El Paso business, business owner charged with fraud and trade-based money laundering scheme linked to black market peso exchange

EL PASO, Texas — U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) special agents and area law enforcement partners Wednesday arrested a local businessman and two others for their alleged roles in an estimated $100 million trade-based money laundering scheme.

Jose Luis Rodriguez, 52, owner of ERENE Inc., named in a 61-count federal grand jury indictment unsealed Thursday in El Paso, is charged with multiple money laundering conspiracy charges.  Also named and charged are Jorge Penuelas, 40, ERENE assistant manager, and Manuel Rodriguez, 53, ERENE employee.

HSI El Paso’s Financial Operations & Currency Unified Strike Force (FOCUS) continues investigating this case.  In addition to HSI, FOCUS comprises investigators from the following agencies:  U.S. Internal Revenue Service (IRS), U.S. Postal Inspection Service, U.S. Customs and Border Protection’s (CBP) Office of Field Operations (OFO), and the El Paso Police Department. The Government of Mexico’s Servicio de Administracion Tributaria (SAT) also assisted in the case.

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 business that primarily sells shoes and other goods to customers in the United States and Mexico.

The following other charges are also alleged in the indictment:  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 at retail prices to end-use consumers. On the basis of this representation, suppliers provided ERENE with millions of dollars in product that was primarily sold wholesale to purchasers in the United States and Mexico. Once these goods were obtained, the indictment alleges, ERENE and the Mexico-based wholesale purchasers used smugglers or “pasadores” to unlawfully smuggle shoes into Mexico from the United States. Through this method, ERENE and the wholesale purchasers in Mexico avoided paying 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 wholesale buyers in Mexico paid for a significant majority of those goods in cash with U.S. dollars. The aforementioned schemes generated significant proceeds that the indictment alleges were laundered by the defendants through various means, such as the purchase of U.S. Postal Service 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, as well as avoid detection of wire transferring the proceeds. Also, it serves to evade Mexican anti-money laundering regulations announced in June 2010 that restrict the amount of physical U.S. currency 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 and retailers or other third parties, then use the U.S. cash to purchase goods, such as shoes, in the United States. These goods are then taken into Mexico and sold for pesos.

All three defendants arrested Wednesday without incident, remain in federal custody pending detention hearings set for next week.

In addition, federal and state law enforcement executed several search warrants Wednesday at various locations and seized about $600,000 from four bank accounts affiliated with ERENE and Rodriguez. They also seized about 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 10 years imprisonment upon conviction.