Over $100 million Seized in Fashion District Raids Linked to Mexican Cartel Money Laundering

Over $100 million Seized in Fashion District Raids Linked to Mexican Cartel Money Laundering

AUSTIN, Texas — High fashion. Violent drug cartels. International kidnappings. Hundreds of millions of dollars. It sounds like the outline for a Hollywood movie script, but it played out in real life on Wednesday morning in Los Angeles, as law enforcement officials conducted raids on dozens of businesses in the Fashion District in connection with an elaborate international scheme to launder money for Mexican drug cartels. In all, search warrants were executed at over 70 businesses, as well as the residences of several people involved, nine people were arrested, over $100 million was seized, and indictments were issued in three separate cases with more potentially on the way.

Thom Mrozek, the Public Affairs Officer for the Los Angeles District Office of the United States Attorney’s Office, told Breitbart Texas that the amount of money seized during the raids was so incredible that they still have not yet finished counting . About two-thirds of the funds were bulk ash, and the remainder was in bank accounts that have been frozen and seized. Mrozek said that at the time of Wednesday’s press conference, they had counted up to $65 million, later that day they released a revised number of $75 million, and the current total is over $100 million.

In a statement to the press, Robert E. Dugdale, the Assistant United States Attorney who oversees the Criminal Division in the Central District of California, discussed the far reach of their investigation. “We have targeted money laundering activities in the Fashion District based on a wealth of information that numerous businesses there are engaged in Black Market Peso Exchange schemes,” said Dugdale. “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.  Because Los Angeles is at the forefront of this money laundering activity, law enforcement in Los Angeles is now at the forefront of combating this issue.”

Mrozek also told Breitbart Texas that this week’s raid was conducted by over 1,000 law enforcement agents, some local but mostly federal, who executed the search warrants and arrest warrants nearly simultaneously all over the Fashion District and the residences of those involved. They had worked closely with the FBI, ICE, and the IRS in gathering evidence for the investigation, and had focused on the fashion district for years. “This is the only first round of cases,” stated Mrozek, “We believe there will be more, many more.” When asked about prior cases that were similar to this week’s indictments, Mrozek remarked that they had pursued similar cases against toy manufacturers and other clothing manufacturers in the past, both businesses that are well suited for a BMPE scheme, with goods that can have high monetary value, and ship easily without spoilage.

The heart of these cases is the way drug cartel money was laundered through a complex process called “trade based money laundering,” or what is more commonly referred to as the Black Market Peso Exchange (BMPE), according to Mrozek. He described the BMPE method as a way to launder funds without moving money through the banking system or having to transport large stockpiles of cash across the border. “When you’re talking about millions of dollars [in cash], it takes a lot of space,” explained Mrozek, mentioning the risks of getting seized by authorities if you try to cross the border, or the risk of getting robbed by other criminal organizations. The cartels “don’t put all their eggs in one basket,” Mrozek said, noting that they still engage in transporting bulk cash, but the BMPE schemes are a significant part of their financial structures.

Mrozek explained the background history behind the recent proliferation of BMPE among Mexican cartels. In the 1990s, American authorities documented BMPE being used occasionally by South American drug cartels. According to Mrozek, there has been a “tremendous increase” in the use of BMPE by the Mexican cartels in recent years, shortly after Mexico enacted new laws in 2010 aimed at combating money laundering and other financial activities by the cartels. These laws were similar to laws that were passed decades ago here in the United States, such as reporting requirements for large cash transactions.

The way that BMPE operates is to transfer value internationally by using merchandise like clothing, which Mrozek agreed was ironic, given the dual meaning of the word “launder.” The scheme starts when a Mexican drug cartel sends drugs to the United States for sale. The cartel’s dealers sell the drugs here for cash, American dollars. Someone with the cartel back in Mexico will contact the American manufacturer that has agreed to be their partner and let them know how much cash they will be getting. The cash is delivered to the American manufacturer and then a corresponding amount of merchandise, for example, blue jeans or shoes, is shipped to a Mexican business that is in on the scheme. The Mexican business will sell the blue jeans, shoes, etc. to the public in Mexico, for pesos, and then turn the pesos over to the cartel, minus a percentage that they keep as their cut. Note that the Mexican business does not pay anything for the merchandise — it was bought with the cartel’s cash in America — so the percentage that the cartel allows them to keep is an easy profit.

Key to the scheme is that both the American manufacturers and the Mexican resellers are legitimate businesses that are engaged in their industries. For example, one of the cases involved a Fashion District company called QT Fashion, Inc. that shipped clothing to a Mexico-based business named Maria Ferre S.A. de C.V. as part of a BMPE scheme with the Sinaloa cartel. QT Fashion does business under the names QT Maternity and Andres Fashion, and internet searches show website listings on Amazon and other online shopping portals selling their clothing. “That’s why it’s a smart scheme,” said Mrozek, “You have legitimate businesses that are manufacturing clothing and shipping to other countries,” as part of their regular business practices, making it harder for authorities to detect their illicit activity.

The money laundering network in one of the cases first came to the attention of authorities when the Sinaloa drug cartel kidnapped an American citizen who had been selling drugs for them, but had lost control of 100 kilograms of cocaine that had been seized by law enforcement. The Sinaloa cartel kidnapped him, took him to a ranch in Mexico, and tortured him — he was shot, beaten, waterboarded, and electrocuted, according to various accounts — and then the cartel demanded money from his family for his release. The family contacted law enforcement for help in getting his safe return. The Christian Science Monitor reported that the family paid $140,000 ransom for his release, and that money was laundered using the BMPE, providing information to federal authorities that was part of the investigation that led to this week’s raids.

Breitbart Texas asked Mrozek about the citizenship and immigration status of the defendants, and he replied that it was not readily available, but there were three defendants connected to the Mexican company Maria Ferre and who are still wanted by authorities: 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. Mrozek stated that he believed Munoz and Gamboa were Mexican citizens, and Estrada had dual U.S.-Mexican citizenship.

Breitbart Texas is continuing to monitor this story.

Follow Sarah Rumpf on Twitter at @rumpfshaker.

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