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.

In a corner office of the anonymous concrete bunker off Harry Hines Boulevard that houses the Drug Enforcement Administration's Dallas headquarters, Julio Mercado, the new man in charge, is squirming like a worm on a hot plate.

It's hard to say exactly what is making the 48-year-old former New York City cop so uncomfortable. The clothes are one possibility. Though nattily attired in a suit of the tiniest black-and-white houndstooth, a white dress shirt, and a yellow, Brooks-Brothers-interprets-Op-Art tie, the mustachioed Mercado--a veteran of more than 700 undercover narcotics "buys"--just looks like the kind of guy who's happier in a pair of jeans and a windbreaker.

On the other hand, it could be the newness of it all. It's been only three and a half weeks since Mercado officially arrived from Puerto Rico, where he was second in command at the DEA's San Juan office. From across his enormous desk, it's painfully clear that Mercado is not only grossly unfamiliar with the sport of media ping-pong, he's, well, still very much a boss-in-training. "Thank you, Eleanor," his secretary Eleanor corrects her boss as she hands him the fourth document he's barked for this hour without so much as a grunt of thanks.

Amid all this very pointed scrutiny, Mercado nervously taps his desk, digs through drawers and then produces a shrink-wrapped box of stogies. "I don't smoke," he explains in a thick New York accent, handing the cigar box over to his interrogator for inspection and explaining that he bought the cigars to hand out to his new employees.

The friendly and boyish Mercado is doing his best to act cool and in control. "There's nothing to hide," he says earnestly mid-interview, displaying an impressively pearly set of whites. Which isn't to say that Mercado has all the answers. Far from it.

The truth is that Mercado is a man who finds himself squarely in the Spanish Civil War of government jobs--a once-quiet kingdom now beset by savage infighting, intervention by the benighted higher-ups, and squabbles among exiled leaders. In its heyday in the early '90s, the Dallas Field Division of the DEA was making hugely publicized cases against such A-list international drug barons as Juan Garcia Abrego and Amado Carrillo Fuentes--the John Gotti and Vincent Gigante of the narcotics trade. Those types of cases don't seem to be happening anymore.

"I don't know the reason why yet, why that's changed," Mercado says, hands fumbling anew with a pad of yellow Post-it notes. "Six months from now, I'll give you an answer."

But if the view from outside the agency is bad, the view from inside is nothing short of hideous. The internal turmoil at the DEA office in Dallas is so bad, in fact, that its employees have been starring on the agency's unauthorized website, a dishy little enterprise that a retired DEA agent started up so frustrated narcs nationwide could air the agency's dirty laundry. (Unfortunately, like many entertaining but underfunded Internet publishing ventures, the website, DEA Watch, recently bit the dust.)

"I don't even look at that, to be honest," Mercado says of the website, displaying a hear-no-evil attitude that has no doubt aided his rise through management ranks. Not that he isn't curious, though. "They probably say a lot of things about me," he says sheepishly, as if seeking reassurance.

Indeed they do--although, lucky for him, it's not what he might imagine. "Julio Mercado is a great guy and a fine manager with the plus that he is an 'old school' agent who believes in doing the job," wrote one contributor. Added another: "I hope that Dallas realizes what a fine leader Mercado is and treats him accordingly. He is one of the best [managers] in DEA and certainly breaks the recent mold...He seems to be able to inspire people to do things that don't normally seem to be within their capability."

To be sure, Mercado is like a freshly minted Cub Scout troop leader, brimming with new-manager enthusiasm. "Have you read this?" he asks eagerly, crossing to his overloaded bookshelf and returning with a copy of Leadership Jazz, his latest pick from his favorite genre--management theory. Written by Max De Pree, the New York aesthete who magically transformed himself in the late '80s from modern furniture executive to management guru, the tome bills itself as a "soaring coda on the art and craft of leadership." The obviously well-read paperback, filled with paper-clipped pages and yellow highlighting, offers some decidedly non-traditional management tips for a cops-and-robbers outpost like the DEA.

"Beauty and harmony must become a red thread through an organization," the book advises. "Beauty and harmony must pervade an organization and all it does."

If Julio Mercado can bring beauty and harmony to the Dallas field office of the DEA, more power to him. But in the meantime, a little more kicking in of drug-house doors and a little less dissension among the troops would be a refreshing change.

