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Happy Ending For Law Enforcement in Spa Crackdown

About ten years ago the Ann Arbor (MI) Police Department’s Deputy Chief came to me with a proposal. AAPD wanted to know if the FBI would be willing to help investigate Asian spas in Ann Arbor, and prosecute them federally. At the time I was the senior agent in the local FBI office and knew next to nothing about Asian spas. I was not even aware there were five such spas operating in the city.

I consulted with the local U.S. Attorney’s Office (USAO) and FBIHQ. I got the go-ahead and learned there were other similar cases being pursued elsewhere in the country. Further there were national implications involved, e.g., organized crime, indentured servitude, immigrant smuggling, and sexual exploitation, which the then US Attorney General had made a priority. I went back to AAPD and told them we could pursue the spas federally, but only if AAPD was willing to commit to a long-term investigation. To AAPDʼs credit, it made that commitment. (I wanted to codename the case Operation Hoedown, but due to some HQ’s sensibility issues, we had to settle for Seoul Provider.)

Ten years later, this story is worth recounting. These type of spas still operate around the country and exploit vulnerable women and degrade communities. We can’t ignore them. But what’s particularly nice about this story is how the FBI and the local police worked so well together, and in the end, the police department reaped the financial rewards from forfeitures.

At the onset of the case, the AAPD understood that the spas could be shut down easily like the speakeasies of the prohibition era, but to have any lasting impact the owners had to to be identified and prosecuted.  It was relatively easy to show there was prostitution occurring in these spas, the trick (no pun intended) was to prove the owners had knowledge that prostitution was occurring, and they were
profiting from it.

All of the spas in Ann Arbor were run by Korean Americans and surveillance and telephone pen-registers indicated some interaction between spas in Ann Arbor and all over the country. All of the spas that we became aware of in Michigan and Ohio were run by Korean Americans. All of these spas had a very similar operating procedure. The working girls were almost exclusively Asian and lived on the premises and seldom left. They moved from one spa to another after six weeks to two months. The spas were usually managed by older Asian women, who were in effect madams. Often the spas would have the working girls sign agreements as independent contractors, thus helping give the owners plausible deniability as to knowledge of sexual activity. The working girls were in almost all cases uncooperative with law enforcement and could not be relied upon as potential witnesses. Despite them being exploited, most had very limited skills, English language ability and were in an indentured servitude status. Life was not good by American standards, but pretty good compared to what they had come from.

The spas operated seven days a week with very long hours, e.g., 10:00 a.m. to 2:00 a.m. (not the kind of hours observed in legitimate massage parlors). The spas would set fees such as $45 for a half hour and $60 for an hour. Generally these initial fees went to the house. The money for sex was added to the initial fee and was negotiated based on the sexual activity. The money for sex was split between the house and the girls. All of the spas we investigated accepted credit cards. This turned out to be a key element in proving the owners knowledge. The owners would establish the merchant account to enable them to accept credit cards. Thus, all proceeds from the credit cards went directly to the owner. So if a customer were to pay his initial fee with a credit card and then within 10 or 15 minutes have a second charge in excess of $100 made on the card it was obvious what was occurring and difficult for the owner to argue they had no knowledge of the sexual activity. (All the credit transaction information was obtained via subpoena.) This coupled with physical surveillance, which included “trash pulls” (the trash pulls revealed among other things, used condoms and daily business records)   and evidence obtained when we ultimately executed search warrants resulted in all of the spa owners being convicted of federal felony charges.

Most of these charges were based on Interstate Transportation In Aid Of Racketeering (ITAR)-prostitution statute (18USC1952), but there were also immigration statutes that were applicable. Also if the owners were not US citizens, they were subject to deportation upon conviction.

The reward for AAPD’s commitment to a long-term investigation was that they received most of about $1 million in criminal forfeiture proceeds seized from the convicted owners.
Yes, for law enforcement, it was a happy ending.

 

Greg Stejskal

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