The Cartel The Inside Story of Britain's Biggest Drugs Gang

by Graham Johnson

  Poncho: ‘It was time to get off – we just knew it. There was something in the air in Amsterdam; you could tell that Curtis getting arrested had changed the game, ever so slightly. And it was no longer in our favour.

  ‘I’d come back to Liverpool to sell cocaine with my brother, so I was a bit insulated in that sense, in that I wasn’t on offer in Dam Square. Scarface and Kaiser were a bit higher risk: they had bought a nightclub in Liverpool but were still going back and forth to Amsterdam. But they soon realised it was now time to pull out of the Dam altogether.

  ‘Fortunately, they had started hanging around with celebrities and agreed to act as security. In Holland, they took care of Michael Hutchence from INXS. So they’d made a few contacts in the music business, and in Hollywood, New York, Miami: places like that. So they picked up and then they went to the States – they’d got some good links over there.

  ‘In New York, Scarface was protecting rap stars such as Naughty by Nature and the acts off Yo! MTV Raps.’

  Poncho added, ‘They didn’t really need the money. It was just a bit of fun, which fitted into their globetrotting. They knew they’d get nicked like Curtis if they kept going to Holland, so that was that. It kept them out of the Dam until things blew over.

  ‘They were big fellers with loads of cash, so stars took to them. The stars knew they didn’t want anything, so they relaxed. Then they worked with Alice Cooper and Danny DeVito. Scarface and Kaiser were clean drugs-wise, but they partied with the rock bands. Scarface used to say to them: “Take my jet.” And some of the rock stars would be snorting on his private Gulfstream.’

  Back down to earth in Liverpool, the Cartel decided to invest some of its profits in bricks and mortar. Money laundering came into its own. In 1992, Liverpool Polytechnic was transformed into John Moores University by an act of Parliament. Tens of thousands more students flooded into the city. The Cartel put up much of the money to build many more student flats than would be required. Colin Smith was on remand, but later he set up a property company on a suburban street. The assets included several million pounds’ worth of student properties.

  The Cartel recruited legitimate investment managers who, according to police, ‘simply ran a parallel industry’. In turn, the Cartel bosses began to look and act like corporate executives.

  One report compared the Cartel to terrorists because they used the same ‘techniques in transnational crime’. The senior figures were described as ‘rationally economic’ men who used extreme violence in pursuit of goals and, of course, secrecy to defy laws. The Cartel employed a dodgy accountant who’d once worked for a big chain of bookmakers. He taught the Cartel to use a money-laundering technique known as ‘starbursts’. A deposit of dirty money was put into a bank account using a shell company. Under complicated standing instructions, the bank was told to wire small portions at random into accounts all over the world. Tracking it down over multiple jurisdictions was very hard. While Curtis Warren languished in jail, his lackeys got busy starbursting a portion of the £87 million that he had made on a 1,000-kilo consignment smuggled two years earlier, in 1991. Investigators missed the boat trying to recover the money, and once it was gone, they spent the next 17 years trying to track it down.

  But as the profits of the Cartel grew, they could no longer rely on offshore havens, which could only wash money in small amounts. They got into a scheme known as ‘smurfing’. This method involved the introduction of small but numerous cash deposits into European economies. The Cartel realised that it was a myth that money launderers used city states and offshore havens. It was too complicated and time-consuming. The most efficient places to hide money were big countries: the US, Italy, Switzerland, Russia and Austria. They were proved right – two-thirds of all money laundering is now concentrated in just 20, mostly First World countries, according to Donato Masciandaro’s 2004 book Global Financial Crime.

  The Analyst was part of a new generation of coppers who understood the drugs market. They’d served their time on the streets when drugs were prevalent. He noticed that criminals were stealing a march on law enforcement. The sheer numbers of drug criminals seemed overwhelming. There was a gold rush and everyone was getting involved because it was lucrative.

  But from a policing perspective, the enforcement style wasn’t really switched on to the new level of criminality. The numbers of Regional Crime Squads covering the region weren’t sufficient. Traditional police officers preferred to target burglars over drug dealers because they saw an imminent threat with the burglars. Meanwhile, the firestorm that had started around drug profits edged closer.

  The Analyst said, ‘It was a perfect storm: the club scene combined with providers to a different market. Suddenly drug dealers had numerous opportunities to start distribution. If you were a drug dealer, you had several options. Do you do E’s into the clubs? Do you do heroin back to the inner cities? Or do you bring cocaine in and get the average member of the middle class involved: the type of person who’s going out into the city centre for an average night out with a line of coke. You can see it anywhere now: people who go into the bars and are using cocaine recreationally to enhance the evening. But that started in the early 1990s. Or do you trade off amphetamines, which became popular around the time of E’s as another buzz, another hit.’

  In St Helens, unemployed builder and failed drug dealer turned tobacco smuggler Frank Smith saw a gap in the market. Speed was a poor man’s Ecstasy, but if it could be made on an industrial scale the potential was enormous. Clubbers in the suburbs were already getting bored with the high cost of designer drugs. ‘Stack ’em high, sell ’em cheap’ was Frank’s motto. He continued his research into chemistry and rooted out contacts who could help him. On the supply side, the Cartel was looking to diversify. They started talking.

