SURGE IN MOONSHINING BRINGS A US CRACKDOWN

ROCKY MOUNT, Va., March 16 -- Grinning seditiously, a prominent
citizen of this Blue Ridge foothills town takes from his kitchen
refrigerator an illegal gift from a moonshiner friend: a syrupy red
liquor in a quart jar packed with grapelike damsonberries. He offers a
taste to his visitor. It is a brandy, sweet and silky.

"Damson's the best," he says.. Next he selects a half-gallon jar of
heart-stopping white lightning, as clear as vodka. Shaking it, he
points to the "bead," or head. Bubbles that form a thick, beery bead
indicate toxic contamination from sleazy stills that use old car
radiators to condense the vapors from cooking and fermentation.

But this bead is wafer-thin. "Look," he says. "No lead." It might all
seem a quaint act of hospitality merely appropriate to this town of
4,400 that likes to boast of being "the moonshine capital of the
world," here in a southern Appalachian region that over the last two
centuries has produced more moonshine than any other in America. But
to a task force of state and federal agents brought in to fight it,
the illicit whiskey of Rocky Mount and the surrounding area is little
other than the work of big-time criminals -- a new generation of
moonshiners who in many cases have transformed the smoky little
woodsmen's stills of legend and song into efficient distilleries, some
capable of producing thousands of gallons of liquor a week.

The task force, applying the muscle of federal law rather than weaker
state anti-moonshine statutes, made its first arrests earlier this
month. Three people were charged with illegally distilling alcohol,
and many more arrests are expected.

Rocky Mount is the hub of the trade, which investigators say operates
here in Franklin County, in three or four nearby counties in
south-central Virginia and just over the line in North Carolina.

Most of the illicit brandy is the work of exacting hobbyists, and
seldom leaves the area.

But moonshine whiskey, mass-produced at as much as 150 proof or even
more and with little attention to health or safety, is growing as a
product of interstate commerce.

Even after a decade of unmatched national prosperity, resilient
pockets of poverty provide ready markets -- in this case, throughout
much of the East -- for a low-priced, illegal high.

Once a sideline of dirt-poor farmers who made whiskey in 50-gallon
stills to get by, moonshining is now carried on here with 800-gallon
stills, sometimes 5 or 10 linked like railroad cars, in a
well-organized, high-profit business. Government investigators say
hundreds of thousands of gallons of moonshine a year flow over the
highways from Virginia and North Carolina, free of all state and
federal taxes or regulatory scrutiny. Moonshiners produce whiskey for
as little as $3 a gallon, the investigators say, then package it in
six-packs of gallon plastic jugs, a thicker-gauge variation of milk
containers, and sell it, unlabeled, for $10 or $12 a gallon to nip
joints, shot houses and the back rooms of bars in Philadelphia,
Richmond, Washington and Baltimore. The bars then sell it for as
little as $1 a shot, much less than the price of lawful whiskey.
Though the investigators do not know how much the moonshiners as a
whole earn from their activity, the business here has grown big enough
to draw a response from the Federal Bureau of Alcohol, Tobacco and
Firearms. About two decades ago, the bureau, turning more of its
attention to the control of guns and explosives, largely abandoned its
pursuit of untaxed liquor, an effort that had dated from the 1920's
and Prohibition, when organized crime delivered vast amounts of
moonshine to the nation's speakeasies. Two years ago, however, the
bureau was called in by the alcoholic beverage control agencies of
Virginia and North Carolina, bodies long frustrated by public
tolerance of bootlegging and by local courts that treated moonshining
much like speeding violations.

Together, the bureau and the two state agencies organized Operation
Lightning Strike, to fight moonshiners unlike those of decades past.
"What you've seen over the years," said Bartley H. McEntire, the
federal agent in charge of the investigation, "is a shift in how they
operate." Rather than selling their liquor themselves, Mr. McEntire
said, "these organizations use hired hands and hired transporters," or
bootleggers. "They aren't your good ol' boys." Wily and resourceful,
this new breed of moonshiner tends to be armed with night-vision
goggles and two-way radios to help stay a jump ahead of the law.

Federal agents' past efforts to fight moonshining in cooperation with
state regulators have been largely fruitless.

But this time, said Sharon Burnham, assistant United States attorney
in nearby Roanoke, the investigation is much broader and tougher: for
the first time, federal money-laundering statutes will be used as a
weapon against moonshiners.

