Offering surety bonds that defrauded clients out of 5.2 million dollars Date: June 9, 2022 Contact: newsroom@ci.irs.gov A Westwood man was arrested today on a 27-count federal grand jury indictment alleging he defrauded victims out of more than $5 million by purporting to sell bonds for large-scale construction and other projects. Tommy Lester Watts, a.k.a. "Michael Nesbeth," "Michael Kent," and "Alex Mason," was arrested at his residence this morning and is expected to be arraigned this afternoon in United States District Court in downtown Los Angeles. Watts is charged in an indictment filed Tuesday with 13 counts of wire fraud, two counts of aggravated identity theft, eight counts of money laundering, two counts of tax evasion and two counts of willful failure to file tax returns. According to the indictment, from September 2016 to September 2019, Watts falsely claimed to be experienced in and able to provide surety bonds and other financial guarantees for large-scale projects. Watts allegedly told victims that he would assist them in obtaining financing for their projects via his various companies, including the Sherman Oaks-based Source One Surety LLC. Watts allegedly misrepresented that any such bonds or guarantees were underwritten by well-known companies and banks, and that they were backed by assets in the millions or billions of dollars. But Watts and his companies were not licensed to sell such bonds in California. And his claims about his experience, his clients – including governments – his underwriting, and his supporting assets were not true, the indictment alleges. To make his scheme appear legitimate, Watts allegedly hijacked the corporate filings of other companies and created fake employees and accounts for underwriters and banks. Watts caused victims to send his companies approximately $5,205,144, the majority of which he spent on personal items such as classic and luxury cars, rent for high-end apartments, and the purchase of luxury retail goods, the indictment states. He also allegedly laundered victim payments through accounts held in the names of corporations that were not registered and used fake taxpayer identification numbers – and then used those accounts to spend victim funds as his own. He hid this income from the IRS in tax years 2017 and 2018, in which years he failed to file any tax returns, according to the indictment. An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt. If convicted, Watts would face a statutory maximum sentence of 20 years in federal prison for each wire fraud count, 10 years in federal prison for each money laundering count, five years in federal prison for each tax evasion count, one year in federal prison for each willful failure to file tax returns count, and a mandatory two-year consecutive prison sentence for each count of aggravated identity theft. IRS Criminal Investigation, the FBI, Homeland Security Investigations, and the California Department of Insurance investigated this matter. Assistant United States Attorney Kristen A. Williams of the Major Frauds Section is prosecuting this case.
