COVERING UP THEIR TRACKS

Drug Dealers Often Clever In Masking Illegal Profits

NEW BEDFORD -- During one in a series of meetings this spring between an
undercover federal drug officer and an accused drug dealer, the agent got
some business advice.

He was told to invest in real estate.

He "told me I should do what he does with my drug profits, buy property,"
relates Drug Enforcement Agency agent Todd Shea in an affidavit on file in
federal court. "He told me that is why he has never been caught."

The suspect, Antonio D. Bairos, 52, also known as Tony Pena, was indicted
by a federal grand jury early this month on eight counts of possession of
cocaine with intent to distribute, and distribution of cocaine.

Word of yet another arrest for cocaine trafficking in drug-plagued New
Bedford is nothing new. But the federal agent's account of his meetings
with the alleged drug dealer provide a rare glimpse into the outrageous
profits and risks of the drug-trafficking business.

The case also provides insight into a phenomenon city police say they know
about but have been unable to track as much as they'd like: the diversion
of illicit profits into legitimate enterprises.

Mr. Bairos owns close to $640,000 worth of real estate properties in the
New Bedford area, including a downtown building just across from the former
Star Store, and several tenements, according to the U.S. attorney's office.

Mr. Bairos, who immigrated from the Azores in 1971, told a newspaper
reporter several years ago that he had built up his fortune by buying and
rehabilitating run-down buildings.

But federal agents contend the New Bedford man's investments have been
funded at least in part by the profits from his illegal drug business.

And those profits appear to be considerable. According to court records,
Mr. Bairos told the federal agent he paid between $23,000 and $32,000 for a
kilogram of cocaine -- which can sell on the street for $40,000 or more.
Initially, the cocaine Mr. Shea purchased from Mr. Bairos was heavily
diluted. He says the New Bedford man offered to sell him uncut cocaine that
could be diluted, thus enabling Mr. Shea to double his profits.

Also in his affidavit, the agent says Mr. Bairos told him to transport his
cocaine in joint compound, available at Home Depot, "because drug-sniffing
dogs could not smell the drugs in the compound."

The transactions between the two men took place in several locations:
Turner's Pond in Dartmouth, where Mr. Bairos drove by and tossed out of his
window a can containing an ounce of cocaine; Mr. Bairos' property on High
Hill Road in Dartmouth; and in the Keystone building, as well as in a New
Bedford sub shop and in a wooded area near the city, according to Mr. Shea.

Initially, the transfer of drugs and money was not face-to-face. The agent
said he would leave money in a prearranged spot -- on at least two
occasions in Mr. Bairos' empty truck, which was parked on his property --
and Mr. Bairos in turn would drop off the drugs.

"Bairos told me that transporting the money was not risky, it was
transporting the cocaine that was risky," Mr. Shea stated in his affidavit.

Although city records list the properties as belonging to either Mr.
Bairos' daughter, Deanna Bairos, or his fiancee, Maria J. Botelho, the U.S.
attorney's office contends they either were financed by or were used to
facilitate Mr. Bairos' drug transactions.

The government has filed a claim to force Mr. Bairos to forfeit the real
estate as well as about $71,100 in cash. Close to $52,000 was found in a
safe deposit box at the Fleet bank branch on Union Street in New Bedford,
according to the U.S. attorney's office. The rest was money the drug agent
paid Mr. Bairos for cocaine.

Mr. Bairos' attorney argues the properties were not bought with drug
profits and he contends the U.S. attorney will fail in his effort to seize
the real estate.

Regardless, local police say such funneling of ill-gotten gains into
legitimate businesses occurs, both in New Bedford and in other urban areas
plagued with similar drug problems. New Bedford police detectives say they
hear stories about dealers funneling money into other businesses. And they
have made drug cases in the past year against several small businessmen,
including the owner of a beeper business and the owner of a painting business.

Some dealers like to flaunt their wealth by buying expensive cars, jewelry
and other luxury items. Others buy property, restaurants, apartment
buildings and other investments that provide a front for cash flow,
explains New Bedford Police Chief Arthur Kelly.

"If I show up at a bank every week with $10,000 in cash, they will report
that to the IRS. But if I make deposits on a daily basis of money I
identify as rent from my business, they will not report that," he says.

Those drug dealers who may not want to stay long in the drug trade will
build up a nest egg by investing in legitimate businesses, he adds.

"You can't just stick it under your bed. Pretty soon you're 4 feet off the
floor and your mattress is lumpy."

