Part 2 Of 2

CHASING DIRTY MONEY

Cops call it velocity. The rapid-fire exchange of dollar bills for dime
bags. Cash flowing from a drug deal into a bank account under an assumed name.

Money being pulled from the account to buy luxury cars, designer clothing
and more dope.

The high-speed spin cycle that makes dirty money clean.

"The faster you can spend the money to buy the dope, the faster you sell
the dope, and the more money you make," said William O'Brien, the assistant
Cook County state's attorney in charge of the office's Narcotics
Prosecution Bureau. "One way to stop the velocity is to throw a wrench into
the money aspect of it. Once it gets deposited and the bulk cash is turned
into a blip on the computer screen, we can't do anything about it."

Police and prosecutors have always known Chicago street gangs launder their
drug profits through seemingly legitimate businesses such as currency
exchanges, cellular phone shops and beauty salons.

Until now, federal agents typically have investigated money- laundering.
Local authorities said they did not have the expertise and manpower to
concentrate on such time-consuming cases.

This year, however, money-laundering is at the heart of Cook County
prosecutors' strategy for breaking up Chicago's drug operations, which they
believe have already been splintered with the imprisonment of top gang leaders.

Millions of dollars are at stake, according to Ranell Rogers, 23, a member
of the Mafia Insane Vice Lords.

"I make between $1,000 and $2,000 a week. It's my keep. I worked for a guy,
and I counted his money one time and for a week, counted $1.2 million
sitting on my table. But it was his money. I wanted to get my gym bag and
run. But he knows where my house is. That was his take."

Cook County's initiative could become a model for the rest of the nation,
backed with the clout of U.S. House Speaker J. Dennis Hastert (R-Ill.).

"It's a 180-degree turn," O'Brien said. "Everyone has always been following
the powder, following the dope. Now we are going to follow the money."

In February, police and prosecutors opened three cases using the new approach.

Police and prosecutors will approach the Illinois Gaming Board to develop
intelligence about drug dealers who launder their cash at riverboat casinos.

They will work with the Illinois Department of Revenue to obtain tax
returns of drug kingpins and their associates.

They will go after cars and houses that drug dealers place in the names of
their families and friends to throw off investigators.

They will try to bust car salesmen who sell luxury vehicles to drug
traffickers in return for cash they know is dirty.

And for the first time, they will launch money-laundering cases against
low-level "mules," the men and women who transport cash across state lines,
with the hope of learning more about their drug bosses.

The strategy is alarming to one prominent defense lawyer who says it will
ensnare innocent people who aren't directly involved in illegal activity.

"It's not going to work," said R. Eugene Pincham, a former state appellate
judge and a civil rights attorney. "You can't expect car dealers to police
the drug business. You are not going to get rid of drug trafficking by
confiscating people's cars and property."

Pincham, who equates the war on drugs to the government's failure to
eradicate illegal liquor sales during Prohibition in the 1920s, expects
prosecutors will run into constitutional problems when defense attorneys
challenge their expanded use of the state's money-laundering statute.

But O'Brien, who is running for judge, said prosecutors need to become more
innovative in their fight against drug dealers, whose methods of hiding
money have become ever more creative.

Cashing In

The jangling world of casinos--from the riverboats that ring Chicago to the
luxury palaces of Las Vegas and Atlantic City--is one of the favorite
places for drug dealers to launder their cash.

A few undercover cases have demonstrated to police and prosecutors that
casinos are a rich resource for money-laundering.

One of those cases came to light in 1997. Police were tailing one dealer
when he led them to Las Vegas.

On one trip, the Chicago drug distributor sidled up to a cashier's window
at a busy casino with $103,000 in money orders. Money orders are easier to
transport than stacks of bills.

Like other big-time drug dealers, he was fully aware of federal money-
laundering laws, police say. He kept the money orders at less than $3,000
each because the currency exchanges where he bought them were required to
report any sales of higher amounts to the federal government. Breaking down
large cash deposits or exchanges into smaller amounts is a common
money-laundering technique called "smurfing."

