The West Hills Cocaine Caper

The story first appeared in the Aug. 19, 1998, edition of WW.

Just over a year ago, certain members of the exclusive Multnomah Athletic Club broke into a major sweat.

The treadmills hadn’t been amped up, and the sauna wasn’t stuck on high. Instead, a number of these well-to-do Portlanders were worried because a cocaine dealer named Michael Hipps had been busted. With that late-May arrest, not only were their drug supplies cut off, but their futures were in jeopardy as well.

Hipps, it turns out, had kept his customers’ names and phone numbers in several address books. Looking through the books, authorities found listings for doctors, lawyers, stockbrokers and other professionals, some of them members of the Multnomah Club, according to the cops’ almost gleeful public statements.

Multnomah County Deputy District Attorney Dave Peters was the first well-known Portlander to fall. Finding Peters’ direct-dial work phone number in one of the so-called “black books,” police in September searched his house. They found cocaine residue and marijuana.

“This is the tip of what may turn out to be a very prominent iceberg,” The Oregonian editorialized at the time. “Peters’ tragic experience serves as a reminder that the drug problem is not limited to the young, unfortunate or ill-informed. And it also indicates that the prominent cannot necessarily escape the consequences of involvement with drugs.”

A year later, however, it would appear that the prominent have escaped the consequences. Of course, the dealers were punished: This week, Hipps received a 16-month prison sentence, and in July, Adam Wylie, Hipps’ sometime partner, received 13 months. Yet none of the other well-to-do buyers listed in the black books has been prosecuted, although many have been interrogated.

Behind the scenes, however, law enforcement authorities have been building a case that may eventually put even more affluent people behind bars.

Willamette Week has learned that the investigation has grown significantly and now involves the Internal Revenue Service, as well as the Portland Police Department. In July, a federal grand jury issued a secret indictment charging three people—the owner of a Portland bed and breakfast, a Napa, Calif., wine merchant and his wife—with an extortion plot that allegedly cost Hipps $55,000. Additionally, a Portland CPA has been implicated in a money-laundering scheme with Hipps—a scheme in which other Portlanders may have been involved.

The case still isn’t over. Authorities have renewed their interest in the black books and are again interviewing alleged customers with vigor. While it’s highly unlikely that any of them will be charged for merely using drugs, authorities say they may issue indictments for those whose crimes are more serious.

Michael Hipps is by no means the biggest cocaine dealer in Portland, but his arrest sent shock waves through the West Hills crowd. Now, a year after the investigation began, it has developed as many twists and turns as Skyline Boulevard and includes “scenery” that’s just as fascinating.

If he hadn’t spent his time selling drugs, Michael Hipps would have made a great corporate manager. At 6 feet 3 inches, he has an imposing presence, although his sweatshirt-and-shorts style of dress reveals an easygoing demeanor. With a master’s in business administration, Hipps also had an air of Republican toughness about him. Forty-eight years old and unmarried, he was never a strong supporter of social programs. He is said to believe that people should pull themselves up by their bootstraps. Friends say he has a harsh attitude towards criminals—but only those of the violent sort.

Until the early ‘90s, Hipps ran his own business. Sterling and Associates, which provided financial consulting services to small companies. In 1994, he got another offer. For several years, according to federal court documents, Hipps had been buying cocaine from Wayne Oppenheimer, a North Portland man who, as a cover, claimed to own a landscaping business. By the early ‘90s, Oppenheimer reportedly wanted out of the drug trade. So, just like a dentist who might sell his practice before retiring, Oppenheimer allegedly decided to sell his client base—his list of drug customers—to Hipps.

“I’ve never seen that before,” says Sgt. John Cordell, the Drug and Vice Division officer who broke the case against Hipps.

After being introduced to Oppenheimer’s clients, Hipps took over, building a healthy business. He later enlisted the occasional help of a partner, Adam Wylie. According to police, by 1997 they had developed an impressive list of customers. “These guys were pretty damn unique,” Cordell says. “They were dealing with prominent people in Portland.”

