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Silicon Valley Shakedown 

A con man feeds on fear and paranoia in the software business

Wednesday, Jan 12 2000
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Page 3 of 4

Barely two weeks later, the phone rang again. This time Yen said that an "IRS boss" in Oakland had found Jou's file, and wanted $15,000 or Jou would be audited. Jou said he would not pay. Yen promised that if Jou paid, the IRS boss would give him a certificate attesting that Jou was "clear" with the agency. A week before Christmas, Jou handed another $15,000 to Yen in the parking lot. But there was no certificate.

Jou grew increasingly frustrated with his situation. Was Yen, whom he still knew only as "Alan," really using the money to pay off the feds? Did Yen even know any government agents? At some point, Yen produced the business card of a federal investigator. Jou called the number on the card, and found it matched the name and agency printed on the card. (Apparently, Yen had picked up the card from a legitimate investigation somewhere.)

Jou was scared. He'd drained his business accounts to pay Yen, and was juggling money to pay his employees. His personal accounts were diminishing, and he didn't know where to turn. Jou was too proud to tell anyone what was going on. And, he wasn't sure where this was all headed. Certainly, as the demands for money continued to drag on, Jou became more suspicious of Yen. But he felt trapped.

When January 1999 came and went without word from Yen, Jou began to think that maybe the situation had finally come to a close. But the phone rang again in early February. This time, Yen's story was that "Internal Affairs" had collected all of the files from the FBI and the IRS and taken them to its San Francisco office. Yen said that the Internal Affairs office wanted a total of $400,000 from all the companies under investigation. Jou's portion of the payoff was supposedly set at $10,000, and if Jou didn't pay, Yen threatened, agents in San Francisco would take action against his business.

In mid-February, Jou handed Alan another $10,000 outside the leasing office of the complex where Jou's office is located. He didn't know what else to do. But by now, Jou had borrowed money from his sister, and was running out of options.

Lawrence Jou met Shawn Leuthold in the mid-1990s when he needed a lawyer for a business transaction. A former Silicon Valley marketing executive, Leuthold now practices several areas of law, primarily in the Chinese community around San Jose.

In March 1999, after Yen had come to him with yet another demand for money, Jou finally decided to confide in Leuthold. By this time, an embarrassed Jou had paid Yen about $90,000. He'd drained both his personal and business accounts and borrowed from relatives. He was tapped out, and no longer knew what, or who, to believe. Jou didn't know whether the scam stopped at Yen, or whether Yen was in fact working for one or more corrupt federal agents.

"By this time, it's clear that this is either a fraud or a very serious problem within the IRS/FBI system," remembers Leuthold. "[In other cases], I've seen frauds practiced within the Chinese community, and have previously taken matters to the FBI. My inclination was to do the same here."

Still, Jou was wary of federal agents. Finally, through a series of negotiations designed to reassure Jou that Yen was not working with federal agents, Leuthold spoke with the U.S. Attorney's Office, which, in turn, cleared a path into the FBI. Degar Yen was working alone. And the tables were about to turn.

When Yen called Jou on March 19, FBI agents were recording Jou's phone calls. With some coaching from the feds, Jou negotiated with Yen to deliver a small payment the following week, and agreed that Yen was to call again soon. (Complicating matters slightly, the conversations between Yen and Jou took place in Mandarin, and had to be translated.)

Yen called back on March 23, and again was recorded. Yen asked Jou for a payment of $5,000, supposedly for IRS agents in San Francisco. Yen also promised to bring Jou his "file" from the government. In a third phone conversation, Yen reluctantly agreed to come to Jou's office park to pick up the money. The trap was set.

On the drizzly afternoon of March 25, Jou prepared to meet with the criminal he knew as "Alan" in the parking lot of the industrial office park where Jou's business is located. FBI agents outfitted Jou with a hidden microphone, and took their places to watch the event. Yen arrived early, and sat in his red Honda, eating lunch.

After a last review, Jou was on. He was about to put his life in the hands of government officials he had never before trusted and once thought corrupt.

Jou walked over to Yen's car and asked him for the promised "file" or "certificate" that would supposedly end Jou's payments. Yen said he'd been unable to get it, but that if Jou turned over the $5,000 they'd discussed, he'd return in two hours with this paperwork. Yen also scolded Jou for being slow to pay. All the other companies involved, he said, paid immediately. Jou argued that he had no more money and handed over only $1,000. Yen counted the money and asked when Jou would have the rest.

A car drove up behind the men, and one occupant called over to Jou, pretending to ask for directions. Methodically, Jou walked toward the new car on the scene. In a few quick moves, FBI undercover agents hid Jou behind their car, and swooped in to arrest Degar Yen.

It was over.

In U.S. District Court in Oakland in August, Degar Yen pleaded guilty to extorting money from Lawrence Jou. He is scheduled for sentencing next month, and could face as much as 20 years in prison.

Meanwhile, most people involved in the case speculate that Jou was probably not Yen's only victim, but rather the only one who came forward. Following Yen's arrest, the FBI even placed advertisements in publications including the Chinese World Journal, notifying other possible victims.

About The Author

Lisa Davis

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