Funding for Frontline is provided by this station and other public television stations nationwide and
by the Corporation for Public Broadcasting.
Illegal drug profits add up to a hundred billion dollars a year.
They will smuggle the cash out of the country the same way they smuggle the drugs into the country a hundred different ways.
Meet some of the legitimate businessmen who make it possible,
accountants, lawyers, and bankers.
Frontline follows a federal investigation of the illegal money trail into the heart of the mainstream economy.
There are legitimate businesses taking advantage of the currency that's out there.
Tonight on Frontline, who profits from drugs?
From the network of public television stations, a presentation of KCTS Seattle, WNET New York, WPBT Miami, WTVS Detroit, and WGBH Boston, this is Frontline with Judy Woodroof.
Good evening.
Our most common images of the illegal drug war in America are of poor, urban neighborhoods besieged by an unstoppable wave of addiction, violence, and greed.
Those images of the drug problem are perpetuated by the media's focus on stories about desperate addicts, ruthless pushers, and invincible foreign cartels.
But there is another side of the story with a very different group of players who don't fit the stereotypes.
Tonight, Frontline investigates what happens to the enormous profits of the illegal drug trade,
following a trail directly into the offices of otherwise respectable businessmen,
people who would say no to drugs, but very willingly say yes to drug money.
It is the untold story of how the whole American economy profits from illegal drugs.
Tonight's program was produced by Charles Stewart and Marcia Vivancos.
It is called Who Profits from Drugs?
This yacht center in Fort Lauderdale, Florida, is just one of thousands of such marinas dotting the seaboard of Florida's coast, all of them potential smuggling havens for drug traffickers.
From 1978 to 1981, when it was known as the Amity Yacht Center, this was the site for one of the largest marijuana smuggling organizations known to the federal government.
Investigators estimate that two million pounds of marijuana, worth at least one-half a billion dollars, was smuggled through here.
The organization was run by this man, Raymond Thompson, who was also suspected of killing at least three people.
At the Florida Department of Law Enforcement, detectives were looking into the Thompson organization.
Lonnie Cooper headed the investigation.
The Ray Thompson organization was run by two main components. One was fear and the other was money.
Now when money wouldn't suffice to elicit the kind of loyalty or obedience that Ray Thompson demanded, then he did not hesitate to invoke fear.
In the summer of 1981, police raided the Amity Yacht Center, seizing 15 tons of marijuana and making one arrest.
They missed Ray Thompson. But Thompson was nervous. He needed a place to hide $550,000 in fives, tens, and twenties.
So he asked his longtime friend, James Savoy, to install a safe in the floor of his workshop.
Large amounts of money were subsequently placed in that safe. That must have put a strain on Savoy that he couldn't stand.
He went one night and tried to break the safe open with a sledgehammer. He was unable to do that.
He then went out and rented a jackhammer, spent almost the rest of the next day jackhammering out.
This floor safe was buried in concrete and placed in the floor. He was able to get the safe and part of the concrete out, but he still couldn't get in the safe.
Savoy eventually opened the safe and stole the money. He drove to North Carolina and checked into a motel.
He hooked up with a prostitute. When their business was done, Savoy either passed out or fell asleep. He woke up the next morning, $550,000 lighter,
with no idea of where to look for the prostitute or what to do. That was his second worst mistake.
His first worst mistake was he then decided to return to South Florida.
In March of 1982, Ray Thompson caught up with James Savoy when he returned to Florida.
He forced Savoy to go to the marina, where he was put on a boat and taken out into the Atlantic Ocean.
They put him on the back of the boat. They weighted him down with some chain they'd bought, an anchor, and Ray Thompson said, I want to do this myself.
Ray Thompson took a gun, placed it to the back of Savoy's head, blew the back of his head off. They threw him out into the water.
They broke the gun down, threw it out in different parts, and returned.
Thompson was eventually convicted of drug smuggling and murder, but the story of his money demonstrates a surprising problem all drug traffickers face, cash.
At the Internal Revenue Service, agents have seized $1.6 million in drug profits from just one raid.
It is money like this, not the growing and manufacturing of their product, not the smuggling and distribution of the drugs,
which presents traffickers with their most difficult business problem, how to handle large amounts of cash.
Dave Wilson, an agent at the Drug Enforcement Administration's Financial Investigations Office, explains why.
Handling millions of dollars creates a weight and distribution problem to them that you wouldn't expect because most of their business is done in fives, tens, and twenties.
