A Vial Crime

Meet Sam Zhadanov, 68-year-old plastic molder and drug-war casualty.

Jacob Sullum from the May 1995 issue

(Page 3 of 4)

Belkin says, "I don't know. Is there a law?"

Roni Moshe again interjects, "That's a container to contain."

Belkin concludes, "To sell it maybe there is no law, but to take it on the road..."

In any event, Sam Zhadanov assumed that he could not be held responsible for the ultimate use of a product made in his factory. Production continued until May 1992, when Zhadanov observed a man in a car taking photographs of the factory. When he told Belkin about the incident, Belkin said the man might be a police officer, or he might have been sent by a competing manufacturer. Alarmed, Zhadanov ordered a halt to production and consulted an attorney about the legality of the operation. After researching the relevant New Jersey statutes and case law, the attorney, Martin A. Spritzer of Edison, New Jersey, wrote Zhadanov a letter on May 21, 1992:

"You have asked for an interpretation as to whether you could be responsible for the manufacturing and distribution of certain items which are being manufactured on your premises by another person to whom you have leased certain machines and molds in the event such product is used in connection with unlawful drug distribution....It is my opinion that the...containers that you showed me, together with the description of how they emanate from your building, should not make you liable....First of all, you are not distributing, processing, or manufacturing the container. The person to whom you leased the molds and machinery is doing that. Secondly, you have no knowledge of how these containers are being used." (By this he meant that Zhadanov did not know for sure that drug dealers were buying the containers.)

Meanwhile, Srebrianski tried unsuccessfully to set up his own factory and continue the operation there. In June 1992, he approached Zhadanov about resuming production at Vortex. Reassured by the attorney's letter, Zhadanov agreed. At this point, Belkin and Edelson changed the way the money was handled. Previously, one of their distributors would collect receipts from the stores and give the money to Belkin and Edelson, who would give Srebrianski his share; then Srebrianski would pay Vortex. Now Belkin and Edelson decided that the distributor should give the money directly to Srebrianski, who would divide it among himself, Vortex, and Belkin and Edelson. Because of this change, the Zhadanovs say, they discovered that Belkin and Edelson were selling the containers for about $850 a case after paying Vortex just $200. So Sam Zhadanov insisted on a $50 price increase, to be split evenly between Srebrianski and Vortex.

Production continued for nearly a year. On the morning of May 19, 1993, state and federal agents banged on the door of Sam and Anna Zhadanov's two-bedroom apartment in Brooklyn. When the Zhadanovs opened the door, the agents tackled Sam (the government says he was "placed on the floor"). "They knocked me down on the floor in my underwear," recalls Zhadanov, who stands five feet, four inches tall and weighs about 135 pounds. "Eight people, big like that. And I am a small old man. They scared me so much, I was close to a heart attack. With guns, they come at 6 o'clock in the morning."

Although they did not have a search warrant, the agents looked through the apartment, ostensibly doing a "security sweep," and discovered a safe in the bedroom. Anna Zhadanov says one of the agents ordered her to open it (the government says he simply "asked" her to do so). The safe contained several shoe boxes, which the agent asked her to open. She refused and closed the safe. The agents later obtained a search warrant and seized about $800,000 in cash from the safe.

Eli Zhadanov notes that his parents come from a culture where there is nothing inherently suspicious about keeping large amounts of cash. The Zhadanovs say about $200,000 of the money belonged to relatives. The balance came from the cash payments that Vortex received from Srebrianski and from Belkin and Edelson over the course of two-and-a-half years. But the Zhadanovs say less than half of that, about $280,000, represents profit. Sam Zhadanov covered expenses for the Belkin and Edelson job with money from other customers that he deposited in Vortex's bank account.

Zhadanov says he did not deposit the cash in the bank because he was afraid it would raise questions about the source, and Belkin and Edelson did not want to be named. Instead, he planned to spend the money on new equipment that he would need to make plastic Scrabble pieces for Milton Bradley. (The Zhadanovs have the prototype for the game pieces and price quotations for the equipment.) Since he intended to reinvest the money in his business, he did not consider it unreported income. The IRS, of course, has a different view, though the agency chose not to bring criminal charges.

In addition to the money from the safe, the government seized the Zhadanovs' personal bank accounts, Vortex's bank account, the factory, the equipment, and the land on which it was located--$1.5 million to $2 million in assets. The government argued that all of this property either represented the proceeds of illegal activity or helped facilitate illegal activity. If drug dealers sold crack and used the proceeds to buy vials from retailers, who paid Belkin and Edelson, who paid Srebrianski, who then paid Vortex, this money then contaminated any bank accounts into which it was deposited. Furthermore, all of the assets associated with Vortex can be said to have facilitated the production of the vials (thereby facilitating the distribution of crack) or to have helped launder the proceeds of illegal activity.

Thus, in the government's view, everything the Zhadanovs had achieved was tainted by the order from Belkin and Edelson. Indeed, in testimony before a federal grand jury in Philadelphia, a DEA agent suggested that Vortex had been established to serve the needs of crack dealers. On November 12, 1992, DEA Special Agent Ellis Hershowitz testified: "This company [Vortex]--our indications of it, it hasn't been in operation all that long. As of the time of the interview, they were just ordering equipment in the early part of '91 through D-M-E Corporation. And it's our understanding that they were just getting started out then. Our impression is that they went into business for the purpose of manufacturing these vials because they knew they could make a lot of money doing it."

A juror asked, "They didn't make anything else, just the vials?"

Hershowitz answered, "Back then they didn't make anything else."

In fact, Vortex had been in business since 1981 and had been making items to order since 1987; its customers included Drexel University, Milton Bradley, Shenley Distillers, and Computer Insights. During the period that Vortex was producing plastic containers for Belkin and Edelson, its main customer was the medical-supply company Becton-Dickinson, for which it made a safety syringe that Zhadanov had invented.