Western District of Washington

Acting U.S. Attorney Annette L. Hayes announced today that the U.S. Attorney’s Office for the Western District of Washington collected $6.9 million in criminal and civil actions in Fiscal Year 2014.  Of this amount, $4.7 million was collected in criminal actions and $2.2 million was collected in civil actionsThe Western District of Washington also collected an additional $12.2 million in forfeited assets related to criminal activity.

Additionally, the Western District of Washington worked with other U.S. Attorneys’ offices and components of the Department of Justice to collect an additional $5.2 million in cases pursued jointly with these offices.  The vast majority of the collections in shared cases were collected in civil actions.

Attorney General Eric Holder announced that the Justice Department collected $24.7 billionin civil and criminal actions in the fiscal year ending September 30, 2014.  The more than $24 billion in collections in FY 2014 represents nearly eight and a half times the appropriated $2.91 billion budget for the 94 U.S. Attorney’s offices and the main litigating divisions in that same period.

“Every day, the Justice Department’s federal prosecutors and trial attorneys work hard to protect our citizens, to safeguard precious taxpayer resources, and to provide a valuable return on investment to the American people,” said Attorney General Holder.  “Their diligent efforts are enabling us to achieve justice and recoup losses in virtually every sector of the U.S. economy.  And this result shows the fruits of the Justice Department’s tireless work in enforcing federal laws; in protecting the American people from violent crime, national security threats, discrimination, exploitation, and abuse; and in holding financial institutions accountable for their roles in causing the 2008 financial crisis.”

“These financial recoveries on behalf of the taxpayers demonstrate that this office will use all the tools at its disposal to protect public safety and our tax dollars,” said Acting U.S. Attorney Annette L. Hayes.  “Among many other key recoveries, the amounts collected from those who have committed environmental crimes are particularly important.  They send a clear message that those who damage our natural heritage will be held to account.”

In March and April 2014, Stowe Construction Inc. paid more than $334,000 related to their conviction for violation of the Clean Water Act.  Stowe Construction, and its President Bryan Stowe, admitted knowingly violating the Construction General Storm Water Permit for the Rainier Park of Industry project, located on West Valley Highway in Sumner.  Permit violations contributed to two major landslides at the site in 2010 and 2011.  Both slides forced closure of the West Valley Highway.  The case is one of the first storm water pollution criminal cases brought in the United States.  More on the case is available here.

In a second environmental case, Ray Caldwell, owner of All-Out Sewer And Drain Service, Inc., a Longview, Washington, septic tank pumping business paid a $250,000 fine in April 2014 for violations of the Clean Water Act.  Caldwell illegally dumped more than two million gallons of waste and pollutants into the Longview sewer system.  More on the case is here.

In civil litigation, the largest collection was $500,000 from Alaska Airlines in September 2014 to settle an FAA civil penalty claims regarding a maintenance issue.  More on that case here.

            The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims.  The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss.  While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.

            The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws.  In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.

           Additionally, the U.S. Attorney’s office in the Western District of Washington working with partner agencies and divisions, collectednearly $12.2 million in asset forfeiture actions in FY 2014. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.

            One of the most significant forfeiture actions concerned three former motels in Tukwila, Washington, which were seized by the government as chronic drug involved residences.  To date the value of properties forfeited in that case exceeds $3 million.  Additional forfeiture proceeds in that case will be recorded in fiscal year 2015.  The motel properties are now being redeveloped by the City of Tukwila. More on this innovative case is available here.

A former executive recruiter for Amazon.com was sentenced today in U.S. District Court in Tacoma to one month in prison and three years of supervised release for Social Security fraud, announced Acting United States Attorney Annette L. Hayes.  Between 2009 and 2012, MARLENE SCOTT, 42, concealed the fact that her mother and sister, who were welfare recipients, had moved from the United States to Lebanon and therefore were no longer entitled to collect welfare benefits in this country.  SCOTT falsely told caseworkers that her mother and sister lived with her in the Magnolia neighborhood of Seattle.  By hiding her mother and sister’s departure, defendant caused the Social Security Administration to pay out more than $50,000 in benefits, which Scott then withdrew.  U.S. District Judge Ronald B. Leighton noted that SCOTT took the witness stand and lied when the case went to trial in June 2014.  The judge declared a mistrial after the jury was unable to reach a unanimous verdict.  Judge Leighton said the story SCOTT told on the witness stand was “preposterous.”  Judge Leighton said Scott’s lies on the witness stand “were a profound offense to the legal system,” and, but for the false testimony, he might have given her a probationary sentence.

            According to records filed in the case, SCOTT’s mother and sister moved to Lebanon in June 2009.  The following year the women visited Scott in Seattle.  They opened bank accounts in Magnolia and had their welfare payments deposited into those accounts.  SCOTT repeatedly accessed the benefits by using her mother’s debit card or by forging her mother’s signature.  During the 2010 visit, SCOTT called Social Security and claimed her mother was living in her home and SCOTT was charging her mother fair market rent.  SCOTT forged her mother’s signature on forms and lied to Social Security personal when they called asking to speak to SCOTT’s mother.  When investigators visited her home, SCOTT claimed her mother was visiting her sister and brother in North Carolina and provided a non-working phone number. SCOTT knew at the time that no one in her family remained in North Carolina since her brother had moved from there to Lebanon in 2003.

            After the jury failed to return a verdict, SCOTT pleaded guilty on July 25, 2014.  In accordance with the plea she repaid $50,973 to the government.

            As prosecutors pointed out in their sentencing memorandum, those who defraud Social Security are stealing from the very poorest and most vulnerable Americans.  Worse, fraud on the welfare system corrodes the trust required to maintain programs that provide a lifeline of last resort for the poor.  Taxpayers contribute to SSI based on trust that the funds will be used to support others in real need.  When someone like SCOTT, an Amazon professional, intentionally exploits that trust through fraud, the result is public cynicism, which further undermines these programs.  The true victims of this offense are those genuinely in need.

            In choosing to impose a prison term instead of home confinement, Judge Leighton said the prison time is “important as a message.  This institution, the judiciary, cannot and will not knowingly tolerate perjury.”

            The case was investigated by the Social Security Administration Office of Inspector General (SSA-OIG).  The case was prosecuted by Assistant United States Attorneys Seth Wilkinson and Kate Crisham.

A citizen of China was sentenced today in U.S. District Court in Seattle to two years in prison for violating the Arms Control Export Act, announced Acting U.S. Attorney Annette L. Hayes.  SEE KEE CHIN, a/k/a, Alfred Chin, 56, of Hong Kong was arrested in Seattle on February 10, 2014, after he entered the United States as part of a scheme to obtain restricted parts and illegally smuggle them to China.  CHIN attempted to obtain and export accelerometers that are designated on the United States Munitions List, International Traffic in Arms Regulations.  The accelerometers are designed for low and zero gravity inertial navigation systems that can be used in satellites and launch vehicle applications.  At the sentencing hearing, U.S. District Judge John C. Coughenour noted that it is important to send a message to others overseas that violations of the Arms Control Act will be punished.

“We will hold to account those who circumvent requirements designed to protect our national security,” said Acting U.S. Attorney Annette L. Hayes.  “This defendant attempted to smuggle restricted equipment out of the United States knowing it was illegal to do so, and he admits he was working for others in China.  Ensuring our technology does not fall into the wrong hands remains a top priority.”

According to the criminal complaint, a U.S. company that sells accelerometers reported suspicious contact with a Canadian who wanted to purchase restricted equipment.  Between September 2013 and February 2014, the investigation revealed that the Canadian was inquiring on behalf of CHIN, who indicated he would personally pick up the order.  CHIN was arrested in Seattle after he made payment of over $85,000, and attempted to pick up the items.  CHIN had indicated he planned to smuggle the parts out of the country in his suitcase.  He previously discussed hiding the items in children’s toys.

“Accelerometers are fairly common, in fact most people have one in their pocket installed in their cellphone,” said Brad Bench, special agent in charge of HSI Seattle.  “What Chin was after wasn’t one of those.  The accelerometers he attempted to purchase are specialized pieces of equipment designed to be used in satellites.  This caught the attention of HSI special agents, whose job it is to keep restricted arms parts out of the hands of our nation’s enemies.  HSI is committed to thwarting clandestine attempts by foreign nationals to illegally export sensitive technology from the U.S.”

The Department of State promulgates the United States Munitions List, which consists of categories of defense articles and services that cannot be exported without a license issued by the Department of State.  The U.S. Munitions List includes the accelerometers ordered in this case. As a result, the export required an export license.

The case was investigated by U.S. Immigration and Customs Enforcement Homeland Security Investigation (HSI).  The case was prosecuted by Assistant United States Attorney Thomas Woods.

A 47-year old Olympia, Washington man who was convicted in May 2014, was sentenced today in U.S. District Court in Tacoma to 15 years in prison for production and possession of child pornography, announced Acting U.S. Attorney Annette L. Hayes.  MICHAEL T. LAURSEN was found guilty by U.S. District Judge Robert J. Bryan following a two day bench trial.  Evidence at trial revealed that LAURSEN supplied a 16-year-old with drugs and photographed her in sexually explicit conduct.  Judge Bryan imposed 10 years of supervised release following prison.

“This defendant betrayed the trust of a vulnerable young woman, claiming he would help and protect her when it really was just a ploy to exploit her,” said Acting U. S Attorney Annette L. Hayes.  “He persisted in blocking the efforts of her family to get her into drug treatment and law enforcement officers investigating the crime.  This 15 year prison sentence with ten years of federal supervision to follow will protect other vulnerable members of the community.”

According to records filed in the case, the victim was known to LAURSEN through her relatives.  She first met LAURSEN when she was 12-years-old.  After she turned 16 years old in 2012, LAURSEN initiated a sexual relationship with her, supplied her with drugs, and encouraged her to miss school.  In June 2012 and October 2012, LAURSEN took photographs of the victim, including photographs of his sexual conduct with her.  LAURSEN encouraged the victim to run away from home, and then had her stay with him in motel rooms, apartments, and other person’s homes.  He directed her to engage in sexually explicit acts while he took photographs.

“This joint federal, state and local agency investigation illustrates the lengths to which law enforcement will go to bring a child predator to justice,” said Brad Bench, special agent in charge of HSI Seattle. “Now, with this federal sentence, the public can rest assured Laursen will spend more than a decade behind bars with close federal monitoring to follow.”

The case was investigated by the Washington State Patrol-Missing and Exploited Children’s Task Force, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI)-South Sound Investigative Task Force, Bureau of Alcohol Tobacco and Firearms, and the Federal Bureau of Investigation.

The case was prosecuted by Assistant United States Attorneys Ye-Ting Woo and Seth Wilkinson.

            A 42-year-old man, who trolled neighborhoods in south King County looking for teen-age girls to recruit into prostitution, was convicted today in U.S. District Court in Seattle of four criminal counts related to sex trafficking, announced Acting U.S. Attorney Annette L. Hayes.  NATHAN BONDS was convicted of two counts of sex trafficking of a juvenile and two counts of transportation of a juvenile to engage in prostitution.  The jury deliberated for five hours following a four day trial.  U.S. District Judge John C. Coughenour scheduled sentencing for February 10, 2015, at 9:00 a.m.

            According to records in the case and testimony at trial, in April 2013, BONDS was parked outside a Kent convenience store when he spotted and befriended a 15-year-old girl who had run away from home.  BONDS let the girl borrow his cell phone, and then let her sit in his car, out of the rain.  BONDS manipulated the girl into accompanying him to a hotel room where he raped her.  Over the next few days, BONDS coerced the girl into working for him as a prostitute, convincing her she had no other options.  BONDS advertised the girl on Backpage.com and made her give him all of the money she earned from prostitution acts.  He also recruited the girl’s 17-year-old friend to work for him as a prostitute.  On April 19, 2013, BONDS transported the 15-year-old girl and her 17-year-old friend, as well as a drug-addicted, homeless adult woman that he had also manipulated into working for him as a prostitute, to Portland to engage in prostitution.  BONDS forced the two teens to take sexually explicit photographs, and then used some of those photographs to advertise them on Backpage.com.    

            Ultimately, both teens returned to their families and law enforcement identified BONDS as a sex trafficker.  He was arrested June 5, 2013, and law enforcement recovered the computer and cell phone he used to conduct the prostitution business, both of which contained evidence establishing BONDS’s longtime involvement in prostitution.

            Sex trafficking of juveniles is punishable by a mandatory minimum sentence of ten years, and up to life imprisonment.

            The case was investigated by the North-Central Sound Child Exploitation Task Force which includes officers and agents from the Kent Police Department and FBI.  The King County Prosecutors Office contributed substantial assistance to the prosecution.  The case was prosecuted federally by Assistant United States Attorneys Kate Crisham and Ye-Ting Woo.

WASHINGTON – The Justice Department today announced that Longview, Washington, landlords Linda and Bert Barber, and their management agent, Lori Thompson, have entered into a consent decree and have agreed pay $25,000 to resolve claims that they discriminated on the basis of disability by refusing to grant a reasonable accommodation to waive a $1,000 pet deposit for a tenant with mental disabilities who needed a dog as an emotional support animal.

The consent decree resolves a lawsuit filed by the department on July 1, 2013, alleging that the defendants refused to grant a waiver of the pet deposit despite numerous attempts by the tenant to provide documentation of her disability and her need for the emotional support animal.  The complaint also alleged that the defendants retaliated against the tenant after she filed a complaint with the U.S. Department of Housing and Urban Development (HUD).  After HUD investigated the complaint, it issued a charge of discrimination and referred the matter to the Justice Department.  The department’s complaint also alleged that defendants’ policies constituted a pattern or practice of discrimination in violation of the Fair Housing Act because they allowed reasonable accommodations for specially-trained service animals but precluded reasonable accommodations for emotional support animals.  Defendants also refused to consider accommodation requests unless tenants had their physician complete forms that threatened penalty of perjury and threatened to require the physician to defend the information provided in court.  Trial was set to begin on Nov. 19.

The settlement, which was approved today by Judge Benjamin H. Settle, requires the defendants to pay $20,000 to the HUD complainant and $5,000 to the United States.  The settlement also requires that the defendants adopt a reasonable accommodation policy that complies with the Fair Housing Act, receive training on the requirements of the Fair Housing Act and report to the department for a period of eighteen months on their compliance with the settlement.

“The Fair Housing Act ensures that persons with disabilities have an equal opportunity to use and enjoy housing,” said Acting Assistant Attorney General Vanita Gupta.  “This includes providing reasonable and necessary accommodations to persons who need assistance animals to help them with their disabilities.  The Justice Department will continue its vigorous enforcement of fair housing laws that protect the rights of persons with disabilities.”

“Landlords may not impose barriers that undermine the housing rights of people with disabilities,” said Acting United States Attorney Annette L. Hayes.  “This settlement requires training for property managers, and clear statements in all advertisements about fair housing/non-discrimination policies to ensure this conduct will not be repeated.”

“Property owners have a legal obligation to permit reasonable accommodations where doing so allows persons with disabilities to fully enjoy their homes,” said HUD Assistant Secretary Gustavo Velasquez for Fair Housing and Equal Opportunity.  “This consent decree reaffirms HUD’s commitment to working with the Department of Justice to take appropriate action anytime the Fair Housing Act is violated.”

