Warrant Served at
MODESTO – Drug Enforcement Administration (“DEA”) Assistant Special Agent in Charge Gordon Taylor, Modesto Police Department Chief Roy W. Wasden, United States Attorney McGregor W. Scott and Internal Revenue Service (“IRS”) Special Agent in Charge Roger L. Wirth, announced the culmination of a 15-month investigation into the illegal trafficking of marijuana from California Healthcare Collective (“CHC”) in Modesto, the largest marijuana distribution center in the Central Valley of California. Earlier this morning agents served federal search warrants at CHC and seven homes in the Modesto area, resulting in the seizure of computer equipment, two loaded handguns, approximately $16,000 from the residences and an unknown amount of U.S. Currency from CHC, approximately 60 lbs processed marijuana, approximately 34 lbs of marijuana laced baked goods, a 2006 Dodge Ram Truck, and a 2007 Mercedes. CHC proprietors Ricardo Ruiz MONTES, 26, and Luke Anthony SCARMAZZO, 26, both of Modesto, were arrested this morning for conspiracy to distribute over 450 kilograms of marijuana from CHC, as alleged in the affidavit. Additionally, eight seizure warrants were served on the bank accounts of MONTES, SCARMAZZO and the CHC. Also arrested were CHC employees Jose Francisco MALAGON, 33, and Antonio MALAGON, 28, both of Modesto, in connection with the investigation.
“We’ve pulled the mask off a multi-million dollar illegal drug enterprise that tried to hide behind California “medical marijuana” laws. Now that the mask is off, people can see these crooks for what they really are--- nothing less than common drug dealers,” said DEA Assistant Special Agent in Charge Gordon Taylor. Taylor added, “The DEA will continue to enforce federal drug laws which prohibit the cultivation and sale of marijuana.”
This investigation was initiated in June 2005 by the Modesto Police Department and DEA’s participation in the case was subsequently requested. According to the affidavit in support of the criminal complaint, MONTES is identified as the Chief Executive Officer (“CEO”) and SCARMAZZO is identified as the Chief Financial Officer (“CFO”) of the CHC. Throughout the investigation law enforcement learned that an individual wanting to purchase marijuana at CHC would encounter “security” personnel at the front door, at which time the individual presented their “documents” and was occasionally “patted” down before being allowed to proceed into the CHC. After passing through security the individual would then come into contact with another CHC employee, who would again look at the “documents”. Finally, the employee would direct the individual to a back room where various types of marijuana were displayed, prices were listed and the transaction would take place. On more than one occasion law enforcement observed almost 50 customers per hour. Taking into consideration CHC’s operating hours, the average would be more than 400 customers per day.
On July 21, 2006, in connection with this investigation officers served two state authorized search warrants on the 2600 block on Beatrice Lane, Modesto. As a result of those searches law enforcement seized an indoor marijuana grow, approximately 39 marijuana plants, 5 ½ lbs packaged marijuana, 14.9 grams cocaine, 3 handguns, 2 of which were stolen, and approximately $93,000 in cash. Furthermore, pay stubs were seized indicating that the MALAGON’s, acting as security personnel at the CHC, were being paid $120-$150 per hour. Agents learned that between October 2004 and June 2006 the proprietors of CHC claimed in excess of $4,500,000 from the sales of marijuana.
“Proposition 215 never allowed for large marijuana distribution centers to sell marijuana for profit. Marijuana distribution centers are in clear violation of federal law and will not be tolerated in Modesto,” stated Chief Wasden
“The fact that sale of marijuana is prohibited under federal law is hardly a secret. These defendants ran a wide scale--and highly profitable--narcotics trafficking operation, that was not just illegal under federal law, but California's Proposition 215 as well. We will not turn a blind eye to our responsibility to enforce federal law when warranted,” said United States Attorney McGregor W. Scott.
According to IRS Special Agent in Charge Roger L. Wirth, “We are proud to be part of this joint law enforcement effort against an organization we believe is in fact a criminal enterprise, motivated by greed and profit. IRS CI can bring our unique financial investigative skills to such investigations to help identify these illicit proceeds and pursue money laundering violations as appropriate.”
Federal search warrants were served this morning at the following locations:
MONTES was arrested at the residence located at 2600 Beatrice Lane, SCARMAZZO was apprehended at his residence on Woolston Way, while J. MALAGON and A. MALAGON were arrested by Modesto Police Department as they were departing Beatrice Lane, all arrests occurred without incident. MONTES, SCARMAZZO, J. MALAGON and A. MALAGON are scheduled to make their initial appearance in Federal Court in Fresno, CA on September 29, 2006. All charged with violations of Title 21 United States Code (“USC”), Section 846-Conspiracy to Distribute Marijuana and Section 841(a)(1)-Distribution of Marijuana. The maximum statutory penalty for Conspiracy to Distribute Marijuana is a minimum mandatory term of imprisonment of ten years, and a maximum term of imprisonment of life; a $4 million dollar fine. The maximum statutory penalty for Distribution of Marijuana is a minimum mandatory term of imprisonment of ten years, and a maximum term of imprisonment of life; a $4 million dollar fine.
This case is the product of an extensive joint investigation conducted by the U.S. Drug Enforcement Administration, Modesto Police Department, Modesto Narcotics Enforcement Team (“MNET”), Stanislaus Drug Enforcement Agency (“SDEA”), and the Internal Revenue Service.
This case is being prosecuted by the United States Attorney’s Office, Eastern District of California, in Fresno. The charges are only allegations and the defendants are presumed innocent unless proven guilty beyond a reasonable doubt.