Feds descend on Yuba-Sutter; nab 5 in alleged $5 million scam
Six Sutter County residents face federal charges in connection with a $5 million unemployment and disability fraud scheme officials said had been running since 1989.
Five people were arrested Tuesday in Yuba and Sutter counties and arraigned in U.S. District Court in Sacramento, said Lauren Horwood, a spokeswoman for the U.S. Attorney's Office in Sacramento.
Another man, Mohammad Adanan Khan, 32, of Live Oak remains at large, Horwood said.
Agents arrested Mohammad Nawaz Khan, 56; Iqila Begum Khan, 31, both of Live Oak; Mohammad Shahbaz Khan, 56; Gurdev Kaur Johl, 67; and Kewal Singh, 74, all of Yuba City.
Officials said there does not appear to be a 'ringleader for the group.
"It seems that no one stood out in that regard," Horwood said.
Tuesday's arrests coincided with searches of several homes and businesses in Yuba City and Live Oak including one business in the 1000 block of Live Oak Boulevard and another in the 600 block of North Palora Avenue, according to the complaint which was unsealed Tuesday.
All six people are accused of forming a series of companies with the Employment Development Department beginning in 1989 and the last company was formed in 2011, Horwood said.
"All of these companies purported to be farm labor contractors that provided labor to harvest various agricultural crops in Sutter and Yuba counties," Horwood said.
However, investigators believe the defendants were selling wages to "hundreds of individuals in Northern California." The defendants would charge an individual between $250 and $1,000 in wages. The buyer, who never performed any work for the suspect companies, would then claim to be laid off and file for unemployment or disability benefits, or, in some case, both.
"The individuals who claimed to have worked for these companies would oftentimes not know the location where they worked, or the name of their supervisor," Horwood said. "Sometimes they would report earnings that greatly exceeded the agricultural norms of the area."
A preliminary analysis of claim records has found more than 2,000 potentially fraudulent unemployment and disability claims and more than $5 million lost, officials said.
"In order to further the fraud, the defendants used the name 'Mohammed Khan,' used each other's business addressees, repeatedly hired and laid off each other, and continually changed the names of the businesses," Horwood said.
In addition to the properties searched Tuesday, agents also linked nine automobiles to the suspected scam.
The investigation is ongoing in order to determine the full extent of the fraud.
The case is the product of an investigation by the FBI, the U.S. Department of Labor, Office of Inspector General and the Investigation Division of the California Employment Development Department.
Singh was released on his own recognizance and Johl was released on a $50,000 bond. The others were still being processed Tuesday.
Mohammad Nawaz Khan was prohibited from acting as a farm labor contractor in 2006 after 100 former employees successfully sued him for exploitation in 2001.
Khan was ordered to pay $325,000.
Khan was also charged with violating Oregon farm labor laws in the early 1990s and ordered to pay about $53,000 in that case, according to Appeal Democrat archives.
All defendants were ordered to appear May 15 for a preliminary examination.
If convicted, the defendants face a maximum of 20 years in prison.