Because of that, as a for instance, we discovered this a while back, $20 in $20 bills, $250,000, weighs about 75 pounds.
When a trafficker is doing several million dollars a week, he has a problem just disposing of the paper, just being able to handle that much paper.
Another problem with cash, who to trust with it. When drugs are seized or lost, traffickers can always get more.
But when they lose their cash, either through a seizure like this one or through a theft like James Savoy's, they have lost what matters most to them, their profits.
You ordinarily will see that the money is handled by a different group of people than the cocaine is handled by.
The people that handle the money tend to be much more influential in an organization, tend to be much more trusted, and are, generally speaking, more sophisticated.
Michael McDonald is a criminal investigator with the Internal Revenue Service. He points to another problem traffickers have with cash.
How to spend it where it doesn't come back to haunt them, in terms of a tax problem, in terms of tax evasion and prosecutions, in terms of rendering his assets sizable and forfeitable.
To simplify things, a very common way of doing it is get the money offshore. You need to get the money into a foreign bank.
They will smuggle the cash out of the country the same way they smuggle the drugs into the country, a hundred different ways.
They'll carry it out in suitcases, they'll carry it out in duffel bags on commercial flights, box it up, they'll package it in commercial shipments, they'll charter jets, they'll take it on by private plane.
People kind of chuckle about that and feel that it's just, that's Hollywood, but that's real life and the drug trade.
In Fort Lauderdale, Florida, the Drug Enforcement Administration has set up a special office to investigate one of the largest drug money laundering operations known to the federal government.
Here, investigators are hidden away behind an unmarked, locked door.
Is Tony there? Yeah, I tried. Is he still out on the street? Yeah, but I thought he was going to go home.
Frontline was allowed inside on the condition that no undercover agents be identified.
This office and its headquarters nearby are the center for what has been codenamed Operation Man.
Okay, ask him how he knows that Nelson did that load when he was out on bond.
It began with intelligence gathered from the investigation into Ray Thompson and his organization.
Agents here are uncovering a trail of $100 million in drug profits laundered through six countries and invested back into the United States.
Based on information from public files and indictments, and on interviews with agents, prosecutors, and defendants, Frontline has pieced together the story of how this drug money was laundered, where it was invested, and who profited.
The key would be an enforcer in the Ray Thompson organization, a man indicted for kidnapping and murder, Scott Errico.
Errico had gone to college, and he was smart enough to know that he needed professional help when it came to moving his share of the drug profits.
In 1983, Errico took half a million dollars in cash, and on instructions from his lawyer, flew to New York.
His lawyer then told him by telephone to go to the Helmsley Hotel, where Errico met an Englishman who would help him launder his money.
They stuffed hundreds of thousands of dollars into suitcases, and together they departed for England.
In London, Errico checked into an expensive apartment under an assumed name. Twice he paid large sums of rent in cash.
But most of his drug profits were deposited into a branch of the Midland Bank, located on the Isle of Man off the coast of England, where bank secrecy laws were particularly strict.
The money launderer, Patrick Diamond, began to educate Errico in the sophisticated art of hiding his money. He set up fake corporations, with Errico as the hidden owner.
But all the while they were meeting. Detectives from Scotland Yard were watching.
Commander Roy Penrose is in charge of criminal investigations for Scotland Yard.
During that surveillance operation, we came across a man called Stephen Mazovilla. We didn't know him. He looked interesting. There were several meets recorded with him and Diamond.
We then decided to put surveillance on him, and as a result of that, we found him to be Scott Errico.
British Airways to Paris Charles de Gaulle flight BA 306. This is the final call, boarding now at Gate 8.
When Errico tried to leave England on September 5, 1985, an increasingly suspicious Scotland Yard stopped him at Heathrow Airport.
He was brought to the Cannon Row prison and questioned closely about drug dealing and the source of his money.
According to a confidential transcript of the interview, Errico pleaded innocent.
I'm not such a bad guy. I went to college. We are all white college boys. There are no Colombians or Cubans. College boys have morals.
Soon Diamond was also arrested and led detectives here to the British Virgin Islands and the island of Tortola to the offices of Financial Management and Trust and its president, Sean Murphy.
At five o'clock in the morning, investigators knocked on Murphy's door and armed with a search warrant took possession of his extensive files.
And from the documentation found there, it was abundantly clear that he was the main or one of the main individuals for money laundering of drug money from the U.S.
