Final Defendant Pleads Guilty in United Auburn Indian Community Fraud Scheme
For Immediate Release
U.S. Attorney's Office, Eastern District of California
Tribal Administrator, Project Manager, and Contractor Schemed to Commit Fraud in the Indian Hills Office Project
SACRAMENTO, Calif. — Darrell Patrick Hinz, 48, of Cameron Park, pleaded guilty today to conspiring to commit mail and wire fraud, conspiring to launder monetary instruments, and filing a false tax return, United States Attorney Benjamin B. Wagner announced.
In August 2012, Hinz, Gregory Scott Baker, 48, of Newcastle, and Bart Wayne Volen, 54, of San Diego and Haiku, Hawaii, were charged with conspiring to commit mail and wire fraud and various money laundering charges as part of a scheme to defraud the United Auburn Indian Community (UAIC) of more than $17 million. In April 2013, a superseding indictment additionally charged Volen and Hinz with filing false tax returns in 2006 and 2007, and charged Baker with filing false tax returns from 2006 through 2009 in connection with the fraud.
According to court documents, between October 2006 and December 2007, Baker, Volen and Hinz executed a scheme to defraud the UAIC. In October 2006, the UAIC hired Volen, a developer, to finish construction on four tribal buildings — a school, a community center, and administrative offices – on UAIC-owned property in Auburn. Volen submitted inflated invoices to the UAIC knowing that Baker and Hinz, both UAIC employees, would approve them based on a kickback agreement the three men had reached earlier. Volen supported his invoices with inflated cost proposals from his general contractor’s company, Sequoia Pacific Builders (SPB), and, at times, inflated invoices from various subcontractors. At Volen’s direction, over 160 SPB cost proposals were fraudulently inflated. Volen’s work on the Indian Hills Office Project began in late 2006 and ended in early 2008. The inflated invoices nearly doubled the cost of the project.
Baker was the UAIC tribal administrator. His duties included overseeing the Indian Hills Office Project. Hinz was a contract employee hired to manage the construction project. Both Baker and Hinz were required to approve all invoices before the UAIC tribal council would sign checks to pay for work done on the project. During the scheme to defraud the tribe, both Baker and Hinz engaged in conduct to insure that the tribal council would pay for the inflated and fraudulent invoices submitted by Volen. They were later paid by Volen for their participation in the scheme. According to court documents, Baker, Volen and Hinz ultimately stole over $17 million from the UAIC through their inflated invoice scheme.
According to court documents, in order to disguise the proceeds of the fraud, Hinz sent a number of fraudulent invoices to Volen for consulting work he claimed he did for Volen. In response, Volen sent Hinz 29 checks, totaling approximately $7.5 million over the course of 10 months. In an effort to further conceal the movement of the fraud proceeds, Volen and Hinz distributed the proceeds between three different companies owned by Hinz.
According to court documents, Hinz then paid Baker indirectly for his assistance in the scheme, using money he received from Volen. Hinz paid for a $12,500 weekend trip he and Baker took in Hawaii and certain obligations owed by Baker. Hinz also purchased a number of things for Baker, including various assets, personal property — a $70,000 BMW and a mobile home — several investment properties and a vacation condominium in South Lake Tahoe, and improvements to property, such as a $54,000 pool at his primary residence. All of these transactions were conducted for the purpose of concealing and disguising the proceeds from the UAIC fraud. During the course of the scheme, Baker received over $1.4 million.
According to court documents, Hinz filed tax returns containing a Schedule C in which he failed to report the income he derived from the scheme. As a result, the United States suffered a tax loss of over $830,000.
This case is the product of an investigation by the Internal Revenue Service, Criminal Investigation. Assistant United States Attorneys Michael M. Beckwith, John K. Vincent and Kevin C. Khasigian are prosecuting the case.
Hinz is scheduled to be sentenced by U.S. District Judge Troy L. Nunley on February 18, 2016. Baker pleaded guilty to similar charges in this case on November 5, 2015, and is scheduled to be sentenced on March 17, 2016. Co-defendant Volen pleaded guilty to similar charges in this case on June 12, 2014, and is scheduled to be sentenced on April 28, 2016. Chris W. Eatough, the owner of Sequoia Pacific Builders, pleaded guilty to a felony related to this case on June 20, 2013, and is scheduled to be sentenced on March 17, 2016 (case number 2:13-cr-214 TLN). Hinz, Baker and Volen have agreed to pay at least $17 million in restitution to the UAIC.
The defendants face a maximum sentence of 20 years in prison, a $250,000 fine, or twice the value of the gross gain or loss, and a three-year term of supervised release for conspiring to commit mail and wire fraud. The maximum statutory penalty for conspiring to launder monetary instruments is 20 years in prison, a $500,000 fine or twice the value of the laundered money, and a three-year term of supervised release. The maximum statutory penalty for the tax violation is three years in prison, a $100,000 fine, or a fine of twice the value of the gross gain or loss, and a one-year term of supervised release. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
Updated November 23, 2015
Press Release Number: 2:12-cr-294-TLN