But while he knows such transactions occur in New Bedford, the chief says
his department has focused its efforts on stomping out the criminal side of
the business ledger, rather than on finding these apparently legitimate
enterprises backed by illegal profits.

Sometimes the local police make a case against a dealer but do not know
about other, hidden assets. New Bedford vice squad detectives charged Mr.
Bairos last year with cocaine distribution. But police might have had a
difficult time tracing Mr. Bairos' properties because they were not listed
in his name.

"We do not have the luxury of staffing and time, where we could have people
focus on assets," says the chief, who declined to comment specifically on
the Bairos case. "That's almost like an entire separate investigation, and
we're busy enough looking at the drug side."

Instead, he said he would like to see the DEA and Internal Revenue Service
take the lead in the city on this type of investigation, with the
assistance of the New Bedford police. Last month, he asked members of the
president's drug policy team to help persuade the DEA to reopen an office here.

Complicating the situation is the fact that money laundering is a federal,
not a state, charge. Only federal agencies, such as the IRS and the DEA,
can make such cases.

The U.S. attorney's office, working with the DEA and the IRS, as well as
local and state police, has been aggressively pursuing such cases around
the state. Just last week, U.S. Attorney Donald Stern announced indictments
against more than two dozen people, including charges of trafficking in
marijuana and cocaine and money laundering. And this fall, defendants in a
Taunton marijuana smuggling ring are scheduled to be sentenced in federal
court on drug trafficking and money laundering charges stemming from
arrests last year.

Kevin Cloherty, the chief of the U.S. attorney's drug task force, will not
comment on ongoing cases and declines to say whether his office has any
additional New Bedford investigations in the works. But the Bairos arrest
is just one of several signs the federal team has set up shop in the city.

Federal investigators occasionally will become involved in a case of
laundering drug money by tracing money transactions, Mr. Cloherty said,
citing as an example an investigation into a Chelsea money-wiring business.
That case resulted in drug-trafficking charges as well as money laundering
allegations. But more often, investigators tracking drug-trafficking learn
about individuals with illegal investments.

The federal agents pursue those investments, because while traffickers
consider the seizure of a drug shipment the cost of doing business, the
loss of accumulated assets costs them their profits.

"That hurts more," Mr. Cloherty said.

In recent years, heroin trafficking has involved the most cash and assets,
he said, adding that a kilo of heroin sells for far more than a kilo of
cocaine.

"It's a problem we're seeing through New England and through eastern
Massachusetts," he said.

In New Bedford, Mr. Bairos' properties mostly consist of neighborhood
apartment buildings. But one, the former Keystone building, sits smack-dab
in the middle of New Bedford's downtown business district.

While city records place the three-story building's current value at about
$149,000, economic development officials say its potential value is much
greater because of its proximity to the former Star Store. Work will begin
in the fall to renovate the former department store into classrooms for
UMass Dartmouth's art program.

The predicted influx of students into the previously near moribund downtown
district, combined with concurrent construction of the new Compass Bank
building, the tourist attractions in the national park, and Whaling Museum
expansion, has sparked investment interest in downtown, said John Zakian,
executive director of the New Bedford Economic Development Council.

"It's a good investment," he said of the Keystone building. "Clearly, (Mr.
Bairos) was in a position to benefit."

Mr. Zakian said his organization has not done business with Mr. Bairos,
whose name he had never heard before reading about the arrest in the newspaper.

The economic development agency does background checks on loan applicants
and looks at financial histories. But he admits the non-profit economic
corporation has no fail-proof way to determine whether its clients are
legitimate businessmen or not.

"Frankly, unless you're law enforcement with the resources to go beyond
what appears on paper, it is difficult to dig deep into ownership to find
out if it is clean or not," he said. "If somebody wants to be crooked, they
are going to find a way. There is no major formula anywhere in the country
to enable people to tell the shady or shaky deals from the legitimate deals."

Similarly, the city's acting director of community development, Patrick
Sullivan, said his department checks applicants' financial records to see,
for example, if they are current on their income taxes.

He also checks references and asks applicants to fill out a form saying
whether they have ever been convicted of a crime. But the department does
not do criminal checks and would have no way of knowing whether a
previously approved applicant had been arrested for drug charges.

"How do you track something like that?" he asked, adding that his
department has never had any such problems with its applicants.

As the city's economic development picture shapes up, Mr. Zakian said he
expects cases such as the one against Mr. Bairos will deter criminal investors.

"New Bedford is a land for legitimate businesses, not illegitimate," he says.