One thing is for sure--it's going to take more than a couple of cigars to turn things around.

It's not just Dallas. But the recent history of the Dallas DEA office represents, in microcosm, many of the problems plaguing the troubled DEA nationwide.

In Dallas--as much as any city--it is painfully clear that the feds are losing the big drug war. The feds are so hamstrung, in fact, that the DEA is currently seeking to have Dallas deemed a drug disaster zone--one of 12 High Intensity Drug Trafficking Areas, or HIDTAs--a declaration that will bring a big pot of federal money to the rescue. If, as expected, Dallas receives the designation this fall, it will make Texas the only state with not one, not two, but three HIDTAs: Dallas, Houston, and the southwest border.

A look at the recent history of the Dallas office reveals many of the reasons why the war is going so badly. Clearly, some of the problems are beyond the ability of the drug warriors to solve: There's the very real possibility, for example, that having the North American Free Trade Agreement (NAFTA) and keeping drug trafficking under control are mutually exclusive. There's also an inherent problem: Human ingenuity being what it is--and the profits to be made from drug dealing being what they are--drug interdiction is an endless cycle of Hydra-slaying.

Still, many of the wounds in this war appear to be self-inflicted. In interviews with the Dallas Observer, 21 current and former DEA agents, as well as numerous state, local, and federal agents who work closely with them, discussed the Dallas division's problems. (Unfortunately, since the DEA does not allow contact between its third estate and members of the fourth, the names of current agents--except, of course, Mercado--have been changed lest they face reprisal.) Their observations were borne out by court records and documents obtained through open records requests, as well as numerous internal DEA reports and correspondence.

All together, these sources and documents reveal an office crippled by revolving-door management, ethical challenges, and endless internal investigations of its own members, not to mention revolts by the local cop shops and a run of can't-keep-it-in-their-pants scandals that would make the American military blush.

They turn up a few other points as well--like how we're fighting a war we can't win, but can't stop fighting because local law enforcement has become addicted to federal money and the shiny new toys and additional personnel that it brings. A nasty brouhaha this spring over the now-decade-old D/FW Airport Joint Task Force--a hush-hush drug-busting program that allows participating cop shops to split confiscated drug money--not only raises the familiar specter of agency infighting, but also poses intriguing questions about the degree to which the financing cart drives the law enforcement horse. Even the DEA, it seems, fears that seizing money has become the raison d'étre of the drug war at every level--a topic that Congress is currently examining.

The DEA is little different from other federally subsidized law enforcement agencies--FBI, CIA, and Secret Service--in that management has no interest in sharing the details of its activities with the U.S. taxpayers who foot the bills. That said, when things go so awry inside one of these top-secret shops that stories start spilling out in the most unlikely places--say twice-weekly postings on the World Wide Web--it's fair to say that things are very, very bad indeed.

It wasn't always this way.
The DEA, like the "drug war" itself, is a legacy of the 1968 presidential campaign. Until then, the business of fighting illegal narcotics was largely the province of local police departments; indeed, modern federal laws banning drugs outright were only passed in 1970. (Until then, Congress believed that the Constitution only gave it authority to tax drug use.)

In 1972, President Nixon created a new federal police force, the Drug Enforcement Administration, whose sole mission was to enforce the new drug laws. Since then, the DEA has grown from a $30 million-a-year minnow to a billion-dollar-a-year leviathan, employing more than 7,000 agents in 45 countries across the globe.

The DEA's Dallas office is one of the agency's 20 domestic regional headquarters--"field divisions" in agency parlance. Dallas oversees nine sub-offices, from Tyler on the east to Midland on the west, and Tulsa on the north. Although Special Agent in Charge (SAC) Mercado guards the exact number of narcs in the Dallas division like the family jewels--"the problem is, you're telling the traffickers," he says--he'll finally concede that the number under him is approximately 200 agents, counting those borrowed, or "detailed," from local police agencies.

Mercado wouldn't divulge the Dallas division's budget, either, but a former employee put the figure north of $30 million a year.

Though estimates vary, some suggest that since 1968, the federal government has spent $300 billion fighting narcotics. Some modest successes have accompanied that effort; usage rates have generally declined since peaking over a decade ago.

Still, usage rates remain higher than they were in 1968 for all drug categories except heroin. And America is awash in drugs of a variety, potency, and cheapness unimaginable 30 years ago. Across the country, police insist that the majority of crime is drug-related. And Texas, thanks to its border with Mexico, has replaced Florida as ground zero in the "war."

