SAN FRANCISCO – Eutimio Reyna-Ceron (a/k/a “Tony,” a/k/a “Gordo,” a/k/a “Little Tony”) pleaded guilty in federal court in San Francisco yesterday to charges of conspiracy to distribute heroin and methamphetamine, distribution of heroin, and money laundering, announced United States Attorney Brian J. Stretch and Drug Enforcement Administration Special Agent in Charge John J. Martin.  Reyna-Ceron’s plea was accepted by the Honorable Vince Chhabria, U.S. District Judge, in San Francisco and represents the twelfth guilty plea accepted by the court in this 20-defendant drug conspiracy case.

In pleading guilty, Reyna-Ceron, 29, of Santa Rosa, Calif., admitted that he and others operated a drug distribution ring in Santa Rosa, and that they distributed an average of a half-kilogram of heroin per week over a period of at least seven months.  Reyna-Ceron admitted that, at any given time, he had three couriers working for him delivering drugs, and that he and his couriers sold drugs in quantities ranging from a gram to multiple ounces at a time.  The defendant also admitted to laundering the proceeds of those transactions, which amounted to between $2,500 and $3,000 per day. 

On July 19, 2017, Reyna-Ceron was charged in a 33-count Superseding Indictment along with 19 other defendants. For his part in the conspiracy, Reyna-Ceron was charged with one count of conspiracy to distribute and possess with intent to distribute heroin and methamphetamine, in violation of 21 U.S.C. § 846; seven counts of distribution and possession with intent to distribute heroin, in violation of 21 U.S.C. § 841; one count of distribution and possession with intent to distribute methamphetamine, in violation of 21 U.S.C. § 841; one count of conspiracy to launder drug proceeds, in violation of 18 U.S.C. § 1956(h); and ten counts of international money laundering, in violation of 18 U.S.C. § 1956(a)(2)(B).  Pursuant to yesterday’s plea agreement, Reyna-Ceron pleaded guilty to one count each of conspiracy to distribute heroin and methamphetamine, distribution of heroin, and money laundering.

Judge Chhabria has scheduled Reyna-Ceron’s sentencing for June 27, 2017, at 10:30 a.m., in San Francisco.  As part of his plea, Reyna-Ceron agreed to a forfeiture money judgment of $1,080,000, which he agreed was an approximation of the amount of proceeds his distribution network received during the period of the conspiracy.  The statutory minimum prison term for the violation of 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(B), as charged in count one of the superseding indictment, is 10 years’ imprisonment; the statutory maximum for the charge is life in prison.  The maximum statutory penalties for the distribution and money laundering to which Reyna-Ceron has pleaded guilty is 20 years in prison.  However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Eleven of Reyna-Ceron’s co-defendants have pleaded guilty to certain crimes related to the drug distribution and money laundering conspiracy.  Reyna-Ceron’s brother, Marcelino Reyna-Ceron, pleaded guilty to conspiracy to distribute drugs and conspiracy to launder proceeds charges.  Reyna-Ceron’s brother-in-law, Raymundo Doval Duran, pleaded guilty to illegal use of a communications facility in connection with the drug operation.  In addition, Reyna-Ceron’s niece, Elizabeth Reyna-Rodriguez, and two nephews, Marcelino Reyna-Rodriguez and Eutimio Reyna-Rodriguez, pleaded guilty to money laundering charges, and his niece’s husband, Ramon Medina, pleaded guilty to drug charges. None of these co-defendants has been sentenced.  Sentencing hearings for these defendants will take place in August and September of 2017.

This case was the product of an extensive investigation by the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.  In this case, the United States Attorney’s Office, the Sonoma County District Attorney’s Office, the Drug Enforcement Administration, the Santa Rosa Police Department, and the Internal Revenue Service, worked together, with assistance from other federal and state agencies, including the Petaluma Police Department, to investigate and prosecute the offenders.

SAN JOSE – Venkat Guntipally was sentenced to 30 months in prison for his role in a conspiracy to commit several crimes including visa fraud, obstruction of justice, use of false documents, and mail fraud, announced Acting United States Attorney Alex G. Tse; U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin; and U.S. State Department, Diplomatic Security Service, San Francisco Field Office Special Agent in Charge Matthew Perlman.  The sentence was handed down by the Honorable Lucy H. Koh, U.S. District Judge.  Guntpally is the last of four defendants to be sentenced in connection with the visa fraud scheme.

A federal grand jury indicted Venkat Guntipally, 49, his wife, Sunitha Guntipally, 44, of Fremont, and two other defendants, Pratap “Bob” Kondamoori, 56, of Incline Village, Nev., and Sandhya Ramireddi, 58, of Pleasanton, in a 33-count indictment filed May 5, 2016.  The indictment contains charges in connection with the submission of fraudulent applications for H-1B specialty-occupation work visas.

“Through this multi-year conspiracy, Mr. Guntipally and his co-conspirators exploited foreign workers for profit, defrauded the United States, and engaged in brazen obstruction of justice,” said Acting U.S. Attorney Tse.  “Today’s sentence reflects that such crimes harm the nation’s immigration system and erode public trust.  This office will continue to prosecute defendants who are out to make an unlawful profit and abuse our immigration laws for purely personal gain.”

“As the lead agency in this investigation, the Diplomatic Security Service demonstrated its commitment to maintaining the integrity of U.S. visas. We pursue those who fraudulently use worker visas, like the H-1B, for personal gain,” said Special Agent in Charge Perlman. “Diplomatic Security Service’s strong relationship with our law enforcement partners and the U.S. Attorney’s Office for the Northern District of California, continues to be essential in the pursuit of justice.”

“Unscrupulous actions by employers to gain an unfair advantage will not be tolerated and HSI will commit its resources to stop these types of criminals from gaming our immigration system to line their pockets with money at the cost of others,” said Ryan L. Spradlin, Special Agent in Charge of HSI operations in northern California and northern Nevada.

Venkat Guntipally pleaded guilty on April 24, 2017, at which time he admitted that he and his wife founded and owned DS Soft Tech and Equinett, two employment-staffing companies for technology firms. In addition, Guntipally admitted that between approximately 2010 and 2014, he and his wife, together with others, submitted to the government more than one hundred fraudulent petitions for foreign workers to be placed at other purported companies.  The end-client companies listed in the fraudulent H-1B applications either did not exist or never received the proposed H-1B workers.  None of the listed companies ever intended to receive those H-1B workers.  The scheme’s intended purpose was to create a pool of H-1B workers who then could be placed at legitimate employment positions in the Northern District of California and elsewhere.  Through this scheme, Venkat Guntipally, along with his co-conspirators, gained an unfair advantage over competing employment-staffing firms, and the Guntipallys earned millions in ill-gotten gains.  Venkat Guntipally also admitted that he and his codefendants obstructed justice, including by directing workers to lie to investigators and by laundering money.  

Venkat Guntipally was charged with one count of conspiracy, in violation of 18 U.S.C. § 371; ten counts of substantive visa fraud, in violation of 18 U.S.C. § 1546(a); seven counts of using false documents, in violation of 18 U.S.C. § 1001(a)(3); and four counts of mail fraud, in violation of 18 U.S.C. § 1341.  He pleaded guilty to the conspiracy charge and the remaining charges were dismissed.  

In addition to the prison term, Judge Koh ordered Venkat Guntipally to serve three years of supervised release and ordered him to forfeit $500,000.  Venkat Guntipally was ordered to self-surrender on or before June 14, 2019.    

All three of Venkat Guntipally’s co-defendants previously pleaded guilty to their respective roles in the scheme.  Last year, Judge Koh sentenced Sunitha Guntipally to 52 months in prison, Ramireddi to 14 months’ imprisonment, and Kondamoori to 20 months’ imprisonment for their respective conduct.  

Assistant U.S. Attorney Jonas Lerman is prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation led by the U.S. Department of State Diplomatic Security Service’s representative to the Document and Benefit Fraud Task Force (DBFTF) overseen by the Department of Homeland Security’s Homeland Security Investigations. The DBFTF is a multi-agency task force that coordinates investigations into fraudulent immigration documents. U.S. Citizenship and Immigration Service’s Office of Fraud Detection and National Security also assisted with the investigation.

 

SAN FRANCISCO – Monterey Airbus, Inc. has entered into a settlement agreement with the United States Attorney’s Office to resolve allegations that the Monterey-based company violated Title III of the Americans with Disabilities Act (ADA) by discriminating against customers with disabilities, announced Acting United States Attorney Alex G. Tse. As part of the settlement, Monterey Airbus will take steps to ensure that it provides equivalent service to individuals with disabilities.

Monterey Airbus, a private transportation company with its principal place of business in Monterey, provides airport shuttle service between the Monterey Peninsula, San Francisco International Airport, and San Jose International Airport. Customers may request rides through the company’s on-line reservation system and a Monterey Airbus vehicle stops at pre-determined locations for customers with a reservation. After the U. S. Attorney’s Office conducted an investigation, Monterey Airbus acknowledged that prior to 2017, it did not provide services for passengers who required wheelchair transportation. Monterey Airbus also admitted that from 2005 to 2015 it purchased at least five new 13-passenger vehicles and five new 24-passenger vehicles for use in its services in the San Francisco Bay Area, none of which were readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs. 

“Passengers with disabilities are entitled to equal access to the different airport shuttle services that facilitate travel to and from the Bay Area,” said Acting United States Attorney Tse. “With the agreement being announced today, Monterey Airbus has pledged its commitment to ensure individuals with disabilities receive the same service as other passengers.  We acknowledge Monterey Airbus’s cooperation throughout this investigation and are glad that we were able to reach this resolution without litigation.”

As a result of the U.S. Attorney’s Office’s investigation and this settlement, Monterey Airbus will make the following changes:

Operate sufficient readily accessible vehicles to ensure individuals with disabilities receive equivalent service. 

Permit passengers with disabilities, including individuals who use wheelchairs, to book a Monterey Airbus trip either on-line or by phone.  

Conduct ADA training for employees to include instruction on the ADA requirements for private entities operating a transportation system and Monterey Airbus’s policies and practices regarding accommodation of individuals with disabilities.

Assistant U.S. Attorney Rebecca A. Falk is handling the matter on behalf of the U.S. Attorney’s Office for the Northern District of California.

SAN FRANCISCO – Tjoman Buditaslim, Jose De Jesus Martinez, and Jose Alfonso Tellez were sentenced today to 24 months, 14 months, and 12 months in prison, respectively, for their participation in a mortgage fraud conspiracy.  The sentences were handed down by the Honorable Charles R. Breyer, Senior U.S. District Judge.Buditaslim, 52, of San Francisco, Martinez, 59, of Daly City, Tellez, 27, of San Jose, and a fourth defendant, Travis Holasek, 52, of San Francisco, were indicted in November 2023 on charges of conspiracy to commit wire fraud and wire fraud.  All four defendants pleaded guilty to conspiracy to commit wire fraud.As detailed in court records, from 2018 through 2022, Buditaslim, a licensed real estate broker until his license was revoked in 2019, conspired to originate approximately 102 home loans worth more than $55 million based on false and fraudulent loan application information.  Buditaslim obtained home loans for his clients, potential homebuyers, by submitting false loan applications and income information to multiple loan companies.  Buditaslim knew that the applicants could not qualify using truthful income information.  Unbeknownst to the applicants, Buditaslim created fraudulent documents, including judicial divorce decrees, alimony and child support checks for nonexistent children, bank statements, and loan applications, that falsely inflated the applicants’ income.  The loan companies extended home loans to Buditaslim’s clients relying on the falsely inflated income information.  Buditaslim and his co-conspirators profited from the conspiracy via payments from escrow when the clients purchased homes or direct payment from the clients.  Buditaslim admitted that the Federal Housing Administration (FHA), which insured many of the fraudulently obtained mortgage loans, lost approximately $486,484.38 to keep certain of the loans from going into foreclosure.According to Martinez’s plea agreement, Martinez, who worked as a licensed real estate agent, directed clients to Buditaslim knowing that Buditaslim would qualify his clients for home loans based on false and fraudulent loan application materials and information.  Buditaslim obtained approximately 49 loans for Martinez’s real estate clients totaling about $27.7 million.  As the agent for the buyers, Martinez earned nearly $590,000 in real estate broker commissions.According to Tellez’s plea agreement, Tellez worked as a loan officer at a mortgage company where he received home mortgage loan applications and supporting documentation to determine if applicants qualified for a mortgage based on his employer’s and FHA rules and guidelines.  As part of the conspiracy, Tellez helped originate approximately 30 home mortgage loans worth more than $17 million based on what he knew to be false and fraudulent income information.  Despite knowing that he was required to stop and flag applications based on false and fraudulent income representations, Tellez knowingly assisted in originating and funding the loans.  Tellez earned more than $134,000 in commissions on the 30 fraudulently obtained loans.“The defendants tried to line their own pockets at the expense of homebuyers, lenders, and federally insured programs.  Instead of helping potential homebuyers obtain home loans for which they were qualified, defendants chased loans that should never have been extended,” said United States Attorney Ismail J. Ramsey.  “Today’s sentences hold the defendants accountable for their conduct.”“Justice was served today. People seeking to fulfill their American dream of homeownership must not be victimized,” said Herminia Neblina, Special Agent in Charge of the Federal Housing Finance Agency Office of Inspector General’s Western Region. “FHFA-OIG will continue to aggressively investigate allegations of mortgage frauds and we will always seek to hold such criminal fraudsters accountable in the justice system.”“The defendants and other co-conspirators engaged in a $55 million mortgage fraud scheme, fabricating material documents to falsely qualify individuals for loans they would not have otherwise qualified for.  When individuals commit fraud against federally funded programs, it creates significant risks to the viability of the program and limits the financial resources available to assist hard working Americans with homeownership,” said Acting Special Agent-in-Charge Joshua Stockman with the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG).  “HUD OIG will continue to work with the U.S. Attorney’s Office and its law enforcement partners to vigorously pursue those who seek to profit by abusing HUD-funded programs.”“To protect the public, Postal Inspectors worked closely with the U.S. Attorney’s Office and our partners at Federal Housing Finance Agency OIG and the U.S. Housing and Urban Development OIG to arrest and prosecute those individuals responsible for fraud schemes committed against businesses and the public,” said San Francisco Division Inspector in Charge Stephen M. Sherwood of the U.S. Postal Inspection Service (USPIS).In addition to the terms of imprisonment, Judge Breyer sentenced each of the three defendants to three years of supervised release.  Buditaslim was also ordered to pay $1,393,018.46 in restitution, Martinez was ordered to pay $840,847.35 in restitution, and Tellez was ordered to pay $858,321.67 in restitution.  Buditaslim, Martinez, and Tellez will begin serving their sentences on Feb. 3, 2025.  Holasek is scheduled to be sentenced on Dec. 4, 2024.The case is being prosecuted by the Corporate and Securities Fraud and General Crimes Sections of the U.S. Attorney’s Office.  Assistant United States Attorney Christiaan Highsmith is prosecuting the case with the assistance of Lance Libatique.  The prosecution is the result of a multi-year investigation by FHFA-OIG, HUD OIG, USPIS, and the California Department of Justice.  

