Newcastle Man Sentenced to over 5 Years in Prison for Defrauding the United Auburn Indian Community

SACRAMENTO, Calif. — Gregory Scott Baker, 48, of Newcastle, was sentenced on Thursday by United States District Judge Troy L. Nunley to five years and four months in prison and ordered to pay $18 million in restitution for defrauding the United Auburn Indian Community (UIAC), conspiring to launder monetary instruments, and filing a false tax return, Acting United States Attorney Phillip A. Talbert announced.

According to court documents, between October 2006 and December 2007, Baker and Bart Wayne Volen, 54, of San Diego and Haiku, Hawaii, and Darrell Patrick Hinz, 48, of Cameron Park, engaged in a scheme to defraud the UIAC. An indictment from August 2012 charged the defendants with conspiring to commit mail and wire fraud and various money laundering violations. A superseding indictment from April 2013 added additional charges, alleging that Volen and Hinz filed false tax returns in 2006 and 2007, and that Baker filed false tax returns from 2006 through 2009. The defendants ultimately stole over $18 million from the UAIC through their scheme.

“With the help of his co-defendants, Gregory Scott Baker used his position as Tribal Administrator to steal over $18 million from the UAIC,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “By concealing and disguising the proceeds of the fraud, the defendant received numerous assets and personal property, totaling over $1.4 million. This sentencing should send a clear message that those involved in these types of schemes will be held accountable.”

According to court documents, in October 2006, the UAIC hired Volen, a developer, to finish construction on a school, a community center, and administrative offices on UAIC‑owned property on Indian Hills Road in Auburn. Volen submitted false and inflated invoices to the UAIC, and Baker and Hinz, both UAIC employees, approved the fraudulent invoices based on a kickback agreement between the three men. 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.

Baker was the UAIC tribal administrator whose duties included overseeing the Indian Hills office project. In this position of trust, he was subordinate only to the UAIC tribal council. Hinz was a contract employee hired by the UAIC to manage the construction at the Indian Hills office project site. Both Baker and Hinz were required to approve all invoices before the UAIC tribal council would sign checks to pay for completed work. During the scheme to defraud the tribe, both Baker and Hinz engaged in conduct to ensure 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.

In order to disguise the proceeds of the fraud, Hinz sent a number of fraudulent invoices to Volen. These invoices were for consulting work that Hinz claimed he did for Volen. After the issuance of the false invoices, Volen sent Hinz 29 checks, totaling approximately $7.5 million. Hinz paid Baker indirectly for his assistance in the scheme, using money he received from Volen.

According to court documents, Hinz paid for a $12,500 weekend trip that he and Baker took in Hawaii and for 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, a vacation condominium in South Lake Tahoe, and various 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, Baker filed tax returns that failed to report the income he derived from the scheme. As a result, the United States suffered a tax loss of between $250,000 and $550,000.

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 and Volen previously pleaded guilty to similar charges in this case and are scheduled to be sentenced on June 16, 2016 and August 4, 2016, respectively. Chris W. Eatough, the owner of Sequoia Pacific Builders, previously pleaded guilty to a felony related to this case on June 20, 2013 (case number 2:13-cr-214 TLN). Eatough is scheduled to be sentenced on July 28, 2016. Both Hinz and Volen have agreed to pay at least $17 million in restitution to the UAIC. Eatough has agreed to pay between $600,000 and $950,000 in restitution to the UAIC.

These 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.