'Puppy laundering' ring dismantled — but affiliated for-profit business still selling dogs

Pet Luv — a strip-mall pet store in the shadow of Chicago’s Midway Airport — sold $1.1 million worth of Hobo K9’s “rescued” puppies in a two-year span, charging more than $1,000 for each dog.

Five miles further south, the Park Pet Shop “adopted out” a single goldendoodle puppy for $3,600.

Customers at both stores thought they were alleviating the country’s pet overpopulation problem by taking in a homeless puppy, giving it shelter, love and a new life.

But what these patrons took on faith as a good deed actually contributed to the issue. Despite what the puppies’ paperwork said, they had been professionally bred, most likely in a puppy mill, and were being passed off as rescues through an elaborate laundering scheme cooked up by three Iowans.

This “puppy laundering” ring, which netted the defendants hundreds of thousands of dollars each, was “dismantled” last week by the Iowa Attorney General, according to a news release.

But the for-profit puppy brokering business that helped facilitate the ring is still transporting animals across state lines, including on a March 16 trip to Washington state, a hot zone of the novel coronavirus.

The Attorney General previously alleged that Jolyn Noethe and Kimberly Dolphin of Britt, Iowa, and Russell Kirk of Ottumwa created animal rescue nonprofits to funnel purebred or designer dogs to stores in cities and states with bans against the sale of puppy mill pets.

Although these puppies were originally acquired from professional breeders, the defendants were able to mask their true origins by selling them to stores through two nonprofits — Hobo K9 Rescue of Britt and Rescue Pets Iowa of Ottumwa — a violation of the Iowa Consumer Fraud Act, among other offenses, according to a lawsuit filed in March 2019.

The defendants agreed last week to pay the state $60,000 and dissolve their nonprofit operations. Securing a dissolution “is like the ‘death penalty’ of consumer and charity fraud remedies — used only in extreme cases,” said Lynn Hicks, communications director for the attorney general’s office.

The “puppy laundering” lawsuit was settled by consent judgment, which allowed the defendants to end ligation without admitting guilt. Indeed, in court documents posted last week, the defendants again denied the state’s allegations.

Lawyers for Noethe, Dolphin and Kirk and their entities did not respond to requests for comment.

But because licensed entities can legally sell dogs to stores in states that don’t have laws about where animals are sourced, JAK’s Puppies, the for-profit company also owned by Noethe and Dolphin, is still moving animals. Despite harsh restrictions on movements due to the coronavirus pandemic, JAK's has driven more than 200 puppies the 25 hours from Iowa to Washington nearly weekly since the start of 2020.

“It is unlikely a judge would order the complete dissolution of a for-profit corporation,” Hicks said.

Iowa's judgment marked a "step forward," said Mindi Callison, executive director of the anti-puppy mill organization Bailing Out Benji, but she was “disappointed” that JAK’s is still operating as normal.

"We are certainly thrilled that the Iowa Attorney General was able to shut down these sham operations," Callison said. "But we had hoped JAK’s would face some kind of repercussion for their role in the puppy-laundering scheme.”

Calling their lawsuit “the first of its kind brought by any state attorney general,” Iowa Attorney General Tom Miller said in a news release he hopes the settlement shines a light on the practice of “puppy laundering.”

“This outcome should send a strong message to others who are thinking about engaging in similar fraudulent activities in Iowa,” Miller said.

How the laundering ring worked

A scheme like this one starts with a puppy.

If that puppy is bred at a puppy mill — a colloquialism for a large-scale breeding facility that puts profits above animal health and safety — to be sold at a pet store, it must first be sold to a broker. That broker acts as a middle man, transporting the dog from the breeder and selling it to a pet store in another state.

When states and cities started enacting bans against the sale of animals from puppy mills or breeding facilities, that system was effectively stalled.

Enter: Puppy laundering, which the Iowa Attorney General defined in its lawsuit as, “the purposeful masking of the genuine source of merchandise puppies from consumers and law enforcement.”

Puppy laundering is basically the old breeder-to-broker-to-store system, but with one new step. Now, instead of a broker selling directly to a store, the broker sells the puppy to an animal nonprofit who in turn sells — or “adopts” out — that puppy to a store.

The added step allows brokers to get around municipal puppy mill bans, while also providing cover to breeders with bad inspections or other unsavory histories.

In the Iowa case, Hobo K9 Rescue and Rescue Pets Iowa acted as the nonprofit rescue organizations and JAK's Puppies as the broker. Noethe and Dolphin co-own JAK’s and both had roles with Hobo K9. Kirk was the president, director, secretary and treasurer of Rescue Pets Iowa.

The two nonprofits exported at least 3,600 dogs, likely bred outside of Iowa, to stores in California, Illinois, Florida and New Jersey from September 2016 to September 2019, according to the Attorney General’s release.