He slid the inch-thick bundle to the cashier and walked away with colorful
stacks of gambling chips, many of them black, the $100 denomination.

At that point, the piles of cash he earned from drug sales on Chicago
streets had already been laundered twice: once through currency exchanges
and next through the casino.

The chips were a form of untraceable currency that he could carry to his
hotel room, where he hooked up with his Texas cocaine supplier.

The Chicago dealer, whom police won't identify because the investigation
continues, gave $91,000 in chips to the Texan for a future delivery of coke
and cashed the remaining $12,000 in chips for himself.

Both men could claim they won their cash at the craps and blackjack tables.

The drugs were later delivered and made their way to five cities, including
a street gang in Chicago, police say. Over six months, the Chicago man
laundered more than $2 million in Las Vegas at three casinos that police
won't identify.

"They try to conceal it as a gambling junket rather than a drug junket,"
said Chicago police Sgt. John Lucki, a member of the department's Financial
Crimes Unit created last year in the anti- money-laundering effort. "They
don't have to meet in an alley and exchange drugs there. It's less risky."

Echoes Of Secret Six

Such schemes were the topic of a closed-door meeting on the fourth floor of
a downtown office building last spring that harkened back to the "Secret
Six," the Citizens Committee for the Prevention and Punishment of Crime,
which met covertly in a Loop office to draw up a battle plan against Al
Capone more than 70 years ago.

At the March meeting was House Speaker Hastert, who gave police and
prosecutors a mandate: Focus on money.

Chicago police Supt. Terry Hillard and his top aides, along with O'Brien
and other prosecutors, were invited to the meeting by Tom Donahue, head of
the High Intensity Drug Trafficking Area, a federally funded agency that
works with 38 Chicago area law enforcement groups to help them combat drug
trafficking.

Speaking from his Capitol Hill office, Hastert said he remained concerned
that heroin continues to flood Chicago's streets. To cut the pipeline, he
pledged more money for the crackdown on money laundering.

The drug trafficking office is asking for about $15 million in federal
funding this fiscal year--triple what it got in last year's budget, Donahue
said.

"We have learned a lot about money-laundering because of terrorism,"
Hastert said. "Terrorists are using grocery coupons to launder their cash
for their programs. We lost more than 2,000 people in New York City, but we
lose 20,000 people a year because of drugs and drug violence. Nobody would
grow this stuff or smuggle it or hawk it on the street corners if they
couldn't get the money into the pockets of the drug lords. Nobody talks
about money-laundering, but it is the key."

Hastert said he thinks more hasn't been done to close the money pipeline
because of resistance from bankers.

"Nobody wanted to step on anybody's toes or get bankers in trouble, but
that is the crux," he said.

Although state prosecutors have not presented any money-laundering cases
since that March meeting, Hastert said he is satisfied with the steps they
are taking. On Jan. 23, prosecutors hashed out their plans with the Chicago
police at the department's Organized Crime Division in Homan Square--a
sprawling, red-brick former Sears distribution center where confiscated
money and drugs are stored, and where narcotics and gang investigators work
in a labyrinth of offices.

The Republican from far west suburban Yorkville said he hopes federal
authorities, including new U.S. Attorney Patrick Fitzgerald, will step up
their efforts, too.

"It's something the feds could do a better job of," he said.

Heroin Capital

From their low-key afternoon meeting, O'Brien and others began drawing up
a blueprint to go after gang money. They have secured a $300,000, 18-month
federal "seed" grant to hire an assistant state's attorney to handle
money-laundering cases, an investigator and a part-time auditor.

One of their aims is to slow the brisk sales in open markets, in particular
of South American heroin, which now dominates the West Side. Suburban teens
are creeping down the side streets near Garfield Park in Chevy Suburbans
and their mothers' Volvos, unarmed, stopping to roll down their windows and
hand a stranger $40 or $50 in exchange for a plastic baggie of heroin.

