Southern District of California
Press releases recorded for this federal judicial district.
U.S. Attorney Laura Duffy to Host Screening of “Out of Reach,” A Short Film About Prescription Drug Abuse Created by A Teen FilmmakerRead the Press Release
SAN DIEGO – U.S. Attorney Laura Duffy will host a special screening of “Out of Reach,” a short documentary about prescription drug abuse created by a teen filmmaker, on Wednesday evening, November 20, at Junipero Serra High School.
This is the first “Out of Reach” screening to take place on the West Coast. Cyrus Stowe, a 17-year-old high school student, interviews friends, classmates, community members and others about prescription drug abuse and their views of what it means to abuse prescription drugs. It was created in collaboration with director Tucker Capps (of A&E’s “Intervention”) and The Partnership at Drugfree.org's Medicine Abuse Project.
The film screening will be followed by a panel discussion moderated by U.S. Attorney Duffy. Local experts will examine the scope of the problem and what’s being done in San Diego County to reduce prescription drug abuse.
In an effort to raise awareness of the disturbing trends, U.S. Attorney Duffy has joined The Partnership at Drugfree.org in The Medicine Abuse Project, a five-year action campaign that aims to prevent half a million teens from abusing medicine by the year 2017 and advises parents and others to take a pledge to take control of their medicine cabinets.
WHAT: Screening of “Out of Reach,” a teen-made documentary on prescription drug abuse
WHO: MODERATOR: Laura Duffy, United States Attorney for the Southern District of California
PANELISTS: Tom Lenox, Supervisory Special Agent Tactical Diversion Squad, Drug Enforcement Administration San Diego
Dr. Roneet Lev, Director of Operations, Scripps Mercy Hospital Emergency Department, San Diego County Prescription Drug Abuse Medical Task Force
Sherrie Rubin, Director, The Hope2Gether Foundation, Prescription Medication, Drug and Alcohol Education and Awareness
WHEN: Wednesday, November 20th, 2013
WHERE: Junipero Serra High School, 5156 Santo Road, San Diego, 92124.
WHY: One out of five high school juniors in San Diego County say they’ve misused prescription drugs. In the last five years, unintentional deaths caused by prescription drugs rose by 22 percent in San Diego County, according to the latest Report Card issued by the Prescription Drug Abuse Task Force earlier this month.
Three Somali Immigrants Sentenced for Providing Support to Foreign TerroristsRead the Press Release
SAN DIEGO – Basaaly Saeed Moalin, a cabdriver who was convicted by a federal jury of providing material support to the terrorist group al-Shabaab, was sentenced today by U.S. District Judge Jeffrey T. Miller to 18 years in prison.
Also sentenced at the same hearing were Mohamed Mohamed Mohamud, the imam at a popular mosque frequented by the city’s immigrant Somali community, to 13 years in prison; and Issa Doreh, who worked at a money transmitting business that was the conduit for moving the illicit funds, to 10 years in prison.
In sentencing Moalin, Judge Miller acknowledged the defendant’s considerable support from the Somali community, his childhood scars from violence in war-torn Somalia and his philanthropy as a naturalized American. However, he noted Moalin’s virtuous behavior “is substantially offset” by his collaboration with al-Shabaab and one of its most prominent leaders - Aden Hashi Ayrow.
Judge Miller said he imposed part of the sentence consecutively – making it three years longer - because Moalin went beyond financial assistance and provided a house to Ayrow. Judge Miller described that action as “an offense of a different magnitude,” noting that Moalin personally offered the home in Mogadishu to advance the agenda of al-Shabaab and to help hide weapons. “This count went beyond financial support and entered into another realm,” Judge Miller said.
At trial, the United States played for the jury a recorded telephone conversation in which Moalin gave the terrorists in Somalia permission to use his house, telling Ayrow that “after you bury your stuff deep in the ground, you would, then, plant trees on top.” Prosecutors argued at trial that Moalin was offering a place to hide weapons.
“These men willfully sent money to a terrorist organization, knowing al-Shabaab’s extremely violent methods, and knowing the U.S. had designated it as a foreign terrorist organization,” said U.S. Attorney Laura Duffy. “Months of intercepted phone conversations included discussion of suicide bombing, assassinations and Jihad. We are satisfied that because of this investigation and prosecution, we have furthered our mission to safeguard national security by blocking financial support to this dangerous group.”
FBI Special Agent in Charge, Daphne Hearn, stated: "I want to commend the work of the FBI's Joint Terrorism Task Force (JTTF) and the U.S. Attorney's Office who worked countless hours to successfully investigate and prosecute this case. As demonstrated in this case, the multi-agency partnerships which make up the JTTF continue to play a critical role in the day-to-day protection of our communities and our national security.”
“Today’s sentencing underscores HSI’s commitment to aggressively investigate those who engage in or attempt to support the financing of foreign terrorist organizations,” said Nick Annan, acting Special Agent in Charge for ICE HSI in San Diego. “I commend all of our partners on the San Diego Joint Terrorism Task Force for their exhaustive efforts to dismantle the plot that aimed to provide support to terrorists who wish to harm us.”
Moalin and his co-conspirators were found guilty during a three-week trial in February. The United States presented evidence that Moalin, Mohamud, Doreh and a fourth defendant, Ahmed Nasiri Taalil Mohamud, conspired to provide money to al-Shabaab, a violent and brutal militia group that engages in suicide bombings, targets civilians for assassination, and uses improvised explosive devices. In February, 2008, the U.S. Department of State formally designated al-Shabaab as a foreign terrorist organization.
At trial, the jury listened to dozens of the defendants’ intercepted telephone conversations, including many between Moalin and Ayrow. In those calls, Ayrow implored Moalin to send money to al-Shabaab, telling Moalin that it was “time to finance the Jihad.”
Ayrow told Moalin, “You are running late with the stuff. Send some and something will happen.” Ayrow was subsequently killed in a missile strike on May 1, 2008.
According to evidence at trial, the defendants conspired to transfer the funds from San Diego to Somalia through the Shidaal Express, a now-defunct money transmitting business in San Diego.
The fourth defendant, Ahmed Nasiri Taalil Mohamud, a cabdriver from Anaheim, is scheduled to be sentenced January 31, 2014 at 10 a.m. before Judge Miller.
This case was prosecuted in federal court in San Diego by Assistant U.S. Attorneys William Cole and Caroline Han and Department of Justice Trial Attorney Steven Ward. This case was investigated by the San Diego Joint Terrorism Task Force; the Federal Bureau of Investigation; the Department of Homeland Security, Immigration and Customs Enforcement; and the Department of Homeland Security, Customs and Border Protection.
DEFENDANTS Criminal Case No. 10CR4246-JM Basaaly Saeed Moalin
Mohamed Mohamed Mohamud
Issa Doreh
Ahmed Nasir Taalil Mohamud SUMMARY OF CHARGESCount 1 (all defendants) : Title 18, United States Code, Section 2339A(a)(1) - Conspiracy provide
material support to terrorists; Maximum penalties: 15 years in prisonCount 2 (all defendants): Title 18, United States Code, Section 2339B(a)(1) - Conspiracy provide
material support to foreign terrorist organization; terrorists; Maximum penalties: 15 years in prisonCount 3 (all defendants): Title 18, United States Code, Section 1956(h) – Conspiracy to launder
monetary instruments; Maximum penalties: 15 years in prisonCount 4 (Basaaly Moalin) Title 18, United States Code, Section 2339A(a) – Providing material support to
terrorists; Maximum penalties: 15 years in prisonCount 5 (defendants Basaaly Moalin, Mohamed Mohamed Mohamud and Issa Doreh) Title 18, United
INVESTIGATING AGENCIES
States Code, Section 2339B(a)(1) – Providing material support to foreign terrorist organization;
Maximum penalties 15 years in prisonSan Diego Joint Terrorism Task Force
Federal Bureau of Investigation
Homeland Security Investigations, Immigration and Customs Enforcement
Homeland Security Investigations, Customs and Border ProtectionSecond Defendant Sentenced in Murder of U.S. Border Patrol Agent Robert RosasRead the Press Release
SAN DIEGO – Marcos Rodriguez-Perez was sentenced today to 56 years in prison for his participation in the July 2009 robbery and murder of United States Border Patrol Agent Robert Rosas, Jr.
Rodriguez-Perez, a 28-year-old Mexican national, pleaded guilty in August, admitting he was one of three gunmen who lured the agent into a trap to steal his night-vision goggles and then fatally shot him during a struggle. He pleaded guilty to conspiracy to commit robbery and kidnaping, robbery of personal property of the United States, and use and carrying of a firearm during the commission of a crime of violence.
United States District Judge M. James Lorenz also ordered that Rodriguez’s sentence run consecutive to a two-year sentence Rodriguez is currently serving for violating his supervised release from a prior alien smuggling conviction. Prosecutors noted in court that because Rodriguez is almost 29 years old, the combined sentences likely mean Rodriguez will spend the rest of his life in prison.
Court filings indicate that in July 2009, Rodriguez and four others plotted to rob a Border Patrol agent of his night vision device. On July 23, 2009, the group, bearing firearms, traveled by car and foot to the international border near Campo, California. Rodriguez and two others sneaked into the United States at night and waited for a Border Patrol agent to arrive in the area, while the remaining two members of the group stood watch in Mexico. After Agent Rosas arrived in the area and exited his vehicle, Rodriguez and other conspirators detained Rosas at gunpoint. Agent Rosas resisted and, during the ensuing struggle, Rodriguez and his co-conspirators shot Agent Rosas multiple times, killing him. Rodriguez and his co-conspirators then stole the agent’s firearm, night vision device, and other equipment and fled back to Mexico.
In April 2011, Mexican officials arrested Rodriguez in Tijuana, Baja California, Mexico, at the request of the United States. Rodriguez was extradited to the United States in October 2011.
Rodriguez is the second defendant to be sentenced for Agent Rosas’s murder. In April 2010, Judge Lorenz sentenced Christian Daniel Castro-Alvarez to 40 years of imprisonment. Two other defendants, Jose Luis Ramirez-Dorantes and Emilio Samyn Gonzales-Arenazas, have pleaded guilty to participating in the murder and are scheduled to be sentenced in December 2013 and January 2014 respectively. The last defendant, Jose Juan Chacon-Morales, remains a fugitive, and there is a reward of up to $100,000 for information leading to his arrest or location.
After Rodriguez’s sentencing, United States Attorney Laura E. Duffy expressed her condolences to Agent Rosas’s family and colleagues at the Border Patrol: “Nothing can change what happened to Robert on that horrible night, and we realize that. I hope, however, that seeing these men brought to justice and sent to prison for decades helps his family and friends, in some way, as they cope with his loss and move forward.”
Duffy also praised the agents of the Federal Bureau of Investigation and Homeland Security Investigations who conducted the investigation. “This has been a lengthy and extraordinarily difficult investigation, but it’s a testament to the diligence and resolve of those agents as well as the people of the United States, that four men were arrested in a foreign jurisdiction and are now sitting in U.S. prisons. If a law enforcement officer is harmed, we’ll use every resource we have to catch the perpetrators, and never let it be doubted: We will find them.”
Chief Patrol Agent Paul A. Beeson of the U.S. Border Patrol’s San Diego Sector said, “On behalf of the Border Patrol agents of San Diego Sector and all Border Patrol agents nationwide - I want to express our deepest gratitude for the tenacity, persistence, and hard work expended by the honorable men and women of law enforcement involved in this compelling case resulting in Rodriguez-Perez’ arrest, conviction, and sentencing. This sentencing is tempered with the sobering reality of the senseless loss of a fine man, husband and father who was Border Patrol Agent Robert Rosas.”
FBI Special Agent in Charge, Daphne Hearn, commented, "Today's sentencing sends a message that the FBI is committed to bringing to justice those responsible for the death of U.S. Border Patrol Agent, Robert Rosas. Agent Rosas served his country with dedication, honor and courage and was killed while protecting our nation's borders. The FBI recognizes that no punishment will lessen Agent Rosas' death, but we hope today's sentencing will help bring some closure to the family."
DEFENDANT Criminal Case No. 10CR1793-L Marcos Rodriguez-Perez SUMMARY OF CHARGESCount 1: Title 18, United States Code, Section 371: Conspiracy to commit robbery and kidnaping
INVESTIGATING AGENCIES
Count 2: Title 18, United States Code, Section 2112: Robbery of U.S. property
Count 5: Title 18, United States Code, Section 924(c)(1): Discharging firearms during and in relation to a crime of violenceFederal Bureau of Investigation
Homeland Security Investigations
United States Border PatrolNavy Commander Charged with Accepting $100,000 Cash and Prostitutes in Widening International Bribery SchemeRead the Press Release
SAN DIEGO, CA - A third senior U.S. Navy official was charged in a complaint unsealed today with accepting prostitutes, luxury travel and $100,000 cash from a foreign defense contractor in exchange for classified and internal U.S. Navy information, announced U.S. Attorney Laura E. Duffy and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.
U.S. Navy Commander Jose Luis Sanchez, 41, was arrested in Tampa, Florida, this morning and made his initial appearance in federal court in the Middle District of Florida this afternoon. The United States will seek removal of Sanchez to San Diego to face charges. Also named in the complaint is Leonard Glenn Francis, 49, of Malaysia, the CEO of Glenn Defense Marine Asia (GDMA), who was arrested September 16, 2013, in San Diego.
Two other senior Navy officials – Commander Michael Vannak Khem Misiewicz, 46, and Naval Criminal Investigative Service Supervisory Special Agent John Bertrand Beliveau II, 44 – have been charged separately in connection with bribery allegations. GDMA executive Alex Wisidagama, 40, of Singapore, has also been charged with participating in a related scheme to overbill the Navy for services provided in ports throughout Southeast Asia.
“According to the allegations in this case, a number of officials were willing to sacrifice their integrity and millions of taxpayer dollars for personal gratification,” said U.S. Attorney Laura Duffy. “While the overwhelming majority of the 400,000 active duty Navy personnel conduct themselves in a manner that is beyond reproach, we and our law enforcement partners at Naval Criminal Investigative Service and Defense Criminal Investigative Service continue to investigate the allegations of fraud and corruption that tarnish the stellar reputation of the U.S. Navy.”
“As described in the corruption charges unsealed today, senior officials with the United States Navy abused their trusted positions as leaders in our armed forces by peddling favorable treatment -- and even classified government information -- for their personal benefit,” said Acting Assistant Attorney General Raman. “In turn, the GDMA executives who illicitly sought information and favors from those Navy officials boasted about their unlawful access to those officials and then traded on the influence that they illegally bought. Day by day, this massive Navy fraud and bribery investigation continues to widen, and as the charges announced today show, we will follow the evidence wherever it takes us.”
“The arrest and criminal complaint against Commander Sanchez is the result of an ongoing investigation by the Defense Criminal Investigative Service and its law enforcement partners to identify and prosecute those individuals who would abuse their positions of trust within the Department of Defense,” said Chris D. Hendrickson, Special Agent In Charge, Office of the Inspector General, Department of Defense, Defense Criminal Investigative Service Western Field Office. “Allegations like these against Commander Sanchez can tarnish the reputation of honest and hardworking government personnel and put military personnel defending our nation around the globe at risk. The mission of DCIS is to ‘Protect America’s Warfighters’ and we will continue to relentlessly identify and investigate those individuals seeking to enrich themselves at the expense of the U.S. taxpayers.”
According to the complaint, Sanchez received bribes in return for sending sensitive U.S. Navy information to Francis, and making recommendations within the Navy to benefit Francis’s company, GDMA. GDMA is a multinational corporation and longtime government contractor based in Singapore, which provides hundreds of millions of dollars of “husbanding” services for the U.S. Navy in at least a dozen countries throughout the Pacific. Husbanding involves supplying food, water, fuel, tugboats and fenders, security, transportation, trash and liquid waste removal, and other goods and services to ships and submarines in foreign ports.
Like Sanchez, Misiewicz is accused of providing sensitive Navy information to Francis and secretly working on behalf of GDMA in exchange for prostitutes and luxury travel. GDMA, which has operating locations in Japan, Singapore, Thailand, Malaysia, Korea, India, Hong Kong, Indonesia, Australia, Philippines, Sri Lanka and the United States, allegedly overcharged the Navy and submitted bogus invoices for millions of dollars in services, the complaint said. Beliveau, the NCIS agent, is charged in another complaint with illegally supplying Francis with sensitive information, including reports of investigations by NCIS into possible fraud committed by GDMA in billing the U.S. Navy under its contracts. Wisidagama is charged with conspiracy to defraud the United States related to the overbilling.
According to court records, Sanchez allegedly provided Francis with internal Navy information, such as U.S. Navy ship schedules – some of which were classified - and information about husbanding issues that could affect GDMA – some of which was classified – in order to help GDMA win and maintain Navy business.
Court records allege that Sanchez regularly emailed Francis internal Navy discussions about GDMA, including legal opinions, and made recommendations in GDMA’s favor about port visits and Navy personnel assignments. In return, Francis gave Sanchez over $100,000 in cash, together with travel expenses and prostitutes. Court records allege that the conspiracy started in January 2009, when Sanchez was the Deputy Logistics Officer for the Commander of the U.S. Navy Seventh Fleet in Yokosuka, Japan, and continued when he was transferred to serve as Director of Operations for Fleet Logistics Command in Singapore, until he transferred to Florida in April 2013.
Sanchez and Francis allegedly communicated regularly via email and Facebook. Sanchez referred to Francis as “Lion King” and “Boss” in the emails, while Francis called Sanchez “brudda.” For his part, Francis allegedly hired female escorts for Sanchez and friends on multiple occasions.
According to court records, in an email exchange on Oct. 16, 2009, Sanchez and Francis allegedly discussed a trip Sanchez planned to take to Kuala Lumpur and Singapore with Navy friends he called his “Wolf Pack.” They discussed the number of rooms the “Wolf Pack” needed, and Sanchez asked Francis for pictures of prostitutes for “motivation.” Francis replied: “J, got it we will hook up after the FLAG dinner, will arrange a nest for you guys and some birds [women].” A few days later, on Oct. 19, 2009, Sanchez sent a Facebook message to Francis saying, “Yummy . . . daddy like.” In an Oct. 23, 2009, Facebook message, Sanchez asked Francis, “Where r we staying in KL [Kuala Lumpur]? No pictures to get our spirits up?”
Between Aug. 26 and 28, 2011, Francis allegedly communicated through email to the address of an escort whom Francis had previously hired for Sanchez. Francis wrote: “Hey Love, Jose is in Manila at the Diamond Hotel go and see him he needs some love asap room.” The escort responded to Francis, “Papi, I'm here jose's fon is not answering. I'm here [h]aving dri[n]ks at the lobby. Call him:: (( maybe his sleeping?” Later that day, she emailed Francis, “I'm with h[i]m already heehhe.”
Court records allege that Francis sent an email on Oct. 20, 2011, asking Sanchez to help “swing” business his way regarding a U.S. Navy ship’s need to refuel at a port in Thailand. The Navy can use “sea cards” to purchase fuel for its ships at a price negotiated by the Defense Logistics Agency for Energy, as opposed to procuring fuel at usually higher prices from the husbanding contractor. In an email from Sanchez the next day, he told Francis: “Ask and you shall receive...we worked this out this morning…” According to court records, the USS Mustin did conduct a port visit to Laem Chabang, Thailand, during which it purchased fuel from GDMA, not via “sea cards.” As a result, the USS Mustin allegedly paid more than $1 million for fuel – more than twice what the fuel would have cost through use of the “sea card.”
The criminal complaint alleges that in an alleged Dec. 2, 2011, email discussion in which Sanchez told Francis about the status of an investigation of GDMA, Francis replied: “I have inside Intel from NCIS and read all the reports. I will show you a copy of a Classified Command File on me from NCIS ha ha.”
This ongoing investigation is being conducted by NCIS, the Defense Criminal Investigative Service and the Defense Contract Audit Agency. Significant assistance was provided by the Drug Enforcement Administration, Homeland Security Investigations, the DOJ Criminal Division’s Office of International Affairs, the Royal Thai Police and the Corrupt Practices Investigation Bureau Singapore. This case is being prosecuted by Assistant U.S. Attorneys Mark Pletcher and Robert Huie of the Southern District of California and Catherine Votaw, Director of Procurement Fraud for the Criminal Division’s Fraud Section and Brian Young, Trial Attorney, of the Criminal Division’s Fraud Section.
Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tipline at www.ncis.navy.mil, the DoD Hotline at www.dodig.mil/hotline or call (800) 424-9098.
DEFENDANTSCase Number: 13-MJ-4027
Leonard Glenn Francis
Jose Luis SanchezCase Number: 13-CR-3781
Leonard Glenn Francis
John Bertrand Beliveau II
Case Number: 13-CR-3782Leonard Glenn Francis
Michael Vannak Khem Misiewicz
Case Number: 13-MJ3783Alex Wisidagama
SUMMARY OF CHARGESCase Number: 13-MJ-4027
Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371
Case Number: 13-CR-3781
Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371
Case Number: 13-CR-3782
Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371
Case Number: 13-MJ-3783
Conspiracy to Defraud the United States in violation of 18 U.S.C. § 371
INVESTIGATING AGENCIESDefense Criminal Investigative Service
Naval Criminal Investigative Service
Defense Contract Audit Agency*A complaint 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.San Diego Cfo Sentenced for Embezzling over $1 Million to Fund Fledgling Professional Football LeagueRead the Press Release
United States Attorney Laura E. Duffy announced that Jaime Cuadra, the former Chief Financial Officer of Oceanic Enterprises, Inc., was sentenced today by United States District Judge Marilyn L. Huff to serve 41 months in custody based on his conviction of wire fraud and filing a false federal income tax return. The charges stemmed from Cuadra’s embezzlement of $1,089,813.26 from Oceanic and its parent company, Umami Sustainable Seafood, Inc., a San Diego-based, publically traded company. Judge Huff also ordered Cuadra to pay back the $1,089,813.26 stolen from Umami and to pay $387,347.58 in back taxes to the Internal Revenue Service.
According to court documents, Cuadra embezzled the money from 2010 to 2013, by taking advantage of his access to one of Oceanic’s business accounts as the company’s CFO. In his guilty plea, Cuadra admitted that he carried out the scheme, in part, by falsifying Oceanic’s financial records by coding illicit transfers and expenditures as legitimate business expenses.
Court records show that during the period of the fraud, Cuadra not only served as Oceanic’s CFO, but also as the President and CEO of a fledgling football league. As a result of this conviction, Cuadra resigned from both organizations. Cuadra converted Oceanic’s funds to financially support the football league as well as for his personal benefit. Specifically, Cuadra used stolen funds to develop the football league and attract investors by paying league executives, as well as the league’s marketing, consulting, and public relations fees. For example, Cuadra directed over $200,000 to a woman who served as the league’s Chief Marketing Officer and Executive Vice President at the time. Cuadra’s use of embezzled funds for his personal expenditures included: (1) support for other outside business ventures (including a T-shirt business); (2) leasing a Porsche Cayenne; (3) travel, hotels, and meals; (4) a variety of miscellaneous purchases, including artwork, designer clothing, computers and entertainment systems, and tickets to sporting events; and (5) transfers to several personal accounts.
Court documents also described Cuadra’s falsification of his tax returns during the years in which he defrauded Oceanic and Umami. In particular, Cuadra failed to report his embezzled income on his 2010, 2011, and 2012 federal tax returns. And, in one instance, he wrote off an expense he had paid with embezzled funds as a “partnership loss,” which further reduced his adjusted gross income. In his guilty plea, Cuadra admitted that his false tax returns resulted in a cumulative tax loss of $387,347.58.
United States Attorney Laura E. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and the Internal Revenue Service and reiterated her support of financial-crime prosecutions: "Mr. Cuadra’s brazen theft of corporate funds from one of our local companies was born from base motives – ego and greed. Such crimes shake the foundations of our businesses and cause investors to lose confidence in the markets. Our office will forge ahead with our commitment to investigate and prosecute this sort of fraud wherever it may occur.”
FBI Special Agent in Charge, Daphne Hearn, commented, "This case is about greed and taking advantage of a position of trust. Mr. Cuadra betrayed the trust of the company's investors and then tried to cover it up by falsifying corporate financial records. Today's sentencing should send a clear message that the FBI will continue to work with the U.S. Attorney's Office and our law enforcement partners to protect the American public from insider corporate fraud."
“Jaime Cuadra used his position of trust as the CFO of Oceanic Enterprises and Umami Sustainable Seafood to defraud them of over $1 million and failed to report his embezzled funds to the Internal Revenue Service,” said Joel P. Garland, IRS Criminal Investigation Acting Special Agent in Charge, Los Angeles Field Office. “Cuadra’s crimes caused a tax loss of more than $387,000. As a result, his future includes a period of imprisonment, being branded a convicted felon for the rest of his life, and paying restitution for all the taxes owed (plus penalties and interest). Today's sentencing of Jaime Cuadra emphasizes IRS Criminal Investigation’s aggressive pursuit of those who methodically use their position of trust to commit tax crimes for their own personal benefit."
