Articles Tagged with fraud

It was recently reported that Rep. Duncan Hunter (R-Alpine) is currently under criminal investigation by the federal Department of Justice for allegedly misspending tens of thousands in campaign funds. According to a report by the Office of Congressional Ethics, Rep. Hunter may have appropriated the money from his congressional campaign committee for personal use to pay for family travel, tuition, jewelry, groceries, and other personal expenses. The Committee on Ethics then deferred its investigation at the request of the Justice Department.

At a town hall in Ramona, California, Hunter was asked about his alleged personal use of campaign funds. In response, the congressman said his campaign had made a “mistake” and that the funds had been paid back. He has reimbursed his campaign fund approximately $62,000.

As of March 23rd, Hunter has been under criminal investigation by the Department of Justice/ Federal Bureau of Investigation for the misspending. Federal election officials and the San Diego Union-Tribune have repeatedly raised questions over the last year about his unusual spending.  These spending issues reach back over a year, when the Federal Election Commission (FEC) first questioned Hunter for using campaign funds to pay for video games on 68 occasions.

The Citizens for Responsibility and Ethics in Washington, the group that filed the original ethics complaint against Hunter, said in a statement that “Hunter has shown a blatant disregard for the rules.” The FBI has looked at the financial dealings of more than a half dozen House members in the last decade.

Federal Campaign Rules

Political action committees or campaign committees are organized for the purpose of raising and spending money to elect and defeat candidates. They must register with the FEC within 10 days of formation and abide by disclosure rules and federal limits on contributions. Candidates are not allowed use the funds in these committees for personal use.

California Campaign Rules

California’s Political Reform Act was adopted as a statewide initiative (Proposition 9) by an overwhelming vote in 1974. The state has been a leader in promoting transparency in elections since. The law requires candidates and committees to file campaign statements disclosing contributions received and expenditures made. These documents are public and can be audited by the Fair Political Practices Commission  and Franchise Tax Board. However, the law only applies to state and local elections, and not federal (ie. Congressional ones).

Additionally many cities have adopted local ordinances on the city level that may also have additional regulations and restrictions. Continue reading

It has been reported by the San Diego Union Tribune that the amount of computer extortion crimes has significantly increased. Victims are getting notices that they have downloaded a virus and will have to pay X amount to ‘get rid of it.’ Victims are accidentally downloading ransomware. Hackers load malicious software onto people’s computers via emails, decoy ads, bogus news stories, and code embedded through websites. They then charge money to “remove” this ransomware. It is a form of extortion.

According to Special Agent Chris Christopherson, who investigates cyber crimes out of the FBI’s field office in San Diego, it is “entirely possible that we’ll have far in excess of $1 billion in losses” worldwide related to ransomware.” The final tally for 2016 has not been completed yet. The FBI claims that every hour, about 4,000 computers around the world become infected with ransomware. This is an exponentially larger problem for the city of San Diego, which faces daily attacks against its 14,000 desktop and laptop computers.

According to cyber experts, many victims never report the extortion because they feel ashamed for getting duped, or are worried that others will know they visited a pornography website or some other questionable page. Others do not know where to report the attack and doubt that law enforcement will investigate the incident.

Lately, there is increasing concern about the innovations seen in ransomware software. The new codes will offer to decrypt infected victim’s computers as long as they are willing to ‘infect someone else’ in their contact list.

Internet Crime

Internet crime is a blanket crime that generally describes fraud crimes involving the use of the internet or computers. These encompass fraudulent schemes carried through email, “phishing” (using email to obtain sensitive information), or accessing a computer or its data without permission.

In order to convict someone of internet fraud under federal law (18 U.S. Code § 1343), prosecutors have to prove that the defendant intended to commit fraud and that he or she used electronic communication to further that scheme. A conviction of internet fraud under the federal wire fraud statute is punishable by up to 20 years of imprisonment and a hefty fine.

Other criminal laws implicated in cyber crimes are identity theft statutes and credit card fraud (as they pertain to phishing schemes). Continue reading

A month after the national news broke that 5,300 Wells Fargo employees were fired for opening two million phony accounts, the California Department of Justice just announced it is investigating the bank on allegations of criminal identity theft over the creation of these accounts. The California DOJ sent over a search warrant to Wells Fargo’s San Francisco headquarters on October 5. The New York Times, through a public records request, has discovered that California Atty. Gen. Kamala Harris, in the final weeks of a run for U.S. Senate, has joined the growing list of public officials and agencies investigating Wells Fargo for the scandal.

