4/18/2022
UNITED STATES OF AMERICA, Plaintiff,
v.
NICHOLAS GARDNER, Defendant.
No. CR 2:22-cr-00147-SVW
For additional context, see Nicholas Gardner’s LinkedIn profile.
TRACY L. WILKINSON
United States Attorney
SCOTT M. GARRINGER
Assistant United States Attorney
Chief, Criminal Division
ALEXANDER B. SCHWAB (Cal. Bar No. 283421)
CAROLYN S. SMALL (Cal. Bar No. 304938)
Assistant United States Attorneys
Major Frauds Section
1100 United States Courthouse
312 North Spring Street
Los Angeles, California 90012
Telephone: (213) 894-1259/2041
Facsimile: (213) 894-0141
E-mail: alexander.schwab@usdoj.gov
carolyn.small@usdoj.gov
Attorneys for Plaintiff
UNITED STATES OF AMERICA
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA 4/18/2022
UNITED STATES OF AMERICA, Plaintiff,
v.
NICHOLAS GARDNER, Defendant.
No. CR 2:22-cr-00147-SVW
PLEA AGREEMENT FOR DEFENDANT NICHOLAS GARDNER
1. This constitutes the plea agreement between defendant NICHOLAS GARDNER ("defendant") and the United States Attorney's Office for the Central District of California (the "USAO") in the investigation of alleged illegal kickbacks being provided by suppliers to executives of HCT Packaging, Inc. and the failure to file Reports of Foreign Bank and Financial Accounts. This agreement is limited to the USAO and cannot bind any other federal, state, local, or foreign prosecuting, enforcement, administrative, or regulatory authority.
Defendant admits that defendant is, in fact, guilty of the offense to which defendant is agreeing to plead guilty. Defendant and the USAO agree to the statement of facts provided below and agree that this statement of facts is sufficient to support a plea of guilty to the charge described in this agreement and to establish the Sentencing Guidelines factors set forth in paragraph 15 below but is not meant to be a complete recitation of all facts relevant to the underlying criminal conduct or all facts known to either party that relate to that conduct.
Between 2003 and January 2017, defendant worked as the Vice President of Sales and later Executive Vice President for HCT Packaging, Inc. (“HCT”), a New Jersey corporation headquartered in Santa Monica, California, where defendant was based during all relevant times. HCT is a subsidiary of HCT Group Holdings Ltd. (“HCT Group”), a Hong Kong corporation that also owns subsidiaries in Asia and the United Kingdom. HCT’s business involved overseeing the design, engineering, manufacturing, and logistics of cosmetics components, such as compacts and blush applicators, for clients in the cosmetics industry. Defendant’s responsibilities included, among other things, interfacing with HCT customers and suppliers in the United States and in Asia and directing orders from HCT customers to particular HCT suppliers. Beginning in 2010, and continuing through at least 2016, defendant began to accept supplemental income from HCT suppliers (the “supplemental income”), including Fortune Packaging, a manufacturer located in China. In an effort to conceal the supplemental income from officials in the United States, defendant opened a foreign bank account in his name with HSBC in Hong Kong (the “Hong Kong HSBC account”) by visiting an HSBC branch in Hong Kong with his project manager and HCT subordinate, Derrick Chang. Defendant then caused the HCT suppliers to deposit the supplemental income into the Hong Kong HSBC account so as to insulate the supplemental income from detection by U.S. officials.
During calendar year 2015, defendant had a financial interest in, and signature and other authority over, the Hong Kong HSBC account, which held an aggregate value of more than $10,000 during 2015. For example, on December 30, 2015, the Hong Kong HSBC account held a balance of approximately $1,201,743. As defendant then knew, he was required to file, with the Department of Treasury, a Report of Foreign Bank and Financial Accounts (“FBAR”) for the 2015 calendar year relating to the Hong Kong HSBC account, yet he willfully failed to do so in an attempt to avoid disclosure of the supplemental income. He instead filed an FBAR for the 2015 calendar year on June 17, 2016, in which he willfully failed to report the Hong Kong HSBC account.
