MOUNDS OF LAUNDERED FUNDS CHURN THROUGH AREA REGULARLY

That nightclub whose parking lot is jammed every Saturday night might
be a front for a drug ring. The vending-machine operator who stocks
your company' s pop and candy machines could be funneling illegal
gambling receipts through his bank account. The fancy condo you rent
in the Caribbean may be owned by a white-collar criminal who has
invested his ill-gotten gains into a legitimate business.

In recent years, money laundering has grabbed headlines in numerous
high-profile cases - including a federal investigation into an
alleged operation at Bank of New York that prosecutors say helped a
Russian bank launder $7 billion.

Former Toledoan Marty Frankel sits in a German prison accused of
defrauding U.S. insurance companies of more than $200 million. He
faces numerous charges, including money laundering.

Toledo itself has had some high-profile money-laundering cases in
recent years; the biggest sent William Harris, owner of Harris
Medical Supply, Inc., to prison for 70 months for defrauding Medicare
of $42 million.

In the 1990s, the Harris case made Internal Revenue Service history
for the largest number of pieces of real estate every seized by the
IRS. The IRS confiscated and sold his apartments and condos in Toledo
and the Cayman Islands for about $29 million in the last year.

In another high-profile case, James Anderson, owner of Central Trux &
Parts and several other firms, and his son, Mark, got prison
sentences last year on a variety of federal charges, including
laundering $1.5 million for Colombian drug dealers.

But, beyond the cases that make headlines, money laundering is an
everyday occurrence. "There are more money launderers than there are
pregnant chads in the state of Florida," Tom Matuszak, head of the
Organized Crime Task Force for Lucas County, said somewhat
facetiously.

The Toledo area has relatively few "Hollywood variety" money
launderers, the kind who run shell companies in the Caribbean and
"who have money moving all over the place," Mr. Matuszak said.

But he and other local and federal officials say the scope of illegal
money transactions is huge, and thousands of people in northwest Ohio
have done financial transactions that could violate provisions of
federal and state money-laundering laws.

Investigations often involve a paper trail through banks,
corporations, tax records, credit histories, subpoenas, grand juries,
and sometimes even trash cans. Sometimes money laundering is the only
way to get a conviction of a criminal, said Mr. Matuszak. Often the
question is: "How can this guy be living high on the hog with no
substantial income?"

Nationally and globally, money laundering is said to be a monumental
problem. The International Monetary Fund estimates that laundered
money amounts to 3 to 5 per cent of the world's economic output, and
the Group of Seven nations estimate $300 billion to $500 billion is
illegally hidden annually. Domestic organizations have put the U.S.
money-laundering figure at $50 billion to $400 billion annually. No
estimates exist for the Toledo area alone.

However, Denise Dolish, public affairs officer with the IRS's
criminal division for northern Ohio, said the agency has had "some
significant" money-laundering investigations in the area.

Perhaps 90 per cent of crimes are committed for profit, so almost all
involve money laundering of some sort, law enforcement officials
said. That means that nearly every drug deal, forgery, robbery, or
embezzlement probably carries some tinge of money laundering.

The Toledo area has both simple and sophisticated money-laundering
schemes, said Dave Bauer, assistant U.S. attorney in Toledo. He
estimated about 10 indictments a year are handed up for money
laundering, calling it a big problem.

At its simplest, money laundering can mean that a drug dealer or
gambler buys cars or luxury items with the ill-gotten revenue, Mr.
Bauer pointed out.

The more sophisticated schemes, using multiple layers of entities,
perhaps even offshore companies, plow the money back into what
appears to be a legitimate enterprise, he said.

The problem can affect many businesses and Americans because of the
way money is washed, said Dean Boyd, spokesman for the U.S. Customs
Service in Washington.

Restaurants financed by drug money can afford to sell food cheaply,
and auto-parts shops don't need to make money on the parts if they
are subsidized by illegal money, he explained.

Some criminals have turned to smuggling money out of country. One
Customs crackdown in the summer netted 262 currency seizures totaling
$11.3 million in a period of several weeks. In one case, an airline
passenger ingested 46 pellets, each containing seven $100 bills, a
total of $32,200.

