Arrest Stuns Indian Artifact Dealers : Money laundering: A well-known expert is accused of aiding drug traffickers. His legitimate clients worry about fragile artworks seized by U.S.

In the marketplace for antique American Indian artifacts, Mark Winter is known as a man with a Midas touch.

He forged his reputation in the mid-1970s when he parlayed a small personal loan into a world-class collection of rare Navajo rugs later exhibited at museums across the nation.

But federal drug agents who arrested Winter, 39, last week charge that the consulting services he provided extended beyond chichi auction houses and galleries to include drug traffickers seeking to launder money by investing in American Indian rugs, baskets and pottery.

Winter’s arrest at a Phoenix hotel by agents of the Drug Enforcement Administration has stunned art dealers from New York to roadside trading posts in the New Mexican desert.

“I’m shocked,” said Bernard de Grunne, in charge of the African and American art department at Sotheby’s auction house in New York. “He was the most prominent Navajo textile weaving dealer in America.”

Meanwhile, the subsequent seizure of artifacts valued at $5 million from vaults in and near Winter’s home in the southern Colorado town of Pagosa Springs has horrified legitimate collectors who had entrusted weavings to him for storage and fear that their irreplaceable items are being mishandled by federal authorities, who are hardly art conservators.

In an effort to allay such fears, Jack Egnor, the U.S. marshal in Denver, has turned over the job of handling artifacts in his custody to members of the Colorado Historical Society.

Nonetheless, Richard Ballantine, who purchased 75% of a famed collection put together by Winter and one of his associates, is still concerned. The so-called Durango Collection includes the oldest example of Navajo weaving in existence, and Ballantine elected to keep it in Winter’s vault.

“My wife and I are very concerned about the condition of the weavings--they are delicate and fragile and need to be stored quite carefully,” said Ballantine, publisher of the Durango Herald in Durango, Colo. “We are looking forward to talking to Mark about all this when he is out on bail.”

Winter was arrested after he met with an undercover agent investigating a major drug ring that smuggled marijuana from Thailand and involved suspects in Mexico and Carlsbad, Calif., a spokesman for the DEA said.

“The investigation started about two years ago and it is still going on,” said Joseph Moody of the DEA office in Carlsbad, who refused to discuss details of the case. “Winter is just one of the rocks we picked up along the road.”

Typically, a money-laundering scheme involves investing illegally obtained money in a bank account or real estate, then later obtaining “clean money” by withdrawing the funds or selling the property.

In this case, federal agents allege, Winter took drug money and invested it in Indian artifacts that would hold their value or appreciate. Winter allegedly purchased the items in his own name and stored them at his business but recorded their true ownership in a secret portfolio.

The agents contend that the case illustrates the creative ways in which drug dealers have sought to launder their profits and how this money has become financially intertwined in everything from jewelry stores and foreign bank accounts to oil paintings and American Indian rugs.

Armed with search warrants and powerful drills used to pierce the steel walls of Winter’s vaults, the agents confiscated all of the artifacts in his possession, along with his home, condominium, BMW automobile and coin collections. They plan to conduct an inventory to determine which items, if any, were purchased for drug dealers.

Winter, who was being held at the county jail in Phoenix pending extradition to San Diego, could not be reached for comment. But his attorney, Richard Barnett, said his client is “totally innocent.”

“The government has made allegations that my client sold some Indian artifacts to people who turned out to be drug dealers,” Barnett said.

“Our position is that my client had an extremely large business and it is not clear whether he made any sales to these individuals,” Barnett added. “Nor is there any evidence he ever knowingly sold items to people he knew to be drug dealers.”

Still, Winter’s friends and business associates in southern Colorado said they were saddened, but not surprised, by his legal problems.

Winter, they recalled, started out in Pagosa Springs in 1974 as a sandal-clad “hippie type” who hawked artifacts out of the back of a van that sometimes served as his sleeping quarters on the road.

Ten years of hard work and intense study later, Winter opened a business in Pagosa Springs that was called American Renaissance and offered weavings and advice to elite collectors and galleries.

“When he started out, he was a sweet, humble young man who worked like hell and even built a house with his own hands,” said Jackson Clark, who owns a bottling company in Durango and lent Winter the money to build the Durango Collection.

“But he changed about two years ago when he got involved with those New York auctioners who asked him for advice,” Clark said. “He became impossibly arrogant, going back to New York, Boston and Florida for 10 days at a time with a platinum American Express card and a cellular phone.”

Barbara Winter, 38, who separated from her husband two years ago and has since moved away from Pagosa Springs with their three children, held out hope. “I feel the legal problems are unfortunate and unfounded,” Mrs. Winter said. “I have faith in Mark.”