DEFENDANT Criminal Case No. 13CR2298-H Jaime Cuadra SUMMARY OF CHARGESCount 1: Title 18, United States Code, Section 1343 B Wire Fraud
INVESTIGATING AGENCIES
Count 2: Title 26, United States Code, Section 7206(1) B Filing a False Federal Income Tax ReturnFederal Bureau of Investigation
Internal Revenue ServiceLos Angeles Businessman Sentenced to 27 Months for Fraudulently Importing $30 Million of Chinese-Made TextilesRead the Press Release
San Diego, CA – United States Attorney Laura E. Duffy announced today that Los Angeles-based businessman Sunil Jiwat Mirwani was sentenced to 27 months in prison for evading customs duties on more than $30 million in Chinese-made wearing apparel. The sentence, handed down by U.S. District Judge Michael M. Anello, also required Mirwani to forfeit his interest in over $30,000 in cash, the contents of a Hong Kong-based bank account—plus an inventory of more than 220,000 pairs of blue jeans valued at more than $1 million. In addition, Judge Anello sentenced Mirwani’s corporation, M Trade, Inc., to five years of probation.
According to the evidence presented at a trial in June 2012, Mirwani hired a group of San Diego-based businessmen and logistics professionals to initiate shipments of Chinese-made merchandise from ports in China to the Port of Long Beach, California. When the goods arrived at Long Beach, Mirwani and his conspirators would ensure that the merchandise was classified as “in bond”—a special customs classification meaning that they had to be shipped directly to Mexico. However, rather than complete the shipment to Mexico as promised, Mirwani and his conspirators forged documents and falsified database entries, allowing them to send the merchandise to warehouses in the Los Angelesarea. Mirwani would then sell his jeans, shorts and skirts throughout the United States— effectively tax-free. In this way, Mirwani could sell more jeans at cheaper prices than his law-abiding competitors—including domestic American manufacturers of similar goods who, unlike Mirwani, could not rely on cheap Chinese labor to keep costs low.
Mirwani profited handsomely from the scheme, laundering his ill-gotten gains through a complex web of international wire transfers. According to evidence introduced at trial, Mirwani transmitted nearly $10 million from M Trade, Inc.’s bank account to the account of Mirvana International, a Hong Kong-based company that Mirwani shares with his Hong Kong-based twin brother. In addition, Mirwani transmitted similar sums to the Mirvana International account through a series of intermediary accounts in the United States and Mexico—and even sent money from M Trade Inc.’s account directly to accounts in mainland China. These international wire transfers served to hide Mirwani’s ill-gotten gains as well as to help fund future fraudulent shipments.
Mirwani’s sentencing was the culmination of a years-long effort by prosecutors and special agents. Following a lengthy wiretap investigation, a federal grand jury indicted Mirwani and M Trade, Inc. in June 2012. One year later, in June 2013, Mirwani and M Trade, Inc. were convicted after a one-week jury trial. Yet Mirwani and M Trade, Inc. were just two of 11 defendants charged in July 2012 as part of a larger conspiracy to fraudulently import foreign-made textiles, cigarettes, snack foods, and Salmonella-infected produce. In the past year, several other defendants have pled guilty and been sentenced for their role in the scheme, including Gerardo Chavez, the former President of the San Diego Customs Brokers Association, who is currently serving a 37-month prison sentence. Two defendants—Joel Erasmo Varela Gonzalez and Jose Porter—are fugitives and remain at large.
U.S. Attorney Duffy commended the efforts of special agents and prosecutors: “Thanks to special agents from the Department of Homeland Security and the IRS, working in conjunction with customs officers, a far-reaching commercial fraud conspiracy has been completely dismantled. This prosecution underscores our commitment to protecting the economic health of the United States and ensuring that no one exploits American and international markets for their personal gain.”
“Today’s sentencing serves as a reminder to those who attempt to exploit our commercial trade corridor in San Diego,” said Derek Benner, Special Agent in Charge for ICE’s Homeland Security Investigations in San Diego. “HSI is committed to using our expertise to investigate suspected customs fraud and dishonest business practices in the international trade arena. We will seek the highest penalty possible for those who game the system for their own illicit gain.”
Trial Exhibit 53 – Fraudulently Imported Blue Jeans
Trial Exhibit 52 – Summary of Mirwani’s Wire Transfers
DEFENDANTS Case Number: 12CR3137-MMASunil Jiwat Mirwani
M Trade, Inc.
SUMMARY OF CHARGES AND MAXIMUM PENALTIES
Los Angeles, CACount 1: Conspiracy to Defraud the United States – 18 U.S.C. § 371. Maximum penalties: 5 years in prison, 3 years of supervised release, $250,000 fine and a $100 special assessment
Counts 2 and 4: Entry of Goods by Means of False Statements – 18 U.S.C. § 542. Maximum penalties: 2 years in prison, 1 year of supervised release, $250,000 fine and a $100 special assessment
Count 57: Conspiracy to Launder Monetary Instruments – 18 U.S.C. § 1956(a)(2)(A) and (h). Maximum penalties: 20 years in prison, 3 years of supervised release, $500,000 fine (or a fine worth twice the amount of the laundered money) and a $100 special assessment.
INVESTIGATING AGENCIESImmigration and Customs Enforcement – Homeland Security Investigations
Internal Revenue Service – Criminal Investigations
United States Food and Drug AdministrationMastermind of $100 Million Mortgage Fraud Sentenced to Eight Years in PrisonRead the Press Release
SAN DIEGO – Mary Armstrong, the mastermind of a $100 million mortgage fraud that generated almost $15 million in illegal kickbacks, was sentenced today to 100 months in prison by U.S. District Judge John A. Houston.
Armstrong’s former boyfriend, William Fountain, was sentenced on Friday to serve 42 months in prison for his participation in the scheme. In addition, both Armstrong and Fountain were ordered to pay more than $500,000 in restitution to victims of the offense.
“These are significant sentences for serious crimes,” said U.S. Attorney Laura Duffy. “Mortgage fraud is one of the fastest growing financial crimes in the country, and we can add these two defendants to a long list of fraudsters who have landed in prison as a result of our crackdown.”
FBI Special Agent in Charge, Daphne Hearn, stated, "Today's sentencing signifies the continued effort of the FBI, U.S. Attorney's Office and Federal Housing Finance Agency to investigate and prosecute those who commit mortgage fraud. The FBI is committed to holding those accountable who line their own pockets at the expense of the American taxpayers and we hope that today's sentencing will help deter future fraud."
Acting Inspector General Stephens of the Federal Housing Finance Agency stated, “Armstrong participated in a fraudulent scheme involving over $100 million in mortgage loans, many of which ultimately defaulted, to the detriment of Fannie Mae, Freddie Mac and the American taxpayers. We are proud to support our law enforcement partners in investigating and prosecuting this case.”
Armstrong, Fountain and their co-conspirators recruited real estate “investors” through advertisements in the Los Angeles Times, Monster.com, and elsewhere. They offered these “investors” the opportunity to purchase homes using their good credit with no money down. In order to get these “investors” to participate in the loan fraud, Armstrong promised to make the mortgage payments on their behalf using rental income from the properties.
In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. Armstrong (who was not a licensed mortgage broker) secured mortgages on the properties by falsifying loan applications for the straw buyers. Among other things, the loan applications falsely claimed exorbitant income from fake employers and used sham companies, which Fountain helped to create, in order to verify the borrowers’ fabricated employment and rental histories. Armstrong and her co-conspirators used these loan applications to obtain mortgages with 100% financing – and thus avoided having to make any down payment on the properties.
Armstrong earned millions of dollars in profits by convincing the sellers of the properties to inflate the purchase price by $100,000 or more per property. These inflated amounts were allegedly for construction to improve the properties. In fact, no construction work was performed and the funds were diverted (or “kicked back”) to bank accounts controlled by Armstrong’s co-conspirators. Armstrong then had Fountain and other co-conspirators launder the funds back to her in cash payments or official checks, so that the money could not be traced. In this way, she pocketed nearly $15 million in kickbacks, made few if any mortgage payments, and allowed nearly all of the properties to swiftly fall into foreclosure. Armstrong arranged the purchase of approximately $100 million in loans through this scheme, resulting in estimated losses between $7 million and $20 million to the mortgage lenders and secondary purchasers Fannie Mae and Freddie Mac.
Armstrong and Fountain were charged with participating in the scheme along with four others: Teresa Rose, a Ramona real estate agent; John Allen, a mortgage loan processor from Laguna Hills; Justin Mensen, a straw buyer who later recruited others and helped launder the funds; and Audrey Yeboah, a Los Angeles-based tax preparer who generated fake paperwork to support the loans. All of the defendants have pled guilty to participating in the scheme. Allen was sentenced by Judge Houston on September 16, 2013, to one year in custody. Audrey Yeboah is scheduled for sentencing on December 2, 2013, and Teresa Rose and Justin Mensen are scheduled for sentencing on December 9, 2013, all before Judge Houston.
United States Attorney Duffy explained that the American public is the actual victim of this type of widespread mortgage fraud, which played such a significant role in destabilizing the country’s financial situation. She emphasized that her office would aggressively prosecute such crimes and urged anyone in the community who has information relating to these charges to contact San Diego FBI Field Office at telephone number (858) 320-1800 or the Federal Housing Finance Agency - Office of Inspector General hotline at (800) 793-7724.
This matter was investigated jointly by agents from the FBI and FHFA-OIG. The case is being prosecuted by FHFA-OIG Investigative Counsel and Special Assistant U.S. Attorney Emily W. Allen and Assistant U.S. Attorney Valerie Chu of the Southern District of California.
DEFENDANTS Criminal Case No. 12CR1848-JAH Mary Armstrong
Teresa Rose
William Fountain
John Allen DEFENDANT Criminal Case No. 12CR1458-JAH Justin Mensen DEFENDANT Criminal Case No. 12CR4322-JAH Audrey Yeboah SUMMARY OF CHARGESMary Armstrong, Teresa Rose, and William Fountain
Count 1: Title 18, United States Code, Section 371 -- Conspiracy to Commit Wire Fraud and to Launder Money -- statutory maximum sentence of 5 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Mary Armstrong
Count 2: Title 18, United States Code, Section 1343 -- Wire Fraud -- statutory maximum sentence of 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Counts 3-5: Title 18, United States Code, Section 1956(a)(1)(B)(I) -- Money Laundering -- statutory maximum sentence of 15 years’ custody, a maximum fine of $500,000 or twice the value of the property involved in the transaction, and $100 special assessment.
Justin Mensen
Information: Title 18, United States Code, Section 371 -- Conspiracy to Commit Wire Fraud and to Launder Money -- statutory maximum sentence of 5 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Audrey Yeboah
Information: Title 18, United States Code, Section 1343 -- Wire Fraud -- statutory maximum sentence of 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
AGENCIESFederal Bureau of Investigation
Federal Housing Finance Agency - Office of Inspector GeneralMore Than 50 People Indicted in Massive Fraud RingRead the Press Release
A massive case of organized tax and bank fraud culminated today with the unsealing of four federal grand jury indictments accusing 55 people of participating in one or more illicit schemes, including the theft of more than 2,000 identities that were used to claim more than $20 million in bogus IRS tax refunds. As a result the IRS paid out more than $7 million – even issuing payments in the names of dead people.
The charges are the result of a two year-long investigation by federal and local authorities in San Diego and Los Angeles. Twenty-two defendants were arrested this morning during sweeps in Los Angeles, San Diego, Las Vegas and Maryland. Hundreds of federal, state, and local law enforcement officers participated in the takedown. Thirty-three defendants remain at large, including 21 who are believed to be out of the country. During searches at 12 locations, authorities seized $13,000 in cash and four handguns, including three that were unregistered.
“This case is staggering in terms of the number of victims, its level of sophistication, its audacious methods and the callous disregard for victims,” said U.S. Attorney Laura Duffy. “These arrests are the first strike back on behalf of taxpayers and more than 2,000 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.”
“Individuals who commit refund fraud and identity theft of this magnitude and with this degree of dishonesty and deceit, deserve to be punished to the fullest extent of the law,” said Richard Weber, Chief, IRS Criminal Investigation. “IRS Criminal Investigation, along with our law enforcement partners and the United States Attorney's Office, remain vigilant in identifying, investigating and prosecuting individuals involved in these schemes.”
FBI Special Agent in Charge, Daphne Hearn, commented, “This investigation involved multiple complex fraudulent schemes resulting in significant losses to financial institutions and American taxpayers. Today's arrests...send a clear message to those involved in stealing money from American taxpayers. The FBI and our partners will aggressively pursue those involved in stealing precious taxpayer money through fraudulent schemes.”
Tax refund fraud involving the use of stolen identities has emerged as such a fast-growing crime category that it has earned an acronym – SIRF – for Stolen Identity Refund Fraud. The Department of Justice issued a new directive last year to coordinate, expedite and streamline the prosecutorial efforts of the Tax Division and U.S. Attorneys offices nationwide.
The various schemes are described in four separate indictments:
- The largest indictment – involving the identity theft and bogus tax refunds - charges 29 people and involved the alleged filing of about 2,000 fraudulent tax returns. The coconspirators filed two types of fraudulent returns – those that claimed refunds from fabricated gambling winnings and losses, and those based on made-up wages and withholdings. The returns sought $17 million in undeserved refunds.
This scheme involved the participation of scores of San Diego-based foreign nationals from former Soviet bloc countries - including Russia, Kazakhstan, and Turkmenistan - who were visiting San Diego using J-1 and F-1 visas. The visas allow foreigners to come to the United States for a short period of time to study, work, and travel.
However, instead of studying or working, the almost two dozen foreign nationals charged today allegedly worked primarily as foot soldiers for criminal organizations operating in Los Angeles and elsewhere. Leaders of the identity theft ring, many of whom are Armenian nationals or Armenian-American, exploited the popular student visa program in part because the visa holders would not be here long. In fact, many have since returned to their countries.
The alleged leaders of the stolen identity fraud schemes were Arthur Grigorian, Ernest Soloian and Hovhannes Harutyunyan. One of the defendants, Yvonne Mihailescu, used her position as an of Wells Fargo Bank to open bank accounts which were used to receive the fraudulent tax refunds launder the proceeds, according to the indictment.
While here, they rented apartments in San Diego and elsewhere, opened post office boxes and bank accounts at the San Diego branches of Bank of America and Wells Fargo, and collected fraudulent tax refunds through the receipt of refund checks and direct deposits from the U.S. Treasury. Some of the refund checks were mailed to apartments on University Avenue and El Cajon Boulevard in San Diego.
The indictment indicates that the coconspirators employed sophisticated methods to cover their tracks. For instance, they took steps to disguise their Internet Protocol (IP address) when filing tax returns electronically, making it difficult for law enforcement to determine the location. In addition, they used code language when communicating and referred to each other only by nicknames, such as “Anaconda” and “Blondie.” They used prepaid cell phones which they changed on a regular basis.
- A second indictment charges three people who are accused of filing more than 400 false returns using stolen identities which claimed more than $3 million in fraudulent refunds. Armen Eritsian and Hovhannes Harutyunyan are the alleged leaders of the scheme.
- A third indictment charges eight people, led by Hovakim Sogomonian and Harout Gevorgyan, and describes an elaborate ruse in which defendants obtained bank account and other personal information about wealthy Wells Fargo customers and then sent imposters to branches to withdraw large sums of money. The imposters altered their appearances with haircuts and new clothes and prepared by role-playing. In all they attempted to withdraw more than $3 million, and succeeded in obtaining $551,842, the indictment said. The imposters instructed tellers to wire large sums of money to the account of a gold dealer, and then they picked up gold coins from the dealer and delivered them to the other defendants.
- Finally, a fourth indictment charges 18 defendants, led by Karen Galstian and Vahag Stepanyan, with a scheme to defraud Bank of America of more than $600,000 by writing bad checks. This scheme also utilized stolen identities to further the fraud.
The FBI and IRS recommend 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 with your SSN on it.
Don’t give a business your SSN 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.All of the defendants arrested in today’s operation are expected to make their initial appearances in federal court either today or tomorrow in the district where they were arrested. Following the defendants’ initial appearances, the next scheduled court date is Oct. 3, 2013, at 2 p.m., before United States Magistrate Judge Mitchell D. Dembin.
*U.S. Attorney Duffy, the IRS’ Anthony J. Orlando and the FBI’s Darrell Foxworth will be available for interviews this afternoon. If you are interested, please contact Kelly Thornton at 619-546-9726.
DEFENDANTS Case Number: 13cr3479 *ARTHUR GRIGORIAN
*ERNEST SOLOIAN
*HAROUT GEVORGYAN
HOVHANNES HARUTYUNYAN
SUKHROB MUSAYEV
STANISLAV MELNIKOV
RENAT TALANOV
*YVONNE MIHAILESCU
MADLEN OSPANOVA
MERUYERT AKHMETOVA
INDIRA AKHMETOVA
*VYACHESLAV LAZAREV
YEVGENIY IVANOV
KARINA POLOZOVA
ZHASSULAN SHILIKBAY
SAGIT BATCHAEV
PATIMAT MAGALIYEV
KURBAN MAGALIYEV
ILYAS ABDRAKHAY
YERMEK DOSSYMBEKOV
VYACHESLAV TSOY
KONSTANTIN IVANOV
NURBEK AKHMADIYEV
ALISHER OMAROV
KSENIA CHABANOVA
*YELENA SKLYAROVA
ULAN ZAKIROV
TAIYR ZHURYN
YEVGENIY SOTNIKOV DEFENDANTS Case Number: 13cr3480 *ARMAN ERITSIAN
HOVHANNES HARUTYUNYAN
MARSAL MEDET DEFENDANTS Case Number: 13cr3481*KAREN GALSTIAN
DEFENDANTS Case Number: 13cr3482
*VAHAG STEPANYAN
*GEORGE KARAPETIAN
ARA ADAMYAN
*CHRISTOPHER BUCKELY
*CARLOS FERRUFINO, Jr.
*AKOP GALSTIAN
*FARBOB GOLHASSANI
PAUL T. GONNELLY, Jr.
*TATYANA KARBACHINSKAYA
MARIA KHARITONOVA
ALISA NOVIKOVA
*DAVID MEGUERIAN
*ASHOT MNATSAKAMYAN
SEDRAK MOVSESYAN
ROBERT T. RODRIGUEZ
*CHRISTOPHER RUIZ
*VARDGES VARDANYAN*HOVAKIM SOGOMONIAN
*HAROUT GEVORGYAN
*TIGRAN ERITSYAN
*EMIL STEPANYAN
SAGIT BATCHAEV
*KONSTANTIN YUGAY
*BAGDASAR BAGDASARYAN
*MAE BARBARA WEISSBERGER*In Custody
SUMMARY OF CHARGESThe following crimes are charged in at least one of the four indictments. For charges against each defendant, please see indictments.
Conspiracy – Title 18, U.S.C., Section 371
Maximum penalty: 5 years’ imprisonment and $250,000 fineMail Fraud – Title 18, U.S.C., Section 1341
Maximum penalty: 20 years’ imprisonment and $250,000 fineWire Fraud – Title 18, U.S.C., Section 1343
Maximum penalty: 5 years’ imprisonment and $250,000 fineMoney Laundering – Title 18, U.S.C. § 1956
Maximum penalty: 5 years’ imprisonment and $250,000 fineAggravated Identity Theft – Title 18, U.S.C., Section 1028A
Maximum penalty: 2 years’ imprisonment consecutive to underlying offenseConspiracy to Commit Bank Fraud – Title 18, U.S.C., Section 1349
Maximum penalty: 30 years’ imprisonment and $1,000,000 fineCriminal Forfeiture – Title 18, U.S.C., Section 981(a)(1)(C) and Title 28, U.S.C., Section 2461(c) Maximum penalty: Forfeiture of proceeds
AGENCIESFederal Bureau of Investigation
Internal Revenue Service Criminal Investigation
Los Angeles Police DepartmentAn indictment 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 Merrill Lynch Stock Broker Pleads Guilty in Connection to Qualcomm Insider Trading SchemeRead the Press Release
Former Merrill Lynch Stock Broker Gary Yin pled guilty today and admitted obstructing justice and laundering money for former Qualcomm Executive Vice President and President of Global Business Operations, Jing Wang (charged elsewhere).
According to his plea agreement, Yin agreed to assist Jing Wang in concealing Wang’s illegal insider trading using a secret, nominee brokerage account at Merrill Lynch. Yin also agreed to Wang’s request that he obstruct an ongoing SEC investigation into Wang’s activities, and to launder the proceeds of Wang’s insider trading. Among other things, Yin agreed to conceal evidence that Wang had engaged in insider trading by setting up a shell company in the British Virgin Islands, opening a brokerage account in the name of the shell company (but actually controlled by Wang), and laundering the illegal insider trading profits by moving them into the British Virgin Islands account.
At Wang’s direction, Yin also obstructed justice by removing account documents (subject to an SEC subpoena) from the United States and taking them to China. In China, Yin delivered the documents to Jing Wang’s brother, Bing Wang. Once delivered, Yin rehearsed a false cover story with Bing, concocted by his brother. In order to make the cover story credible, Yin also reviewed the trading history in the offshore account with Bing Wang to enable him to lie successfully to the authorities in the United States.
Finally, in order to hide the proceeds of Wang’s illegal trades, and to distance Wang from the trades, Yin transferred money from one shell company’s brokerage account to another. All told, Yin transferred approximately $525,000 from accounts related to shell companies in the British Virgin Islands.
Yin entered his guilty plea before U.S. Magistrate Judge Nita Stormes, and is next expected in court on December 16 at 9 a.m. for his sentencing before U.S. District Court Judge William Q. Hayes.
DEFENDANT CRIMINAL CASE NO. 13cr3488-WQH Gary Yin SUMMARY OF CHARGESTitle 18 U.S.C. Section 371 – Conspiracy to commit offenses against the United States.
DEFENDANT Criminal Case No. 13CR3487-H Jing Wang
Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release and
$100 special assessment.
Bing Wang SUMMARY OF CHARGESTitle 15 U.S.C. Sections 78j(b), 78ff and 17 C.F.R. § 240.10b-5—Securities Fraud (Insider Trading). Maximum Penalty: 20 years custody, a maximum fine of $5 million, five years supervised release, and $100 special assessment.
Title 18 U.S.C. Section 371 – Conspiracy (Obstruction of Justice and Money Laundering). Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release and $100 special assessment.
Title 18 U.S.C. Section 1512(c)(1) and (c)(2) -- Obstruction of Official Proceedings. Maximum Penalty: 20 years custody, a maximum fine of $250,000 years supervised release, and $100 special assessment.
Title 18 U.S.C. 1956 – Money Laundering. Maximum Penalty: 20 years custody, a maximum fine of $250,000 years supervised release, and $100 special assessment.
Title 18 U.S.C. 1028A – Aggravated Identity Theft. Maximum Penalty: Mandatory two years custody consecutive to any other sentence.
DEFENDANT Criminal Case No. 13CR3487-H Bing Wang SUMMARY OF CHARGESTitle 18 U.S.C. Section 371 – Conspiracy (Obstruction of Justice and Money Laundering).
INVESTIGATING AGENCIES
Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release
and $100 special assessment.Federal Bureau of Investigation
Internal Revenue Service-Criminal InvestigationTwo Former Real Estate Brokers Plead Guilty to Conspiring to Fraudulently Obtain the Sales Proceeds of Million Dollar Homes in San Diego and Del Mar by Filing Fictitious Title DocumentsRead the Press Release
United States Attorney Laura E. Duffy announced that Adel Afkarian and Atef Afkarian each entered a guilty plea in federal court in San Diego today to count one of an information charging them with conspiracy to commit mail fraud and wire fraud, in connection with a fraud scheme involving sales of million-dollar homes in San Diego and Del Mar, California.
In connection with the entry of their guilty pleas, both defendants, who worked through entities known as The Better Mortgage Company and Elite Coast Realty, admitted that they fraudulently obtained the entire proceeds of the sales of homes in Del Mar, La Jolla, and San Diego from innocent purchasers who were unaware that the defendants had hidden the existence of outstanding liens on the properties held by institutional lenders. The defendants also acknowledged that they used sham entities to execute and record documents falsely purporting to affect the legal title to the properties, including fraudulent deeds of trust and reconveyances that falsely purported to totally eliminate the existing debt to institutional lenders secured by the properties. During the course of the scheme the defendants sold their own property and properties of others with a combined sales price of more than $4,000,000.
Defendants Adel Afkarian and Atef Afkarian will appear before United States District Judge John A. Houston for sentencing on March 17, 2014, at 8:30 a.m.
DEFENDANTS Criminal Case No. 13CR1469-JAH Adel Afkarian
Atef Afkarian SUMMARY OF CHARGESCount 1: Title 18, United States Code, Section 371 - Conspiracy
INVESTIGATING AGENCY
Maximum penalties: 5 years' imprisonment, $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss (whichever is greatest), $100 special assessment, 3 years of supervised releaseFederal Bureau of Investigation
Two Brothers Plead Guilty to Defrauding Sports FansRead the Press Release
United States Attorney Laura E. Duffy announced that twin brothers Anthony Donald Casias and Leo Ronald Casias, Jr., pled guilty to a scheme to defraud local sports fans through their company, "L & T Sports Events, Inc."
