Few Get Rich, Most Struggle in Crack’s Grim Economy : Drugs: In job-poor areas, many turn to dealing. But riches often are illusory, rip-offs and arrests all too real.

Sweat glistened on Nutty Boy’s fuzzy lip as he dumped the dregs of his cocaine into a jar of steaming water.

A 17-year-old high school dropout, pudgy underneath an oversized T-shirt and sagging jeans, he is Los Angeles’ typical crack dealer. He lives with his aunt in a decaying cluster of South-Central apartments. He drives an American sedan punctured with bullet holes. He once had a $100-a-week job planting trees, but discovered he could pocket that in a few hours if he was willing to risk jail or death.

With a kitchen mitt, he set the glass container inside a blackened saucepan, heating the solution until it lumped up into a pale, gray, gum-sized wad. In less than a minute, a teaspoon of worthless crumbs from the bottom of his stash had been recycled into a $40 rock--a simple chemical reaction that can be redeemed on almost any corner for instant cash.

“I pay my bills with this, keep myself dressed, eat every day and put gas in my car,” said Nutty Boy, before running out to peddle his creation. “I ain’t really trying to be no big bad king of L.A. dope dealers. It’s more like a temporary way of getting by.”

In the mythology of urban Los Angeles, crack has bestowed fantastic wealth on an army of Uzi-toting gangbangers, teen-age Darth Vaders battling over the blood money that floods their lawless streets. So lucrative is their trade, according to popular imagination, that thousands of youths have eschewed honest work for thick rolls of $100 bills, mocking a society of clock-punchers as they flaunt their beepers and fat gold chains.

The economic reality of crack’s hold on Los Angeles is a far grimmer picture--a poisonous mirage that promises riches for the destitute, but instead lures them down an even more virulent path.

In the last decade, millions of dollars have flowed through the most depressed inner-city communities, only to evaporate like an addict’s high. Rather than a ticket out of poverty, the crack business has amounted to a harsh underground economy, a fast-food drug trade financing the mundane basics of working-class life.

Swarming legions of peddlers, brazenly parading their wares, have become fixtures of a bleak curbside marketplace, flagging down cars and pouncing on customers everywhere from the meanest Pico-Union tenement to the farthest corner of the San Fernando Valley. Night and day, hawking and haggling and hustling, they turn residential streets into open-air drug bazaars, verdant parks into treacherous battlefields, abandoned buildings into fetid smoke houses.

At a ramshackle recycling center in South-Central, gaunt addicts eliminate the middleman, exchanging shopping carts full of cans and bottles directly for their next rock. In the cheesy motels along Figueroa Street, the drug has devalued human flesh to what must be an all-time low. On the bustling fringes of MacArthur Park, crack is the vortex of a full-fledged black market--along with fraudulent green cards, pirated telephone calling cards and unlicensed gypsy cabs--all taxed by street gangs who charge a daily “rent” of $20 to $40 per merchant.

“If you plan on profiting, you got to take it like a serious job,” said Nutty Boy, still hunched over the kitchen stove, just a few steps from a group of neighborhood children in the living room watching after-school cartoons.

“From the 1st to the 5th, that’s when most of the money rolls in, when the county checks arrive,” he explained, estimating that he can take in as much as $1,000 a day after his customers receive their welfare benefits. By the end of the month, though, the cash usually is long gone, which means Nutty Boy also must scrape to get by.

“When they get paid, I get paid,” he said, inspecting the lowly lump of crack he just pasted together. “Right now, I’ll probably have to give all of this out on credit.”

No other drug has ever been marketed this way, or become so thoroughly enmeshed in the community’s economic fabric. Unlike marijuana or heroin, whose effects generally sate the user for hours or even days, crack’s short-lived high commands the addict to return again and again as often as money will allow--a relentless cycle of misery nurtured and exploited for commercial gain.

