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New Charges

Kelly McReynolds sits on a broken marble lion outside her business I Do, I Do Wedding Boutique Friday as she talks about her legal troubles. The McReynolds family faces new allegations of forced labor and money laundering stemming from two year investigation that culminated in their July 2011 arrests. (Jake Bacon/Arizona Daily Sun)

A Flagstaff family charged with running what investigators called a “modern-day slavery” operation out of their downtown lingerie and adult shop will serve no jail time thanks to a plea deal made with federal prosecutors.

A final deal with Huong Thi “Kelly” McReynolds, owner of the I do! I do! Wedding Boutique and Sweet Nothings Lingerie store, was filed by a U.S. District Court Judge in Phoenix yesterday.

The plea deal calls for her to serve five years of probation and make 60 monthly payments to the seven named victims, which will total $156,000.

Going into the hearing this week, the government had sought a sentence of 18 to 24 months in prison for Kelli McReynolds, as the guidelines for the felony called for.

The judge decided against any prison time.

A defense attorney for McReynolds said that his client had broken the law, but said the government’s claims were much-hyped and overblown.

“The government just completely overstated their case — overstated the amount of the loss,” said Alfred Donau, defense attorney for Kelly McReynolds. “They didn’t take into consideration room and board and the payments that were made.”

“And the argument that they were being held captive was utter nonsense,” he added.

None of the victims showed up to testify at the sentencing hearing.

The two-year investigation into the McReynolds family was dubbed Operation Broken Promises and resulted in the July 2011 arrests of Flagstaff residents Huong Thi “Kelly” McReynolds; her ex-husband, James Hartful McReynolds; as well as Joseph Minh McReynolds and Vincent Minh McReynolds.

Investigators with the U.S. Department of Homeland Security at the time referred to it as a case of “modern-day slavery.”

And a federal grand jury had added an additional 15 charges against the family last year. Those recent counts included forced labor and money laundering. Since the arrests, the family has continued to operate their Santa Fe Avenue businesses.

Kelly McReynolds, the main focus of the investigation, spent just one night in jail in July 2011 — as did the other defendants — and was released the day after her business was raided by federal agents.

But a plea deal reached earlier this summer arranged for McReynolds to plead guilty to one Class B misdemeanor offense for violations of the Fair Labor Standards Act and one count of felony visa fraud. That deal became final this week.

The other members of the family also received plea deals that did not include jail time.

LIED UNDER OATH

Attorneys for the defendants said that the government’s case crumbled when it became apparent that the victims had lied to immigration officials, FBI agents and the courts about what happened.

“Some of the victims had admitted that they had lied under oath — they lied about mistreatment because then the government gave them an avenue toward citizenship without doing any work,” Donau said. “They’re lawfully in the country at the courtesy of the U.S. government.”

However, as part of the sentencing, the judge determined the case did meet the definition of forced labor. He also ordered back wages, but not in the nearly half-million-dollar amount prosecutors had sought.

Prosecutors had claimed that the downtown Flagstaff business was run on slave labor starting in 2001. Within three years, the McReynolds family was traveling to Vietnam and arranging marriages to enlist more cheap labor.

One worker said she was paid $105 for two years of work. Another said she’d been paid $800 over the course of four years, while a third said she wasn’t paid at all for nearly a year. According to court documents, one worker claimed she’d been paid $1 for every five shoes she polished or three shirts she cleaned.

But the defense says the victims had exaggerated what they weren’t paid. The attorneys settled on $156,000 worth of unpaid back wages, several hundred thousand dollars less than initially alleged. And the McReynolds family will get to keep their assets, including homes and businesses, as long as they pay off the back wages.

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“The evidence was more than weak,” said Jeanette Alvarado, defense attorney for James McReynolds.

DENIED ALLEGATIONS

The family had denied the allegations from the beginning. Kelly McReynolds had suggested that the government was tricked by the victims, who she says were motivated by greed and jealousy.

The investigation was carried out by Immigrations and Customs Enforcement, the FBI, the U.S. Department of Labor, the U.S. Marshal’s Service and the IRS.

The crimes were alleged to have happened between September 2001 and September 2008. In all, the government said that five adult Vietnamese females, two Vietnamese girls and two Vietnamese men were brought into the country illegally and forced to work as slaves.

Investigators said that marriages were arranged to evade immigration laws and tuition was paid to maintain student visas. The victims told investigators that in Flagstaff, their papers were confiscated and they were forced to work under threat of being turned in to the police.

The initial indictment also said that McReynolds filed false reports with the Flagstaff Police Department against the workers and tried to have one of the workers deported by ICE when a man escaped from their home.

Prosecutors say that by 2001, the family was using slave labor to run their business. And in 2004, they started traveling to Vietnam to arrange marriages to enlist more cheap labor.

PAID ON COMMISSION

But McReynolds claims that she paid her employees based on commission. If they sold a dress, they got a cut of the sales, she said.

“All I did my whole life was try to help my family,” Kelly McReynolds said in an interview with the Daily Sun last year. “I’m in here seven days a week, 365 days a year. I feel like the whole town is against me,” she added.

Prosecutors and officials with the U.S. Attorney’s Office did not respond to repeated requests for comment on Thursday.

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