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Chicago Woman Arrested for Selling Fraudulent Identity Documents to Illegal Aliens
A woman was arrested Wednesday, February 13, 2013, on charges she allegedly sold fraudulent identity documents to illegal aliens. These charges resulted from an investigation conducted by U.S. Immigra

L.A. Toy Company Dismantled for Money Laundering, Drug Trade

The co-owners and three employees of a Los Angeles toy company made their initial appearances in federal court Monday, April 16, following their indictment for allegedly orchestrating an elaborate financial scheme to launder millions of dollars for drug trafficking organizations in Mexico and Colombia.

The employees of Woody Toys Inc. were taken into custody the morning of Monday, April 16, capping an 18-month probe by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Internal Revenue Service (IRS) Criminal Investigation, and the multi-agency Southern California Drug Task Force headed by the Drug Enforcement Administration (DEA). Two Mexico-based toy dealers are also charged in the case.

The two-count indictment, unsealed Monday, April 16, accuses the City of Industry toy wholesaler, and seven individual defendants, with using dozens of “structured” cash deposits in the United States to launder illicit proceeds generated by drug trafficking organizations. The indictment also accuses Woody Toys of receiving multiple cash payments of more than $10,000 without filing the required paperwork with the IRS. The case is being prosecuted by the U.S. Attorney for the Central District of California.

“Using a toy company as a front for narcotics proceeds is an insidious practice,” said United States Attorney André Birotte Jr. “I applaud the federal agents who worked long and hard to crack this elaborate money laundering scheme. Their work hits drug traffickers where it hurts – in their wallets and pocketbooks.”

The indictment details how Woody Toys employees allegedly received payments in U.S.
dollars of what one defendant described as “narco-money.” According to the indictment, in some instances the money was deposited in the company’s accounts at banks in Chicago, New York, Laredo and south Florida on behalf of the company’s customers in Mexico and Colombia. Other times, the currency was given directly to Woody Toys’ employees by  couriers. The indictment describes one such money drop in the parking lot of an El Monte fast food restaurant where an unnamed company worker picked up $10,000 wrapped in cellophane. In another example, seized video shot by a company surveillance camera  shows one of Woody Toys’ owners accepting seven bricks of cash from two men who were not toy buyers.

According to court documents, the company’s cash receipt books reveal that between 2005
and December 2011, Woody Toys took in approximately $3 million in out-of-state cash without filing the required IRS forms. Additionally, during that same six-year timeframe, Bank of America (BoA) records indicate another $3 million in out-of-state cash was deposited into Woody Toys’ BoA accounts in structured amounts.

“Drug dealers and toy sellers are unlikely bedfellows, but let’s not kid ourselves, legitimate teddy bear buyers don’t close the sale with stacks of cash in restaurant parking lots,” said Claude Arnold, special agent in charge for HSI Los Angeles. “The reality is, unscrupulous companies that conspire to help the cartels cover their financial tracks are contributing in no small way to the devastation wrought by the international drug trade.”

According to the indictment, as part of the scheme, foreign toy retailers with Colombian
and Mexican pesos would contact currency brokers to buy discounted U.S. dollars to purchase merchandise from Woody Toys. The dollars being “sold” were allegedly proceeds from illegal drug sales that have been deposited in the toy company’s accounts or delivered to the business. Finally, the Colombian or Mexican pesos the currency broker received from the foreign toy retailer are remitted to the drug trafficking organization.

“This investigation revealed that Woody Toys was accepting bulk cash at their business premises allegedly from individuals other than their toy customers,” stated Special Agent in Charge Leslie P. DeMarco of IRS-Criminal Investigation’s Los Angeles Field Office. “Money launderers seeking to introduce illegally-generated funds into the legitimate financial system by structuring their deposits will not be tolerated by the federal
government. IRS-Criminal Investigation is working hard to ensure criminals do not use the United States financial system to legitimize their illegal profits.”

Investigators say the scenario, often referred to as a “black market peso exchange,” benefits all of the participants. Criminal organizations have a means to launder illicit proceeds using international trade; the access to discounted U.S. currency enables foreign retailers to avoid steep exchange rates and other fees, boosting their profit margins; and for the U.S.-based company, the scheme is a way to substantially increase its sales volume.

In addition to the criminal charges, the indictment seeks the forfeiture of more than $3.7 million identified during the investigation as proceeds allegedly derived from the money laundering scheme.

“Today’s announcement makes it clear that DEA will continue to work together with its
federal, state, local and international partners in identifying, targeting and arresting those who distribute drugs in our communities or benefit from the distribution of drugs to our children,” said Briane M. Grey, acting special agent in charge for DEA Los Angeles.

According to the indictment, the defendants’ money laundering activities date back to
2005 and continued until on or about December 2011. Those charged in the case are:

  • Jia “Gary” Hui Zhou, 43, of Diamond Bar, co-owner of Woody Toys;
  • Dan “Daisy” Xin Li, 43, of Diamond Bar, co-owner of Woody Toys;
  • Kit Yee Lam, 51, of Diamond Bar, accountant for Woody Toys;
  • Jazmin Contreras, 33, of Los Angeles, accountant for Woody Toys;
  • Anabel Rufino, 32, of Norwalk, sales manager for Woody Toys;
  • Jose Miguel Yong-Hinojosa, 26, of Guadalajara, Mexico, Woody Toys client; and
  • Luis Ernesto Flores Rivera, 53, of Guadalajara, Mexico, Woody Toys client.

The five toy company employees were taken into custody Monday in the Los Angeles area. Luis Flores was arrested April 1 in Laredo, Texas. He has been arraigned and is expected to be transferred to California by the U.S. Marshals Service. Meanwhile, Jose Yong-Hinojosa was detained by federal agents Saturday night at Los Angeles International Airport  following his arrival on a flight from Mexico.

The multi-agency probe targeting Woody Toys began in November 2010 based on  evidence uncovered during a similar money laundering investigation targeting another Los Angeles-area toy wholesaler, Angel Toys. Angel Toys’ two top executives pleaded guilty to money structuring violations and were sentenced earlier this year to 37 months in prison. Several former employees of Angel Toys subsequently went to work for Woody Toys.

All of the defendants in the Woody Toys case are charged with conspiring to evade
federal reporting requirements involving cash transactions of more than $10,000, a charge that carries a maximum penalty of five years in federal prison. In addition, the company, and defendants Zhou and Flores are charged with conspiring to launder money, which is punishable by up to 20 years in prison.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty.