Sacto 9-1-1
April 30, 2013
Third person pleads guilty in scheme to defraud Raley's

The third person charged in a scheme to defraud the Raley's supermarket chain of more than $2.5 million has entered a guilty plea.

Jason Allen Smith, 47, of Foresthill pleaded guilty today in federal court in Sacramento to a conspiracy to commit mail and wire fraud, according to a federal Department of Justice news release.

According to court documents, Smith, a former contract employee, conspired with David John Magana, 46, Raley's former director of advertising, and Martin Stewart Cullenward, 60, of Cool, along with others to defraud the West Sacramento-based supermarket chain. Smith took part in two of Magana's fraud schemes. Magana and Cullenward previously pleaded guilty.

Authorities said the investigation is continuing.

According to the plea agreement, Smith used a company he created legally before the scheme, Advantage Paper Inc., to receive the proceeds from the scheme. He and Magana then began supplying paper -- newsprint for advertising inserts, according to Raley's -- to the supermarket chain at an inflated price. They met from time to time to determine the ultimate amount Raley's would pay for the paper.

The proceeds from the inflated paper purchases were deposited into Advantage Paper's bank accounts and later split with Magana. At times, Smith paid Magana a portion of the fraud proceeds in cash. In other instances, he paid for bills on Magana's behalf.

Some of the paper that Raley's purchased was never used by Raley's. Instead, Magana allowed Smith and Cullenward to sell that paper to third parties for a fraction of the amount paid by Raley's, authorities said. Proceeds from the fraudulent paper sales went to Smith and Cullenward, both of whom paid kickbacks to Magana.

Smith is to be sentenced Sept. 10 by U.S. District Judge John A. Mendez. He faces a maximum sentence of 20 years in prison, a fine of $250,000, or twice the gross gain or loss, whichever is greater.

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