Date: Feb. 23, 2024 Contact: newsroom@ci.irs.gov Fresno, CA — As a result of Operation Fraud Street Mafia, a Kern Valley State Prison (KVSP) inmate has been charged in two separate federal complaints with drug trafficking and COVID-19 fraud. Seven defendants in California and Maryland are also charged in the two schemes. Making the announcement today are U.S. Attorney Phillip A. Talbert, IRS Criminal Investigation (CI) Oakland Field Office Acting Special Agent in Charge Michael Mosley, and DEA Special Agent in Charge Brian M. Clark, Acting Special Agent in Charge Mark Remily of the FBI Sacramento Field Office. “It is remarkable that a prison inmate coordinated with others on the outside to distribute over 100 pounds of methamphetamine into the community,” said U.S. Attorney Talbert. “But that apparently was not enough: he also conspired to pursue over half a billion dollars in federal tax credits that were meant to help struggling businesses during the COVID-19 pandemic. The U.S. Attorney’s Office is committed to combatting organized crime whether it is drug trafficking or theft of taxpayer money, and whether it is committed inside or outside of prisons.” “Kristopher Thomas and his associates being in federal custody are a result of an incredibly detailed, multi-agency OCEDTF investigation and is a critical milestone in this case,” said IRS Criminal Investigation Acting Special Agent in Charge Mosley. “While incarcerated and with the help of his associates, Thomas is accused of leading a conspiracy to defraud taxpayers of over $550 million by falsely claiming COVID-19 Employee Retention Credits. CI agents specialize in financial investigations and remain on the front lines of fighting fraud.” “This extensive drug trafficking investigation exposed a massive fraud operation being conducted from behind bars. As a prison inmate engineered a criminal network from coast to coast to peddle poison, law enforcement put their collective authorities together to dismantle this organization brick by brick,” said DEA Special Agent in Charge Clark. “Strong law enforcement partnerships built on action are an invaluable tool to ensure prison is no longer a place where violent criminals can operate without consequence.” “I applaud the work of our California COVID-19 Fraud Strike Force and the hard-working prosecutors, agents, and analysts in the Eastern District of California who conducted this investigation,” said Michael C. Galdo, Department of Justice Director of COVID-19 Fraud Enforcement. “The Department will continue to work with our law enforcement partners around the country to uncover these schemes and hold those accountable who attempt to steal from the American people—whether they are hiding overseas or, like the allegations in this investigation, operating conspiracies from behind bars.” “The criminal enterprises we battle today are more sophisticated than ever before,” said FBI Acting Special Agent in Charge Remily. “From interstate drug trafficking rings to massive fraud schemes aimed at stealing pandemic relief funds meant for struggling American businesses, the criminal conspiracies we face are complex and ever-changing. Despite these challenges, the dedicated men and women of the FBI and our local, state, and federal law enforcement partners will continue to diligently investigate these criminals. We will use every investigative technique at our disposal to disrupt their activities and bring them to justice.” According to court documents, in August 2022, the DEA began a wiretap investigation into a methamphetamine trafficking operation that was run out of the Kern Valley State Prison in Delano, California, by inmate Kristopher Thomas, 36. Thomas has been incarcerated since December 2010 after being convicted of a gang-related first-degree murder. Thomas is a long-time member of the Main Street Mafia Crips, a street gang located in South Los Angeles. Agents reviewed recorded jail calls placed by Thomas on a prison-issued tablet to numerous romantic partners, family members, and other individuals believed to be involved in drug trafficking. Agents also intercepted Thomas sending and receiving text messages about what appeared to be a tax fraud scheme. The intercepted text messages contained screenshots of tax information for many businesses with tax refund amounts. This triggered the DEA to request assistance from IRS Criminal Investigation and the FBI. The drug trafficking and the tax fraud scheme are being prosecuted separately, and Thomas is charged in both cases. The methamphetamine trafficking scheme According to court documents, Thomas was the head of a drug trafficking organization (DTO) that was responsible for the shipment of large quantities of methamphetamine to Hawaii, Oklahoma, Alabama, New Jersey, and elsewhere, as well as the smuggling of fentanyl into Kern Valley State Prison. The investigation began after DEA agents identified Thomas as a source of methamphetamine supply in Hawaii. Subsequent recorded negotiations with Thomas resulted in the seizure in Oahu, Hawaii, of more than 90 pounds of methamphetamine. These seizures became the basis for the initiation of the wiretap investigation into multiple contraband cellphones in Thomas’s possession at KVSP. The wiretap investigation revealed that Thomas orchestrated the interstate shipment of more than 54 pounds of methamphetamine to other states, including Oklahoma, Alabama, and New Jersey. Thomas was assisted by other gang associates. In addition, wire intercepts led to the seizure of an additional 40 pounds of methamphetamine, over 14 pounds of fentanyl, 9.5 pounds of heroin, and 8.5 pounds of cocaine. A half a pound of fentanyl was seized after it was smuggled into KVSP at Thomas’s direction. Charged with Thomas in the drug trafficking scheme are Justin Damonte Mitchell, 31, of Los Angeles; Derrick D. Charles, 41, a former inmate at KVSP; Natasha Michelle Bailey, 44, of Bakersfield; Antrell Maeshack Sr., 41, of Santa Clarita; and Marie Joo-Yeon Choi, 29, of Los Angeles. The IRS Employee Retention Credits scheme According to court documents, from January 2022 through at least July 2023, Thomas led a multi-million-dollar tax refund fraud scheme whereby Thomas and his co-conspirators filed payroll tax returns with the IRS that claimed Employee Retention Credits (ERC) for businesses that were not entitled to receive the credits so that they would receive large tax refunds. Others charged with Thomas in the ERC scheme are Thomas’s mother, Kettisha Thompson-Dozier, 55, and her spouse Charmane Dozier, 44, both of Waldorf, Maryland, and Sharon Vance, 36, of Hawthorne, California. During the COVID-19 pandemic, the ERC became available as a refundable federal tax credit for employers as a way to encourage businesses to keep employees on their payrolls. The credit was available to eligible employers that paid wages to some or all employees during the pandemic. IRS records show Thomas and his co-conspirators filed hundreds of payroll tax returns that claimed over $550 million in tax refunds. The payroll tax returns were for fake business entities, actual businesses with overstated wages and numbers of employees, and businesses that were defunct at the time the payroll tax returns were filed. The defendants used the proceeds for improper personal expenditures. For example, in December 2022, Thomas celebrated his birthday by paying for his family members and friends to be driven to Las Vegas from Los Angeles, party for the night at a luxury penthouse, and then fly back to Los Angeles on a private jet. The drug trafficking case is the product of an investigation by the DEA with assistance from the U.S. Marshals Service. Assistant U.S. Attorney Karen Escobar is prosecuting the case. The ERC tax fraud case is the product of an investigation by the IRS Criminal Investigation (CI) and the FBI. Assistant U.S. Attorneys Joseph Barton and Jeffrey Spivak are prosecuting the case. The crimes charged today carry the following penalties: (1) conspiracy to distribute and to possess with intent to distribute methamphetamine and fentanyl and distribution of methamphetamine – both of which carry a 10-year mandatory minimum prison term and maximum penalty of life in prison; and (2) conspiracy to defraud the United States by submitting fraudulent ERC claims – which carries a maximum penalty of five years in prison. Any sentence, however, would 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. The charges are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt. The case was investigated under the Organized Crime Drug Enforcement Task Forces (OCDETF). OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
