This relates the story of the college-educated "Boston Boys." They bucked the
stereotype of drug kingpins and quietly made millions of dollars in marijuana
Original Air Date: February 21, 1989
Produced by Charles C. Stuart and Marcia Vivancos
Written by Charles C. Stuart
Reported by Chalres C. Stuart, Marcia Vivancos, and Mark Hosenball
Illegal drug traffic adds up to one hundred billion dollars a year.
They will smuggle the cash out of the country the same way they smuggle the
drugs into the country, a hundred different ways.
Meet some of the legitimate businessmen who make it possible--accountants,
...five... six... seven...
FRONTLINE follows a federal investigation of the illegal money trail into the
heart of the mainstream economy.
There are legitimate businesses taking advantage of the currency that's out
Tonight, on FRONTLINE: "Who Profits From Drugs?."
Our most common images of the illegal drug war in America are of poor, urban
neighborhoods besieged by an unstoppable wave of addiction, violence, and
Those images of the drug problem are perpetuated by the media's focus on
stories about desperate addicts, ruthless pushers, and invincible foreign
But there is another side of the story with a very different group of players
who don't fit the stereotypes. Tonight, FRONTLINE investigates what happens to
the enormous profits of the illegal drug trade, following a trail directly into
the offices of otherwise respectable businessmen... people who would say no to
drugs, but very willingly say yes to drug money. It is the untold story of how
the whole American economy profits from
Tonight's program was produced by Charles Stuart and Marcia Vivancos. It is
called, "Who Profits From Drugs?"
This yacht center in Fort Lauderdale, Florida is just one of thousands of such
marinas dotting the seaboard of Florida's coast--all of them potential
smuggling havens for drug traffickers. From 1978 to 1981, when it was known as
the Amity Yacht Center, this was the site for one of the largest
marijuana-smuggling organizations known to the federal government.
Investigators estimate that two million pounds of marijuana worth at least one
half a billion dollars was smuggled through here.
The organization was run by this man, Raymond Thompson, who was also suspected
of killing at least three people.
At the Florida Department of Law Enforcement, detectives were looking into the
Thompson organization. Lonnie Cooper headed the investigation.
LONNIE COOPER, Detective
The Ray Thompson organization was run by two main components: one was fear and
the other was money. Now, when money wouldn't suffice to elicit the kind of
loyalty or obedience that Ray Thompson demanded, then he did not hesitate to
In the summer of 1981, police raided the Amity Yacht Center, seizing fifteen
tons of marijuana and making one arrest. They missed Ray Thompson. But
Thompson was nervous. He needed a place to hide five hundred and fifty thousand
dollars in fives, tens, and twenties, so he asked his long-time friend, James
Savoy, to install a safe in the floor of his workshop.
Large amounts of money were subsequently placed in that safe. That must have
put a strain on Savoy that he couldn't stand. He went one night and tried to
break the safe open with a sledgehammer. He was unable to do that. He then went
out and rented a jackhammer, spent almost the rest of the next day
jackhammering out this floor safe, was buried in concrete, and placed in the
the floor. He was able to get this safe and part of the concrete out, hut he
still couldn't get in the safe.
Savoy eventually opened the safe and stole the money. He drove to North
Carolina and checked into a motel.
He hooked up with a prostitute. When their business was done, Savoy either
passed out or fell asleep. He woke up the next morning five hundred and fifty
thousand dollars lighter, with no idea of where to look for the prostitute or
what to do. That was his second worst mistake. His first worst mistake was he
then decided to return to South Florida.
In March of 1982, Ray Thompson caught up with James Savoy when he returned to
Florida. He forced Savoy to go to the marina, where he was put on a boat and
taken out into the Atlantic Ocean.
They put him on the back of the boat, they weighted him down with some chain
they'd bought, an anchor, and Ray Thompson said, "I want to do this myself."
Ray Thompson took a gun, placed it to the back of Savoy's head, blew the back
of his head off. They threw him out into the water. They broke the gun down,
threw it out in different parts and returned.
Thompson was eventually convicted of drug smuggling and murder, but the story
of his money demonstrates a surprising problem all drug traffickers face:
At the Internal Revenue Service, agents have seized 1.6 million dollars in drug
profits from just one raid.
It is money like this, not the growing and manufacturing of their product, not
the smuggling and distribution of the drugs, which presents traffickers with
their most difficult business problem--how to handle large amounts of cash.
Dave Wilson, an agent at the Drug Enforcement Administration's financial
investigations office, explains why.
DAVE WILSON, Agent, DEA
Handling millions of dollars creates a weight and, ah, distribution problem to
them that you wouldn't expect, because most of their business is done in fives,
tens, and twenties. Because of that--as for instance, we discovered this a
while back, twenty dollars, in twenty-dollar bills, two hundred and fifty
thousand dollars weighs about seventy-five pounds. Well, when a trafficker is
doing several million dollars a week, he has a problem just disposing of the
paper. Just being able to handle that much paper.
