Chinatown Cosa Nostra

Police experts fear that a little-known criminal subculture could become America's No. 1 law-enforcement threat

Painting by Barclay Shaw

"It is very hard to tell with men. Some like tall and skinny ones. Some like fat ones," Shih Hsaio Pao, a middleaged Taiwanese madam and mother of three, complained to an oriental New York City police detective who was posing as a wearing a wire, nodded sympathetically. "Everybody's taste is different," Shih Hsaio Pao continued. "Some girls look really good. Once they get into the room, they are as cold as ice. That is useless. The customer is not happy and must scold her. Some people are not as beautiful. But they are more humble, and they are willing to do anything. So the men figure that they are not marrying a wife, and he said he used condoms as a culinary aid: "I cook in a wok, and I keep them on my fingers to protect from splashing hot oil." all they want is good service."

The detective was a key player in an extensive investigation initiated by the Federal Immigration and Naturalization Service's Senior Special Agent James Goldman. It was nicknamed the "Project Hydra" case, and Goldman was assisted by his partner Glen Reyes. During a period of several weeks in, March 1986, Goldman's undercover detectives had wined and dined Shih in an effort to find out how she ran her international alien smuggling and prostitution ring. Madam Shih didn't appear to find her job particularly daunting. There wasn't, she assured one detective, "a single bit of risk" in getting the girls.

"We get them over from Taiwan, where my son works in the travel business," she explained. She neglected to mention the fact that her son specialized in approaching cosmeticians, factory workers, and hotel maids who were desperately poor-and equally ingenuous. He enticed them with tales about America, the land they called "The Mountain of Gold." His mother, he said, owned nightclubs there, where there were job openings for entertainers and hostesses.

"If a girl wants to come here, my son has her sign a contract," said Shih. "This is her agreement that she will pay back all her travel expenses after she has earned them by working for me. Every month, we are getting visas issued from the Taiwanese U.S. Consulate, where my son has a connection inside. We give the girls money to buy the airplane tickets, money to settle their families down. Sometimes the money situation is tight. The uglier ones require a smaller advance. The younger and good-looking ones typically repay us slowly. The total fee for a customer is $80. The admission fee is $20. We get an extra $18 from the girls-$8 is for those in Taiwan who arranged for the girls; the remaining $10 goes to the shop. The ordinary massage parlor only makes $20. We make an extra $10. This is where we are stronger than other places."

The detective humbly expressed his deepest respect for his dining companion's business acumen. But wasn't there a possibility, he asked, of losing the investment if a girl ran away? "Over in Taiwan we know where they live," she assured him. "We know their telephone numbers. If she cannot be found here, she can be found in Taiwan."

She sighed, and repeated that "the tastes of men are strange. There are girls who dress nicely-20 years old-they did not do any business the whole day. Then there is one who is quite, quite old, 40 something years old. Every day, she does 3 hours a day, and the 20-year-old, she sits on the bench."

Stranger still, she added, was the customers' desire for "fresh girls only." Shih explained her ingenious system of "recycling" her workers-at her whim, she transferred employees between any of her seven brothels located in New York City, Houston, San Francisco, and Lakewood, Colorado.

There were also new girls coming in all the time, Shih said. Her daughter's lover, Lu Hung-Dar, was planning to bring in two girls from Thailand who were 19 and 20 years old. "Thai girls have very small waists and big breasts," said Shih. "[The travel expenses] would be $6,000. But this is no problem. Let us suppose she has five customers a day. We can make back $300 a day. As long as she can be controlled to work for 20 days over here, then we get our money back. We have to keep an eye on her for 20 days. We don't let her leave. With girls like that, we surely hold on to their passports."

As Agent Goldman read the transcripts of these tapes (which were later introduced as evidence), he grew increasingly convinced that Madam Shih's enterprise did not exist in a vacuum, but was linked to a highly organized, clandestine Chinese organized-crime network operating in America and working with connections in the Orient. Many of his colleagues in the I.N.S. and in other federal government agencies regarded this with skepticism. The year was 1985 and the consensus among law-enforcement officials at the time was that Chinese criminal activities in America were restricted to the occasional street-gang shoot-out in New York or San Francisco, and, of course, sales of illegal fireworks on Independence Day.