Their service was top-notch, too. Hipps maintained a strict noon-to-nine, six-days-a-week schedule and would gladly make deliveries—but not at taverns and not to groups of people. Sometimes he’d arrange to meet his customers in the parking lot at Zupan’s Market at the foot of the West Hills, where exchanges of drugs for money would take place on the leather seats of Saabs and BMWs.

Never interested in being a Hollywood-style drug kingpin, Hipps sold his cocaine in small quantities and chose his customers wisely so as not to attract attention. At the same time, he did well enough to buy a condo in Breckenridge, Colo. Cordell says Hipps claimed to have sold an ounce or two of cocaine each week, although Cordell believes the amount to be somewhat higher. If what Hipps says is accurate, he would have grossed between $54,000 and $208,000 a year.

“Hipps was a good businessman,” Cordell said. “It wasn’t as though you were meeting somebody in a dark alley. He would deliver it to you, your home, your business. He provided a service in that regard.”

Being at heart a businessman rather than a street-smart dealer, Hipps couldn’t have been more surprised when the police came knocking on his door.

Something about John Cordell makes him different from most other Portland cops. Maybe it’s his style. A slim, balding man of 47, he has the slow and meticulous approach of a solitary rock climber, plotting every move with a single goal in mind. As many cops will attest, he is one of the more dogged members of the force.

“He’s a hard-working guy who doesn’t like to let go,” says one Portland cop.

As a drug and vice officer Cordell has taken down his share of dealers, but until he stumbled onto Hipps he never made any headline-grabbing busts. “It was the case of a lifetime,” says one defense lawyer who is involved with the case. In June of this year, after two decades on the force, he was promoted to sergeant and reassigned to East Precinct.

Cordell got to Hipps with the help of an informant, which is common practice in investigations of more sophisticated drug dealers. “It’s more difficult to get into those circles than somebody on a street corner,” Cordell says. “I’ve always been interested in developing an informant into those circles.”

Ray Carpenter was Cordell’s man. Although authorities won’t reveal any details about Carpenter, they will concede that he has helped the Portland Police Bureau several times in the past. In April of 1997, Cordell had Carpenter looking for cocaine connections. Carpenter came across Hipps after a Southwest Portland realtor gave him the dealer’s pager number. (Authorities have refused to reveal the name of the realtor.)

In April 1997, Carpenter called the pager and reached Adam Wylie, who by chance was filling in for Hipps that day—one of just a dozen or so occasions on which Wylie acted as Hipps’ emissary. That’s where the the drug-dealing duo got into trouble. Normally, Hipps wouldn’t sell to a total stranger. In this case, Wylie assumed that Hipps knew Carpenter. And when Carpenter later contacted Hipps, Hipps assumed Carpenter was a friend of Wylie’s.

Over the next few weeks. Carpenter wound up buying drugs from Hipps three different times, according to police reports.

By May, Cordell had enough evidence to obtain a search warrant for Hipps’ apartment at 2320 SW Cactus Drive. According to a police report, authorities found 212 grams of cocaine. They also found $10,000 in cash, numerous business documents and the now-infamous black books.

The documents and address books gave Cordell and IRS special agent Michael Maney enough work to keep them busy for months.

Although they had both been working in Portland for years, Maney and Cordell had never met. Michael Hipps brought them together.

By coincidence Cordell was digging into the Hipps case around the same time Maney was investigating Wayne Oppenheimer, 36, who moved from Portland to Napa with his wife, Pamela, in 1995.

Oppenheimer’s tax statements didn’t match up with his lifestyle.

Between 1993 and 1994, Oppenheimer claimed to net less than $6,500 from his landscaping business, the only source of income he reported, according to court documents. In 1995, Oppenheimer’s finances were so poor that he was represented by a public defender when he was charged with Assault IV. (He had accidentally run over a cop’s foot after the cop had given him a ticket. He later plead no contest to reckless endangering, a lesser charge, and was sentenced to probation.)

Maney now thinks Oppenheimer’s landscaping business was a front, according to court documents. Oppenheimer owned landscaping equipment and a truck, but “the truck never moved,” Maney’s search warrant affidavit quotes a friend as saying. Another friend allegedly told authorities he only knew of one job that OPI Landscaping had completed: Oppenheimer’s own yard at 1610 North Portland Blvd.