Another problem with cash--who to trust with it. When drugs are seized or lost,
traffickers can always get more. But when they lose their cash, either through
a seizure like this one, or through a theft like James Savoy's, they have lost
what matters most to them, their profits.
Ordinarily, we'll see that the money is handled by a different group of people
than the cocaine is handled by. The people that handle the money tend to be
much more influential in an organization, tend to be more trusted, and are
generally speaking more sophisticated.
Michael MacDonald is a criminal investigator with the Internal Revenue Service.
He points to another problem traffickers have with cash.
MICHAEL MacDONALD, Criminal Investigator, IRS
How to spend it where it doesn't come back to haunt them, in terms of a tax
problem, in terms of tax-evasion prosecutions, in terms of rendering his assets
seizable, forfeitable. To simplify things, a very common way of doing it is get
the money offshore. You need to get the money into a foreign bank.
They will smuggle the cash out of the country the same way they smuggle the
drugs into the country, a hundred different ways. They'll carry it out in
suitcases. They will carry it out in duffel bags on commercial flights, box it
up. They'll package it in commercial shipments. They'll charter jets. They'll
take it on by private plane. People will kind of chuckle about that and feel
that's Hollywood, but that is real life in the drug trade.
In Fort Lauderdale, Florida the Drug Enforcement Administration has set up a
special office to investigate one of the largest drug money laundering
operations known to the federal government. Here, investigators are hidden away
behind an unmarked, locked door.
Is Tony there? Yeah, try it. He still out on the street? Yeah, but I thought
he was going to go home...
FRONTLINE was allowed inside on the condition that no undercover agents be
That file is right in front of where Tim, ya know, reconciliation...
This office, and its headquarters nearby, are the center for what has been
code-named "Operation Man."
Okay, ask him how he knows that Nelson did that load when he was out on
It began with intelligence gathered from the investigation into Ray Thompson
and his organization. Agents here are uncovering a trail of 100 million dollars
in drug profits laundered through six countries and invested back into the
Based on information from public files and indictments, and on interviews with
agents, prosecutors and defendants, FRONTLINE has pieced together the story of
how this drug money was laundered, where it was invested, and who profited.
The key would be an enforcer in the Ray Thompson organization, a man indicted
for kidnapping and murder: Scott Errico. Errico had gone to college and he was
smart enough to know that he needed professional help when it came to moving
his share of the drug profits.
In 1983, Errico took half a million dollars in cash and, on instructions from
his lawyer, flew to New York. His lawyer then told him by telephone to go to
the Helmsley Hotel, where Errico met an Englishman who would help him launder
They stuffed hundreds of thousands of dollars into suitcases, and together they
departed for England.
In London, Errico checked into an expensive apartment under an assumed name.
Twice he paid large sums of rent in cash. But most of his drug profits were
deposited into a branch of the Midland Bank located on the Isle of Man off the
coast of England' where bank secrecy laws were particularly strict.
The money launderer, Patrick Diamond, began to educate Errico in the
sophisticated art of hiding his money. He set up fake corporations with Errico
as the hidden owner. But all the while they were meeting, detectives from
Scotland Yard were watching.
Commander Roy Penrose is in charge of criminal investigations for Scotland
ROY PENROSE, Detective, Scotland Yard
During that surveillance operation, we came across a man called Stephen
Marzovilla. We didn't know him. He looked interesting. There were several
meets recorded with him and Diamond. We then decided to put surveillance on
him and as a result of that, we found him to be Scott Errico.
British Airways to Paris, Charles de Gaulle flight BA-306. This is the final
call boarding now at gate number eight.
When Errico tried to leave England on September fifth, 1985, an increasingly
suspicious Scotland Yard stopped him at Heathrow Airport.
He was brought to the Cannon Row Prison and questioned closely about drug
dealing and the source of his money. According to a confidential transcript of
the interview, Errico pleaded innocent: "I'm not such a bad guy. I went to
college. We are all white college boys. There are no Colombians or Cubans.
College boys have morals."
Soon Diamond was also arrested and led detectives here to the British Virgin
Islands and the island of Tortola, to the offices of Financial Management and
Trust, and its president Shaun Murphy.
At five o'clock in the morning investigators knocked on Murphy's door and,
armed with a search warrant, took possession of his extensive files.
...and from the documentation found there, it was abundantly clear that he was
the main, or one of the main, individuals for money laundering, drug money,
from the U.S.
Because the money was coming in from the United States, Scotland Yard notified
the Drug Enforcement Administration, which in turn called in United States
Customs and the Internal Revenue Service.
