Cline says gang laundered $70 mil. through mortgage fraud

Chicago Sun-Times,  Oct 1, 2004  by Fran Spielman

Gang leaders devised a scheme to launder $70 million in drug money by filing more than 100 fraudulent mortgage applications, Chicago Police Supt. Phil Cline said Thursday.

"We've known that the gangs are sophisticated in how they launder their money. This is the first time we've seen it at this scale," Cline said. "We've executed search warrants and we've uncovered information that the gangs are using real estate deals and mortgage fraud applications to launder their drug proceeds."

Cline lifted the veil on a federal investigation known as "Operation This Old House" as he joined Mayor Daley in discussing plans to beef up the Gang Intelligence Unit by 50 percent -- from 60 officers to 90.

Came from wired informant

The white-collar crime investigation sprang from a huge murder investigation named "Operation 5K" for the corner of Fifth and Karlov where one of the targets lived on the West Side, a law enforcement source said.

The informant in Operation 5K wore a wire last year, recording conversations with gang members. The probe led to arrests of 12 suspects in eight murders. Police involved in Operation 5K expected to obtain charges in 19 more killings, the Chicago Sun-Times reported last month .

The same informant told police about the money-laundering scheme, the source said. "There was a preliminary conversation about it on the wire."

The Internal Revenue Service is investigating.

The Vice Lords street gang was involved in the financial scheme, Cline said. He would not elaborate on the financial investigation, saying he hopes to reveal more in a few months, alongside U.S. Attorney Patrick Fitzgerald. The investigation is another example of the increasing pressure police and the feds have put on gangs over the last year.

Last December, Cline resurrected the Gang Intelligence Unit to shift the focus away from the Chicago Outfit and toward gangs, which he called Chicago's "new organized crime."

New strategy

The idea was to rebuild intelligence gathering lost when the citywide Gang Crimes Unit with more than 100 specialists was disbanded in 2000 after the conviction of gang crimes specialist Joseph Miedzianowski.

The new strategy appears to be working. The new unit has built cases against some of Chicago's most violent gang members. Operation Stone Breaker, for instance, zeroed in on the Northwest Side's Familia Stones gang, leading to seven arrests in four killings, officials said.

"It's very difficult for police officers to see a guy who has a Mercedes every week and buys it in cash, has four or five homes. Has more jewelry than anyone combined, more girlfriends, nail shops -- everything else and no one says anything. I know we're after terrorists. Why can't we be after narcotics terrorists at the same time?" Daley said.