Arrest Reveals Pipeline to Illicit ‘Designer’ Drug Labs

Police and federal agents who staked out the Chemical Shed Inc.’s offices in Canoga Park last year said in interviews and affidavits that they were astounded by owner Burton W. Farrell’s clientele.

Virtually all the customers drove up in cars or rented vans and trucks lacking chemical company logos. They glanced warily up and down the street when entering and leaving the store, and several license plates were traced to manufacturers of synthetic heroin, methamphetamine and the hallucinogen PCP.

“We have a lot of experience doing these kinds of surveillances, and we were struck dumb,” said Sgt. Mike Murphy, head of the Los Angeles Police Department’s clandestine lab squad. “It was very difficult finding a legitimate buyer. It got to be ridiculous.”

“Bud” Farrell, who in the mid-1970s parlayed a career as a distributor for a St. Louis chemical manufacturer into his own million-dollar business, according to law enforcement officials, was the biggest supplier of chemicals to illegal drug laboratories in the state, if not the country.

His operation was so immense, authorities say, that the price of PCP in Los Angeles doubled when he finally went out of business. In addition, police and federal drug agents say he became the nation’s largest wholesale buyer of five-gallon containers of ether, a necessary item in manufacturing illegal synthetic, or “designer,” drugs.

Police and U.S. Drug Enforcement Administration agents say they were aware Farrell was selling chemicals to illicit drug manufacturers as early as 1977. Yet it took several years and a recently enacted law allowing the government to seize property through the civil courts before Farrell was put out of business last July. Criminal charges were filed earlier this month, and last week Farrell pleaded guilty in U.S. District Court in Los Angeles to racketeering, tax evasion and aiding and abetting the manufacture of illegal drugs.

The government now owns the $680,000 Westlake Village home Farrell paid for with cash and a $130,000 inheritance of his wife. Federal agents also took his two Cadillacs, his Chemical Shed outlet stores in San Bernardino and Ventura and $130,000 in stocks and bonds.

An insulin-dependent diabetic suffering from muscular dystrophy, the 58-year-old Farrell faces 20 years in prison when he is sentenced next month in U.S. District Court.

“His health is deteriorating badly,” a business acquaintance who asked not to be named said Thursday. “I was shocked when I saw him last week. He was limping, one of his eyes was closing (and) he can’t hold a pen to write.”

Farrell refuses to discuss the case. “I’m not going to comment,” he said when reached by telephone. “Thank you very much, though.”

One of his attorneys, Eugene West, said Farrell was conducting a legitimate business and selling chemicals to known drug manufacturers only because he had worked as a police informant for several years and was led to believe it was legal as long as the chemicals were not on a “restricted” list.

“It’s like busting a gas station owner because some of the gas he sold may have been used to make a Molotov cocktail,” West said. “The police really started to hang him out to dry.”

Law enforcement officials acknowledge that Farrell’s information led them to about a dozen clandestine drug laboratories from 1977 to 1983. But they claim that since 1983 Farrell either refused to assist them or gave them worthless information to cover his illegal activities.

“He’d say some black guy in a red Chevy came in and bought some ether. What the hell good is that?” said Murphy, who worked the case with LAPD Detective Roy Wunderlich. “He was just throwing us crumbs. . . . All the time we’re playing fat, dumb and happy.”

Federal prosecutor John Kuray said Farrell’s 1984 gross income was $1.2 million and his projected income for 1985 was $1.5 million, according to account books Farrell kept.

“One was actual income and one was for the IRS,” Kuray said. “Seventy-five to 80% was illegal business.” Farrell played an immense role in supplying clandestine drug manufacturers with the chemicals necessary to manufacture synthetic heroin, methamphetamine, PCP, cocaine and Quaaludes, according to DEA agents.

Forty-one of the 84 times Los Angeles police were called to investigate illegal drug labs or dump sites from 1983 to July, 1985, they discovered Chemical Shed labels on the containers.

When the Chemical Shed went out of business last July, the price of PCP went from $100 to $200 an ounce, a DEA agent said. It also became much harder to find.

“When we finally shut down the place there was hardly any juice (PCP) to be found,” Murphy said. “We didn’t get any calls for months and months.”

Chemical Shed sold supplies, including glassware used in the manufacturing process, to people operating clandestine labs in the San Fernando Valley, South-Central Los Angeles, Compton, Barstow and San Bernardino, investigators said. One unnamed informant from Minneapolis quoted in an affidavit filed in U.S. District Court said it was easier driving 2,000 miles to buy chemicals from Farrell than purchasing the items in Minnesota.