Paul Teresi headed the drug enforcement's Fort Lauderdale office which ran the
PAUL TERESI, DEA
Ah, the very unique part of this in that we had the money launderers, the
person who's actually moving the money, who also had very clear records in
black and white showing who the money belonged to and the paper trail, how it
was being moved.
The files were airlifted to Fort Lauderdale. They were extensive and complete.
Murphy and Diamond had kept three files for each transaction: one for the
client, another for auditors, the third and most important was for
If they knew that the police were coming they would have removed the third
file. The third file was the code system, the handwritten notes, accounting for
the wire transfers, the ah, cash transfers, ah, the money orders, and the way
they were received.
Shaun Murphy was an accountant who specialized in taking in cash dollars and
converting them into the accounts of fake, offshore corporations. Because
government agents from two countries now had his files and threatened him with
prosecution, he revealed everything he knew.
According to a confidential report from Scotland Yard, the detail which issued
forth from the mouth of Murphy was staggering. Under interrogation, he
admitted receiving in excess of one hundred million dollars in drug trafficking
proceeds and identified ten or more large-scale, U.S.-based, drug money
Today's date is April the twenty-second, 1986. The following is a call being
made by Shaun Patrick Murphy to Michael I. Levine in Miami, Florida from Mr.
Murphy's office in Tortola, British Virgin Islands.
While Federal agents listened in, Murphy called one of his clients, a lawyer,
to discuss the arrest of Diamond.
...what, huh, sorry, hang on, there's a bit static on the line, hang
on, carry on.
I don't think you've done anything wrong so as far as you're concerned that
should be the answer.
But, I mean this thing about Diamond really frightens me. I mean Diamond's been
involved with all this kind of stuff. I've been wiring money to Diamond and so
I mean I can't tell you not to do something if you legally gotta do it. But I
mean I'm just saying see counsel over there and, ah...
Right, they are going to walk in with an affidavit and what do ya call it, a
search warrant thing and just go through all my files
Well if, if an affidavit is a search warrant, then legally there's nothing you
can do about it.
Levine, Michael Levine, had been laundering drug money for a major marijuana
import, ah, smuggling organization, of which Scott Errico was also part of, the
initial organization going back to 1982.
This is Michael Levine, Scott Errico's lawyer. He was quickly arrested and
charged with money laundering.
Well, let's see, I think that's taken in, I don't see Michael there...oh there
he is on the side, my sister, and my cousins.
Gerry Levine is Michael Levine's mother.
That's Camp Wildwood, it was the summer...there's Michael on the dock getting
ready to go swimming, and ah, I think it was the summer of '65.
Michael Levine grew up in Miami, Florida, and by all appearances had a normal
childhood. He played sports and attended private schools where he was rewarded
for good conduct. He graduated from the University of Miami Law School
specializing in tax law.
I think he got involved without realizing what he was getting involved in. I
mean, he's a tax lawyer. And the same--whether it's a tax lawyer or a criminal
lawyer, people come to you--particularly a tax lawyer--to invest money. And
that's what your job is. And I don't think you necessarily know where that
money is coming from.
Today, Michael Levine is in federal prison.
In my personal case it wasn't ah, a conscious, at least, it was not a
conscious decision, I am going to launder money. Ah, it was ah, I was in the
tax field, in the corporate field and ah, as a professional referral someone
says, well, can you form a corporation for a client? When that happened I did
it. That was ah, I thought my job and what my rationalization was in terms of
the client, who I had known to be a drug dealer. I say-I'd know, for him to be
a drug dealer, we never discussed it. Ah, I never was involved in his
organization. I knew he was a drug dealer like you would know most clients
that come into your office, the way they dress, the way they act, the way they
handle themselves, the type of money they have, you can make a presumption
that ah, in all probability their funds are from illegal sources.
Levine laundered money for various drug dealers, including Scott Errico. His
primary client was Patrick Bilton, who imported marijuana by the ton and
brought the cash to Levine.
The first times that client gave me money it was only like five thousand
dollars. I say only 'cause it kinda, this whole thing distorts your value of
money, ah, I was flabbergasted. I've never seen five thousand dollars in my
life and I, I counted several times and what happens is slowly you get used to
it. Ah, when I took that to the bank, ah, you look over your shoulder, you
think someone is going to rob you and then it gets to the point where they give
you twenty thousand dollars or they gave you fifty thousand dollars and then
they, as I told you, they gave me sometimes one hundred to two hundred thousand
dollars.. You tend after a while to lose the ah, the apprehension of the money.
It's kinda scary at the beginning. After a while it loses its value, you don't
think of it in terms of what it can buy. You just think, well, one hundred
thousand dollars, you don't count it, at least I never did after a while, it
was, ya know, if you had it in twenties or hundreds it just took too long to
Levine needed help to launder the money internationally. He returned to his
alma mater, and went to the law library where he looked up the name of a
company specializing in tax shelters and located Patrick Diamond.
