Smuggling Raids Target Spy Gear Stores : Probe: Undercover investigation reveals illegal trafficking in electronic bugs, officials charge. Nine are arrested.

Customs Service agents raided spy equipment stores from Southern California to the East Coast on Wednesday, ending a 17-month undercover investigation into alleged smuggling of telephone bugging devices and other electronic surveillance equipment. Nine arrests have been made and more are expected, officials said.

The James Bond-style equipment, ranging from ballpoint pens equipped with secret transmitters to sophisticated devices that intercept and transmit telephone signals several blocks away, allegedly was shipped from Japan illegally and sold in dozens of retail stores.

Investigators said they discovered that among the thousands of purchasers were drug dealers and other criminals who used the devices “for counterintelligence and other illegal ends,” according to a 106-page affidavit by customs agent William E. DeArman.

In Miami, for example, customs agents last year intercepted 500 kilograms of cocaine packaged to look like candy. When they inspected the cargo container and discovered its illicit contents they also found two battery-operated, long-range transmitters the size of cigarette packs.

*

Apparently alerted by the transmitted sounds of the customs inspectors finding their cocaine shipment, no drug smugglers ever claimed the valuable load, investigators said.

The affidavit also said some of the allegedly smuggled devices were used last year “to carry out a kidnaping and extortion plot” in Manhattan. The defendants, who are still awaiting trial, used small transmitters in separate cars to coordinate their criminal acts, an investigator said.

“This is state-of-the-art equipment,” said Robert Van Etten, special agent in charge of the Customs Service enforcement office in New York. “It’s as good as the best equipment we’re able to use.”

At a press conference Wednesday, Customs Commissioner George J. Weise said the surveillance devices “pose a threat to law enforcement” and to individual privacy. U.S. Atty. Mary Jo White warned that the equipment had been used not only to counter law enforcement operations but also to facilitate corporate espionage.

“This operation should cripple the source of these devices in the United States,” she said.

Federal law prohibits the “manufacture, assembly, possession or sale of any device . . . that is primarily useful for surreptitious interception of wire, oral or electronic communications.”

Other buyers who remain the objects of continuing investigation are lawyers and private detectives, investigators said.

Among the nine arrested so far was Ken Taguchi, identified as the owner of Micro Electronics Ind. Co. of Tokyo, the largest manufacturer of the devices, according to customs officials.

Taguchi was taken into custody on Tuesday night after being lured to New York by undercover agents posing as retail distributors who were planning a grand opening of a store to sell Micro Electronics’ bugging devices.

Also raided by agents on Wednesday were 14 Spy Factory stores, including those in West Hollywood, Costa Mesa, San Diego, Las Vegas and San Francisco. The San Antonio-based chain, owned by a former U.S. drug enforcement agent, was identified by customs investigators as the biggest distributor of the electronic surveillance equipment. Marlin Richardson, one of its employees, was arrested in Texas.

Two of those arrested Wednesday are retired New York City police officers Brian Dunne and Anthony Palma of The Spy Store in New York.