Out of Storage: Lifestyles of the lowly bankrupt bureaucrats

By Van Smith

Baltimore, Jan. 7, 2019

When the Feds came down on the Baltimore-based Rice Organization in 2005, the politically connected violent drug-dealing enterprise had been operating largely with impunity for about a decade. As the facts unfolded in drips and drabs with successive court filings in the hotly contested RICO case that ensued in U.S. District Court in Baltimore, and real-life parallels to themes in the then-running HBO series The Wire became apparent, I took notes.

There was George Butler, already a star on the streets for his appearances in the Stop Fucking Snitching DVD. There was actress Jada Pinkett Smith, co-owning an East Baltimore property with Rice Organization co-conspirator Chet Pajardo. There was the backstory on the multiple stabbing that had occurred during Kevin Liles’ birthday bash at Hammerjacks nightclub in 2002. There was Robert Simels, the bigshot NYC attorney who kept showing up in connection with players I was writing about, and who ended up going to prison himself, for witness-tampering in connection with a Guyanese death-squad drug-dealer he was defending. There was Eric Clash, cooperating with the government and living to tell about it. The story just kept on giving, and kept on connecting to other matters I was pursuing.

So when I picked up some old investigative records of mine from storage earlier today, the name “Raeshio Rice” popped up off the page. Back in the day, I’d poured over bankruptcy filings that I’d connected, through various other public records, to Rice Organization players. People go bankrupt for any number of reasons, but sometimes when a crime figure suddenly loses income as the law enforcers close in, people close to them may start to suffer sudden financial hardship.

Brothers Howard Rice and Raeshio Rice, ages 38 and 32 when the indictment came down in 2005, were the leaders of the outfit, and Raeshio’s name appeared in connection with his mother’s 2004 bankruptcy case. Her listed occupation was “program coordinator” for “the City of Baltimore” since 1994, earning less than $50,000 annually. Her 1999 Bentley Arnage had already been repossessed early in 2004, but she still had payments to make on the 1998 Mercedes Benz E320 station wagon that was titled in Raeshio Rice’s name.

Another 2004 bankruptcy case tied via public records to the Rice Organization featured a woman who’d worked for 29 years as a case worker for the Maryland Department of Social Services, earning a little over $35,000 a year. Among her assets: times shares in Massanutten Resort in Virginia and St. Martin Island in the Caribbean.

A Bentley and vacations at the Friendly Island – not bad for a couple of low-level civil servants.

Star-Crossed: Property co-owned by Jada Pinkett Smith tied to alleged Baltimore drug conspiracy

By Van Smith

Published in City Paper, Feb. 16, 2005

A Feb. 2 indictment of 13 men who federal prosecutors say are involved in a violent Baltimore drug conspiracy called the “Rice Organization” seeks forfeiture of co-conspirators’ assets—including an East Baltimore property that state records show is co-owned by actress Jada Pinkett Smith. The property, 1538 N. Caroline St., is a three-story corner building on a 1,440-square-foot lot in the heart of Oliver, a neighborhood long ravaged by the illegal-drug economy. The indictment does not mention what role the property played in the alleged conspiracy, only that the government would seek “all of the right, title and interest of Chet Pajardo, the defendant, in the real property and appurtenances” there.

The $22,000 purchase of the house by Pinkett Smith (listed as “Jada K. Pinkett” in the property records; her middle name is Keran) and Chet Pajardo, a 36-year-old Owings Mills man named as a defendant in the case, was recorded with the Maryland Department of Assessments and Taxation on Nov. 17, 1994. At the time, Pinkett Smith was 23, had already appeared in her feature-film debut, Menace II Society, and was on theater screens co-starring with Keenan Ivory Wayans in A Low Down Dirty Shame. Less than three years later, in 1997, she married fellow actor Will Smith in a ceremony at the Cloisters in Baltimore County.

Ken Hertz, senior partner of the Beverly Hills, Calif., law firm Goldring, Hertz, and Lichtenstein, who represents Pinkett Smith, told City Paper on Feb. 10 that the actress, who grew up in Baltimore and was living here in 1994, met Pajardo about 10 years ago, when Pajardo was working for United Parcel Service. “He was an acquaintance,” Hertz says, explaining that Pinkett Smith split the down payment with Pajardo and has been paying her share of the monthly mortgage payments ever since. She’s had no contact with Pajardo in many years, Hertz contends, and she’d forgotten she owned the building because her accountant made the monthly payments.

Despite the neighborhood’s plight—two blocks away in 2003, for example, all seven members of the Dawson family were burned to death in their home by one of the drug dealers they’d been trying to run off—Hertz says Pinkett Smith’s was “not a dumb investment, because it was so little money.” The Sun reported on Feb. 12 that Hertz also said it was “very important to note that we’ve been assured that she is not a target of the investigation.” (City Paper first reported on its web site that Pajardo and Pinkett Smith co-own the Caroline Street property on Feb 10.)

Pajardo’s defense attorney in the federal conspiracy case, James Gitomer, told City Paper that “I don’t speak to reporters about my clients” when asked if he would be willing to answer some questions about Pajardo.

Members of the Rice Organization, according to the federal indictment, are charged with murders in connection with a drug-trafficking conspiracy that yielded at least $27 million since 1995. Prosecutors allege the group has brought at least 3,000 pounds of cocaine and heroin to the streets of Baltimore. Chet Pajardo faces one conspiracy count, though the details of his alleged crimes are not given.

One Rice member appears in the locally produced Stop Fucking Snitching DVD that drew widespread attention late last fall as an unusual example of witness intimidation doubling as entertainment. Another of those indicted as an ostensible part of the Rice Organization, Anthony B. Leonard, co-owned the former Antique Row restaurant Downtown Southern Blues, which was housed in a North Howard Street property owned by the family of Kenneth Antonio Jackson. Jackson is a strip-club owner and an ex-con who, in the 1980s, became famous as a top lieutenant for the heroin-trafficking organization of Melvin Williams, a major figure in Baltimore’s drug underworld of the 1960s, ’70s, and ’80s.

Pajardo has a noteworthy connection to city politics. On Sept. 8, 2003, he gave $200 to the re-election campaign of city Comptroller Joan Pratt (D) at a fund raiser catered by Downtown Southern Blues; the event brought in a total of $11,500. Four days later, on Sept. 12, 2003, Pajardo donated $100 to the campaign of Democrat Charese Williams, who challenged incumbent City Councilwoman Stephanie Rawlings Blake (D-6th District) and lost in the September 2003 primary. Pratt also donated to Williams’ upstart campaign, giving $1,500 of the $22,500 it raised. Pratt did not respond to requests for comment by press time; attempts to reach Williams were unsuccessful.

During a Feb. 9 visit to the Caroline Street property co-owned by Pajardo and Pinkett Smith, the building was boarded up but had a fresh coat of paint on the entrance. It appeared structurally sound and well-maintained, though its property-tax assessment dropped from $14,100 to $3,000 this year, according to state records. A pay phone was attached to its outside wall. When a photographer visited the building the next day, a woman driving by in a car shouted out, “Is that Jada’s place?” On another Feb. 10 visit, an unidentified man was seen locking up and leaving the property.

Baltimore City Board of Municipal and Zoning Appeals records indicate that Everton Allen applied in April 2003 to use a portion of the building as a grocery store, though housing records indicate that the property has been vacant since 2000. A phone number could not be found for Allen at the Randallstown address given in his application.

The previous zoning application for the Caroline Street property was filed in 1996 by Brian E. Macklin, who wanted to open a convenience store at the site. A Polaroid of the building contained in the zoning file shows a Pepsi-Cola sign hanging over the entrance that reads andy’s grocery. A copy of Macklin’s application was sent by the zoning board to “C&J Inc., c/o Chet Pajardo,” and the file notes that in 1993 Pajardo and Jay Anderson pulled an occupancy permit for the address. Court records indicate that Macklin’s current address is on Kentbury Court in the Lyonswood subdivision of Owings Mills, the same small cul-de-sac as another Pajardo property that is under federal forfeiture as part of the Rice Organization indictment. The listed phone number for Macklin’s home-improvement company, Sorgen LLC, is disconnected, and no other contact information for him could be found.

An internet search of the Caroline Street address turns up the name of a business, Peaceful Image Inc., located there. Its corporate charter was forfeited for failure to file tax returns for 1998, according to state records, and it was incorporated by Pajardo on Aug. 15, 1995, “to engage in the business of retailing, wholesaling, manufacturing, and distributing clothing and accessories.” The founding board members were Pajardo, Leon Dickerson, and Michelle Narrington. A year earlier, on Aug. 3, 1994, these three and another individual, Condessa Tucker, registered Peaceful Image as a trade name, and stated its business as “silkscreen, embroidery, T-shirts, and hats.” The company’s principal office was in a building Pajardo owned between 1992 and 2000, on the 1000 block of West 43rd Street in Medfield.

Leon R. Dickerson was identified on the Peaceful Image trade-name application as Leon Dickerson III. An obituary for Leon R. Dickerson III was published in The Sun on Dec. 21, 2001, after he was killed in a stabbing. He was 31 years old and described as a social worker and basketball coach who worked with students struggling with learning disabilities and emotional challenges. According to Baltimore County Police records, Dickerson, who was married, was killed in a lovers’ triangle when the estranged husband of his girlfriend entered her Cockeysville apartment and stabbed both of them; only Dickerson died from his wounds. Dickerson’s parents are neighbors of Pajardo and Macklin in the Owings Mills subdivision of Lyonswood.

When Pajardo and Pinkett Smith purchased the Caroline Street property in 1994, the address given for property-tax mailings was in the 2300 block of North Monroe Street in West Baltimore. The owner, then and now, is listed as Wahseeola C. Pajardo. City Paper’s attempts to reach her at her listed phone number were unsuccessful.

 

Sweet Deal: Reptilian Records’ Chris X pleads guilty, gets probation on drug charges

By Van Smith

Published on March 23, 2011 in City Paper

On March 15, 44-year-old Christopher Neu, better known as “Chris X,” owner of Reptilian Records in Baltimore, started five years of probation during which he could face up to 60 years of incarceration if he is found to be in violation.

As Baltimore City Circuit Judge Lawrence Fletcher-Hill explained from the bench that day, after Neu pleaded guilty to possession with intent to distribute cocaine, hydrocodone, and oxycodone, “I’m going to strike the convictions and enter probation before judgment” on all three counts, each of which carries a maximum 20-year prison sentence.