He flew to London to meet with Diamond, and together they set up shell
corporations to hide the proceeds of the drug dealing. On one such trip,
Scotland Yard was watching and took this picture.
A typical transaction, if you will, would have been someone, in this case
Patrick Bilton, coming to see me and saying ah, here is ah, probably one
hundred fifty thousand dollars and I need this in my overseas account. It's a
corporation that's already been set up. Ah, based upon that, I would call up
either Shaun Murphy or Patrick Diamond and they would come to the United
States. I'd have that money in my safe deposit box, ah, go to the safe deposit
box sometimes with Mr. Diamond or Mr. Murphy, sometimes not, give them the cash
in my office ah, and they would walk out with it and bring it back themselves,
any method they wanted to, with instructions to fill out a currency report.
Okay, you're all traveling together, you are ready to go.
Anyone leaving the United States with more than ten thousand dollars in cash is
required by law to go to United States Customs and fill out a currency report.
Murphy and Diamond never did. They smuggled drug money out of the country in
suitcases and were never caught.
Frankly, most of our efforts is put on incoming aircraft with drugs, and is ah,
there's only minimal effort put on outgoing aircraft.
Patrick O'Brien is head of enforcement for U.S. Customs in Miami.
PATRICK O'BRIEN, U.S. Customs, Miami
I can't go into all of our techniques, certainly not in detail, but you do use
profiles. Certain profiles that we've developed based on our success as to who
would be a likely candidate to be smuggling. The problem, of course, with
profiles is that they become self-fulfilling. If you only look at this type of
person, then those are the only people that you ever find smuggling money. And
then your profiles get narrower and narrower.
I mean, we've had cases here where we've been watching money coming in or going
out and the ah, the baggage handlers have better profile systems than we do. I
mean, they have done very well ripping off some of this. The second thing, of
course, is information. We rely on that a lot, both from sources of information
and from investigations.
Okay, move it over there...Wally's got the dope scales...let's just stick it
over here...Do a million, let's see how much a million weighs...So what's a
million dollars weigh these days?...should weigh twenty-four pounds,
right?...in hundreds...a million dollars in hundreds. Twenty-two pounds.
When Customs does seize money, they often get a lot of it. This is ten million
dollars of drug proceeds. But this is only a small fraction of what federal
investigators estimate to be approximately one hundred billion dollars
generated by the drug business every year.
It is at this point, when drugs have become cash dollars and traffickers start
looking for ways to move it and launder it, that investigators say businessmen
and financial institutions start sharing in the profits.
For example, this money is from a bank which is under active investigation for
taking in cash from the sale of drugs...fives, tens and twenties...and then,
for a service charge, giving the drug dealers back these one-hundred dollar
Once drug money makes it safely out of the country and is deposited offshore,
some banks make a profit by charging a fee to accept large cash deposits.
The banks in the British Virgin Islands started charging two percent to make a
deposit down there, which I always found kind of curious in that ah, these were
major banks we're talking about, ya know, largest in the world ah, saying that
we will charge you two percent to make a deposit, with a straight face, and I
just, you know, I can't imagine anyone making a deposit and paying someone, a
bank, to take that money unless the source was illegal.
To further conceal the drug profits, Levine would invest his client's money
back into the United States into boats, real estate, both commercial and
residential, and he entered into an agreement for part ownership in a radio
station...all totaling close to twenty million dollars in assets purchased with
With each transaction, Levine would charge a fee for his service, and yet he
didn't see himself as part of the drug problem.
No, I did think about it, ah, several times I would say, well, am I bringing
drugs to the schools? And in my case, my rationalization was these specific
clients ah, were doing it anyway. It was only after the fact that they said I
want to buy a toy, a house or a boat that they came to see me. So the
rationalization was that with me or without me, it was going to get done.
Levine used a complex strategy to hide the ownership of assets purchased with
drug profits, in this case a boat used by one of his clients for smuggling. The
owner of this boat was listed as a corporation Levine had set up in Delaware,
which was in turn owned by another corporation set up in the British Virgin
At the United States Department of Justice, a special team of lawyers tries to
trace these ownerships backwards and link them to drug profits. Michael Zeldin
is head of Asset Forfeiture.
MICHAEL ZELDIN, Asset Forfeiture
We have to trace the asset. We have to prove that the asset was derived from or
facilitated or was in some way involved with the illegal activity before we can
forfeit it. We can't just forfeit 'cause we want to. And so the more layers of
insulation you place between the investigator and the ultimate asset, the more
difficult it is.
Once assets are seized and proven to have been purchased with drug proceeds,
they are sold by the government at auctions like this one.
