Auburn man pleads guilty to defrauding Raley’s of $2.5M
A former Raley’s advertising director from the Auburn-area pleaded guilty to defrauding the West Sacramento-based grocery chain of more than $2.5 million using a number of schemes, according to authorities and court documents.
David John Magana, 46, entered the guilty plea Tuesday, United States Attorney Benjamin B. Wagner announced in a press release. He is being charged with a conspiracy to commit mail and wire fraud and a money laundering conspiracy, according to the release.
“The magnitude of Mr. Magana’s misconduct is unacceptable,” Sacramento Division FBI Special Agent in Charge Herbert M. Brown said. “The FBI is dedicated to identifying and pursuing cases where an employee intentionally takes advantage of an employer for financial gain.”
Magana is released on his own recognizance and is in talks with the U.S. Attorney’s Office to come to a plea agreement, office spokesperson Lauren Horwood said.
The investigation is ongoing, and though the release mentions multiple co-conspirators, no one else is facing charges at this time, Horwood said.
Magana’s 21-year employment with Raley’s ended September 2010, company spokesman John Sagale said. No current Raley’s employees are being investigated, based on what the company has been told, Sagale said.
“We greatly appreciate the efforts of the FBI and the IRS in getting this guilty plea,” Sagale said in a prepared statement. “While we may never know what motivated his decision to commit fraud, it is clear he will pay a very steep price for his actions.”
Magana demanded printing services company Vertis Inc. and paper supplier Graphic Communication Holding Inc. pay a co-conspirator unnecessary commissions for them to continue business with Raley’s, according to court documents.
Given Magana’s position as advertising director, both companies agreed to pay the co-conspirator, so long as Magana ensured Raley’s reimbursed them, which he did by disguising the unnecessary commissions as additional charges within their regular invoices, authorities said.
Magana approved the inflated invoices and received a kickback from his co-conspirator, authorities said.
“Mr. Magana abused his position to take control of millions of dollars of company money for personal profit,” IRS-Criminal Investigation Special Agent in Charge Jose M. Martinez said. “Not only did he defraud his employer, but the everyday customer.”
Magana and his co-conspirators laundered fraud proceeds of their fraud through two companies: Seven Sisters Media Inc. and Advantage Paper, according to authorities. They also used Advantage Paper to supply Raley’s with paper at an inflated price, meeting occasionally to determine how much Raley’s would pay for the product, authorities said.
Part of that inflated price included a kickback to Magana from Advantage Paper, authorities said.
Magana and others also worked together to sell “significant quantities” of Raley’s paper inventory to third parties at a discounted rate, authorities said.
Magana is to be sentenced by U.S. District Judge John A. Mendez on June 3.
He faces a maximum prison sentence of 20 years for the mail fraud charge, a fine of $250,000 or twice the gross gain or loss, whichever is greater. For the money laundering charge, he faces up to 20 years in prison and a fine of $500,000 or twice the gross gain or loss, whichever is greater.
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