Convicted of Racketeering, forgery, and much more!
These once-respected officers and district attorneys were all convicted in state and federal court. Each was known to Pete Bennett as far back as 1980.
The Point of Sale System
FOR IMMEDIATE RELEASE
2021-262
Washington D.C., Dec. 17, 2021 —
The Securities and Exchange Commission today announced charges against J.P. Morgan Securities LLC (JPMS), a broker-dealer subsidiary of JPMorgan Chase & Co., for widespread and longstanding failures by the firm and its employees to maintain and preserve written communications. JPMS admitted the facts set forth in the SEC’s order and acknowledged that its conduct violated the federal securities laws, and agreed to pay a $125 million penalty and implement robust improvements to its compliance policies and procedures to settle the matter.
“Since the 1930s, recordkeeping and books-and-records obligations have been an essential part of market integrity and a foundational component of the SEC’s ability to be an effective cop on the beat. As technology changes, it’s even more important that registrants ensure that their communications are appropriately recorded and are not conducted outside of official channels in order to avoid market oversight,” said SEC Chair Gary Gensler. “Unfortunately, in the past we’ve seen violations in the financial markets that were committed using unofficial communications channels, such as the foreign exchange scandal of 2013. Books-and-records obligations help the SEC conduct its important examinations and enforcement work. They build trust in our system. Ultimately, everybody should play by the same rules, and today’s charges signal that we will continue to hold market participants accountable for violating our time-tested recordkeeping requirements.”
As described in the SEC’s order, JPMS admitted that from at least January 2018 through November 2020, its employees often communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts. None of these records were preserved by the firm as required by the federal securities laws. JPMS further admitted that these failures were firm-wide and that practices were not hidden within the firm. Indeed, supervisors, including managing directors and other senior supervisors – the very people responsible for implementing and ensuring compliance with JPMS’s policies and procedures – used their personal devices to communicate about the firm’s securities business.
JPMS received both subpoenas for documents and voluntary requests from SEC staff in numerous investigations during the time period that the firm failed to maintain required records. In responding to these subpoenas and requests, JPMS frequently did not search for relevant records contained on the personal devices of its employees. JPMS acknowledged that its recordkeeping failures deprived the SEC staff of timely access to evidence and potential sources of information for extended periods of time and in some instances permanently. As such, the firm’s actions meaningfully impacted the SEC’s ability to investigate potential violations of the federal securities laws.
“Recordkeeping requirements are core to the Commission’s enforcement and examination programs and when firms fail to comply with them, as JPMorgan did, they directly undermine our ability to protect investors and preserve market integrity,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “We encourage registrants to not only scrutinize their document preservation processes and self-report failures such as those outlined in today’s action before we identify them, but to also consider the types of policies and procedures JPMorgan implemented to redress its failures in this case.”
“As today’s order reflects, JPMorgan’s failures hindered several Commission investigations and required the staff to take additional steps that should not have been necessary,” said Sanjay Wadhwa, Deputy Director of Enforcement. “This settlement reflects the seriousness of these violations. Firms must share the mission of investor protection rather than inhibit it with incomplete recordkeeping.”
JPMS agreed to the entry of an order in which it admitted to the SEC’s factual findings and its conclusion that JPMS’s conduct violated Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(b)(4) and 17a-4(j) thereunder, and that the firm failed reasonably to supervise its employees with a view to preventing or detecting certain of its employees’ aiding and abetting violations. JPMS was ordered to cease and desist from future violations of those provisions, was censured, and was ordered to pay the $125 million penalty. JPMS also agreed to retain a compliance consultant to, among other things, conduct a comprehensive review of its policies and procedures relating to the retention of electronic communications found on personal devices and JPMS’s framework for addressing non-compliance by its employees with those policies and procedures.
As a result of the findings in this investigation, the SEC has commenced additional investigations of record preservation practices at financial firms. Firms that believe that their record preservation practices do not comply with the securities laws are encouraged to contact the SEC at BDRecordsPreservation@sec.gov.