Fighting illegal housing discrimination is a top priority of the Department of Justice.  The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status.  More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt.  Individuals who believe that they may have been victims of housing discrimination can call the Justice Department at 1-800-896-7743, e-mail the Justice Department at [email protected], or contact HUD at 1-800-669-9777 or through its website at http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp.

            The latest participant in a well-known fraudulent tax refund scheme will spend 18 months in prison for four counts of filing fraudulent tax returns, announced Acting U.S. Attorney Annette L. Hayes.  CHARLES SCOTT BROWN, 54, of Camas, Washington, was sentenced last week and ordered to pay more than $1.2 million in restitution to the Internal Revenue Service.  At the sentencing hearing U.S. District Judge Robert J. Bryan told him, “This is a huge tax theft, not a nickel and dime deal.  This is a serious, serious offense.  I don’t know how someone can do this and not expect to get jail time.”

            “This defendant is the latest in a line of U.S. and Canadian scammers illegally claiming huge tax refunds at the expense of law abiding Americans,” said Acting U.S. Attorney Annette L. Hayes.  “Now he is paying with his freedom, and with a share of his future earnings for the money he stole.”

            Between December 2007, and February 2008, BROWN submitted four fraudulent tax returns, claiming he was owed more than $1.2 million in tax refunds.  When the refund checks came in, BROWN used the money for travel to Mexico and Hawaii, shopping sprees at Nordstrom and Zappos.com, and luxury hotel stays with expensive dinners out.

“At IRS Criminal Investigation, our top priority is protecting the integrity of our nation’s tax system,” said Special Agent in Charge Teri Alexander.  “Together with the Department of Justice, we have a long history of identifying and prosecuting those who promote and use abusive tax schemes.  The 1099 OID scheme that was used by this defendant and others sentenced in this district is particularly troublesome. These individuals not only evaded their legal tax obligation, they took their fraud a step further and attempted to blatantly steal millions from the U.S. Treasury.  Our Special Agents are dedicated to ensuring that our tax laws are administered fairly under the law.  When unscrupulous individuals such as this defendant seek to take advantage of the taxpaying public, we will be there to bring them to justice.”

            Examples of other defendants prosecuted in the Western District of Washington for 1099 OID fraud include:

Franzie F. Colaco,

Nine years in prison

$6 million tax loss

Ronald L. Brekke,

12 years in prison

$6 million tax loss

33 months in prison

$360,000 tax loss

John Chung

One year in prison

$370,000 tax loss

Wonita Chung

18 months in prison

$612,237 tax loss

Raymond Jarlik-Bell

Eight years in prison

$705,276 tax loss

Peter Gibney

One year in prison

$465,136 tax loss

Debra Aaron

Five years in prison

$723,275 tax loss

            The IRS has more information on 1099 OID fraud here: http://www.irs.gov/uac/Newsroom/IRS-Releases-the-“Dirty-Dozen”-Tax-Scams-for-2014;-Identity-Theft,-Phone-Scams-Lead-List.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI).  BROWN was prosecuted by Assistant United States Attorney Marci Ellsworth.

The U.S. Department of Justice and Swedish Edmonds Hospital have entered into a settlement agreement to remedy alleged violations of the Americans with Disabilities Act (“ADA”), announced Acting United States Attorney Annette L. Hayes.  The U.S. Attorney’s Office for the Western District of Washington began the investigation after a complainant, who is deaf, alleged that during an emergency room visit to the hospital for her 13-year-old son she requested a sign language interpreter, but none was provided.  During the more than five hours in which her son was treated at the hospital following a severe fall, he underwent an EKG, blood draws, and stitches.  Because no sign language interpreter was made available, the complainant relied upon a non-medically certified interpreter on loan from her son’s school in order to communicate with doctors and staff regarding her son’s medical treatment.

“Every parent understands the importance of being able to communicate directly with a child’s healthcare provider, especially in a hospital setting,” said Acting U.S. Attorney Annette L. Hayes.  “This resolution demonstrates our unwavering commitment to protect the rights of those who are deaf or hard of hearing and to ensure that they too are able to communicate with health care professionals.”

Under the settlement reached October 10, 2014, the hospital admits no law violation, wrongdoing or misconduct but agreed to: (1) adopt policies and procedures that ensure that individuals who are deaf or hard of hearing receive auxiliary aids and/or services (including sign language interpreters when necessary) that insure effective communication; (2) train its staff on the ADA’s effective communication requirements; and (3) pay $3,000 to the complainant.

This case is a part of the Department of Justice’s Barrier-Free Health Care Initiative, which seeks to enforce the ADA’s prohibition of discrimination against disabled individuals by health care providers, including hospitals.  Through the Barrier-Free Health Care Initiative, U.S. Attorneys’ offices across the nation and the Department’s Civil Rights Division target their enforcement efforts on this critical area for individuals with disabilities—access to medical services and facilities.  The Barrier-Free Health Care Initiative is a multi-phase initiative that includes effective communication for people who are deaf or have hearing loss, physical access to medical care for people with mobility disabilities, and equal access to treatment for people who have HIV/AIDS.

The Department of Justice has a number of publications available to assist entities in complying with the ADA, including a Business Brief on Communicating with People Who Are Deaf or Hard of Hearing in Hospital Settings, at www.ada.gov/hospcombr.htm. For more information on the ADA and to access these publications, visit http://www.ada.gov or call the Justice Department’s toll-free ADA information Line at 800-514-0301 or 800-514-0383 (TDD). ADA complaints may be filed by email to [email protected].

This matter was handled by Assistant United States Attorney Christina Fogg.

Acting United States Attorney Annette L. Hayes announced today that Assistant United States Attorney (AUSA) Arlen Storm will lead efforts in the Western District of Washington in connection with the Justice Department’s nationwide Election Day Program with respect to the upcoming November 4, 2014, general elections.  AUSA Storm has been appointed to serve as the District Election Officer (DEO) for the Western District of Washington, and in that capacity is responsible for overseeing the District’s handling of complaints of election fraud and voting rights abuses in consultation with Justice Department Headquarters in Washington DC.  
                                                                                               
             “Every citizen must be able to vote without interference or discrimination and know that their vote will be counted without the corrosion of fraud,” said Acting United States Attorney Annette L. Hayes. “The Department of Justice will act promptly and aggressively to protect the integrity of the election process.”

In order to respond to complaints of election fraud or voting rights abuses and to ensure that such complaints are directed to the appropriate authorities, Acting United States Attorney Hayes stated that AUSA/DEO Storm will be on duty in this District until voting is complete.  He can be reached by members of the public at the following telephone numbers: 206-553-7970 or 253-428-3800. 

            The Department of Justice has an important role in deterring election fraud and discrimination, and combating these violations whenever and wherever they occur.  The Department’s long-standing Election Day Program furthers these goals, and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.  It also contains special protections for the rights of voters and provides that they can vote free from acts that intimidate or harass them.  Federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

            In addition, the FBI will have special agents available in each field office and resident agency throughout the country to receive allegations of election fraud and other election abuses.  Complaints can be called in to the FBI at 206-622-0460.

            Complaints about possible violations of the federal voting rights laws can also be made directly to the Civil Rights Division’s Voting Section in Washington by phone at 1-800-253-3931 or (202) 307-2767, by fax at (202) 307-3961, by email to [email protected] or by complaint form at http://www.justice.gov/crt/complaint/votintake/index.php.

Acting United States Attorney Annette L. Hayes said, “Ensuring free and fair elections depends in large part on the cooperation of the American electorate.   It is imperative that those who have specific information about discrimination or election fraud make that information available immediately to my Office, the FBI, or the Civil Rights Division.”

A former hard money lender who resides in University Place, Washington was sentenced today in U.S. District Court in Tacoma to five years in prison, three years of supervised release and $831,607 in restitution for his mortgage fraud scheme announced Acting U.S. Attorney Annette L. Hayes.  EMIEL A. KANDI, 37, pleaded guilty in April 2014 to Conspiracy to Submit False Statements in Loan Applications and to Make False Statements to the Department of Housing and Urban Development, and Submitting False Statements in Loan Applications.  The mortgage fraud scheme caused a loss of more than $800,000 to the U.S. Department of Housing and Urban Development and defrauded mortgage applicants as well.   At sentencing U.S. District Judge Ronald B. Leighton said KANDI “was a predator.  He took advantage of situations.  He found a method to secure funds… He was aggressive, he was pushing the envelope, he was a risk-taker without humility and without empathy – those characteristics are ruinous.”

“This defendant lined his pockets at the expense of taxpayers and his own clients,” said Acting U.S. Attorney Annette L. Hayes.  “His scheme diverted funds that had been set aside to help people achieve the dream of homeownership.  Kandi also hid as much as $35,000  in fraudulent charges in loan documents – money he siphoned directly into his bank accounts.  As the recent housing crisis demonstrated, mortgage fraud can have a devastating impact on homeowners and on the economy.”

“Whether fueled by greed or hubris, Emiel Kandi thought he could get away with exploiting members of our community and the federal government,” said Assistant Special Agent in Charge Carlos L. Mojica of the FBI’s Seattle field office.  “He boasted about being a wolf that preyed on the weak, but today he learned that criminal activity is not a badge of honor but a disgrace.  The FBI and its partners in the Puget Sound Mortgage Fraud Working Group are committed to holding people like Kandi accountable for their fraudulent schemes.”

According to records in the case, between 2008 and 2009, KANDI submitted false information to obtain home mortgage loans.  Some of these fraudulent home mortgage loans were designed to let KANDI cash out of properties that KANDI owned through his hard money lending.  KANDI’s lending activities were typically secured by a borrower’s home and charged a high rate of interest.  The hard money loans were structured, in some instances, to allow KANDI to seize control of a home if the borrower missed a single payment.  Other fraudulent home mortgage loans included an inflated and often disguised commission payment to KANDI.  In at least 19 loans, KANDI and his co-schemers submitted false information regarding the borrowers’ employment, salary, and intention to live in the home.  Some of the loan paperwork included inflated appraisals so that KANDI could maximize the money he obtained in the scheme.  The false statements were designed to make the loans appear legitimate and ensure that they would meet federal lending standards.  Many of the loans were processed by Pierce Commercial Bank and were insured by the Federal Housing Administration (FHA), a unit within the federal Department of Housing and Urban Development (HUD).

“As a result of his conduct the legislature changed the law to protect consumers who secure loans with their primary residence, even when they are characterized as a business loan,” Deborah Bortner, Director of Consumer Services at the Washington State Department of Financial Institutions (DFI) said. “Emiel Kandi was particularly predatory to some of our most vulnerable citizens.”

“In the last number of years, we have seen enormous and damaging developments in the mortgage and housing markets.  Convictions such as this set an important precedent that submitting false statements and fraudulent behavior will not be tolerated and will be aggressively pursued.  The United States Department of Housing and Urban Development, Office of Inspector General is deeply committed to working in partnership with other federal, state and local authorities to ensure that corrupt individuals do not use their positions to enrich themselves at the expense of the HUD and its federally-insured mortgage loan program,” said David R. Barnes, Special Agent in Charge.

False statements were made in loan applications for various properties in Western Washington, including properties in Pierce, King, and Clark County.  Under the terms of the plea agreement, KANDI agreed to make restitution of $831,607 due to HUD.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being investigated by the Puget Sound Mortgage Fraud Working Group, whose members include the FBI, the Department of Housing and Urban Development – Office of Inspector General, the Washington Department of Financial Institutions (DFI), and the Washington State Department of Licensing.  The case is being prosecuted by Assistant United States Attorney Brian Werner and Special Assistant United States Attorney Hugo Torres.  Mr. Torres is a King County Deputy Prosecutor specially funded by the Washington Department of Financial Institutions (DFI) to handle mortgage fraud cases in state and federal court.

In recognition of Hispanic Heritage Month, Washington Supreme Court Justice Mary Yu spoke to the U.S. Attorney’s Office for the Western District of Washington about her groundbreaking career in the law.  Justice Yu is of Hispanic and Asian heritage and is the first openly gay member of the Washington State Supreme Court.  Justice Yu’s father was an immigrant from China, her mother was from Mexico.  She is also the first Latina Justice and Justice of Asian heritage.

Justice Yu talked about her childhood in Chicago, and described her decision to pursue a legal career as a way to bring positive change in the community, especially for those who are disadvantaged.  Justice Yu described the sense of history she feels in the Supreme Court chambers and talked about the importance of remembering that the parties in the cases are real people, not just names on papers filed with the court.

Justice Yu was appointed by Governor Jay Inslee on May 1, 2014.  Justice Yu joined the Supreme Court after more than 14 years as an accomplished trial court judge in King County Superior Court where she heard a wide variety of criminal and civil cases and presided over hundreds of adoptions and other family law matters.

 Justice Yu has a deep record of service both on and off the bench, mentoring young attorneys, law clerks and students, co-chairing the statewide Minority and Justice Commission, lecturing at Seattle University, helping lead the bar association’s leadership institute for young attorneys, and serving on the board of FareStart and the advisory board for the University of Washington School of Law’s Gates Public Service Program.  She has officiated hundreds of weddings and adoptions, including our state’s first same-sex weddings on the first day couples of the same-sex could legally marry in our state.

Before becoming a judge, Justice Yu served as Deputy Chief of Staff to King County Prosecutor Norm Maleng and as a deputy in the Criminal and Civil Divisions. Prior to attending law school, Justice Yu worked in the Peace and Justice Office for the Archdiocese of Chicago as staff and later appointed by Cardinal Bernardin as Director of that Office.

Justice Mary Yu was raised in Bridgeport (a south side neighborhood in Chicago). She is the first in her family to graduate from college.

An Olympia, Washington tax preparer was sentenced today in U.S. District Court in Tacoma to two years in prison for a tax fraud scheme in which he falsely claimed tax refunds while victimizing his clients, announced Acting U.S. Attorney Annette L. Hayes.  KYLE BAXTER, 31, pleaded guilty in July 2014 for the scheme that netted him more than $250,000 over three years.  “You were evil and criminal while doing this,” said U.S. District Judge Robert J. Bryan.  “These are serious offenses that hurt a group of people and the public.”

Court records in the case reveal BAXTER admitted that from 2010 through 2013, he represented himself to be a provider of tax preparation services operating under the name “Baxtax.”  BAXTER maintained a website for “Baxtax,” and promoted his services through advertisement in local media, even though BAXTER never obtained a Preparer Tax Identification Number, ordinarily required of any person or entity that prepares tax returns for a fee.  During that three-year period, BAXTER, a firefighter, filed at least 280 tax returns.  Many of his clients were fellow firefighters, as well as emergency medical technicians and paramedics.  In many filings, BAXTER claimed deductions and credits for which his clients were plainly ineligible, such as child tax credits for clients without children.  The false filings increased the refunds paid by the IRS to the clients.  BAXTER provided clients paper copies of tax returns purportedly reflecting their filings.  However, the copies were not what had been provided to the IRS.  BAXTER actually filed returns with distorted numbers that yielded even larger refunds, and BAXTER secretly diverted significant portions of these refunds to himself.  Over the course of the scheme, BAXTER stole at least $250,000 in taxpayer funds by partially diverting refund payments in this manner.  BAXTER was ordered to pay $255,033 in restitution to the Internal Revenue Service.