The outcome was hammered out during a bench conference between the judge, Neu’s attorney Andrew Cooper, and Baltimore City Assistant State’s Attorney Staci Pipkin. If Neu is convicted of new crimes or violates the terms of his probation during the next five years, Fletcher-Hill said he can “enter the convictions without any further proceedings” and Neu will face “the possibility of 60 years” in prison.

Neu, who was busted last summer as a result of a narcotics investigation, said in a post-hearing phone interview that “I feel damn good not to be in jail, and you can quote me on that.”

Cooper, also reached by phone after the hearing, explains that Pipkin’s plea-deal offers for Neu had come in a succession of proposals carrying ever-lighter sentences. At first, she offered 10 years in prison, with all but five years suspended; then she dangled the prospect of suspending all but one year. In the end, Cooper says, probation before judgment “was a good result for everyone involved,” but was “a big benefit” for Neu.

Cooper predicts that Neu, who has no prior criminal record, is unlikely to violate the terms of his probation. He also points out that two other people charged in the investigation received probation before judgment despite the fact that one of them, whose past included prior run-ins with the law, had a gun seized when the police arrested him. Cooper also says he believes that the police conducted an illegal search when they came for Neu. Had the prosecutor continued to press the charges, Cooper contends, the case may have fallen apart before trial with a ruling that the seized drugs could not be used as evidence.

Baltimore City State’s Attorney’s Office spokesperson Mark Cheshire, in an e-mail, says that “the defense claim that this case involved an illegal search is baseless and played absolutely no role in the outcome.” Cheshire also took issue with Cooper’s assertion that Pipkin offered anything short of “prison time for the defendant. The presiding judge sentenced him to five years of probation, which is [the judge’s] prerogative and a decision we respect.”

Reptilian Records has long received coverage from City Paper, including awards in the annual Best of Baltimore issue in 1996 (“Best Open/Closed Store Sign”), 2001 (“Best Punk Rock Bastion”), 2004 (“Best Record Label”), and 2007 (“Best Relocation”). The store had operated on South Broadway in Fells Point for 17 years until 2007, when it relocated to North Howard Street, next to Ottobar, and then shuttered in 2009 (“Vinyl Destination,” Music, Jan. 14, 2009), opting for online-only sales. In addition to noting Chris X’s book-publishing foray (Q&A, June 22, 2005), CP marked two of Reptilian’s anniversaries with coverage: in 2003 (“Noise to the World,” No Cover, Nov. 26, 2003) and in 2010, when it was described as “Baltimore’s cornerstone underground heavy music outlet and record label” (“Chris X,” Music, Nov. 24, 2010). In the latter piece, Neu’s legal name was given incorrectly as Christopher Xavier Donovan; confusion over Neu’s identity delayed CP’s ability to obtain records of his legal troubles.

Neu was arrested on the night of July 30 last year, after Baltimore City police arrived at his closed record store at 2545 N. Howard St. They came there after having served a search-and-seizure warrant at 4903 Harford Road in Waltherson, where they arrested two men—38-year-old Michael Deming and 37-year-old Daniel Mersheck—and seized about 7 ounces of cocaine, 4 ounces of marijuana, 27 oxycodone pills, a loaded 9mm handgun, and other contraband.

Deming, court records state, told the police “that he and his friend, later identified as Christopher Neu, ‘went halfs’ on a brick of cocaine” and “that a significant amount of cocaine was located” at Neu’s Howard Street business. As a result of this information, “two uniform officers were sent” there “to secure the location pending an investigation.”

After the uniformed officers arrived at Reptilian Records, court records state, a search turned up a pharmacopeia of mind-altering substances. In all, about 13 ounces of cocaine (street value: $16,740), more than 21 ounces of marijuana (street value: $3,635), 14 grams of psilocybin mushrooms, and hundreds of pills—mostly hydrocodone and oxycodone, but also Valium, Oxycontin, methadone, and muscle relaxers—were seized, along with other contraband.

“Neu advised he had borrowed more than $12,000 from a friend to purchase the amount of cocaine which he had possession of,” the court records state, noting that Neu “was cooperative throughout the entire investigation.”

Neu is also cooperative with CP, openly discussing his charges and the context in which he was caught. He is anxious to explain that he’d entered the coke-dealing arena only recently, in an attempt to dig himself out of debt, and that he had obtained the pills by purchasing monthly prescriptions from elderly public-housing residents who had come to rely on his cash payments to supplement their meager household incomes.

“I sold weed for years,” Neu says—something that this writer, as a patron of Reptilian Records and acquaintance of Chris X’s, had known, having purchased small quantities of marijuana at the store more than 10 years ago while working as a freelance journalist and bartender. “But I always said I’d never sell coke,” Neu explains, adding, “I broke my own rule and that’s basically why I fell. I never would have done that had I not been so desperate” financially, due to unpaid mortgage and property-tax payments. “Now I’m more in the hole than I was before,” he says, and “my first concern is paying [family and friends] all back for helping with my bail and my lawyer.”

Neu’s Howard Street property is currently listed for sale, he explains, which “is the only reason it hasn’t been foreclosed on.” He has been selling off belongings, and says he still has “plenty of stuff to sell,” including comics, posters, records, and other collectibles.

As for the pills, Neu says, “The truth is, I got them from older people who live in public housing, who got by by selling me their prescriptions. But I’m not running around selling this stuff—that’s why [the pills] were stockpiled. I was kind of loaded up on them, because I only sold them to a few people I trusted who had drug problems, so they wouldn’t run out and buy heroin off the streets. It was a way for them to stop putting needles in their arms.”

Regarding the police search, Neu says the officers “lied to get in the door. They said they had an anonymous tip of a woman screaming” inside his business. Cooper adds that, when the case was first brought in Baltimore City District Court last summer, “The officers admitted this in discussions outside the courtroom, that they made up the reason to go in to begin with. They needed a warrant, but instead they used a ruse to get into his place of business.”

Furthermore, Cooper says, having already found the drugs, the police secured Neu’s consent to a search. To be lawful, such consent must be given beforehand and voluntarily, but Cooper and Neu say it was tendered after-the-fact and under duress. “They told me,” Neu recalls, “that if I didn’t sign the consent, they’d get a warrant and tear the place apart.”

“It was a horrible search,” Cooper concludes. In the end, though, Cooper did not have to argue these legal points before a judge, since Neu agreed to probation in return for a guilty plea without a trial.

The experience prompts Neu to offer cautionary words for others who may be tempted to try to turn a quick buck in the drug game: “Hey kids,” he says, “don’t do what I did. Pay your taxes and keep your noses clean.”

The Doctor Is In: Schmoke Inches Toward His “Medicalization” Approach to Drug Reform

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By Van Smith

Published in City Paper, Apr. 13, 1994

With two recent political and legislative breakthroughs for Mayor Kurt Schmoke, Baltimore is becoming a model city for drug reform. In March, a $2.3 million federally funded Substance Abuse Treatment and Education Program (STEP), or “drug court,” began diverting nonviolent drug criminals from prisons to treatment programs. And on April 5, the Maryland State legislature passed a bill exempting Baltimore City from certain drug-paraphernalia laws and approving funding for a needle-exchange program called the AIDS Prevention Pilot Program. In a reversal of his earlier stance, Governor William Donald Schaefer supported the bill and is expected to sign it. The success of these two initiatives is a major priority for Schmoke, who is out to prove that what he calls a “medicalization” approach is the best solution for our multiple woes of drugs, crime, and AIDS.

The drug court and the rest of Schmoke’s immediate drug-reform measures appear to enjoy wide support here in Baltimore City. The City Council is almost unanimously behind the mayor’s initiatives. Baltimore’s public-health and drug-treatment providers, who stand to gain funding and stature from the initiatives, also generally approve of them. The new police commissioner, Tom Frazier, says needle exchange, the drug court, and expanded treatment will make his job easier. And of course Baltimore’s heroin and cocaine addicts – who make up about six percent of the population, according to Bureau of the Census figures – are all for it.

In fact, one gets the impression that the mayor’s local drug-reform agenda has been falling into place with relative ease. People tend to see needle exchange, the drug court, and expanded treatment as almost clinical prescriptions for treating the symptoms of the drug crisis.

It is Schmoke’s national long-term drug policy, with its overtones of decriminalization, that has attracted strong and vocal opposition.

By now, everybody knows that Schmoke advocates some form of drug decriminalization. To a lot of people, that strategy sounds so radical on the surface that they aren’t very interested in the details. For example, Lieutenant Leander Nevin, president of the Baltimore City Fraternal Order of Police, says the bottom line is that Schmoke “wants to legalize drugs and give away free needles,” and asks sarcastically, “It’s socialism, right?”

To Michael Gimbel, director of the Baltimore County Office of Substance Abuse, the details of decriminalization are insignificant compared to the impact of even talking about it. He sees a direct correlation between rising drug use in high schools and the whole debate over decriminalization, which Schmoke has persistently publicized for six years now.

“I think this whole discussion is more hurtful than helpful,” Gimbel says. “I have to deal with the kids today who believe in legalization only because the mayor or the rap group Cypress Hill said so. For the last ten years we have seen major decreases [in drug use] and changes of attitude. Now all of the sudden these kids are changing the way they looking at [legalization]. I have to deal with that, and I blame it on the legalization debate.”

Barring some undetected tectonic shift in public opinion over the last six years, Nevin and Gimbel are right in line with most Marylanders’ opinions of legalization. In 1988, The Evening Sun contracted a public-opinion research firm to survey a random sample of Marylanders over 18 years old to ask them whether they support drug legalization. The results were basically the same for Baltimore as for the whole state: less than 20 percent were for legalization, and more than 70 percent were opposed to it.

In spite of this opposition, Schmoke has high hopes for his long-term, national strategy, which he clearly does not want associated with the term legalization.

“My approach is not legalization, that is, the sale of drugs in the private market,” he told an audience of doctors and nurses at the Johns Hopkins School of Hygiene and Public Health in March. Rather, he proposes lifting a corner of the current blanket prohibition on illegal drugs by drawing addicts into the public-health system, where they could be maintained, if necessary, using drugs made available through a government market.

