In almost every narcotics-related crime the underlying motivation is money, because money is the key to furthering the illegal drug trade, whether domestic or foreign.
In order to make a significant impact on the drug trade on both domestic and international fronts, the focus should be placed on following the money back to the sources of drug supply and tracing of assets purchased with the ill-gotten gains.
Narcotics investigations are all about following the money and IRS-Criminal Investigation plays a unique role in addressing drug related crime. IRS-CI is the only federal agency that can leverage the criminal provisions of the Internal Revenue Code (Title 26), the Bank Secrecy Act (Title 31) and the Money Laundering Control Act that are particularly useful in the financial investigation (and prosecution) of major narcotics traffickers and money launderers and the seizure and forfeiture of their profits.
IRS-CI plays a significant role in narcotics investigations as part of a joint federal Law Enforcement Officer (LEO) effort in combating illegal drug trade.
Financial investigations are by their nature very document intensive. Specifically, they involve records, like bank and investment account information and real estate files, which point to the movement of money. Any record that pertains to, or shows the paper trail of, events involving money is vital to the investigation. The major goal in a financial investigation is to identify and document the movement of money during the course of a crime, and sometimes before the suspected start of the criminal activity. The link between where the money comes from, who gets it, when it is received, and where it is stored or deposited, can provide proof of criminal activity.
The tracking down and documenting of financial leads can often be the crucial key that leads to opening the door to pinpointing the leader of the narcotics organization. A complete financial analysis and reconstruction of a drug organization's financial activity as it relates to unreported income on tax returns and money laundering can often be critical to making the conviction.
IRS-CI has been part of joint agency efforts in working drug-related investigations resulting in successful prosecutions and many traffickers are behind bars today because of CI's financial expertise. The following are examples of the narcotics related investigations that IRS-CI special agents have worked jointly with federal, state and local LEOs in the Southern California area. These case summaries are from the public record in the Southern Judicial District of California.
45-Count Indictment Charges 13 Individuals for Marijuana Distribution and Money Laundering
San Diego On July 22, 2010, a federal grand jury sitting in San Diego handed up a
45-count indictment*, charging 13 defendants, including Joshua John Hester, Rex Naanos, Jay Hansen, Kelsey Lynn Weidenhoefer, Marco Manuel Luis, Ryan Michael White, Tara Elizabeth Hester, Zachary Dickinson, Justin Matthew Hunt, Stephanie Tine, Alec Christian Pacillas, Joseph Matthew Nunes, and Adam Muscat, with several felony crimes. There were also several money forfeiture allegations in the indictment.
According to the indictment, Joshua John Hester, Rex Naanos, and Jay Hansen were charged with conspiracy to distribute over 1,000 kilograms of marijuana, and conspiracy to launder millions of dollars. Defendants Joshua Hester, Marco Manuel Luis, a real estate agent, and Kelsey Lynn Wiedenhoefer were charged with several felony charges related to the purchase of the two-million-dollar Rancho Santa Fe residence, where a marijuana grow was found, including conspiracy to engage in money laundering.
Defendants Joshua Hester, Ryan Michael White, Tara Hester, Zachary Dickinson, Justin Matthew Hunt, Stephanie Tine, Alec Pacillas, and Adam Muscat were also charged with several felony offenses, including conspiracy to distribute over 100 kilograms of marijuana, to manufacture marijuana plants, and to maintain drug-involved premises. In addition, Nunes, who is currently serving a 12-month prison sentence, was charged with using a communication device to facilitate the conspiracy to distribute marijuana.
Joshua Hester was also charged with multiple felony counts of engaging in monetary transactions related to several real estate properties. In addition, Hester and Stephanie Tine were charged with conspiracy to launder drug proceeds, and laundering drug proceeds. Hester was also charged with criminal forfeiture, including several seizures of bank accounts, cash, jewelry, and a vehicle.
