BEAN-COUNTING COMMANDOS: DRUG DEALERS ALSO ARE TAX DODGERS

Local IRS Agents Get Involved In Major Drug Investigations

A Gary woman tried to be inconspicuous when she brought $110,000 in small
bills into an area bank for deposit recently. She put some of the money in
a shopping bag.

However, the Internal Revenue Service noticed. Its investigation of this
and a $70,000 deposit she made a few days later resulted in federal charges
alleging the woman and her son were involved in a scheme to distribute
cocaine and launder the drug profits. They are scheduled to go before a
jury this month.

Lake County's IRS is more than a bunch of tax collectors. They also are
bean-counting commandos in the area's drug war. The IRS initiated more than
1,107 narcotics cases involving billions of dollars nationwide last year.
They sent 785 people to prison for an average of more than six years per
convict.

"We are involved in every major drug case," Marion J. Siara, an IRS special
agent who has been chasing corrupt politicians and crooked businessmen in
Lake County since the 1970s. "We just haven't been promoting that until now."

IRS agents have been able to convict drug dealers without bringing a gram
of drugs into the courtroom, and the only other witnesses are those on
drugs. "Our agents are able to summarize the assets we've found and where
they get their millions, and the jury is very impressed," Larry Hlista, an
IRS supervisory special agent for Lake County said.

Among the crowd in their Merrillville office's waiting room looking for a
little tax advice may be confidential informants prepared to turn in drug
dealers whose sudden wealth and conspicuous consumption has drawn some
attention and ire.

"The biggest problem drug dealers have is what to do with their money,"
Hlista said. They often have to employ a full-time business staff to keep
track of the crack house income.

"We find there are always enough people who hate (drug dealers) and are
willing to talk because these guys have screwed so many people over," he said.

Dealers especially love to stick it to Uncle Sam, refusing to pay taxes on
their ill-gotten gains. The federal government began enlisting the IRS's
help in the early 1980s in sniffing out drug-related money laundering --
the concealment or disguising of illegal income and profits to make it look
legal.

Carolyn Jones, supervisory special agent in Merrillville, said drug dealers
love to hide their money through intricate schemes, which send her staff
through equally elaborate treasure hunts.

Dealers often establish legitimate-sounding corporations that are nothing
but shells into which they deposit and withdraw drug revenue. The dealer
disguises himself as an officer of the shell corporation or as a business
consultant being paid by it.

They also use business associates, friends and relatives to buy luxury
items. They send money through accounts in phony names to Europe or Latin
America. They buy real estate that generates legitimate rental income.

Casinos unwittingly have been used by dealers who buy thousands of dollars
of casino chips they either play to obtain legitimate winnings or just cash in.

IRS agents in criminal investigations follow the drug money by interviewing
everyone from drug users to bank officials.

"We like to do the fun things like camera surveillance and phone
monitoring, but we spend a lot of our time with paper work searching
through bank records, credit card records, brokerage accounts and county
records," Hlista said.

Siara said sometimes they look for patterns. "If someone deposits $600
every Friday and then writes three checks for the same amounts, that's a
consistency we notice. We look for checking accounts where cash comes in,
but nothing is spent." In other cases, large but infrequent deposits are
red flags.

Hlista said, "We had one drug dealer called 'ghost.' His legitimate job was
garbage collector, but he hadn't cashed a payroll check in six months. We
figured he had surplus income from somewhere else. We traced $750,000 in
drug assets to him."

Sometimes they wait for known drug dealers to make a mistake.

Nate Hill was a drug dealer in his 20s from Chicago's South Side who had
accumulated $6 million in assets, including a jet plane and a yacht.

"They could never get anyone near him to buy cocaine. He slipped up when he
had his girlfriend put a car he had bought into a storage locker in Alsip, Ill.

"Somehow it got screwed up, and they put it in the locker of someone else
who owed money to the rental place. They broke the lock, found the car,
which wasn't supposed to be there and called police. A drug-sniffing dog
went crazy over it. They opened the trunk and found $2.3 million there in a
duffel bag."