Spotlight

Money Laundering

They came from opposite ends of South Carolina society. Jimmy Thompson was a high school dropout from the poorest neighborhood in Greenville. Attorney Thomas N. Rhoad 3d was the well-bred son of a state leg isiator.

Despite their different backgrounds, the two men were in the same line of work - drug trafficking and they faced the same financial dilemma: how to launder the millions of dollars their separate drug operations generated.

Both were able to conceive schemes that, at least temporarily, hid the trail of their money. But in one case, the government was able to follow that trail and seize the properties that had been bought with the drug dollars. In the other case, investigators still don't know what happened to the profits.

Rhoad's drug ring laundered cash by stashing it in foreign bank ac counts and using straw corporations to purchase expensive pieces of Nantucket real estate. Sull, the government ended up with 34 million in cash and property.

Thompson's, on the other hand. made as much as $10 million between 1981 and April 1983 selling heroin and cocaine in the Sonoma Street area of Roxbury. But investigators can only speculate that the cash was carried to a New York City partner.

There's a lot of money unaccounted for." said Anthony Duarte, an agent for US Drug Enforcement Administration. "It has to be somewhere. we just haven't been able to find it."

Today, all of Rhoad's assets belong to the government, and Thompson's do not, because of the different approaches that law enforcement agents took in investigating the cases.

Thompson's pursuers in Boston and Greenville gave priority to choking the drug flow, not seizing the profits. They used traditional methods such as wiretaps and surveillance to try to break his organization's hold on the East Coast cocaine and heroin trade.

But because South Carolina invest!gators tracked Rhoad's footprints through public documents and financial records in the United States and abroad. they succeeded not only in dismantling his drug ring but in capturing its profits. In fact, they began to seize Rhoad's property even before they brought criminal charges against him and his associates.

"It was an unusual way to approach a case." said E. Bart Daniel, an

assistant US attorney in Charleston. who prosecuted Rhoad. "We managed to take away their cash and their property, which is more effective than simply putting them in jail."

Investigators on the Thompson case had an urgent reason for concentrating on the drugs first. Thompson and two partners, who became known as the "Capsule Boys," were flooding Inner-city neighborhoods in New York. Boston. Bridgeport, Conn., Roanoke, Va., and Greenville with thousands of capsules of cocaine and heroin.

Yet Greenville remains a center for cocaine and heroin distribution, despite the arrest of Thompson and his two associates earlier this year. Until they locate and seize the millions of dollars in profits earned by the oper ation. Investigators now concede, they will not be able to push the drug trade out of Greenville.

Investigators did make a little headway in tracing the proceeds of Thompson's Boston network. According to a federal indictment against seven alleged members of his Roxbury oper ation, hundreds of thousands of dol lars in cash were carried to New York City. One investigator, who asked not to be identified, said much of the money was handed over to Thomas A. (Blue) Burnside, who was managing the group's Connecticut and Harlem rings at the time. Burnside, who told arresting officers he was a "financial consultant." was sentenced this spring to 54 years in prison on narcotics charges by a federal judge in South Carolina.

His lawyer, Daniel Greenberg of

Globe Staff Photo by Stan Groesfeld

New York, denied in a telephone inter-
view that Burnside was part of the
drug ring or received any money from
Thompson's Boston couriers. Green-
berg said that Burnside was gainfully
employed in New York as a manager
of several fast food restaurants, which
were owned by Noah Robinson, a Chi-
cago entrepreneur and the half-broth-
er of Rev. Jesse Jackson.

Investigators trying to determine
where Thompson's group may have
hidden its drug profits said they want
to learn more about the relationship
between Robinson and Burnside, but
do not have sufficient cause to subpoe-
na records.

Robinson. a Greenville native. said
in a recent telephone interview that
Burnside had worked for him as a se-
curity guard on several occasions in
1981 and 1982, but did not manage
his restaurants. He said he had hired
Burnside because their families had
been friendly in Greenville. Robinson
said that he did not know Burnside
was involved in drug trafficking, and
that Burnside had never invested any
money with him.

"We never had any business rela-
tionship, except he worked for me as a
security guard for a short period of
time." Robinson said. "Those restau-
rants were bad investments anyway. I
wish someone had been willing to put
some extra money into their accounts.
Maybe that's what I needed to get
them to stay open."

