On September 25th, 2015

Three People Sentenced in $14 Million Unemployment Fraud Scheme

faviconSACRAMENTO-  Investigators from the California Employment Development Department assisted in a lengthy unemployment fraud scheme investigation that has led to prison sentences for three Sutter County residents.

On September 24, 2015,

  • Mohammad Adnan Khan, 35, of Live Oak, was sentenced to nine years in prison
  • Iqila Begum Khan, 32, of Live Oak, to five years in prison
  • and Mohammad Shahbaz Khan, 50, of Yuba City, to seven years and three months in prison and a $50,000 fine

for their roles in a $14 million unemployment and disability benefits fraud scheme based out of Yuba City and Live Oak

According to court documents, the Khans sold fake paystubs to people in Sutter County  and used the companies they controlled to report false wages for the individuals who purchased those paystubs. At times, the Khans instructed the purchasers how to use the fake paystubs to fraudulently claim unemployment and disability benefits. The Khans set up a storefront in Yuba City and sold the fraudulent paystubs on a walk-in basis. Purchasers found out about the opportunity to commit fraud with the Khans in a number of ways. Some purchasers approached the Khans looking for work and were told to commit fraud instead. Others learned of the fraud at public places in the community, like the grocery store.

Over the course of the conspiracy, the defendants reported wages for over 400 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits. The loss in this case is more than $14 million. To date, 28 individuals have been charged and 24 have pleaded guilty to various offenses connected to the scheme.

"This fraudulent activity went on for decades," said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  "These prison sentences should serve as a warning to others who steal from a fund meant for those who have worked for it."

“To defraud vital programs that serve as a lifeline for unemployed and disabled workers is unconscionable,” said EDD Director Patrick W. Henning, Jr. “Today’s sentencing highlights the commitment of EDD investigators, the U.S. Attorney’s Office, and our law enforcement partners to safeguard these programs.”

All three sentenced September 24th,  are also ordered to serve a term of three years of supervised release following the service of their prison terms. A hearing will be held November 5, 2015 to determine the amount of restitution owed to the California Employment Development Department. Parole has been abolished in the federal system, and each defendant will be required to serve at least 85 percent of the prison time imposed. A fourth defendant, Mohammad Nawaz Khan, 60, is scheduled to be sentenced on October 1, 2015.

Of the 28 individuals charged in this investigation, three defendants are awaiting trial.   A trial date is set for Mohammad Riaz Khan, Mohammad Shahbaz Khan, and Harjit Johal on November 10, 2015, at 9:00 a.m. before United States District Judge Garland E. Burrell Jr.

This case is the product of an investigation by the Federal Bureau of Investigation; the U.S. Department of Labor, Office of Inspector General; and the California Employment Development Department, Investigations Division. Assistant United States Attorneys Jared C. Dolan and Sherry D. Haus are prosecuting the case.

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