When measured in $20 rocks, the drug may seem inexpensive, which is what lures both the seller and buyer so readily into the trade. But there’s nothing cheap about a business that strips consumers of everything they own, fills prisons with tens of thousands of bodies and sparks shocking spasms of violence, some of it racially charged, as traffickers vie over the scarce resources in their neighborhoods.

“It’s a sucker’s game all around,” said Earl Massey, 41, a former dealer and recovering addict, who ended up living by candlelight, cooking by campfire and burning the walls in his four-bedroom Pomona home for heat. “The dealers become hooked just like the addicts: They’re both a slave to the business, doing whatever the drug demands them to do.”

Far from a Mafia of ghetto godfathers, most crack dealers are small fish on the drug’s international food chain, the last retail link in an industry ultimately controlled by South America’s iron-fisted cartels. The median wage, according to a landmark 1989 RAND Corp. study of traffickers in Washington, amounts to just $721 a month.

Even if a few manage to make it big, they usually fall victim to the vicissitudes of an illicit, cash-only world, without the benefits of insurance or credit. If their profit isn’t consumed by food and shelter, it’s invariably seized by police, consumed by legal fees, stolen by rivals or squandered on conspicuous excesses that do nothing to enhance long-term economic health.

“Out of 20,000 gang members I’ve known, I can count on one hand the number who make enough from dope to cover a $600 apartment and a $400 car payment and take care of their old lady and kids,” said Jim Galipeau, a veteran Los Angeles County probation officer in the department’s Metropolitan Specialized Gang Unit. “Most of them would give it all up for a righteous $8-an-hour job with medical and dental.”

In an era of shrinking legitimate prospects, however, crack has become an equal-opportunity alternative, the employer of last resort in many of Los Angeles’ poorest neighborhoods. It is the domain not just of gangbangers and criminal misfits, but of laid-off factory workers who’ll never recoup their union wages in an age of global competition, impressionable teen-agers who’ve been told they need sneakers with triple-digit prices to be cool, single moms who can’t pay the rent on single incomes.

Some of them end up becoming addicts themselves, selling just enough of the drug to support their own habit. But for most dealers, it’s merely a commodity, a means to an end, which they’d gladly exchange for widgets if that would generate the same rewards. In its own nefarious way, crack has created a new sub-class of urban entrepreneurs--high-risk capitalists who speak not of breaking the law, but of “getting paid.”

“I knew people who were doing it, but I said never,” recalled a former crack dealer known as Arnell, who had the benefit of a stable, middle-class childhood in Inglewood, a parochial school diploma and three years of Navy service that qualified him for work as a Northrop technician. “It was kind of like a moral thing. I knew it just wasn’t right.”

But Arnell’s sense of morality proved no match for necessity’s demands. Six months after landing his $11.20-an-hour aerospace job, he was broke--one of thousands laid off in 1986 after Northrop failed to sell its troubled F-20 fighter jet to the Pentagon.

Day after day, Arnell said, he looked for work without luck. His bills were stacking up. His supply of instant noodles, the staple of his cupboard, was running low. He fell a month behind on his $455 rent. It didn’t help that his childhood friends, most of whom had begun peddling crack while he was in the military, were now living in nicer apartments, driving nicer cars, wearing nicer clothes and eating nicer meals.

“I still had the idea that I was going to find a real job,” said Arnell, a solemn, soft-spoken, 29-year-old father of three. “But I had to get paid.”

His initiation--merely delivering half a kilo for his buddies--netted him $1,000 in cash. With their help, he was soon dressing in silk Italian suits, driving a turbo Porsche and dropping $5,000 a hand on blackjack at Caesars Palace. By the following year, he had been shot with an Uzi during a drug heist and lost a home in Rancho Cucamonga to a money-laundering scam. He also watched his cousin, a former firefighter whom he occasionally supplied with drugs, turn into a destitute addict scrounging for his next rock on Skid Row.

“That’s when it began to wear on my conscience, when I saw what the drugs were actually doing,” said Arnell, who was lucky enough to salvage $12,000 in crack profits and buy himself a big-rig. Today, he still has a bullet lodged in his shoulder, but his cousin is clean, and Arnell now supports his wife and kids hauling coal.