‘Restricted List’

It is legal to sell most chemicals used to manufacture illegal drugs with the exception of those on a “restricted list” that, by law, require identification of both the buyer and seller. Most chemical dealers, however, require that customers open accounts with their stores and maintain files with the buyers’ names and addresses.

It is illegal to sell any chemical if the dealer knows it will be used to manufacture illegal drugs. Kuray said few dealers are prosecuted, however, because it is difficult to prove intent to violate the law.

But with the passage of the Omnibus Crime Control Act of 1984, the federal government can use civil procedures to shut down businesses “used to facilitate illicit drug activity.” Assistant U.S. Atty. James Stotter II said the seizure in July of Farrell’s assets and property was the first application of the law in California.

Attorney West believes the law is an unconstitutional seizure of property before a determination of criminal guilt. He was appealing the seizure when his client decided to plead guilty to the criminal charges and relinquish his home and other assets, including “truckloads” of drugs taken from his stores.

‘No Questions Asked’

Kuray said none of the receipts kept by Chemical Shed employees showed the names of purchasers. “As long as you had the cash, there were no questions asked,” he said.

In addition, Kuray and case investigators said Farrell marked up the price of several chemicals if he knew they were going to be used in the manufacture of illegal drugs. This was especially true for such restricted chemicals as pyrrolidine, which is used to manufacture PCP, n-methylformamide, an ingredient in methamphetamine, and methylacrilate, a key ingredient in the manufacture of synthetic heroin.

“A pint bottle of pyrrolidine is $25,” Kuray said. “He was charging (undercover agents) $100 and then $150.”

Most of the government’s evidence came from court-approved wiretaps, a hidden microphone in Farrell’s Canoga Park store in the 7800 block of Alabama Avenue and a video camera secreted in an equipment box hanging from a telephone pole across the street.

Kuray and Murphy said that although Farrell and store manager Barry Marton knew about the camera, they apparently didn’t tell their customers, not even when police and federal agents began stopping and searching vehicles as they drove away.

‘They’d . . . Wave at Us’

“They’d come out of the shop and wave at us,” Kuray said. “They knew we had the camera, but they never picked up on the fact their phones were tapped” or that there was a hidden microphone placed in the office.

Kuray said there were not enough agents and police assigned to the case to follow suspicious vehicles to illicit drug labs. Nor were there enough investigators or time to stake out many of the suspected labs, obtain search warrants and conduct raids on the homes and apartments.

So, he said, investigators stopped and seized chemicals from more than 70 suspicious vehicles during the stakeout, which lasted from May to June of last year.

“We weren’t arresting them,” Kuray said. “We were just taking their chemicals.”

Five drug labs were raided during the Chemical Shed stakeout, and investigators said a grand jury will soon begin hearing testimony regarding up to nine individuals allegedly involved in illegal drug manufacturing.

One of the labs raided during the Chemical Shed probe was allegedly operated by Luther Dickson, 47, and Larry King, 38, out of an expensive home in the 11500 block of Lamaida Street in North Hollywood. The residence was searched by police and federal agents last year but charges were not filed until another raid on the house earlier this month.

DEA spokesman Dwight McKinney said a forensic chemist estimated there were enough chemicals in the North Hollywood lab to manufacture 100 million doses of fentanyl. Fentanyl sells for less than $5 a dose although drug enforcement agents say it is hundreds of times as potent as organic heroin or morphine. DEA officials blame the drug for up to 100 overdose deaths in California during the past two years.

Dickson, an Air Force veteran with a Ph.D. in chemistry who served a prison sentence for manufacturing PCP, visited Farrell’s store on May 23, 1985, and purchased three kilos of methylacrilate, according to an affidavit on file in U.S. District Court in Los Angeles.

The following day officers Wunderlich and Murphy went to the shop with a list of ingredients for fentanyl and asked Farrell and Marton if anyone had attempted to purchase methylacrilate.

According to the affidavit, Wunderlich asked, “Any calls for that?” and Farrell replied “Nope.”

Minutes after the two officers left, the affidavit quotes a store employee as saying, “They know what we’ve been selling,” to which Marton replied, “Don’t worry, we’re not doing anything illegal.”

A transcript of the federal wiretap quotes Marton as telling an employee, “. . . It’s obvious we’re not reporting this to the IRS.”

No criminal charges have been filed against Marton, although police and federal agents say they are still gathering information about his role in the business.