Eugene Man Pleads Guilty to Investment Fraud and Tax Fraud

EUGENE, OR—Today, Hussein Ali Mehdi, 48, of Eugene, Oregon, pleaded guilty to three counts of mail fraud and one count of tax fraud related to an investment fraud scheme.

According to court documents, the defendant admitted to submitting fraudulent claims for class action settlements associated with various securities litigation. The defendant further admitted to receiving more than $850,000 of fraudulent proceeds through his investment scheme.

In those claims, the defendant falsely asserted that he and others held stock in the companies subject to the class action settlements. To support the false claims, the defendant created fraudulent brokerage account statements purported to be from various investment brokerage firms, including Charles Schwab, TD Waterhouse, and Ameritrade, that falsely represented that he and others owned shares of the securities covered by the settlements. To pull off his scheme, the defendant used several nominees and addresses in at least two states.

In connection with the investment fraud scheme, the defendant also admitted filing a false federal income tax return on which he severely understated his income. On the false tax return, the defendant claimed his taxable income was only $58,241, when, in reality, he knew it was more than $290,000.

“This message needs to get out to the fraudsters—if you're sneaking around and stealing other people's money, special agents from IRS Criminal Investigation and the FBI are going to find you and shed light on your operations,” said Marcus Williams, Special Agent in Charge of the Seattle Field Office of Internal Revenue Service - Criminal Investigation.

Sentencing is set for June 7, 2011, at 10 a.m. before the U.S. District Judge Michael R. Hogan. The maximum penalty for mail fraud is 20 years' imprisonment and a $250,000 fine, and the maximum penalty for filing a false tax return is three years' imprisonment and a $100,000 fine.

This case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service - Criminal Investigation, and Homeland Security Investigations. The case is being prosecuted by Assistant U.S. Attorney Scott E. Bradford.