Because the money was coming in from the United States, Scotland Yard notified the Drug Enforcement Administration, which in turn called in United States Customs and the Internal Revenue Service.
Paul Teresey headed the Drug Enforcement's Fort Lauderdale office, which ran the investigation.
The very unique part of this is that we had the money launderers, the person who was actually moving the money, who also had very clear records in black and white showing who the money belonged to and the paper trail, how it was being moved.
The files were airlifted to Fort Lauderdale. They were extensive and complete. Murphy and Diamond had kept three files for each transaction, one for the client, another for auditors, the third and most important was for themselves.
If they knew that the police were coming, they would have removed the third file. The third file was the code system, the handwritten notes, accounting for the wire transfers, the cash transfers, the money orders and the way they were received.
Sean Murphy was an accountant who specialized in taking in cash dollars and converting them into the accounts of fake offshore corporations. Because government agents from two countries now had his files and threatened him with prosecution, he revealed everything he knew.
According to a confidential report from Scotland Yard, the detail which issued forth from the mouth of Murphy was staggering. Under interrogation, he admitted receiving an excess of $100 million in drug trafficking proceeds and identified 10 or more large-scale U.S.-based drug money laundering organizations.
Today's date is April the 22nd, 1986. Along is a call being made by Sean Patrick Murphy to Michael Aladine in Miami, Florida from Mr. Murphy's office in Tortola, British Virgin Islands.
While federal agents listened in, Murphy called one of his clients, a lawyer, to discuss the arrest of Diamond.
Right, they're going to walk in one day and with an affidavit or whatever you call it, search one thing and just go through my file.
An affidavit is a search warrant and there's nothing you can do about it.
Levine, Michael Levine, had been laundering drug money for a major marijuana import smuggling organization of which Scott Errico was also part of the initial organization going back to 1982.
This is Michael Levine, Scott Errico's lawyer. He was quickly arrested and charged with money laundering.
Oh, let's see. I think that's taken and I don't see Michael there. Oh, there he is on the side, my sister and my cousins.
Jerry Levine is Michael Levine's mother.
That's Camp Wildwood. It was the summer, there's Michael on the dock getting ready to go swimming and I think it was the summer of 65.
Michael Levine grew up in Miami, Florida and by all appearances had a normal childhood.
He played sports and attended private schools where he was rewarded for good conduct.
He graduated from the University of Miami Law School, specializing in tax law.
I think he got involved without realizing what he was getting involved in.
I mean he's a tax lawyer and whether it's a tax lawyer or a criminal lawyer, people come to you, particularly a tax lawyer, to invest money and that's what your job is.
And I don't think you necessarily know where that money is coming from.
Today Michael Levine is in federal prison.
In my personal case it wasn't a conscious, at least it was not a conscious decision I am going to launder money.
I was in the tax field, in the corporate field and as a professional referral someone says, well, can you form a corporation for a client?
When that happened I did it. That was, I thought, my job and what my rationalization was in terms of the client, who I had known to be a drug dealer,
and I say I had known for him to be a drug dealer, we never discussed it. I never was involved in his organization.
I knew he was a drug dealer like you would know most clients that come into your office, the way they dress, the way they act, the way they handle themselves,
the type of money they have, you can make a presumption that in all probability their funds are from illegal sources.
Levine laundered money for various drug dealers, including Scott Errico.
His primary client was Patrick Bilton, who imported marijuana by the ton and brought the cash to Levine.
The first time that client gave me money was only like $5,000. I say only because it kind of, this whole thing distorts your value of money.
I was flabbergasted. I've never seen $5,000 in my life and I counted it several times.
And what happens is slowly you get used to it. When I took that to the bank, you look over your shoulder, you think someone's going to rob you,
and then it gets to the point where they gave you $20,000 or they gave you $50,000, and then they, as I told you, they gave me sometimes $100,000, $200,000.
You tend, after a while, to lose the apprehension of the money. It's kind of scary at the beginning. After a while it loses its value.
You don't think of it in terms of what it can buy. You just think of, well, $100,000. You don't count it.
At least I never did after a while. It was, you know, if you had it in 20s or 100s, it just took too long to count.
Levine needed help to launder the money internationally. He returned to his alma mater and went to the law library,
where he looked up the name of a company specializing in tax shelters and located Patrick Diamond.
He flew to London to meet with Diamond, and together they set up shell corporations to hide the proceeds of the drug dealing.
