Private Eye Targets Business Drug Busts

The arrests early last year of 10 employees for peddling drugs at the Kaiser Permanente Hospital in Hollywood was credited to a six-month investigation by narcotics officers of the Los Angeles Police Department.

Only a handful of hospital administrators and law enforcement officers knew that, in fact, the probe was planned and executed by a quiet but successful San Diego firm that specializes in drug investigations for private companies and is headed by a retired San Diego narcotics officer.

That kind of misinformation, which would upset most businessmen, was just fine for Hal Phenix, 38, the founder of Narcorp.

“We don’t seek publicity. We want to be like the picture frame on the wall. We just want to blend in,” Phenix said.

Narcorp is a Mission Valley private detective firm that in 1984 opened the door to an innovative area of narcotics enforcement in the private sector. In his work, Phenix has elevated the private detective from gumshoe to undercover operative with ties to law enforcement.

First of Its Kind

Narcorp was the first private investigative agency in California, and perhaps the United States, to put private investigators undercover in the workplace to ferret out drug users and sellers. The firm’s cases are limited to drug probes where Phenix’s people are hired to do the investigation, leaving the police to make the arrests.

Since Phenix founded the company four years ago, copycat firms have sprung up throughout Southern California, but police officials from Los Angeles to San Diego say that Narcorp is still the most effective and professional.

“We don’t endorse any private agency, but Narcorp is very professional,” said Capt. Bob Blanchard, commander of the LAPD’s narcotics division. “Phenix and his investigators know the legal liabilities surrounding undercover operations . . . . We had a 100% conviction in the Kaiser investigation. His people are very thorough.”

Blanchard said that his narcotics officers are currently working on another investigation with Narcorp but declined to elaborate.

Lt. Dan Berglund, head of the San Diego Police Department’s narcotics street team, said that Narcorp’s investigations are “very thorough and comprehensive.” Like Blanchard, Berglund said that he could not endorse the firm, but called the company’s investigators “as professional as our people.”

“He (Phenix) goes by our guidelines when we work with them, but his people do all the digging and they’re the ones who build the cases against the dope dealers and users,” Berglund said.

Traditionally, private detectives made a living tracking down unfaithful spouses in divorce cases and doing pretrial investigations for lawyers. Phenix is more exclusive. His clients range from some of the country’s best known corporations to the city of Poway, and his fees range from $5,000 to $10,000 a month.

Some Controversy

Narcorp’s only mission is to bust and help convict drug users and sellers who practice their illegal habits on company time. “We don’t take a case unless the client is serious about sending people to jail,” Phenix said.

However, Narcorp’s investigations have not been without controversy. Phenix and San Diego Sheriff’s Lt. Pat Kerins acknowledged that two Narcorp investigators smoked marijuana and ingested cocaine with some of the people arrested in the five-month Poway investigation, in which four city employees were arrested and fired and another 15 were placed on administrative leave. Poway City Manager James Bowersox said that the city paid Narcorp about $40,000 for the undercover probe, which was aimed at ridding the city of employees who allegedly used and dealt drugs at work.

Kerins said that the Narcorp investigator’s use of drugs during the Poway investigation was “regrettable,” but denied that it involved entrapment. Attorney Richard Mills, who is representing two defendants in the case, said that he thinks they “have a great entrapment case,” but acknowledged it would be difficult to prove in court.

Phenix said that in the more than 200 cases that the company’s investigators have worked, they have ingested drugs “a handful of times in order not to compromise the investigation.”

Until recently, when the widely-reported drug arrests at the San Diego Union and Tribune and in Poway were credited to the company’s undercover investigations, Narcorp was virtually unknown to the public, although well known in corporate and police circles.

Unwanted Recognition

Its success has bred unwanted recognition.

For Phenix, who ran his company with secrecy that rivaled the CIA, the publicity given to Narcorp is disturbing. He would not allow his photograph to be used for this story. Until last month, when Pacific Bell mistakenly listed the firm in its white pages directory, Narcorp’s Mission Valley address and phone number were unlisted. The door to his stylish office simply has the suite number and the company’s name is not to be found anywhere in the waiting area.

“The reason is simple,” said Phenix. “We don’t advertise. Our clients seek us out.”

Narcorp’s success is its calling card. Phenix said he has never lost a case in court, and no one has ever escaped prosecution by using an entrapment defense against his investigators. And he gets his clients to pay him fees of up to $10,000 a month on cases that can last as little as three weeks or as long as a year.

According to Phenix, referrals come from former clients and occasionally from police departments.

Four years ago Phenix approached the San Diego Police Department’s narcotics street team with his unique proposal to work with the thinly-stretched police narcs in drug investigations. In order to make any evidence stand up in court, the civilian undercover operatives would be under the constant supervision of a San Diego police officer.

