Orange County Attorney Pleads Guilty to Wire Fraud and Tax Evasion Charges in $8 Million Scheme Related to Investments by Clients
LOS ANGELES—An attorney who prosecutors believe took at least $8 million in investment capital from clients and used the funds for personal expenses and luxury items pleaded guilty this morning to wire fraud and tax evasion charges.
Stephen Young Kang, 46, of Newport Beach, pleaded guilty before United States District Judge George Wu to two counts of wire fraud and one count of tax evasion.
According to a plea agreement filed last week in United States District Court, Kang “admits that beginning as early as October 2012, and continuing through in or about at least September 2015, in Los Angeles and Orange Counties, and elsewhere, defendant knowingly and with intent to defraud, devised, participated in, and executed a scheme to defraud clients to whom defendant had agreed to provide legal or investment services.”
Kang admitted in court today that he defrauded a food distribution company, Ottogi America, Inc., that hired the attorney to help the company purchase properties near its distribution center in Gardena. Ottogi wire transferred funds to a trust account in Houston, Texas, to be used for the purchase of the properties. But Kang admitted that he did not use the money to invest in properties. Rather, Kang admitted that he caused the funds to be transferred to other accounts that he controlled. Prosecutors believe that Kang then used a substantial portion of Ottogi’s money to pay for personal expenses and business ventures, as well as to make partial payment to other victims.
Kang also admitted that he defrauded a Texas victim out of $500,000 in 2013 by falsely representing that he would invest the $500,000 in a company called Pegasus Capital Ltd., LLC. When the victim demanded repayment, Kang agreed in September 2015—which was after he was initially indicted in this fraud case—to provide the victim with a “first priority security interest” in a term life insurance policy. Kang, however, failed to disclose to the victim that the life insurance was worth only $250,000, that Kang’s wife was the sole beneficiary of the policy, and that the policy was first applied for and approved on August 28, 2015. Prosecutors believe that Kang offered, and in some cases provided, the same life insurance policy to other victims.
“Attorneys owe their clients a special duty of loyalty and trust that is fundamental to our legal system,” said United States Attorney Eileen M. Decker. “The Department of Justice will defend this principle by holding responsible those who violate this duty of loyalty for their own personal gain.”
David L. Bowdich, the Assistant Director in Charge of the FBI’s Los Angeles Field Office, stated: “Unfortunately, Mr. Kang put his personal financial interest above those of his clients who entrusted him to act on their behalf. By virtue of his profession and the trust afforded to him, his actions are all the more egregious.”
In relation to the tax evasion count, Kang admitted that he received at least $1,516,000 in income in 2013, but willfully attempted to evade the assessment of income tax by failing to file a federal income tax return for calendar year 2013 and using corporate accounts to conceal the income he received.
“Professionals, including attorneys, who create elaborate schemes that have no purpose other than to mislead others and defraud the IRS run the very high risk of prosecution,” said Special Agent in Charge Erick Martinez of IRS Criminal Investigation. “These individuals face severe consequences including imprisonment and substantial fines.”
As a result of today’s guilty pleas, Kang faces a statutory maximum sentence of 45 years in federal prison when he is sentenced by Judge Wu on February 11, 2016.
The case against Kang is the product of an ongoing investigation by the Federal Bureau of Investigation and IRS Criminal Investigation.
Based on the evidence in this case, investigators believe Kang may have victimized others in locations where he practiced law or resided, including California, Texas, and Seoul, Korea. Anyone who believes they may have been victimized by Kang should contact the FBI’s Los Angeles Field Office at (310) 477-6565.