Harris’ office has demanded the bank turn over the identities of California customers who had unauthorized accounts opened in their names, information about fees related to those accounts, the names of the Wells Fargo employees who opened the accounts, the names of those employees’ managers and emails, and other communication related to those accounts. The search warrant says that there is probable cause to believe Wells Fargo violated two sections of the state penal code — one outlawing identity theft, and the other outlawing the unauthorized use of personal information. Both are felonies.

It is unclear whether Harris will be pursuing criminal charges against individual bank employees or the bank itself. Federal regulators had revealed last month that bank employees had been secretly creating unauthorized bank and credit card accounts without their customers’ permission or knowledge since 2011. The phony accounts earned the bank boosted fees and sales figures to make the bank more money and to make employees bonuses. The bank has agreed to pay $185 million in fines along with refunding their customers $5 million.  $50 million of those fines were paid out to Los Angeles County.

According to police, a woman in North Miami Beach, Florida was arrested at a nightclub and was using someone else’s Driver’s license to cheat the system. On the night of April 17th, the suspect was allegedly being disruptive and even pushed bouncers at the G5ive club. She also allegedly pushed an officer when police arrive at the scene. When she was taken into custody, she gave a fake driver’s license with the name and address of a woman who lives in Los Angeles, California. She was fingerprinted, but the fingerprints would only confirm her identity  if she had a prior criminal history.

As a result, this woman has since paid bail and left the area under the California woman’s name.  She also did not show up on her court date, which resulted in a letter being sent to the California address. The true victim in this case called the police and stated she has never even been to Miami.

Prosecutors said she fooled everyone with the fake driver’s license. In this case, officials are asking for the public’s help in identifying her. Unless this is cleared up, the victim of the identity theft will now have to carry a letter with her at all times in case she is ever stopped by authorities to prove that she has never in fact committed a crime.

It is a Crime to Use a Fake Driver’s License or ID

Under California Penal Code § 470(b), it is a crime (either a misdemeanor or felony) to display or possess any fake ID with the intent to commit a forgery or fraud. The legal definition of displaying a fake ID also consists of the following elements:

  • You possessed/displayed a government issued ID card such as driver’s license, social security card, or passport;
  • That ID card was altered, counterfeited, reproduced, or forged;
  • Your knew it was a fake ID.

Specifically, teenage minors under the age of 18 who are caught with a fake ID face a fine of $250 and 24-32 hours of community service and a one-year suspension of their driver’s license.    Continue reading

In another scandal that has disgusted the entire nation, it is reported that the passports of at least 200 Americans show up in this week’s 11 million data leak. The “Panama Papers” is the world’s largest document leak and went public on April 3rd. The documents detail the offshore bank accounts of the world’s richest people who have hidden their money in Panama to avoid taxes and other reasons. Vladimir Putin for example, is linked moving over $2 billion through shell companies.

The Panama-based law firm Mossack Fonseca is accused of aiding the registration of offshore companies for Americans and many other Europeans who are now either accused or convicted by federal prosecutors of serious financial crimes, including securities fraud and running a Ponzi scheme. In some cases, the shell companies, which are inactive companies that only serve to move assets around, were part of the fraudulent activities.

Currently, the documents are being analyzed by the Internal Revenue Service and approximately 350 investigative journalists under the umbrella of the International Consortium of Investigative Journalists. Amongst the Americans involved were Robert Miracle of Bellevue, Washington. He had already been indicted for running a Seattle-area Ponzi scheme under his shell company, Mcube Petroleum.

What are Ponzi Schemes?

According to the U.S. Securities and Exchange Commission (SEC), a “Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Fraudsters attract new money to make promised payments to earlier stage investors to give the appearance that they are investing in a legitimate business.  They require a constant flow of new money because they have little to no legitimate business earnings.

Securities Fraud

In California, our state’s Supreme Court has said that the definition of a security needs to be decided on a case by case basis. Securities fraud is occurs when one induces investors to make purchase or sale decisions on the basis of false information. It is either a misdemeanor or felony, punishable by up to three years imprisonment/$1 million fine or five years imprisonment/$10 million fine. However, the California Corporate Securities Law of 1968 does not allow criminal penalties to be assessed unless the defendant broke the law ‘willfully.’ If you merely made a mistake and gave the wrong advice to an investor, you cannot be convicted. Continue reading

Chinese New Year may have just passed, but San Francisco District Attorney George Gascón is warning residents in Chinatown about a scam that has popped up every year. The “blessing scam,” which is a scam committed by fortune tellers of all cultures, involves a “psychic” who claims s/he will un-curse someone if the victim is willing to pay up large sums of money or gold.

