Mexican Businessman Pleads Guilty in Toy-Drug Money Scheme

A Mexican businessman admitted this week conspiring with a city of Industry toy wholesaler to launder thousands of "narco dollars'' for cross-border drug cartels, federal proecutors said.

Luis Ernesto Flores Rivera, 54, of Guadalajara, pleaded guilty to one federal count of conspiring to launder cash, according to the U.S. Attorney's Office. He faces up to 20 years in prison, with sentencing set for Oct. 15.

Flores is the first defendant to be convicted or plead guilty in Los Angeles on money laundering charges arising from a type of scheme commonly referred to as a "black market peso exchange,'' federal officials said.

Flores was among seven individuals indicted in April, along with Woody Toys in the City of Industry, on charges of using structured cash deposits in the United States to launder illicit proceeds generated by cartels based in Mexico and Colombia.

A structured deposit is less than $10,000 and is designed to avoid laws that require any cash transaction of at least $10,000 to be reported to federal authorities.

Trial is set for Oct. 16 for the remaining defendants, who include owners and employees of Woody Toys.

According to his plea agreement, Flores worked with Woody Toys to launder up to $120,000 between 2008 and 2011.

"Money laundering is a nefarious practice that plays an integral role in narcotics trafficking,'' said U.S. Attorney Andre Birotte Jr. "Here, Mr. Flores stooped to using children's merchandise as part of a scheme to hide illegal proceeds -- a practice that serves to demonstrate how desperate drug trafficking organizations are to evade law enforcement's efforts to cut off their flow of money.''

As part of the scheme, foreign toy retailers in Colombia and Mexico would contact currency brokers to buy discounted U.S. dollars, which they would use to purchase merchandise from Woody Toys, according to federal prosecutors.

The dollars being sold were allegedly proceeds from illegal drug sales that had been deposited in the toy company's accounts or had been delivered to the business in the form of bulk cash.

To complete the circle, the Colombian and Mexican pesos used by the foreign toy retailers to purchase the discounted U.S. dollars were remitted by currency brokers to drug trafficking organizations, prosecutors allege.

According to the indictment, Woody Toys took in about $3 million in out-of-state cash between 2005 and the end of 2011 without filing the required paperwork with the government.

During the same period, Bank of America records show that another $3 million in out-of-state cash was deposited into Woody Toys' accounts, according to the U.S. Attorney's Office.

The probe targeting Woody Toys began in November 2010 based on evidence uncovered during a similar investigation into another Los Angeles-area toy wholesaler, Angel Toys.

Several former employees of Angel Toys subsequently went to work for Woody Toys, prosecutors said.

Keep up with South Gate Patch Latino by subscribing to breaking news alerts, liking us on Facebook and following us on Twitter. Have an event or announcement you'd like to publicize? Submit them for free.