Until the mid- to late-'80s, locals and feds say, the DEA's Dallas Field Division was no more than a sleepy outpost, for the most part policing Mexican marijuana-smuggling routes that had been established decades earlier. Phillip Jordan, who served as head of the Dallas DEA office from 1984 to 1994, recalls that the biggest problem when he came to town was the customary infighting among federal, state, and local law enforcement.

"There was a sense of mistrust among the agencies," recalls Jordan, now retired and living in Dallas. "Lots of turf wars. A lack of coordination. A lack of teamwork, which in the big picture can lead to someone getting hurt. Like that case in California, where DEA and Customs ended up shooting at each other."

Jordan, a big, affable Inspector Clouseau sort with a passion for basketball and a gift for networking, immediately set about building relationships with the local police agencies, as well as with the DEA's traditional drug-fighting rivals, the FBI and U.S. Customs Service.

"I did have a lot of resistance from old-time agents, who felt the feds ruled and DEA didn't have to share," Jordan says. "But DEA alone cannot solve the problem. Even Michael Jordan needs a team to win."

Under Jordan, the Dallas DEA office put together a series of joint task forces, consisting of local and federal agencies working together to cover specific beats or cases. The participants have well-defined roles: The locals provide most of the personnel, the feds foot most of the bill.

DEA agents across the country say that while several of these communal experiments became models of federal-state cooperation, the D/FW Task Force was undeniably the showpiece. "They were the most successful airport group in the country," recalls Mark, a California agent who worked closely with the D/FW group. In 1990, agents say, the D/FW task force became one of the first in the nation to create what had long eluded state and local narcs alike--a drug-courier profile that was actually useful, but didn't target minorities or nationalities.

This is how it worked: Airline employees with access to SABRE, American Airlines' reservations system, were recruited to cooperate with the narcs. Normally, airline passenger information is off-limits to law enforcement--by law, U.S. Customs is the only federal agency with access to passenger manifests, and even then, only those from incoming international flights.

But the "skynarcs," as task force agents who work airports are called, taught willing ticket, reservations, and gate agents to comb airline records with an eye toward spotting suspicious passengers. Such a passenger might be someone traveling one-way to or from a well-known narcotics "source" or "destination" city who paid in cash without checking luggage. If they spotted such a person, the employees simply called the DEA.

The system worked for everyone but the poor schmo relieved of his drug-tainted cash. When the airline employees hit a live one, they got to keep up to 10 percent of the confiscated booty. Narcotics agents, in turn, benefited from a profiling system that was virtually challenge-proof, since SABRE does not identify passengers by race. And the airlines had no objections to the scheme, having learned that non-cooperation can be expensive.

"If they cooperate of their own free will, they get to police themselves," explains one task force agent. "In the old days, Eastern [Airlines] didn't cooperate. And they got a plane or two seized. So they all like to be good citizens."

By 1991, agency statistics show, D/FW's "skynarc" program was the most successful in the nation, seizing more cash and contraband than any other airport. In its peak year, 1992, D/FW agents seized $5 million in cash allegedly bound for Mexico, and were credited with alerting other airports to couriers carrying another $4 million. The Dallas DEA agents traveled the country, educating their less-skilled brethren in the fine art of profiling drug-money couriers. And other agencies adopted the system as well. The FBI, for example, acknowledges using the D/FW group's work as the model for its current hijacker profile.

The state and local coordination also paid off on the street. In 1986, Dallas police recall seeing a strange new drug called crack for the first time. Investigations revealed it was being supplied by sophisticated Jamaican gangs who specifically targeted Dallas because their market studies showed it was relatively free of organized street-level competition. And they brought with them violence even Texans had never seen before--by 1991, thanks to drugs, Dallas had one of the highest murder rates in the country.

Dallas DEA agents helped local and state authorities clean out the Jamaicans, as well as a number of other street-level drug moguls who ruled some South and West Dallas streets during the early '90s. In 1994, the feds and locals together put away several local heroin gangs and Ray Charles Fields, the city's last major street-level crack dealer.

They didn't get to spend a long time back-slapping, though, because they soon had another disaster on their hands. "For some time, we underestimated the Mexican drug cartels," says Dallas police chief Ben Click. "And then we woke up one day and had five major cartels under our noses."

