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Thursday
Sep112014

Feds seize $65 million, arrest 9 in LA fashion district takedown

Image released by the DOJ on September 10, 2014 A thousand federal agents launched raids across the Los Angeles fashion district Wednesday and seized an estimated $65 million in cash allegedly linked to a money laundering operation for Mexican drug cartels.

Nine people were arrested in raids at 70 downtown locations.

The cartels were allegedly using businesses in the fashion district to convert dollars into Mexican pesos.

“Los Angeles has become the epicenter of narco-dollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses,” according to Robert E. Dugdale of the U.S. Attorneys office in LA.

In addition to the $65 million in cash, federal authorities also siezed bank accounts and other assets worth about $25 million allegedly linked to the cartels.

Mexico restricted the use of U.S. dollars in 2010. According to the LA Times, "black market peso brokers contact legitimate Mexican importers who want to buy goods in Los Angeles. If an importer wants to buy $30,000 worth of shirts, for example, the broker directs a drug contact in the United States to pay the bill to a shirt wholesaler in dollars. The importer in Mexico then pays the broker in pesos, who takes a cut, and pays the rest to a cartel."

One of the three federal indictments released Wednesday alleged that the Sinaloa cartel "directed ransom money to be delivered to Q.T. Fashion Inc., a maternity apparel wholesaler on East 12th Street," the report said.

Three defendants related to Q.T. Fashion were arrested Wedneday morning, the DOJ said. They are Jong Hack Park (aka Andres Park), 56, of La Canada-Flintridge, Sang Jun Park, 36, of La Crescenta, and Jose Isabel Gomez Arreoloa (aka Chabelo), 49, of downtown Los Angeles.

The DOJ alleged that a Sinaloa, Mexico-based business, Maria Ferre S.A. de C.V., was involved in the scheme to launder the ransom money. Three defendants linked to Maria Ferre aren't in custody and are wanted by authorities. They are Luis Ignacio Orozco Munoz (aka Nacho), 50, of Culiacan, Sinaloa, Armando Arturo Chavez Gamboa, 43, of Culiacan, Sinaloa, and Daisy Corrales Estrada, 30, of Culiacan, Sinaloa.

The six individual defendants were charged in a three-count indictment returned under seal by a federal grand jury on June 19. The indictment was unsealed Wednesday. It accuses the defendants of conspiracy to launder money, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business.

If they're convicted of the charges in the indictment, each defendant would face up to 30 years in federal prison.Image courtesy of the DOJ

In a second indictment announced Wednesday related to the LA fashion district, three family members -- Xilin Chen, 55, along with Chuang Feng Chen (aka “Tom”), 24, who is Xilin Chen’s son, and Aixia Chen, 28, Xilin Chen’s daughter -- were charged with conspiring to launder monetary instruments, money laundering, and various immigration offenses.

During Wednesday's sweep, Xilin Chen and Chuang Chen were arrested. Aixia Chen is a fugitive now being sought by authorities, the DOJ said.

The indictment alleged that through the Chens’ businesses -- Yili Underwear and Gayima Underwear -- they received bulk cash from a drug trafficker in Los Angeles and from an undercover agent posing as a drug trafficker.

The Chens allegedly laundered the money for drug trafficking organizations outside of the United States  and “structured” the deposits of the bulk cash they received at their businesses to avoid currency reporting requirements, according to the indictment.

If convicted, Xilin Chen faces up to 100 years in federal prison, Chuang Chen faces up to 40 years, and Aixia Chen could be sentenced to as much as 80 years.

A third case announced Wednesday involved another business in the LA fashion district named Pacific Eurotex, Corp. The company and four individuals connected to it were charged with conspiracy to launder money, conspiring to illegally structure currency transactions to reporting requirements, structuring and failing to report currency transactions over $10,000. 

This Indictment alleged that the defendants used Pacific Eurotex to receive bulk cash they thought was drug money. They laundered it using foreign accounts.

The four individual defendants named in the Pacific Eurotex indictment were arrested Wednesday morning. They are Hersel Neman, 55 of Beverly Hills, the chief financial officer of Pacific Eurotex, his brother Morad Neman, 54, of the Westwood District of Los Angeles, the chief executive officer of Pacific Eurotex, Mehran Khalili, 45, of Beverly Hills, a brother in law of the Nemans, and Alma Villalobos, 52, of Arleta, California.

Pacific Eurotex allegedly received, laundered, and structured $370,000 in bulk cash from an undercover agent delivered to them in four shipments.

"According to the indictment, the defendants laundered money, despite the fact that, on one occasion, some of the bulk currency appeared to be spattered with blood," the DOJ said.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

Reader Comments (1)

These businesses had a bank account somewhere. The article doesnt how much Q.T. Fashion was laundering, but is it possible that the banks identified suspicious activity and reported the business to the feds?
September 11, 2014 | Unregistered CommenterLeo Saraceni
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