Law Enforcement

RIVERSIDE -- Attorney General Kamala D. Harris yesterday filed a civil lawsuit seeking the removal of officers and directors of Help Hospitalized Veterans, a California charity. The complaint alleges that those running the organization engaged in self-dealing, paid excessive executive compensation and engaged in fraudulent fundraising and other unlawful activities.

The lawsuit also seeks to recover more than $4.3 million in funds improperly diverted from Help Hospitalized Veterans. Those funds were meant to support several programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. Instead, they were used to enrich the organization’s officers and fundraisers.

“The officers of Help Hospitalized Veterans improperly diverted money that hard-working and patriotic Americans donated to support injured vets,” said Attorney General Kamala D. Harris.  “We must protect veterans, active-duty military and donors from scam artists who see them as little more than prey for their financial frauds.”

The lawsuit alleges that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on such things as golf memberships and a condominium (for use by officers), and authorizing excessive executive compensation to the group’s former President (Roger Chapin) and its current President (Michael Lynch). 

The suit alleges Chapin received more than $2.3 million in excessive compensation during the final seven years of his tenure and excessive compensation to Lynch totaled over $900,000.  Chapin is additionally charged with self-dealing as a result of substantial diversions of the charity’s funds to entities in which he had a financial interest. Those diversions include loans Help Hospitalized Veterans made to a firm called American Target Advertising, which was making substantial payments to Chapin. American Target Advertising is a for-profit business (founded by Chapin’s close friend Richard Viguerie) that directs Help Hospitalized Veterans’ vast direct-mail fundraising operation.

The lawsuit further alleges that the nonprofit used increasingly-common accounting gimmicks to inflate the amount of income purportedly spent on providing veterans’ services while artificially minimizing the amount reportedly spent on fundraising. For example, Help Hospitalized Veterans’ use of one of these gimmicks resulted in decreasing its reported fundraising costs from 65 percent of total costs to less than 30 percent. As a result, the filings to both the IRS and the Attorney General’s office were substantially false. Donors and charity watchdog groups rely on both of those reported expenditure categories in evaluating a charity’s efficiency. 

Controversy around the performance of veteran’s charities like Help Hospitalized Veterans was brought to the public’s attention in 2007 by Rep. Henry A. Waxman who, as Chairman of the House Oversight and Government Reform Committee Hearings, held hearings into their fundraising practices and overhead.   

The lawsuit seeks general and punitive damages, restitution, civil penalties and the removal of those officers and directors named in the lawsuit.

Named defendants in the lawsuit include: Help Hospitalized Veterans; its former president Roger Chapin (California); former employee Elizabeth Chapin (California); current president Michael Lynch (California); the following officers or directors of the charity: Robert Beckley, Jr. (Arizona), Thomas Arnold (Florida), Leonard Rogers (Florida), and Gorham Black (Florida); accountant Robert Frank and the company Frank & Company, PC (Virginia); and direct-mail professional fundraiser Creative Direct Response, Inc. (Maryland).

The Complaint alleges seven causes of action:  (1) breach of fiduciary duty (against Help Hospitalized Veterans directors and officers); (2) aiding and abetting a breach of fiduciary duty (against Frank and Frank & Co.); (3) engaging in self-dealing transactions in violation of Corporations Code section 5233 (against Chapin); (4) excessive executive compensation in violation of Corporations Code section 5235 (against Chapin and Lynch); (5) wrongful acquisition of property/unjust enrichment (against Chapin and his wife Elizabeth); (6) misrepresentations in solicitations to donors in violation of Government Code section 12599.6 (against Help Hospitalized Veterans, its directors and officers, and Creative Direct Response); and (7) unfair business practices (against all defendants other than Elizabeth Chapin and Creative Direct Response).

