Judge Allowed Evidence of Relationship in Fraud Trial

A federal judge will allow evidence of a romantic relationship in the upcoming trial of former employee Karla Montoya.

Updated on Sept. 30, 2026 in Financial Crime

Bold flat-color editorial illustration of a heavy institutional stone facade, representing the gravity of federal legal proceedings. — Judge Troy L. Nunley has ruled that prosecutors may introduce evidence of a romantic relationship in the fraud trial of former employee Karla Montoya. AI Illustration. Upload story photo >

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Should courts allow evidence of personal relationships between defendants and their employees in criminal trials?

Judge Troy L. Nunley has ruled that prosecutors may introduce evidence of a romantic relationship between former Sacramento City Council member Shahriar Loloee and his employee, Karla Montoya. Montoya is the final defendant facing trial for her alleged role in a fraud scheme involving COVID grant money.

Why it matters

Prosecutors argue that the relationship and the provision of rent-free housing are central to proving that Loloee and Montoya acted as co-conspirators in the fraud. The evidence is intended to establish the nature of their professional and personal ties during the period of the alleged crimes.

Shahriar Loloee has pleaded guilty to tax fraud and obtaining over $1.2 million in COVID grants, while Karla Montoya awaits trial on conspiracy and obstruction charges. Loloee and the Shams brothers are scheduled for sentencing on November 19, 2026.

The players

Shahriar Loloee

He is a former Sacramento City Council member who pleaded guilty to tax underreporting and fraudulently obtaining federal COVID grants.

Karla Montoya

She is the final defendant in the fraud case to proceed to trial on charges of conspiracy to defraud the United States and obstruction of agency proceedings.

Troy L. Nunley

He is the federal judge presiding over the case who recently ruled that evidence of a romantic relationship can be introduced at trial.

Mirwais and Ahmad Shams

They are co-defendants who pleaded guilty to filing false tax returns in August 2026.

The details

The prosecution intends to call witnesses to provide first-hand evidence that Montoya lived in a Hagginwood home owned by Loloee without paying rent. This development follows Loloee's January 2024 resignation from the Sacramento City Council and the earlier guilty pleas of Mirwais and Ahmad Shams.

In June 2022, reporting indicated that Montoya lived in a house owned by Loloee.
A criminal indictment was filed against the defendants in 2023.
Shahriar Loloee resigned from the Sacramento City Council in January 2024.
Mirwais and Ahmad Shams pleaded guilty to filing false tax returns in August 2026.
Sentencing for Loloee and the Shams brothers is scheduled for Nov. 19, 2026.

Legal Context

This case follows the investigative and prosecutorial patterns established by the 2020 federal COVID-19 relief fraud enforcement initiatives. It reflects the broader federal effort to hold public officials and business owners accountable for the misuse of pandemic-era grant funding.

The ongoing legal proceedings serve as a reminder of the public scrutiny applied to former local representatives following allegations of financial misconduct. Residents and local businesses can monitor future court filings for updates on the recovery of federal funds.

The takeaway

The court's decision to allow evidence of a personal relationship highlights how prosecutors build conspiracy cases using non-traditional evidence. Establishing these connections is a key component of the legal process in high-profile fraud investigations.