Warsaw Showdown Pits Police Against Gangsters : Europe: Officials see the faceoff in historic Old Town as a high-stakes test of Poland’s resolve to turn back organized crime.

The circles beneath the eyes of Police Chief Jerzy Stanczyk are dark and heavy, the battle wounds of a hellish few weeks. Stanczyk is struggling for control of Warsaw, his underworld adversaries taunting him like a caged animal.

For more than a month, a gang of thugs, many with lengthy criminal records and alleged ties to organized crime, have terrorized restaurant and store owners in Old Town, the capital’s historic center and the cobblestoned home to its most popular eateries and galleries.

The gangsters, openly contemptuous of police, have demanded money--in some cases thousands of dollars--and reacted violently when turned away. A French tourist was knocked to the floor and beaten when the owner of one restaurant balked, and several establishments were ransacked. Anonymous bomb threats have also been reported.

“There is a huge amount of money in Old Town,” Stanczyk said from a desk cluttered with bleak crime reports and an overstuffed ashtray. “This could be a spectacular effort to gain control of it.”

By choosing Old Town, the brazen gangsters have taken on one of Poland’s most enduring--and successful--commercial centers, a crowded tourist attraction dating to the 17th Century. There is perhaps no better illustration of Poland’s determined recovery from World War II than the picturesque district, which was painstakingly reconstructed from a heap of rubble according to 200-year-old paintings and sketches.

“This case deals with the heart of Poland,” said Andrzej Cubala, spokesman for the Ministry of Justice. “These criminals acted in Old Town because they wanted to show everyone their strength and test the reaction of the police.”

Authorities say extortion schemes are increasingly common across Eastern Europe and the former Soviet Union, where criminal organizations have found ways to exploit the shift from communism to private enterprise.

But until recently, Poland had been left mostly untouched. Gangs of criminals here dealt largely in smuggling electronic goods, narcotics, cigarettes and alcohol.

The assault on Old Town is seen as the boldest in a series of brash moves by Polish gangsters to push beyond those traditional venues. Police in the port city of Gdansk have set up a hot line to accommodate the growing number of extortion victims there, while Poland’s top law enforcement official recently resigned in a scandal over alleged ties between criminals and police in Poznan, a large trade center in western Poland.

The stepped-up criminal activity has frightened Poles and worried government officials, many of whom view the Old Town faceoff as a high-stakes test of Poland’s resolve to turn back the gangsters. Earlier this month, after receiving a letter from Old Town business owners, President Lech Walesa requested a special briefing on organized crime from the interior minister. Meanwhile, the governor of the Warsaw-area province asked the army to deploy troops in the region.

The FBI announced last month that it will open an office in Warsaw to help Polish authorities turn back Russian criminal organizations, which are said to be eyeing operations in Poland. The new office will be shared with the Drug Enforcement Administration and special services of the U.S. Treasury Department.

“I am really shocked,” said Magdalena Palonek, a college student visiting Old Town on vacation. “I didn’t expect this kind of crime could happen in Poland. You hear about it in other countries, but when our country began changing, I thought we would adopt the good things from other countries, not the bad.”

The crisis in Old Town has taken on an even greater significance because of the woeful response of the Warsaw police. Restaurant owners in Old Town complain that it took weeks before police addressed their problems seriously, and then only after journalists chronicled the lackluster effort.

Some owners have accused officers of cooperating with the extortionists, an allegation denied by police, while some government officials have suggested the gangsters were encouraged to move into Old Town by a widespread perception of police incompetence.

“Because of the reputation of the police in the Communist times, police today are afraid of being accused of an abuse of power,” said Jan Rutkiewicz, mayor of the central Warsaw district. “So they would often rather not act than be charged with doing something wrong.”

Merchants became so frustrated with police inaction that they took the dramatic step of closing Old Town for three days at the height of the summer tourism season.

Shortly after the protest was announced, police inundated the area with extra patrols, arrested a suspect and raided the offices of a security firm said to have links to the extortion ring. The police presence has been heavy ever since, with patrol officers questioning anyone they deem suspicious, but many merchants fear it still will not be enough.

“People are frightened. We are all afraid,” said the owner of the Senator restaurant, which opened during the protest only to host a wedding reception. “If we don’t react, Warsaw will be taken over by the criminals.”

About 150 businesses participated in the boycott, which transformed the central Old Town Market Square into a ghost town and cost merchants tens of thousands of dollars in lost revenue. On some streets, police patrols outnumbered pedestrians, but merchants said customers have since returned and have expressed support for the protest.

“This is very, very bad for the image of Poland,” said Maria Bednarz, a hospital administrator from northern Poland vacationing in Warsaw. “Something had to be done.”

Chief Stanczyk bristles at the suggestion that his officers dragged their feet in Old Town, saying they were only following Polish laws, which in most instances require a formal complaint before an investigation is launched. Fearing reprisals, none of the restaurant owners filed such complaints, but the investigation began anyway following a storm of public outrage over the department’s timidity.

Stanczyk and other law enforcement officials said Polish laws will have to be amended to reflect the country’s changing criminal reality, particularly the increase in economic crimes, such as extortion and fraud. Parliament is to review a proposed new criminal code, but reform efforts have failed in the past.

Present laws do not allow prosecutors to offer immunity in exchange for testimony, and police are barred from staging sting operations. In addition, the country has no witness protection program.

“I want to live,” one Old Town restaurant owner explained when asked why he kept quiet about the extortion attempts.

Police in Warsaw have other problems too. Because of low salaries, reduced pension benefits and five years of political purges, the department has had difficulty attracting and keeping officers, who patrol an area of 2.5 million people.

The force now stands at 7,100 officers, nearly 3,000 fewer than allocated for in the budget and half the number authorized by the former Communist regime. About 40% of the force, moreover, has less than three years’ experience, with most of the new recruits coming from faraway rural areas with high unemployment.

Police departments across Poland are operating with 25% fewer officers than five years ago, and the federal Ministry of Justice, which has been highly critical of Warsaw’s handling of the Old Town extortion attempts, established its organized crime unit only in June.

“Our numbers and abilities are no match for the threats of the criminal world,” said Stanczyk, who is also new to Warsaw, having moved here just six months ago from Szczecin, near the German border. “We don’t have the tools we need to fight this crime.”