Chasing dirty money
Money being pulled from the account to buy luxury cars, designer clothing and more dope.
The high-speed spin cycle that makes dirty money clean.
"The faster you can spend the money to buy the dope, the faster you sell the dope, and the more money you make," said William O'Brien, the assistant Cook County state's attorney in charge of the office's Narcotics Prosecution Bureau. "One way to stop the velocity is to throw a wrench into the money aspect of it. Once it gets deposited and the bulk cash is turned into a blip on the computer screen, we can't do anything about it."
Police and prosecutors have always known Chicago street gangs launder their drug profits through seemingly legitimate businesses such as currency exchanges, cellular phone shops and beauty salons.
Until now, federal agents typically have investigated money-laundering. Local authorities said they did not have the expertise and manpower to concentrate on such time-consuming cases.
This year, however, money-laundering is at the heart of Cook County prosecutors' strategy for breaking up Chicago's drug operations, which they believe have already been splintered with the imprisonment of top gang leaders.
Millions of dollars are at stake, according to Ranell Rogers, 23, a member of the Mafia Insane Vice Lords.
"I make between $1,000 and $2,000 a week. It's my keep. I worked for a guy, and I counted his money one time and for a week, counted $1.2 million sitting on my table. But it was his money. I wanted to get my gym bag and run. But he knows where my house is. That was his take."
Cook County's initiative could become a model for the rest of the nation, backed with the clout of U.S. House Speaker J. Dennis Hastert (R-Ill.).
"It's a 180-degree turn," O'Brien said. "Everyone has always been following the powder, following the dope. Now we are going to follow the money."
In February, police and prosecutors opened three cases using the new approach.
Police and prosecutors will approach the Illinois Gaming Board to develop intelligence about drug dealers who launder their cash at riverboat casinos.
They will work with the Illinois Department of Revenue to obtain tax returns of drug kingpins and their associates.
They will go after cars and houses that drug dealers place in the names of their families and friends to throw off investigators.
They will try to bust car salesmen who sell luxury vehicles to drug traffickers in return for cash they know is dirty.
And for the first time, they will launch money-laundering cases against low-level "mules," the men and women who transport cash across state lines, with the hope of learning more about their drug bosses.
The strategy is alarming to one prominent defense lawyer who says it will ensnare innocent people who aren't directly involved in illegal activity.
"It's not going to work," said R. Eugene Pincham, a former state appellate judge and a civil rights attorney. "You can't expect car dealers to police the drug business. You are not going to get rid of drug trafficking by confiscating people's cars and property."
Pincham, who equates the war on drugs to the government's failure to eradicate illegal liquor sales during Prohibition in the 1920s, expects prosecutors will run into constitutional problems when defense attorneys challenge their expanded use of the state's money-laundering statute.
But O'Brien, who is running for judge, said prosecutors need to become more innovative in their fight against drug dealers, whose methods of hiding money have become ever more creative.
Cashing in
The jangling world of casinos--from the riverboats that ring Chicago to the luxury palaces of Las Vegas and Atlantic City--is one of the favorite places for drug dealers to launder their cash.
A few undercover cases have demonstrated to police and prosecutors that casinos are a rich resource for money-laundering.
One of those cases came to light in 1997. Police were tailing one dealer when he led them to Las Vegas.
On one trip, the Chicago drug distributor sidled up to a cashier's window at a busy casino with $103,000 in money orders. Money orders are easier to transport than stacks of bills.
Like other big-time drug dealers, he was fully aware of federal money-laundering laws, police say. He kept the money orders at less than $3,000 each because the currency exchanges where he bought them were required to report any sales of higher amounts to the federal government. Breaking down large cash deposits or exchanges into smaller amounts is a common money-laundering technique called "smurfing.''
He slid the inch-thick bundle to the cashier and walked away with colorful stacks of gambling chips, many of them black, the $100 denomination.
At that point, the piles of cash he earned from drug sales on Chicago streets had already been laundered twice: once through currency exchanges and next through the casino.