Goldman had first become suspicious of Madam Shih's activities when he was transferred from the United States Border Patrol to New York City in July 1984 An anonymous letter had been sent to him by a concerned Chinese-American citizen, alleging that a house of prostitution was operating at 148 Baxter Street in Chinatown. Goldman surveyed the location, and observed a heavy traffic of oriental males and a video camera positioned above the front door. Neighborhood residents told him stories of gunshots, violence, and protection by members of Chinese street gangs. Next, a search of public records connected the name Stephen Lai to the Baxter Street residence. Goldman learned that Lai was a repeat felon who had sold heroin to a Drug Enforcement Administration undercover agent. Shortly after Goldman began the Madam Shih investigation, Lai's wife Mary was gunned down by Chinese gang members at her place of work-a brothel located at 686 Sixth Avenue in New York. Mary Lai had comanaged the house with her husband, who was considered a prime suspect in the homicide. No one was ever charged with the murder, and the case remains unsolved. Both the brothels at 686 Sixth Avenue and at 148 Baxter Street were owned by Madam Shih Hsaio Pao.

Pulling the telephone records for Baxter Street and Sixth Avenue, Goldman was taken aback when he saw repeated calls to numbers in Houston, San Francisco, Lakewood and to Central and South America, Taiwan, and Thailand.

"At that point, I realized I was dealing with a large-scale illegal operation with national and international connections," Goldman said.

His next step was to develop a highlevel informant within the Madam Shih organization. Goldman chose an old friend and trusted confidant of Shih's. The informant told Goldman that Madam Shih was eager to open up new "shops." It was decided that Detective Albert Chan would present himself as a greedy entrepreneur with unlimited cash flow. At a critical meeting, Chan brought along his "bodyguard," Detective Louie Chan (no relation). Madam Shih brought her daughter and key associate, I Huei Chin. Albert Chan pretended to be a neurotic, fastidious, and polite investor. In contrast, Louie Chan acted the tough guy. He made statements like, "If you don't fucking believe me, then how can you fucking get me to come here today?" He snickered about the corruption of "white foreign devil" officials, at one point referring to deceased Queens Borough President Donald Manes as "a turtle egg."

Through their combination of deference and defiance, the two wired detectives gained the trust of the two wary women. There was a tense moment, however, when Albert Chan discovered that he didn't have enough money to pay for the expensive meal at one of Manhattan's more elegant Japanese restaurants. Pleading car trouble, he beeped James Goldman from a pay phone. Goldman, his fellow agents, and New York City cops had surrounded the lroha Restaurant in unmarked vehicles. Goldman walked from car to car, collecting all the cash he could to cover Chan's bill . . . and save Chan's cover.

Finally, Goldman obtained enough incriminating evidence to execute search and arrest warrants at all of Madam Shih's brothels and residences. Goldman's task force now included I.N.S. agents and police officers in San Francisco, Denver, New York, and East Brunswick, New Jersey. Guns were confiscated at the Lakewood brothel, glassine envelopes at Baxter Street. The building in New York had been fortified with three steel-locked doors, and was guarded by several Chinese youth gang members, one of whom held a loaded and cocked .22 caliber pistol disguised as a ballpoint pen. I Huei Chin's $92,000 East Brunswick condo (paid for in part with a $60,000 loan from Citibank) was seized, and explorations of her safe-deposit boxes unearthed over $17,000 worth of jewelry, gold, jade, and pearls. There were also bankbooks revealing that mother and daughter had amassed upwards of $100,000.

The tiny rooms in which the 50 Taiwanese women lived and worked contained tremendous quantities of condoms, other contraceptives, and tubes of KY jelly. A hundred condoms were found in the refrigerator of a whorehouse owned by a man who had once rented a shop to Madam Shih. When questioned by an assistant U.S. attorney in his private chambers, the man said that he used the prophylactics as a culinary aid: "Many times I cook in a wok, and I keep them on my fingers to protect from splashing hot oil," he said.

