Two Chinese nationals arrested in a large-scale marijuana bust in Yuba County last year have been indicted on federal charges.
Zhen S. Lin, 37, and Li J. Wang, 37, are facing charges of money laundering, conspiracy to manufacture marijuana, and manufacturing of marijuana, according to the federal complaint. They, along with Feng Li, are accused of conspiring with Elk Grove real estate broker Heidi Phong, 36, to convert residential homes into indoor marijuana cultivation sites.
Using her professional business, HP Real Estate, Phong allegedly represented the home buyers, who would use wire transfers from China to fund the down payments. In many cases, according to the complaint, once the funds were wired into the U.S., the funds from multiple wires in the names of different individuals would be aggregated to make the down payment on a single home.
For nearly four years, Phong and her co-conspirators arranged for the financing of the homes through “hard money” lenders in order to lessen the chance of detection, as the lenders did not have the same level of review used by traditional banks to ensure legitimate income and the ability to repay the loan. They used the lenders even though the resulting loan arrangements cost the borrowers more in interest, fees and down payment amounts.
In addition to earning a commission on each house purchase, Phong occasionally invested directly in the property purchases through Skye Investment LLC in the form of loans to the home purchaser. The co-conspirators took steps to avoid detection of the ongoing conspiracy, according to the complaint, including creating false lease and rental agreements to make it appear to law enforcement as though the homeowners were not the occupants maintaining the grow; by arranging home purchases to place their title in others’ names; and by assisting home purchasers in refinancing loans in order to prevent lenders from conducting property inspections.
Federal investigators also allege that Phong advised her clients to remove money from their bank accounts to deter seizure of assets, to place utilities for grow sites in others’ names and to avoid visiting grow homes when law enforcement was scrutinizing them.
Lin, Wang and seven others were arrested in March 2017 at five homes less than a mile apart in the Edgewater area of Yuba County. The homes had been converted into indoor grows with soil spread out on the floors and equipment found in every room. The bust led police to another home in Sacramento County that netted three arrests. In total, 3,667 plants, 50 pounds of processed marijuana and two firearms were seized.
If convicted, the federal government is seeking $67,000 in currency and any other sum of money equal to the amount of money involved in the offenses. The defendants also face up to $5 million in fines and 20 years to 40 years imprisonment for each charge.
Lin is also implicated in a separate investigation in the Sacramento area busted by federal agents in July 2017.
Yuba County District Attorney Pat McGrath said an investigation like this is similar to peeling an onion: it starts locally, with investigators looking for commonalities in different cases. But association doesn’t necessarily mean correlation.
“It’s very tedious, very time-consuming,” McGrath said Thursday. “It’s a trail of financial documents and you’re trying to link people or accounts.”
Cases like this with international ties have commonalities: people who seem to have some ability to control the flow of money and the ability to acquire properties, people who are expendable, cheap labor and disconnected from more valuable information, McGrath said.
Whether a sophisticated enterprise involves guns, methamphetamine or cannabis, the products are just a means to an end: a tool to make money.
Yuba County Sheriff Wendell Anderson said it’s important for local agencies to have working relationships with the federal government, especially given some of the logistical limitations of the department.
“In the end, the state and the federal law enforcement have similar goals and whenever we get the opportunity to work with them, we will take advantage of the opportunity,” Anderson wrote in an email Thursday.
McGrath said prosecuting cases like this is important because the enterprise leads to other illegal activities like weapons, gangs that profit off selling the drugs and human trafficking.
“Essentially you have a lot of people engaged in really predatory behavior and they don’t care about the folks dying of overdoses…” McGrath said. “They’re simply taking advantage of a weakness that we have.”