“The government, not private traffickers, would control the price, distribution, purity, and access to particular substances, which we already do with prescription drugs,” Schmoke told the audience. “This, mind you, would take most of the profit out of street-level drug trafficking, and it is the profits that drive crime. Addicts would be treated and, if necessary, maintained under medical auspices. In my view, street crime would go down, children would find it harder, not easier, to get their hands on drugs, and law-enforcement officials would concentrate on the highest echelons of drug-trafficking enterprises.”

Schmoke’s zeal for reform is coupled with a hardened distaste for drug prohibition.

“Drug prohibition is a policy that has now turned millions of addicts into criminals, spawned a huge international drug-trafficking enterprise, and brought unrelenting violence to many of our urban neighborhoods,” Schmoke said. “It was a flawed strategy when it began, and it is still a flawed strategy now.”

Legalization or not, the mayor’s approach is roundly dismissed by people who think any fiddling with drug prohibition would, as a sociobiologist might say, damage the antidrug “chromosomes” that have been grafted into society’s DNA sequence over the last few generations. One such person is Dr. Lee P. Brown, the director of President Clinton’s Office of National Drug Control Policy. In a statement on drug legalization last December, after U.S. Surgeon General Joycelyn Elders suggested that legalization would reduce crime, Brown commented that “[a]ny change in the current policy of prohibiting drug use would seriously impair antidrug education efforts, drug-free community programs, drug-free workplace programs, and the overall national effort to reduce the level of drug use and its consequences.”

Local opposition to Schmoke’s call to change national drug laws is every bit as pointed as the Washington establishment’s. Gimbel protests that decriminalization “is a real intellectual pipe dream, and it scares me because the mayor is very articulate in selling this program.” City Councilman Martin O’Malley, of the Third District, thinks it “just amounts to so much more intellectual bullshit.” Joyce Malepka, founder of the Silver Spring antidrug lobbying group called Maryland Voters for a Responsible Drug Policy, says, “There is no intellectual argument about legalizing drugs because anyone who is that short-sighted isn’t really experienced, and if that is the case, then there is certainly no business talking about it.”

One objection that Schmoke’s medicalization opponents make is that a prescription-based drug-treatment system for addicts would be ripe for abuse. Steve Dnitrian, vice president of the Partnership for a Drug-Free America, in New York City, argues that legal drugs are already abused and a wider array of them would lead to greater use and abuse.

“Take a look at the drugs that are already regulated medically, such as Valium,” Dnitrian says, by way of illustration. “Are they abused? Heavily. Medicalization would be the same thing. You would just be adding a couple of more flavors to the vast array of products we have right now to alter reality. If you make available a product that is not readily available, it is going to get used. Even people who favor decriminalization acknowledge that drug use would go up dramatically.”

Still, Schmoke has so far managed to buck the antidecriminalization establishment and remain in office. How has he done it?

One explanation is that his drug-reform strategy is multi-faceted and comprehensive, so many who oppose him on decriminalization or needle exchange agree with many of his other drug-reform ideas. For instance, his crusade for drug treatment on demand and the creation of drug courts is lauded from all corners, including by Malepka and Gimbel, President Clinton, and the antidrug advertising venture Partnership for a Drug-Free America.

Schmoke hasn’t got this far by smart policymaking alone, however. Part of it was political drive: he is on the line with this medicalization talk, so he has been campaigning hard to prove his is right; if he can’t, he risks losing legitimacy with the public. Frank DeFillipo, a political columnist for The Evening Sun, says, “Schmoke has a lot to defend. He is going to have to go out and defend that issue in the mayoral race, and there are compelling arguments against what he is advocating.”

On the mayor’s side are a significant number of individual legislators, doctors, lawyers, judges, and religious leaders – powerful people with connections to organizations that can effect change. Schmoke feels that the average voter may also be coming around to agree that we need a new strategy against drugs, crime, and AIDS, and that medicalization should be given a sporting chance. Depending on how he plays this issue during the upcoming mayoral campaign, Schmoke may bet his future in political office on that perceived trend. He has been making every effort to swing the Zeitgeist around. Given the poll-pending strength of his supporters, he just might be able to do it.

“My sense is that the majority of Baltimoreans may disagree with my conclusion about the need for medicalization and decriminalization,” Schmoke acknowledges, “but that they agree that I should raise this issue and am glad that I didn’t change my mind. And the overwhelming majority of people believe that the current approach is not working, but they are not sure which way we should go.”

Schmoke hopes to make medicalization an asset at the polls by plugging the effectiveness of the needle-exchange program and the drug court, although he is not sure the results will be in by election time. To bolster his position, he says he will stump medicalization as effective in its own right but even better when combined with community development and community policing initiatives.

“All those things add up to positive impacts,” Schmoke says, “and that is what I’m hoping will happen in the communities.”

Schmoke is confident that all of his attention to detail will pay off politically, because he is well prepared to discuss and defend his proposals. In short, he has a plan, so the burden of proof is on the opposition to propose a better one.

“I think that if somebody is going to raise it as an issue in the election and be critical of my positions,” Schmoke challenges, “then they are going to have to have an alternative, a substantive alternative that will be attractive to the citizenry.”

Mary Pat Clarke, Schmoke’s challenger in next year’s mayoral race, does not plan on making medicalization an issue in the election.

“It is not a local issue,” Clarke points out. “It can’t be solved locally. The real issue is the here and the now and the livability of Baltimore City. If it is an issue in the mayoral race, it will be so only because [Schmoke] makes it one.” The bottom line to Clarke is that medicalization “is not something that we can do [on a local level], it is only something that we can talk about,” and too much talk means too little action. “You can’t use these discussions as an excuse to abandon the treatment programs that exist today,” Clarke argues.

She has particular misgivings about Schmoke’s new STEP, or drug court, program, which has already enrolled more than a dozen addicts and plans to divert 600 nonviolent drug criminals to treatment in its first year. Although she supports the initiative, Clarke fears that the city’s troubled drug-treatment system is ill equipped to handle the new program.

“To talk about a drug court without a rehabilitated and refunded treatment system,” Clarke asserts, “is just to create another level of logjam, frustrations, and problems. Expanded and improved treatment is an imperative before we create a drug court and an entire new system that would fall to pieces without the backup required.”

Baltimore City State’s Attorney Stuart O. Simms, however, points out that funding for the STEP program will cover drug treatment for participants. Also, by freeing up prison space and court dockets, Simms estimates that “in one year, the cost savings of such a program will be $1.8 million.” This money can help fund an expanded treatment system.

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The STEP program is modeled after the drug court in Miami, where only about one in 10 participants have been rearrested during the year following their treatment. To better the chances of the defendants’ success in beating the monkeys off their backs, the STEP program, in addition to drug treatment, provides job training, academic services, life-skills programs, job placement, and other support. It is a one-stop shop for getting your act together. All you have to do is get arrested.

Richard Farr, a cocaine addict, says people might do just that in order to get the treatment they need.

“There are a lot of people out there now who want to get into a drug program, but they can’t,” observes Farr, “so I guess you got to get caught to get into a program. It doesn’t seem right, but it sounds like that’s what you got to do.”

State’s Attorney Simms urges addicts tempted to take this route to “contact the Baltimore Substance Abuse Systems [the city’s treatment referral system] and try to see if they can get involved through the city health department. That is painstaking, that is slow, and I agree that the answer is insufficient.”

Mary Pat Clarke is more optimistic about the mayor’s AIDS Prevention Pilot Program. The $160,000 program is designed for 750 to 1,000 intravenous-drug-using participants, who will be able to exchange dirty needles for clean ones on a one-for-one basis. Another $250,000 has been dedicated for approximately 100 drug-treatment slots reserved for needle-exchange participants. Schmoke expects a needle-exchange program in Baltimore to have results similar to one in New Haven, Connecticut, where needle exchange is credited with a one-third decline in the rate of new HIV infections.

“From a public-health perspective, it is rational,” says Clarke. “Like most of us, I obviously have my concerns about the message it sends, but I think that the public-health issues are imperative. I hope that it will be successful in Baltimore City.”

Baltimore City police commissioner Tom Frazier agrees that “needle exchange is a good thing both in terms of human suffering and public-health costs.”

Clarke and Frazier are joined in support of needle exchange by many experts in the medical community. The Baltimore City Medical Society and the Medical and Chirurgical Faculty of Maryland, the city and state medical societies, respectively, are both behind the measure as a way to control the spread of AIDS without increasing drug abuse. And Dr. Michael Fingerhood, assistant professor of medicine at Johns Hopkins and medical director of the Detox Inpatient Unit at Francis Scott Key Medical Center, says, “Most of the people in primary care who take care of people with HIV without a doubt are in favor of needle exchange.”

Dr. David Vlahov, associate professor of epidemiology at the Johns Hopkins University School of Public Health, who has been studying the natural history HIV infection among about 600 HIV-infected IV-drug users in Baltimore since 1988, is a fervent supporter of needle exchange. Vlahov points out that there are 39 needle-exchange programs operating in the United States, that there have been numerous studies of needle exchange, including studies by the Centers for Disease Control and Prevention and the U.S. General Accounting Office, and that the results are favorable.

“Looking across the date from a variety of different studies,” Vlahov said as he shared the Hopkins stage with Schmoke in March, “the results have been that needle-exchange programs do not encourage people to start drug use, they do not encourage current drug users to inject more frequently, they do not encourage former users to restart drug use, and they do not encourage needle sharing. So a lot of these concerns that people have had are thwarted by the data that have come forth from these studies.”

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The Governor’s Executive Advisory Council, which advises and reports to Governor Schaefer on public-policy issues, just plain disagrees. Last spring it submitted a “Presentation in Opposition to Needle and Syringe Exchange Programs” to the Governor’s Drug and Alcohol Abuse Commission, the body responsible for helping to form and implement the governor’s drug-and-alcohol-abuse policies. The report concludes that the evidence on needle exchange is shaky, and “the real risk of doing real harm is too great.”

The council argues, based on what its chairman, Marshall Meyer, calls “a lot of data, research, study, and common sense,” that need-exchange programs are not safe. The list of risks include sending the wrong message about drug use, causing increased drug use and conversion to injection drugs, assisting criminal behavior, subverting drug-treatment efforts, and increasing the likelihood of “needle stick accidents.”

The council also questions whether needle exchange will work. Focusing just on needles, the report points out, overlooks the roles that other injection paraphernalia and that unsafe sex play in transmitting HIV.