More than 2 million of the nation’s 22 million veterans live in California, the highest number for any state. Protecting these veterans, and active-duty military, from financial scams has been a priority for Attorney General Harris. This focus resulted from a survey of veterans who work in the Department of Justice that was undertaken to inform Department efforts on the matter.  Attorney General Harris and Holly Petraeus of the Consumer Financial Protection Bureau recently spoke at Travis Air Force Base to warn of financial scams that target military members.

SACRAMENTO – Attorney General Kamala D. Harris and El Dorado County District Attorney Vern Pierson today announced that a retired El Dorado County Deputy Sheriff was sentenced to five years in state prison for embezzling more than $300,000 over six years from the El Dorado County Deputy Sheriff’s Association.

Donald Philip Atkinson, the former president of the El Dorado County Deputy Sheriff's Association (DSA), opened bank accounts in his name and submitted forged documents to the DSA to justify payments made to him and his companies. Much of the money was obtained through ATM withdrawals and checks payable to Atkinson, which made his actions difficult for auditors to trace.

“This individual took advantage of his position within the organization by pocketing money that was not intended for personal use,” said Attorney General Harris. “The damage that he caused is widespread and his sentence reflects the seriousness of his crimes.” 

Atkinson was sentenced today in El Dorado County Superior Court on three felony counts of embezzlement, elder fraud and perjury. He was ordered by the court to pay more than $400,000 in restitution. While he is in state prison and on parole, Atkinson has agreed to pay $1,000 per month from his retirement fund to the victims.

The case was investigated by the El Dorado County District Attorney’s Office with support from the Attorney General’s Office. The investigation showed that Atkinson falsified Fair Political Practice Commission forms and submitted forged documents to DSA.

He also claimed checks were written for charitable purposes, but none of the named organizations and individuals received donations from either Atkinson or the DSA.  Among these charitable organizations was a donation fund for the families of four murdered Oakland police officers.

Several checks drawn from the DSA general fund and signed by Atkinson were used to pay rent for an apartment occupied by a woman with whom he was in a relationship.

Atkinson was also charged with theft from an elder or dependent adult. The victim loaned Atkinson $100,000 to purchase a photography business from a man with cancer. Atkinson had falsified information in the contract he signed, and bank records indicate that none of the victim’s funds was spent for the purpose Atkinson had claimed.

A copy of the complaint is attached to the March press release that announced Atkinson’s arrest: http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-and-el-dorado-county-district-attorney-vern.

LOS ANGELES -- Attorney General Kamala D. Harris today announced defendants who ran a national loan modification scam were ordered to pay more than $4 million in penalties and restitution, including $2 million to consumers who were falsely promised modifications of their mortgage loans.

More than 1,000 customers paid more than $2 million for loan modification services to Statewide Financial Group, Inc., which did business as US Homeowners Assistance and Webeatallrates.com, and was based in Orange County. In July 2009, the Attorney General’s office shut down the business, which had been in operation since January 2008.

“These defendants took advantage of vulnerable people in extremely difficult circumstances, including many who faced imminent loss of their homes,” said Attorney General Harris. “The significant financial penalties imposed by the court let scammers know that severe consequences will flow to those who defraud California consumers.”

The Orange County Superior Court ordered that every US Homeowners Assistance loan modification customer should receive a full refund upon request.  The defendants were also permanently enjoined from engaging in the conduct that led to the lawsuit and were ordered to pay $2 million in civil penalties.  It is unclear, however, how much money will be recovered and available to pay refunds or penalties.

The prosecution of this action took nearly three years, culminating in a multi-week bench trial in March 2012. The business’ owners, Zulmai Nazarzai and Hakimullah Sarpas and Fasela Sheren (who went by the name Sharon Fasela), were all found liable for violating California’s Unfair Competition Law and False Advertising Law.

In a separate proceeding in late 2010, Attorney General Harris successfully prosecuted Nazarzai for contempt of court for his refusal to turn over $360,000 unlawfully taken by defendants as ordered by the court. He has been incarcerated in the Orange County jail since December 2010 because of his continued refusal to comply with the court’s order.