This world has no shortage of pain, hardships, and heartache. It is fairly easy for these “psychics” to convince their victims that they are cursed. Overall, incidents of the blessing scam, carried out mostly in San Francisco’s Chinatown, have decreased dramatically from 2012, when 47 cases were reported and 10 people were charged with crimes. City officials and law enforcement attribute this decrease to the community outreach and education they have been doing in senior centers in Chinatown. They have been warning people not to fall for scammers asking them for their family heirlooms, valuables, or money.

Fraudulent Fortune Telling vs. ‘Free Speech’

Under California’s Penal Code § 332, fraudulently taking someone’s money or property through: card game tricks (ie. the “three card monte”), betting or gambling, or fraudulent fortune telling is a crime. It is considered a type of theft.

However, the crime of fraudulent fortune telling is difficult to prosecute. Nearly three decades ago in 1985, the California Supreme Court struck down an ordinance banning fortune-telling. As such, ‘genuine’ fortune-telling is protected under the First Amendment of free speech. Since then, a handful other courts in several states (New York included) have since followed suit in response to claims brought by fortune-tellers and the American Civil Liberties Union (ACLU).

What does this mean? This means that only fortune telling fraud may be considered a crime.  Generally, the fortune-teller must not legitimately believe in his or her services, and must have the intent to defraud victims of large sums of money/property. In other words, you must have knowingly lied.

Penalties

A violation of CA Penal Code § 332 is the same as with California theft. If you defraud someone of property worth more than $950, it is up to the prosecutor to charge you with either a misdemeanor or felony. A misdemeanor is punishable by up to 6 months imprisonment and $1,000. If you defraud someone worth more than $5,000, it is a felony punishable by up to three years imprisonment and a $10,000 fine. Continue reading

Earlier this month, five suspects from Santa Ana, Orange County were arrested for their suspected connection with a fraud and identity theft ring. Orange County Sheriff’s Deputies arrested Nhan Hoang Pham, 29, of Fountain Valley, Lam Thanh Bui, 30, of Garden Grove, Chieu Bach Nguyen, 29, of Santa Ana, and Keeta Thilauan, 25, for multiple alleged thefts and burglaries in the past several months. A fifth suspect, according to inmate records, is listed under two names.

The SWAT team and Sheriff’s investigators issued search warrants and did a parole and probation check on the suspects. The team raided the home of the five and found weapons, a half pound of methamphetamine, several thousand dollars, and gift cards. They also found fraudulently obtained credit cards, identity theft profiles, computers, cell phones, and data storage devices. Authorities believe the ring is operating throughout California in conjunction  with a larger crime ring. They further believe there are hundreds of potential identity theft victims that they are trying to identify through financial information from the searches.

California Identity Theft Laws (CA Penal Code 530.5)

As shown by this month’s headlines, California seems to be plagued with fraud issues on the government level. Most of the fraud is allegedly being committed by government workers. The California Department of Insurance awarded $34.95 million in grants to district attorney offices across the state to help fight workers’ compensation insurance fraud. The grants were funded by employer fees and will be used to pay enforcement officials to investigate and prosecute fraud workers’ compensation system during fiscal year 2015-2016.

While the Department of Insurance was dealing with its own problems, it was discovered that California DMV workers traded cash for illegal licenses. At least 100 commercial truck drivers bribed DMV workers at $5,000/piece for trucking licenses. From 2011 to 2015, employees allegedly changed computer records to show that truck drivers passed their behind-the-wheel tests when they did not. Officials said up to 23 traffic accidents could be related to the fraud.

Fraud in California

Under the common law, fraud is generally defined as an intentional misrepresentation of existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage.

Generally, you violate California’s criminal fraud statutes whenever you commit an act that results in an unfair or undeserved benefit for yourself, and/or cause harm or loss to another person. The California Penal Code addresses many types of fraud:

  • Car insurance fraud
  • Health insurance fraud
  • Unemployment insurance fraud
  • Welfare fraud
  • Worker’s compensation fraud
  • Check, credit card, and securities fraud (the 3 types of financial fraud)
  • Forgery and identity theft
  • Mail fraud
  • Check fraud (writing bad checks)
  • Foreclosure and real estate fraud

Penalties

The penalties for each individual type of fraud differ. For example, workers compensation fraud can be punished by two to five years imprisonment and a $150,000 fine. Fraud can be charged as either a misdemeanor or felony. Prosecutors typically decide this based on the amount of money involved and any prior convictions on one’s record. Continue reading