Diamond Bar Man Gets 24-Month Sentence in Money Laundering Scheme

By City News Service

The co-owner of a Los Angeles-area toy wholesaler was sentenced today to 24 months confinement for his part in a scheme to launder millions of "narco dollars" for cross-border drug cartels.

U.S. District Judge R. Gary Klausner ordered Jia "Gary" Hui Zhou to serve 18 months in federal prison, followed by six months in a residential re- entry facility, according to the U.S. Attorney's Office. He was also ordered to pay a $10,000 fine.

At the conclusion of the hearing, 44-year-old Zhou -- co-owner of the Industry-based Woody Toys -- was remanded into custody. Last May, Klausner sentenced Zhou's wife -- Dan "Daisy" Xin Li -- to eight months behind bars, and she is currently serving her sentence of six months home confinement.

As part of their agreements with federal prosecutors, the Diamond Bar couple forfeited $2 million, prosecutors said.

Zhou and Li pleaded guilty in Los Angeles federal court in 2012 to conspiring to structure currency transactions with a United States financial institution to avoid the filing of a Currency Transaction Report.

The charges arise from a type of scheme commonly referred to as a "black market peso exchange." The scheme's purpose is to facilitate "swaps" of dollars owned by cartels in the United States for pesos already in Colombia, by selling the dollars to Colombian businessmen who are seeking to buy United States goods for export.

In a sentencing memo, prosecutors described Woody Toys as the last "spoke in the wheel" that cleaned illicit proceeds and enabled drug trafficking organizations to "convert their dirty dollars into clean pesos."

Zhou caused the structuring of cash deposits worth approximately $3.9 million between 2005 and 2011 without filing the required paperwork with the government, court papers show. During the same period, Woody Toys received approximately $4.9 million in cash at its business without filing the appropriate IRS forms, according to the U.S. Attorney's Office.

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, prosecutors said.

Woody Toys' officials were sentenced in November 2012 to five years of probation after a guilty plea was entered on behalf of the company to charges of conspiracy to launder money involving drug proceeds.

The sentence prohibits the company from receiving payments of more than $2,000 in cash and the business may not receive cash from anyone who is not a customer.

Woody Toys must also report the identity and contact information of all its customers. Finally, the business will be subject to unannounced examinations of its books and records, according to the U.S. Attorney's Office.