According to court documents, clients of L&T Sports paid in advance for travel, lodging, transportation, and game tickets to out-of-town sporting events, such as San Diego Chargers "away" games, other NFL games, and collegiate sporting events. The brothers told customers that L&T Sports purchased specific flights, game tickets, and hotel accommodations for them for a set amount of money. The defendants even promised clients that L&T Sports obtained tickets in specific seating areas (for example, "lower level corner end zone" or "club level" seating), accommodations at specified hotels, and seats on specific airline flights, to reassure clients that the services clients paid for would be provided when the clients arrived at the game destinations.
The defendants admitted today that once the clients paid the advance fees in reliance on the brothers' statements, the defendants fraudulently diverted the funds to other uses, thereby leaving clients stranded in other cities without hotel accommodations, transportation, game tickets, and flights back to San Diego.
Court documents indicate that on at least one occasion the defendants used one individual's credit card to pay for another L&T Sports client's trip to Hawaii. Furthermore, according to individuals who addressed the court at today's guilty plea, the defendants borrowed money from victims, claiming that the funds would be used to purchase specific travel-related services to keep the business afloat. Instead, the brothers used the money for personal expenses, such as car payments and cable bills, and failed to repay the victims. One elderly individual informed the court that the brothers had obtained from him the money he had saved for his own cremation.
The court remanded both defendants into custody. The defendants will next appear before Judge John A. Houston on October 4, 2013, at 1:00 p.m. for a further hearing on whether they will remain in custody pending sentencing. They will appear before Judge Houston for sentencing on January 6, 2014, at 8:30 a.m.
If you are a victim of L&T Sports, please contact the FBI at (858)320-1800.
DEFENDANTS Criminal Case No. 12CR4966-JAH Anthony "Tony" Donald Casias
Leo Ronald Casias, Jr. SUMMARY OF CHARGECount 1: Title 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud. Maximum
INVESTIGATING AGENCY
penalties: 20 years' imprisonment, $250,000 fine, $100 special assessment, 3 years of supervised release, mandatory restitution to victims.Federal Bureau of Investigation
President of Argyll Equities Sentenced to Serve 15 Years Relating to $80 Million International Securities Fraud SchemeRead the Press Release
United States Attorney Laura Duffy announced today that Douglas McClain, Jr. ("McClain"), President of Argyll Equities, Inc., was sentenced today by United States District Court Judge Roger T. Benitez to serve 15 years in federal prison and ordered to pay $81,731,879.98 in restitution, for his role in a multi-million dollar stock loan fraud scheme which defrauded victims in the United States, Canada, Mexico, Panama, China, England, and Belgium. McClain was also ordered to forfeit several million dollars in assets that were the proceeds of the fraud, including cash and securities held in brokerage accounts, a luxury home in Florida, a houseboat, and diamond jewelry.
On April 13, 2012, McClain was charged in an indictment with 27 counts of conspiracy, mail fraud, wire fraud, securities fraud, and money laundering. On May 31, 2013, a federal jury returned guilty verdicts on all counts in the indictment against McClain.
According to the evidence presented a trial, McClain owned and controlled several entities that did business in San Diego, California, Florida, Texas, and Georgia under the name "Argyll." Beginning in at least 2004, McClain conspired with loan brokers to defraud the public, and borrowers, by falsely representing that Argyll was an institutional lender with significant cash to lend to corporate executives and other individuals. According to court records, McClain, and others, fraudulently induced corporate executives to pledge millions of dollars’ worth of stock the executives held in publicly traded companies as collateral for loans by falsely representing that the borrowers' stock would not be sold unless there was a default on the loan.
The evidence presented at trial showed that McClain's entities had no cash to lend and, instead, survived for years by immediately selling borrowers stock on the day after the stock was pledged as collateral. The proceeds from the sale of the stock were used to fund the loans creating the appearance that the Argyll entities had plenty of cash to lend.
The evidence also showed that McClain, and others, fraudulently induced the borrowers to make monthly interest payments on their loans by falsely representing that their collateral was safe and would be returned as long as they did not default. At the end of the loan terms, the borrowers paid off their loans. Instead of returning the stock to the borrowers, McClain kept the money and provided false excuses about why he could not return their stock.
The evidence further showed that McClain's unauthorized sales of stock held by insiders of publicly traded companies caused the stock price to plummet which defrauded purchasers of these publicly traded securities who purchased stock through public stock exchanges.
United States Attorney Duffy praised the efforts of the FBI for its investigation of the case. U.S. Attorney Duffy stated, “The evidence at trial showed how McClain was able to steal publicly traded securities from unsuspecting corporate insiders through an elaborate scheme involving an international network of loan brokers that deceived the public into believing that McClain’s entities were legitimate lenders. This case is a reminder to the public to be extremely cautious when pledging property to unregulated third party lenders.”
FBI Special Agent in Charge, Daphne Hearn, commented, “This investigation highlights the need for consumers to do their own homework before entering into business arrangements and not simply take the word of the other person, especially when it comes to pledging stocks, bonds or other negotiable instruments as collateral. I commend the U.S. Attorney's Office and the FBI Agents and professional employees who worked so diligently to bring this matter to justice.”
This case was investigated by the Federal Bureau of Investigation-San Diego Division.
DEFENDANT Case Number: 12cr0918BEN Douglas A. McClain, Jr. SUMMARY OF CHARGESCount 1: Conspiracy (Title 18, United States Code, Section 371):
INVESTIGATING AGENCY
Counts 2-8 Mail Fraud (Title 18, United States Code, Section 1341
Counts 9-23 Wire Fraud (Title 18, United States Code, Section 1343)
Count 24 Securities Fraud (Title 15, United States Code, Sections 78j(b) and 78ff)
Counts 32-35 Money Laundering (Title 18, United States Code, Section 1957)Federal Bureau of Investigation
Former President of Qualcomm’s Global Business Operations Indicted for Insider TradingRead the Press Release
SAN DIEGO – Jing Wang, a former Executive Vice President and President of Global Business Operations for Qualcomm, Inc. (NASDAQ: QCOM) was charged with insider trading in shares of both Qualcomm and Atheros Communications, Inc. (“Atheros”) using a secret brokerage account and an offshore shell company in the British Virgin Islands.
Wang, 51, of Del Mar, is also charged with conspiring with his brother, co-defendant Bing Wang, and his former Merrill Lynch stock broker, Gary Yin, to obstruct an ongoing SEC investigation, and laundering the proceeds of his insider trading using a second offshore shell company and secret brokerage account.
United States Attorney Laura E. Duffy and Acting Assistant Attorney General for the Justice Department’s Criminal Division Mythili Raman announced that Wang was taken into custody at the Federal Bureau of Investigation earlier today on these charges, and is expected to make his initial appearance in federal court in the Southern District of California at 2 p.m. before U.S. Magistrate Judge Nita Stormes. A warrant has been issued for the arrest of Bing Wang, 53, who is believed to be a citizen and resident of China.
Yin, the former stock broker, was charged in a criminal information filed today in the Southern District of California, and is expected to make his initial appearance on Tuesday, September 24, at 10:00 a.m. in federal court in San Diego, also before Judge Stormes.
“When there are two sets of rules – one for the powerful insiders and one for everybody else – the public quickly loses confidence in the stock market,” Duffy said. “We intend to restore confidence in our markets by making sure that everyone is playing by the same rules.”
FBI Special Agent in Charge, Daphne Hearn, commented, "Insider trading investigations are important, because our nation's economy is increasingly dependent on the success and integrity of the stocks and commodities markets. The FBI's message is simple, if your information is inside information, you can't trade on it."
“Mr. Wang has been charged with using offshore entities and secret brokerage accounts to conceal and disguise illicit profits from insider trading. Our special agents are experts in following the financial transactions that unravel complex schemes where individuals who use nominee offshore accounts believe they are out of the reach of the IRS,” said Richard Weber, Chief, IRS Criminal Investigation. “These individuals face severe consequences including imprisonment and substantial fines.”
“Insider trading is an insidious crime. It undermines ordinary investors’ faith in our financial markets, and the Justice Department has zero tolerance for it,” said Acting Assistant Attorney General Raman. “Today’s charges show that you cannot trade on inside information, pocket the profit, and expect to get away with it. The Criminal Division has had a terrific partnership with the U.S. Attorney’s Office for the Southern District of California in this important investigation, and through partnerships like these throughout the country, we will continue to root out fraud in our markets at every level.”
According to the indictment, Wang used his Merrill Lynch broker (Yin) to create the offshore entity, Unicorn Global Enterprises (“Unicorn”), in the British Virgin Islands and to open a brokerage account for Unicorn at Merrill Lynch. Wang provided documents to Yin to create the false impression that his brother, Bing Wang, controlled the account, when in fact Qualcomm’s Wang was the true owner of the account. This allowed Wang to conceal his true ownership and control of the assets in the account and to avoid reporting to U.S. tax authorities. Significantly, it also allowed Wang to disguise his transfer of large sums of money to China.
The indictment alleges that after the creation of the Unicorn account, Wang was named an Executive Vice President of Qualcomm and fell within the company’s insider trading restrictions for officers. As an officer, Wang was exposed to Qualcomm’s confidential business information, and was repeatedly notified that he was not permitted to use material, non-public information to engage in stock transactions.
Among the inside information learned by Wang because of his senior position was the fact that in the first quarter of 2010, Qualcomm was poised to announce an increased quarterly dividend and a stock repurchase program. On March 1, 2010, Wang allegedly acted on this material nonpublic information and directed Yin to purchase as much Qualcomm stock as possible in the Unicorn account before the information became public. After the close of trading on that same day, Qualcomm issued a press release announcing the dividend increase and stock repurchase program, and the company’s stock appreciated approximately 10 percent in value.
According to the indictment, Wang next engaged in insider trading when he learned that Qualcomm was interested in purchasing Atheros. On December 1, 2010, acting on this information, Wang met with Yin and instructed him to sell all Qualcomm shares in the Unicorn account. Wang then told Yin to make preparations to purchase Atheros with the funds in the account, but to wait for further confirmation. Wang’s broker proceeded to liquidate all of the illegally held Qualcomm stock in the Unicorn account, resulting in ill-gotten gains of approximately $94,709 from the earlier insider trading.
The indictment alleges that on December 6, 2010, while attending a meeting of Qualcomm’s Board of Directors in Hong Kong, Wang learned that the board authorized Qualcomm to make a non-public offer to purchase Atheros for $45 per share. Later that same day, Wang called Yin in San Diego and instructed him to use all available funds in the secret Unicorn account to purchase Atheros stock, the indictment said. The broker followed Wang’s instructions and purchased 10,800 shares at approximately $34 per share for a total of $366,766.
Qualcomm’s offer to purchase Atheros remained confidential until an article appeared in the Dealbook section of the New York Times’ website on January 4, 2011, and Qualcomm made an official announcement of the deal on January 5, 2011. Between the close of trading on January 3, 2011, and the close of trading on January 5, 2011, the price of Atheros stock jumped from approximately $37 to $44.50 – an increase of close to 20 percent.
The indictment alleges that Wang engaged in a third incident of insider trading on January 25, 2011, when he learned that Qualcomm was about to release record financial results. Immediately prior to announcement of those earnings, Wang directed Yin to sell all the Atheros stock in the Unicorn account and purchase Qualcomm stock. The broker sold all of Wang’s illegally purchased Atheros stock for $44.60 per share, and used all of the proceeds to purchase Qualcomm stock at $50.87 per share. The following day, after Qualcomm announced the record earnings results, Qualcomm’s stock price increased by approximately $4 per share. All told, Wang illegally gained approximately a quarter of a million dollars from these three illegal transactions.
The indictment and criminal information further alleges that in order to conceal his insider trading, Wang conspired with his brother, Bing Wang, and Yin, to conceal Wang’s control of the Unicorn account and his illegal purchases of Qualcomm and Atheros stock. Yin and Bing Wang allegedly agreed to assist Wang, and the three defendants engaged in a number of activities to obstruct any investigation of the trades, as well as to conceal Wang’s control of the Unicorn account. These obstructive acts included concocting a false cover story that would blame Bing Wang for the illegal trades in Qualcomm and Atheros, concealing Wang’s actual control of the Unicorn account from Merrill Lynch, and transferring the proceeds of Wang’s insider trading to another offshore entity nominally owned by Wang’s mother.
For example, in carrying out the obstruction, the indictment alleges that in January 2012, Wang forged the signature of his mother and used her identification documents to create another British Virgin Islands entity called Clearview Resources, Ltd (“Clearview”). At Wang’s instruction, Yin created a Merrill Lynch account for Clearview, and attempted to further distance Wang from the transactions by transferring all of the money in the Unicorn account to the Clearview account in a series of structured transactions.
Another example of obstructive conduct alleged in the indictment took place in March 2012, when Wang met with Yin and explained that the SEC was investigating Qualcomm. At that time, Wang told Yin he was worried that his control of the Unicorn account and insider trading would be discovered. By that time, the SEC had already issued a subpoena to Wang calling for him to produce information about any brokerage accounts he controlled. Wang allegedly pressed Yin to stick to the false cover story he had created earlier – that his brother Bing Wang was the person who made the illegal trades, not him. Soon afterwards, Wang gave Yin a number of Merrill Lynch documents related to his Unicorn account and directed his broker to take the documents to China, give them to Bing Wang, and help his brother use them to corroborate the false cover story. Yin agreed, and during two trips to China in 2012, Yin met with Bing Wang, provided him with Unicorn documents removed from the United States, and rehearsed the false cover story. The indictment further alleges that after these meetings, Bing Wang and Yin sent emails to each other containing false and misleading statements in order to make it appear that Bing Wang actually controlled the Unicorn and Clearview accounts.
United States Attorney Duffy praised the efforts of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation for piecing together this complex, international insider trading scheme. United States Attorney Duffy also thanked the SEC’s Los Angeles Regional Office for its assistance, and noted that the SEC had today filed a civil complaint against Wang and Yin in federal court in San Diego.
*The public is reminded that indictments and informations are not evidence that the defendants committed the crime charged. The defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
DEFENDANT Criminal Case No. 13CR3487-H Jing Wang
Bing WangAge: 51
Del Mar, CA
Age: 53
China SUMMARY OF CHARGESTitle 15 U.S.C. Sections 78j(b), 78ff and 17 C.F.R. § 240.10b-5—Securities Fraud (Insider Trading). Maximum Penalty: 20 years custody, a maximum fine of $5 million, five years supervised release, and $100 special assessment.
Title 18 U.S.C. Section 371 – Conspiracy (Obstruction of Justice and Money Laundering). Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release and $100 special assessment.
Title 18 U.S.C. Section 1512(c)(1) and (c)(2) -- Obstruction of Official Proceedings. Maximum Penalty: 20 years custody, a maximum fine of $250,000 years supervised release, and $100 special assessment.
Title 18 U.S.C. 1956 – Money Laundering. Maximum Penalty: 20 years custody, a maximum fine of $250,000 years supervised release, and $100 special assessment.
Title 18 U.S.C. 1028A – Aggravated Identity Theft. Maximum Penalty: Mandatory two years custody consecutive to any other sentence.
DEFENDANT Criminal Case No. 13CR3487-H Bing WangAge: 53
China SUMMARY OF CHARGESTitle 18 U.S.C. Section 371 – Conspiracy (Obstruction of Justice and Money Laundering).
DEFENDANT Criminal Case No. 13CR3488 Gary Yin
Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release
and $100 special assessment.Age: 54
San Diego SUMMARY OF CHARGESTitle 18 U.S.C. Section 371 – Conspiracy to commit offenses against the United States.
INVESTIGATING AGENCIES
Maximum Penalty: 5 years custody, a maximum $250,000 fine, three years supervised release
and $100 special assessment.Federal Bureau of Investigation
Internal Revenue Service-Criminal InvestigationFormer Middle School Teacher Sentenced to Federal Prison for Receipt and Possession of Child PornographyRead the Press Release
United States Attorney Laura E. Duffy announced today that Timothy James Hensley was sentenced to serve 70 months in federal prison, in addition to five years of supervised release, and to register as a sex offender, by United States District Court Judge Irma E. Gonzalez. Hensley, a former local middle school teacher at Bell Middle School, in San Diego, pled guilty on May 16, 2013 to a five count indictment charging him with receipt and possession of child pornography.
As part of his guilty plea, Hensley admitted to receiving images of a minor female approximately 10 years of age engaged in sexually explicit conduct as well as to possessing an iMac computer and computer disks containing images depicting minors engaged in sexually explicit conduct, in violation of Title 18, United States Code, Section 2252(a)(2) and (4)(B). According to court records, several of these images depicted prepubescent minors engaged in sexually explicit conduct. The defendant was arrested by special agents with Homeland Security Investigations on January 15, 2013, following the execution of a federal search warrant at Hensley’s residence.
This case stems from an investigation by the Department of Homeland Security, Immigration and Customs Enforcement's Homeland Security Investigations.
This case was brought as part of the Department of Justice’s Project Safe Childhood, and ICE's Operation Predator, both are nationwide initiatives launched to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys' Office and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources." For more information about on Operation Predator, please visit www.ice.gov.
DEFENDANT Criminal Case No. 13cr0393-IEG Timothy James Hensley CA SUMMARY OF CHARGESThree Counts: Title 18, United States Code, Section 2252(a)(2) (Receipt of Child Pornography)
Two Counts: Title 18, United States Code, Section 2252(a)(4)(B) - Possession of Child Pornography
INVESTIGATING AGENCYImmigration and Customs Enforcement’s Homeland Security Investigations
Pittsburgh Oncology Practice Pleads Guilty to Buying Unapproved Foreign DrugsRead the Press Release
United States Attorney Laura E. Duffy announced today that Jan C. Seski, M.D. & Associates, P.C., an oncology practice based in Pittsburgh, Pennsylvania, pleaded guilty to a criminal charge of having caused the introduction of an unapproved drug into interstate commerce and was ordered to pay a $100,000 fine. Magistrate Judge Karen S. Crawford also ordered the defendant to place ads in two medical journals, warning of the dangers of unapproved drugs.
In pleading guilty earlier today before Judge Crawford, the medical practice admitted that between December 4, 2008 and May 25, 2011, the practice ordered $973,795 worth of foreign versions of the oncology drugs Eloxatin7, Gemzar7 and Taxotere7 from GlobalRxStore.com, and had them shipped through Oberlin Medical Supply of San Diego. The drugs ordered by the practice were determined to be foreign versions of these drugs and were not approved by the Food and Drug Administration for use in the United States.
According to sentencing documents filed with the court, this case came to light in May of 2011, when federal agents visited Oberlin Medical Supply's offices in San Diego. Maher Idriss, (charged in Criminal Case No. 12cr1775-WQH) the owner of Oberlin Medical Supply, had been working in conjunction with Martin Bean (charged in Criminal Case No. 12cr3734-WQH) and others of GlobalRxStore.com (GlobalRx) to supply foreign oncology drugs to doctors throughout the United States. At Oberlin, the agents discovered numerous boxes of oncology drugs that bore labeling indicating that the products had been manufactured outside of the United States and were not approved for use in this country.
The medical practice provided agents with a copy of a label for boxes of Gemzar received from GlobalRx. The labeling indicated that the product was manufactured by Eli Lilly in Fegershaim, France. The labeling was partially in English and partially in Turkish. The labels did not bear the words "Rx only" as required by the FDA, and did not bear the National Drug Code ("NDC") numbers used for Medicare billing in this country. Moreover, the labels were different in color from the FDA-approved labeling for the U.S. product.
The medical practice later provided to the government one of the vials of drugs that was in the box. When tested, the vial was found to have the active ingredient used in the manufacture of Gemzar. However, without such testing there is no assurance that other foreign drugs purchased by the defendant (outside of the closed chain system established by the FDA to protect patients in this country) all contain the active ingredient. Just recently, in February, 2013, the FDA warned doctors about batches of counterfeit Avastin (an oncology drug) that had been sold to U.S. doctors that did not contain any of the active ingredients, the third such incident in several months.
DEFENDANT Criminal Case No. 13cr3316-KSC Jan C. Seski, M.D. & Associates, P.C.
Pittsburgh, Pennsylvania Date of Incorporation: 1973 SUMMARY OF CHARGESIntroduction into Interstate Commerce of an Unapproved Drug, a misdemeanor, in violation of Title 21,
AGENCIES
United States Code, Section 331(d), 333(a)(1) and 355(a)Food and Drug Administration, Office of Criminal Investigations
Federal Bureau of InvestigationInternational Bribery Schemes Uncovered Involving Hundreds of Millions of Dollars in Defense ContractsRead the Press Release
SAN DIEGO, CA – Three individuals – a commander in the United States Navy, a special agent for the Naval Criminal Investigative Service (NCIS) and the CEO of a multinational defense contractor – were charged in criminal complaints unsealed today in connection with two separate bribery schemes.
The complaints allege that Leonard Glenn Francis, the CEO of Singapore-based Glenn Defense Marine Asia Ltd. (GDMA), paid U.S. Navy Commander Michael Vannak Khem Misiewicz and NCIS Supervisory Special Agent John Bertrand Beliveau II with luxury travel and prostitutes in exchange for confidential information and other assistance in relation to hundreds of millions of dollars in Navy contracts.
Francis was arrested in San Diego yesterday evening and made his initial appearance in federal court this afternoon before U.S. Magistrate Judge Karen S. Crawford. Also yesterday, Misiewicz and Beliveau were arrested in Colorado and Virginia, respectively. The next date in the cases is a hearing set for Friday, September 20, 2013 at 9:30am before U.S. Magistrate Judge William McCurine Jr., in federal court in San Diego, to determine whether Francis should be detained as a flight risk and as a risk to obstruct justice. Francis will remain in custody without bond pending Friday’s hearing. The United States will seek the removal of Misiewicz and Beliveau to San Diego to face the charges.
U.S. Attorney Laura E. Duffy of the Southern District of California and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division made the announcement after the complaints were unsealed.
As set forth in the complaints, Francis, a Malaysian national who resides in Singapore, is the chief executive officer and president of Glenn Defense Marine Asia Ltd. (GDMA), a multi-national corporation with headquarters in Singapore and operating locations in other countries, including Japan, Singapore, Thailand, Malaysia, Korea, India, Hong Kong, Indonesia, Australia, Philippines, Sri Lanka and the United States. GDMA provides hundreds of millions of dollars in “husbanding” services to the U.S. Navy, which involves the coordinating, scheduling and procurement of items and services required by ships and submarines when they arrive at port. These services include, for example, providing tugboats and fenders; paying port authority and customs fees; furnishing security and transportation; supplying provisions, fuel and water; and removing trash and collecting liquid waste.
Misiewicz, 46, is a commander and captain-select in the U.S. Navy, assigned to U.S. Northern Command located at Peterson Air Force Base in Colorado Springs, Colo. Before this position, he served as the deputy operations officer for the U.S. Commander, Seventh Fleet aboard the USS Blue Ridge. The Seventh Fleet’s area of operations consists of 48 million square miles extending from Japan to Diego Garcia in the Indian Ocean and from Vladivostok, Russia, to Australia. As the deputy operations officer, Misiewicz had high-level exposure to the operational planning for ships in the Seventh Fleet and for any U.S. Navy ship traveling through the Seventh Fleet’s area of responsibility. He also held influence in determining or modifying the schedule of port visits for U.S. Navy vessels.
Beliveau, 44, is a supervisory special agent for NCIS at Quantico, Va. In that position, he has had access to the internal NCIS database containing investigative reporting, including reports into an investigation by NCIS into possible fraud committed by GDMA in billing the U.S. Navy under its contracts.
According to one of the criminal complaints, Misiewicz and Francis allegedly engaged in a conspiracy to commit bribery. As part of the conspiracy, Misiewicz sent to Francis information that the Navy had classified as “Confidential,” including schedules reflecting the movements of Navy ships months in advance. Misiewicz also operated as an advocate within the Navy for GDMA’s interests, urging decisions about port visits and contractor usage that were designed to benefit GDMA. In return, Francis provided Misiewicz with paid travel, luxury hotel stays and prostitution services. To communicate with Francis privately, Misiewicz set up a special personal email account with a name that included Francis’s initials.
As set forth in another complaint, Beliveau and Francis allegedly entered into a separate bribery conspiracy. As part of that conspiracy, Beliveau provided Francis with confidential information about the NCIS criminal fraud investigation into GDMA by secretly downloading reports from the NCIS database and conveying the information to Francis. Beliveau also allegedly provided Francis guidance as to how to deal with NCIS inquiries. In exchange, Francis provided Beliveau with, among other things, paid travel, luxury hotel stays and prostitution services.
