Diamond Bar Residents, Industry Business Face Federal Charges

An Industry toy wholesaler, its owners, and the company’s primary bookkeeper pleaded guilty today to federal conspiracy charges.

Woody Toys owners Jia “Gary” Hui Zhou, 43, and his wife, Dan “Daisy” Xin Li, 43, both of Diamond Bar, pleaded guilty to conspiring to structure currency transactions with a U.S. financial institution to avoid the filing of a Currency Transaction Report. They are scheduled to be sentenced Feb. 11.

Kit Yee “Ella” Lam, 52, of Diamond Bar, the business’ primary bookkeeper, pleaded guilty to one count of money laundering conspiracy and is scheduled to be sentenced Nov. 19.

The company’s ownership also pleaded guilty to failing to file a required Internal Revenue Service Form 8300 showing the receipt of more than $10,000 in cash from Woody Toys’ Mexican customers. Sentencing for that is scheduled for Jan. 28.

Department of Justice officials said the group took part in a Black Market Peso Exchange, which enables drug trafficking organizations in Mexico and Colombia to launder proceeds from their drug sales.

The scheme involved foreign toy retailers with Colombian and Mexican pesos using currency brokers to allegedly buy discounted U.S. dollars they used to purchase merchandise from Woody Toys.

According to federal officials, the dollars being “sold” were allegedly proceeds from illegal drug sales that had been deposited in the toy company’s accounts or delivered to the business.

The currency brokers then turned around and transferred the Colombian or Mexican pesos used to buy the discounted dollars back to the drug trafficking organizations, officials said.

Eight people have been charged in the Woody Toys case. Participants are accused of using of “structured” cash deposits in the United States to launder drug trafficking money from organizations based in Mexico and Colombia, federal officials said.

Cash transactions of $10,000 or more must be reported to federal authorities. The indictment alleges that between 2005 and 2011, about $3 million in structured, out-of-state cash was deposited into Woody Toys’ bank accounts. During that same time, Woody Toys took in approximately $3 million in cash without filing required IRS 8300 Forms, officials said.

“Drug trafficking organizations attempted to weave an intricate web involving Woody Toys to conceal the flow of money from the United States to Mexico and Colombia,” said United States Attorney André Birotte Jr. “The Department of Justice and law enforcement partners are ramping up the prosecution of Black Market Peso Exchanges involving companies in the United States.”

All four defendants pleaded guilty before United States District Judge R. Gary Klausner. Zhou and Li each face statutory maximum sentences of five years in federal prison but plea agreements could spell a two-year prison term for Zhou. A deal could also cut Li’s sentence to one year in prison. Judge Klausner had not said if he would accept the binding plea agreements as of last week, DOJ officials said.

As part of their plea deal, the couple agrees to forfeit to the government $2 million in proceeds allegedly derived from the scheme, officials said.

“As this case has demonstrated, drug dealers will go to extreme methods to hide their illegal profits,” said Drug Enforcement Administration Acting Special Agent in Charge Jon S. Goldberg. “DEA will continue to work with our law enforcement partners to ensure those involved in this complex web of drug trafficking are brought to justice.”

Today’s pleas are the latest developments in an investigation conducted by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), IRS-Criminal Investigation, and the multi-agency Southern California Drug Task Force, which is headed by the Drug Enforcement Administration.

Three other defendants charged in this case previously pleaded guilty. Read more on the US Department of Justice website.