“Diamond Merchant” Pleads Guilty to Conspiracy to Distribute Marijuana, Money Laundering, and Transporting Stolen Gem Stones
MINNEAPOLIS – In federal court on January 31, 2012, Richard Allen Kay, age 39, of Zumbro Falls, Minnesota, pleaded guilty to conspiring to distribute more than 1,000 kilograms of marijuana, money laundering, and transporting stolen gem stones. Kay, who did business in Minnesota as ‘Kay Diamonds,’ pleaded guilty to one count of conspiracy to distribute and possess with intent to distribute marijuana and one count of conspiracy to engage in the interstate transportation of stolen goods, along with 11 counts of money laundering. Kay, who was charged in a superseding indictment on December 5, 2011, entered his plea before United States District Court Judge Ann D. Montgomery. Kay did not enter into a plea agreement with the U.S. but, rather, offered a “straight plea” to all 13 counts in the indictment.
In court, Kay admitted that between January of 1995 and March of 2011, he conspired with others to distribute and possess with intent to distribute more than 1,000 kilograms of marijuana. The defendant testified that he specialized in high-quality marijuana, worth about $5,000 per pound. He also admitted that from 2001 through 2009, he transported stolen merchandise, specifically, gem stones. To that end, he conspired with an unnamed co-conspirator who was employed at the time at Sterling Jewelers, Inc. Sterling is a large distributor of diamonds, with more than 1,300 stores nationwide. The unnamed co-conspirator had access to company jewels, and supplied Kay with diamonds and other jewels stolen from the company. Kay then transported those stolen gem stones to Minnesota. According to the superseding indictment, Kay made about ten trips between Minnesota and Ohio for that purpose between 2001 and 2009 and transported a total of between 50 to 100 stolen gems.
Kay also admitted in court to 11 separate counts of money laundering. Kay testified that on three occasions, he conducted financial transactions with banks that involved the proceeds of drug trafficking. Kay also admitted that on eight occasions, he engaged in conduct known as “structuring.” Banks, merchants, and even post offices are required by law to submit a currency transaction report to the Secretary of the Treasury when cash transactions exceed certain amounts, specifically, $10,000 for banks and merchants and $3,000 for the post office. Those requirements are designed to track the flow of cash in the U.S. Kay intentionally conducted multiple smaller transactions for the purpose of evading the requirements, which is a violation of federal law.
Four additional men from southern Minnesota have already pleaded guilty for their roles in the marijuana distribution conspiracy. All four admitted distributing marijuana as well as helping Kay hide assets generated from the conspiracy. On January 30, 2012, Jamie Allen Davidson, age 40, of Rochester, pleaded guilty to one count of conspiracy. Davidson joined the conspiracy in 2005.
On October 28, 2011, Jason Ray Meek, age 37, and Shawn Robert Milliken, age 32, both of Rochester, pleaded guilty to one count of conspiracy. In their plea agreements, they admitted the marijuana was transported from other states to Rochester, where it was stored in several residences and storage units. From there, it was delivered to distributors. Milliken joined the conspiracy in 2003, and Meek joined in 2000.
On October 21, 2011, Brandon Christopher Lusk, age 37, also of Rochester, pleaded guilty to one count of conspiracy and one count of conspiracy to commit money laundering. Lusk admittedly formed a company called Rochester Reliable Rentals, which acquired nine Rochester properties. Lusk knowingly financed improvements and renovations to those properties with proceeds of the marijuana conspiracy. Lusk joined the conspiracy in 2005.
For their crimes, the defendants face a potential maximum penalty of life in prison for conspiracy to distribute marijuana. In addition, Kay faces a potential maximum penalty of five years in prison for transporting stolen property. He also faces a potential maximum penalty of ten years on each money laundering count and five years on each structuring count. Judge Montgomery will determine the sentences at future hearings, not yet scheduled.
The federal government is also seeking forfeiture of assets alleged to have been proceeds of Kay’s illegal activities. The assets, including cash, jewelry, a boat, a luxury automobile, and lakeshore property in Zumbro Falls, are worth hundreds of thousands of dollars. Forfeiture is available if property can be shown to be the result of illegal activity or acquired from the proceeds of illegal activity.
This case was investigated by the U.S. Drug Enforcement Administration, the Internal Revenue Service-Criminal Investigation Division, the Wabasha County Sheriff’s Office, the Southeast Minnesota Drug Task Force, Minnesota Bureau of Criminal Apprehension, and U.S. Postal Inspection Service. The case is being prosecuted by Assistant U.S. Attorneys Julie E. Allyn and Steven L. Schleicher.