Each defendant was charged with conspiring to commit bribery, which carries a maximum penalty of five years in prison. A criminal complaint is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
This ongoing investigation is being conducted by NCIS, the Defense Criminal Investigative Service, the Defense Contract Audit Agency, and the Drug Enforcement Administration. The Criminal Division’s Office of International Affairs provided significant assistance in this matter, and the Royal Thai Police and the Corrupt Practices Investigation Bureau Singapore also provided law enforcement assistance. This case is being prosecuted by Assistant U.S. Attorneys Mark Pletcher and Robert Huie of the Southern District of California and Catherine Votaw, Director of Procurement Fraud for the Criminal Division’s Fraud Section.
Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tipline at www.ncis.navy.mil or call the DoD Hotline at (800) 424-9098.
DEFENDANTSCase Number: 13-MJ-3456
Leonard Glenn Francis
John Bertrand Beliveau IICase Number: 13-MJ-3457
SUMMARY OF CHARGES
Leonard Glenn Francis
Michael Vannak Khem MisiewiczCase Number: 13-MJ-3456
Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371Case Number: 13-MJ-3457
INVESTIGATING AGENCIES
Conspiracy to Commit Bribery in violation of 18 U.S.C. § 371Defense Criminal Investigative Service
Naval Criminal Investigative Service
Homeland Security Investigations
Drug Enforcement AdministrationDepartment of Justice Awards Hiring Grants to Support Southern District of California Law EnforcementRead the Press Release
Grants awarded to hire law enforcement positions
SAN DIEGO – The Department of Justice awarded grants totaling $925,235 to two cities in the Southern District of California, aimed at creating six new law enforcement positions, announced United States Attorney Laura E. Duffy.
The Department of Justice Community Oriented Policing Services (COPS) Hiring Program offers grants to state, local and tribal law enforcement agencies to hire or rehire community policing officers. The program provides salaries and benefits for officer and deputy hires for three years. Grantees for the 2013 hiring program were selected based on their fiscal needs, local crime rates, and community policing plans.
This year’s COPS grantees within the Southern District are the City of Brawley, located in Imperial County, will receive $425,235 and the City of Chula Vista, located in San Diego County, will receive $500,000.
U.S. Attorney Duffy noted that these grants will provide additional resources to address public safety in this District. We are pleased that the Department is recognizing and supporting the efforts of local law enforcement in Chula Vista and Brawley.
The COPS Office is responsible for advancing community policing nationwide. Since 1995, COPS has awarded over $14 billion to advance community policing, including grants awarded to more than 13,000 state, local, and tribal law enforcement agencies to fund the hiring and redeployment of approximately 125,000 officers and provide a variety of knowledge resource products including publications, training, and technical assistance.
Additional information about the 2013 COPS Hiring Program can be found on the COPS website at www.cops.usdoj.gov.
Loan Processor Who Helped Obtain $100 Million in Fraudulent Mortgages Sentenced to 12 Months in PrisonRead the Press Release
SAN DIEGO – United States Attorney Laura E. Duffy and Federal Housing Finance Agency Inspector General Steve A. Linick announced that John Allen, a mortgage loan processor based in Laguna Hills, was sentenced today to one year in custody by U.S. District Court Judge John A. Houston for his participation in an investment and mortgage loan fraud scheme that generated nearly $15 million in kickbacks.
Allen worked with Mary Armstrong, a self-described but unlicensed mortgage broker, and several other co-conspirators to steal money from real estate purchase transactions. Armstrong recruited “investors” through advertisements in the Los Angeles Times, Monster.com, and elsewhere, and offered them the opportunity to purchase homes using their good credit with no money down. In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. Allen helped to secure mortgages for the properties by falsifying loan applications. Among other things, the loan applications falsely claimed exorbitant income from fake employers and used fabricated documents, which Allen helped to create, in order to support the claims. The defendants used these loan applications to obtain mortgages with 100% financing – and thus avoided having to make any down payment on the properties.
The defendants earned millions of dollars in profits by convincing the sellers of the properties to inflate the purchase price by $100,000 or more, which was allegedly to be used for construction to improve the properties. In fact, no construction work was ever performed and the funds were instead diverted (or “kicked back”) to bank accounts controlled by the defendants. Allen helped to identify properties to purchase as part of the scheme, and inflated the prices by $100,000 or more to fund the kickbacks. All together, the defendants pocketed nearly $15 million in kickbacks in this way, and allowed nearly all of the properties to swiftly fall into foreclosure. Through this scheme, the defendants arranged the purchase of approximately $100 million in mortgages, resulting in estimated total losses between $7 million and $20 million to the mortgage lenders and secondary purchasers Fannie Mae and Freddie Mac.
Allen was charged with participating in the scheme along with five others: Armstrong, Teresa Rose, a Ramona real estate agent; William Fountain, Armstrong’s assistant; Justin Mensen, a straw buyer who went on to recruit others and help to launder the funds; and Audrey Yeboah, a Los Angeles-based tax preparer who generated fake paperwork to support the loans. All of the defendants have pled guilty to participating in the scheme. Allen was the first defendant to be sentenced. Fountain is scheduled for sentencing on September 20, 2013, and Armstrong is scheduled for sentencing on September 30, 2013, both before Judge Houston.
United States Attorney Duffy explained that the American public is the very real victim of this type of widespread mortgage fraud that played such a significant role in destabilizing the country’s financial situation. She emphasized that her office would aggressively prosecute such crimes and urged anyone in the community who has information relating to these charges to contact the San Diego branch of the Federal Bureau of Investigation at (858) 565-1255 or the Federal Housing Finance Agency - Office of Inspector General hotline at (800) 793-7724.
This matter was investigated jointly by agents from the FBI and FHFA-OIG. The case is being prosecuted by FHFA-OIG Investigative Counsel and Special Assistant U.S. Attorney Emily W. Allen and Assistant U.S. Attorney Valerie Chu of the Southern District of California.
DEFENDANTS Criminal Case No. 12CR1848-JAH Mary Armstrong
Teresa Rose
William Fountain
John Allen DEFENDANT Criminal Case No. 12CR1458-JAH Justin Mensen DEFENDANT Criminal Case No. 12CR4322-JAH Audrey Yeboah SUMMARY OF CHARGESMary Armstrong, Teresa Rose, and William Fountain
Count 1: Title 18, United States Code, Section 371 -- Conspiracy to Commit Wire Fraud and to Launder Money -- statutory maximum sentence of 5 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Mary Armstrong
Count 2: Title 18, United States Code, Section 1343 -- Wire Fraud -- statutory maximum sentence of 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Counts 3-5: Title 18, United States Code, Section 1956(a)(1)(B)(I) -- Money Laundering -- statutory maximum sentence of 15 years’ custody, a maximum fine of $500,000 or twice the value of the property involved in the transaction, and $100 special assessment.
Justin Mensen
Information: Title 18, United States Code, Section 371 -- Conspiracy to Commit Wire Fraud and to Launder Money -- statutory maximum sentence of 5 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
Audrey Yeboah
Information: Title 18, United States Code, Section 1343 -- Wire Fraud -- statutory maximum sentence of 20 years custody, a maximum fine of $250,000 or twice the gain derived from or loss caused by the offense, and $100 special assessment.
AGENCIESFederal Bureau of Investigation
Federal Housing Finance Agency - Office of Inspector GeneralPatient Recruiter Convicted in Massive Social Security and Immigration Fraud SchemeRead the Press Release
United States Attorney Laura E. Duffy announced that Nawal Talia of Spring Valley pled guilty today and admitted recruiting patients as part of a multi-year fraud scheme to falsify medical certifications to the federal government.
As revealed in her guilty plea, Talia recruited patients for the mastermind of the health care fraud scheme, Dr. Roberto Velasquez. Earlier this year, Velasquez was sentenced to 21 months in prison, and ordered to pay more than $1.5 million in restitution to the Social Security Administration — the largest single restitution order in Social Security’s history.
For the past several years, Talia served as a paid advocate for immigrants seeking assistance in obtaining U.S. citizenship or Social Security benefits. In this role, Talia submitted documents to federal agencies on behalf of her clients, certifying that her clients were mentally disabled. Rather than obtaining benefits legitimately, Talia and Velasquez worked together to falsify medical certifications and fabricate patient histories. In her plea, Talia admitted that she helped Velasquez falsify two different types of disability reports: (1) Medical Certification for Disability Exception Forms (Forms N-648), which are used by the Department of Homeland Security during the naturalization process; and (2) Medical Letters, which are used by the Social Security Administration to award Supplemental Security Income and disability payments. On each of these forms, Talia lied about the length of time her clients had been under the care of Velasquez. In one case, Talia certified that a patient had been treated by Dr. Velasquez for a year, when the patient had actually only met Velasquez once. In another, she filed a Social Security appeal, falsely certifying that the patient had been treated by Dr. Velasquez for 11 months. In reality, Talia simply made up that number so that her client appeared to be eligible for disability benefits, when in fact Talia knew he was not.
The fraud was uncovered through an undercover operation conducted jointly by the Department of Homeland Security, Immigration and Customs Enforcement/Homeland Security Investigations, and the Office of Inspector General, Social Security Administration. Although Talia held herself out as a legitimate patient advocate, the investigation revealed her blatant disregard for federal disability requirements. Investigators established that Talia repeatedly lied about the duration of the treatment in order to create a “track record” that would satisfy reviewers at the Social Security Administration and Citizen and Immigration Services (“CIS”).
This prosecution is a part of the United States Attorney’s ongoing Health Care Fraud initiative. United States Attorney Duffy noted, “Combating health care fraud is a top priority of the Department of Justice. Patient recruiters like Talia help perpetuate fraud when they falsify documents and corrupt the integrity of the system.” The United States Attorney noted that this type of fraud is particularly egregious as it improperly helps undeserving individuals obtain citizenship and other benefits that may then not be available to the truly deserving.
Sentencing was set for December 16, 2013, at 9 a.m. before U.S. District Judge Marilyn L. Huff
DEFENDANT CRIMINAL CASE NO. 13cr3393-H Nawal Talia SUMMARY OF CHARGESCount One - Title 18, United States Code, Section 1546 – False Statements in Immigration Documents
INVESTIGATING AGENCIES
Count Two - Title 42, United States Code, Section 1383a(a)(2) - False Statements in Applications for SSI Disability BenefitsUnited States Immigration and Customs Enforcement’s Homeland Security Investigations
Office of Inspector General, Social Security AdministrationFormer Reserve Deputy Sheriff of Imperial County Sentenced to 30 Months in Prison for Smuggling Illegal Aliens in the Trunk of Her CarRead the Press Release
San Diego – A former reserve Imperial County Sheriff’s Deputy was sentenced today to serve a term of 30 months in prison for smuggling illegal aliens, including a minor, in the trunk of her car as she drove through a Border Patrol checkpoint wearing her uniform and department-issued firearm.
While serving as a reserve Deputy Sheriff of Imperial County, Elizabeth Hernandez and her co-defendant, Edna Yanie Calderon, were arrested on April 17, 2013 for transporting illegal aliens. On June 25, 2013, Hernandez and Calderon pled guilty to transporting illegal aliens, and consented to the forfeiture of proceeds and assets associated with their crimes.
According to her plea agreement, Hernandez abused her position of public trust by using her Imperial County Sheriff Department’s uniform and loaded firearm to facilitate the transportation of illegal aliens through the Highway 86 checkpoint operated by Border Patrol. From at least October 2012 through April 17, 2013, Hernandez earned at least $90,000 from transporting illegal aliens in the United States, the court records said.
In addition, Hernandez admitted that she used proceeds from alien smuggling to purchase several vehicles, including a 2013 Dodge Charger, a 2012 Polaris off-road recreational vehicle, and a 2008 GMC Sierra pickup truck. In addition, Hernandez consented to the forfeiture of approximately $20,000 in cash that was found on her at the time of arrest and at her residence following a search warrant, which were proceeds from her alien smuggling.
U.S. District Court Judge Janis L. Sammartino found that Hernandez’s use of her uniform and firearm made her conduct more egregious and distinguished her from Calderon. Judge Sammartino agreed that Hernandez’s abuse of her position of public trust provided the smuggling organization with a “guaranteed method” to transport illegal aliens through the Border Patrol checkpoint. In addition to imposing a 30-month prison sentence, Judge Sammartino ordered forfeiture of several vehicles and $20,000 in proceeds from alien smuggling. Following her prison sentence, Judge Sammartino placed Hernandez on three years of supervised release.
Hernandez was ordered to self-surrender to her designated prison facility by no later than November 5, 2013 at 12:00 p.m. A status hearing regarding Hernandez’s self-surrender is scheduled for November 8, 2013 at 9:00 a.m, before Judge Sammartino. Hernandez’s co-defendant, Calderon, is scheduled to be sentenced by Judge Sammartino on October 4, 2013 at 10:30 a.m.
DEFENDANTS Criminal Case No. 13CR1794-JLS Elizabeth Hernandez
Edna Yanie Calderon SUMMARY OF CHARGESTitle 8, United States Code, Section 1324(a)(1)(A)(ii) B Transportation of Illegal Aliens
AGENCY
Maximum Penalties: 10 years of imprisonment and $250,000 fineUnited States Border Patrol-El Centro Sector
San Diego Man Who Wore "I Make Pimpin’ Look Easy" Shirt Pleads Guilty to Transporting A Minor for ProstitutionRead the Press Release
Martell Davis, who was wearing a T-shirt that read "I MAKE PIMPIN' LOOK EASY…" when he arrived to pick up his 17-year-old prostitute from a hotel and was arrested, admitted in federal court today that he was, indeed, a pimp.
Davis pleaded guilty before U.S. Magistrate Judge Ruben B. Brooks to transportation of a minor to engage in prostitution. In his plea agreement, Davis admitted that he acted as pimp for a 17-year-old girl when he drove her from San Diego to Yuma, Arizona, so she could engage in commercial sex acts.
According to court records, Davis' arrest was the result of an undercover operation by San Diego vice cops. A detective, responding to an online prostitution ad, set up an $80 "date" for July 26 at a Best Western hotel in Mission Valley. The girl was arrested.
While in the hotel room, the detective used the girl's phone to text a person they believed was her pimp. Posing as the girl, the detective texted the pimp, asking how much she should charge for a particular sex act. The person on the other end responded, "Break the bank." And later, the person using the phone of the suspected pimp inquired how much she’d made from the sex act. The detective texted back "5," meaning $500. The person responded via text, "damn cool."
Using the girl’s phone, the detective asked when the suspected pimp would pick her up. The person responded that he would come to get her. Moments later, defendant Martell Davis arrived at the room where the date was set up with the undercover detective. Davis was arrested at approximately 12:30 am on July 27, 2013, while wearing the T-shirt that read “I MAKE PIMPIN’ LOOK EASY….”
Davis was scheduled to be sentenced December 13, 2013, at 9am before U.S. District Judge Janis L. Sammartino.
DEFENDANT Case Number: 13cr3149 Martell Davis SUMMARY OF CHARGESTransportation of a Minor to Engage in Prostitution, in violation of Title 18, United States Code, Section
INVESTIGATING AGENCY
2423(a) – Maximum Penalties: Life in prison, with mandatory minimum 10 years.San Diego Police Department
Internet Pharmacy Operator Sentenced to Two Years in PrisonRead the Press Release
United States Attorney Laura E. Duffy announced today that Martin Paul Bean III of Boca Raton, Florida, was sentenced by the Hon. William Q. Hayes to serve 24 months in custody for his role in a scheme to sell unapproved foreign oncology drugs to doctors in the United States. Bean had pled guilty to conspiracy to commit a number of federal offenses, including wire fraud, mail fraud, selling unapproved drugs, selling misbranded drugs, and importing merchandise contrary to law. Bean was further ordered to forfeit the Jaguar XJ he purchased with the proceeds of the scheme, and to pay restitution of $19,270 to one of the victims of his scheme.
In pleading guilty, Bean admitted that between February 24, 2005, and October 30, 2011, he operated a business (GlobalRx Store) from his residence in Florida, and unlawfully sold over $7 million of prescription oncology drugs to doctors throughout the United States. Bean ordered unapproved drugs from foreign sources, including sources in Turkey, India and Pakistan, and sold them to doctors within the United States at substantially discounted prices. Among the misbranded and unapproved drugs sold by Bean were versions of drugs marketed in the United States as Gemzar®, Taxotere®, Eloxatin®, Zometa® and Kytril®.
Bean ordered the unapproved drugs from foreign sources, and directed them to be shipped in bulk to a location in San Diego, California, where a co-conspirator would repackage and ship individual orders to specific doctors throughout the country. Accompanying the shipments to doctors would be invoices from a California wholesale pharmacy (Oberlin Medical Supply) which helped create the false and misleading appearance that the drugs were approved for use in the United States. Bean and his co-conspirators also operated a call center in Winnipeg, Canada, using toll free numbers, where orders from doctors in the United States for oncology drugs were accepted by telephone, facsimile and electronic mail.
According to court papers filed in connection with today's sentencing hearing, the investigation began in early 2010, when the Medicines & Healthcare Regulatory Agency ("MHRA," the equivalent of the FDA in the United Kingdom) advised the FDA that they had intercepted a shipment of an unapproved form of Gemzar sent from a company in Pakistan to Oberlin Medical Supply in San Diego. Gemzar is a prescription oncology drug produced by the pharmaceutical company Eli Lilly. The only FDA-approved manufacturing site for Gemzar to be sold in the United States at that time was in Indianapolis, Indiana. Gemzar is labeled and packaged in Japan, Mexico and Brazil for exclusive use in those countries, and Gemzar is also manufactured in France for all other international markets.
After further investigation, federal agents visited the business location of Oberlin and discovered numerous boxes of oncology drugs, including Eloxatin, Taxotere and Zoldria (a generic form of Zometa not approved for use in the United States), in addition to the Gemzar. The boxes bore labeling indicating that the products had been manufactured outside of the United States, and certain boxes had labels in languages other than English. None of the drugs bore the wording "Rx only," as required by U.S. law. In addition, there were boxes of Abraxane, manufactured in Illinois, which bore a stamp which said, "Imported and Marketed by Biocon Limited, Bangalore, India."
After the visit from federal agents, Oberlin Medical Supply processed no further orders on behalf of Global Rx. The lack of shipments and payments prompted Bean to contact Oberlin repeatedly, during which the owner of Oberlin (Maher Idriss) advised Bean that the sale of the imported prescription pharmaceuticals in the United States was not lawful. Idriss went so far as to forward to Bean an email from the FDA which stated that "the Food, Drug and Cosmetic Act does not permit you to import pharmaceutical drugs manufactured in a foreign country which are not intended for the U.S. market."
In spite of these warnings, Bean continued to press Idriss to return the remaining inventory of unapproved oncology drugs and pay Oberlin's outstanding balances. On May 25, 2011, Bean arrived at Oberlin and picked up 12 boxes containing the inventory of imported pharmaceuticals. Bean then drove the contraband to a hotel in the Mission Valley area, where he was later seen loading the boxes into a vehicle driven by another man.
The individual was later approached by federal agents, and surrendered to them the boxes of unapproved pharmaceuticals and a check for $300 he had received from Bean. Bean later called that individual and offered him another $2,500 to deliver some of the pharmaceuticals to doctors in and around Fremont, California. Although Bean acknowledged that one of the drugs (Zoldria) was not approved for use in the United States (a fact he had verified on the FDA's website), he nonetheless requested that the drug be delivered to several doctors in California.
After the end of their association with Oberlin, Bean and his co-conspirators renamed their company "My Rx Store," and sent promotional material to doctors in the same format as Global Rx, offering the same unapproved drugs as Global Rx, and using the same toll-free number. Bean personally received over $865,000 from the scheme.
"This defendant blithely put the public's health at risk so he could line his own pockets," said Derek Benner, special agent in charge for Homeland Security Investigations San Diego. "This sentence should serve as a stern reminder about the potential consequences facing those who deal in imposter drugs with no regard for the dangers they pose to patients and consumers. HSI will continue to work with its law enforcement partners here and abroad to prevent the distribution of counterfeit and misbranded pharmaceuticals."
The prosecution of Bean is related to United States v. Maher Idriss, Criminal Case No. 12cr1775-WQH, in which Idriss pleaded guilty to conspiring to import merchandise contrary to law. At the time of his plea, Idriss admitted that between 2006 and 2011, he conspired with the owners and operators of Global Rx Store to import and distribute medication (primarily oncology drugs) not intended for sale in the United States. Idriss acknowledged that the owners of Global ordered the foreign oncology drugs intended for sale in countries such as Turkey, Pakistan, India and the United Kingdom and arranged for them to be shipped directly from the foreign source to Oberlin. Idriss admitted that he received the foreign oncology drugs, stored them and later shipped them out to doctors within the United States, as directed by the owners of Global. After receiving payment from the ordering doctors, Idriss wire transferred payments to the source of the drugs abroad and to an account in Canada controlled by Bean and his co-conspirators. Idriss is scheduled to be sentenced before District Judge Hayes on October 21, 2013 at 9:00 a.m.
The Food, Drug & Cosmetic Act ("FDCA") is intended to assure, among other things, that all drugs manufactured and distributed within the United States are safely manufactured, made from appropriate ingredients, and properly labeled. To enforce this law, the FDA regulates the manufacture, processing, labeling, and distribution of all drugs shipped and received in interstate commerce, including the wholesale distribution of prescription drugs. Under the FDCA, anyone manufacturing, preparing, compounding, or processing prescription drugs for sale and use in the United States must annually register with the FDA as a drug establishment, and provide a list to the FDA of the drugs which they manufacture for commercial distribution, and a copy of all labeling. This registration requirement applies equally to drug establishments located outside of the United States that import their drugs into the United States. Under the FDCA, a drug is deemed misbranded if it was manufactured at any domestic or foreign establishment and that drug was not annually listed with the FDA by the establishment as one of the drugs which was manufactured for commercial distribution in the United States at that location.
Under the FDCA, no person may offer for sale in the United States any drug not approved by the FDA. The approval process addresses the chemical composition of the drug, the drug's safety and effectiveness, and elements of the drug's distribution, such as the methods used in, and the facilities and controls used for, the manufacture, processing, and packing of the drug, as well as the labeling to be used for the drug. The approval process is specific to each manufacturer and each product and its labeling. Drugs manufactured outside the United States which are not intended for use in the United States do not go through this approval process and are considered unapproved drugs.
Any prescription drug that does not bear the label "Rx only" is deemed to be misbranded. Moreover, all wording required by the FDCA to appear on drug labels and labeling sold in the continental U.S. must be in the English language. If a drug is manufactured in the United States and exported to other countries, is unlawful for anyone other than the original manufacturer to bring that same drug back into the United States.
DEFENDANT Case Number: 12cr3734-WQH Martin Paul Bean, III SUMMARY OF CHARGESCount 1 - Conspiracy, in violation of Title 18, United States Code, Section 371. Maximum Penalty: 5 years in custody and/or $250,000 fine.
INVESTIGATING AGENCYFood and Drug Administration, Office of Criminal Investigations; Department of Homeland Security, Immigration and Customs Enforcement; Federal Bureau of Investigation; Postal Inspection Service
Federal Narcotics and Firearms Charges Filed Against Twelve San Diego County ResidentsRead the Press Release
Federal grand jury indictments were unsealed today charging 12 San Diego County residents with federal drug trafficking and firearms offenses. The charges are part of a 10-month investigation by federal and local authorities that culminated with the arrests of dozens of people during raids this morning in the North County.
Of those charged federally, 10 were taken into custody during today’s sweep and two were still at large. Dozens of additional defendants will be prosecuted by the San Diego County District Attorney’s Office as part of the investigation, dubbed “Operation Mountain Shadow.”
The federal charges against the twelve defendants are the result of an intensive ten-month long investigation led by the Violent Trafficker Team (VTT) from DEA's San Diego division. Most of the defendants were arrested in today’s massive law enforcement operation involving more than 150 federal, state, and local law enforcement officers. Officers also executed federal search warrants at six residences and businesses during the operation.
All of the federal defendants are charged with distributing methamphetamine or conspiring with others to distribute methamphetamine. Several are also charged with illegally possessing firearms, and one is charged with discharging a firearm in furtherance of a drug trafficking crime.
Those in federal custody include Paulino Aguirre, Johnny Castillo, Christopher Maldonado, John Caudle, Oscar Rodriguez-Torres, Miguel Rodriguez-Torres, Todd Young, Jose Tyoran and Israel Ornelas. Tyoran and Ornelas appeared in federal court this afternoon; they entered not-guilty pleas and a detention hearing was set for Sept. 12 at 9:30 a.m. before U.S. Magistrate Judge David Bartick. The two federal fugitives are Vasquez and Juan Aguirre are not yet in custody.
The DEAs Violent Trafficker Team was created to respond to violent drug trafficking organizations in local communities throughout the nation. The Violent Trafficker teams are deployed on a temporary basis to assist state and local law enforcement in the disruption and dismantling of drug trafficking organizations. The Violent Trafficker Team’s deployment in Poway and Ramona was intended to address a surge in violent crime and drug overdoses, particularly among young people, in those communities. The surge was directly connected to narcotics and firearms trafficking in the area.
