Dope sales build secret empires

April 7, 2002
You can't order a milkshake or a sundae at the "Ice Cream Shop." Only crack cocaine and heroin are on the menu, and gang members take your order.

On a 20-degree day, a young Gangster Disciple in a black parka stands guard in front of one of the low buildings of the Ida B. Wells housing development on the South Side.

While he watches, another teenager strolls up to a slow-cruising Toyota Corolla, a knit stocking cap pulled low over his eyes.

Holding a roll of cash in his gloveless hand, he calls out, "Rock! Blow!" The puffs of his breath vanish in the chilly air, and the Corolla rolls on.

Minutes later, another car pulls up. The kid in the stocking cap hands something to the driver. The driver hands something back. Probably a $10 bill.

This will go on all day.

Thousands of street-corner drug sales, the backbone of powerful gang empires in Chicago, rake in more than half a billion dollars a year in drug profits--nearly 1 percent of the city's economy, experts say.

A trickle of this river of cash pays for fancy cars and expensive suburban houses. The rest--the kind of money that would put legitimate enterprises into the Fortune 500--seems to disappear. But, in fact, it flows deep underground, seeping into cell phone stores, nightclubs, beauty shops, apartment buildings, record companies and even Hollywood.

For five months, the Chicago Sun-Times tracked the huge sums made by drug sales by interviewing cops, gang members and university experts, and spending days and nights on neighborhood streets and alleys to see drug dealers at work.

It starts with a dime bag

The trail begins with $10 for a dime bag of dope sold by a teenage foot soldier who earns about twice the minimum wage. Multiply that one transaction by hundreds of sales sold by a crew of gang dealers, and the numbers quickly swell to an estimated $5,000 a day, $1.8 million a year, just at that one stop--the Ice Cream Shop at 38th and Vincennes.

Day and night, "slingers" here openly sell crack cocaine in baggies stamped with ice cream cones--giving the corner its nickname. They also shell out their "Lucky 7" brand of heroin and pass out yellow business cards stamped with a logo of pharmacy bottles and the slogan, "Specializing in Medicine." Their location is boldly printed in blue.

The money is filtered up the gang chain. Dues are paid, SUVs are bought by lieutenants, and houses are purchased in the names of grandmothers. Some of the money ends up in tree-lined suburban neighborhoods, where the more powerful gang members lay their heads at the end of the day, a world away from the projects.

The money disappears into local riverboats and the noisy, gleaming casinos of Las Vegas and Atlantic City. There, it becomes traceless, hidden in casino chips used to pay drug suppliers or laundered as gambling wins.

And sometimes, it's just buried in backyard dirt.

"It's big business,'' said Willie Lloyd, whom police identify as the leader of the Vice Lords Nation, although the 51-year-old grandfather insists he is retired. "You have your accountants, you have your lawyers, everyone you need to be competitive out there in the streets and survive. You have your police for protection.''

Hip-hop wash cycle

Troy Watts was an aspiring music tycoon. He poured heroin profits into his Oak Park recording studio to buy a 2-inch reel-to-reel recorder, a 36-channel mixing board--everything necessary to attract a top-notch hip-hop group.

"Troy Watts lavished money on this studio," Assistant U.S. Attorney David Bindi said in federal court. "He bought state-of-the-art equipment--everything was the best."

Watts, 38, who attended Malcolm X College, never shied away from work. He held a job in a hardware store in the seventh grade and managed a grocery at age 17. What got him into trouble was trying to take a shortcut to success.

"Unfortunately, like many young men coming of age in the 1980s, he was seduced, apparently, by the allure of profit in this particular illicit business," his lawyer, Jeffrey Urdangen, said.

Watts recruited a cadre of smugglers to import about $16 million in heroin from Thailand from 1990 to 1994.

His best friend was a brutal Chicago gang member who acted as an "enforcer" to deal with problems, one of Watts' co-defendants told authorities.

In 1992, at the peak of the operation, Watts opened a recording studio, TCR&R, with three musically inclined pals. He pumped more than $100,000 into the business, court records show.

TCR&R signed a rap group, Crucial Conflict, that wound up abandoning Watts and joining other companies, including a major recording label. The group hit the big-time with a top 10 single, "Hay," and gold-selling album, "The Final Tic." But TCR&R never made any money, prosecutors said.

Watts' career in show business ended in 1998 when he pleaded guilty to drug conspiracy and money-laundering, landing himself a 24-year federal prison sentence in Lexington, Ky., far from music-industry types like Paulie Richmond, a Grammy Award-winning writer who penned the hit song "Shining Star." Richmond testified as a character witness at the trial of one of Watts' co-defendants.

Though he is in prison, Watts continues to try to cash in on the success of the band he claims he founded. He filed a $9 million lawsuit to get a cut of Crucial Conflict's profits.

'It moves through me'

Another man with one foot in the music business and another in the drug world was Nathan "Nate" Hill.

Hill, 35, was arrested in 1998 after he fled to Africa to avoid prosecution for supplying the Gangster Disciples and Vice Lords gangs with more than 6,600 pounds of cocaine from 1987 to 1995.

