SAN JOSE, Calif. (KRON) — A father and son pleaded guilty in federal court for committing mail fraud in connection with a scheme to divert medical equipment owned by Kaiser for their own San Jose-based company.

The U.S. Attorney’s Office for the Northern District of California announced last week that 34-year-old Anthony Montanelli and his father, 63-year-old Steven Montanelli, both of San Ramon, each pleaded guilty to the charges in accordance with separate plea agreements entered by the court.

According to the plea agreements, both men worked as biomedical engineers at Kaiser, responsible for repairing and servicing Kaiser ultrasound systems used at its medical facilities located throughout the Bay Area.

For nearly ten years, both the father and son allegedly used their positions at Kaiser to order new ultrasound parts that were supposed to be used to repair, replace, and maintain Kaiser’s medical equipment, but instead were diverted to their own business, Pacific Coast Imaging (PCI).

They then sold the equipment through PCI for their own profit.

The U.S. Attorney’s Office said the father and son also admitted to “operating their scheme and business, which they did not disclose to Kaiser, while being paid by Kaiser to service Kaiser-owned equipment.”

From February 2010 through April 2018, both men rented storage units to stockpile new, used, and decommissioned Kaiser-owner ultrasound systems and parts.

Some of the Kaiser inventory they ordered through Kaiser became PCI inventory, which they sold and leased to PCI customers.

Both men acknowledged that for years they caused Kaiser’s procurement specialists to process, order, and have mailed to them an unknown number of ultrasound parts which they diverted to PCI.

According to a press release, both men admitted that they recorded parts and systems as decommissioned but instead diverted them to PCI.

In the end, the pair confessed they diverted Kaiser-owned equipment to PCI, operated PCI while employed by Kaiser, and used work hours paid for by Kaiser to operate PCI. 

Kaiser would end up losing a total of $1,500,000.

The conspiracy charge carries a maximum statutory penalty of 20 years in prison and a fine of up to $250,000.