For a guy who a never seemed to work, according to a neighbor, he lived pretty well.

When Oppenheimer left Portland for Napa, he had to rent a trailer just to carry his collection of wine, some 2,500 bottles, federal court documents say. Financial statements filed by Oppenheimer show he owned $15,000 in stamps and $40,000 in art, according to those same documents. In Napa, Oppenheimer bought a house for $175,000 and spent thousands on renovations. He now runs a wine shop there.

Authorities now believe that at least some of Oppenheimer’s money came from drugs. They came to this conclusion after talking with Michael Hipps.

By last summer, Hipps knew he was in serious trouble. The U.S. Attorney’s office was looking to prosecute him in federal court, where the potential sentence was significant. In order to avoid those federal charges, Hipps agreed to talk.

His confession was startling. “I’ve been in this business a long time,” said Assistant U.S. Attorney Claire M Fay. “There’s not too much that surprises me. But there is kind of a different twist on this whole thing.”

According to court documents, Oppenheimer did more than just sell Hipps his drug-dealing business. He also allegedly told Hipps that he had been paying off a Portland police officer for protection. Hipps would have to keep up those payments if he wanted to avoid prison, Oppenheimer reportedly said.

Hipps complied. Over the course of the next year or two, he received four different extortion notes, which police reportedly found when they searched Hipps’ house. One doubled the monthly payments from $500 to $1,000; another demanded a $6,000 holiday bonus; the third demanded a summer cash bonus of $12,500, and the fourth demanded an additional $10,000 in cash. In all, Hipps sent 59 money orders to two different Portland post office boxes, leaving the payee’s name blank, according to court documents. In total, he sent the unnamed cop $55,000.

In 1996, Hipps finally learned the truth. There was no dirty cop. Instead, he allegedly found out from a customer that Oppenheimer had concocted the scheme himself. When Hipps confronted Oppenheimer, Oppenheimer allegedly threatened to expose him as a cocaine dealer. He also allegedly told Hipps that for a final payment of $3,000, the demands for money would stop.

When authorities traced the money orders, Hipps’ story seemed to check out. The Oppenheimers had spent 52 of the 59 money orders, sometimes using them to pay their mortgage or for renovations to their Napa house, according to court documents.

The Oppenheimers allegedly weren’t the only ones to profit from Hipps’ payments. Two friends, Paul Oliver and Archie Lanning Blanks Jr., let Oppenheimer use their post office boxes in exchange for a cut of the proceeds, according to an affidavit filed by Maney. Oliver, a North Portland handyman, earned $200 for forwarding 10 money orders from his post office box to Oppenheimer in California. Blanks, who until last year managed the restaurant in the Malory Hotel—and who, in 1997, bought Northeast Portland’s White House Bed and Breakfast with a partner—allegedly did the same, earning an undisclosed amount for forwarding 44 money orders.

Last month, a federal grand jury issued a secret indictment charging Wayne and Pamela Oppenheimer with mail fraud, money laundering, receiving the proceeds of extortion and drug conspiracy. (The indictment has become public since Oppenheimer’s July arrest.) Blanks was charged with mail fraud, money laundering and receiving the proceeds of extortion. Oliver has not been charged with any crime.

Blanks referred all questions to his lawyer, Steve Houze, who declined to comment. Oliver would not answer WW’s questions about the case.

The Oppenheimers did not return several WW phone calls, but Wayne Oppenheimer told The San Francisco Chronicle, “These are just stories from a convicted drug dealer...[Hipps is] full of baloney. [The indictment] is a bunch of bull. These people in the federal government think they have a case against us. Well, that remains to be seen.” Their first scheduled appearance in U.S. District Court is Sept. 10.

With the federal indictment, Maney had answered a lot of questions. But the investigation still wasn’t complete.

In order to be successful, a drug dealer needs two things: a regular supplier and a way to disguise his income.