“I saw the glitter and thought it was gold,” he said. “But it’s a game that nobody wins. It ain’t designed for that. I was stupid and fell into the trap.”

The crack trade has not just realigned inner-city commerce, it has infiltrated virtually every stratum of the Southern California economy--from cellular phone companies to paraphernalia manufacturers to the American banking system.

Drugs literally have touched so much money here that at least three-quarters of all bills in circulation are estimated to have trace amounts of cocaine. The Los Angeles branch of the Federal Reserve Bank has now surpassed Miami as the nation’s cash-surplus leader--an indicator, according U.S. Treasury agents, of the billions of dollars in profit that traffickers are laundering into legitimate channels.

Some of the money passes through legal businesses, such as BMW dealers and Rolex merchants, who capitalize on crack’s symbiotic relationship with the mainstream economy. But some white-collar crooks have gone out of their way to cater to drug lords, such as the proprietors of AMS Auto Sales, a La Cienega Boulevard dealership that routinely sold $60,000 luxury sedans for suitcases full of $100 bills--sometimes even for kilos of cocaine--no questions asked.

“In my mind, they’re equally if not more culpable than the actual drug dealers,” said former Assistant U.S. Atty. Michael Fitzgerald, who prosecuted the AMS owners. “The people who get involved in that end of the business are very sophisticated and intelligent--the exact sort of people who could easily have made a legitimate living.”

Lawyers have made millions representing suspected traffickers, even though they risk losing their fees if it can be proven that the money came from illicit sources. Westside attorney Alan Fenster--who defended Freeway Ricky Ross, one of Los Angeles’ richest cocaine dealers--said his own discomfort over “profiting from these ill-begotten proceeds” helped persuade him to abandon his practice for several years.

The law enforcement community has similarly tasted the riches of cocaine--in ways both beneficial and corrupt.

Police agencies have reaped so much money in asset forfeitures, for example, that when Burbank Chief David P. Newsham dedicated his city’s new heliport in September, he jokingly thanked narcotics dealers for being “good enough to pay their share.”

But the temptation to grab a share of drug profits also brought down nearly the entire anti-narcotics team of the Los Angeles County Sheriff’s Department in the 1980s. At last count, more than two dozen deputies had been convicted in the worst money-skimming scandal in local law enforcement history.

“We still demonize the people standing on the street corner with a bag in their hand, or the mythical godfather-type running the show, but the truth is . . . everybody’s suspect,” said ex-Assistant U.S. Atty. Thomas Hagemann, the lead prosecutor in the case. “I suppose it’s about as powerful as any temptation we know.”

If a well-trained, middle-class professional sworn to uphold the law can succumb, it takes even less for a defiant teen-ager who feels the deck already is stacked against him. Nowhere has that theme echoed more hauntingly than in South-Central Los Angeles, where crack’s impact was felt first and probably fiercest.

Although crack now touches almost every corner of the region, South-Central’s long history of economic deprivation, racial oppression and social isolation left it particularly susceptible to the drug’s financial lure.

“When you come from having nothing, and everyone around you has nothing, what’s wrong? I mean what’s really considered wrong ?” said DJ Pooh, one of South-Central’s hottest-selling rap producers, who bought his first turntable a decade ago with crack profits. “When pushed, all people--and I mean all people--are animals. They’ll do whatever’s necessary to survive.”

The drug’s arrival was paved by a wave of deindustrialization that convulsed the Southern California economy in the late 1970s and early 1980s, wiping out tens of thousands of high-wage factory jobs made obsolete by foreign competition. At the same time, Los Angeles’ safety net of social programs was being slashed by Proposition 13 and Reagan Administration cutbacks, more bad news for the unskilled and unemployed.

