Tears, anger as tribal leaders are sentenced in California casino embezzlement

Some of the money John Crosby stole went to buy an $838,000, five-bedroom house on a seven-acre plot in Redding, while another $600,000 was spent on adding a pool and spa, patio, full-sized basketball court and a garage to hold his Boss 302 Mustang, Chevrolet Camaro ZL1 and other exotic vehicles.

About $160,000 more went to buying gold bars for the former Sacramento FBI agent, with another $480,000 spent on Sacramento Kings tickets and other sporting events he traveled to in a private jet.

His mother, Ines Crosby, spent part of her share of the money stolen from the tribe that runs the Rolling Hills Casino in Corning on a $93,000 car, a $49,000 trip to Africa and a $55,468 watch.

And her sister, Leslie Lohse, used $280,000 of the money to deposit directly into her personal bank accounts.

On Friday, 13 years and an estimated $47 million later, the three former officials of the Paskenta Band of Nomlaki Indians faced sentencing in federal court in Sacramento for an embezzlement scheme, one that tribal chairman Andrew Alejandre described as a “brutal kleptocracy in which they used their control over the Tribe’s government and money to enrich themselves.”

In a three-and-a-half-hour sentencing hearing before U.S. District Judge John A. Mendez, the three defendants apologized to the tribe and their own families, saying they felt remorse for their actions.

But tribal members, who packed the courtroom to capacity and spoke as victims of the scheme, said the three had caused unending heartache for members who were banished from the tribal rolls — and lost their annual stipends — for speaking out and asking where the casino money was being spent.

Some choked with emotion as they wondered how the three could have spent so much enriching themselves instead of considering building community centers or other needed tribal facilities with the money. Others were simply angry.

At one point, one member said, they began raising questions about whether the tribe really had leased a private jet, and whether Crosby had used it to fly from Red Bluff to Corning, a 19-mile drive along Interstate 5.

“They had no compassion, no understanding,” said Bonnie Gonzalez, at 86 the tribe’s eldest elder. “They didn’t care. I just want to tell you when I look at them I get bile in my throat.”

Mendez made clear during the hearing that all three would get prison time, that suggestions from Ines Crosby’s and Leslie Lohse’s lawyers that they get home confinement were non-starters.

And he said he was taken aback at the notion that he was sentencing a former FBI agent.

“He’s an FBI agent,” Mendez said. “When I read that, I just went, ‘Wow. I have a former FBI agent sitting before me.’

“I don’t understand that at all.”

John Crosby, 58, who was described in court papers by his lawyers as “a fierce and dedicated advocate for Native American rights“ and a “kind and loving father and loyal husband,” was sentenced to four years, nine months in prison.

Ines Crosby, his 78-year-old mother, who was called “a pillar of her community” and “a warm and compassionate public servant” by her attorneys, got the same amount of time.

And Leslie Lohse, Ines’ 67-year-old sister, whose lawyers referred to her “vast ocean of good deeds,” was sentenced to three years, five months in prison.

The sentencings come more than two years after the trio accepted plea deals and agreed to plead guilty to conspiracy to embezzle from a trial organization and to tax charges, and five years after a federal grand jury issued a 69-count indictment charging them with using millions in stolen casino profits for trips to Final Four and World Series games and international travel.

Federal prosecutors have said the embezzlement totaled $6 million; tribal authorities say the scheme cost the tribe much more.

“The financial losses suffered by the Tribe as a result of the Crosby/Lohses’ criminal conspiracy are enormous,” Alejandre, the tribal chairman, wrote in a victim impact statement filed in court Tuesday. “Without factoring in the loss of opportunities to earn returns on the (stolen) funds, the Tribe’s financial losses total over $50 million.”

Alejandre called the 13-year period from 2001 to 2014 while the three ran the tribal finances “the most traumatic” in its history, with tribal members who questioned their spending tossed out of the tribe for 10-year suspensions that cost them the $54,000 in annual payments handed out to tribal members from casino profits.

“The Crosby/Lohses are not good people who briefly went astray,” Alejandre wrote. “These are cold-hearted criminals who for well over a decade stole millions from the Tribe, taking whatever measures necessary — regardless of the harm it caused others — to maintain their control over the Tribe and its money so that they alone could live a life of luxury.”

He added that John Crosby appeared to have used his experience as an FBI special agent to help in the scheme.

“John Crosby had apparently learned a playbook from the criminals he investigated,” Alejandre wrote. “He and his mother and aunt— Ines Crosby, Leslie Lohse — then executed on that playbook for over a decade, stealing money from the Tribe to live a life of luxury.”

Assistant U.S. Attorney Christina McCall wrote in court filings that the three embezzled millions “to secretly fund their extravagant personal and family expenses” and covered up the theft by filing false tax returns and making false entries on tribal checks to hide what they were spending the money on.

Even after being ousted from their tribal leadership positions in 2014, the defendants concocted “a written agreement that purported to authorize their expenditures of Tribal funds starting as early as 2001” and forged the signature of a dead former tribal leader and others, McCall wrote.

“The defendants tried to convince the bank where they had chosen to deposit most of the Tribe’s money to cut off the Tribe’s access to its money,” she wrote.

Eventually, the defendants and tribal leaders each hired security guards armed with assault weapons who engaged in a standoff over the casino, a move that led a federal judge to order a ban on firearms within 100 yards of the gaming facility.

That was followed by a cyberattack on casino computers that wiped out data.

The casino, which sits 110 miles north of Sacramento on Interstate 5 and opened in 2002, generates an estimated $100 million a year for the tribe and its 300 adult members.

In court papers, lawyers for the defendants argue that the tribe itself would not exist as a recognized federal entity if the Crosby family had not pushed for it, and that the Crosby family is largely responsible for the casino’s existence and the tribe’s wealth.

“The source of its enormous wealth and prosperity — the Rolling Hills Casino and investment portfolio created almost singlehandedly by John and his family — is all but forgotten in the Tribe’s desire to rid the Crosby’s from all Tribal association,” San Francisco defense attorney Elliot Peters wrote.

Peters wrote that current tribal leaders “ousted John and his entire family (over 80 people) from the Tribe following a coup” by falsely claiming that they were not true descendants of the tribe.

“Nor did the Tribe’s vendetta against John and his family stop there,” Peters added. “Following the coup, the Tribe then worked with the government to ensure John, Ines, and Leslie were indicted...

“The vitriol that the Tribe is likely to show toward Ines, John, and Leslie is seeded in deep personal animosity that has no place in sentencing.”

Mendez brushed aside such arguments, noting that the embezzlement went on for more than a decade.

“This became a way of life, and the chairman described your clients as criminals, hardened criminals, and I agree,” the judge said. “What they did was criminal.”

The judge also rejected arguments that John Crosby should get some credit for working to restoring the tribe’s federal recognition in 1994 and helping to realize the tribe’s dream of getting a casino built that would provide money to formerly poor members.

“He worked really hard to recreate the tribe, to create the wealth the tribe has today,” Peters, John Crosby’s attorney, argued.

“He created that wealth for himself,” Mendez replied, “not the tribe.”