Sacramento councilman Sean Loloee charged by feds with fraud, obstruction, immigration violations

Embattled Sacramento City Councilman Sean Loloee was indicted by a federal grand jury on fraud, obstruction and other charges, according to a 26-page indictment unsealed Friday morning hours before he was charged in front of a federal magistrate.

The 25-count indictment charges Loloee with conspiracy to defraud the U.S. Department of Labor, 14 counts of possession of false immigration documents, two counts of using a false immigration document, two counts of obstruction of agency proceedings, three counts of falsifying records and three counts of wire fraud. If convicted of the most serious charges, Loloee could face up to 20 years in prison.

Loloee, 53, was indicted along with Karla Montoya, the general manager of Loloee’s four Viva Supermarkets, on allegations that they hired employees who used phony immigration documents.

Both appeared Friday afternoon before U.S. Magistrate Judge Deborah Barnes and pleaded not guilty, and both were ordered released from custody after Assistant U.S. Attorney Audrey Hemesath said the government would not press for them to be jailed.

Loloee and Montoya made their way into court with their hands cuffed. Loloee wore a white dress shirt without a tie and a gray suit that had a waist chain wrapped around the back and connected to his cuffs.

Loloee, who has homes in North Sacramento and Granite Bay and has been dogged by questions about whether he actually lives in his council district, was ordered to reside at the Granite Bay home over the objection of attorney Sherry Haus, who said he needed to be closer to his Sacramento supermarkets.

But the judge ordered him to reside at his wife’s Placer County home, which the government called his “primary residence,” because Montoya lives at Loloee’s North Hagginwood house and the two were released under orders not to have contact with each other unless it is in the presence of their attorneys and pre-approved by pretrial services.

“Certainly this case will pose inconveniences,” Barnes said. “This will be the least of them.”

Loloee already had surrendered his U.S. passport and was ordered to turn over an expired Iranian passport on Monday. Montoya was ordered to turn over a Mexican passport the same day.

The two are due back in court Feb. 12.

Loloee didn’t say anything to reporters Friday evening as he left Robert T. Matsui Federal Courthouse. He wore a mask covering the lower portion of his face as he was ushered quickly into a waiting car and driven away.

Montoya also was accused of using a fraudulent Social Security card to work in the United States despite not being eligible to do so. That card was for an American citizen who died in 2007, the indictment says.

“Montoya, at Loloee’s direction, regularly hired undocumented workers at the Viva Supermarkets because it was Loloee’s view that undocumented workers were easier to control,” the indictment says. “Loloee had knowledge of the practice of hiring undocumented workers and himself reviewed job applicants.

“By maintaining a workforce of undocumented workers, Loloee enriched himself in various ways, including by not paying them overtime wages that would otherwise be required.”

Loloee said in a statement to The Sacramento Bee that he plans to fight the indictment.

“Today’s news comes as a shock, particularly since I came to this country as a teenager in 1989 with absolutely nothing and have worked tirelessly to meet the needs of the underserved in both my grocery stores and as a member of the city council; both of which I will continue to do as I fight these allegations,” Loloee said.

Montoya attorney William Portanova, said before court that his client “is a hard-working mother who’s been working as hard as she can the last 20 years.”

“She’s raised a family, paid her taxes, and she is unfortunately in this situation at this moment,” Portanova said. “But, by the end of it, we expect to remove her from the situation.”

Loloee ‘has an obligation to do the right thing’

Loloee, who has been under pressure to resign following federal raids on his grocery stores and homes in October, already has said he does not intend to run for re-election next year. He has another year on his current term, which ends in December 2024.

Sacramento Mayor Darrell Steinberg in a statement Friday hinted that he wants Loloee to resign.

“The charges are very troubling,” Steinberg said. “I talked to the council member this morning and will be speaking with him throughout the day. He has the right to due process, and he also has an obligation to do the right thing by District 2 and by the city.

“I expect the situation to be resolved within the next 24 hours.”

Loloee has been under investigation by federal agents and was sued by the U.S. Department of Labor in April 2022 over allegations that he threatened to report workers at his Viva Supermarket chain over their immigration status.

He also has been accused in court documents of destroying evidence related to his businesses during the investigation.

“These are very serious charges. I guarantee the upper levels of the Department of Justice had to approve this,” said Sacramento attorney Mark Reichel. “It’s a lot of work to defend against these cases. They’re not that common. He’ll likely get out of custody today because there’s not a forced labor charge.”

The civil case, filed by federal labor officials in 2022, is still active. But Reichel said it would likely soon be put on hold given the new charges.

“It would be incredibly unfair and I don’t see it happening if they were to go forward with the civil case in light of a federal criminal indictment. You can’t force someone to answer questions in a civil case that are clearly admissible in a criminal case. It sure has a lot more power now that he has been indicted. I’m sure his lawyers will make that argument.”

Feds say Loloee relied on ‘atmosphere of intimidation’

The indictment says that Loloee used “an atmosphere of intimidation” at his markets by making clear he “knew who was ‘illegal,’” threatened immigration consequences and required employees who didn’t speak English to sign documents without having them translated from English.

The indictment says Loloee and Montoya “deployed this system of maintaining an undocumented labor force in all Viva Supermarkets across many years.”

“In some instances, Montoya directed job candidates who admitted that they did not possess lawful employment authorization documents to obtain fraudulent documents from locations in south Sacramento,” the indictment says. “In at least one instance, Montoya herself obtained a fraudulent document for an undocumented applicant.

“In other instances, Montoya accepted for verification purposes documents that she knew were fraudulent.”

In October, when federal agents raided Loloee’s businesses and homes, agents found phony Social Security cards and permanent resident cards for 289 Viva Supermarket workers, the indictment says.

