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Narcotics
03/30/2012

Undercover drug probe leads to arrest of 2 Canadians, seizure of more than $1 million

SANTA ANA, Calif. — Two Canadian men are expected to make their initial appearance in federal court Friday afternoon on charges stemming from their alleged role in a complex scheme operating out of Southern California to launder millions of dollars in drug proceeds for a Canada-based narcotics trafficking organization.

June Jie Zhang, 31, of Toronto, and John Philip Co, 41, of Richmond, British Columbia, were arrested late Wednesday night. Co was taken into custody at a public storage facility in Costa Mesa by special agents with U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI). Zhang was arrested by detectives from the South Gate police department at a casino in Commerce. The two men are charged in a federal criminal complaint with conspiracy to distribute more than 37 kilograms of cocaine. The case is being prosecuted by the U.S. Attorney's Office for the Central District of California. The charges carry a maximum penalty of life in prison.

The arrests are the culmination of a multi-agency undercover probe that began in February after HSI Santa Ana received a lead about operatives for a Canada-based drug trafficking organization who were seeking to purchase large quantities of cocaine. The cocaine buys are a means for Canadian drug trafficking organizations to launder proceeds generated by the sale of the high-grade Canadian marijuana and Ecstasy the organizations export to the United States. The purchased cocaine is then smuggled back to Canada and sold.

"Money laundering can take many forms, but it's unusual to find a scheme where suspects seek to cover their tracks by using criminal proceeds to buy more contraband," said Claude Arnold, special agent in charge for HSI Los Angeles. "But Canadian organizations are willing to take the risk. First they reap huge profits by selling marijuana and Ecstasy in this country. Then they double their money by buying cocaine here and exporting it to Canada where it commands twice the price."

As part of the investigation, HSI special agents posed as brokers for Mexican cocaine traffickers and initiated contact with the defendants. The affidavit filed in support of the criminal complaint details a series of phone calls and meetings between the defendants and undercover special agents to finalize the cocaine sale. Wednesday afternoon, undercover special agents in Santa Ana and El Monte collected $750,000 in two separate cash payments. Meanwhile, Co was taken into custody at the storage facility where he was allegedly waiting to retrieve the 80 pounds of cocaine purchased with those funds.

A subsequent search of a hotel room in Pasadena led to the discovery of an additional $350,000 and a ledger detailing other financial transactions. Based on evidence recovered during the probe, investigators suspect the defendants may have laundered more than $15 million in drug proceeds in the last year alone.

The case is the result of a multi-agency probe involving HSI Orange County; the La Habra, Downey, Santa Ana and South Gate police departments; and the San Luis Obispo Sheriff's Department.