LOS ANGELES – Three men were arrested this morning on federal charges alleging they took part in a scheme that used millions of dollars wired from China to purchase seven residential homes in San Bernardino County that were converted into illegal marijuana grow houses.
The three defendants arrested today pursuant to a federal criminal complaint are:
· Lin Li, a.k.a. Aaron Li, 37, of Chino, the U.S.-based coordinator of the alleged scheme;
· Ben Chen, 42, of Alhambra, who allegedly took care of the marijuana grows; and
· Jimmy Yu, 44, of Pasadena, a second alleged grow house caretaker.
The complaint charges the three defendants with one count of manufacturing, distributing, and possessing with the intent to distribute marijuana. The three men are expected to make their initial appearances this afternoon in United States District Court in Los Angeles.
In conjunction with the arrests, law enforcement executed search warrants at Li's home and seven marijuana grow houses in Chino, Ontario and Chino Hills. As a result of the searches, authorities seized approximately 1,650 marijuana plants from several grow houses, as well as cash at Li's house currently estimated to be at least $80,000.
Today's takedown is the result of a 14-month investigation that was initiated by the San Bernardino County Sheriff's Department and soon after was joined by U.S. Immigration and Customs Enforcement's Homeland Security Investigations (HSI).
In relation to the criminal charges, the U.S. Attorney's Office, in coordination with the HSI's Asset Identification and Removal Group, has begun the process to forfeit the seven homes where marijuana was being grown. The properties are cumulatively worth more than $5 million.
According to a 120-page affidavit in support of the criminal complaint, Li, a real estate agent, orchestrated a scheme that purchased residential properties through transactions designed to conceal the homes' true owners, converted the houses to marijuana grow operations, and trafficked marijuana, with most of the processed marijuana being sold to customers in California and Nevada.
After receiving financing from sources in China, Li “acted as the realtor for the purchase of [seven residences], which he then converted into illegal marijuana grow houses,” the affidavit states. “Li coordinated the purchase of the properties, managed them after purchase, paid their utilities and taxes, and established shell companies for the purpose of managing the properties' finances.”
Investigators believe Li attempted to distance himself from the conspiracy by using Chen and Yu to manage day-to-day operations at the grow houses, to help with out-of-state distribution of the marijuana, and to return marijuana sale proceeds. Li also used bypasses to physically divert electricity directly from power lines, thus stealing power from the electric companies, hiding the grow houses' high power usage from law enforcement, and creating fire risks in neighborhoods. According to the affidavit, Li's attempts to insulate himself from culpability went as far as creating fake leases for some of the properties, documents that included fake tenants, forged electronic signatures, and special clauses that purported to prohibit the fake tenants from cultivating marijuana at the homes.
“In states that have decriminalized marijuana, we have seen an influx of foreign money used to establish grow operations, with much of the marijuana being destined for out-of-state consumers,” said United States Attorney Nick Hanna. “By establishing illegal drug operations in residential neighborhoods, the defendants increased the risks to law-abiding homeowners, caused neighborhood blight, and stole power from utilities.”
“HSI, together with our law enforcement partners, will continue to target transnational criminal organizations that think they can use our neighborhoods as locations for criminal activity,” said Joseph Macias, Special Agent in Charge for HSI Los Angeles. “Today's arrests and searches, coordinated jointly with the San Bernardino Sheriff's Department and the U.S. Attorney's office, are the next step in shutting down criminals who would trash our communities for their own greed.”
“Deputies and detectives from the San Bernardino County Sheriff's Department assisted HSI with multiple narcotic search warrants. We assist our federal law enforcement partners regularly when requested,” said Sheriff John McMahon. “Our county does not support criminal operations like this and will make every effort to eliminate these threats to our local communities.”
According to the affidavit, down payments for most of the grow houses were traced back to wire transfers from China, and several of the properties were bought by “straw buyers” who actually had nothing to do with the transaction. The titles for most of the homes were transferred, shortly after they were purchased, to limited liability companies associated with Li, who served as the homes' property manager.
For example, in relation to one of the homes, the affidavit describes how a straw buyer purchased a Chino Hills residence in 2015 for $782,000. The purported buyer was named as chief executive officer of an LLC that Li had established, and that LLC received a $1 million wire transfer from a Hong Kong-based investment group. The vast majority of the purchase price of the house was then wired from the LLC's bank account. Li received a commission check as the realtor for the sale and also served as the home's property manager, the affidavit alleges. In early 2018, a neighbor complained to law enforcement about the “overwhelming” smell of marijuana coming from the Chino Hills home and how no one seemed to live there, court papers state.
The total purchase price for the seven homes, which were bought between July 2013 and September 2017, was $4,067,882, according to the affidavit.
In June 2018, deputies and HSI agents executed a search warrant and seized 1,038 marijuana plants at an eighth grow house in Chino Hills believed to be part of the same criminal scheme.