OAKLAND – Christina Burden was arrested today on a federal criminal complaint charging her with bank fraud in connection with a scheme to illegally obtain more than $4.5 million in pandemic relief loans, announced United States Attorney David L. Anderson; Treasury Inspector General for Tax Administration J. Russell George; Federal Bureau of Investigation, Special Agent in Charge Craig D. Fair; and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Michael Daniels.   

Christina Burden, 31, of Oakland, is charged in the complaint with one count of committing bank fraud on or about June 20, 2020, when she applied for and later received $684,375 in a forgivable loan from the government’s Paycheck Protection Program (PPP) for her shell entity “Blessing Box Co LLC.”  The complaint further describes a scheme in which Burden submitted nine other fraudulent applications for PPP loans between April and June of 2020, one of which resulted in her receiving an additional $307,916 in PPP funds. In total, Burden attempted to obtain over $4.5 million in PPP forgivable loans for four different shell entities. 

During this time, Burden also submitted one fraudulent Economic Injury Disaster Loan Program (EIDL) application for one of the same shell entities, for which she received $150,900 in funds.  The four entities had recently been created by Burden, according to the complaint, and do not appear to engage in any legitimate business nor to have any employees.  Loan applications for both PPP and EIDL loans are required to be certified by the applicant as true, and the criminal complaint describes how Burden’s applications contained false information and misleading statements as well as doctored bank statements and fictitious tax forms.

Burden ultimately obtained a total of over $1 million in fraudulent pandemic relief loans, including almost $1 million in PPP funds.  The PPP requires that its funds be used for legitimate business and payroll expenses, and the complaint describes how Burden spent the bulk of the loan money on personal indulgences, including private jet travel, hotel stays, boat rentals, expensive automobiles, luxury goods purchased from Louis Vuitton and Neiman Marcus, and specialty items purchased from the Sunglass Hut and the San Francisco Giants Dugout Store.

“The Paycheck Protection Program provides a financial lifeline to needy businesses and their employees,” said U.S. Attorney Anderson.  “We allege that Christina Burden obtained PPP funds by fraud, submitting false business information, false employee numbers, false bank statements, and false tax returns.  She used those funds for a spending spree on entertainment, luxury goods, and high end excursions, including travel by private jet.”  

“The Treasury Inspector General for Tax Administration aggressively pursues those who endeavor to defraud taxpayer-funded Coronavirus Aid, Relief, and Economic Security Act programs, which were established to provide assistance to American business owners during these unprecedented times,” said J. Russell George, the Treasury Inspector General for Tax Administration.  “We appreciate the efforts of the U.S. Department Justice and our law enforcement partners in this effort.”

“As we begin a second round of PPP loans for small businesses who are struggling during this pandemic, we will be on alert for fraudsters who seek to take advantage of the program,” said FBI San Francisco Special Agent in Charge Craig Fair. “Those who wish to defraud programs designed to help those in need should know that the FBI and our partners will pursue every investigative tool available to us to ensure the integrity of those programs and that they remain available to our community’s small business owners.”

“Christina Burden allegedly used fraudulently obtained funds from the Paycheck Protection Program and Economic Injury Disaster Loan program to unjustly enrich herself.  According to the criminal complaint, she submitted false documents and records to banks showing that she had employees, paid wages to those employees, and paid employment tax payments to the IRS – none of which is true,” said Michael Daniels, Acting Special Agent in Charge of IRS Criminal Investigation's Oakland Field Office.  “IRS-CI is proud to work with our law enforcement partners by lending our expertise in complex financial cases like this one.

As outlined in the complaint, the PPP is administered by the U.S. Small Business Administration (SBA) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The CARES Act is a federal law enacted in March 2020 to provide emergency financial assistance to the millions of Americans suffering from the economic effects caused by the COVID-19 pandemic.  PPP loan proceeds must be used by the business on certain permissible business expenses, including payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on a PPP loan to be entirely forgiven if the business spends the loan proceeds on these business expense items within a designated period of time and uses at least 60% of the PPP loan proceeds on payroll expenses.  Loans made through the PPP are 100% guaranteed by the SBA. 

Similarly, the EIDL Program provides low-interest non-forgivable loans to small businesses, among others, in regions affected by disasters.  In March 2020 the President of the United States extended the availability of EIDL funds to all states and territories due to the magnitude and severity of the COVID-19 pandemic. 

According the complaint, Burden’s loan applications contained multiple false statements certified as true.  Among those, Burden falsely affirmed that each business was in operation before February 15, 2020, and her businesses had up to 89 employees and monthly payroll expenses of over $700,000.  The complaint alleges, however, that the entities’ tax records reveal that none of them paid payroll taxes nor submitted any payroll tax forms.  Bank records submitted in Burden’s applications as evidence of the four shell entities’ payroll expense payments were revealed to be doctored when compared against the actual bank records, per the complaint’s allegations. 

The complaint lastly alleges that once Burden received the funds, she did not use the money to pay allowable PPP business expenses but instead spent it on personal indulgences: $184,000 on airfare, private jet travel, and hotel expenses; $124,000 on luxury purchases from Louis Vuitton and Neiman Marcus as well as purchases from Nordstrom, the San Francisco Giants Dugout Store, Sunglass Hut, Tumi, and Wayfair; $16,000 on boat and car rentals; and $14,000 on various restaurant and entertainment expenses, among other purchases.  In addition, the complaint alleges Burden wired hundreds of thousands of dollars to friends and family, $150,000 of which was spent in part on Mercedes and Land Rover vehicles.

The charges in the complaint are merely allegations and the defendant is presumed innocent unless proven guilty in a court of law.  

Burden is charged with one count of bank fraud, in violation of 18 U.S.C. § 1344.  Burden faces a maximum penalty of 30 years in prison and a one million dollar fine, if convicted.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Burden was arrested this morning in Austin, Texas. Her initial appearance in United States District Court will be in the Western District of Texas on Monday, February 8, 2021, before United States Magistrate Judge Mark Lane, who sits in Austin.  It is anticipated that Burden will be ordered at that hearing to appear in the United States District Court in Oakland, California, to face the charge in the federal complaint.  The date for her initial appearance in Oakland federal court is as yet unscheduled. 

Abraham Fine is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kay Konopaske and Laurie Worthen.  The prosecution is the result of an investigation by TIGTA, IRS-CI, and the FBI.

SAN FRANCISCO – Japheth Dillman was arrested today in connection with an alleged scheme to defraud victims into investing in a San Francisco-based cryptocurrency trading fund, announced U.S. Attorney Stephanie M. Hinds, FBI Acting Special Agent in Charge Sean Ragan and Internal Revenue Service, Criminal Investigation (IRS-CI) Special Agent in Charge Mark H. Pearson.

Dillman, 44, of San Francisco, was charged in a complaint filed April 26, 2022, and unsealed earlier today.  According to the complaint, from June 2017 through July 2018, Dillman was a general partner of Block Bits Fund I, LP (Block Bits Fund), a limited partnership incorporated in Delaware with a principal place of business in San Francisco.  Dillman is alleged to have represented to potential investors that Block Fits Fund was developing a novel autotrader that would automatically complete cryptocurrency arbitrage trades on different exchanges.  Dillman told potential investors that Block Fits Fund would profit from exploiting the price differences between different cryptocurrencies being sold on various exchanges.  According to Dillman, investor funds would be used to develop and operate the autotrader, which he told investors was functioning and already returning profits.  The complaint further alleges that, together with another general partner, David Mata, 42, of Spokane Wash., Dillman raised approximately $960,000 from investors by misrepresenting the status and functionality of the technology underlying the autotrader and by making false representations regarding the manner investor funds were being used.  

The misrepresentations Dillman allegedly made are described in the complaint.  For example, Dillman represented to multiple investors in June and July 2017 that the autotrader was already functioning and returning a substantial profit to Block Bits Fund.  In fact, according to the complaint, there was no functioning autotrader at the time, and any claims regarding the autotrader’s ability to generate profits were false.  According to the complaint, Block Bits Fund was never able to develop a functioning autotrader at any point in its existence.  Further, in August 2017, Dillman represented to investors in an email that the arbitrage autotrader was being tested and that it would be deployed for automated trades within a week.  The complaint alleges that these representations were false.  According to the complaint, there was no prospect that the autotrader could be developed and deployed within one week of the date of the email, as development of the autotrader had not yet begun.  

In addition, the complaint describes how Dillman allegedly misrepresented how investor funds were being used by representing that funds were being placed in “cold storage” where they would return high rates of profit for investors.  “Cold storage” refers to a way of storing cryptocurrency that is supposedly safe and not exposed to risky investments.  Dillman informed investors on multiple occasions that Block Bits Fund had reached “cold storage” deals with third parties whereby investor funds would be placed in “cold storage” for a period of time and receive a significant profit at the end of the storage period.  However, rather than place the investor funds in “cold storage” for safe keeping, Dillman and Mata instead diverted the funds and used them to invest in risky, cryptocurrency-related ventures, none of which involved “cold storage” or were related to the stated purpose of Block Bits Fund.  Moreover, the complaint alleges Dillman and Mata sent misleading updates and profit reports to investors representing that their funds were being stored securely when, in fact, they were invested in risky ventures.  According to the complaint, all of the investments failed and investors lost a substantial portion of their funds. 

In sum, the complaint alleges Block Bits investors lost approximately $508,000 due to Dillman’s scheme.  Dillman is charged with one count of wire fraud, in violation of 18 U.S.C. § 1343.  Mata also is charged with one count of wire fraud in a separate document, an information filed earlier today.  If convicted, Dillman and Mata face a maximum statutory prison sentence of 20 years.  In addition, the charge carries a maximum $250,000 fine and 3 years of supervised release.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

A criminal complaint and an information contain mere allegations and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Dillman’s next court appearance is scheduled for April 28, 2022, before U.S. Magistrate Judge Thomas S. Hixson.  Mata’s next court appearance is scheduled for April 29, before Magistrate Judge Hixson.

The cases against Dillman and Mata are brought as a result of an investigation by the FBI and IRS-Criminal Investigation.  

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office for the Northern District of California.  The U.S. Attorney’s Office appreciates the assistance of the San Francisco Regional Office of the Securities and Exchange Commission.

 

SAN JOSE – Sunitha Guntipally was sentenced today to 52 months in prison for her role in a conspiracy to commit several crimes including visa fraud, obstruction of justice, use of false documents, mail fraud, and witness tampering, announced United States Attorney Brian J. Stretch; U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin; and U.S. State Department, Diplomatic Security Service, San Francisco Field Office Special Agent in Charge Matthew Perlman.  The sentence was handed down by the Honorable Lucy H. Koh, U.S. District Judge, after Guntipally pleaded guilty to the conspiracy charge on May 3, 2017. 

A federal grand jury indicted Sunitha Guntipally, 44, of Fremont, and three co-defendants, Venkat Guntipally, 49, of Fremont; Pratap “Bob” Kondamoori, 56, of Incline Village, Nev.; and Sandhya Ramireddi, 58, of Pleasanton, in a 33-count indictment filed May 5, 2016.  The indictment contains charges in connection with the submission of fraudulent applications for H-1B specialty-occupation work visas.

In connection with her guilty plea, Sunitha Guntipally admitted that she and Venkat Guntipally were a husband and wife team who founded and owned DS Soft Tech and Equinett, two employment-staffing companies for technology firms. Sunitha Guntipally admitted that between approximately 2010 and 2014, she and her co-defendants submitted more than one hundred additional fraudulent petitions for foreign workers to be placed at other purported companies.  The end-client companies listed in the fraudulent H-1B applications either did not exist or never received the proposed H-1B workers.  None of them ever intended to receive those H-1B workers.  These applications were designed and intended to create a pool of H-1B beneficiaries who then could be placed at legitimate employment positions in the Northern District of California and elsewhere.  Through this scheme, Sunitha Guntipally, along with her co-conspirators, gained an unfair advantage over competing employment-staffing firms and, as a result, she and her husband, Venkat Guntipally, earned money from these downstream companies for themselves and their companies.  In addition, Sunitha Guntipally admitted that she obstructed justice, and directed her co-defendant to do the same, in an effort to mislead the agents, and conceal the conspiracy.

In sum, Sunitha Guntipally was charged with one count of conspiracy, in violation of 18 U.S.C. § 371; ten counts of substantive visa fraud, in violation of 18 U.S.C. § 1546(a); seven counts of using false statements, in violation of 18 U.S.C. § 1001(a)(3); four counts of mail fraud, in violation of 18 U.S.C. § 1341; and four counts of witness tampering, in violation of 18 U.S.C. § 1512(b)(3).  Pursuant to her guilty plea, Sunitha Guntipally pleaded guilty to the conspiracy charge and the remaining charges were dismissed.  

In sentencing Sunitha Guntipally, Judge Koh stated that the defendant’s crime does “damage to the rule of law.”  Judge Koh stated that the defendant’s conduct “undermines respect for our legal immigration system” and does “tremendous damage to our institutions and affects the rights of others to immigrate to the United States.”   

In addition to the prison term, Judge Koh ordered Sunitha Guntipally to serve three years of supervised release and to pay a $50,000 fine.  Each of Sunitha Guntipally’s co-defendants has already pleaded guilty to his respective roles in the scheme.  Judge Koh sentenced Ramireddi to 14 months’ imprisonment and Kondamoori to 20 months’ imprisonment for their respective roles earlier this year.  Venkat Guntipally, Sunitha Guntipally’s husband, is scheduled to be sentenced on March 21, 2018, at 9:15 a.m.  

Assistant U.S. Attorney Timothy J. Lucey is prosecuting the case with the assistance of Laurie Worthen.  The prosecution is the result of an investigation led by the U.S. Department of State Diplomatic Security Service’s representative to the Document and Benefit Fraud Task Force (DBFTF) overseen by the Department of Homeland Security’s Homeland Security Investigations. The DBFTF is a multi-agency task force that coordinates investigations into fraudulent immigration documents. U.S. Citizenship and Immigration Service’s Office of Fraud Detection and National Security also assisted with the investigation.

 

OAKLAND – A federal grand jury has returned an indictment charging a Contra Costa County man with wire fraud and other crimes relating to a scheme in which he fraudulently obtained more than $1.1 million in government-backed COVID-19 relief funds, announced United States Attorney Ismail J. Ramsey; Federal Bureau of Investigation (FBI) Special Agent in Robert K. Tripp; and Small Business Administration (SBA) Office of Inspector General (OIG) Special Agent in Charge Weston King of the Western Region.

