Foresthill man pleads guilty in $2.5M Raley’s fraud case
A third local man has been charged and pleaded guilty to his part in a conspiracy of schemes that cost Raley’s Family of Fine Stores more than $2.5 million.
Foresthill area resident Jason Allen Smith, 47, entered his plea Tuesday on conspiracy to commit mail and wire fraud, U.S. Attorney Benjamin B. Wagner announced.
According to court documents, Smith, a former contract employee conspired with Auburn’s David John Magana, Raley’s former advertising director, Cool’s Martin Steward Cullenward, and others to defraud the West Sacramento-based grocery chain.
Magana and Cullenward previously pleaded guilty.
Smith used his company, Advantage Paper Inc., to receive proceeds from the scheme that he would split with Magana, according to the plea agreement. He and Magana supplied paper to Raley’s at an inflated price, meeting periodically to determine how much Raley’s would pay.
“At times, Smith paid Magana a portion of the fraud proceeds in cash,” according to the press release from the Federal Bureau of Investigation. “In other instances, he paid for bills on Magana’s behalf.”
Raley’s never used some of the paper it purchased – instead Magana allowed Smith and Cullenward to sell it for a fraction of the amount paid by Raley’s, the release said. Both Smith and Cullenward received proceeds from the fraudulent sales and paid kickbacks to Magana.
The FBI and the Internal Revenue Service-Criminal Investigation are continuing to investigate the case, which is being prosecuted by Assistant U.S. Attorney Michael M. Beckwith.
Smith is scheduled to be sentenced by U.S. District Judge John A. Mendez on September 10. He faces a maximum sentence of 20 years in prison; a fine of $250,000, or twice the gross gain or loss, whichever is greater; and a three-year term of supervised release.