4 Convicted in $9-Million Embezzlement Scheme

A government clerk and the sister of state Sen. Diane Watson (D-Los Angeles) were among four people convicted Thursday in a scheme to embezzle $9.5 million from the Department of Defense by issuing a phony federal check.

A federal jury convicted all four on six counts of conspiracy, computer fraud, mail fraud and theft. Three of the four were convicted on an additional count of transfer of stolen funds. The jury deadlocked on an additional perjury charge against Watson’s sister, Barbara Coleman of Los Angeles.

Coleman, 55, allegedly participated in the scheme to help pay off debts from a series of earlier fraudulent real estate transactions, according to Assistant U.S. Atty. William Fahey, who prosecuted the case.

“There’s no indication at all that Diane Watson was involved in either the prior fraudulent real estate transactions or in this $9.5 million,” Fahey said.

Defense Contractors

Government prosecutors presented evidence that the scheme began with Eunice Williams, a computer and customer relations clerk with the Defense Contract Administration Services Region facility in El Segundo, which disburses billions of dollars in government contract money to defense contractors throughout the western United States.

Co-defendant Anderson Belvin, a friend of Williams, learned sometime in late 1986 that Williams had access to large sums of money through her job, and eventually acted as the middleman with the other defendants, Fahey said.

Williams programmed the government computer and inputted information about a company that had been created by Coleman and another defendant, Wallace Medeiros, Fahey said. The computer cut a check in the amount of $9,469,348, which Coleman picked up and sent to Medeiros in Bellingham, Wash.

Medeiros attempted to cash the check on the following Monday. A bank vice president declined to cash it, but did allow Medeiros to deposit it in his account with a three-day hold placed on withdrawal of any funds. Bank officials began making inquiries about the check, and Medeiros was arrested when he came to make a withdrawal two days later.

Coleman, Medeiros and Belvin face a maximum of 35 years in prison and a $1.7-million fine. Williams faces 30 years in prison and a $1.5-million fine. U.S. District Judge Ronald Lew set sentencing for March 28.