Internal DEA documents tell the now-familiar tale of the rise of the Mexican Federation. "In the mid- to late-1970s, an organized group of individuals was in a position to control virtually all marijuana and cocaine trafficking in Mexico," one 1995 in-house report states. "This group eventually became the Mexican Federation."

The original five Federation members agreed that instead of fighting among themselves over territory, they would each control one traditional smuggling corridor from Mexico to the United States. Unlike the well-established Colombian cartels, the Federation never confined itself to cocaine; it also had factions specializing in marijuana, Mexican-grown "black tar" heroin, and methamphetamines.

According to DEA intelligence, key Federation members were related to Colombian cartels by blood or marriage; so when the Colombians lost too many loads by air and by sea in South Florida to the feds, they naturally turned to their Mexican relatives, who specialized in ground transportation. The deal was simple and lucrative: In exchange for acting as the Colombians' shipping arm, the Federation could keep half the cocaine. By 1989, law enforcement was making record cocaine seizures on this side of the Mexican border: 19 tons here, 21 tons there. By 1992, it was clear these weren't flukes; Texas and California had replaced Florida as the U.S. entry point for drugs.

"Dallas had always been a semi-transshipment point," Jordan says. "But as the Mexican Federation and Juan Garcia Abrego and Amado Carrillo Fuentes gained control in Mexico, Dallas-Fort Worth became of increasing strategic importance."

Juan Garcia Abrego, who controlled the border from Matamoros to Laredo during the late '80s and early '90s, was particularly effective in moving his product into Texas. In 1988, Fort Worth police uncovered a cell of the Garcia Abrego organization here in the Dallas-Fort Worth area. With the help of the Dallas DEA and the FBI's Brownsville office, the U.S. Attorney's office in Dallas obtained indictments against Garcia Abrego for drug trafficking and money laundering. (Mexico finally turned Garcia Abrego over to U.S. authorities in 1996; he was convicted last fall and is now doing life in a federal prison.)

Three years later, local police uncovered another cell that led back to a different branch of the Mexican Federation run by Amado Carrillo Fuentes, the man who controlled El Paso--the entry point, the DEA says, for the majority of the cocaine, marijuana, and methamphetamines currently available in this country. In 1993, Carrillo Fuentes was indicted in Dallas for cocaine trafficking. But July 6 press reports originating from Mexico City stated that Carrillo Fuentes died last week during cosmetic surgery to change his appearance. (There's also been speculation that he faked his own death to elude authorities.)

The DEA's heady successes were short-lived, however, because in 1994, two things changed. In January, NAFTA arrived. And in February, Thomas Constantine took over as the national DEA administrator.

In order to understand the turmoil that began to envelop the DEA in 1994, it helps to understand DEA agents--and then to get your cop prejudices straight.

At the time they are hired, DEA agents must be between 22 and 36, must have a college degree, and must sign a pledge to move wherever the work demands. Many do stints in one of the DEA's 44 foreign offices, and most have dodged bullets. (Mercado has himself been shot at--and missed--twice.) At their best, these agents are smart-alecky, hard-boiled types reminiscent of Philip Marlowe, Raymond Chandler's fictional detective: proud, honorable, and, as Chandler described his hero, full of "rude wit, a lively sense of the grotesque, a disgust for sham, and a contempt for pettiness."

At their worst, they are the most macho of coppers, a shortcoming Mercado acknowledges. ("The problem with us is, most agents want to go through a door," he says. "No one wants the rear. Everyone wants the door. It's just, I would say, the DEA way.") Even in law enforcement circles, they are notorious for being "badge heavy"--given to throwing around their weight, not to mention their Sig-Sauer semi-automatics, in inappropriate circumstances. Perhaps not surprisingly, a good number display a devil-may-care attitude toward rules and regulations borne of running snitches, serving as buckshot-fodder, and hunting down drug dealers on unfamiliar, often hostile, foreign soil.

Most have a well-developed rebellious streak, and being clever, long ago learned how to circumvent bureaucracy. Almost all consider fighting drugs a jihad, and being holy warriors, don't mind lopping a few corners off due process now and then.