  The Analyst said, ‘You started to see a number of different markets with a number of sophisticated criminals who wanted to be a jack of all trades. They wanted to build relationships with the distribution networks involving different people in different environments who could supply a number of different commodities. In that sense, Liverpool criminals were ahead of the game.

  ‘By the early ’90s, our Liverpool criminals had been established for 20 years: the travelling networks abroad and over here had been established back in the 1970s. They were ahead of the game because they had been involved in building working relationships across Europe.

  ‘For instance, prison was important. When they had been caught and gone into prison in Holland or Germany or wherever, they continued their education and built relationships with people in prison in Spain and Holland and right the way across the continent.

  ‘When you get to the ’90s, when there was a need to import to meet demand, the Liverpool criminals had already got ahead of the game from what they were doing during the ten or fifteen years of growth, even at a low level. Even before that, people were coming from all over to Liverpool to buy at street level.’

  At street level, the heady cocktail of super profits, violence and competition to join the Cartel warped the club scene. The Quad nightclub closed down, but other violence-prone nightspots opened up one after another. One club was a typical example of a venue of its time with links to organised crime. It had had a chequered history. Not long after opening, the club was shut down after serious drug and violence problems. When it reopened in 1992, the level of threat was such that only doormen with serious martial-arts training could cope. They were highly paid. The doormen involved later ran security at the world-famous Cream nightclub.

  The market for drugs inside the club was so lucrative that two drug dealers from Toxteth started turning up in BMWs and Porches, trying to intimidate the door staff. The plan was to be deliberately provocative by hitting girls and throwing money around, to draw the door staff into a war.

  Like most doormen, the security preferred one-on-one straighteners to settle disputes. They won and considered the matter settled fairly. But the drug dealers claimed they’d been publicl
y humiliated. A short while later they came back – armed with an Uzi sub-machine gun. They fired it at the doormen at point-blank range. They ran right up to the entrance and peppered the door with bullets. No one was injured, but the use of guns was emblematic: they were becoming common.

  The clubs were gold mines for the dealers who sold the tablets inside. At other superclubs, some doormen were making thousands of pounds a week by controlling the supply. There were two ways of operating. One was for the head doormen to buy the tablets themselves in bulk and hire their own dealers on a wage to sell for them inside. The doormen then stopped other rogue dealers from getting inside, thereby creating a monopoly.

  The other method involved extracting a tax from existing drug dealers. The head doorman cut a deal with an established ‘team’ of dealers and runners. The percentage from each tablet they sold varied between 25 and 50 per cent. Dealers who weren’t part of the set-up were beaten up if they were caught selling inside the club. Their drugs were often confiscated and then recycled back into the club: handed to the ‘authorised’ drug dealers to sell. The models were a win–win situation for the doormen. Many grew very rich. One club owner estimated that ‘one in ten’ of the doormen he employed became millionaires as a result of the E trade.

  The traffic was on a massive scale. Almost everyone in certain clubs was on E’s or similar drugs. Thousands of tablets were being ‘knocked out’. In some places, if disapproving, old-style doormen came on heavy to the punters and dealers, they’d get told off by the owner.

  A private detective who was employed by a nightclub chain to spy on corrupt doormen reported that ‘law-abiding’ nightclub workers were soon ‘overwhelmed’ by the drugs trade. Only one in ten bags of Ecstasy tablets was confiscated, he reported. Even those that were taken from ravers were resold by corrupt doormen. He told how one punter was caught with seven hundred tablets hidden in a jacket. Instead of calling the police, the head of security passed the drugs on to tame dealers. He described the supply as limitless and said that there was no incentive for doormen not to become complicit with the drug dealers.

  The report stated: ‘The clients’ contractor pays head doormen £500 a week, which all of the lads considered to be a good wage. They can make that in one night at the weekend.’

  The illegality led to other serious breaches. At one club, doormen were observed exploiting vulnerable young women. They regularly had sex with women high on drugs inside and outside the premises and then went straight back to work.

  Meanwhile, Fred the Rat decided that he was going to relocate to Spain. By now, he was fabulously wealthy. Estimates put his fortune at between £50 and £100 million. But the gang wars, the door squabbles and Curtis Warren’s arrest had given him the jitters. He’d never been caught for drugs. Fred had accumulated a string of legitimate enterprises, including several construction-related businesses, several pubs and nightclubs, a huge number of properties and a formidable landbank (an investment used by property speculators in which land is stored up in trusts). It was time to get out while the going was good.

  CHAPTER 20

  RETURN

  1993

  SCARFACE AND KAISER continued their rock ’n’ roll lifestyle in exile for around a year. When they were convinced that the heat from Curtis Warren’s arrest had died down, they slipped back into Amsterdam once again. It was time to get down to business. Another 1,000-kilo load was organised from South America. The deal went off smoothly. But they noticed an undercurrent of violence sweeping through the Dutch capital. It had lost its innocence.