The case was investigated by the Internal Revenue Service-Criminal Investigation.  The case was prosecuted by Assistant United States Attorney Rebecca Cohen.

            A 67-year-old Renton, Washington man who illegally collected his father’s Social Security benefit checks for 17 years after his father’s death was sentenced today to a year in prison, announced Acting U.S. Attorney Annette L. Hayes.  PATRICK M. DERRICK pleaded guilty to theft of public funds in May 2014, admitting that for 17 years following his father’s death he continued to collect and spend the Social Security payments that were wrongly deposited in his father’s bank account.  In order to execute the fraud, DERRICK repeatedly forged his father’s signature on bank documents.  At sentencing U.S. District Judge Ricardo S. Martinez noted that Social Security funds are public money set aside for the needy and disabled.  DERRICK “stole from the most vulnerable who need these benefits to survive,” Judge Martinez said.

            According to records filed in the case, DERRICK’s father died in November 1996.  DERRICK never informed the Social Security Administration (SSA) of his father’s death.  Monthly benefits continued to be paid into the father’s bank account, and DERRICK would withdraw the money by writing a check to himself and forging his father’s signature.  He stole 201 monthly Social Security payments totaling $219,032.  In September 2013, SSA learned of the father’s death.   When interviewed by federal agents, DERRICK initially denied knowing about the payments to his father’s account and denied taking the money.  DERRICK had a 21-year military career, followed by a 17-year career with Boeing.  Prosecutors argued that this was not a case where the defendant was living on the margins and needed the extra money to survive.

            Addressing the court, DERRICK said he started taking the money to “make ends meet” between his military and Boeing careers, and never seemed to be able to catch up with the bills.  He admitted using the money to pay college tuition for his daughter and to make donations to his church.  He said it is a relief that the “wait for the knock on the door is over.”

The Western District of Washington is a national leader in pursuing fraud on Social Security benefit programs.  Eight other defendants have been charged over the last 18 months with theft of government funds for fraudulently collecting Social Security benefits for years after their parents’ death.  As a result of the prosecutions, courts in this district have ordered in excess of $1 million in restitution to the United States.  The following are the longest running of these frauds:

RAYMOND C. O’DELL, 70, who now resides in Arizona, was sentenced to six months in federal prison, six months of home detention, $188,436 in restitution and a $20,000 fine for theft of government funds.  O’DELL’s mother died in November 1989, but he failed to notify Social Security and benefits continued to be paid into their joint account. On at least two occasions between November 1989 and June 2012, O’DELL contacted the Social Security Administration to update his mother’s contact information and never informed anyone of her death.

PATTY BUCHANAN, 57, is one of the largest Social Security benefit fraud cases prosecuted as part of the initiative in the Western District of Washington.  BUCHANAN’s father died in May 1993, but she continued to receive and cash his benefit checks using a check cashing business.  She told the outlet her father was infirm and homebound and that she had power of attorney.  Every month for 19 years she cashed the checks – in all, 235 checks for a total of $239,083.  When one of the tellers at the check cashing business became suspicious, BUCHANAN forged a fraudulent power of attorney document.  When staffers at the outlet called to try to speak with BUCHANAN’s father, BUCHANAN had a male friend pretend to be her father.  Ultimately, an anonymous tip to Social Security ended the fraud in December 2012.  BUCHANAN was sentenced to 18 months in prison in June 2013.

DENNIS JAY GORIN, 76, of Eatonville, fraudulently collected about $100,000 in Social Security benefits belonging to his mother following her death in around 2003. GORIN did not notify federal or state authorities of his mother’s death and personally disposed of his mother’s body on property in a rural area. Between 2003 and 2013, GORIN forged his mother’s signature to embezzle an estimated $100,000 worth of Social Security benefits. GORIN pleaded guilty on May 21, 2013, and was sentenced in September 2013 to ten months in prison.

CLAUDIA RUTH GREENAMYER, 72, of University Place, fraudulently collected $219,960 following the death of her mother in 1996 and her father in 2000. The payments were made to bank accounts GREENAMYER held jointly with her parents. GREENAMYER continued to use the money without telling Social Security her parents were deceased. She forged signatures to continue the theft, and when confronted by agents in February 2013, she claimed to have seen her parents one month earlier. GREENAMYER pleaded guilty to theft of government funds on May 15, 2013 and was sentenced in September 2013 to three months in prison.

DAVID MICHAEL COSTA, 77, of Sammamish, fraudulently collected $297,948 of his mother’s Social Security benefits following her death in 1989. While COSTA originally thought the payments coming to the joint bank account were from an annuity, in 1992 he learned they were Social Security payments. Rather than alert authorities and pay back the $40,000 that had wrongly been paid, COSTA continued to collect the benefits for more than 15 years. COSTA forged his mother’s name on documents and substituted his address for hers on all records, updating it three different times over the years. COSTA pleaded guilty on June 3, 2013, and was sentenced in September 2013 to ten months in prison.

These cases were investigated by the Social Security Administration Office of Inspector General (SSA-OIG) and are being prosecuted by Assistant United States Attorney Seth Wilkinson as part of a partnership venture between the Social Security Administration Office of General Counsel and the United States Attorney’s Office.

WASHINGTON – A federal grand jury in Seattle returned a second superseding indictment late yesterday charging a Russian national with 11 additional counts and further detailing his alleged scheme to hack into businesses and steal credit card information for later sale over the Internet on “carding” websites.

The now 40-count superseding indictment alleges that Roman Valerevich Seleznev, aka “Track2,” 30, of Vladivostok, Russia, was involved in the theft and sale of more than 2 million credit card numbers.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Annette L. Hayes of the Western District of Washington made the announcement.

“The charges returned by the grand jury detail a criminal scheme that continued right up until Mr. Seleznev’s arrest in July,” said Acting U.S. Attorney Hayes.  “As set forth in the indictment, the government expects to prove at trial that Seleznev was a leader in the marketplace for stolen credit card numbers, and even created a website offering a tutorial on how to use stolen credit card numbers to commit crime.”

“The additions in this superseding indictment show how cybercriminals use the Internet not only to infiltrate and steal sensitive data, but also to teach other criminals how to navigate the credit-card selling underworld and get equipment that can be used to defraud U.S. citizens,” said Assistant Attorney General Caldwell.  “The Criminal Division is committed to investigating these thefts and uncovering the methods of computer hackers to stay one step ahead of them and bring them to face justice.”

 The superseding indictment charges Seleznev with 11 counts of wire fraud, nine counts of intentional damage to a protected computer, nine counts of obtaining information from a protected computer, nine counts of possession of 15 or more unauthorized access devices and two counts of aggravated identity theft.  Seleznev is currently scheduled for trial on Nov. 3, 2014, and will be arraigned on the new charges sometime next week.

            According to court documents, between October 2009 and October 2013, Seleznev allegedly hacked into retail point of sale systems and installed malicious software to steal credit card numbers from various businesses.  Seleznev allegedly created and operated the infrastructure to facilitate the theft and sale of credit card data, used servers located all over the world to facilitate his operation, and sold stolen credit card data on a website known as “2pac.cc.”

            Seleznev is also charged in a separate indictment in the District of Nevada with participating in a racketeer influenced corrupt organization (RICO) and conspiracy to engage in a racketeer influenced corrupt organization, as well as two counts of possession of 15 or more counterfeit and unauthorized access devices.

The charges contained in the indictments are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
The case is being investigated by the U.S. Secret Service Electronic Crimes Task Force, which includes detectives from the Seattle Police Department.  The case is being prosecuted by Assistant U.S. Attorneys Norman M. Barbosa and Seth Wilkinson of the Western District of Washington and Trial Attorney Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section.  The Office of International Affairs and the U.S. Attorney’s Office for the District of Guam provided substantial assistance in this case.

            A Canadian tax fraud promoter who was extradited from Canada and convicted at trial was sentenced today to nine years in prison for conspiracy and three counts of wire fraud, announced Acting U.S. Attorney Annette L. Hayes.  FRANZIE F. COLACO, 54, of Brampton, Ontario, Canada was convicted in July 2014 following a two-day jury trial. COLACO conspired with Ronald L. Brekke and others to promote a scheme known as “1099 OID” fraud.  Under this scheme, tax filers use fraudulent Form 1099-OID forms to claim tax refunds equal to the value of the filer’s personal debt.  COLACO promoted this scheme throughout Canada and encouraged Canadian citizens to request refunds from the U.S. government.  U.S. District Judge John C. Coughenour found COLACO responsible for more than $6.2 million in restitution to the Internal Revenue Service, and cited the “audacious nature of the scheme,” in imposing the lengthy sentence on COLACO.

            “This defendant promoted theft of U.S. tax dollars by convincing Canadians they could get rich at others’ expense,” said Acting U.S. Attorney Annette L. Hayes.  “This is a fraud – pure and simple – and one that will not go unpunished.”

The IRS flagged the vast majority of the 1099 OID filings as frivolous, but refund claims totaling approximately $14 million were paid to followers of Brekke and COLACO before the IRS detected the fraudulent nature of the returns. About two-thirds of those filing for money they didn’t deserve were Canadians who had never paid any income tax in the United States and were not owed any money by the U.S. Treasury. Those submitting the phony claims were told to quickly move the money to Canada where it would be more difficult for the IRS to recover the money.  COLACO personally collected over $600,000 in fraudulent refunds under the scheme.

“In all my years investigating tax crimes, this is one of the most egregious cases I have ever seen,” said Special Agent in Charge Teri Alexander of IRS Criminal Investigation.  “It is unfathomable that Colaco and his co-conspirators concocted a scheme wherein their followers could extract hundreds of millions of taxpayer funds, especially when many of their adherents were not even citizens of this country and had never paid a dime of income tax.”

The IRS has been able to get just over half of the $14 million back, resulting in a restitution figure for COLACO and Brekke of $6,206,998.

Brekke, the leader of the scheme, was sentenced in June 2012 to 12 years in prison.  Other defendants convicted and sentenced include Donald Mason who received a $360,000 fraudulent refund check.  He unsuccessfully attempted to help his wife receive an additional $333,000. He was sentenced to 33 months in prison. John Chung received a $370,000 fraudulent refund check.  He was sentenced to a year in prison.  Finally, Wonita Chung helped promote the scheme, and unsuccessfully attempted to receive approximately $210,000 in funds.  She was sentenced to 18 months in prison.

The IRS has more information on 1099 OID fraud here: http://www.irs.gov/uac/Newsroom/IRS-Releases-the-“Dirty-Dozen”-Tax-Scams-for-2014;-Identity-Theft,-Phone-Scams-Lead-List
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The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the United States Secret Service. The case was prosecuted by Assistant United States Attorneys Thomas Woods and Francis Franze-Nakamura.

A Tacoma, Washington man who claimed more than $1.8 million in false income tax refunds was sentenced today in U.S. District Court in Tacoma to 46 months in prison, announced Acting U.S. Attorney Annette L. Hayes.  SEENEY RISTICK, 33, pleaded guilty in June 2014.  At sentencing U.S. District Judge Benjamin H. Settle noted that the dollars stolen were paid into the system by hard-working tax payers and intended to support all the things that the government does.  Because of RISTICK’s actions that did not occur.

According to the plea agreement, between 2008 and 2013, RISTICK presented various fraudulent papers and forms to different tax preparation firms in Western Washington and directed the filing of bogus tax returns in his own name and the names of others, to include relatives and friends.  To facilitate the scheme, RISTICK created false income journals and falsely claimed self-employment income and various tax credits, all with the intent to defraud the Internal Revenue Service.  RISTICK typically approached the tax preparers by himself and presented fraudulent, and sometimes forged, powers of attorney, which purported to allow RISTICK to represent the named tax-filer in financial matters.  At other times, he would accompany individuals to the tax preparation firms and assist them in filing the false tax return.  RISTICK then charged the person for filing the false tax return between $500 and $1500 for the service he provided.

In all, RISTICK was involved in filing 524 fraudulent federal income tax returns, claiming a total of $1,826,944 in refunds.  The U.S. Treasury paid out $1,584,398 before the fraud was uncovered.  None of the money has been repaid.

“We want every American taxpayer to claim every entitlement, deduction, and credit that they are lawfully due,” said Special Agent in Charge Teri Alexander of IRS Criminal Investigations.  “However, when someone like Ristick undertakes to submit false returns claiming undue refunds, they effectively steal from those paying their honest share.  IRS Criminal Investigation will tirelessly pursue those who would claim false refunds thereby undermine the tax system.”

The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI). The case was prosecuted by Assistant United States Attorney Steven Masada.

            A 55-year-old Edmonds, Washington man who moved more than $150 million from overseas sources, through his U.S. bank accounts, and then back overseas, was sentenced today in U.S. District Court in Seattle to two years in prison, announced Acting U.S. Attorney Annette L. Hayes.  PAVEL ROMBAKH, who immigrated to the U.S. from Ukraine in the 1990’s, pleaded guilty to operating an unlicensed money transmitting business in May 2014.  As part of his plea, he forfeited to the government cash and property worth $510,000.  At sentencing, U.S. District Court Judge James L. Robart stated, “He moved a staggering $150 million….  The money came out of Russia and Cyprus, into the U.S. and was wired out to Latvia, the United Arab Emirates and China.  That makes this a serious offense.”

            According to records filed in the case, over a five year period, ROMBAKH received wires of more than $150 million from overseas and then wired the funds back out to other accounts.  Many of the wires originated in Russia and Cyprus and were promptly re-wired to England, Latvia, the United Arab Emirates, and China.  ROMBAKH kept a small percentage of the funds as his fee.  Investigators were not able to determine the source of the funds, nor what they were used for overseas.  Defense attorneys claimed some of the money went to a mining company in Mongolia, but no evidence corroborating this claim was found in the investigation.

            “IRS Criminal Investigation is committed to ensuring the integrity of our nation's banking system,” stated Special Agent in Charge Teri Alexander.  “Financial Institutions are regulated by federal law.  Rombakh attempted to circumvent that law by acting like a bank but without the necessary oversight that protects our overall financial system.”

            A violent sex offender who failed to register as required by law was sentenced today in U.S. District Court in Seattle to 99 months in prison, announced Acting U.S. Attorney Annette L. Hayes.  TIMOTHY G. DORAN, 48, of Seattle was arrested in December 2011.  DORAN pleaded guilty to failing to register as a sex offender in September 2012.  However, over the last two years prosecutors presented evidence tying DORAN to the murder of a woman in Vietnam.  U.S. District Judge Robert S. Lasnik ruled prosecutors had proven DORAN guilty of the murder by clear and convincing evidence, thus making the murder something he could consider at sentencing.  Today Judge Lasnik noted DORAN had a history of “multiple instances of violence and depravity against women he claimed to love and cherish…He is a clear and present danger to any woman he establishes a relationship with…. He is a serial domestic abuser.”