Madam Shih's defense attorney also attempted to deny the obvious implications of the seized sexual paraphernalia. In his opening arguments in U.S. District Court in Manhattan in June of 1986, in the case of United States of America v. / Huei Chin and Shih Hsaio Pao, Steven Rosenzweig proclaimed, "Nobody is on trial here for owning KY jelly." The lawyer was less glib, however, when Carl Loewenson, Jr., the assistant U.S. attorney, presented substantial evidence of unstamped passports, contracts made out by the travel agent, address books containing names of people and hotels throughout Central and South America, and transcripts of the taped conversations. I Huei Chin fixed an evil eye on the dozen former "employees" who testified for the prosecution. The young women described, through a translator, being' flown to Bolivia, El Salvador, and Guatemala. From there, they were smuggled over the Mexican border and held captive in houses in Texas until being transported to New York City. They spoke of their isolation and unhappiness, of the urgency they felt to pay off their "travel debts"-which ranged from $3,000 to $6,000-of the fear of retribution against their families should they fail to fulfill their "contracts." Some witnesses said that even after they repaid their debts, I Huei Chin refused to relinquish the documents.

Madam Shih and I Huei Chin were each convicted of prostitution racketeering and given long terms in federal penitentiaries. The other members of the network included Shih's two sons; Stephen Lai; I Huei Chin's lover; and a popular Taiwanese movie director. One son and Hung Chang Wang, known as "Director Wong," pleaded guilty to felony charges in California. The son was sentenced to four years in prison, and Director Wong was sentenced to 20 months. Stephen Lai was already incarcerated following his second arrest for selling heroin. Chin's lover, Lu Hung-Dar, remains a fugitivealthough James Goldman traced his movements through Guatemala, Ecuador, Thailand, and Hong Kong, and came close to capturing him in a dragnet in Oklahoma, where his sister owned a Chinese restaurant. Shih's No. 2 son, the travel agent, remains at large and cannot be legally extradited since the United States does not officially recognize Taiwan.

In many ways, Madam Shih's prosecution was a historic victory. It was the first time ever that the I.N.S. had brought a case under the federal RICO (Racketeer Influenced and Corrupt Organizations) statute, which prohibits conducting the affairs of an enterprise through a pattern of certain kinds of illegal activity (such as "transportation of women in interstate or foreign commerce for the purpose of prostitution").

For James Goldman, the conviction was a personal triumph-the result of extensive investigation, shrewd strategy, and almost obsessive dedication. Developing informants and coordinating work with detectives contrasted dramatically with his experiences as a United States Border Patrol agent at the U.S.-Mexican border. The only son of a middle- class Boston family, Goldman's parents had expected him to become a doctor or a lawyer. But after enlisting in the Air Force and working for a detective agency, Goldman decided on a career in law enforcement. He had been to the Mexican border, and realized that the most challenging of all law-enforcement positions would be with the l.N.S. -- combating the hordes of illegal aliens storming across the border. His first assignment was the harrowing Chula Vista sector. The routine raids there were often conducted at night, with one's closest partner stationed 40 miles away. There were times when Goldman discovered groups of 50 or more people hiding in the brush, any one of whom could be dangerous and desperate. I.N.S. policy is, don't shoot unless fired upon. Although James Goldman is tall and powerfully built, retaining the musculature he developed as a professional boxer, he learned techniques of large-scale psychological intimidation. The Chula Vista border, Goldman says, was like a world unto itself: a physical, rugged, unpredictable, and unremittingly stressful world. But after six years, Goldman realized that many aliens were still escaping through the border, and an equal number were committing crimes. He decided to work in the interior, concentrating on criminal investigations.