According to the indictment filed this week, Jenkins, 53, of El Sobrante, California, was president of a company called A & L Investments LLC (A&L), which was founded in 2016, headquartered in El Sobrante, and purported to purchase, renovate, and sell distressed properties. The indictment alleges that, in February 2021 and April 2021, Jenkins applied for and received two Paycheck Protection Program (PPP) loans totaling more than $1 million on the basis of false and fraudulent representations that A&L had dozens of employees and hundreds of thousands of dollars in monthly payroll expenses. In fact, A&L had zero employees and no monthly payroll. In December 2021, Jenkins applied for and received forgiveness of the first of those two loans, falsely certifying he had used the PPP funds to make payroll for A&L’s nonexistent employees. In fact, Jenkins had used the money for personal expenses and to pay off personal debts.

The indictment also states that, in July 2020, Jenkins applied for and received an Economic Injury Disaster Loan (EIDL) of nearly $95,000 for a maid and cleaning service he said he operated as a sole proprietor. The application falsely stated that Jenkins had 10 employees and gross revenues of $241,353. In fact, he had no employees and no revenues. Rather than use the EIDL funds he received on approved business expenses, Jenkins used that money to enrich himself.

The PPP was administered by the SBA as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a federal law enacted in March 2020 to provide billions of dollars in emergency financial assistance to millions of Americans suffering from the economic effects of the COVID-19 pandemic. The PPP provided forgivable loans to small businesses for job retention and certain other qualified business expenses. PPP funds were disbursed by SBA-approved third-party lenders.

The EIDL program is also administered by the SBA. It provides low-interest financing to small businesses, renters, and homeowners in regions affected by declared disasters. As relevant here, the CARES Act authorized the SBA to make EIDL loans of up to $2 million to eligible small businesses experiencing substantial financial disruption due to the COVID-19 pandemic. EIDL funds are disbursed directly by the SBA.

The Indictment charges three counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of submitting false writings to a government agency, in violation of 18 U.S.C. § 1001(a)(3).

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Jenkins faces a maximum statutory sentence of 20 years in prison on each of the three counts of wire fraud and a maximum statutory sentence of 5 years in prison on the fourth count, which charges him with submitting false writings to a government agency. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Jenkins has not yet appeared in court to face the charges against him.

Assistant U.S. Attorney Kenneth Chambers is prosecuting the case. The prosecution is the result of an investigation by the FBI and SBA-OIG.

SAN FRANCISCO – A federal jury in San Francisco returned a guilty verdict against Dwayne Lorenzo Richardson on three counts of tax evasion, announced United States Attorney Ismail J. Ramsey and Internal Revenue Service Criminal Investigation (IRS-CI) Acting Special Agent in Charge Michael Mosley.  The guilty verdict followed a three-day jury trial before the Honorable William Alsup, Senior U.S. District Judge.  A three-count indictment was filed on June 27, 2023, charging Richardson with tax evasion in violation of 26 U.S.C. § 7201.According to court documents and evidence presented at trial, Richardson, 53, of San Francisco, evaded his personal income taxes for tax years 2017, 2018, and 2019 by claiming to owe only about $28,496 in total tax when he made over $1.2 million as a software engineering manager. Richardson did so by declaring over $1.1 million in medical expenses on his tax returns, overstating those expenses by more than $945,000.Richardson received tax refunds totaling over $165,000 for the three charged tax years, according to evidence presented at trial. Richardson then lied to an IRS revenue agent in two audit interviews, stating that the $1.1 million of medical expenses were related to an appendectomy. But according to the court record, Richardson paid no more than a few hundred dollars for treatment related to the appendectomy, which took place in 2010, not 2017, 2018, or 2019. As Richardson explained to one of his representatives in the tax audit, Richardson deducted nonexistent medical expenses from his taxes for multiple years because he had not been “caught” the first time he did it.Assistant United States Attorneys Jared S. Buszin and Ryan Rezaei and Special Assistant United States Attorney Matthew Chou are prosecuting the case, with assistance from Helen Yee.  The prosecution is the result of an investigation by IRS-CI.Richardson’s sentencing hearing is set for Jan. 14, 2025.  Richardson faces a maximum statutory penalty of five years in prison and a $100,000 fine on each of the three counts.  However, any sentence will be imposed only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

SAN FRANCISCO – Jonathan Yet Wing Soong pleaded guilty today to violating export control laws in connection with a scheme to secretly funnel sensitive aeronautics software to a Beijing university, announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement (BIS), Special Agent in Charge John D. Masters; Defense Criminal Investigative Service (DCIS) Special Agent in Charge Bryan D. Denny. The plea was accepted by the Hon. Susan Illston, United States District Judge. 

Between August 2016 and September 2020, Soong, 35, of Castro Valley, Calif., was employed as a program administrator by Universities Space Research Association (USRA), a nonprofit research corporation focusing on advancing space science and technology. In April of 2016, USRA contracted with the National Aeronautics and Space Administration (NASA) to, among other things, license and distribute aeronautics-related Army flight control software for a fee. Soong’s duties included, among other things, conducting and servicing software license sales, conducting export compliance screening of customers, generating software licenses, and exporting software pursuant to purchased licenses. As part of his duties, Soong was responsible for vetting customers to ensure they did not appear on certain restrictive lists—including the Department of Commerce’s Entity List and other U.S. government lists—that placed limitations on the transfer of products to identified entities. In pleading guilty, Soong admitted that he willingly exported and facilitated the sale and transfer of restricted software to Beihang University knowing that the university was on the Department of Commerce’s Entity List. According to government filings in the case, Beihang University was added to the Entity List due to the University’s involvement in People’s Republic of China military rocket systems and unmanned air vehicle systems. In his plea agreement, Soong acknowledged he used an intermediary to complete the export of the program to avoid detection that the real purchaser was on the Entity List. 

At issue in the case is a software package referred to as CIFER, a tool that allows a user to develop a dynamic model of an aircraft, based on collective flight test data using system identification techniques. According to government filings, the package could be used to analyze and design aircraft control systems. According to his plea agreement, Soong was aware in April of 2017 that the CIFER software was subject to Export Administration Regulations and that Beihang University was on the Entity List thus making it necessary to obtain a license prior to exporting the CIFER software to the university. Soong acknowledged that he nonetheless arranged to sell and transfer the CIFER software package to the entity without obtaining a license. 

The plea agreement describes how, on May 1, 2017, a representative of the university communicated with Soong and expressed an interest in exploring an arrangement in which rather than use Beihang University as the purchaser of the CIFER software, the purchase would be made in the name of a third-party small company. For the next several months, Soong communicated with the representative and then, in late 2017, Soong communicated with a representative from Beijing Rainbow Technical Development Ltd. (Beijing Rainbow), identified as being the third-party intermediary for the sale of the CIFER software to Beihang University. Soong ultimately exported directly to Beihang University. In July 2018, Soong also arranged to have the passcodes for the CIFER software package forwarded to Beihang University with payment coming from Beijing Rainbow.

On September 26, 2022, Soong was charged by information with one count of violating the International Emergency Economic Powers Act (IEEPA), in violation of 50 U.S.C. §§ 1702 and 1705. Pursuant to today’s agreement, Soong pleaded guilty to the count.

The IEEPA violation carries a statutory maximum penalty of 20 years in prison and a $1,000,000 fine. In addition, as part of any sentence, the court may order restitution and up to three years of supervised release. However, any sentence after conviction will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Soong remains out of custody pending sentencing. Judge Illston scheduled Soong’s sentencing hearing for April 28, 2023. Assistant United States Attorney Barbara Valliere of the United States Attorney’s Office’s Special Prosecutions Section is prosecuting the case with the assistance of Maddi Wachs and Kathy Tat. The prosecution is the result of an investigation by the BIS, DCIS, and the FBI with assistance from the NASA Office of Inspector General; U.S. Army Criminal Investigation Division; the U.S. Army Counterintelligence; and the Department of Homeland Security, Homeland Security Investigations.

SAN FRANCISCO – Attila Colar a/k/a Dahood Sharieff Bey, a/k/a Sharieff Dahood Bey, a/k/a Dawud Sharieff Bey Ahed, a/k/a Dawud Azadene, a/k/a Attilla Collan, has been charged in a federal criminal complaint with bank fraud in connection with an alleged scheme to obtain illegally more than $22 million dollars in loans through the U.S. government’s Payroll Protection Program (PPP), announced U.S. Attorney David L. Anderson; FBI Special Agent in Charge John L. Bennett; Federal Reserve System Office of Inspector General for the Board of Governors and the Bureau of Consumer Financial Protection (FRB/CFPB-OIG) Western Region Special Agent in Charge Scott Redington; and Small Business Administration Office of the Inspector General (SBA-OIG) Western Region Special Agent in Charge Weston King. Colar made his initial federal court appearance earlier today before U.S. Magistrate Judge Kandis A. Westmore. 

According to the criminal complaint, Colar, 48, of Richmond, submitted three applications between April and June of 2020, on behalf of Hercules-based non-profit All Hands on Deck, Inc.  All Hand on Deck is a non-profit that purports to provide housing “to men getting out of prison, food bank services, life and work skills, trainings, resiliency treatment services, prenatal life skills, and a variety of necessary know hows to survive in today’s society.”  Colar received over $1.1 million from one of those loans.  The complaint separately alleges that six more applications were submitted in that same time period on behalf of two other entities linked to Colar—The Family Investment Group, Inc. and Oversight Security, Inc.  The criminal complaint describes how the loan applications are rife with false information, misleading statements, and glaring omissions.

“The Payroll Protection Program is supposed to support everyday Americans suffering economic distress,” said U.S. Attorney Anderson. “The complaint describes the methodical preparation of fraudulent loan applications to deprive the program of $22 million that is sorely needed by the public to endure this national crisis.” 

“The COVID-19 pandemic has caused economic suffering for so many families and small businesses.  It’s particularly abhorrent when criminals take advantage of this situation for their own greed," said FBI Special Agent in Charge John F. Bennett.  "Based on the FBI’s investigation, Mr. Colar appears to have illegally used the Paycheck Protection Program to attempt to fraudulently line his own pockets.  The FBI is quickly and carefully investigating all claims of PPP fraud to ensure that American businesses aren’t further victimized during this challenging time.” 

“We are fully committed to bringing to justice wrongdoers who exploit and defraud financial institutions and the government’s response to the COVID-19 pandemic,” said Special Agent in Charge Redington.

“Fraudsters are tireless and brazen in their fraudulent efforts to steal from taxpayers for their selfish ends,” said Special Agent in Charge King.  “OIG and its law enforcement partners will relentlessly pursue fraudsters and bring them to justice.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”

The PPP is administered by the U.S. Small Business Administration as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The CARES Act is a federal law enacted in March of 2020 to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  PPP loan proceeds must be used by the business on certain permissible expenses—payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on the PPP loan to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time and uses at least 60% of the PPP loan proceeds on payroll expenses.  Loans made through the PPP are 100% guaranteed by the SBA.

The complaint alleges Colar prepared numerous loans for submission through the PPP.  One such application, submitted in June 2020, requested $2 million from a bank in Salt Lake City, Utah.  That loan was ultimately funded in the amount of $1,113,112.  The complaint alleges the application contained false information including bogus employee names, false payroll records, and fraudulent tax documents.  For example, the application was supported by IRS Forms 941 that purported to establish All Hands on Deck employed 45 people in the third quarter of 2019 and 81 people in both the fourth quarter of 2019 and the first quarter of 2020.  Nevertheless, the names of the purported employees not only included one of Colar’s aliases, it also included two contractors and several current and former residents of All Hands on Deck, none of whom could support the information in the IRS forms.  In addition, the application contained direct questions pertaining to the background of the principal sponsor; in response Colar allegedly failed to admit he had a criminal record.  

Including the successful $2 million loan application submitted on behalf of All Hands on Deck in June, the complaint alleges Colar prepared several other loan applications, the following of which, were actually submitted to banks:

 



Date Submitted





Applying Entity





Amount requested





April 2020





All Hands on Deck





$2,422,615





May 2020





All Hands on Deck





$1,618,200





June 2020





All Hands on Deck





$2,000,000





June 2020





The Family Investment Group





$3,310,241.05





June 2020





The Family Investment Group





$3,310,000,00





June 2020





Oversight Security, Inc.





$2,893,149.79





June 2020





Oversight Security, Inc.





$2,893,149.79





June 2020





Oversight Security, Inc.





$1,896,063





June 2020





Oversight Security, Inc.





$2,893,147



In sum, Colar is charged with bank fraud, in violation of 18 U.S.C. § 1344.  The charge in the complaint is merely an allegation and the defendant is presumed innocent unless proven guilty in a court of law.  Colar faces a maximum penalty of 30 years in prison and a million dollar fine, if convicted.  

Magistrate Judge Westmore ordered Colar released on a $100,000 bond.  Colar’s next federal court appearance is scheduled for October 27, 2020, for further proceedings.

The prosecution is being handled by the Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California.  The prosecution is the result of an investigation by the FBI, FRB/CFPB-OIG, and SBA-OIG.  

 

 

 

 

OAKLAND – Gina Suzanne Lonestar was sentenced to 22 months in federal prison in connection with a wire fraud scheme pursuant to which she embezzled over $1.7 million from her former employer, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. Jon S. Tigar, United States District Judge.

Lonestar, 52, of Danville, Calif., pleaded guilty to the charge on May 19, 2023. According to her plea agreement, Lonestar admitted that, in December 2010, she devised a scheme to create a fake vendor to defraud Men’s Wearhouse and later Tailored Brands (Men’s Wearhouse’s parent company) of money by submitting and approving false invoices for the fake vendor to the accounts payable department. Lonestar created a document stating the vendor was a sole proprietorship associated with a family member and then began submitting and approving invoices falsely claiming the vendor was performing work at Men’s Wearhouse stores throughout California, such as inspections and handyman work. Lonestar admitted that she submitted and approved false invoices in the name of the fake vendor for approximately eight years, defrauding her employer of over $1.7 million, which was paid to her joint checking account. Lonestar admitted that the vendor did not exist and the family member with whom she co-owed the company performed none of the work for which she provided invoices.

At the time Lonestar devised the scheme, she was a Director in the Facilities Department of Men’s Wearhouse. During the relevant time period she was promoted to Senior Director of Facilities and Corporate Services and then to Vice President of Construction, Maintenance, and Facilities. In all of her roles, she had the authority to approve invoices for work done by vendors. Lonestar’s scheme ended in 2019 when the company discovered the conduct during an internal audit.

On September 8, 2022, a federal grand jury indicted Lonestar charging her with six counts of wire fraud, in violation of 18 U.S.C. § 1343. Pursuant to her plea agreement, Lonestar pleaded guilty to one count and the court dismissed the remaining counts during her sentencing hearing.