The quick-fire deals are completed in minutes, and the teens are back on
the Eisenhower Expy., returning to their families' large homes in DuPage
County. Some of these junkies are A and B students; some are enrolled in
colleges. To feed their habits, they take their chances, sometimes even
walking at 1 or 2 a.m. through darkened neighborhoods where most of the
city's homicides are tallied.

Few of them die of violence in these drug buys--gangs forbid members from
hurting or robbing their white customers. But many wind up in the hospital.
More heroin users visited Chicago area emergency rooms in 2000 than in New
York and other major cities, and heroin-related deaths here rose from 224
in 1996 to 457 in 1999, according to the latest available statistics from
the federal government. Experts say the problem is worsening.

"Chicago is the heroin capital of the United States," Donahue said. "We
have not been successful at all when it comes to domestic money-
laundering. My goal is to determine where the money goes when it leaves the
street."

It was government bean counters--not federal agents armed with
machineguns--who took down Capone in 1931. The legendary mob boss made his
fortune supplying bootleg liquor during Prohibition.

Since then, big financial cases involving gangsters have typically been
handled by the feds, and not local prosecutors.

About two years ago, Congress changed the law to make it easier for federal
authorities to seize suspected drug money. Now they simply must prove the
money was tied to criminal activity, when in the past they were required to
establish a money-laundering scheme, FBI spokesman Frank Bochte said.

Other changes, however, were designed to protect innocent people from
government seizures, Bochte said. Strict timetables were set up for the
government to notify people of seizures and to file forfeiture lawsuits, he
said.

"We can't hold on to property for years," Bochte said. "It keeps everybody
honest."

State prosecutors long have used forfeiture laws to take away property and
money linked to the drug trade, but they rarely have used the state's
money-laundering statute to launch criminal cases, O'Brien said.

One of the reasons: They were not often given access to key state tax forms
when the Illinois Department of Revenue considered their request a "fishing
expedition," O'Brien said. His office is trying to forge a stronger
relationship with revenue officials, he said.

By building a tax case against a suspected gang member at the same time
they launch a drug investigation, prosecutors can get a judge to approve
wiretapping, search warrants and access to state tax forms simultaneously,
O'Brien said.

"When you broaden narcotics investigations to look at the financial aspect
of it, you now uncover a slew of information, potential witnesses and
potential informants on the dope end, as well as on the money end," he said.

Among the targets are drug dealers' family members who hide money for them
so it doesn't show up on cops' radar screens.

Both Republican Joe Birkett and Democrat Lisa Madigan who are running for
state Attorney General plan to target money laundering by gang members,
according to both campaigns.

A Safe Deposit Key

One such case was exposed in the 1980s when police arrested a drug dealer
with several kilos of cocaine, said Lucki, the Chicago police sergeant.

Along with the drugs, police found a key to a safe deposit box. They
eventually tracked down the box, but not before the man's elderly mother
got to the stash of money first.

When police showed up at her home, they caught her throwing thousands of
dollars in cash out of a first-floor window of the apartment she shared
with her son.

She eventually admitted to police that the money belonged to him. But she
insisted it was being used in a noble way.

"It turns out she had two sons, one that was arrested with the kilos of
cocaine and another who was going to medical school," Lucki said. "The one
son was paying for the other's education. The mother knew she needed the
money for tuition."

Other targets are businesses that take in drug money, allowing gang-
connected owners to claim that the cash came from customers' purchases.

Several examples emerged in the federal prosecution of the Gangster
Disciples in the 1990s.

Police officer Sonia Irwin was sentenced to more than 12 years in prison in
1997 after prosecutors showed that a high-ranking gang member used drug
money to buy a seafood restaurant, June's Shrimp on the 9, under Irwin's name.

In addition to investing drug profits in the restaurant, the gang leader,
Gregory Shell, used the restaurant to collect "street taxes" from
lower-level drug dealers and held gang meetings there, prosecutors said.

