OFFICIALS SAY RAID AND 10 ARRESTS WILL SLOW METH TRADE

East Bay Chemical Wholesaler Shut Down

A Hayward chemical wholesaler has been shut down and 10 people have been
arrested in a case law-enforcement authorities say will put a huge dent in
California's methamphetamine trade.

Federal and state drug agents and local police served search warrants early
Thursday morning on seven sites in Oakland and one each in Hayward, San
Leandro and East Palo Alto. At the top of the list was All Discount
Laboratory Supply on American Avenue in Hayward, which has been under
investigation for conspiracy to sell chemicals used in making methamphetamine.

"I would not be surprised to see a tremendous drop in the amount of illicit
methamphetamine on the streets of Northern California ... until the
manufacturers can find another source of these chemicals to start over
again," said Bob Elsberg, senior special agent in charge of the state
Bureau of Narcotics Enforcement's San Francisco office.

Alameda County Narcotics Task Force Lt. Paul Wallace said All Discount
supplied freon to major methamphetamine producers statewide.

"The chemicals that these guys were (selling) were going to big labs ... in
the Central Valley. They literally had hundreds of dump sites," Wallace
said Friday, referring to investigators' finding empty, five-gallon freon
cans with All Discount markings as far away as San Diego and Los Angeles.

Wallace and Lowery Leong, assistant special agent in charge of the Drug
Enforcement Administration's San Francisco office, would neither confirm
nor deny the case's possible links to Russian organized crime, but Wallace
said the investigation continues and it "could go higher."

The investigation also probably will delve into whether All Discount was
set up from the start as a criminal "front," and whether it received its
chemicals legally.

All Discount's co-owner, Mark Alexander Kesel, 43; its manager, Vladimir
Kotlyarenko, 43; warehouseman William Albert Gifford, 44; and employee
Diane Marie Engle, 43, were arrested and charged with unlawful distribution
of a chemical that can be used to make a controlled substance; aiding and
abetting methamphetamine manufacture; and conspiracy. If convicted, they
could face 10 years to life in federal prison and up to $4 million in fines.

Also arrested on similar charges were six members of what Elsberg called a
Mexican methmaphetamine-making ring. They are Arnulfo Ochoa Navarro, 33;
Maria Dolores Silva Navarro, 31; Juanita Navarro, 25; Jose Manuel Navarro,
23; Domingo Lopez, 19; and Cristobal Vera Sandoval, 23.

Elsberg said this group has bought 24,000 gallons of freon since 1997 --
enough to make about 34 tons of methamphetamine, worth about $297 million
on the street. In that same time, All Discount provided almost all of
California's freon supply, Elsberg said; it bought 58,000 gallons of freon
for resale, which is enough for 87 tons of methamphetamine worth $696 million.

U.S. Magistrate Judge Wayne Brazil of Oakland on Friday ordered all 10
defendants jailed at least until a bail hearing next Wednesday.

Methamphetamine, a stimulant also known as "crank" or "speed," is most
often snorted, smoked or injected and can be made in small labs from
chemicals and over-the-counter drugs. Freon is used in the final stages of
production, causing the pure form of the drug to separate from other
chemicals. "Freon doesn't have that much of a legitimate use today,"
Elsberg said, adding it's needed in relatively small amounts for
refrigeration, air conditioning and other uses. He said police guess about
90 percent of the freon All Discount sold was going to methamphetmine
producers.

Elsberg said agents who raided All Discount on Thursday seized 37 55-gallon
drums full of freon, and about as many empty drums.

He also said that while almost nine out of 10 methamphetamine labs seized
in California last year were not operated by Mexican nationals, those that
were operated by Mexican nationals were much bigger operations, accounting
for 90 percent of the state's total meth production.

Hayward Police narcotics squad Sgt. Tom Perry noted methamphetamine labs
are dangerous: the chemicals are highly explosive, and the drug-making
process produces toxic gases. Hayward finds five to eight such labs each
year, he said.

All Discount registered with the state as a company in 1995 and opened in
Hayward in 1996, taking out a hazardous materials storage permit, according
to Hayward Fire Department records. Since then, inspectors have regularly
visited the site and have not found any major violations, records show. The
most recent inspection was Sept. 19; inspectors found only routine code
violations.

The United States Business Directory lists All Discount as a chemical
retail company doing $500,000 to $1 million in sales each year. It has a
"satisfactory" credit rating.

Staff Writer Robert Gammon Contributed To This Report.