LOS ANGELES — Attorney General Jeff Sessions called it “one of the largest residential forfeiture actions in American history.”
In early April, local and federal authorities descended upon 74 marijuana grow houses in the Sacramento area they say were underwritten by Chinese organized crime. They filed court paperwork to seize the properties, worth millions of dollars.
Federal officials allege that legal recreational marijuana states like California, Colorado and Washington, where enforcement of growing regulations is hit-or-miss, have been providing cover for transnational criminal organizations willing to invest big money to buy or rent property to achieve even bigger returns.
Chinese, Cuban and Mexican drug rings have purchased or rented hundreds of homes and use human trafficking to bring inexperienced growers to the United States to tend them, federal and local officials say.
The suspects are targeting states that have already legalized marijuana "in an attempt to shroud their operations in our legal environment here and then take the marijuana outside of the state," said Mike Hartman, executive director of the Colorado Department of Revenue, which regulates and licenses the cannabis industry. Authorities say they've seen an increase in these "home grows" since the launch of recreational pot sales in Colorado.
While California and Washington have mainly seen organized criminals from China buying homes and converting them into grow houses, Colorado has largely been grappling with Cuban and Mexican-led cartels, said Sheriff Bill Elder of the El Paso County Sheriff's Office in Colorado.
"They have found that it's easier to grow and process marijuana in Colorado, ship it throughout the United States, than it is to bring it from Mexico or Cuba," Elder said.
A 'massive' marijuana network
In El Paso County, NBC News witnessed firsthand the damage a commercial-scale cannabis grow can do to a home otherwise built for an average American family. Growers pose as legitimate renters, and by the time authorities disrupt their operation, homes have been gutted and trashed.
"We've fallen through floors," U.S. Drug Enforcement Angecy Special Agent Randy Ladd said. "The electrical damage, they draw so much current that you'll see, in some places, the wires are fused inside of the electrical box. And — a lot of people — they don't wanna pay the high electric bills. So what they do is they take jackhammers and pickaxes and they cut through the foundation of the house, so that they could steal the power."
One of the biggest busts so far came last June, when the Colorado attorney general’s office announced that “a massive illegal interstate marijuana distribution and cultivation network stretching from Colorado to Texas” had been dismantled. It was allegedly Chinese-connected, Ladd said.
Authorities said the network was responsible for securities fraud, millions of dollars of laundered cash, 2,600 “illegally cultivated” marijuana plants and 4,000 pounds of harvested cannabis, according to the Colorado attorney general's statement.
The operation took place in 18 warehouses and storage units and 33 homes, mostly in the Denver area, authorities said. “These seizures are believed to only scratch the surface,” the office said.
Ladd alleged that some Chinese crews cover immigrants’ costs of traveling to America in exchange for work in the grow houses. “It’s like indentured servitude,” he said. “It is a form of human trafficking.”
The workers often fly from China to Belgium, and from Belgium to Mexico, before making asylum claims at the border and then disappearing by the time they’re scheduled to tell their stories in court, Ladd said. Often when grow houses are raided, immigration fugitives are discovered, he said.
The grow homes are usually purchased by shell property management companies, Ladd said. “These growers can hide in plain sight,” he said.
How foreign cartels operate in the U.S.
The Sacramento-area raids, which also struck Calaveras, Placer, San Joaquin, El Dorado, Yuba and Amador counties, shed some light on how many of the foreign rings operate.
Northern California-based DEA Special Agent Casey Rettig said suspects send cash to the United States in $9,999 increments, just below the mandated reporting threshold, and receive funds from China that fly under that nation’s $50,000 foreign spending limit. They then purchase homes with the help of cash lenders instead of traditional mortgage firms.
Last fall, a scenario fitting that pattern unfolded in Grays Harbor County, Washington, southwest of Seattle, as a drug task force busted an alleged cultivation ring funded by organized crime in China.
More than 40 suspects were arrested and $80 million worth of cannabis was seized, the Grays Harbor County Sheriff’s Office said. “The majority of these homes were purchased with cash, and information was developed that these purchases were conducted by Chinese nationals involved in organized crime,” according to a statement from the Sheriff’s Office.
And just this month, search warrants were served at 19 locations in the Puget Sound area of Washington state, a federal official who did not want her name used said. The ring was allegedly run by three Chinese nationals who produced thousands of pounds of cannabis destined for greater New York, the U.S. attorney’s office in Seattle alleges.
The suspects, who face drug conspiracy charges, purchased homes with the help of multiple wire transfers from China that included dollar figures — $2,000 to $5,900 — they believed would fly under the radar, according to a federal complaint.
Ultimately it was the houses’ exorbitant electricity use — up to 38,477 kilowatt hours in one day versus the American average of just 30 — that made them targets of a federal investigation, according to the filing.
Even a single grow house can contain a large marijuana operation. In April, police in Pomona, California, an exurb in Los Angeles County, announced they discovered a 23-room grow house allegedly run by Chinese nationals. Fifty-five-hundred marijuana products, including 2,900 plants and nearly 21 pounds of cannabis, were seized, police said.
It’s like indentured servitude. It is a form of human trafficking.
“The grow operation used advanced systems of lighting, air conditioning, fans, exhaust blowers and air-filtering systems to control the climate inside the buildings and the odor of marijuana,” according to a Pomona police statement.
Pomona police spokeswoman Aly Mejia said a gun and $6,900 in cash were also found.
The DEA’s Rettig, speaking from her base in San Francisco, said the Chinese operations are “illegal under state law.” In California, marijuana growers, producers and retailers need state and local licenses. Cities can opt out and ban such businesses altogether.
Rettig said even with the Golden State’s sky-high housing market — the median price of a home is $535,100, according listings site Zillow — overseas criminals know that “marijuana can fetch three times as much out of state.”
“There’s a great profit motive in it,” the DEA's Ladd said. “In Colorado, marijuana legalization has magnified the black market. The standard price per pound here is $2,000, but they can get $3,500 to $4,500 by shipping it back East. The profits are great there.”