On one such trip, Scotland Yard was watching and took this picture.
A typical transaction, if you will, would have been someone, in this case Patrick Bilton, coming to me and saying,
here is probably $150,000, and I need this in my overseas account, this corporation that's already been set up.
Based upon that, I would call up either Sean Murphy or Patrick Diamond, and they would come to the United States.
I'd have that money in my safe deposit box, go to the safe deposit box, sometimes with Mr. Diamond or Mr. Murphy,
sometimes not, give them the cash in my office, and they would walk out with it and bring it back themselves,
any method they wanted to, with instructions to fill out a currency report.
Anyone leaving the United States with more than $10,000 in cash is required by law to go to United States customs
and fill out a currency report. Murphy and Diamond never did.
They smuggled drug money out of the country in suitcases and were never caught.
Frankly, most of our effort is put on incoming aircraft with drugs, and there's only a minimal effort put on outgoing aircraft.
Patrick O'Brien is head of enforcement for U.S. Customs in Miami.
I can't go into all of our techniques, certainly not in detail, but you do use profiles,
certain profiles that we've developed based on our success as to who would be a likely candidate to be smuggling.
The problem, of course, with profiles is that then becomes self-fulfilling.
If you only look at this type of person, and those are the only people that you ever find smuggling money,
and then your profile gets narrower and narrower.
We've had cases here where we've been watching money coming in or going out,
and the baggage handlers have better profile systems than we do.
They've done very well ripping off some of this.
The second thing, of course, is information.
We rely on that a lot, both from sources of information and from investigations.
When Customs does seize money, they often get a lot of it.
This is $10 million of drug proceeds.
But this is only a small fraction of what federal investigators estimate to be approximately $100 billion
generated by the drug business every year.
It is at this point when drugs have become cash dollars and traffickers start looking for ways to move it and launder it
that investigators say businessmen and financial institutions start sharing in the profits.
For example, this money is from a bank which is under active investigation
for taking in cash from the sale of drugs, fives, tens, and twenties,
and then for a service charge giving the drug dealers back these $100 bills.
Once drug money makes it safely out of the country and is deposited offshore,
some banks make a profit by charging a fee to accept large cash deposits.
The banks in the British Virgin Islands started charging 2 percent to make a deposit down there,
which I always found kind of curious in that these were major banks.
We're talking about the largest in the world saying that we will charge you 2 percent to make a deposit
with a straight face and I just, you know, I can't imagine anyone making a deposit
and paying someone a bank to take that money unless the source was illegal.
To further conceal the drug profits, Levine would invest his client's money back into the United States,
into boats, real estate, both commercial and residential,
and he entered into an agreement for part ownership in a radio station,
all totaling close to $20 million in assets purchased with drug proceeds.
With each transaction, Levine would charge a fee for his service,
and yet he didn't see himself as part of the drug problem.
No, I did think about it several times. I would say, well, am I bringing drugs to the schools?
And in my case, my rationalization was these specific clients were doing it anyway.
It was only after the fact that they said I want to buy a toy, a house, or a boat that they came to me.
So my rationalization was with me, without me, it was going to get done.
Levine used a complex strategy to hide the ownership of assets purchased with drug profits.
In this case, a boat used by one of his clients for smuggling.
The owner of this boat was listed as a corporation Levine had set up in Delaware,
which was in turn owned by another corporation set up in the British Virgin Islands.
At the United States Department of Justice,
a special team of lawyers tries to trace these ownerships backwards and link them to drug profits.
Michael Zeldin is head of asset forfeiture.
We have to trace the asset.
We have to prove that the asset was derived from or facilitated
or was in some way involved with the illegal activity before we can forfeit it.
We can't just forfeit because we want to.
And so the more layers of insulation you place between the investigator and the ultimate asset, the more difficult it is.
Once assets are seized and proven to have been purchased with drug proceeds,
they are sold by the government at auctions like this one.
Item number 127, a 1980 Lamborghini.
It's got 12 cylinders. This car was titled in the state of Florida.
It had a Florida tag on it.
It was made overseas. It's got kilometers on the speedometer.
I got 20 and a half, I got 20 and a half, I got 20 and a half, I got 25 and a half.
Last year, the government seized 22,000 items worth $550 million, purchased primarily with drug proceeds.
59 and a half now, 60, 59 and a half now, 60. 60 now, half, I got 60,000, now the half.