Separately, the Commodity Futures Trading Commission announced a settlement with JPMS and affiliated entities for related conduct.
The SEC’s investigation, which is continuing, has been conducted by Joshua Brodsky, Zachary Sturges, Theresa Gue, Andrew Dean, Osman Nawaz, Adam Grace, John Enright, and Thomas P. Smith, Jr. of the New York Regional Office, and Laura K. Bennett, Christopher G. Margand, Margaret Y. Rubin, Sonia G. Torrico, and David A. Becker of the Home Office. The case is being supervised by Mr. Wadhwa, Richard R. Best, and Carolyn Welshhans.
LOS ANGELES – A former California Employment Development Department (EDD) employee has agreed to plead guilty to a federal criminal charge for causing nearly 200 fraudulent COVID-related unemployment relief claims to be filed in other people’s names, resulting in more than $1.6 million in ill-gotten gains, the Justice Department announced today.
Gabriela Llerenas, a.k.a. “Maria G. Sandoval,” 49, of Perris, signed a plea agreement that was filed today in which she has agreed to plead guilty to a single-count information charging her with mail fraud.
Court records show that Llerenas previously worked at EDD as a disability insurance program representative. She resigned in March 2002 after admitting to fraudulently authorizing and paying disability benefits administered by EDD. She was sentenced to 37 months in federal prison in connection with that scheme.
The new scheme that Llerenas has admitted running took advantage of the expanded eligibility for unemployment insurance (UI) benefits made possible by the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress and signed into law in March 2020. The CARES Act provided additional UI benefits to qualified individuals and helped provide UI benefits during the COVID-19 pandemic to people who did not otherwise qualify, including business owners, self-employed workers, independent contractors, and those with a limited work history.
From April to October 2020, Llerenas filed and caused the filing with EDD of fraudulent unemployment insurance benefits that falsely asserted the named claimants were self-employed independent contractors – often identifying them as cake decorators or event attendants – who were negatively affected by the COVID-19 pandemic. Llerenas obtained some of the names, Social Security numbers and other identifying information she used to submit the fraudulent claims through her prior work as a tax preparer.
In her plea agreement, Llerenas also admitted to falsely stating on some of the applications that the claimants were residents of California entitled to unemployment insurance benefits administered by EDD when in fact they lived elsewhere. She also admitted that, on some applications, she inflated the amounts of income she reported for the claimant to maximize the benefit amount. She also admitted to sometimes filing a dozen or more fraudulent EDD claims in a day.
As a result of the fraudulent unemployment benefits applications that Llerenas filed and caused to be filed, EDD authorized Bank of America to mail debit cards in the names of the claimants to addresses she provided, including her residence, her husband’s business location, her mother’s apartment and the addresses of friends and other family members.
Llerenas admitted that she charged the named claimants a fee for filling the applications, which was often paid out of the fraudulently obtained benefits. In at least one case, she told the named claimant that she was still employed at EDD and could control the distribution of the unemployment insurance benefits, and then demanded an additional payment for “releasing” the benefits.
In total, 197 debit cards were fraudulently issued because of this scheme, resulting in losses to EDD and the United States Treasury that Llerenas has admitted were at least $1,633,487.
Llerenas is scheduled to make her initial appearance on September 22. The criminal offense to which Llerenas has agreed to plead guilty carries a statutory maximum sentence of 20 years in federal prison.
The Department of Labor-Office of Inspector General, EDD-Investigations Division, Homeland Security Investigations, United States Postal Inspection Service, Federal Bureau of Investigation and Social Security Administration-Office of Inspector General investigated this matter.
Assistant United States Attorney Ranee A. Katzenstein, Chief of the Major Frauds Section, is prosecuting this case.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud.
The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at (866) 720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
Philip KAHN et al., Plaintiffs and Respondents, v. Benny CHETCUTI, Jr., Defendant and Appellant.