In addition to the 22-month sentence, Judge Tigar ordered Lonestar to pay a $1,736,216 forfeiture money judgment and to serve three years of supervised release which will begin after she leaves prison. Judge Tigar ordered that Lonestar begin serving her sentence on January 5, 2024. In addition, Judge Tigar scheduled a hearing for December 1, 2023, to determine issues regarding restitution.

The case is being prosecuted by Assistant United States Attorney Noah Stern with assistance from Elizabeth Kim and Kathleen Turner. The prosecution is the result of an investigation by the FBI.

SAN JOSE – Amanda Christine Riley was sentenced in federal court today to 60 months in prison after pleading guilty to wire fraud in connection with a scheme to solicit donations from individuals to help her pay for cancer treatments she never needed nor received, announced United States Attorney Stephanie M. Hinds and Internal Revenue Service (IRS) Criminal Investigation, Special Agent in Charge Mark H. Pearson.  The sentence was handed down by the Honorable Beth Labson Freeman, United States District Judge for the Northern District of California.

Beginning in 2012, Riley, who was then living in San Jose, began to falsely report that she had been diagnosed with Hodgkin’s lymphoma, a type of cancer.  Although she was not actually ill, Riley carefully cultivated a social media presence, using Facebook, Instagram, Twitter, and a blog.  She used her presence on these sites to “document” her nonexistent medical condition, and to aggressively solicit donations, supposedly to cover her medical expenses.  In truth, Riley had no medical expenses.  The donations she received were deposited into her personal bank accounts and used to pay her living expenses.  In total, the government identified 349 individuals and entities who made contributions with a total value of $105,513 towards Riley’s fabricated medical expenses.

Information provided at the sentencing hearing showed that Riley went to great lengths to maintain her deception: she shaved her head to make it appear as if she were receiving chemotherapy; she falsified medical records; she forged physicians’ letters and medical certifications; she convinced family members to echo her false claims; she gave materially false testimony in several legal proceedings; and she attacked anyone who suggested she was malingering (going so far as to sue one of them).  Riley’s scheme continued from 2012 until 2019, when it was uncovered by an investigation of the Internal Revenue Service, Criminal Investigation, and the San Jose Police Department.

Riley was charged by criminal complaint in July 2020 and pleaded guilty to an information charging one count of wire fraud in violation of 18 U.S.C. § 1343 on October 12, 2021.  In addition to her 60-month prison sentence, Judge Freeman ordered that Riley pay restitution in the amount of $105,513.  The sentence also included a three year period of supervision following her release from prison.

Assistant U.S. Attorneys Michael G. Pitman and Scott Simeon prosecuted the case with the assistance of Sahib Kaur.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation, and the San Jose Police Department.  

 

SAN FRANCISCO – Derf Butler, owner and president of San Francisco-based Butler Enterprises, pleaded guilty today to conspiracy to defraud the United States in connection with a federal construction contract, and making false statements to federal investigators, announced United States Attorney Alex G. Tse, Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and the Department of Energy (DOE) Office of Inspector General Special Agent in Charge James Breckenridge.  The plea was accepted by the Honorable Charles R. Breyer, U.S. District Judge.

A federal grand jury indicted Butler, 54, of Vallejo, with the charges on April 6, 2017.  In pleading guilty to the charges without a plea agreement, Butler has admitted that he conspired with others to knowingly and intentionally defraud the DOE.  Specifically, Butler admitted that beginning no later than July 17, 2013, he was involved with others in an illegal scheme to obtain a contract with the DOE to renovate a building on the campus of the Lawrence Berkeley National Laboratory (LBNL).  

Contractors seeking construction work with the DOE are legally required to obtain work through a competitive bidding process. In this case, Butler and others agreed to submit, or participate in the submission of, fraudulent and non-competitive bids to perform the renovation of LBNL Building 84.  Specifically, Butler agreed to take steps to ensure that a particular “developer” won the contract by ensuring the developer’s bid on the renovation project was the lowest bid.  Butler also helped to orchestrate the submission of bids by other contractors in amounts dictated by the developer.  Butler also admitted he understood the bids he arranged for submission by other contractors were not genuine bids and were intended to be higher than the bid submitted to the DOE by the developer.

In addition, Butler admitted meeting with the developer in July of 2013, at which time Butler agreed to locate contractors to submit bids for the DOE contract in amounts higher than the contractor’s bid.  During the meeting, the developer gave Butler $2,000 in cash.  At the same meeting, Butler proposed that, instead of paying the contractors for submitting the bids, the developer could give the bidders sub-contracting work once the developer won the contract.  Later that same month, Butler met with the developer other contractors.  All agreed that the contractors would submit separate bids and none of the bids would be lower than the $5.7 million bid to be submitted by the developer.  Within the next three months, the contractors’ additional, higher bids were submitted to the DOE and Butler received two additional cash payments of $4,000 and $9,000.  

Butler also admitted facts related to making fraudulent statements to investigators.  On March 26, 2014, agents from the Federal Bureau of Investigation interviewed Butler about his dealings with the developer.  Butler told the agents he had never received money from and that he had no financial relationship with the developer.  In truth, Butler already had received $15,000, he had requested an additional $15,000, and he had multiple conversations with the developer about the financial benefits he expected to receive once the DOE contract for the renovation project was awarded.

The grand jury charged Butler with one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371, and one count of making a false statement, in violation of 18 U.S.C. § 1001(a)(2).  Pursuant to today’s plea agreement, he pleaded guilty to both counts.  Judge Breyer scheduled Butler’s sentencing for January 23, 2019.

Butler faces a maximum penalty of five years imprisonment, a three-year term of supervised release and a $250,000 fine for the conspiracy charge.  In addition, Butler faces a maximum penalty of ten years imprisonment, a three-year term of supervised release, and a $250,000 fine for the false statement count.   However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

On March 9, 2018, Anton Kalafati, 34, of San Francisco, President of B Side Inc. in San Francisco, pleaded guilty to his role in the scheme.  Kalafati admitted to being one of the contractors who submitted a sham bid for the LBNL Building 84 renovation contract.  There is currently no date scheduled for Kalafati’s sentencing hearing. 

The investigation that led to the charges in the indictment arose out of the FBI’s 2012-2014 public corruption investigation of San Francisco political consultant Keith Jackson and then-State Senator Leland Yee, and the related organized crime investigation of Raymond “Shrimp Boy” Chow.  The FBI source who was posing as the developer and acting undercover in connection with the CalVet and DOE contracts described above was also involved in the investigation of Jackson and Yee.  Jackson and Yee were convicted of corruption charges in 2015.  

Assistant United States Attorneys Cynthia Frey, William Frentzen, and David Countryman are prosecuting the case with the assistance of Rosario Calderon and Bridget Kilkenny.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and United States Department of Energy, Office of Inspector General. Additional assistance was provided by the California Department of Veteran’s Affairs.

 

SAN FRANCISCO – The United States Attorney’s Office today unsealed a criminal complaint charging Jonathan Yet Wing Soong with smuggling and violating export control laws by allegedly secretly funneling sensitive aeronautics software to a Beijing university, announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation Special Agent in Charge Sean Ragan; Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement (BIS), Special Agent in Charge John D. Masters;  Defense Criminal Investigative Service (DCIS) Special Agent in Charge Bryan D. Denny.  Soong made his initial appearance to face the charges in federal court earlier today before U.S. Magistrate Judge Joseph C. Spero. 

The allegations against Soong, 34, of San Jose, were set out in a complaint filed May 23, 2022, and unsealed earlier today.  According to the complaint, Soong was employed by Universities Space Research Association (USRA) between April 2016 and September 2020 as a program administrator.  USRA is a nonprofit corporation contracted by the National Aeronautics and Space Administration (NASA) to, among other things, distribute domestically and internationally sensitive aeronautics-related software developed through the Army’s Software Transfer Agreement (STA) program.  As USRA’s STA program administrator, Soong was responsible for overseeing certain software license sales, conducting export compliance screening of customers, generating software licenses, and, on occasion, physically exporting software.  

Soong is alleged to have been trained in and been aware of export compliance rules which, among other things, restrict sales and exports to certain entities.  As relevant to this case, the complaint describes rules that restrict sales of certain technology to entities on the U.S. Department of Commerce Entity List (Entity List), a list with associated regulations that are maintained by the Department of Commerce pursuant to federal statutory and presidential directive.  The Entity List and associated regulations prohibit export without a license of certain technology with commercial and potential military applications to entities and individuals whose activities have been found to be contrary to U.S. national security or foreign policy interests.  The complaint alleges Soong unlawfully and without a license exported and facilitated the sale and transfer of software to an entity on the Entity List—Beijing University of Aeronautics and Astronautics (BUAA), which is also known as Beihang University.  According to the complaint, Beihang University was added to the Entity List due to the University’s involvement in People’s Republic of China military rocket systems and unmanned air vehicle systems.  Given its inclusion on the Entity List, BUAA is prohibited from receiving certain items without a license.  The complaint alleges Soong used an intermediary in hopes that the illegal transfer would not be detected.

At issue in the case is a software package that is marketed for the development of unmanned aircraft.  The Army flight-control software packages, referred to in the complaint as CIFER, performed as a tool to allow a user to develop a dynamic model of an aircraft based on collective flight test data.  The package could be used to analyze and design aircraft control systems.  According to the complaint, in April 2017, Soong became aware that BUAA was on the Entity List and nonetheless arranged to sell and transfer the CIFER software package to BUAA.  Soong ultimately exported directly to Beihang University in July 2018.  The complaint alleges that Soong arranged to sell the CIFER software package to Beijing Rainbow Technical Development Ltd., as an intermediary for the purchase to disguise BUAA’s involvement, as Soong knew that BUAA could not receive this technology without a license from the Department of Commerce.  The complaint describes how Soong arranged for the intermediary to receive the CIFER program package, and ultimately Soong arranged to have the passcodes for the CIFER software package forwarded to Beihang University with payment coming from Beijing Rainbow.

A criminal complaint merely alleges that crimes have been committed.  All defendants, including Soong, are presumed innocent until proven guilty beyond a reasonable doubt.  

Soong is charged with violating International Emergency Economic Powers Act (IEEPA), in violation of 50 U.S.C. §§ 1701–1707, and smuggling, in violation of 18 U.S.C. § 554.  The IEEPA violation carries a statutory maximum penalty of 20 years in prison and a $1,000,000 fine.  The smuggling count carries a statutory maximum penalty of 10 years in prison and a $250,000 fine.  In addition, as part of any sentence handed down after conviction, the court may order restitution, and up to three years of supervised release.  However, any sentence after conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Soong’s next scheduled appearance is set for June 2, 2022, before U.S. Magistrate Judge the Honorable Laurel Beeler.

Assistant United States Attorney Barbara Valliere of the United States Attorney’s Office’s Special Prosecutions Section is prosecuting the case with the assistance of Maddi Wachs and Kathy Tat.  The prosecution is the result of an investigation by the BIS, DCIS, and the FBI with assistance from the NASA Office of Inspector General; U.S. Army Criminal Investigation Division; the U.S. Army Counterintelligence; and the Department of Homeland Security, Homeland Security Investigations.

 

SAN FRANCISCO – The Office of the United States Attorney filed criminal complaints against Ramon Covarrubias Rangel, Jorge Lozano Guzman, Alejandro Alvarez, Kelman David De La Cruz Pedroza, and Erick Alexandro Torres Cruz for their alleged respective roles in drug distribution schemes in the San Jose area, announced United States Attorney David L. Anderson, Drug Enforcement Administration (DEA) Special Agent in Charge Daniel C. Comeaux, and Homeland Security Investigations (NorCal) Special Agent in Charge Tatum King.  In a press conference earlier today, U.S. Attorney Anderson announced that the complaints were the culmination of one of four simultaneous federal investigations into the movement of drugs from Mexico to the streets of the San Jose area.  

“We describe in these charging documents mid-level dealers operating in a thriving and deadly local market for methamphetamine and cocaine,” said U.S. Attorney Anderson.  “The crimes and sheer lawlessness of their activity is a profound threat to individuals and neighborhoods, undermining the safety and aspirations of whole communities of law-abiding people.”

“Methamphetamine that is pure, potent and cheap has flooded the American market and drug trafficking organizations see an opportunity to profit. They utilize distribution hubs, like the Bay Area, to distribute their poison,” said Special Agent in Charge Comeaux. “As methamphetamine overdoses rise, the significant drug seizures in this investigation has undoubtedly saved lives. DEA will continue to target and to bring to justice these criminal organizations who traffic drugs in our community to keep Americans safe.”

“Homeland Security Investigations is committed to combating the illegal trafficking of  firearms and drugs that fuel violence in the United States and abroad. Our investigation of 5 locations yielded: 4 arrests, 4 guns, over 7 kg of methamphetamine and 2 kg cocaine,” said Special Agent in Charge King. “Partnerships are a key facet of HSI’s approach to countering illegal activity. We are grateful for the important contributions of or partners with the DEA, FBI, CBP, California Highway Patrol, Alameda County Narcotics Task Force, Salinas Police Department, Soledad Police Department, Gilroy Police Department, and the U.S. Attorney’s Office – Northern District of California.”

The drug distribution charges are contained in three separate complaints.  The first complaint, filed January 26, 2021, alleges Rangel, Lozano, and Alvarez conspired to distribute more than 500 grams of methamphetamine in the San Jose area.  According to the complaint, the DEA, HSI, and the Federal Bureau of Investigation were conducting an investigation into the drug trafficking activities of these defendants when in December of 2019, investigators used confidential sources to make controlled purchases.  The complaint describes how Lozano met the confidential source in a parking lot in San Jose and sold the source one ounce of cocaine for $860 and one kilogram of methamphetamine for $3,000.  On February 26, 2020, a similar transaction occurred; however, on this occasion, confidential sources spoke with all three defendants.  Covarrubias made initial contact with the confidential source, Lozano negotiated the price, and Alvarez made the delivery in a parking lot in San Jose. On that day, a confidential source purchased an additional kilogram of methamphetamine from the defendants for $2,700.  Rangel, Lozano, and Alvarez are charged with conspiracy to distribute and possess with intent to distribute cocaine and more than 500 grams of methamphetamine, in violation of 21 U.S.C. §§ 846, 841(a)(1), (b)(1)(A)(viii).  If convicted, the defendants each face a minimum 10 years and a maximum of life in prison, as well as a maximum $10,000,000 fine. 

In the second complaint, De La Cruz is charged with selling a pound of methamphetamine to a confidential source in August of 2020.  According to the complaint, after completing the transaction, De La Cruz informed the source that it would cost $34,000 for a kilogram of cocaine and that if the source needed cocaine, the source should call De La Cruz.  De La Cruz is charged with distribution of 50 grams or more of methamphetamine, in violation of 21 U.S.C. §§ 841, 841(a)(1), (b)(1)(B)(viii).  If convicted, De La Cruz faces a minimum 5 years and a maximum 40 years in prison as well as a maximum $5,000,000 fine. 

