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Department of Justice Logo 

U.S. Department of Justice

United States Attorney
Northern District of California

 

11th Floor, Federal Building
450 Golden Gate Avenue, Box 36055
San Francisco, California  94102

FOR IMMEDIATE RELEASE
 

 

Tel: (415) 436-7200
Fax: (415) 436-7234

 

July 15, 2003

SAN FRANCISCO PLAINTIFF'S LAWYER ARRESTED FOR BILKING
SETTLEMENT FUNDS FROM CLIENTS

VICTIMS INCLUDED DISABLED CHILDREN AND LOW-INCOME TENANTS

Nikolai Tehin, a San Francisco plaintiffs' attorney who was recently suspended from practice by the State Bar, was arrested this morning on charges that he stole and misused more than $2 million in settlement funds belonging to his clients, and then laundered a portion of the stolen funds to pay the mortgage on his Pacific Heights home and finance repairs to his 73-foot yacht.  The arrest and charges were announced today by the U.S. Attorney's Office, Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation Division.  Mr. Tehin's alleged victims include infant children who were disabled as a result of alleged medical malpractice and more than 100 low-income apartment tenants who sought relief from substandard living conditions.

Mr. Tehin, age 56 of San Francisco, California, a prominent plaintiffs' lawyer and the principal partner in the law firm of Tehin + Partners, was charged in a criminal complaint with mail fraud, in violation of 18 U.S.C. §1341, and money laundering, in violation of 18 U.S.C. §1957.  The complaint was filed in San Francisco federal court on July 14, 2003 and was under seal until his arrest.

According to an affidavit filed by an FBI agent in support of the criminal complaint, it is alleged that during 2001 and 2002, Mr. Tehin secretly converted to his own personal use more than $2 million in settlement funds belonging to his clients.  He used this money to fund an extravagant personal lifestyle and to cover the operating expenses of his law firm, Tehin + Partners.  The law firm operated from the 33rd floor of the Bank of America building in San Francisco.

The complaint alleges that Mr. Tehin operated a fraud similar to a Ponzi-scheme.  He used settlement funds received on behalf of one client to pay off other clients whose settlements he had already stolen.  The affidavit also describes one incident in which Mr. Tehin sent a fraudulent billing statement to a client, falsely charging her thousands of dollars for seven expert witnesses who never did any work on the client's case, along with travel expenses unrelated to her case.

According to the affidavit filed with the complaint, Mr. Tehin misappropriated funds in connection with the following cases:

The Vintage Ranch Tenants.  In 2000, Mr. Tehin was retained by Legal Aid of the North Bay to represent a group of over 100 low-income tenants, many of them Latino farm workers in Napa, California, who had sued the owners of their apartment buildings for maintaining sub-standard living conditions.  At the time, this was the largest case in California history brought by tenants against a landlord for failing to keep rental housing in safe and habitable conditions. 

In early 2001, Mr. Tehin settled the Vintage Ranch lawsuit for $2 million.  After attorney's fees and costs, the clients were entitled to approximately $1.3 million.

According to the complaint, however, within just two months of receiving the final settlement check in the case, Mr. Tehin had actually stolen and spent the entire $2 million on unauthorized personal and business expenses before any of the Vintage Ranch plaintiffs received any of their settlement funds. 

In the months following the settlement, Mr. Tehin's clients complained repeatedly about how long it was taking for them to be paid.  Tensions were so high that a dozen of the unpaid clients marched in front of Mr. Tehin's office building in San Francisco's Financial District holding placards with slogans such as: "Taking Money from the Poor, Shame on You Nick Tehin and Pam Stevens" and "Bank Records Don't Lie, You Took Our Client Trust Fund."  His clients elicited the help of Legal Aid lawyers.  According to the complaint, Mr. Tehin was quoted as dismissing the Legal Aid lawyers as "goody two-shoes who were freaking out over nothing." 

When the Vintage Ranch clients did ultimately receive their money, they were paid not with their own settlement funds, but with funds belonging to other clients of Tehin + Partners. 

Medical Malpractice Cases.  The complaint also describes two different cases during 2002 in which Mr. Tehin allegedly stole hundreds of thousands of dollars in settlement funds he had secured on behalf of disabled children he was representing.  The victims in both of these cases remain unpaid to this day.

One case involved a $250,000 settlement obtained on behalf of a newborn who sustained severe neurological injuries during the delivery as the result of alleged negligence by physicians and hospital staff.  A second case involved a $1 million settlement Mr. Tehin had secured on behalf of two infant children with cystic fibrosis.  According to the criminal complaint, Mr. Tehin deposited and stole the entire $1 million without even telling the parents of his clients that he had received settlement funds in their case. 

Money Laundering.  Mr. Tehin is also charged with laundering funds that he stole from his clients.  Specifically, the complaint charges that, in June 2001, Mr. Tehin used approximately $237,000 in funds he had stolen from the Vintage Ranch clients to make a single mortgage payment on his six-bedroom, seven-bathroom mansion in the Pacific Heights area of San Francisco.

Maximum PenaltiesThe maximum statutory penalty for a violation of 18 U.S.C. §1341 (mail fraud) is five years in prison and a fine equal to twice the amount of the defendant's gain from the offense, plus restitution to the victims.  The maximum penalty for a violation of 18 U.S.C. §1957 (money laundering) is 10 years in prison and a fine equal to twice the amount of laundered funds, plus restitution.  However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court.  A criminal complaint simply contains allegations against an individual and, as with all defendants, Mr. Tehin must be presumed innocent unless and until convicted.

Mr. Tehin was arrested by agents this morning as he left his Pacific Heights home.  He will make an initial appearance in federal court this afternoon.  A preliminary hearing or arraignment date has not yet been scheduled.  In a separate proceeding, the State Bar of California brought a case against Mr. Tehin and his wife, also a lawyer at the firm, to suspend them from the practice of law in California.  Permanent disbarment proceedings are pending.

U.S. Attorney Kevin V. Ryan said, "Lawyers owe a duty of loyalty to their clients. Nikolai Tehin is accused not just of breaching that duty in the most egregious way, but of violating federal law to enrich himself at the expense of the people who trusted him.  The U.S. Attorney's Office will prosecute anyone–including a lawyer–who abuses his position of trust to illegally benefit himself."  In an unrelated case, the U.S. Attorney's Office announced the indictment yesterday of the general counsel of U.S. Wireless for securities fraud violations.

The Special Agent in Charge of the FBI's San Francisco field office, Mark Mershon, said, "This investigation illustrates the FBI's continued commitment to the pursuit of complex and sophisticated fraud schemes.  The crimes alleged in this case are especially serious given that a prominent San Francisco attorney abused the judicial system to fund a lavish personal lifestyle with settlement funds he stole from his clients, many of whom were chronically sick or disabled children."

IRS Special Agent in Charge Victor Song said, "My sympathies go to the victims of this alleged scheme.  The IRS will always dedicate resources to these types of white collar criminal investigations."

The prosecution is the result of an investigation by agents of the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Division.  Miles F. Ehrlich is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Legal Tech Lori Lucchetti. 

A copy of this press release may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.  Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on http://pacer.cand.uscourts/gov.

All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415) 436-7181.

All press inquiries to the FBI should be directed to Special Agent LaRae Quy at (415)553-7450.

All press inquiries to the IRS should be directed to Public Information Officer Mark Lessler at (510)637-4637.

Matt Jacobs' Signature