Ironically, Goldman first became aware of oriental alien smuggling while patrolling the Mexico-California border. Driving toward a school playground, he saw a group of young men, all wearing brandnew sneakers, playing basketball. A closer look revealed that they had no idea how to dribble. Goldman drove even closer, and discovered that the men were not Chicanos, but Orientals. A few miles down the road, there was a van filled with empty sneaker boxes. The Taiwanese smugglers who lay in wait there had assumed that the trendy footwear would make their group look more American. In the summer of 1984, he was transferred to New York City, where he concentrated on emerging ethnic crime groups. Even his most preliminary observations indicated that the Chinese had long ago emerged as active criminals. Soon, Goldman was introduced to yet another world unto itself; one that was, in its way, as treacherous as Chula Vista. Chinatown. As he walked the streets, he learned that Chinese youth gangs were regularly committing a full spectrum of street crimes. At night, he crawled through convoluted tunnels built deep beneath Chinatown's streets . . . and stumbled upon a clandestine firing range where older, seasoned criminals taught Chinese youth gang members to clean and fire Saturday night specials. Chinese youth gang kids crouched on rooftops, waiting for rival gang members to pass by, waiting to empty their weapons. Shabby, innocuous little storefronts housed high-stakes gambling dens where wizened old men chain-smoked cigarettes and drank cups of tea while they won and lost thousands of dollars a night playing mah-jongg and fan-tan, Chinese citizens who went on organized junkets to the "Chinese mecca," Atlantic City, were entertained by singers who had been brought over by Chinese criminal triads. Respectable citizens shook their heads in fear and refused to answer questions about the influence of the notorious criminal tongs: the Ghost Shadows, the United Bamboo Gang, and the Flying Dragon. Murder, extortion, drug trafficking, alien smuggling, prostitution- these were part of daily life in the New York Chinese community. Goldman knew that the scope of these activities couldn't possibly be restricted to a single neighborhood. Then the reports began coming in-police reports of Chinese youth gangs committing crimes in cities across the nation.

In early 1986, James Goldman began meeting with the D.E.A.'s newly formed Chinese Unit. This group of multilingual agents had been the brainchild of Robert Stutman, special agent in charge of the New York field division of the D.E.A. Stutman is a dynamic and innovative policymaker and supervisor, renowned for his incisive intelligence, broad understanding, and visionary ideas. Still, there were many law-enforcement officials who questioned the necessity of a unit devoted exclusively to Chinese drug trafficking. But Stutman had closely reviewed the analyses performed by D.E.A. laboratories, and by 1986, it was determined that approximately 40 percent of all the heroin being sold on the streets of New York City-and thus to the entire eastern region of the United States-derived from the "Golden Triangle" of Thailand, Burma, and Laos. Stutman hadn't been surprised to discover that so much heroin was coming from a new source, After all, the elimination of the French Connection, the raids on Corsican heroin- processing laboratories, the Pizza Connection trials, plus the recent vigorous prosecution of major Mafia figures (who had previously controlled eastern U.S. heroin trafficking) had all had an impact. Says Stutman, "As with any other aspect of crime, when one group steps out, another steps in." In this case the group was comprised of ethnic Chinese from Thailand, Hong Kong, Malaysia, Taiwan, and China. Reportedly over 1,200 tons of opium are produced yearly in the Golden Triangle. In June of 1987, Interpol issued a warning that Chinese organized- crime groups were transporting heroin from Southeast Asia to the United States through Panama via contacts with Chinese communities in Bolivia and Paraguay. Later that summer, officials in Connecticut warned of an increase in heroin deaths due to the unprecedented purity of the new Southeast Asian heroin known as "China White." And in December of that year, estimates of the influx of Southeast Asian heroin into New York City rose to 60 percent. During that same month, the D.E.A. and U.S. Customs agents arrested two Chinese men and one Chinese woman in their car in Queens, New York. The trio had just arrived on a Flying Tigers airline flight from Bangkok. The woman was three months pregnant. The victims surrendered with the stoicism characteristic of the Chinese. A search of the car unearthed $1 million in cash, phony passports, records of accounts in Atlantic City casinos, a $25,000 ruby and diamond-encrusted Rolex. and 165 pounds of pure Southeast Asian heroin. At the time, it was the fifth-largest heroin seizure in United States history. Last February in New York City, six men (from Thailand and Hong Kong) were arrested and charged with attempting to smuggle $165 million worth of heroin into the U.S. in terra-cotta statues. Customs officials said the statues were transported into the country on a Flying Tigers cargo plane from Thailand. In March 1988, the D.E.A. arrested their No. 1 drug fugitive, Chinese businessman Kon "Johnny Kon" Yu-Leung, said to be responsible for smuggling as much as $2 billion worth of heroin into the U.S. Kon was arrested when a group of eight D.E.A. agents interrupted his friedchicken dinner at the New York Hilton. It was reported that his past and present holdings included a trading company in Hong Kong, a watch company in Paraguay, and a fur business in Newark, New Jersey. A retired New York City police officer, Jonathan J. Ruotolo, was also arrested for allegedly being one of Kon's New York City drug distributors. At a press conference, Stutman said that he believed the importation of Southeast Asian heroin was now being controlled "virtually 100 percent" by Chinese criminal groups.

