Yet Alexander ignored the advice of the law enforcement experts and finally succeeded in removing the question in June 1975. The notes of the confidential IRS meeting indicate that he didn't even consult the Treasury and Justice Departments before finally striking the question off the tax forms. Alexander's attitude was betrayed by his remarks to a group of public accountants. "We have knocked out the foreign bank account question at long last." he told them.

Footnote: An IRS spokesman acknowledged there had been disagreement over the question's removal, but insisted Alexander's actions were beyond reproach. Meanwhile, Rep. Charles A. Vanik (D-Ohio) has introduced legislation that would force the IRS to reinstate the foreign bank account question.

SUSPICIOUS THAIS

The Thai government is quietly investigating a questionable deal between a Thai airline and a U.S. aircraft manufacturer.

The Thais want to find out why the airline, Thai International, paid McDonnell Douglas Corp. $2 million more per plane than was charged to other airways. Thai investigators are also suspicious, say our sources, because the government-owned airline made a down payment before the transaction was approved by the Thai cabinet. This violated government regulations.

As part of the investigation, the Thai government has sent a communications secretary, Dr. Gun Nagamati to the United States to do a little probing. He met privately with Securities and Exchange Commission officials and Senate investigators.

A McDonnell spokesman told us it was against company policy to discuss the terms of the Thai transaction. We have obtained a confidential cable, however, in which the corporation's president, Sanford N. McDonnell, denies any impropriety. Corporation officials have also assured the Thais privately that the company did not "bribe or promise to pay money to any airline or government official." A spokesman for the Thai embassy confirmed the details of the investigation.

[From the Baltimore Sun]

PROSECUTORS CALL RECENT CONVICTIONS ONLY THE START OF "WAR" AGAINST

DRUGS

(By Robert A. Erlandson)

When a federal judge recently imposed a 30-year sentence on Jerra Lyles, ringleader of a vast heroin operation, it marked the latest in a long series of successful major federal drug prosecutions in Baltimore.

But it also led the prosecutor to tell the judge, “Although we have been fighting the heroin war for seven years, it is safe to say we are losing."

"The trouble is that there's just more war," Andrew Radding, the assistant U.S. attorney who prosecuted the case, said later in an interview. And he added that that war was not confined to heroin, but also included cocaine, various drugs known generally as "pills," and a "significant, read that significant, increase in the use of powerful hallucinogens."

"We're seeing an awful lot of it and a proliferation of illict laboratories for making the hallucinogens. It has been building for two years and it has reached proportions where it is keeping us busy," he said.

The profits of drug trafficking, in its many variations, remains so high despite the risks of arrest and conviction that even long prison sentences appear to have little deterrent effect, but they are the best that prosecutors like Mr. Radding can hope for.

“Heroin is still the number one problem," Mr. Radding said. “As much as we would like to, we have not stopped the flow of heroin into the city. However, if its sale and use is increasing, it's at a much lower rate than before," he said.

"There are tangible symbols of our successes; in 1971, a bag of 10 percent pure heroin sold for $5, now that same bag, at 2 percent pure, is selling for between $15 and $20," Mr. Radding said.

The prosecutor estimated that there were 5,000 heroin addicts in Baltimore, and said that while their numbers were not rising sharply, "Heroin represents the greatest danger, not only for the users but because its effect spreads throughout the community as the No. 1 crime-breeder. It's like a cancer. We may have controlled the spread but we can't completely prevent it from coming into the city." Mr. Radding roundly disputed, at least for Maryland, recent charges that Drug

Enforcement Administration policies have failed and led to a steadily worsening drug crisis in this country.

Baltimore has a "record that is enormously better than comparable cities such as Boston or Buffalo. Our record of arrests, indictments, convictions and sentences is significantly better," he said.

Within the last three years, federal Drug Enforcement Administration agents in Maryland have broken up a half-dozen big-time heroin and cocaine rings, and succeeded with many smaller prosecutions.

More than 300 indictments have resulted, and the subsequent prosecutions have led to long sentences for such leaders as John "Liddy" Jones, Melvin "Little Melvin" Williams, Bernard "Big Head Brother" Lee and Jerra "Gatorman" Lyles, said Mr. Radding, who is in charge of federal drug prosecutions in Maryland.