Item #127, a Lamborghini. This car was titled in the state of Florida, it had a
Florida tag on it, it was made overseas, it's got kilometers on the
speedometer. I got twenty now five, twenty
Last year the government seized 22,000 items worth five hundred and fifty
million dollars purchased primarily with drug proceeds.
...fifty-nine and a half, now sixty. Are we through? Is everybody happy? That
man right over yonder, sixty thousand five hundred dollars.
The money from the sales goes to the federal government.
It's earmarked for law enforcement. So the money we take off the criminal is
put back into law enforcement agency budgets for further apprehension and
generating more money. Like the revenue collectors, we make our salary and then
The Levine case has convinced law enforcement agents that businessmen and
public officials also profit from money gained from the sale of drugs.
Elton Gissendanner was director of Florida's Department of Natural Resources.
He was accused of accepting a bribe to arrange for a reduced charge for a
defendant in a drug-smuggling case.
According to investigators, Gissendanner made a series of cash payments
totaling fifty to sixty thousand dollars to build this house in Tallahassee,
Florida. Gissendanner would not talk to FRONTLINE, but he has told
investigators that the money he invested was family money, not drug money. He
pled guilty to a lesser charge of obstruction of justice.
LOTHAR GENGE, Prosecutor
Mr. Gissendanner, in fact, was in turn ah, using substantial amounts of cash
and making cash deliveries to persons in the Tallahassee area. I think the
evidence at the trial showed, in one case, he delivered ten thousand in cash in
connection with an investment in a nightclub type of operation.
When Scott Carswell was looking for investors in his Tallahassee night club,
seventy-five people responded. Elton Gissendanner came up with a
ten-thousand-dollar payment in cash.
We had a little trailer and he came in and I was at a table with some other
investors, and he asked me to come to the back, and I did, of the trailer. And
that's when he brought out, at that Point, cash and asked me if I would have
any trouble taking cash for his investment, and it was at that point I told him
I really didn't know.
'Course, I wanted the investment. We needed the money. I didn't want to lose
it, but I didn't want to take it improperly.
Carswell took the money and reported it properly as a large cash investment.
But investigators say Scott Carswell is the exception rather than the rule.
They say that the business community is too often willing to accept cash
payments and not report them, further laundering drug profits into the local
Michael MacDonald has investigated money laundering for ten years for the
Internal Revenue Service.
And this is just, just typifies the type of situation we're running into, where
there are legitimate businesses taking advantage of the currency that is cut
there, to move it through their institutions, move it through their companies,
move it through their accounts, and they can make money off it and they can
make a lot of money off it.
And I think that there are a lot of people who are privileged who are
benefiting from the narcotics trade in small ways or in large ways, who don't
see themselves as the problem, but rather see the peddlers of the drugs as the
problem, and if they could only get rid of those guys, then we'd have no other
problem. I think they're blind.
Attorney Michael Levine pled guilty to laundering money and is currently
serving a thirty-month sentence. Shortly before he was caught, he realized the
violent reality behind his involvement in the drug business.
I was about to make a trip to London and all of a sudden in the paper, the
Miami Herald had a picture of Scott Errico and said he had murdered
somebody, which I didn't know that, you know, until that time, and then all of
a sudden it wasn't the game anymore. You know, these are real people and real
lives. All of a sudden, the person that was in the paper was my client I was
assisting prior to that time.
Federal prosecutors admit that without the capture of Scott Errico, Michael
Levine and dozens of others would still be in business today.
In Fort Lauderdale, agents continued to develop information provided by the
accountant Shaun Murphy. Using this information and documents from his files,
they followed a paper trail which was now leading them outside of Florida to
places like Boston, Massachusetts.
Investigators emphasize that the laundering of drug money is no longer confined
to southern Florida, and Boston is a good example. Founded on old money and
thriving on new, two-earner incomes, Boston is seemingly far removed from the
center of the drug trade. But money was laundered here and legitimized into the
local economy by two drug dealers, Fred Carroll and Thomas McNichols.
By the summer of 1988, McNichols and Carroll had been arrested and had pled
guilty to charges of drug smuggling and money laundering. As they awaited
sentencing, they reported to the courthouse each week. They declined to be
interviewed by FRONTLINE, but grand jury testimony, public records and
interviews reveal the full extent of their story.
Carroll and McNichols grew up in Boston and graduated from Boston College and
the University of Massachusetts. Carroll went on to get a law degree.
During the early 1980's, they imported marijuana by the ton into New England.
One shipment arrived one evening in May of 1982. Carroll and McNichols had
arranged for ten to fifteen tons of marijuana to be brought from Colombia
directly into Boston Harbor. They communicated with the ship at sea by radio
from this house in Quincy, just south of Boston. The ship radioed that the
marijuana was too heavy, the boat they were using too old, and distress signals
indicated that it was taking on water. It limped into Boston Harbor and docked
directly behind a popular restaurant where it remained for the night.
