Black market peso plea involves laundering scheme

A Mexican businessman pleaded guilty Wednesday in federal court to conspiring with the owners of a Los Angeles-area toy wholesaler to launder money for drug trafficking organizations in Mexico.

The businessman, 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 his 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.

“Money laundering is an nefarious practice that plays an integral role in narcotics trafficking,” said U. S. Attorney André Birotte Jr. “Here, Mr. Flores stooped to using children’s merchandise as part of a scheme to hide illegal proceeds – a practice that serves to demonstrate how desperate drug trafficking organizations are to evade law enforcement’s efforts to cut off their flow of money.”

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 company’s 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.

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 company’s employees, and another Mexico-based toy dealer. The remaining seven defendants are scheduled to go on trial Oct. 16.

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