How Ronald Reagan and South Carolina’s new governor shut down the Lowcountry’s ‘Gentlemen Smugglers’

President Ronald Reagan had just sounded a battle whoop for the “War on Drugs” when he appointed current South Carolina Governor Henry McMaster as U.S. attorney in 1981.

McMaster insisted on an aggressive fight against drug smuggling, not knowing that some of the defendants in the Lowcountry would turn out to be people he knew growing up, or at the University of South Carolina.

The defendants would be part of what would be known as “Operation Jackpot,” a $850 million Lowcountry scheme that would lead to more than 100 convictions.

The kingpins were from good families, earning the name “gentlemen smugglers” because they never used violence in their murky trade, and never trafficked in hard drugs. They thumbed their noses at a straight-laced life, and they were millionaires in their 20s.

But finding the “gentlemen smugglers” wouldn’t be easy.

Soon after McMaster was appointed, veteran Internal Revenue Service investigator Brian Wellesley told him about a different approach to cracking tough cases: a task force of investigators from a variety of federal agencies dropping their normal tasks and working together.

Instead of looking for boats full of dope in a dark marsh, they would search for evidence of tax evasion, racketeering or currency violations.

McMaster made the task force happen. It started with two agents: Claude McDonald of U.S. Customs and David Forbes of the IRS.

They knew something was going on, but had no clue about who, when or where.

Two hunches paid off. They figured the smugglers had to be South Carolinians who lived on the coastline that they would need to know so well. And they had a hunch that the top smugglers would be buying nice things with cash, and living well.

They came to Hilton Head.

It started with cold calls on real estate agents and luxury car dealers, asking who was paying cash.

They finally got a “yes” on a land purchase. They pored over records in the county courthouse and discovered a pattern of land purchases on Hilton Head under the names of two offshore corporations, and often with the same attorney and real estate agent.

Enough pieces of the puzzle came together to get a search warrant for the lawyer’s office. Within hours he agreed to cooperate and opened the books, investigators told Jason Ryan, a former Beaufort Gazette reporter who wrote the 2011 book, “Jackpot: High Times, High Seas and the Sting That Launched the War on Drugs.”

Evidence took investigators to banks in the Bahamas and off the shores of Normandy.

“They looked for substantial wealth with no apparent source of income,” said Bart Daniel, who devoted 3 1/2 years of his life to Operation Jackpot as an assistant U.S. attorney under McMaster, in a recent interview with the Packet and Gazette.

“Hilton Head broke it,” said Daniel, who would later become the U.S. attorney for South Carolina. “We followed the money, boats and assets all over the world.”

‘Hated to leave’

Investigators also did some mucky gum shoe work in the Lowcountry.

Two telephone numbers scribbled on a piece of paper found in a sunken sailboat led them to a dock builder, which led them to an extra-large dock built on in Sea Pines on Calibogue Cay, and the name Les Riley.

Ryan tells in his book that the FBI’s David Forbes would say: “I had a tiger by the tail and I said, ‘I ain’t turning this thing loose. I got something here. I ain’t too sure what, but I got it.’”

The Jackpot task force grew to 17 agents and included the FBI, U.S. Drug Enforcement Agency, U.S. Customs Patrol and the State Law Enforcement Division.

They dived into another cutting-edge approach: civil asset forfeiture. Jackpot was one of the first cases in which the alleged gains of illegal drug trafficking were seized before the owners had been convicted.

They turned a lot of heads when they seized the classy 82 Queen restaurant in downtown Charleston, in a building then partly owned by Lowcountry drug smuggling kingpin Barry “Flash” Foy.

They also seized a lot of property on Hilton Head, boats, cars, jewelry, cash, a certificate of deposit — even a collection of Tiffany vases that made the cover of a Sotheby’s auction catalog. They raked in some $15 million, most of it going to the federal treasury and some of it paying for rewards for South Carolina CrimeStoppers tips.

From Wally Butler, successful real estate agent and former Sea Pines vice president, the government took at least two lots in Spanish Wells Plantation, one lot in Forest Beach (in the Palm Forest subdivision), and a custom-built 36-foot sport fishing boat named “The Last Scene.”

“Once we hit them in the pocketbook, it dried up the ‘gentlemen smugglers’ along the South Carolina coast,” said Daniel, now a private defense attorney in Charleston.

“We kind of got run out of Hilton Head,” Foy said. “I sold all my property immediately and was out there. I hated to leave Hilton Head, but I had to.”

This story was originally published August 21, 2017 at 8:39 AM with the headline "How Ronald Reagan and South Carolina’s new governor shut down the Lowcountry’s ‘Gentlemen Smugglers’."