FEDERAL USE OF INFORMANT CRITICIZED

Despite adopting sweeping new guidelines a year ago that tightened the
rules for handling informants, the FBI and other law enforcement agencies
continued to use an admitted drug dealer and con man to set up stings
against other people, according to interviews with the informant.

The informant told the Globe he has evaded jail since the 1950s, when he
served a year for a Medford home invasion, because agents gave him
''leeway'' to commit crimes in exchange for information about gangsters,
drug dealers, bank robbers, and art thieves.

Although he was arrested in 1993 on charges of defrauding a Boston hotel,
the informant said he resolved the case by agreeing to pay his $30,000
hotel bill.

The informant, who was recruited 40 years ago by the same FBI agent who
brought notorious gangster Stephen ''The Rifleman'' Flemmi into the fold,
was finally dropped by federal officials last month after reporting that he
had been stealing prescription drugs and giving them to one of his
handlers, a US Customs agent. He also accused the agent of extorting more
than $150,000 from him.

And recently, federal prosecutors launched a separate investigation into
allegations that the informant tried to taint a probe of Teamsters Local 25
last year by fabricating corruption allegations against an agent assigned
to that case, according to law enforcement officials.

The allegations have raised questions about whether the US Justice
Department has succeeded in cleaning house since the FBI's relationship
with Flemmi and James ''Whitey'' Bulger, now charged with killing 21 people
between them, was exposed in 1998 during federal court hearings in Boston.

''Based on everything we know about Bulger and Flemmi, it would be a
tragedy if the Justice Department failed to learn from its mistakes,'' said
Representative Dan Burton, an Indiana Republican who chairs a congressional
committee investigating the FBI's use of informants. ''This is something
the committee will look into.''

FBI and US Customs Service officials declined to discuss the case. But
during recent interviews, the informant - who asked that his name be
withheld for fear of his safety - said he manipulated the system for years,
informing on others to clear the way for his own crimes.

The informant who said he has gone by various code names, including
''Dunkin' Donuts,'' said he made a living selling information to the
government, while also selling heroin, cocaine, and marijuana and
concocting ''swindles and frauds.''

''When you're doing something bad and something is going to happen, you run
and give the people up,'' said the informant, insisting that agents knew he
was involved in criminal activity but didn't talk about it.

In one case, he allegedly bilked a Fall River police dispatcher out of
$400,000 through phony investment schemes, then orchestrated an FBI sting
of the man on gun charges, according to federal court records. An FBI agent
revealed in court last year that the informant had implicated himself and
the dispatcher in a series of home invasions a decade ago that targeted
drug dealers, but the charges weren't investigated.

The FBI, under its new guidelines, isn't supposed to work with people
committing crimes, unless they have been authorized in writing for a
specific period of time. FBI officials would not disclose whether the
informant was reevaluated under the new Justice Department guidelines that
call for a review of all criminals who have worked as informants for six years.

US Attorney Michael J. Sullivan also declined to comment on the informant,
but underscored the line that law enforcement continues to walk in dealing
with people who peddle information.

''If somebody showed up on the doorstep of law enforcement or the US
attorney's office and suggested they had information that could
significantly improve public safety, like deter the next World Trade Center
bombing, we wouldn't ignore that information, even if the person had a
serious criminal history,'' Sullivan said.

However, Sullivan added, investigators must corroborate information and
make sure their sources are credible.

The informant, a fourth-grade dropout, grew up in Boston's West End and was
recruited in 1962 by FBI agent H. Paul Rico. The informant said Rico caught
him with two machine guns, but agreed not to arrest him if he informed on
others. The informant said he promptly gave up two mobsters on heroin charges.

Rico is the same agent who was chastised by Burton's committee last year
for his handling of informants and is currently being targeted by a federal
grand jury investigating alleged FBI misconduct. Rico's lawyer said Friday
his client declined to comment.

While the informant insists he's always told the truth, he was briefly
dropped by the FBI in the 1960s because of credibility problems, according
to court documents. He was also investigated by the FBI for perjury in 1970
after he testified for the defense to discredit a key government witness at
the armored car robbery trial of Boston Mafia boss Gennaro ''Jerry''
Angiulo, who was acquitted.

Still, he managed to get back into the informant program, offering
information over the years on everything from the 1990 heist of $200
million in paintings stolen from the Isabella Stewart Gardner Museum to
organized crime, according to federal court documents.

Several years ago, he agreed to become a government witness, lured, he
said, by promises that if he helped convict wealthy criminals, he could
reap as much as 25 percent of all assets seized in those cases under
federal forfeiture laws.

''Do you know how easy it is to entice somebody?'' said the informant, who
for the past few years worked with a multi-agency task force that included
the FBI, US Customs, and State Police.

The informant said an FBI agent introduced him to David McClanahan, a US
Customs agent who suggested they sting Shirley Sack, a Manhattan art
dealer. Sack was convicted in 1978 of fencing paintings that had been
stolen from the home of Harvard president Derek Bok.

The informant arranged for Sack and another art dealer to sell paintings
valued at $4.1 million to an undercover agent posing as a drug dealer,
leading to Sack's arrest in Boston last May on money laundering charges.

The informant has been paid $30,000 for his work on the Sack case and said
he's been promised as much as $250,000 if the paintings are forfeited to
the government.

But federal law enforcement officials said that case could be in jeopardy
because of an investigation into allegations that surfaced after McClanahan
crashed into a parked car in Bridgewater last September and drugs were
found in his system. After the accident, the informant said, he told a
Customs supervisor that he had been stealing prescription painkillers from
a Braintree doctor's office and giving them to McClanahan.

He also claimed McClanahan had extorted more than $150,000 from him over 18
months, allegedly to buy drugs and a new car, and to fix an investigation
into the informant's illegal activities.

Both McClanahan and his lawyer, Peter Noone, declined to comment on the
allegations. Robin Avers, the special agent in charge of US Customs' Boston
office, declined to discuss the investigation, other than to say that
McClanahan is still employed by the agency.

While the investigation is continuing, McClanahan recently returned to work
after a five-month leave, law enforcement officials said.

''It is unbelievable that federal law enforcement agencies continue to use
informants of this type and nature, knowing the scandals that they have
created and the disrepute they bring to the credibility of federal law
enforcement,'' said Boston lawyer Stephen Delinsky, who represents Sack and
claims the informant entrapped her after borrowing $15,000.

After federal prosecutors arrested the Fall River dispatcher last year on
charges of selling guns to the informant, they reduced the charges and
agreed not to seek jail time under a plea agreement. The deal was struck
after the dispatcher, Nuno Barboza, claimed the informant swindled him out
of $400,000 on phony investments and then used the government to entrap him.

''It's like the tail wagging the dog here,'' said lawyer Benjamin Entine,
who represents Barboza. ''The informant is feeding the FBI what the
informant wants them to know and is getting away with whatever he wants to
do under the cover of the relationship.''

In September 2000, Attorney General Thomas F. Reilly's office investigated
complaints from several investors who lost money to the informant, but
prosecutors decided not to pursue charges because many allegations were too
old and there were other problems with the case, according to a state
prosecutor.

The informant continued working cases for the government until Jan. 22,
when US Customs sent a letter notifying him he had been dropped because
federal prosecutors wouldn't take any new cases he was involved in.

The letter, which the informant provided to the Globe, said, ''The United
States Attorney's office arrived at this decision based upon what they
believe is a fact pattern depicting your lack of candor, credibility and
veracity.''

Judy Rakowsky of the Globe Staff contributed to this report.