The suggestion was untried in law enforcement, and Phenix received a less-than-enthusiastic response from the department and district attorney’s office. But the problem with drugs in the workplace was so pervasive that police officials agreed to “try it out one time.”

Just One Chance

Phenix did not need a genius to tell him that he had one shot to make his idea work. The pressure was on him to show wary cops and prosecutors that his investigators could do a narcotics officer’s job.

“You’re on stage. If you can dance, you dance. If not, you get the hook,” Phenix said.

He danced four years ago and has not stopped since. Phenix estimates that of the companies he talks to, only 10% actually end up hiring him.

“They come in and tell me about the threats, thousands of dollars they’re losing to employees who steal in order to feed their drug habits and the contraband that they find laying around . . . . When I get around to telling them about my fee they say that they didn’t know it was going to cost so much,” Phenix said.

City manager Bowersox said that the $40,000 paid by Poway for Narcorp’s undercover investigation was “a good investment.”

“Drugs affect an employer in a multitude of ways, not least being the liability problem. We also have a responsibility to provide a drug-free environment for employees who don’t use drugs . . . . We found that drugs were affecting productivity and safety. We had to resolve the problem . . . . That ($40,000 fee) may seem like a lot, but it was a good investment for the city,” Bowersox said.

Before Narcorp, narcotics investigations were almost always conducted by law enforcement agencies and involved big operations. But as the use and selling of drugs in today’s society spread to the workplace, employer after employer came to San Diego police asking for help in arresting those who used and sold drugs at work.

Saw the Need, Filled It

However, frustrated police officials with limited budgets and manpower looked on helplessly and often responded to these calls with little more than sympathy. Police investigations were focused on the “big” cases, leaving companies with relatively small-time drug dealers and abusers to fend for themselves in dealing with the problem.

Phenix saw a need, and like any enterprising businessman, he filled it. “We bridged that enforcement gap between private industry and the police,” he said.

Except for the investigations that were widely reported in the press, Phenix is hesitant to identify the other approximately 50 corporate clients that his investigative firm has worked for.

However they include the local distributor for a major soft drink company, a major paint store chain in San Diego and one of the biggest grocery chains in the county. Narcorp also conducted an undercover investigation at San Diego State University in 1987. Most investigations are done in a low-key manner, and all of the companies that hired Phenix and that were contacted for this story declined to comment.

When Phenix, a quiet, intense man, speaks, he sounds like the late Frank Lovejoy, an actor who often played private detectives. Phenix was a San Diego police officer for 11 years--five spent in narcotics work--before he retired with a disability in 1983. Four years earlier, Phenix was on duty when a bar bouncer beat him with a baseball bat. He sued the bar and subsequently received a settlement of more than $1 million.

Phenix said he employs between 15 and 25 investigators, men and women. Most of his employees aspire to be police officers, and like his clients, have to be referred to him, Phenix said. He interviews all applicants personally and each one, including prospective receptionists, is subjected to a stringent background check.

Phenix does not hesitate to admit that he looks for investigators who do not have felony records but who have had “encounters with narcotics.”

“I need people who have that street sense and experience. You can’t teach that. Either you’ve been there or you haven’t . . . . I’m sending these individuals into a culture where I want them to identify with the people we’re trying to bust and I want these people to identify with my investigators,” Phenix said.

Former Police Officers

Although the firm’s three supervisors are former police agents, Phenix said that he will not hire an ex-cop to do undercover work. Cops and former cops glow like neon lights, he said.

“Ideally, an ex-cop is the best guy to have in an undercover job. But people in the drug culture can pick out a cop quicker than you think . . . . A cop usually gives himself away doing unconscious things like crossing his arms, staring at a guy or sitting in a corner in order to watch his back . . . . People in the drug culture know how cops act . . . . Hell, they spend most of their lives avoiding cops so they can usually pick out a cop in the crowd,” Phenix said.

Some Narcorp investigators have had guns pulled on them and others have been roughed up, but none have been shot, stabbed or seriously hurt, Phenix said. He refuses to arm his investigators.

“I believe that weapons only lead to trouble. Our philosophy is to avoid altercations at all costs. If I were to give my guys weapons, I think that one way or another it would encourage altercations,” Phenix said.

Lt. Berglund said that San Diego police officials have overcome any reservations that they initially had about Narcorp. The firm’s track record in drug investigations has contributed to the confidence that the department now has in the firm.

“It’s worked out well for us . . . . Our private business sector requires assistance and it’s very difficult for us to infiltrate their employees because it’s expensive and we don’t have the time or manpower . . . . We’ve learned that sometimes the best way to do this is for us to cooperate with a private investigative firm that knows what it’s doing and hired by the company . . . . Hal has a good convictions record,” Berglund said.