During the Violent Trafficking Team’s ten-month investigation, agents conducted multiple seizures of methamphetamine and also seized firearms including several 12-gauge shotguns, one sawed off shotgun, and several semi-automatic rifles.
DEFENDANTS Case Number: 13cr3310Juan Aguirre
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)
Unlawful possession of firearm (18 U.S.C. § 922(g)(1))
Discharge of a firearm in furtherance of a drug trafficking offense (18 U.S.C. § 924(c))Paulino Aguirre
DEFENDANTS Case Number: 13cr3311
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Johnny Castillo
DEFENDANTS Case Number: 13cr3312
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)
Unlawful possession of firearm (18 U.S.C. § 922(g)(1))Jose Ernesto Dinero
DEFENDANTS Case Number: 13cr3313
Charges: Distribution of methamphetamine (21 U.S.C. §§ 841(a)(1))Christopher Maldonado
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Jose Tyoran
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)John Caudle
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Michelle Vasquez
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Israel Ornelas
DEFENDANTS Case Number: 13cr3314
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Oscar Rodriguez-Torres
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)
Unlawful possession of firearm (18 U.S.C. § 922(g)(5)Miguel Rodriguez-Torres
DEFENDANTS Case Number: 13cr3315
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)Todd Young
SUMMARY OF CHARGES
Charges: Distribution of methamphetamine and conspiracy (21 U.S.C. §§ 841(a)(1) and 846)
Unlawful possession of firearm (18 U.S.C. § 922(g)(1))Conspiracy to Distribute Controlled Substances B Title 21, United States Code, Sections 841(a)(1) and 846
Maximum penalty: Life imprisonment and $4,000,000 fineDistribution of Controlled Substances B Title 21, United States Code, Section 841(a)(1)
Maximum penalty: Life imprisonment and $4,000,000 fineUnlawful Possession of Firearm B Title 18, United States Code, Section 922(g)
Maximum penalty: 10 years= imprisonment and $10,000 fineCriminal Forfeiture B Title 21, United States Code, Section 853
AGENCIES
Maximum penalty: Forfeiture of proceedsDrug Enforcement Administration
Alcohol, Tobacco, Firearms and Explosives
United States Border Patrol
United States Marshals Service
San Diego County Sheriff's DepartmentAn indictment 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 Customs and Border Protection Officer Sentenced to More Than Six Years for Receiving Bribes to Allow Aliens to Enter the U.S. IllegallyRead the Press Release
Former Customs and Border Protection Officer Hector Rodriguez was sentenced today by U.S. District Judge Roger T. Benitez to serve 78 months in federal prison followed by three years of supervised release for bribery, bringing in aliens for financial gain and conspiracy.
Rodriguez, who pleaded guilty on March 28, also forfeited a 2009 Jaguar, 12 luxury watches – including five Rolexes - jewelry, televisions, cash, and computers that were obtained as a result of his criminal activity.
Two of Hector Rodriguez’s accomplices were also sentenced today. Codefendant Gerardo Rodriguez was sentenced to 60 months in prison followed by three years of supervised release and he forfeited a 2005 Mercedes, 2006 Harley Davidson, $60,000, televisions, and computers that were obtained as a result of his criminal activity. Codefendant Maria Guerrero was sentenced to 30 months in federal prison followed by three years of supervised release and ordered to pay a $40,000 fine.
The case was investigated by the multi-agency Border Corruption Task Force.
According to court records, defendant Hector Rodriguez agreed that from around 2010 until his arrest on July 13, 2012, he received bribes from codefendants Gerardo Rodriguez and Maria Guerrero, in the form of cash money, use of luxury vehicles, and use of an apartment, in return for failing to enforce U.S. immigration laws by admitting illegal aliens into the U.S. through his inspection lane at the San Ysidro Port-of-Entry.
Defendant Hector Rodriguez provided his lane assignment information to codefendants who would then drive vehicles containing illegal aliens from Mexico to the United States through his assigned inspection lane. On their date of arrest, July 13, 2012, codefendant Gerardo Rodriguez drove a vehicle containing eight illegal aliens and codefendant Vanessa Moya drove a vehicle containing six illegal aliens through defendant Hector Rodriguez’s inspection lane. To conceal the smuggling, defendant Hector Rodriguez would enter into the government database false information about who was driving the vehicle and the number of occupants, thereby concealing the fact that the vehicles contained illegal aliens.
(Codefendant Vanessa Moya was previously sentenced on May 13, 2013 to five years of probation and ordered to pay a $2,500 fine.)
United States Attorney Laura E. Duffy stated, “The honesty and integrity of those who protect our borders are an integral part of the security equation. Corrupt officials who violate the public’s trust and jeopardize the security of our borders will not be tolerated and will be brought to justice.”
Pete Flores, director of CBP field operations for San Diego, said: “The sentencing of this former officer sends a message both to the community at large and to those in trusted positions in federal law enforcement who would contemplate participating in corrupt and unlawful behavior. We will not tolerate corruption within our workforce and we will actively ferret out and prosecute to the fullest extent of the law any employees who commit unethical or unlawful acts that violate that special trust.”
FBI Special Agent in Charge (SAC) Daphne Hearn commented, "Public corruption tears at the fabric of our communities and our national security. The FBI will continue to work with our partners in the Border Corruption Task Force (BCTF) to root out corruption along the Southwest Border and ensure those who violate the public's trust are held accountable." The public can report alleged instances of corruption to the FBI hotline at 1-800-NO BRIBE.
DEFENDANTS Case Number: 12cr2997-BEN/12cr4462-BEN Hector Rodriguez
Gerardo Rodriguez
Vanessa Moya
Maria Guerrero SUMMARY OF CHARGESTitle 8, United States Code, Section 371- Conspiracy to Bring In Aliens For Financial Gain and Bribery;
INVESTIGATING AGENCIES
Title 8, United States Code, Section 1324(a)(2)(B)(ii)- Bringing In Illegal Aliens For Financial Gain; and
Title 18, United States Code, Sections 201(b)(1), 201(b)(2) – Bribery.The Border Corruption Task Force is composed of the Federal Bureau of Investigation, Customs and
Border Protection - Internal Affairs, Customs and Border Protection - Field Operations, Border Patrol,
Transportation Security Administration, and Drug Enforcement Administration.San Diego Federal Jury Finds Michigan Man Guilty of Interstate StalkingRead the Press Release
United States Attorney Laura E. Duffy announced that, on Tuesday, August 26, 2012, a jury returned guilty verdicts on all counts in an indictment charging Brian Curtis Hile, a resident of Michigan, with Interstate Stalking, in violation of Title 18, United States Code, Section 2261A(1).
According to evidence presented at trial and the investigation by the Federal Bureau of Investigation and the Computer and Technology Crime Hi-Tech Response Team, Hile travelled to San Diego from Michigan in August 2011, with the intent to kill a female victim and her boyfriend. Prior to travelling from Michigan to San Diego, Hile engaged in an online relationship, which spanned a couple of years. During the course of that online relationship, Hile exchanged romantic communications and explicit photographs with someone he believed to be a woman. However, when Hile learned that his online paramour was in fact a man residing in South Africa, and that his romance was nothing more than a “Cat fishing” scheme, Hile became enraged and initiated what he termed “an investigation” to find the woman in the photographs used in the scheme.
Trial evidence revealed that as part of his investigation, Hile conducted an extensive search of the Internet, utilizing chat rooms and online gaming blogs to identify and locate the woman in the photographs, a resident of San Diego County, who years earlier had her online “Photo Bucket” account comprised resulting in her photographs being disseminated over the Internet.
The evidence presented at trial showed that after a diligent search, Hile not only identified the woman in the photograph, but obtained personal information for her as well as her boyfriend, the victim’s family members and friends. Hile was arrested in San Diego within miles of the victim’s home. At the time of his arrest, Hile was in possession of the victim’s address, telephone numbers, email addresses, telephone contacts, contact information for the victim’s favorite restaurant and the names and addresses for educational institutions that the victim had previously attended. Forensic evidence presented at trial showed that Hile retrieved the victim’s confidential information by hacking into the victim’s email account. Hile was also found in possession of duct tape, zip ties, and a to-do list that included additional supplies he needed to obtain to complete his plan to kill the female victim and her boyfriend, including a trench coat, knife, and chloroform.
United States Attorney Duffy noted, “This prosecution demonstrates the potential for stalkers to use information from the Internet to prey on their victims, and reaffirms the Department’s commitment to ensure the safety of all of the people in our community.” U.S. Attorney Duffy also praised the efforts of the Federal Bureau of Investigation and the Computer and Technology Crime Hi-Tech Response Team. The Computer and Technology Crime High-Tech Response Team (CATCH) is a multi-agency task force formed in June 2000 to apprehend and prosecute all criminals who use technology to prey on the citizens of San Diego and Imperial and Riverside Counties.
Hile is next scheduled to appear in court at his sentencing hearing on November 22, 2013 at 9:00 a.m., before the Honorable Janis L. Sammartino, United States District Court Judge.
DEFENDANT Case Number: 12CR1687JLS Brian Curtis Hile SUMMARY OF CHARGESCounts: 2: Title 18, United States Code, Section 2261A(1) -Interstate Stalking
INVESTIGATING AGENCIESFederal Bureau of Investigation
Computer and Technology Crime Hi-Tech Response TeamExecutive Indicted for Embezzling More Than Half A Million Dollars from Westin HotelRead the Press Release
San Diego, CA - United States Attorney Laura E. Duffy announced that Kevin Kelso, a former Director of Finance at the Westin San Diego, was arraigned yesterday in Los Angeles on charges involving his embezzlement of more than $500,000 from the Westin San Diego.
According to the indictment, Kelso served as the Director of Finance at the Westin San Diego between approximately December 2010 and September 2012. During that time, he embezzled funds using several different methods, including: (1) taking advantage of the hotel’s change order process – by which they converted larger denomination currency into smaller bills in order to make change for customers; (2) using an unauthorized corporate American Express card to pay personal expenses; (3) submitting duplicate expense reports to obtain undeserved reimbursement; (4) reversing charges at the Westin San Diego for his friends and acquaintances; and (5) writing Westin checks to improperly pay himself and third parties.
The defendant was arrested by U.S. Secret Service agents on August 27, 2013, at another hotel, his current place of employment. He was arraigned in the Central District of California before Magistrate Judge Ralph Zarefsky and pled not guilty. Magistrate Judge Zarefsky set bail at $100,000 and ordered the defendant to appear in the Southern District of California in the courtroom of Magistrate William V. Gallo on September 4, 2012 at 2 p.m.
The public is reminded that an indictment is 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.
DEFENDANT Criminal Case No. 13CR3017-DMS Kevin Kelso SUMMARY OF CHARGESCounts 1-6: Title 18, United States Code, Section 1343 – Wire Fraud
Forfeiture: Title 18, United States Code, Sections 981(a)(1)(C) and Title 28, United States Code,
INVESTIGATING AGENCY
Section 246United States Secret Service
Fourth Man Admits Involvement in Murder of U.S. Border Patrol Agent Robert Rosas Jr.Read the Press Release
SAN DIEGO - A 28-year-old Mexican national entered a guilty plea today in federal court in connection with the July 2009 murder of U.S. Border Patrol Agent Robert Rosas, Jr., admitting he was one of three gunmen who lured the agent into a trap to steal his night-vision goggles and then fatally shot him during a struggle.
Marcos Rodríguez-Perez was arrested by Mexican authorities on April 11, 2011, in Tijuana, Baja California, Mexico and was extradited from Mexico on October 13, 2011, escorted by special agents of the Federal Bureau of Investigation and Immigration and Customs Enforcement’s Homeland Security Investigations. Rodríguez-Perez pleaded guilty to conspiracy to commit robbery and kidnaping, robbery of personal property of the United States, and use and carrying of a firearm during the commission of a crime of violence. The plea agreement calls for a sentence of 58 years in prison.
According to the plea agreement, Rodríguez-Perez admitted that on July 23, 2009, he and four others - Jose Juan Chacon-Morales, Jose Luis Ramirez-Dorantes, Christian Daniel Castro Alvarez, and Emilio Samyn Gonzales-Arenazas - traveled by car and foot to a remote area on the Mexican side of the U.S.-Mexico border near Campo, California. All five were carrying firearms and, once at the border, entered into an agreement to rob a U.S. Border Patrol agent of his night vision device.
As Agent Rosas, in uniform and performing his official duties, responded to the area, the defendant entered the U.S. with Castro-Alvarez and Gonzales-Arenazas through a hole in the border fence, while Chacon-Morales and Ramirez-Dorantes remained in Mexico and stood watch. After Agent Rosas exited his vehicle, the defendant, Castro-Alvarez, and Gonzales-Arenazas detained Agent Rosas at gunpoint.
Agent Rosas resisted, and during the ensuing struggle, the defendant, Castro-Alvarez and Gonzales-Arenazas fired multiple shots at Agent Rosas, killing him. The three men “stole Agent Rosas's bag, firearm, handcuffs, and night vision device, among other things…and fled back to Mexico,” the plea agreement said. They rejoined Chacon-Morales and Ramirez-Dorantes, and all five fled the area.
To date, three defendants besides Rodríguez-Perez have pleaded guilty: Christian Daniel Castro-Alvarez was sentenced to 40 years of imprisonment; Emilio Samyn Gonzalez-Arenazas and Jose Ramirez-Dorantes are scheduled to be sentenced in November. Jose Juan Chacon-Morales remains a fugitive.
Rodriguez-Perez pleaded guilty before U.S. District Court Judge M. James Lorenz. Sentencing was set for November 14, 2013, at 2:00 p.m.
The Federal Bureau of Investigation (“FBI”) and Immigration and Customs Enforcement’s Homeland Security Investigations (“ICE-HSI”) are jointly investigating Agent Rosas’ murder.
DEFENDANT Criminal Case No. 10CR1793-L-3 Marcos Rodriguez-Perez SUMMARY OF CHARGESConspiracy - Title18, United States Code, Section 371;
INVESTIGATING AGENCIES
Robbery of personal property of the United States - Title 18, United States Code, Section 2112;
Use and carrying of a firearm during the commission of a crime of violence - Title18, United States Code, Section 924(c)(1)(A)Federal Bureau of Investigation
Immigration and Customs Enforcement’s Homeland Security InvestigationsFormer Camp Pendleton Marine Captain Pleads Guilty to FraudRead the Press Release
United States Attorney Laura E. Duffy announced today that a former U. S. Marine Captain admitted to submitting tens of thousands of dollars in false lodging receipts to the Marine Corps and the Department of Veterans Affairs from 2009 to 2011. At the time, Captain Shawn A. Joyce was stationed at Marine Corps Base Camp Pendleton.
As detailed in his plea agreement, Joyce had initially been discharged from active duty in October 2008, entered the Marine Corps reserves, and thereafter sought and obtained orders placing him back on active duty at Camp Pendleton. Under certain circumstances, reservists who are called to active duty become eligible for a housing reimbursement benefit during the term of their active duty, in addition to the basic allowance for housing that they receive. Joyce exploited this housing reimbursement benefit by falsely claiming reimbursement for rent that he never paid. Specifically, in 2009 and 2010, Joyce falsely claimed to be paying rent up to $4,030 per month for an address in Solana Beach. In 2011, Joyce falsely claimed to be paying rent of $3,700 per month for an address in Fountain Valley.
In order to conceal and disguise the fraud, Joyce submitted false rental receipts to the Marine Corps and created a fake email address in the name of his former landlord at the Solana Beach address. This email address was then used without his former landlord’s knowledge or consent to facilitate the fraud.
In his plea agreement, Joyce also admitted to devising a separate scheme to defraud the Department of Veterans Affairs of tens of thousands of dollars. Under federal law, a servicemember receiving VA disability benefits is not entitled to simultaneously receive active duty compensation. To avoid this type of “double payment,” service members (who receives VA disability benefits) are required to advice the VA when they receive orders placing them on active duty. Despite this regulation, Joyce failed to advise the VA and continued to receive VA disability benefits to which he was not entitled. Compounding the loss, Joyce contacted the VA from time to time trying to increase the amount of his improper disability payments.
Joyce pled guilty to two counts of wire fraud. He acknowledged defrauding the Defense Department of $48,740 (count one) and the VA of $41,862 (count two). In his plea agreement, Joyce agrees to pay restitution in the full amount of the losses.
United States Attorney Duffy stated, “With our nation’s military budget being strained to the breaking point, fraud that drains funds needed by the U. S. Marine Corps and our veterans, will not be tolerated.”
“The Office of Inspector General for the Department of Veterans Affairs aggressively investigates fraudulent receipt of VA benefits in order to preserve these benefits for those entitled to them,” said VA Deputy Assistant Inspector General for Investigations Quentin Aucoin.
The case has been assigned to U. S. District Judge John A. Houston. The next scheduled court appearance is November 18, 2013 for sentencing.asdf
DEFENDANT Case Number: 13cr3063-JAH Shawn A. Joyce SUMMARY OF CHARGESCount 1: Wire fraud, in violation of Title 18, United States Code, Section 1343 - Maximum penalties: 20
years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.Count 2: Wire fraud, in violation of Title 18, United States Code, Section 1343 - Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.
INVESTIGATING AGENCIESDepartment of Veterans Affairs, Office of Inspector General
Naval Criminal Investigative ServiceLocal San Diego Physician Charged with Multiple Counts of Tax EvasionRead the Press Release
San Diego – A local physician was arraigned this afternoon on eight counts of tax evasion. According to the indictment, from at least calendar years 2004 through 2011, William Richard Bailey, a physician of osteopathic medicine, provided physician services to the patients of several clinics operated by at least two other local doctors. Despite earning significant income, Bailey accomplished his tax evasion by concealing his income and by preparing and filing false federal income tax returns for the years 2004 through 2011 reporting $0 in taxable income and $0 in tax due and owing to the Internal Revenue Service (IRS).
As charged in the indictment, Bailey accomplished his tax evasion by using a purported “trust” and “unincorporated business trust organization” (UBO) during calendar years 2004 through 2011 to conceal income he earned as a physician from the IRS. To further his evasion, Bailey opened a bank account in the name of the UBO. Bailey received checks from at least two physicians who operated clinics in San Diego County where Bailey provided physician services in exchange for compensation. Bailey directed that the checks be made payable to the name of the UBO. According to the indictment, Bailey deposited these checks into the UBO bank account. Bailey then transferred funds from the “UBO” bank account to pay for his own personal expenses and benefit. During Bailey’s court appearance today, Assistant U.S. Attorney Joseph J.M. Orabona, who is prosecuting the case, stated that Bailey failed to report more than $1.1 million in income he earned during the calendars years 2004 through 2011, resulting in an alleged tax loss of approximately $300,000.
The arraignment took place today before U.S. Magistrate Judge Barbara L. Major. Bailey entered a plea of not guilty to the charges of tax evasion. The Court set a bond in the amount of $40,000. A motion hearing and trial setting is scheduled for September 27, 2013, before U.S. District Judge Cathy A. Bencivengo.
DEFENDANTS Criminal Case No. 13CR3046-CAB William Richard Bailey SUMMARY OF CHARGESTitle 26, United States Code, Section 7201 B Tax Evasion
AGENCY
Maximum Penalties: 5 years of imprisonment and $250,000 fineInternal Revenue Service-Criminal Investigations
An indictment or complaint itself is not evidence that the defendant committed the crimes charged. The defendant is presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
Guilty Plea in Long-running Investment SchemeRead the Press Release
DEFENDANT ADMITS HE PERSONALLY SOLICITED
OVER $2 MILLION WITH PHANTOM MINING ASSETSSan Diego, CA - United States Attorney Laura E. Duffy announced that Douglas Ellingson pleaded guilty today to participating in an investment fraud conspiracy that cheated victims from San Diego and elsewhere out of more than $2 million. Ellingson admitted that between April 2008 and September 2012, he conspired with co-defendant William Ison and others to fraudulently mislead investors about the nature and security of their investment, and induce victims into wiring money to one of several accounts under Ellingson’s control. Ellingson entered his plea to a wire fraud conspiracy before Magistrate Judge Bernard G. Skomal. He is scheduled to appear before U.S. District Court Judge Irma E. Gonzalez on October 28, 2013 for sentencing.
In entering his plea, Ellingson explained that he and Ison first conspired with James Pantazelos in early 2008 to fraudulently solicit investors by falsely promising that investments would be secured by valuable precious minerals obtained by Ison’s mining company, Olathe Mining Company (“OMC”). In fact, OMC had not begun mining operations, and its assets consisted of merely mining claims and extraction technology, not actual minerals. Pantazelos previously pleaded guilty in the Northern District of Illinois to one count of mail fraud arising from this scheme involving Ellingson and Ison. (United States v. Pantazelos, Case No. 11-cr-50078 (N.D. Ill.)). On February 15, 2013, Pantazelos was sentenced to 114 months in custody and ordered to pay over $3.3 million in restitution to victims
Ellingson further admitted that beginning in June 2008, he and Ison agreed to fraudulently solicit investments in OMC through Ellingson’s new business entity, Capital Advancement Systems (“CAS”). As with the Pantazelos scheme, Ellingson and Ison again fraudulently claimed that investments in CAS would be secured by OMC, although OMC had no liquid assets had not actually mined anything. Later, Ellingson and Ison expanded their falsehoods by fraudulently claiming to investors that funds would be backed by “guarantees” from Ison’s new company, Blue Diamond Excavation, Inc. (“BDE”). As Ellingson knew, however, BDE’s only assets were OMC’s non-liquid assets.
Later, Ellingson and Ison expanded their lies to potential investors by promising (1) that funds sent to CAS would never produce a loss, (2) that funds would be maintained in a bank account under Ellingson’s control, and (3) that funds would be used to secure loans for business deals, such that investor funds would never actually be placed at risk. In fact, Ellingson wired almost all of the funds directly to Ison, and was informed that Ison was sending 100% of the victim funds to an investment partner to be used in various business deals.
In order to promote Ison’s appearance of wealth to potential investors, Ellingson and Ison falsely claimed Ison was the head of a large non-profit foundation that gave over a “trillion dollars” to various humanitarian causes. They encouraged investors to hand over funds by promising that the profits would be used to support charitable causes.
Ultimately, the victims did not receive promised profits or a return of their original investments. In total, Ellingson personally obtained over $2 million from victims, almost all of which he wired directly to Ison.
United States Attorney Duffy stated that the prosecution of the wide-ranging conspiracy would continue. She thanked the Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation, which jointly investigated the matter. United States Attorney Duffy reminded the public to be wary of investment fraud scams that make promises that seem “too good to be true.” More information to help you avoid becoming the victim of an investment fraud scheme is located at www.stopfraud.gov/protect-securities.html.
DEFENDANT Case Number: 12CR4030-IEG Douglas Ellingson Age: 44 SUMMARY OF CHARGESCount 1: Title 18, United States Code, Section 371 (Conspiracy)
AGENCIES
Maximum penalties: 5 years of custody; $250,000 Fine, or twice the gross gain/gross
loss resulting from the offenseFederal Bureau of Investigation
Internal Revenue Service - Criminal InvestigationPhysician Sentenced to Prison in Million Dollar Power Wheelchair ScamRead the Press Release
United States Attorney Laura E. Duffy announced that Irving J. Schwartz, M.D. was sentenced today to 5 months in prison, followed by 5 months in a half-way house, for his involvement in a scheme to defraud the Medicare trust fund by writing hundreds of false and fraudulent prescriptions for costly medical equipment that was not medically necessary. Dr. Schwartz was also ordered to pay restitution of $593,429.81 to the Medicare trust fund, and to forfeit $55,800 in kickbacks that he received for his role in the fraudulent scheme.
The Medicare program is a federally-funded health insurance program that provides health care services and equipment — including power wheelchairs to qualifying individuals who cannot walk without assistance. Prior to receiving this expensive equipment, however, a medical doctor must write a prescription certifying that the Medicare beneficiary has a medical need for the power wheelchair. In this case, Dr. Schwartz abused his position as a licensed physician by writing prescriptions for pricey medical equipment without any regard for the wants or needs of his patients.
The scheme focused on the sale of fraudulent power wheelchair prescriptions, with the end-goal being to obtain reimbursements from Medicare for power wheelchairs that patients did not need. Dr. Schwartz and a Co-conspirator named Gloria Hernandez would travel to El Centro, California in search of elderly Medicare patients. Schwartz would then write the patients prescriptions for power wheelchairs, even though the patients did not need the equipment and could walk without assistance. Schwartz collected a $300 cash kickback in exchange for each power wheelchair prescription. Hernandez would then sell the power wheelchair prescriptions to a medical supply owner named Jose Melendez (another Co-Conspirator), charging him $1,000 per fraudulent prescription.
Melendez, in turn, sold some of the power wheelchair prescriptions to other co-conspirators, charging an additional mark-up on each prescription. As the last step in the scheme, Melendez and the other co-conspirator owners of medical supply companies would submit the fraudulent prescriptions to Medicare for reimbursement, billing up to $5,865 for each power wheelchair.
