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Posted on 08/01/2002 9:28:56 AM PDT by RightOnTheLeftCoast
From The Wall Street Journal Online
LOS ANGELES -- In the scrappy world of pay-telephone entrepreneurs, everybody knew Paul Edward Hindelang Jr. -- or so they thought.
His story was legendary: Starting with a few phones in L.A.'s poorest neighborhoods, Mr. Hindelang had built his business, Pacific Coin, into one of the country's largest independent pay-phone operators. Last year, he and several partners sold half their stake to a group that included former Treasury Secretary William E. Simon, in a multimillion-dollar deal.
But last Dec. 18, Mr. Hindelang was uncharacteristically subdued during a conference call to negotiate a big long-distance deal. Afterward, he called back his partner, Pacific Coin Chairman Thomas Keane. "Tom, I've got some very bad, difficult, disturbing news," he said, according to Mr. Keane. "I thought this would never come to light."
The news, as a statement from the Miami U.S. attorney's office later that day put it, was that Mr. Hindelang had agreed to forfeit to the government $50 million in drug-trafficking proceeds "previously held offshore."
Ed Hindelang, it emerged, was one of the biggest and most innovative marijuana smugglers of the 1970s, and had done prison time before getting into phones. Stunned, Mr. Keane and the Pacific Coin board voted that day to fire Mr. Hindelang, the chief executive of the company. That weekend, Mr. Keane says, he spent a long time with his young sons, "taking Ed off the pedestal I'd put him on."
Mr. Hindelang, 51 years old, declines to comment, and many details of his story remain sealed in court documents or otherwise hidden. What is known offers a rare peek into the shadow land of dirty money and the government's war on drugs, with all its dark twists and strange allegiances. For instance, Mr. Hindelang's attorney, Harland Braun, says that some of Mr. Hindelang's ill-gotten loot was still around all these years later because, back when Mr. Hindelang was busted and put out of the dope business, federal agents encouraged him to retain access to some of his money to fund the job they put him up to next: informer.
A Drug Enforcement Administration spokesman calls that "highly unlikely." Privately, though, some law-enforcement officials say Mr. Braun may be right, and court records make clear that Mr. Hindelang was an informant -- a good one. The authorities dispute another of the attorney's assertions: that the forfeited $50 million wasn't technically Mr. Hindelang's anymore because he had simply given his drug money to a family friend more than two decades ago.
Improbable as that may seem, it is no more so than many aspects of Mr. Hindelang's career. In the gated community near Santa Barbara that Mr. Hindelang helped develop and where he lives, neighbors are agog. Les Charles, one of the creators of the television sitcom "Cheers," snorts upon hearing that his sometime golfing partner coughed up $50 million to the government. "His bank account's bigger than mine," he exclaims. Adds Paul Franz, a construction-company owner who counts Mr. Hindelang as a dear friend: "It's not the Ed that I know."
It's easy to see why some things might drop off Mr. Hindelang's resume. In 1970, when he was 22 years old, he was caught at the Mexican border trying to sneak 75 pounds of pot into the U.S., and served six months in jail, court records show. After a stint as a public-school teacher in East St. Louis, Ill., near his hometown, he moved to Miami.
There, according to law-enforcement officials and court testimony, Mr. Hindelang helped pioneer the "mother ship" smuggling technique, a major advance at the time. It involves a big freighter full of dope unloading on the high seas to a handful of medium-size boats, which then relay the product to smaller craft that blend in with recreational boaters for the trip to shore. It made Mr. Hindelang a smuggling star.
"My role was contacting the Colombians, making the contact with the man who was able to arrange the offloading of the marijuana at sea close to the U.S. shore, and then I would sell a portion of the load," Mr. Hindelang said in 1982 federal court testimony in New Orleans. He said his group stuffed 18-wheel trucks with marijuana, added a layer of vegetables to disguise it, then used false bills of lading to ship it "all over the country."
The operation was soon rolling in dough. One colleague, whose job was to travel the U.S. in a private jet collecting cash from distributors, liked to get stoned and wallow naked in the piles of greenbacks on the flight home, says one person familiar with the operation.
But Mr. Hindelang's luck began to turn in the late 1970s, and he went on the lam with his wife, then pregnant with their first child. Even as a fugitive, he kept smuggling -- until he was caught up in a 1981 undercover sting while trying to set up a trafficking network in rural Louisiana. He pleaded guilty in New Orleans federal court to charges carrying a possible sentence of up to 65 years, agreeing to cooperate with authorities and to forfeit his drug money. He told prosecutors that his ill-gotten assets consisted solely of $640,000 in cash, which he had stashed in a suitcase at his brother-in-law's house.
Mr. Braun, Mr. Hindelang's attorney, says his client then engaged in dangerous cloak-and-dagger assignments for the DEA. "He named a lot of names," says John Patrick Deveney, a former U.S. prosecutor who used Mr. Hindelang as a witness. "He was a good witness because he was so damned smart. He remembered everything he'd done."
