Head Shop Owners’ Lives up in Smoke

     CORPUS CHRISTI, Texas (CN) – Husband-and-wife owners of Texas head shops being investigated for selling synthetic marijuana pleaded guilty to structuring cash deposits to duck bank reporting laws, federal prosecutors said.
     Leroy Mitchan Jr., 33, and Kimberly Davis, 27, both of Corpus Christi, were indicted on June 12 on charges of illegal financial transaction structuring, the U.S. Attorney’s Office.
     The couple owns two Mr. Nice Guys Smoke Shops and the Nice Guys car dealership in Corpus Christi.
     Mitchan faces up to 10 years in prison and a fine of up to $500,000; Davis faces up to five years and a $250,000 fine.
     They agreed to forfeit three Nueces County properties valued at $1.2 million, $396,000 in cash and 42 vehicles worth $409,000, prosecutors said.
     Their arrests came out of an investigation into their shops’ sale of synthetic marijuana, prosecutors said.
     “The factual summary as presented in court indicated that from February 2012 through January 2013, officers with the Corpus Christi Police Department (CCPD) seized more than 40.93 grams of synthetic marijuana during numerous undercover purchases from both of the smoke shops,” prosecutors said in the statement. “On Feb. 1, 2013, CCPD executed state search warrants at the shops and seized a total of 1.5 kilograms of synthetic marijuana as well as various smoking paraphernalia such as pipes, bongs, glassware, grinders and scales. Also seized were detailed drug ledgers and price lists relating to the sale of synthetic marijuana along with documents guiding employees on the proper coded vocabulary to use when describing the illegal items being sold to customers.
     “The Drug Enforcement Administration (DEA) learned Mitchan and Davis had recently purchased three real estate properties in Corpus Christi and were making payments on these properties with large cash transactions. A preliminary review of bank accounts revealed several cash deposits under $10,000.”
     The IRS then investigated the cash deposits, as the Bank Secrecy Act of 1970 requires financial institutions to report transactions of more than $10,000 to the Treasury Department, to help detect money laundering or other criminal activity. Structuring involves breaking up a large deposit into smaller ones to avoid scrutiny by regulators and law enforcement.
     Davis admitted in her plea that she deposited $44,101 in a bank account with five deposits of under $10,000, prosecutors said.
     “Mitchan admitted he worked with a local real estate agent and provided him with large amounts of cash,” the U.S. attorney said in the statement. “Mitchan told him to deposit it into his personal bank account and later withdraw the money in the form of cashier’s checks or via Moneygram to pay for property he was purchasing. The total amount structured at the direction of Mitchan was approximately $461,000. Mitchan directed him and others to structure currency transactions to avoid the threshold reporting requirement.”
     Mitchan and Davis are out on bond until their Nov. 18 sentencing hearing.

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