In this dispute arising from the sale of a home to respondents, seller Benny Chetcuti, Jr., appeals from a judgment confirming an award in a contractual arbitration and denying his petition to correct the award. He contends (1) the arbitrator exceeded his powers, and (2) the arbitrator erred procedurally when he awarded attorney fees and costs to respondents. In the published portion of the opinion, we interpret the parties' agreement to authorize the arbitrator to determine whether the prevailing party's act of filing a complaint before an obligatory mediation barred the award of attorney fees to that party. That determination, we conclude, is not subject to judicial review. We reject the second argument in the unpublished portion of our opinion and affirm the trial court's judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
In March 1995, appellant purchased a residence located on Edgehill Drive in Burlingame as a business investment. Appellant renovated the property and then listed it for sale. Respondents Philip and Mara Kahn purchased the residence from appellant in June 1996 for $455,000. The purchase agreement contained clauses stating that any disputes arising out of the contract must be mediated, and if that was unsuccessful, submitted to binding arbitration. The agreement also provided that the prevailing party in any arbitration or other legal proceedings was entitled to reasonable attorney fees, with a limitation on the right to fees where an arbitrator determined that a party otherwise entitled to fees resisted mediation.
In April 1998, Lori Lutzker, an attorney representing respondents, sent a letter to appellant alleging he had failed to disclose certain defects that were present in the residence. Acknowledging the alternative dispute resolution clauses in the purchase agreement, Lutzker demanded that appellant submit the dispute to mediation.
Gerald Filice, an attorney, replied to Lutzker's letter on appellant's behalf. He denied that appellant had made any misrepresentations, but he agreed to “undertake” mediation. He urged Lutzker to submit the names of potential mediators.
In the weeks that followed, Lutzker and Filice exchanged a series of letters trying to select an appropriate mediator. That process was still not complete by late June 1998, and Lutzker became concerned that the statute of limitations for certain claims respondents had against appellant might pass. Hoping to “avoid [an] unnecessary legal action” Lutzker drafted an agreement and sent it to Filice, asking him to waive “all applicable statutes of limitations during the time when we are attempting to resolve the dispute through mediation and arbitration.”
Filice refused to sign the agreement. Therefore, on July 2, 1998, Lutzker filed a complaint against appellant on respondents' behalf. Respondents did not intend to proceed with the litigation. They filed the complaint solely to preserve their legal rights. In fact, Lutzker prepared a stipulation proposing to stay the action pending the conclusion of the arbitration.
The mediation was conducted in September 1998. It was unsuccessful. The parties then proceeded to arbitration.
An arbitration hearing was conducted before an attorney selected by the parties, William L. Nagle, on three days in January and February 2001. During the arbitration, both parties agreed that the issue of attorney fees would be litigated after the arbitrator had issued his initial award.
On February 15, 2001, the arbitrator issued his award and memorandum of decision. He ruled respondents were entitled to $100,000 in damages, but that those damages were subject to a $50,000 setoff based on sums respondents had received from their broker and real estate agent. Thus respondents were awarded $50,000 from appellant. The arbitrator also ruled respondents were the prevailing parties and that they were entitled to their attorney fees and costs under the terms of the arbitration agreement.
On April 3, 2001, respondents filed a memorandum with the arbitrator setting forth the fees and costs they had incurred. Appellant then filed what he described as a motion to strike and to tax costs. He raised two issues that are relevant here. First, appellant argued the arbitrator exceeded his authority when he awarded attorney fees and costs to respondents because respondents had filed a complaint before the mediation hearing. According to appellant, that act (filing the complaint) precluded an award of fees and costs under the terms of the purchase agreement. Second, appellant argued the arbitrator lacked jurisdiction to award fees and costs because respondents' application for those fees and costs was a “correction” to the arbitration award that was not “timely” under the California arbitration statutes. (See Code Civ. Proc.,1 § 1280 et seq.)
The arbitrator held a hearing on the fee request on May 14, 2001. On May 31, 2001, the arbitrator issued his written ruling awarding respondents $83,289.75 in attorney fees, plus $13,638.95 in costs.