The DEA, in turn, treated him with unusual regard. He was allowed to travel widely. At his sentencing, agents testified on his behalf. He got 10 years, but served only about 30 months.
After his release, he settled near Santa Barbara. By all accounts, Mr. Hindelang sold no more weed, throwing his entrepreneurial skills into a new realm: competing against the Baby Bells in the newly deregulated pay-phone market.
His company, Pacific Coin, started small, with something like 168 phones, remembers Wayne Tully, one of Mr. Hindelang's first employees. Mr. Hindelang showed some of the same drive and savvy that had made him such a formidable trafficker: He often serviced the phones himself, collecting coins and making repairs, working sometimes until 4 in the morning in rough areas of East L.A. -- prime pay-phone territory because many homes lacked private phones.
When drug dealers' use of pay phones became a concern in some neighborhoods, he posted security guards at some Pacific Coin phones. Tall and charismatic, Mr. Hindelang became an outspoken fixture on the boards of industry associations.
It remains unclear whether Mr. Hindelang used any of his dope money to aid Pacific Coin's early growth, although some investigators suspect he did. But even law-enforcement officials say the company thrived mainly because of Mr. Hindelang's entrepreneurial talent. As for his past, Mr. Hindelang was vague. Mr. Tully recalls his speaking of being in the cattle-hide business -- which had been an assumed identity during his undercover activities for the DEA. He talked of promoting rock concerts. No one in his new world suspected drugs. "This is beyond our family's belief," says Mr. Tully, remembering how Mr. Hindelang joined his church and helped with a youth camp.
By 1997, Pacific Coin was in negotiations to merge with a company founded by Mr. Keane. William E. Simon & Sons LLC, an investment boutique nominally headed by the former Treasury secretary but run day-to-day by one of his sons, was picked to help finance the deal.
Simon & Sons declined to comment on the matter. Mr. Keane says due diligence by auditor Deloitte & Touche turned up nothing unusual. Mr. Keane says Mr. Hindelang seemed such a straight arrow that no one would have suspected a criminal past. Mr. Hindelang's convictions, more than a decade old, didn't pop up on a routine sweep of public records.
In early 1998, the merger was announced, with a Simon & Sons-led group putting up an estimated $24 million to buy a half-stake in the combined enterprise. In a press release, Simon & Sons lauded Mr. Hindelang and its other new partners as "the best in the business." Mr. Hindelang was a wealthy man -- again.
His future looked bright. But ghosts from the past were gathering.
Operating out of a windowless building in the Florida Keys town of Marathon, Chuck Visco, a detective with the Monroe County Sheriff's department, and Linda Hunt, a special agent with the U.S. Customs Service, had already spent the better part of a decade trying to trace Mr. Hindelang's money trail.
They are the prime movers behind Operation Cash Extraction, an unusual effort to recoup money from retired drug runners who had laundered funds into the legitimate economy, buying houses, nightclubs and other businesses. Mr. Visco, a short, unassuming New Jersey native, in particular is known for his love of the dramatic moment of reckoning. He might, for instance, slip into an elevator with his target, alone, and whisper the name of a Liechtenstein shell company supposedly known only to the former smuggler.
"That one word just crushes you," says Mr. Visco. "I've had some people vomit."
For years, the two agents had been hearing intriguing rumors about Mr. Hindelang's fortune. Based on the number of successful smuggling runs his group had made, the agents believed he must have held on to much more than the $640,000 he claimed was his only dirty money back when he was busted. If so, the government could go after him and any of his stashed cash.
One big break came when Mr. Visco traveled to Aspen, Colo., to look into a tip that Mr. Hindelang had developed some real estate there. County land records showed that a Dan Hindelang had purchased a real-estate parcel in 1977 that was eventually developed into the Good Thunder Condominiums. Daniel Hindelang, it turned out, was Ed's younger brother. The land was soon transferred to a Nevada corporation, Brixia Inc., but the damage was done: Ed's family name was in the public domain, giving detectives a crucial piece of evidence as they traced the apparent route of his money.
Daniel Hindelang says he didn't know at the time of his Colorado land deal that his brother was a drug dealer. Daniel maintains he himself did nothing illegal. The whole family is now suffering from the recent disclosures about his brother, he adds, near tears: "The human devastation is something that's beyond words."
Mr. Hindelang's path also brought him into contact with a pair of prominent entertainment lawyers. One was Harold S. Kant, who for decades was the attorney for the Grateful Dead. He says that he represented Brixia on some matters years ago, but that the owners of the company were "three Colombians," whom he declines to name. Mr. Kant says Ed Hindelang was an "employee" of Brixia who was fired on Mr. Kant's advice when he learned of the drug-running indictment.
Nevada state records show that in 1978, Mr. Hindelang was not only president of Brixia, but also vice president, secretary, treasurer and sole director. Law-enforcement officials who have investigated Brixia recently now believe that he also was its owner. Brixia's Panamanian-registered affiliate, Brixia SA, had a more interesting slate of officers and directors over the years, including a Roman Catholic priest who boasts he was an informant for the Central Intelligence Agency and a British honorary consul in Colombia who was gunned down in 1986.
