W. Hollywood Man Admits Pepsi Tampering Scheme : Court: He faces federal charges of making false statements. Investigators say he planned to seek a settlement from the company.

A West Hollywood man who reported finding a syringe in a can of Diet Pepsi--then admitted it was a hoax--was arrested Friday on federal charges of making false statements to authorities.

James Ray Russell, 30, who spent 10 years in the Navy and served in Operation Desert Storm, confessed that he fabricated the product tampering earlier in the week in a scheme to win a settlement from Pepsi that could be “used to help the homeless,” according to an affidavit filed with the charges.

Russell, described in federal court as an A student at a local computer trade school, was the second Southern California resident arrested in two days for allegedly preying on the nationwide Pepsi scare. On Thursday, a 62-year-old Covina woman was charged with lying to authorities about finding a syringe in a can of Crystal Diet Pepsi.

“Clearly I think the government and the FDA would like to send a message that if they commit crimes like this, they’re going to be prosecuted,” said Assistant U.S. Atty. Walter F. Brown Jr., who is handling both cases.

Russell had no comment Friday as he was brought for arraignment before U.S. Magistrate R. J. Groh Jr., who ordered him released on $5,000 bond pending a preliminary hearing July 8.

Russell allegedly bought a can of Diet Pepsi at a Santa Monica Boulevard 7-Eleven on Tuesday night, then staged his a scam at a community meeting about an upcoming gay pride parade and festival in West Hollywood. According to an affidavit filed by Food and Drug Administration Agent Francis W. Allen, he opened the can and showed it to a friend, who exclaimed, “Oh my God, there is a needle in there.”

Russell later told authorities that he planned to sue the PepsiCo. because he was suffering emotionally as a result of his discovery, the affidavit said.

During a follow-up interview with FDA agents on Thursday, however, the Navy veteran admitted finding the syringe on the street while walking to the meeting, then placing it inside his sock. After buying the cola and bringing it to the meeting, “he bent over as if he were scratching his ankle and retrieved the needle . . . (then) placed the Diet Pepsi can in his lap and surreptitiously placed the needle and syringe into the can,” the affidavit said.

Russell told the agents that if he got any damages from Pepsi, “he intended this money to be used to help the homeless children, not for his own use.”

He faces up to five years in prison and a $250,000 fine if convicted.

Brown said Russell was charged with making false statements, rather than product tampering, because “if you put something in your own soda, I don’t know if that amounts to tampering.”

Russell’s friend, Robert Bernhardt, said he was stunned. “I can’t fathom (it)--this is so out of character for James,” he said. For more than a month, Russell had been sleeping on a couch in Bernhardt’s studio apartment after he and a roommate got behind on their rent and lost their apartment.

Bernhardt said Russell was unemployed but hoping to graduate from computer school this fall.

“This is really stupid,” Bernhardt said. “I would have given James more credit than this.”

A spokesman for Christopher Street West, the group planning the two-day parade and festival, said Russell was one of more than 3,000 volunteers who signed up to help.