James Goldman wasn't surprised by this statement, nor by the magnitude of the bust. He had been trying to enlighten his colleagues about the scope of Chinese organized crime ever since observing that the boundaries of New York's Chinatown had extended into Little Italy- and that the Italians and the Chinese were coexisting in an unprecedentedly peaceful fashion. Says Goldman, "No one moves into Italian turf, no one dominates an enterprise, unless there is some kind of unity. Informants have told me about powwows between high-level Italian and Chinese criminals. It's only logical-can you imagine Cuban organized crime trying to take over trash collection in Little Italy?"

Furthermore, Goldman suspects that there is a "giant and as yet unfounded connection between the Chinese and traditional organized crime in America. My suspicion is that the Chinese are equal in number to any major organized-crime network, and equal in sophistication, too. The Chinese have instilled more of a fear in their own communities than traditional organized crime has maintained, and they may possibly become the No. 1 threat to our nation's law enforcement. Obviously, the situation will become particularly perilous when Hong Kong loses its lease in 1997 (and is returned to China's control). Inevitably, there will be a major influx of immigrants, many of whom will be career criminals for whom bribery and corruption is a way of life. Others will be poor people who will be faced with the option of either washing dishes 14 feet underground or working with the criminal element. I really don't understand why most law-enforcement officials are dragging their feet on this issue."

But don't get Goldman wrong. He isn't critical of all his cronies. He knows how impenetrable oriental culture may seem even to the most sophisticated federal agent-it's a culture where million-dollar heroin deals are counted on an abacus, where youth gang initiates drink chicken blood dripped into wine and take oaths such as, "If I ever betray the organization, may I be struck 1,000 times by lightning." He understands the difficulties of developing young Chinese undercover agents-many of whom have never learned to speak Chinese-in communities where over 12 Chinese dialects are spoken. He lauds the exemplary efforts of the D.E.A., and he is encouraged by the special camaraderie that has grown between members of his I.N.S. task forces and police officials nationwide. Working today in Washington, D.C., James Goldman oversees all Organized Crime Drug Enforcement Task Force (0.C.D.E.T.F) investigations conducted by the I.N.S.

Still, James Goldman is dissatisfied. He is angered by the fact that I Huei Chin's lover is still a fugitive from Project Hydra, and that Madam Shih's "travel agent" son cannot be extradited here. He finds it appalling that a leader of a notorious Chinese organized-crime gang was able to become a naturalized U.S. citizen while out on bail for the rape of a Queens, New York, woman. He deems oriental brothels "breeding grounds for a wide variety of crimes, including homicide" and would like to see them unilaterally shut down. And while it is not technically illegal, Goldman finds it morally reprehensible that many of New York City's private Chinese nightclubs-which cater solely to Chinese customers, using beautiful hostess girls to promote business-are protected by legally armed, retired New York City cops. But Goldman's most consuming regret is the closing of his investigation of a notorious Queens nightclub.