            “This case demonstrates our commitment to working with our law enforcement partners around the world to ensure justice is done,” said Acting United States Attorney Annette L. Hayes.  “Working with law enforcement in Vietnam, bringing witnesses to court here in Seattle, our prosecutors made sure all the relevant facts could be considered by the court to hold this defendant accountable.”

            According to records filed in the case, DORAN has a lengthy history of violence against women, including rape and assaults.  In 1990 he was convicted of breaking his wife’s ankle and using a knife to make a cut across her neck.  In 1992 DORAN raped and brutally beat his ex-girlfriend, leaving her and her children to die in a home filling with natural gas.  He was sentenced to more than seven years in prison and was required to register as a sex offender.  Following his release from prison for that crime, his new girlfriend sought a protective order because he threatened her with knives.

            In mid-2010, DORAN moved to Vietnam without updating his sex offender registration.  DORAN became involved with a young woman in Vietnam and in the early morning hours of March 6, 2011, he strangled her and left her body hidden in a closet in the home.  Within days DORAN fled Vietnam and returned to the U.S.  He traveled between various states, again failing to register as a sex offender.  Following his arrest, U.S. prosecutors worked with law enforcement in Vietnam to obtain and present evidence tying DORAN to the murder.

            DORAN will be on five years of supervised release following his prison term.

            The case was investigated by the U.S. Marshal’s Service.  The case was prosecuted by Assistant United States Attorneys Andrew Friedman, Jerrod Patterson and Brian Werner.

Acting U.S. Attorney Annette L. Hayes announced today that the Puget Sound Educational Service District and the University of Washington will share a Department of Justice grant of nearly $1.5 million to improve school safety by early intervention with at-risk students.  The grant is part of $63 million being awarded nationwide as part of the Comprehensive School Safety Initiative (CSSI).  CSSI is a large-scale, multi-agency research effort to build knowledge about effective approaches to increasing school safety nationwide.

            “This grant will help identify ways to keep at-risk kids in school and create safer schools for all,” said Acting U.S. Attorney Annette L. Hayes. “The University of Washington will take a rigorous look at the data on early interventions to identify programs that successfully prevent anti-social behavior before it starts.”

            In addition to the research grant, the City of Seattle was awarded a $20,000 grant to become part of the National Forum on Youth Violence Prevention.  As part of the program, Seattle is eligible for an additional $100,000 once it develops a plan to align and coordinate existing resources, engage in community outreach, and increase the engagement of youth, the faith community, law enforcement, victim services and others to combat youth violence.

         Through the Comprehensive School Safety Initiative, the Office of Justice Programs’ National Institute of Justice (NIJ) is funding 24 research projects under two different solicitations. The first, “Investigator-Initiated Research,” includes nine awards to research organizations totaling more than $18 million. The second, “Developing Knowledge about What Works to Make Schools Safe,” provides more than $45 million to 15 school districts and their research partners.  The Western Washington grant is in the second group.

            “We know a great deal about how to make schools safe in general but very little about the specifics for various settings and populations,” said Dr. William J. Sabol, Acting Director of NIJ. “With this $63 million investment, the nation will gain an understanding of school safety that is scientifically sound, practical, and that can be easily interpreted and used by schools.”

 President Obama’s January 2013 plan to end gun violence emphasized keeping guns out of potentially dangerous hands and recognized that additional actions are needed to make our schools safer. CSSI was launched in early 2014 in response to a Congressional request for a broad, research-based effort to increase safety in the nation’s schools.

The initiative has three primary goals: to collect national-level data; to convene stakeholders to identify and share best practices; and to conduct innovative research and evaluate pilot projects in school districts. The programs and policies within CSSI are designed to produce evidence about what works in such areas of school safety as effectiveness of school resource officers and mental health professionals, violence and bullying reduction, and effectiveness of such restorative justice interventions as youth courts. The initiative will also examine potential unintended consequences of school safety efforts, including the excessive use of exclusionary discipline and arrests of students.

Specifically, the grant to the Puget Sound Education Service District and the University of Washington calls for the evaluation of a three-step early warning and intervention process that identifies students at risk and matches effective, brief interventions to meet their needs.  The process is designed to shift schools away from disproportionate, reactive and punitive discipline towards a more proactive and positive approach.

            The National Forum on Youth Violence Prevention aims to build a national conversation about youth and gang violence to increase awareness, drive action, and build local capacity to more effectively address youth violence. It models a new kind of federal and local collaboration, encouraging its members to change the way they do business by sharing common challenges and promising strategies, through comprehensive planning and coordinated action.  Currently active in Boston, Chicago, Detroit, Memphis, and Salinas and San Jose, California, today DOJ announced the addition of Long Beach, California; Cleveland, Ohio; Louisville, Kentucky; Seattle, Washington; and Baltimore, Maryland.

         Although NIJ has primary responsibility for CSSI, the program is a collaborative effort among more than 20 federal partners, including the Departments of Justice, Education, Health and Human Services, Homeland Security, and the Treasury. This partnership will allow the federal government to make a significant impact on school safety by investing limited funds in research that has practical applications for every school in the nation. By determining what interventions work best for specific schools and students, CSSI will provide professionals with a body of knowledge to help them make decisions about which programs will be most effective — and most cost effective — for their particular schools and their challenges.

         A list of the awards and more information about CSSI are available at www.nij.gov, keywords: “School Safety.”

The Office of Justice Programs (OJP), headed by Assistant Attorney General Karol V. Mason provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice, and assist victims. OJP has six bureaus and offices: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime; and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART).

            The Executive Office of United States Attorneys has selected Annette L. Hayes to serve as Acting United States Attorney pending the appointment and confirmation of a presidentially appointed United States Attorney for the Western District of Washington.  Ms. Hayes has served as the First Assistant United States Attorney since 2010.  In that role she has been second-in-command of the U.S. Attorney’s Office and a key leader in both criminal and civil litigation in the office.  Ms. Hayes takes over from Jenny A. Durkan, who stepped down yesterday.

            Annette L. Hayes joined the U.S. Attorney’s Office in 1997 as an Assistant United States Attorney in the Criminal Division. She was assigned to prosecute a range of drug cases including large-scale, international trafficking and cartel related cases.  In 2002, she became the Deputy Supervisor of the Complex Crimes Unit where she prosecuted cyber hacking and intellectual property cases while working with law enforcement on outreach to the private sector.  In 2005, she became one of the supervisors of the General Crimes Unit where she worked closely with and trained many new attorneys on a range of federal crimes including child exploitation, drug, fraud, identity theft, immigration and violent crimes cases.

            Prior to joining the U.S. Attorney’s Office, Ms. Hayes spent her first six years as an attorney handling a variety of civil litigation matters at law firms in Seattle and Washington, D.C.

            Ms. Hayes is a graduate of Cornell Law School and Williams College.

WASHINGTON, DC—Today the U.S. Department of Justice, Office of Community Oriented Policing Services (COPS) announced funding awards to seven cities and counties in the Western District of Washington, aimed at creating, and in some cases protecting, 33 law enforcement positions.  Nearly $121 million will be awarded nationally, including $6.2 million for Western Washington.

“This essential program will put more officers on our streets and in our schools to improve community safety,” said U.S. Attorney Jenny A. Durkan.  “It was a competitive process for grants, and today’s announcement is a tribute to these departments who demonstrated how they will serve their communities.”

The Seattle Police Department and Tacoma Police Department each received funding for ten new officers.  Auburn is funded for five officers, Federal Way four officer and the cities of Fife and Aberdeen one officer each.  The Skagit County Sheriff’s Department was awarded funding for two officers.

“The COPS Office is pleased to assist local law enforcement agencies throughout the country in addressing their most critical public safety issues,” said Ronald L. Davis, Director of the COPS Office.  “Funding from this year’s program will allow many cities and counties to apply new sworn personnel to issues related to violent crime, property crime, and school safety.”

The 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 2014 hiring program were selected based on their fiscal needs, local crime rates, and community policing plans.

The COPS Office is a federal agency 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.

For the entire list of grantees and additional information about the 2014 COPS Hiring Program, visit the COPS website at www.cops.usdoj.gov.

            A 43-year-old Marysville, Washington man was sentenced today in U.S. District Court in Seattle to nine years in prison for distribution of child pornography, announced U.S. Attorney Jenny A. Durkan.  TODD ALAN RAMEY was arrested in November 2013 following the serving of a search warrant at his Marysville home.  RAMEY was identified in an investigation by U.S. Immigration and Customs Enforcement’s Homeland Security Investigation (HSI) of a foreign based website used to exchange images of child rape and sexual abuse.  The forensic review of RAMEY’s computer revealed more than 14,000 images and 1,700 videos of children being raped and sexually molested.  RAMEY was ordered to pay $12,000 in restitution to the victims depicted in the photos.  U.S. District Judge James L. Robart imposed 15 years of supervised release following the prison sentence.

            According to records filed in the case, RAMEY came to the attention of law enforcement because of his use of a website involved in the exchange of child pornography.  In addition to the child pornography, RAMEY distributed images of children with descriptions of how he planned to rape or molest them.  RAMEY had been investigated previously in connection with sexual contact with a 14-year-old.  RAMEY pleaded guilty to distribution of child pornography in February 2014.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice.  Led by United States Attorneys= Offices and the Criminal Division's Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.justice.gov/psc

            The case was investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigation (HSI) and was prosecuted by Assistant United States Attorney Kate Vaughan.

The U.S. based leader of a drug and gun trafficking organization with direct links to a violent Mexican drug cartel was sentenced today in U.S. District Court in Seattle to 27 years in prison, announced U.S. Attorney Jenny A. Durkan.  CRISTIAN BERRELLEZA-VERDUZCO, 31, of Everett, Washington, pleaded guilty in April 2013 to Conspiracy to Distribute Controlled Substances; Conspiracy to Commit Money Laundering; Conspiracy to Interfere with Commerce by Robbery; Conspiracy to Possess Firearms in Furtherance of a Drug Trafficking Crime, and Possession of a Firearm in Furtherance of a Drug Trafficking Crime.  BERRELLEZA-VERDUZCO and his brother Victor were the U.S leaders of a large Mexico based drug and gun trafficking ring with ties to the violent Beltran-Leyva drug cartel.  The men’s father is the leader of the drug trafficking organization and remains a fugitive in Mexico.  At sentencing U.S. District Judge Robert S. Lasnik said all three of the BERRELLEZA-VERDUZCO brothers are imprisoned in the U.S., a reality that was “set in motion by their father.”

“This sentence helps protect us from a very dangerous man and organization.  This defendant raked in massive profits from the scourge of heroin addiction.  He and his family sought to control the entire supply chain, from growing the poppies, to manufacturing the heroin, to selling it in this District,” said U.S. Attorney Jenny A. Durkan.  “And just as they moved their drugs north, they wanted to move high powered weapons back to Mexico to cause further cartel related violence.”

“From his base in an unassuming Snohomish County neighborhood, Berrelleza-Verduzco ran a multimillion dollar heroin and meth trafficking operation that took multiple federal, state and local agencies in three states to dismantle.” said Brad Bench, special agent in charge of Homeland Security Investigations in Seattle. “He fed the destructive habit of Washington addicts and fueled Mexican cartel violence with drug money. Incarcerating Berrelleza-Verduzco and his co-conspirators is a significant victory for public safety, especially considering the massive increase in local teens dying of heroin overdoses in recent years.”

According to records filed in the case, CRISTIAN BERRELLEZA-VERDUZCO directed both the smuggling of meth and heroin from Mexico into the United States and in efforts to smuggle guns back to Mexico.  Phone calls recorded in the wire-tap investigation reveal he frequently threatened to harm or kill those whom he had felt had failed him.  BERRELLEZA-VERDUZCO was arrested in Arizona with firearms, including an AK-47 style assault weapon, in October of 2011.  He was prosecuted and deported by state authorities, but quickly returned to Washington to continue his gun and drug trafficking activities.

BERRELLEZA-VERDUZCO and 29 co-conspirators were arrested in March 2012, following a lengthy investigation.  During the investigation agents seized multiple kilos of heroin, pounds of methamphetamine, and more than a dozen firearms, including military-style assault rifles which were bound for cartel members in Mexico.  In all, 34 people were charged in the case.  Most have been sentenced, some to prison terms in excess of ten years.  One year ago, Victor Berrelleza-Verduzco was sentenced to 20 years in prison, and his brother Ivan Berrelleza-Verduzco was sentenced to seven years in prison.

This was an Organized Crime and Drug Enforcement Task Force (OCDETF) investigation, providing supplemental federal funding to the federal and state agencies involved. The case was investigated by the ICE’s Homeland Security Investigations, the Bureau of Alcohol, Tobacco and Firearms (ATF), the Drug Enforcement Administration (DEA), the Lake Stevens Police Department, the Snohomish Police Department, Washington State Patrol, the Snohomish Regional Drug Task Force and the Seattle Police Department.

The case is being prosecuted by Assistant United States Attorney Vince Lombardi.

A south King County man was sentenced today in U.S. District Court in Seattle to seven years in prison for using a firearm during a drug crime that turned deadly, announced U.S. Attorney Jenny A. Durkan.  LENNY BRIKN, JR, 19, of Federal Way, and his half-brother Deshawn Boykin attempted to rob two drug dealers of two pounds of marijuana.  After holding the men at gunpoint, Boykin was fatally shot as he and BRIKN tried to run away.  At sentencing U.S. District Judge Robert S. Lasnik said, “firearms in the hands of people who cannot control themselves continues to create tragedy in our community.”

“From any perspective, this case is a pure tragedy,” said U.S. Attorney Jenny A. Durkan.  “One young man is going to prison and his brother is dead -- all over marijuana valued at less than $5,000.  This is a further reminder that guns and drugs are a deadly combination.”

According to the records filed in King County Superior Court as well as the indictment, David Ross, 35 of Renton, Washington, and an associate arrived at a Federal Way apartment complex to sell marijuana to the two men.  Ross was armed with a gun, despite having two previous felony drug convictions that prohibit him from possessing a firearm. BRIKN and Boykin drew “Mac 10” style semi-automatic pistols, ordered Ross and his associate to lie on the ground, and attempted to rob them of the marijuana they brought to the drug deal.  BRIKN and Boykin ultimately ran away, and Ross drew his gun and fired multiple times at the fleeing men.  Boykin was hit twice and died of his wounds at St. Francis Medical Center.

Ross is charged with conspiracy to distribute marijuana, unlawful possession of a firearm and discharging a firearm in furtherance of a drug trafficking crime.  Discharging a firearm in furtherance of a drug trafficking crime carries a mandatory minimum ten year sentence in addition to any other sentence imposed in the case.  Ross is scheduled for trial in January 2015.

The case was investigated by the Federal Way Police Department and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.  The case is being prosecuted by Assistant United States Attorney Todd Greenberg.

            Today, President Obama and Attorney General Eric Holder announced the Attorney General will be resigning.  For six years Attorney General Holder has led the Department of Justice with honesty, integrity and a profound commitment to justice.  He has worked tirelessly to keep our country and our people safe.  It has been my privilege to work with Attorney General Holder for five years. I am grateful for his service and wish him well as he returns to private life and new challenges.