In addition, Torres Cruz is charged with distributing a half kilogram of methamphetamine to a confidential source for $2,600 in January of 2021.  The complaint alleges that the transaction occurred in a parking lot in San Jose and that after the transaction was completed, Torres Cruz offered to reduce the price of the methamphetamine if the source were willing to buy larger quantities.  Like De La Cruz, Torres Cruz is charged with distribution of 50 grams or more of methamphetamine, in violation of 21 U.S.C. §§ 841, 841(a)(1), (b)(1)(B)(viii).  If convicted, Torrez Cruz faces a minimum 5 years and a maximum 40 years in prison as well as a maximum $5,000,000 fine.

A criminal complaint merely alleges that crimes have been committed, and each defendant must be presumed innocent until proven guilty beyond a reasonable doubt.  The court may order additional terms of supervised release and restitution, if appropriate; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

The defendants are scheduled for court appearances as follows:



Defendant





Next Court Date





Covarrubia Rangel





March 11, 2021





Lozano





February 16, 2021





Alvarez





None Scheduled





De La Cruz





February 24, 2021





Torres Cruz





February 18, 2021



The case is being prosecuted by the Organized Crime Drug Enforcement Task Force (OCDETF) of the United States Attorney’s Office for the Northern District of California. The investigation of this case was conducted by the DEA and HSI with assistance from the Federal Bureau of Investigation; the California Highway Patrol; the police departments of Hawthorne, Salinas, Soledad, and Gilroy; LA IMPACT; the Alameda County Narcotics Task Force; and U.S. Customs and Border Patrol Tactical Analysis Unit.

This investigation and prosecution is part of OCDETF, which identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.

SAN FRANCISCO- Gary Kwong Yiu Chen, Anthony John Lai, and Xiu Ying Ling “Elaine” Liang pleaded guilty to money laundering charges; Tong Zao Zhang pleaded guilty to dealing in contraband cigarettes; and Bryan Tilton pleaded guilty to conspiracy to transport stolen goods in interstate commerce announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.   The five plea agreements, accepted Wednesday by the Honorable Charles R. Breyer, U.S. District Judge, resulted from charges leveled against the defendants in the same original indictment that eventually led to the trial and conviction of Raymond “Shrimp Boy” Chow.   

According to their plea agreements, Chen and Lai, both of San Francisco, admitted that from October through December of 2013, they facilitated eight separate financial transactions for the purpose of disguising the proceeds of illegal drug sales.  The defendants admitted they engaged in drug trafficking from which the profits were obtained and that the purpose of the financial transactions was to promote ongoing criminal activity.  The defendants also acknowledged that part of their objective was to transport profits from the East Coast to the West Coast and to conceal and disguise the funds from law enforcement.  Chen and Lai each acknowledged that the amount of money involved in the transactions was over $635,000.  They both pleaded guilty to two counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(i).  Elaine Liang pleaded guilty, without a written agreement, to a single count of money laundering related to arranging the transactions that were carried out by Chen and Lai.  

In addition, Zhang, of Brooklyn, N.Y., pleaded guilty to dealing in contraband cigarettes.  According to his plea agreement, Zhang admitted that in July of 2013, he received more than 10,000 Marlboro cigarettes that he knew were contraband.  He transported the cigarettes, none of which bore evidence of the payment of applicable New York state taxes, and delivered them to another location for resale and distribution as contraband cigarettes.  Zhang acknowledged the amount of taxes avoided because of the transaction was approximately $292,500.  Zhang was charged in a Superseding Information filed January 3, 2017, with one count of dealing in contraband cigarettes, in violation of 18 U.S.C. § 2342(a) and 2344.  Pursuant to Wednesday’s plea agreement, he pleaded guilty to the charge.

Tilton, of San Francisco, admitted that between December of 2011 and March of 2013, he agreed with others including Chow and George Nieh, to purchase stolen Hennessy XO cognac alcohol.  On March 9, 2012, Tilton met in San Francisco with Nieh and others, including an undercover FBI agent, for the purpose of making arrangements for the purchase of purportedly stolen Hennessey XO. Tilton provided the undercover agent with a purple bag containing $30,000 in cash, tasted a sample of the liquor to confirm that it was not counterfeit, and arranged for the liquor to be unloaded from the undercover agent’s van.  Tilton admitted he later delivered an envelope containing $5,000 to Chow in exchange for Chow’s involvement in arranging the purchase of the purportedly stolen liquor.  Tilton pleaded guilty to one count of conspiracy, in violation of 18 U.S.C. § 371. 

Chen, Lai, Liang, Zhang, and Tilton all were named in an indictment filed April 3, 2014.  The indictment was amended several times and eventually led to the trial and January 8, 2016, conviction of Raymond Chow, 55, of San Francisco, for racketeering, murder, money laundering, and conspiracy.  Among the crimes with which Chow was charged and convicted were arranging the murder of Allen Leung and conspiring with others to murder Jim Tat Kong. The jury found Chow guilty of every one of the 162 charges leveled against him.

The maximum statutory sentence for money laundering is 20 years in prison and $250,000 or twice the value of the property laundered, whichever is greater.  The maximum statutory sentence for dealing in contraband cigarettes is five years in prison and a $250,000 fine.  The maximum statutory sentence for a violation of 18 U.S.C. § 371 is five years in prison and $250,000.  In each case, additional terms of supervised release, restitution, and forfeiture may apply.  However, any sentence would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  Judge Breyer is scheduled to sentence the defendants on the following dates: Zhang—April 12, 2017; Chen, Lai, and Liang—May 10, 2017; Tilton—June 7, 2017. 

Assistant U.S. Attorneys William Frentzen, Susan Badger, S. Waqar Hasib, and David Countryman prosecuted the case with the assistance of Rosario Calderon, Kurk Kosek, Ana Guerra, Marina Ponomarchuk, Victoria Etterer, Lance Libatique, and Bridget Kilkenny.  The prosecution is the result of an investigation by Federal Bureau of Investigation; the U.S. Marshal Service, San Francisco Police Department Gang Task Force; Oakland Police Department; Internal Revenue Service, Criminal Investigation; New York Police Department; Mercer County New Jersey Sheriff's Office; and the San Francisco and Alameda County Sheriff’s Departments.

SAN FRANCISCO – The United States Attorney’s Office for the Northern District of California filed an indictment charging defendant Rodney L. Stevenson II with wire fraud, mail fraud, and money laundering for his operation of an e-commerce site that claimed to have N95 masks for sale during the current COVID-19 epidemic, announced United States Attorney David L. Anderson, U.S. Postal Inspector in Charge Rafael E. Nuñez, and Federal Bureau of Investigation Special Agent in Charge Craig Fair.  Stevenson was previously arrested and charged via criminal complaint.

According to the indictment, Stevenson operated EM General, a Michigan limited liability company created in September 2019, which purported to sell N95 masks with N99 filters.  At the onset of the COVID-19 pandemic in February 2020, EM General and its website, controlled by Stevenson, advertised that it had N95 masks “in stock” and available for shipping.  EM General sold many of these masks for as much as $24.95 each.  Also according to the indictment, to bolster the legitimacy of EM General, Stevenson created a professional-looking website that included the names, backstories, and stock photographs of a group of fake EM General executives.  It also falsely described how long the company had been in business, its sales volume, and its reputation.  Stevenson also used fictitious names in emails to customers.

The indictment alleges that, as the pandemic worsened and demand for N95 masks increased dramatically, EM General’s sales skyrocketed.  EM General’s total sales from approximately on or about February 11, 2020, to approximately on or about March 8, 2020, were approximately $3,500,000 involving over 25,000 customers, the vast majority of which were sales of N95 masks that were never delivered to customers.  This amount included over $900,000 in sales on February 28, 2020, alone. 

According to the indictment, Stevenson and EM General delivered almost none of the masks.  Instead, when customers complained and asked for refunds, Stevenson, at times communicating with Gmail accounts he created under the names of fake identities, generally refused to refund customers and instead offered a series of lies to fraudulently prolong his scheme while he continued selling masks.  These lies included that EM General could not offer refunds because it had already paid for the customer’s order from a manufacturer, that products would ship soon, and that customers would receive tracking orders soon.  For a small number of customers, Stevenson eventually fraudulently substituted masks that did not meet the standards set by the National Institutes of Occupational Safety and Health for N95 or N99 masks, meaning that they did not filter out 95 or 99 percent of particulate matter from the air.

Stevenson is charged with nine counts of wire fraud, in violation of 21 U.S.C. § 1343; one count of mail fraud, in violation of 18 U.S.C. § 1341; five count of laundering of monetary instruments, in violation of 18 U.S.C. § 1956(a)(1)(A)(i); and one count of money laundering, in violation of 18 U.S.C. § 1957. 

An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the defendant faces a maximum sentence of 20 years of prison, 5 years of probation, and a fine of $250,000 for each count of wire fraud or mail fraud, and a maximum sentence of 10 years of prison, 3 years of probation, and a fine of $250,000 for each count of laundering of monetary instruments or money laundering.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

Stevenson was charged by criminal complaint with one count of wire fraud on April 22, 2020.  He is currently scheduled for arraignment on the indictment on January 15, 2021, before Alex Tse, U.S. Magistrate Judge.

The case is being prosecuted by the Special Prosecutions Section the United States Attorney’s Office for the Northern District of California.

SAN FRANCISCO – A federal jury convicted Joseph Sullivan, the former Chief Security Officer of Uber Technologies, Inc. (“Uber”), of obstruction of proceedings of the Federal Trade Commission (“FTC”) and misprision of felony in connection with his attempted cover-up of a 2016 hack of Uber. The announcement was made by United States Attorney Stephanie M. Hinds and FBI San Francisco Special Agent in Charge Robert K. Tripp following a four week trial before the Hon. William H. Orrick, United States District Judge.

“Technology companies in the Northern District of California collect and store vast amounts of data from users,” said U.S. Attorney Hinds. “We expect those companies to protect that data and to alert customers and appropriate authorities when such data is stolen by hackers. Sullivan affirmatively worked to hide the data breach from the Federal Trade Commission and took steps to prevent the hackers from being caught. We will not tolerate concealment of important information from the public by corporate executives more interested in protecting their reputation and that of their employers than in protecting users. Where such conduct violates the federal law, it will be prosecuted.”

“The message in today’s guilty verdict is clear: companies storing their customers’ data have a responsibility to protect that data and do the right thing when breaches occur,” said FBI Special Agent In Charge Tripp. “The FBI and our government partners will not allow rogue technology company executives to put American consumers’ personal information at risk for their own gain."

The circumstances regarding Sullivan’s violations of the law involve two separate hacks of Uber’s databases—one in 2014 and another in 2016. The evidence at trial established that Sullivan was hired as Uber’s Chief Security Officer (“CSO”) in April 2015. At that time, Uber had recently disclosed to the FTC that it had been the victim of a data breach in 2014 (“2014 Data Breach”) and that the breach related to the unauthorized access of approximately 50,000 consumers’ personal information, including their names and driver’s license numbers. In the wake of that disclosure, the FTC’s Division of Privacy and Identity Protection embarked on an investigation of Uber's data security program and practices. In May 2015, the month after Sullivan was hired, the FTC served a detailed Civil Investigative Demand on Uber, which demanded both extensive information about any other instances of unauthorized access to user personal information, and information regarding Uber’s broader data security program and practices. 

The evidence at trial demonstrated that Sullivan, in his new role as CSO, played a central role in Uber's response to the FTC. Specifically, Sullivan supervised Uber’s responses to the FTC’s questions, participated in a presentation to the FTC in March 2016, and testified under oath, at length, to the FTC on November 4, 2016, regarding Uber’s data security practices. Sullivan’s testimony included specific representations about steps he claimed Uber had taken to keep customer data secure. 

Exactly ten days after his FTC testimony, Sullivan learned that Uber had been hacked again. The hackers reached out to Sullivan directly, via email, on November 14, 2016. The hackers informed Sullivan and others at Uber that they had stolen a significant amount of Uber user data, and they demanded a large ransom payment from Uber in exchange for their deletion of that data. Employees working for Sullivan quickly verified the accuracy of these claims and the massive theft of user data, which included records on approximately 57 million Uber users and 600,000 driver license numbers. 

The evidence demonstrated that, shortly after learning the extent of the 2016 breach and rather than reporting it to the FTC, any other authorities, or Uber’s users, Sullivan executed a scheme to prevent any knowledge of the breach from reaching the FTC. For example, Sullivan told a subordinate that they “can’t let this get out,” instructed them that the information needed to be “tightly controlled,” and that the story outside of the security group was to be that “this investigation does not exist.” Sullivan then arranged to pay off the hackers in exchange for them signing non-disclosure agreements in which the hackers promised not to reveal the hack to anyone, and also contained the false representation that the hackers did not take or store any data in their hack. Uber paid the hackers $100,000 in bitcoin in December 2016, despite the fact that the hackers had refused to provide their true names. Uber was ultimately able to identify the two hackers in January of 2017 and required them to execute new copies of the non-disclosure agreements in their true names and emphasized that they were not allowed to talk about the hack to anyone else. Sullivan orchestrated these acts despite knowing that the hackers were hacking and extorting other companies as well as Uber, and that the hackers had obtained data from at least some of those other companies.

The evidence showed that, despite knowing in great detail that Uber had suffered another data breach directly responsive to the FTC’s inquiry, Sullivan continued to work with the Uber lawyers handling or overseeing that inquiry, including the General Counsel of Uber, and never mentioned the incident to them. Instead, he touted the work that he and his team had done on data security. Uber ultimately entered into a preliminary settlement with the FTC in summer 2016, supported fully by Sullivan, without disclosing the 2016 data breach to the FTC.

In Fall 2017, Uber’s new management began investigating facts surrounding the 2016 data breach. When asked by Uber’s new CEO that had happened, Sullivan lied, falsely telling the CEO that the hackers had only been paid after they were identified and deleting from a draft summary prepared by one of his reports that the hack had involved personally identifying information and a very large quantity of user data. Sullivan lied again to Uber’s outside lawyers conducting an investigation into the incident. Nonetheless, the truth about the breach was ultimately discovered by Uber’s new management, which disclosed the breach publicly, and to the FTC, in November 2017. 

In addition, the two hackers identified by Uber were ultimately prosecuted in the Northern District of California. Both pleaded guilty on October 30, 2019, to computer fraud conspiracy charges and now await sentencing. The separate guilty pleas entered by the hackers demonstrate that after Sullivan assisted in covering up the the hack of Uber, the hackers were able to commit an additional intrusion at another corporate entity—Lynda.com—and attempt to ransom that data as well. 