He had never heard of the club when he was working the Chinatown beat. One day, a source tipped him off that a former Madam Shih employee was working as a hostess in this establishment. After Goldman and his partner identified themselves as I.N.S. agents, they were reluctantly let into the premises. There was no sign of the woman among the 25 attractive oriental "hostess girls" and their 50 patrons. Goldman and his partner confirmed that all the hostesses were illegal aliens. None would talk about the hostess in question. Two nights later, the two men returned and arrested 20 entirely new oriental women. This prompted a phone call from the club's owners-- offering to lead Goldman to the hostess if he promised to stay away. Goldman got his witness. But as the Madam Shih trial wound down, Goldman learned that the nightclub owners were well known and well feared Chinese organized-crime figures who had been closely linked to Chinese heroin traffickers. State Liquor Authority records indicate that the club's liquor license had been issued to a Colombian under another name. James Goldman and the S.L.A. had all the ingredients for a second racketeering case-hostesses being brought in and harbored in violation of federal law; a fraudulent liquor license with established criminal ties. But before he could pursue his investigation, a customer at the club got into a dispute with a waiter, made an obscene gesture to the manager, who ejected him, and was shot in the head and killed as he stepped into his car. The gunman was identified from a mug shot as a Chinese street-gang kid, but the witnesses never showed up for the lineup. Fearing ghosts, evil spirits, and further raids by "white foreign devils," the owners quickly shut down the club. The I.N.S. ordered Goldman to disband his task force and drop the investigation.

"It didn't make any sense," says Goldman. "I still saw the suspected gunman walking around Chinatown."

Although he may sound like a one-man crusader, James Goldman insists that he is not "preaching yellow peril." He has made many friends in New York's Chinatown community-tough street kids, graceful waitresses, frail elderly fan-tan players. During his forays into Chinese social clubs looking for leads, Goldman often finds himself the only American among the middle-aged oriental men who pay hundreds of dollars to dance with hostess girls, drink Remy Martin and Hennessy X.O., eat sweet bean pastries, and listen to a procession of heavily made-up Taiwanese women wearing punk outfits or prom dresses singing Patsy Cline songs in Taiwanese.

A jovial person with an easy laugh, Goldman was an ideal big-brother figure to the dozen female witnesses he harbored in a hotel during the Madam Shih trial. When the women complained about not being able to play mah-jongg, Goldman obtained a card table from hotel security. On another night, during a break in the trial, Goldman escorted two of the women to dinner at a trendy Mexican restaurant A yuppie approached the prettier one and launched a monologue about his job on Wall Street, brand-new condo, and BMW. Each boast received a nod and a smile. Goldman wore the biggest smile of all when he informed the smitten stockbroker that his gorgeous Asian fantasy girl spoke not a word of English.

Most of the time, however, James Goldman is deadly serious about his work. One of the l.N.S.'s top priorities is preventing aliens from entering this country illegally-and prosecuting them when they engage in criminal activities. And Goldman thinks his agency has the potential to be the most powerful deterrent to Chinese organized crime in America.

"It's easier to develop informants within the Chinese criminal community than any other group I've worked with," Goldman says. "The Chinese are terrified of the I.N.S. because so many of them are illegal aliens. Even the arrogant Madam Shih feared the white foreign devils in immigration. But the I.N.S. can't work in isolation. My goal is to enlighten all local, state, and federal agencies and police forces as to the existence and potential power of Chinese organized crime. Many of them will be skeptical. After all, when I worked on the Madam Shih case, I never expected to find so many links to Chinese criminal organizations in Central and South America. Five years ago, the D.E.A. never dreamed that ethnic Chinese would dominate the East Coast heroin trade. Today, Chinese criminal groups are flourishing in major cities throughout the United States. We are talking about major national and international criminal networks that are highly organized, thoroughly armed, extremely dangerous . . . and expanding daily."

On January 4, 1988, I.N.S. Senior Special Agent James Goldman's warnings were finally validated by the press, when Peter Kerr reported in The New York Times that "law-enforcement officials say they fear that Chinese organized crime could eventually achieve as much wealth and influence as Italian organized crime has had over the last century."

After almost half a decade of ceaseless effort, James Goldman had finally gotten his message across.