On June 24th, 2014

Unemployment Scheme Bilked EDD Out of $14 Million New arrests, 28 charged, more than 1,000 claimants

cslea - On June 20, 2014, four Sutter County residents were arrested in connection with a decades-long unemployment benefits fraud scheme that used farm labor contracting companies to sell false paystubs that indicated the purchasers had been employed by the companies when it fact they had not. The phony paystubs enabled the purchasers to apply for unemployment and disability benefits to which they were not entitled. This scheme is alleged to have defrauded the California Employment Development Department (EDD) of more than $14 million.

The ongoing investigation has resulted in a total of 28 suspects charged, 13 of whom have pleaded guilty to various charges.

The most recent developments  in this case involved two federal grand jury indictments on June 19, 2014.   The grand jury returned a "superseding" indictment that expands the original charges brought in 2012 against six defendants.  The grand jury also returned a new indictment charging one of those defendants and another man with starting a new scheme to sell false wages. Two new defendants were also charged with committing perjury before the investigating federal grand jury.

The superseding indictment charges that

Mohammad Nawaz Khan, 56, of Live Oak
Mohammad Adnan Khan, 31, of Live Oak
Iqila Begum Khan, 31, of Live Oak
Mohammad Shahbaz Khan 56, of Yuba City

controlled a series of companies that were reported to the Employment Development Department as farm labor contractors. The Khans, together with Gurdev Kaur Johl, 69, and Kewal Singh, 76, both of Yuba City, who were also charged, sold fake paystubs to other people in the community and used the companies they controlled to report false wages for the individuals who purchased those paystubs.

According to the superseding indictment, the Khans, at times, instructed the purchasers how the fake paystubs could be used to fraudulently claim unemployment and disability benefits. Over the course of the conspiracy, which allegedly began in the early 1990s, the defendants reported false wages for more than 1,000 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits.

The new indictment charges that while out on bond for the first indictment, Mohammad Shahbaz Khan began a new conspiracy with Mohammad Riaz Khan, aka Ray Khan, 53, of Live Oak, to commit unemployment and disability fraud. It is alleged in the indictment that Mohammad Riaz Khan issued checks to his supposed employees and directed those individuals to cash the checks and return the money to him in order to make it appear that the individuals were actually being paid wages by Mohammad Riaz Khan. Also in that indictment, Harmit Chechi, 27, of Yuba City, and Harjit Johal, 47, of Yuba City, are charged with committing perjury before a federal grand jury in connection with that investigation. Mohammad Riaz Khan, Mohammad Shahbaz Khan, Chechi, and Johal were arrested June 20, 2014.

"It is unconscionable, that this group would rip off a benefits system meant to help hard-working individuals who suddenly found themselves without a job and without any means of supporting their families," said Alan Barcelona, president of the California Statewide Law Enforcement Association (CSLEA) which represents EDD investigators.  "And to keep up with the scheme and invent another means of scamming benefits while the investigation continued, is absurd."

“Those responsible for this scheme are likely to end up in prison, and those who purchased false wages from them should come clean rather than try to conceal the scheme," said United States Attorney Benjamin B. Wagner.

This case was investigated  by the U.S. Department of Labor, Office of Inspector General; the Federal Bureau of Investigation; and the Employment Development Department-Criminal Investigations.

If convicted, each defendant faces a maximum statutory penalty of 20 years in prison and a $250,000 fine for each count. Chechi and Johal face a maximum statutory penalty of five years in prison for perjury.

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