Zumbro Falls ‘Diamond Merchant’ pleads guilty to conspiring to distribute marijuana, money laundering, and transporting stolen gem stones
FOR IMMEDIATE RELEASE
January 31, 2012
MINNEAPOLIS – Earlier today in federal court, Richard Allen Kay, age 39, of Zumbro
Falls, Minnesota, pleaded guilty to conspiring to distribute more than 1,000 kilograms of
marijuana, money laundering, and transporting stolen gem stones. Kay, who did business in
Minnesota as ‘Kay Diamonds,’ pleaded guilty to one count of conspiracy to distribute and
possess with intent to distribute marijuana and one count of conspiracy to engage in the interstate
transportation of stolen goods, along with eleven counts of money laundering. Kay, who was
charged in a superseding indictment on December 5, 2011, entered his plea before United States
District Court Judge Ann D. Montgomery. Kay did not enter into a plea agreement with the U.S.
but, rather, offered a “straight plea” to all thirteen counts in the indictment.
In court, Kay admitted that between January of 1995 and March of 2011, he conspired with
others to distribute and possess with intent to distribute more than 1,000 kilograms of marijuana.
The defendant testified that he specialized in high-quality marijuana, worth about $5,000 per
pound. He also admitted that from 2001 through 2009, he transported stolen merchandise,
specifically, gem stones. To that end, he conspired with an unnamed co-conspirator who was
employed at Sterling Jewelers, Inc., in Ohio, at the time. Sterling is a large distributor of
diamonds, with more than 1,300 stores nationwide. The unnamed co-conspirator had access to
company jewels, and supplied Kay with diamonds and other jewels stolen from the company.
Kay then transported those stolen gem stones to Minnesota. According to the superseding
indictment, Kay made about ten trips between Minnesota and Ohio for that purpose between
2001 and 2009 and transported a total of between 50 to 100 stolen gems.
Kay also admitted in court to eleven separate counts of money laundering. Kay testified that
on three occasions, he conducted financial transactions with banks that involved the proceeds of drug trafficking. Kay also admitted that on eight occasions, he engaged in conduct known as
“structuring.” Banks, merchants, and even post offices are required by law to submit a currency
transaction report to the Secretary of the Treasury when cash transactions exceed certain
amounts, specifically, $10,000 for banks and merchants and $3000 for the post office. Those
requirement are designed to track the flow of cash in the U.S. Kay intentionally conducted
multiple smaller transactions for the purpose of evading the requirements, which is a violation of
Four additional men from southern Minnesota have already pleaded guilty for their roles in
the marijuana distribution conspiracy. All four admitted distributing marijuana as well as helping
Kay hide assets generated from the conspiracy. Yesterday, Jamie Allen Davidson, age 40, of
Rochester, pleaded guilty to one count of conspiracy. Davidson joined the conspiracy in 2005.
On October 28, 2011, Jason Ray Meek, age 37, and Shawn Robert Milliken, age 32, both of
Rochester, pleaded guilty to one count of conspiracy. In their plea agreements, they admitted the
marijuana was transported from other states to Rochester, where it was stored in several
residences and storage units. From there, it was delivered to distributors. Milliken joined the
conspiracy in 2003, and Meek joined in 2000.
On October 21, 2011, Brandon Christopher Lusk, age 37, also of Rochester, pleaded guilty to
one count of conspiracy and one count of conspiracy to commit money laundering. Lusk
admittedly formed a company called Rochester Reliable Rentals, which acquired nine Rochester
properties. Lusk knowingly financed improvements and renovations to those properties with
proceeds of the marijuana conspiracy. Lusk joined the conspiracy in 2005.
For their crimes, the defendants face a potential maximum penalty of life in prison for
conspiracy to distribute marijuana. In addition, Kay faces a potential maximum penalty of five
years in prison for transporting stolen property. He also faces a potential maximum penalty of
ten years on each money laundering count and five years on each structuring count. Judge
Montgomery will determine the sentences at future hearings, not yet scheduled.
The federal government is also seeking forfeiture of hundreds of thousands of dollars worth
of assets it claims were the proceeds of Kay’s illegal activities, including cash, jewelry, a boat, a
luxury automobile, and lakeshore property in Zumbro Falls. Forfeiture is available if property
can be shown to be the result of illegal activity or acquired from the proceeds of illegal activity.
This case was investigated by the U.S. Drug Enforcement Administration, the Internal
Revenue Service-Criminal Investigation Division, the Wabasha County Sheriff’s Office, the
Southeast Minnesota Drug Task Force, Minnesota Bureau of Criminal Apprehension, and U.S.
Postal Inspection Service. The case is being prosecuted by Assistant U.S. Attorneys Julie E.
Allyn and Steven L. Schleicher.
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