The next day, Carroll and McNichols ordered the captain to take the boat back
down to Quincy where, in broad daylight, it was run ashore. A neighbor found
the sight of a large, beached boat interesting enough to capture it in a
watercolor painting, never suspecting that it contained tons of marijuana.
The following evening, offloaders known as Red's Raiders, after McNichols'
nickname, loaded the marijuana into large rental trucks and drove it back into
Boston, to Horticulture Hall, where an employee let them in after hours.
Undercover agent Wendy Lovato investigated for the Drug Enforcement
WENDY LOVATO, Agent, DEA
At that time in the hall, Fred Carroll and Thomas McNichols would be there in
person with ledger sheets. They would weigh the marijuana that would be noted
and it would be noted who was taking what amount of drugs out of there, so they
would know how much they would be paid.
A celebration and cash payoffs took place later outside the Bull and Finch bar,
better known as Cheers, after the television show. Evidence shows that
McNichols and Carroll were extremely sophisticated in the laundering and
investing of the proceeds from their drug sales. They had met Shaun Murphy in
their travels to the Caribbean and they smuggled their cash out of the country
Mr. McNichols had a leather jacket with secret compartments sewn in the back,
and he would transport the money that way and other ways they would get the
money into the island of Tortola. They would take the thousands of dollars of
cash to Mr. Murphy.
Off-camera, Carroll told FRONTLINE, "I'm just a hippie left over from the
1960's who wanted to get his friends high." But he was sophisticated enough to
know he needed a good lawyer to help deal with the laundering and investing of
his money. He turned to his cousin John Rogers, who had experience in criminal
law serving two years as an assistant district attorney in Boston.
To launder the money, Rogers and Murphy became co-signers in fake corporations
set up outside of the united States. Drug money began to flow back into Boston
from these offshore corporations, much of it into Boston's prestigious and very
expensive Back Bay.
Carroll bought a condominium at 205 Commonwealth Avenue, and McNichols
purchased a unit at 120 Beacon Street.
Jonathan Chiel is an assistant U.S. attorney in Boston.
JONATHAN CHIEL, Assistant U.S. Attorney
If you were to try to find out who owned 120 Beacon Street, you would find a
realty trust held in the name of a company owned by a British Virgin Islands
company whose shareholders were located in, again, some other company, perhaps
in Panama. The layering was complete and designed so that no one could ever
follow the trail back.
Early on, attorney Rogers wrote Murphy telling him to invest thirty thousand
dollars into a new retail business to be opened in Faneuil Hall Marketplace and
operated by Francis McNichols.
Faneuil Hall Marketplace in Boston is visited by over ten million people a
year. Business flourishes, and McNichols saw an opportunity to get a good
return on his money. He invested close to two hundred thousand dollars of drug
profits and opened not one, but three sporting-apparel stores.
The stores were half-owned and managed by Tom McNichols' brother, Frank. Thomas
McNichols being the other fifty-percent owner and ah, Tom McNichols would
funnel in his narcotics money into the stores, which virtually kept the stores
By the early 1980's, Carroll, McNichols, and Rogers were buying buildings,
renovating and selling them each at a large profit, running over a million
dollars through an unsuspecting savings bank south of Boston.
Said Fred Carroll off-camera, "I made three times as much money in real estate
as I did with marijuana."
So successful were they at laundering and investing their money, they stopped
smuggling drugs by 1982. When McNichols promised his girlfriend that he had
quit the drug business, she agreed to marry him. Shaun Murphy, by now a close
friend of the drug dealers, flew to Boston from the Virgin Islands and took
Number 477, John Lennon's piano, and I have... five thousand pounds...
During a trip around the world in 1983, Carroll and McNichols stopped in
London, at Sotheby's, for an auction of Beatles memorabilia.
Eight thousand pounds at the back of the room. All done at eight thousand
pounds. Any more for it? Eight thousand pounds. All done at eight thousand
pounds. Thank you.
The high bidder for John Lennon's piano, with $19,000 of drug money, was Thomas
He and Fred Carroll tried to avoid an inquisitive press.
Why so secretive? I mean, there's a lot of fans out there...
Have to catch a plane. Have to catch a plane to Switzerland...
How much were you prepared to pay for it?
I would have gone to $25,000.
Why are you being so reluctant to talk about
'Cause I have to catch a plane. C'mon. Get us a cab, will ye?
Can you tell us anything about the collection at all?
Will it be in a museum or...
