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Toy company accused of laundering drug money

Woody Toys in City of Industry allegedly converted more than $1 million a year into pesos, ICE says. An attorney says the owners made an 'unknowing mistake.'

April 17, 2012|By Victoria Kim, Los Angeles Times
  • A surveillance photo shows bricks of cash changing hands at City of Industry-based Woody Toys Inc.
A surveillance photo shows bricks of cash changing hands at City of Industry-based… (Immigration and Customs…)

They were sellers of pastel-toned huggable plush toys with names like "Baby Frenz Forever" and "Jungle Pals." At the same time, authorities say, they were receiving bricks of U.S. dollars wrapped in cellophane that were drug proceeds to be laundered into clean pesos for drug lords in Mexico and Colombia.

On Monday, authorities announced charges against the City of Industry-based Woody Toys Inc. and seven owners, employees and customers in what marks the second case in two years involving toy exporters allegedly acting as conduits for the drug trade.

Woody Toys was a key player in a sophisticated international financial scheme that converted more than $1 million into pesos each year, according to officials with U.S. Immigration and Customs Enforcement Homeland Security Investigations.

With tighter banking regulations in the U.S. and overseas, drug cartels are increasingly looking for innovative ways to move their lucrative proceeds across borders, and legitimate businesses are lured into illicit schemes in tough economic times, said Claude Arnold, special agent in charge of ICE in Los Angeles.

"This is the way they convert cash into seemingly legitimate income," he said. "They can make all the money in the world, but it doesn't do any good to have cash stacked in a semi somewhere."

In all, the company is accused of laundering about $6 million in suspected drug profits since 2005, according to the indictment.

A woman who answered the phone at Woody Toys on Monday afternoon said the company had no comment.

An attorney representing Dan "Daisy" Xin Li, who owns the company along with husband Jia "Gary" Hui Zhou, said the two owners are immigrants from China who are upstanding, honest people who made an "unknowing mistake." The couple have been cooperating with the government for months, attorney Victor Sherman said.

"This is a case of their lack of understanding of how they were supposed to file paperwork," he said. "They didn't understand the American law, did not understand what was required."

According to investigators, the company received suspected drug proceeds either through in-person deliveries — a hand-off at a McDonald's parking lot and drop-offs at warehouses — or through anonymous bank deposits. Employees "structured" deposits into the company's bank accounts, keeping sums under $10,000 to avoid reporting requirements, authorities allege.

The sums were then credited to accounts of toy dealers in Mexico or Colombia, who in turn made payments through the black market peso exchange to drug trafficking groups. The foreign toy dealers got a discounted exchange rate, the company received a boost in its business and drug traffickers got laundered proceeds that appear to be generated from a legitimate trade.

Others indicted are accountants Kit Yee Lam, 51, and Jazmin Contreras, 33; sales manager Anabel Rufino, 32; and Guadalajara, Mexico-based clients Jose Miguel Yong-Hinojosa, 26, and Luis Ernesto Flores Rivera, 53.

The money laundering charge carries a sentence of up to 20 years in prison, according to ICE.

The owners of Los Angeles-based Angel Toy Corp. were accused in 2010 of receiving duffel bags stuffed with alleged cocaine sales proceeds and laundering them into pesos. They pleaded guilty to charges of "structuring" and in January were sentenced to three years in prison.

Some employees who formerly worked for Angel Toy later went on to work for Woody Toys, authorities said.

victoria.kim@latimes.com

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