But it was these very successes that led him to sound the note of pessimism. "We have made the dope peddlers reform," Mr. Radding said. "The new organizations are smaller and not so flashy. And, frankly, what makes it harder for us is that the heroin coming in now is from Mexico, and it's harder to stop than it ever was in the French connection. There are too many ways to get it into the country."

The successes of recent years have enabled local agents to establish a strong, working network of informants, and the policy of George Beall and his successor as U.S. attorney, Jervis S. Finney, has been to concentrate on narcotics conspiracies which are the cases that have led to the convictions of ring leaders.

Mr. Finey said he is seeking assignment of a special Controlled Substances Unit to his office. This would add more special agents as investigators and another assistant U.S. attorney to prosecute drug cases.

"Narcotics prosecutions continue to be top priority in this office. Our theory is to emphasize the heavy, high-level conspiracy cases with the primary drug distributors, rather than the buy-bust street sales," Mr. Finney said.

Baltimore is one of only five cities that concentrates on attacking narcotics conspiracies, Mr. Radding said. The others are New York, Los Angeles, Chicago and Miami. "Prosecutors in other cities want drug sales or seizures, but it's harder to get the top men that way," the prosecutor continued.

He had the highest praise for the newest official weapon in the narcotics war, the formal agreement signed July 27 between the Drug Enforcement Administration and the Internal Revenue Service to assure the cooperation of the two agencies in battling drug dealers.

Drug agents have long tried to use the tax laws as a means of seeking out big-time narcotics peddlers, but Donald C. Alexander, the IRS commissioner, had said the tax service was not a criminal investigating agency.

He had used the same argument regarding the use of IRS investigators to catch white-collar criminals such as corrupt politicians and had been criticized sharply for it by prosecutors who felt that without the special aid provided by tax agents, it would be extremely difficult, if not impossible, to break corrupt schemes.

Under the new agreement, which represents an apparent change in IRS policy, Mr. Alexander announced that the IRS had received the names of two hundred suspected narcotics dealers for special audits as part of a major new federal attack on the illegal drug traffic.

"These are the organizers, the financiers, the guys who never touch the drug," a DEA spokesman said.

In the Baltimore area, Mr. Radding said, the city, Baltimore county and federal agents have continued a joint drug task force established in 1972 to deal primarily with the lower level dealers and street cases, but it is also moving into investigations of sophisticated drug conspiracies.

Mr. Radding said there are "several large organizations still under investigation in Baltimore, and within a year there will be at least two significant heroin conspiracy prosecutions."

The prosecutor said, "The people who are running the smaller networks were low rankers in the convicted networks and now are operating themselves. That means there is more to do, and we need sentences like the 30 years Lyles got to do the job."

One of the counts on which Lyles was convicted was a charge of operating a "continuing criminal enterprise," and it alone carriers a penalty of ten years to life in prison.

Lyles was the first defendant prosecuted in Maryland under that statute, which is part of the 1971 Controlled Substances Act. "We will continue to use that charge, and any time there is a leader we will use that statute. The head of every ring we have prosecuted has gotten the maximum sentence under the laws he was convicted of violating," Mr. Radding said.

During the federal push that broke the "French Connection" in the early 1970's and brought a temporary halt in the production of Turkish opium poppies, heroin traffic dropped significantly.

Cocaine, the "Cadillac of stimulants," a product of South America's coca bushes imported through traditional smuggling routes. has been a growing problem throughout the United States for the last decade. Mr. Radding said.

During the early 1970's its popularity increased dramatically throughout the United States, and became a major focus of enforcement attention. Within the last three years, federal drug agents in Maryland have broken up at least four major cocaine gangs.

At present, Mr. Radding said, "The cocaine problem appears to have been stabilized in the Baltimore area, at least to the point where it is far less visible than it was a few years ago."

The increase in the illicit manufacture, distribution and use of the "mind-blowing" hallucinogens, particularly among white, middle-class youths, is presenting a serious new problem, particularly because the two most popular substances, phencyclidine, known as PCP, killer weed and angel dust, and dimethyltriptamine, called DMT, cause permanent damage to the nervous system.