“Facilitating drug use, through the provision of needles, is not likely to result in safe sexual behavior,” the report states, so it concludes that needle exchange may exacerbate the spread of sexually transmitted HIV. Finally, the council noted “that needle exchange programs are having very limited success in reaching, and even less success in keeping, the highest risk users.”

Some representatives in Baltimore’s City Council are concerned not only about mixed messages regarding condoning drug use, but also that the needle-exchange program won’t work. Councilwoman Paula Johnson Branch, of the Second District, feels that “the concept is okay, if addicts would turn the needles in and use clean needles, but I don’t think that will happen. I don’t think addicts are responsible enough to do that.”

Councilman Nick D’Adamo, of the First District, agrees: “Needle exchange is iffy to me, because if a drug user on the corner is going to shoot up, I don’t think he’ll be looking for a clean needle. I think he is going to use whatever is there at the time.”

Tony Whiting, an IV-drug addict living in a homeless shelter run by Street Voice, an advocacy group for addicts, thinks the council members are wrong on this score.

“People will use brand-new needles if they have them,” Whiting insists. “Even the ones who don’t care want to use brand-new needles because they are easy to use, they don’t clog, and it makes the whole process a whole lot easier. Any addict would rather have a brand-new set than something used any day.”

Fellow Street Smart denizen and drug addict Richard Farr basically agrees with Whiting.

“Not everybody will go to get a clean needle every time, but the majority of them would,” he predicts. “Maybe if there was a place where they could go to get clean needles, then a lot of [needle sharing] would be eliminated. Not all of it, but a lot of it would.”

Whether addicts will use the program is not the issue for some people; the issue is the extent to which the needle exchange amounts to legalization.

“It’s a bizarre thing to do,” Joyce Malepka says. She argues that “it’s Draconian to give someone who injects heroin needles to continue that process. We see it as a giant step toward legalization.”

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Mary Pat Clarke feels that for now, Schmoke’s visions may be delusions.

“If he can help to improve and enlarge the treatment system in Baltimore City, I would support that,” Clarke says, “but the council has been looking at the current programs and is beginning to meet with [drug treatment] providers and explore the gaps. The providers are out there, underfunded and struggling to survive and handle their caseload, and it is a system in crisis. They are overloaded, they are underfunded, and the city has failed to supply an adequate system of coordination to really assist.”

At least part of the problem is the miniscule amount of funding that comes from the city itself for drug treatment: the figure hovers around $150,000 per year, or about one percent of the total drug-treatment budget for Baltimore City. Because of this meager contribution, some people believe that Schmoke is merely canting when he calls for more treatment.

“He’s been talking like this for so many years,” Michael Gimbel says, “but how much money has he put in his budget to back up his word that he really believes in treatment? Baltimore City gets millions right now from the state for drug treatment, and the city puts virtually nothing in. Yet he wants to go to Annapolis and say, ‘My top priority is needle exchange.’ Why isn’t his top priority treatment for everybody? That is hypocrisy. That is politics, so I can’t respect that.”

Politics or not, if Schmoke manages to get 10,000 new federally funded treatment slots, it will be a coup for the beleaguered Baltimore treatment community.

According to “Baltimore’s Drug Problem,” published by the Abell Foundation, which has funded or carried out many studies about local issues for the city government, “drug treatment experts in Baltimore City suggest that the number of treatment slots needs to be increased, conservatively, by three-fold.” Since there are currently 5,300 treatment slots, Schmoke’s proposal would almost meet the target.

The mayor is seeking a meeting with Clinton Administration officials to discuss his drug-treatment proposal. In the meantime, alternative funding may be found from two other federal sources: Clinton’s crime bill, if passed by Congress, will provide more money for drug treatment, and U.S. Attorney Janet Reno has created a new block-grant program that can be used for either policing or drug treatment.

“Both of those together don’t make up ten thousand [treatment slots],” Schmoke says, “but they would allow us to almost double the number of slot that we have now.”

Despite Schmoke’s optimism, the operable word when it comes to expanded federal funding for drug treatment in Baltimore City is if. And if Schmoke doesn’t produce the proposed treatment slots, then Baltimore’s addicts will continue queuing up on the treatment waiting list and continue to rob, steal, smoke, and shoot up until they can get effective treatment for their disease. According to “Baltimore’s Drug Problem,” on any given day there are about 730 addicts on the treatment waiting list, and only one out of 10 Baltimore substances abusers who want help can get it.

Since 1988, when Schmoke opened a national debate over drug decriminalization, he has done his fair share of talking about providing the help addicts need. Now he has started to take steps to do something about it. He is determined to prove that his medicine works, and if he stays in office another term, Baltimore is destined to be the testing ground.

Schmoke, casting himself as the good doctor, has donned the white lab coat and drawn up the syringe, and Baltimore, gravely ill from the combined effects of drugs, crime, and AIDS, is rolling up its sleeve to take the dose. But will the good doctor find a vein?

 

Cashed Out: South Mountain Creamery’s Bank Account Seized as Part of Money-Laundering Crackdown

By Van Smith

Published by City Paper, Apr. 18, 2012

South Mountain Creamery, the Frederick County dairy farm and food-distribution company, is a fixture of Baltimore-area farmers markets, particularly the Waverly market on Saturdays or the one on Sundays, downtown under the Jones Falls Expressway. South Mountain co-owner Randy Sowers is now in the hot seat with the feds, because in late February, the Internal Revenue Service’s Criminal Investigations Division (IRS-CID) used a federal anti-money-laundering statute to seize the contents of a PNC bank account Sowers says was the depository of cash earned by his company’s farmers-market business.

Sowers has not been charged with a crime, and says he expects to learn soon whether or not he will be. As for getting his money back—nearly $70,000, a fraction of the nearly quarter-million dollars in cash deposits the feds say Sowers laundered between May and December last year—well, based on the experiences of others in his position, he’ll likely not see it again, at least not all of it.

Baltimore County Police officer Michael Aiosa, who has been detailed as an IRS-CID task-force member since October 2010, signed the six-page affidavit used to get the seizure warrant to empty the account, of which Sowers and his daughter-in-law, Karen Sowers, are co-signatories. The affidavit says cash deposits were broken down into increments of under $10,001 each, causing PNC to not generate required “currency transaction reports” (CTRs) that financial institutions must file with regulators when they receive or disburse more than $10,000 in a single cash transaction. Under 31 U.S.C. 5324, federal law prohibits such conduct, which is called “structuring.”

Sowers, who did not seek publicity about his predicament but spoke to a reporter after the search warrant in the court records came to City Paper’s attention, says he deposited the cash he’d made in the increments in which it had been earned. If the deposited amounts often ended up being a little under $10,001, he explained, that’s just the way it worked out and he no intention of breaking the law.

“We had no idea there was supposedly a law against it—we were just doing it the way we figured we were supposed to, making deposits every week,” Sowers explains. “We weren’t laundering money,” he adds. “We’re farmers, we struggle every day to pay bills. We don’t know what else to do. Now we just feel like putting [our cash] in a can somewhere.”

Sowers’ attorney, David Watt, says his client “probably shouldn’t have said anything” when contacted by City Paper, and declined to comment further, saying, “We don’t want to act like we’re trying to influence the goings-on” by talking with the press.

Historically, the anti-structuring statute has been used by prosecutors as an ancillary charge with other accusations of nefarious behavior, such as drug dealing or terrorism. And it still is. But over the last few years, prosecutors have started to use it more regularly as a standalone charge—an observation noted by defense attorneys that Maryland U.S. Attorney Rod Rosenstein confirms.

Syracuse University’s Transactional Records Access Clearinghouse, a data center about federal court cases, reports that in fiscal year 2011 Maryland brought 14 of the nation’s 99 structuring cases, making it the top state for such prosecutions. Nationally, the numbers have been rising; the 2011 figures are up 8.8 percent from the year before and up 57.1 percent from five years ago.

Greater prosecutorial emphasis on enforcing the anti-structuring statute has resulted in a rise in money seizures, civil-forfeiture cases, and criminal charges against small businesses and the people who own them. Typical targets handle a lot of cash, and in Maryland gas stations, liquor stores, and used-car dealerships have landed in expensive trouble, losing money through seizures, criminal penalties, and legal bills.

South Mountain is not the first seasonal-produce market to find itself targeted for structuring recently. Taylor’s Produce Stand, on the Eastern Shore, was stung last year after the feds seized about $90,000 from its bank accounts. In December, pursuant to a civil-forfeiture settlement agreement after no criminal charges were filed, the stand’s owners got back about half of the seized money.

Two members of the defense bar who handle structuring cases, Gerard Martin and Steven Levin, both former Maryland assistant U.S. attorneys, say they have noticed the anti-structuring enforcement trend emerging in Maryland over the last several years.

“The emphasis is on basically seizing money, whether it is legally or illegally earned,” Levin says. “It can lead to financial ruin for business owners, and there’s a potential for abuse here by the government, where they use it basically as a means of seizing money, and I think we’ve seen that happen.”

“South Mountain Creamery!” Martin exclaims when contacted by phone. “They’re going after South Mountain Creamery! That’s an icon. That’s like going after mom and apple pie.” Then he settles in to ruminate on the general trends, saying cases typically arise because financial institutions “are required to tell the government about it” when they suspect a pattern of structured cash deposits. Then, “the government gets a search warrant and takes every nickel out of the guy’s bank account,” Martin continues, adding that “structuring is generally an indication that there is something going wrong, but the government doesn’t always find another crime,” such as drug dealing or tax evasion.

“There are a lot of legitimate reasons why a liquor store or a gas station would be depositing $9,500 in cash a day,” Martin says. “Sometimes the numbers just work out that way. But it is usually not an accident that it is happening.”

Rosenstein says that anti-structuring efforts “are an increasing area of emphasis for the Justice Department, and there has been an influx of resources” to investigate and prosecute it. Thus, he says, “I’d be disappointed if there wasn’t an uptick” in prosecutions, given the additional resources.

Post-Sept. 11 changes to banking laws, Rosenstein continues, have prompted financial institutions to report suspicious financial doings more vigilantly, and as a result, investigators and prosecutors now have “a treasure trove of information” about transactions, which provides them with “potential leads for finding criminal activities.” Structuring is often a red flag for other crime since, Rosenstein says, “typically people who go through all those lengths” to make multiple cash deposits of just under $10,000, sometimes at multiple bank branches on the same day, are trying to hide something. But, he continues, “There’s a possibility that somebody did it innocently, and we are always open to that.”