We got 60,000, now the half, I got 60,000, now the half.
We got 60 and a half now, 61 and a half, now one.
The bid is $60,500. Are we through?
Does everybody have?
That man right over there, $60,500.
The money from the sales goes to the federal government.
It's earmarked for law enforcement.
So the money we take off the criminal is put back into law enforcement agency budgets for further apprehension and generating more money.
Like the revenue collectors, we make our salary and then some.
The Levine case has convinced law enforcement agents that businessmen and public officials also profit from money gained from the sale of drugs.
Elton Gissendanner was director of Florida's Department of Natural Resources.
He was accused of accepting a bribe to arrange for a reduced charge for a defendant in a drug smuggling case.
According to investigators, Gissendanner made a series of cash payments totaling $50,000 to $60,000 to build this house in Tallahassee, Florida.
Gissendanner would not talk to Frontline, but he has told investigators that the money he invested was family money, not drug money.
He pled guilty to a lesser charge of obstruction of justice.
Lothar Genghi was the prosecutor.
Mr. Gissendanner, in fact, was in turn using substantial amounts of cash and making cash deliveries to persons in the Tallahassee area.
I think the evidence at the trial showed in one case he delivered $10,000 in cash in connection with an investment in a nightclub type of operation.
When Scott Carswell was looking for investors in his Tallahassee nightclub, 75 people responded.
Elton Gissendanner came up with a $10,000 payment in cash.
We had a little trailer and he came in and I was at a table with some other investors and he asked me to come to the back, and I did, of the trailer.
And that's when he brought out at that point cash and asked me if I would have any trouble taking cash for his investment.
And it was at that point I told him I really didn't know.
Of course I wanted the investment, we needed the money.
I didn't want to lose it, but I didn't want to take it improperly.
Carswell took the money and reported it properly as a large cash investment.
But investigators say Scott Carswell is the exception rather than the rule.
They say that the business community is too often willing to accept cash payments and not report them, further laundering drug profits into the local economy.
Michael McDonald has investigated money laundering for 10 years for the Internal Revenue Service.
And this just typifies the type of situation we're running into where there are legitimate businesses taking advantage of the currency that's out there to move it through their institutions,
move it through their companies, move it through their accounts, and they can make money off it, and they can make a lot of money off it.
And I think that there are a lot of people who are privileged, who are benefiting from the narcotics trade in small ways or in large ways,
who don't see themselves as the problem but rather see the peddlers of the drugs as the problem.
And if they could only get rid of those guys, then we'd have no other problem. I think they're blind.
Attorney Michael Levine pled guilty to laundering money and is currently serving a 30-month sentence.
Shortly before he was caught, he realized the violent reality behind his involvement in the drug business.
I was about to make a trip to London and all of a sudden in the paper, the Miami Herald had a picture of Scott Errico and said he had murdered somebody,
which I didn't know that, you know, until that time. And then all of a sudden it wasn't the game anymore.
You know, these were real people, real lives. And all of a sudden the person that was in the paper was my client that I was assisting prior to that time.
Federal prosecutors admit that without the capture of Scott Errico, Michael Levine and dozens of others would still be in business today.
In Fort Lauderdale, agents continued to develop information provided by the accountant Sean Murphy.
Using this information and documents from his files, they followed a paper trail which was now leading them outside of Florida to places like Boston, Massachusetts.
Investigators emphasize that the laundering of drug money is no longer confined to southern Florida, and Boston is a good example.
Founded on old money and thriving on new two-earner incomes, Boston is seemingly far removed from the center of the drug trade.
But money was laundered here and legitimized into the local economy by two drug dealers, Fred Carroll and Thomas McNichols.
By the summer of 1988, McNichols and Carroll had been arrested and had pled guilty to charges of drug smuggling and money laundering.
As they awaited sentencing, they reported to the courthouse each week.
They declined to be interviewed by front line, but grand jury testimony, public records and interviews revealed the full extent of their story.
Carroll and McNichols grew up in Boston and graduated from Boston College and the University of Massachusetts.
Carroll went on to get a law degree.
During the early 1980s, they imported marijuana by the ton into New England.
One shipment arrived one evening in May of 1982.
Carroll and McNichols had arranged for 10 to 15 tons of marijuana to be brought from Columbia directly into Boston Harbor.
They communicated with the ship at sea by radio from this house in Quincy, just south of Boston.