The former cross country ski coach at a Seattle private school was indicted today by a federal grand jury for five child pornography related offenses, announced U.S. Attorney Jenny A. Durkan.  JASON CHRISTOPHER PAUR, 44, of Seattle was arrested by the Royal Canadian Mounted Police in December 2013 at Silver Star ski area in British Columbia, Canada.  The arrest came after female students on a school sponsored field trip discovered a video camera had been hidden in their bedroom.  The camera had been positioned to video-tape the young students while they got dressed after showering.  PAUR is charged with two counts of Production and Transportation of Child Pornography, Production of Child Pornography with Intent to Transport, Possession of Child Pornography and Transportation of Minors with Intent to Engage in Criminal Sexual Activity.  PAUR remains in Canadian custody.
                                   
According to records in the case and the indictment, the investigation revealed that PAUR had secretly recorded students while on the annual field trip in 2011 and 2012.  The camera seized in Canada contained images of students between the ages of 14 and 17 being secretly filmed while changing clothes or after exiting the shower.  The indictment alleges PAUR used the pictures for his own sexual gratification, and transported the pictures from Canada to the U.S.  The indictment further alleges that PAUR traveled with the juveniles to Canada knowing that he planned to film them for his own sexual gratification.

PAUR was immediately removed from the field trip by the chaperons who notified police.  PAUR was fired by the school, which has fully cooperated with law enforcement.

The charges contained in the indictment are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

The case is being investigated by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI).  The case is being prosecuted by Assistant United States Attorney Kate Vaughan.

Press contact for the U.S. Attorney’s Office is Emily Langlie at (206) 553-4110 or [email protected].

            A 28-year-old Tacoma man was sentenced today in U.S. District Court in Tacoma to 130 months in prison for Conspiracy to Possess with Intent to Distribute Heroin and Possession of a Firearm in Furtherance of a Drug Trafficking Offense, announced U.S. Attorney Jenny A. Durkan.  ARNOLDO MENDOZA RAMOS is a Mexican national who likely will be deported following his prison term.  At the sentencing hearing U.S. District Judge Ronald B. Leighton noted heroin is a resurgent problem in Western Washington and a threat to our communities.

            “Heroin is a growing public safety and public health problem,” said U. S. Attorney Jenny Durkan.  “We will hold the people dealing death accountable.”

            According to records filed in the case, on four occasions in September and October 2013, RAMOS, and his girlfriend Ana L. Gaytan Torres, 38, distributed heroin to a person working with law enforcement.  The heroin sales were made at various parking lots in Tacoma and Lakewood, Washington.  On October 24, 2013, law enforcement executed a search warrant at the couple’s Tacoma apartment.  They seized 2.4 pounds of heroin.  Some of the heroin was hidden in a freezer door, in a can marked as baby formula, in a macaroni and cheese box and in a tub of beans.  Inside an armrest of the couch law enforcement found two handguns and additional heroin packaged for sale.  In the bedroom closet agents found a shotgun that had been reported stolen in Port Orchard, Washington.  More than $18,000 in cash, eleven cell phones and small amounts of methamphetamine and cocaine were also found in the apartment.

            RAMOS pleaded guilty in June 2014.  Torres pleaded guilty in May 2014 and will be sentenced in October 2014.

            The use of firearms in furtherance of a drug trafficking offense carries a mandatory minimum additional consecutive five year sentence to the sentence imposed on the underlying drug offense.

            The case was investigated by the Drug Enforcement Administration and the Bremerton Police Department.

            The case is being prosecuted by Assistant United States Attorneys Amy Jaquette and Grady Leupold.

            The Chief Executive Officer of an energy firm headquartered in Tukwila, Washington, pleaded guilty today in U.S. District Court in Seattle to two counts of Securities Fraud.  DICKSON LEE, 66, served as the CEO of L & L Energy Inc., until his arrest earlier this year.  L&L, a formerly NASDAQ listed company, purported to be engaged in various aspects of the coal business including mining, washing, and wholesale distribution of coal, all within the People’s Republic of China.  According to the plea agreement signed today, LEE admits he falsified reports to the U.S. Securities and Exchange Commission (SEC) regarding the existence of a Chief Financial Officer and, in a separate scheme, issued under false pretenses hundreds of thousands of shares of L&L stock to individuals controlled by LEE.  LEE is scheduled for sentencing by U.S. District Judge Richard A. Jones on January 9, 2015.

            According to the plea agreement, in the first count of Securities Fraud, LEE admits that in 2008 and 2009, while trying to get L&L stock listed on a national exchange, he falsely reported the identity of the company’s Chief Financial Officer (CFO) and lied about the existence of adequate internal controls in public SEC filings.  In fact, the person LEE claimed was the CFO had refused to accept the position, and L&L had no CFO to ensure accurate financial reporting.  In 2009, when the purported CFO discovered the fraud, LEE paid the individual tens of thousands of dollars in cash and stock in exchange for her silence, and never disclosed the arrangement to shareholders.  Finally, in 2013, during a subsequent SEC investigation, LEE falsely testified under oath about the CFO’s role in the company.

            In the second count of Securities Fraud, LEE admits that in 2011 and 2012, he issued hundreds of thousands of company shares to third-parties in China who, at LEE’s direction, sold the shares on the market to generate revenue for cash-strapped L&L.  At the time, LEE knew that the SEC had initiated an investigation into L&L’s affairs and that raising cash through established investment banks was no longer a viable option.  LEE also knew that L&L’s Board had been specifically advised that it could not authorize the direct issuance and sale of stock without public disclosure of the investigation.  LEE, therefore, secretly issued L&L stock to China-based individuals under false pretenses and then directed their sale without ever disclosing the truth about the company.  In order to further conceal his actions, LEE directed that the shares issued be falsely recorded in L&L’s accounting records as having  been issued for compensation for services, whereas none of these individuals provided any benefit to L&L in return for the shares.  Between May 2011 and March 2012, LEE directed in this manner the issuance and sale of approximately 730,000 shares.

            The case is being investigated by the FBI.  A parallel civil case is being pursued by the SEC.  The case is being prosecuted by Assistant United States Attorney Kathryn Kim Frierson.

A Seattle man with known gang ties was sentenced today in U.S. District Court in Seattle to 101 months in prison following his conviction at trial for being a felon in possession of a firearm, announced U.S. Attorney Jenny A. Durkan.  JIMMY GENE MILLER, 29, was arrested on June 13, 2013 after Seattle Police responded to reports of a beating behind a nightclub in Seattle’s Capitol Hill neighborhood.  MILLER was convicted following a three day jury trial.    At sentencing U.S. District Judge Richard A. Jones said MILLER had continued a pattern of “violence and drug dealing that had gone on for many years,” and he noted the danger “of bringing a firearm into a public arena.”

“Too many youths in our community are lost to the lure of gangs and the violence they breed,” said U.S. Attorney Jenny A. Durkan.  “This defendant, barely six months out of prison, thought he could rule the streets through violence and intimidation.  He guessed wrong.  I commend the FBI and Seattle Police Department for their quick work on this case, and bringing him to justice.”

“Seattle embraces diverse groups and people working together for the community, not those trying to rip it apart,” said Special Agent in Charge Frank Montoya, Jr. of the FBI’s Seattle Division. “It is imperative that people like Jimmy Gene Miller face justice for their heinous violence.  The FBI will continually stand with the Seattle Police Department against gangs, against criminals, and against those who attempt to bring violence to our streets.”

According to records in the case and testimony at trial, MILLER encountered a rival gang member at ‘The Garage,’ a bar/pool hall/bowling alley on Capitol Hill in Seattle.  MILLER flashed a firearm in the waistband of his pants as he took the victim out the alley door of the nightclub.  In the alley MILLER assaulted the victim.  Portions of the assault were captured on surveillance video.  The victim was found stripped naked and beaten.  The surveillance cameras photographed MILLER jumping into the passenger seat of a distinctive black Camaro.  Seattle Police moved quickly after getting reports on the assault, locating the car a few miles from the club.  MILLER and his associates were found nearby.  The victim’s wallet was found in the front passenger seat.  A court-authorized search of the car revealed a .40 caliber Glock pistol in the glove compartment in front of where MILLER had been sitting.  Text messages introduced at trial revealed MILLER discussing an extended magazine for the semi-automatic weapon with an associate in the weeks before the assault.

MILLER was prosecuted as part of the U.S. Attorney’s Office’s comprehensive and strategic approach to gun law enforcement. In King County the close partnerships between federal, state and local prosecutors and law enforcement allows these programs to be effective and enhances public safety.

The case was investigated by the FBI Seattle Safe Streets Task Force, which is composed of the FBI, Seattle Police Department, and other law enforcement partners.  The case was prosecuted by Assistant United States Attorneys Vince Lombardi and Jerrod Patterson.

            A long-time Lynnwood accounting and tax professional was sentenced today in U.S. District Court in Seattle to 41 months in prison for wire fraud and tax evasion, announced U.S. Attorney Jenny A. Durkan. BRUCE BERGMAN, 59, of Kirkland, Washington, victimized relatives who believed he was making their tax payments from money they sent to his trust account.  Instead, between 2002 and 2011, BERGMAN kept their money and never paid the taxes due, leaving the couple with a tax bill of more than one million dollars.  At sentencing U.S. District Judge Richard A. Jones said it was a “devastating crime… a wrecking ball in the lives of so many people who were affected.”

            According to records filed in the case, in 2000 BERGMAN started his own accounting firm, the Bergman Group.  For the previous nine years BERGMAN had been doing the taxes of a close family member and her husband.  In 2002 he led the couple to believe that he was still completing their taxes and making payments from the funds they sent to him.  In fact he was keeping their money and never filing their tax returns or their payments.  In order to keep the scheme going, BERGMAN filled out various documents including change of address forms so that no notices from the IRS about failure to pay taxes would reach the couple. The scheme was discovered when the relatives consulted a different accountant who discovered no taxes had been paid on behalf of the couple.

            “It is bad enough that Bruce Bergman stole from the IRS, but it is unconscionable that he would steal from his own family,” said Special Agent in Charge Teri Alexander of IRS Criminal Investigation.  “The sentence today highlights the resolve of the Department of Justice and the IRS to protect the integrity of the tax system and holds Bergman accountable for his duties as a professional accountant.”

            In their sentencing recommendation prosecutors noted that BERGMAN needs drug treatment, as some of the money he stole from his relatives went to support a drug habit that cost him as much as $400 a day.

            The case was investigated by the Internal Revenue Service Criminal Investigation.  The case was prosecuted by Assistant United States Attorney Matthew Diggs.

A long-time Kenmore, Washington financial advisor was sentenced today in U.S. District Court in Seattle to five years in prison for mail fraud and Social Security Number fraud, announced U.S. Attorney Jenny A. Durkan. EDWARD H. KAHLER, 65, was the owner of Key Resources, a Kenmore, Washington retirement consulting company which sold annuities and life insurance. KAHLER used proprietary information from the company he previously represented to access customer accounts. KAHLER used that information to liquidate the customer accounts and used the money for his own benefit. KAHLER was ordered to pay more than $1 million to eight elderly victims.  At sentencing U.S. District Judge Robert S. Lasnik called KAHLER a “sophisticated fraudster” and noted “he took away trust, he took away money… and now people’s lives are affected in a terrible way.”

According to records filed in the case, from 1983 to 2007 KAHLER was a financial advisor for Variable Annuity Life Insurance Company (VALIC), and was appointed by VALIC to sell its annuities. VALIC terminated KAHLER in 2007 when it discovered he was promoting competing annuities. Using information that he had in his files, KAHLER created profiles for former clients using the VALIC on-line system, and fraudulently caused VALIC to liquidate the clients’ accounts and send the proceeds to him for his personal use and benefit. In the instance described in the complaint, on Christmas Eve 2012, KAHLER liquidated the account of a client who had died in 1984, and used the $125,000 to fund a trip to Las Vegas, the payment on a BMW and other personal expenses. He also paid business expenses with the money.

In fact, one type of KAHLER’s fraud endured nearly 30 years.  In 1986 one victim thought she had purchased an annuity for more than $103,000.  In fact KAHLER kept the money and never purchased the annuity.  Over the years KAHLER sent false statements to the purchaser indicating the value of the account.  In 2008, KAHLER sent a statement stating the account was worth more than $390,000.  However, in 2012 when the victim tried to access her funds, she learned no annuity had ever been purchased on her behalf.  Five other victims also sent checks to KAHLER for him to purchase annuities for them.  KAHLER kept the money and never invested the money as requested.

The case was investigated by the FBI, the U.S. Postal Inspection Service (USPIS), and the Social Security Administration Office of Inspector General (SSA-OIG). The case is being prosecuted by Assistant United States Attorney Justin Arnold.

WASHINGTON – Five current or former members of the U.S. Attorney’s Office for the Western District of Washington were honored today in Washington D.C. for their work on the Seattle Police Department Pattern and Practice investigation, and resulting consent decree on police reforms.  The recognized team included Attorneys J. Michael Diaz, Rebecca S. Cohen, Kerry J. Keefe, Thomas A. Bates and paralegal Shannon K. Connery.  The case was one of a number of cases recognized by Attorney General Eric Holder at the 30th Annual Director’s Awards Ceremony today in Washington D.C.

In his prepared remarks, Attorney General Holder told the awardees, “Locally, nationally, and internationally, you represent the very best that this Department has to offer.  Your work embodies our ongoing commitment – not merely to win cases, but to do justice; to protect our fellow citizens from crime, violence, and terrorism; to empower the most vulnerable among us; and to uphold the rule of law.”

“This case is a national model,” said U.S. Attorney Jenny A. Durkan.  “At each stage the team worked to ensure the voice of the community was heard, the important work of the police was advanced and our neighborhoods were made more safe.  The relationship between police and the people they serve is critical to civil society.”

The litigation team in Seattle was recognized along with members of the Civil Rights Division in Washington D.C. for their outstanding work on the Civil Rights Pattern and Practice investigation of the Seattle Police Department (SPD) and the implementation of the court-ordered consent decree.

In making the award the Justice Department noted that “the team worked thoroughly and timely to investigate allegations of excessive use of force and discriminatory policing by the Seattle Police Department.  Their work produced a findings letter in less than one year, as well as a consent decree that requires comprehensive and monitored reform of the SPD.  The team’s efforts in civil rights enforcement helped move Seattle toward meaningful police reform, and serve as a collaborative model for future investigations.”

The Western District of Washington was one of 44 districts represented at the ceremony which was held in the Great Hall at the Robert F. Kennedy Department of Justice Building.

Monty Wilkinson, the Director of the Executive Office of U.S. Attorneys told the  recipients, “You have persevered, and remained focused and motivated – achieving remarkable results in work that makes a difference in the lives of citizens across our great country.  The vast scope of your collective accomplishments is nothing short of exceptional.”

The Executive Office of U.S. Attorneys (EOUSA) provides oversight, general executive assistance, and direction to the 94 United States Attorneys’ offices around the country.  For more information on EOUSA and its mission, visit www.justice.gov/usao.