Since then, economists say that Los Angeles’ work force has grown only more polarized, with new jobs being created in the high-paying technical fields and minimum-wage service sector--but little in between. In South-Central Los Angeles, according to U.S. Census data, that translated into just a 6.5% gain in per capita income during the 1980s, while an increase of 14.8% was posted citywide.

“You can be as strong as you want and have the best values in the world,” said Karen Bass, executive director of the Community Coalition for Substance Abuse Prevention and Treatment. “But there’s nothing that destabilizes a family quicker than unemployment and nothing that destroys an individual’s self-esteem like not being able to feed their own children.”

Into that void flowed a new cut-rate stimulant, potent, compact, durable and neatly packaged in units small enough for anyone to afford--”like McDonald’s bringing 15-cent hamburgers to everyone on the streets,” said U.S. Drug Enforcement Administration special agent John Marcello.

Crack tapped into a market that was hungry for smokable cocaine, serving up a drug that was easier and less hazardous to use than earlier freebase methods. But crack was also invented as a scheme to expand the market at a time when a glut of cocaine threatened to drive prices downward. Although the identities of those who concocted the formula remain unclear, there’s no doubting the effectiveness of their ploy.

“If you were going to introduce a new product and wanted cheap labor and huge profits--without advertising, investment or infrastructure--you wouldn’t look in Beverly Hills,” said J. Eugene Grigsby, director of UCLA’s Center for African American Studies. “From the perspective of a pure marketing analysis, the conditions in most African American urban areas were ripe to spawn an alternative economic structure.”

Demand for the intense but fleeting high was insatiable, the customer base captive. A huge labor pool, already alienated from the mainstream work force, jumped at the promise of an instant payday. Getting a piece of the action required no job application, no educational background and no special training--other than street savvy, one of the few skills already in plentiful supply.

“It was like, ‘I don’t need no education, I don’t got to kiss nobody’s ass, I’m the boss, this is my enterprise--and I’m only 16,’ ” said ex-gangster T. Rodgers, a founding father of the Bloods, who ruled over a now-defunct crack empire during the 1980s. “Any kid old enough to hold a rock could become king for a day.”

South-Central street gangs, viewed by the cocaine smugglers as tough but expendable foot soldiers, provided a ready-made distribution network for the marketing of this new discount commodity.

In a so-called “Dun and Bradstreet Primer” issued in 1989 by the U.S. attorney general, the Bloods and Crips were described as the nation’s most powerful crack-trafficking ring, urban terrorists who had achieved dominance in at least 47 cities, “due in part to their steady recourse to murderous violence.”

The most sophisticated gang factions, along with their prison-based leadership, do control a large share of the wholesale trade, sometimes buying directly from Colombian suppliers. They also have embarked on an unprecedented cross-country migration, lured by profits many times higher than on Los Angeles’ saturated streets. But most authorities ultimately have come to see the gangs less as huge conglomerates than as independent contractors--bandit franchisees duking it out in a cutthroat market.

Unlike Mafias of past generations, which were able to parlay their ill-gotten gains into legitimate enterprises, most street gangs haven’t demonstrated that kind of cohesiveness or business acumen. Even if tainted, such ventures might at least have created a few more avenues to mainstream success in the city’s most desolate neighborhoods. Instead, like a giant plantation economy, crack has only intensified the financial vacuum, siphoning up the spare change of people who have nothing left to spare.

“Crack may have allowed some people to kind of take care of business and support their families, but it’s essentially a redistributive, zero-sum economy that squeezes the last cents out of the poorest communities in America,” said Los Angeles historian Mike Davis, who has written extensively about the trade. “Despite all the gangsta rap images of these new robber-baron coke-dealers . . . I think black Americans will emerge from this pretty much as they always have: the victims.”

Norman Tillman was bigger than most street-level dealers ever dream of becoming, a true high-rolling, fast-living, crack impresario. “But it’s an illusion--a delusion,” said Tillman, 35, who figures he was worth about $700,000 before his coast-to-coast drug ring collapsed in the late 1980s.