Appellant then filed a petition in the San Mateo Superior Court seeking to correct the arbitration award. As is relevant here, he raised the same two issues that he raised before the arbitrator in his motion to strike and to tax costs.
On June 18, 2001, respondents filed a petition to confirm the arbitration award.
Both petitions were heard by the court at a hearing on July 17, 2001. The court denied appellant's motion to correct the award and granted respondents' request to confirm. In addition, the court awarded respondents an additional $3,690 in attorney fees. This appeal followed.
II. DISCUSSION
A. Did the Arbitrator Exceed his Power?
Appellant contends the trial court should have granted his motion to correct the arbitration award because the arbitrator exceeded his powers when it awarded attorney fees and costs to respondents. Whether the arbitrator exceeded his powers presents a question of law that we decide de novo on appeal. (Creative Plastering, Inc. v. Hedley Builders, Inc. (1993) 19 Cal.App.4th 1662, 1666, 24 Cal.Rptr.2d 216.)
The pivotal question a court must answer when deciding whether an arbitrator exceeded his powers is whether the arbitrator had the authority to rule on a particular issue under the terms of the controlling arbitration agreement. (Creative Plastering, Inc. v. Hedley Builders, Inc., supra, 19 Cal.App.4th at p. 1666, 24 Cal.Rptr.2d 216; Southern Cal. Rapid Transit Dist. v. United Transportation Union (1992) 5 Cal.App.4th 416, 422, 6 Cal.Rptr.2d 804; cf. DiRussa v. Dean Witter Reynolds, Inc. (2d Cir.1997) 121 F.3d 818, 824.) Here, the purchase agreement contains a clause that specifically authorized an award of attorney fees and costs. It states, “Should any legal or equitable action, arbitration or other proceeding between Buyer and Seller arise out of this agreement, the prevailing party shall be awarded reasonable attorney's fees and court or arbitration costs in addition to any other judgment or award.” Clearly the arbitrator had the power to award fees and costs.
Appellant contends the arbitrator exceeded his powers because he awarded fees and costs to respondents even though such an award was prohibited under the facts of this case. Appellant bases his argument on the mediation clause contained in the purchase agreement, which states in part, “Buyer [and] Seller ․ agree to and shall mediate any dispute or claim between them arising out of this contract․ The mediation shall be held prior to any court action or arbitration․ Should the prevailing party attempt an arbitration or a court action before attempting [to] mediate, THE PREVAILING PARTY SHALL NOT BE ENTITLED TO ATTORNEY FEES THAT MIGHT OTHERWISE BE AVAILABLE TO THEM IN A COURT ACTION OR ARBITRATION․” (Italics in original.) Appellant contends respondents were not entitled to fees and costs under this language because they filed a complaint against him before the mediation hearing and thus they “attempt[ed] ․ a court action before attempting [to] mediate.” Under these circumstances, appellant contends, the arbitrator exceeded his powers when he made such an award.
We must reject appellant's argument. The arbitration clause in the purchase agreement states that the arbitrator was authorized to decide “[a]ny dispute or claim in law or equity arising out of this contract or any resulting transaction․” One dispute or claim the arbitrator was authorized to decide under this broad language was whether respondents had in fact “attempt[ed] ․ a court action before attempting [to] mediate.” By rejecting appellant's motion to strike and to tax costs, the arbitrator impliedly concluded respondents had not “attempt[ed] ․ a court action before attempting [to] mediate.” (Cf. Rosenquist v. Haralambides (1987) 192 Cal.App.3d 62, 67, 237 Cal.Rptr. 260 [“courts must indulge every reasonable intendment to give effect to arbitration proceedings”]; Griffith Co. v. San Diego Col. for Women (1955) 45 Cal.2d 501, 516, 289 P.2d 476, [same]; see also Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 381, 36 Cal.Rptr.2d 581, 885 P.2d 994 [courts must defer to an arbitrator's implied findings].) The arbitrator did not “exceed his powers” when he decided an issue he was clearly authorized to decide.