"His famous phrase was, 'If anything moves through Chicago, it moves through me,'" said Assistant U.S. Attorney Colleen Coughlin, adding that Hill was a friend of reputed Gangster Disciples kingpin Larry Hoover.

Hill, who wasn't a gang member, was sentenced to life and fined $8.5 million, and forfeited cash and property valued at $5 million. He was convicted of drug conspiracy, tax fraud, money laundering, operating an ongoing criminal enterprise and ordering the killings of three enemies, two of whom were, in fact, killed.

With his drug money, Hill moved into the recording business, founding New York-based Pocketown, named after his South Side neighborhood at 78th and Stony Island. Pocketown scored a top 10 music video with "Froggy Style" by Nuttin' Nyce in 1995 and published "Wandering Eyes," which was on the soundtrack of Whoopi Goldberg's film "Sister Act 2."

He also plowed his cash into a bus company, American Tour and Travel, which offered a Heritage Tour of 20 Chicago sites of significance to black history. He even spent $700,000 in drug profits on a movie, "Reasons," which was based on his life.

A witness at Hill's trial described how he bragged about his toys: a $600,000, eight-passenger Lockheed jet; a $900,000, 73-foot yacht dubbed Magic Challenger, and five homes, including a four-bedroom A-frame on 11 acres complete with indoor pool on Boy Scout Road near Kankakee.

Hill was one of the top 15 most-wanted fugitives in America when he was nabbed in the west African country of Guinea, where he had become a coffee magnate, prosecutors said.

At Hill's 1998 sentencing, U.S. District Judge Charles P. Kocoras called Hill a smart, charming and organized businessman.

"It is just a tragic thing that you chose to commit all of those skills and your abilities to a life of crime," Kocoras said.

Phones, CDs and haircuts

A third drug dealer who made a foray into the music world was Lawrence Nathan, now 68. The reputed Gangster Disciple was convicted in 1997 of narcotics racketeering and selling drug paraphernalia from his South Side record shop. He was sentenced to four years in prison.

Nathan's guilty plea cost him the store, Mary's Records at 361 E. 69th, plus about $97,000 in cash and money orders, a Jeep and dozens of pieces of jewelry, all of which he was forced to hand over to the government.

Music stores, currency exchanges, car washes, beauty shops and apartment buildings are among the traditional fronts drug dealers use to launder money.

Unless police count every customer walking into a barbershop, they don't know how much business the store does. A drug dealer can overstate the barbershop's business to hide his drug profits.

Dope dealers with seemingly legitimate businesses will undercut competitors' prices on phones, CDs or haircuts to keep a steady stream of customers coming through the door.

"They're a scourge on the community," police Sgt. John Lucki said.

No Cub Scouts or Boys Club

Chicago's major gangs are 40 to 50 years old. They're as much a part of some neighborhoods as churches and schools.

Sitting at a back table in Grandma Sally's Family Restaurant in affluent west suburban River Forest, Willie Lloyd sips a glass of orange juice while explaining how the Vice Lords provided a social outlet for kids growing up in his poor neighborhood in Lawndale.

Lloyd, who became the chief of the Vice Lord Nation in the 1970s, said he began his own faction, the Unknown Vice Lords, in the mid-1960s when he was about 15 years old.

"There was no Cub Scouts or Boys Club for us," said Lloyd, who has a thin scar running from his forehead to his neck, which he explains came from a box cutter in a fight when he was a teenager. "The YMCA was not really available to me. I just felt brotherhood and pride in the gang."

The Vice Lords were among the most violent street gangs in the 1960s, but they also became a nonprofit corporation and set up a neighborhood ice cream parlor called Teen Town, two Tastee-Freez franchises and the House of Lords, a hangout with pinball machines and a jukebox.

The enterprise even sent a letter on Vice Lords stationery to Mayor Richard J. Daley after the West Side riots of 1968. Conservative Vice Lords Inc. President Alfonso Alford offered to launch a beautification program with the city's help, writing, "In the past few days, we were on the street urging young people to end the burning and looting."

He never heard back from the mayor.

The budding social activism of the Vice Lords and other gangs was discarded in a brutal scramble for big money in the 1970s, Lloyd said.

Sitting next to Lloyd was a beefy man whom Lloyd introduced as a Gangster Disciples friend. The man remained stone-faced during the two-hour interview, breaking his silence once--to say grace over his spaghetti.

"With the drugs came the violence," Lloyd loudly exclaimed, sitting at Grandma Sally's, causing customers to stop eating and look over at him. "Greed became the motivating factor of these organizations. It became almost military in operation because we had to bring in weapons to guard the money, drugs and turf."

Lloyd--who claims he is now trying to stop the violence over money, drugs and turf--spent much of his life behind bars because of it.

He served 15 years in prison for his part in the killing of a state trooper in Iowa in 1970. He has been arrested more than 30 times, and survived two assassination attempts by other gang members. He was released from federal prison last year after serving an eight-year sentence on a federal gun conviction.

Though he was in prison for much of the 1980s and 1990s, his gang, the Vice Lords, dominated the city's drug sales--and murder statistics--along with the Gangster Disciples and the Latin Kings.

