Mexican Toy Dealer Pleads Guilty in Drug Money Laundering Case

LOS ANGELES - A Mexican businessman has plead guilty in federal court to conspiring with the owners of a Los Angeles area toy wholesaler to launder thousands of narco dollars for drug trafficking organizations in Mexico. Luis Ernesto Flores Rivera, 54, of Guadalajara, Mexico, faces up to 20 years in prison after pleading guilty to one count of conspiring to launder financial instruments. As a result of todays guilty plea, Flores becomes the first defendant to be convicted in Los Angeles on money laundering charges arising from this type of scheme, which is commonly referred to as a black market peso exchange. Flores was among eight defendants, including Woody Toys in the City of Industry, indicted in April for allegedly using structured cash deposits in the United States to launder illicit proceeds generated by drug trafficking organizations based in Mexico and Colombia. A structured deposit is less than $10,000 and is designed to avoid laws that require any cash transaction of at least $10,000 to be reported to federal authorities. According to his plea agreement, between 2008 and 2011, Flores conspired with Woody Toys to launder between $70,000 and $120,000. As part of the money laundering scheme, the indictment in the case alleges that foreign toy retailers in Colombia and Mexico would contact currency brokers to buy discounted U.S. dollars, which they would use to purchase merchandise from Woody Toys. The dollars being sold were allegedly proceeds from illegal drug sales that had been deposited in the toy companys accounts or had been delivered to the business in the form of bulk cash. To complete the circle, the Colombian and Mexican pesos used by the foreign toy retailers to purchase the discounted U.S. dollars were remitted by currency brokers to drug trafficking organizations. According to the indictment in this case, Woody Toys took in approximately $3 million in out-of-state cash between 2005 and December 2011 without filing the required paper work with the government. During that same time, Bank of America records show that another $3 million in out-of-state cash was deposited into Woody Toys accounts at the financial institution. Flores pleaded guilty before United States District Judge R. Gary Klausner, who is scheduled to sentence the defendant on October 15. As a result of his guilty plea, Flores faces a statutory maximum sentence of 20 years in federal prison. In addition to Woody Toys and Flores, the other defendants charged in the case include the owners of Woody Toys Jia Gary Hui Zhou, 43, and Dan Daisy Xin Li, 43 three of the companys employees, and another Mexico-based toy dealer (see: www.justice.gov/dea/pubs/states/newsrel/2012/la041612a.html). The remaining seven defendants are scheduled to go on trial on October 16 before Judge Klausner. The probe targeting Woody Toys began in November 2010 based on evidence uncovered during a similar investigation into another Los Angeles area toy wholesaler, Angel Toys. Several former employees of Angel Toys subsequently went to work for Woody Toys. Investigators say the black market peso exchange benefits criminal organizations by giving them a means to launder illicit proceeds using international trade. The system also gives foreign retailers access to discounted U.S. currency, which enables the foreign retailers to avoid steep exchange rates and other fees. And, for the U.S. based company, the scheme is a way to substantially increase sales volume.