 

Sowers spoke at length about being targeted for structuring. In essence, he thinks the government used an exotic legal gimmick to suck hard-earned money out of his business just as he’s facing bills for hay and other spring-time expenses farmers incur—but he admits that, if there’s a law against what he did, “well, it looks like we did break the law,” even if he didn’t mean to.

The seizure and the resulting legal limbo as he awaits the prosecutor’s charging decision has “scared us to death,” he says. And the banking headaches that resulted from an emptied account have been never-ending, including bounced checks, mucked-up automatic withdrawals, and the resulting overdraft fees.

“It makes me look bad,” Sowers says.

Homicide, Revisited: Two Men Want Detectives Made Famous by David Simon to Pay After Flawed Murder Convictions Put Them in Prison for Decades

By Van Smith

Published in City Paper, Dec. 10, 2013

James Owens is angry.

“I get pissed off every time I think about this,” the 53-year-old from Southeast Baltimore declares, sitting at a conference table in his lawyer’s office. “I don’t trust the cops,” he says, his glasses only slightly shielding the fury in his eyes, a thin mustache punctuating his vehemence. “Never have, after this happened, and I never will. I hate them.”

Looking at Owens, hearing his Baltimore accent stridently utter those words, it’s clear he’s simply telling it like it is. Twenty years in prison before being cleared of a murder conviction will make a man mad.

But Wendell Griffin, a 62-year-old also at the lawyer’s office meeting, is not the least bit angry. His bald pate rests smoothly above his kind face and soft eyes, a wispy gray beard on his chin. Griffin appears to be a gentle soul, and it seems perfectly natural for him to wax calmly and philosophically about his experience: “If the good Lord does things in such a way that I don’t even understand it,” he says, “then I just keep my faith and I move forward.”

 

Clarification: Neither of the murders for which James Owens and Wendell Griffin were wrongfully convicted occurred in 1988, and thus neither were mentioned, much less covered, in Homicide.

Around the Block: The Colorful Past, Controversial Present, and Uncertain Future of Baltimore’s Red-Light District

By Van Smith

Published in City Paper, Feb. 2, 2000

Our values have changed,” Joanne Attman proclaims.

Attman and her husband, Ely Attman, own the building at 425 E. Baltimore St., and are thus the landlords of Club Harem, a strip club in Baltimore’s red-light district, the Block. “There’s nothing wrong with sex,” she says in a telephone interview. “There just isn’t. It’s an adult thing, and as long as it stays an adult thing, that’s all that’s important.

“You know,” she continues, “we’ve come a long way, and people do not view sex as a bad thing if they can do all that’s on the Internet, do what they do on TV, and on the phone. So, as far as the Block, the Block is benign.”

The Attmans, like most of the owners of Block property and businesses, do not live in Baltimore City. Their abode, most recently assessed at more than $225,000, is in a new development in Pikesville. Being a nice, suburban couple, the Attmans probably don’t often come down to the Block and look around; as Joanne Attman says, “We don’t really pay any attention to it.” Like most landlords, they just get a check from their tenants and make the necessary improvements to their property. End of story.

But if the Attmans were paying more attention to what’s happening on the Block, they’d know that its problems have little to do with the morality of sex among adults. The area is besieged by negative publicity over drug dealing, prostitution, employment of underage dancers, and the threatening atmosphere some civic and business leaders contend the Block creates in the middle of the downtown business district.

If they were paying attention, the Attmans would know that last May four pipe bombs were found and defused in the Diamond Lounge, a few doors down from their Block property. They’d know that a club next door to their building, the Circus Bar, was ordered to sell its liquor license last October after a former doorman, convicted of dealing drugs from the club, told the Baltimore City Board of License Commissioners (aka the liquor board) that he thought it was “part of my duties” to sell cocaine from the bar. They’d know that in July 1998, the 408 Club was cited by the liquor board for employing two 16-year-old Baltimore County high-school students as dancers and using three rooms above the bar for prostitution. And they’d know that these incidents are just the tip of the iceberg. (For a fuller accounting of Block property owners and the records of businesses there, see “What’s Around the Block”.)

But Joanne Attman doesn’t want to hear about it. “That’s ludicrous,” she says of the idea that a Block employee considered drug dealing part of his job. “You can go anywhere and buy drugs anywhere in the city. You can buy them at school. They’re being sold everywhere. So to focus in on the Block is absolutely ludicrous.” She is adamant that the action on the Block is essentially harmless: “You know, most of the people down there are there to make a living and that’s what they’re doing–a clean living.” With that, the interview ends abruptly.
The way people make their living on the Block isn’t causing ripples just in City Hall and law-enforcement circles; it is fast becoming a divisive issue within the red-light district’s business community itself. Today, two separate entities–Baltimore Entertainment Center Inc. (BEC) and Downtown Entertainment Inc.–claim to represent the interests of Block businesses. Both groups, at least on the face of it, share the same goal: to clean up the Block’s act so that its businesses can work with city leaders to promote the district as a destination for tourists and conventioneers. But their respective members don’t see eye to eye on how to achieve that aim, according to Block sources.

Today, Baltimore Entertainment Center is effectively defunct, although it is still recognized by many on the Block as an ongoing concern. BEC was formed in February 1997 and until a few months ago was represented by Baltimore attorney Claude Edward Hitchcock, a confidant of former Mayor Kurt Schmoke. At the time the group was launched, Hitchcock said it represented a “new breed of owner and operator on the Block” that is “trying to become better citizens and better neighbors.” Hitchcock resigned as BEC’s attorney in September; the following month, the group forfeited its right to operate in Maryland due to its failure to file property-tax returns–a rectifiable situation, should the taxes be brought up to date. (Attempts to speak with Frank Boston III, reportedly BEC’s new attorney, were unsuccessful.)

Days after Hitchcock left BEC, Downtown Entertainment was formed, with Hitchcock as its lawyer and Jacob “Jack” Gresser–the owner of the Gayety Building, a Block landmark, and another former BEC guiding force–as president. Gresser says Downtown Entertainment wants “to go in the direction of a partnership with the city, in respect of getting involved in the conventions that are coming to town, where the city will advertise these particular businesses in their convention brochures and throw the business our way, if possible.” Ultimately, Gresser says, he wants the Block to become like Bourbon Street, New Orleans’ famous playground of vice. So far, eight to 10 of the Block’s two dozen adult-entertainment establishments have joined the new group, he says.

Gresser says the splintering of BEC occurred over the course of last year, culminating about six months ago–“That’s when we decided to go our different ways.” While he’s loath to speak for those who haven’t joined Downtown Entertainment, he says there are “two distinct, different views of how people want to run their business down on the Block. Everybody runs their business differently. Everyone has a responsibility to run their business properly. I would just like to see everyone get together and go in one direction. We really don’t need this diversification.”

That “diversification” has created to some bad blood. “This has not been a walk in the park,” Hitchcock says. “I mean, I’ve gotten calls here in the office on my voice mail, you know, the use of the ‘N’ word, and ‘Who the fuck do you think you are?’ and all. One guy who was a part of [Downtown Entertainment] got his windows bashed in–both in his business and his car–and his family got threatening phone calls over the telephone at home. I’ve gotten it all. I mean, this has not been easy.”

Neither Gresser nor Hitchcock will go into detail about the causes of the split. Other sources familiar with the situation, who spoke on condition of anonymity, are less cagey–they claim the split is between clubs that host prostitution and clubs that don’t.

“Apparently the difference is private rooms, no private rooms,” says one source. “If there are no private rooms, then you obviously can’t have prostitution on the site.” The clubs without private rooms are the ones moving into Downtown Entertainment, he says.

Sources say the new group also wants police officers currently on the Block beat rotated out. “The policemen around there have been around there for years and have a bunch of friendships,” one source says. “If you are there too long, familiarity can breed bad things.”

Hitchcock says Downtown Entertainment has “scheduled an appointment to talk with the new police commissioner [Ronald Daniel] to basically introduce this new organization to him, to give him a feel for what we intend to do, how we intend to run the businesses, [and] to affirm or reaffirm with him our willingness to be cooperative with the Baltimore City Police Department. In fact, we encourage the police department to be active–fair, but active–on the Block.”

Police spokesperson Robert Weinhold says Daniel “has had conversations with representatives from the Block” and recognizes that they want to make the red-light district as crime-free as possible. “We would expect the efforts of the Block representatives to continue, and that all of the establishments and the citizens who work there will be law-abiding in their business efforts.”

Eventually, Hitchcock says, Downtown Entertainment will seek a meeting with Mayor Martin O’Malley, but it has yet to broach the subject with him. For the time being, the new mayor’s approach to managing the situation on the Block remains a mystery. Despite assurances that he would grant an interview for this article, repeated attempts to set up such a meeting were unsuccessful. O’Malley’s press secretary, Tony White, eventually explained that the mayor has yet to formulate his opinions about the Block district and therefore would rather not discuss it at this time.

“Being the entertainment mogul that he is, he’s thinking about” the Block, White says, but this thinking “hasn’t come to fruition yet.”

It would be a stretch to suggest that contributions to O’Malley’s mayoral campaign last year will have a direct impact on his eventual stance. But several Block interests did pledge support for his candidacy, in all likelihood out of a desire to foster access to and good relations with their potent neighbor in City Hall.

Between July and October of 1999, Block interests donated $6,400 to O’Malley’s cause, according to campaign-finance reports. One of Gresser’s businesses, Custom House News, gave $1,000, as did PP&G, which co-owns the strip club Norma Jean’s and is headed by Pete Koroneos, secretary and treasurer of Downtown Entertainment. The law firm O’Malley worked for before he became mayor gave $2,000 to his campaign, and one of its partners, Joseph Omansky, has long represented Block interests. The remaining $2,400 came from other Block lawyers, owners, liquor licensees, and an accountant.
The Block’s generosity toward politicians is a long-established tradition–probably as old as the Block itself. The district sprang up almost immediately after the Great Baltimore Fire of 1904, with the Gayety Theater (opened in 1906 at its present site at 403 E. Baltimore St.) becoming its first landmark. Initially, penny arcades and vaudeville venues dominated, but after the repeal of Prohibition the area took off as a dense concentration of bars and burlesque houses.