When they returned, they continued to invest their money. An estate in Maine
and land in St. Thomas. In what would have been one of their most successful
ventures, they purchased twenty-eight prime acres on Martha's Vineyard for four
hundred seventy-five thousand dollars. By the time it was seized and sold by
the federal government, it brought $1.2 million. Investigators found that many
people who came in contact with Carroll and McNichols were only too willing to
help them invest their money. No one asked what they did for a living.
They were simply interested in the fact that Carroll, McNichols and their front
man, Rogers, had money to offer. This real estate broker, who sold them
property, talked to FRONTLINE on the condition that he not be identified. He
says that had he known they were dealing in drug profits, he would have dealt
with them anyway.
REAL ESTATE BROKER
I have an obligation to feed myself and my family and that's it. I mean, I'm
not a police officer. That's not my job. My job is to sell property, and get as
much money as I can for my clients.
In 1986, agents in Fort Lauderdale had just begun the Boston phase of their
investigation. They labeled McNichols, Carroll and Rogers the Boston Boys, and
they had to act quickly.
An indictment was returned within a year just before the five-year statute of
limitations ran out. They were charged with drug smuggling, money laundering,
and tax evasion, but in the rush, information was only just coming to light
that the Boston Boys had also given out a series of loans to several friends,
businessmen who realized that Carroll and McNichols had money, and lots of
Not only did they loan one hundred and ninety thousand dollars to McNichols'
brother to open the Pulse Sports Apparel stores, but one hundred thousand
dollars went to the owners of the Seaside Restaurant.
Two loans, each for three hundred thousand dollars went to a real estate
developer to renovate two town houses. Another loan for one hundred thousand
dollars went to a New York stockbroker for his personal use.
Investigators wanted to know if the businessmen who received these loans knew
they were borrowing drug money.
The loan to the Seaside Bar was at prevailing interest rates and was used to
maintain the business. The owners were friends of Carroll and McNichols. They
declined to comment to FRONTLINE about the loan, but told agents they didn't
know the origin of the money.
Six hundred thousand dollars in loans went to two trusts set up to purchase
town houses at 352 Beacon Street and 88 Marlborough Street. Investigators say
the money went to a developer, Peter Bailey, who works here. When asked about
the loans, Bailey said, "It's none of your business." He denies receiving any
But investigators from the Internal Revenue Service, the Justice Department,
and the Drug Enforcement Administration disagree.
Again, these were all cash transactions. The Boys gave Mr. Bailey three hundred
thousand dollars and he, not wanting his name on paper, Mr. Bailey used a
Agents say the stock broker from New York, Herbert Hardt, was an acquaintance
who used his loan for his own personal use and invested another one hundred
twenty thousand dollars in the stock market for McNichols and Carroll. He told
FRONTLINE he was not interested in commenting.
The three Pulse stores owned by the McNichols brothers remain open for
business. In a plea agreement, Thomas McNichols agreed to forfeit fifty
thousand dollars of the one hundred ninety thousand dollars he had invested.
Prosecutors could not prove that his brother Frank knew the money had come from
There is the complication of the fact that his brother's involvement and there
is a company going there which we could not say with certainty knew of the
source of the funds. We ah...
It's his brother. He'd know his brother was dealing marijuana, would he not?
We don't know that, sir. I mean, we, that's something that you have to prove
beyond a reasonable doubt. This was a criminal forfeiture that we're talking
But to this agent, who investigated the case, it is clear the businessmen must
have known the source of the money.
Everyone in their mind said they didn't know what they were doing, yet I
believe everyone knew exactly what they were doing. So I believe if they knew
that the Boston Boys were making millions of dollars off narcotics, why not go
to them for a loan?
In the fall of 1988, at the federal courthouse in Boston, Carroll and McNichols
were sentenced to ten years each. Emerging from the courtroom, Frank McNichols,
part owner of the Pulse stores, declined to comment about his brother's
Outside, the Boston Boys still did not want to talk about the case. For his
part, John Rogers was sentenced to three years in federal prison for the
laundering of drug money. No one else was indicted, including the recipients of
the loans, who had paid them back with interest.
Without specifically, without specific regard to any individuals in this case
who I don't want to comment on in any way; absolutely, the people who profit,
the real estate agent, the realtor, the yacht salesmen, whoever it may be, who
receive large amounts of money often in cash, who look the other way. They are
absolutely an essential part of the problem.
In 1986, in the middle of the Boston Boys investigation, Congress passed a
tough money-laundering statute to help prosecute people who do business with
drug traffickers. Congress made it a federal crime for anyone to become
involved in a financial transaction if they know that the money represents the
proceeds from an unlawful activity.
If you come in with cash, if you come in with enough cash, then by and large
you get your way.
At the Justice Department, Michael Zeldin says the government should now focus
its investigations on those in the business community who are looking for quick
profits from drug money.
