the public’s trust will be held accountable for their crimes. We thank our partners at the FBI and DMV for their commitment to this important investigation.”
“Our department takes any type of crime among our employees very seriously,” said DMV Director Jean Shiomoto. “Our own DMV Investigations Unit and other law enforcement agencies are always on the lookout for this type of illegal activity in any of our field offices.”
Of the 31 defendants charged in this widespread corruption scheme (related Criminal Case Nos. 12CR1852-CAB, 13CR0121-CAB, and 13CR0592-CAB), 30 of the 31 defendants, including Bednarek, have pleaded guilty to felony conduct, namely, conspiracy to commit bribery and identification document fraud. One defendant is a fugitive. All of the former DMV employees convicted in this case were sentenced to prison, and most of the recruiters and driver’s license applicants received probationary sentences. In total, the Court imposed approximately $119,000 in fines. The following table provides a summary of the crimes and sentences for almost all of the defendants in the widespread corruption scheme:
DEFENDANT CASE NO. CHARGE(S) SENTENCE Jim Lynn Bean 12CR1852-CAB Conspiracy
Bribery 597 days in prison,
3 years supervised release,
Fine of $25,000 Jeffrey Thomas Bednarek 12CR1852-CAB Conspiracy
Bribery
Identification
Document Fraud
Witness Tampering 36 months in prison,
3 years supervised release,
Fine of $25,000 Scott David Friedli 12CR1852-CAB Conspiracy 4 months in prison,
2 years supervised release,
Fine of $1,500 Marco Beltran 12CR1852-CAB Conspiracy 6 months in prison,
2 years supervised release,
Fine of $4,000 Gabriella Villanueva 12CR1852-CAB Conspiracy 5 years probation,
Fine of $200 Bashar Assad Azaria 12CR1852-CAB Conspiracy 5 years probation,
Fine of $2,000 Reenan Esa Kuza 12CR1852-CAB Conspiracy 2 years probation,
Fine of $3,000 Usman Aliyev 12CR1852-CAB Conspiracy 5 years probation,
Fine of $2,100 Abdulmajed Alhokair 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Ahmad Alarbeed 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Mohammed Alsuwaidi 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Khalid Abdulaziz Al-Sowaidi 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Talal Bass Almousharji 12CR1852-CAB Conspiracy 5 years probation,
Fine of $900 Virginia Pena 12CR1852-CAB Conspiracy 51 days in prison,
2 years supervised release,
Fine of $600 Gizem Yontar 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Douri Zafer 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Asiel Bahjat Tomika 12CR1852-CAB Conspiracy 5 years probation,
Fine of $4,600 Angel Salvador Astimibay 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Bekzad Mirhanov 12CR1852-CAB Conspiracy 5 years probation,
Fine of $1,000 Jesus Leon 13CR0121-CAB Conspiracy 5 years probation,
Fine of $200 Jesse Mario Bryan 13CR0592-CAB Conspiracy
Bribery 6 months in prison,
3 years supervised release,
Fine of $25,000 Alexander Gonzalez 13CR0592-CAB Conspiracy 12 days in prison,
32 months supervised release,
Fine of $8,000 Frank Tom Attiq 13CR0592-CAB Conspiracy 5 years probation,
Fine of $200 Ali Al Nadawi 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,500 Saleh Almuzini 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000 Matthew Allan Elliott 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000 Mohamed Alali 13CR0592-CAB Conspiracy 5 years probation,
Fine of $800 James Lester Shaw 13CR0592-CAB Conspiracy 10 days in prison,
2 years supervised release,
Fine of $4,000 Hassan Hamad Althani 13CR0592-CAB Conspiracy 5 years probation,
Fine of $1,000These cases are the result of an active, ongoing criminal investigation. Anyone with information about corruption at the DMV is asked to contact the Federal Bureau of Investigation at 1-877-NO-BRIBE (662-7423), or the DMV’s Investigations Branch-Office of Internal Affairs at 626-851-0173.
DEFENDANT Case Number: 12CR1852-CAB Jeffrey T. Bednarek Age: 54 SUMMARY OF CHARGESCount 1 Title 18, United States Code, Section 371 -- Conspiracy to Commit Bribery and to Produce Unauthorized Identification Documents -- statutory maximum sentence of 5 years’ custody, a maximum fine of $250,000, special assessment of $100, and a maximum term of supervised release of 3 years.
Count 2 Title 18, United States Code, Section 666(a)(1)(B) -- Bribery -- statutory maximum sentence of 10 years’ custody, special assessment of $100, and a maximum term of supervised release of 3 years.
Count 7: Title 18, United States Code, Section 1512(b)(1) -- Witness Tampering -- statutory maximum sentence of 20 years’ custody, a maximum fine of $250,000, special assessment of $100, and a maximum term of supervised release of 3 years.
