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US$65m raid on Los Angeles' garment district in drug cash laundering probe
2014-09-11
Nine arrested in probe of businesses in fashion district, as official says Mexican cartels made city the hub of narco-dollar money laundering
■A police officer with some of the US$65 million in cash seized in Wednesday's raids. Photo: AFP/ICE
US federal agents launched a series of raids in the downtown Los Angeles fashion district and seized an estimated US$65 million in cash and other assets they allege were part of a widespread attempt by Mexican drug cartels to launder narcotics profits.
Nine people were arrested on Wednesday in raids targeting 70 locations, many of them businesses in the fashion district. Those arrested included two members of the Chen family who import clothing from China and are accused of laundering US$75,000 for drug traffickers and federal agents posing as traffickers.
Federal officials said they believe the drug organisations have used numerous businesses in the garment district to convert their vast earnings into pesos, turning Los Angeles into a hub for "trade-based money laundering".
"Los Angeles has become the epicentre of narco-dollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses," Robert Dugdale, the assistant US attorney in charge of federal criminal prosecutions in the region, said.
Wednesday's seizures included piles of cash and money stashed in bank accounts around the world, federal authorities said.
■Robert Dugdale gives details of Wednesday's raids. Photo: AFP
Agents with the FBI and Immigration and Customs Enforcement (ICE) infiltrated several peso brokerages operating in Los Angeles, officials said. The undercover officers delivered bundles of cash, sometimes shrink-wrapped in grocery bags, to stores in the district, even telling business owners the money came from drug trafficking.
The indictments accuse three businesses - Yili Underwear, Gayima Underwear and Pacific Eurotex Corp - of laundering drug trafficking proceeds.
The San Gabriel Valley Tribune reported that the operator of Yili and Gayima, Xilin Chen, 55, was arrested in the raid. Son Chuang Feng Chen, 24, was arrested in New Jersey. His sister, Aixia Chen, was being sought as a fugitive.
The Tribune said the family patriarch faced up to 100 years in prison, while his daughter and son faced terms of 80 and 40 years respectively.
Operations that launder drug money through legitimate trade have soared since Mexico restricted the use of American dollars in 2010, forcing the cartels to convert their dollars to pesos without tipping off authorities.
Black market peso brokers suddenly found themselves in high demand. The brokers contact legitimate Mexican importers who want to buy goods in Los Angeles. If an importer wants to buy US$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.
In the most harrowing scheme detailed in the three indictments released, the Sinaloa cartel allegedly directed ransom money to be delivered to Q. T. Fashion, a maternity wear wholesaler. The ransom involved a drug distributor who had fallen into debt to the cartel when US agents intercepted a shipment of 100kg of cocaine he was responsible for. He was allegedly kidnapped and tortured at a ranch in Sinaloa until he could pay off the debt.
His family and friends delivered at least US$140,000 in bulk cash to the Los Angeles business, according to the indictment.
Q. T. then sent clothes to a retail business in Culiacan, Sinaloa, prosecutors allege.