Money Laundering in L.A. Fashion District

LOS ANGELES — Hundreds of federal agents raided Fashion District businesses in downtown Los Angeles, arresting nine people and seizing $65 million in a crackdown on what prosecutors called a scheme to launder cash for Mexican drug cartels.

The Sept. 10 raids — part of what federal prosecutors dubbed “Operation Fashion Police” — coincided with the unsealing of three federal indictments, one of which alleged that a Fashion District business was laundering ransom money payments made to secure the release of a U.S. citizen kidnapped and tortured in Mexico by the Sinaloa drug cartel.

Federal prosecutors said other Fashion District stores were being used to launder money from drug traffickers and other offenders in what is known as a “Black Market Peso Exchange” scheme. The garment trade and its nearly 3,000 businesses is the largest manufacturing sector in the area, officials said.

“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 Assistant U.S. Attorney Robert E. Dugdale. “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.”

The cartels’ cash is “the lifeblood of their organization,” Dugdale said.

Prosecutors said three people were arrested in connection with the alleged laundering of ransom money paid to the Sinaloa cartel. According to a federal indictment, a business called QT Fashion accepted bulk amounts of cash and funneled it through 17 other Fashion District businesses at the direction of a Mexico-based business called Maria Ferre S.A. de C.V.

The $140,000 in ransom was paid by relatives of a U.S. citizen who was kidnapped by the Sinaloa cartel after U.S. authorities seized more than 100 kilograms of cocaine the man had been responsible for distributing. The man was taken to a ranch in Mexico, where he was beaten, shot, electrocuted and water- boarded, according to federal prosecutors. The man was released after the ransom was paid and is now back in the U.S., officials said.

Andrew Jong Hack Park, 56, of La Canada Flintridge; Sang Jun Park, 36, of La Crescenta; and Jose Isabel Gomez Arreoloa, 49, of Los Angeles; were arrested in connection with the QT Fashion case, according to prosecutors.

Three other defendants named in the indictment — all of Mexico — remain at large.

Three members of a Temple City family — Xilin Chen, 55; his son, Chuang Feng Chen, 24; and his daughter, Aixia Chen, 28 — were named in a second indictment accusing them of money laundering through Fashion District businesses called Yili Underwear and Gayima Underwear. Xilin Chen and Chuang Chen were both arrested this morning, but Aixia Chen remains at large.

Four people connected to a business called Pacific Eurotex Corp. were named in a third indictment, accusing them of money-laundering. The indictment alleges the defendants used the company as a repository to receive bulk amounts of cash that they knew or believed to be drug money, and laundered the funds.

Arrested in that case were Hersel Nemen, 55, of Beverly Hills, the company’s CFO; Morad Neman, 54, of Westwood, the CEO; Mehran Khalili, 45, of Beverly Hills; and Alma Villalobos, 52, of Arleta. The Nemans are brothers, and Khalili is their brother-in-law, prosecutors said.

In May, reacting to an upsurge in money laundering operations downtown, Homeland Security Investigations conducted an outreach program targeting 160 Fashion District businesses, said HSI Special Agent Claude Arnold.

Two defendants — Neman and Villalobos — attended the symposium, in which the consequences of involvement in the illegal trans-national cash trade were explained, Arnold said.

During the raids, authorities seized $65 million, some in cash and some from around the world, prosecutors said.

Millions of cartel dollars were retrieved from tightly packed banker’s boxes in a Los Angeles condominium, at a mansion in Bel Air, and hidden in the bottom of a pet-food bag, according to Arnold.

Such cash “contributes to the violence, pain and bloodshed,” Arnold said.

As a result of the recent cash loss, the Sinaloa cartel is expected to “change the way it launders money in the future,” said William Bodner, assistant special agent in charge of the Drug Enforcement Administration.

Bodner said regulations put into effect in Mexico in 2010 restricted the amount of U.S. cash that could be deposited in banks spurred an increase in trade-based money laundering.

“This is just the beginning,” Bodner said, addressing his message to businesses in the downtown textiles and wholesale district.

California Attorney General Kamala D. Harris said the two-year

“Operation Fashion Police” has struck at the heart of the district’s dirty money trade, leaving a “huge hole” in the profits of Mexican drug cartels.

To anyone involved in such a criminal enterprise, Harris warned, “we’ll track you down, and hold you accountable — and we’ll take your money.”