In a further attempt to avoid disclosure of the supplemental income, defendant instructed a family member in the United Kingdom to structure recurring ATM cash withdrawals out of his HSBC accounts. Defendant also created a Hong Kong business entity called “Cognisant Limited,” which he used to create invoices addressed to Fortune Packaging for services purportedly rendered in exchange for the supplemental income. Between 2011 and 2015, defendant received supplemental income into the Hong Kong HSBC account of approximately $5,263,321, which he failed to report to the United States Internal Revenue Service, as he knew he was required to do.
18. Defendant understands that by pleading guilty, defendant gives up the following trial rights with respect to count two:
19. Having been fully advised by defendant’s attorney regarding application of the statute of limitations to the offense to which defendant is pleading guilty, defendant hereby knowingly, voluntarily, and intelligently waives, relinquishes, and gives up: (a) any right that defendant might have not to be prosecuted for the offense to which defendant is pleading guilty because of the expiration of the statute of limitations for that offense prior to the filing of the information alleging that offense; and (b) any defense, claim, or argument defendant could raise or assert that prosecution of the offense to which defendant is pleading guilty is barred by the expiration of the applicable statute of limitations, pre-indictment delay, or any speedy trial violation.
20. Defendant understands that, with the exception of an appeal based on a claim that defendant’s guilty plea was involuntary, by pleading guilty defendant is waiving and giving up any right to appeal defendant’s conviction on the offense to which defendant is pleading guilty. Defendant understands that this waiver includes, but is not limited to, arguments that the statute to which defendant is pleading guilty is unconstitutional, and any and all claims that the statement of facts provided herein is insufficient to support defendant’s plea of guilty.
21. Defendant gives up the right to appeal all of the following: (a) the procedures and calculations used to determine and impose any portion of the sentence; (b) the term of imprisonment imposed by the Court, provided it is no more than 60 months; (c) the fine imposed by the Court, provided it is within the statutory maximum; (d) to the extent permitted by law, the constitutionality or legality of defendant’s sentence, provided it is within the statutory maximum; (e) the amount and terms of any restitution order; (f) the term of probation or supervised release imposed by the Court, provided it is within the statutory maximum; and (g) any of the following conditions of probation or supervised release imposed by the Court: the conditions set forth in Second Amended General Order 20-04 of this Court; the drug testing conditions mandated by 18 U.S.C. §§ 3563(a)(5) and 3583(d); and the alcohol and drug use conditions authorized by 18 U.S.C. § 3563(b)(7).
22. Defendant also gives up any right to bring a post-conviction collateral attack on the conviction or sentence, including any order of restitution, except a post-conviction collateral attack based on a claim of ineffective assistance of counsel or an explicitly retroactive change in the applicable Sentencing Guidelines, sentencing statutes, or statute of conviction. Defendant understands that this waiver includes, but is not limited to, arguments that the statute to which defendant is pleading guilty is unconstitutional, that newly discovered evidence purportedly supports defendant’s innocence, and any and all claims that the statement of facts provided herein is insufficient to support defendant’s plea of guilty.
23. The USAO agrees that, provided all portions of the sentence are within the statutory maximum specified above, the USAO gives up its right to appeal any portion of the sentence, with the exception that the USAO reserves the right to appeal the amount of restitution ordered.
24. Defendant agrees that if, after entering a guilty plea pursuant to this agreement, defendant seeks to withdraw and succeeds in withdrawing defendant’s guilty plea on any basis other than a claim and finding that entry into this plea agreement was involuntary, then: (a) the USAO will be relieved of all of its obligations under this agreement; and (b) should the USAO choose to pursue any charge that was either dismissed or not filed as a result of this agreement, then: (i) any applicable statute of limitations will be tolled between the date of defendant’s signing of this agreement and the filing commencing any such action; and
(ii) defendant waives and gives up all defenses based on the statute of limitations, any claim of pre-indictment delay, or any speedy trial claim with respect to any such action, except to the extent that such defenses existed as of the date of defendant’s signing this agreement.