Loloee also paid some employees in cash between 2018 and March 2020, “typically without providing a pay stub,” the indictment says.

From May 2017 through January 2020, some employees were paid with checks that they were told could not be cashed at banks. Instead, they were told to cash them at Western Union offices inside the Viva Supermarkets, where they were charged a 2% surcharge for cashing them, the indictment says.

Loloee also sometimes told workers that part of their pay had to be redeemed as a voucher for use at his supermarkets, the indictment says.

The Labor Department investigated Loloee’s supermarket operations three times, beginning in 2008, the indictment says, and filed an April 2022 lawsuit seeking payment of $1.5 million in back wages and penalties, the indictment says.

During the investigations, Loloee and Montoya instructed workers not to cooperate with investigators and lie, and directed some workers to impersonate investigators “in order to gather information and identify other employees who cooperated with the agency’s investigation,” the indictment says.

Loloee and Montoya also asked workers who received back payments as a result of the investigations to hand that money back over to Loloee, the indictment says, adding that Loloee and Montoya both made false statements to investigators.

Constituent renews call for Loloee’s resignation

Daniel Savala, executive director for the Del Paso Boulevard Partnership, said the allegations against Loloee listed are “disturbing,” but he wasn’t surprised Friday morning to learn of the indictment.

“I think he should resign,” said Savala, who also lives within Loloee’s district. “I have no doubt the man cares about this area. But in his time in office, he has done nothing for this community.”

Spending another year on the City Council would be a complete disservice to the constituents Loloee was elected to represent, Savala said.

“What for? So we can have a ‘Lame Duck’ council member for a year? What does that do for us,” said Savala whose group represents businesses along the North Sacramento corridor. “Nothing is being done for this community.”

His comments echoed those made by other residents of North Sacramento and activists during a City Council meeting in mid-November.

Savala said the area still has a lot of serious issues to face, including obtaining government funding for businesses to rebound from the lasting effects of the COVID-19 pandemic.

Savala suspects Loloee, however, would be spending most of his time on the council mounting his legal defense to these new allegations, which carry sizable prison time if he’s convicted. That’s where Loloee’s focus should be, Savala said, not staying in office for another year.

Savala said he’s disgusted over the allegations against Loloee and said so are many others in Sacramento’s Latino community who know well the “plight of immigrants” in the United States.

“They are the most vulnerable,” Savala said. “And this what they get? They’re being exploited?”

Indictment alleges COVID-19 relief fraud

The indictment also accuses Loloee of providing false information to obtain COVID-19 relief money, submitting an application stating that his company’s 2020 gross receipts were $3.8 million when they actually were $5.8 million.

Loloee knew that if he submitted his actual gross receipts his company, SMF Global Inc., would be ineligible for relief funds, the indictment says, and he requested more than $1 million from the Small Business Administration. The SBA denied that request.

In May 2021, Loloee submitted an application for another company, Nari Trading Inc., and estimated gross receipts at $5.2 million when prosecutors said he knew they were $7.7 million, according to the indictment.

That application resulted in the government awarding him $1.2 million in funds, the indictment says.

In April 2020, the city of Sacramento also granted Loloee a $25,000 forgivable economic relief loan using coronavirus federal grant money. At the time, Loloee had advanced to a runoff for the Council District 2 seat.

Loloee and his business dealings have been under scrutiny since 2009 over allegations involving violations of child labor and overtime laws.

He also is the subject of an investigation by the state’s Fair Political Practices Commission and has been dogged by questions about whether he lived in his Nogales Street home in the city’s 2nd District or in Granite Bay.

A three-month investigation concluded in October 2022 that Loloee lives in his district home.

Loloee won his council seat in November 2020, defeating incumbent Allen Warren by a margin of about 55% to 44%.

When reached by phone Friday, Warren declined to comment on the indictment directly.

“I want the best for Sacramento,” Warren said. “I hope our city can turn the corner and deal with some of these major challenges we have, like homelessness.”

Loloee campaigned on a theme of bringing more business opportunities and jobs to the 2nd District, and on addressing the city’s homeless crisis.

“If convicted, Loloee and Montoya face a maximum statutory penalty of five years in prison and a $250,000 fine for each count of conspiracy to defraud the Department of Labor, to commit immigration document fraud, and to obstruct justice; up to 10 years in prison and a $250,000 fine for each count of possession of false immigration documents or use of a false immigration document; and up to five years in prison and a $250,000 fine for each count of obstruction of agency proceedings,” U.S. Attorney Phil Talbert’s office said in a statement.

“If convicted of the counts of falsification of records or wire fraud, Loloee faces a maximum statutory penalty of up to 20 years in prison and a $250,000 fine for each count.”

Feds: Loloee lives in Granite Bay

Loloee also has been under scrutiny since The Sacramento Bee in June 2021 reported he apparently did not live in the district, but instead in his wife’s $1.4 million Granite Bay house, where he was virtually sworn into council in 2020, then lied about it. He has maintained he lives in a Hagginwood house within his district with his employees — where 911 calls for guns and parties are frequent, and over a dozen vehicles and a mini excavator are parked, ongoing violations of city code. A city-commissioned outside investigation, which did not include interviews with neighbors, found he did indeed live in the Hagginwood house.

But, according to the indictment and news release by the U.S. Attorney’s Office, Loloee is identified as a resident of the ritzy Placer County enclave. When asked for clarification, a spokeswoman for U.S. Attorney Phil Talbert reiterated what federal investigators asserted.

“As part of the investigation, it was determined that his residence is in Granite Bay,” said spokeswoman Lauren Horwood.

The Bee’s Rosalio Ahumada, Ryan Lillis, Stephen Hobbs, Ishani Desai and Daniel Hunt contributed to this story.