Another Brixia officer was Mr. Kant's former law partner, John W. Starr. Now a well-known civic activist in Aspen, Mr. Starr acted as Brixia's secretary in a 1986 sale by Brixia of a Good Thunder unit to John Watts Starr Inc. for $85,000. Mr. Starr says there was nothing improper about the deal. He says he "never represented Ed Hindelang, never." Neither Mr. Starr nor Mr. Kant has been charged with any wrongdoing in the matter.
Mr. Visco also found Mr. Hindelang's footprints in the small town of Three Forks, Mont. Public records show that Tomas Batalla, a longtime client of Mr. Starr and one of the richest men in Costa Rica, in 1980 purchased Madison River Cattle Co., a 10,000-acre ranch ringed by jagged mountains near Three Forks. But those records also show that a Paul Hindelang -- Ed's father -- was hired as the ranch's manager, leading investigators to suspect that the true owner was Ed Hindelang.
According to Ed Hindelang's 1982 court testimony, he merely served as a consultant to the Batalla family, helping them locate agricultural properties around the U.S. and doing "research" for the family's cold-cut business. U.S. authorities now believe that Mr. Hindelang also had a significant interest in a Costa Rican cable-TV company that would become a major Batalla family holding. The Batallas sold the cable venture in 1997 for about $19 million.
Reached in Costa Rica, Mr. Batalla says, "I'm not the dead man at the funeral," meaning he isn't the one who did something wrong. He won't elaborate or respond to written questions. Mr. Starr says that the ranch truly belonged to Mr. Batalla. (Mr. Starr, who also worked on the cable deal, says, "Ed was not an investor" in that venture "while I was around.")
Paul Hindelang, Ed's father, says he also believes the ranch belonged to the Costa Rican. As for his son, Paul Hindelang says: "He's been a completely honest person, he's paid his debt to society and I'm proud of him." The "hardest thing in the world," he adds, was when Ed recently had to tell his own grown children of his dope-dealing past.
Exactly what else the Florida detectives found about the path of Mr. Hindelang's drug money remains murky. But in late 1997, Mr. Visco phoned Mr. Hindelang, and persuaded him to meet with the detective in Miami. During a long interview, Mr. Visco peppered him with questions, manipulating his laptop computer so that it beeped ominously. By the end of the meeting, Mr. Hindelang was actually "relieved" to be unburdened of his secret life, according to Mr. Visco. "He was overwhelmed by the knowledge we had."
Mr. Hindelang had now acknowledged that there was money from his doper days held offshore. Mr. Braun, the attorney, was brought in to negotiate its return. It was then, he says, he discovered yet another twist. Mr. Hindelang claimed he no longer owned the money. Around the time of his 1981 indictment, he "gave" almost all of his drug money to Mr. Batalla, says Mr. Braun.
The government scoffs at that. "It's our position that it was Ed's money," says Richard Byrne, the federal prosecutor in Miami who handled the forfeiture case. "Any monies held by a nominee are still legally considered to be the true owner's money," he says.
In fact, Mr. Hindelang theoretically could have fought the return of the money. But that likely would have sparked a noisy legal battle with the government, and Mr. Hindelang had his legitimate fortune to protect. Within a year, he had given authorities an accounting of his dope money, and the two sides agreed that he would cough up $50 million.
Mr. Batalla was approached to secure the money's return, says Mr. Braun. He says Mr. Batalla -- who is about 80 years old and has told people he didn't know Mr. Hindelang was a trafficker -- agreed. A wire transfer of $50 million was sent into Mr. Braun's law firm account and forwarded to the government. "Batalla gave Ed a gift of $50 million," says Mr. Braun.
Law-enforcement officials say their investigation into former dopers and hidden money continues. Meanwhile, Mr. Hindelang is weighing his options, and looking for new entrepreneurial projects. And if it turns out that he had even more than $50 million squirreled away somewhere? "That's the question I get all the time," says Mr. Byrne, the prosecutor. Although Mr. Hindelang stands to lose everything else he owns if he is caught in another lie, Mr. Byrne adds, "I can never 100% guarantee anything."
So a lawsuit not against Simon yielded a $65 million fraud judgement ... what about the $24 billion deficit of Gray Davis at the expense of the taxpayers of California?
Thanks for the ping and posting the article!
calgov2002:
|
calgov2002: for old calgov2002 articles. calgov2002: for new calgov2002 articles. Other Bump Lists at: Free Republic Bump List Register |
"That one word just crushes you," says Mr. Visco. "I've had some people vomit."
During a long interview, Mr. Visco peppered him with questions, manipulating his laptop computer so that it beeped ominously.
Here is a guy who truly loves his job. I wish I could have as much fun in my job as this guy does.
It is amazing how much info the author, Michael, Allen, could come up with and how many times he refers to information that is of public record. How could D&T have missed all this?
...More fuel for the WOD???(sorry, just stirring up the pot, hahahohoook)
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