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A Mountain View man is facing federal charges of wire fraud and money laundering after he allegedly orchestrated a kickback scheme to siphon $17 million from his former employer into a shell company he owned.
The U.S. Attorney’s Office filed the complaint against 62-year-old Kevin Chao, the details of which were released last week. He faces charges of wire fraud, money laundering and conspiracy to commit wire fraud. Saratoga resident Richard Sze, also facing money laundering and wire fraud charges, allegedly worked with Chao to carry out the illicit activity.
Chao worked for a company only referred to as “Company-1,” which was described as a “global leader” in industrial automation. In 2012, the company switched to a new China-based software development vendor, 80% of which was owned by someone who Chao allegedly knew.
In the years that followed, Chao and Sze allegedly worked together to steer more development work to this new company, filing inflated and false invoices totaling more than $30 million, in some cases authorizing the invoices themselves. From there, the money was deposited into the outside software development company’s bank account, and then a large of portion of it was rerouted into a California-based LLC called Mooteec.
Mooteec, according to investigators, has no products or services, has a P.O. Box as its mailing address, and appears to be a shell corporation designed to conceal or move kickback money. Mooteec is entirely controlled by Chao and Sze, according to the federal complaint, and has allegedly received $17 million from the overseas software company.
Withdrawals from the Mooteec account into personal bank accounts allegedly show Chao took $5.4 million and Sze took $1.3 million.
In late 2019, an employee resigning from the unnamed company reported that there was “something funny” going on between Chao and the new software development company, leading to an internal investigation. In December 2019, Chao and Sze resigned on the same day, according to the complaint.
The FBI carried out an investigation into the alleged money laundering scheme carried out by Chao and Sze, providing key evidence for the U.S. Attorney’s Office to file charges against the two men. The maximum sentence for each count of money laundering, wire fraud, conspiracy to commit wire fraud is 20 years in prison.