Although money laundering has been around forever, probably, its name
dates only to 1973, during the Watergate hearings, according to the
Oxford English Dictionary.

William Safire, author of Safire's New Political Dictionary, agrees,
but he cites earlier references to "washing" or "cooling" of money by
mobsters, gamblers, and bootleggers.

Congress has tackled money laundering numerous times in the last
three decades, beginning with the Bank Secrecy Act of 1970. Other
federal laws include the Money Laundering Act of 1986, the Anti-Drug
Abuse Act (1988), the Annunzio-Wylie Anti-Money-Laundering Act
(1992), and the Money Laundering Suppression Act (1994). Ohio's
statute went into effect four years ago, and Mr. Matuszak said it has
some provisions that help prosecutors more than the federal laws.

The most recent federal money-laundering initiative failed in
Congress this fall because a number of lawmakers felt it was too
intrusive and gave federal agencies too much power - even though U.S.
officials complained that 15 nations, including Russia and Israel,
are not cooperating to stem the flow of illicit money.

Ron Dunbar, vice president of compliance for Fifth Third Bank of
Northwestern Ohio, agreed with the lawmakers. "It's not banks'
obligation to track every customer," he said, adding that the
requirements are tolerable.

Among the requirements are a transaction report for deals involving
more than $10,000 in currency, IRS form 8300 for business cash
payments over $10,000, and various other reports for foreign
transactions and foreign bank accounts.

Plus, there's a suspicious-activity report. "We tell our people if it
doesn' t look right, smell right, or feel right, notify us," said Mr.
Dunbar. Federal guidelines list dozens of clues: a customer whose
business or residence is outside the area; a business that differs
from the normal banking pattern for its industry; wire transfers for
no apparent reason; a customer purchasing a number of cashier's
checks or money orders for large amounts; someone who frequently
deposits musty or extremely dirty bills.

Michael Williams, executive vice president for Mid Am Bank, said
computers as well as tellers can spot suspicious activity,
particularly if multiple transactions occur in one day.

Paul Bauer, an economist with the Federal Reserve Bank of Cleveland,
characterizes attempts to stop money laundering as
"needle-in-a-haystack efforts" because more than $2 trillion courses
daily through the U.S. economy.

A recent Cleveland Fed report, Understanding the Wash Cycle,
co-written by Mr. Bauer, noted that money laundering, even though not
specifically outlawed until 14 years ago, figured in prominent
criminal cases in the past.

"Two of the century's most notorious criminals were undone by failure
to cover their financial tracks," he wrote in the report. Al Capone
was finally convicted of tax evasion, not racketeering, and Bruno
Richard Hauptmann, who kidnapped Charles Lindberg's son in 1932, was
caught because he did not launder the ransom money thoroughly, Mr.
Bauer wrote.

Experts say money laundering involves three steps: placement, or
getting funds into the financial system; layering, or obscuring the
paper trail; and the payoff, or the final stage, in which the
ill-gotten money appears to originate from legitimate businesses.

The Fed's Mr. Bauer pointed out that, in the placement phase, the
form of the funds must be converted to hide its illicit origins, and
that often includes changing small bills into large denominations.

It's easy to understand why criminals prefer $100 bills. The
Department of Justice calculates that, for example, $1 million in $5
bills would weigh 440 pounds, but the same amount in $100 bills would
weigh just 22 pounds.

Converting to large bills, cashier's checks, and other instruments is
often accomplished using cash-intensive businesses like restaurants,
hotels, vending-machine companies, casinos, and car washes as fronts,
Mr. Bauer said in his Fed report.

Another placement technique is called "smurfing" - using couriers to
take cash to banks to exchange for cashier's checks and money orders.
It was used by Alberto Barrera-Duran, a Colombian whom the United
States accused of running a group of 15 couriers, laundering as much
as $1 million a day in a number of U.S. cities in the mid-1980s.

Greg Arndt, a certified fraud examiner with the Maumee accounting
firm of William Vaughan Co., said, "Cash businesses can hide illegal
money by overstating reported revenue and expenses - by reporting
payment for supplies never received, professional services never
rendered, or wages for fictitious employees.

"A favorite type of purchase is real estate because it increases in
value. Also, rental income can be altered to launder more funds."