The investigation led to a life sentence against Larry Hoover, chairman of
the Gangster Disciples. Other gang leaders, including Gustavo "Gino" Colon
of the Latin Kings, have been imprisoned in recent years, causing internal
turmoil in those gangs and others.

"I think we have become a victim of our own success," said Harvey Radney,
deputy superintendent of the Chicago Police Department's Bureau of
Investigative Services.

Once the gang hierarchy is damaged, lower-level gang members jockey for
leadership positions, Radney said. They are willing to take more chances to
carve out business, leading to more outbreaks of violence.

But the breakdown of gang leadership can work in prosecutors' favor as they
launch their new money-laundering initiative, O'Brien said.

"This is an informant-rich business. The one thing we have as a tool and
advantage over them is we can use paranoia," he said. "They employ very
weak people. To save their own throats--or their families--people are
willing to turn in other people."

Flaunting wealth on the street is a must From flashy SUVs such as the
Cadillac Escalade to the fanciest clothes and jewelry, gang members show it
off to command respect and lure new recruits

At the time Elbert "Pierre" Mahone was gunned down last year, the leader of
one of the city's most notorious street gangs drove a Rolls- Royce, wore
full-length fur coats and had built up a reputation as a Robin Hood for
spreading money around his impoverished Lawndale community.

While it would seem people living on the wrong side of the law would want
to draw as little attention to themselves as possible, many gang members
are attracted to the designer clothing, luxury autos, large glitzy jewelry
and other "flash" paid for by their illicit activities.

In their world, a person's "rep" for being a ruthless and savvy businessman
can protect him.

"My notoriety do demand a certain amount of respect in the community. I can
walk around and I'm going to be respected because of my past experience and
my involvement in the gangs," said Willie Lloyd, who claims he is a retired
gang leader. "There is a notoriety about Willie Lloyd."

When Lloyd left Logan Correctional Center in 1992 after serving time for a
gun conviction, he wore a black-and-white leather outfit under a mink coat.

His subordinates--who themselves were dressed in leather, fur, gold,
diamonds with alligator shoes--picked him up from the jail in five limousines.

Wearing the latest styles, driving the flashiest must-have vehicles and
using their cash to parlay good faith in the neighborhoods can add to the
gangs' allure on the street.

For future gang members, it's seen as a lucrative alternative to working a
minimum-wage job flipping burgers.

"Once the money starts comin' in, you got to figure out what to do with
it," said Ranell Rogers, a 23-year-old Mafia Insane Vice Lords gang member.
"Nine times outta 10, it might be a young guy who doesn't know what to do
with it. It might go to drugs, women, guns, cars. Those are necessary;
everybody wants 'em. If you don't have 'em, you ain't cool."

The most obvious gang status symbol is the right car.

Gang members, especially mid-level gang members who are in charge of a
local crew of "slingers" who actually sell the drugs, will sometimes own a
small fleet of vehicles that they have put in the names of family members
and friends to keep officials from establishing a paper trail against them.

The "must-have" cars these days are the fully decked out Cadillac Escalade
SUV truck, which runs more than $45,000; the GMC Envoy SUV, which averages
$30,000, and Jaguars, which run about $46,000. The colors of choice are
black or white.

"They are trend-setters, they'll always go with the biggest trend," Chicago
police Sgt. John Lucki said.

When Satan Disciples gang member Santos Garcia was arrested in 1998, police
recovered $44,644 in cash, thousands of dollars in jewelry and several
vehicles, including a Lincoln Continental, a Chrysler Intrepid, a Ford
Mustang, a Lincoln Navigator SUV--and two Chevy Astro vans used to cart
dope from the Mexican border.

Garcia was sentenced to 15 years in prison in March after being convicted
of drug dealing, but fled before he saw a day in prison. Two men who worked
with him pleaded guilty in December to drug charges and received three
years probation, Cook County State's Attorney Anthony Kyriakopoulos said.