All in all, they are as manageable as a herd of cats. They disdain other federal agencies, especially the FBI, whom they call "feebs" (as in "feeble") and view as drug-war upstarts. By tradition, they war with Customs and with the CIA (yes, the CIA has drug jurisdiction), and show contempt for local police, whom they semi-secretly consider lower life forms. The other agencies, in turn, refer to DEA agents as "doorkickers" or "cowboys," and suggest that DEA stands for "drunk every afternoon."

A quick peek at the rank-and-file's unauthorized website reveals their core values. They value loyalty to each other above all else. They regard any mention of drug legalization as seditious libel. And a surprising number hate the current agency head in Washington, DEA Administrator Constantine.

Part of this, of course, is because Constantine is a Clinton appointee, and in their hearts all cops suspect Clinton did inhale and might, without eternal vigilance, lead America down the slippery slope of drug-induced light-headedness. Part of this is because Constantine is from the New York State Police--not merely a local cop, but, in their view, little more than a highway speed-trapper, one of the lowest forms of locals. (DEA agents sneeringly refer to Constantine as "The First Trooper.")

But most of all, the website suggests, they hate the boss because they perceive he has forced an unprecedented number of agents out of the agency.

To some degree, Administrator Constantine is a victim of demographics. The generation of agents hired when the DEA was born are now hitting their 25-year anniversaries--retirement time. And since agency hirings waxed under Nixon and waned under Carter, the agency is currently undergoing something of a mass exodus.

But many agents insist that internal agency turmoil is the real root of the problem. "Constantine forced a ton of retirements by transferring people against their will," explains Mark, the California agent. "Agents used to stay at DEA until 55 or 56. Now they hit 50, they're gone. The agency has lost an invaluable amount of experience because of it."

Others say the transfers were simply the new ruler's prerogative. "I think Constantine clearly transferred people to force them out, because he wanted his own people in key slots," says the local head of one federal agency that works closely with the DEA. "It's not that unusual."

There's a second way that agents perceive Constantine has forced people out, and in their minds it's even more nefarious. Under the guise of "raising ethical standards," Constantine beefed up the Office of Professional Responsibility (OPR), the DEA's own in-house ethics police. "We had problems, don't get me wrong," says Tony Ricevuto, who until 1995 was the head of the DEA's Los Angeles OPR office, one of three in the country. "But we were never as bad as the other agencies--as the FBI, much less the CIA.

"Constantine wanted a clean agency," continues Ricevuto, now retired and living in Los Angeles. "Which is good. But I think he went a little overboard. I saw lots of micromanaging. Cases would be reopened, reports kicked back because you didn't talk with the girlfriend's mother. It had to be a real hard-nosed line. And if they couldn't get 'em on the underlying complaint, they'd get 'em on something administrative--failure to fill out a report properly. That sort of thing. The investigations dragged on forever."

At least, those were the rules for the rank-and-file. "The feeling in the agency was that OPR was used politically," says Norm, a former Houston agent who retired earlier this year.

It is an assessment with which Tony Ricevuto agrees: "The politics definitely came in. Certain people got favored treatment. Certain people didn't get touched."

In September 1994, the highly respected Phil Jordan became a political casualty of the new forced transfer policy. Jordan was transferred from his position as Dallas SAC to head of the DEA's El Paso Intelligence Center. His family stayed behind; a year later, disgusted by the unwanted transfer, Jordan retired and moved back to Dallas.

True, the decade under Jordan had by no means been trouble-free. He'd been dealt the usual personnel problems: drunken DEA agents being stopped for weaving in traffic and taking swings at local cops; agents ticketed for violating open-container laws. (DEA regulations prohibit agents from drinking and driving in their government cars.)

But post-Jordan, things definitely took a turn for the worse. Since his 1994 departure, the Dallas office has had three different bosses--that is, when there was a boss. The results have been predictable: Ego-driven men with high testosterone levels and licenses to carry don't fare particularly well under wobbly leadership. Which brings to mind the infamous Cookie--as in DEA agent Morris "Cookie" Walters.

"I think it really kind of began with Cookie," recalls a DPD narcotics officer assigned to a DEA joint task force. "Cookie had been out of control for a long time." Walters, who couldn't be reached for comment, reportedly had pulled a gun in a Fort Worth strip bar--an indiscretion for which he wasn't even written up. And then came "that deal in Dallas," the DPD officer says.