The ship radioed that the marijuana was too heavy, the boat they were using too old, and distress signals indicated that it was taking on water.
It limped into Boston Harbor and docked directly behind a popular restaurant where it remained for the night.
The next day, Carroll and McNichols ordered the captain to take the boat back down to Quincy, where in broad daylight it was run ashore.
A neighbor found the sight of a large beached boat interesting enough to capture it in a watercolor painting, never suspecting that it contained tons of marijuana.
The following evening, offloaders known as Reds Raiders, after McNichols' nickname, loaded the marijuana into large rental trucks and drove it back into Boston to Horticultural Hall, where an employee let them in after hours.
Undercover agent Wendy Lovato investigated for the Drug Enforcement Administration.
At that time, in the hall, Fred Carroll and Thomas McNichols would be there in person with ledger sheets.
They would weigh the marijuana, that would be noted, and it would be noted who was taking what amount of drugs out of there so they wouldn't know how much they would be paid.
A celebration and cash payoffs took place later outside the Bull and Finch Bar, better known as Cheers, after the television show.
Evidence shows that McNichols and Carroll were extremely sophisticated in the laundering and investing of the proceeds from their drug sales.
They had met Sean Murphy in their travels to the Caribbean, and they smuggled their cash out of the country to him.
Mr. McNichols had a leather jacket with a secret compartment sewn in the back, and he would transport money that way and other ways they would get the money into the island of Tortola.
They would take the thousands of dollars of cash to Mr. Murphy.
Off camera, Carroll told Frontline, I'm just a hippie left over from the 1960s who wanted to get his friends high.
But he was sophisticated enough to know he needed a good lawyer to help deal with the laundering and investing of his money.
He turned to his cousin, John Rogers, who had experience in criminal law, serving two years as an assistant district attorney in Boston.
To launder the money, Rogers and Murphy became co-signers in fake corporations set up outside of the United States.
Drug money began to flow back into Boston from these offshore corporations, much of it into Boston's prestigious and very expensive Back Bay.
Carroll bought a condominium at 205 Commonwealth Avenue, and McNichols purchased a unit at 120 Beacon Street.
Jonathan Chiel is an assistant U.S. attorney in Boston.
If you were to try to find out who owned 120 Beacon Street, you'd find a realty trust held in the name of a company owned by a British Virgin Islands company whose shareholders were located in, again, some other company, perhaps in Panama.
The layering was complete and designed so that no one could ever follow the trail back.
Early on, attorney Rogers wrote Murphy telling him to invest $30,000 into a new retail business to be opened in Faneuil Hall Marketplace and operated by Francis McNichols.
Faneuil Hall Marketplace in Boston is visited by over 10 million people a year.
Business flourishes and Thomas McNichols saw an opportunity to get a good return on his money.
He invested close to $200,000 of drug profits and opened not one, but three sporting apparel stores.
These stores were half owned and managed by Tom McNichols' brother, Frank, Thomas McNichols being the other 50% owner, and Tom McNichols would funnel in his narcotics money into the stores, which virtually kept the stores alive.
By the early 1980s, Carroll, McNichols, and Rogers were buying buildings, renovating, and selling them, each at a large profit, running over a million dollars through an unsuspecting savings bank south of Boston.
Said Fred Carroll off camera, I made three times as much money in real estate as I did with marijuana.
So successful were they at laundering and investing their money, they stopped smuggling drugs by 1982.
When McNichols promised his girlfriend that he had quit the drug business, she agreed to marry him.
Sean Murphy, by now a close friend of the drug dealers, flew to Boston from the Virgin Islands and took these pictures.
During a trip around the world in 1983, Carroll and McNichols stopped in London at Sotheby's for an auction of Beatles memorabilia.
The high bidder for John Lennon's piano with $19,000 of drug money was Thomas McNichols.
He and Fred Carroll tried to avoid an inquisitive press.
Why so secretive? I mean, there's a lot of fans out there that are interested.
How much were you prepared to pay for it?
I would have gone to $25,000.
Why are you being so reluctant to talk about it?
Because I've got to catch a plane.
We'll help you get a cab.
Can you tell us anything about the owner at all?
No. It's a private corporation.
Will it be in a museum?
No, it's probably in a private collection.
When they returned, they continued to invest their money, an estate in Maine and land in St. Thomas.
In what would have been one of their most successful ventures, they purchased 28 prime acres on Martha's Vineyard for $475,000.