In finding Sullivan guilty, the jury concluded he obstructed justice, in violation of 18 U.S.C. § 1505, and that he committed misprision of felony (i.e., knew that a federal felony had been committed and took affirmative steps to conceal that felony), in violation of 18 U.S.C. § 4. Sullivan faces a maximum of five years in prison for the obstruction charge, and a maximum three years in prison for the misprision charge. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

Sullivan remains free on bond pending sentencing. His sentencing will be set at a later date. 

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney’s Office. The prosecution is the result of an investigation by the FBI. 

 

SAN JOSE – Kishore Kumar Kavuru was sentenced late yesterday in federal court to 15 months in prison for making false statements in foreign worker visa applications, announced Acting United States Attorney Stephanie M. Hinds, U.S. Department of Labor Office of Inspector General Special Agent in Charge Quentin Heiden, Los Angeles Region, and Homeland Security Investigations Special Agent in Charge Tatum King.  The sentence was handed down by United States District Judge Edward J. Davila.   

Kavuru, 49, of Sunnyvale, California, pleaded guilty to one count of visa fraud on May 24, 2021.  In his plea agreement, Kavuru stated he owned, operated, and was CEO of four different staffing companies.  His companies specialized in obtaining H-1B visas for foreign skilled workers and placing these individuals in the United States at technology firms seeking qualified H-1B contractors.  Known as H-1B Specialty Occupation Workers program, the H-1B visa program allows an employer to temporarily hire a skilled foreign worker in the United States on a nonimmigrant basis.  The position must qualify as a “specialty occupation,” that is, one that requires the application of specialized knowledge and a bachelor’s degree or equivalent in the specialty.  At the four staffing companies he owned and ran, Kavuru was responsible for creating H-1B visa applications for foreign workers and submitting them to the appropriate government agencies of the United States.

Kavuru admitted in his plea agreement that from 2009 through at least 2017 he engaged in a scheme to obtain H-1B visas from government agencies by submitting H-1B applications that contained false and fraudulent statements.  Kavuru admitted to submitting more than one hundred applications that falsely described available H-1B positions and falsely stated that the H-1B workers were to be placed at the positions at specific companies.  Kavuru admitted he knew at the time he submitted the applications that the companies did not have the named jobs and that he did not intend to place the workers at those companies.  None of those foreign skilled workers were ever placed at those companies.  Kavuru – or one of his employees at Kavuru’s direction – nevertheless signed the visa applications attesting under penalty of perjury to the truth of those false statements. 

Kavuru further admitted that he required the H-1B foreign skilled workers to pay him thousands of dollars in cash for the cost of preparing and submitting their H-1B visa petitions, which is a violation of U.S. Department of Labor (US DOL) regulations.  He also admitted requiring his H-1B visa recipients to go unpaid for months while he looked for legitimate H-1B positions for them, violating US DOL regulations by failing to pay H-1B workers while they are “benched” in this manner.

In a memo filed for sentencing, the government calculated that Kavuru orchestrated the submission of over 100 fraudulent H-1B visa applications that earned him more than $1.5 million in fraudulently-obtained proceeds.

In addition to his 15 month prison sentence imposed for visa fraud in violation of 18 U.S.C. § 1546(a),  United District Judge Edward J. Davila entered a forfeiture money judgment in the amount of $533,350.03.  The sentence also included a three year period of supervision following Kavuru’s release from prison. 

Kavuru will surrender to begin serving his sentence on February 10, 2022. 

Assistant United States Attorney Maia T. Perez prosecuted the case, with the assistance of Lakisha Holliman.  The prosecution is the result of an investigation by the U.S. Department of Labor, Office of Inspector General and Homeland Security Investigations.

SAN FRANCISCO – Joseph Sullivan was sentenced to serve a three-year term of probation and ordered to pay a fine of $50,000, announced First Assistant United States Attorney Stephanie M. Hinds and FBI San Francisco Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Hon. William H. Orrick, United States District Judge, after a jury found Sullivan guilty of two felonies in October 2022.

Sullivan, 54, from Palo Alto in Santa Clara County, previously served as the Chief Security Officer for Uber Technologies, Inc. (“Uber”). The evidence at trial established that while Sullivan was serving in that role, Uber was under investigation by the Federal Trade Commission (“FTC”) as a result of a data breach Uber had suffered in 2014. The FTC’s Division of Privacy and Identity Protection, which is charged with overseeing issues related to consumer privacy and information security, among other things, ultimately investigated both the nature and circumstances of that 2014 data breach and Uber’s broader cybersecurity program. Sullivan was hired soon after the FTC investigation launched, and he participated in Uber’s response to that investigation, including its efforts to comply with investigative demands issued by the FTC. Among other things, Sullivan participated in a presentation to the FTC in March 2016 regarding Uber’s cybersecurity program, and he testified under oath in November 2016. 

As established at trial, ten days after his sworn FTC testimony, Sullivan learned that Uber had been hacked again. Furthermore, the hackers had exploited the same vulnerability that had led to the 2014 breach. Unlike the 2014 breach, however, the data stolen in 2016 was massive in scale and included records associated with approximately 57 million Uber users and drivers. Despite having testified regarding that same security vulnerability and related issues ten days prior, Sullivan executed a scheme to prevent any knowledge of the breach from reaching the FTC. For example, Sullivan told a subordinate that they “can’t let this get out” and stated that the breach would “play very badly based on previous assertions” to the FTC. He also arranged to pay off the hackers in exchange for them signing non-disclosure agreements in which the hackers promised not to reveal the hack to anyone. Those contracts, drafted by Sullivan and a lawyer assigned to his team, falsely represented that the hackers did not take or store any data in their hack. Thereafter, Sullivan continued to work with the Uber lawyers handling or overseeing the FTC investigation, including the General Counsel of Uber, but he withheld information about the breach from all of them. Uber ultimately entered into a preliminary settlement with the FTC in summer 2016 without disclosing the 2016 data breach to the FTC. As part of the negotiations, Sullivan learned that the FTC was relying on false information previously provided by Uber, but he failed to alert any of Uber’s lawyers or the FTC.

In Fall 2017, Uber’s new management began investigating facts surrounding the 2016 data breach. When asked by Uber’s new CEO what had happened, Sullivan lied about the circumstances of the breach, including by telling the CEO that the hackers did not steal any data. Sullivan lied again to Uber’s outside lawyers who were conducting an investigation into the incident. Nonetheless, the truth about the breach was ultimately discovered by Uber’s new management, which disclosed the breach publicly, and to the FTC, in November 2017. 

Assistant U.S. Attorneys Andrew F. Dawson and Benjamin Kingsley are prosecuting the case, with the assistance of Patricia Mahoney and Nina Burney. The prosecution is the result of an investigation by the FBI. 

“We allege Miranda Devlin committed serial fraud,” said U.S. Attorney Anderson.  “Among the schemes alleged in the complaint, Devlin used a shell company to defraud the Paycheck Protection Program, known as PPP, out of pandemic relief funds.  PPP funds provide a critically important safety net for legitimate businesses suffering real losses.  Anyone considering PPP fraud should know law enforcement is watching, and federal prosecution can follow.”

“By allegedly defrauding the Paycheck Protection Program, a program designed to assist our local businesses as they navigate stressful, uncertain times, Miranda Devlin violated the trust of her community,” said FBI San Francisco Special Agent in Charge Fair.  “By allegedly exploiting this program and further straining resources designated for pandemic relief, she cheated legitimate, hardworking business owners and their employees.”

The criminal complaint alleges that Devlin, 37, of San Francisco, impersonated multiple California licensed attorneys by using their names and license numbers.  The complaint states that Devlin assumed the name of “Miranda Martin” and later “Miranda Petrillo” and used those names to act as a criminal defense attorney.  She was retained by two defendants facing serious criminal charges in Marin County Superior Court.  Devlin initially appeared in court as “Miranda Martin.”  The complaint alleges that when questioned, she thereafter pivoted and assumed the identity of another attorney who also shared her first name, Miranda Petrillo.  Devlin was arrested for impersonating an attorney after a court appearance on November 26, 2019, in Marin County.  The complaint alleges that the true Miranda Martin and Miranda Petrillo are licensed attorneys with the State Bar of California and are both victims of Devlin’s identity thefts.

The complaint further alleges that, in the course of investigating Devlin’s attorney impersonations, investigators uncovered that Devlin had recently defrauded the Small Business Administration by submitting a loan application to the Paycheck Protection Program (PPP) in the name of a shell business.  The PPP arose out of the CARES Act passed by Congress in March 2020 which authorized forgivable PPP loans to small businesses to promote job retention and certain other expenses during the pandemic.  A PPP loan must be used for payroll costs, interest on mortgages, rent, and utilities, and the applications for such loans, administered by the U.S. Small Business Administration, must meet certain requirements and be made under oath. 

The complaint alleges that Devlin submitted an application for a PPP loan in the amount of $32,700 on behalf of an entity she created, the Common Nucleus of Cancer, LLC (CNC).  In CNC’s application, Devlin made multiple false statements and provided false IRS documents to support the statements.  For example, Devlin claimed that she was Miranda Martin, that CNC was managed by Miranda Martin, that Miranda Martin owned 100% of the entity, that CNC had two employees and a monthly payroll of $13,115, that it had paid employee salary and payroll taxes throughout the four quarters of 2019, and that CNC was in operation on February 15, 2020.  Each of statements were made under oath.  None of them are true.  Once the loan was funded, Devlin used the money for a variety of unauthorized non-payroll expenses, such as purchases from Amazon, Bloomingdale’s, and Tiffany & Co., and for purchases of stock. 

Devlin made her initial appearance in federal court on February 12, 2021, before the Honorable Laurel Beeler, United States Magistrate Judge.  Devlin was released on bond and her next scheduled appearance is on March 8, 2021, for a status hearing before the Honorable Sallie Kim, United States Magistrate Judge.             

The charges contained in the criminal complaint are mere allegations.  As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.

Devlin is charged with false statements on an application in violation of Title 18, United States Code Section 1014, and mail fraud in violation of Title 18, United States Code Section 1341.  If convicted of making false statements on an application, she faces a maximum penalty of 30 years in prison and a fine of $1,000,000.  If convicted of mail fraud, she faces a maximum penalty of 20 years in prison, a fine of $250,000.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

The United States Attorney’s Office Special Prosecutions Team is prosecuting the case.  The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Treasury Inspector General for Tax Administration (TIGTA).

The FBI believes that there may be more victims in this case and is urging the public to contact the FBI San Francisco at (415) 553-7400 if they believe they are a victim, have information about potential victims, or have information related to this ongoing case.  Calls can remain anonymous.

SAN FRANCISCO – Chariot Transit, Inc. has entered a landmark settlement agreement with the United States Attorney’s Office to resolve allegations that the San Francisco-based company violated Title III of the Americans with Disabilities Act (ADA) by discriminating against customers with disabilities, announced United States Attorney Brian J. Stretch.  As part of the settlement, Chariot will pay a $50,000 civil penalty to the United States and take numerous steps to ensure that it provides equivalent service to individuals with disabilities.

Chariot, a private transportation company with its principal place of business in San Francisco, provides private commuter transportation services in the San Francisco Bay Area, New York City, and Austin, Texas. Customers may request rides through a smartphone application, and the Chariot commuter vehicle stops at pre-determined locations if customers have requested a vehicle to stop there.  An investigation by the United States determined that from July 2015 to November 2016, Chariot may have violated the ADA by leasing at least 161 new 14-passenger vehicles for use in its services in the San Francisco Bay Area and Austin, none of which were readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs. During this time, Chariot’s website and individual responses to customer inquiries indicated that Chariot only provided service to individuals who use wheelchairs if they could transfer to a seat and if there was space for their wheelchair that did not take the seat of another passenger; those who required an accessible vehicle would only be provided “accessible resources in the region.”  

“Passengers with disabilities are entitled to equal access to the innovative forms of transportation available in today’s market,” said United States Attorney Stretch. “With this agreement, Chariot has pledged its commitment to ensure individuals who use wheelchairs receive the same service as other passengers.”

Pursuant to the settlement, Chariot will pay a $50,000 civil penalty to the United States and will make the following changes:

Operate sufficient readily accessible vehicles in each market to ensure individuals with disabilities receive equivalent service. 

Not require passengers with disabilities, including individuals who use wheelchairs, to book a Chariot trip differently from any other passenger.  

Ensure the Chariot smartphone application requests all relevant information from passengers such that a separate phone call or message with Chariot staff will not be required for passengers with disabilities. 

Conduct ADA training for employees who interact with commuter customers, commuter vehicles, or the commuter customer-facing smartphone application (including product design employees, customer success managers and agents, Charioteers (drivers), captains, marketing employees, brand ambassadors, dispatchers, operations employees, and general managers).  The training will include instruction on the ADA requirements for private entities operating a transportation system and Chariot’s policies and practices regarding accommodation of individuals with disabilities.

Assistant U.S. Attorney Erica Blachman Hitchings is handling the matter on behalf of the U.S. Attorney’s Office for the Northern District of California.

OAKLAND, Calif. - A federal grand jury indicted Karl James Stehlin and Gregory Scott Winters charging them each with conspiracy to commit wire fraud and wire fraud, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  According to the indictment unsealed last Friday, January 13, 2017, the defendants allegedly engaged in a scheme to defraud a victim in Walnut Creek, Calif., into paying in excess of $5,000,000 for fake invoices reflecting goods sold to non-existent customers, including several businesses purportedly in the equine industry. 

According to the indictment, Stehlin, 57, of Seminole, Fla., and Winters, 45, a resident of Ocala Fla., at the relevant time, were part of a conspiracy that sold millions of dollars’ worth of fake invoices to a Walnut Creek company that provides accounts receivable collateralized lending services, also called “factoring.”  Factoring is a financial transaction in which a business sells its accounts receivable (invoices) to a third party (the factor) at a discount.  The factor advances a percentage of the face amount of the invoice to the business and then collects the full amount from the customers of the business in due course.  Following collection from the customers, the factor deducts its commission and other fees and then pays the balance to the business. 

Stehlin, Winters, and their co-conspirators allegedly created multiple shell entities, including Nature’s Own Pharmacy, a company they claimed sold equine supplements, as well as many other shell companies that were represented to be Nature’s Own Pharmacy’s customers but in fact did no legitimate business with Nature’s Own Pharmacy.  According to the indictment, the defendants then created fake invoices that gave the appearance of the sale of goods from Nature’s Own Pharmacy to the fake customers of Nature’s Own Pharmacy.  The defendants then allegedly sold the invoices to the Walnut Creek factoring company.  The defendants allegedly used false names, virtual office addresses, and other false information to execute their scheme.  The fake customers of Nature’s Own Pharmacy supposedly received goods shipped from Nature’s Own Pharmacy to locations in various states around the country including Florida, California, Arizona, and Texas.  In reality, the indictment alleges, Nature’s Own Pharmacy sold neither goods nor services, and none of the purported customers bought any goods or services from Nature’s Own Pharmacy; the invoices sold were allegedly completely fake. 

