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March 8, 2002
The United States Attorney's Office for the Northern District of California announced that Daniel David and Scott D. Nisbet were indicted late yesterday on charges of mail fraud, conspiracy and money laundering, as well as tax fraud for Mr. David. Mr. David and Mr. Nisbet are alleged to have engaged in a scheme in which they leased two dozen payphone lines from Pacific Bell, routed the phone lines to an empty office, hooked up the lines to an autodialer and made countless telephone calls to 800-numbers in order to collect money from the phone companies. The defendants are alleged to have received nearly half a million dollars in their scheme.
Mr. David, age 36, and Mr. Nisbet, age 38, both of whom live in Berkeley, are charged in a 17-count indictment returned yesterday afternoon by a federal grand jury in San Francisco. They are charged with conspiracy in violation of 18 U.S.C., Section 371, mail fraud in violation of 18 U.S.C., Section 1341, and money laundering in violation of 18 U.S.C. 1956. In addition, the indictment charges Daniel David with tax fraud in violation of 26 U.S.C., Section 7306(1)(making and subscribing a false return), and seeks forfeiture of $444,198.91 in a house owned by Mr. David in Kensington, California.
According to the indictment, the defendants leased 24 payphone lines, 23 of which were routed to an office space in South San Francisco. The defendants knew that they would receive approximately 24 cents for evert toll-free call made from each payphone. This financial arrangement occurs because payphone owners or leasors receive some share of the profits from the phone companies as a result of the calls made from their payphones. In the case of toll-free calls, the 800 number which is called has to pay a fee per call to the long-distance carrier. The long-distance carrier in turn shares the profit with the owners or leasors of the payphone from which the call is made. That amount is approximately 24 cents.
The indictment charges that the defendants leased the phone lines using fictitious names: Bill Jansen and Dave Jacobs. After the defendants acquired the payphone lines through fraud, they programmed an autodialer to make more than a million calls to 800-numbers. Then the defendants instructed the phone companies to cut checks to them made payable to the fictitious Jansen and Jacobs, and directed that the dividend checks from the fraud be sent to a mail drop in Arizona. The mail box drop was opened in the name of Jacobs and Jansen using a fake notary stamp. Daniel David and Scott Nisbet then arranged to have the checks, which were made payable to Jansen and Jacobs, sent to them in San Francisco. In one case, the checks were sent via United Airlines cargo service and picked up by an individual using another apparently fake name made up of one defendant's last name and the other's first name: David Scott.
The defendants are also charged with laundering the proceeds of their fraudulent scheme. In particular, Daniel David is alleged to have arranged with a friend who was an attorney to have the checks made payable to Jansen and Jacobs deposited into the attorney's client trust account. At Mr. David's direction, the attorney wrote checks to Mr. David in identical amounts. Mr. David then deposited those checks into his personal account at the Bank of America. Mr. Nisbet is also alleged to have committed money laundering by using proceeds from the illegal scheme to pay a tax accountant to set up four shell corporations in Nevada for the purpose of further concealing the fraud from the telephone companies.
Mr. David is charged with tax fraud as well. After laundering approximately $444,000 from the scheme, Daniel David reported the proceeds as income on his tax returns, but then claimed, falsely, that he had not been paid $349,750 and deducted that amount as a bad debt expense.
The maximum statutory penalty for each count in violation of 18 U.S.C., Section 1341 (mail fraud) is five years in prison, three years of supervised release, a $250,000 fine and restitution. The maximum statutory penalty for each count in violation of 18 U.S.C., Section 1956 (money laundering) is 20 years in prison, three years of supervised release, and a $500,000 fine or twice the value of the laundered funds, whichever is greater. The maximum statutory penalty for making and subscribing a false return in violation of Title 26 U.S.C., Section 7206(1) is three years in prison, a $100,000 fine, a $100 special assessment plus the costs of prosecution. However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court. An indictment simply contains allegations against an individual and, as with all defendants, Mr. David and Mr. Nisbet must be presumed innocent unless and until convicted.
The prosecution is the result of a three-year investigation by agents of the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation division. Matthew J. Jacobs is the Assistant U.S. Attorney who is prosecuting the case with the assistance of legal technician Elaine Rene-McCoy.
The defendant's first appearance in federal court will be March 18, 2002 at 9:30 a.m. before Magistrate Judge Joseph C. Spero.
A copy of this press release and related court documents may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.
All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415)436-7181.
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