A graduate of Dorsey High in Southwest Los Angeles, Tillman spent his teen-age years toiling in a string of low-paying jobs, from pumping gas to marinating fast-food chicken to stripping paint. Later, he served in the Marine Corps and won a tennis scholarship to The Citadel in South Carolina, but broke his ankle and ended up living on a $250-a-month unemployment check.

When childhood friends sent him a first-class plane ticket back to California in 1983, they enlisted Tillman in one of the most prolific crack-dealing crews ever to rise up from Los Angeles’ streets. In the span of a few years, he moved from selling crack on the curbside to supervising a network of rock houses to netting about $50,000 a week distributing kilos to other dealers across the country.

“It had all the trappings of legitimacy,” said Tillman, an imposing, statuesque man with a shaved head and silver hoop earring. “I felt as successful as any other successful businessman . . . on the same par as a Ph.D. graduate with money-management skills.”

But Tillman’s success was as ephemeral as a $20 rock. In rapid succession, his cohorts got busted--in Chicago, in Boston, in Indianapolis--costing him hundreds of thousands of dollars in lost product, bail bonds and legal fees. After his supplier was indicted, Tillman lost even more buying bogus dope from unreliable connections. He invested $80,000 in a children’s photography studio that he called Tiny Tots, but his employees walked off with the cameras.

At home, meanwhile, Tillman’s poison also was taking its toll. A brother, now in rehab, got hooked on crack. So did a sister, who was forced to surrender a child to foster care. Another brother was gunned down in a drive-by. And their father, a disabled steelworker, died of a stroke--just as he filled his lungs with a long drag of cocaine smoke.

“I had lost control of the animal,” Tillman said. “The animal had turned into a beast.”

Broke and repentant, Tillman recently tried his hand at the condom business, peddling a new skin-toned brand on the very South-Central streets where he once dealt crack. But with a profit-margin of just 8 cents per prophylactic, he gave it up in November and headed back to his native Chicago, where he hopes to land a job in a housing authority drug recovery program.

“When he was handling all that cash, I tried to tell him, ‘You can’t keep this up,”’ said Tillman’s 72-year-old mother, Bernice, a retired cafeteria worker. “But he didn’t listen. All those millions--and the powers-that-be got it all back.”

Few dealers, in fact, ever make it out of the bottom rungs of the business, which has spawned almost unlimited entry-level opportunities but little real hope for long-term advancement. In pure financial terms, they barely rank above the Huallaga Valley’s campesinos , poor Andean farmers who make up for their own lack of economic mobility by harvesting the coca leaves in the first place.

The big bucks always have gone to those who control the cocaine pipeline between South America and the United States: cartels in Colombia, smugglers in Mexico, corrupt politicians and bribe-taking police from Latin America to California. Ex-Medellin kingpin Pablo Escobar probably lost more to mildew--$400 million of his cash reportedly once rotted in a Los Angeles stash house--than the Bloods or Crips ever made in a decade.

Whenever a dope dealer does make it big--or a basketball player or a rapper--their success becomes entwined in the folklore of the streets, inspiring others to follow that route. This is a country, after all, that not only prizes the entrepreneurial spirit, but heaps scorn on those who fail to pull themselves up by their own bootstraps.

Although the odds are slim, most young hustlers have nothing but a dismal future to lose. For all its horrific costs, crack has at least served as an antidote to defeat.

“I got one homeboy, I guess he don’t like money or he’s just stupid, because he goes around with his pocket empty all the time,” said Ozzy, 21, who can make more money in one night selling crack than most families in his Eastside housing project ever see in a month.

Like many dealers, he’s got little to show for it, other than tales of cruising in limos, renting motel rooms for nights on end and buying an ’83 Cadillac, which his friends promptly smashed up, unlicensed and uninsured. But Ozzy, who hasn’t asked his parents for a dime since dropping out of the eighth grade, takes pride in knowing that he’s got the cash to burn.

“As long as I got money in my pocket,” he said, after handing a friend a few bucks to fetch him a cheeseburger, “I must be doing something right.”