Husband and Wife Sentenced to Prison for Ecstasy Distribution and Money Laundering
San Diego On April 19, 2010, Ruth Correia was sentenced to serve 24 months in prison and three years supervised release following her guilty plea to conspiracy to launder money. On April 5, 2010, Gregory Correia, Ruth Correias husband was sentenced to serve 70 months in prison and five years of supervised release after his guilty pleas to conspiracy to distribute ketamine, conspiracy to launder money, and distribution of methylenedioxymethamphetamine (commonly referred to as ecstasy or MDMA). The Correias were also ordered the two to pay of fine of $4,437.
According to court records, Gregory Correia admitted that he supplied ketamine to customers in San Diego County, Orange County, and the state of New York. Gregory Correia admitted that he shipped at least 900,000 dosage units of ketamine from San Diego or Orange Counties to customers in New York State. His ketamine customers deposited cash into the bank accounts of Gregory and Ruth Correia at East Coast bank branches. Gregory and Ruth Correia then withdrew the drug proceeds at bank branches on the West Coast. Both Ruth and Gregory Correia admitted that they laundered at least $900,000 in drug proceeds and that the withdrawals and deposits were made in such a way as to conceal and disguise the source, ownership, and control of the drug proceeds.
Former San Diego Resident Sentenced to Serve 41 months in Federal Prison for Tax Evasion and Conspiracy to Distribute Marijuana
San Diego On April 5, 2010, a former San Diego resident involved in a drug conspiracy was sentenced to federal prison after previously pleading guilty to charges related to the illegal distribution of marijuana and tax evasion.
Paul A. Blea, 39, who has been in custody since his arrest on April 24, 2009, was sentenced to serve 41 months in federal prison and spend five years on supervised release after serving his sentence. According to court records, beginning in 2004 and continuing up to February 2007, Blea conspired to distribute marijuana and distributed approximately 260 pounds of marijuana to people in the San Diego area.
Blea received $57,102.46 in total income from the sale of marijuana in 2004 that he did not report to the IRS and failed to file a federal income tax return in 2004. Blea personally structured and directed others to structure deposits of large amounts of cash from selling marijuana into the bank accounts that Blea controlled. Bleas conduct resulted in a tax loss of more than $98,516 to the federal government for years 2004-2007.
Owner of Two San Diego Marijuana Locations Pleads Guilty in Federal Court to Multiple Criminal Charges
San Diego On December 10, 2009 Joseph Nunes pled guilty to three felony counts of a superseding information including manufacturing marijuana plants; renting, using and maintaining two drug-related premises; and, money laundering.
Nunes was arrested following a federal search warrant executed at 3415 Mission Boulevard, San Diego, Calif., known as Green Kross Collective, where agents found marijuana plants, marijuana contained in bags and jars, cookies and brownies containing marijuana, sodas containing marijuana, lollipops containing marijuana, and other edible marijuana items.
Agents also found $38,915 in cash at that location. Agents further discovered sales receipts books revealing that during a two-day period, Green Kross Collective sold approximately $16,000 of marijuana and marijuana products. Upon searching Nunes downtown condominium, agents found approximately $29,777 in cash. At 777 6th Avenue, Suite 127, San Diego, Calif., known as Downtown Kush Lounge Cooperative, agents found 89 marijuana plants.
As part of his plea, Nunes admitted that he rented the location 3415 Mission Boulevard, San Diego, Calif., since May 1, 2009, as well as 777 6th Avenue, Suite 127, San Diego, Calif., since Sept. 1, 2009, for the purpose of distributing marijuana and manufacturing marijuana plants, in violation of federal law. In his plea, Nunes also admitted that he laundered drug proceeds by renting these locations, as well as another warehouse located at 3515 Hancock Street, San Diego, Calif., to facilitate and promote his drug activities. Nunes also agreed to forfeit $71,336 in drug proceeds.
* An indictment is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.
For more information on IRS-CI narcotics-related financial investigations, visit
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access