"Under the federal liquor laws, they're facing up to five years in
prison," Ms. Burnham said. "Under the money-laundering laws, they're
facing up to 15 years." In Operation Lightning Strike's first arrests,
early this month, the agents charged a man with operating a
1,000-gallon still. Also seized were his two employees: a Mexican
couple, both illegal immigrants who lived and worked at the site with
their three young children.

Profits from moonshining can be serious money here in Franklin County,
where a waning of the textile industry and a decline in tobacco and
dairy production have cursed the economy. Those profits have been a
boon, too, investigators say, for a few enterprising and newly
land-rich families whom the government has named, though not yet
charged, as leaders of the local moonshine industry.

For the most part, residents of moonshine communities see still
operators as good people, said Allen G. Hudson, deputy director of the
Virginia alcohol agency's Bureau of Law Enforcement.

"It's an awkward situation," Mr. Hudson said. "They are good for the
economy. They hire people locally and buy materials locally. We don't
get a lot of cooperation, because they see them doing more good than
we can do them."

William G. Davis, a former assistant United States attorney in
Roanoke, is the area's leading defense lawyer for people charged with
moonshining. Like many others in town, he acknowledges that illegal
liquor is produced here. But the government, he says, has exaggerated
the extent of it. What is worse, Mr. Davis said, is the investigators'
manner. "To me, it's the hobnail-boot approach," he said.

"They're riding roughshod over people, calling them liars. They are
mean." In one instance, agents shut down the Helms Farmers' Exchange,
a farm and garden business that was one of Rocky Mount's biggest
retail and wholesale concerns. It was owned by Ramsey and William
Helms, brothers in their 50's, and it included a warehouse two miles
outside of town on busy Route 40 West and an imposing red-brick store
on Main Street downtown, just a block from the county courthouse and
the sheriff's office. Agents say the brothers had a sideline in
moonshine supplies that dwarfed their legitimate commerce. The
government confiscated from the store and the warehouse 9,648
one-gallon jugs, 32 100-pound bags of sugar, 4 bags of rye and 14
boxes of Mason jars, and from Ramsey Helms's home a gun, radio
scanners and a family photo album. Nine days after the raid, Ramsey
Helms put a gun to his chest and killed himself. Since then, the
agents have frozen $86,442 in William Helms's checking accounts and
made a claim on 113 acres of his land, in effect a lien so that the
government can sell it if Mr. Helms is charged and found guilty of
ill-gotten gains.

Stripped of their money, business and personal vehicles, and
livelihood, William Helms and his wife, Bonnie, are living on the
charity of friends, Mr. Davis says. In answering the government's
court requests to search and seize property, the Helmses told the
court that all the property ultimately taken from them had come from
inheritances and from income earned through legitimate commerce.

But the investigators' leading targets are 60-year-old Ralph D. Hale
and several members of his family. The agents say that from 1990
through 1998, Mr. Hale and his wife, Judy, filed tax returns showing
annual joint income ranging from $21,149 to $33,139.

Yet, the government maintained on March 6 in an affidavit related to
its request for a search warrant, Mr. Hale is the person code-named
Hat Man in the journals of the Farmers' Exchange. According to the
journals, Hat Man bought 17,925 100-pound bags of sugar, paying close
to $700,000, and 2,710 bundles of one-gallon containers for which he
paid $42,000. With the sugar, the affidavit said, he could have
produced 179,250 gallons of illegal liquor, worth $1.8 million at $10
a gallon.

The Hales have also amassed many assets, including land on which
illegal stills have been found. Holdings that the government has
frozen are mostly in Mrs. Hale's name, with the rest in the names of
family members other than Mr. Hale. They include nearly 400 acres
worth $681,900, $59,405 in mutual fund accounts and $54,991 in bank
accounts.

[Mr. Hale, reached by telephone on Monday, declined to comment.]
Though choosing not to comment on those figures, Mr. Davis, who
expects to represent the Hales in any criminal case, said, "A whole
lot of that information" is "incorrect." The allegations attempt to
portray the Hales as "monsters," he said, "and it's not true."

In fact, in the minds of some, even admitted moonshiners are far from
monsters, instead little more than a link to a proud tradition. Even
as the government crackdown continues, Rocky Mount's business people
are divided over whether to shun or celebrate the area's historic bond
with moonshine. Brian G. Duvall, executive director of the Franklin
County Chamber of Commerce, says one contingent has proposed building
a moonshine museum and even producing boutique liquor, in a legal still.

Ultimately, though, "we need to get away from it," said David Furrow,
a prominent lawyer here. "It would be nicer if it were in the past,
and we could say we used to be the moonshine capital of the world."