INVESTIGATING AGENCIES
Federal Bureau of Investigation
Department of Motor Vehicles B Investigations DivisionTwo Suspected Smugglers Charged with Leaving A Woman to Die in the Otay MountainsRead the Press Release
SAN DIEGO – Two suspected alien smugglers, Fernando Armenta-Romero and Carlos Hernandez-Palma, were arrested over the Labor Day weekend for allegedly leaving a woman to die in the Otay Mountains over the 2013 Christmas holidays. Yesterday, charges of bringing in an illegal alien resulting in death were filed against the alleged smugglers, who were arraigned today before U.S. Magistrate Judge Karen S. Crawford.
According to the amended complaint, on or about December 29, 2013, at approximately 7:10 PM, the Border Patrol Search Trauma and Rescue (“Border Patrol”) unit responded to a report of a 32-year-old undocumented alien female abandoned in the Otay Mountain Wilderness. The Otay Mountain Wilderness is located near the U.S.-Mexico border in southeastern San Diego County. This is a rugged and isolated area with limited access to roads and no development. Border Patrol agents contacted the reporting party, later identified as Baltazar Razo-Barreto (“Razo”). Mr. Razo identified himself as the husband of the 32-year-old woman, who he identified as Jaqueline Capistran-Ochoa (“Capistran”). He told the agents that Ms. Capistran had been in medical distress when he left her in the care of others while he sought help.
After an extensive search of the mountainous area over a period of two days, Mr. Razo eventually led Border Patrol agents to an area where they discovered the body of a woman, who Mr. Razo identified at the scene as his wife, Ms. Capistran. When Ms. Capistran was found, she had no pulse and displayed signs of rigor mortis. According to the medical examiner, Ms. Capistran’s death was attributed to hyperglycemia and ketoacidosis due to diabetes mellitus and hypothermia from environmental exposure. As alleged in the complaint, the medical examiner reported that Ms. Capistran was pregnant and estimated the gestational age of the fetus at approximately 11 to 12 weeks.
According to court documents, Mr. Razo and his wife, Ms. Capistran, made arrangements with smugglers in Mexico to be brought illegally into the United States in December 2013. The smugglers identified themselves to Mr. Razo as “CARLOS” and “ARMENTA,” according to the complaint.
The following information is alleged in the complaint:
The smugglers told Mr. Razo that they would smuggle him and Ms. Capistran into the United States for $12,000. During their discussion, the smugglers explained that the journey from Mexico into the United States would take 1.5 to 2 days, including frequent breaks. They added that it was not particularly arduous as the terrain was mostly flat. The smugglers told Mr. Razo that the hardest part was climbing the U.S.-Mexico border fence. Mr. Razo relayed this information to Ms. Capistran. She had developed diabetes after the birth of their second child and was on diabetes medication. They also suspected that she might be pregnant.Before leaving Tijuana, Mexico, for their journey into the United States, the smugglers took Ms. Capistran for walks around the park to determine whether she was fit enough to make the trip, especially since she appeared overweight and tired. Ms. Capistran walked with the smugglers through the park, but often grew tired and repeatedly required rest stops. The smugglers argued about whether she could make the smuggling trek. Despite their misgivings, they decided to take the chance given the promised payment. On or about December 26, 2013, CARLOS and ARMENTA smuggled Mr. Razo and Ms. Capistran into the United States by climbing over the U.S./Mexico boundary fence in Tijuana, Mexico.
Despite the smugglers’ description of the terrain as mostly flat, the hike was actually mountainous, covered with large boulders and difficult to traverse. After approximately two days, Ms. Capistran began to slow down and required more frequent rest stops. Ms. Capistran told Mr. Razo that she felt like there was water in her lungs, and she was having a hard time breathing. Soon she was unable to walk at all.
Mr. Razo repeatedly pleaded with the smugglers to seek help and to use their cellular phone. However, the smugglers refused. They claimed the phone did not work and that it had been destroyed. After the third day, on December 29, 2013, Ms. Capistran was unresponsive. Since the smugglers refused to seek help, Mr. Razo left his wife with CARLOS and ARMENTA, and hiked into the wilderness on his own. With the help of a Good Samaritan, Mr. Razo eventually contacted Border Patrol for assistance. Unfortunately, by the time Border Patrol agents and Mr. Razo found Ms. Capistran in the Otay Mountains, it was too late. Ms. Capistran had died and was left along a trail in the mountains. CARLOS and ARMENTA were gone. They had hiked out of the mountains two days before and called ARMENTA’s brother to pick them up.
CARLOS and ARMENTA made their initial appearance today before Judge Crawford for arraignment. The Government moved to detain both alleged smugglers based on risk of flight and danger to the community. A detention hearing is scheduled for September 9, 2014, at 9:30 a.m., before Judge Crawford.
DEFENDANT Case Number: 14MJ2956-KSC Fernando Armenta-Romero Age: 43 Carlos Hernandez-Palma Age: 35 CHARGESCount 1: Title 18, United States Code, Section 1324 – Bringing in Illegal Aliens Resulting in Death – statutory maximum of 10 years in prison, a maximum fine of $250,000, a 3-year term of supervised release, and $100 special assessment.
INVESTIGATING AGENCY
All defendantsU.S. Border Patrol - Chula Vista Intelligence Division
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.