In his plea agreement, Dr. Schwartz admitted that he wrote at least 186 fraudulent power wheelchair prescriptions for Medicare beneficiaries in exchange for more than $55,000 in bribes and kickbacks. Melendez, the owner and operator of Oceanside Medical Services, purchased these 186 fraudulent prescriptions and used them to submit over $830,000 in false claims to Medicare. In a related case, co-conspirators Aristeo and Laura Tavares admitted to submitting more than $250,000 in false claims, based on Dr. Schwartz’s fraudulent prescriptions. In total, the scheme resulted in more than $1 million in false claims to the Medicare trust fund.
During today’s hearing, prosecutors described Dr. Schwartz’s conduct as an egregious breach of trust and an abuse of his position as a medical doctor. In one case, Dr. Schwartz wrote two power wheelchair prescriptions for a husband and wife living in El Centro. Four years after Medicare paid for the expensive equipment, the power wheelchairs were still wrapped in the original plastic covering and sat unused in the couple’s home – except during Christmas when one wheelchair was used as a Christmas tree stand. The husband and wife were both able to walk without difficulty, and they told federal agents that they never asked for the costly equipment, never needed it, and never used it. United States District Court Judge Marilyn L. Huff chastised Dr. Schwartz in open court, remarking that “he should have known better,” and reminding Dr. Schwartz that these types of schemes take valuable government resources away from elderly patients who actually need expensive medical equipment.
United States Attorney Duffy said, “As a physician, Dr. Schwartz was licensed to operate in a system dependent on trust and honesty. He knew it was illegal to write false and fraudulent prescriptions, yet he purposefully engaged in criminal activity in order to line his own pockets at the expense of the Medicare program and the American taxpayer.”
DEFENDANTS CRIMINAL CASE NO. 12cr2599-H Irving Schwartz SUMMARY OF CHARGESCount 1: Conspiracy to Pay and Receive Health Care Kickbacks and Defraud -Title 18, United States Code, Section 371; Maximum Penalties: Five years in custody; $250,000 fine; 3 year of supervised release; and mandatory restitution
INVESTIGATING AGENCIESFederal Bureau of Investigation
Department of Health and Human Services, Office of Inspector General$250,000 Fine Imposed for Fraudulent Sale of Postal UniformsRead the Press Release
Los Angeles resident Carl Wayne Adrian, Sr., and his company, California Uniforms, Inc. were fined $250,000 and ordered to forfeit $135,000 worth of seized Postal uniform items. Adrian Sr. was also sentenced to 12 months of home detention by U.S. District Judge William Q. Hayes.
As revealed during their guilty plea, the defendants participated in a scheme to defraud the Postal Service by providing unlicensed vendors with access to the Postal Service uniform sales reimbursement system in return for a 10% kickback.
Postal Service contracts with vendors wishing to sell licensed Postal uniform items require the vendor to accept payment only at the point of sale from Postal employees with proper identification. Payment for Postal uniforms can only be accepted in the form of uniform allowance cards, which are funded by the Postal Service. Vendors under contract with the Postal Service are given an authorization code which allows them to receive payments.
The vendor licensing agreements allow the Postal Service to insure that its uniforms are sold only by responsible vendors. This control over the sales of Postal uniforms has an important public safety aspect, in that most Americans will willingly open the door to their home to anyone wearing a Postal letter carrier uniform. For this reason, it is a misdemeanor for anyone who is not a letter carrier to wear such a uniform (18 USC 1730).
In December of 2009, Carl Adrian, Sr. received a proposal from Ace Uniforms in San Diego (which had recently lost its license to sell Postal uniforms) that he and his company, California Uniforms (which at that time possessed a valid license to sell Postal uniforms) process the uniform allowance card purchases made at Ace Uniforms, Inc. stores in San Diego and Phoenix, falsely representing the purchases to be the sales of California Uniforms, in return for a kickback of 10% of the amount paid by the Postal Service. Adrian admitted that he agreed to this proposal and during the period from December 9, 2009, through August 31, 2010, he and his firm improperly processed payments totaling approximately $105,000 for Postal uniform items sold at Ace Uniforms.
On August 31, 2010, the Postal Service canceled the contract with California Uniforms, Inc. that allowed the firm to sell Postal uniforms. Thereafter, the company contacted Monica Lauer of Merchandise Center, Inc. (who possessed a valid license to sell Postal uniforms), and proposed that Merchandise Center process the uniform allowance card purchases made at California Uniforms, Inc. stores in San Diego and Los Angeles, falsely representing the purchases to be the sales of Merchandise Center, in return for a kickback of 10% of the amount paid by the Postal Service. During the period from August 31, 2010, through October 13, 2011, Merchandise Center improperly processed payments totaling $410,000 for Postal uniform sold at California Uniforms.
This is one of a series of cases involving this scheme to defraud. On February 2, 2012, defendant Ace Uniforms, Inc. and its owner, Marc Stein, pled guilty to Conspiracy to Provide Kickbacks for their part in the scheme. Both Ace Uniforms and California Uniforms agreed to forfeit to the government all Postal uniforms found at their locations during the execution of search warrants at their business locations. Ace 3 Uniforms and Stein are scheduled to be sentenced before Judge Hayes on September 23, 2013, at 9:00 a.m.
On August 21, 2012, Monica Lauer and Merchandise Center, Inc. also pled guilty to Conspiracy to Accept Kickbacks for their role in the scheme. Lauer and Merchandise Center are also scheduled to be sentenced before Judge Hayes on September 23, 2013, at 9:00 a.m.
On August 22, 2013, Carl Wayne Adrian, Jr., the manager of the San Diego store for California Uniforms, pled guilty to Criminal Infringement of a Copyright. Postal uniforms bear the Sonic Eagle logo, which is copyrighted and trademarked by the Postal Service. Adrian Jr. admitted that he directed his employees to continue selling the Postal uniform items in inventory, including those bearing the Sonic Eagle logo, after California Uniform's license to distribute Postal uniforms had been revoked, thereby infringing upon the Sonic Eagle copyright held by the Postal Service. On October 9, 2012, Adrian Jr. was sentenced to one year probation and a fine of $500.
Pacific Area Field Office Special Agent in Charge Scott Pierce said: “The Postal Service manages over 30,000 contract actions each fiscal year. About $11 billion were spent on postal contracts in FY 2012. Due to the sheer volume of contracts and the huge dollar amounts involved, the Postal Service can be susceptible to losses in the hundreds of millions to fraud every year. Special Agents of the United States Postal Service Office of Inspector General actively investigate allegations of fraud, waste, and misconduct by contractors and postal employees who handle contracts. This case is an excellent example of the successful partnership between the Office of Inspector General and the U.S. Attorney’s office to aggressively pursue and prosecute cases where contract improprieties are uncovered.”
Criminal Case No. 12cr3650-WQH DEFENDANTS California Uniforms, Inc.
Los Angeles, California
Carl Wayne Adrian, Sr.
Los Angeles, CaliforniaDate of Incorporation: 8-15-67
SUMMARY OF CHARGESCount 1 - Adrian Sr.
Wire Fraud, in Violation of Title 18, United States Code, Section 1343
Maximum Penalties: 20 years in custody and/or $250,000 fine, $100 special assessment.Count 6 - California Uniforms, Inc.
Wire Fraud, in Violation of Title 18, United States Code, Section 1343
Criminal Case No. 12cr3136-WQH DEFENDANTS
Maximum Penalties: 5 years probation, $500,000 fine, $400 special assessment.Merchandise Center, Inc.
North Hollywood, CaliforniaMonica Lauer
Los Angeles, CaliforniaDate of Incorporation: 12-17-86
SUMMARY OF CHARGESConspiracy to Accept Kickbacks, in Violation of Title 18, United States Code, Section 371, and Title 41, United States Code, Sections 8702 and 8707
Maximum Penalties: 5 years in custody and/or $250,000 fine, $100 special assessment for the individual, and 5 years probation, a $500,000 fine and a $400 special assessment for the corporation.
Criminal Case No. 12cr0235-WQH DEFENDANTSAce Uniforms, Inc.
San Diego, CaliforniaMarc Stein
San Diego, CaliforniaDate of Incorporation: 1-12-95
SUMMARY OF CHARGESConspiracy to Provide Kickbacks, in Violation of Title 18, United States Code, Section 371, and Title 41, United States Code, Sections 52 and 53
Maximum Penalties: 5 years in custody and/or $250,000 fine, $100 special assessment for the individual, and 5 years probation, a $500,000 fine and an $400 special assessment for the corporation
Criminal Case No. 12cr3452-JMA DEFENDANTSCarl Adrian, Jr.
SUMMARY OF CHARGES
San Diego, CaliforniaCriminal Infringement of a Copyright, in Violation of Title 18, United States Code, Sections 2319 and 2 Maximum Penalties: 1 year in custody and/or $100,000 fine, $25 special assessment
AGENCYUnited States Postal Service, Office of Inspector General
Wildlife Researcher Sentenced for Golden Eagle TheftRead the Press Release
United States Attorney Laura E. Duffy announced that Julian resident John David Bittner was sentenced today following his plea of guilty to the unlawful taking of a Golden Eagle, in violation of the Bald and Golden Eagle Protection Act.
At the sentencing hearing today, Magistrate Judge David H. Bartick observed that although Bittner had devoted his life to wildlife, he had apparently placed his own financial interests ahead of the need to comply with federal permitting requirements. Bittner was paid by power companies, developers and others to track the birds for environmental impact studies.
Judge Bartick cited the fact that Bittner captured and banded birds without federal and state permits, placed unpermitted devices on birds, conducted aerial surveys after authorization was denied, used wild birds in educational programs without a permit, failed to immediately send eagle carcasses to the National Eagle Repository (where there is a lengthy waiting list for Native Americans to obtain plumage for religious ceremonies) and failed to provide to the government the data he had obtained about this wildlife. After considering the scientific concerns associated with placing multiple tracking devices on a single bird, and the failure to send eagle carcasses to the National Eagle Repository, Judge Bartick concluded that "it cannot be said that there was no harm in this case."
Judge Bartick sentenced Bittner to three years’ probation, a $7,500 fine, and ordered Bittner to provide the government with the raw data compiled from tracking birds from 2007-2012. Bittner had previously withheld this data, but now it can be used by government biologists to evaluate the effect of proposed projects on the bird population.
According to court documents and admissions in his guilty plea, Bittner is the founder of a non-profit organization and makes his living by “banding” birds and gathering data on the movement of those birds. Bittner performs these services to assist companies with environmental impact statements needed for the construction and maintenance of power lines and wind power generators. In order to “band” a bird, the creature must be trapped, captured or taken out of its nest. Such activity is considered a "take" of the bird and requires a permit under both the Migratory Bird Act and the Bald and Golden Eagle Protection Act. These permits are issued by the federal Bird Banding Lab (“BBL”) in Laurel, Maryland, under the auspices of the U.S. Geological Survey. There are 2000 federal Master Bander permits issued throughout the entire United States, and only 181 Master Banders are authorized to band Golden Eagles.
Bittner first obtained a federal bird banding permit while living in Ohio on July 15, 1964. On August 13, 1980, the BBL sent a letter to Bittner, advising him that his permit was revoked due to "various discrepancies in your bird banding operation." This action was taken after the State of Ohio had revoked Bittner's 1979 state banding permit, and requested that the federal government remove Ohio from the list of states in which Bittner was permitted to band birds. The BBL subsequently agreed to keep Bittner’s permit status as inactive, rather than revoked.
Bittner had no active federal permit to band birds from 1980 until April 30, 1997, when Bittner obtained authorization to band all non-endangered species of migratory birds, and later, to band California Condors and Golden Eagles. Like all such permits, his permit limited the permitted activities to specific states and stated that the federal permit was not valid "unless accompanied by any required State permits or licenses."
In California, a state permit is required to band Golden Eagles, as well as other migratory birds. Since 2000, Bittner has not possessed a valid permit from the State of California, due in large part to his failure to provide the required data in reference to past activities. The lack of a permit from the State of California invalidated the federal permit held by Bittner with respect to collecting and banding of 936 birds in California during the period from 2000-2011.
Bittner's federal banding permit expired on January 31, 2010. On February 13, 2010, Bittner emailed the BBL, stating: "My permit expired on January 31, 2010 but was just renewed on July 14, 2009 only five months before. Permits are supposed to be valid for two years. What's up?" A BBL biologist responded, noting that Bittner’s permit was not automatically renewed in July 2009, and reminding Bittner that he owed BBL data on 300-400 bands he had already conducted. Eventually, on August 12, 2010, the federal permit was renewed.
Despite not having a valid federal or California bird banding permit, during the period from January 31, 2010 through August 12, 2010, Bittner illegally trapped and marked 164 birds (including 37 eagles); 144 of those birds were trapped in San Diego or Imperial County. Of the 144 birds trapped in San Diego and Imperial Counties, 29 were Golden Eagles, and the banding cards filled out at the time the birds were marked indicated that Bittner – the only person in the organization who previously held a permit – was personally present on at least 18 of those occasions. As Judge Bartick noted in sentencing Bittner, during the time when no permits were in effect, the defendant's non-profit organization was paid over $500,000 by various clients for its services.
According to Paul Schmidt, the Fish and Wildlife Service's Assistant Director for Migratory Birds in 2009, "The Bald Eagle population has rebounded in the past decades, and its recovery poses the challenge of managing a healthy population still protected under the Bald and Golden Eagle Protection Act. But unlike the Bald Eagle, the Golden Eagle population is not expanding, and may be in decline." The Bald and Golden Eagle Protection Act continues to protect these birds by prohibiting anyone without a permit from "taking" Bald or Golden eagles, including their parts, nests and eggs. “Taking” such birds includes pursuing, shooting, shooting at, poisoning, wounding, killing, capturing, trapping, collecting, molesting or disturbing.
United States Attorney Laura E. Duffy observed, "It is a sacred trust to preserve our natural heritage for future generations. This trust mandates that we observe both the spirit and letter of our law designed to protect the environment."
DEFENDANT Criminal Case No. 13cr1391-W John David Bittner SUMMARY OF CHARGESUnlawful Taking of a Golden Eagle, in Violation of Title 16, United States Code, Section 668(a).
AGENCY
Maximum Penalties: 1 year in custody and/or $100,000 fine, $25 special assessment.U.S. Fish and Wildlife Service
Lieutenant of Major Mexican Drug Cartel SentencedRead the Press Release
Mario Escamilla, a high-ranking lieutenant of the Fernando Sanchez-Arellano drug trafficking organization, was sentenced today to 35 years in prison for his role as leader of the cartel’s U.S. operations, which included kidnappings and murders.
Escamilla is the 39th of 43 defendants charged in the case in July of 2010 to plead guilty. The original complaint charged that defendants participated in a federal racketeering (RICO) conspiracy involving murder, kidnaping, robbery, drug trafficking and money laundering offenses. As set forth in the complaint, the defendants are members and associates of the Fernando Sanchez Organization (FSO), an offshoot of the Arellano-Felix cartel.
Escamilla pleaded guilty in January of 2012 to the RICO conspiracy and narcotics distribution conspiracy charges. In his plea agreement, he admitted to involvement in three murder conspiracies – all of which were prevented by law enforcement.
In the sentencing memorandum, Assistant U.S. Attorney Todd Robinson wrote that Escamilla targeted people for assassination for frivolous reasons – like stealing a relatively small quantity of marijuana, or for “disrespecting” the cartel leadership.
“Escamilla confirmed through his conduct in this case that he has no qualms about committing murder, no matter how trivial the justification is for doing so,” prosecutors wrote. Because of court-authorized electronic surveillance in this case and the diligence of the law enforcement officers handling this investigation, defendant Escamilla failed in his attempts at killing the above-noted individuals.
In handing down the sentence, U.S. District Judge William Q. Hayes noted that “the conduct of Mr. Escamilla can only be described as aggravated . . . he conspired to murder three people in cold blood and he participated in the trafficking of a significant amount of methamphetamine, one of the most addictive and destructive controlled substances our society must deal with.”
Of the remaining four defendants, two are fugitives, one is believed to be dead, and the lead defendant in the case, Armando Villareal-Heredia, was extradited to the United States on May 23, 2012; his trial is scheduled to begin on October 22, 2013.
Also charged in this case was Jesus Quiñones Marques, the Director of International Liaison for the Baja California Attorney General’s Office. According to court documents, Quinones was aware of the FSO’s illegal activities and used his position to obtain confidential law enforcement information for the use of the FSO. According to his plea agreement, he was involved in making arrangements to have various rivals of the FSO arrested and detained by Mexican law enforcement officials. He was sentenced to 97 months in prison in September of 2012.
This case was the result of a long-term investigation conducted by the multi-agency San Diego Cross Border Violence Task Force (CBVTF). The CBVTF was formulated to target those individuals involved in organized crime-related violent activities affecting both the United States and Mexico. Law enforcement personnel assigned to the CBVTF made extensive use of courtauthorized wiretaps and other sophisticated investigative techniques to develop the significant evidence which led to the charges in this case.
United States Attorney Duffy praised the Organized Crime Drug Enforcement Task Force (OCDETF) for the coordinated team effort in the culmination of this investigation, “Operation Luz Verde.”
Agents and officers from the Federal Bureau of Investigation, San Diego Police Department, Drug Enforcement Administration, San Diego Sheriff’s Office, Chula Vista Police Department, U.S. Marshals Service, Bureau of Alcohol, Tobacco and Firearms, San Diego District Attorney’s Office, and California Department of Justice participated in this OCDETF investigation. The OCDETF program was created to consolidate and utilize all law enforcement resources in this country’s battle against organized crime and major drug trafficking organizations.
DEFENDANT Case Number 10CR3044-WQH Mario Escamilla SUMMARY OF CHARGESTitle 18, United States Code, Section 1962(d) - Conspiracy to Conduct Enterprise Affairs
Through a Pattern of Racketeering Activity (RICO conspiracy)
Maximum penalties: Life in prison, $250,000 fineTitle 21, United States Code, Sections 846 and 841(a)(1) - Conspiracy to Distribute Controlled Substances
INVESTIGATING AGENCIES
Maximum penalties: Life in prison, $10,000,000 fineFederal Bureau of Investigation
Chula Vista Police Department
San Diego Police Department
Drug Enforcement Administration
San Diego Sheriff’s Office
U.S. Marshals Service
Bureau of Alcohol Tobacco and Firearms
California Department of JusticeMortgage Broker Indicted in $2.2 Million Loan Fraud and Kickback SchemeRead the Press Release
SAN DIEGO - Donald V. Totten, an unlicensed mortgage broker who operated a mortgage brokerage business from Rancho Santa Fe, was indicted today by a federal grand jury on charges that he obtained $2.2 million in mortgage loans using false information and then siphoned off hundreds of thousands of dollars from the sale of the properties.
Totten was arrested on July 24, 2013, and made his initial appearance in the Northern District of California. He is currently in federal custody and will be transported to the Southern District of California for the proceedings.
According to the indictment, Totten arranged a series of real estate transactions with a Chula Vista property owner who was struggling to make his mortgage payments. In a complicated set of transactions, Totten first entered into a partnership with an investor from Carlsbad, promising to share the costs of maintenance of the properties and then split the proceeds from an eventual re-sale.
To purchase the properties, Totten employed a straw buyer (his investor’s girlfriend) who never intended to live in the properties despite certifications to the contrary on her loan applications. In addition to providing significant down payments from his own funds, Totten falsified the straw buyer’s loan applications and, among other things, inflated her income and assets in order to induce the financial institutions to grant the mortgages.
According to the indictment, Totten and his loan processor, Shellie Lockard, who worked for his brokerage business Money World, then sent fabricated supporting documents to the mortgage lenders to bolster the bogus claims in the loan applications. The indictment charges Totten with purchasing four homes for the same straw buyer simultaneously – by intentionally failing to disclose to each lender that the borrower was in the process of buying multiple properties.
Last week, Lockard admitted falsifying applications for dozens of Money World mortgage loans. Lockard pled guilty on July 30, 2013. According to court documents, in addition to the four Chula Vista properties, Lockard processed dozens more fraudulent loan applications for Totten involving the purchase and re-finance of properties around the country. In each case, Lockard admitted that the loan paperwork she provided to mortgage lenders contained false information about the borrowers’ income, assets, debts, intent to occupy the properties, and other lies.
According to the indictment, Totten earned substantial commissions on the four Chula Vista sales, and at the same time he secretly arranged for almost $192,000 in sale proceeds to be sent directly to his own bank accounts as kickbacks. He concealed his receipt of these payments from the lenders by directing them to Island Financial, a company which he controlled. According to the indictment, after the sales closed, Totten had the straw buyer sign over the deeds to the properties to a trust that he controlled, effectively obtaining ownership. Eventually, however, each of the four mortgages defaulted and the properties were foreclosed. The lenders and secondary mortgage purchasers, including Fannie Mae and Freddie Mac, suffered losses as a result of the foreclosures.
“Prosecuting people who have contributed to the mortgage meltdown is one of my top priorities because they have played such a significant role in our nation’s financial turmoil, and because the economic damage to taxpayers is immense,” said U.S. Attorney Laura Duffy.
FBI Special Agent in Charge Daphne Hearn commented, “Mortgage fraud costs taxpayers billions of dollars every year and is a threat to our nation's economy. The FBI will continue to lend our agent and analyst resources to investigate these important cases.”
“Totten allegedly participated in a fraudulent scheme involving over $2 million in mortgage loans that ultimately defaulted, to the detriment of Fannie Mae, Freddie Mac and American taxpayers,” said Federal Housing Finance Agency Inspector General Steve A. Linick . “We are proud to support our law enforcement partners in investigating and prosecuting this case.”
“Mortgage fraud causes tremendous financial damage to everyone, including financial institutions, borrowers and the American taxpayer,” said Jose A. Gonzalez, Special Agent in Charge for IRS Criminal Investigation’s (IRS CI) Los Angeles Field Office. “IRS CI is firmly committed to supporting our law enforcement partners and the U.S. Attorney’s Office in the investigation and prosecution of fraudsters committing mortgage fraud crimes.”
These charges are the result of an active, ongoing criminal investigation. Anyone with information relating to these charges should contact the San Diego branch of the Federal Bureau of Investigation at (858) 565-1255, or the Federal Housing Finance Agency - Office of Inspector General hotline at (800) 793-7724.
The public is reminded that an indictment is 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.
DEFENDANT Criminal Case No. 13MJ2783 Donald V. Totten SUMMARY OF CHARGESTitle 18, U.S.C., Section 1349 -- Conspiracy to Commit Wire Fraud. Maximum Penalty: 30
years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss caused by
the offense, five years supervised release, and $100 special assessment.Title 18, U.S.C., Section 1343 -- Wire Fraud Affecting a Financial Institution. Maximum
DEFENDANT Criminal Case No. 13MJ2783 Shellie Lockard Age: 43 Westlake Village, CA SUMMARY OF CHARGES
Penalty: 30 years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss
caused by the offense, five years supervised release, and $100 special assessment.Title 18, U.S.C., Section 1349 -- Conspiracy to Commit Bank Fraud and Wire Fraud. Maximum
INVESTIGATING AGENCIES
Penalty: 30 years custody, a maximum fine of $1,000,000 or twice the gain derived from or loss
caused by the offense, five years supervised release, and $100 special assessment.Federal Bureau of Investigation
Internal Revenue Service-Criminal Investigation
Federal Housing Finance Agency-Office of Inspector GeneralConvicted Sex Offender Charged with Illegal Sexual Conduct with A MinorRead the Press Release
United States Attorney Laura E. Duffy announced that today a federal grand jury returned a superseding indictment charging Norman Felts, a convicted sex offender, with engaging in illegal sexual conduct with a minor while traveling in foreign commerce and for committing this offense while under a legal obligation to register as a sex offender. The defendant was previously charged with a complaint and has been in custody since his arrest on June 11, 2013.
The charging document alleges that, between December 2008 and January 11, 2013, Felts, a citizen of the United States, traveled to Mexico and engaged in illicit sexual conduct with a person under the age of 18, in violation of Title 18, United States Code, Section 2423(c). During that time period, Felts was required by federal and California state law to register as a sex offender. The superseding indictment also alleges that, on May 28, 2013, Felts possessed a hard drive that contained visual depictions of minors engaged in sexually explicit conduct, in violation of Title 18 U.S.C. 2522(a)(4)(B), and transported images of minors engaged in sexually explicit conduct, in violation of Title 18 U.S.C. 2522(a)(1).
As to these charges, the superseding indictment alleges that Felts was previously convicted of oral copulation under Cal. Penal Code 288A in 1972, child molestation under Georgia law in 1977, and procurement of a child under the age of 16 for lewd or lascivious acts under Cal. Penal Code 266j.
The defendant is next scheduled to be in court on August 8, 2013, before Judge Cathy Ann Bencivengo. The public is reminded that an indictment itself is not evidence that the defendant committed the crimes charged. The defendant is presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
This case stems from an investigation by the Department of Homeland Security, Immigration and Customs Enforcement's Homeland Security Investigations.