By the time it was seized and sold by the federal government, it brought $1.2 million.
Investigators found that many people who came in contact with Carroll and McNichols were only too willing to help them invest their money.
No one asked what they did for a living.
They were simply interested in the fact that Carroll, McNichols and their frontman Rogers had money to offer.
This real estate broker who sold them property talked to Frontline on the condition that he not be identified.
He says that had he known they were dealing in drug profits, he would have dealt with them anyway.
I have an obligation to feed myself and my family and that's it.
I mean, I'm not a police officer. That's not my job.
My job is to sell property and get as much money as I can for my clients.
In 1986, agents in Fort Lauderdale had just begun the Boston phase of their investigation.
They labeled McNichols, Carroll and Rogers the Boston Boys and they had to act quickly.
An indictment was returned within a year just before the five-year statute of limitations ran out.
They were charged with drug smuggling, money laundering and tax evasion.
But in the rush, information was only just coming to light that the Boston Boys had also given out a series of loans to several friends,
businessmen who realized that Carroll and McNichols had money and lots of it.
Not only did they loan $190,000 to McNichols' brother to open the Pulse sports apparel stores,
but $100,000 went to the owners of the Seaside Restaurant.
Two loans each for $300,000 went to a real estate developer to renovate two townhouses.
Another loan for $100,000 went to a New York stockbroker for his personal use.
Investigators wanted to know if the businessmen who received these loans knew they were borrowing drug money.
The loan to the Seaside Bar was at prevailing interest rates and was used to maintain the business.
The owners were friends of Carroll and McNichols.
They declined to comment to Frontline about the loan, but told agents they didn't know the origin of the money.
$600,000 in loans went to two trusts set up to purchase townhouses at 352 Beacon Street and 88 Marlboro Street.
Investigators say the money went to a developer, Peter Bailey, who works here.
When asked about the loans, Bailey said, it's none of your business.
He denies receiving any money.
But investigators from the Internal Revenue Service, the Justice Department, and the Drug Enforcement Administration disagree.
Again, these were all cash transactions.
The boys gave Mr. Bailey $300,000, and he, not whining his name on paper, Mr. Bailey used a corporate name.
Agents say the stockbroker from New York, Herbert Hart, was an acquaintance who used his loan for his own personal use
and invested another $120,000 in the stock market for McNichols and Carroll.
He told Frontline he was not interested in commenting.
The three pulse stores owned by the McNichols brothers remain open for business.
In a plea agreement, Thomas McNichols agreed to forfeit $50,000 of the $190,000 he had invested.
Prosecutors could not prove that his brother, Frank, knew the money had come from drug profits.
There is the complication of the fact that his brother's involvement and there is a company going there
which we could not say with certainty knew of the source of the funds.
It's his brother. He'd know his brother was dealing marijuana, would he not?
We don't know that, sir. That's something that you have to prove beyond a reasonable doubt.
This is criminal forfeiture that we're talking about.
But to this agent who investigated the case, it is clear the businessmen must have known the source of the money.
Everyone in their mind said they didn't know what they were doing, yet I believe everyone knew exactly what they were doing.
So I believe if they know that the Boston boys are making millions of dollars off narcotics, why not go to them for a loan?
In the fall of 1988, at the federal courthouse in Boston, Carroll and McNichols were sentenced to 10 years each.
Emerging from the courtroom, Frank McNichols, part owner of the pulse stores, declined to comment about his brother's investments.
Outside, the Boston boys still did not want to talk about the case.
For his part, John Rogers was sentenced to three years in federal prison for the laundering of drug money.
No one else was indicted, including the recipients of the loans, who had paid them back with interest.
Without specific regard to any individuals in this case who I don't want to comment on in any way,
absolutely the people who profit, the real estate agents, the realtors, the yacht salesmen, whoever it may be,
who receive large amounts of money often in cash, who look the other way, they are absolutely an essential part of the problem.
In 1986, in the middle of the Boston boys' investigation,
Congress passed a tough money laundering statute to help prosecute people who do business with drug traffickers.
Congress made it a federal crime for anyone to become involved in a financial transaction
if they know that the money represents the proceeds from an unlawful activity.
If you come in with cash, if you come in with enough cash, then by and large you get your way.
At the Justice Department, Michael Zeldin says the government should now focus its investigations
on those in the business community who are looking for quick profits from drug money.
And people are on the bottom line going to say, what's in it for me?
