Former Silicon Valley executives charged with fraud | #phishing | #scams

SAN JOSE (KRON) – The Department of Justice announced that it has charged two former Silicon Valley tech executives last week with fraud.

Kevin Chao and Richard Sze, who were arrested on October 28, began working for Company-1, an industrial automation company that provides hardware and software services, when their previous company was acquired by Company-1 in 2005.

Both rose through the ranks with Chao eventually becoming the Global Business Director, and Sze the Manager of Software Engineering, who reported directly to Chao. 

Prosecutors allege that Chao and Sze orchestrated a kickback scheme with a new software development company from 2016 through 2020, in which Chao personally knew the majority owner of the new company.

Inflated or false invoices were submitted to Company-1 for the software development work with Chao and Sze authorizing the invoices. The paid funds were then funneled to Chao and Sze through a California limited liability company named Mooteec, which was entirely controlled by Chao and Sze.

According to the complaint’s affidavit, Mooteec produces no product or service, has a P.O. box as its mailing address, has no physical office, and appears to be a shell corporation designed to conceal and move kickback money.  Money that moved through Mooteec passed to Chao, Sze, and Chao-related bank accounts. 

From 2016 until early 2020, the complaint describes that nearly $17 million was deposited from the new software company’s bank account into a Mooteec account.  Withdrawals from the Mooteec account reflect that more than $5.4 million was sent to Chao’s accounts and over $1.3 million went to Sze’s accounts.

An employee noticed discrepancies in late 2019, which lead to an internal investigation and the eventual resignation by both Chao and Sze on the same day in December 2019.

Chao is charged in his complaint with wire fraud, honest services wire fraud, and conspiracy to commit wire fraud and money laundering. Sze is charged with conspiracy to commit honest services wire fraud and money laundering.

If convicted of wire fraud, honest services wire fraud, or conspiracy to commit wire fraud, the maximum sentence for each count is 20 years in prison and a fine of $250,000 or twice the gross gain or gross loss.  If convicted of money laundering, each defendant faces a maximum sentence of 20 years in prison and a fine of $500,000 or twice the value of the property involved.

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