Assistant United States Attorney Kerry J. Keefe heads the Civil Division of the United States Attorney’s Office, Western District of Washington.  Assistant United States Attorney J. Michael Diaz serves as the division’s Civil Rights Coordinator for the U.S. Attorney’s Office, Western District of Washington.  Shannon K. Connery is a paralegal with the Western District of Washington who provided broad support for the case.  Thomas A. Bates is the former Executive Assistant U. S. Attorney for the Western District of Washington.  He has since left the U. S. Attorney’s Office.

A 35- year-old Arlington, Washington man was sentenced today in U.S. District Court in Seattle to a total prison sentence of fifteen years in prison for distribution of child pornography, announced U.S. Attorney Jenny A. Durkan.  CHRISTOPHER DAVID DOGGETT, pleaded guilty in May 2014.  DOGGETT has a 2003 conviction for possession and distribution of child pornography. DOGGETT  has already served 56 months of a 90 month state sentence for distributing child pornography, and today was sentenced to an additional 124 months as his federal sentence.  The federal sentence is to run concurrently with the remainder of his state sentence, for a total prison term of 15 years.  At sentencing Chief U.S. District Judge Marsha J. Pechman said DOGGETT had “a long troubled history” with child pornography, and would need to be “vigilant every day so there aren’t any more victims.”

According to records filed in the case, when Snohomish County Sheriff’s deputies searched DOGGETT’s home on January 22, 2010, they discovered more than 600 images of child pornography on his digital media devices that he had distributed via computer.  On DOGGETT’s smartphone, investigators found images of him molesting a young child.  DOGGETT was convicted in Snohomish County Superior Court of dealing child pornography in February 2011.

Under the terms of the federal plea agreement, DOGGETT will be required to register as a sex offender and will undergo a psycho-sexual evaluation.  Chief Judge Pechman sentenced him to lifetime supervision by a federal probation officer.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by United States Attorneys’ Offices and the Criminal Division's Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

A former Belfair, Washington resident who once served as the president of an elementary school PTA was sentenced today in U.S. District Court in Tacoma to 23 years in prison and lifetime of supervised release for four child pornography offenses, announced U.S. Attorney Jenny A. Durkan.  DAVID MICHAEL NAVARRO, 38, was arrested in August 2013, after investigators traced a video posted on the internet to NAVARRO.  The video showed the rape of an 8-year-old child.  NAVARRO pleaded guilty in April 2014 to two counts of production of child pornography, one count of distribution of child pornography, and one count of possession of child pornography.  At sentencing U.S. District Judge Benjamin H. Settle said, “it is almost impossible to conjure up any offense more serious than what you've done.  Words don't exist in the English language to describe this.  Your sentence pales in comparison to the lifetime of nightmares and psychological harm your victims will suffer.”

“This defendant is a dangerous sexual predator,” said U.S. Attorney Jenny A. Durkan.  “He preyed on children in a horrific fashion, even recording the sexual assault of a child in the hallway of an elementary school after a PTA event.  We are safer because of this much deserved prison sentence.”

According to the facts in the plea agreement, between November of 2011 and May of 2013, NAVARRO produced multiple videos of himself raping and molesting a young child.  Some of the videos seized from the defendant also showed a second young victim, and one video depicted NAVARRO engaged in sexually explicit conduct while seated next to an unidentified child on an airplane.  Law enforcement analysis revealed more than 700 images of child pornography and 157 videos of child pornography on NAVARRO’s electronic devices including cameras, computers, thumb drives, and smartphones.  NAVARRO admits that he shared much of the child pornography he produced over the Internet, trading for other images of child pornography.

Investigators also found videos showing NAVARRO masturbating in public and taking surreptitious photos aimed at women’s underwear in various public settings such as school libraries or at a car repair shop.  The people victimized in the photos were unaware NAVARRO was engaged in lewd conduct.

The case was investigated by the FBI and is being prosecuted by Assistant United States Attorney Marci Ellsworth.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by United States Attorney’s Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

A former Vancouver, Washington man who has served three years in state prison for attempted child molestation, was sentenced to an additional 12 years in federal prison for distributing pictures and videos of children being raped, announced U.S. Attorney Jenny A. Durkan.  JOSEPH SCHESSO, 36, was indicted in 2011 by a federal grand jury for production of child pornography, distribution of child pornography, receipt of child pornography and possession of child pornography.  Following a lengthy series of appeals regarding search warrants executed in the case, SCHESSO pleaded guilty to distribution of child pornography.  Today’s twelve year sentence runs consecutive to the three years SCHESSO has spent in prison on the state charge, resulting in a total of 15 years imprisonment.  At sentencing U.S. District Judge Robert J. Bryan said “These crimes carry long sentences, but they are appropriate under the circumstances.”

According to records filed in the case, SCHESSO first came to the attention of authorities when investigators in Germany discovered an individual in the U.S. distributing child pornography through a file-sharing program.  The information was passed from German law enforcement to investigators with U.S. Immigration and Customs Enforcement (ICE), who traced the computer’s internet protocol address to SCHESSO’s residence.  In June 2010, agents executed a search warrant on SCHESSO’s Vancouver home.  Investigators found more than 3,400 images and 632 movie files of child pornography on SCHESSO’s computers.  They also located a media card for a digital camera.  Forensic examination of the media card revealed sexually explicit photos of a young child.  Further examination revealed furniture and blankets in the photos were at SCHESSO’s home.  The child was later identified as someone who had visited SCHESSO’s home.

On November 28, 2012, SCHESSO was sentenced in Clark County Superior Court to 40 months to life in prison for attempted child molestation. 

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice.  Led by United States Attorneys= Offices and the Criminal Division's Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims.  For more information about Project Safe Childhood, please visit www.justice.gov/psc.

The case was investigated by ICE’s Homeland Security Investigations.  The case is being prosecuted by Assistant United States Attorney Marci Ellsworth.

            Alaska Airlines, Inc. (Alaska) has agreed to pay the United States $500,000 to settle civil penalty claims that the U.S. Attorney’s Office has pursued on behalf of the Federal Aviation Administration (FAA).

            This action arose out of an incident on January 18, 2010 in which an electrical fire ignited in the ceiling of the cockpit of an Alaska Boeing 737-400 while it was parked at the gate in Anchorage, Alaska.  FAA’s investigation indicated that the fire was caused by chafed wiring that resulted from an improperly positioned metal clamp that attaches an air hose to one of the overhead panels in the cockpit.

            Based on its own investigation, Alaska informed FAA in April 2010 that its maintenance task cards for the aircraft “directed” its maintenance provider, AAR Corporation (AAR), to remove the cockpit panel at issue during maintenance in July and August 2008, but failed to include the warning from Alaska’s Maintenance Manual, which specifically warned that an electrical fire could occur if the clamp was not positioned properly.  Alaska also determined that the incorrect clamp or part was used and/or the clamp was installed improperly on additional aircraft, which resulted in chafed wiring on one aircraft.

            By letter dated July 15, 2011, FAA informed Alaska that it violated multiple FAA regulations by operating the aircraft involved in the January 18, 2010 incident, as well as nine other aircraft with incorrect clamps or parts and/or improperly positioned clamps.  Based on these findings, FAA assessed a $590,000 civil penalty against Alaska.  Alaska has since disputed that AAR or its other maintenance providers reinstalled or repositioned the clamp on its Boeing 737-400 aircraft, including the aircraft involved in the January 18, 2010 incident.  Pursuant to the parties’ settlement, Alaska denies all legal fault and responsibility.

            “Civil enforcement actions are an important tool to ensure the FAA’s mission to provide safe air travel,” stated U.S. Attorney Jenny A. Durkan.  “I am pleased we were able to bring a positive resolution to this matter.”

                Government agencies supporting and/or participating in the successful resolution of this matter include: FAA Office of Chief Counsel and FAA Northwest Mountain Region Office of Regional Counsel.

Jenny A. Durkan announced today that she will step down as U.S. Attorney for the Western District of Washington at the end of the month, after serving five years in office.  She has informed the President, Attorney General Eric Holder and U.S. Senators Murray and Cantwell of her decision.  Durkan, known nationally for her trial and legal work, was in the first group of six U.S. Attorneys nominated by President Obama in May 2009; she was confirmed unanimously by the U.S. Senate in September 2009.

            “I have been honored to serve the communities in Western Washington, to lead an office of extraordinary people and public servants, and to work with dedicated federal, state, local and tribal law enforcement.  Together we have taken on a range of challenges, threats and bad actors.  We have made our nation and communities safer, while also making our civil rights stronger,” said U.S. Attorney Jenny A. Durkan.

“As United States Attorney for Western Washington, Jenny has served as a tireless advocate for the American people, for the citizens of Washington State, and for the cause of justice,” said Attorney General Eric Holder.  “Jenny has been an exceptional leader in the Justice Department’s fight against cyber-crime… Jenny Durkan exemplifies the highest standards of personal integrity and professional excellence.  For the past five years, I have been grateful for Jenny’s dedicated service and her wise counsel.  I am certain that the people of Western Washington will continue to benefit from her service for years to come.  And although I wish her the very best as she takes the next step in her career, I will miss her leadership, her contributions, and her friendship.”

Durkan served for two years on Attorney General Holder’s original Attorney General Advisory Committee, and has chaired his advisory Subcommittee on Cybercrime and Intellectual Property Enforcement since 2009.

            Durkan is known for her national role in fighting cybercrime, and for increasing the federal capabilities to meet cyber-based national security threats.  She helped craft the Department of Justice’s cyber strategy, and has worked with international partners to increase cyber security.  At the same time, Durkan served on the Terrorism and National Security subcommittee.  Durkan faced the reality of such a terrorist threat when authorities discovered a plot to bomb a military recruiting office in Seattle.  The building also housed a daycare.  The plot was disrupted and the men convicted.

During her tenure, Durkan moved the U.S. Attorney’s office to more proactive enforcement efforts, leading “hot spot” initiatives in areas of persistent crime and by targeting armed criminals and gun crimes.  Under Durkan, these initiatives and other prosecutions were often coupled with forfeiture actions to recover money for taxpayers and strip criminals of their assets.  In January of this year, the office announced that its work with DOJ and other U.S. Attorneys’ offices led to the recovery of over $800 million, while the office’s independent work recovered an additional $22 million.

            Durkan’s office has received national recognition for its work against cartel-related drug trafficking organizations — cases notable for their use of wiretaps and sophisticated financial analyses.  Assuming her position in the wake of the financial meltdown, Durkan took a hard line on “white collar” financial fraud, resulting in a number of convictions and significant prison terms for defendants.  Durkan also formed a civil rights section in the U.S. Attorney’s office that has increased enforcement of civil rights laws, including the employment rights of returning military personnel.

Her office also joined with the United States Department of Justice (DOJ) Civil Rights Division to investigate the Seattle Police Department’s use of force and concerns of biased policing.  This led to broad reforms in the SPD and ongoing monitoring of a consent decree by the federal court.  The team from the U.S. Attorney’s office that worked on the case will receive an award for their work from the DOJ next week in Washington, D.C.

ADDITIONAL INFORMATION ON WORK OF THE U.S. ATTORNEY’S OFFICE UNDER DURKAN

National Leader on Cybercrime  Upon becoming U.S. Attorney, Durkan moved quickly to prioritize investigations and prosecutions of cybercrime and the theft of intellectual property.  Her office increased outreach to and collaboration with cyber-security and privacy experts, academics, local businesses, international companies based in Western Washington, and area schools.  She has hosted in Seattle an annual cybercrime conference, which featured industry leaders, privacy and security experts, government officials, and top national security experts.

Her office has brought a number of successful cyber prosecutions, and is currently prosecuting Roman Seleznev, a Russian national accused of large-scale illegal hacking and credit card fraud.  As chair of the Attorney General’s cybercrime subcommittee, Durkan also has been a national leader in DOJ efforts to fight the rising threat of cybercrime, and has testified before Congress on the issue.  Working with the Justice Department’s National Security Division, she helped form a network of national security cyber prosecutors to ensure that every U.S. Attorney’s office had a prosecutor able to handle such cases.  She also serves on DOJ’s Cyber Advisory Council, helped craft the federal cyber strategy and serves on DOJ’s Intellectual Property Enforcement Task Force. She has worked with international law enforcement partners to increase collaboration in cyber-security issues.

            Durkan believes that cyber-based threats and digital crime are now the most significant challenges facing the country.

“Individual privacy, national security and the global economy are all at risk,” said Durkan.  “We have always been a country built on innovation, but now we must focus that genius on building digital security into every product, home and business.  We cannot afford to let criminal gangs or rogue states outpace us.”

            Proactive Initiatives with Law Enforcement.  As U.S. Attorney, Durkan has emphasized proactive enforcement initiatives to identify and fight crime.  Those initiatives have depended upon strong collaboration among federal, state, local and tribal law enforcement.  Early in her tenure, the office worked with a variety of law enforcement agencies to stem criminal conduct by the so-called “sovereign citizen” movement.  She also prioritized prosecution of gun crimes, including illegal gun show sales, and the illegal possession of firearms by felons.  Working with state and local law enforcement, Durkan’s office has spearheaded a number of “hot spot” initiatives in White Center, Kent Valley, and Tukwila, and focused efforts on the “worst of the worst” criminals who were harming communities in Clark, Skagit and Whatcom Counties.  Durkan increased outreach to tribal partners, and created the first tribal Special Assistant United States Attorney to improve the office’s work in Indian country.  She recognizes that to be most successful, prosecutions need to be combined with strong community outreach, education and prevention efforts.

            Increased Emphasis on Forfeitures.  Advocating an “all-tools” approach, Durkan’s office has aggressively used forfeiture powers to benefit the community and strip criminals of their profits.  One recent joint law enforcement initiative led to the seizure of three motels in Tukwila, near Sea-Tac airport, and the prosecution of their owners.  Crime in the Tukwila area dropped significantly as a result of these efforts.  Similarly, when her office obtained guilty pleas from Frank Colacurcio, Jr. and his associates, Durkan insisted all of Colacurcio strip clubs be forfeited to the government and sold.  And when Colton Harris-Moore pleaded guilty, Durkan required that he forfeit all rights to his story and all proceeds from a planned movie go to victims.  As noted, in January of this year, the office announced that its work with DOJ and other U.S. Attorneys’ offices had led to the recovery of over $800 million and the office’s independent work recovered to another $22 million.

            Obligation to Protect Civil Rights.  A fundamental obligation of DOJ and every U.S. Attorney is to protect the civil rights of all.  To better discharge this obligation, Durkan formed a civil rights unit in her office, which includes criminal and civil AUSAs.  The unit has brought hate crime prosecutions and has worked to protect a range of civil rights from fair housing, to language access, to the employment rights of returning soldiers.  The office also increased outreach to communities of color, other minority communities and to the Arab, Muslim and Sikh communities.  Together with the Justice Department’s Civil Rights Division, the U.S. Attorney’s office launched a civil rights investigation of the Seattle Police Department’s use of force and treatment of minority communities.  The investigation led to a landmark consent decree negotiated with the City of Seattle and current monitoring by a federal court.  Today, all new policies required by the decree have been implemented, and training is underway.  The court-approved policies seek to minimize the need for force while keeping officers safe, to enhance skills and resources for dealing with people in crisis and to bridge the gap between police and racial and minority communities.

