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San Diego Man Sentenced in Scheme to Defraud USPS of $5 Million
Cuong H. Nguyen, an online vendor based in San Diego, was sentenced last week in federal court after pleading guilty to charges involving a complex conspiracy to defraud the U.S. Postal Service (USPS) of millions of dollars in postage fees over the course of approximately four years. According to a press release issued by the U.S. Attorney’s Office for the Southern District of California on November 1, 2021, Nguyen pleaded guilty to engaging in a “wide-ranging postage counterfeiting, forging, and tampering scheme that, over the course of multiple years and more than 160,000 packages, deprived the U.S. Postal Service of approximately $5 million of postage due and owing.”
Defendant Tampered with Postage Evidencing System
The investigation into Nguyen’s conspiracy scheme was carried out by Special Agents from the U.S. Postal Inspection Service, the IRS Criminal Investigation unit, and the Financial Investigations and Border Crimes Task Force, which is based in San Diego and Imperial Counties and is funded by the Treasury Executive Office of Asset Forfeiture. During their investigation, the Special Agents discovered that Nguyen had digitally altered, forged, counterfeited, and tampered with postage evidencing systems (PES), or postage meters, which are secure systems that generate distinguishing marks on shipping labels to indicate prepayment of postage.
Postage meters allow people sending packages through the USPS to pay for and print shipping labels online, and these systems are regulated by the USPS to protect postal revenue in accordance with the U.S. Code of Federal Regulations, 39 CFR Part 501. According to the U.S. Attorney’s Office, Nguyen used the postage evidencing system known as Click-N-Ship to send approximately 162,221 packages of food and beverage products from his businesses in San Diego between 2015 and 2019. However, because he and others altered, counterfeited, and/or forged the shipping labels on those packages, Nguyen ended up paying much less than what was owed. The packages were still delivered, however, which deprived the USPS of several million dollars in postage fees over the course of several years.
“Mr. Nguyen perpetrated a complex postal fraud scheme and enriched himself with funds stolen from the United States,” said Special Agent in Charge Ryan L. Korner of IRS Criminal Investigation’s Los Angeles Field Office. “IRS Criminal Investigation is proud to lead the FIBC and to work with our law enforcement partners to root out financial frauds and to protect our country’s critical infrastructure.” By misrepresenting information on the labels used to ship his packages, including the size, weight, origin, and destination of the packages, Nguyen underpaid $5,127,712.88 worth of postage to the USPS, resulting in net profits to him, his businesses, and others of $862,374, the U.S. Attorney’s Office states.
U.S. Postal Service Fraud a Federal Crime
The U.S. Postal Inspection Service is the law enforcement branch of the USPS, and its job is to enforce the more than 200 federal statutes that pertain to crimes involving the postal system, USPS employees, and USPS customers, and investigate any crime that involves the mail. Because the USPS is a federal agency, fraud and other illegal activity involving the mail are charged as federal crimes. For his part in the postal fraud scheme, Nguyen was charged with federal criminal conspiracy under Title 18, U.S.C., Section 371, which carries a maximum penalty of five years in prison, forfeiture, and $250,000 in fines. He pleaded guilty to the charge in April 2021.
Nguyen admitted to the conspiracy at his November 2021 sentencing hearing before Hon. Cynthia A. Bashant, who said, “The USPS provides a valuable service. Fraudulent acts like this will prevent us from having the postal service in years to come.” As part of his plea agreement, Nguyen will serve three years’ probation. He has also agreed to forfeit $862,374 to the United States as profits, proceeds, and property obtained directly or indirectly from the fraud scheme.
U.S. Attorney Calls Fraud Scheme a “Complex Web of Digital Crime”
“With the U.S. Postal Service delivering almost 150 billion pieces of mail annually scammers mistakenly believe they can hide and profit from postage fraud,” stated Inspector in Charge Carroll N. Harris III of the U.S. Postal Inspection Service Los Angeles Division. “The U.S. Postal Inspection Service has over 246 years of defending the nation’s mail system. We remain steadfast in exposing scammers. Today’s sentencing reaffirms the commitment Postal Inspectors have in holding criminals accountable and ensuring the public trust in the mail.”
Acting U.S. Attorney Randy S. Grossman said in response to the sentencing, “I commend the work of the USPIS, IRS-CI, and the FIBC for unraveling this complex web of digital crime. This is a great example of how the U.S. Attorney’s Office will continue to work collectively with our law enforcement partners to pursue the most challenging investigations as we protect our nation’s resources, including the U.S. Postal Service.”