El Paso Business And Businessowner Charged In Connection With An Alleged Fraud And Trade Based Money Laundering Scheme Associated With Black Market Peso Exchange
In El Paso, federal and state authorities have arrested the owner and two employees of ERENE, Inc., (ERENE) for their alleged roles in an estimated $100 million trade based money laundering scheme announced U.S. Attorney Robert Pitman and Homeland Security Investigations (HSI) Acting Special Agent in Charge Tom Hernandez, El Paso Division.
ERENE, doing business as “J&E Sports,” “Rise High Skateshop,” Quicken,” “Quicken Footwear & Accessories,” “Pepes Casual,” “Arise 915,” and “Forward Footwear,” is an El Paso-based business which primarily sells shoes and other goods to U.S. and Mexican-based customers.
A 61–count federal grand jury indictment unsealed today in El Paso, charges ERENE, 52–year-old owner Jose Luis Rodriguez, 40–year-old ERENE Assistant Manager Jorge Penuelas, and 53-year-old ERENE employee Manuel Rodriguez with multiple money laundering conspiracy charges. Other charges alleged in the indictment include smuggling goods from the United States; engaging in monetary transactions in property derived from specified unlawful activity; conspiracy to commit mail and wire fraud; mail fraud; and, wire fraud.
The indictment alleges that since May 2007, Rodriguez on behalf of ERENE, made false and material representations to shoe suppliers that ERENE would only sell their product on a retail bases i.e. to end use consumers. On the basis of this representation, suppliers provided ERENE with millions of dollars in product which was primarily sold on a wholesale basis to Mexican and U.S. based purchasers. Once these goods were obtained, the indictment alleges, ERENE and the Mexican based wholesale purchasers used smugglers or “pasadors” to unlawfully smuggle shoes into Mexico from the United States. Through this method, ERENE and the Mexican based wholesale purchasers avoided tariffs, duties, and fees imposed by the Mexican government on the import of shoes into Mexico. Further, although the goods smuggled into Mexico are sold for pesos, the Mexican based wholesale purchasers paid for a significant majority of those goods with U.S. cash dollars.
The aforementioned schemes generated significant proceeds which the indictment alleges were laundered by the defendants through various means such as the purchase of U.S. Postal money orders.
Trade based money laundering (TBML) is the exploitation of the international trade system, including its financial system, to launder illicit proceeds. A subset of TBML is the Black Market Peso Exchange (BMPE). According to the indictment, criminal organizations are using the BMPE to convert the proceeds of their illegal activities from U.S. dollars to Mexican pesos in order to avoid the risk of smuggling bulk amounts of U.S. Currency across the border; risk detection by having to wire transfer the proceeds; and, to evade Mexican anti-money laundering regulations announced in June 2010 that restrict the amount of physical U.S. currency that Mexican banks may receive.
Generally, the BMPE scheme involves a drug trafficking organization or other criminal organization obtaining large amounts of U.S. dollars through illegal activity. These organizations, either directly or in conjunction with Mexican wholesalers/retailers or other third parties, then use these U.S. cash dollars to purchase goods within the United States, such as shoes. These goods are then brought into Mexico and sold for pesos.
All three defendants, who were arrested yesterday without incident, remain in federal custody pending detention hearings next week. In addition, federal and state law enforcement executed several search warrants yesterday at various locations and seized approximately $600,000 from four bank accounts affiliated with ERENE and Rodriguez as well as approximately 25,000 pairs of shoes with a rough estimated domestic value of $1,125,000.
Each money laundering conspiracy, mail and wire fraud conspiracy, mail fraud and wire fraud charge carries a maximum penalty of 20 years in federal prison upon conviction. Each money laundering and smuggling charge carries a maximum of ten years imprisonment upon conviction.
This investigation is being conducted by the HSI’s Financial Operations & Currency Unified Strikeforce (FOCUS). FOCUS is comprised of investigators from HSI, IRS – Criminal Investigation (IRSCI), U.S. Postal Inspection Service (USPIS), Customs and Border Protection – Office of Field Operations (CBP-OFO) and the El Paso Police Department. The Government of Mexico Servicio de Administracion Tributaria (SAT) also assisted in this investigation. The case is being prosecuted by Assistant United States Attorney Joseph Blackwell.An indictment is merely a charge and should not be considered as evidence of guilt. The defendants are presumed innocent until proven guilty in a court of law.