LOS ANGELES – A business that rented safe deposit boxes in Beverly Hills to customers who wished to remain anonymous was fined $1.1 million Monday for money laundering after admitting it sought drug traffickers and other criminals as customers who often kept stacks of illegally obtained cash in their personal vaults.
U.S. Private Vaults, a Nevada-based company that operated on West Olympic Boulevard, was raided by the FBI and the U.S. Drug Enforcement Administration last year. Agents broke open boxes, seizing drugs, firearms and large amounts of gold bullion and cash, as well as other valuables, from about 396 of the rented boxes, according to an indictment alleging three separate conspiracies to violate federal law.
Since then, box holders who denied criminal culpability successfully petitioned a Los Angeles federal judge to have their property returned.
The company pleaded guilty in March through an attorney to a federal charge of conspiracy to launder money.
U.S. District Judge Mark Scarsi sentenced U.S. Private Vaults to three years of probation and the maximum fine of $1.1 million. He also ordered that a preliminary order of forfeiture of its business equipment be made final.
The federal government has remained silent about its case against the now-defunct business, whose board of directors has not been charged or named.
The company admitted to having “recruited as its customers drug traffickers and other criminals” who paid over $550,000 in cash and bitcoin in exchange for the anonymous use of safety deposit boxes “to store the proceeds of their offenses, most often in stacks of $100 bills,” according to the plea agreement filed in Los Angeles federal court.
Box rental payments were made to U.S. Private Vaults with the company’s knowledge that the money came from “the proceeds of the distribution of controlled substances and other crimes,” the plea agreement states.
The company would deposit the cash with banks, using the money to pay its costs for maintaining the business, “thereby promoting the distribution of controlled substances and other crimes by its customers,” federal prosecutors wrote.
Box holders seeking the return of their property said the government overstepped constitutional protections in efforts to uncover illegal activity. About $86 million in cash and millions more in jewelry and other valuables were reportedly seized, but specific criminal conduct has not been alleged against customers.
In the indictment, Los Angeles prosecutors allege that U.S. Private Vaults adopted “business practices that attracted customers in possession of proceeds from criminal offenses, including drug trafficking” and other crimes.
U.S. Private Vault customers were not required to use their names to access their boxes. Instead, the company used iris scans and other means to keep client identities secret.
The warrant authorizing the raid on U.S. Private Vaults stated that it “does not authorize a criminal search or seizure of the contents of the safety deposit boxes,” according to Rob Johnson, senior attorney with the Institute for Justice, which filed suit for the return of box contents on behalf of clients.
Despite the direction of the judge who signed the warrant, “the FBI opened every box in the vault and forced individuals to prove their own innocence to get their property back,” Johnson said.
The government abandoned its forfeiture claims against the institute’s clients and finished returning seized property late last year, Johnson said.