Stehlin is in the custody of the Bureau of Prisons on other charges and will be transported to the Northern District of California to make his initial appearance in this case.  Winters is scheduled to make an initial appearance before U.S. Magistrate Judge Donna M. Ryu on February 2, 2017. 

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the defendants face a maximum sentence of twenty (20) years in prison, a three-year term of supervised release, a fine of $250,000 or twice the gross gain or loss (whichever is greater), plus restitution, and a $100 special assessment for each count.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

Assistant U.S. Attorney William Gullotta is prosecuting the case with the assistance of Michelle Alter Eck and Trina Khadoo.  The prosecution is the result of an investigation by the FBI. 

SAN FRANCISCO - Sean Clark Cutting and Brian Scott Melland, respectively the former chief executive officer and former chief loan officer of Sonoma Valley Bank which failed on August 20, 2010, were sentenced today for their December, 2017 convictions for conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, lying to bank regulators and other crimes, announced Acting United States Attorney Alex G. Tse; Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy Goldsmith Romero; Federal Housing Finance Agency (FHFA), Office of Inspector General Laura Wertheimer; and Federal Deposit Insurance Corporation (FDIC) Inspector General Jay N. Lerner.  Also sentenced today was co-defendant David John Lonich for his December 2017 convictions for conspiracy, bank fraud, wire fraud, attempted obstruction of justice, and other offenses.  Lonich was an attorney for Bijan Madjlessi, the Marin and Sonoma County real estate developer who, before his death on May 16, 2014, had been indicted on charges of bank fraud, wire fraud, attempted obstruction of justice, and other offenses.  The convictions and sentences followed an eight-week trial before the Honorable Susan Illston, U.S. District Judge that concluded in December 2017.

The court sentenced Cutting, 44, of Sonoma, Calif., to 100 months in prison; Melland, 45, of Santa Rosa, Calif., to 100 months in prison, and Lonich, 59, of Santa Rosa, Calif., to 80 months in prison.

“The defendants’ crimes directly caused the failure of a once-beloved community bank resulting in at least $47 million in losses and other staggering consequences,” said Acting U.S. Attorney Alex G. Tse.  “Senior bank executives and the corrupt attorneys who help them must always be held accountable for threatening the safety and soundness of federally insured banks, as today’s significant sentences reaffirm.”

“TARP is not a cookie jar, but that’s what Sonoma Valley Bank CEO Sean Cutting called it as he applied for $8 million in TARP dollars all while knowing he was committing a massive fraud that caused holes in the bank’s books,” said SIGTARP Special Inspector General Christy Romero.  “TARP was intended for healthy banks, not to fill holes in fraud-riddled bank books. Former bank CEO Cutting and chief loan officer Brian Melland will now spend years in prison after causing the bank to collapse under the weight of their fraud, leaving taxpayers who funded TARP at a loss of $8.6 million. I commend Acting U.S. Attorney Alex Tse, prosecutors Adam Reeves and Rob Rees, and our other law enforcement partners, for bringing accountability and justice.”

“Today’s sentencing holds senior bank executives and an attorney accountable for their years of deception to orchestrate multi-million-dollar fraud and for their abuse of positions of trust,” said FDIC Inspector General Lerner.  “We remain vigilant to investigate such fraud schemes that undermine the integrity of financial institutions, and we will continue to work with our law enforcement partners to bring to justice those who commit such offenses and breach their duties.”

The evidence at trial demonstrated that Cutting, Melland, and Lonich were involved in multiple schemes to defraud numerous financial institutions including Sonoma Valley Bank, its regulators at the FDIC, and what was then called the California Department of Financial Institutions (DFI).  The schemes to defraud involved years of excessive and illegal lending, often using “straw” or nominee borrowers, to Madjlessi for real estate projects in Santa Rosa and Petaluma, Calif.  

The defendants’ fraud and other crimes caused the failure of Sonoma Valley Bank.  Their crimes caused losses to taxpayers of over $47 million, as well as to the FDIC (approximately $39.18 million) and to the Troubled Asset Relief Program (TARP) (approximately $8.65 million) of the United States Treasury.  Other victims included the shareholders of Sonoma Valley Bank who suffered losses when the value of their securities collapsed.

In addition to the sentences listed above, Judge Illston ordered the forfeiture to the United States of Lonich’s interest in the Park Lane Villas East, an apartment complex located in Santa Rosa worth approximately $20.8 million.  Judge Illston found that the Park Lane Villas East complex constituted the proceeds of Lonich’s offenses.  Judge Illston also scheduled a hearing on September 18, 2018, to decide the amount of restitution the defendants owe. 

Much of the evidence at trial related to Madjlessi’s real estate projects at the Park Lane Villas in Santa Rosa and Petaluma Greenbriar Apartments in Petaluma.  According to the evidence admitted at trial, Sonoma Valley Bank, between 2004 and 2010, loaned Madjlessi and the persons and entities he controlled in excess of $35 million, approximately $24.7 million more than the legal lending limit set by the bank’s regulators.  To conceal this high concentration of lending, Cutting and Melland, the loan officer who worked most closely with Madjlessi, recommended multi-million dollar loans to nominee or “straw” borrowers, knowing that millions in proceeds from loans to other borrowers would go to Madjlessi and the companies he controlled.  At trial, the evidence proved that Cutting and Melland schemed to give Madjlessi and his companies in excess of $8.6 million in proceeds from loans nominally made in the name of other borrowers.

Melland also was convicted of receiving a bribe in the amount of approximately $50,000 from Madjlessi. In April 2008, Melland and Cutting recommended a set of loans for approximately $3.65 million to a nominee or “straw” borrower controlled by Madjlessi.  According to the trial evidence, Melland received the bribe the very next day.

Cutting and Melland were convicted of making false statements to Sonoma Valley Bank’s regulators, the FDIC and DFI, during joint examinations in May 2008, and again in December 2009, about the true nature and extent of the bank’s lending to Madjlessi and the persons and entities he controlled.

Judge Illston also sentenced Lonich, Madjlessi’s lawyer.  In early 2009, Lonich conspired with Cutting and Melland to mislead Sonoma Valley Bank into lending millions more to Madjlessi, again in the name of a nominee or “straw” borrower.  The conspiracy allowed Madjlessi to illegally buy-back for approximately $4 million an approximately $27 million debt he owed to IndyMac Bank.  At the time, IndyMac Bank had failed and been taken over by FDIC and FDIC rules specifically prohibited delinquent borrowers, like Madjlessi, from purchasing their own notes at auction.  Nonetheless, the defendants were all convicted of an elaborate bank and wire fraud scheme to obtain the defaulted note by misleading Sonoma Valley Bank, the FDIC, and eventually other financial institutions, about Madjlessi’s true role in the scheme.

In addition, in late 2009 and early 2010, Cutting helped Lonich gain control of additional units at the Park Lane Villas by issuing letters on Sonoma Valley Bank letterhead falsely stating that potential nominee buyers had sufficient funds at Sonoma Valley Bank for purchase.  The evidence at trial also demonstrated Lonich instructed one nominee to make false claims to federal agents and to a federal grand jury investigating the transactions.

In sum, the defendants were convicted of the following specific crimes:



DEFENDANT





CHARGES





Cutting, Melland, and Lonich





Conspiracy to Commit Bank Fraud, in violation of 18 U.S.C. § 371





Cutting, Melland, and Lonich





Bank Fraud, in violation of 18 U.S.C. § 1344





Cutting (six counts),      Melland (eight counts), and Lonich (five counts)





False Bank Entries and Reports, in violation of 18 U.S.C. § 1005





Cutting and Melland





Conspiracy to Make False Statements to the FDIC, in violation of 18 U.S.C. § 371





Cutting and Melland





Misapplication of Bank Funds, in violation of 18 U.S.C.  § 656





Cutting and Melland





False Statements to the FDIC, in violation of 18 U.S.C. § 1007





Melland





Receipt of Gifts for Procuring Loans, in violation of 18 U.S.C. § 215





Cutting, Melland, and Lonich





Conspiracy to Commit Wire Fraud, in violation of 18 U.S.C. § 1349





Cutting, Melland, and Lonich





Five counts of Wire Fraud, in violation of 18 U.S.C. § 1343





Cutting, Melland, and Lonich





Twelve counts of money laundering, in violation of 18 U.S.C. § 1957





Lonich





One count of attempted obstruction of justice, in violation of 18 U.S.C. § 1512(c)



Judge Illston ordered the defendants to surrender to begin serving their prison sentences by October 1, 2018. 

On May 6, 2014, approximately two months after he was indicted in this case, Madjlessi was found dead after the single-person car accident in a steep ravine in the Marin Highlands off Highway 1 in Marin County.

Assistant U.S. Attorneys Robert David Rees and Adam A. Reeves prosecuted the case with the assistance of Philip Villanueva, Maryam Beros, Patricia Mahoney, and Bridget Kilkenny.  The prosecution is the result of a multi-year investigation by the Special Inspector General for the Troubled Asset Relief Program, the Federal Housing Finance Agency Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General, with the assistance of the Marin County Sheriff’s Office, the Sonoma County Sheriff’s Office, and the Santa Rosa Police Department.

 

OAKLAND – A federal criminal complaint charging Troy Elias Walker, David Michael Rembert, and Daljit Kamal Singh with a conspiracy to deal firearms without a license was unsealed today, announced Acting United States Attorney Stephanie M. Hinds, Special Agent in Charge Patrick Gorman of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), San Francisco Division Inspector in Charge Rafael Nunez of the U.S. Postal Inspection Service, and Special Agent in Charge Wade R. Shannon of the Drug Enforcement Administration (DEA).  The three defendants initially appeared last Friday, August 13, in federal court to face those charges.  

According to the allegations in the complaint, ATF engaged in an investigation into unlicensed and illegal firearms trafficking conducted via Instagram and also in-person by a group of individuals, including Walker, 24 years old, and Rembert, 40 years old, who are both from Concord, and Singh, who is 27 years old and from Hercules.  During the investigation, law enforcement conducted multiple undercover buys resulting in the purchase of 13 firearms and 17 Glock conversion switches, collectively.  A Glock conversion switch, as the complaint describes, is a device that modifies a Glock-style pistol so that it fires multiple bullets in rapid succession by a single pull of the trigger.  The complaint also alleges the undercover purchases netted commercial factory firearms as well as privately made firearms (PMFs).  PMFs – colloquially referred to as “ghost guns” – are firearms made from unfinished receivers in which manufacturer’s marks and serial numbers are absent.  According to the complaint, none of the defendants had a license to import, manufacture, or deal in firearms.   

This case follows the launch by the U.S. Department of Justice of cross-jurisdictional strike forces in five key regions that are focused on disrupting illegal firearms trafficking.  One of the five Strike Forces was launched here, in the San Francisco Greater Bay Area and Sacramento Region.  The strike force identifies sources of illegally trafficked firearms and disrupts straw purchasing and firearms trafficking schemes and networks through collaborative cross-jurisdictional efforts, which include additional states and multiple law enforcement agencies.

“Collaboration with our local law enforcement partners is key to disrupting illegal firearms trafficking,” said Acting United States Attorney Stephanie M. Hinds. “Working with our partners to combat illicit firearms trafficking is and will remain a high priority in our region.”

“Illegal firearms trafficking is a primary focus of ATF and one of the most pressing problems we face today,” said ATF Special Agent in Charge Patrick Gorman.  “This regional strike force is designed to disrupt such trafficking, and we will continue to work alongside our law enforcement partners to ensure crimes of this nature are investigated and prosecuted.

“Postal Inspectors are continuously working with the U.S. Attorney’s Office and our partners in law enforcement in operations just like this one to keep dangerous items out of the mail, protecting U.S. Postal Service Employees and the public we serve,” said San Francisco Division Inspector in Charge Rafael Nunez of the U.S. Postal Inspection Service. 

“Our greatest tool in combatting violent crime is to combine our diverse resources and expertise,” said DEA Special Agent in Charge Wade R. Shannon. “By leveraging our collective authorities and capabilities we underscore our commitment to the communities we serve.”

Walker, Rembert, and Singh made their initial appearances Friday, August 13, in federal court before United States Magistrate Virginia K. DeMarchi.  The next appearances in the case are scheduled for Tuesday, August 17, at 1 p.m. before United States Magistrate Judge DeMarchi.     

The complaint charges Walker, Rembert, and Singh with a single count of conspiracy to deal firearms without a license in violation of 18 U.S.C. §§ 371 and 922(a)(1)(A).  The charge carries a maximum term of 5 years in prison and a maximum fine of $250,000.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

A complaint merely alleges that crimes have been committed, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.  

Jonathan U. Lee and Abraham Fine are the Assistant U.S. Attorneys prosecuting the case, with the assistance of Leeya Kekona and Kathleen Turner.  The prosecution is the result of an investigation by ATF, DEA, the United States Postal Inspection Service, the Concord Police Department, and the Antioch Police Department. 

 

SAN FRANCISCO - Sean Clark Cutting and Brian Scott Melland, respectively the former Chief Executive Officer and former Chief Loan Officer of Sonoma Valley Bank, were convicted yesterday of conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, lying to bank regulators, and other crimes, announced United States Attorney Brian J. Stretch; Federal Deposit Insurance Corporation (FDIC) Inspector General Jay N. Lerner; Special Inspector General for the Troubled Asset Relief Program (TARP) Christy Goldsmith Romero; and Federal Housing Finance Agency (FHFA), Office of Inspector General Western Region, Special Agent in Charge Jay N. Johnson.  Co-defendant David John Lonich, an attorney for Marin and Sonoma County real estate developer Bijan Madjlessi (who had been indicted on these charges before his death on May 16, 2014) was also convicted of conspiracy, bank fraud, wire fraud, attempted obstruction of justice, and other offenses.  The verdicts followed an eight-week trial before the Honorable Susan Illston, U.S. District Judge.    

The evidence at trial demonstrated that Cutting, 48, of Sonoma, Calif.; Melland, 48, of Santa Rosa, Calif.; and Lonich, 63, of Santa Rosa, Calif.; were involved in multiple schemes to defraud Sonoma Valley Bank, which failed on August 20, 2010; its regulators at the FDIC; what was then called the California Department of Financial Institutions (“DFI”); and other financial institutions.  The schemes involved years of excessive and illegal lending to Madjlessi, often using “straw” or nominee borrowers, for real estate projects in Santa Rosa, Calif., and Petaluma, Calif.  As alleged in the indictments, the failure of Sonoma Valley Bank caused in excess of $20 million in losses to taxpayers, approximately $11.47 million to the FDIC, and $8.65 million to the TARP.

