Manhattan U.S. Attorney Announces Charges Against 37 Members Of Nationwide Marijuana And Cigarette Distribution Conspiracy
Conspiracy Involved Manufacture And Distribution Of Marijuana Worth Over $45 Million
Illegally Distributed Nearly 44 Million Cigarettes, Which Resulted in Over $7 Million in Lost Tax Revenue
Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the unsealing of a three-count Indictment charging 37 members of a Chinese marijuana and contraband cigarette trafficking organization (the “Organization”) that operated throughout the United States. The Organization allegedly conspired to manufacture and distribute over $45 million worth of marijuana, and to illegally distribute nearly 44 million cigarettes, which resulted in over $7 million in lost tax revenue. Thirty-two members of the Organization were arrested this morning in New York, New Jersey, California, Tennessee, Alabama, and Rhode Island as part of a coordinated operation involving federal, state, and local law enforcement officers. The Indictment has been assigned to U.S. District Judge Miriam Goldman Cedarbaum; the 14 defendants arrested in New York and New Jersey will appear before Judge Cedarbaum this afternoon in Manhattan federal court. The remaining 18 defendants will appear before U.S. Magistrate Judges in the Eastern and Central Districts of California, the Northern District of Alabama, the Middle District of Tennessee, and the District of Rhode Island. One additional defendant is scheduled to surrender in Arkansas this afternoon, and four others are still at large.
Manhattan U.S. Attorney Preet Bharara said: “Today’s arrests deal a blow to an organization that allegedly conspired to manufacture multi-million dollar quantities of marijuana that they would then distribute, along with millions of contraband cigarettes, nationwide. Thanks to the coordinated efforts of federal, state, and local law enforcement around the country, this alleged supply chain has effectively been broken.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr., said: “This alleged drug trafficking organization was a highly organized network. These allegedly corrupt people were savvy in their alleged scheme to move hundreds of thousands of dollars and drugs throughout the United States. While some may mistakenly perceive smuggling and trafficking in narcotics as a path to a quick profit, these arrests demonstrate the serious consequences that await those who engage in the smuggling and sale of illegal drugs.”
As alleged in the Indictment and other court documents:
Since 2010, the defendants were part of a nationwide organization that produced and distributed marijuana, and distributed contraband cigarettes from California to various places throughout the U.S., including the New York City area. PAUL COONG LAY and his brother CHAN COONG LAY maintained a network of marijuana grow locations throughout California and elsewhere. For example, in October 2012, law enforcement executed a search warrant at one such location in Porterville, California – after observing PAUL and CHAN LAY visiting the premises – seizing more than 200 pounds of processed marijuana and approximately 185 live marijuana plants.
Marijuana grown by the LAY brothers, along with contraband cigarettes, were then shipped by tractor trailer from the Los Angeles region throughout the U.S., using a trucking company owned and operated by STEVEN QU and his wife YUN XING (the “Trucking Company”). QU’s trucks were followed by law enforcement to locations in Colorado, Tennessee, and New York, where they off-loaded hundreds of pounds of marijuana and/or cases of cigarettes. For example, in the New York area, law enforcement observed on numerous occasions WAI C. AU-YEUNG, RU XIANG MEI, and XIUZHEN LIN meet and unload QU’s trucks at a warehouse in Jersey City, New Jersey. AU-YEUNG, MEI, and LIN then transported the contraband to locations in Manhattan and Brooklyn, where it was distributed. During the course of the investigation, law enforcement seized in excess of 120 pounds of marijuana, 1,816 cartons of contraband cigarettes, and 545,860 counterfeit cigarette tax stamps from the New York arm of the Organization alone.
In the Tennessee area, law enforcement observed on various occasions DENISE RAGLAND and others unloading the trucks at a warehouse maintained by QU’s Trucking Company. Earlier this month, for example, law enforcement observed CHAN LAY – who had traveled from California to Tennessee to supervise the shipment – and OAKLEY SIMPSON, among others, unloading one of the Organization’s trucks. Law enforcement subsequently arrested SIMPSON, who was in possession of approximately 80 pounds of marijuana.
Money generated by the sale of the Organization’s marijuana and contraband cigarettes was also laundered by members of the Organization through a variety of means. For example, members regularly flew from New York and elsewhere to California carrying hundreds of thousands of dollars. In October 2011, for instance, law enforcement seized approximately $180,000 from WAI C. AU-YEUNG, XIUZHEN LIN, and HOA PHAN as they were about to board a flight from New York to California. Other members of the Organization shipped cash from the East Coast back to California using the trucks registered to QU’s Trucking Company. For example, in September 2012, law enforcement seized approximately $110,000 in cash from PAUL LAY, which was concealed in cardboard shipping boxes otherwise filled with lollipops.
Other members of the Organization laundered proceeds of the marijuana and cigarette operations through financial institutions. For example, in September 2012, law enforcement seized approximately $114,000 from TONGMIAO YAN. According to YAN, those funds belonged to JIA QIAO. A review of QIAO’s bank records, among other sources of information, revealed that QIAO and her husband, JAMES CHEN, have been laundering funds for the Organization through two entities that they control.
In conjunction with today’s arrests, law enforcement also seized the contents of 17 banks accounts used by the Organization to launder the proceeds of its marijuana and contraband cigarette distribution business, including accounts belonging to STEVEN QU’s Trucking Company and to the entities controlled by JAMES CHEN and JIA QIAO. Law enforcement also seized a number of vehicles, including four tractor trailers registered to the Trucking Company.
A chart containing the names, ages, residence information, charges against the defendants, and the maximum penalties they face, is attached.
Mr. Bharara praised the outstanding investigative work of ICE HSI. He also thanked the Nassau County Police Department, the Los Angeles Police Department, the U.S. Marshals, and the Internal Revenue Service – Criminal Investigations for their assistance in the case.
This case is being handled by the Office’s Narcotics Units. Assistant United States Attorneys Matthew L. Schwartz, Paul Monteleoni, and Eun Young Choi are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.