Attorney General Harris formed the Mortgage Fraud Strike Force in May 2011 to investigate and prosecute crimes and wrong-doing related to mortgages, foreclosures, and real estate. The prosecution of this action is part of Attorney General Harris’ ongoing efforts to protect homeowners, which also includes the national mortgage settlement and the California Homeowner Bill of Rights.

Copies of the court’s judgment and statement of decision are attached to the online version of this release at www.oag.ca.gov.

SANTA CRUZ -- Attorney General Kamala D. Harris today announced that Michael Anthony Gomez, Jr., 55, of Capitola, was sentenced in Santa Cruz Superior Court on Friday to 16 months in jail after pleading guilty to one count of selling pirated software.

As required by statute, the court ordered Gomez to forfeit any devices used to manufacture, reproduce, transport or assemble the counterfeit goods. He surrendered his computer to the California Department of Justice so it can be refurbished and donated to an appropriate local charity.  Gomez also agreed to pay restitution in the amount of $5,000 to AutoDesk and between $200-800 to each of the additional four victims.

“The sale of pirated software defrauds both the users and the developers of the programs, and undermines the strong technology-based segment of California’s economy,” said Attorney General Harris. “The eCrime Unit focuses on crimes involving technology, from piracy to identity theft, and I applaud their professionalism and success in securing this conviction.”

Gomez is alleged to have used Craigslist to sell illegally pirated versions of software programs, including Final Cut Studio III, Microsoft Office for Mac, Rosetta Stone Spanish and Mandarin, AutoDesk Revit and Filemaker 12.  These products retail for up to thousands of dollars, but he sold them for substantially less than the suggested retail prices.

The case was prosecuted by the Attorney General’s eCrime Unit and investigated by the Northern California Computer Crimes Task Force (NC3TF). The task force has its main office in Napa County and is one of five inter-agency Computer Crimes Task Forces in California. eCrime Unit prosecutors are assigned to all five task forces.

In April 2012, Gomez was contacted by an investigator with the NC3TF, who observed a post on Craigslist that offered for sale a copy of the program AutoDesk Revit.  On or about April 10, Gomez agreed to sell a 2013 version of the program for $50. Its suggested retail price is $5,000.

Gomez mailed the investigator a DVD containing a version of the program, but it would not load.  Gomez later provided the investigator with a software patch to ensure the program would function.  Properties embedded in the program indicated it was a copy downloaded from the Internet and then burned onto the DVD.

Gomez was charged with Counterfeit of a Registered Trademark Penal Code section 350(a) (2), a felony, as well as four counts of Counterfeit of a Registered Trademark.  Gomez was arrested on July 10.

Gomez is on probation for a 2010 conviction of previously selling pirated software.

In addition to the jail sentence and restitution, Gomez is restricted from having a computer or Internet access for three years. He forfeited his computer equipment to the Attorney General’s office and it will be donated for non-profit and charitable use.

This case was prosecuted by Deputy Attorney General Johnette Jauron of the eCrime Unit.  Attorney General Harris created the eCrime Unit in 2011 to identify and prosecute identity theft crimes, cyber crimes and other crimes involving the use of technology. More information available here: http://oag.ca.gov/cybersafety.

SACRAMENTO – Attorney General Kamala D. Harris today announced the creation of the Privacy Enforcement and Protection Unit in the Department of Justice which will focus on protecting consumer and individual privacy through civil prosecution of state and federal privacy laws.

“In the 21st Century, we share and store our most sensitive personal information on phones, computers and even the cloud. It is imperative that consumers are empowered to understand how these innovations use personal information so that we can all make informed choices about what information we want to share,” said Attorney General Harris. “The Privacy Unit will police the privacy practices of individuals and organizations to hold accountable those who misuse technology to invade the privacy of others.”

