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Financial Crimes
02/25/2008

Attorney, 2 others charged in scam to sell "billions" worth of bogus Federal Reserve notes

LOS ANGELES - A Los Angeles lawyer is among three suspects charged as a result of an undercover investigation by U.S. Immigration and Customs Enforcement (ICE) into an alleged financial scam to sell hundreds of counterfeit Federal Reserve notes, many with a purported face value of a half billion dollars.

Darrell Lee Johnson, 78, was arrested Friday afternoon at his San Marino home by ICE agents. The Los Angeles defense attorney is charged in a criminal complaint with possessing and attempting to sell fictitious financial obligations. Johnson made his initial appearance in federal court here Feb 22, where a judge set his bond at $100,000.

In recent weeks, ICE agents executed search warrants at Johnson's Wilshire Avenue law office and at his residence, where they seized nearly 500 of the fraudulent Federal Reserve notes. The notes, printed with a 1934 issue date and a portrait of President William McKinley, had been treated to make them appear old. Investigators say that is just one of the ploys suspects used to convince investors that these types of phony financial instruments are real.

Johnson is the third defendant charged in connection with the fraud scheme. Earlier this month, ICE agents, posing as unscrupulous securities brokers, arrested a suspected associate of Johnson's, 60-year-old Renato Gaza of San Diego, following an undercover meeting at a restaurant in Mission Viejo, Calif. On February 19, four days after that meeting, ICE agents took Victoria Hoffman, 48, into custody at her home in Dallas, Texas.

Investigators allege the three are part of a loose-knit network that sought to market the fake Federal Reserve notes to unwitting investors across the country. ICE's investigation into the scheme is ongoing. Agents urge anyone who has more information about the case to call the agency's 24-hour tip line at 1-866-DHS-2ICE.

"You would think the half billion dollar denomination would be a dead give away that these notes are fake, but people are nevertheless taken in," said Jennifer Silliman, deputy special agent in charge for ICE's office of investigations in Los Angeles. "For investors, the bottom line needs to be, if it sounds too good to be true, it probably is."

The case is being prosecuted by the U.S. Attorney's Office for the Central District of California. ICE received substantial assistance in the investigation from the U.S. Secret Service.

The largest denomination of currency ever printed by the Bureau of Engraving and Printing was the $100,000 Series 1934 Gold Certificate featuring a portrait of President Wilson. These notes, which were printed from Dec. 18, 1934, through Jan. 9, 1935, were used only for official transactions between Federal Reserve Banks. They were never circulated among the general public.

ICE officials say cases of fictitious instrument fraud involving the sale or transfer of nonexistent securities appear to be on the rise. Scam artists typically try to sell the bogus securities at a discounted value or use them as collateral to secure loans or make purchases.

Investigating financial crime and fraud is the focus of Operation Cornerstone, ICE's comprehensive initiative to combat vulnerabilities in the nation's financial system. Such schemes can easily be exploited by criminal organizations to earn, move, and store illicit funds.

ICE agents say this case is just the latest example of fictitious instrument fraud. ICE officials encourage those seeking to learn more about this type of fraud to visit the U.S. Bureau of Public Debt web site - www.treasuryscams.gov. The site features samples of various kinds of fictitious fraud instruments and provides information about the related financial schemes.

Editor's Note: Digital photos of the some of the phony Federal Reserve notes seized in connection with this investigation are available on the ICE website at www.ice.gov http://www.ice.gov or by contacting ICE public affairs at (949) 360-3096.