According to authorities, a Pico Rivera nightclub owner was recently sentenced to prison for money laundering and his involvement in a drug-trafficking ring operating within the United States and Mexico.

Edgar Fragoso Sentenced in Money Laundering and Drug Trafficking Case

Edgar Fragoso, the owner and general manager of El Rodeo nightclub, has admitted to laundering roughly $235,000 in cash through his nightclub based in Pico Rivera. Fragoso’s plea deal called for all but one of the money laundering charges against him to be dismissed. As part of that same plea deal, Fragoso surrendered his liquor license. Additionally, Fragoso received a two-year split-sentence of prison and home detention and was ordered to pay a $14,000 fine and complete a three-year term of supervised release.

Undercover Operation

Fragoso was investigated by the Drug Enforcement Administration following an investigation of two people who were trafficking methamphetamine in Texas. Fragoso’s link to the illegal drug trade was discovered when he openly discussed money laundering with undercover operatives that were working at the night club. According to those operatives, the nightclub served as a drop-off point where as much as $150,000 in cash was forked over at a time.

Money Laundering

Money laundering is a crime that involves moving illicit money into legitimate channels in order to disguise the money’s illegal source and avoid tax officials. Some forms of criminal activity, such as drug smuggling, yield large amounts of cash, leaving the criminals with the problem of what to do with the vast amounts of money they earn. One solution is to take this “dirty” money and channel the funds through bank accounts of legitimate businesses. Other money laundering activities include transactions such as bank deposits, withdrawals, fund transfers, wire transfers, payments, and other financial activities. Sophisticated use of current technology creates paper trails in money laundering cases that may not only be more complex; they may also be more difficult to uncover because many financial transactions are completed entirely using anonymous means like bitcoins. Embezzlement and fraud may also be associated with money laundering.

California Money Laundering Laws: Penal Code Section 186.10 PC

Money laundering is a serious federal crime that involves taking money that has been unlawfully obtained and working to integrate it so it may appear to come from a lawful source. A defendant may face money laundering charges brought under federal laws or California state laws. Those charged with money laundering also may face racketeering/RICO charges if they are involved in organized crime.

Penal Code Section 186.10 PC contains the following elements:

1. The defendant completed a transaction or a series of transactions through a financial institution.

2. The total amount of the transaction(s) must be more than $5,000 in a seven day period OR more than $25,000 in a 30 day period

3. The transaction(s) was made with the intent to promote criminal activity or the defendant knew that the funds involved were from the proceeds of criminal activity.

Money Laundering under Penal Code 186.10 PC is a “wobbler,” which means that a prosecutor can file either misdemeanor or felony charges, depending on the factual circumstances and the defendant’s criminal history.

Misappropriation of Funds

As is often the case in many crimes, misappropriation of funds requires that prosecutors must prove to a jury certain number of points or elements of the crime. Misappropriation of funds has four:

1. Control but not ownership. The prosecutor must show that the owner of the property entrusted or gave the money to the defendant, or otherwise allowed the defendant control over it. In short, the defendant rightfully had possession, but not ownership.

2. Intent. First, a person must knowingly misappropriate the money, and cannot commit the crime by making a mistake or error. It can be enough for a prosecutor to show that the accused intended to take any action that results (or would likely result) in the misappropriation of funds.

3. Conversion. In order to commit misappropriation of funds, a person must not only take the money but must use it for his own purposes. Even transfer of money to a bank account or the refusal or failure to hand over the owner’s money when the owner demands it is considered misappropriation.

4. Return. A person who misappropriates funds with the intent to later return the money to the rightful owner is still guilty of misappropriation. It also doesn’t matter if the misappropriation only lasted for a short amount of time.

Drug Crimes

What Does it Mean to Possess an Illegal Controlled Substance?

Although state and federal laws may vary, a person has possession of an illegal substance when that person knows of its presence and has physical control of it. A person also has possession of an illegal substance if that person has the power and intention to control it.
“Use” means using an illegal controlled substance not prescribed by a licensed physician or practitioner.

Examples of Illegal Controlled Substances

Examples of illegal drugs or narcotics include opiates and opiate derivatives, cocaine (and cocaine base), heroin, peyote, gamma-hydroxybutyric acid (“GHB”), and certain hallucinogenic substances.

What Does it Mean to Manufacture an Illegal Controlled Substance?

A person is generally guilty of manufacturing a drug when he produces an illegal substance by means of a chemical synthesis or a natural extraction. The manufacturing of an illegal controlled substance can also include the packaging or repacking of the substance or the labeling and re-labeling of its container.

What Does it Mean to Distribute an Illegal Controlled Substance?

A person is generally guilty of “distribution” when he transfers an illegal controlled substance to another person. The transfer can be:

  • Actual – a person physically transfers the controlled substance to another.
  • Constructive – evidence of a large quantity of drugs packaged in small bindles may infer that a person’s drugs are “packaged to sell”.
  • Attempt – a person attempts to transfer the controlled substance to another, but is otherwise prevented from doing so.

What is Criminal Possession of an Illegal Controlled Substance?

Criminal possession is the holding of property that is illegal to possess.

  • Actual Possession – a person has actual possession of an illegal substance when it is physically on their person.
  • Constructive Possession – it is possible for a person to be in possession of an illegal substance even when it is not on their physical person.

Working with a Criminal Defense Lawyer

Being accused of a white collar crime like money laundering is not to be taken lightly. While buyers might face penalties if it has been discovered that they have provided false names, the penalties will be far worse if it’s discovered that money laundering has also taken place.

The sooner a Los Angeles white collar crimes defense attorney can get involved in a white collar case, the better. If you have not already been charged with a criminal offense but believe you are the target of an investigation, contact our Los Angeles law office immediately. We may be able to help you avoid being charged with a crime.

If you have been charged with a white collar crime, we may be able to negotiate a resolution to your case with the prosecution in which you pay restitution and either avoid a criminal conviction, plead guilty to a lesser offense, avoid incarceration or significantly limit any time you may be required to serve. As a former prosecutor, Los Angeles white collar crimes attorney Daniel Perlman is highly adept at communicating with prosecutors and understands the critical importance of proactive case management. Finding creative solutions to criminal problems is a hallmark of our firm.

Daniel R. Perlman, Esq.
Law Offices of Daniel R. Perlman