The California Constitution guarantees all people the inalienable right to privacy. The Privacy Unit will protect this constitutionally-guaranteed right by prosecuting violations of California and federal privacy laws. The Privacy Unit centralizes existing Justice Department efforts to protect privacy, including enforcing privacy laws, educating consumers and forging partnerships with industry and innovators.

The Privacy Unit’s mission to enforce and protect privacy is broad. It will enforce laws regulating the collection, retention, disclosure, and destruction of private or sensitive information by individuals, organizations, and the government. This includes laws relating to cyber privacy, health privacy, financial privacy, identity theft, government records and data breaches. By combining the various privacy functions of the Department of Justice into a single enforcement and education unit with privacy expertise, California will be better equipped to enforce state privacy laws and protect citizens’ privacy rights.   

The Privacy Unit will reside in the eCrime Unit and will be staffed by Department of Justice employees, including six prosecutors who will concentrate on privacy enforcement. Joanne McNabb, formerly of the California Office of Privacy Protection, will serve as the Director of Privacy Education and Policy, and will oversee the Privacy Unit’s education and outreach efforts. 

Protecting the privacy of Californians is one of Attorney General Harris’s top priorities. The creation of the Privacy Enforcement and Protection Unit follows the forging of an industry agreement among the nation’s leading mobile and social application platforms to improve privacy protections for consumers around the globe who use apps on their smartphones, tablets, and other electronic devices. The platform companies who signed on to that agreement -- Amazon.com Inc., Apple Inc., Facebook, Google Inc., Hewlett-Packard Company, Microsoft Corporation and Research in Motion Limited -- agreed to privacy principles designed to bring the industry in line with California law requiring apps that collect personal information to post a privacy policy and to promote transparency in the privacy practices of apps. 

Attorney General Harris established the eCrime Unit in 2011 to prosecute identity theft, data intrusions, and crimes involving the use of technology. The eCrime Unit provides investigative and prosecutorial support to the five California regional high-tech task forces funded through the High Technology Theft Apprehension and Prosecution Trust Fund Program and provides coordination for out-of-state technology-crime investigation requests. The eCrime Unit also develops and provides training for law enforcement officers, prosecutors, the judiciary and the public on cyber safety and the importance of strong information-security practices.  

The February 2012 press release announcing the apps agreement can be found here: http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-secures-global-agreement-strengthen-privacy

The June 2012 press release announcing that Facebook joined the apps agreement can be found here: http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-announces-expansion-california%E2%80%99s-consumer

The December 2011 press release announcing the creation of the eCrime Unit can be found here: http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-announces-creation-ecrime-unit-targeting

SANTA CRUZ -- Attorney General Kamala D. Harris today announced that bail has been set at $50,000 in the case of Michael Anthony Gomez, Jr., 55, of Capitola, who was charged in Santa Cruz Superior Court with five charges of selling pirated software.

“Illegally selling pirated software rips off both consumers and developers of the programs, and undermines the strong technology-based segment of California’s economy,” said Attorney General Harris. “Criminals are moving their crimes online, and law enforcement must embrace innovation to counter this emerging threat.”

Gomez is alleged to have used Craigslist to sell illegally pirated versions of software programs, including Final Cut Studio III, Microsoft Office for Mac, Rosetta Stone Spanish and Mandarin, AutoDesk Revit and Filemaker 12.  These products retail for up to thousands of dollars, but he sold them for substantially less than the suggested retail prices.

The case is being prosecuted by the Attorney General’s eCrime Unit and was investigated by the Northern California Computer Crimes Task Force (NC3TF). The task force has its main office in Napa County and is one of five inter-agency Computer Crimes Task Forces in California. eCrime Unit prosecutors are assigned to all five task forces.

In April 2012, Gomez was contacted by an investigator with the NC3TF, who observed a post on Craigslist that offered for sale a copy of the program AutoDesk Revit.  On or about April 10, Gomez agreed to sell a 2013 version of the program for $50. Its suggested retail price is $5,000.

