Crime syndicate crackdown in Elk Grove
In the largest operation of its kind, federal agents swept across the Sacramento region Tuesday and Wednesday targeting about 75 homes serving as suspected marijuana growing sites that authorities say are operated by a Chinese organized crime syndicate.
The raids, which involved more than 500 federal, state and local agents, hit homes from Elk Grove to Sacramento to rural areas and are aimed at forcing the forfeiture of about 100 homes to the federal government, an effort valued at hundreds of millions of dollars in real estate and marijuana.
“This represents one of the largest residential forfeiture efforts in the nation’s history,” the U.S. Justice Department said.
The investigation began in 2014 as authorities began to see an uptick in marijuana growing operations concealed in residential neighborhoods throughout the Sacramento area and escalated in the past year as agents used utility bills and sophisticated financial analysis to track millions of dollars coming from China into the United States for the purchase of the homes.
The buyers, typically Chinese citizens in the country legally, are suspected of turning the homes into pot-growing operations that then shipped the marijuana through trucks, mail and couriers to the Eastern seaboard for sale, authorities say.
This week‘s raids resulted in the seizure of more than 61,050 marijuana plants, 200 kilos of processed marijuana valued at up to $100 million and about $100,000 in cash, as well as 15 firearms, officials say. Those numbers are expected to grow as the final tallies are calculated.
The bulk of the raids took place this week, although a couple of dozen had been searched in prior weeks, including one in the 9900 block of Pianella Way, in a quiet subdivision in Elk Grove, about two months ago.
Neighbors said they saw authorities hauling away black bags filled with marijuana plants and taking a female occupant, who appeared to be Asian, into custody.
“I just woke up one morning, cop cars everywhere, and all the pot plants were in black bags in the garage,” said Mar Caballero, who lives across the street. “There were guys in hazmat suits.” He said the occupant was taken away in handcuffs.
The home was later put on the market, and a Realtor’s sign says a sale is pending. Wang Xiong, who works for HP Real Estate, was checking on the property Wednesday afternoon but said he had no information about the buyer, seller or the raid.
“It’s all news to me,” he said.
Caballero said he had no previous interaction with the woman but that her living arrangement seemed strange. She lived alone but had a minivan, which was almost always parked in the driveway.
“It was kind of odd: a minivan, only one woman, no kids,” he said.
Another neighbor, Steve Johnson, said he believed other people lived there as well but that he had no inkling of any wrongdoing.
“I had no clue that they were growing marijuana there,” he said. “This is a very quiet neighborhood.”
Federal officials said many of the people tending the grows inside the homes were essentially “indentured servants” forced to remain there and have food and supplies brought to them. Those individuals were offered victim assistance during the raids, and a handful accepted the help, officials said.
In an unusual twist, no arrests have yet been made as the investigation continues and focuses on the manner in which the homes were purchased and the identity of suspects federal authorities believe handled the transactions.
McGregor Scott, the U.S. attorney for the Sacramento-based Eastern District of California, emphasized that the raids, which used flash-bang grenades to gain access to some homes, are not aimed at restricting California's new state law allowing recreational marijuana use.
“It absolutely has nothing to do with that,” Scott said. “This is illegal under anybody’s law.”
Instead, he said, they are targeting a foreign operation that he says has increased crime in neighborhoods where they are based and represents a massive effort to subvert federal marijuana laws.
Scott said authorities believe 85 percent of the home purchases were handled by a single real estate agent in the Sacramento area but would not disclose a name, saying the investigation is continuing.
Court filings made late Tuesday spell out details of how authorities believe the operation worked.
“Since 2014, state and federal law enforcement have investigated an organization of individuals believed to be purchasing homes in the Sacramento region using money from China, converting these residences into indoor marijuana cultivation sites, and then trafficking the processed marijuana to other parts of the country, particularly the Eastern United States,” one home forfeiture court filing states. “Law enforcement has identified a number of common links between the residences converted to indoor marijuana grows, including down payments financed by wires mainly from Fujian Province, in China.”
Authorities are looking at “one of a handful of common Sacramento realtors,” the documents state, but identify them only as “Person A and Person B.”
The documents say the buyers and real estate agents used hard-money lenders instead of banks.
“The buyer generally puts $5,000 to $10,000 down, usually through a domestic wire transfer, a personal check, or a cashier’s check, followed by a second round of domestic wire transfers or cashier’s checks into escrow, often from multiple individuals not listed as co-buyers on any documentation,” the documents say.
About $6.3 million for escrow payments has flowed into the United States from a series of roughly 125 wire transfers from China, authorities say, each one just under the $50,000 limit Chinese law places on financial transfers out of the country.
For instance, a home in Wilton that sold for $695,000 as a rental was purchased in part using six wire transfers — each for $49,989 — and a seventh for $14,989 that were sent in a six-day period, officials say.
The grow houses are in suburban neighborhoods and rural areas; 12 homes alone were found in Valley Springs in Calaveras County in recent months, officials say.
Over the past two days, agents searched 41 homes in Sacramento, 16 in Elk Grove and others in the surrounding region.
Some were detected through analysis of utility bills, where grow lights and other equipment boosted electricity consumption 3,000 to 4,000 percent, court documents say. Some of the utility bills were paid in cash, further alerting authorities to unusual behavior, documents say.
Other homes used diesel generators that operated 24 hours a day and were concealed from view of the streets.
Investigators have been targeting Chinese marijuana growing operations for several years and have indicted a number of suspects, including an Ohio man named Leonard Yang who court documents say was tied to seven Sacramento-area homes.
“In September 2016, law enforcement executed federal search warrants at the seven residences and seized more than approximately 5,000 marijuana plants,” court documents state. “Each residence contained an active marijuana grow and law enforcement found documents connecting Leonard Yang’s group to the Midwest and Eastern United States, and China.
“A search of Leonard Yang’s Cadillac uncovered $10,000 in cash, four different garage door openers and multiple house keys, items consistent with law enforcement’s physical surveillance of Leonard Yang’s regular visits to his network of residential grow sites prior to the September 2016 takedown.”
Yang faces money laundering charges from an August 2017 indictment; that case is pending.
A plea agreement issued for a co-defendant who was found hiding in the attic of a Wilton-area home linked to Yang describes the evidence authorities seized in a September 2016 raid there.
“In the main residence eight rooms were converted into marijuana grow rooms with 1,297 plants,” court documents state. “The house had significant electrical, ducting and structural modifications to allow it to be a large scale marijuana grow.
“In the barn, two areas had been converted into marijuana grow rooms with over 300 plants each, and the upstairs loft was being used to dry, store, trim and process marijuana.”
The home used so much electricity for the grow operation that it overloaded a SMUD transformer, court documents say, prompting the utility to install a larger capacity transformer at a cost of $4,485.
The Sacramento region is a hotbed of such activity in part because of the large Chinese and Asian populations here and in the Bay Area, authorities say. Pot-growing operations broken up in the 1990s frequently were traced back to gangs working out of the Bay Area, which used homes in Sacramento because housing prices are much lower in this region.
Scott said authorities believe the homes the government plans to obtain through forfeiture will later be auctioned off, with the proceeds going to the U.S. government.
“These people are going to lose hundreds of millions of dollars,” he said.