Federal authorities said Tuesday they have cracked a twisted case of drug trafficking in the Baltimore-Washington area that reveals how organized crime rings can use identity theft to supplement income from other criminal sources. Among the allegations in the indictment: that dozens of conspirators got their victims hooked on cocaine, crack or heroin, then took out life insurance policies in their names and collected when the victims died.
According to the indictment, Paulette "Auntie" Martin, 57, of Takoma Park, Md. and 30 others sold drugs and took out life insurance policies dating back to 1995. A 20-month investigation called "Operation Encore" climaxed June 1, when federal agents simultaneously executed 30 search warrants, followed by 29 arrests.
Among those arrested: Richard Gunn, 52, an insurance agent who worked in Burtonsville, Md. The indictment says Gunn worked with Martin to take out 17 life insurance policies via identity theft, and collected on the policies as recently as March of this year. Pilfered Social Security numbers and other stolen personal information were used without the victim's knowledge to fill out the insurance paperwork, the government alleges. Martin and others paid for the life insurance polices with proceeds from drug sales.
"What makes the indictment so unique is this is the first time we've come across a drug organization laundering proceeds in this fashion," U.S. Attorney Thomas M. DiBiagio said. "Drug organizations love to double their profits."
In the past, drug gangs would set up retail shops such as auto parts stores, buy inventory with the drug proceeds, then double their money through sales, DiBiagio said. Identity theft is apparently just the latest method.
"They are businessmen. They realize this is a way to make more money," he said. He declined to discuss more details of the case.
Not all of the insurance policies were taken out on behalf of drug users, U.S. attorney spokeswoman Vickie LeDuc said. Others were taken out on behalf of other individuals "with low life expectancies," she said. In each case, a member of the crime ring was the designated beneficiary.
In one case, a life insurance policy was taken out in 1995 in the name of Gregory Harris with Conseco Life Insurance Company in Carmel, Ind. When Harris died, Martin and another suspect then collected on the policy in March of this year, according to the authorities.
A Conseco representative said the firm hadn't seen the indictment and couldn't comment.
"If the allegations contained in the indictment are true, this is the most despicable use of identity theft I have ever encountered," said identity theft expert Rob Douglas, who has testified before Congress several times on the topic. "To sell life-threatening drugs to addicts, while collecting the proceeds of fraudulently procured life insurance policies issued in the names of addicts, is perhaps the most heinous and perverted form of financial fraud in the United States to date."
Most of the suspects will be arraigned within the next few weeks, LeDuc said. The case is also unusual because Martin, the alleged ringleader, is a woman, and so are many of the other suspects.
It's not clear how much money the alleged crime ring walked away with, but large amounts appear to have been involved. Three suspects arrested earlier this year -- Gwendolyn Levi, 60, of Elkridge, Md., Donna Johnson, 46, of Landover, Md., and Juan Manuel Rojas-Castro, 29, of Bronx, New York -- were found with three kilograms of heroin and $250,000 in cash. Authorities allege that they were responsible for importing large quantities of heroin into Maryland from the New York area.
Agents executing the search warrants on June 1 seized eight handguns, large quantities of cocaine and heroin, and more than $1 million in criminal proceeds that the organization had accumulated through their operation, the indictment says.
Douglas said the indictment also serves as notice that organized drug rings have seized upon identity theft as another tool in their arsenal. "This is a window into that world," he said.