While Garcia, a 28-year-old native of Mexico, allegedly held down a
$19,000-a-year job as a machine operator, he owned a $71,644 28-foot power
boat and a Jet Ski worth $10,000. He also owned a $200,000 five- bedroom
home in Marquette Park, which prosecutors are trying to seize because they
say it was bought with his drug profits.

Like any good business person, a gang leader often showers underlings with
gifts and clothing as a way to keep employees in their good graces and to
keep them from "flipping" to a rival gang, Lucki said.

"You'll hear how the guy who is supplying them will throw a picnic for them
or buy them all gym shoes or different types of uniforms, whether it's
current trendy jackets or hats, pants or clothes," Lucki said. "Essentially
he becomes an employer for the community."

Along with the cars, gang members seek out "hip-hop" designer clothing such
as Pelle Pelle, which has leather jackets selling for $500 and velour
warmup suits going for $200; FUBU clothing, especially a $135 denim jacket
called the "Gang In Boxes Jacket." And anything with the name Sean Jean, a
line launched by rap star Sean "P. Diddy" Combs, is also hot among gang
members, Chicago police Sgt. Marc Moore said.

"You see 19-year-olds driving down the street in a 2001 Cadillac Escalade,
and when you ask them who it belongs to, they'll say my aunt, my cousin,
my--" Moore said.

"One guy said he was driving his mama's car, and he had about $10,000 in
speakers in the back. I said your mama must be really deaf."

The gangs have bought into the pop culture--especially the black gangs, who
see their enterprise more as a business than do the Latin gangs, which
usually set up family members in their gang, said Andrew Papachristos,
director of field research for the National Gang Crime Research Center.

"They employ the business jargon, 'The Godfather' mentality that they see
in pop culture," said Papachristos. "The day you can identify a gang member
by a baseball hat is pretty much over because people are getting smarter,
and it's a business."

Department on lookout for cops in gangs It's trying harder to weed out
tainted officers in light of past embarrassments such as the Austin 7--who
included a ranking Conservative Vice Lords member

Talk to a gang member, and he'll tell you about cops who have ripped him off.

Cops who sell drugs.

Even cops who are gang members themselves.

Enough money-hungry police officers have fallen into the orbit of gangs
they're supposed to bust that such claims often ring true.

Take the Austin 7, seven officers arrested in 1996 for engaging in robbery
and extortion. One of them was a high-level gang member.

Or the Shakespeare police district on the Northwest Side, where more than
20 officers were once under investigation for links to gangs, according to
a 1995 Chicago Sun-Times series.

Lately, the Chicago Police Department has become more vigilant in weeding
out potential gang members before they are issued a gun or a badge, said
David Bayless, a department spokesman. Potential officers must undergo
background checks, drug testing, psychological evaluations and written
exams. They must have two years of college credits or military experience
to qualify.

Two young police recruits were booted from the 722-member Class of 2000
when evidence mounted of their ties to street gangs, Bayless said.

A female recruit was fired for interfering with the arrest of her niece. A
male recruit was fired after he overdosed on drugs in Mexico.

"The reason they were fired was because of what we learned in the past
about what can happen when our officers become involved in criminal
activity," Bayless said, calling the outlaws a "few bad apples."

Over the last decade, a handful of Chicago police officers have been
unmasked as gang members in high-profile federal investigations.

In the Austin 7 case, Edward Lee Jackson Jr. was identified as a ranking
member of the Conservative Vice Lords, a position he held even when he
patrolled the Austin police district on the West Side, authorities said.
Jackson, known as "Pacman," received a 115-year sentence in October.

"They had no credibility," Joseph M. Alesia, deputy supervisor of the gang
crime unit in the Cook County state's attorney's office, said of Jackson
and the six other officers arrested in the probe. "It caused us to dismiss
a lot of cases that on their face looked like good cases to prosecute
because of the officers involved."