Gangs have become a major economic force in the city, said Steven Levitt, a University of Chicago economist. He estimated their annual profit from drugs at about $500 million, about two-thirds of 1 percent of Chicago's gross domestic product, a measure of goods and services moving through the economy.

Tom Donahue, a federal drug enforcement coordinator here, called that figure "conservative" and said the total is closer to $1 billion.

Gangs also are more violent than their colleagues in crime--the mob--ever were. In the Al Capone era of the mob, according to the 1929 Illinois Crime Survey, 215 gangsters were gunned down in four years in Chicago. Last year alone, 249 slayings were linked to gang activity, police said.

Ledgers, dues and guns

As gangs grew more corporate in the 1980s and 1990s, they stepped up their collection of dues and "street taxes," solidifying their control of neighborhood drug operations much like restaurant chains exert control over franchisees.

The Sun-Times has obtained the ledger of one street-corner "set" of the Latin Kings that shows how dues were allocated from 1996 to 1997.

The faction's leader told his foot soldiers their dues would pay for guns for the gang, the handwritten ledger says. The North Side group included 20 members who met 42 times over a year, each paying an average of $15 in dues at each meeting. Over the course of the year, they wound up giving about $12,600 to gang leaders for a gun shopping spree.

The Latin Kings operate dozens of such crews--each funneling dues to the top, said Andrew Papachristos, director of field research for the National Gang Crime Research Center. He estimated the gang collected hundreds of thousands of dollars in dues throughout the city in that one year alone.

In addition to dues, Latin King foot soldiers, whom Papachristos studied, were required to pay a "street tax" of more than half of their drug profits to higher-level gang members.

The teenage foot soldiers wound up making an average of $10 an hour. Their job description: hang out on street corners and watch for police; keep track of the money, drugs and weapons, which lay hidden in separate places, and peddle the narcotics to customers, many of whom drive in from the suburbs.

"It's mostly boring work," Papachristos said.

Foot soldiers, most of them under 18, "basically have a job at Target, but their risk is enormous," said Gregory Scott, an assistant professor of sociology at DePaul University.

Just ask Ranell Rogers, a 23-year-old member of the Mafia Insane Vice Lords. He wears a tattoo of a tombstone on his chest, a homage to his older brother Amin, killed in 1997. Like most gang members interviewed by the Sun-Times, Rogers knows of dozens of fellow gang members, friends, who have been killed.

"I graduated from a school not far from here, and there were maybe 47 boys in two eighth-grade classes. There are maybe eight of us left alive," said Rogers, who lives on the West Side. "To get by, you have to kill your conscience."

Who needs colors?

The honchos of Chicago's biggest gangs--from Gangster Disciples chairman Hoover to Latin Kings chief Gustavo "Gino" Colon--have been taken down by federal prosecutions since the mid-1990s.

As a result, the discipline and corporate hierarchies of gangs such as the Gangster Disciples are breaking down.

"Don't nobody care what you are anymore, you fake like you're best buddies, but behind closed doors you're calling the cops on the other guys," said Rogers, a Mafia Insane Vice Lords member for about 10 years.

On the streets, many young gang members no longer know the laws for their gangs--the law, for example, that they are not to use addictive drugs. They also may not know anything about their gang leaders--who may have been imprisoned for as long as the younger members have been alive.

Prison, and not the streets, is considered the "gang university" where they are expected to learn the rules and history of their organizations if they are to survive.

Gone from the streets are the outward trappings of gang membership proudly displayed in the 1980s and 1990s.

Gang members have stopped wearing gang colors to "reduce rivalry and violence, decrease pressure from law enforcement and communities, and increase profits," according to the 2002 National Drug Threat Assessment, an analysis the federal government released.

And on the streets, these young foot soldiers--who dutifully paid their dues and street taxes in the 1980s and 1990s--are now increasingly snubbing the gang leadership.

"You have pockets of GDs all by themselves," said Chicago police Sgt. Marc Moore, as he drove past a Gangster Disciple guarding one of the high-rises in the Robert Taylor Homes--where a Chicago police rookie was gunned down in 1998 during an undercover drug stakeout.

"The allegiance is not as strong to the gang as it used to be. The allegiance now is to making money."

Greed has prompted strange and uncomfortable alliances--anything to get the dope sold and the money collected. Gangs now rent out corners--and entire public housing high-rises--to rival gangs to keep the money flowing. The Gangster Disciples, for instance, "rented" an apartment building they controlled in the Robert Taylor Homes to the Mickey Cobras for $10,000 a month, police say.

The lack of a strong hierarchy in many Chicago gangs is leading to shoot-outs as young members vie for power.

"There is a struggle from above to decide who is going to claim the lower levels," Columbia University Professor Sudhir Venkatesh said. "It's as though you had all of the McDonald's franchises now removing their signs and only putting up 'Burgers for Sale.' And all of the corporate leaders of Wendy's, McDonald's and Burger King are fighting to win over the allegiance of those franchises and put their name on the signs."

Police and state prosecutors see these power struggles as weakness. And they think the time is ripe to attack gangs with a new weapon.

Tax returns--not tommy guns--brought down Al Capone.