Andrew Blankstein and Tracy Connor, CNBC, March 3, 2015

Southern California apartment complexes that doubled as “maternity hotels” for Chinese women who want made-in-America babies were raided early Tuesday, capping an unprecedented federal sting operation, officials said.

NBC News was on the scene as Homeland Security agents swept into The Carlyle, a luxury property in Irvine, California, which housed pregnant women and new moms who allegedly forked over $40,000 to $80,000 to give birth in the United States.

“I am doing this for the education of the next generation,” one of the women told NBC News.

None of the women were arrested; they are being treated as material witnesses, and paramedics were on hand in case any of them went into labor during the sweep.

Instead, the investigation was aimed at ringleaders who pocketed hundreds of thousands of dollars tax-free to help Chinese nationals obtain visas and then pamper them until they delivered in an American hospital at a discount, court papers show.

All told, the feds raided 20 locations in Los Angeles, Orange and San Bernardino counties, targeting three competing birth tourism schemes, officials said.

The organizers who allegedly ran the Carlyle site, Chao Chen and Dong Li, used a website to drum up business, touting the benefits of a child with U.S. citizenship: 13 years of free education, low-cost college financial aid, less pollution, and a path for the entire family to emigrate when the child becomes an adult.

Clients were counseled on what lies to tell to obtain a tourist visa; how to fly through Hawaii, Las Vegas or Korea to avoid suspicious immigration officers at Los Angeles International Airport; and how to disguise their pregnancy in transit, according to search warrant affidavit unsealed Tuesday.

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The women’s handlers provided transportation for doctor visits and trips to restaurants and shops, the court papers say. An agent tailing one of the suspects followed them to Target and Babies R Us.

They were funneled to several Orange County hospitals to deliver, but they didn’t pay full price–approximately $25,000–for medical services, officials said. Instead, they got reduced rates for the indigent, ranging from nothing to $4,000, the court papers say.

That translated into big losses for the hospitals. More than 400 babies linked to the scheme were born at just one facility in a two-year period, investigators said.

The investigators discovered that the parents of one baby born in April 2014 who paid the hospital just $4,000 were spending money at the Wynn Las Vegas Hotel, Rolex and Louis Vuitton, using an account with almost a quarter of a million dollars in it.

The fraud, authorities say, went beyond the visas.

Li didn’t file a U.S. tax return and Chen didn’t declare hundreds of thousands of dollars in proceeds, the affidavit says. In addition, Chen and his wife, Jie Zhu committed marriage fraud, pretending to be divorced so they could get “green-card” marriages in the U.S., the feds charged.

The phenomenon of foreigners coming to the U.S. to have babies is not new but appears to be growing. One study found that 40,000 children a year are born to women here on a travel visa, the affidavit notes.

Tuesday’s crackdown marked the first large-scale federal probe of birth-tourism kingpins in the continental U.S.

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