Former San Francisco Investment Fund Manager Sentenced

SAN FRANCISCO—Edward S. Ehee was sentenced today to 51 months in prison, and ordered to pay restitution for committing wire fraud, tax evasion and making and subscribing a false partnership return, United States Attorney Joseph P. Russoniello announced.

In his guilty plea on March 13, 2009, Ehee admitted that between 2001 and 2006 he defrauded investors in investment funds he operated of more than $4 million. Ehee represented to investors that he would invest their funds in the securities markets and employ complex trading strategies to earn high returns with less risk than is ordinarily associated with such returns. Instead of investing the funds as promised, though, he secretly diverted most of the funds for improper purposes, including the payment of existing investor distribution obligations using new contributions from other investors, and payments for the benefit of himself and his family.

Ehee also admitted that although he had approximately $240,500 in taxable income in 2005 and used most of those funds to pay for such personal expenses as his mortgage, car, retail goods and family support, he did not file an income tax return or pay any income tax for the tax year 2005. Ehee also admitted that he made and subscribed, under the penalties of perjury, a materially false partnership return for the tax year 2005 for one of the investment funds he operated. Ehee intentionally inflated the assets reported on the balance sheet of the return to match the amount of money that he was supposed to have invested on behalf of his clients, when he knew that he had not invested any of their money in that fund in 2005.

Ehee, 46, of Walnut Creek, Calif., pleaded guilty to charges in a criminal information filed Jan. 30, 2009. The information charged him with one count of wire fraud, one count of tax evasion and one count of making and subscribing a false return, in violation of 18 U.S.C. Section 1343, and 26 U.S.C. Sections 7201 and 7206(1), respectively.

The sentence was handed down by U.S. District Court Judge Susan Illston following a guilty plea on all counts charged in the information. Judge Illston also sentenced the defendant to a three-year period of supervised release, to pay restitution to victims in an amount to be determined in further proceedings, and to pay the Internal Revenue Service in accordance with its settlement of the defendant’s tax liabilities. The defendant will begin serving the sentence on or before April 15, 2010.

Thomas E. Stevens is the Assistant U.S. Attorney who is prosecuting the case, with the assistance of Ponly Tu. The prosecution is the result of a two-year investigation by the Internal Revenue Service and Federal Bureau of Investigation. The U.S. Attorney’s Office acknowledges the valuable assistance of the San Francisco Regional Office of the Securities and Exchange Commission in this matter.

Further Information:

Case #: CR-09-0105-WHA

A copy of this press release may be found on the U.S. Attorney's Office's Web site at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges' calendars with schedules for upcoming court hearings can be viewed on the court's Web site at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney's Office should be directed to Jack Gillund at (415) 436-6599 or by email at Jack.Gillund@usdoj.gov.