At 3 a.m. on August 3, 1994, agent Walters and Dallas District Attorney's office investigator George Espinoza went to a house near Bachman Lake occupied by one Fernando Perez, a dealer who had turned confidential informant and was trying to sing his way out of a 10-kilo cocaine bust.

According to Dallas police reports, Walters "started knocking on the front door and yelling that he needed to talk." When Perez opened the door, Cookie "pulled a pistol and pointed it at [Perez] and [a female friend] and told them he could kill them and nobody would ever know." To emphasize the point, Cookie "then ejected live rounds from his pistol while pointing it at [Perez] and then put in another loaded clip."

Having had their fun, Walters and Espinoza then turned around and left. (Although Dallas police filed charges against Walters, Assistant District Attorney Mike Gillett says he can find no evidence that the case was ever presented to a grand jury.)

It was Cookie's Last Stand. OPR agents flew to Dallas, investigated, issued a report. Walters got the obligatory termination notice. But he wasn't going down without a fight. "Cookie told on everyone," recalls the DPD narcotics officer. "Everyone who was going out drinking in their G-cars, everyone who was messing around. Even supervisors. A lot of people went down when Cookie went down."

"They investigated 23 of us because of Cookie," says Steve, a Dallas DEA agent. "The allegation against me was that two years before, I had a beer in a restaurant at lunch. And down they came--seven of 'em--to investigate the charge.

"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.

In his defense, Phelps says he did what any parent would do--none of which was unethical.

Amid cries of foul from numerous underlings, yet another OPR investigation was mounted, but in short order, Phelps was cleared of wrongdoing--a result that only further infuriated the rank-and-file.

Clearly stung by all the criticism of him, Phelps rather shamelessly opened his own OPR-style investigations into the activities of his new Dallas employees. A number of local police officers assigned to DEA task forces around the Dallas-Fort Worth area recall that Phelps contacted them upon his arrival, asking strange questions. "He asked me, 'If I were a fly on the wall, what would I hear your guys saying about the DEA agents?'" recalls one. "He wanted me to rat them out."

Not that there wasn't anything to look into.
In July 1996, the U.S. Attorney's office in Dallas notified several local defense attorneys who were handling drug-bust cases about a serious problem. A DEA chemist in the Dallas office, Anne Castillo, had admitted to falsifying lab reports from February through July 1996. Castillo was subsequently fired, according to DEA officials.

Then on July 18, 1996, Dallas police arrested DEA agent Gary Jackson in a sweep of a North Dallas wife-swapping club. The club, dubbed "The Inner Circle," was located in a modest home on Northmoor Drive, just south of Forest Lane at the Dallas North Tollway. According to the arrest report, DEA Agent Jackson "did then and there knowingly engage in an act, namely of deviate sexual intercourse by contact between any part of the genitals of Gary Alan Jackson and the mouth of Robin Carol Avalos." (Avalos, who is not a DEA agent, was also arrested and charged with public lewdness, a misdemeanor, according to court records. The case is pending.)

Ten people were arrested that night--another four, posing as swinging couples, were DPD vice officers. Public lewdness charges are pending against Jackson with the Dallas County DA's office. The DEA says the incident is still under investigation. Jackson has pleaded innocent; his attorney, Dan Hagood, denies that Mr. Jackson committed any criminal act.

Jackson wasn't the only Dallas agent caught with his pants down, so to speak. According to five DEA agents--including one who works closely with the offending agent--one Dallas agent, dressed only in his skivvies, allegedly chased a confidential informant around her hotel room in late 1996. (Six months later, another informant reportedly lodged a similar complaint against the same agent.) DEA officials decline comment except to say the incident is under investigation.

Then there's the tale of the Dallas division manager who was accused of sexual harassment by a female employee in the Oklahoma City office. Following an internal investigation, the manager was demoted two government "grades" in rank and pay, though his title remains the same. Asked about the incident, Mercado is cryptic: "My ASACs have had their problems," he says.

Phelps didn't just offend his own men, though--he went for the local cops, too. Out at D/FW Airport, Phelps unilaterally decided to change the way the highly successful skynarcs operated. "In his defense, it was a new regime coming in, and he had his own ideas that he wanted to try," says a Dallas police sergeant connected with the task force. Among the ideas was Phelps' notion that the skynarcs were relying too heavily on airline employees for tips.