During the World War II years and into the 1950s, the Block’s reputation spread nationally as striptease acts became the main attraction at many of the nightclubs and, as two out-of-town reporters wrote in 1951, “any and all forms of vice are tolerated and protected. There is a price for everything, and it’s not much.”

With all of the fun and money being generated on the Block, heat from law enforcement was turned up. Various congressional inquiries and grand-jury investigations fingered the Block as an organized-crime stronghold in the 1950s and ’60s, a place where the rackets, gambling and prostitution in particular, thrived and fueled corruption and violence. Even during its heyday–so romanticized by a legion of old-time Baltimoreans and local scribes–the Block was a dangerous place that spawned crime sprees and fear and trepidation among hand-wringing city residents.

If the 1960s were bad on the Block from a criminal-justice standpoint, the ’70s were much worse. Julius “The Lord” Salsbury, the acknowledged king of Block rackets, was finally convicted on federal charges in 1969, only to flee the country the following year. (Never brought to justice, he remains a legendary fugitive.) But with the end of Salsbury’s reign–and perhaps because of the destabilizing effect of his absence–came an era of unprecedented violence in the district. When crime fighters did try to put the screws to the Block, they often ended up embarrassing themselves: A 1971 raid by federal agents produced little in the way of convictions and made law-enforcement appear groundlessly zealous in pursuit of justice for Block racketeers.

With downtown’s renewal into a modern entertainment district, however, the Block gained a sense of legitimacy, due largely to rose-colored memories of its former glory and its faded Damon Runyonesque character. Then-Mayor William Donald Schaefer spared the Block from his wide-swinging wrecking ball as he rebuilt downtown, and in 1977 it received a special designation as an entertainment district. But the Block’s salad days were long gone; drugs and sleaziness continued to define its identity into the 1980s and ’90s.

As Schaefer moved from City Hall to the State House, his tolerance for the Block wore down. Late in his second term as governor, he ordered a four-month investigation of crime on the Block that culminated in a January 1994 Maryland State Police raid in which some 500 state troopers descended on the district and shut it down. Initially, the governor and his troopers made great claims–one drug kingpin and three distributors had been nabbed, an arsenal of guns had been confiscated, the back of criminal interests on the Block had been irreparably broken. But attempts to prosecute those arrested fell apart amid allegations of improprieties and faulty techniques among the investigators. Once again, law enforcement was left red-faced by its flawed attack on the tenderloin.

Schaefer’s raid occurred as his mayoral successor, Kurt Schmoke, was in the midst of his own attempt to put the Block out of his misery, by buying it out and relocating businesses. This economic attack failed, however–community leaders around the city feared porn shops and strip clubs would spring up in their backyards. Ultimately, after a flood of contributions to Schmoke’s campaign committee from Block interests in late 1996, a détente was reached. Fronted by the Schmoke-friendly Hitchcock–who had previously represented other downtown business interests that hoped to end the Block once and for all–Block operators received a respite as City Hall promised to await improvements promised by the newly formed Baltimore Entertainment Center.

The city held up its commitment, providing physical improvements such as new brick sidewalks in 1997, but so far the businesses haven’t held up their end of the bargain by substantially cleaning up their acts. If and how O’Malley reacts remains to be seen.

The mayor may still be forming his ideas on the future of the Block, but a new regulatory era is already underway. In November, the city liquor board started enforcing new rules that hold the threat of revocation of adult-entertainment licenses should club employees commit too many violations.

Hitchcock says Downtown Entertainment welcomes the restrictions. “We frankly saw it as tightening of the regulations in a fashion that we all agreed needed to happen,” he says. “We’ve had some very damaging rulings by the liquor board against some of those clubs down there. People are getting the message–you know, you do this stuff and you will lose your livelihood, period, end of story. You may be able to appeal it until it gets to some point of finality, but the liquor board’s not playing about this because they have taken on a responsibility and their credibility is on the line.”

Perhaps even more significant than the new regulations, from a business standpoint, is a January 1999 court ruling that full nudity is legal at adult-entertainment establishments that opened before 1993. The ruling arose when the Spectrum Gentlemen’s Club in East Baltimore appealed a nude-dancing violation and found a loophole in the law, which had been interpreted to require that dancers be partially clothed while performing. The decision was handed down by Circuit Court Judge Richard Rombro, in his last judicial act before retiring from the bench. (Unnoticed at the time was the fact that the judge’s nephew, Stuart Rombro, is an attorney who represents Gresser’s Custom House News.) Regardless, it’s been good for business on the Block.

Hitchcock downplays the ruling’s practical significance. “There’s no real difference,” he says. “I mean, yeah, rather than you put a little star on the nipple, you can take the star off now.” But he acknowledges that Baltimore strip clubs have become a “more marketable and a bigger revenue-generating business because you can basically say it’s nude dancing.”

And a more marketable Block is a boon for Baltimore, says City Council member Nicholas D’Adamo, a Democrat whose 1st District includes the Block and many other adult-entertainment venues.

“Let’s be honest,” asserts D’Adamo, who acknowledges that he patronizes Block establishments now and again. “Is it a plus for the city of Baltimore? I think it is. I think for out-of-towners to come to the city, it could be a stop on their agenda if they’re staying downtown.” He further maintains that Block businesses employ some 1,000 workers and should be recognized as job-providers.

Of the allegations of vice associated with Block clubs, the council member says, “I think the press has blown it out of proportion. Sure, there are problems down there. But I think there are problems in every bar. It’s just a matter of what you consider a problem. So why pick on the Block?

“You show me a person a week’s being killed on the Block, or a person a week’s being stabbed and almost died–you show me numbers like that, we got a problem,” D’Adamo continues. “But goddammit, there’s a lot of streets in this city that have these problems that are a lot worse than the Block. We need to address that first.” And, for the time being, it appears that’s exactly what the city’s going to do.

Bodog Internet Gambling Investigation Leads to Money-Laundering Charges

By Van Smith

Published by City Paper, Oct. 30, 2008

Federal authorities in Maryland have filed money-laundering charges against two men, Edward Courdy and Michael Garone, who have figured in an ongoing investigation into the internet gambling empire Bodog. Both men were described in two forfeiture proceedings earlier this year, which resulted in the seizure of a total of $24 million from numerous bank accounts, as processors of illegal gambling transactions in the United States on behalf of Bodog.

The charges against Courdy and Garone were filed on Sept. 29, though the filings were not publicized and were found yesterday by City Paper on the online federal courts web site, known as PACER.

Courdy is charged with transferring $2,380,273 in April from Dublin, Ireland, to a Nevada State Bank account held by Zaftig Instantly Processed Payments Corporation (ZIP Payments), and then to Maryland and elsewhere, to promote the carrying on of an illegal gambling business [Courdy Info]. Garone is charged with the same general scheme, alleged to have occurred in April 2007, involving the transfer of $1,499,975 from Frankfurt, Germany, to Branch Banking and Trust Bank account in Georgia held by JBL Services, Inc. [Garone Info].

The U.S. Attorney’s Office in Maryland confirms that the two men are not currently in custody on the charges, and that no court dates have been set in the cases. Spokeswoman Marcia Murphy says that the office cannot discuss the matters other than what is contained in the court filings.

The Sept. 29 filing the of Courdy and Garone charges coincides with the date that Courdy and ZIP Payments filed a claim in forfeiture proceedings involving $9,869,283.05, which was seized in July from several bank accounts tied to Courdy. Courdy and ZIP Payments, through their California attorney, Stanley I. Greenberg, are seeking the return of the seized money. Also filing a claim that day was 1st Technology, LLC, which recently won a $46,597,849 Nevada court judgment against Bodog and is seeking to collect part of the money by intervening in the ZIP Payments forfeiture proceeding.

Garone and his company, JBL Services, did not contest the federal forfeiture of $14,200,195.73 in alleged Bodog-related proceeds [Bodog Affadavit $14.2M]. In mid-July, Maryland U.S. District Court Judge Catherine Blake finalized the forfeiture of those funds.

Garone and Courdy could not be reached for comment. Greenberg, Courdy’s attorney in the forfeiture case, did not immediately return a phone call for comment.

The affidavits supporting the forfeiture proceedings describe in great detail the lengthy, convoluted efforts of Internal Revenue Service criminal investigator Randall S. Carrow to bring to light the global movement of money in support of Bodog’s on-line gambling activities. The documents also indicate that the case is being brought in Maryland because on-line gambling via Bodog was conducted by an undercover agent working in Maryland.

Bodog founder Calvin Ayre, a Canadian now living in Antigua, became a world-famous billionaire from online gambling and other entertainment enterprises. He was featured on the cover of Forbes magazine in 2006. Carrow writes in his affidavit that investigative interest in Bodog and Ayre started in 2003, but the passage of a 2006 federal law that strengthened prosecutors’ ability to go after on-line gambling activities kicked a formal investigation into gear.

GoldenCasino.com’s Payment Processor Targeted in Latest On-Line Gambling Seizures in Maryland

By Van Smith

Published by City Paper, Oct. 28, 2009

As the Maryland-based federal probe of on-line gambling continues, the latest move to show up in court records in Baltimore is the seizure of $365,366.69 from two bank accounts in the name of Atrium Financial Group (AFG). According to the affidavit in the case (below), Delaware-based AFG disburses money to on-line gamblers, including those who try their luck using GoldenCasino.com. City Paper has been unable to reach representatives of AFG and GoldenCasino.com for comment.

The AFG seizure—unlike several others reported recently by City Paper—is supported by an affidavit that was not sealed (see Atrium Financial Group affidavit). The 13-page sworn statement by Immigration and Customs Enforcement (ICE) special agent Augusta Ferenec, who is based in New Orleans, La., provides a peek into the complexities of the investigation. Signed on Sept. 4 by U.S. District Court magistrate judge Beth Gesner, the warrant was filed in the court records on Oct. 22.

According to Ferenec’s affidavit, the investigation leading to the AFG seizures dates to July 14, 2008, when Louisiana State Police (LSP) officers opened an “undercover gambling account” with GoldenCasino.Com, and then later requested a payout. The first check–from a Canadian outfit called Interco Finance Corporation (IFC)–bounced. Eventually, a second check came, this one from AFG. Thus, the investigation established that GoldenCasino.com was using both IFC and AFG as payment processors for its on-line gambling patrons. Ferenec explains in the affidavit that a fourth business–Con-Tex Converters, another Canadian firm–entered the picture as investigators followed the global movement of funds.