This case was brought as part of the Department of Justice's Project Safe Childhood and ICE's Operation Predator. Both are nationwide initiatives to combat the growing epidemic of child sexual exploitation and abuse, to locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources." For more information about on Operation Predator, please visit www.ice.gov.
Anyone with information relating to the charges against this defendant is urged to call (619) 744-4623 and leave a confidential message, which will be returned by special agents investigating this case.
DEFENDANT Case Number: 13CR2296-CAB Norman Felts In Custody SUMMARY OF CHARGESCount 1 18 U.S.C. 2423(c) Engaging in Illicit Sexual Conduct in a Foreign Place
Maximum penalties: 30 years’ imprisonmentCount 2 18 U.S.C. 2260A Penalties for Registered Sex Offenders
Maximum penalties: 10 years’ imprisonmentCount 3 18 U.S.C. 2522(a)(1) and (b)(1) Transportation of Images of Minors Engaged
in Sexually Explicit Conduct
Maximum penalties: 15 years imprisonment minimum, 40 year maximumCount 4 18 U.S.C. 2522(a)(2)(b) and (b)(2) Possession of Matters Containing Images
of Minors Engaged in Sexually Explicit Conduct
Maximum penalties: 10 years’ imprisonment minimum, 30 year maximumCount 5 18 U.S.C. 1001 False Statement to a Federal Officer
INVESTIGATING AGENCIES
Maximum penalties: 8 years’ imprisonmentImmigration and Customs Enforcement's Homeland Security Investigations
Customs and Border ProtectionAn indictment itself is not evidence that the defendant committed the crimes charged.
The defendant is presumed innocent until the Government meets its burden in court of
proving guilt beyond a reasonable doubt.Former Executive Director of Indian Human Resource Center Pleads Guilty to Embezzling Non-Profit’s MoneyRead the Press Release
San Diego, CA - United States Attorney Laura E. Duffy announced today that David Hedley, a former Executive Director of the Indian Human Resource Center (“IHRC”), admitted embezzling over $140,000 from the San Diego-based non-profit.
According to his plea agreement, Hedley served as IHRC’s Executive Director between September 10 and December 11, 2012. Taking advantage of his position as a signer on IHRC’s credit union account, he obtained a debit card allowing him virtually unrestricted access to the funds in one of the credit union accounts. Once he obtained this access, Hedley stole approximately $141,260 in federal funds from IHRC.
According to the plea agreement, at the same time Hedley was stealing funds from IHRC’s credit union account, he was spending comparable sums gambling at a local Indian casino. For example, on October 9, 2012, Hedley withdrew $15,000 in cash from the IHRC credit union account at the North Island Credit Union (“NICU”) located in La Mesa, California. On that same day, Hedley gambled $15,000 at Viejas Casino. Similarly, on October 12, 2012, Hedley improperly withdrew $20,000 in cash from IHRC’s credit union account at the NICU branch in Imperial Beach, California and gambled with that sum at Pala Casino. Hedley also admitted to using over $800 in embezzled funds to buy Southwest Airlines tickets to Las Vegas, Nevada, where he spent thousands of dollars in stolen funds at the Hard Rock Hotel and Casino.
The IHRC was established to train and assist Native Americans with finding employment outside the tribal setting and was awarded over a half million dollars in federal funding from the U.S. Department of Labor over the past two years as part of the Workforce Investment Act (“WIA”). The Workforce Investment Act of 1998 (“WIA”) established a national workforce preparation and employment system to meet the needs of persons seeking employment, including new entrants to the workforce, in order to increase the employment, job retention, earnings and occupational skills of participants, improve the quality of the workforce, reduce welfare dependency, and improve the productivity and competitiveness of the United States.
As a result of his guilty plea, Hedley is facing up to 10 years in prison, and has agreed to pay mandatory restitution of $141,260.44, and to forfeit any property derived from or traceable to the proceeds he obtained from the offense.
Sentencing is scheduled for October 21 at 9 a.m. before U.S. District Judge William Q. Hayes.
DEFENDANT Criminal Case No. 13CR1129-WQH David M. Hedley SUMMARY OF CHARGESCounts 1-8: Title 18, United States Code, Section 666(a)(1)(A) – Theft from Program Receiving
Federal FundsForfeiture: Title 18, United States Code, Sections 981(a)(1)(C) and Title 28, United States Code,
INVESTIGATING AGENCIES
Section 2461(c)Federal Bureau of Investigation
California Department of Justice, Bureau of Gambling ControlCEO Pleads Guilty to $2.5 Million Fraud Involving Florida Software CompanyRead the Press Release
San Diego, CA - United States Attorney Laura E. Duffy announced today that John G. Rizzo, the CEO of iTrackr Systems, has admitted defrauding investors in connection with millions of shares of his Florida-based company.
As set forth in his Plea Agreement, in early 2006, Rizzo agreed to raise money for a Florida software company called iTracker, which developed software to track the inventories and availability of electronics, e.g., X-Boxes. In approximately late 2008, Rizzo and his coconspirators used the services of offshore “boiler rooms” to solicit investments for the company’s “penny stock.” Unknown to investors, the boiler rooms failed to disclose that only 20% of each investment would go to iTracker, with the remainder being paid to the boiler rooms as commission.
As part of that scheme, Rizzo utilized his shell company in the British Virgin Islands (“BVI”) and the company’s bank account in Belize. Rizzo sold millions of shares of iTrackr stock through his BVI company in order to avoid U.S. securities registration requirements and disguise the fact that almost all the investor funds were being diverted to the boiler rooms. In addition, Rizzo used a complex array of different entities to conceal the fact that he was selling the shares, not independent third party investors. During 2009 alone, approximately 120 different individuals in the United Kingdom invested a total of $2.5 million in iTrackr through this scheme.
United States Attorney Laura Duffy once again cautioned the public that they need to be vigilant against all forms of illegal stock manipulation, especially in the penny stock markets. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and the Internal Revenue Service for their efforts, and the continuing support of the Securities and Exchange Commission for their expertise and guidance.
FBI Special Agent in Charge, Daphne Hearn, commented, " This investigation highlights the need for investors to do their own homework before investing their money in schemes such as the one perpetrated by Mr. Rizzo. If something seems too good to be true, it almost always is. The FBI will continue to lend our expertise and resources to these types of cases and work with our partners, so that others do not fall prey to such fraudulent investment schemes."
Rizzo is scheduled to be sentenced on October 28, 2013 at 9:30 a.m. before U.S. District Court Judge Larry A. Burns.
DEFENDANT Case Number: 13cr2716-JAH JOHN G. RIZZO SUMMARY OF CHARGETitle 18, United States Code, Section 1349 - Conspiracy to Commit Wire Fraud. Maximum
PARTICIPATING AGENCIES
penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution,
forfeiture, and $100 special assessment.Federal Bureau of Investigation
Internal Revenue ServiceEx-ceo of Imperial Valley Hospital Pleads Guilty to Fraud and EmbezzlementRead the Press Release
Richard Mendoza, the former Chief Executive Officer (“CEO”) of Pioneers Memorial Healthcare District (“PMHD”) in Brawley, California, pled guilty today to embezzling more than $90,000 from the Imperial Valley Hospital.
According to court documents, Mendoza served as CEO of PMHD from October 2001, until his termination in November 2011. Mendoza’s embezzlement activity was initially discovered by the Imperial Valley hospital in the fall of 2011, during an annual audit of expenses and disbursements. The FBI subsequently initiated an investigation that uncovered the extent of Mendoza’s embezzlement activity. According to court documents, while CEO, Mendoza submitted more than 30 fraudulent reimbursement requests for trainings, seminars and conferences that he never attended. As set forth in his plea agreement, Mendoza filled out registration forms indicating that he had paid for this training with his personal credit card, when in fact he had not. To conceal the fact that he had not actually paid for the conferences, Mendoza took advantage of his position as the hospital’s top executive and directed employees in PMHD’s Accounts Payable Department to reimburse his personal credit card account based only on these fraudulent registration forms (and without any additional proof of payment).
At the time he submitted each false reimbursement request, Mendoza knew that he had not registered for the medical conferences, was not planning to attend the medical conferences, and had not used his personal credit card to pay for the attendant registration costs. To the contrary, Mendoza would often be seen around the hospital on the dates he was supposedly attending these out-of-town conferences. For example, on one occasion Mendoza submitted a fraudulent reimbursement request for a medical conference in New York City, but instead attended a PMHD Board of Directors meeting in Brawley on the date of the conference. As part of his plea agreement, Mendoza agreed to pay more than $90,000 in restitution to the hospital.
United States Attorney Laura E. Duffy praised the hard work of the agents from the Federal Bureau of Investigation and emphasized her support for financial crime prosecutions: “Mr. Mendoza violated the trust of his employer and the people he served in the community. Today’s guilty plea is yet another example of our commitment to investigate and prosecute those who illegally use their position of trust to unlawfully enrich themselves.”
FBI Special Agent in Charge, Daphne Hearn, commented, “Today’s plea agreement is a direct result of the commitment and teamwork between the FBI and the U.S. Attorney’s Office to hold those accountable who use their position of trust to unjustly line their own pockets.”
Mendoza is scheduled to be sentenced on October 25, 2013, at 8:30 a.m. before U.S. District Judge John A. Houston.
DEFENDANT Case Number: 13cr2716-JAH Richard Mendoza SUMMARY OF CHARGESMail fraud, in violation of Title 18, United States Code, Section 1341 - Maximum penalties: 20 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.
INVESTIGATING AGENCYFederal Bureau of Investigation
Civilian Navy Employee Who Defrauded Navy and VA of over $350,000 in Benefit Payments to Serve 2 Years in PrisonRead the Press Release
United States Attorney Laura E. Duffy announced that veteran Leray Shurn was sentenced yesterday to serve two years in federal prison by United States District Court Judge Thomas J. Whelan for running a landscaping business while claiming worker’s compensation and unemployment benefits from the Department of the Navy (Navy) and Department of Veterans Affairs (VA) to which he was not entitled. Judge Whelan also ordered Shurn to pay $357,977 in restitution and a $5,000 fine. Shurn’s fraud spanned more than five years and cheated two U.S. government agencies out of over $350,000.
According to evidence presented during trial, Shurn falsely represented to the Navy and VA that back and later knee injuries prevented him from working as a Navy civilian employee, and that he was not engaged in any employment where he received payment of any kind, was not self-employed, was not involved in any business enterprises, and did not have an ownership interest in any business enterprises. He also falsely claimed that his disability prevented him from being able to obtain employment.
In January 2013, a jury returned guilty verdicts on all 16 counts of fraud (5 counts of mail fraud, 4 counts of wire fraud, 5 counts of fraud to obtain federal employee’s compensation, and 2 counts of false statements to the VA). During the trial, the jury heard and saw evidence, including video recordings, that Shurn operated a landscaping business in which he personally performed landscaping work for numerous customers, provided customers with his business card for “Leray’s Landscaping” as well as monthly invoices, and represented to landscaping suppliers that he was in the landscaping business. The jury also received evidence that while Shurn was concealing his landscaping business from the Navy and VA, he completed a survey in which he indicated that he was a business owner.
United States Attorney Duffy added, “During these difficult budgetary times, submission of fraudulent claims harms our community and government agencies by diverting financial resources away from those with legitimate claims who are most in need of benefits payments and prevents agencies from funding other priorities.”
DEFENDANT Case Number: 12CR1053-W Leray Shurn SUMMARY OF CHARGES16 Counts
INVESTIGATING AGENCIES
Title 18, United States Code, Section 1341 - Mail Fraud
Title 18, United States Code, Section 1343 - Wire Fraud
Title 18, United States Code, Section 1920 - False Statement or
Fraud to Obtain Federal Employee’s Compensation
Title 18, United States Code, Section 1001 - False Statement to a Government AgencyNaval Criminal Investigative Service
Department of Veterans Affairs Office of Inspector GeneralLoan Modification Scam Resulting in Foreclosed Homes and over One Million Dollars in Losses Sends San Diego Man to 57 Months in PrisonRead the Press Release
United States Attorney Laura E. Duffy announced that Jose Ruiz of San Diego was sentenced today to 57 months of custody by District Court Judge William Q. Hayes for crimes arising from a mortgage loan-modification scheme that cheated 289 families out of over $1.1 million, and resulted in the loss of many victims’ homes to foreclosure. Ruiz was also ordered to pay full restitution to all of his victims.
Between approximately March 2009 and October 2011, Ruiz falsely told victims facing foreclosure that he could lower their mortgage loan payments. Ruiz made these false claims through his business entities based in San Diego and Chula Vista, California, including: “Equity Choice,” “Casa Nuestra,” and “UHUD National Reserve.” Ruiz pleaded guilty on August 2, 2012 to one count of mail fraud (18 U.S.C. § 1341), and one count of money laundering (18 U.S.C. § 1357).
In order to carry out his fraud, Ruiz sent hundreds of solicitation letters in which he falsely represented that his businesses were affiliated with the U.S. Department of Housing and Urban Development (“HUD”), and its Home Affordable Modification Program (“HAMP”). The letters directed the recipients to contact one of Ruiz’s business entities by telephone, or obtain information from one of the websites he had created to advertise his services. Ruiz specifically targeted low-income persons with Hispanic surnames by obtaining marketing leads with these specific criteria.
When the victims responded to the solicitation letters, Ruiz or one of his employees promised to provide relief under the HAMP program, despite having no connection with this government program. Ruiz and his employees then falsely represented that they would negotiate a modified mortgage payment on behalf of the victims with the victims’ respective lenders. In exchange, the victims were instructed to send mortgage payments directly to one of Ruiz’s business entities instead of their lenders.
Although Ruiz and his employees promised the victims that their payments would be held untouched in an impound account, and ultimately sent to the victims’ lenders at the end of negotiations, none of the money was forwarded. Many of his victims lost their homes to foreclosure as a result of the lenders’ failure to receive mortgage payments.
Rather than maintaining the victims’ funds, Ruiz spent the proceeds on a variety of luxury furnishings and personal items, including a diamond ring, computers, and a large-screen television. All of these items were seized by the United States and forfeited as part of Ruiz’s sentence. The items will be sold at auction, with proceeds going to the victims. Additionally, Ruiz was ordered to pay $1,122,031 in restitution to the victims.
Ruiz’s scheme was discovered after Special Agents from the United States Postal Inspection Service of the Downtown San Diego Station received over 750 undeliverable solicitation letters in April 2011 sent by Ruiz and his associates. The solicitation letters appeared to offer loan modification services and a free consultation regarding HAMP, or another HUD home-loan restructure program. Because the letters bore non-existent or incorrect return addresses, Postal Inspection agents began investigating the legitimacy of the offered services. In conjunction with the HUD Office of the Inspector General, agents interviewed hundreds of victims, conducted various searches, and seized property purchased with proceeds obtained pursuant to Ruiz’s fraudulent scheme.
On May 20, 2013, Judge Hayes sentenced Christian Hidalgo (Case Number: 12CR1658-WQH), a former associate of Ruiz, to 57 months of custody and ordered he pay restitution of over $687,000, for perpetrating the identical scam on over 120 additional victims. Judge Hayes also ordered Hidalgo forfeit various items he purchased from fraud proceeds, including a BMW, diamond rings, a large-screen television, and firearms.
United States Attorney Duffy added, “Although we are pleased with the successful investigation by the U.S. Postal Inspection Service and HUD-OIG, the swift prosecution, and the fruitful seizure of many valuable items purchased with the fraud proceeds, we are dismayed by the continued suffering of many innocent victims who have suffered the loss of their home and significant funds as a result of this repugnant scam. The victims suffered financially and emotionally from the defendant’s exploitation of their belief they were obtaining necessary relief from a government agency. They were targeted both because of their financial predicament and their Hispanic surnames. We will continue to seek redress for all victims of home-loan modification scams and hope that the defendant’s punishment serves as a strong deterrent to others who are committing, or plan to commit, similar crimes.”
DEFENDANT Case Number: 12CR1657-WQH Jose Ruiz SUMMARY OF CHARGESCount 5 Title 18, United States Code, Section 1341, 2 (mail fraud, aiding and abetting)
Maximum penalty: 20 years of custody; $1,000,000 FineCounts 10 Title 18, United States Code, Section 1957 (money laundering)
AGENCIES
Maximum penalty: 10 years of custody; $250,000 FineUnited States Postal Inspection Service (“USPIS”)
United States Department of Housing and Urban Development, Office of the Inspector General (“HUDOIG”)An indictment 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.Inmate Pleads Guilty to Heroin Trafficking Inside the Metropolitan Correctional Center in Downtown San DiegoRead the Press Release
United States Attorney Laura E. Duffy announced today that Kirk Borja pled guilty in federal court in San Diego before United States Magistrate Judge Jan M. Adler to conspiring to distribute methamphetamine and possessing heroin with the intent to distribute it.
Borja was originally indicted on the methamphetamine trafficking charge following his arrest in January 2012, as part of “Operation Carnalismo,” an investigation into the Mexican Mafia gang and affiliated associates conducted by the Violent Crime Task Force - Gang Group (VCTF-GG), a group of federal, state, and local law enforcement agents led by the Federal Bureau of Investigation.
Since his arrest, Borja has been incarcerated at the Metropolitan Correctional Center (MCC), a federal detention facility in downtown San Diego. Borja admitted in his plea to possessing the heroin inside the MCC with the intent to distribute it to other inmates. According to his plea, Borja concealed the heroin inside his body before being discovered by the Bureau of Prison’s Special Investigative Supervisor unit.
United States Attorney Laura E. Duffy praised the VCTF-GG for marshaling the evidence of Borja’s methamphetamine trafficking that led to his arrest, as well as the work of the investigators at the MCC and the FBI’s Violent Crime squad who assisted with the investigation inside the detention facility. “This prosecution illustrates our commitment, and that of our law enforcement partners, to protect not only our streets, but our jails as well,” Duffy said. “Dangerous, addictive drugs like methamphetamine and heroin hurt any community that suffers their presence, whether it be a local neighborhood or one of our detention facilities.”
Borja’s plea is subject to final acceptance by United States District Judge Anthony J. Battaglia. Sentencing for Borja was set for Sept 27 at 9 a.m. before Judge Battaglia.
DEFENDANT’S INFORMATION Case Number: 12CR0291-AJB Kirk Borja SUMMARY OF CHARGESTitle 21, United States Code, Sections 841/846 – Conspiracy to distribute methamphetamine
Maximum penalty: 40 years in prisonTitle 21, United States Code, Sections 841 – Possession of heroin with the intent to distribute
INVESTIGATING AGENCIES
Maximum penalty: 20 years in prisonFederal Bureau of Investigation
Chula Vista Police Department
San Diego County Sheriff's Department
National City Police Department
San Diego Police Department
San Diego County District Attorney's Office
U.S. Bureau of Prisons
California Department of Corrections and Rehabilitation
San Diego County Probation
Department, Immigration and Customs Enforcement's Homeland Security Investigations
Internal Revenue Service-Criminal InvestigationsMarine Police Commander Found Guilty in Miramar Bribery SchemeRead the Press Release
A federal jury convicted former U. S. Marine Sergeant Luis Gilbert Menchaca of conspiracy and false claims in connection with a fraud and bribery scheme at Marine Corps Air Station (MCAS) Miramar in San Diego, California. As part of the scheme, Menchaca – while serving as a watch commander for the military police at Miramar – paid thousands of dollars of bribes to another Marine in order to obtain tens of thousands of dollars in fraudulent lodging reimbursements.
Last year, Menchaca was charged in an indictment with one count of conspiracy and three counts of false claims. The case was tried before a jury beginning on Monday, July 15, 2013. This afternoon, after less than 30 minutes of deliberations, the jury returned a verdict of guilty on all counts.
The evidence presented at trial showed that Menchaca first joined the Marine Corps in 1998, and after an initial four-year term, was discharged and entered the Marine Corps Reserve. From time to time thereafter, Menchaca, who had attained the rank of Sergeant, received orders placing him on active duty. In connection with his mobilization orders, Menchaca became eligible to receive certain travel payments, including lodging reimbursement and a per diem allowance, for the entire duration of his active duty service. These travel payments were in addition to the compensation and basic housing allowance (“BAH”) that he, like other Marines, received.
The evidence at trial showed that in May 2007, after being placed on active duty at Miramar, Menchaca entered into a conspiracy with another Miramar Marine, Manuel Ramos-Padilla. Ramos worked in an administrative office at Miramar that processed travel claims for reservists like Menchaca. In connection with the scheme, Menchaca and Ramos agreed to submit falsely completed travel vouchers that claimed reimbursement for thousands of dollars in lodging expenses that Menchaca had not incurred or paid. In addition to submitting these false travel vouchers, the conspirators submitted a fake rental receipt, for an address on Mission Village Drive in San Diego. In fact, the address listed on the fake receipt did not exist.
Menchaca and Ramos repeated the scheme month after month, for a period of ten months. In total, Menchaca submitted approximately $38,000 in false lodging claims. The proceeds of the scheme were deposited directly into Menchaca’s bank account every month.
In exchange for Ramos’s part in the conspiracy, Menchaca made cash payments to Ramos of up to $1,000 per month. On occasion, Menchaca also paid bribes to Ramos of up to $1,500 in the form of personal checks.
While on active duty with the Marine Corps, Menchaca spent over four years in the military police. During the time period of the fraud, Menchaca served as a watch commander within the military police. In that role, he supervised patrol supervisors, who in turn supervised lower-ranking military police officers. Menchaca had responsibilities for overseeing the enforcement of federal laws, including the Uniform Code of Military Justice; as well as for enforcing the California Vehicle Code and Miramar regulations.
United States Attorney Duffy stated, “Investigating and prosecuting bribery is one of our top priorities. With our nation’s military budget strained to the breaking point, we cannot afford to allow public corruption to drain much-needed U. S. Marine Corps resources.”
Menchaca’s case is set for sentencing on October 4, 2013, before U. S. District Judge Dana M. Sabraw.
Menchaca’s co-conspirator, Manuel Ramos-Padilla, pled guilty on April 9, 2013 to conspiring to commit bribery and make false claims. Ramos’s case is set for sentencing on August 9, 2013, also before Judge Sabraw.
DEFENDANTS
Case Number: 12cr5099-DMS Manuel Ramos-Padilla
Luis Gilbert Menchaca SUMMARY OF CHARGESConspiracy to commit bribery and make false claims, in violation of Title 18, United States Code, Section 371 (Menchaca and Ramos) - Maximum penalties: 5 years in prison, $250,000 fine, term of supervised release of three years, restitution, forfeiture, and $100 special assessment.
Three counts of false claims, in violation of Title 18, United States Code, Section 287 (Menchaca) - Maximum penalties (per count): Five years in prison, $250,000 fine, term of supervised release of three years, restitution, and $100 special assessment.
INVESTIGATING AGENCYNaval Criminal Investigative Service
Cal State San Marcos Student Sentenced for Rigging Campus ElectionsRead the Press Release
Former Cal State San Marcos student Matthew Weaver of Huntington Beach was sentenced today to one year in prison for stealing the identities and passwords of more than 700 fellow students so he could rig campus elections and win the presidency.
Weaver pleaded guilty in March to wire fraud, unauthorized access of a computer and identity theft. He admitted that he used small electronic devices known as keyloggers that record a computer user's keystrokes to steal 745 student passwords. He then used many of those stolen identities to snoop in email and Facebook accounts, and to cast about 630 votes for himself and for friends who also were on the ballot.
During the hearing, U.S. District Judge Larry A. Burns said he was troubled most by the fact that Weaver – even after his arrest - attempted to frame other CSU-SM students for the election irregularities and even solicited news media coverage, contending he’d been framed.
Falsely blaming others when Weaver knew he was responsible for the crime is “the phenomenal misjudgment I just can’t get around,” the judge told Weaver. “That’s what bothers me more than the original rigging” of the election.
Judge Burns noted that the original crime might have been perceived as less egregious – even a youthful prank - except for the cover up. “He’s on fire for this crime and then he pours gasoline on it” with similar bad behavior, the judge said.
“Weaver ran roughshod over the privacy rights of hundreds of people so that he could indulge his vanity,” said U.S. Attorney Laura Duffy. “If privacy is to mean anything in a digital age, it has to be protected. A 12-month sentence adequately warns men and women like Weaver that they cannot hide from the consequences of their actions behind youth or privilege. Everyone’s rights matter – not just theirs.”
Weaver cast many of the votes from a computer located on campus. According to court records, Weaver was exposed during the final hour of the student body election, when network administrators noticed unusual voting activity associated with a computer in Academic Hall 204. The administrators were able to determine that the user, later identified as Weaver, was cutting and pasting student usernames and passwords from an Excel spreadsheet into the VOTE system and then cast those students’ votes.
Shortly after the election closed at 5 p.m., CSU-SM network administrators asked CSU-SM police officer Brian McCauley to go to the suspicious computer in Academic Hall 204. There, Officer McCauley found Weaver sitting at the computer and noted that Weaver was using the only computer in the lab whose screen was not visible to the rest of the room.
Weaver, after seeing McCauley, who was in uniform, began shutting down the campus computer. McCauley and Weaver then had a short conversation, during which Weaver said he was working on a school project, but refused to provide details. McCauley then arrested Weaver and seized his bag, which contained six keyloggers as well as other evidence of the crimes.
