Crime - Sacto 911

Sutter County man sentenced for role in $14 million benefits fraud scheme

A Sutter County man has been sentenced to 12 1/2 years in federal prison for his role in a $14 million unemployment and disability benefits fraud scheme.

In sentencing Mohammad Nawaz Khan, 60, Thursday, U.S. District Judge Morrison C. England Jr. said this was one of the longest-running, most sophisticated fraud schemes he had ever seen, according to a U.S. Attorney’s Office news release.

Judge England ordered Khan taken into custody at the end of Thursday’s hearing.

According to court documents, Khan and other family members operated a scheme that involved selling fake pay stubs to other people in the community and using the companies they controlled to report false wages for the individuals who purchased the pay stubs.

At times, the Khans instructed the purchasers how to use the fake pay stubs to fraudulently claim unemployment and disability benefits. The Khans set up a storefront operation in Yuba City and sold the fraudulent pay stubs on a walk-in basis, authorities said.

Purchasers found out about the opportunity to purchase the pay stubs in a number of ways. Some approached the Khans looking for work and were told to commit fraud instead, authorities said.

Over the course of the conspiracy, the defendants reported wages for more than 400 separate individuals, resulting in more then 2,000 fraudulent claims for unemployment and disability benefits, authorities said. The loss in this case was reported to be more than $14 million.

To date, 28 people have been charged and 24 have pleaded guilty to various offenses connected to the scheme, according to U.S. Attorney’s Office. Last week, Judge England sentenced co-defendants Mohammad Adnan Khan, 35, of Live Oak to nine years in prison; Iqila Begum Khan, 34, of Live Oak to five years in prison; and Mohammad Shahbaz Khan, 50, of Yuba City, to seven years and three months in prison and a $50,000 fine. Each was also ordered to serve a term of three years of supervised release following the prison terms.

A hearing is scheduled Nov. 5 to determine the amount of restitution owed to the California Employment Development Department.

Officials noted that parole has been abolished in the federal system, and each defendant will be required to serve at least 85 percent of the prison time imposed.

The case resulted from an investigation by the FBI; the U.S. Department of Labor, Office of Inspector General; and the California Employment Development Department, Investigations Division.

Cathy Locke: 916-321-5287, @lockecathy

  Comments