Defendants Found Guilty in Calif. Charity Fraud Case

Three defendants, Armand J. Tiano, a former lieutenant in the Santa Clara County (California) Sheriff’s Office, Matthew B. Kellner, and George S. Kellner, an attorney based in Contra Costa County, were found guilty of various felony charges in Santa Clara County’s largest-ever charity fraud case.

The Kellners, who are brothers, operated Family Entertainment Group, a commercial fundraising business. The defendants were convicted for crimes related to their operation of a phony law enforcement organization called the “Santa Clara County Police and Sheriffs’ Athletic League,” and the “Deputy Sheriffs’ Athletic League,” which fraudulently raised more than $3.5 million dollars from Bay Area donors. Tiano and Matt Kellner were convicted of conspiracy, grand theft, insurance fraud, embezzlement, perjury and tax fraud. Tiano was also convicted of money laundering, George Kellner was convicted of tax fraud and perjury. The defendants were convicted following a year-long jury trial. Seven of their co-defendants pleaded guilty before trial. The jury was unable to reach verdicts as to three defendants, Lovie Nicoletti, the mother of the Kellner brothers, Joseph Dagna, III, a telemarketing manager, and Lesa Stone, the ex-wife of Armond Tiano.

The guilty verdicts were the culmination of a multi-year investigation by the Santa Clara County District Attorney’s Office, the Franchise Tax Board, the Attorney General’s Office and the Employment Development Department.

Thirty donors testified during trial that they believed, when contacted by the defendants’ telemarketers, that they were being contacted by a law enforcement agency representative. They further believed their contributions would be used to help underprivileged children and families and the family of a slain Millbrae police officer. Many victim donors said they believed the callers were with a law enforcement agency because Armand Tiano was associated with the organizations and identified as a lieutenant with the Sheriff’s Office. In reality, contributors’ donations were primarily used to pay the defendants and their commercial fundraising staff. More than $1.4 million of donor contributions were paid out of the defendant’s organization through untraceable cash payments. Defendants and their staff reportedly did not report their income or pay taxes to taxing authorities such as the Franchise Tax Board and the Employment Development Department. Of the more than $3.5 million raised, less than $50,000 was used for charitable purposes. It is estimated that more than 50,000 Bay Area residents were victimized over a seven-year period between 1993 and 2000.

In addition to the charity fraud, Tiano and co-defendant Matthew B. Kellner were convicted of insurance fraud-related crimes.

Tiano and Matt Kellner reportedly colluded to defraud an insurer claiming Tiano lost wages following an auto accident. Tiano was also convicted of workers’ compensation insurance fraud. He falsely claimed he had a disabling back injury from a work-related construction-site accident but was reportedly caught at the same time continuing to drive race cars in amateur racing events and participating in weightlifting competitions.

Sentencing is scheduled for Feb. 18, 2005. Deputy District Attorneys Martha Donohoe and Stephen Lowney prosecuted the case. Santa Clara Superior Court Judge Paul Bernal presided over the case, which took a year to try.

The defendants could be sentenced to up to 29 years in prison, and ordered to pay restitution exceeding $3.5 million dollars, and could be fined up to $10 million dollars.