"He wanted us to go back to walking the airport, looking for suspects," recalls another task force member, a DPD narcotics detective. "To watch the flights and wait when people deplaned--like we did it in the dark ages. He didn't like us relying on ticket agents. There were a lot of comments about [ticket] agents making too much money.

"The problem with that is, you wind up focusing on the minorities," the detective adds. "You can't help it. There are a million white guys out here, and they all look alike. That's what's nice about the computer. Working cold, it's the minorities you tend to notice. The others are just too hard to pick up."

Airport stats fell significantly. Although currency seizures had been declining gradually since 1992, drug seizures at the airport had remained pretty steady--more than 2,000 pounds a year of marijuana and more than 200 pounds of cocaine.

By 1996, airport stats were lousy; drug seizures were down 75 percent from the previous year, and money seizures were down 50 percent. (The number of cocaine seizures did get an unexpected boost when a routine maintenance check turned up 100 bricks of cocaine packed into the electrical paneling of an American Airlines jet hangared in Dallas.) The decrease was so startling that in January 1997, Dallas police chief Click asked his deputy narcotics chief, Roger Duncan, to write an internal memo explaining the plunge.

Although Duncan's January 14 memo lays the primary blame on NAFTA--"since the inception of [NAFTA], many of these organizations prefer vehicular transportation"--many involved agreed privately that declining morale and the changes Phelps had initiated in the program were also devastating. (Phelps says the only morale problems at the airport were due to malcontents--the same ones, he says, who are now singing to the Observer.)

By last summer, DEA employees' spirits were at an all-time low in Dallas--and so were drug stats division-wide. Marijuana seizures were down 90 percent from the year before. Pharmaceutical busts--LSD, quaaludes--had fallen 40 percent. Cocaine was flat. (Only heroin was up significantly, thanks to one gigantic bust in Lubbock.)

Phelps blamed the locals, who he thought were more concerned with filling city coffers than fighting drugs. And Phelps believed the airport task force needed stronger leadership. In January of this year, he came up with a solution: He signed a memorandum of understanding with the Dallas and Tarrant County Sheriff's departments, adding them to the task force.

The locals were incensed. They hadn't been consulted, and the issue wasn't academic. Under the terms of everyone's annual agreement with the DEA, participants split all the cash and property that was seized. Twenty percent off the top went to the DEA--the remaining 80 percent was split among the other task force members, according to the percentage of personnel each provided. (For example, DPD has contracted to provide 28.4 percent of the manpower, so it gets 28.4 percent of 80 percent of the booty.)

In years past, the city of Dallas has recouped as much as a quarter of the DPD's total narcotics budget from the D/FW task force alone. The smaller police forces relied on the money even more. In a series of emotional meetings from February through April of this year, the feds and the locals hurled charges and countercharges at each other. The feds told the local chiefs they cared too much about money and not about drugs; the locals accused the feds of arrogance and of forgetting who really did all the work.

After much discussion, the chiefs took a most practical approach: They decided to call Thomas Constantine. By then, with complaints reaching crescendo level, Phelps had unexpectedly retired--to take an executive security position with GTech, the company that runs lottery games nationwide, including the one in Texas. Mercado, meanwhile, had been notified that he was taking Phelps' place. So the next big task force powwow on April 24 saw a wide-eyed Mercado sitting at the conference table in Dallas with the local police chiefs.

Mercado is exceedingly gracious about the task force affair, which he is obviously still working furiously to defuse. "I think it was a mistake on our part," he says. "I think that it was just that we didn't address it initially--request to see if they wanted to increase their manpower. But it has been resolved, or it will be."

As of last week, though, no one had figured out quite what to do about those newly hired sheriff's deputies. After all, they specialize in running clean jails, not snaring evil drug runners.

Two things are sure to happen.
First--all management techniques involving Beauty and Harmony aside--the resolution of the problem will definitely involve a lot more federal drug money. It's HIDTA money to the rescue. "Do you know about this?" asks Mercado, proffering a copy of the Dallas DEA's HIDTA proposal for a $2 million cash infusion, which he expects to be approved later this year.

And second, as soon as all the airport greed is sorted out, Mercado will have to turn his attention to much bigger issues. At the top of his list will be transforming a drug enforcement agency into, well, a drug enforcement agency.

"We will do better," vows Mercado, with the solemnity of a man who takes his management-theory reading very seriously. "We will do better. You'll see."

Christine Biederman is a Dallas freelance writer.

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