Keeping tabs: law enforcement hard-pressed to stay ahead.

HUGH Wilton had never seen that much cash in one room.

Wilton, a detective in the Los Angeles Police Department's asset forfeiture detail, was standing over almost $4 million scattered across the bedroom of an East L.A. house serving as a cocaine pad.

Bills were stacked in its corners, and there was a large suitcase stuffed with $1 bills. Four hundred thousand of them.

"It's not that often you go into a bedroom full of money," Wilton remembers. "And to have a suitcase so heavy I couldn't budge it, lifting it was out of the question. We couldn't even drag it on the carpet."

The haul was big, but it was also rare.

From drugs to dental services, businesses fueling the criminal underground economy are hard to crack. The tools used by law enforcement agencies--mainly tracking suspicious bank deposits or seizing assets--are only helpful when the cash surfaces in the formal economy.

As a result, investigators depend less on science and more on an agent's imagination.

"Most law enforcement admit that it's luck," says Gary Tang, a spokesman for the Internal Revenue Service's criminal investigations division. "We stumble upon it."

During the last few years, those investigations have expanded to a new crop of cash businesses, including cigarette sales, unlicensed dental services, travel agencies, real estate services and pirated compact discs.

Still, most criminals evade tracking by unloading their cash quickly, either spending it or moving it into "clean" situations. Some drug dealers, for instance, frequent casinos to dispose of dirty cash, exchanging chips for a check written on the casino's account.

Further complicating enforcement is the unwillingness of businesses or employees to cooperate in investigations. Workers paid in cash--often illegal immigrants fearing deportation--rarely report violations of overtime and minimum wage laws, says Dean Fryer, a spokesman for the state's Department of Industrial Relations.

Resources also play a role in pursuing cash crimes. Wilton, part of the LAPD's narcotics division, has had several detectives shifted to homicide, burglary and car theft divisions in the past few years, and relies heavily on federal agencies to investigate financial crimes.

But federal investigators mostly handle large-scale narcotics and organized crime. And local prosecutors, such as those at the City Attorney's Office, often skip complex investigations for more easily prosecuted street vendors.

Lost in the mix are essentially legal entities, even if they hire illegal workers.

"They may have a legitimate business that pays taxes, or at least some of them, " says Thom Mrozek, spokesman for the U.S. Attorney's Office in Los Angeles. "You have a slice of the business under the radar, and that profit generated, or the taxes not paid, is washed into the main revenue stream. It's difficult to find that out."

Still, law enforcement officials have some tricks of their own. The best leads come from suspicious activity reports, or SARs.

In the past, financial institutions filed currency transaction reports if a customer made a deposit or withdrawal of $10,000 or more. But criminals got wise, limiting deposits to $9,999 or spreading smaller deposits among multiple accounts.

An expansion in the late 1990s of the Bank Secrecy Act required banks to the SARs on any currency transaction they feel is suspect, regardless of dollar value.

"If you have someone who doesn't look like they have that kind of cash, or if you have repeated cash deposits of $5,000 to $6,000 in small bills, there might be something to that," Tang says.

Reports on the rise

The act was expanded again as part of the U.S.A. Patriot Act following the September 2001 terrorist attacks to apply to about two-dozen types of businesses dealing in cash, including casinos, real estate agencies and boat dealers.

As a result, SARs filings are up in Southern California, where businesses file 5,000 each month, compared with 3,000 before 9/11.

All businesses are required to file a form with the IRS when a customer makes a payment of $10,000 or more in cash. "We get a lot of cars," Tang says. "People buy a lot of cars with cash."

The regulations are an attempt to impose some paper trail as cash enters the legitimate market. And while not every transaction is caught this way, investigators use patterns to develop leads.

IRS agents often go undercover to crack down on car dealers who turn a blind eye to cash purchases. In one case, an agent purchased Mercedes and Porsches for cash three times and the dealer never reported the purchases. Those leads may result in finding criminal behavior.

Investigators also look to goods as a tip that off-the-books cash deals are in the offing.

At the Drug Enforcement Administration, agents track cash purchases of raw materials and other items used by drug dealers, says Jose Martinez, a spokesman for the DEA's L.A. field division. Methamphetamine labs, for instance, use generators, blast equipment and pharmaceuticals.

"All those would be tidbits of information that by themselves don't mean anything, but together, might be a lead for an investigator," Martinez says.

The immigration and customs enforcement arm of the Department of Homeland Security often tracks suspicious cargo coming into the ports, explains Kevin Kozak, assistant special agent in charge of its Long Beach operations. That office receives tips from freight forwarders, customs houses, shippers, port inspectors and border patrols.

If 900 containers of Louis Vuitton designer bags arrive from China, where Louis Vuitton does not have a manufacturing site, inspectors may contact immigration and customs enforcement.

And while investigators have the authority to freeze bank accounts, there is often little there because the businesses deal largely in cash. "They aren't like legitimate businesses with receipts or checks or transactions," Kozak says. "That's the challenge we face."

As a result, the success rate of cash crime investigations remains unclear. "They usually stay around long enough to make their money," Tang says. "Once there is a red flag out there for law enforcement, they'll either take off or stay in flight."

RELATED ARTICLE: Money managers.

More than one dozen federal, state and local agencies track the flow of cash.

* U.S. Internal Revenue Service: Obtains tips from businesses about suspicious cash transactions, including those reported on Form 8300.

* U.S. Drug Enforcement Administration: Monitors purchasing activity of drug criminals.

* U.S. Bureau of Immigration and Customs Enforcement: Seizes counterfeit merchandise arriving at ports and monitors work sites employing illegal immigrants.

* Federal Bureau of Investigation: Investigates money laundering, drug trafficking, fraud and other large crimes by seizing assets and monitoring bank transaction information.

* U.S. Attorney: Probes and prosecutes money laundering, drug trafficking, fraud and other large crimes by seizing assets or monitoring bank transaction information.

* Los Angeles City Attorney: Probes and prosecutes misdemeanor off-the-books violations.

* Los Angeles County District Attorney: Prosecutes felonies including the sale of narcotics, environmental crimes, workers' compensation fraud, real estate fraud, organized crime and consumer fraud.

* Los Angeles Police Department: Investigates drug-related and organized crimes with authority to seize assets of $500 or more.

* Los Angeles County Sheriff's Department: Investigates crimes related to cash: drugs, casinos and gaming, pawnshops, organized crime, real estate, computers and auto theft.

* U.S. Department el Labor: Enforces federal labor laws, including those involving wages, migrant workers, construction and workers' compensation.

* California Department of Industrial Relations: Files civil actions on businesses violating state's overtime, minimum wage and other labor laws.

* California Franchise Tax Board: Collects and investigates state's personal income and corporate taxes.

* California Employment Development Department: Collects and investigates payroll taxes, maintains employment records.

--Amanda Bronstad