What's my bottom line financial interest in this proposition? And that's the problem.
When they say, what's in it for me, and don't see that what's in it for them is a society that's going to be ruined by drugs,
then they're part of the problem. They're the problem.
Operation Man is a rare case where the files of a money launderer provided a virtual roadmap
to how and where drug profits were invested.
The government knows it may never seize files this extensive again.
So federal agents are now posing as money launderers in an effort to reach the highest levels of drug organizations.
In the summer of 1988 in Seattle, Washington, a ship carrying 72 tons of marijuana was towed into port by the United States Coast Guard.
Despite this successful seizure, none of the 18 arrested on the boat would give information about the head of the organization,
Brian Daniels, who allegedly had been smuggling drugs into the United States for the past 15 years.
To reach Daniels, government agents set up a sting offering to launder Daniels' money through a gambling casino.
When a lawyer showed up in a Las Vegas motel room with $7.6 million, he was arrested. The arrest of Daniels followed.
And in an effort to arrest businessmen willing to profit by helping drug traffickers launder their cash,
federal agents are using informants and surveillance cameras.
Here, an informant with his back to the camera explains to a Dallas businessman that he needs drug money laundered.
Renee Munoz headed the investigation for the Internal Revenue Service.
The money was attractive to them. They recognized the ability where they could launder millions and millions of dollars of illegal proceeds,
and they would generate a healthy profit from that source.
The individuals were very intelligent in terms of the methods that they would use.
In a second meeting, the chairman of the board of the Premier National Bank, Connie Armstrong, on the right,
explained that there would be no problem laundering the money.
The informant for the Internal Revenue Service then brought out $100,000 in cash,
which Armstrong readily accepted.
Armstrong and the other businessman, Thomas Crouch, pled guilty to defrauding the government and failing to report a cash transaction.
They were just two of many businessmen caught in the IRS money laundering sting.
Another banker in Tulsa, Oklahoma.
A lobbyist in Washington, D.C.
In Atlanta, accountants from the brokerage houses Dean Witter, Prudential Bache, and Oppenheimer.
Also in Atlanta, a former United States Congressman, Pat Swindoll, allegedly agreed to accept drug money to pay for a house, then declined.
And in Boston, indictments are expected, which involve restaurants, trade unions, and more lawyers.
In Fort Lauderdale, Operation Man continues with a series of active investigations into drug smuggling and money laundering organizations worth over $100 million.
Most notable is an investigation into the owners of the Apache powerboat racing team, Ben and Jack Kramer.
Included in the indictment is their attorney, Melvin Kessler, who was arrested on his way to teach a course at the University of Miami Law School.
According to a confidential drug enforcement report, the federal government expects to seize assets worth in excess of $45 million.
Neither federal investigators or those charged would talk to Frontline because the investigation is still active.
Agents at the center of the investigation hope that their efforts will make a difference in the war against drugs by taking some of the profit out of the crime.
But even at its most successful, Operation Man will seize only a small fraction of the billions of dollars generated by the business of drugs.
The lesson of the operation, these agents say, is that greed crosses all lines of the business and legal communities.
For Michael Levine, one of the first men jailed by Operation Man, the lesson is different but just as clear.
You know, it's a strange feeling all of a sudden to be thrust into the limelight for something illegal.
And to find yourself recognized by this illegal act, forget about what you've done prior to that date.
It's just, it doesn't matter at that point, it's just that illegal act from then on that will be with you the rest of your life, no matter what happens.
Was it worth it?
Oh, never. No. Not even a close claw on it.
And I can't imagine it ever being worth it for anybody if you want to remain a legitimate part of society. It just is never worth it.
Operation Man continues.
Two bankers in Los Angeles were recently indicted for their involvement in laundering drug money
and the federal government, in an ongoing effort to take the profit out of the illegal drug trade,
is expected to make arrests next month in a money laundering scheme stretching across the country,
totaling well in excess of one billion dollars, more than ten times the size of Operation Man.
Thank you for joining us. I'm Judy Woodruff. Good night.
Music
Music
Music
Frontline is produced for the documentary consortium by WGBH Boston, which is solely responsible for its content.
Funding for Frontline is provided by this station and other public television stations nationwide
by the Corporation for Public Broadcasting.
For videocassette information about this program, please write to this address.
For a transcript of this program, please send five dollars to Frontline, Box 322, Boston, Massachusetts, 02134.