[From the Baltimore Sun]

TAX-CASE DEPOSITS PUT AT $840,000

(By Robert A. Erlandson)

The Internal Revenue Service has uncovered another bank account showing $170,000 in deposits that bring to about $840,000 the total bank deposits made last year by a Thai national who is charged with falsifying his 1975 tax return, it was testified yesterday.

Andrew Radding, the assistant United States attorney prosecuting the case, told U.S. Magistrate Clarence E. Goetz that the money comes from the sale of heroin and that the defendant, Suwan N. Ratana, 45, is a millionaire drug dealer in suburban Washington.

After the testimony and legal argument, the magistrate said he believed that Mr. Ratana represented an "extremely high flight risk" and he continued the $250,000 bail set on the man after his arrest a week ago.

An IRS special agent, Ronald N. Beran, testified that, only hours before he took the witness stand, he had reviewed the records of the latest account found that is owned by Mr. Ratana, who lives in Silver Spring.

Mr. Ratana and his wife, Rebecca, 43, are charged with reporting on their 1975 tax return income of $13,184-which represented her salary as a nursewhile depositing hundreds of thousands of dollars in various bank accounts. Agent Beran testified that Mrs. Ratana had deposited $5,200 of her pay in a credit union.

In the first four months of 1976, said Mr. Radding, Mr. Ratana deposited more than $1 million in a Swiss bank and $170,000 in a bank in Thailand. The couple faces a tax liability of $778,000 this year alone, he said. This money is in addition to the $840,000 the IRS has impounded in U.S. banks, he said.

Mr. Radding told Magistrate Goetz that "the deposits were the proceeds of income from the sale of heroin." He said Mr. Ratana has been unemployed since 1972, after having worked at the Thai Embassy, a supermarket and a travel agency since coming to the U.S. as a permanent resident in 1959.

Yesterday's hearing was on Mr. Ratana's request for a bail reduction. Mrs. Ratana, the mother of four young children, is free on personal bond.

Mr. Radding told Magistrate Goetz that he expects a grand jury to return indictments Tuesday charging the Ratanas with tax evasion and false statements on their returns in 1974 and 1975, and with conspiracy to defraud the U.S. In addition, he continued, the IRS is investigating the couple's tax returns for 1972 and 1973.

Mr. Radding declined, however, despite questions by Joseph J. Lyman and Kenneth A. Reich, the Ratanas' lawyers, to say when he expected to bring drug charges against Mr. Ratana.

In response to the defense lawyers' contentions that the $250,000 was unreasonably high for a single tax charge, Mr. Radding admitted that only "a minimal part" of the government's case has been disclosed in court so far, but, he said, "This is not a case where the taxpayer has fudged and gets slapped on the wrist." As two examples of Mr. Ratana's banking methods, Mr. Radding said that February 2, 1976, the man made 17 separate deposits, each between $5,000 and $5,115 in one account in one bank, he said. Reminded that Mr. Ratana is charged with falsifying his 1975 tax return, Mr. Radding recited a record of eight deposits, each of $5,000, made October 2, 1975, in a single account, "all in $5, $10 and $20 bills."

[From the Washington Whispers, Oct. 11, 1976]

SATISFACTION FOR IRS CHIEF ALEXANDER

Donald C. Alexander has gotten the best of Administration critics who were trying a few months ago to ease him out as head of the Internal Revenue Service. These insiders had predicted his exit before the end of summer. But, Mr. Alexander says now, "The end of summer has passed and I am still here."

[From the Washington Post, Oct. 17, 1976]

TAX SHELTERS

Wealthy Americans who have stashed away large amounts of money in tax shelters of questionable legality in the Bahamas may be feeling considerable discomfort in the coming months.

"Project Haven," temporarily suspended by the Internal Revenue Service and then handed over to the Justice Department late last year, is, in the words of one of the principals of the investigation, "very active, very viable and very productive."

The investigation had been halted last year after it was learned that an IRS informant removed a list of names and telephone numbers from the briefcase of a Bahamas bank official and photocopied it while the bank official was in the company of a female companion hired by the informant.

At that time, IRS Commissioner Donald C. Alexander was reported to be under investigation for allegedly stopping the probe to protect high government officials. The Justice Department subsequently cleared Alexander of the charge.

As for that list of names and phone numbers. the government has recently obtained a court ruling saying that, regardless of whether the list was legally obtained. its contents may be used in the investigation.