            Countering Terrorism and National Security Threats.  During Durkan’s term, a terrorist threat against a local military facility that was discovered by the Seattle Police Department and the FBI Joint Terrorism Task Force.  A Seattle-area man, Abdul Latif and his co-conspirator, Walli Mujahidh, were successfully investigated, arrested, charged and convicted.  Under Durkan, the office also finally brought to conclusion the prosecution and appeals of Ahmed Ressam, the so-called Millennium Bomber.  In October 2012, Ressam was sentenced to 37 years in prison.  Her office also has brought a number of prosecutions for the illegal export of weapons and technology to prohibited countries.

            White Collar Prosecutions.  Durkan’s office has prosecuted several large-scale bank and fraud schemes, as well as a number of serious environmental violations.  Examples include Darren Berg, who was sentenced to 18 years in prison for his role in the largest fraud scheme to be prosecuted in Western Washington; Shawn Portman, an executive with collapsed Pierce Commercial Bank, who received 10 years for his role in pushing fraudulent  loans; and Patrick Dooley, who was sentenced to 33 months in prison for illegally dumping a hazardous chemical.  These cases reflect Durkan’s belief that so-called “white collar” defendants must also face serious sanctions, including incarceration when appropriate.        

            Combatting Drug Trafficking Organizations.  Durkan has been outspoken on the threat that cartel-related crime poses for the Northwest.  Her office has been a national leader in prosecuting large-scale drug trafficking organizations, and in seizing the assets relating to those cases.  During Durkan’s tenure, the office has brought a number of cases — often aided by wiretaps and experienced financial investigators— to dismantle and prosecute the drug organizations and strip them of their proceeds.  At the same time, Durkan recognized the need to implement other tools to deal with non-violent addicted offenders.  Working with U.S. District Judge Ricardo Martinez, Durkan helped form one of the first diversionary federal drug courts in the country.  In addition, Durkan helped craft the federal response to marijuana legalization in Washington, focusing resources on harms associated with interstate trafficking, use of firearms, and sales to minors.  To address clear federal interests and threats to public safety, the office has prosecuted a number of marijuana storefront operators, and moved strongly against any sales to children or near schools.  Recently, the office charged a number of defendants in connection with explosions and fires in multiple cities caused by the manufacture of so-called Butane Honey Oil (BHO) — used in edible marijuana products.

            Recognition and Awards as U.S. Attorney.  Awards and recognition include: Warren G. Magnuson Memorial Award, Seattle Municipal League (2014); Inspiring Women, Seattle Storm (2014); Special Contribution to the Judiciary, Washington Women Lawyers (2013); Jaswant Singh Khalra Award for Social Justice, Sikh Community (2013);Leadership and Justice Award, Mother Attorneys Mentoring Association of Seattle (2012); Distinguished Alumni, University of Washington School of Law (2011); Woman of the Year, Seattle University School of Law (2011); Seattle’s Most Influential People, Seattle Magazine (2011 and 2012); Women of Power In Law, Women of Color (2010); Fellow, American College of Trial Lawyers; AV Preeminent (highest) Peer Rating in both Legal Ability and Ethics, Martindale-Hubbell (1997 – 2014).

             Term of Office.   Durkan was appointed to a four-year term.  When her original term of four years expired a year ago, the federal government was locked in budget disputes and a government shutdown.  Durkan’s office faced a rising vacancy rate because of a long-term hiring freeze.  Durkan stayed on to guide the office through the budget challenges, and to shepherd some key cases through important stages.  Durkan says she will take time to find the right “next challenge” after she steps down.

WASHINGTON—Attorney General Eric Holder released the following statement Wednesday on the resignation of U.S. Attorney Jenny Durkan for the Western District of Washington:

"As United States Attorney for Western Washington, Jenny has served as a tireless advocate for the American people, for the citizens of Washington state, and for the cause of justice.

“Over the years, she has demonstrated remarkable skill in guiding complex litigation, fostering interagency coordination, and combating a wide range of criminal activities.  Jenny has been an exceptional leader in the Justice Department’s fight against cyber-crime and our work to protect the civil rights of all Americans.  And with a strong focus on education, prevention, treatment, and community outreach, she launched one of the first federal drug courts.

“Jenny Durkan exemplifies the highest standards of personal integrity and professional excellence.  For the past five years, I have been grateful for Jenny’s dedicated service and her wise counsel.  I am certain that the people of Western Washington will continue to benefit from her service for years to come.  And although I wish her the very best as she takes the next step in her career, I will miss her leadership, her contributions, and her friendship.”

            A 23-year-old Vancouver, Washington gang leader was sentenced today to five years in prison for being a felon in possession of a firearm, announced U.S. Attorney Jenny A. Durkan.  CARLOS CARMONA-GONZALEZ was convicted Wednesday, February 12, 2014, following a two day jury trial.  At the sentencing hearing U.S. District Judge Ronald B. Leighton noted that gangs are a serious problem that operate on fear and paralyze communities.  The judge imposed three years of supervised release following prison.

 In July 2013, CARMONA-GONZALEZ was seen by three police officers and one civilian eyewitness placing a rifle wrapped in a jacket in his friend’s car. The car was later stopped by police and officers recovered the pink rifle that had been wrapped in a jacket.  The rifle had been stolen from a garage.  CARMONA-GONZALEZ is a prominent member of the Surenos gang in the Southwest Washington region. CARMONA-GONZALEZ is prohibited from possessing firearms because he has four previous felony convictions, including possession of MDMA (Clark County 2011), attempted assault (Clark County 2009), Escape (Clark County 2008) and assault (Clark County 2008).  

            An enrolled member of the Makah Tribe was sentenced today to 33 months in prison and three years of supervised release for assault with a dangerous weapon, announced U.S. Attorney Jenny A. Durkan.  KENNETH A. WARD, 44, was taken into federal custody on December 26, 2013, following the assault on Makah Tribal land.  At sentencing U.S. District Judge Robert J. Bryan said, “When you're drinking, you're a danger to your community and a danger to your family . . . .  This was an inch away from a murder case . . . you're in luck you weren't successful with the swing of your knife.”

            According to records filed in the case, on December 22, 2013, WARD showed up at the apartment of the victim and accused the victim of stealing his jacket.  After punching the victim in the face, WARD pulled out a knife with a 2-3 inch blade, and slashed and cut the victim’s chin, narrowly missing the victim’s throat.  The assault resulted in the victim having to receive medical treatment and four internal and four external stitches to his wounds.

            WARD pleaded guilty in May 2014.

            The case was investigated by the Neah Bay Department of Public Safety and the FBI.

            The case was prosecuted by Assistant United States Attorneys J. Tate London and Ye-Ting Woo.

            A repeat offender arrested as part of an anti-gang initiative was sentenced this week in U.S. District Court in Tacoma to 20 years in prison, announced U.S. Attorney Jenny A. Durkan.  ERIC QUINN FRANKLIN, 49, of Lakewood, Washington was convicted at a trial in September 2013, of three counts related to the distribution of crack cocaine, one count of possessing a firearm in relation to a drug trafficking offense, and one count of being a felon in possession of a firearm.  Judge Benjamin H. Settle ruled FRANKLIN qualified as an Armed Career Criminal.  The illegal firearms convictions and the Armed Career Criminal designation combine for a mandatory minimum 20 years sentence.

            FRANKLIN was arrested May 11, 2011 at his Lakewood apartment, following sales of crack cocaine to a person working with law enforcement.  At the time of his arrest law enforcement located a safe in the bedroom of the apartment.  Inside the safe was an unloaded Raven Arms .25 caliber semi-automatic pistol, and a loaded Para-Ordnance Warthog, .45 caliber semi-automatic pistol.  The safe contained additional ammunition as well as cocaine, oxycodone and cash.  FRANKLIN has four prior felony drug convictions.

            FRANKLIN was prosecuted as part of a law enforcement emphasis on gang activity in the Pierce County area.  FRANKLIN was an associate of the ‘Tillicum Park Gangsters’ who were investigated in a joint operation by the Lakewood Police Department and the FBI’s South Sound Gang Task Force.

            The case was prosecuted by Assistant United States Attorneys Gregory A. Gruber and Arlen Storm.

A former Washington State Prison inmate who led a tax fraud scheme from prison, was sentenced today in U.S. District Court in Tacoma to 25 years in prison for illegal possession of firearms, explosives and ballistic vests, announced U.S. Attorney Jenny A. Durkan.  KENNETH RANDLE DOOR, 44, has more than 30 felony convictions over the last three decades and was found to be an Armed Career Criminal by U.S. District Judge Ronald B. Leighton.  DOOR has prior convictions for assault with a deadly weapon for shooting at police officers, as well as multiple burglary convictions.  At sentencing Judge Leighton said to DOOR, “You are quintessentially evil….you know no regard for community, for people who are weaker than you are.”

“For the last 30 years, this defendant has been on a continuous and relentless quest to wreak havoc on others and his community,” said U.S. Attorney Jenny A. Durkan.  “He has left countless victims in his wake.  Dozens of convictions and criminal sentences for burglary, theft, assault, harassment, high-speed car chases, unlawful firearms possession and more have failed to deter him from unlawful behavior.  This lengthy sentence is needed to protect the public.”

According to records filed in the case, DOOR was arrested on November 9, 2011 while still on community supervision from a state conviction.  Acting on a tip, law enforcement discovered DOOR had two firearms, two bullet-proof vests and an explosive device at his Tacoma home.  One of the firearms had been stolen in a burglary.  DOOR originally pleaded guilty in October 2013, then withdrew his plea and went to trial in March 2014.  He was found guilty following a four day jury trial.

DOOR will be sentenced by U.S. District Judge Benjamin H. Settle on September 15, 2014 for the separate criminal scheme involving tax fraud while incarcerated at the Washington State Penitentiary at Walla Walla.  According to records in that case, in 2008 and 2009, DOOR and other defendants conspired to file fake tax returns using the names and Social Security numbers of prison inmates to claim fraudulent refunds.  Using the internet the conspirators identified companies that had declared bankruptcy and had recently closed.  The conspirators created fake W-2 forms indicating wages paid and taxes withheld from the individuals whose identities they used.  Virtually all of these individuals were prison inmates at the time who had not been employed by the now defunct companies.  The conspirators filed at least 31 false tax returns, attempting to obtain more than $145,000 in refunds.  The conspirators obtained nearly $72,000 in fraudulent tax refunds.

DOOR’s co-conspirators in the tax scheme have been sentenced to terms ranging from eight months to 33 months in prison.

The tax case was investigated by Internal Revenue Service Criminal Investigation (IRS-CI). The weapons case was investigated by the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) and the Washington State Department of Corrections.  The cases are being prosecuted by Assistant United States Attorneys Steven Masada and Norman Barbosa.

The United States Department of Justice today closed the criminal investigation arising from the April 2010 explosion at the Tesoro Anacortes refinery that resulted in the deaths of seven Tesoro employees.  Shortly after the explosion, federal criminal investigators and prosecutors began an extensive investigation to determine whether federal criminal environmental and worker safety laws and regulations had been violated.  The decision to close the case with no criminal charges was shared with the survivors of the victims this morning.

“This tragedy demanded careful and thorough investigation.  I am satisfied that the investigators and the experienced environmental attorneys in my office evaluated all the evidence and determined it does not reach the exacting bar for criminal prosecution,” said U.S. Attorney Jenny A. Durkan.  “I believe this investigation, as well as those conducted by other agencies, have prompted changes in how the industry conducts itself.  We will continue to work with the Chemical Safety Board to ensure a more expedited investigative process to ensure the public is served, the industry is held accountable and justice is done.”

The four year investigation included interviewing past and present employees, reviewing thousands of documents, and consulting with industry experts.  In addition, investigators and prosecutors reviewed investigative reports prepared by other investigative authorities, including the United States Chemical Safety and Hazard Investigation Board and the Washington State Department of Labor and Industries.  Based on information developed through these investigative efforts, the Department of Justice has concluded there is insufficient evidence to support bringing criminal charges for violating federal environmental and worker safety laws and regulations.

To the extent the investigation uncovered practices or procedures that risked worker safety or the environment, that information was communicated to the company so necessary improvements could be implemented.

            A 46-year-old Battle Ground, Washington man was sentenced today to 15 years in prison and lifetime supervised release for production of child pornography, announced U.S. Attorney Jenny A. Durkan.  DAVID P. HARLAN, 46, pleaded guilty in January 2014.  He has been serving a six and a half year state sentence for child molestation since May 2014.  His federal sentence will run concurrent with the state sentence.  At his sentencing hearing U.S. District Judge Ronald B. Leighton told him, “This is a serious offense, with tragic consequences.  The sentence here needs to deter conduct like this by you or by like-minded people.”

According to records filed in the case, U.S. Immigration and Customs Enforcement (ICE) agents in Portland, Oregon were alerted by German authorities that someone at a particular IP address in the Vancouver, Washington, area was distributing child pornography using peer-to-peer file sharing software.  HARLAN was identified as the person controlling the computers at the IP address.  A court authorized search warrant was served on HARLAN’s Battle Ground home in March 2010.  Ten computers, numerous DVDs, hard drives and cameras were seized from the residence.  Forensic analysis discovered more than 5,300 images and 183 movie files of children engaged in sexually explicit conduct.  Some of the child pornography was of victims already identified by the Center for Missing and Exploited Children.  However, investigators determined that some of the pornographic pictures had been taken of young children whose parents were friends of HARLAN.  In one instance the photos had been taken when the child was about 5-years-old, and her mother was busy in the kitchen.

“This case is a sad reminder that most children are victimized by someone they know and trust,” said Brad Bench, special agent in charge of HSI Seattle.  “Fortunately, through this investigation that began halfway around the world in Germany, HSI and its local partners have put an end to Harlan’s sexual abuse of children.”

The case was investigated by U.S. Immigration and Customs Enforcement (ICE) and the Battle Ground Police Department.  The case was prosecuted by Assistant United States Attorney David Reese Jennings.

            Accused Russian hacker ROMAN SELEZNEV was ordered detained in federal custody today pending trial scheduled for October 2014.  SELEZNEV’s attorneys had asked the court to release him to a furnished apartment in Seattle on a $1 million bond secured by $100,000 in cash, and to essentially place him on house arrest with electronic home monitoring and no access to computers.  Magistrate Judge James P. Donohue rejected the defense proposal, however, noting that SELEZNEV has no ties to the Western District of Washington, was a frequent international traveler, has large amounts of money in bank accounts around the world, and is computer savvy enough to create false identity documents which would allow him to flee.

            “Today was another important step in ensuring the charges against this defendant are tried in this community,” said U.S. Attorney Jenny A. Durkan.  “The defendant is entitled to every protection offered by our system, but will be afforded no special privileges.  Our investigation into the scope of defendant's actions is ongoing.”

            During the hearing, prosecutors revealed that a laptop computer seized from SELEZNEV at the time of his arrest contains 2.1 million stolen credit card numbers.  The forensic analysis of the computer also shows that in the days before his arrest SELEZNEV was searching the electronic filing system for the United States federal courts looking for his name or online nicknames in any federally filed cases.

