Ex-Sacramento Councilman Sean Loloee hit with new federal tax, money laundering charges

Former Sacramento City Councilman Sean Loloee and three workers from his supermarket chain were named in a new federal indictment unsealed Friday, with Loloee now accused of filing false tax returns and cheating workers out of pay they were owed.

The superseding indictment names Loloee and his supermarket general manager, Karla Montoya, who were both charged in the original indictment in December and pleaded not guilty then.

The new indictment adds charges against Loloee and two brothers: Mirwais Shams, Viva Supermarket’s controller and financial auditor, and Ahmad “Shah” Shams, the firm’s human resources director.

Loloee faces new charges of conspiracy to defraud the IRS, willful failure to collect or pay overwithheld taxes, three counts of filing a false tax return and three counts of money laundering.

The Shams brothers also face charges of filing false tax documents, and Ahmad Shams faces two counts of perjury for allegedly lying to a federal grand jury.

All four defendants pleaded not guilty Friday to the charges in the new indictment, and all four were permitted to remain out of custody pending trial. The next court date in the case was set for April 29.

The December indictment accused Loloee and Montoya with conspiracy, obstruction of agency proceedings, and possession and use of false immigration documents in a case alleging they hired employees who were using false immigration papers.

The new indictment adds allegations that Loloee, Mirwais Shams and Ahmad Shams manipulated the working hours reported by Viva employees “to lower Loloee’s on-the-books payroll, to lower the expense of overtime, to lower Loloee’s federal payroll tax obligation and to lower Loloee’s labor costs overall.”

The practice occurred “in tens of thousands of instances,” the indictment says, “representing a significant percentage of all punch-clock recorded worker time.”

The indictment charges that Loloee and the two brothers used a system called TimeClock Plus to report hours worked to Heartland payroll.

The time clock system was designed to let employers override the data employees entered into their time clock system, a feature that was supposed to be used to correct time cards if a worker forgot to punch out after a shift or to punch in after a lunch break, the indictment says, but Loloee found a way to use it benefit himself.

“Beginning at least in or about November 2017, M. Shams and S. Shams, working at the direction of Loloee, used the manual override option offered by TimeClock Plus to reduce hours of Viva supermarkets employees, and to delete employees from punch clock records all together,” the new indictment states.

“The shaving down of hours and deleting employees had at least two purposes: (1) to deprive employees of overtime pay they would be entitled to if their true number of hours were reported to Heartland Payroll, thus enriching Loloee, who kept the proceeds of any unpaid overtime; and (2) to deprive the IRS of the payroll tax obligation that Loloee would bear if the true hours were reported to Heartland Payroll.”

The indictment says Loloee also was able “to entirely delete certain employees, typically employees who were also undocumented, from the payroll.”

This allowed Loloee to “avoid scrutiny and any reporting requirements caused by his continued employment of undocumented workers,” the indictment says, and let him avoid paying workers overtime they were owed. The scheme also allowed Loloee “to lower his federal payroll tax obligation,” the indictment says.

The new indictment also charges Loloee with three counts of money laundering fraudulently obtained COVID-19 pandemic relief funds.

U.S. Attorney Phil Talbert’s office said those charges stem from May 2021, when “Loloee fraudulently applied for $2.2 million in COVID-19 relief from the Restaurant Revitalization Fund program (RRF) and received $1.2 million.”

“After receiving the $1.2 million, Loloee initiated the laundering of funds with 10 checks all bearing the same issue date of June 18, 2021, moving the money through multiple accounts that he controlled,” Talbert’s office said. “Loloee completed the laundering with three bank transfers that moved $949,900 into a trust account in the name of one of his family members.”

In April 2020, the city of Sacramento also granted Loloee a $25,000 forgivable economic relief loan using coronavirus federal grant money. At the time, Loloee had advanced to a runoff for the 2nd District Council seat, which he won but resigned from on Jan. 4 of this year, three weeks after the first indictment was handed up.

Loloee’s lawyers previously sought dismissal of much of the original 25-count indictment, arguing that many of the charges stem from years-old allegations and are a “thinly-veiled end-run around the statute of limitations.”