While declining to discuss the nature of the charges or the targets of the probe, Cono Namorato, chief of the criminal section of the Justice Department's tax division, says the investigation is "broadening" and will produce indictments "further along the way."

EXCERPTS FROM HEARINGS BEFORE THE HOUSE WAYS AND MEANS
SUBCOMMITTEE, AUGUST 5, 1976

Mr. RANGEL. I am talking about the number of people that have been active politically, especially in the Southern States, where any number of journalists have pulled together statistics to show how many people are under investigation. I am not talking about immunity. I am asking as to whether or not, in the course of some questions that I and other people have raised, you investigated to find out whether certain people are just checked out because of their activities, rather than because of their tax situation.

Commissioner ALEXANDER. Well, this morning, we were talking about checking because of activities, and those people were narcotics traffickers, and tax evaders,

and those people ought to be checked out. Because they are narcotics traffickers, they are tax evaders.

Mr. RANGEL. I want to talk about that, too.

Commissioner ALEXANDER. That is what I was testifying about on the Senate side this morning.

Mr. RANGEL. Did you make an agreement with our Drug Enforcement Administration?

Commissioner ALEXANDER. That is right. We made an agreement with the DEA. Mr. RANGEL. Is that agreement public?

Commissioner ALEXANDER. Sure it is public. It has been in the Press. I would be glad to furnish it-sent it to you.

Mr. RANGEL. I am only on this because you raised it.
Commissioner ALEXANDER. What? On the DEA?

Mr. RANGEL. I don't know why you would raise the drug offender that, certainly, you and I are in accord with. I was talking about political activities. Commissioner ALEXANDER. Do you know why I raised that?

Because you raised a very broad question, and because if I answered it, "Yes" or "No", I would have answered something that went far beyond the question you raised.

The question you raised, I think, to answer it narrowly, to put it in context back in 1973-something called Friends and Enemies, right? There was some investigation by the Joint Committee about the use, or mis-use, of the IRS to harass enemies and reward friends. And this was Count One, as I recall, in the House Judiciary Committee's impeachment process.

Mr. RANGEL. I remember it well.

Commissioner ALEXANDER. I do, too. I will never forget it. I hope my successors never forget it. We are not about to let the system be abused by harassing people because of their beliefs; because of their political actions or non-actions; because of their cult; because of other irrelevancies. There is not going to be any of that. I don't believe there has been since I have been Commissioner. Mr. RANGEL. A list of names were alleged

Commissioner ALEXANDER. We looked into that.

Mr. RANGEL. I am just saying that you and I are in the business of attempting to restore confidence in the Government.

Commissioner ALEXANDER. It is damn difficult.

Mr. RANGEL. You can help, because when the Press makes these types of statements and actually names individuals that have been selected, and you look at their backgrounds, if your investigation shows that they are just in a broad number of people that are under investigation, these things should be made public.

My question does not deal, now, with the Drug Enforcement Administration. I will try to make it as narrow as possible. But there was some publicity given to people who were active in the Civil Rights struggles, and politics. Edder's name was among those included. You know, I am trying to get as small a list of people that I am talking about as possible.

I asked your Office whether or not it could check this out to determine, not whether this is your policy—I don't have any major problem with the direction which you think our Government should be going, Commissioner-but I am concerned as to whether or not certain regions of our Country-whether we are talking about the FBI, or the IRS-whether there is enough discretion there where the mores of a particular town are not developed by those that have the discretion to make policies, to determine who will be investigated.

Commissioner ALEXANDER. All right. Here we are talking about general policy and specific policy.

I would like Mr. Williams to respond, specifically.

Mr. JONES. Let me also say that the Staff has been working on this issue for some time.-I think with the IRS and Mr. Von tells me that we will have a rather thick report within the month-they expect it to be the week after Labor Day-on this.

Mr. RANGEL. Well, maybe my question is premature-except in a general way. Mr. WILLIAMS. It is not, really! We had some of the Staff down in our offices last week. And in response to the list of questions-the rather long list of questions in which specific details in each of the cases were referred to, we did come up with several charts that were incomplete simply because, with the number of cases and the number of tax years involved, we have not been able to tackle them down to the last detail. But the things that we had identified,