An investigation by California DOJ special agents with support from EDD and DHCS
“These investigations help to improve our neighborhoods, protect victims, and recover money obtained illegally from State funds. We thank California DOJ special agents and their State investigator partners for helping to protect our state and our citizens.”
– CSLEA President Alan Barcelona
OAKLAND— On January 26,2026, California Attorney General Bonta announced the multiple felony convictions of Paul Anthony Gregorio and Xuan Phi Nguyen for defrauding state and local agencies, laundering money, and operating three illicit massage businesses in Sacramento and Placer Counties. The defendants each pled guilty to two felony charges of pandering, one felony charge of pimping and one felony charge of unemployment insurance fraud. Gregorio also pled guilty to one felony charge of money laundering. Nguyen additionally pled guilty to one felony charge of making a false claim for payment of a health benefit.
“This case demonstrates the California Department of Justice’s commitment to protecting public safety — we’re ensuring that bad actors are held accountable and providing support to survivors throughout the process,” said Attorney General Bonta. “These establishments function openly within communities throughout the United States, presenting themselves as legitimate massage businesses. However, behind closed doors, they are actually criminal operations serving as a front for sexual exploitation.”
The defendants maintained and operated three illicit massage businesses between April 2020 through June 2022 by leasing locations, procuring women to work, posting advertisements for prostitution services and collecting a cash fee from each customer. An extensive investigation was conducted by special agents from the California Department of Justice’s Human Trafficking and Sexual Predator Apprehension Team, with support from the Employment Development Department, the California Department of Health Care Services and the Sacramento County Department of Human Assistance. The investigation also uncovered that the couple submitted false statements regarding their income to receive unemployment benefits and Nguyen falsified her income to receive an overpayment of Medi-Cal and Cal-FRESH benefits.
Nguyen was sentenced to a seven-year, eight-month prison term on January 23, 2026. Gregorio was sentenced to a six-year, eight-month prison term on October 11, 2024. Both parties are responsible for restitution to the Employment Development Department in the amount of $71, 318. Nguyen is additionally responsible for restitution in the amount of $18,504.28 to Sacramento County Department of Health Care Services, $5,169.13 to HealthNet, and $10,697 to Sacramento County Department of Human Assistance.
The case was prosecuted by DOJ’s Special Prosecutions Section, which works to protect Californians by investigating and prosecuting complex criminal cases, primarily related to fraud, public corruption, “underground economy” offenses, counterfeiting, and human trafficking.