And people on the bottom line are going to say, What's in it for me? What's my
bottom-line financial interest in this proposition?" And that's the problem.
When they say, "what's in it for me?" and don't see that what's in it for them
is a society that's going to be ruined by drugs, then they're a part of the
problem. They're the problem.
Operation Man is a rare case where the files of a money launderer provided a
virtual road map to how and where drug profits were invested. The government
knows that it may never seize files this extensive again. So federal agents are
now posing as money launderers in an effort to reach the highest levels of drug
In the summer of 1988, in Seattle, Washington, a ship carrying seventy-two tons
of marijuana was towed into port by the United States Coast Guard. Despite this
successful seizure, none of the eighteen arrested on the boat would give
information about the head of the organization, Brian Daniels, who allegedly
had been smuggling drugs into the United States for the past fifteen years.
To reach Daniels, government agents set up a sting, offering to launder
Daniels' money through a gambling casino. When a lawyer showed up in a Las
Vegas motel room with $7.6 million, he was arrested. The arrest of Daniels
And in an effort to arrest businessmen willing to profit by helping drug
traffickers launder their cash, federal agents are using informants and
Here an informant, with his back to the camera, explains to a Dallas
businessman that he needs drug money laundered.
...I do manage the money for some drug dealers, so this is drug money. You
know, I just don't want there to be no misunderstanding about that.
Rene Manoz headed the investigation for the Internal Revenue Service.
RENE MANOZ, IRS Investigator
Ah, the money was attractive to them. They recognized the ability where they
could launder millions and millions of dollars of illegal proceeds. And they
would generate a healthy profit from that source. The individuals were very
intelligent in terms of the methods they would use.
In a second meeting, the chairman of the board of the Premier National Bank,
Connie Armstrong, on the right, explained that there would be no problem
laundering the money.
And we'll go right down and have cashier's checks issued. See, what she's...
Yeah, but I don't want any problem at the bank.
We won't have a problem at the bank.
See, we're going to his bank to have the cashier's checks issued.
Okay. His bank already been informed?
His bank has already been informed.
The informant for the Internal Revenue Service then brought out one hundred
thousand dollars in cash, which Armstrong readily accepted.
Come out here and help me count this. Make sure that's...
How much is...
One, two, three...
Armstrong and the other businessman, Thomas Crouch, pled guilty to defrauding
the government and failing to report a cash transaction.
They were just two of many businessmen caught in the IRS money-laundering
sting. Another banker in Tulsa, Oklahoma. A lobbyist in Washington, D.C. In
Atlanta, accountants from the brokerage houses Dean Witter, Prudential Bache,
Also in Atlanta, a former United States Congressman, Pat Swindall, allegedly
agreed to accept drug money to pay for a house, then declined.
And in Boston, indictments are expected which involve restaurants, trade unions
and more lawyers.
In Fort Lauderdale, Operation Man continues with a series of active
investigations into drug smuggling and money-laundering organizations worth
over one hundred million dollars.
The most notable is an investigation into the owners of the Apache powerboat
racing team, Ben and Jack Kramer.
There's the Apache helicopter always present. Jack Kramer watching his son do
battle in the World Offshore Championship...
Included in the indictment is their attorney, Melvyn Kessler, who was arrested
on his way to teach a course at the University of Miami Law School.
According to a confidential drug enforcement report, the federal government
expects to seize assets worth in excess of forty-five million dollars. Neither
federal investigators or those charged would talk to FRONTLINE because the
investigation is still active.
Meduluna, see the city? Okay, that would be, just outside that city would be
where the airstrip is.
Agents at the center of the investigation hope that their efforts will make a
difference in the war against drugs by taking some of the profit out of the
crime. But even at its most successful, Operation Man will seize only a small
fraction of the billions of dollars generated by the business of drugs. The
lesson of the operation, these agents say, is that greed crosses all lines of
the business and legal communities.
For Michael Levine, one of the first men jailed by operation Man, the lesson is
different, but just as clear.
It is a strange feeling all of a sudden to be thrust into the limelight for
something illegal, and finding yourself recognized by this illegal act, forget
about what you have done prior to that date. It doesn't matter at that point.
It is just that illegal act from then on that will be with you the rest of your
life, no matter what happens.
Was it worth it?
Never. No. Not even a close call on it. And I can't imagine it ever being worth
it for anybody if you want to remain a legitimate part of society. It just is
never worth it.
Operation Man continues. Two bankers in Los Angeles were recently indicted for
their involvement in laundering drug money.
And the federal government, in an ongoing effort to take the profit out of the
illegal drug trade, is expected to make arrests next month in a money
laundering scheme stretching across the country, totaling well in excess of one
billion dollars--more than ten times the size of Operation Man.
Thank you for joining us. I'm Judy Woodruff. Goodnight.
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