Busted

Julio Mercado is Dallas' brand-new DEA boss, and he's inherited kilos of trouble. His city is about to be declared a drug disaster zone, but all his narcs seem to care about is snitching on each other.

"I never did get a letter of clearance," Steve adds. "And I know for a fact that there are guys still being investigated for stopping to pick up a pint of milk on the way to work three years ago." (DEA regulations bar agents from stopping in their government cars on their way to or from work.)

It was not a good time for the Dallas office. The game of musical chairs was going on at the top; agent Cookie was ratting out his friends; and the in-house ethics gestapo was turning the Dallas field office inside out. Meanwhile, the number of drug busts was plummeting.

Part of the problem was NAFTA.
Immediately after NAFTA went into effect on January 1, 1994, 15,000 vehicles a day began pouring through each of El Paso's three points of entry. The numbers have been increasing ever since. DEA intelligence analysts estimate that 65,000 to 70,000 cars a day are coming through now; of that number, only 15 percent can be reasonably checked for drugs. In other words, roughly 58,000 vehicles a day get simply waved through El Paso's checkpoints--and that's just one border city.

Not surprisingly, overland entry has become the drug dealer's route of choice. By 1995, internal DEA records suggested that more than 70 percent of the cocaine entering the country, as well as the bulk of the methamphetamines and marijuana that wound up on American streets, was coming through El Paso's checkpoints.

"Right now, our problem is the border," observes Dallas police chief Click. "Specifically, it's the effect of NAFTA on the number of vehicles coming over without being checked. They don't even scratch the surface. And the result is, drugs are coming into this country at will."

From the border, narcs say, drugs are driven to safehouses in El Paso or Houston. The next step is to get the drugs to a staging area, where mules--the street dealers--converge from around the country to pick it all up.

"Houston became the source city, and Dallas became the hub," explains a DPD narcotics sergeant. "It's easier to distribute from Dallas than from anywhere else in the country. Just look at the map. We're in the middle, we've got every major highway and two major airports."

Not surprisingly, the huge volume caused local street prices to plunge. According to DPD narcotics officers, low-grade Mexican marijuana, which in the late '80s sold for $2,000 a pound, fell to $400 a pound by 1996. Cocaine went from $50,000 a kilo in 1985 to $17,500 a kilo in 1996-'97. Heroin fell too, from $5,000 an ounce in 1990 to $1,650 today.

With the abundance of cheap drugs on the street, the DEA's statistics should have been sharply rising. Instead, they began to drop. They dropped all over the country, but in Dallas they fell off a cliff. From 1994 to 1995, cocaine seizures in the Dallas office dropped 75 percent. Though methamphetamine seizures jumped--as they have every year since 1991--other categories remained flat. Asset seizures in the Dallas division also fell, from $12.6 million in 1994 to $11 million in 1995. Likewise, seizures at D/FW--which had once accounted for as much as half of Dallas' totals--fell from $5.6 million in 1994 to $4.6 million in 1995.

Part of the problem, everyone agrees, was that the traffickers were getting smarter. Wiretaps in other parts of the country revealed that couriers and traffickers alike were avoiding D/FW Airport like Ebola. But part of the problem, many felt, was the inner turmoil in the Dallas office itself.

Just when it seemed things couldn't get any worse, they did. On November 27, 1995, Administrator Constantine announced that OPR Chief Johnny Phelps was taking over in Dallas.

Phelps admits his previous stint with the DEA ethics police in Washington didn't exactly make him the most popular guy in Dallas when he was transferred. "It absolutely puts you in a bad position," Phelps says, "because you're tasked with investigating your peers."

Never mind that on the way to Dallas, Phelps experienced his own ethical transgression.

Just six days before it was announced that Phelps was shipping out to Dallas, Phelps' 22-year-old son, Steven, a student at the University of Texas, was arrested by police in Arcadia, California, for--oddly enough--torching a tree at a gas station in the L.A. 'burb. (Department reports do not suggest a motive for the arbor arson.)

Without his father's knowledge, the young Phelps immediately pleaded no contest. On the same day his dad's transfer was announced, Steven Phelps began serving a 45-day sentence.

Then two days later, after learning his son was in the slammer in California rather than in school in Texas, Phelps wrote a letter begging the judge presiding over the case to reconsider the sentence. According to a copy of the November 29 letter, obtained by the Observer, Phelps had the curious judgment to use DEA letterhead and a DEA fax machine. His narrative was chock-full of references to his national crime-fighting position and his 30 years in law enforcement.

Phelps' appeal was seen by his much-investigated employees as a blatant, ham-fisted attempt to use his position to influence the outcome of his child's court case. In other words, Phelps did something that was strictly verboten under the ethical canons Phelps was previously charged with enforcing. Worse, in the view of some, was that his son's recurring problems apparently earned Dad a reassignment to Texas for personal reasons, a rare and coveted perk.

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