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About This Series

In this four-part series, The Times examines how Los Angeles County’s neighborhoods, institutions and morals have been ravaged by a decade of crack, the most addictive form of cocaine ever devised.

* Sunday: Crack drains funds from vital public agencies, imposing a hidden tax on everyone.

* Monday: Crack creates a new wave of homelessness, bringing more crime and despair to the streets.

* Today: Crack forges an underground economy, luring a generation with false promises.

* Wednesday: Crack takes down a neighborhood--but the spirit of its residents brings it back.

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The Economics of Crack

Over the last decade, crack has spawned an underground economy in Los Angeles that employs thousands of traffickers, many of whom view the illicit trade as their only financial option. Before it arrives on the streets, the drug passes through many hands, each time increasing in value.

1) Harvesting: Hundreds of thousands of poor South American farmers earn their livelihood growing coca leaves.

Price: In Bolivia, one carga of leaves, or about 100 pounds, fetches between $38 and $51.

2) Refining: In makeshift labs throughout the Andean countries, the leaves are soaked in kerosene and acid, turning them into cocaine sulfate, also known as coca paste. The paste is further treated with chemical solvents, resulting in powdered cocaine.

Price: Before it leaves South America, a kilogram of powder, or 2.2 pounds, is worth between $950 and $1,200.

3) Shipping: As a result of crackdowns off the Florida coast, most shipments have been redirected to California via overland routes. Mexican smuggling rings now handle an estimated 70% of the cocaine bound here.

Price: For their trouble, they charge their Los Angeles connections between $12,000 and $14,000 per kilo.

4) Wholesaling: Southland street gangs and their prison-based leadership control most wholesale distribution of the drug, which they cook into crack by adding baking soda and water.

Price: When resold, often in one-ounce packets, each kilo can bring in between $25,000 and $35,000.

Retailing: The retail trade is a laissez-faire market, open to just about anybody willing to stand on a street corner with a plastic bag of crack.

Price: The standard curbside price is $20 per rock, a small nugget that averages about 0.2 of a gram. A kilo broken into these individual rocks will generate at least $100,000, and as much as $200,000 if cut with adulterants such as lidocaine and procaine.

Using: Crack’s potent but short-lived punch commands addicts to return again and again as often as money will allow.

Price: The average crack user, according to one study, smokes about seven or eight rocks a day--a habit that runs about $1,050 a week.

Source on pricing: U.S. Drug Enforcement Administration

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Finding a Job

There are a variety of agencies and organizations that offer tips on employment, testing and job training at little or no cost:

California Conservation Corps

* The California Conservation Corps hires people 18 to 23 to work for one year on a variety of environmental and community projects, and to respond to emergencies such as forest fires, floods and earthquakes. Call (800) 952-5627.

Los Angeles Urban League

* Counseling, training, placement and community development. Call (213) 299-9660.

Mexican American Opportunity Foundation

* Nonprofit organization assists professionals and unskilled people wanting to enter or re-enter the workplace. Call (213) 722-7807.

Pacific Asian Consortium in Employment

* Nonprofit organization helps low-income residents receive on-the-job training, classroom instruction and counseling, and find jobs. Call (213) 389-2373.

Private Industry Councils--Job Training Programs

* The Job Training Partnership Act of 1982 provides federal funds for locally managed employment and training programs. Applicants may qualify for one or more reasons, including a layoff, long-term unemployment or income below poverty levels. Call (800) FOR-A-JOB.

UAW-Labor Employment Training Corp.

* A private, nonprofit corporation that provides job development, training and retraining, and placement services to unemployed and economically disadvantaged applicants. Call (818) 781-2172 or (213) 562-6100.

Series Reprints

* Reprints of the Times series, the Real Cost of Crack, will be available by mail after the conclusion of the series. To order, call Times on Demand 808-8463. Press *8630 and select option 3. Order Item No. 5514. $6 plus $1 for delivery.

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