Weaver’s supporters have described his crime as a prank.
But in a sentencing memorandum, prosecutors dismissed that characterization, saying Weaver was fully aware of the serious ramifications of his crime and was motivated by ego and greed. In fact, a search of Weaver’s laptop showed queries like “jail time for keylogger” and “how to rig an election.”
“He wanted power through the $300,000 budget and respect through his status as CSU-SM’s student body president. But he did not want to earn it, he wanted to steal it,” prosecutor Sabrina Feve wrote in a sentencing memorandum.
“Weaver determinedly and repeatedly spied on his classmates, stole their passwords, read their secrets, and usurped their votes – and he did it with his eyes wide open,” the memorandum said. “Weaver actually researched the legality of his scheme beforehand…and then, when he knew it was completely illegal, he researched how to blame someone else.”
In fact, Weaver should have had a special appreciation for the rights of fellow students to express themselves through voting. Weaver was one of the leaders of a publication called Koala San Marcos and, when CSU-SM students protested in October 2011 against some of its content, he got the ACLU to represent the group against CSU-SM.
“Ironically, at or around the time the ACLU was defending Weaver’s freedom of thought and expression, he was actively planning to defraud other students of their ability to vote and, a just a few months later, chilling their freedom of thought and expression by logging their keystrokes and snooping through their email and Facebook accounts,” Feve wrote in the sentencing memorandum.
DEFENDANTS Criminal Case No. 13CR0821-LAB Matthew Weaver SUMMARY OF CHARGESWire Fraud, in violation of 18 U.S.C. § 1343 (Count 1);
Maximum penalties: 20 years imprisonment and $250,000 fineUnauthorized Access of a Computer, in violation of 18 U.S.C. § 1030(a)(2) and
(c)(3)(B)(ii) (Count 2)
Maximum penalties: 5 years imprisonment and $250,000 fineIdentity Theft, in violation of 18 U.S.C. § 1028(a)(7) (Count 3)
PARTICIPATING AGENCIES
Maximum penalties: 5 years imprisonment and $250,000 fineFederal Bureau of Investigation
Cal State University San Marcos Police DepartmentFormer Customs and Border Protection Officer Sentenced to 12 Years for Bribery and Conspiracy to Import DrugsRead the Press Release
Former Customs and Border Protection Officer Oscar Osbaldo Ortiz-Martinez was sentenced today by Chief United States District Judge Barry Ted Moskowitz to serve 144 months in federal prison for conspiring to allow drugs to be smuggled into the United States through his inspection lanes in exchange for tens of thousands of dollars in bribes. Judge Moskowitz also ordered the defendant to serve 5 years of supervised release following his prison term and imposed a $22,000 fine.
Ortiz, a two-year veteran who was assigned to the Calexico Ports of Entry, was convicted by a federal jury in September 2012, of conspiracy to import controlled substances and bribery. After a trial that lasted more than a week, the jury deliberated for just three hours before returning the verdicts.
According to court records and evidence presented at trial, Ortiz and his accomplice, Victor Manuel Silva, Jr., believed they were working for individuals with ties to a drug trafficking organization when, in fact, they were doing business with undercover agents and federal law enforcement cooperators posing as narcotics traffickers. Ortiz accepted $22,000 in bribes and was arrested on September 23, 2010, when he showed up to collect another $30,000 bribe from the informant. Silva was arrested later that day.
At trial, the government presented audio recordings of Ortiz discussing the smuggling of narcotics through his inspection lane with co-defendant Silva and a confidential informant. In two of those conversations, Ortiz made plans to allow the informant to cross 5 - 12 kg of cocaine through his lane in exchange for $20,000 and 15 kg of methamphetamine for $30,000.
Also during those recorded conversations, Ortiz established code words for the informant to use if the computer randomly required Ortiz to send the informant to secondary inspection, and they agreed these code words would prompt the informant to abandon the vehicle and run back to Mexico. Ortiz also at one point suggested the informant use motorcycles to smuggle narcotics, because they could then cross drugs “every day.”
The verbal exchanges between Ortiz and the informant when two bribes were paid, for $2,000 and $20,000, were also audio recorded. And for the latter transaction, agents video recorded Ortiz leaving the informant’s truck with the bag of money in his hand.
Silva, the accomplice who pleaded guilty in February 2011 to conspiracy to import at least 5 kilograms of cocaine, testified at trial against Ortiz, admitting that he and Ortiz had conspired to use the informant to smuggle narcotics through Ortiz’s lane. Silva also testified that he and Ortiz wanted to make as much money as possible.
“While the overwhelming majority of border officers are doing their jobs with vigilance and integrity, we have found that some are not, and we are going to bring to justice every one of these corrupt officials who violate the public’s trust and put our borders at risk,” said U.S. Attorney Laura Duffy.
“Acts of corruption within the Department of Homeland Security represent a threat to our nation and undermine the honest and hardworking employees who strive to maintain the integrity of the Department,” said Dennis M. McGunagle, Special Agent-in-Charge for the Department of Homeland Security, Office of Inspector General. “Corruption will not be tolerated and those who choose to break the law will be pursued aggressively. We appreciate the efforts of the U.S. Attorney’s Office for bringing these individuals to justice.”
“I commend the outstanding work by the law enforcement team of investigators and prosecutors in this important case,” said Joe Jeronimo, special agent in charge for ICE Office of Professional Responsibility. “ICE takes all allegations of criminal misconduct by DHS employees seriously, and will continue to aggressively investigate such allegations to ensure that the perpetrators are prosecuted to the fullest extent of the law.”
“Corrupt acts are a disgrace and the exact opposite of the values that form the basis of who we are,” said Pete Flores, Director of Field Operations for U.S. Customs and Border Protection (CBP) in San Diego. “CBP is a world-class law enforcement agency and enjoys a special position of national trust as the sole border enforcement agency. The vast majority of our officers are highly skilled, hard-working professionals dedicated to our mission to protect the American public. We will actively ferret out and work to prosecute to the fullest extent of the law any employees who commit unethical or unlawful acts that violate that special trust. This case will send a strong message to the community at large that we will not tolerate corruption in our workforce.”
DEFENDANTS
Criminal Case No. 10cr3986-BTM Oscar Osbaldo Ortiz-Martinez
Victor Manuel Silva, Jr. SUMMARY OF CHARGESConspiracy to Import Controlled Substances, in violation of Title 21, United States Code, Sections 952, 960, and 963
Bribery, in violation of Title 18, United States Code, Section 201
INVESTIGATING AGENCIESUnited States Department of Homeland Security, Office of Inspector General
United States Department of Homeland Security, Immigration and Customs Enforcement, Office of Professional ResponsibilityFormer President of San Diego Customs Brokers Association Sentenced to 37 Months in Prison for Evading Import Taxes on $100 Million in Foreign-Made GoodsFraudulently Imported Goods Included Chinese-made Clothing, Cigarettes and Salmonella-Infected ProduceRead the Press Release
United States Attorney Laura E. Duffy announced that a San Diego businessman and his corporation were sentenced today for their roles in a long-running conspiracy to evade customs duties.
United States District Judge Michael M. Anello sentenced Gerardo Chavez to serve 37 months in prison and his corporation, International Trade Consultants, LLC, to serve 5 years of probation. In addition, Judge Anello ordered that Chavez forfeit real property in Tecate, California, where Chavez maintained his corporate offices. Judge Anello also ordered Chavez to appear for a future restitution hearing, at which Chavez could be ordered to pay millions of dollars in compensation to state and federal taxing authorities.
According to court filings, Chavez was the President of the San Diego Customs Brokers Association, a trade group for licensed professionals in the import-export field. Between 2007 and his arrest in 2012, Chavez and his companies supervised numerous shipments of commercial goods while coordinating one-half billion dollars in trade between merchants in the United States and other countries. Ultimately, Chavez was apprehended after a four month-long wiretap investigation led by special agents with Immigration and Customs Enforcement’s Homeland Security Investigations and assisted by specialized international trade experts and officers from United States Customs and Border Protection. Prior to sentencing, Chavez cancelled his individual, local and national Customs licenses, effectively ending his career as a customs broker.
According to court documents, Chavez’s scheme focused on purchasing large, commercial quantities of foreign-made goods and importing them without paying import taxes, also known as Customs duties. Wholesalers in the United States would procure commercial shipments of, among other things, Chinese-made apparel and Indian-made cigarettes, and arrange for them to be shipped by ocean container to the Port of Long Beach, California. Before the goods entered the United States, conspirators acting at Chavez=s direction would prepare paperwork and database entries indicating that the goods were not intended to enter the commerce of the United States, but instead would be “transshipped” “in-bond” to another country, such as Mexico. By claiming that the goods would not enter the commerce of the United States but instead were just passing through to another country, Chavez and his conspirators tricked Customs officials into believing that no customs duties were owed on the merchandise.
Then, instead of completing the in-bond transshipment, Chavez and his conspirators would hire truck drivers to haul the shipments to warehouses throughout Southern California. Chavez and his conspirators then generated fraudulent paperwork to cover up the scheme. As the conspirators had now effectively imported the goods tax-free, they could in turn sell more merchandise at cheaper pricesCand reap greater profitsCthan their law-abiding competitors, including domestic American manufacturers of the same goods.
According to court filings, Chavez played a crucial role in the scheme, allowing others to use his lucrative customs license as the authority under which commercial shipments fraudulently entered the United States. While delegating much of the day-to-day operations to employees and contractors, Chavez provided crucial support to the conspiracy, advising on how to best deceive federal officers—and even volunteering to erase evidence from conspirators’ computers. Over the course of his scheme, Chavez helped his clients evade at least $18 million in import taxes on more than $100 million in fraudulently imported foreign goods. In addition, Chavez’s coconspirators—using Chavez’s license, expertise and logistical support—succeeded in importing adulterated Mexican food products, as well as produce infected with Salmonella Agona, a disease-causing and potentially life-threatening bacteria.
Chavez’s 37-month sentence also marks the latest in a string of Customs-related prosecutions pursued by the U.S. Attorney’s Office. Chavez’s sentencing came a little more than three weeks after a federal jury returned guilty verdicts on all counts pursued against one of Chavez’s conspirators, Sunil Mirwani and his Los Angeles-based company, M Trade, Inc. Mirwani owned approximately $30 million in Chinese-made textiles that Chavez helped fraudulently import into the United States. During that trial, some of Chavez’s former coconspirators testified under oath about Chavez’s fraudulent methods, noting that one of his contractors had access to equipment capable of forging certain official marks used by United States Customs and Border Protection.
United States Attorney Duffy said: "Our system of international trade relies on the honesty and integrity of all participants; and perhaps most of all, of customs brokers, to ensure that applicable taxes are paid, and that hazardous materials do not cross our country’s borders. Gerardo Chavez abused the trust this country instilled in him, endangering public health and stealing from the United States treasury at a time when we could ill afford it—all for his personal, fraudulent, gain.”
“Today’s sentencing illustrates the importance of DHS components working seamlessly to prevent criminals from exploiting the commercial trade corridor in the San Diego-Tijuana region,” said Derek Benner, special agent in charge for HSI in San Diego. “HSI will continue to prioritize investigations involving suspected Customs fraud in an effort to maintain the highest degree of integrity in cross border trade.”
“CBP is charged with protecting the revenue of the United States. This case demonstrates our commitment to that mission and the importance of working with our federal partners,” said Pete Flores, CBP director of field operations for San Diego. “Joint efforts such as this are crucial to maintaining our nation’s economic security and competitiveness.”
Lisa Malinowski, Special Agent in Charge, U.S. Food and Drug Administration's Office of Criminal Investigations, Los Angeles Field Office, said: “Today’s sentencing demonstrates OCI’s commitment to investigating and holding accountable those who conspire to import adulterated and potentially life-threatening products to the unsuspecting public. OCI will continue to join with our law enforcement counterparts to pursue those who place consumer’s health at risk for financial gain.”
DEFENDANTS Case Number: 12CR3137-MMA Gerard Chavez
International Trade Consultants, LLC SUMMARY OF CHARGESChavez:
Count 1: Conspiracy to Defraud the United States and to Commit Offenses against the
United States, in violation of Title 18, United States Code, Section 371.Counts 2-3: Bringing in Goods by Means of False Statements, in violation of Title 18, United
States Code, Section 542.Count 57: Laundering of Monetary Instruments, in violation of Title 18, United States Code,
Section 1956(a)(2)(A) and (h).International Trade Consultants, LLC
INVESTIGATING AGENCIES
Count 1: Conspiracy to Defraud the United States and to Commit Offenses againstImmigration and Customs Enforcement’s Homeland Security Investigations
United States Customs and Border Protection
Internal Revenue Service – Criminal Investigations
Food and Drug Administration
Alcohol and Tobacco Tax and Trade BureauMan Sentenced for Elaborate Identity Theft SchemeRead the Press Release
A man who stole hundreds of identities – many by skimming debit card numbers from gasoline pumps around San Diego - was sentenced today to more than three years in prison and ordered to pay $521,800 in restitution to victims.
Akop Taymizyan, 37, pleaded guilty in January, 2013, to conspiracy to commit access device fraud and bank fraud and aggravated identity theft. A co-conspirator, Georgi Rushanyan, pleaded guilty to the same charges and was sentenced to 48 months in custody on April 27, 2012.
During today’s hearing, U.S. District Judge Dana M. Sabraw called the thefts a “highly sophisticated conspiracy” and “a drain on society’s resources.”
Assistant U.S. Attorney Sabrina Feve, in urging the court to impose a lengthy sentence, noted that Taymizyan continued to steal even after his co-conspirator was taken into custody. “Even Rushanyan’s arrest and prosecution did not deter the conspiracy from continuing to steal and make unauthorized use of victims’ debit card numbers and PINs,” Feve wrote in court documents.
The charges against Taymizyan arose from his involvement in a scheme to steal and use victims’ debit card numbers and personal identification numbers (PINs). Beginning in or about December 2009, the conspiracy installed skimming devices inside gas pumps located in California, Arizona, and Nevada. These devices surreptitiously recorded victims’ debit card numbers and PINs.
The conspiracy then re-encoded the stolen debit card numbers onto dummy magnetized access cards and affixed the matching PIN via a sticker. Taymizyan, along with other co-conspirators, then traveled around California, Arizona, Nevada, Texas, and Georgia making unauthorized withdrawals from victims’ bank accounts. The withdrawals were for both cash and US Postal stamps.
The conspiracy stole debit card numbers and PINs for over 400 bank accounts belonging to at least six banks, and over 8,800 “Forever” stamps. To date, the conspiracy has made over $500,000 in unauthorized withdrawals.
Gas pumps in and around San Diego were targeted as part of this scheme and at least 30 bank accounts belonging to San Diego-area victims were compromised. Members of the conspiracy, including Taymizyan, also traveled to San Diego to make unauthorized withdrawals. In February 2010, Taymizyan made an unauthorized withdrawal from a La Jolla ATM.
“Identity theft is a pervasive and growing threat to consumers and financial institutions,” said U.S. Attorney Laura Duffy. “The U.S. Attorney’s Office recommends that individuals monitor their monthly bank, credit card, and brokerage account statements for unauthorized charges and immediately report any unauthorized charges or transfers to their financial institutions.”
DEFENDANT Case Number: 12cr4134-DMS Akop Taymizyan SUMMARY OF CHARGESConspiracy to Commit Access Device Fraud and Bank Fraud - Title 18, United States Code, 371
AGENCIES
Maximum penalties: 5 years' imprisonment and $250,000 fine
Aggravated Identity Theft - Title 8, United States Code, Sections 1028A
Mandatory sentence: 2 years’ imprisonmentUnited States Secret Service, Las Vegas Metropolitan Police Department; Cobb County, Georgia District Attorney’s Office
Local Oncology Practice Sentenced to Pay Millions for Medicare FraudRead the Press Release
The La Jolla oncology practice known as Joel I. Bernstein, M.D., Inc. was sentenced today to pay a $500,000 fine, forfeit $1.2 million and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing Medicare as if the drugs were legitimate.
The sentence was handed down by U.S. District Judge Cathy A. Bencivengo following the corporation’s guilty plea to health care fraud in January. The practice was also sentenced to a year of probation, which means it must allow Probation officers to scrutinize finances, submit to office searches and prepare a compliance program to avoid such problems in the future.
In pleading guilty, the practice admitted that it had purchased $3.4 million of foreign cancer drugs, knowing they had not been approved by the U.S. Food and Drug Administration for use in the United States. From 2007 to 2011, Bernstein’s office purchased these drugs for significantly less than market value in the U.S., and then submitted claims to Medicare at the full reimbursement price. To conceal the scheme, the office fraudulently used Medicare reimbursement codes for approved cancer drugs, as Medicare does not pay for unapproved drugs.
The drugs purchased by the corporation were meant for markets outside the United States and contained the same active ingredients as drugs sold in the U.S. under the brand names Abraxane®, Alimta®, Aloxi®, Boniva®, Eloxatin®, Gemzar®, Neulasta®, Rituxan®, Taxotere®, Venofer® and Zometa®).
The practice has admitted that it was aware that the drugs were intended for markets other than the United States and were not the drugs approved by the FDA for use in the United States because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the United States; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the United States; (c) the labels did not bear the “Rx Only” language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) the office had received a Notice from the FDA in October, 2008, that a shipment of drugs had been detained because the drugs were unapproved.
Medicare provides reimbursement only for drugs approved by the Food and Drug Administration (FDA) for use in the United States. The practice admitted that it knowingly submitted claims for payment to Medicare using the reimbursement codes for the U.S. approved drugs, falsely representing that the drugs were those approved by the FDA for use on patients in the United States.
The defendant acknowledged that between January of 2007, and May of 2011, the practice received $1.7 million in reimbursement from Medicare as a result of this fraudulent scheme. The practice was ordered to forfeit $1.2 million, which was the amount of gross proceeds received by the defendant solely related to the drugs.
In a related False Claims Act lawsuit filed by the United States, Dr. Bernstein and his medical practice paid in excess of $2.2 million to settle allegations that they submitted false claims to the Medicare program. The corporation was allowed to apply that sum toward the amount owed in the criminal restitution to Medicare.
Dr. Bernstein himself also pleaded guilty to a misdemeanor charge of Introducing Unapproved Drugs into Interstate Commerce. In pleading guilty, Dr. Bernstein admitted that on July 8, 2010, he purchased the prescription drug Mabthera (intended for market in Turkey and shipped from a source in Canada) and administered it to patients. Bernstein further acknowledged that the drug Mabthera is not approved by the Food and Drug Administration for use in the United States. Rituxin®, a product with the same active ingredient, is approved by the Food and Drug Administration for use in the United States.
Dr. Bernstein was released on a $10,000 personal surety bond and is scheduled to be sentenced on July 2, 2013 at 2:00 p.m.
DEFENDANT Criminal Case No. 13cr0119-CAB Joel I. Bernstein, M.D., Inc. Date of Incorporation: 1998 La Jolla, California SUMMARY OF CHARGESHealth Care Fraud, in violation of Title 18, United States Code, Sections 1347 and 2 Maximum Penalty for a Corporation: $500,000 fine, $400 special assessment.
AGENCIESFood and Drug Administration, Office of Criminal Investigations
Federal Bureau of InvestigationVista Man Charged with Obstructing Murder InvestigationRead the Press Release
Brian Karl Brimager, former boyfriend of United States Citizen Yvonne Baldelli, was indicted by a federal grand jury in San Diego yesterday on charges that he obstructed justice and made false statements to law enforcement in connection with the investigation into Baldelli’s suspected murder in Panama in 2011. Agents with the Federal Bureau of Investigation arrested Brimager without incident this morning at his house in Vista.
The indictment, unsealed today, alleges that Brimager killed Baldelli in late November 2011 and then engaged in an elaborate scheme to cover up his crime. This scheme included destroying evidence, giving false information to law enforcement, and sending a series of emails purportedly from Baldelli making it appear to her friends and family that she was still alive and traveling with another man in Costa Rica.
According to the indictment, in September 2011 the couple moved together from Los Angeles to the archipelago of Bocas del Toro, Panama. They rented a room in a five-unit hostel on Isla Carenero, a small island near Bocas reachable only by boat. The indictment alleges that while in Panama, Baldelli suffered physical abuse at the hands of Brimager resulting in bruising around her eyes and on her arms.
Baldelli was last seen on the evening of November 26, 2011, when she left Carlos’ Steakhouse, a bar and restaurant in Bocas del Toro, with Brimager.
The indictment alleges that after Baldelli’s disappearance, Brimager created a cover story to explain her whereabouts and in the days and months that followed engaged in a series of obstructive acts designed to make that version appear credible. For example, using Baldelli’s laptop, Brimager sent emails to Baldelli’s friends and family from her personal email account, purporting to be from Baldelli, falsely stating that she was in Costa Rica with another man. To “corroborate” this story, Brimager traveled to Bocas Del Toro on November 27, 2011 and withdrew money from Badelli’s bank account at an ATM to make it appear that she was on her way to Costa Rica. Later, on his way back to the United States, Brimager took a two-day layover in Costa Rica. According to the indictment, while in Costa Rica, Brimager made another withdrawal from Baldelli’s bank account at an ATM in order to make it appear that Baldelli was alive and in San Jose.
“Brimager impersonated Baldelli over email in an attempt to trick her friends and family into believing she was still alive, thereby obstructing, influencing and impeding investigation into her disappearance and suspected death,” the indictment said.
In addition to sending fake emails from Baldelli, the indictment charges that Brimager obstructed justice by disposing of physical evidence, including a bloody mattress. The indictment alleges that prior to dumping the mattress in the ocean, Brimager conducted two internet searches on Baldelli’s computer – one for “washing mattress” and a second for “washing mattress blood stain.” The indictment also alleges that Brimager got rid of Baldelli’s personal belongings – including clothing, cosmetics and jewelry – by packing the items into approximately 10 large garbage bags and leaving them on the dock outside the hostel for disposal.
The indictment also charges Brimager with making materially false statements to the FBI during an interview on March 21, 2012. The indictment alleges that Brimager falsely stated to the FBI that Baldelli left Panama for Costa Rica on November 27, 2011. Brimager also claimed that Baldelli took her white Sony VAIO laptop with her when she left Panama, when in fact, the laptop was found in Brimager’s possession on March 21, 2012 – months after Baldelli’s disappearance. The indictment alleges that Brimager also made materially false statements to the FBI regarding the laptop ever being in Panama, Brimager’s plans to return to the United States, and his striking of Baldelli. Brimager also falsely stated, according to the indictment, that he had never accessed Baldelli’s personal email account or sent emails purporting to be from Baldelli.
DEFENDANT Case Number: 13CR2381-JM Brian Karl Brimager SUMMARY OF CHARGESObstruction of Justice, 10 counts - Title 18, United States Code, Section 1512(c)(2)
Maximum Penalties: 20 years imprisonment for each count, a $250,000 fine, 3 years supervised releaseFalse Statement to a Federal Officer, 1 count - Title 18, United States Code, Section 1001
AGENCIES
Maximum Penalties: 5 years imprisonment, a $250,000 fine, 3 years supervised releaseFederal Bureau of Investigation
*An indictment itself is not evidence that the defendant committed the crimes
charged. The defendant is presumed innocent until the United States meets its
burden of proving guilt beyond a reasonable doubt.Man Sentenced for Attempting to Smuggle Roosters into Mexico for Cockfighting; Mutilated Birds Had to Be EuthanizedRead the Press Release
A man who attempted to smuggle more than two dozen roosters and hens into Mexico for the purposes of cockfighting was sentenced today by U.S. District Judge William Q. Hayes to time served, which amounted to 65 days in custody.
Marco Marquez-Avila, 41, of Tijuana, was returned to the United States on April 22, 2013, by Mexican authorities who discovered that he had 28 adult roosters and hens that were covered by floor mats in his Toyota Camry.
Each bird was individually encased in a nylon sock with the head covered and the feet bound with a velcro strap. Additionally, the birds had had their combs and wattles removed, a common mutilation for birds intended for cockfighting. All birds required euthanasia.
While cockfighting is legal in Mexico, it is not legal in the state of California. Federal law in the U.S. prohibits the transportation of animals that are to be used in an animal fighting venture. Additionally, federal regulations require that poultry exported to Mexico be eligible to be freely transported and marketed in the United States, which cockfighting birds are not.
This is the fifth case of cockfighting birds being smuggled southbound to Mexico this year, and the second time someone has been turned around by Mexican authorities and returned to Customs and Border Protection officers in as many months because adult poultry are not allowed to be exported to Mexico without prior inspection and certification.
DEFENDANT Case Number: 13cr01845 MARCO MARQUEZ-AVILA SUMMARY OF CHARGESUnlawful transportation of animals used in animal fighting venture – Title 7, United States Code, 2156
AGENCIES
Maximum penalties: 5 years imprisonment and $250,000 fineU.S. Department of Agriculture, Office of Inspector General
U.S. Customs and Border Protection