“Hipps knew he couldn’t gain financially from dealing cocaine if he couldn’t get cocaine,” Cordell said. “He also knew he couldn’t gain financially if he couldn’t launder his cash.”

Cordell says Hipps had both ends sewn up. He allegedly got his cocaine from Shawnee Arbogast and her boyfriend, Fidel Cortez-Hernandez, both of Washington County. As part of his deal with authorities, Hipps gave up his supplier’s identity and led police to Arbogast last December. Arbogast and Hernandez were charged in Washington County with distribution of a controlled substance. Earlier this year Arbogast was sentenced to two years probation, and Hernandez received 22 months in prison.

Hipps enlisted friends to help him disguise his cash, according to Cordell. The dealer’s own documents allegedly helped to prove it.

Among Hipps’ papers, Cordell found a promissory note for $60,000 signed by David Tarlow, a certified public accountant. To the drug investigator, the document was curious. Cordell decided to ask the Portland Police Bureau’s financial investigator for help.

In July, the police talked to Tarlow at the downtown accounting firm in which he was a partner and asked him why a drug dealer owed him so much money. He had a plausible explanation. According to a police report, Tarlow told authorities that he lent Hipps $60,000 in 1996 to help Hipps buy a condo in Breckenridge. Tarlow said that although he hadn’t received any payments from Hipps on the loan, he did receive a $9,000 loan fee. In addition, Tarlow said he received a trust deed on the property.

Hipps told a different story.

To make the cash he earned from selling drugs look like legitimate income, Hipps allegedly told authorities he got help from Tarlow. From statements in federal court documents and police reports, it appears that Hipps gave Tarlow $69,000 in cash and asked him to launder it. Tarlow allegedly complied, taking the cash and giving Hipps a check in exchange.

It’s unclear how Tarlow may have accomplished this task. As an accountant, Tarlow didn’t regularly deal in large amounts of cash, according to his former partner, Ron Stefani. Therefore, doing the obvious—depositing the money in his own bank account and writing a check on it—probably would have looked suspicious. What was Tarlow’s alleged technique? Police won’t say for sure. But it’s reasonable to assume that if he couldn’t do it alone, he may have gotten help from other moneyed Portlanders.

Five months after he was first contacted by police, Tarlow told Stephani that he was resigning from the firm “for personal reasons.” Stephani says Tarlow now works as a lumber broker.

Tarlow hasn’t been charged with a crime. His lawyer, Norman Sepenuk, refused to comment on the case.

Sitting behind bars in Snake River Correctional Institution, Adam Wylie, who assisted Hipps in selling cocaine, is not an unbiased observer in this war on West Hills drug dealing. But he makes an interesting argument as to why the efforts may have been misdirected.

The way he tells it, he sold cocaine on just 10 to 15 occasions. Even the cops say that most of his customers were occasional users, not addicts, and they had developed their fondness for the drug long before he made his deliveries. The deals were done discreetly, so they didn’t affect the city’s livability—a common complaint about other drug dealers.

“I’m still kind of struggling with who’s the victim in this, except for the people I’ve let down,” he said. “Are any of Hipps’ customers victims? Does the state of Oregon feel like a victim?”

Wylie was by no means a high-level dealer. He had no prior convictions, held a full-time job and has a family, including two young daughters. Under state sentencing guidelines, he could have gotten probation. Yet he was sentenced to 13 months in prison, a comparatively long sentence for someone with that profile.

Wylie says his sentence is the result less of his behavior than of the public frenzy surrounding the bust. The involvement of a deputy DA didn’t help matters, either. “My attorney said, Adam, you don’t mess with the West Hills crowd. Because you’re perceived to have done that, you’re probably going to do some time.”

Cordell has little sympathy. “Wylie’s an intelligent man, has a pleasant personality, is educated and had a substantial income,” he says. “So what’s the excuse?”

Besides, Cordell thinks that the law shouldn’t let middle-class white guys slide. “I think a lot of wannabe drug dealers aspire to be the wealthy sophisticated drug dealer they see on TV. It’s my belief that we need to go after that image because it is that image which causes a lot of these youngsters out there to try and emulate that.”