For instance, an AFG account with Mercantile Bank received wire transfers between Dec. 2008 and Jan. 2009 amounting to more than $1.5 million. The money came from a Con-Tex bank account in Cyprus and a combined Con-Tex/IFC bank account in Canada. During the same timeframe, Ferenec’s affidavit continues, AFG cut 1,473 checks from that account, at least two of which went to people in Maryland. In Aug. 2009, investigators talked to one of the Maryland recipients, who admitted the proceeds had come from gambling.

In all, Ferenec’s affidavit maps out a total of nearly $6.3 million wired internationally by either Con-Tex or IFC to AFG bank accounts in the U.S. The AFG accounts, which the affidavit says have all been closed by the banks due to suspicions that the money was tied to illegal gambling, were held with Mercantile, Sovereign Bank, Wachovia Bank, National City Bank, and TD Bank North. The international wire transfers from Con-Tex and IFC were the sole sources of funds in the AFG accounts, the affidavit explains.

The two AFG bank accounts targeted for seizure are with Fifth Third Bank and Wilmington Savings Fund Society. The Fifth Third account, from which $124,028.88 was seized, received about $3.3 million in wire transfers from Con-Tex and IFC between Dec. 2008 and June 2009, the affidavit explains. Nearly 4,000 checks were cut from the account, totaling about $3.1 million disbursed to people in the U.S. During July and Aug. 2009, 35 of those checks were issued to Marylanders. The amount of money entering AFG’s Wilmington Savings account is not specified in the affidavit, which explains that about 575 checks were cut from the account, one of which was mailed to a Texan who “confirmed to the bank that the check was proceeds of online gambling.”

Ferenec’s affidavit says it’s likely that money will continue to enter the targeted accounts “for a period of time” after the warrants are executed, because those involved “will be unable to promptly stop the flow of funds or inform all of their contacts of this investigation.” Thus, Ferenec requests that the warrant order the banks to allow the deposits to continue, but not any attempted debits, and that “ICE be allowed to periodically remove such funds” during a 21-day period after the warrants are executed.

The Ghost Hand: Maryland Law Enforcers Aim to Take the Pot by Secretly Sitting at the Online Gambling Table

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By Van Smith

Published by City Paper, March 24, 2010

On Dec. 21, 2006, someone in Maryland opened an account with bodog.com, an online gaming site whose customers bet on sports and horse-racing and play poker and casino games on their computers. The same day, that same someone placed two online bets on football games with Bodog. Over the course of 2007, after more wagering, the online gambler requested and received two payout checks from Bodog: one for $1,500 and another for $700.

Mundane as they may seem, the Maryland gambler’s wagers and payouts have had major repercussions in the online-gambling world. That’s because, starting in 2008, the details of that person’s online betting activities were included in meticulous affidavits supporting warrants to seize the contents of bank accounts said to be tied to illegal gambling. The Maryland gambler was actually a special agent working undercover for the U.S. Internal Revenue Service (IRS) Criminal Investigation Division.

Under U.S. law, facilitating transactions tied to online gambling is illegal. Yet, due to the immense popularity among Americans of wagering over the internet, the overseas companies that provide this kind of entertainment continue to seek ways to do business with U.S. customers. In order to pay out winnings to gamblers in this country, they have to hire U.S. companies willing to operate as payment processors–middle-men who take foreign casino companies’ money and disburse it to players when they want to cash out their online gambling accounts. These payment processors are taking a risk that U.S. law enforcement will detect the transactions and seize the money while it’s sitting in the payment processors’ accounts–which is exactly what federal investigators in Maryland, and elsewhere, have been doing–but due to the lucrative nature of the business, both the payment processors and the online-casino companies have been willing to take that gamble.

In the post-Sept. 11 world, the U.S. government has developed a heightened interest in augmenting its ability to track the ways and means of global money-moving. Though the motivation is to protect the world from terrorists by interrupting their finances, this trend also means that financial crimes of all kinds–including the movement of online gambling money into the United States–face a greater risk of detection. In the world of internet wagering, whenever money is sitting in a U.S. bank account, it is exposed to possible seizure by the authorities. And, as investigators’ successes mount, it’s clear they are getting better at it.

IRS criminal investigators in Maryland “opened a formal investigation of Bodog in 2006,” court records state, after having “conducted interviews regarding Bodog.com, Calvin Ayre, and Bodog’s operations in approximately 2003.” Ayre, a Canadian who’s been living in exile for several years now, is the founder of Bodog, which is based in Antigua and has operations in Costa Rica.

Bodog, a 15-year-old company which claims to be the world’s pre-eminent online gambling site and whose operations span the globe, is not the first to be targeted by American law enforcement’s crackdown on internet gambling. That honor goes to Jay Cohen, who in 1998 was indicted in New York along with numerous other defendants for violating the federal Wire Wager Act in running the Antigua-based World Sports Exchange. Cohen fought the charges, saying federal laws prohibiting wire transfers of gambling proceeds do not apply to the internet. He lost and was sentenced to 21 months in prison. Since then, the feds have continued to focus on an industry that, in effect, presents opportunities for people to gamble anywhere and anytime, despite the laws of any particular country or state.

“If you’re in Antigua running a casino, that’s fine,” says Maryland U.S. Attorney Rod Rosenstein. “But if you’re actually operating a casino in someone’s bedroom in Montgomery County over the internet, that’s illegal.” Thus, any proceeds that can be traced to gambling activity that takes place in Maryland–whether it’s actual betting over the internet, or just the arrival of checks in the mailboxes of Maryland gamblers cashing out their online-gambling accounts–could end up seized by Maryland authorities.

Since early 2008, according to federal court records, the ongoing federal investigation of online gambling based in Maryland–which, in addition to the IRS, also involves members of a Department of Homeland Security Immigration and Customs and Enforcement (ICE) task force–has brought at least $29,206,594.62 in alleged gambling proceeds into federal coffers. The latest warrant in the investigation was signed by U.S. magistrate judge Paul Grimm in early February, and it targeted the contents of a Mercantile Bank account in Tampa, Fla. The account, held in the name of a company called Direct Channel LLC, yielded $860,335.90 on March 5. Direct Channel, like the other companies included in the Maryland internet-gambling seizures, allegedly provided payment-processing services in the U.S. for gambling web sites based in other countries. Though the Maryland investigation initially appeared to focus on payment processors for Bodog, such as Direct Channel, it has since broadened to include funds held by companies serving another gambling site, goldencasino.com, which is also based in Antigua.

Any U.S. bank account used by a payment processor working with online casinos could be targeted by investigators, potentially wiping out millions of dollars when a seizure warrant arrives at the bank. But due to the magnitude of online gambling in the United States–half of the $16 billion per year that internet gambling is estimated to generate is believed to originate in the United States–the risk may be worth it. Though federal investigators in Maryland and elsewhere, including New York, Missouri, and Florida, go for the money, there’s so much in play at any given moment that what they seize is only a small portion of money flow.

So far, after several years of effort, Maryland law enforcers have seized nearly $30 million in suspected online-gambling proceeds. That’s equal to less than one half of one percent of the $8 billion that U.S. online gamblers are estimated to spend each year. But it’s a start. And as the effort builds and grows more sophisticated and nimble with experience, the potential is as vast as the American online-gambling economy itself.

“There are very big numbers in internet gambling,” say Rosenstein, acknowledging the sizeable cut the government could get through seizing and forfeiting assets, which are funneled into law-enforcement budgets to support the efforts of the agencies that seized them. Asked if seizures, in the long run, could undermine gambling web sites’ ability to pay out to U.S. customers, he says: “That’s a possibility, and it’s certainly a risk for customers. And it’s a pretty effective deterrent, since customers have no remedy if the gambling operator fails to pay. They won’t be able to go into court and enforce that. It’s an illegal contract.”

Seizing and forfeiting criminally derived assets, including those from online gambling, has been made a priority by Rosenstein’s office. Last year, he hired the nation’s top asset-forfeiture prosecutor–Stefan Cassella, who literally wrote the book on the subject, a 950-page tome entitled Asset Forfeiture Law in the United States–to lead the effort. Among Cassella’s achievements is the largest forfeiture in U.S. history: $1.2 billion from the Bank of Credit and Commerce International in the 1990s. Given the size of the online-gambling industry’s assets, Cassella may have an opportunity to break his own record while working in Maryland.

Law-enforcement efforts to interrupt internet-gambling money flowing in and out of the United States were ramped up after the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA), which was signed by President George W. Bush in October that year. Before that law was passed, the federal Wire Act, which dates back to 1961, already prohibited the transfer of gambling proceeds via wire communications. That law had been used to go after internet gambling prior to the UIGEA’s passage. But unlike the Wire Act, the UIGEA specifically outlaws internet-gambling transactions and requires financial operators, such as banks and payment processors, to determine which transactions are tied to online gambling and report them to regulators.

The banking industry, concerned that UIGEA requirements would be difficult to enforce and would force bankers to become anti-gambling police, persuaded the Obama administration to postpone the law, scheduled for implementation in December 2009, for six months. U.S. Rep. Barney Frank (D-Mass.), meanwhile, is currently trying to usher through legislation that would repeal the UIGEA and instead set up a regulate-and-tax scheme for the industry, arguing that online gambling is a liberty–and a potentially large source of public revenues–that the government should not prohibit.

But Rosenstein contends that going after the illegal profits gained from the U.S. market for internet gambling is a matter of fairness. “What Americans find particularly galling,” he says, “is when something is criminalized, honest people don’t engage in the activity, but criminals do, so they get excess profits because their only competition is from other criminals.”

Those seeking to legitimize aspects of online gambling, though, have other thoughts on the matter. Last year, in trying to persuade a federal judge to release funds seized from a payment processor allegedly tied to online gambling, lawyers for the Poker Players Alliance (PPA), a Washington, D.C.-based interest group, argued that online poker is a game of skill, not of chance, and thus is not illegal gambling. They also contended that the UIGEA establishes criminal culpability for “persons who operate illegal gambling sites, rather than those who process payment transactions,” and that restricted transactions under the UIGEA do not include funds going to a gambler because a gambler is “not engaged in the business of betting or wagering.”

