The federal prosecutor’s office in Massachusetts announced last Wednesday that the third suspect, James Lee, who operated high-end brothels in Massachusetts and Virginia, pleaded guilty in court. He admitted to being involved in running upscale brothels and fraudulently obtaining over $580,000 in COVID-19 relief funds. He is set to be sentenced in April this year.
Since November 2023, the federal prosecutor in Massachusetts has been prosecuting three Asian individuals, accusing them of establishing multiple brothels in the greater Boston area and eastern Virginia to organize interstate prostitution activities. Additionally, Lee and his accomplices conspired to launder the profits of the prostitution network through concealing the criminal sources of income.
The clientele of the brothels included elected officials, high-tech and pharmaceutical company executives, military officers, government contractors with security clearances, doctors, professors, lawyers, scientists, accountants, and professionals from various fields. Prosecutors stated that these clients paid up to $600 per hour, primarily engaging with Asian women.
James Lee leased upscale apartments in Boston and eastern Virginia to operate brothels, being the sole legitimate tenant of at least six brothel locations. To do so, he used his own name, false identities, and even forged signatures of others on lease agreements. The main suspect, Han Lee, paid him a commission of about $1,000 per valid lease agreement each month. James Lee also acted as the liaison between the prostitutes in the brothels and the property management, coordinating maintenance and inspection matters.
Furthermore, Lee and his accomplices deposited hundreds of thousands of dollars in cash earnings into personal bank accounts and further concealed the proceeds of the crimes through peer-to-peer transfers. They also utilized cash from the prostitution business to purchase money orders below the statutory reporting threshold to pay for the rent and utilities of the brothels.
According to the indictment, this prostitution ring may have had hundreds of clients. Currently, 28 men have been charged for patronizing the aforementioned brothels, but Massachusetts courts have not yet decided whether to publicly try their cases. The main suspect, Han Lee, pleaded guilty in September 2024 and is expected to be sentenced on March 19.
According to the announcement, from March 2020 to September 2021, James Lee attempted to defraud loans from the CARES Act and Small Business Administration (SBA) programs, including Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP), by submitting false information.
He used third-party personal identification information to submit false loan applications and opened bank accounts to receive fraudulent funds. Additionally, Lee applied for PPP loans and EIDL funds under fictitious business or shell company names, submitting false tax documents and lease agreements to support the applications. Through these schemes, Lee obtained at least $580,000 in ill-gotten funds.
Of the three charges James Lee admitted to, conspiracy to commit prostitution carries a maximum sentence of five years in prison and a $250,000 fine. Money laundering conspiracy carries a maximum penalty of 20 years in prison and $500,000 fine, or twice the amount of laundered money (whichever is higher). Telecommunications fraud has a maximum penalty of 20 years in prison and a $250,000 fine or double the fraud losses.