San Ramon Man Pleads Guilty to Wire Fraud, Tax Evasion

SAN FRANCISCO, CA—Edward S. Ehee pleaded guilty today to wire fraud, tax evasion and making and subscribing a false tax return, United States Attorney Joseph P. Russoniello announced.

In pleading guilty, Ehee admitted that between 2001 and 2006, he defrauded individuals who invested in investment funds he operated of more than $4 million.

According to the plea agreement, 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, Ehee 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. Among the tactics Ehee used in the scheme was the dissemination to investors of materially false account statements and fictitious audit opinion letters.

The plea agreement also states that Ehee 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 2005 tax year. Ehee also admitted that he made and subscribed, under the penalties of perjury, a materially false partnership return for the 2005 tax year for one of the investment funds he operated. Ehee intentionally inflated the assets reported on the balance sheet of that 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, 45, of San Ramon , Calif. , pleaded guilty to charges in a criminal information filed January 30. The information charged Ehee 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. Under the plea agreement, the defendant pled guilty to all three counts and is required to pay restitution to the investors and, for the tax loss, to the United States .

The sentencing of Ehee is scheduled for August 7 before Judge Susan Illston in San Francisco . The maximum statutory penalty for violation of the wire fraud statute (18 U.S.C. Section 1343) is twenty years, and a fine of $250,000 or twice the gross gain or loss, whichever is greater, plus restitution. The maximum statutory penalty for violation of the tax evasion statute (26 U.S.C. Section 7201) is five years and a fine of $100,000. The maximum statutory penalty for making and subscribing a false return (26 U.S.C. Section 7206(1)) is three years and a fine of $100,000. However, any sentence following conviction would be imposed by the court after consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. Section 3553.

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 assistance of the San Francisco Regional Office of the Securities and Exchange Commission in this matter.

Further Information:

Case # CR 09-0105

A copy of this press release may be found on the U.S. Attorney's Office's website 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 website at www.cand.uscourts.gov.