Background on the case
Roman Valerevich Seleznev, aka “Track2,” 30, of Vladivostok, Russia, was indicted by a federal grand jury in the Western District of Washington on March 3, 2011, and the indictment was unsealed on July 7, 2014.  Seleznev is charged in connection with operating several carding forums, which are websites where criminals gather to sell stolen credit card numbers, and hacking into retail point of sale systems and installing malicious software on the systems to steal credit card numbers.

According to the allegations in the indictment, Seleznev hacked into retail point of sale systems to steal credit card numbers between October 2009 and February 2011.  Seleznev also created and operated infrastructure using servers located all over the world to facilitate the theft and sale of credit card data and host carding forums.  Seleznev is charged with 29 counts: five counts of bank fraud, eight counts of intentionally causing damage to a protected computer, eight counts of obtaining information from a protected computer without authorization, one count of possession with intent to defraud of 15 or more unauthorized access devices (stolen credit card numbers), two counts of trafficking in unauthorized access devices and five counts of aggravated identity theft.

The case is being investigated by the U.S. Secret Service Electronic Crimes Task Force, which includes detectives from the Seattle Police Department.  The case is being prosecuted by Assistant United States Attorneys Norman M. Barbosa and Seth Wilkinson of the Western District of Washington and Trial Attorney Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section.  The Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office for the District of Guam provided substantial assistance.

Seleznev has also been charged in an indictment filed in the District of Nevada that was returned on Jan. 10, 2012, and unsealed on Nov. 13, 2013, alleging that he participated in a racketeer influenced corrupt organization, conspired to engage in a racketeer influenced corrupt organization, and possessed counterfeit access devices.  Seleznev, referenced as “Track2” in the indictment, and 54 others are charged with being members of the “Carder.su” organization which allegedly trafficked in compromised credit card account data and counterfeit identifications and committed money laundering, narcotics trafficking, and various types of computer crime.  Seleznev allegedly operated a website that sold stolen credit card information to members of the Carder.su organization.  Thus far, at least 25 of the defendants have been convicted, and several others are fugitives.

The Nevada investigation is being handled by Immigration and Customs Enforcement – Homeland Security Investigations and the U.S. Secret Service.  The Nevada case is being prosecuted by Assistant United States Attorneys Kimberly M. Frayn and Andrew W. Duncan of the District of Nevada and Trial Attorney Jonathan Ophardt of the Criminal Division’s Organized Crime and Gang Section.

The charges contained in the indictments are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

WASHINGTON – A Russian national indicted for hacking into point of sale systems at retailers throughout the United States and operating websites that distributed credit card data of thousands of credit card holders appeared today for arraignment in U.S. federal court, announced U.S. Attorney Jenny A. Durkan of the Western District of Washington and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.

“Cyber-criminals should take heed: distance will not protect you from the reach of justice.  We will investigate, we will locate, and we will bring foreign hackers to stand trial,” said U.S. Attorney Jenny A. Durkan.  “This defendant is presumed innocent, and will be afforded the full protections of our system of justice.  But he will do so in our courthouse, in the community where harm was done.”

“Cyber-criminals have caused enormous financial damage and innumerable invasions of Americans’ privacy, often from halfway around the world,” said Assistant Attorney General Caldwell.  “The alleged crimes in this case harmed thousands of U.S. citizens, and thanks to our law enforcement partners throughout the world, we will have the opportunity to seek justice in a U.S. courtroom.”

Roman Valerevich Seleznev, aka “Track2,” 30, of Vladivostok, Russia, was indicted by a federal grand jury in the Western District of Washington on March 3, 2011, and the indictment was unsealed on July 7, 2014.  Seleznev is charged in connection with operating several carding forums, which are websites where criminals gather to sell stolen credit card numbers, and hacking into retail point of sale systems and installing malicious software on the systems to steal credit card numbers.  Seleznev was transferred to Seattle, Washington, from Guam, where he made his initial appearance on July 7, 2014.  Today, Seleznev entered pleas of “not guilty” to the charges in the indictment.  Trial is scheduled for October 6, 2014.

According to the allegations in the indictment, Seleznev hacked into retail point of sale systems to steal credit card numbers between October 2009 and February 2011.  Seleznev also created and operated infrastructure using servers located all over the world to facilitate the theft and sale of credit card data and host carding forums.  Seleznev is charged with 29 counts: five counts of bank fraud, eight counts of intentionally causing damage to a protected computer, eight counts of obtaining information from a protected computer without authorization, one count of possession with intent to defraud of 15 or more unauthorized access devices (stolen credit card numbers), two counts of trafficking in unauthorized access devices and five counts of aggravated identity theft.

“This case will no doubt serve as a serious warning to cyber criminals.  The Secret Service will partner with law enforcement worldwide and will not relent in the pursuit of transnational cyber criminals that try to exploit the U.S. financial payment systems” said Secret Service Assistant Director Paul Morrissey of the Office of Investigations.

The case is being investigated by the U.S. Secret Service Electronic Crimes Task Force, which includes detectives from the Seattle Police Department.  The case is being prosecuted by Assistant United States Attorney Norman M. Barbosa of the Western District of Washington and Trial Attorney Ethan Arenson of the Criminal Division’s Computer Crime and Intellectual Property Section.  The Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office for the District of Guam provided substantial assistance.

Seleznev has also been charged in an indictment filed in the District of Nevada that was returned on Jan. 10, 2012, and unsealed on Nov. 13, 2013, alleging that he participated in a racketeer influenced corrupt organization, conspired to engage in a racketeer influenced corrupt organization, and possessed counterfeit access devices.  Seleznev, referenced as “Track2” in the indictment, and 54 others are charged with being members of the “Carder.su” organization, which allegedly trafficked in compromised credit card account data and counterfeit identifications and committed money laundering, narcotics trafficking, and various types of computer crime.  Seleznev allegedly operated a website that sold stolen card information to members of the Carder.su organization.  Thus far, at least 25 of the defendants have been convicted, and several others are fugitives.

The Nevada investigation is being handled by Immigration and Customs Enforcement – Homeland Security Investigations and the U.S. Secret Service.  The Nevada case is being prosecuted by Assistant U.S. Attorneys Kimberly M. Frayn and Andrew W. Duncan of the District of Nevada and Trial Attorney Jonathan Ophardt of the Criminal Division’s Organized Crime and Gang Section.

The charges contained in the indictments are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

            A former Senior Manager at Microsoft was sentenced today to two years in prison, three years of supervised release for insider trading, announced U.S. Attorney Jenny A. Durkan.  BRIAN JORGENSON, 32, of Lynnwood, Washington was employed as a Senior Manager in Microsoft’s Treasury Group.  JORGENSON pleaded guilty earlier this year admitting that he recruited a former co-worker at an asset management company to make stock trades to help him profit on the movement of Microsoft stock and the stock of related companies.  JORGENSON’s codefendant Sean Stokke, 28, of Seattle was sentenced last month to 18 months in prison.  At the sentencing hearing today Chief Judge Marsha J. Pechman noted that the financial markets operate on trust.  “If we don’t stop the people (who are cheating) that we catch and hold them up as an example, we erode that trust,” Chief Judge Pechman said.

“Motivated by greed, this defendant traded on his employer’s confidential information to line his own pocket,” said U.S. Attorney Jenny A. Durkan.  “Western Washington abounds in publicly traded companies with thousands of insiders who have daily access to market moving information.  The sentence in this case should serve as a warning to others who might be tempted to engage in this conduct.”

According to the records in the case, the men profited on three distinct instances of insider information: Microsoft’s investment in Barnes and Noble; Microsoft’s failure to meet earnings estimates in the fourth quarter of fiscal 2013; and Microsoft’s increased first quarter earnings in fiscal 2014.  After the successful trades, Stokke provided JORGENSON with envelopes of cash in approximately $10,000 increments to avoid any paper trail.

At the sentencing hearing JORGENSON told the court, “I cheated. I tried to take a shortcut for my own financial gain…. I persuaded myself it was a gray area, when it clearly was black and white.”

Through his employment, JORGENSON became aware in early April 2012 that Microsoft was considering an investment in Barnes and Noble for its digital and college business.  Stokke opened an online options account and began accumulating options on Barnes and Noble stock.  When Microsoft announced the investment in Barnes and Noble, the Barnes and Noble stock jumped 49%.  The men sold the option for a profit of more than $184,000.

In early July 2013, JORGENSON learned through his employment that Microsoft would not meet its earnings estimate.  Beginning in mid-July, Stokke bought “put” options on Microsoft stock and the stock of a technology sector fund influenced by Microsoft stock – essentially betting both stocks would go down.  When Microsoft announced the lower than expected earnings on July 18, the stock did drop and the “put” options resulted in a profit to the two men of more than $218,000.

In October 2013, because of his employment, JORGENSON learned that Microsoft would announce a 17 percent increase in earnings per share over the prior year.  One day before the announcement, Stokke used brokerage accounts controlled by the two men to purchase call options of a technology sector fund that is influenced by the price of Microsoft stock.  Following the earnings announcement, Microsoft stock and thus the sector fund went up.  The men executed their options and sold the shares for a profit of nearly $13,000.

The case was investigated by the FBI and the SEC.  The case is being prosecuted by Assistant United States Attorney Katheryn Kim Frierson.

A Florida resident who threatened family members over a $20,000 debt and used firebombs to torch one home and threaten another, was sentenced today to fifteen years in prison, announced U.S. Attorney Jenny A. Durkan.  SANG NGOC UNG, 54, of Margate, Florida pleaded guilty in April 2014 to Collection of Extension of Credit by Extortionate Means, Interstate Travel in Aid of Racketeering Activity, Unlawful Possession of a Destructive Device and Carrying a Firearm During and in Relation to a Crime of Violence.  In his plea agreement UNG admits that in the early morning hours of June 10, 2013 he set fire to his relative’s home on S. Cloverdale Street in Seattle.  The fire extensively damaged the home and forced the homeowner, her adult children and a friend to flee through a window and the garage.  Shortly after that fire, investigators went to a second home associated with the family and discovered a destructive device that had not ignited.  U.S. District Judge Richard A. Jones imposed the sentence.

“This defendant earned every day of this sentence.  He  attempted to rule his victims through fear and violence,” said U. S. Attorney Jenny A. Durkan.  “He endangered not just his targeted victims, but those who live nearby and all first responders.”

According to records in the case, UNG had been pressuring family members in Seattle about $20,000 he believes is owed to him.  Family members had attempted to pay some of the money, but UNG reportedly continued to threaten them if the debt was not paid.  In mid-May 2013, UNG arrived in the Seattle area and again began pressuring the family to repay the debt.  On June 9, 2013, UNG was observed attempting to contact people at both homes.  The fire and the destructive device that failed to ignite were discovered the next day.  Cell phone records place UNG in the Seattle area during the time the fire and destructive device were set.  Evidence on the destructive device ties him to the scene.  UNG returned to the Seattle area in July 2013 and was arrested by Seattle Police and ATF agents.  At the time of his arrest UNG had a firearm in his possession and admits that he was armed during the criminal conduct in this case.

The case was investigated by the Seattle Police Department and the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF).  The case was prosecuted by Assistant United States Attorney Todd Greenberg.

            IMCO General Construction (IMCO), a heavy construction company located in Ferndale, Washington, settled claims this week with the U.S. Department of Transportation (USDOT) that it submitted false claims related to its Disadvantaged Business Enterprise (DBE) program.  IMCO denies any wrongdoing in connection with the $200,000 settlement.

            According to the settlement document, the government alleged that while working on the federally-funded Horton Road Project, widening a stretch of Washington State Highway 539 north of Bellingham, IMCO falsely claimed that a DBE completed certain work, when, in fact, the work was done by a non-DBE.  IMCO claimed the work was completed by Aleut, a federally certified DBE company.  In fact the work was completed by BBK Trucking, a company that is not certified as a DBE.

            “Disadvantaged Business Enterprise (DBE) fraud harms the integrity of the DBE program and law-abiding contractors by defeating efforts to ensure a level playing field in which all firms can compete fairly for contracts,” said William Swallow, regional Special Agent-in-Charge of the U.S. Department of Transportation (DOT) Office of Inspector General. “Our agents will continue to work with the Secretary of Transportation and other Federal, State, and local law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes that adversely affect public trust and DOT-assisted highway programs.”

            In 1980, the USDOT issued regulations in connection with a program to increase the participation of minority and disadvantaged business enterprises (“DBEs”) in federally funded public construction contracts (the “DBE Program”). Pursuant to those regulations, recipients of United States Department of Transportation (“USDOT”) construction grants are required to establish a DBE program that, among other things, (1) establishes goals for the percentage of a construction project’s work that should be awarded to DBEs (“DBE goals”); and (2) requires general contractors on construction projects to make good faith efforts to meet the relevant DBE goals.

            The case was investigated by the Department of Transportation Office of Inspector General. The case was prosecuted by Assistant United States Attorney Kayla C. Stahman

            Three men who allegedly manipulated penny stocks, and then laundered the proceeds by purchasing precious metals, were charged today in U.S. District Court in Tacoma with conspiracy to commit securities fraud and conspiracy to launder monetary instruments, announced U.S. Attorney Jenny A. Durkan.  MIKHAIL GALAS, 24, of Vancouver, Washington was arrested in Long Beach, California after he arrived on a flight from Portland, Oregon.  He will make his initial appearance in U.S. District Court in Los Angeles.  CHRISTOPHER MROWCA, 24, was arrested in Bradenton, Florida and will make his initial appearance in Tampa.  ALEXANDER HAWATMEH, 23, of Salem, Oregon is incarcerated in Oregon on an unrelated charge and will appear in federal court at a later date.  In addition to the arrests, searches were conducted in Vancouver, Washington, Bradenton, Florida, Salem, Oregon and Boulder, Colorado.

            “Manipulative trading in penny stocks can lead to big profits for swindlers at the expense of small investors who buy the hype,” said U.S. Attorney Jenny A. Durkan.  “The Securities and Exchange Commission is working closely with our office to hold these market manipulators accountable.”

            In addition to the criminal complaint filed today, the Securities and Exchange Commission also filed a civil case against the men.

            According to the criminal complaint, between December 2011 and April 2012, the men engaged in a scheme to make it appear that a particular penny stock was being actively traded.  During that period the men accounted for 85% of the trades in the particular stock related to a purported flea market business in Florida.  The conspirators allegedly engaged in “matched trades” where one sold shares and the other bought shares to make it appear investors were interested in the company.  In fact the penny stock had little value and no business that would generate significant revenue or income.  In addition to the trades to make it appear there was interest in the stock, the men sent fraudulent and misleading “blast” e-mails through promotional websites and email addresses under their control with the intent of increasing demand for the stock.  The blast emails enticed other unknowing investors to buy the stock – then the men sold their shares, earning a profit of more than $223,000.  CHRISTOPHER MROWCA and ALEXANDER HAWATMEH then engaged in a scheme to launder the proceeds of the illegal stock manipulation scheme by passing the money through third party accounts and ultimately purchasing gold and silver bars.

            Conspiracy to commit securities fraud is punishable by up to five years in prison and a $250,000 fine.  Conspiracy to launder monetary instruments is punishable by up to 20 years in prison.

            The charges contained in the complaint are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

            The case is being investigated by the FBI.  The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Katheryn Kim Frierson.