“Ultimately, this case was about senior bankers, and the persons with whom they conspired, putting their interests ahead of the federally-insured and federally-regulated bank they served,” United States Attorney Stretch stated.  “The defendants resorted to bank fraud, lies to bank regulators, and other crimes in a multi-year scheme to conceal millions of dollars in failed and failing loans.  By doing so, they put a respected community bank at ever greater risk of loss and jeopardy.  I am proud of the collaboration between the United States Attorney’s Office and our law enforcement partners whose perseverance and dedication over a multi-year investigation made this just outcome possible.”

“Today’s verdict sends a strong message that bank executives and attorneys who devise and orchestrate multi-million-dollar bank fraud schemes will be held accountable for their crimes,” said FDIC Inspector General Lerner.  “The FDIC Office of Inspector General is committed to working with U.S. Attorneys and its other law enforcement partners to deter such activity and help protect financial institutions against harm.”

“Today a federal jury brought justice to the top two officers of Sonoma Valley Bank for a massive fraud scheme designed to conceal bad loan after bad loan to a single customer, which ultimately cost the bank millions,” said Special Inspector General Romero.  “An aspect of the scheme started weeks after the bank received an $8.65 million bailout from TARP, all of which was lost.  An important source of lending to the Sonoma community was extinguished when this bank failed a little more than a year later.  I thank the U.S. Attorney’s Office for the Northern District of California for its excellent work and commitment to fighting TARP-related crime.”

“The evidence at trial showed that the defendants used their positions of power to take advantage of the banking system and ultimately the taxpayers,” said FHFA Special Agent in Charge Johnson.  “As the jury found in this case, their actions were unacceptable and will not be tolerated.  We are appreciative of our law enforcement partners on this case.  We will continue to work diligently to bring bad actors to justice.” 

Much of the evidence at trial related to Madjlessi’s real estate projects at the Park Lane Villas in Santa Rosa and Petaluma Greenbriar Apartments in Petaluma.  According to the evidence admitted at trial, between 2004 and 2010, Sonoma Valley Bank loaned Madjlessi and the persons and entities he controlled in excess of $35 million, approximately $24.7 million more than the legal lending limit set by the bank’s regulators.  To conceal this high concentration of lending, Melland, the loan officer who worked most closely with Madjlessi, and Cutting recommended that the bank approve multi-million dollar loans to nominee or “straw” borrowers.  The evidence at trial established that Melland and Cutting knew that millions in proceeds from loans to these other borrowers would go to Madjlessi and the companies he controlled.  In sum, the evidence at trial proved that Cutting and Melland schemed to give Madjlessi and his companies in excess of $8.6 million in proceeds from loans nominally made in the name of other borrowers.

Melland was also convicted of receiving a bribe from Madjlessi of approximately $50,000 in April 2008.  According to the trial evidence, one day after he received the bribe, Melland recommended a set of loans for approximately $3.65 million to a nominee or “straw” borrower controlled by Madjlessi.

Cutting and Melland also were convicted of making false statements to Sonoma Valley Bank’s regulators, the FDIC, and DFI.  The evidence established that during joint examinations in May 2008, and again in December 2009, Cutting and Melland provided false and misleading information to the regulators about the true nature and extent of the bank’s lending to Madjlessi and the persons and entities he controlled.

Yet another scheme involved a conspiracy whereby Lonich, Madjlessi’s lawyer, conspired with Cutting and Melland to mislead Sonoma Valley Bank into lending millions more to Madjlessi, again in the name of a nominee or “straw” borrower, so Madjlessi could illegally buy back a debt he owed to IndyMac Bank.  IndyMac Bank had failed and been taken over by FDIC.  In early 2009, the defendants conspired to lend the money to Madjlessi’s nominee so that Madjlessi could buy the approximately $27 million debt back for only approximately $4 million.  FDIC rules specifically prohibited delinquent borrowers, like Madjlessi, from purchasing their own notes at auction.  Nonetheless, the defendants were convicted of an elaborate bank and wire fraud scheme to obtain the defaulted note by misleading Sonoma Valley Bank, the FDIC, and eventually other financial institutions about Madjlessi’s true role in the transactions. 

In late 2009 and early 2010, Cutting helped Lonich gain control of additional units at the Park Lane Villas by issuing letters on Sonoma Valley Bank letterhead.  The letters falsely stated that potential nominee buyers had sufficient funds at Sonoma Valley Bank to purchase the units.  The evidence at trial also demonstrated that Lonich attempted to obstruct justice by, among other things, instructing the nominee to make false statements to federal agents.

On May 6, 2014, approximately two months after he was indicted in this case, Madjlessi was found dead after a single-person car accident in a steep ravine in the Marin Headlands off Highway 1 in Marin County.

The defendants were convicted of the following specific crimes, which carry the maximum statutory penalties specified below:

 



DEFENDANT





CHARGES





Cutting, Melland, and Lonich (one count each)





Conspiracy to Commit Bank Fraud, in violation of 18 U.S.C. § 371, with up to 5 years of imprisonment, 3 years of supervised release, and a fine of $250,000.





Cutting, Melland, and Lonich (one count each)





Bank Fraud, in violation of 18 U.S.C. § 1344, with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting (six counts), Melland (eight counts), and Lonich (five counts)





False Bank Entries and Reports, in violation of 18 U.S.C. § 1005, each with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting and Melland (one count each)





Conspiracy to Make False Statements to the FDIC, in violation of 18 U.S.C. § 371, with up to 5 years of imprisonment, 3 years of supervised release, and a fine of $250,000.





Cutting and Melland (one count each)





Misapplication of Bank Funds, in violation of 18 U.S.C.  § 656, with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting and Melland (one count each)





False Statements to the FDIC, in violation of 18 U.S.C. § 1007, with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Melland (one count)





Receipt of Gifts for Procuring Loans, in violation of 18 U.S.C. § 215, with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting, Melland, and Lonich (one count each)





Conspiracy to Commit Wire Fraud, in violation of 18 U.S.C. § 1349, with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting, Melland, and Lonich (five counts each)





Wire Fraud, in violation of 18 U.S.C. § 1343, each with up to 30 years of imprisonment, 5 years of supervised release, and a fine of $1,000,000.





Cutting, Melland, and Lonich (twelve counts each)





Money Laundering, in violation of 18 U.S.C. § 1957, each with up to 10 years of imprisonment, 3 years of supervised release, and a fine of $250,000.





Lonich (one count)





Attempted Obstruction of Justice, in violation of 18 U.S.C. § 1512(c), with up to 20 years of imprisonment, 3 years of supervised release, and a fine of $250,000.



 

In addition, the defendants face a $100 mandatory special assessment for each count of conviction against them as well as potential forfeiture and restitution.  However, any sentence following conviction will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  Judge Illston scheduled the defendants’ sentencing hearing for April 27, 2018.

Assistant U.S. Attorneys Robert David Rees and Adam A. Reeves are prosecuting the case with the assistance of Philip Villanueva, Maryam Beros, Patricia Mahoney, and Bridget Kilkenny.  The prosecution is the result of an investigation by the Special Inspector General for the Troubled Asset Relief Program, the Federal Housing Finance Agency Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General, with the assistance of the Marin County Sheriff’s Office, the Sonoma County Sheriff’s Office, and the Santa Rosa Police Department.

SAN JOSE – The U.S. Attorney’s Office for the Northern District of California has filed a series of federal criminal complaints charging three defendants with possession with the intent to distribute fentanyl in Santa Cruz County, announced United States Attorney Ismail Ramsey and Drug Enforcement Administration (DEA) Special Agent in Charge Brian Clark. The complaints have been filed as part of a law enforcement operation focused on investigating and prosecuting fentanyl traffickers and illegal open-air fentanyl drug markets in the Santa Cruz area.

“The dramatic increase in the use of fentanyl in the last five years has destroyed countless lives in and around Santa Cruz County. We stand prepared to work with our federal and local law enforcement partners to address the damage being done to our communities,” said U.S. Attorney Ramsey. “We will seek to bring to justice the purveyors of this poison in our neighborhoods – if you are considering selling fentanyl in Santa Cruz, it is time to think again.”

According to the filed criminal complaints, the distribution of fentanyl has fueled a dramatic increase in overdose deaths over the last years. According to these documents, 133 people died of fentanyl-related overdoses in Santa Cruz County in 2023. The County’s population was approximately 261,547. By contrast, in 2019, Santa Cruz County experienced 5 fentanyl-related overdose deaths.

The defendants named in these complaints are Miguel Geronimo, 30, Jesus Nunez Martinez, 49, and Oscar Angel Alvarez, 28. A separate criminal complaint has been filed against each defendant.

According to the complaint filed against Geronimo, on May 1, 2024, shortly before noon, detectives from the Santa Cruz County Sheriff’s Office were patrolling the area of 115 Coral Street in Santa Cruz that is known to be a common drug-trafficking area. The detectives observed multiple persons entering and exiting a van, none spending more than a couple of minutes in the van. The deputies approached and allowed a drug-sniffing dog to circle the vehicle. The dog positively alerted to the van, indicating the presence of certain narcotics. In the van, the detectives encountered Geronimo, who was lying down in the back-passenger section of the van, and another person who was in the front passenger seat. Detectives searched the van and found approximately 86.6 grams of fentanyl, sales paraphernalia, and over $3,300 in cash. Geronimo is charged with possession with intent to distribute fentanyl.

According to the complaint filed against Martinez, on February 9, 2024, detectives with the Santa Cruz County Sheriff’s Office spotted Martinez driving with a suspended driver’s license and expired tags. The complaint alleges another deputy arrived with a drug-sniffing dog and allowed the dog to circle Martinez’s vehicle. After the dog alerted the deputies to the presence of drugs, deputies searched the car. The complaint details that the investigating deputies found various items, including a distributable amount of actual methamphetamine, sales paraphernalia, and over $750 in cash in the vehicle. Furthermore, more than a month later, on March 29, 2024, sheriff’s detectives conducted a traffic stop on Martinez for failing to stop at a stop sign. Another search of Martinez’s car resulted in the seizure of additional drugs, sales paraphernalia, and over $400 in cash. On this occasion, Martinez possessed a distributable amount of fentanyl and carfentanil, a fentanyl analogue and synthetic opioid that is approximately 100 times more potent than fentanyl. Martinez is charged with possession with intent to distribute fentanyl, carfentanil, and methamphetamine.

According to the complaint filed against Alvarez, the defendant was found in possession of various controlled substances, including fentanyl, in the early morning of February 5, 2024. More specifically, the complaint describes how a sheriff’s deputy was patrolling the area of the 500 block of Water Street in Santa Cruz—an area known for drug trafficking, drug use, and other crime. At approximately 4:12AM, the deputy spotted Alvarez outside the main office of a motel, wearing two backpacks. The deputy approached Alvarez, who claimed he was trying to get a room, although the lobby of the hotel was empty, and Alvarez walked away from the hotel lobby and to the rear of the motel. A later search of Alvarez and the backpacks revealed more than 15 baggies of suspected drugs packaged for sales and more than $2,500 cash. After subsequent testing, the substances in Alvarez’s possession were found to include more than 150 grams of fentanyl, over 95 grams of methamphetamine, and more than 50 grams of cocaine. Additionally, according to the complaint, Alvarez was found with approximately 54.4 grams of p-Fluorofentanyl and 27.781 grams of methamphetamine HCL during a traffic stop on May 29, 2024. Alvarez has been charged with possession with intent to distribute fentanyl, methamphetamine, and cocaine, on February 5, 2024.

In sum, if convicted, the defendants face the following charges:

 









Defendant





Charges





Maximum Statutory Penalties









Miguel Geronimo





Possession with intent to distribute fentanyl

(21 U.S.C. 841(a)(1) and (b)(1)(C))





20 years of imprisonment; maximum lifetime of supervised release (minimum term of 3 years of supervised release); $1 million fine









Jesus Nunez Martinez





Possession with intent to distribute 5 grams or more of actual methamphetamine

(February 9, 2024)

(21 U.S.C. § 841(a)(1), (b)(1)(B))





40 years of imprisonment (mandatory minimum of 5 years of imprisonment);

maximum lifetime supervised release (mandatory minimum of 4 years of supervised release); $5 million fine









Possession with intent to distribute fentanyl and carfentanil

(March 29, 2024)

21 U.S.C. § 841(a)(1), (b)(1)(C)





20 years imprisonment; maximum lifetime of supervised release (minimum term of 3 years of supervised release); $1 million fine









Oscar Angel Alvarez





Possession with intent to distribute 40 grams or more of fentanyl

(21 U.S.C. § 841(a)(1), (b)(1)(B)(vi))





40 years of imprisonment (mandatory minimum of 5 years of imprisonment); maximum lifetime of supervised release (mandatory  minimum 4 years of supervised release); $5,000,000 fine









Possession with intent to distribute 5 grams or more of actual methamphetamine

(21 U.S.C. § 841(a)(1), (b)(1)(B)(viii))





40 years of imprisonment (mandatory minimum of 5 years of imprisonment); maximum lifetime of supervised release (mandatory  minimum 4 years of supervised release); $5,000,000 fine









Possession with intent to distribute cocaine

(21 U.S.C. § 841(a)(1), (b)(1)(C))





20 years of imprisonment; maximum lifetime of supervised release (mandatory minimum of 3 years of supervised release); $1,000,000 fine









A criminal complaint merely alleges a crime has been committed. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The three criminal complaints were filed by the U.S. Attorney in partnership with the DEA and based on the invaluable work of the Santa Cruz County Sheriff’s Office. The complaints were unsealed in conjunction with proactive law enforcement action by the DEA, Santa Cruz County Sheriff’s Office, and other federal and local partners to address the growing use of fentanyl in Santa Cruz County. On July 11, 2024, federal and local law enforcement collaborated in a joint street enforcement operation focusing on the open-air fentanyl markets in the Santa Cruz area. This enforcement activity resulted in the seizure of fentanyl, a ghost gun, ammunition, and multiple arrests by state authorities of persons possessing drugs for sale.

Martinez made his initial federal court appearance to face the charges on July 15, 2024, before the Hon. Virginia K. DeMarchi, United States Magistrate Judge for the Northern District of California. Martinez was temporarily ordered detained, and a detention hearing in his case is set for July 19, 2024, at 1:00 p.m. at the United States District Court in San Jose. Neither Alvarez nor Geronimo have made their initial appearances on the above-listed federal charges.

Assistant U.S. Attorneys Johnny E. James, Jr., Jeffrey A. Backhus, and Sarah Griswold are prosecuting the cases with assistance from Elise Etter, Susan Kreider, and Lynette Dixon. These prosecutions are the result investigations by the Santa Cruz County Sheriff’s Office and the DEA, with operational assistance from the Federal Bureau of Investigation and the Santa Cruz Police Department. The U.S. Attorney’s Office thanks the Office of the Santa Cruz County District Attorney for its cooperation in bringing the federal prosecutions of these defendants.