On March 28th, 2017

Two Sutter County Women Found Guilty of Making False Statements to a Grand Jury $14 million unemployment fraud scheme

SACRAMENTO – It’s a case that is out-pacing the Energizer Bunny, which  keeps going and going.  To date, 26 people have been convicted for their roles in a $14 million unemployment fraud scheme based out of Yuba City and Live Oak, and investigated, in part, by the California Employment Development Department – Criminal Investigations.

The latest convicted – two Sutter County women who lied to a grand jury in the course of this investigation in 2014.  On March 24, 2017, after a six-day trial, a federal jury found Harjit Kaur Johal, 50, and Jasvir Kaur, 47, guilty of making false declarations before a grand jury.

According to evidence presented at trial, the two women participated in a series of unemployment and disability fraud schemes in Yuba City. The organizers of the schemes were members of the Khan family and included Mohammad Nawaz Khan, Mohammad Adnan Khan, Mohammad Shahbaz Khan, and Mohammad Riaz Khan. The organizers set up a series of farm labor contracting businesses that purported to provide labor to harvest crops in Sutter and Yuba Counties. The organizers then sold fraudulent paystubs to other people, including the defendants, and reported false wages to the Employment Development Department. The purchasers of the paystubs would subsequently file for unemployment or disability benefits with the EDD based upon the fictitious wages. Because the amount of the benefits that the EDD pays is based upon the claimant’s prior earnings, the participants would pay the Khans to report high wages to the EDD.

“This unemployment and disability fraud scheme went on for years,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “These convictions, and prison sentences that follow, serve as a warning to others who steal from a fund meant for those who have worked for it.  This was a lengthy and complicated investigation that involved numerous law enforcement agencies on every level.”

In 2014, the Harjit Kaur Johal and Jasvir Kaur were subpoenaed to testify before a federal grand jury investigating the fraud scheme. During their testimony, when questioned about their wages, the defendants falsely stated under oath that they picked peaches for Ray Khan and that they did not commit fraud. Both defendants claimed they had picked peaches for Ray Khan for at least eight hours a day, six days a week, during the summer months of June through September. Both defendants also claimed that they worked on other tasks in the orchards for hours every day after picking peaches.

Testimony from individuals with knowledge of Ray Khan’s real employees established that he did not employ the defendants. Further, evidence presented at trial showed the defendants had reported chronic back and knee problems in prior disability claims with the EDD and were not capable of doing the physically intensive work required by peach picking. Finally, evidence at trial established that the defendants purchased paystubs from Ray Khan so that he would report falsely inflated wages to the EDD, which the defendants could then use to claim the maximum possible amount of unemployment benefits. Both defendants had participated in previous fraud schemes with other Khan family members and had already claimed benefits in excess of $30,000 each.

“The Employment Development Department works closely with our law enforcement partners to prosecute attempts to defraud the employer-funded Unemployment Insurance Program, including those who perjure themselves in federal court,” said Patrick W. Henning Jr., Director of the California EDD. “We're happy to see coordination with law enforcement helping to avert losses to a benefit program that is a lifeline for unemployed Californians.”

The defendants’ trial was the latest in a series of cases involving the Khan family fraud schemes. Over the course of these related conspiracies, the Khans reported wages for over 400 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits. The fraud schemes defrauded the California Employment Development Department of more than $14 million.

These cases are the product of an investigation by the U.S. Department of Labor, Office of Inspector General; the Federal Bureau of Investigation; and the Employment Development Department-Criminal Investigations.

Johal and Kaur are scheduled to be sentenced. on June 16, 2017. Each faces a maximum statutory penalty of five years in prison.

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