Gomez mailed the investigator a DVD containing a version of the program, but it would not load.  Gomez later provided the investigator with a software patch to ensure the program would function.  Properties embedded in the program indicated it was a copy downloaded from the Internet and then burned onto the DVD.

Gomez was charged with Counterfeit of a Registered Trademark Penal Code section 350(a) (2), a felony, as well as four counts of Counterfeit of a Registered Trademark.  He pled not guilty to all charges.  Gomez was arrested on July 10 and a preliminary hearing on the charges is set for July 23.

Gomez is on probation for a 2010 conviction of previously selling pirated software.

This case is being prosecuted by Deputy Attorney General Johnette Jauron of the eCrime Unit.  Attorney General Harris created the eCrime Unit in 2011 to identify and prosecute identity theft crimes, cyber crimes and other crimes involving the use of technology. More information available here: http://oag.ca.gov/cybersafety.

SACRAMENTO -- Attorney General Kamala D. Harris today announced the Assembly Public Safety Committee passed an important piece of the California Homeowner Bill of Rights that aims to protect California homeowners from fraud and scams.

Senate Bill 1474 (Senator Loni Hancock, D-Berkeley) would allow Attorney General Harris to convene a special grand jury to investigate and indict the perpetrators of financial crimes involving victims in more than one county, as well as crimes conducted by a single defendant or multiple defendants who worked together. The bill passed unanimously with bipartisan support.

Under current law, fraud in which the victims are located across the state require separate grand juries and charges must be filed in every county where the defendant committed a crime. This legislation would provide for the option of a special grand jury that can produce indictments for financial crimes beyond the scope of single-county grand juries.

“Scammers continue to prey on vulnerable Californians who simply want to stay in their homes,” Attorney General Harris said. “This legislation will create a more cohesive legal process to prosecute those who prey on Californians across county lines.”

“The Attorney General is currently engaged in the investigation of significant crimes,” Senator Hancock said. “Unfortunately, county-by-county grand juries do not work well in dealing with large-scale wrongdoing in multiple jurisdictions. With this bill, the Attorney General can investigate multijurisdictional crimes – it will provide protection when Californians need it the most.”

The Mortgage Fraud Strike Force, established by Attorney General Harris, investigates and prosecutes crimes related to mortgages, foreclosures and real estate. In recent weeks, the Strike Force has secured the conviction of perpetrators of scams in the Fresno and Sacramento areas.

SB 1474 will be heard next in the Assembly Appropriations Committee.

For more information on the California Homeowner Bill of Rights, go to www.oag.ca.gov.

SACRAMENTO --- Attorney General Kamala D. Harris today released the following statement:

“The President is exactly right. Our law enforcement resources are limited, and should be directed towards dealing with serious and violent criminals.  There is no rationale for spending these precious resources on college kids, military members, small business entrepreneurs, and productive members of society who were brought here by their parents.  I applaud the President's leadership on this issue, and believe it takes us one step closer to the comprehensive immigration reform our nation needs.”

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced the outcomes of two cases investigated by her office’s eCrime Unit in which defendants “skimmed” credit card information of Chase Bank customers across the state.

Both cases involved a type of crime frequently referred to as a “skimmer operation.” In both cases, the defendants, organized as “crews,” replaced the card readers at Chase Bank ATM vestibules with ones that allowed them to retrieve customers’ card information. Additionally, both crews installed micro cameras to capture the card holders’ PIN entry. With this information, they created bogus ATM access cards.

“Technology benefits consumers, but also opens them up to risks that law enforcement must respond to,” said Attorney General Harris. “ATM skimming cases like these are fast-growing, can lead to identity theft and significant financial losses.  I applaud the state and local collaboration that shut down these two criminal schemes.”

Gnel Snapyan, 35, was sentenced today in San Luis Obispo County Superior Court to 364 days in state prison and five years probation. His co-conspirator, Gervork Aroutiounyan, 48, was sentenced in March 2012 to three years and eight months in state prison. The men were ordered to pay restitution to Chase Bank.     

