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Once on the hook for fostering sweatshop-like conditions, Los Angeles’s Fashion District has become an “epicenter of narco-dollar money,” according to the U.S. Department of Justice. Nearly 1,000 law-enforcement agents swept through 75 locations in downtown L.A. in early September, arresting nine people and seizing an estimated $100 million that authorities say included ransom payments to the Sinaloa drug cartel in Mexico. Federal agents believe cartels are increasingly relying on the city’s 3,000-business fashion district to channel proceeds from drug sales, kidnappings, and other illicit activities because of its brisk trade with Mexico. “They produce cheap wares that can be sold down in Mexico,” Robert E. Dugdale, chief of the criminal division at the U.S. attorney’s office in Los Angeles, told the Associated Press. “The Fashion District in particular seems to be where this is thriving at the moment.”
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Because heightened bank restrictions and border patrols are making it difficult for cartels to smuggle drug money across the border, many have turned to “black-market peso exchange” schemes to access their money.
Under the scheme, a “peso broker” finds businesses in Mexico to purchase goods from U.S. firms in American dollars. The Mexican companies then proceed to sell those goods, converting them to pesos for the broker and eventually the cartel.
Court documents reveal that apparel wholesaler QT Fashions funneled $140,000 through 17 garment businesses this way to win the release of an American relative from the Sinaloa drug cartel. An unsealed indictment notes that the victim, who was captured after U.S. authorities seized one of his cocaine shipments in 2012, was imprisoned at a ranch in Mexico, where he was allegedly beaten, shot, electrocuted, and water-boarded. He has since been released and is back in the United States, officials say.
Although California Attorney General Kamala Harris warns that “transnational gangs” like the ones behind the alleged Fashion District money-laundering schemes, are “the No. 1 threat to California’s public safety,” Kent Smith, executive director of the L.A. Fashion District, says that most of the city’s $18 billion garment district operates within the law.
“It’s unfair to paint the rest of the legitimate businesses … with what a small number of businesses may be doing in terms of illegal activity,” he told the Los Angeles Times.