25. Defendant agrees that if the count of conviction is vacated, reversed, or set aside, both the USAO and defendant will be released from all their obligations under this agreement.
26. This agreement is effective upon signature and execution of all required certifications by defendant, defendant’s counsel, and an Assistant United States Attorney.
27. Defendant agrees that if defendant, at any time after the effective date of this agreement, knowingly violates or fails to perform any of defendant’s obligations under this agreement (“a breach”), the USAO may declare this agreement breached. All of defendant’s obligations are material, a single breach of this agreement is sufficient for the USAO to declare a breach, and defendant shall not be deemed to have cured a breach without the express agreement of the USAO in writing. If the USAO declares this agreement breached, and the Court finds such a breach to have occurred, then: (a) if defendant has previously entered a guilty plea pursuant to this agreement, defendant will not be able to withdraw the guilty plea; and (b) the USAO will be relieved of all its obligations under this agreement.
28. Following the Court’s finding of a knowing breach of this agreement by defendant, should the USAO choose to pursue any charge that was either dismissed or not filed as a result of this agreement, then:
29. Defendant understands that the Court and the United States Probation and Pretrial Services Office are not parties to this agreement and need not accept any of the USAO’s sentencing recommendations or the parties’ agreements to facts or sentencing factors.
30. Defendant understands that both defendant and the USAO are free to: (a) supplement the facts by supplying relevant information to the United States Probation and Pretrial Services Office and the Court; (b) correct any and all factual misstatements relating to the Court’s Sentencing Guidelines calculations and determination of sentence; and (c) argue on appeal and collateral review that the Court’s Sentencing Guidelines calculations and the sentence it chooses to impose are not error, although each party agrees to maintain its view that the calculations in paragraph 15 are consistent with the facts of this case. While this paragraph permits both the USAO and defendant to submit full and complete factual information to the United States Probation and Pretrial Services Office and the Court, even if that factual information may be viewed as inconsistent with the facts agreed to in this agreement, this paragraph does not affect defendant’s and the USAO’s obligations not to contest the facts agreed to in this agreement.
31. Defendant understands that even if the Court ignores any sentencing recommendation, finds facts or reaches conclusions different from those agreed to, and/or imposes any sentence up to the maximum established by statute, defendant cannot, for that reason, withdraw defendant’s guilty plea, and defendant will remain bound to fulfill all defendant’s obligations under this agreement. Defendant understands that no one -- not the prosecutor, defendant’s attorney, or the Court -- can make a binding prediction or promise regarding the sentence defendant will receive, except that it will be within the statutory maximum.
32. Defendant understands that, except as set forth herein, there are no promises, understandings, or agreements between the USAO and defendant or defendant’s attorney, and that no additional promises, understanding, or agreement may be entered into unless in a writing signed by all parties or on the record in court.
See signed certifications in PDF.
UNITED STATES OF AMERICA, Plaintiff,
v. NICHOLAS GARDNER, Defendant.
CR No. INFORMATION
[18 U.S.C. § 1349: Conspiracy to Commit Wire Fraud Involving Deprivation of Honest Services; 31 U.S.C. §§ 5314, 5322(a), (b), 31 C.F.R. §§ 1010.350, 1010.306, 1010.840: Willful Failure to File Report of Foreign Bank and Financial Accounts; 18 U.S.C.