In a separate scam, Santiago Alcantar, 37, Genea Antoine, 39, and Anthony Garcia, 30, entered a plea of guilty today in San Luis Obispo County Superior Court to one count of conspiracy to commit grand theft, computer access fraud, identity theft, second degree burglary and forgery of access cards. They were charged in March with 14 counts of felony fraud.

Between July 2010 and February 2011, Snapyan fraudulently withdrew approximately $220,000 from the bank accounts of more than 300 victims in Santa Clara, Marin, Fresno, San Luis Obispo counties. 

The case was investigated by the San Luis Obispo County Police Department and the Attorney General’s eCrime Unit. In September 2011, the Attorney General’s office charged Snapyan and Aroutiounyan with 28 counts of felony fraud. On March 1, the defendants entered a plea of guilty to one count of conspiracy to commit grand theft, computer access fraud, identity theft, second degree burglary and forgery of access cards. Additionally, each pled guilty to three counts of second degree burglary.  

Between October 2010 and February 2011, Alcantar, Antoine, and Garcia ran their skimmer operation in Los Angeles, San Luis Obispo, San Bernardino and Ventura counties. The crew stole approximately $217,000 from more than 200 victims. 

Sentencing is scheduled for July 27, at which time Alcantar will be sentenced to four years in state prison; Antoine to two years in state prison and Garcia to a sentence that will not exceed one year and 4 months.

In both cases, Chase Bank has reimbursed customers for their losses.

The California Department of Justice eCrime Unit was created last year to identify and prosecute identity theft crimes, cyber crimes and other crimes involving the use of technology. 

Photos are attached to the online version of this release at  https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-announces-crackdown-atm-%E2%80%9Cskimming%E2%80%9D-and-identity .      

LOS ANGELES --- California Attorney General Kamala D. Harris today announced the arrest of two individuals in a $1.3 million Ponzi scheme that targeted Latino investors, many of whom were seniors.

Edwin G. Salazar, 34, of Downey, CA and Michael Z. Zuniga, 41, of Fullerton, CA were arrested on 57 counts of elder abuse, grand theft and securities fraud. Salazar’s bail was set at $100,000 and Zuniga’s at $50,000.

“The defendants defrauded investors with promises of guaranteed returns and even convinced some victims to re-finance their own homes in order to participate in the scheme,” said Attorney General Harris. “What victims thought was a resourceful real estate investment only brought them losses and heartbreak.”

From January 2007 through June 2008, licensed insurance agents Salazar and Zuniga, doing business as OMEGA Investment Group, of Downey, CA, issued over $1.3 million in fraudulent securities to individual investors they befriended through their insurance business.

The case was investigated by Department of Justice Special Agent Debra Gard, along with the California Department of Insurance Los Angeles Investigation Division.

“These agents conspired to rip-off trusting members of their own community,” said Insurance Commissioner Dave Jones. “Preying on Senior Citizens for financial gain is deplorable and it will not go unpunished.”

The scheme targeted Latino investors, many of whom were seniors. Investors were promised that their investments were secure and “risk-free” because of the company's strong track record of buying and selling homes in foreclosure. Investors were guaranteed a return of 15 percent. In many cases, the defendants convinced investors to refinance their homes and take out money to invest in the foreclosed properties.

In fact, OMEGA had not been buying and selling foreclosed properties with the money, was never a profitable company, could not secure any funds raised, and diverted funds to other investments and to the personal uses of Salazar and Zuniga. As OMEGA continued raising and diverting money, it began to operate like a classic Ponzi scheme, paying interest to previous investors from capital raised from new ones.

Attorney General Harris formed a Mortgage Fraud Strike Force in May 2011 to investigate and prosecute crimes related to mortgages, foreclosures, and real estate.

This case is being prosecuted by Deputy Attorney General Ed Skelly.