News and Press Releases

News and Press Releases

Zumbro Falls ‘Diamond Merchant’ sentenced for
conspiring to distribute marijuana, money laundering, and
transporting stolen gem stones

FOR IMMEDIATE RELEASE
June 15, 2012


MINNEAPOLIS – Earlier today in federal court, Richard Allen Kay, age 39, of Zumbro
Falls, Minnesota, was sentenced for 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,’ was sentenced to 200 months in prison on 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. He was also ordered to pay a $500,000 fine to the United States and $300,000
in restitution to Sterling Jewelers. He was immediately taken into custody.

Kay, who was charged in a superseding indictment on December 5, 2011, was sentenced by
United States District Court Judge Ann D. Montgomery. On January 31, 2012, 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.

Following today’s sentencing, Special Agent in Charge Kelly R. Jackson, from the St. Paul
field office of the IRS, said, “IRS–Criminal Investigation is committed to unraveling complex
financial transactions and money laudering schemes where individuals attempt to conceal the
true source of their money. Not only will these criminals go to jail, but the government will seize
illegal proceeds through asset forfeiture. IRS–Criminal Investigation is proud to provide its
financial expertise as we work alongside our law enforcement partners to bring criminals to
justice.”

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 $3,000 for the post office. Those
requirements 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
federal law.

Also today, Judge Montgomery sentenced Jamie Allen Davidson, age 40, of Rochester, to
60 months on one count of conspiracy. He pleaded guilty on January 30, 2012. In his plea
agreement, Davidson admitted joining the conspiracy in 2005, and admitted distributing
marijuana as well as helping Kay hide assets generated from the conspiracy.

Yesterday, Shawn Robert Milliken, age 32, also of Rochester, was sentenced to 50 months
on one count of conspiracy. He pleaded guilty on October 28, 2011. In his plea agreement,
Milliken 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.

On October 28, 2011, Jason Ray Meek, age 37, of Rochester, pleaded guilty to one count of
conspiracy. In his plea agreement, Meek 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. Meek joined the conspiracy in 2000. He is scheduled to be
sentenced on August 15, 2012.

On October 21, 2011, Brandon Christopher Lusk, age 38, 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. He is scheduled to be
sentenced on August 13, 2012.

For their crimes, the defendants face a potential maximum penalty of life in prison for
conspiracy to distribute marijuana.

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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