The chips were a form of untraceable currency that he could carry to his hotel room, where he hooked up with his Texas cocaine supplier.
The Chicago dealer, whom police won't identify because the investigation continues, gave $91,000 in chips to the Texan for a future delivery of coke and cashed the remaining $12,000 in chips for himself.
Both men could claim they won their cash at the craps and blackjack tables.
The drugs were later delivered and made their way to five cities, including a street gang in Chicago, police say. Over six months, the Chicago man laundered more than $2 million in Las Vegas at three casinos that police won't identify.
"They try to conceal it as a gambling junket rather than a drug junket," said Chicago police Sgt. John Lucki, a member of the department's Financial Crimes Unit created last year in the anti-money-laundering effort. "They don't have to meet in an alley and exchange drugs there. It's less risky."
Echoes of Secret Six
Such schemes were the topic of a closed-door meeting on the fourth floor of a downtown office building last spring that harkened back to the "Secret Six," the Citizens Committee for the Prevention and Punishment of Crime, which met covertly in a Loop office to draw up a battle plan against Al Capone more than 70 years ago.
At the March meeting was House Speaker Hastert, who gave police and prosecutors a mandate: Focus on money.
Chicago police Supt. Terry Hillard and his top aides, along with O'Brien and other prosecutors, were invited to the meeting by Tom Donahue, head of the High Intensity Drug Trafficking Area, a federally funded agency that works with 38 Chicago area law enforcement groups to help them combat drug trafficking.
Speaking from his Capitol Hill office, Hastert said he remained concerned that heroin continues to flood Chicago's streets. To cut the pipeline, he pledged more money for the crackdown on money laundering.
The drug trafficking office is asking for about $15 million in federal funding this fiscal year--triple what it got in last year's budget, Donahue said.
"We have learned a lot about money-laundering because of terrorism," Hastert said. "Terrorists are using grocery coupons to launder their cash for their programs. We lost more than 2,000 people in New York City, but we lose 20,000 people a year because of drugs and drug violence. Nobody would grow this stuff or smuggle it or hawk it on the street corners if they couldn't get the money into the pockets of the drug lords. Nobody talks about money-laundering, but it is the key."
Hastert said he thinks more hasn't been done to close the money pipeline because of resistance from bankers.
"Nobody wanted to step on anybody's toes or get bankers in trouble, but that is the crux," he said.
Although state prosecutors have not brought charges in any money-laundering cases since that March 2001 meeting, Hastert said he is satisfied with the steps they are taking. On Jan. 23, prosecutors hashed out their plans with the Chicago police at the department's Organized Crime Division in Homan Square--a sprawling, red-brick former Sears distribution center where confiscated money and drugs are stored, and where narcotics and gang investigators work in a labyrinth of offices.
The Republican from far west suburban Yorkville said he hopes federal authorities, including new U.S. Attorney Patrick Fitzgerald, will step up their efforts, too.
"It's something the feds could do a better job of," he said.
Heroin capital
From their low-key afternoon meeting, O'Brien and others began drawing up a blueprint to go after gang money. They have secured a $300,000, 18-month federal "seed" grant to hire an assistant state's attorney to handle money-laundering cases, an investigator and a part-time auditor.
One of their aims is to slow the brisk sales in open markets, in particular of South American heroin, which now dominates the West Side. Suburban teens are creeping down the side streets near Garfield Park in Chevy Suburbans and their mothers' Volvos, unarmed, stopping to roll down their windows and hand a stranger $40 or $50 in exchange for a plastic baggie of heroin.
The quick-fire deals are completed in minutes, and the teens are back on the Eisenhower Expy., returning to their families' large homes in DuPage County. Some of these junkies are A and B students; some are enrolled in colleges. To feed their habits, they take their chances, sometimes even walking at 1 or 2 a.m. through darkened neighborhoods where most of the city's homicides are tallied.
Few of them die of violence in these drug buys--gangs forbid members from hurting or robbing their customers. But many wind up in the hospital. More heroin users visited Chicago area emergency rooms in 2000 than in New York and other major cities, and heroin-related deaths here rose from 224 in 1996 to 457 in 1999, according to the latest available statistics from the federal government. Experts say the problem is worsening.