Appellant seems to contend that because respondents filed a complaint against him before the mediation hearing the arbitrator had no alternative but to conclude that respondents had “attempt[ed] ․ a court action before attempting [to] mediate.” However “the merits of a controversy that has been submitted to arbitration are not subject to judicial review. This means that we may not review the validity of the arbitrator's reasoning, the sufficiency of the evidence supporting the award, or any errors of fact or law that may be included in the award.” (Harris v. Sandro (2002) 96 Cal.App.4th 1310, 1313, 117 Cal.Rptr.2d 910.)
Our deference to the arbitrator's implied ruling should not be interpreted as meaning that we somehow disagree with his decision. Absent a restriction to the contrary, “ ‘arbitrators ․ may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10-11, 10 Cal.Rptr.2d 183, 832 P.2d 899, quoting Sapp v. Barenfeld (1949) 34 Cal.2d 515, 523, 212 P.2d 233.) “ ‘[A]rbitrators are not bound to award on principles of dry law, but may decide on principles of equity and good conscience, and may make their award ex aequo et bono [according to what is just and good].’ ” (Id. at p. 11, 10 Cal.Rptr.2d 183, 832 P.2d 899, quoting Muldrow v. Norris (1852) 2 Cal. 74, 77.)
Here, the evidence shows respondents filed a complaint against appellant prior to the mediation hearing. However, the evidence also shows respondents only did so because the statute of limitations for some of their claims was about to pass, and appellant's counsel refused to sign an agreement waiving the statute of limitations. Furthermore, the evidence shows respondents did not intend to pursue the suit, and that they filed it only to preserve their legal rights. The arbitrator reviewing this evidence could reasonably conclude respondents did not, in any real sense, “attempt ․ a court action before attempting [to] mediate.”
Appellant's final argument on this issue is that the arbitrator exceeded his power as that concept is interpreted in DiMarco v. Chaney (1995) 31 Cal.App.4th 1809, 37 Cal.Rptr.2d 558. We disagree. In DiMarco, the parties to a real estate transaction submitted their dispute to arbitration under a contract that said the prevailing party “shall be entitled to reasonable attorney's fees and costs.” (Id. at p. 1812, fn. 1, 37 Cal.Rptr.2d 558.) The arbitrator ruled the seller was the prevailing party but declined to award her fees and costs. The appellate court ruled the arbitrator had exceeded his powers under those circumstances because “having made a finding [the seller] was the prevailing party, the arbitrator was compelled by the terms of the agreement to award her reasonable attorney fees and costs.” (Id. at p. 1815, 37 Cal.Rptr.2d 558.) 2
DiMarco is distinguishable because here, the arbitrator did not find that respondents had “attempt[ed] ․ a court action before attempting [to] mediate.” Indeed precisely the opposite is true. By rejecting appellant's motion to strike and tax costs, the arbitrator impliedly made an opposite finding. DiMarco is inapposite.
We conclude the arbitrator did not exceed his powers when he awarded respondents their attorney fees and costs.3
B. Did the Arbitrator Err Procedurally when he Awarded Attorney Fees and Costs? **
III. DISPOSITION
The judgment confirming the award and denying appellant's petition to correct the award is affirmed.
FOOTNOTES
FN1. Unless otherwise indicated, all further section references will be to the Code of Civil Procedure.. FN1. Unless otherwise indicated, all further section references will be to the Code of Civil Procedure.
2. Our Supreme Court recently took note of the decision in DiMarco but declined to decide whether its reasoning was correct. (See Moshonov v. Walsh (2000) 22 Cal.4th 771, 779, 94 Cal.Rptr.2d 597, 996 P.2d 699.) We too need not state an opinion on the issue because the case is distinguishable.
3. Having reached this conclusion, we need not reach respondents' argument that any limitation on the right of the prevailing party to recover attorney fees would be unenforceable.
FOOTNOTE. See footnote *, ante.
JONES, P.J.
We concur: STEVENS and SIMONS, JJ.