The lawyers for the PPA (whose motto is “Poker is not a crime: Join the fight.”) did not prevail. But their efforts–and the well-heeled existence of the PPA, which has its own lobbying arm, PokerPAC, and whose board is chaired by former U.S. Senator Alfonse D’Amato (R-New York)–indicates that powerful forces in American society don’t like the online-gambling crackdown. Recent public-opinion polling, though, indicates the prohibition of online gambling is popular; two-thirds of those responding to a Fairleigh Dickinson University poll released on March 11 say they do not favor legalizing it.

Though online gambling is legal in many parts of the globe, enjoyed by many Americans, and accepted in many cultures–to the point that online-gambling companies’ stocks often are publicly traded in other nations–its continued prohibition in the United States may be explained by the longtime association of the gambling industry with unseemly characters making obscene profits.

Recent cases against internet gambling operations, for instance, give a sense of the profit potential the business presents and sometimes allege organized-crime ties. In New York in October 2009, the operators of Panama-based betonline.com were charged with illegal online gambling; authorities claimed the group made $587 million in 28 months and was linked to the Gambino and Genovese crime families. In a 2006 Missouri case against the longtime gambling figures who ran Costa Rica-based betonsports.com, the indictment states that the company’s promotional materials boasted “100,000 active players, who placed 33 million wagers, worth over $1.6 billion” in 2003, before the company went public on the London stock exchange. In February, Missouri authorities indicted the operators of Costa Rica-based Elite Sports, which ran the web sites best24b.com and best24b.net, and among the defendants were members of the Kansas City’s storied Cammisano crime family.

In addition, federal authorities in New York have charged two men–Anurag Dikshit in 2008 (Dikshit NY info) and Douglas Rennick in 2009 (Rennick indictment)–with illegally running online-gambling ventures. Dikshit, who was born in India and is one of the youngest billionaires in the world thanks to the success of his online-gambling business, is co-founder of the Gibraltar company that operated partypoker.com; charges against him include the forfeiture of $300 million in gambling revenues. Rennick, a Canadian, ran a series of payment-processing companies that allegedly served the internet-gambling industry, and the government is seeking to forfeit more than a half billion dollars of the proceeds from his financial dealings.

Another alleged payment processor was charged in Florida in February, when a bank alerted federal authorities that customers were trying to cash large checks they said were the payouts from online-gambling winnings. Michael Olaf Schuett, a German man living in Naples, Fla., had set up hundreds of companies and had dozens of bank accounts that were allegedly used to operate the scheme since 2007. The complaint against him (Schuett FL complaint) says that he transferred online-gambling payments to about 23,000 people, mostly in the United States, and that the total amount of money involved was $70 million.

In what may have been the first federal gambling case involving the internet in Maryland, IRS investigators and Montgomery County police teamed up to bust a ring that, in 2003 and 2004, handled action from Maryland customers on behalf of a Dominican company called World Wide Wagering, which runs the web site wager.dm. The conspiracy case, which ended with the convictions of seven men from Montgomery County, Baltimore, and Florida, followed the money flow to and from bettors and the defendants. The case included the cashing of more than $150,000 worth of checks at University Liquors in Hyattsville.

Just as IRS agents in Maryland were cracking the World Wide Wagering case, they started looking into Bodog. But it wasn’t until December 2006, shortly after the UIGEA was signed into law by then-President George W. Bush, that the Bodog investigation got serious–it began with an investigator logging onto the web site, posing as a customer, and starting to gamble.

Once the investigator started receiving payout checks in 2007, the money trail could be tracked. In the meantime, the investigation gained a cooperating witness from inside the internet-gambling industry, who corroborated facts about Bodog’s operations, including the contention that “Bodog takes in from $250,000 to millions per day on sports bookmaking alone,” court records show. An informant also helped out by corroborating facts based on experience using Bodog’s site to gamble in Florida. The informant was able to explain the betting process to investigators; additional information was gleaned from investigators working online-gambling probes in other jurisdictions.

By 2008, sufficient cause had been established by Maryland IRS investigators to seize funds from the bank accounts of three payment-processing companies suspected of handling funds for Bodog: JBL Services and Transactions Solutions in Georgia (JBL forfeiture), and a California company called ZAFTIG Instantly Processed Payments Corp., operating as ZipPayments.com.

On Jan. 18, 2008, U.S. District Court magistrate judge Beth Gesner signed a search-and-seizure warrant application for bank accounts in the name of JBL Services and Transactions Solutions; $14,200,195.73 was seized. On June 28, 2008, U.S. District Court magistrate judge Susan Gauvey signed another warrant application for ZipPayments.com bank accounts, which yielded another $9,869,283.05. By July 2008, the U.S. Attorney’s Office in Maryland had filed forfeiture actions against both pots of money. The legal actions were based on lengthy affidavits written by IRS criminal investigator Randall Carrow.

In September 2008, the case against ZipPayments.com’s money suddenly heated up. A claim for nearly $10 million was filed by ZipPayments.com and Edward Courdy, a California man who sought to have the money returned, saying it was lawfully his. Within days of filing his claim, Courdy was charged with money laundering, as was Michael Garone, a Georgia man connected to JBL Services and Transaction Solutions (“Bodog Internet Gambling Investigation Leads to Money-Laundering Charges,” Mobtown Beat, Oct. 30, 2008). In February 2009, as a result of a forfeiture settlement negotiated by Courdy’s attorney, Stanley Greenberg, and assistant U.S. attorney Richard Kay, the government returned $200,000 of the ZipPayments.com money to Courdy, and kept the rest.

Today, the status of the criminal cases against Courdy and Garone is unclear. Some time in the fall of 2009, a little over a year after they were filed, the online records of the cases against them disappeared from the federal court-records database system, known as Public Access to Court Electronic Records (PACER). Since Maryland’s federal courts handle only electronically filed documents, PACER is the only repository of its records. The disappearance from PACER of Maryland criminal case numbers 08-454 (against Courdy) and 08-455 (against Garone), creates the illusion that they were never filed at all–though City Paper still has copies of the documents charging them, which bear Rosenstein’s signature. Despite City Paper‘s requests for explanation, the U.S. Attorney’s Office in Maryland has remained mum about what happened.

Courdy’s lawyer, Greenberg, has consistently declined City Paper‘s request for comment about his client’s troubles in Maryland. Efforts to contact Garone, and to identify his lawyer in the Maryland case, have been unsuccessful.

After the money seizures and criminal charges involving Courdy and Garone were filed, the online gambling investigation in Maryland appears to have shifted from the IRS to Immigration and Customs Enforcement–and the level of secrecy surrounding the investigation increased. Though numerous search-and-seizure warrants have been filed for the contents of bank accounts and an e-mail account associated with payment processors since last summer, nearly all of them were granted under seal, so probable cause for the seizures has not been revealed to the public.

Despite the secret nature of many of the seizure filings, certain information about them is available. Three ICE task force members in Maryland–Maryland State Police trooper Robert J. Mignona, ICE special agent M. Lisa Ward, and Anne Arundel County Police detective Richard S. Gunn–and one ICE special agent in Louisiana, Augusta B. Ferenec, filed the warrant applications. The companies whose bank accounts have been seized–HMD, Forshay Enterprises , and Electracash in California; Atrium Financial Group (AFG) in Delaware; and Direct Channel in Florida–are in the payment-processing business. The amounts seized so far from these companies’ bank accounts add up to $5,137,115.84. And, in the case of Electracash–a business that has past associations with Courdy–warrants have been issued not only to seize the contents of bank accounts, but of an e-mail account the company has with Intermedia, a New York City communications company. (The Electracash e-mail warrant, unlike the bank-account seizures, so far has yielded nothing, court records show.)

One of the unsealed search-warrant affidavits–the one filed early this year against Direct Channel’s bank account in Florida–was written by Ward, but draws directly from the IRS affidavit in the Courdy and Garone seizures, and thus sheds no new light on the investigation’s details. The other unsealed warrant, against Atrium Financial Group and written by Ferenec, shows that ICE’s financial-investigations group in New Orleans, La., along with the Louisiana State Police, are in on the Maryland probe (“GoldenCasino.com’s Payment Processor Targeted in Latest OnLine Gambling Seizures in Maryland,” The News Hole, Oct. 28, 2009).

The Louisiana end of the Maryland investigation began on July 14, 2008, when Louisiana State Police officers opened a gambling account with goldencasino.com. They did not immediately succeed, because the bank they were using to deposit $100 into the gambling account apparently blocked the transaction. On the second try, though, they succeeded. They then requested a payout.

The first payout check bounced, but the second one, from AFG, cleared, and the investigators, using information they gleaned from their transactions, used their investigative powers to start on up the money trail. They discovered funds moving between Canadian companies’ bank accounts in Canada and Cyprus and on to AFG bank accounts in the United States, which then issued checks to U.S. residents, including in Maryland. The transactions they tracked involved millions of dollars zipping across the globe.

“Because of enhanced monitoring of financial transactions since Sept. 11, we have a much better handle on the movement of funds,” Rosenstein says about the ability of investigators to dig into the online-gambling industry. In fact, the affidavits of investigators Carrow and Ferenec indicate that initiating a successful seizure of funds from payment processors doesn’t require particularly sophisticated investigative techniques. The trick, it seems, is trying to pinpoint where the money will be at any given moment, hoping to gain court orders to freeze it, and seize it before it shifts yet again.

Rosenstein points out another challenge investigators face in trying to seize online gambling funds: While it’s relatively easy to go after funds in U.S. accounts, going after offshore accounts–where the big money is, since that’s where the online gaming companies operate–is tricky.

“It’s similar to the challenges we face with child pornography, which is often stored overseas and transported to the United States over the internet,” Rosenstein says. “The degree of international cooperation with regard to child pornography is far greater than with offshore gambling, though. But we can readily intercept the money flowing through financial institutions that we have jurisdiction over.”

Rosenstein says online gambling can be prosecuted anywhere that customers are located, and that the public should expect to see more enforcement efforts taking place in more jurisdictions. He says that criminal activity is increasingly becoming more internet-based, and that investigative agencies are becoming more focused on financial crimes. They’re also becoming more sophisticated when it comes to following the money.

“Anything that illegally generates large amounts of money is a concern on many levels,” Rosenstein says. “People engaged in such conduct may be committing other crimes. They may not be paying taxes, and they may be investing in other illegal activities.”