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Senior Director of Strategic Alliances
LexisNexis Risk Solutions - Government

Have you ever found something interesting while looking for something else? Serendipity! Look for something, find something else, and realize that what you’ve found better! Just like the results found by Operation Fraud Street Mafia, which targeted a nationwide criminal enterprise that wasn’t coming from the streets but the Kern Valley State Prison. As a result of the operation, KVSP inmate, Kristopher Thomas, has been charged not only with drug trafficking, but a half a billion-dollar COVID-19 scheme as well. Serendipity!

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. Thomas has been incarcerated since December 2010 after being convicted of a gang-related first-degree murder. As a prison mate, Thomas was now head of a drug trafficking organization 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. After reviewing phone calls placed by Thomas on a prison-issued tablet to romantic partners, family members, and other individuals’, agents discovered Thomas was sending and receiving text messages about what appeared to be a tax fraud scheme. Call the IRS!

Turns out, from January 2022 through at least July 2023, Thomas and his co-conspirators filed hundreds of payroll tax returns that claimed over $550 million in Employee Retention Credits. 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. 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.

Today’s Fraud of The Day is based on article “Mafia operation run out of Kern Valley State Prison shut down” published by KEYE News on February 23, 2024.

U.S. Attorney Phillip A. Talbert announced the results of Operation Fraud Street Mafia which targeted a nationwide criminal enterprise run out of Kern Valley State Prison (KVSP). As a result of the operation, a KVSP inmate has been charged in two separate federal complaints with drug trafficking and COVID-19 fraud.

Seven other people in California and Maryland were also charged in the two schemes. U.S. Attorney Talbert held a news conference on Friday with DEA Special Agent in Charge Brian M. Clark, Acting Special Agent in Charge Mark Remily of the FBI Sacramento Field Office, and IRS Criminal Investigation Oakland Field Office Acting Special Agent in Charge Michael Mosley.

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