Former Contract Employee Pleads Guilty to Defrauding Raley’s
|U.S. Attorney’s Office April 30, 2013|
SACRAMENTO, CA—Foresthill area resident Jason Allen Smith, 47, pleaded guilty today to a conspiracy to commit mail and wire fraud in a scheme to defraud Raley’s Family of Fine Stores, United States Attorney Benjamin B. Wagner announced.
According to court documents, Smith, a former contract employee, conspired with David John Magana, Raley’s former director of Advertising; Martin Stewart Cullenward, 60, of Cool; and others to defraud Raley’s. Smith took part in two of Magana’s fraud schemes. Altogether, Magana’s various schemes cost Raley’s more than $2.5 million. Smith is the third defendant to be charged in the conspiracy. Magana and Cullenward previously pleaded guilty. The investigation is ongoing.
According to the plea agreement, Smith used a company he created legally prior to the scheme, Advantage Paper Inc., to receive the proceeds from this scheme. He and Magana then began supplying paper to Raley’s at an inflated price. They met from time to time to determine the ultimate amount Raley’s would pay for paper. The proceeds from the inflated paper purchases were deposited into Advantage Paper’s bank accounts and later split with Magana. At times, Smith paid Magana a portion of the fraud proceeds in cash. In other instances, he paid for bills on Magana’s behalf.
Some of the paper purchased by Raley’s was never used by Raley’s. Instead, Magana allowed Smith and Cullenward to sell that paper to third parties for a fraction of the amount paid by Raley’s. Proceeds from the fraudulent paper sales went to both Smith and Cullenward, both of whom paid kickbacks to Magana.
This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. Assistant United States Attorney Michael M. Beckwith is prosecuting the case.
Smith is scheduled to be sentenced by United States District Judge John A. Mendez on September 10, 2013. He faces a maximum sentence of 20 years in prison; a fine of $250,000, or twice the gross gain or loss, whichever is greater; and a three-year term of supervised release. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.