  Poncho said, ‘The scene had definitely toughened up. There was an edginess in the air now. Gone was the lazy, hazy way of doing things, of getting stoned, sunbathing or nipping into the cat house in the afternoon. The whole Liverpool firm was massive now. It was up and running at full speed now, and it was serious. There was definitely more internal competition.’

  The world that Scarface and Kaiser inhabited became increasingly brutal, and though they might not have liked it, they were swept up in the tide of violence. Scarface was linked to the murder of a drug dealer who had been thrown out the window of a block of flats during a party, and he was also rumoured to have been involved in the deaths of three other men, though he was never convicted of any of the crimes.

  Unlike many gangsters, Scarface and Kaiser did not crave status through violence, according to Poncho. In the early 1990s, Poncho claimed that many ‘plastic criminals’ – villains who pretended to be tough but weren’t – got involved in the Cartel. He said that ‘they were charged off cocaine and steroids’. The rage led to gang wars such as the dispute between a doorman called Stephen Clarke and a rival family.

  Poncho said, ‘The kind of violence that was going on between doormen back in Liverpool was sporadic and seemed to have no goal in sight, whereas the violence that Scarface and Kaiser got involved in was more often than not planned and the outcome was always to improve business.’

  Lucio and Scarface grew closer. They even looked similar and were often mistaken for twins. One time Lucio asked Scarface and his Scousers to collect a debt from a fellow South American who was flying into Holland from the US with ‘mad money’. The cash, reputedly several million dollars, had been stolen from Lucio a few months before. The contract was a sign of how close they were – and how powerful the Cartel were in the eyes of the Colombians.

  Scarface made a call to Liverpool and recruited a ‘team’ to carry out the raid. But in the end, the job turned out to be so sensitive that Scarface and Kaiser agreed to go on the raid themselves. They realised that failure could sour their relationship with Lucio. They stormed the South American safehouse wearing balaclavas and sporting assault rifles.

  Little did they know that the US Drug Enforcement Administration had followed the shady South American from the US. The DEA had been stepping up operations in Amsterdam to combat Ecstasy. The details of what happened next are unclear. However, later Scarface was arrested. He was released amid claim and counterclaim that the raid had blown an undercover US operation.

  By 1993, the senior Cartel strategists realised that supply of drugs was outstripping demand. The growth of Ecstasy had levelled off. For a couple of years, the Cartel’s lower-rung salesmen had been pushing out into the countryside, trying to stimulate sales and set up with people like unemployed builder Frank Smith. But the process was painfully slow as it still relied on out-of-town dealers driving to Liverpool once or twice a week to stock up on supplies. Decisions were made: now the Liverpool dealers would take the business to them. The franchise system was set up. Cartel dealers would be sent out to live in Wales, Hull, Cumbria, Cheshire and Lancashire to settle in communities. Nothing would be left to chance: local dealers wouldn’t have to travel to Merseyside. They would be supplied from a local hub – and if they didn’t want drugs then they would be forced on them. The Analyst noticed the change.

  The Analyst said, ‘The Liverpool criminal was thinking: “Do we really need someone coming to Liverpool to buy a couple of ounces? Isn’t it easier if we go out and distribute six ounces a day as opposed to waiting for someone to buy one ounce every week?”

  ‘So they were going out to the outlying areas, to places like Cumbria and Yorkshire. You look at Cumbria and think there’s no drugs industry there. But the Scousers have been out there and set one up because they’ve realised people want drugs.

  ‘So, as opposed to someone from Whitehaven coming down on a Friday to stock up on what they wanted to sell over the weekend, the idea was that they would have it there ready to go and they would set up a distribution network that ran itself.

  ‘So they were starting to franchise and to organise. They would settle there and build the relationships. Once they had got it up and running, someone local would take it over because they had the local knowledge of criminals and users, and then our Merseyside criminal can just worry about the distribution network, so they were effectively franchising the local sales out.

  ‘It’s lik
e McDonald’s. The Merseyside criminal comes in, teaches them their trade and then he goes away to maintain the supply chain.’

  The Analyst noticed how the Cartel was adapting ready-made travelling networks to sell drugs. For instance, Dorset police would report that a Liverpool gang were committing burglaries locally. The network remained, but the crimes changed.

  The Analyst said, ‘It goes back to how the city started. For instance, building a motorway network around Kirkby: you’ve got the M57, M58, M62 and the M6 on the doorstep of Kirkby. So do the Kirkby criminals come into Liverpool to commit crime in a poor and troubled city? Or just as quickly do they travel out to more lucrative opportunities anywhere in the country?

  ‘They knew that the law enforcement wasn’t as switched on. So they could travel to a rural shire district and be involved in burglaries there, where the risk of being caught was minimal and the pickings were better.

  ‘But the shrewder individuals used the money that they made to step up into the drugs trade. But not everyone involved in the chain became a drugs dealer. There were people involved in these travelling networks such as hauliers, transport companies, taxi firms – that type of industry – so people were making the money there.