Records in Greenville show Burn-
side's sister opened a disco in a build-
ing owned by Robinson. The first floor
of the building was rented to a delica-

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tessen managed by the wife of Roosevelt Butler Jr.. Burnside's drug partner who was sentenced in the same case to 47 years in prison.

Beyond the two small businesses, investigators have found little evidence of Thompson. Burnside or Butler spending heroin cash in Greenville. Unlike most drug traffickers, the men did not own luxury cars, private planes or expensive homes.

By contrast. Investigators first looked at Rhoad and his associates because of their lavish spending. Early In 1982, drug enforcement agents heard rumors that unnamed drug distributors were buying up a condominlum development in the resort town of Hilton Head, S.C.. a few miles from Rhoad's hometown of Charleston.

Soon, they found that one of the condos was bought by a corporation in England's Channel Islands, off the coast of France. It turned out to be one of several corporations formed there by Rhoad and his partner. Barry J. Foy.

The Channel Islands offer bank se crecy and low taxes, making them a convenient link in a money laundering chain for drug traffickers such as Rhoad and Foy who wanted to buy real estate in the United States without directly paying cash. David John Capps, the English solicitor who formed their corporations, later testifled that he had accepted hundreds of thousands of dollars in cash from the

two men.

In the spring of 1980. Rhoad took a trip with his girlfriend to Nantucket where he had vacationed as a boy. He would eventually buy three properties there for a total of more than $400,000 and in each instance, would have the cash wired from his Channel Islands accounts to a Nantucket bank.

But because Rhoad had to purchase the properties through his foreign corporations Bacchus Properties Ltd. and Atlantic Moors Properties Ltd. he was fearful that Nantucket restdents might become suspicious of him. When he bought his first house there. he instructed Ann Killen, the real es tate agent who handled the transac tion, to tell any inquirers that he was just a caretaker.

One agent at Killen's firm said Rhoad did not seem out of the ordinary: "He was quiet, kept a low profile. To us, it was just a normal transaction between banks and lawyers.”

Once, one of Rhoad's drug distributors flew to visit him on Nantucket. carrying at least $100.000 in cash. According to the testimony of Rhoad's girlfriend. Maura Mooney, she and Rhoad hid the cash away in safety deposit box #101 at Nantucket Savings

Bank. The money had been spent before investigators were able to freeze Rhoad's assets.

Since money in safety deposit boxes is not subject to federal reporting requirements, criminals frequently use them to hold cash or other valuables. When Rhoad was arrested. Investigators learned he had an additional $395.000 hidden away in four bank deposit boxes in New York and Callfor

nia.

According to prosecutor Daniel. Rhoad was aware by early 1983 that federal investigators were on his trail. When he was sure the agents had learned the names of his Channel Is lands corporations, he created a corporation in Panama and opened a Bahamian bank account for it. Money was wired from the Channel Islands to the Bahamas

When investigators found out about the Bahamian bank account. Rhoad hopped on a plane with two empty suitcases and withdrew, in cash, almost $1 million from the ac count. Then he did something risky.

"He walked about two blocks down the street into another bank and deposited the money there. He set up a signature account and didn't even take a deposit slip." Daniel said.

The advantage of a signature account to Rhoad was that he would not receive a passbook, account number or receipt. So federal investigators could not discover the account's existence. let alone confiscate the money in it. without help from Rhoad himself. The disadvantage was that, without a receipt for his deposit, he could have been cheated by the bank.

Several months later. In July of 1983. Rhoad was indicted and fled South Carolina. Police found him in San Diego Last March. living under the allas Cullen Lee Brown Jr. Foy was ar

rested in the same month at a New York airport

Before the two arrests, police had Initiated forfeiture proceedings against Rhoad's three Nantucket parcels, a downtown Charleston warehouse, and a Lincoln Continental that he gave to his father. They had seized Foy's $450.000 restaurant in Charleston's historic district, two boats, two Jeeps and almost $100,000 in cash. While in custody, the two men turned over an additional $1.4 million in cash and property.

Now serving a 15-year sentence. Rhoad recently declined a Boston Globe request to be interviewed. An article on money laundering, he said. "may give a false unpression to wouldbe law abiding citizens that this is a viable method of circumventing our tax and currency laws.

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