§ 981(a)(1)(C), 28 U.S.C. § 2461(c): Criminal Forfeiture] EXHIBIT A
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA
The United States Attorney charges:
COUNT ONE
[18 U.S.C. § 1349]
1. INTRODUCTORY ALLEGATIONS
At times relevant to this Information:
1. Defendant NICHOLAS GARDNER and co-conspirator Derrick Yishin Chang were residents of Los Angeles County.
1. HCT Packaging, Inc. (“HCT”), was a New Jersey corporation headquartered in Santa Monica, California. HCT was a subsidiary of HCT Group Holdings Ltd. (“HCT Group”), a Hong Kong corporation that had subsidiaries in Asia and the United Kingdom. HCT’s business involved overseeing the design, engineering, manufacturing, and logistics of cosmetics components, such as compacts and blush applicators, for customers in the cosmetics industry.
2. Defendant GARDNER was employed by HCT from in or about 2003 until in or about January 2017. In or about April 2009, defendant GARDNER was promoted to Executive Vice President of Sales for HCT in which capacity he reported directly to the Chief Executive Officer and owed a fiduciary duty to HCT.
3. Co-conspirator Chang was employed by HCT from in or around 2007 until in or around January 2017. For the majority of co-conspirator Chang’s tenure with HCT, he worked as a project manager reporting directly to defendant GARDNER. At the time co-conspirator Chang’s employment with HCT ended, co-conspirator Chang held the position of Senior Director of Development and Manufacturing.
4. Defendant GARDNER and co-conspirator Chang’s job responsibilities included selecting manufacturers to supply HCT product components. HCT policy prohibited employees from accepting “money or benefits of any kind for any advice or services [they] may provide to a supplier in connection with its business with the corporation.”
5. HCT oversaw the manufacturing of cosmetics components requested by its customers. HCT submitted design specifications for a requested component to prospective manufacturers together with a request for a price quote. In selecting a manufacturer, HCT relied on factors such as manufacturing capacity, capability, and HCT’s access to the manufacturer, in addition to the quoted price. Because of these considerations, HCT preferred manufacturers that were owned or controlled by HCT Group. HCT required employees involved in the selection of manufacturers to obtain price quotes from at least two separate prospective manufacturers at least one of which was an HCT-controlled or owned factory.
6. Manufacturers generally issued invoices to HCT, which HCT often paid via international wire transfers. HCT maintained an account at HSBC Bank USA, N.A. in New Jersey (the “HCT HSBC Account”) for this purpose.
B. OBJECT OF THE CONSPIRACY
1. Beginning no later than on or about September 20, 2010, and continuing until at least in or about April 2017, in Los Angeles County, within the Central District of California, and elsewhere, defendant GARDNER conspired with co-conspirator Chang and others to commit the crime of wire fraud involving deprivation of honest services, in violation of Title 18, United States Code, Sections 1343 and 1346.
C. MANNER AND MEANS OF THE CONSPIRACY
1. The object of the conspiracy was carried out, and was to be carried out, in substance, as follows:
1. Instead of selecting manufacturers based on criteria that would advance HCT’s interests, and contrary to HCT’s stated policies, defendant GARDNER and co-conspirator Chang would cause HCT to award manufacturing contracts to companies (the “kickback-paying companies”) that, in turn, would pay kickbacks to defendant GARDNER and co-conspirator Chang in exchange for receiving those contracts. The kickback-paying companies included actual manufacturers, such as Fortune Plastic Packaging (Huizhou) Co., which was based in China (“Fortune”), as well as companies that posed as manufacturers but that, in fact, outsourced the contracts to other companies that were true manufacturers, such as JC Packaging Co., Ltd., which represented on its invoices that it was based in Taiwan (“JC Packaging”).
2. To conceal their solicitation and receipt of the kickbacks, defendant GARDNER and co-conspirator Chang would instruct the kickback-paying companies to transfer the kickbacks through foreign wire communications to bank accounts defendant GARDNER and co-conspirator Chang would open in foreign countries, including an account at The Hongkong and Shanghai Banking Corporation Limited that defendant GARDNER opened in Hong Kong (the “GARDNER HSBC Account”).
3. To maintain the contracts that resulted in the kickbacks, thereby ensuring the continued payment of the kickbacks, defendant GARDNER and co-conspirator Chang would orchestrate the use of interstate and foreign wire communications to cause invoices to be sent from the kickback-paying companies to HCT and payments to be sent from HCT to the kickback-paying companies.
