San Jose Man Pleads Guilty To $37M Cisco Fraud

SAN JOSE – Cuong Cao “Calvin” Dang pleaded guilty in federal court late Friday afternoon to running a business selling products stolen from Cisco Systems by its employees, Acting United States Attorney Brian Stretch, and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge Andrew Toth announced today. In pleading guilty, Dang admitted to running Network Genesis, whose business, according to the plea agreement, was “overwhelmingly that of buying and selling merchandise stolen from Cisco” by its employees. Dang admitted that from January 2006 until Network Genesis was raided by federal law enforcement officers in January 2013, sales revenues totaled approximately $37,000,000.

According to the plea agreement, Dang, 45, of San Jose, Calif., owned and operated Network Genesis, based in San Jose, from approximately January 2006 until January 23, 2013. He also owned The Dang’s Investment, Inc. (TDI), which managed residential and commercial real estate properties Dang bought using profits generated from Network Genesis. Dang also worked at Cisco for almost five years between 1999 and 2004. He admitted to having a small network of Cisco employees who delivered stolen Cisco merchandise to Network Genesis for resale to customers both in and outside California. Dang admitted that, to cover his tracks, he changed the serial numbers on the stolen merchandise and created fraudulent “test sheets” to give to customers. (A test sheet shows the diagnostic information, including the serial number, for a particular part.) 

To conceal how much he was making from the scheme, Dang admitted using nominees to launder the illicit proceeds. He directed some of his customers to send checks to his co-defendants instead of paying Network Genesis directly. In return for commissions from Dang, his co-defendants cashed some of those checks and deposited others into their own bank accounts, then withdrew the cash in structured amounts and funneled the money back to Dang. In this way, Dang was able to obtain large amounts of cash without having the money go through bank accounts associated with him or his businesses.

Dang was initially indicted by a federal Grand Jury on July 24, 2013, when he was charged with conspiracy to commit mail fraud, in violation of 18 U.S.C. § 1349; six substantive mail fraud counts, in violation of 18 U.S.C. § 1341; two counts of engaging in financial transactions using criminally derived proceeds, in violation of 18 U.S.C. § 1957; and forfeiture allegations.

The grand jury returned a superseding indictment on October 30, 2013, in which seven additional defendants were charged with various offenses relating to Dang’s scheme. In the superseding indictment, Dang was also charged with six counts of money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and (a)(1)(B)(i). Under the plea agreement, he admitted guilt to one count each of conspiracy to commit mail fraud (Count One), substantive wire fraud (Count Two), money laundering (Count Eight), and engaging in financial transactions using criminally derived proceeds (Count Seventeen). Dang is currently free on a $2.5M secured bond.

Dang’s sentencing hearing is scheduled for March 28, 2016, at 1:30 p.m., before the Honorable Edward J. Davila, United States District, in San Jose.  The maximum statutory penalties he faces are: (1) for Count One, 20 years’ imprisonment and twice the gross gain he derived from the offense; (2) for Count Two, the same penalty as Count One; (3) for Count Eight, 20 years’ imprisonment and $500,000, or twice the value of the property involved in the transaction, whichever is greater; and (4) for Count Seventeen, 10 years’ imprisonment and $250,000, or twice the value of the property involved in the transaction, whichever is greater. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. Restitution would usually also be ordered to be paid to the victim; however the parties agreed in the plea agreement that no restitution should be ordered in light of a Civil Settlement Agreement entered into between Dang and Cisco in Case No. 5:14-cv-01789-EJD.

A co-defendant, former Cisco employee Loc Xuan Hoang, pleaded guilty on February 11, 2015, to conspiring with Dang to commit mail fraud. His sentencing is pending. The superseding indictment remains pending against the following co-defendants: Emily Le, David Huynh, Thuy Nguyen, Long Pham, and Edwin Lin, each of whom is scheduled to return to court on December 21, 2015, at 1:30 p.m., for further status. Co-defendant Hieu Nguyen is a fugitive. (Any person with knowledge of his whereabouts is urged to contact IRS Criminal Investigation at 510-529-1923.)

Assistant United States Attorney David R. Callaway is prosecuting the case with the assistance of Elise Etter and Karen Bishop. The prosecution is the result of an investigation by the IRS Criminal Investigation, with the assistance of the Santa Clara R.E.A.C.T. Task Force.