During an investigation that preceded last year’s lawsuit, Hobo K9 exported 1,290 puppies in the almost two years between September 2016 and July 2018. Vet certificates showed all of these animals to be puppies — not older dogs as is typical for rescues — and of “designer” breeds like Pomeranians, Shih Tzus, Shibu Inus and Bichons.

Hobo K9 claimed in a mission statement sent to the Attorney General that the organization worked with breeders to “rehome” flawed or otherwise unneeded animals from breeding programs. They also said they did not take donations, instead asking for a fee of $25 when they rehomed dogs.

But the investigation showed they did not rehome any dogs in the state of Iowa and instead sent “rescues” to pet stores out of state.

Follow the money

Hobo K9 charged the stores where they sent rescue dogs a “pedigree fee,” the March 2019 lawsuit contended.

Those fees netted the organization almost $715,000 between September 2016 and July 2018. And the Attorney General believed Hobo K9 “continued to export large quantities after” July 2018, when the time frame under investigation ended.

Hobo K9 wrote “large checks” to JAK’s Puppies to cover “procurement fees” during this time, according to the investigation.

“The defendant’s funneling of money between non-profit and for-profit entities further underscores the inherently for-profit nature of their fraudulent puppy laundering operations,” the lawsuit said.

Because the defendants are officers in Hobo K9 and JAK’s, the lawsuit continued, “it appears they must claim to ‘rescue’ puppies from themselves — or from the for-profit puppy mill industry in which they participate.”

Pet Luv, the store near Midway, marketed the puppies they sold as being bred by Hobo K9 Rescue, not the for-profit breeders where the animals actually originated. The store acquired 765 “designer” puppies from Hobo K9 between 2016 and 2018 and sold most of those pets for more than $1,000 each — totaling $1.1 million in that two-year span.

The other Chicago pet store, Park Pet Shop, “adopted out” puppies at ridiculously high prices — including that $3,600 goldendoodle — a sure sign that the animals were not rescues, the lawsuit contended.

"In no event would dogs from legitimate rescues within Iowa be consistently transferred to new owners for fees of any kind more than $1,000," Tom Colvin, executive director of the Animal Rescue League of Iowa, said in a sworn affidavit.

Nor would rescues have "the time and resources necessary to transport dogs to new owners hundreds of miles away in order to make profits," Colvin added.

A new charity, and an old system

After the Attorney General started investigating Hobo K9, the defendants created a new charity, Rescue Pets Iowa, under which they could replicate the scheme, according to court documents.

Kirk’s home address appeared to be the office of Rescue Pets, the lawsuit said, and Noethe signed some vet certificates on behalf of the new organization.

There was “no legitimate reason” for Noethe to be a part of the new rescue, the lawsuit said.

Rescue Pets Iowa is also the subject of a separate puppy laundering lawsuit in California brought by Bailing Out Benji, the Iowa anti-puppy mill organization, which is represented by the Animal Legal Defense Fund. That lawsuit is ongoing, the group said this week.

In multiple court filings, including in the recent judgment, the defendants have denied these and all claims the attorney general made against them.

In cities and states that don’t have puppy mill bans, JAK’s Puppies is still free to do business, though the Attorney General succeeded in obtaining a permanent injunction against the company from engaging in “puppy laundering.”

At the time of its last USDA inspection in 2019, JAK’s had 233 puppies and no adult dogs at its property in Britt.

In 2018 and 2019, JAK’s purchased thousands of puppies from more than 160 breeders in 11 states, not including Iowa, according to veterinary records. JAK’s then transported and sold those dogs to pet stores in at least 12 states, those records show.

Since January, JAK’s has driven at least 218 puppies to two Washington stores — Puppyland in Puyallup and Puppyworld in Olympia — making deliveries nearly every week. And posts on both locations' Facebook pages showed they planned to have at least a dozen new puppies as of March 23.

“It is extremely irresponsible of this broker to transport animals over 1,600 miles one-way during a global pandemic where many businesses deemed non-essential have been shut down,” said Callison of Bailing Out Benji. “This not only puts the customers in danger but also the store employees and the transport drivers who are traveling through at least six different states just to deliver puppies.”

Though this particular ring has been shut down, Miller said that "increasing consumer and government scrutiny into puppy mills" could mean more of these puppy laundering schemes will pop up.

“Legitimate rescue groups have told us the activities of these sham nonprofits discredited and demeaned the good work that they do,” Miller said.

Courtney Crowder, the Register's Iowa Columnist, traverses the state's 99 counties telling Iowans' stories. Do you have an animal story? She wants to hear it! Reach her at ccrowder@dmreg.com or 515-284-8360. Follow her on Twitter @courtneycare.

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