"Chicago is the heroin capital of the United States," Donahue said. "We have not been successful at all when it comes to domestic money-laundering. My goal is to determine where the money goes when it leaves the street."
Both Republican Joe Birkett and Democrat Lisa Madigan, who are running for state attorney general, plan to target money laundering by gang members, according to both campaigns.
It was government bean counters--not federal agents armed with machineguns--who took down Capone in 1931. The legendary mob boss made his fortune supplying bootleg liquor during Prohibition.
Since then, big financial cases involving gangsters have typically been handled by the feds, and not local prosecutors.
About two years ago, Congress changed the law to make it easier for federal authorities to seize suspected drug money. Now they simply must prove the money was tied to criminal activity, when in the past they were required to establish a money-laundering scheme, FBI spokesman Frank Bochte said.
Other changes, however, were designed to protect innocent people from government seizures, Bochte said. Strict timetables were set up for the government to notify people of seizures and to file forfeiture lawsuits, he said.
"We can't hold on to property for years," Bochte said. "It keeps everybody honest."
State prosecutors long have used forfeiture laws to take away property and money linked to the drug trade, but they rarely have used the state's money-laundering statute to launch criminal cases, O'Brien said.
One of the reasons: They were not often given access to key state tax forms because the Illinois Department of Revenue considered their requests a "fishing expedition," O'Brien said. His office is trying to forge a stronger relationship with revenue officials, he said.
By building a tax case against a suspected gang member at the same time they launch a drug investigation, prosecutors can get a judge to approve wiretapping, search warrants and access to state tax forms simultaneously, O'Brien said.
"When you broaden narcotics investigations to look at the financial aspect of it, you now uncover a slew of information, potential witnesses and potential informants on the dope end, as well as on the money end," he said.
Among the targets are drug dealers' family members who hide money for them so it doesn't show up on cops' radar screens.
A safe deposit key
One such case was exposed in the 1980s when police arrested a drug dealer with several kilos of cocaine, said Lucki, the Chicago police sergeant.
Along with the drugs, police found a key to a safe deposit box. They eventually tracked down the box, but not before the man's elderly mother got to the stash of money first.
When police showed up at her home, they caught her throwing thousands of dollars in cash out of a first-floor window of the apartment she shared with her son.
She eventually admitted to police that the money belonged to him. But she insisted it was being used in a noble way.
"It turns out she had two sons, one that was arrested with the kilos of cocaine and another who was going to medical school," Lucki said. "The one son was paying for the other's education. The mother knew she needed the money for tuition."
Other targets are businesses that take in drug money, allowing gang-connected owners to claim that the cash came from customers' purchases.
Several examples emerged in the federal prosecution of the Gangster Disciples in the 1990s.
Police officer Sonia Irwin was sentenced to more than 12 years in prison in 1997 after prosecutors showed that a high-ranking gang member used drug money to buy a seafood restaurant, June's Shrimp on the 9, in Irwin's name.
In addition to investing drug profits in the restaurant, the gang leader, Gregory Shell, used the restaurant to collect "street taxes" from lower-level drug dealers and held gang meetings there.
The investigation led to a life sentence against Larry Hoover, chairman of the Gangster Disciples. Other gang leaders, including Gustavo "Gino" Colon of the Latin Kings, have been imprisoned in recent years, causing internal turmoil in those gangs and others.
"I think we have become a victim of our own success," said Harvey Radney, deputy superintendent of the Chicago Police Department's Bureau of Investigative Services.
Once the gang hierarchy is damaged, lower-level gang members jockey for leadership positions, Radney said. They are willing to take more chances to carve out business, leading to more outbreaks of violence.
But the breakdown of gang leadership can work in prosecutors' favor as they launch their new initiative, O'Brien said.
"This is an informanch business. The one thing we have as a tool and advantage over them is we can use paranoia," he said. "They employ very weak people. To save their own throats--or their families--people are willing to turn in other people."