Jackson had become a member of the gang in his teens. His father was a
founder of the gang, one of the largest and oldest in Chicago, prosecutors
said.

The Shakespeare District was a source of embarrassment for the department,
too. One Shakespeare officer, Tommy Marquez, admitted he was a member of
the Latin Counts street gang in his youth, but insisted he was not in the
gang as a cop. He pleaded guilty to extortion in 1995.

Another officer, Sonia Irwin, was convicted in 1996 of aiding and abetting
the Gangster Disciples street gang. She was a Chicago police officer while
she dated Gangster Disciples Chairman Larry Hoover's right-hand-man,
Gregory "Shorty G" Shell, renting cars for him and driving him to a
Downstate prison to meet with Hoover.

"They used her charge card to rent motel rooms and cars," said Bernie
Murray, chief of the felony division for the Cook County state's attorney's
office, who prosecuted Hoover.

Irwin owned a South Side restaurant, June's Shrimp on the 9, where the
Gangster Disciples made drug deals, prosecutors said.

Bayless said he knows of no officers fired during police Supt. Terry
Hillard's four-year tenure for having gang affiliations. But several
officers in recent years have been charged with crimes that prosecutors
suspect were tied to gangs.

Officer Pedro Mataterrazas II was working for a drug-dealing friend before
he entered the police academy in 1998 and made at least 10 trips to
Nashville in cocaine-loaded cars after he took the oath to serve and
protect, prosecutors said. He pleaded guilty in October 2000 to drug
charges and was sentenced to 72 months in a federal boot camp.

One of the most infamous cases involved former gang crimes officer Joseph
Miedzianowski and his partner John Galligan, who were convicted last year
of overseeing a Miami-to-Chicago drug ring in a conspiracy with Chicago
gang members. Both await sentencing.

Miedzianowski was accused of harboring a killer from the Latin Lovers
street gang, Nelson "Baby Face" Padilla, after he shot and killed a rival
gang member, Roberto Detres, in 1995. The dirty cop brought Padilla a copy
of the police file on the investigation, and let him read it and learn the
names of witnesses, authorities said. Padilla eventually was convicted of
the crime and pleaded guilty to participating in Miedzianowski's drug
operation. He was sentenced to 35 years in state prison and awaits federal
sentencing.

At least three other officers, whose badges were stripped in 1999, also are
under investigation in the Miedzianowski case, sources say. They remain in
the department on desk duty. The scandal prompted Hillard to break up the
department's gang unit two years ago and reassign its officers.

One Northwest Side plainclothes police officer said his philosophy when
dealing with gangs is "live and let live," that is, until someone is killed
or wounded. The officer, who did not want his name used, said that in
return for his hands-off approach, he expects information in return. He
said he carries a starter pistol used in sports events to force reluctant
gang members to give up information about crimes.

Gang members have told the Sun-Times that officers with gang affiliations
continue to work for the department and protect drug dealers' fiefdoms.

One gang member, who identified himself as "K-Swiss," said he knows of two
fellow Latin Kings who have become officers and work in the Uptown
neighborhood. But the 21-year-old said he did not have any evidence that
the officers engage in illegal activity now.

K-Swiss said he has endured many beatings at the hands of the police and
that an officer once pointed a loaded gun at his head to get him to confess
to a weapons charge.

"Of course, sometimes on the street they will take our money," said K-
Swiss. "The cops say, 'Gang-banger, you got a receipt for that?'"

(SIDEBAR)

WHAT AUTHORITIES SEIZED LAST YEAR:

COOK COUNTY: $14.8 million, including $11.8 million in cash and 582
vehicles valued at $3.04 million, constituting 5,776 forfeiture cases
initiated.

U.S. GOVERNMENT: $19,589,139 (total deposits to U.S. asset forfeiture fund
for Illinois, including Northern District of Illinois, which comprises most
of the cases).

SOURCES: Cook County state's attorney's office, U.S. Justice Department