4. Defendant GARDNER would create business entities, including “Cognisant Limited,” a Hong Kong company, which he would use to issue invoices to the kickback-paying companies. The invoices would purport to be for payments for valid business expenses incurred by the business entities defendant GARDNER had created. In fact, the invoices were not for valid business expenses and were instead used to solicit kickbacks from the kickback-paying companies and to conceal the nature of the kickback payments defendant GARDNER received.
5. To further the conspiracy and to ensure that they received all of the kickback payments generated by the conspiracy, defendant GARDNER and co-conspirator Chang would maintain a ledger titled “Special Items” (the “Special Items Ledger”) that tracked the kickbacks they were owed by the kickback-paying companies and those they had already received. Defendant GARDNER and co-conspirator Chang would also electronically communicate with each other concerning the receipt of kickback payments.
6. To further the conspiracy, defendant GARDNER and co-conspirator Chang would conceal evidence of their conspiracy from HCT by, among other things, failing to disclose and affirmatively denying their financial interests in, among other things, entities and bank accounts used to carry out the scheme, to HCT and its agents and by deleting incriminating files from their HCT-issued digital devices.
COUNT TWO
[31 U.S.C. §§ 5314, 5322(a), 31 C.F.R. §§ 1010.350, 1010.306, 1010.840]
1. INTRODUCTORY ALLEGATIONS
1. At times relevant to this Information:
a. Citizens and residents of the United States who had a financial interest in, or signature or other authority over, one or more financial accounts in a foreign country with an aggregate value of more than $10,000 at any time during a calendar year were required to file with the Department of the Treasury a Report of Foreign Bank and Financial Accounts (“FBAR”), for every such calendar year.
b. Defendant NICHOLAS GARDNER was a resident of the United States.
c. During calendar year 2015: i. Defendant GARDNER had an interest in and signature authority over one or more financial accounts at a bank located in Hong Kong, a foreign country (the “foreign account(s)”), namely, the GARDNER HSBC Account, and ii. The foreign account(s) had an aggregate value in excess of $10,000 at some time during the calendar year.
B. FAILURE TO FILE REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS
11. On or about April 15, 2016, in Los Angeles County, within the Central District of California, and elsewhere, defendant GARDNER knowingly and willfully failed to file with the Department of the Treasury an FBAR disclosing that he had a financial interest in, and signature and other authority over, one or more bank and other financial accounts in a foreign country that had an aggregate value at any time during 2015 of more than $10,000.
FORFEITURE ALLEGATION
[18 U.S.C. § 981(a)(1)(C); 28 U.S.C. § 2461(c)] 12. Pursuant to Rule 32.2 of the Federal Rules of Criminal Procedure, notice is hereby given that the United States of America will seek forfeiture as part of any sentence, pursuant to Title 18, United States Code, Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c), in the event of defendant NICHOLAS GARDNER’s conviction of the offense set forth in Count One of this Information.
13. Defendant GARDNER, if so convicted, shall forfeit to the United States of America the following:
1. All right, title, and interest in any and all property, real or personal, constituting, or derived from, any proceeds traceable to the offenses; and
2. To the extent such property is not available for forfeiture, a sum of money equal to the total value of the property described in subparagraph (a).
14. Pursuant to Title 21, United States Code, Section 853(p), as incorporated by Title 28, United States Code, Section 2461(c), defendant GARDNER, if so convicted, shall forfeit substitute property, up to the value of the property described in the preceding paragraph if, as the result of any act or omission of the defendant, the property described in the preceding paragraph or any portion thereof (a) cannot be located upon the exercise of due diligence; (b) has been transferred, sold to, or deposited with a third party; (c) has been placed beyond the jurisdiction of the court; (d) has been substantially diminished in value; or (e) has been commingled with other property that cannot be divided without difficulty.